Income Taxes

3 Months Ended

Apr. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents income taxes and the effective tax rates for the periods indicated (in thousands, except percentages):

	Three Months Ended
	April 2, 2022			April 3, 2021
Income before income taxes	$	9,820		$	20,765
Income taxes	$	1,701		$	150
Effective tax rate	17.3		%	0.7		%

The Company’s income taxes for the three months ended April 2, 2022 and April 3, 2021 were determined using an estimated effective tax rate adjusted for discrete items that occurred during the respective periods. The Company's effective tax rate for the three months ended April 2, 2022 was lower than the statutory federal corporate tax rate of 21% primarily due to U.S. federal research tax credits and excess tax benefits from stock-based compensation partially offset by state taxes, the inclusion of income from certain foreign operations and the effect of non-deductible stock-based compensation for executive officers. The Company's effective tax rate for the three months ended April 3, 2021 was significantly lower than 2022 as the Company maintained a full valuation allowance during the period.

The Company has net deferred tax assets that have arisen primarily as a result of temporary differences, net operating loss carryforwards and tax credits. The Company’s ability to realize a deferred tax asset is based on its ability to generate sufficient future taxable income within the applicable carryforward period and subject to any applicable limitations. Management continues to believe that it is more likely than not we will utilize a significant portion of our deferred tax assets.

The Company continues to maintain a valuation allowance of $30.3 million on certain U.S. federal and state deferred tax assets that the Company believes are not more likely than not to be realized in future periods.

The Company considers scheduled reversals of deferred tax liabilities, projected future taxable income, ongoing tax planning strategies and other matters, including the period over which its deferred tax assets will be recoverable, in assessing the need for and the amount of the valuation allowance. In the event that actual results differ from these estimates, or if the Company decides to adjust these estimates in the future periods, further adjustments to its valuation allowance may be recorded, which could materially impact the Company’s financial position and net income in the period of the adjustment.

The Company’s income taxes may be subject to fluctuation during the year and in future years as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate including factors as actual results differing from its estimates of pre-tax earnings in the various jurisdictions in which the Company operates, which could impact the recognition of its deferred tax assets, benefits from stock option exercises, further investments in the Company’s foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.