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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign components of income before incomes taxes were as follows (in thousands):
|  | Years Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Domestic |  | $ | (36,990) |  |  | $ | 30,983 |  |  | $ | 51,442 |
Foreign |  | 5,344 |  |  | 3,774 |  |  | 2,600 |
|  | $ | (31,646) |  |  | $ | 34,757 |  |  | $ | 54,042 |
Income taxes consisted of the following (in thousands):
|  | Years Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |  |
Federal |  | $ | 3,181 |  |  | $ | (2,407) |  |  | $ | 3,671 |
State |  | 2,110 |  |  | 6,493 |  |  | 6,555 |
Foreign |  | 2,779 |  |  | 2,006 |  |  | 874 |
Current income tax |  | 8,070 |  |  | 6,092 |  |  | 11,100 |
Deferred: |  |  |  |  |  |
Federal |  | (8,120) |  |  | 2,050 |  |  | 6,336 |
State |  | (926) |  |  | (2,525) |  |  | (4,372) |
Foreign |  | (923) |  |  | (185) |  |  | (32) |
Deferred income tax |  | (9,969) |  |  | (660) |  |  | 1,932 |
|  | $ | (1,899) |  |  | $ | 5,432 |  |  | $ | 13,032 |
The differences between the statutory and effective tax rates, expressed as a percentage of net income before income taxes, were as follows:
|  | Years Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Impact of state taxes |  | 0.9 |  |  | 2.6 |  |  | (4.9) |
Foreign operations |  | (4.2) |  |  | 0.8 |  |  | — |
R&D tax credits |  | 14.0 |  |  | (13.5) |  |  | (9.1) |
U.S. tax impact of foreign operations |  | (0.4) |  |  | (2.4) |  |  | 7.8 |
Stock-based compensation |  | (24.3) |  |  | 8.8 |  |  | — |
Other permanent items |  | (1.7) |  |  | 2.5 |  |  | 1.2 |
Provision to return adjustments |  | 6.4 |  |  | (9.7) |  |  | (0.4) |
Valuation allowance |  | (2.1) |  |  | — |  |  | 1.3 |
Attribute expiration |  | (0.1) |  |  | 0.8 |  |  | 5.5 |
Uncertain tax positions |  | (3.5) |  |  | 4.7 |  |  | 1.7 |
|  | 6.0 | % |  | 15.6 | % |  | 24.1 | %
The significant components of the Company’s deferred tax assets were as follows (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Deferred tax assets: |  |  |  |
Net operating loss carryforwards |  | $ | 1,405 |  |  | $ | 1,020 |
Tax credit carryforwards |  | 53,788 |  |  | 58,349 |
Inventory |  | 14,737 |  |  | 16,592 |
Accruals and reserves |  | 5,090 |  |  | 6,684 |
Deferred revenue |  | 9,463 |  |  | 13,460 |
Stock-based compensation |  | 13,787 |  |  | 12,087 |
Lease liability |  | 1,445 |  |  | 2,277 |
Capitalized R&D |  | 114,050 |  |  | 93,340 |
Other |  | 383 |  |  | 144 |
Gross deferred tax assets |  | 214,148 |  |  | 203,953 |
Valuation allowance |  | (30,571) |  |  | (29,908) |
Total deferred tax assets |  | 183,577 |  |  | 174,045 |
Deferred tax liabilities: |  |  |  |
Fixed assets |  | (1,760) |  |  | (1,484) |
Right of use assets |  | (1,006) |  |  | (1,710) |
Intangible assets |  | (3,211) |  |  | (3,160) |
Total deferred tax liabilities |  | (5,977) |  |  | (6,354) |
|  | $ | 177,600 |  |  | $ | 167,691 |
All deferred taxes, along with any related valuation allowance, are classified in the Consolidated Balance Sheet as long-term. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized. At each reporting period, the Company assesses the estimated future realizability of the gross carrying value of its deferred tax assets. The Company’s periodic assessments take into consideration both positive evidence (future profitability projections for example and recent financial performance) and negative evidence (historical financial performance for example) as it relates to evaluating the future recoverability of its deferred tax assets. The valuation allowance increased by $0.7 million from 2023 to 2024. During the twelve months ended December 31, 2024, the Company released a valuation allowance of $0.6 million related to federal foreign tax credits that the Company expects to utilize prior to expiration. The Company continues to maintain a valuation allowance of $30.6 million on certain U.S. state deferred tax assets that the Company believes are not more likely than not to be realized in future periods. As of December 31, 2024, the Company had U.S. state net operating losses of approximately $23.6 million which will expire at various dates through 2039 if not utilized. Additionally, the Company has U.S. federal, California and other U.S. states research and development credits of approximately $39.6 million, $52.5 million and $2.7 million as of December 31, 2024, respectively. The U.S. federal research and development credits will expire at various dates through 2044 if not utilized. The California research and development credits have no expiration date. The credits related to other various U.S. states have begun to expire and will continue to expire at various dates through 2039. Uncertain Tax Positions ASC 740, “Income Taxes,” prescribes a recognition threshold and measurement attribute to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The standard requires the Company to recognize the financial statement effects of an uncertain tax position when it is more likely than not that such position will be sustained upon audit. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense, respectively, in its Consolidated Statements of Comprehensive Income (Loss). The Company’s unrecognized tax benefits were as follows (in thousands):
|  | Years Ended December 31,
|  | 2024 |  | 2023
Balance at beginning of year |  | $ | 32,449 |  |  | $ | 29,215 |
Reduction for tax positions related to prior year |  | (121) |  |  | (19) |
Additions for tax positions related to prior year |  | — |  |  | 580 |
Additions for tax positions related to current year |  | 2,310 |  |  | 2,673 |
Balance at end of year |  | $ | 34,638 |  |  | $ | 32,449 |
As of December 31, 2024 and 2023, the Company had unrecognized tax benefits of $34.6 million and $32.4 million, respectively, $18.9 million of which would affect the Company’s effective tax rate if recognized. There were no accrued interest or penalties for uncertain income tax as of December 31, 2024. The Company files tax returns in the United States and various state jurisdictions, China, India and the United Kingdom. The tax years 2000 through 2024 remain open and subject to examination by the appropriate governmental agencies due to tax attribute carryforwards. In December 2021, the Organization for Economic Cooperation and Development enacted model rules for a new global minimum tax framework (“Pillar Two”), and certain governments in countries which the Company operates have enacted local Pillar Two legislation, with an effective date from January 1, 2024. The Company currently does not expect Pillar Two to have a material impact on its financial statements.

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