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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table sets forth the components of the Company's (loss) income before income tax (expense) benefit:
| Years Ended December 31,
(in thousands) | 2024 |  | 2023 |  | 2022
United States | $ | (31,483) |  |  | $ | (278,741) |  |  | $ | 68,706 |
Foreign | (34,515) |  |  | 18,197 |  |  | 30,269 |
Total (loss) income before income tax (expense) benefit | $ | (65,998) |  |  | $ | (260,544) |  |  | $ | 98,975 |
The following table sets forth the components of the Company's income tax (expense) benefit:
| Years Ended December 31,
(in thousands) | 2024 |  | 2023 |  | 2022
Current tax (expense): |  |  |  |  |
Federal | $ | (5,316) |  |  | $ | (1,870) |  |  | $ | (42,065) |
State and local | (1,800) |  |  | (1,542) |  |  | (6,579) |
Foreign | (6,498) |  |  | (8,238) |  |  | (11,096) |
Total current tax (expense) | (13,614) |  |  | (11,650) |  |  | (59,740) |
Deferred tax benefit (expense): |  |  |  |  |
Federal | 5,748 |  |  | 7,789 |  |  | 9,096 |
State and local | (1,677) |  |  | (826) |  |  | (3,439) |
Foreign | 1,325 |  |  | 5,936 |  |  | 9,456 |
Total deferred tax benefit | 5,396 |  |  | 12,899 |  |  | 15,113 |
Total income tax (expense) benefit | $ | (8,218) |  |  | $ | 1,249 |  |  | $ | (44,627) |
The following table sets forth the principal reasons for the differences between the effective income tax rate and the statutory federal income tax rate for the Company:
| Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Statutory federal tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Foreign rate differential | 5.7 | % |  | 0.3 | % |  | 0.1 | %
State and local taxes, net of federal tax benefit | (10.1) | % |  | (0.8) | % |  | 9.1 | %
Change in value of indemnification asset | — | % |  | (0.9) | % |  | (0.4) | %
Non-deductible executive compensation | (3.7) | % |  | (1.0) | % |  | 1.8 | %
Stock compensation | 0.2 | % |  | — | % |  | — | %
Non-deductible transaction costs | (1.8) | % |  | (0.2) | % |  | 0.1 | %
Change in federal and state valuation allowance | 5.2 | % |  | 0.1 | % |  | (0.7) | %
Change in unrecognized tax benefits (including FBOS) | (3.8) | % |  | 2.4 | % |  | 1.9 | %
Bargain purchase gain | — | % |  | — | % |  | (2.2) | %
Non-deductible goodwill impairment | (32.8) | % |  | (21.7) | % |  | 21.6 | %
Federal research and development credit | 3.2 | % |  | 0.6 | % |  | (1.4) | %
Foreign exchange | 2.2 | % |  | (0.1) | % |  | (0.4) | %
Other, net | 2.3 | % |  | 0.8 | % |  | (5.4) | %
Effective tax rate | (12.4) | % |  | 0.5 | % |  | 45.1 | %
Deferred Taxes Deferred taxes arise because of differences in the book and tax basis of certain assets and liabilities. A valuation allowance is recognized to reduce gross deferred tax assets to the amount that will more likely than not be realized. The following table sets forth the significant components of the Company's deferred income tax assets and liabilities:
| Years Ended December 31,
(in thousands) | 2024 |  | 2023
Deferred tax assets |  |  |
Allowance for doubtful accounts | $ | 3,887 |  |  | $ | 4,405 |
Deferred and other compensation | 15,184 |  |  | 16,662 |
Capital investments | — |  |  | 3,790 |
Interest expense limitation | 21,677 |  |  | 9,680 |
Fixed assets and capitalized software | 27,781 |  |  | 14,786 |
Pension and other post-employment benefits | 10,578 |  |  | 18,805 |
Operating lease liability | 2,627 |  |  | 3,474 |
Reserve for facility exit costs | 4,719 |  |  | 4,812 |
Net operating loss and credit carryforwards (1) | 35,325 |  |  | 27,593 |
Non-compete and other agreements | 24,375 |  |  | 37,615 |
Goodwill and other intangible assets | 13,319 |  |  | 15,567 |
Other, net | 13,436 |  |  | 8,361 |
Total deferred tax assets | $ | 172,908 |  |  | $ | 165,550 |
Valuation allowance | (15,662) |  |  | (18,810) |
Net deferred tax assets | $ | 157,246 |  |  | $ | 146,740 |
Deferred tax liabilities |  |  |
Goodwill and other intangible assets | $ | — |  |  | $ | (2,587) |
Deferred costs | (1,754) |  |  | (3,368) |
Investment in subsidiaries | (4,193) |  |  | (4,489) |
Operating lease right-of-use assets | (5,323) |  |  | (5,582) |
Fixed assets and capitalized software | (2,889) |  |  | (1,099) |
Other, net | — |  |  | (2,676) |
Total deferred tax (liabilities) | $ | (14,159) |  |  | $ | (19,801) |
Net deferred tax asset | $ | 143,087 |  |  | $ | 126,939 |
(1) For the year ended December 31, 2024, the Company had gross federal net operating loss carryforwards of $83.8 million, subject to an annual Section 382 limitation of $0.4 million. The Company also had net operating loss and credit carryforward deferred tax assets of $17.8 million and $20.9 million for the years ended December 31, 2024 and 2023, respectively, for state income tax purposes, which will begin to expire in 2025. Additionally, $1.1 million o f the state net operating loss carryforward deferred tax asset is subject to a Section 382 limitation of $0.4 million. The Company establishes a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the ability to realize deferred tax assets, the Company considers all available positive and negative evidence, in determining whether, based on the weight of that evidence, a valuation allowance is needed for some or all of the Company's deferred tax assets. In determining the need for a valuation allowance on the Company's deferred tax assets, the Company places greater weight on recent and objectively verifiable current information. The Company has considered taxable income in prior carryback years, future reversals of existing taxable temporary differences, tax planning strategies, and future taxable income in assessing the need for the valuation allowance. If the Company was to determine that it would be able to realize the deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. As of December 31, 2024, management has determined that it is more likely than not that its deferred taxes will be realized, with the exception of certain indefinite lived deferred tax assets and certain state net operating loss carryforwards of $15.7 million. For the year ended December 31, 2024, the Company recorded a net valuation allowance decrease of $3.1 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. Valuation Allowance The following table sets forth changes in the Company’s valuation allowance:
(in thousands) | 2024 |  | 2023
Balance at beginning of period | $ | 18,810 |  |  | $ | 21,109 |
Net change in valuation allowance | (3,148) |  |  | (2,299) |
Balance at end of period | $ | 15,662 |  |  | $ | 18,810 |
Unrecognized Tax Benefits The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. The Company is subject to taxation in the United States and various other state and foreign jurisdictions. The material jurisdictions in which the Company is subject to potential examination include the United States and Australia. Tax years 2021 through 2023 are subject to examination by the Internal Revenue Service and tax years 2020 through 2023 are subject to examination by the Australian Tax Authority. State tax returns are open for examination for an average of three years; however, certain jurisdictions remain open to examination longer than three years due to the existence of net operating loss carryforwards. The Company received IRS FPAA notification letters dated August 29, 2018 for IRS adjustments related to the tax years 2012-2015, for which the Company has previously and adequately reserved. See Note 15, Contingent Liabilities. Keap is currently under audit with the IRS for tax year 2022 and is in the initial stages of responding to information requests. The Company is also currently under examination by the Florida Department of Revenue for tax years 2020 through 2022. The Company does not have any other significant state or local examinations in process. The following table reflects changes to and balances of the Company's unrecognized tax benefits:
(in thousands) | 2024 |  | 2023 |  | 2022
Balance at beginning of period | $ | 17,140 |  |  | $ | 21,443 |  |  | $ | 20,834 |
Gross additions for tax positions related to the current year | 774 |  |  | 624 |  |  | 423 |
Gross additions for tax positions related to prior years | 150 |  |  | 201 |  |  | 332 |
Gross reductions for tax positions related to prior years | — |  |  | (5,128) |  |  | — |
Gross reductions for tax positions related to the lapse of applicable statute of limitations | — |  |  | — |  |  | (146) |
Balance at end of period | $ | 18,064 |  |  | $ | 17,140 |  |  | $ | 21,443 |
For the year ended December 31, 2024, the Company's unrecognized tax benefit increased by $0.9 million, while for the year ended December 31, 2023, the Company's unrecognized tax benefit decreased by $4.3 million, and for the year ended December 31, 2022, the Company's unrecognized tax benefit increased by $0.6 million. The increase for the year ended December 31, 2024 was primarily attributable to the tax positions related to research and development credits claimed for tax years 2023 and 2024. The decrease for the year ended December 31, 2023 was primarily attributable to favorable developments with ongoing U.S. federal tax examinations, partially offset by the increase attributable to tax positions related to research and development credits claimed for tax years 2022 and 2023. The increase for the year ended December 31, 2022 was primarily attributable to tax positions related to research and development credits claimed for tax years 2021 and 2022 offset by the reduction for tax positions related to the lapse of applicable statute of limitations. For the years ended December 31, 2024, 2023 and 2022, the Company had $18.1 million, $17.1 million, and $21.4 million, respectively, of unrecognized tax benefits, excluding interest and penalties, that if recognized, would impact the effective tax rate. The Company recorded adjustments to interest and penalties related to unrecognized tax benefits as part of the expense/(benefit) for income taxes in the Company's consolidated statements of operations and comprehensive (loss) income of $2.3 million, $(2.8) million, and $2.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. Unrecognized tax benefits include $11.3 million, $9.0 million, and $11.7 million of accrued interest as of December 31, 2024, 2023, and 2022, respectively. It is reasonably possible that the $18.1 million unrecognized tax benefit liability presented above for the year ended December 31, 2024, could decrease by $15.6 million within the next twelve months, due to an anticipated settlement with the tax authorities and the expiration of the statute of limitations in certain jurisdictions.

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