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Income Taxes
 12 Months Ended
Dec. 31, 2024
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,

 

 

 

2024

 

 

2023

 

 

2022

 

United States

 

$

(97,993

)

 

$

(95,662

)

 

$

(97,047

)

Foreign

 

 

5,465

 

 

 

6,568

 

 

 

4,466

 

Worldwide pre-tax loss

 

$

(92,528

)

 

$

(89,094

)

 

$

(92,581

)

 

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

 

 

Year Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

164

 

 

 

51

 

 

 

86

 

Foreign

 

 

1,250

 

 

 

516

 

 

 

619

 

Total Current

 

$

1,414

 

 

$

567

 

 

$

705

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

$

(127

)

 

$

—

 

 

$

—

 

State

 

 

(29

)

 

 

—

 

 

 

—

 

Foreign

 

 

533

 

 

 

702

 

 

 

91

 

Total Provision

 

$

1,791

 

 

$

1,269

 

 

$

796

 

 

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, 2024, 2023, and 2022 from operations as a result of the following:

 

 

 

Year Ended December 31,

 

 

 

2024

 

2023

 

2022

 

Statutory federal income tax rate

 

21.00

%

21.00

%

21.00

%

State income taxes, net of federal tax benefits

 

2.51

 

4.11

 

4.34

 

Permanent differences

 

(0.51)

 

(0.48)

 

(0.29)

 

Tax credits

 

6.63

 

7.24

 

6.49

 

Foreign rate differential

 

(0.06)

 

0.18

 

0.25

 

Stock based compensation

 

(10.16)

 

(9.70)

 

(3.36)

 

Other

 

0.16

 

0.07

 

(0.04)

 

Valuation allowance

 

(21.49)

 

(23.84)

 

(29.25)

 

Tax provision

 

(1.92)

%

(1.42)

%

(0.86)

%

 

 

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):

 

 

Year Ended December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

123,133

 

 

$

111,904

 

Credit carryforwards

 

 

29,143

 

 

 

22,428

 

Stock-based compensation

 

 

4,670

 

 

 

7,187

 

Accruals and reserves

 

 

2,961

 

 

 

550

 

Operating lease liability

 

 

1,402

 

 

 

2,049

 

Fixed assets

 

 

226

 

 

 

86

 

Capitalized research and development costs

 

 

31,971

 

 

 

25,277

 

Intangibles

 

 

—

 

 

 

428

 

Accumulated other comprehensive loss

 

 

2

 

 

 

45

 

Other

 

 

174

 

 

 

175

 

Gross tax assets

 

 

193,682

 

 

 

170,129

 

Valuation allowance

 

 

(184,238

)

 

 

(161,456

)

Realizable deferred tax assets

 

 

9,444

 

 

 

8,673

 

Deferred tax liabilities:

 

 

 

 

 

 

Deferred commission costs

 

$

(10,636

)

 

$

(9,491

)

Operating lease right-of-use assets

 

 

(1,328

)

 

 

(1,720

)

Intangibles

 

 

(550

)

 

 

—

 

Gross deferred liabilities

 

 

(12,514

)

 

 

(11,211

)

Net deferred tax assets (liabilities)

 

$

(3,070

)

 

$

(2,538

)

 

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.

As of December 31, 2024, the Company had approximately $473.6 million and $356.3 million of net operating loss carryforwards available to offset future federal and state 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 $448.2 million of carryforward losses will carryforward indefinitely. State carryforwards will expire beginning 2030.

As of December 31, 2024, the Company had tax credit carryforwards of $16.7 million and $14.8 million, net of reserves to offset future federal and state tax and $0.8 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, 2024, the Company had unrecognized income tax benefits of $7.3 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,

 

 

 

2024

 

 

2023

 

 

2022

 

Beginning balance

 

$

5,118

 

 

$

3,625

 

 

$

2,253

 

Increases related to tax positions taken during a prior year

 

 

—

 

 

 

—

 

 

 

—

 

Decreases related to tax positions taken during a prior year

 

 

—

 

 

 

—

 

 

 

—

 

Increases related to tax positions taken during the current year

 

 

2,145

 

 

 

1,493

 

 

 

1,372

 

Ending balance

 

$

7,263

 

 

$

5,118

 

 

$

3,625

 

 

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, 2024.

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, 2024, the Company’s management asserted that it is their intent to indefinitely reinvest unremitted foreign earnings for all its foreign entities.