XML 30 R14.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
(7)
Income Taxes

Pre-tax book loss has been recorded in the following jurisdictions (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

United States

 

$

(97,047

)

 

$

(79,354

)

 

$

(26,758

)

Foreign

 

 

4,466

 

 

 

5,400

 

 

 

3,024

 

Worldwide pre-tax loss

 

$

(92,581

)

 

$

(73,954

)

 

$

(23,734

)

 

The provision for income taxes consists of the following (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

86

 

 

 

26

 

 

 

12

 

Foreign

 

 

619

 

 

 

583

 

 

 

353

 

Total Current

 

$

705

 

 

$

609

 

 

$

365

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

(320

)

 

$

—

 

State

 

 

—

 

 

 

(57

)

 

 

—

 

Foreign

 

 

91

 

 

 

797

 

 

 

468

 

Total Provision

 

$

796

 

 

$

1,029

 

 

$

833

 

 

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21% to pre-tax loss for the years ended December 31, 2022, 2021, and 2020 from operations as a result of the following:

 

 

 

Year Ended December 31,

 

 

 

2022

 

2021

 

2020

 

Statutory federal income tax rate

 

21.00

%

21.00

%

21.00

%

State income taxes, net of federal tax benefits

 

4.34

 

3.88

 

4.12

 

Permanent differences

 

(0.29)

 

(6.74)

 

(1.14)

 

Tax credits

 

6.49

 

6.12

 

14.53

 

Foreign rate differential

 

0.25

 

(0.33)

 

(0.78)

 

Stock based compensation

 

(3.36)

 

88.87

 

(11.60)

 

Other

 

(0.04)

 

(0.02)

 

(1.07)

 

Valuation allowance

 

(29.25)

 

(114.17)

 

(28.57)

 

Tax provision

 

(0.86)

%

(1.39)

%

(3.51)

%

 

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, 2022, 2021, and 2020 related to the following (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

107,341

 

 

$

103,028

 

 

$

23,493

 

Credit carryforwards

 

 

15,876

 

 

 

9,742

 

 

 

5,199

 

Stock-based compensation

 

 

7,124

 

 

 

3,456

 

 

 

1,061

 

Accruals and reserves

 

 

544

 

 

 

533

 

 

 

326

 

Operating lease liability

 

 

2,806

 

 

 

—

 

 

 

—

 

Fixed assets

 

 

—

 

 

 

—

 

 

 

73

 

Capitalized research and development costs

 

 

14,674

 

 

 

—

 

 

 

—

 

Intangibles

 

 

145

 

 

 

—

 

 

 

168

 

Accumulated other comprehensive loss

 

 

190

 

 

 

—

 

 

 

—

 

Other

 

 

167

 

 

 

44

 

 

 

37

 

Gross tax assets

 

 

148,867

 

 

 

116,803

 

 

 

30,357

 

Valuation allowance

 

 

(139,291

)

 

 

(110,720

)

 

 

(26,286

)

Realizable deferred tax assets

 

 

9,576

 

 

 

6,083

 

 

 

4,071

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

Deferred commission costs

 

$

(8,962

)

 

$

(6,881

)

 

$

(4,727

)

Internal use software

 

 

—

 

 

 

(643

)

 

 

(277

)

Operating lease right-of-use assets

 

 

(2,428

)

 

 

—

 

 

 

—

 

Fixed assets

 

 

(22

)

 

 

(1

)

 

 

—

 

Intangibles

 

 

—

 

 

 

(303

)

 

 

(14

)

Other

 

 

—

 

 

 

—

 

 

 

(1

)

Gross deferred liabilities

 

 

(11,412

)

 

 

(7,828

)

 

 

(5,019

)

Net deferred tax assets (liabilities)

 

$

(1,836

)

 

$

(1,745

)

 

$

(948

)

 

Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income or loss in the future years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established for deferred tax assets to the extent it is more likely than not that the deferred tax assets may not be realizable.

The Company evaluates uncertain tax positions taken or expected to be taken in the course of preparing its tax return to determine whether the tax positions are more likely than not of being sustained upon challenge by the applicable taxing authority. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or remeasurement are reflected in the period in which the change in judgment occurs.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the levels of historical taxable income and projections for future taxable income over the period in which temporary differences are deductible, the Company has recorded a valuation allowance for substantially all of its deferred tax assets, except to the extent of deferred tax liabilities, as it is unable to conclude that it is more likely than not that the deferred tax assets in excess of deferred tax liabilities will be realizable.

At December 31, 2022, the Company had approximately $422.2 million, $288.0 million, and $0.6 million of net operating loss carryforwards available to offset future federal, state, and foreign taxable income, respectively. If realized, none of the net operating loss carryforwards will be recognized as a benefit through additional paid-in capital. If not realized, federal carryforward losses of $25.4 million will expire beginning in 2032 and $396.8 million of carryforward losses will carryforward indefinitely. State carryforwards will expire beginning 2030. The foreign losses can be carried forward indefinitely.

At December 31, 2022, the Company had tax credit carryforwards of $9.1 million and $8.5 million, net of reserves to offset future federal and state tax and $0.1 million of foreign research tax credit carryforwards. The carryforwards will expire in various amounts for federal purposes beginning 2033. The California R&D credits will not expire but the California competes tax credits will expire beginning 2026. The foreign research tax credits are allowed a carryforward of 20 years and are set to expire in 2042.

Utilization of net operating loss carryforwards and credits may be subject to substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of the net operating losses before utilization.

As of December 31, 2022, the Company had unrecognized income tax benefits of $3.6 million. The increase in the Company’s unrecognized tax benefit was primarily attributable to current year credit activities. A reconciliation of the beginning and ending amount of unrealized tax benefit (excluding interest and penalties) is as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Beginning balance

 

$

2,253

 

 

$

1,226

 

 

$

766

 

Increases related to tax positions taken during a prior year

 

 

1,372

 

 

 

1,027

 

 

 

460

 

Decreases related to tax positions taken during a prior year

 

 

—

 

 

 

—

 

 

 

—

 

Increases related to tax positions taken during the current year

 

 

—

 

 

 

—

 

 

 

—

 

Ending balance

 

$

3,625

 

 

$

2,253

 

 

$

1,226

 

 

The total unrecognized tax benefit, if recognized, would not affect the Company’s effective tax rate as the tax benefit would increase the deferred tax asset, which is currently offset with a full valuation allowance. The Company does not anticipate that the amount of existing unrecognized tax benefit will significantly increase or decrease within the next 12 months. Accrued interest and penalties related to the unrecognized tax benefits are recorded in income tax expense. No interest, penalties, or tax benefits were recognized during the year ended December 31, 2022.

The Company files U.S. federal, Netherlands, United Kingdom, France, Singapore, Japan, Germany, Canada, India, and Australia income tax returns as well as state income tax returns for various state jurisdictions. Due to the Company’s net operating loss carryforwards in the United States, its income tax returns remain subject to federal and state tax authorities for all prior years. There are no tax years under examination by any jurisdiction, except India, at this time. The Company records liabilities related to uncertain tax positions and believes that it has provided adequate reserves for income tax uncertainties in all open tax years.

The Company provides for U.S. federal income taxes on the earnings of foreign subsidiaries unless they are considered permanently reinvested outside of the U.S. As of December 31, 2022, the Company’s management is asserting that it is their intent to indefinitely reinvest unremitted foreign earnings for all its foreign entities.

The Tax Cuts and Jobs Act (“TCJA”) amended Section 174 to require taxpayers to capitalize costs properly identified as research and experimental expenditures and amortize such costs ratably over a period of either five or fifteen years (beginning with the midpoint of the tax year in which the specified expenditures are paid or incurred), depending on whether the costs were associated with domestic or foreign activity, respectively. The TCJA specified that amendments to Section 174 were applicable to research and experimental costs incurred in taxable years beginning after December 31, 2021 and as such, the Company has adopted the amendment. This amendment did not have a material impact to income taxes in the Company's financial statements for the year ended December 31, 2022.

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (“CHIPS”) and the Inflation Reduction Act (“IRA”) of 2022 were signed into law by President Biden on August 9, 2022 and August 16, 2022, respectively. These laws introduce new options for monetizing certain credits, a corporate alternative minimum tax, and a stock repurchase excise tax. The Company is currently evaluating the impact of CHIPS and IRA, but at present does not expect that the any of the provisions included in these acts would result in a material impact to the Company's deferred tax assets, liabilities, or income taxes payable.