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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table presents components of loss before income taxes for the periods presented (in thousands):
Year Ended December 31,
202420232022
United States$(22,903)$(80,348)$(76,280)
International10,148 925 (13,982)
Loss before income taxes$(12,755)$(79,423)$(90,262)
Provision for (benefit from) income taxes for the periods presented consisted of (in thousands):
Year Ended December 31,
202420232022
Current:
U.S. federal$519 $— $— 
U.S. state2,728 2,531 576 
Foreign1,628 (243)724 
Total provision for income taxes - Current4,875 2,288 1,300 
Deferred:
U.S. federal(4,308)— — 
U.S. state(1,174)— — 
Foreign647 53 3,088 
Total (benefit from) provision for income taxes - Deferred(4,835)53 3,088 
Total provision for income taxes$40 $2,341 $4,388 
The Company recorded current income tax expense during 2024 principally due to U.S. taxable income as a result of IRC Section 174 research and experimental capitalization requirements. The Company offset federal taxable income through the utilization of available net operating loss carryforward attributes. However, the Company was subject to net operating loss utilization limitations in some U.S. federal and state jurisdictions. These considerations were partially offset by the Company's acquisition of Acqueon, which carried a U.S. net deferred tax liability balance and provided the Company with a source of taxable income to release a portion of the consolidated U.S. valuation allowance.
Income tax expense differed from the amount computed by applying the U.S. federal statutory income tax rate of 21% to pre-tax (loss) income for the periods presented as a result of the following (in thousands):
Year Ended December 31,
202420232022
U.S. federal tax at statutory rate$(2,679)$(16,676)$(18,957)
U.S. state income taxes1,553 2,531 576 
Section 162(m)4,474 6,417 3,851 
Global intangible low-taxed income— (4,002)4,127 
Effect of waived tax deductions - Base Erosion and Anti-Abuse Tax(7,751)7,751 — 
Miscellaneous permanent tax adjustments26 230 78 
Research and development credit(1,383)(943)(1,194)
Stock-based compensation16,981 10,829 1,722 
Transaction costs862 415 — 
Tax benefit from acquisition/reorganizations(4,308)— (3,852)
Foreign tax rate differential525 (383)6,749 
Adjustments related to tax positions taken during prior years(2,083)249 — 
Change in valuation allowance(6,177)(4,077)11,288 
Total provision for income taxes$40 $2,341 $4,388 
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 related to the following (in thousands):    
December 31,
20242023
Deferred tax assets:
Net operating loss and credit carryforwards$91,826 $115,137 
Capitalized R&D costs78,961 55,167 
Accrued liabilities872 617 
Provision for credit losses671 1,236 
Property and equipment35 — 
Amortizable intangibles— 29 
Deferred revenue3,687 2,440 
Accrued compensation5,797 4,132 
Long-term lease liabilities15,928 11,171 
Stock-based compensation10,224 9,190 
Deferred interest expense349 — 
Other755 — 
Gross deferred tax assets209,105 199,119 
Valuation allowance(123,141)(134,802)
Net deferred tax assets85,964 64,317 
Deferred tax liabilities:
Property and equipment(8,647)(7,037)
Amortizable intangibles(7,697)— 
Right of use assets(13,493)(9,092)
Deferred contract acquisition costs(52,663)(44,217)
Other— (205)
Gross deferred tax liabilities(82,500)(60,551)
Net deferred taxes$3,464 $3,766 
To enhance clarity, the Company has revised certain disclosures in its effective tax rate reconciliation and disclosure of its deferred tax assets and liabilities, and has conformed prior year disclosures to ensure comparability with the current year.
With the exception of Russia, the Company has not provided for U.S. income taxes on undistributed earnings of its foreign subsidiaries because it intends to permanently re-invest those earnings outside the United States. The Company has plans to liquidate its Russian subsidiary. As such, the Company no longer asserts an intention to permanently re-invest those earnings. The undistributed earnings of the Company’s foreign subsidiaries were immaterial as of December 31, 2024 and 2023 and no U.S. income taxes have been accrued.
A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income and the accumulated deficit for the year ended December 31, 2024, the Company has provided a valuation allowance against its U.S. net deferred tax assets. The Company has recorded net foreign deferred tax assets associated with its Australia, Germany, India, Portugal and the U.K. operations totaling $3.5 million since management has assessed it is more likely than not that the results of future operations within these jurisdictions will generate sufficient taxable income to realize the deferred tax assets. The foreign deferred tax assets cannot increase its U.S. valuation allowance. The net change in the valuation allowance for the years ended December 31, 2024 and 2023 were decreases of $11.7 million and $0.6 million, respectively. The decrease of the valuation allowance in the current year was primarily attributed to the Company’s acquisition of Acqueon, which provided a source of future U.S. taxable income to support a reduction in the consolidated U.S. valuation allowance.
As of December 31, 2024, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $310.1 million, $254.3 million and $7.3 million, respectively, available to reduce future income subject to income taxes. If not utilized, various amounts of significant state net operating loss carryforwards will begin to expire in 2028, while $310.1 million of federal net operating losses, as well as the foreign net operating losses, do not expire. As of December 31, 2024, the Company also had gross research credit carryforwards for federal and California state tax purposes of $14.1 million and $8.6 million, available to reduce future income subject to income taxes. The federal research credit carryforwards will expire between 2025 and 2044. The California state research credits do not expire. The IRC imposes restrictions on the utilization of net operating losses and credits in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses and credits may be subject to substantial limitation as prescribed under the IRC Sections 382 and 383 and similar state provisions. Events that may cause limitations in the amount of the net operating losses and credits that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. In the event the Company has changes in ownership, net operating losses and research and development credit carryforwards, which are fully reserved by the deferred tax asset valuation allowance, could be limited and may expire unutilized.
Unrecognized Tax Benefits
The table below shows the changes in the gross amount of unrecognized tax benefits for the periods presented (in thousands):
Year Ended December 31,
202420232022
Unrecognized benefit — beginning of period$11,124 $9,415 $7,643 
Gross increases — current year tax positions2,502 1,413 1,773 
Gross increases — prior year tax positions40 299 — 
Gross decreases — prior year tax positions(91)(3)(1)
Settlements with tax authorities— — — 
Unrecognized benefit — end of period$13,575 $11,124 $9,415 
As of each of December 31, 2024 and 2023, the Company had unrecognized tax benefits that, if recognized, would impact its effective tax rate by $1.0 million and $0.5 million, respectively. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense, which has cumulatively been immaterial to the financial statements. The Company does not anticipate its total unrecognized tax benefits as of December 31, 2024 will significantly change due to settlement of examination or the expiration of statutes of limitation during the next 12 months. The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate over the next 12 months.
The Company is subject to taxation in the United States, various states and several foreign jurisdictions. Due to the Company’s recently utilized and net carryover of unused operating losses, all years from 2004 forward remain subject to future examination by the U.S. federal and state tax authorities. The Company’s foreign tax returns are open to audit under the statutes of limitation of the respective foreign countries in which the subsidiaries are located. With the exception of Russia, the Company considers all undistributed earnings of its foreign subsidiaries indefinitely reinvested.