Income taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The Company recorded income tax expense of $1.3 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate was 23.6% and 79.5% for the third quarter of 2024 and 2023, respectively. The Company recorded income tax expense of $5.8 million and $8.0 million for the nine months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate was not meaningful during the nine months ended September 30, 2024 and 2023 due to immaterial income/(loss) before tax compared to the income tax expense recorded.

The change in the effective tax rate for the three and nine months ended September 30, 2024, as compared to the same period in 2023, was attributable mainly to Section 162(m) compensation deduction limitations, state tax expense, and foreign inclusion adjustments.

For the three and nine months ended September 30, 2024, the Company used a discrete effective tax rate method to calculate income taxes due to sensitivity of the forecast. Through September 30, 2024, the Company determined that small changes in the estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate causing material distortion in the year-to-date tax provision.

As of September 30, 2024, the Company is unable to produce a reliable estimate of ordinary income for the quarter and year ending 2024 due to the inability to reliably or accurately forecast 2024 operating expenses. Similarly, for the three and nine months ended September 30, 2024, due to uncertainties created by geopolitical risks, the Company’s estimated annual effective tax rate method would not provide a reliable estimate and therefore was not used.