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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before provision (benefit) for income taxes included the following components for the years ended December 31 (in thousands):
| 2024 |  | 2023 |  | 2022
United States | $ | 357,484 |  | $ | 134,509 |  | $ | 191,353 |
Foreign | 24,020 |  | 22,552 |  | 4,885
Total | $ | 381,504 |  | $ | 157,061 |  | $ | 196,238
Significant components of the provision (benefit) for income taxes were as follows for the years ended December 31 (in thousands):
| 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 60,924 |  | $ | 33,084 |  | $ | 10,804 |
State | 18,298 |  | 10,371 |  | 10,118
Foreign | 3,388 |  | 2,804 |  | 2,892 |
Total current | 82,610 |  | 46,259 |  | 23,814
Deferred: |  |  |  |  |
Federal | (63,073) |  |  | (60,673) |  | 26,180 |
State | (20,838) |  |  | (9,172) |  |  | (2,015) |
Foreign | (1,815) |  | 89 |  |  | (2,146)
Total deferred | (85,726) |  |  | (69,756) |  |  | 22,019 |
Tax impact of unrecorded tax benefits liability | 7,586 |  | 4,775 |  | 3,475 |
Provision for (benefit from) income taxes | $ | 4,470 |  |  | $ | (18,722) |  |  | $ | 49,308 |
A reconciliation of our effective income tax rate to the federal statutory rate follows for the years ended December 31 (in thousands):
| 2024 |  | 2023 |  | 2022
Federal income tax at the statutory rate | $ | 80,120 |  |  | $ | 32,983 |  |  | $ | 41,224 |
Excess stock-based compensation benefit | (83,748) |  |  | (106,522) |  |  | (4,616) |
Executive compensation limitation | 51,858 |  |  | 77,350 |  |  | 5,784 |
R&D credits | (36,571) |  |  | (26,204) |  |  | (13,340) |
Nontaxable gain on investments | (19,727) |  |  | — |  |  | — |
Change in unrecognized tax benefits | 7,356 |  |  | 4,351 |  |  | 3,215 |
Other permanent differences | 5,176 |  |  | 1,201 |  |  | 1,118 |
Global intangible low-taxed income | 3,081 |  |  | 1,890 |  |  | 653 |
Foreign derived intangible income deduction | (2,558) |  |  | (961) |  |  | (2,597) |
Foreign tax credit | (1,914) |  |  | (1,922) |  |  | — |
State income taxes, net of federal benefit | 1,713 |  |  | 3,730 |  |  | 7,915 |
Change in valuation allowance | (903) |  |  | (4,695) |  |  | 10,216 |
Tax effects of intercompany transactions | (222) |  |  | (2,033) |  |  | (417) |
Difference between statutory and foreign tax rates | 801 |  |  | 1,013 |  |  | (428) |
Other | 8 |  |  | 1,097 |  |  | 581 |
Provision for (benefit from) income taxes | $ | 4,470 |  |  | $ | (18,722) |  |  | $ | 49,308 |
Effective tax rate | 1.2 | % |  | (11.9) | % |  | 25.1 | %
Significant components of our deferred income tax assets and liabilities are as follows at December 31, 2024 and December 31, 2023 (in thousands):
| 2024 |  | 2023
Deferred income tax assets: |  |  |
R&D capitalization, net | $ | 193,265 |  |  | $ | 99,746 |
Deferred revenue | 66,948 |  |  | 59,443 |
Stock-based compensation | 51,088 |  |  | 10,544 |
Convertible debt, net | 31,603 |  |  | 39,649 |
Reserves, accruals, and other | 21,634 |  |  | 12,264 |
R&D tax credit carryforward | 19,100 |  |  | 16,554 |
Net operating loss carryforward | 17,824 |  |  | 2,115 |
Accrued bonus | 12,101 |  |  | 11,253 |
Lease liability | 11,966 |  |  | 9,664 |
Inventory reserve | 5,794 |  |  | 1,986 |
Deferred compensation | 4,021 |  |  | 2,803 |
Strategic investments | — |  |  | 6,109 |
Amortization | — |  |  | 4,425 |
Total gross deferred tax assets | 435,344 |  |  | 276,555 |
Valuation allowance | (23,054) |  |  | (21,600) |
Total deferred income tax assets, net of valuation allowance | 412,290 |  |  | 254,955 |
Deferred income tax liabilities: |  |  |
Strategic investments | (42,260) |  |  | — |
Amortization | (36,185) |  |  | — |
Depreciation | (16,739) |  |  | (14,575) |
Right of use asset | (10,639) |  |  | (8,404) |
Prepaid expenses | (2,874) |  |  | (2,223) |
Customer contract asset | (1,174) |  |  | (690) |
Goodwill amortization | (509) |  |  | (314) |
Other | — |  |  | (965) |
Total deferred income tax liabilities | (110,380) |  |  | (27,171) |
Net deferred income tax assets | $ | 301,910 |  |  | $ | 227,784 |
Deferred taxes are reflected in the consolidated balance sheet as follows: |  |  |
Non-current tax assets (included in deferred tax asset, net) | 304,282 |  |  | 227,784 |
Non-current tax liabilities (included in other long-term liabilities) | (2,372) |  |  | — |
Total | $ | 301,910 |  |  | $ | 227,784 |
The following table presents the valuation allowance activity for years ended December 31, 2024, 2023 and 2022 (in thousands):
| 2024 |  | 2023 |  | 2022
Balance, beginning of period | $ | 21,600 |  | $ | 26,368 |  | $ | 16,168
Tax provision (benefit) | (576) |  |  | (4,262) |  |  | 10,409 |
Deductions charged to tax provision / benefit | (327) |  | (505) |  | (164)
Additions (reversals) to other accounts | 2,357 |  | (1) |  | (45)
Balance, end of period | $ | 23,054 |  | $ | 21,600 |  | $ | 26,368
As of December 31, 2024, we have recorded a net tax benefit totaling $17.8 million for U.S. federal, state, and foreign net operating loss carryforwards ("NOLs"). As of December 31, 2024, $15.5 million of NOLs may be carried forward indefinitely while the remaining $2.3 million will begin to expire at various times from 2036 through 2044. As of December 31, 2024, we have a total of $26.1 million state (net of federal benefit) R&D credit carryforwards available to offset future income taxes. A total of $2.5 million of the state R&D credits may be carried forward indefinitely while the remaining $23.6 million will begin to expire at various times from 2025 through 2044. As of December 31, 2024, we anticipate sufficient future pre-tax book income to realize a significant portion of our deferred tax assets. However, as we have Arizona R&D tax credits expiring unutilized each year, unrealized investment losses for which realization is uncertain, and specific identified intangibles with an indefinite life, we have recorded a 23.1 million valuation allowance against these specific deferred tax assets as of December 31, 2024. The net change in total valuation allowance for the years ended December 31, 2024, and 2023 was an increase of $1.5 million and decrease of $4.8 million, respectively. The valuation allowance changes are driven primarily by certain state R&D tax credits that are expected to expire unutilized, acquired state NOLs, and movement in deferred tax assets associated with unrealized investment losses and transaction costs incurred in connection with certain investments that are not more likely than not to be realized. Of the net change in the valuation allowance in 2024 and 2023, a decrease of $0.9 million and $4.8 million, respectively, was recorded to tax expense and an increase of $2.4 million and $0 million, respectively, was recorded through the consolidated balance sheet. We consider the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We project that our foreign earnings will be utilized offshore for working capital and future foreign growth and we have not made a provision for U.S. or additional foreign withholding taxes of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. We have estimated the amount of deferred tax liability related to investments in these foreign subsidiaries undistributed earnings is approximately $1.1 million. If we decide to repatriate the undistributed foreign earnings, we will recognize the income tax effects in the period we change our assertion on indefinite reinvestment. We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax purposes. We have made the determination that it is not more likely than not that the full b enefit of the R&D tax credit will be sustained on examination. As such, we recorded a liability for unrecognized tax benefits of $32.7 million as of December 31, 2024. We expect the amount of the unrecognized tax benefit to decrease by approximately $9.0 million within the next 12 months due to statute of limitations expirations. Should the unrecognized benefit of $32.7 million be recognized, our effective tax rate would be favorably impacted. The following table presents a roll forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31 (in thousands):
| 2024 |  | 2023 |  | 2022
Balance, beginning of period | $ | 25,754 |  | $ | 21,492 |  | $ | 18,249
Increase (decrease) in previous year tax positions | 501 |  |  | (215) |  | 232
Increase in current year tax positions | 7,313 |  | 6,963 |  | 3,343
Decrease due to lapse of statute of limitations | (842) |  |  | (2,486) |  |  | (332) |
Balance, end of period | $ | 32,726 |  | $ | 25,754 |  | $ | 21,492
Federal inc ome tax returns for 2021 through 2023 remain open to examination by the U.S. Internal Revenue Service, while state and local income tax returns for 2020 through 2023 also generally remain open to examination by state taxing authorities. The 2010 through 2019 state and local income tax returns are only open to the extent that net operating losses or other tax attributes carrying forward from those years were utilized in 2020 through 2023. The foreign tax returns for 2020 through 2023 also generally remain open to examination, although some foreign jurisdictions can audit returns up to ten years. We recognize interest and penalties related to unrecognized tax benefits within the provision (benefit) for income tax expense line in the consolidated statements of operations and comprehensive income. We have recognized expense (benefit), before federal tax impact, related to interest of $1.2 million, $0.3 million, and $0.1 million in 2024, 2023, and 2022 respectively. As of December 31, 2024, and 2023, we had accrued interest o f $1.8 million and $0.6 million, respectively. As part of the OECD global minimum tax framework, certain jurisdictions in which we operate have enacted or are in the process of implementing top-up tax provisions under Pillar Two. We have assessed the impact of these regulations on our tax position and included an immaterial adjustment in our income tax provision as of December 31, 2024. We continue to monitor legislative developments and will assess potential future impacts as additional guidance and implementation details become available.

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