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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 14 – INCOME TAXES

The components of loss before taxes are as follows (in thousands):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

U.S.

 

$

(142,447

)

 

$

(667,612

)

 

$

(123,201

)

Foreign

 

 

12,801

 

 

 

(80,005

)

 

 

(37,037

)

Loss before taxes

 

$

(129,646

)

 

$

(747,617

)

 

$

(160,238

)

The provision for income taxes consisted of the following (in thousands):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

 

 

 

 

U.S. federal

 

$

1,398

 

 

$

—

 

 

$

—

 

Foreign

 

 

16,546

 

 

 

21,252

 

 

 

12,531

 

State and local

 

 

694

 

 

 

1,723

 

 

 

(604

)

Total current

 

 

18,638

 

 

 

22,975

 

 

 

11,927

 

Deferred:

 

 

 

 

 

 

 

 

 

U.S. federal

 

 

19

 

 

 

(5,431

)

 

 

1,215

 

Foreign

 

 

(8,113

)

 

 

(3,871

)

 

 

7,116

 

State and local

 

 

(502

)

 

 

(84

)

 

 

(1,418

)

Total deferred

 

 

(8,596

)

 

 

(9,386

)

 

 

6,913

 

Provision for income taxes

 

$

10,042

 

 

$

13,589

 

 

$

18,840

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

As of December 31, 2023, the Company released $2.6 million of valuation allowance associated with certain foreign deferred tax assets due to the change in circumstances that affect the realizability of those deferred tax assets.

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

 

 

December 31,

 

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Net operating losses

 

$

22,442

 

 

$

19,477

 

Research credits

 

 

10,513

 

 

 

6,791

 

Foreign tax credits

 

 

5,796

 

 

 

2,119

 

Accrued expenses

 

 

25,729

 

 

 

27,987

 

Basis difference in fixed and intangible assets

 

 

38,899

 

 

 

16,290

 

Deferred revenue

 

 

10,652

 

 

 

9,556

 

Capitalized R&D

 

 

87,465

 

 

 

63,601

 

Lease liability

 

 

11,075

 

 

 

13,310

 

Other tax credits

 

 

2,318

 

 

 

1,673

 

Gross deferred tax assets

 

 

214,889

 

 

 

160,804

 

Valuation allowance

 

 

(157,595

)

 

 

(111,779

)

Net deferred tax assets

 

 

57,294

 

 

 

49,025

 

Deferred tax liabilities:

 

 

 

 

 

 

Acquired intangible assets

 

 

(36,416

)

 

 

(45,424

)

Revenue recognition

 

 

(4,574

)

 

 

(2,292

)

Operating ROU assets

 

 

(9,758

)

 

 

(10,550

)

Other

 

 

(8,436

)

 

 

(1,562

)

Gross deferred tax liabilities

 

 

(59,184

)

 

 

(59,828

)

Net deferred tax liabilities

 

$

(1,890

)

 

$

(10,803

)

 

The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of the Company’s net deferred tax assets, the Company determined that it was not more-likely-than-not that it would realize its federal, certain state and certain foreign deferred tax assets. The Company intends to continue maintaining a valuation allowance on its federal deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release depends on the level of profitability that the Company is able to achieve.

As of December 31, 2023, the Company had recorded deferred tax assets for the tax effects of the following gross tax loss carryforwards (in thousands):

 

 

Carry forward Amount

 

 

Years of Expiration

Federal

 

$

29,202

 

 

2027—indefinite

State (post-apportionment)

 

$

93,258

 

 

2024—2042

As of December 31, 2023, the Company had the following credits available to reduce future income tax expense (in thousands):

 

 

Carry forward Amount

 

 

Years of Expiration

Federal research and development credits

 

$

9,451

 

 

2024—2043

State research and development credits

 

$

17,356

 

 

2024—indefinite

Foreign tax credits

 

$

8,114

 

 

2026—2033

The deferred tax asset valuation allowance and changes in the deferred tax asset valuation allowance consisted of the following (in thousands):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

111,779

 

 

$

101,529

 

 

$

52,676

 

Charged (credited) to expenses

 

 

46,397

 

 

 

19,321

 

 

 

59,249

 

Charged (credited) to other accounts

 

 

(581

)

 

 

(9,071

)

 

 

(10,396

)

Balance at end of period

 

$

157,595

 

 

$

111,779

 

 

$

101,529

 

Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate to loss before income taxes as a result of the following (in thousands):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

U.S. federal statutory rate

 

$

(27,226

)

 

$

(157,032

)

 

$

(33,650

)

State, net of federal benefit

 

 

532

 

 

 

1,974

 

 

 

(258

)

Stock-based compensation

 

 

6,758

 

 

 

2,036

 

 

 

(1,740

)

Executive compensation limitation

 

 

1,911

 

 

 

2,286

 

 

 

2,221

 

Research tax credit

 

 

(6,983

)

 

 

(5,225

)

 

 

(2,321

)

Foreign withholding tax

 

 

12,811

 

 

 

8,079

 

 

 

11,018

 

Goodwill impairment

 

 

—

 

 

 

107,831

 

 

 

—

 

Restructuring and transaction costs

 

 

649

 

 

 

293

 

 

 

—

 

Divestiture-related activity

 

 

(26,915

)

 

 

—

 

 

 

—

 

Foreign rate differential

 

 

(7,354

)

 

 

19,337

 

 

 

16,407

 

Foreign tax credit

 

 

(10,124

)

 

 

(977

)

 

 

(8,928

)

Change in valuation allowance

 

 

50,314

 

 

 

20,491

 

 

 

39,063

 

Foreign income inclusions

 

 

10,151

 

 

 

7,656

 

 

 

—

 

Unrecognized tax benefits

 

 

746

 

 

 

6,798

 

 

 

1,526

 

Change in estimates

 

 

3,844

 

 

 

(1,802

)

 

 

(4,674

)

Others

 

 

928

 

 

 

1,844

 

 

 

176

 

Total

 

$

10,042

 

 

$

13,589

 

 

$

18,840

 

 

At December 31, 2023, the Company asserts that it will not permanently reinvest its foreign earnings outside the United States. The Company anticipates that the cash from its foreign earnings may be used domestically to fund operations or used for other business needs. The accumulated undistributed earnings generated by its foreign subsidiaries was approximately $29.7 million. Substantially all of these earnings will not be taxable upon repatriation to the United States since they will be treated as previously taxed earnings and profits. The U.S. state income taxes and foreign withholding taxes related to the distributable cash of the Company’s foreign subsidiaries are not expected to be material.

As of December 31, 2023, unrecognized tax benefits were approximately $23.6 million, of which $9.6 million would affect the effective tax rate, if recognized. As of December 31, 2022, unrecognized tax benefits were approximately $19.4 million, of which $8.8 million would affect the effective tax rate, if recognized. As of December 31, 2021, unrecognized tax benefits were approximately $8.4 million, of which $1.7 million would affect the effective tax rate, if recognized.

The Company is unable to make a reasonable estimate of the timing of the long-term payments or the amount by which the unrecognized tax benefits will increase or decrease over the next 12 months.

The reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Total unrecognized tax benefits at January 1

 

$

19,354

 

 

$

8,438

 

 

$

7,106

 

Changes due to mergers and transactions

 

 

—

 

 

 

1,682

 

 

 

(1,440

)

Increases for tax positions related to the current year

 

 

4,070

 

 

 

8,793

 

 

 

1,962

 

Increases for tax positions related to prior years

 

 

961

 

 

 

444

 

 

 

1,303

 

Decreases for tax positions related to prior years

 

 

(798

)

 

 

(3

)

 

 

(493

)

Total unrecognized tax benefits at December 31

 

$

23,587

 

 

$

19,354

 

 

$

8,438

 

It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. For the year ended December 31, 2023, the Company recognized interest and penalties of $0.3 million related to unrecognized tax benefits, whereas interest and penalties were immaterial for the years ended December 31, 2022 and 2021. As of December 31, 2023, accrued interest and penalties were $0.4 million, whereas amounts accrued as of December 31, 2022 were immaterial.

With few exceptions, the Company’s 2019 through 2023 tax years are open and subject to potential examination in one or more jurisdictions at December 31, 2023. In addition, in the United States, any net operating losses or credits that were generated in 2022 or earlier but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to adjustment if the Former Parent were to be audited.