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Income Taxes
 3 Months Ended
Mar. 31, 2025
Income Taxes  
Income Taxes

4.Income Taxes

For the three months ended March 31, 2025, the Company recorded an income tax provision of approximately $0.6 million. The Company generated taxable income in the United States during the period; however, no U.S. federal tax expense was recognized as the taxable income was fully offset by the utilization of net operating loss carryforwards (“NOLCO”). The income tax provision recorded for the period primarily relates to utilization of U.S. deferred tax assets, State income tax provisions, the Company’s foreign subsidiaries income tax provisions in accordance with local tax regulations, the tax impact of Global Intangible Low-Taxed Income (“GILTI”) inclusions, offset in part by the release of the valuation allowance for the deferred tax assets of one of the Company’s Canadian subsidiary and reversal of uncertain tax positions under ASC 740.

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The estimated annual effective tax rate applied to the three-month period ended March 31, 2025 differs from the U.S. federal statutory rate of 21% principally due to the favorable effect of stock-based compensation, change in valuation allowance, and change in unrecognized tax benefits, offset in part by IRS section 162(m) adjustments, state income tax provisions, tax effect of foreign operations, and income earned outside the U.S. which is subject to the U.S. tax on global intangible low taxed income (“GILTI”).

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The estimated annual effective tax rate applied to the three-month period ended March 31, 2024, differs from the U.S. federal statutory rate of 21% principally due to income earned outside the U.S. which is subject to the U.S. tax on global intangible low taxed income (“GILTI”), provision on uncertain tax positions, true up adjustment on prior year tax provision, and other net increases, offset in part by a reduction in the valuation allowance and foreign exchange gains and losses.

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During the first quarter of 2025, the Company determined it was more likely than not that one of the Company’s subsidiaries in Canada would be able to realize the benefit of the deferred tax assets in Canada, 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 Canadian subsidiary, as well as expectations regarding the generation of future taxable income.

The reconciliations of the U.S. federal statutory rate with the Company’s effective tax rate for the three months ended March 31, 2025 and 2024, respectively, are summarized in the table below:

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For the Three Months

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​

​

Ended March 31,

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2025

    

2024

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Federal income tax expense (benefit) at statutory rate

 

21.0

%

21.0

%

Effect of:

 

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​

​

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Section 162(m)

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28.1

​

-

​

State income tax net of federal benefit

​

2.1

​

0.7

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Tax effects of foreign operations

​

1.2

​

2.4

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GILTI provisions

​

1.1

​

11.8

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Withholding tax

​

0.3

​

2.0

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Return to provision true up

​

-

​

5.1

​

Foreign operations permanent differences - foreign exchange gains and losses

​

-

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(7.9)

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Deemed interest

​

(0.3)

​

(2.7)

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Foreign rate differential

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(0.5)

​

0.5

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Change in unrecognized tax benefits (ASC 740)

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(1.5)

​

6.1

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Change in valuation allowance

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(3.3)

​

(10.4)

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Effect of stock-based compensation

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(40.8)

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0.7

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Other

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(0.1)

​

0.7

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Effective tax rate

​

7.3

%

30.0

%

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The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2025 (in thousands):

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Unrecognized

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Tax Benefits

Balance - January 1, 2025

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$

999

Increase for current period tax positions

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76

Decrease for prior year tax positions

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(213)

Interest accrual

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10

Foreign currency remeasurement

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4

Balance - March 31, 2025

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$

876

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