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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before the provision for (benefit from) income taxes consisted of the following:
(in millions) |  |  |  |  |  |
Year Ended December 31, |  | 2022 |  | 2021 |  | 2020
Domestic |  | $ | (16.3) |  |  | $ | (35.0) |  |  | $ | 1.9 |
Foreign |  | (3.7) |  |  | (2.7) |  |  | (1.0) |
Total |  | $ | (20.0) |  |  | $ | (37.7) |  |  | $ | 0.9 |
The components of the provision for (benefit from) income taxes are as follows:
(in millions) |  |  |  |  |  |
Year Ended December 31, |  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
Federal |  | $ | 2.0 |  |  | $ | — |  |  | $ | (0.1) |
State |  | 1.9 |  |  | 0.7 |  |  | 0.3 |
Foreign |  | 0.1 |  |  | — |  |  | — |
Total |  | 4.0 |  |  | 0.7 |  |  | 0.2 |
Deferred: |  |  |  |  |  |
Federal |  | (12.3) |  |  | 4.9 |  |  | (4.0) |
State |  | (1.6) |  |  | (0.2) |  |  | (0.6) |
Foreign |  | 0.1 |  |  | (0.6) |  |  | — |
Total |  | (13.8) |  |  | 4.1 |  |  | (4.6) |
Provision for (benefit from) income taxes |  | $ | (9.8) |  |  | $ | 4.8 |  |  | $ | (4.4) |
The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
(in millions) |  |  |  |  |  |
Year Ended December 31, |  | 2022 |  | 2021 |  | 2020
Tax at federal statutory rate |  | $ | (4.2) |  |  | $ | (7.9) |  |  | $ | 0.4 |
Permanent items |  | 0.3 |  |  | — |  |  | 0.5 |
Foreign rate differential |  | 0.9 |  |  | (0.2) |  |  | 0.2 |
Stock-based compensation |  | 1.0 |  |  | (2.0) |  |  | (3.1) |
Tax credits |  | (6.1) |  |  | (5.6) |  |  | (4.9) |
Change in valuation allowance |  | (3.7) |  |  | 15.1 |  |  | 1.1 |
Tax contingency and interest |  | 1.3 |  |  | 1.9 |  |  | 1.1 |
State taxes |  | (0.7) |  |  | (0.4) |  |  | 0.1 |
Non-deductible contingent consideration |  | 1.4 |  |  | 4.1 |  |  | — |
Other |  | — |  |  | (0.2) |  |  | 0.2 |
Tax at effective tax rate |  | $ | (9.8) |  |  | $ | 4.8 |  |  | $ | (4.4) |
The valuation allowance decreased by $3.7 million in 2022, mainly attributable to a corresponding reduction in the valuation allowance for a deferred tax liability related to the acquisition of OTB (see further discussion below), and corresponding changes in deferred tax assets, primarily net operating loss carryforwards and federal and state tax credits, partially offset by capitalization of research and development expenses under new tax regulations effective in 2022. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets and liabilities are as follows:
(in millions) |  |  |  |
As of December 31, |  | 2022 |  | 2021
Deferred tax assets: |  |  |  |
Accruals and reserves |  | $ | 2.1 |  |  | $ | 0.6 |
Federal and state tax credits |  | 14.0 |  |  | 17.9 |
Stock-based compensation |  | 3.9 |  |  | 3.3 |
Capitalized research and development expenses |  | 22.2 |  |  | — |
Net operating loss carryforwards |  | 4.1 |  |  | 13.5 |
Lease liabilities |  | 3.1 |  |  | 3.7 |
Other |  | 0.1 |  |  | 1.2 |
Total gross deferred tax assets |  | 49.5 |  |  | 40.2 |
Deferred tax liabilities: |  |  |  |
Prepaid expense and other |  | (0.6) |  |  | (1.3) |
Right-of-use assets |  | (2.8) |  |  | (3.4) |
Basis difference for fixed assets and intangibles |  | (28.0) |  |  | (14.8) |
Total gross deferred tax liabilities |  | (31.4) |  |  | (19.6) |
Valuation allowance for deferred tax assets |  | (19.3) |  |  | (22.4) |
Net deferred tax liability |  | $ | (1.2) |  |  | $ | (1.8) |
The net deferred tax liability is recorded in Other Liabilities—Noncurrent on the Company’s consolidated balance sheet. As part of the acquisition of OTB on July 11, 2022, the Company recorded identified intangible assets of $50.1 million. As these identified intangible assets are not deductible for U.S. tax purposes, a related deferred tax liability of $12.1 million was recognized, which provided an additional source of taxable income to support the realization of a portion of the Company’s pre-existing U.S. deferred tax assets. As the Company had previously established a full valuation allowance against its net U.S. deferred tax assets, the Company reduced its deferred tax asset valuation allowance by a corresponding $12.1 million, with the reduction in allowance recognized as an income tax benefit in the consolidated statement of operations for the year ended December 31, 2022. As of December 31, 2022, the Company has federal net operating loss carryforwards of $6.3 million, of which $3.4 million, if not utilized, will begin to expire in 2034, and the remaining $2.9 million can be carried forward indefinitely. As of December 31, 2022, the Company has state net operating loss carryforwards of $32.9 million. The majority of state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2032. In addition, as of December 31, 2022, the Company has $16.0 million and $9.6 million of California and federal research and development credit carryforwards, respectively. The California credits can be carried forward indefinitely. The federal credits will begin to expire on various dates beginning in 2040 and continuing through 2042. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax-planning strategies in making this assessment. Based on the Company’s ongoing assessment of all available evidence, both positive and negative, including consideration of the Company’s historical profitability and the estimated impact of its operating model on future profitability, the Company concluded that it was more likely than not that its U.S. deferred tax assets in excess of deferred tax liabilities would not be realized. Accordingly, the Company recorded a valuation allowance against these net U.S. deferred tax assets as of December 31, 2022. The Company’s judgment regarding the likelihood of realization of these deferred tax assets could change in future periods, which could result in a material impact to the Company’s income tax provision in the period of change. A reconciliation of unrecognized tax benefits, excluding accrued interest and penalties, are as follows:
(in millions) |  |  |  |  |  |
Year Ended December 31, |  | 2022 |  | 2021 |  | 2020
Balance as of beginning of year |  | $ | 8.4 |  |  | $ | 6.3 |  |  | $ | 4.8 |
Increases related to prior year tax positions |  | — |  |  | 0.6 |  |  | 0.3 |
Decreases related to prior year tax positions |  | (0.2) |  |  | — |  |  | (0.1) |
Expiration of statute of limitations |  | — |  |  | — |  |  | (0.1) |
Current year increases |  | 1.7 |  |  | 1.5 |  |  | 1.4 |
Balance as of end of year |  | $ | 9.9 |  |  | $ | 8.4 |  |  | $ | 6.3 |
Interest and penalties were not material for 2022 and 2021. The Company accrued $0.1 million for interest and penalties on its uncertain tax positions for 2020. Unrecognized tax benefits of $0.4 million, as well as accrued interest and penalties, would affect the Company’s provision for income taxes if recognized. The Company does not anticipate that its total unrecognized tax benefits will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months. The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company’s tax years for 2014 and forward are subject to examination by U.S. and various state tax authorities due to certain acquired attribute carryforwards.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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