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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of (loss) income before provision for income taxes on continuing operations were as follows:
202320222021
Domestic$(63,874)$(131,717)$1,348 
Foreign5,144 (6,063)(227)
Total (loss) income before income taxes$(58,730)$(137,780)$1,121 
The provision (benefit) for income taxes on continuing operations consisted of the following:
Year Ended December 31,
202320222021
Current (benefit) / provision
Federal$— $2 $(16)
State92 77 126 
Foreign(1,689)2,756 1,666 
Total current (benefit) / provision$(1,597)$2,835 $1,776 
Deferred (benefit) / provision
Federal$3 $733 $(2,300)
State(4)197 239 
Foreign3,200 (1,062)(2,464)
Total deferred (benefit) / provision$3,199 $(132)$(4,525)
Total (benefit) / provision
Federal$3 $735 $(2,316)
State88 274 365 
Foreign1,511 1,694 (798)
Total (benefit) / provision$1,602 $2,703 $(2,749)
A reconciliation of the U.S. federal statutory income tax rate on continuing operations of 21% for the years ended December 31, 2023, 2022 and 2021 to the Company’s effective tax rate is as follows:
Year Ended December 31,
202320222021
Income tax (benefit) provision at the U.S. federal statutory rate$(12,333)$(28,934)$235 
State income taxes(1,418)(1,208)(454)
Permanent differences(50)380 286 
Change in valuation allowance11,725 14,529 4,693 
Effect of foreign operations1,837 (147)(825)
Stock-based compensation1,728 4,222 (838)
Transaction costs— — 1,247 
Section 162(m)221 493 — 
Derivative and warrant liabilities(36)(1,940)(6,612)
U.S. GILTI inclusion511 139 — 
Goodwill impairment— 13,957 — 
Effect of change in tax rates17 (165)(835)
Research & development tax credits— — (501)
Foreign currency translation & transactions(237)560 254 
Other(363)817 601 
Total provision (benefit) for income taxes$1,602 $2,703 $(2,749)
For the years ended December 31, 2023, 2022 and 2021, the Company’s effective tax rate was (2.7)%, (2.0)% and (245.2)% respectively. For the year ended December 31, 2023, the Company’s effective tax rate differed from the U.S. federal statutory income tax rate of 21% primarily related to a valuation allowance against net deferred tax assets that were not realizable on a more-likely-than-not basis. For the year ended December 31, 2022, the Company’s effective tax rate differed from the U.S. federal statutory income tax rate of 21% primarily related to both a valuation allowance against net deferred tax assets that were not realizable on a more-likely-than-not basis and the impairment of non-deductible goodwill for which no tax benefit was provided. For the year ended December 31, 2021, the Company’s effective tax rate differed from the U.S. federal statutory income tax rate of 21% primarily due to the partial release of the Company’s U.S. valuation allowance as a result of the February 2021 acquisition of HuffPost (the “HuffPost Acquisition”). The Company recorded excess deferred tax liabilities related to the Business Combination which provided a source of future taxable income to support this partial realization of the Company’s pre-existing deferred tax assets. The income tax benefit related to this change in the Company’s valuation allowance was offset by an income tax provision for foreign taxes.
In August 2022, the Inflation Reduction Act and CHIPS and Science Act were both enacted. This new legislation included the implementation of a new corporate alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions. The income tax provisions of the legislation had limited applicability to the Company and did not have a material impact on the Company’s consolidated financial statements.
On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released “Pillar Two” model rules defining a 15% global minimum tax rate for large multinational corporations with consolidated revenue above €750 million (or approximately $827.7 million as of December 31, 2023). The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the “Pillar Two Framework” expected by calendar year 2024. The Company continues to evaluate the Pillar Two Framework and its potential impact on future periods, however based on the current proposed revenue thresholds, the Company does not expect to be subject to tax changes associated with Pillar Two.
Significant components of deferred tax assets and liabilities as of were as follows:
Year Ended December 31,
20232022
Deferred tax assets
Net operating loss carryforwards$101,422 $97,812 
Accruals2,119 2,295 
Stock-based compensation1,913 2,859 
Bad debt263 360 
Interest expense7,857 4,146 
Lease liabilities14,442 20,022 
Section 174 capitalized R&D costs13,057 9,826 
Capitalized production expenses330 2,384 
Other1,729 94 
Total deferred tax asset$143,132 $139,798 
Valuation allowance(116,404)(104,679)
Net deferred tax asset$26,728 $35,119 
Deferred tax liabilities
Deferred state income tax(3,158)(2,678)
Operating lease, right-of-use asset(11,334)(16,078)
Depreciation and amortization(710)(1,529)
Intangible assets(11,558)(11,630)
Total deferred tax liability$(26,760)$(31,915)
Net deferred tax (liability) asset$(32)$3,204 
Net deferred tax assets are included within prepaid expenses and other assets and net deferred tax liabilities are included within other liabilities on the Company’s consolidated balance sheets.
In assessing the realizability of its deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based upon the weight of available evidence, the Company concluded it is more likely than not that it will not be able to realize its U.S. deferred tax assets and therefore has maintained a full valuation allowance on its U.S. deferred tax assets. In addition, the Company maintains a valuation allowance against certain deferred tax assets in the United Kingdom (the “U.K.”), Spain, Japan and Canada. The Company’s valuation allowance increased by approximately $11.7 million in 2023.
As of December 31, 2023, the Company has U.S. federal and state NOLs of approximately $358.3 million and $13.3 million, respectively. Of the $358.3 million of U.S. federal NOLs, $202.2 million expire in tax year beginning 2030 through 2037 if not utilized and $156.1 million that have an indefinite lived carryforward period. The $13.3 million of state NOLs will expire in tax years beginning in 2025 to 2043 if not utilized. As of December 31, 2023, the Company has foreign NOL carryforwards of $1.1 million in Canada expiring in 2041 through 2043, $5.0 million in Japan expiring in 2026 through 2033, and $1.3 million in Spain and $15.9 million in the U.K., both with indefinite carryforward periods. Utilization of NOLs and tax credit carryforwards are subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), in the event of a change in the Company’s ownership, as defined in current income tax regulations.
As of December 31, 2023, the Company has deferred interest expense carryforwards under Section 163(j) of the Code of $47.2 million which may be carried forward indefinitely but only available to offset 30% of tax adjusted earnings before interest and taxes (EBIT). In addition, the Company had federal research and development tax credits of approximately $7.5 million, which expire in the tax years beginning in 2032 through 2040, if not utilized.
Notwithstanding the current taxation of certain foreign subsidiaries under GILTI and one-time transition taxation enacted as part of the Tax Cut and Jobs Act, the Company intends to continue to reinvest its foreign earnings indefinitely outside the U.S. If these future earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes (if any) and applicable withholding taxes. It is not practicable to estimate the tax impact of the reversal of the outside basis difference, or the repatriation of cash due to the complexity of its hypothetical calculation.
The Company applies the applicable authoritative guidance which prescribes a comprehensive model in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. The Company recognizes interest and penalties related to income tax positions taken on the Company’s tax returns in income tax expense in the consolidated statements of operations. As of December 31, 2023 and 2022, the Company recorded an uncertain tax position of $nil including interest and penalties related to state taxes. As of December 31, 2023 and 2022, the Company had no uncertain tax positions.
The Company, or one of its subsidiaries, files its tax returns in the U.S. and certain state and foreign income tax jurisdictions with varying statute of limitations. The earliest years’ tax returns filed by the Company that are still subject to examination by the tax authorities in the major jurisdictions are as follows:
Years
United States2019
United Kingdom2022
Japan2018
Canada2019