INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

16.INCOME TAXES

The components of net loss before income taxes, by geography, are as follows:

	For the year ended December 31,
	2023		2022		2021
U.S.	$	(3,126)	$	5,827	$	5,608
Foreign		(18,548)		(15,957)		(9,534)
Net loss before income taxes	$	(21,674)	$	(10,130)	$	(3,926)

Income tax expense (benefit) consists of the following:

	For the year ended December 31,
	2023		2022		2021
Current income taxes:
Federal	$	(279)	$	1,696	$	—
State and local		1,568		1,068		155
Foreign		1,347		577		468
Total current		2,636		3,341		623
Deferred income taxes:
Federal		(9,224)		904		(1,849)
State and local		(1,552)		72		(7)
Foreign		(441)		(2,143)		(1,214)
Total deferred		(11,217)		(1,167)		(3,070)
Income tax expense (benefit)	$	(8,581)	$	2,174	$	(2,447)

During the year ended December 31, 2023, the Company recognized a $27 income tax expense in accumulated other comprehensive loss relating to unrealized gains (losses) from foreign currency translation adjustments, revaluations, and available-for-sale securities. During the year ended December 31, 2022, the Company recognized a $12 income tax benefit in accumulated other comprehensive loss relating to unrealized gains from foreign currency translation adjustments and revaluations, and available-for-sale securities.

The reconciliation of the effective tax rate to tax at the statutory rates for the years ended December 31 is as follows:

	2023				2022				2021
	Total		Tax Rate		Total		Tax Rate		Total		Tax Rate
Pretax net loss	$	(21,674)			$	(10,130)			$	(3,926)
Taxes:
U.S. federal income tax at statutory rate	$	(4,552)	21.0	%	$	(2,128)	21.0	%	$	(825)	21.0	%
State income taxes		289	(1.3)	%		441	(4.4)	%		678	(17.3)	%
Stock-based compensation expense		(6,236)	28.8	%		1,787	(17.6)	%		(4,550)	115.9	%
Impact of foreign operations		1,463	(6.8)	%		1,352	(13.3)	%		954	(24.3)	%
Transaction costs		—	0.0	%		176	(1.7)	%		1,082	(27.6)	%
U.S. taxation of foreign earnings		(245)	1.1	%		(179)	1.8	%		144	(3.7)	%
Nondeductible compensation		2,822	(13.0)	%		485	(4.8)	%		682	(17.4)	%
Tax credits		(5,818)	26.8	%		(341)	3.4	%		(488)	12.4	%
Change in valuation allowance		3,386	(15.6)	%		427	(4.2)	%		373	(9.5)	%
Changes in prior year unrecognized tax benefits		451	(2.1)	%		—	0.0	%		—	0.0	%
Other permanent items, net		(141)	0.7	%		154	(1.7)	%		(497)	12.8	%
Taxes and effective tax rate	$	(8,581)	39.6	%	$	2,174	(21.5)	%	$	(2,447)	62.3	%

The effective tax rate in 2023 increased to 39.6% from (21.5)% in 2022. The increase in income tax benefit in 2023 was primarily driven by changes in tax benefits on exercises and vestings of stock awards, tax credits, valuation allowances on net deferred tax assets established for certain foreign jurisdictions, loss before income tax, and limitations on deductions of certain employees’ compensation under Internal Revenue Code (“IRC”) Section 162(m).

The effective tax rate in 2022 decreased to (21.5)% from 62.3% in 2021. The income tax expense in 2022 was primarily driven by a net shortfall in tax benefits on exercises and vestings of stock awards and limitations on deductions of certain employees’ compensation under IRC Section 162(m), partially offset by the favorable impact of tax credits and foreign tax benefits from the deduction for foreign-derived intangible income.

The impact of foreign operations in 2023, 2022, and 2021 primarily reflects losses in Ireland taxed at 12.5%, as well as income or losses taxed at rates in other foreign jurisdictions, as opposed to the statutory U.S. federal income tax rate.

Significant components of the Company’s net deferred tax assets (liabilities) are as follows:

	As of December 31,
Deferred tax assets:	2023		2022
Deferred revenue	$	3,523	$	2,981
State operating loss carry forwards		2,682		2,831
Federal and foreign loss carry forwards		4,361		11,318
Accrued expenses		2,239		2,238
Accrued compensation		2,339		—
Deferred and stock-based compensation		19,008		23,634
Operating lease liabilities		5,151		6,272
Tax credits		3,662		—
Depreciation and amortization		6,417		—
Other		2,721		—
Deferred tax assets		52,103		49,274
Valuation allowance		(5,941)		(2,285)
Total deferred tax assets		46,162		46,989
Deferred tax liabilities:
Depreciation and amortization		—		(9,337)
Prepaid expenses		(1,026)		(1,256)
Right of use asset		(3,428)		(4,325)
Accrued compensation		—		(1,434)
Other		—		(115)
Total deferred tax liabilities		(4,454)		(16,467)
Net deferred tax asset	$	41,708	$	30,522
Classification in the consolidated balance sheets:
Deferred income tax asset	$	41,708	$	30,938
Deferred other liabilities		—		(416)
Net deferred tax asset	$	41,708	$	30,522

At December 31, 2023, the Company has no U.S. federal operating loss carry forwards and available U.S. state operating loss carry forwards of $42,090. The state operating losses will expire at varying dates beginning in 2031 through 2043 or will carry forward indefinitely. Management expects to fully use these U.S. state operating loss carry forwards.  

At December 31, 2023, the Company has available foreign operating losses of approximately $27,577 and nontrading losses of $51, which generally carry forward indefinitely. A valuation allowance for a portion of the foreign operating and non-operating losses is recorded at December 31, 2023 and 2022.

At December 31, 2023, the Company has available U.S. federal R&D tax credit carryovers of $4,014. The credits will expire from 2041 through 2043. Management expects to fully use these U.S. federal credit carry forwards.

At December 31, 2023 and 2022, the Company has a valuation allowance of ($5,941) and ($2,285), respectively, primarily against certain net deferred tax assets, including losses, in foreign jurisdictions. The net increase in the total valuation allowance of ($3,656) during December 31, 2023 primarily related to recording additional valuation allowance on net deferred tax assets in foreign jurisdictions that, in the judgment of management, are not more likely than not to be realized, partially offset by the release of a valuation allowance on the net deferred tax asset in  foreign jurisdictions, which management believes is more likely than not to be realized, as well as changes in foreign exchange rates.

The Company does not assert any earnings to be permanently reinvested with respect to the undistributed earnings of its foreign subsidiaries.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which the Company operates. Under applicable U.S. federal statutes, tax years ended December 31, 2020 through December 31, 2023 remain subject to examination. Under applicable statutes, state and foreign corporate tax returns filed for the Company and its respective foreign subsidiaries for years ended December 31, 2018 through December 31, 2023 remain subject to examination by the respective authorities.