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INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

16.INCOME TAXES

Before revocation of the S Election on July 27, 2020, the Company had historically been taxed as an S-Corporation for U.S. federal and most state income tax purposes. This resulted in income not being subject to U.S. federal income taxes or state income taxes in those states where the S-Corporation status was recognized. Therefore, before July 27, 2020, no provision or liability for federal or state income tax had been provided in the consolidated financial statements except for those states where the S-Corporation status was not recognized or that imposed a tax on S-Corporations. The provision for income tax in the historical periods prior to the Offering consisted of these state taxes and taxes from certain foreign jurisdictions where the Company was subject to tax.

The revocation of the S Election was treated as a change in tax status resulting in the recording of the deferred tax effects of such change to income from continuing operations on the date of such revocation. The termination of the S Election had a material impact on the Company’s 2020 results of operations and financial condition. As such, the Company’s income tax provision for periods subsequent to the C-Corporation conversion will not be comparable to periods prior to such conversion.

For U.S. corporate income tax purposes, the Company apportioned its 2020 results between the S-Corporation and C-Corporation periods. This allocation effectively resulted in a blended income tax rate for the 2020 year, as only the C-Corporation net losses were subject to both U.S. federal and state corporate income tax, while the S-Corporation earnings were only subject to tax in those states that tax S-Corporations or do not recognize S-Corporation status.

The components of net income (loss) before income taxes, by geography, are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	For the Year Ended December 31,
​	​	2022			2021			2020
U.S.	​	$	5,827	​	$	5,608	​	$	(107,959)
Foreign	​		(15,957)	​		(9,534)	​		90
Net loss before income taxes	​	$	(10,130)	​	$	(3,926)	​	$	(107,869)

​

Income tax expense (benefit) consists of the following:

​

​	​	​	​	​	​	​	​	​	​
​	​	For the Year Ended December 31,
​	​	2022			2021			2020
Current income taxes:		​			​			​
Federal	​	$	1,696	​	$	—	​	$	—
State and local	​	​	1,068	​	​	155	​	​	617
Foreign	​		577	​		468	​		94
Total current	​		3,341	​		623	​		711
Deferred income taxes:	​			​			​
Federal	​	​	904	​	​	(1,849)	​	​	(27,076)
State and local	​		72	​		(7)	​		(6,491)
Foreign	​		(2,143)	​		(1,214)	​		68
Total deferred	​		(1,167)	​		(3,070)	​		(33,499)
Income tax expense (benefit)	​	$	2,174	​	$	(2,447)	​	$	(32,788)

​

During the year ended December 31, 2022, the Company recognized a $12 income tax benefit in accumulated other comprehensive loss relating to unrealized gains (losses) from foreign currency translation adjustments, revaluations, and available-for-sale securities. During the year ended December 31, 2021, the Company recognized a $89 income tax expense in accumulated other comprehensive loss relating to unrealized gains from foreign currency translation adjustments and revaluations.

The reconciliation of the effective tax rate to tax at the statutory rates for the years ended December 31 is as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		2022					2021					2020
​	​	Total		​	Tax Rate	​	Total		​	Tax Rate		Total		​	Tax Rate
Pretax net loss	​	$	(10,130)			​	$	(3,926)			​	$	(107,869)			​
Taxes:	​		​			​					​					​
U.S. federal income tax at statutory rate	​	$	(2,128)		21.0	%	$	(825)		21.0	%	$	(22,652)		21.0	%
State income taxes	​	​	441		(4.4)	%	​	678		(17.3)	%	​	(1,811)		1.7	%
Tax effect of S-Corporation status	​	​	—	​	—	%	​	—	​	—	%	​	21,325	​	(19.8)	%
Impact of change in tax status	​	​	—	​	—	%	​	—	​	—	%	​	(25,396)	​	23.5	%
Stock-based compensation expense	​	​	1,787	​	(17.6)	%	​	(4,550)	​	115.9	%	​	(5,809)	​	5.4	%
Impact of foreign operations	​		1,352	​	(13.3)	%		954	​	(24.3)	%		(56)	​	0.1	%
Transaction costs	​	​	176	​	(1.7)	%	​	1,082	​	(27.6)	%	​	—	​	—	%
U.S. taxation of foreign earnings	​	​	(179)	​	1.8	%	​	144	​	(3.7)	%	​	81	​	(0.1)	%
Nondeductible compensation	​	​	485	​	(4.8)	%	​	682	​	(17.4)	%	​	883	​	(0.8)	%
Tax credits	​	​	(341)	​	3.4	%	​	(488)	​	12.4	%	​	(44)	​	0.0	%
Change in valuation allowance	​	​	427	​	(4.2)	%	​	373	​	(9.5)	%	​	109	​	(0.1)	%
Other permanent items, net	​	​	154		(1.7)	%	​	(497)		12.8	%	​	582		(0.5)	%
Taxes and effective tax rate	​	$	2,174		(21.5)	%	$	(2,447)		62.3	%	$	(32,788)		30.4	%

​

The effective tax rate in 2022 decreased to (21.5)% from 62.3% in 2021. The income tax expense in 2022 was primarily driven by a net shortfall in tax benefits on exercises and vestings of stock awards and limitations on deductions of certain employees’ compensation under Internal Revenue Code Section 162(m) (“IRC 162(m)”), partially offset by the favorable impact of tax credits and foreign tax benefits from the deduction for foreign-derived intangible income.  

The effective tax rate in 2021 increased to 62.3% from 30.4% in 2020. The income tax benefit in 2021 was primarily driven by exercises and vestings of stock awards partially offset by the unfavorable impact of limitations on deductions of certain employees’ compensation under IRC 162(m), and acquisition costs.

The impact of foreign operations in 2022 and 2021 primarily reflects losses in Ireland taxed at 12.5%, as well as income or losses taxed at rates in other foreign jurisdictions, as opposed to the statutory U.S. federal income tax rate. The impact of foreign operations were not significant in 2020.

Significant components of the Company’s net deferred tax assets (liabilities) are as follows:

​

​	​	​	​	​	​	​
​	​	As of December 31,
Deferred tax assets:		2022			2021
Deferred revenue	​	$	2,981	​	$	3,788
State operating loss carry forwards	​		2,831	​		3,894
Federal and foreign loss carry forwards	​		11,318	​		21,617
Accrued expenses	​		2,450	​		2,023
Accrued variable compensation	​		—	​		3,110
Deferred and stock-based compensation	​		23,634	​		24,971
Operating lease liabilities	​	​	6,272	​	​	7,204
Tax credits	​	​	—	​	​	532
Other	​		—	​		53
Deferred tax assets	​		49,486	​		67,192
Valuation allowance	​		(2,285)	​		(1,839)
Total deferred tax assets	​		47,201	​		65,353
Deferred tax liabilities:	​			​
Depreciation and amortization	​		(9,337)	​		(26,269)
Prepaid expenses	​	​	(1,256)	​	​	(1,329)
Right of use asset	​		(4,325)	​		(5,120)
Accrued variable compensation	​	​	(1,646)	​	​	—
Other	​	​	(115)	​	​	—
Total deferred tax liabilities	​		(16,679)	​		(32,718)
Net deferred tax asset	​	$	30,522	​	$	32,635
​	​	​	​	​	​	​
Classification in the consolidated balance sheets:	​	​	​	​	​	​
Deferred income tax asset	​	$	30,938	​	$	35,298
Deferred other liabilities	​	​	(416)	​	​	(2,663)
Net deferred tax asset	​	$	30,522	​	$	32,635

​

At December 31, 2022, the Company has available U.S. federal operating loss carry forwards of $38,723 and U.S. state operating loss carry forwards of $45,742. The federal operating loss will carryforward indefinitely, and the state operating losses will expire at varying dates beginning in 2023 through 2042 or will carryforward indefinitely. Management expects to fully use these U.S. federal and state operating loss carry forwards.  

At December 31, 2022, the Company has available foreign operating losses of approximately $4,110 and trading losses of $14,726, which generally carry forward indefinitely. A valuation allowance for a portion of the foreign operating and non-operating losses is recorded at December 31, 2022 and 2021.

At December 31, 2022 and 2021, the Company has a valuation allowance of ($2,285) and ($1,839), respectively, primarily against certain net deferred tax assets, including losses, in foreign jurisdictions. The net increase in the total valuation allowance of ($446) during December 31, 2022 primarily related to recording additional valuation allowance on net deferred tax assets in foreign jurisdictions that, in the judgment of management, are not more likely than not to be realized, partially offset by the release of a valuation allowance on the net deferred tax asset in a foreign jurisdiction which management believes is more likely than not to be realized, as well as changes in foreign exchange rates.

The Company does not assert any earnings to be permanently reinvested with respect to the undistributed earnings of its foreign subsidiaries.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which the Company operates. Under applicable U.S. federal statutes, tax years ended December 31, 2019 through December 31, 2022 remain subject to

examination. Under applicable statutes, state and foreign corporate tax returns filed for the Company and its respective foreign subsidiaries for years ended December 31, 2017 through December 31, 2022 remain subject to examination by the respective authorities.

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- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
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