Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

To determine its income tax expense or benefit for interim periods, consistent with accounting standards, the Company applies an estimated annual effective income tax rate to year-to-date results, plus any applicable discrete items, which are recorded in the period in which they occur. Discrete items can include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitations, and an increase or decrease in valuation allowances on deferred tax assets.

The Company recorded an income tax benefit of $2.8 million for the three months ended September 30, 2023 compared with an income tax benefit of $0.1 million for the three months ended September 30, 2022. The higher income tax benefit during the three months ended September 30, 2023 reflected a change in estimate related to the finalization of a tax

return filing. The Company recorded an income tax benefit of $26.2 million for the nine months ended September 30, 2023 compared with an income tax benefit of $83 thousand for the nine months ended September 30, 2022. The higher income tax benefit in 2023 was primarily the result of the release of a valuation allowance as a result of an internal reorganization of its subsidiaries that occurred in the second quarter of 2023 as well as a change in estimate in the third quarter of 2023 related to the finalization of a tax return filing. The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighed the evidence based on its objectivity. After consideration of the evidence, the Company believes it would more likely than not be able to utilize existing loss carryforwards and research and development tax credits to offset future income in the United States. The operating entity in the United States has a history of cumulative net profits as it carries out services for other entities in the group.