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Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Taxes  
Income Taxes

5.Income Taxes

Income taxes primarily consist of a provision for foreign taxes recorded by the Company’s foreign subsidiaries in accordance with local tax regulations.

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The estimated annual effective tax rate applied to the nine-month period ended September 30, 2024 differs from the U.S. federal statutory rate of 21% principally due to the release of the U.S. valuation allowance, state income taxes and provision on uncertain tax positions.

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The estimated annual effective tax rate applied to the nine-month period ended September 30, 2023 differs from the U.S. federal statutory rate of 21% principally due to the change in valuation allowance, tax effect of foreign operations, and Section 162(m) of the Internal Revenue Code of 1986, as amended, offset in part by the effect of stock-based compensation expense.

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During the third quarter of 2024, the Company determined it was more likely than not that the Company would be able to realize the benefit of the deferred tax assets in the United States, resulting in the release of the valuation allowance. In reaching this determination, the Company considered the growing trend of profitability over the last three years in the United States, as well as expectations regarding the generation of future taxable income.

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The reconciliations of the U.S. federal statutory rate with the Company’s effective tax rate for the nine months ended September 30, 2024 and 2023, respectively, are summarized in the table below:

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​

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​

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For the Nine Months

​

​

​

Ended September 30,

​

​

    

2024

    

2023

​

Federal income tax expense (benefit) at statutory rate

 

21.0

%

(21.0)

%

Effect of:

 

​

​

​

​

GILTI provisions

​

2.8

​

—

​

Withholding tax

​

0.8

​

6.0

​

Tax effects of foreign operations

​

0.8

​

35.7

​

Foreign operations permanent differences - foreign exchange gains and losses

​

0.3

​

(2.4)

​

Section 162 (m)

​

0.0

​

32.2

​

Effect of stock-based compensation

​

(0.4)

​

(74.3)

​

Foreign rate differential

​

(0.7)

​

(4.7)

​

Deemed interest

​

(0.9)

​

(8.4)

​

Return to provision true up

​

(1.4)

​

(4.6)

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Change in unrecognized tax benefits (ASC 740)

​

(3.1)

​

6.9

​

State income tax net of federal benefit

​

(4.5)

​

1.1

​

Change in valuation allowance

​

(54.6)

​

77.3

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Other

​

0.1

​

0.4

​

Effective tax rate

​

(39.8)

%

44.2

%

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The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the nine months ended September 30, 2024 (in thousands):

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​

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Unrecognized

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Tax Benefits

Balance - January 1, 2024

​

$

1,942

Increase for current period tax positions

​

 

179

Decrease for prior year tax positions

​

​

(662)

Interest accrual

​

 

78

Foreign currency remeasurement

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(17)

Balance - September 30, 2024

​

$

1,520

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During the three and nine months ended September 30, 2024, the Company reversed an accrual for $0.6 million in unrecognized tax benefits for a subsidiary because the examination period for an open tax year had prescribed. The Company expects that unrecognized tax benefits as of September 30, 2024, if recognized, would have a material impact on the Company’s effective tax rate.