Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Inflation Reduction Act, signed into law on August 16, 2022, provides tax incentives for certain industries and imposes a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on stock buybacks. The Company is subjected to the new excise tax on certain stock buybacks that occur after December 31, 2023. The Company does not anticipate a material impact from the Inflation Reduction Act on the Company's consolidated financial statements.

The following table presents domestic and foreign components of (loss) income before income taxes as follows for the periods indicated:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Domestic	$	(104,161)	$	42,080	$	(378,831)
Foreign	2,272		3,259		(1,808)
(Loss) income before taxes	$	(101,889)	$	45,339	$	(380,639)

The federal, state and foreign components of the income tax (benefit) expense are summarized as follows:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Current:
Federal	$	34	$	407	$	(727)
State	216		306		513
Foreign	3,793		2,189		1,735
Total current income tax expense	4,043		2,902		1,521
Deferred:
Federal	(4,137)		(257)		(2,952)
State	(633)		(166)		(80)
Foreign	(1,046)		(1,364)		(364)
Total deferred tax benefit	(5,816)		(1,787)		(3,396)
Total income tax (benefit) expense	$	(1,773)	$	1,115	$	(1,875)

The effective tax rate of the provision for income tax differs from the federal statutory rate as follows for the periods indicated:

	Year Ended December 31,
(in thousands)	2023				2022				2021
Federal statutory income tax rate	$	(21,398)	21.0	%	$	9,521	21.0	%	$	(79,935)	21.0	%
State taxes, net of federal benefit	(3,083)		3.0		(1,041)		(2.3)		(1,041)		0.3
Officer compensation	844		(0.8)		2,323		5.1		486		(0.1)
Change in fair value of warrants	(2,503)		2.5		(16,452)		(36.3)		58,236		(15.3)
Change in fair value of earn-out shares	—		—		—		—		9,891		(2.6)
Transaction costs	—		—		(32)		(0.1)		3,312		(0.9)
Share-based compensation	2,922		(2.9)		—		—		—		—
Foreign rate differential	338		(0.3)		(10)		—		475		(0.1)
R&D credit	(824)		0.8		(900)		(2.0)		(152)		—
Permanent differences	2,183		(2.1)		—		—		—		—
Change in valuation allowance	18,400		(18.1)		6,242		13.8		4,755		(1.2)
Other	1,348		(1.3)		1,464		3.2		2,098		(0.6)
Income tax (benefit) expense	$	(1,773)	1.7	%	$	1,115	2.4	%	$	(1,875)	0.5	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. The components of the deferred tax assets are as follows for the periods indicated:

(in thousands)	December 31, 2023		December 31, 2022
Deferred income tax assets
State taxes	$	23	$	55
Accrued expenses	5,807		1,608
Inventories	4,944		4,772
Accounts receivable	1,563		625
Section 163(j) limitation	6,031		4,782
Net operating loss carryforwards	12,379		3,680
Share-based compensation	4,032		5,072
Lease liabilities	3,191		4,469
Capitalized research	5,305		1,730
Other	1,611		685
Total deferred income tax assets	44,886		27,478
Deferred income tax liabilities
Goodwill and intangibles	(6,713)		(5,582)
Prepaid expenses	(434)		(435)
Right-of-use assets	(2,506)		(3,966)
Property and equipment	(2,165)		(3,852)
Total deferred tax liabilities	(11,818)		(13,835)
Valuation allowance	(33,239)		(14,839)
Net deferred income tax liabilities	$	(171)	$	(1,196)

The Company’s net deferred tax liability as presented in the consolidated balance sheets consists of the following items as of the dates indicated:

(in thousands)	December 31, 2023		December 31, 2022
Deferred income tax assets	$	531	$	815
Deferred income tax liabilities	(702)		(2,011)
Net deferred income tax liabilities	$	(171)	$	(1,196)

The Company has established a valuation allowance against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized. In determining whether deferred tax assets are realizable, the Company considered numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize deferred tax assets. The valuation allowance increased $18.4 million in 2023 from 2022 primarily due to recognizing valuation allowances against deferred tax assets of certain state and foreign net operating loss carryforwards and federal and state interest carryforwards.

If the Company were to release the valuation allowance upon management determining that it is more likely than not the deferred tax assets could be recognized, $33.2 million of income tax benefit would be recorded to continuing operations.

At December 31, 2023, the Company had gross federal, state and foreign net operating loss carryforwards of $42.6 million, $57.3 million and $1.8 million, respectively. The state losses expire beginning in 2030 and the foreign losses beginning in 2028.

As of December 31, 2023 and December 31, 2022, the Company had recorded gross unrecognized tax benefits of $1.1 million and $0.7 million, respectively. All of the unrecognized tax benefits as of December 31, 2023, if recognized, would not materially impact the effective tax rate. As of December 31, 2023, there were no unrecognized tax benefits that the Company expects would change significantly over the next twelve months. The Company recognizes interest expense and penalties associated with uncertain tax positions as a component of income tax expense. The Company has not recognized any interest or penalties because of losses.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

(in thousands)	December 31, 2023		December 31, 2022
Unrecognized tax benefits at beginning of period	$	674	$	210
Increases for tax positions in prior periods	230		260
Decreases for tax positions in prior periods	(112)		(36)
Increases for tax positions in current period	312		240
Total unrecognized tax benefits	$	1,104	$	674

The Company is subject to taxation and files income tax returns in the United States federal jurisdiction and many state and foreign jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions. The Company’s tax returns remain open for examination in the United States for years 2020 through 2022. Its foreign subsidiaries are generally subject to examination three years following the year in which the tax obligation originated. The years subject to audit may be extended if the entity substantially understates corporate income tax.

APB 23 (codified as FASB ASC 740-10-25-3) allows an exception to the general rule that a U.S. multinational company must accrue U.S. taxes on foreign earnings of its controlled non-U.S. subsidiaries. Under this exception, a U.S. multinational company is not required to accrue U.S. taxes on foreign earnings that are indefinitely reinvested in its foreign subsidiaries. The Company will continue to indefinitely reinvest earnings from its foreign subsidiaries, which are not significant.

During the year ended December 31, 2023, the Company received $5.4 million for the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act, of which $4.9 million was recorded in other (income) expense, net and $0.5 million was recorded in interest income on the Company’s Consolidated Statements of Comprehensive Income (Loss).