v3.22.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign components of income before provision for income taxes were as follows (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Domestic | $ | 32,945 |  |  | $ | 61,822 |  |  | $ | 28,169 |
Foreign | 4,522 |  |  | 2,981 |  |  | 3,411 |
Income before provision for income taxes | $ | 37,467 |  |  | $ | 64,803 |  |  | $ | 31,580 |
The provision for income taxes consisted of the following (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Current provisions for income taxes: |  |  |  |  |
Federal | $ | 11,379 |  |  | $ | 2,437 |  |  | $ | 360 |
State | 2,060 |  |  | 714 |  |  | 240 |
Foreign | 1,349 |  |  | 295 |  |  | 1,434 |
Total current tax expense | 14,788 |  |  | 3,446 |  |  | 2,034 |
Deferred tax expense: |  |  |  |  |
Federal | (5,491) |  |  | 4,513 |  |  | 1,845 |
State | (769) |  |  | 251 |  |  | 1,170 |
Foreign | 234 |  |  | (11) |  |  | (82) |
Total deferred tax expense | (6,026) |  |  | 4,753 |  |  | 2,933 |
Total provision for income taxes | $ | 8,762 |  |  | $ | 8,199 |  |  | $ | 4,967 |
The following table presents a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the periods presented:
| December 31,
| 2022 |  | 2021 |  | 2020
Federal statutory income tax rate | 21.00 | % |  | 21.00 | % |  | 21.00 | %
State after-tax rate | 3.45 |  |  | 1.49 |  |  | 4.47 |
Stock options | 2.67 |  |  | (10.38) |  |  | (6.79) |
Research credit | (4.51) |  |  | (1.37) |  |  | (2.04) |
Transfer pricing reserve | 0.76 |  |  | (1.26) |  |  | 1.32 |
Foreign rate differential | (0.02) |  |  | 0.73 |  |  | 0.61 |
Foreign derived intangible income | (2.13) |  |  | (0.48) |  |  | (3.26) |
Section 162(m) limitation | 2.59 |  |  | 2.49 |  |  | — |
Other | (0.38) |  |  | 0.42 |  |  | 0.42 |
Effective tax rate | 23.43 | % |  | 12.64 | % |  | 15.73 | %
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |  |
Net operating loss carryforwards | $ | 263 |  |  | $ | 56 |  |  | $ | 124 |
Accruals and allowances | 1,067 |  |  | 1,104 |  |  | 614 |
Tax credits | 1,954 |  |  | 1,396 |  |  | 1,631 |
Stock-based compensation | 4,907 |  |  | 3,171 |  |  | 2,045 |
Unrealized gain on equity investment | 124 |  |  | — |  |  | — |
Intangibles assets | 907 |  |  | 1,010 |  |  | 1,106 |
Lease obligation | 5,074 |  |  | 5,226 |  |  | — |
Other | 1,222 |  |  | 808 |  |  | 1,101 |
Total deferred tax assets | 15,518 |  |  | 12,771 |  |  | 6,621 |
Valuation allowance | (1,954) |  |  | (1,396) |  |  | (1,372) |
Total deferred tax assets, net of valuation allowance | 13,564 |  |  | 11,375 |  |  | 5,249 |
Deferred tax liabilities: |  |  |  |  |
Property, equipment, and software | (3,905) |  |  | (8,316) |  |  | (4,995) |
Goodwill | (843) |  |  | (749) |  |  | (653) |
Prepaid expense | (1,188) |  |  | (1,365) |  |  | (400) |
Right-of-use asset | (5,158) |  |  | (5,201) |  |  | — |
Acquired intangibles | (1,996) |  |  | — |  |  | — |
Unrealized loss on equity investment | — |  |  | (1,296) |  |  | — |
Total deferred tax liabilities | (13,090) |  |  | (16,927) |  |  | (6,048) |
Net deferred income tax asset (liabilities) | $ | 474 |  |  | $ | (5,552) |  |  | $ | (799) |
The Company had gross federal and state net operating loss carryforwards of approximately $1.1 million and $1.3 million, respectively, as of December 31, 2022. The federal net operating loss never expires and the state net operating losses will expire at various dates beginning in 2035 if not utilized and may be subject to annual limitations of usage, as promulgated by the Internal Revenue Service, due to ownership changes that may have occurred in the past. As of December 31, 2022, the Company had state research and development credit carryforwards of $4.1 million. The state credits can be carried forward indefinitely. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), the Company’s ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if the Company experiences an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of the Company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three year period. Similar rules may apply under state tax laws. Net operating loss carryforwards and other tax attributes generated are currently not subject to limitation by Section 382, but subsequent changes in the Company’s stock ownership as well as other changes that may be outside of the Company’s control, could result in additional ownership changes under Section 382 of the Code. Deferred Tax Valuation Allowance A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Management has determined that there is sufficient positive evidence that a valuation allowance against deferred tax assets is not required as of December 31, 2022 and 2021, except for state research credit carryforwards, starting in 2020, for which realization is not deemed more likely than not given the Company expects to generate more credits in future than can be utilized against projected taxable income. The Company has not historically provided for U.S. deferred taxes on the cumulative earnings of non-U.S. affiliates that have been reinvested indefinitely. However, under the 2017 Tax Act the Company was deemed to have repatriated the cumulative earnings of its non-U.S. affiliates and the U.S. liability associated with those cumulative earnings has been reflected in the current federal tax provision. In addition, the Tax Act has enacted tax provisions that will subject all foreign earnings to U.S. taxation. The Company will continue to maintain its policy of indefinite reinvestment to the extent that the repatriation of foreign earnings are restricted by local laws, accounting rules, substantial incremental costs associated with repatriating the foreign earnings, or other business requirements. Uncertain Tax Positions The activity related to the unrecognized income tax benefits is as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Gross unrecognized income tax benefits — beginning balance | $ | 2,364 |  |  | $ | 3,208 |  |  | $ | 2,369 |
Increases related to tax positions taken during the current year | 1,788 |  |  | 649 |  |  | 951 |
Decreases related to tax positions taken during current year | — |  |  | — |  |  | — |
Increases related to tax positions taken during the prior years | 386 |  |  | — |  |  | — |
Decreases related to tax positions taken during the prior years | (235) |  |  | (1,493) |  |  | (112) |
Gross unrecognized income tax benefits — ending balance | $ | 4,303 |  |  | $ | 2,364 |  |  | $ | 3,208 |
The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision. As of December 31, 2022 and 2021, the Company had approximately $0.2 million and $0.1 million, respectively, of accrued interest related to uncertain tax positions. All of the $4.3 million of unrecognized income tax benefits would, if recognized, impact the effective tax rate in the period in which each of the benefits is recognized. The Company files U.S., state and foreign income tax returns with varying statutes of limitations. The federal, state, and foreign returns statute of limitations remains open for tax years from 2013 and thereafter. There are currently no income tax audits involving any U.S. states or foreign tax jurisdictions.

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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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