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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8. Income Taxes The Company is a U.S. domiciled corporation for tax purposes. The Company’s income tax expense and balance sheet accounts reflect the results of the Company and its subsidiaries. The domestic and foreign components of income before provision for income taxes for the years ended December 31, 2023, 2022, and 2021, respectively, were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Income (loss) before provision for income taxes from United States operations |  | $ | 25,250 |  |  | $ | 46,766 |  |  | $ | (7,791 | )
Income before provision for income taxes from foreign operations |  |  | 23,226 |  |  |  | 38,313 |  |  |  | 32,704 |
Income before provision for income taxes |  | $ | 48,476 |  |  | $ | 85,079 |  |  | $ | 24,913 |
The domestic and foreign components of the provision for income taxes for the years ended December 31, 2023, 2022, and 2021, respectively, were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 18,486 |  |  | $ | 179 |  |  | $ | 58 |
State |  |  | 5,772 |  |  |  | 4,593 |  |  |  | 4,003 |
Foreign |  |  | 6,480 |  |  |  | 9,817 |  |  |  | 7,618 |
Total Current |  | $ | 30,738 |  |  | $ | 14,589 |  |  | $ | 11,679 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  | $ | (16,857 | ) |  | $ | 1,773 |  |  | $ | 549 |
State |  |  | (2,313 | ) |  |  | 5,030 |  |  |  | (4,495 | )
Foreign |  |  | (385 | ) |  |  | (917 | ) |  |  | 1,129 |
Total Deferred |  | $ | (19,555 | ) |  | $ | 5,886 |  |  | $ | (2,817 | )
Total |  | $ | 11,183 |  |  | $ | 20,475 |  |  | $ | 8,862 |
The following table reconciles the U.S. statutory federal tax rate of 21% to the Company’s effective income tax rate of 23.07%, 24.07%, and 35.57%, for the years ended December 31, 2023, 2022, and 2021, respectively:
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. statutory federal tax rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
State and local income taxes – net of federal tax benefits |  |  | 3.89 |  |  |  | 2.85 |  |  |  | (5.32 | )
Foreign rate difference |  |  | 0.59 |  |  |  | 0.67 |  |  |  | 3.25 |
Change in valuation allowances |  |  | 0.83 |  |  |  | (1.06 | ) |  |  | (2.72 | )
GILTI inclusion |  |  | — |  |  |  | 1.41 |  |  |  | 7.92 |
Transaction cost |  |  | 0.31 |  |  |  | — |  |  |  | 5.21 |
Share-based compensation |  |  | 3.36 |  |  |  | 0.62 |  |  |  | 5.82 |
Rate change impact |  |  | (0.66 | ) |  |  | (0.43 | ) |  |  | 2.23 |
US research and development credit |  |  | (3.96 | ) |  |  | (1.44 | ) |  |  | (7.15 | )
Withholding tax |  |  | 0.65 |  |  |  | 0.38 |  |  |  | 5.34 |
Return-to-provision adjustment |  |  | (3.56 | ) |  |  | — |  |  |  | — |
Other |  |  | 0.62 |  |  |  | 0.07 |  |  |  | (0.01 | )
Effective tax rate |  |  | 23.07 | % |  |  | 24.07 | % |  |  | 35.57 | %
As of December 31, 2023, the Company had approximately $56.2 million of accumulated unremitted earnings generated by its foreign subsidiaries. Under the U.S. Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”), a portion of these earnings was subject to U.S. federal taxation with the one-time transition tax. With the exception of certain unremitted earnings in India, the Company asserted indefinite reinvestment on its unremitted earnings as well as any other additional outside basis differences of its foreign subsidiaries at December 31, 2023. Any future reversals could be subject to additional foreign withholding taxes, U.S. state taxes, and certain tax impacts relating to foreign currency exchange effects on any future repatriations of the unremitted earnings. The primary components of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2023 and 2022 consist of the following (in thousands):
|  | December 31, |
|  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Federal net operating loss carryforwards |  | $ | — |  |  | $ | 2,304 |
State net operating loss carryforwards |  |  | 5,101 |  |  |  | 6,782 |
Foreign net operating loss carryforwards |  |  | 5,653 |  |  |  | 4,888 |
Deferred revenues |  |  | 394 |  |  |  | 205 |
Bad debt reserves |  |  | 276 |  |  |  | 297 |
Employee benefits |  |  | 1,237 |  |  |  | 1,563 |
Share-based compensation |  |  | 660 |  |  |  | 546 |
Accrued expenses and loss reserves |  |  | 2,460 |  |  |  | 1,802 |
Section 267 adjustment |  |  | 3,742 |  |  |  | — |
Other deferred tax assets |  |  | 653 |  |  |  | 5,890 |
Less: Valuation allowances |  |  | (1,863 | ) |  |  | (1,467 | )
Total deferred tax asset |  | $ | 18,313 |  |  | $ | 22,810 |
Deferred tax liabilities: |  |  |  |  |  |
Trade names |  | $ | (16,420 | ) |  | $ | (17,632 | )
Goodwill |  |  | (12,929 | ) |  |  | (11,703 | )
Depreciable and other amortizable assets |  |  | (55,028 | ) |  |  | (77,127 | )
Other deferred liabilities |  |  | (2,424 | ) |  |  | (4,482 | )
Total deferred tax liability |  | $ | (86,801 | ) |  | $ | (110,944 | )
Net deferred tax liability |  | $ | (68,488 | ) |  | $ | (88,134 | )
Based upon the weight of all available evidence, the Company does not maintain a valuation allowance against its deferred tax assets in the United States. As of December 31, 2023 and 2022, the Company believes that federal, state, and foreign net operating loss carryforwards will be available to reduce future taxable income after taking into account various federal and foreign limitations on the utilization of such net operating loss carryforwards. The net operating loss carryforward balances as of December 31, 2023 and 2022, are as follows (in thousands):
|  | December 31, |
|  | 2023 |  |  | 2022 |
Federal |  | $ | — |  |  | $ | 10,970 |
State |  |  | 97,659 |  |  |  | 125,989 |
Foreign |  |  | 24,980 |  |  |  | 24,207 |
|  | $ | 122,639 |  |  | $ | 161,166 |
If not utilized, certain foreign net operating losses will begin to expire in 2024 and certain state net operating loss carryforwards will begin to expire in 2026. The Company has fully utilized the research and development credit carryforward as of December 31, 2023. The Company had $4.4 million of research and development credit carryforwards as of December 31, 2022. After consideration of all of the evidence, the Company has determined that a valuation allowance of approximately $1.9 million and $1.5 million is necessary as of December 31, 2023 and 2022, respectively, for certain foreign net operating loss carryforwards. The increase in the valuation allowance in 2023 is primarily due to the additional loss generated during the year in jurisdictions with full valuation allowance and revaluation of certain net operating loss carryforwards at December 31, 2023. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2012, and state, local, and non-U.S. income tax examinations by tax authorities before 2005. The aggregate changes in the balance of our gross unrecognized tax benefits, excluding accrued interest, for the years ended December 31, 2023, 2022, and 2021, were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Balance, beginning of period |  | $ | 972 |  |  | $ | 1,399 |  |  | $ | 1,341 |
Increases for tax positions related to prior years |  |  | 39 |  |  |  | 28 |  |  |  | 58 |
Decreases for tax positions related to prior years |  |  | — |  |  |  | (455 | ) |  |  | — |
Balance, end of period |  | $ | 1,011 |  |  | $ | 972 |  |  | $ | 1,399 |
An income tax benefit of approximately $1.0 million would be recorded if these unrecognized tax benefits are recognized. The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the next twelve months. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in income tax expense. On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the U.S. Some of the key provisions included in the IRA include implementation of a new alternative minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives. The Company incurred $0.5 million of excise tax on stock buybacks in 2023 as a result of IRA. The Company has determined that the other provisions in the IRA had no impact on the Company as of and for the year ended December 31, 2023. On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operating and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. While the Company is not currently subject to Pillar Two due to not meeting the revenue threshold, it will continue to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries.

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