INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income (loss) before income tax:	Year ended December 31,
(in thousands)	2021		2020		2019
Domestic	$	(5,688)	$	(42,905)	$	1,769
Foreign	14,559		16,688		(8,365)
Income (loss) before income taxes	$	8,871	$	(26,217)	$	(6,596)

Provision for (benefit from) income taxes:	Year ended December 31,
(in thousands)	2021		2020		2019
Current:
Federal	$	4	$	124	$	(180)
State	85		93		108
Foreign	2,469		2,103		1,525
Deferred:
Foreign	(6,941)		734		(2,125)
Total provision for (benefit from) income taxes	$	(4,383)	$	3,054	$	(672)

The difference between the tax provision at the statutory federal income tax rate and the provision for (benefit from) income tax as a percentage of income (loss) before income taxes (effective tax rate) for each period was as follows:

	Year ended December 31,
	2021		2020		2019
Statutory U.S. federal income tax rate	21	%	21	%	21	%
Increase (reduction) in rate resulting from:
Differential in rates on foreign earnings	42	%	(11)	%	(37)	%
Change in valuation allowance	(113)	%	(16)	%	14	%
Change in liabilities for uncertain tax positions	(2)	%	—	%	6	%
Non-deductible stock-based compensation	11	%	(2)	%	(8)	%
Permanent differences	—	%	(2)	%	11	%
Adjustments related to tax positions taken during prior years	(3)	%	—	%	6	%
Research and development credits	(10)	%	—	%	—	%
Other	3	%	(2)	%	(3)	%
Effective tax rate	(49)	%	(12)	%	10	%

The Company operates in multiple jurisdictions and its profits are taxed pursuant to the tax laws of these jurisdictions. The Company’s effective income tax rate differs from the U.S. federal statutory rate primarily due to geographical mix of income and losses, full valuation allowance against U.S. federal and state deferred tax assets, foreign withholding taxes and income taxes on earnings from operations in foreign tax jurisdictions. The Company’s effective income tax rate may be affected by changes in its interpretations of tax laws and tax agreements in any given jurisdiction, utilization of net operating loss and tax credit carry forwards, changes in geographical mix of income and expense, and changes in management's assessment of matters such as the ability to realize deferred tax assets, as well as one-time discrete items. During fiscal 2021, the Company recorded a one-time benefit of approximately $8.6 million due to the release of valuation allowance on deferred tax assets in foreign jurisdictions due to its improved earnings in recent years and increasing future projected earnings. During fiscal 2019, the Company recorded a one-time benefit of approximately $2.0 million due to changes in the Company's global tax structure, and a $0.8 million benefit from a valuation allowance release for one of its foreign subsidiaries. This release of the valuation allowance was due to changes in forecasted taxable income resulting from the Company receiving a favorable tax ruling during 2019.

The components of deferred taxes are as follows:

	As of December 31,
(in thousands)	2021		2020
Deferred tax assets:
Reserves and accruals	$	24,833	$	21,823
Net operating loss carryforwards	33,070		39,733
Research and development credit carryforwards	39,730		38,179
Deferred stock-based compensation	1,354		1,202
Intangibles	7,321		7,838
Operating lease liabilities	8,697		7,822
Capitalized research and development expenses	9,681		10,805
Other	31		442
Gross deferred tax assets	124,717		127,844
Valuation allowance	(90,247)		(99,585)
Gross deferred tax assets after valuation allowance	34,470		28,259
Deferred tax liabilities:
Depreciation	(6,597)		(6,399)
Convertible notes	(3,652)		(4,708)
Operating lease right-of-use assets	(7,402)		(6,529)
Other	—		—
Gross deferred tax liabilities	(17,651)		(17,636)
Net deferred tax assets	$	16,819	$	10,623

The following table summarizes the activities related to the Company’s valuation allowance:

	Year ended December 31,
(in thousands)	2021		2020		2019
Balance at beginning of period	$	99,585	$	95,518	$	77,144
Additions	310		6,690		23,929
Deductions	(9,648)		(2,623)		(5,555)
Balance at end of period	$	90,247	$	99,585	$	95,518

Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

As of December 31, 2021, the Company had $103.6 million, $61.8 million, $61.1 million of foreign, U.S. federal and state net operating loss (“NOL”) carryforwards, respectively. Certain foreign NOLs expire beginning in 2026, if not utilized, while the majority of the foreign NOLs carryforward indefinitely. $28.9 million of U.S. federal NOL carryforward expires at various dates beginning in 2022 through 2037, if not utilized, and the remainder carries forward indefinitely. Certain U.S. states NOL carryforward expires at various dates beginning in 2029, if not utilized.

As of December 31, 2021, the Company had U.S. federal and California state tax credit carryforwards of $15.5 million and $37.3 million, respectively. If not utilized, the U.S. federal tax credit carryforwards will begin to expire in 2031, while the California tax credit carryforward will not expire.

In the event the Company experiences an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), the Company’s ability to utilize net operating losses, tax credits and other tax attributes may be limited.

The Company has not provided U.S. state income taxes and foreign withholding taxes on approximately $42.0 million of cumulative earnings for certain non-U.S. subsidiaries, because such earnings are intended to be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanently in duration is not practicable.

The Company applies the provisions of the applicable accounting guidance regarding accounting for uncertainty in income taxes, which require application of a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits the recognition of a tax benefit measured at the largest amount of such tax benefit that, in the Company’s judgment, is more than fifty percent likely to be realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions to be recognized in earnings in the period in which such determination is made. The Company will continue to review its tax positions and provide for, or reverse, unrecognized tax benefits as issues arise. As of December 31, 2021, none of unrecognized future tax benefits would favorably impact the effective tax rate in the future due to a full valuation allowance in the United States. The following table summarizes the activities related to the Company’s gross unrecognized tax benefits:

	Year ended December 31,
(in millions)	2021		2020		2019
Balance at beginning of period	$	17.6	$	17.0	$	18.0
Increase in balance related to tax positions taken during current year	0.3		0.3		0.2
Decrease in balance as a result of a lapse of the applicable statutes of limitations	(0.2)		—		(0.1)
Increase in balance related to tax positions taken during prior years	—		0.3		—
Decrease in balance related to tax positions taken during prior years	(3.9)		—		(1.1)
Balance at end of period	$	13.8	$	17.6	$	17.0

The Company recognizes interest and penalties related to unrecognized tax positions in income tax expenses on the Consolidated Statements of Operations. The net interest and penalties charges recorded for the years ended December 31, 2019 through 2021, were not material.

The 2015 through 2021 tax years generally remain subject to examination by U.S. federal and most state tax authorities. In addition, the Company remains subject to income tax examination for several other jurisdictions, including in Switzerland for years after 2016, Israel for years after 2019, and France for years after 2016.