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INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

11. INCOME TAXES

The components of income before income taxes for the years ended December 31, 2024, 2023 and 2022 are as follows (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​		2024			2023			2022
Domestic	​	$	(101,092)	​	$	(57,289)	​	$	(37,777)	​
Foreign	​		50,126	​		29,750	​		29,721	​
Total	​	$	(50,966)	​	$	(27,539)	​	$	(8,056)	​

​

The following is a reconciliation from the tax computed at statutory income tax rates to the Company’s income tax expense for the years ended December 31, 2024, 2023 and 2022 (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​		2024			2023			2022
Tax computed at statutory US federal income tax rates	​	$	(10,703)	​	$	(5,783)	​	$	(1,681)	​
Noncontrolling interest	​	​	124	​	​	(62)	​	​	844	​
Foreign tax rate differential	​	​	(12,321)	​	​	(8,853)	​	​	(6,525)	​
Over (under) provided in prior periods	​		328	​		(179)	​		(437)	​
Nondeductible expenses	​		1,716	​		1,806	​		2,111	​
Global intangible low-taxed income	​	​	3,363	​	​	-	​	​	-	​
Capitalized transactions costs	​		-	​		56	​		134	​
Change in tax reserves	​	​	(7,100)	​	​	2,783	​	​	4,052	​
State Taxes, net of federal benefit	​		(3,819)	​		(1,776)	​		(1,126)	​
Change in valuation allowance	​		6,715	​		2,467	​		2,117	​
Investment tax credit	​	​	880	​	​	84	​	​	84	​
Stock-based compensation	​	​	911	​	​	812	​	​	696	​
Deferred income tax revaluation	​	​	792	​	​	(140)	​	​	(742)	​
Total income tax expense	​	$	(19,114)	​	$	(8,785)	​	$	(473)	​

​

The components of income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022 are as follows (in thousands):

\	​	​	​	​	​	​	​	​	​	​
​		2024			2023			2022		​
Current:	​	​	​	​	​	​	​	​	​	​
United States—Federal	​	$	(8,730)	​	$	921	​	$	302	​
United States—State	​		(26)	​		404	​		20	​
Foreign	​		2,419	​		6,646	​		6,657	​
Total current income tax expense	​	$	(6,337)	​	$	7,971	​	$	6,979	​
Deferred:	​	​	​	​	​	​	​	​	​	​
United States—Federal	​	$	(8,228)	​	$	(7,786)	​	$	(4,527)	​
United States—State	​		(3,032)	​		(2,781)	​		(1,895)	​
Foreign	​		(1,517)	​		(6,189)	​		(1,030)	​
Total deferred income tax expense (benefit)	​	$	(12,777)	​	$	(16,756)	​	$	(7,452)	​
Consolidated:	​	​	​	​	​	​	​	​	​	​
United States—Federal	​	$	(16,958)	​	$	(6,865)	​	$	(4,225)	​
United States—State	​		(3,058)	​		(2,377)	​		(1,875)	​
Foreign	​		902	​		457	​		5,627	​
Total income tax expense (benefit)	​	$	(19,114)	​	$	(8,785)	​	$	(473)	​

​

The significant components of deferred tax assets and liabilities are as follows as of December 31, 2024 and 2023 (in thousands):

​	​	​	​	​	​	​	​
​		2024			2023
Deferred tax assets:	​	​	​	​	​	​	​
Accounts receivable and inventory allowances	​	$	2,548	​	$	2,552	​
Basis in investments	​		3,925	​		3,795	​
Accrued expenses	​		7,565	​		7,331	​
Deferred revenue	​		20,774	​		26,768	​
Employee benefits	​		2,304	​		4,515	​
Other, net	​		28,191	​		14,764	​
Net operating losses	​	​	85,926	​	​	78,876	​
Tax credits	​	​	4,918	​	​	5,659	​
Operating lease liability	​	​	23,608	​	​	23,370	​
Total deferred tax asset	​		179,759	​		167,630	​
​	​	​	​	​	​	​	​
Deferred tax liabilities:	​	​	​	​	​	​	​
Acquired intangible assets, property and equipment	​	​	94,533	​	​	105,729	​
Right-of-use asset	​	​	27,087	​	​	27,099	​
Prepaid expense	​		353	​		250	​
Total deferred tax liabilities	​		121,973	​		133,078	​
​	​	​	​	​	​	​	​
Valuation allowance	​		(49,774)	​		(43,118)	​
​	​	​	​	​	​	​	​
Net deferred tax liabilities	​	$	8,012	​	$	(8,566)	​

​

​

Deferred tax assets and liabilities are reflected in the accompanying consolidated balance sheets as follows (in thousands):

​	​	​	​	​	​	​	​
​		2024			2023
Deferred tax assets:	​	​	​	​	​	​	​
Long term	​	$	12,894	​	$	11,209	​
Total deferred tax asset	​	$	12,894	​	$	11,209	​
Deferred tax liabilities:	​	​	​	​	​	​	​
Long term	​	$	(4,882)	​	$	(19,775)	​
Total deferred tax liabilities	​	$	(4,882)	​	$	(19,775)	​
Net deferred tax asset (liabilities)	​	$	8,012	​	$	(8,566)	​

​

The Company’s effective tax rate for the years ended December 31, 2024 and 2023 was 37.5% and 31.9%, respectively.

The effective tax rate for the year ended December 31, 2024 was primarily impacted by the following items: (i) a $7.1 million net benefit associated with the change in unrecognized tax positions, (ii) a $6.7 million net expense related to valuation allowances placed on certain deferred tax assets, (iii) a $3.4 million expense associated with Global Intangible Low Tax Income inclusion, (iv) a $3.8 million benefit related to state income taxes, net of federal benefit, and (v) a $12.3 million benefit associated with the mix of income generated among the foreign jurisdictions in which the Company operates.

The effective tax rate for the year ended December 31, 2023 was primarily impacted by the following items: (i) a $2.8 million net increase of unrecognized tax positions, (ii) a $2.5 million net increase related to valuation allowances placed on certain deferred tax assets and (iii) the mix of income generated among the jurisdictions in which the Company operates along with the exclusion of losses in jurisdictions where valuation allowances have been established for deferred tax assets as required by ASC 740-270-30-36(a), primarily in the US Virgin Islands.

As of December 31, 2024, the Company estimated that it had gross federal, state and foreign net operating loss (“NOL”) carryforwards of $158.9 million, $142.7 million and $185.6 million respectively. Of these, $147.1 million will expire between 2028 and 2044 and $340.1 million may be carried forward indefinitely.

The Company assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets. A significant piece of negative evidence evaluated is cumulative losses incurred in certain reporting jurisdictions over the three-year period ended December 31, 2024. Other negative evidence examined includes, but is not limited to, losses expected in early future years, a history of tax benefits expiring unused, uncertainties whose unfavorable resolution would adversely affect future results, and brief carryback, carry forward periods. On the basis of this evaluation, the Company believed it was more likely than not that the benefit from some of these federal, state, and foreign deferred taxes would not be realized.

In recognition of this risk at December 31, 2024 the Company has provided a valuation allowance against certain domestic and foreign deferred tax assets of $49.8 million. The valuation allowance primarily relates to net operating losses, with the remaining amount applicable to other net deferred tax assets which the Company does not expect to be able to realize.

As of December 31, 2024 the Company had an estimated $222.4 million of undistributed earnings attributable to foreign subsidiaries for which no provision for state income taxes or foreign withholding taxes have been made because it is expected that such earnings will be reinvested outside the U.S. indefinitely unless repatriation can be done substantially tax-free. The Company will generally be free of additional U.S. federal tax consequences on distributed foreign subsidiary earnings due to a dividends received deduction implemented as part of the Tax Act for earnings distributed after January 1, 2018. Additionally, due to the one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings, the majority of previously unremitted earnings have already been

subjected to U.S. federal income tax. The Company continues to assert indefinite reinvestment on outside basis differences in our non-U.S. subsidiaries, additionally any determination of the amount of the unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios and the variation due to multiple potential assumptions relating to the timing of any future repatriation.

The Company had unrecognized tax benefits (including interest and penalty) of $42.8 million as of December 31, 2024, $49.9 million as of December 31, 2023 and, $48.6 million as of December 31, 2022. The net decrease of the reserve during the year ended December 31, 2024 was attributable to an increase in tax positions for prior periods of $4.3 million, an increase in tax positions for the current period of $3.0 million, offset by a lapse in statute of prior year positions of $14.4 million.

The following shows the activity related to unrecognized tax benefits (not including interest and penalty) during the three years ended December 31, 2024 (in thousands):

​	​	​	​
Gross unrecognized uncertain tax benefits at December 31, 2021	​	$	43,714
Increase in unrecognized tax benefits taken during a prior period	​	​	—
Increase in unrecognized tax benefits taken during the current period		​	5,080
Increase in unrecognized tax benefits acquired as part of a business combination		​	(6,825)
Lapse in statute of limitations	​	​	(2,050)
Settlements	​	​	—
Gross unrecognized uncertain tax benefits at December 31, 2022	​	$	39,919
Increase in unrecognized tax benefits taken during a prior period	​	​	—
Increase in unrecognized tax benefits taken during the current period	​	​	2,598
Increase in unrecognized tax benefits acquired as part of a business combination	​	​	—
Lapse in statute of limitations	​	​	(2,449)
Settlements	​	​	—
Gross unrecognized uncertain tax benefits at December 31, 2023	​	$	40,068
Increase in unrecognized tax benefits taken during a prior period	​	​	1,505
Increase in unrecognized tax benefits taken during the current period	​	​	3,020
Increase in unrecognized tax benefits acquired as part of a business combination	​	​	—
Lapse in statute of limitations	​	​	(9,557)
Settlements	​	​	—
Gross unrecognized uncertain tax benefits at December 31, 2024	​	$	35,036

​

The Company’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The accrued amounts for interest and penalties are $7.8 million as of December 31, 2024, $9.8 million as of December 31, 2023, and $8.7 million as of December 31, 2022.

The majority of unrecognized uncertain tax benefits (including interest and penalty) would impact the effective tax rate if recognized.

The Company and its subsidiaries file income tax returns in the US and in various, state and local and foreign jurisdictions. The statute of limitations related to the consolidated US federal income tax return is closed for all tax years up to and including 2020. The expiration of the statute of limitations related to the various state and foreign income tax returns that the Company and subsidiaries file varies by jurisdiction.

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