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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before income taxes was generated in the following jurisdictions:
| Years Ended December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
U.S. | $ | 41,309 |  |  | $ | (13,526) |  |  | $ | (9,569) |
Non-U.S. | 5,178 |  |  | (13,787) |  |  | (2,124) |
Total | $ | 46,487 |  |  | $ | (27,313) |  |  | $ | (11,693) |
For the years ended December 31, 2024, domestic income excludes intercompany dividend income of $8.6 million. For the years ended December 31, 2023 and 2022, there was no intercompany dividend included in domestic income. The (benefit) provision for income taxes consists of the following:
| Years Ended December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 525 |  |  | $ | 2 |  |  | $ | 122 |
State | 266 |  |  | 54 |  |  | 32 |
Foreign | 4,906 |  |  | 2,473 |  |  | 1,665 |
Total current | 5,697 |  |  | 2,529 |  |  | 1,819 |
Deferred: |  |  |  |  |
Federal | (16,771) |  |  | 361 |  |  | (349) |
State | (2,318) |  |  | (47) |  |  | 35 |
Foreign | 2,797 |  |  | (357) |  |  | 1,236 |
Total deferred | (16,292) |  |  | (43) |  |  | 922 |
Total | $ | (10,595) |  |  | $ | 2,486 |  |  | $ | 2,741 |
For 2024, 2023, and 2022, the Company's U.S. federal statutory rate was 21%. The differences between the income tax (benefit) and provisions computed using the statutory federal income tax rate and the (benefit) provisions for income taxes reported in the consolidated statements of operations are as follows:
| Years Ended December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
Expected tax at statutory rate | $ | 9,762 |  |  | $ | (5,736) |  |  | $ | (2,456) |
Foreign taxes at other rates | (532) |  |  | (213) |  |  | 3,373 |
Valuation allowance changes | (10,464) |  |  | 8,513 |  |  | 4,370 |
Global intangible low-taxed income inclusion | 5,571 |  |  | — |  |  | — |
State income taxes, net of federal benefit | (1,281) |  |  | (170) |  |  | (322) |
Uncertain tax positions | — |  |  | — |  |  | (515) |
Research credits | (956) |  |  | (633) |  |  | (2,568) |
Worthless stock deduction | (12,632) |  |  | — |  |  | — |
Disallowed expenses and other | (63) |  |  | 725 |  |  | 859 |
Total | $ | (10,595) |  |  | $ | 2,486 |  |  | $ | 2,741 |
The Company's release of the valuation allowance for the year ended December 31, 2024 was partly due to the IP transfer discussed below and the Company's reassessment of its deferred tax assets that are more likely than not to be realized. The Company determined that there is sufficient positive evidence, including recent cumulative pretax income, that the Company will generate significant income in the future. Based on the review of this evidence, the Company determined that it is more likely than not deferred tax assets are realizable and therefore released a portion of the valuation allowance during the year. During 2024, the Company completed an intra-entity asset transfer of certain intellectual property (“IP Transfer”) to the U.S., which was classified as an arm’s length transaction at fair value pursuant to the asset transfer agreement. The fair value of the IP asset was a non-recurring fair value measurement. With the assistance of a third-party valuation specialist, the fair value of the IP was determined using the income method,which reflects the Company's assumptions regarding projected revenue, earnings before interest and taxes and a discount rate. The assumptions used in the estimation of the IP asset involved Level 3 inputs of the fair value hierarchy. The tax deduction amortization related to the IP asset will be recognized in future periods over the next fifteen years. The transaction resulted in a step-up of tax-deductible basis driven by the fair value of the IP Transfer, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible asset, which resulted in the recognition of a discrete tax benefit of $3.7 million. The tax-deductible amortization related to the transferred IP rights will be recognized in future periods. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. The Company expects to realize the deferred tax asset resulting from the IP Transfer and will assess the realizability of the deferred tax asset quarterly. The Company recorded an income tax benefit related to a worthless stock deduction for the Company’s investment in one of its wholly owned subsidiaries. The worthless stock deduction was $60.2 million, resulting in an estimated tax benefit of $12.6 million. In addition, the Company received a favorable response in connection with its Mutual Agreement Procedure ("MAP") request related to a Belgium audit concluded in 2020. The Company recorded a net tax benefit of $1.2 million during the year ended December 31, 2024 in connection with the MAP request. The Company's policy is to record interest and penalties on income taxes as income tax expense. It recorded a benefit of $0.2 million in 2024 and expense of less than $0.1 million in 2023 and 2022. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2024 and 2023, are as follows:
| December 31,
(In thousands) | 2024 |  | 2023
Deferred tax assets: |  |  |
Stock and long-term compensation plans | $ | 1,224 |  |  | $ | 1,515 |
Foreign NOL & other carryforwards | 48,705 |  |  | 45,390 |
U.S. and state NOL carryforwards | 8,128 |  |  | 7,866 |
Deferred revenue | 219 |  |  | 650 |
Pension liability | 436 |  |  | 531 |
Depreciation and amortization | — |  |  | 1,626 |
Intangible assets | 7,855 |  |  | — |
Lease liability | 2,310 |  |  | 2,383 |
Capitalized research and development | 1,054 |  |  | 446 |
Accrued expenses and other | 1,036 |  |  | 948 |
Total gross deferred tax assets | 70,967 |  |  | 61,355 |
Less: Valuation allowance | (37,246) |  |  | (47,844) |
Net deferred income tax assets | $ | 33,721 |  |  | $ | 13,511 |
Deferred tax liabilities: |  |  |
Accruals | $ | — |  |  | $ | 367 |
Tax on unremitted foreign earnings | 3,516 |  |  | 1,164 |
Right of use asset | 2,527 |  |  | 2,095 |
Intangible assets | — |  |  | 2,217 |
Depreciation and amortization | 2,378 |  |  | — |
Tax on credits | 4,810 |  |  | 3,689 |
Contract acquisition costs | 3,654 |  |  | 3,325 |
Deferred tax liabilities | $ | 16,885 |  |  | $ | 12,857 |
Net deferred tax assets | $ | 16,836 |  |  | $ | 654 |
Deferred tax assets and liabilities are netted by tax jurisdiction. The valuation allowance against the net deferred tax assets as of December 31, 2024 and 2023 was $37.2 million and $47.8 million, respectively. The Company recorded changes in valuation allowance of $(10.5) million and $8.5 million, during the years ended December 31, 2024 and 2023, respectively, against deferred tax assets that, based on the Company's assessment are considered not to be more likely than not to be realized. The decrease in the valuation allowance in 2024 reflects changes in management's assessment of the ability to use existing deferred tax assets, including NOLs, due to an increase in operating profit and IP Transfer. The Company assesses the need for a valuation allowance on a regular basis, weighing all positive and negative evidence to determine whether a deferred tax asset will be fully or partially realized. In evaluating the realizability of deferred tax assets, significant pieces of negative evidence such as 3-year cumulative losses are considered. The Company also reviews reversal patterns of temporary differences to determine if the Company would have sufficient taxable income due to the reversal of temporary differences to support the realization of deferred tax assets. In 2022, the Company established a valuation allowance against certain deferred tax assets in jurisdictions that were not previously valued as the deferred tax assets were no longer more likely than not to be realized. In 2023, the Company continued to maintain a valuation allowance against certain deferred tax assets in jurisdictions where assets are not more likely than not to be realized. In 2024, the Company reversed the valuation allowance in certain jurisdictions based on an assessment of the ability to utilize the deferred tax assets. For all other remaining deferred tax assets, the Company believes it is still more likely than not that the results of future operations or tax planning strategies will generate sufficient taxable income to realize the deferred tax assets. At December 31, 2024, the Company had foreign and state net operating loss (NOL) carryforwards and other foreign deductible carryforwards as shown in the following table:
(In thousands) | Carryforward |  | Expiration
NOL Carryforward |  |  |
Canada | $ | 52,645 |  |  | 2031-2044
United States | 22,678 |  |  | None
United Kingdom | 10,433 |  |  | None
Other foreign | 5,147 |  |  | None
Canada province | 48,742 |  |  | 2031-2044
U.S. states | 44,074 |  |  | 2025-2043
| $ | 183,719 |  |  |
Other Carryforwards |  |  |
United States credit | $ | 1,166 |  |  | 2031-2034
Canada | 50,099 |  |  | None
Canada province | 63,523 |  |  | None
Capital loss | 348 |  |  | None
Canada credits | 10,231 |  |  | 2033-2044
Canada province credits | 4,936 |  |  | 2036-2044
| $ | 130,303 |  |  |
| $ | 314,022 |  |  |
ASC 740, Income Taxes sets a “more-likely-than-not” criterion for recognizing the tax benefit of uncertain tax positions. As of December 31, 2024, 2023, and 2022, the Company had reserves of $0.
| December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
Reserve at beginning of year | $ | — |  |  | $ | — |  |  | $ | 512 |
Increases related to prior year tax positions | — |  |  | — |  |  | — |
Decreases related to prior year tax positions | — |  |  | — |  |  | (512) |
Settlement | — |  |  | — |  |  | — |
Total | $ | — |  |  | $ | — |  |  | $ | — |
The Company files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, and is subject to examination of its income tax returns by the IRS and other tax authorities. The Company reduced an uncertain tax position in the U.S. upon filing of an accounting method change and receiving audit protection. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with the Company's expectations, there could be a requirement to adjust the provision for income taxes in the period such resolution occurs. There are no unrecognized tax benefits as of December 31, 2024 that, if recognized, would affect the effective tax rate. The Company's primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.
Australia | 2016
Austria | 2018
Belgium | 2020
Canada | 2020
Netherlands | 2019
Singapore | 2019
Switzerland | 2023
United Kingdom | 2022
United States | 2017

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