Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate ("AETR") for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The discrete effective tax rate method has been used to calculate taxes for the fiscal three months ended March 31, 2024. The Company has determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the fiscal three months ended March 31, 2024.

The Company recorded a benefit from income taxes of $0.2 million and $3.4 million for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate was 9% and 37% for the three months ended March 31, 2024 and 2023, respectively. The benefit from income taxes for the three months ended March 31, 2024 is related to tax benefits from foreign-derived intangible income (FDII), research tax credits, and deductions for equity awards, offset by nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers’ compensation.

Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, the Company considers its historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes the Company’s realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.