Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The U.S. and foreign components of income before income taxes were as follows:

	Years Ended December 31,
(in millions)	2020		2019		2018
U.S.	$	(1.6)	$	2.5	$	(3.0)
Foreign	11.3		12.0		8.2
Income before income taxes	$	9.7	$	14.5	$	5.2

Income tax expense consists of the following: 

	Years Ended December 31,
(in millions)	2020		2019		2018
Current:
U.S. State	$	0.2	$	0.2	$	0.2
Foreign	4.0		3.4		2.1
Total current expense	4.2		3.6		2.3
Deferred:
U.S. Federal	—		(0.1)		—
Foreign	(1.3)		(0.6)		(0.4)
Total deferred expense	(1.3)		(0.7)		(0.4)
Income tax expense	$	2.9	$	2.9	$	1.9

Reconciliations of the federal statutory income rate to the Company’s effective income tax rate are as follows:

	Years Ended December 31,
	2020		2019		2018
U.S. statutory rate	21.0	%	21.0	%	21.0	%
Foreign rate differential	7.0		4.2		(2.4)
State taxes, net of federal benefit	1.3		1.3		2.9
Tax credits	(40.5)		(15.4)		(13.7)
Stock-based compensation	(311.1)		(158.7)		(159.1)
Loss on extinguishment of debt	—		14.8		—
Non-deductible officers’ compensation	30.0		1.9		81.3
Permanent items	2.1		3.0		16.8
Foreign income taxed in the U.S.	(21.0)		19.0		26.1
Change in valuation allowance	336.2		130.6		67.0
Other	4.6		(1.9)		(2.9)
Effective income tax rate	29.6	%	19.8	%	37.0	%

As of December 31, 2020, 2019 and 2018 the Company had no uncertain tax positions.

No provision for income taxes has been provided on undistributed earnings of the Company's foreign subsidiaries, except for Canada, because such earnings are indefinitely reinvested in the foreign operations. The Company has recorded a deferred tax liability for withholding tax that could be incurred upon repatriation of earnings from its Canadian subsidiary, the amount of which is not significant. A deferred tax liability related to the repatriation of approximately $24.3 million indefinitely reinvested earnings would not be material to the Company’s consolidated financial statements, primarily due to treaty-based withholding tax rates in the jurisdictions in which the Company operates.

The Company files federal, state and foreign tax returns, which are subject to examination by the relevant tax authorities. The tax filings relating to the Company’s U.S. federal and state tax returns are currently open to examination for tax years 2017 through 2019. The Company is currently under exam in Ontario, Canada. There are no uncertain tax positions or adjustments associated with the exam at this time. In addition, the Company's U.S. net operating loss carryforwards from 2001 and forward may be subject to examination if the losses are utilized in future years.

Interest and penalties are classified as a component of income tax expense and were not material for any period presented.

The components of the net deferred tax asset at the end of each year are as follows:

	As of December 31,
(in millions)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	173.8	$	144.6
Tax credits	21.3		15.2
Capital loss carryforwards	12.2		12.7
Stock-based compensation	5.8		8.9
Other	15.4		13.8
Total deferred tax assets	228.5		195.2
Deferred tax liabilities:
Prepaid assets	(3.5)		(2.1)
Depreciation and amortization	(6.9)		(2.2)
Amortization of debt discount	(60.6)		(73.4)
Capitalized contract acquisition costs	(7.5)		(7.1)
Other	(4.6)		(5.0)
Total deferred tax liabilities	(83.1)		(89.8)
Net deferred tax asset before valuation allowance	145.4		105.4
Valuation allowance	(143.4)		(104.4)
Net deferred tax asset	$	2.0	$	1.0

The Company maintained a valuation allowance of $143.4 million and $104.4 million at December 31, 2020 and 2019, respectively, against U.S. federal and state deferred tax assets, as management has determined that it is more-likely-than-not that these net deferred tax assets will not be realized. The valuation allowance is based on cumulative tax losses in the U.S. and the uncertainty of generating future taxable income in the U.S. to utilize our loss and credit carryforwards. The $39.0 million increase in the Company’s valuation allowance during the year ended December 31, 2020 was primarily due to current-year net operating losses in the U.S.

The Company’s net operating loss carryforwards consist of the following:

	Years Ended December 31,
(in millions)	2020		2019
U.S. Federal	$	732.4	$	607.4
State	$	341.3	$	298.8
Foreign	$	5.4	$	—

For U.S. federal tax purposes, $192.1 million of the net operating losses have an indefinite carryforward period. The remaining U.S. federal carryforwards, if not utilized, will begin to expire in 2021 and will continue to expire through 2037, and the state net operating loss carryforwards expire through 2040. The utilization of such net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon the Company’s ability to generate taxable income in the U.S. Research and development and other tax credits were $22.8 million and $16.1 million at December 31, 2020 and 2019, respectively. If not utilized, federal research and development credits will begin to expire in 2022. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based on changes in the ownership of the Company ordinary shares.