Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

(13) Income Taxes

The components of loss before income taxes are as follows (in thousands):

	Year Ended December 31,
	2023			2022			2021
Domestic	$	(12,682	)	$	(30,297	)	$	(90,584	)
Foreign		(30,915	)		(33,275	)		(16,791	)
Total	$	(43,597	)	$	(63,572	)	$	(107,375	)

For purposes of reconciling the Company’s provision for income taxes at the statutory rate and the Company’s provision (benefit) for income taxes at the effective tax rate, a notional 21% tax rate was applied as follows (in thousands):

	Year Ended December 31,
	2023			2022			2021
Income tax at federal statutory rate	$	(9,155	)	$	(13,350	)	$	(22,549	)
Increase (decrease) in tax resulting from:
State income tax expense, net of federal tax effect		1,823			658			(5,018	)
Nondeductible permanent items		190			1,169			(87	)
Accrued legal dispute		5,250			—			—
Executive compensation		746			746			4,885
Global Intangible Low-Taxed Income		—			3,055			—
Foreign rate differential		(344	)		(638	)		(1,060	)
Gain on extinguishment of debt		—			—			(2,123	)
Research and development tax credits		(749	)		—			—
Adoption of ASU 2020-06		—			(70,503	)		—
Tax rate change		(12	)		(3	)		(1,039	)
Adjustment to deferred taxes		(9,425	)		1,980			817
Change in valuation allowance		8,246			67,450			23,262
Uncertain tax positions		—			(423	)		165
Nonqualified stock option and performance award shortfall (windfall) upon exercise		7,482			7,745			(9,352	)
Other		(344	)		(284	)		(480	)
Total	$	3,708		$	(2,398	)	$	(12,579	)

The difference between the statutory federal income tax rate and the Company’s effective tax rate in 2023, 2022 and 2021 is primarily attributable to the effect of state income taxes, difference between the U.S. and foreign tax rates, non-deductible officer compensation, share-based compensation, true up of deferred taxes, other non-deductible permanent items, and change in valuation allowance. In addition, the Company’s foreign subsidiaries are subject to varied applicable statutory income tax rates for the periods presented.

The provision for (benefit from) income taxes is as follows (in thousands):

	Year Ended December 31,
	2023			2022			2021
Current:
Federal	$	253		$	129		$	67
State		1,352			395			49
Foreign		4,073			2,151			212
		5,678			2,675			328
Deferred:
Federal		(227	)		(48,545	)		(20,181	)
State		(745	)		(17,404	)		(7,634	)
Foreign		(9,244	)		(6,574	)		(8,354	)
		(10,216	)		(72,523	)		(36,169	)
Change in valuation allowance		8,246			67,450			23,262
Total	$	3,708		$	(2,398	)	$	(12,579	)

The net deferred tax assets (liabilities) are comprised of the following (in thousands):

	As of December 31,
	2023			2022
Deferred tax assets
Lease liability	$	5,022		$	6,094
Tax credits		3,091			185
Accrued expenses		3,312			3,222
Deferred revenue		1,298			1,800
NOL carryforward		91,257			94,817
Other assets		5,227			7,119
Property and equipment		180			—
Intangible assets		28,988			22,843
Valuation allowance		(93,988	)		(85,392	)
Total net deferred tax assets		44,387			50,688
Deferred tax liabilities
Deferred commissions		(9,095	)		(7,193	)
Intangible assets		(35,943	)		(44,568	)
Property and equipment		—			(550	)
Right-of-use asset		(3,668	)		(4,609	)
Other		1			(4	)
Total deferred tax liabilities		(48,705	)		(56,924	)
Total deferred income tax liabilities	$	(4,318	)	$	(6,236	)

A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation, at December 31, 2023 and 2022, a valuation allowance of $94.0 million and $85.4 million, respectively, has been recorded.

As of December 31, 2023, the Company has accumulated federal and state net operating loss (“NOL”) carryforwards of $238.1 million and $212.0 million, respectively. Of the $238.1 million of federal NOL carryforwards, $20.3 million are pre-2018 losses and may be carried forward for twenty years. The remaining $217.9 million can be carried forward indefinitely but can only be utilized to offset 80% of taxable income . Of the $212.0 million of state NOL carryforwards, $28.4 million can be carried forward indefinitely with the remaining NOLs expiring in various years through 2043 if not utilized. The Company completed a Section 382 study for the period through December 31, 2022 and determined that a Section 382 ownership change occurred on December 31, 2017 subjecting all pre-2018 losses to a utilization limitation; however, such limitation is not expected to result in NOLs expiring unused. Any future annual limitation may result in the expiration of NOLs before utilization.

As of December 31, 2023 and 2022, the Company had combined foreign NOL carry-forwards available to reduce future taxable income of approximately $115.0 million and $85.3 million, respectively. As of December 31, 2023 and 2022, valuation allowances of $108.0 million and $82.5 million, respectively, had been recorded against the related deferred tax assets for those loss carry-forwards that are not more likely than not to be fully utilized in reducing future taxable income.

The following changes occurred in the amount of unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2023			2022			2021
Beginning balance of unrecognized tax benefits	$	1,067		$	1,490		$	748
Increases for current year tax positions		—			127			138
Increases (decreases) for prior year tax positions		32			(577	)		577
Decreases due to settlements with taxing authorities		(1,099	)		—			—
Ending balance (excluding interest and penalties)		—			1,040			1,463
Interest and penalties		—			27			27
Total	$	—		$	1,067		$	1,490

For the years ended December 31, 2023, 2022 and 2021, the Company recorded income tax (benefit) expense of $32,000, ($423,000) and $165,000, respectively, related to uncertain tax positions. In 2023, the Company settled an income tax audit with the Chinese tax authorities resulting in a decrease of $1.1 million uncertain tax position which was reclassed to taxes payable. The Company’s policy is to recognize potential interest and penalties related to unrecognized tax benefits associated with uncertain tax positions, if any, in the income tax provision. At December 31, 2023, the Company had no accruals for interest and penalties related to uncertain tax positions. At December 31, 2022 and 2021, the Company had accrued $27,000 for each period in interest and penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and various states along with other foreign countries. The Company has not been notified that it is under audit by the IRS or any state, however, due to the presence of NOL carryforwards, all the income tax years remain open for examination in each of these jurisdictions. There are no audits in any foreign jurisdictions. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations. At December 31, 2023, the Company had $15.2 million in unremitted earnings that were permanently reinvested related to its consolidated foreign subsidiaries.