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Income Taxes
 3 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

9. Income Taxes

 

The provision for income taxes includes estimated federal, state and foreign income taxes.

The provision for income taxes and the effective income tax rates were as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2025

 

 

2024

 

Provision for income taxes

 

$

424

 

 

$

1,071

 

Effective income tax rate

 

 

14.2

%

 

 

(8.0

)%

 

The effective tax rates differ from the statutory tax rates for the three months ended March 31, 2025 and 2024 primarily due to the Company’s full valuation allowance position against net domestic deferred tax assets. The provision for income taxes for the three months ended March 31, 2025 and 2024 included estimated federal, state, and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes.

As of March 31, 2025, the Company had a valuation allowance of approximately $ 61,488,000 against all net domestic deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and

negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. Despite recent positive operating results, the Company faces uncertainties in forecasting its operating results due to the unpredictability of customer orders in certain markets, product transitions, new program introductions and adoption times of new technology offerings. This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years. As a result, management has concluded, as of March 31, 2025, it is more likely than not the Company’s net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets is still warranted as of March 31, 2025. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If the positive operating results continue, the Company’s concerns about industry uncertainty, product transitions, new program introductions and adoption times of new technology offerings are resolved, and the Company believes future taxable income can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term. Certain state tax credits, though, will likely never be released by the valuation allowance. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.