XML 66 R18.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The geographical breakdown of income before income taxes is as follows (in thousands):
Years Ended December 31,
202420232022
Domestic income$56,707 $41,105 $52,231 
Foreign income1,392 2,690 485 
Income before income taxes$58,099 $43,795 $52,716 

The provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
202420232022
Current provision for income taxes:
Federal$3,894 $329 $— 
State1,809 2,016 1,107 
Foreign1,959 1,228 1,917 
Total current7,662 3,573 3,024 
Deferred tax expense (benefit):
  Federal$975 $1,374 $2,206 
  State(556)(1,265)656 
  Foreign(122)143 (78)
Total deferred297 252 2,784 
Provision for income taxes$7,959 $3,825 $5,808 

     The reconciliation of the statutory federal income taxes and the provision for income taxes is as follows (in thousands, except percentages):
Years Ended December 31,
202420232022
AmountPercentageAmountPercentageAmountPercentage
Tax at statutory rate$12,201 21.0 %$9,197 21.0 %$11,070 21.0 %
State tax - net of federal benefits763 1.3 751 1.7 1,531 2.9 
Foreign rate differential1,606 2.8 954 2.2 1,737 3.3 
Changes in federal valuation allowance— — 210 0.5 — — 
Stock-based compensation108 0.2 (1,083)(2.5)(1,992)(3.8)
Non-deductible meals and entertainment expenses289 0.5 398 0.9 252 0.5 
Other permanent items— — 5 — 73 0.1 
Federal tax credits - net of uncertain tax positions(3,959)(6.8)(4,047)(9.2)(3,844)(7.3)
Amended return true-up(162)(0.3)(8)— (4,176)(7.9)
Foreign-derived intangible income deduction(3,699)(6.4)(3,585)(8.2)— — 
162(m) limitation on officers compensation873 1.5 1,221 2.8 998 1.9 
Other(61)(0.1)(188)(0.4)159 0.3 
$7,959 13.7 %$3,825 8.7 %$5,808 11.0 %
Deferred tax balances are comprised of the following (in thousands):
As of December 31, 2024As of December 31, 2023
Deferred tax assets:
Net operating loss carryforwards$3,561 $3,799 
Research and development credits, net of uncertain tax positions29,217 36,592 
Accruals, reserves and other19,086 18,433 
Stock-based compensation2,040 1,475 
Depreciation and amortization(1,293)(1,052)
Operating lease liability2,728 3,669 
Capitalized research and development expenses30,985 23,497 
Gross deferred tax assets86,324 86,413 
Valuation allowance(18,569)(17,588)
Total deferred tax assets67,755 68,825 
Deferred tax liabilities:
Deferred contract acquisition costs(2,560)(2,429)
Operating lease right-of-use asset(2,610)(3,533)
Other(221)(138)
Total deferred tax liabilities(5,391)(6,100)
Net deferred tax assets$62,364 $62,725 

Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. Primarily based upon a strong earnings history, expectation of future taxable income, with the exception of certain state tax attributes, we believe that a significant amount of the deferred tax assets would be realized on a more likely than not basis. Therefore, we released the valuation allowance on our U.S. deferred tax assets except for state credits in 2021. For the years ended December 31, 2024 and 2023, the valuation allowance increased by $1.0 million and $2.0 million, respectively.

Companies subject to the Global Intangible Low-Taxed Income provision (“GILTI”) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI. We have elected to account for GILTI as a period cost.

As of December 31, 2024 and 2023, we had no U.S. federal NOL carryforward balance. As of December 31, 2024 and 2023, we had state NOL carryforwards of $51.0 million and $54.9 million, respectively. The state NOL carryforwards expire in various years beginning in 2025, if not utilized.

Additionally, as of December 31, 2024 and 2023, we had U.S. federal research and development credit carryforwards of $14.8 million and $22.8 million, respectively, and state research and development credit carryforwards of $27.1 million and $25.3 million, respectively. The federal credit carryforwards will begin to expire at various dates beginning in 2031 while the state credit carryforwards can be carried over indefinitely.

Utilization of the NOL and credit carryforwards may be subject to an annual limitation provided for in IRC Sections 382 and 383 and similar state codes. Any annual limitation could result in the expiration of NOL and credit carryforwards before utilization. The Company believes NOL’s will not expire unused as a result of any Section 382 annual limitations.

Additionally, as of December 31, 2024, we had no U.S. foreign tax credit carryforwards and, as of December 31, 2023, we had $0.4 million of U.S. foreign tax credit carryforwards.

With respect to our undistributed foreign subsidiaries’ earnings, we consider those earnings to be indefinitely reinvested and, accordingly, no related provision for U.S. federal and state income taxes has been provided. Our intention has not changed subsequent to the one-time transition tax under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to both U.S. income taxes subject to an adjustment for foreign tax credits and withholding taxes in the various countries. As of December 31, 2024 and 2023, the
undistributed earnings approximated $18.6 million and $18.5 million, respectively. Our undistributed earnings through December 31, 2017, have been taxed under the one-time transition tax under the Tax Act.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) amended Section 174 to require research and experimental (“R&E”) expenses incurred in tax years beginning on or after January 1, 2022, to be capitalized and amortized over five years (fifteen years for expenditures attributable to R&E activity performed outside the U.S.) using a half-year convention. Prior to the amendment, Section 174 expenses were allowed to be expensed in the year incurred. In 2024, the Company is capitalizing $41.5 million of US R&E expenses (amortizable over 5 years) and $16.3 million of R&E expenses performed outside the US (amortizable over 15 years) which results in unfavorable book/tax differences as a temporary adjustment. Since the Section 174 impact is a temporary difference, no material impact to tax expense is expected.

Uncertain Tax Positions

As of December 31, 2024, 2023 and 2022, we had gross unrecognized tax benefits of $8.1 million, $7.6 million and $7.1 million, respectively. Accrued interest expense related to unrecognized tax benefits is recognized as part of our income tax provision in our consolidated statements of operations and was immaterial for the years ended December 31, 2024, 2023 and 2022. Our policy for classifying interest and penalties associated with unrecognized income tax benefits is to exclude such items in income tax expense.

The activity related to the unrecognized tax benefits is as follows (in thousands):
Years Ended December 31,
202420232022
Gross unrecognized tax benefits—beginning balance$7,575 $7,077 $6,841 
Increases (decreases) related to tax positions from prior years— 27 (226)
Increases related to tax positions taken during current year576 580 462 
Releases / statute lapses(76)(109)— 
Gross unrecognized tax benefits—ending balance$8,075 $7,575 $7,077 

These amounts are related to certain deferred tax assets with a corresponding valuation allowance. As of December 31, 2024, the total amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $3.7 million. We do not anticipate a material change to our unrecognized tax benefits over the next twelve months. Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business.

The Company is subject to taxation in the U.S., various states, and several foreign jurisdictions. Because the Company has NOL and credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine our tax returns for all years from 2005 through the current period. The Company is not currently under examination by any taxing authorities.