INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, the income tax provision and/or benefit has been computed for the Company on an as if standalone, separate return basis and payments to and refunds from IAC for the Company’s share of IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the statement of cash flows. The tax sharing agreement between the Company and IAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to the Company, entitlement to refunds, allocation of tax attributes and other matters and, therefore, ultimately governs the amount payable to or receivable from IAC with respect to income taxes. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement and the current tax provision or benefit computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital in the statement of shareholders’ equity and financing activities within the statement of cash flows.

U.S. and foreign (loss) earnings from continuing operations before income taxes and noncontrolling interests are as follows:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
U.S.	$	(38,717)	$	(87,557)	$	(80,182)
Foreign	10,509		(7,001)		(13,730)
Total	$	(28,208)	$	(94,558)	$	(93,912)

The components of the income tax provision (benefit) are as follows:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Current income tax provision:
Federal	$	1,373	$	27	$	36
State	3,198		2,650		3,038
Foreign	7,277		1,691		1,249
Current income tax provision	11,848		4,368		4,323
Deferred income tax (benefit) provision:
Federal	(8,232)		(8,045)		(27,800)
State	(1,499)		(2,894)		(8,712)
Foreign	(278)		1,181		2,295
Deferred income tax benefit	(10,009)		(9,758)		(34,217)
Income tax provision (benefit)	$	1,839	$	(5,390)	$	(29,894)

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.

	December 31,
	2023		2022
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	182,386	$	187,449
Tax credit carryforwards	26,519		21,588
Capitalized research & development expenditures	18,919		12,551
Long-term lease liabilities	16,288		21,902
Capitalized software, leasehold improvements and equipment, net	10,923		—
Other	33,485		30,980
Total deferred tax assets	288,520		274,470
Less valuation allowance	(76,821)		(64,877)
Net deferred tax assets	211,699		209,593
Deferred tax liabilities:
Intangible assets, net	(46,571)		(47,016)
Right-of-use assets	(10,588)		(13,919)
Capitalized costs to obtain a contract with a customer	(9,004)		(9,264)
Capitalized software, leasehold improvements and equipment, net	—		(3,839)
Other	(92)		(83)
Total deferred tax liabilities	(66,255)		(74,121)
Net deferred tax assets	$	145,444	$	135,472

The portion of the December 31, 2023 deferred tax assets that will be payable to IAC pursuant to the tax sharing agreement, upon realization, is $92.9 million.

At December 31, 2023, the Company has federal and state NOLs of $480.9 million and $431.0 million, respectively, available to offset future income. Of these federal NOLs, $214.2 million can be carried forward indefinitely and $266.7 million, if not utilized, will expire at various times between 2033 and 2037. Of these state NOLs, $25.5 million will be carried forward indefinitely and $405.5 million will expire at various times primarily between 2025 and 2043. Federal and state NOLs of $396.6 million and $331.3 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law. At December 31, 2023, the Company has foreign NOLs of $329.9 million available to offset future income. Of these foreign NOLs, $317.5 million can be carried forward indefinitely and $12.4 million, if not utilized, will expire at various times between 2038 and 2043. During 2023, the Company recognized tax benefits related to NOLs of $0.5 million.

At December 31, 2023, the Company has tax credit carryforwards of $34.1 million relating to federal and state tax credits for research activities. Of these credit carryforwards, $1.7 million can be carried forward indefinitely and $32.4 million, if not utilized, will expire between 2024 and 2043.

The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience. At December 31, 2023, the Company has a U.S. gross deferred tax asset of $209.6 million that the Company expects to fully utilize on a more likely than not basis.

During 2023, the Company’s valuation allowance increased by $11.9 million primarily due to an increase in unbenefited capital losses, foreign NOLs, and currency translation adjustments. At December 31, 2023, the Company has a valuation allowance of $76.8 million related to the portion of NOLs and other items for which it is more likely than not that the tax benefit will not be realized.

A reconciliation of the income tax provision (benefit) to the amounts computed by applying the statutory federal income tax rate to earnings (loss) from continuing operations before income taxes is shown as follows:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Income tax (benefit) at the federal statutory rate of 21%	$	(5,924)	$	(19,857)	$	(19,722)
State income taxes, net of effect of federal tax benefit	1,510		362		(1,040)
Research credit	(4,912)		(7,123)		(2,431)
Stock-based compensation	4,546		3,917		(13,643)
Non-deductible executive compensation	3,514		4,731		3,312
Unbenefited losses	3,352		7,106		1,610
Net adjustment related to the reconciliation of income tax provision accruals to tax returns	(2,430)		(1,212)		335
Foreign income taxed at a different statutory tax rate	1,216		5,355		2,872
Change in judgement on beginning of the year valuation allowance	399		966		(4,165)
Deferred tax adjustment for enacted changes in tax law and rates	99		178		768
Other, net	469		187		2,210
Income tax provision (benefit)	$	1,839	$	(5,390)	$	(29,894)

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows:

	December 31,
	2023		2022		2021
	(In thousands)
Balance at January 1	$	6,181	$	6,298	$	5,268
Additions based on tax positions related to the current year	1,564		1,342		1,317
Additions for tax positions of prior years	545		1,006		264
Reductions for tax positions of prior years	(88)		—		(91)
Settlements	(188)		(2,465)		(460)
Balance at December 31	$	8,014	$	6,181	$	6,298

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At December 31, 2023 and 2022, accruals for interest are not material and there are no accruals for penalties.

The Company’s income taxes are routinely under audit by federal, state, local and foreign authorities as a result of previously filed separate company and consolidated tax returns with IAC. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. On June 27, 2023 the Joint Committee of Taxation completed its review of the federal income tax returns for the years ended December 31, 2013 through 2019, which includes the operations of the Company, and approved the audit settlement previously agreed to with the Internal Revenue Service. The statutes of limitations for the years 2013 through 2019 expired December 31, 2023. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2013. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from the examination of prior year tax returns. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

At December 31, 2023 and 2022, the Company has unrecognized tax benefits, including interest, of $8.1 million and $6.2 million respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at December 31, 2023 are subsequently recognized, the income tax provision would be reduced by $7.6 million. The comparable amount as of December 31, 2022 is $5.8 million. The Company believes it is reasonably possible that its unrecognized tax benefits could decrease by $0.2 million by December 31, 2024 due to settlements, all of which would reduce the income tax provision.