XML 44 R19.htm IDEA: XBRL DOCUMENT v3.23.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company is the sole managing member of S1 Holdco and, as a result, consolidates the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by the Company.

Domestic and foreign components of the Company’s income (loss) before income taxes were as follows:

SuccessorPredecessor
Period from January 27, 2022 through December 31, 2022Period from January 1, 2022 through January 26, 2022Year Ended December 31, 2021
Domestic
$(480,672)$(38,068)$30,521 
Foreign
(63,383)378 3,440 
Income (loss) before income taxes
$(544,055)$(37,690)$33,961 
The components of the income tax provision (benefit) were as follows:

SuccessorPredecessor
Period from January 27, 2022 through December 31, 2022Period from January 1, 2022 through January 26, 2022Year Ended December 31, 2021
Current:

—

—
Federal$79 $— $— 
State426 17 55 
Foreign
5,317 170 1,882 
Total current provision
$5,822 $187 $1,937 
Deferred:
Federal$(89,997)$— $— 
State(8,769)— — 
Foreign
(9,032)(816)(972)
Total deferred (benefit)
$(107,798)$(816)$(972)
Income tax (benefit) provision
$(101,976)$(629)$965 
A reconciliation of the statutory tax rate to the effective income tax rate for the periods presented was as follows:


SuccessorPredecessor
Period from January 27, 2022 through December 31, 2022Period from January 1, 2022 through January 26, 2022Year Ended December 31, 2021
Amount%Amount%Amount%
Income tax (benefit) provision at statutory tax rate$(114,252)21.0 %$(7,915)21.0%$7,132 21.0%
State tax, net of federal(5,470)1.015 —55 0.2
Non-Controlling interests19,205 (3.5)— —— —
Effect of flow-through entity— —7,994 (21.2)(6,409)(18.9)
Changes in unrecognized tax benefits8,940 (1.6)— —— —
Foreign income taxes at different statutory rate1,152 (0.2)18 —88 0.3
Investment in partnership basis adjustments(13,491)2.4— —— —
Other1,940 (0.4)(741)1.999 0.2
Effective income tax rate$(101,976)18.7%$(629)1.7%$965 2.8%

The aggregate amount of gross unrecognized tax benefits related to uncertain tax positions were as follows:

Gross Unrecognized Tax Benefits
January 1, 2021 (Predecessor)$— 
Increases based on tax positions related to prior periods— 
Increases based on tax positions related to current periods— 
December 31, 2021 (Predecessor)$— 

Gross Unrecognized Tax Benefits
January 1, 2022 (Predecessor)$— 
Increases based on tax positions related to prior periods— 
Increases based on tax positions related to current periods— 
January 26, 2022 (Predecessor)$— 

Gross Unrecognized Tax Benefits
January 27, 2022 (Successor)$— 
Increases based on tax positions related to prior periods221 
Increases based on tax positions related to current periods11,061 
December 31, 2022 (Successor)$11,282 
Interest and penalties related to the Company's unrecognized tax benefits are recorded as components of the provision for income taxes. Interest or penalties accrued for the years ended December 31, 2022 and 2021 were not material.

The total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax rate was $9,200 (net of Federal benefit) at December 31, 2022.

The Company is not currently under examination in any jurisdiction. It is reasonably possible that, within the next twelve months, statutes of limitation will expire which could have the effect of reducing the balance of unrecognized tax benefits by $29.
The earliest tax years that remain subject to examination in the major tax jurisdictions in which the Company operates were as follows:

JurisdictionTax Year
United States2019
California2018
United Kingdom2021
Netherlands2016

The components of the deferred income taxes were as follows:

SuccessorPredecessor
December 31, 2022December 31, 2021
Deferred tax assets:
Net operating losses$16,053 $— 
Interest expense1,196 165 
Other1,920 5 
Total deferred tax assets
19,169 170 
Valuation allowance(1,087)(170)
Total net deferred tax assets$18,082 $— 
Deferred tax liabilities:
Investment in partnerships$21,144 $— 
Intangibles40,112 7,789 
Other171 — 
Total deferred tax liabilities
$61,427 $7,789 
Net deferred tax liabilities
$43,345 $7,789 
    
The Company assesses available positive and negative evidence to estimate if it is more likely than not to use certain jurisdiction-based deferred tax assets including net operating loss carryovers. On the basis of this assessment, a valuation allowance was recorded during the year ended December 31, 2022.

As of December 31, 2022, the Company had U.S. federal net operating loss carryovers (“NOLs”) of $9,911 that may be used indefinitely and various state NOLs that will expire at different times. The Company also has United Kingdom NOLs of $70,873 that may be used indefinitely. Uncertainties that may affect the utilization of our tax attributes include future operating results, tax law changes, rulings by taxing authorities regarding whether certain transactions are taxable or deductible and expiration of carryforward periods.

The Company had an ownership change and as a result certain federal and state NOLs were limited pursuant to Section 382 of the Code. This limitation has been accounted for in calculating the Company's available NOL carryforwards.

The change in the valuation allowance was comprised of the following:
Valuation Allowance
January 1, 2021 (Predecessor)$170 
Increases in valuation allowance recorded through earnings— 
December 31, 2021 (Predecessor)$170 

Valuation Allowance
January 1, 2022 (Predecessor)$170 
Increases in valuation allowance recorded through earnings— 
January 26, 2022 (Predecessor)$170 

Valuation Allowance
January 27, 2022 (Successor)$170 
Increases in valuation allowance recorded through earnings917 
December 31, 2022 (Successor)$1,087 

Tax Receivable Agreement

Pursuant to the Company's election under Section 754 of the Internal Revenue Code (the “Code”), the Company expects to obtain an increase in its share of the tax basis in the net assets of S1 Holdco when LLC Interests are redeemed or exchanged by the other members of S1 Holdco. The Company intends to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that would otherwise be paid in the future to various tax authorities.

On January 27, 2022, the Company entered into a Tax Receivable Agreement with certain of the then-existing members of S1 Holdco that provides for the payment by the Company of 85% of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in the Company's share of the tax basis in the net assets of S1 Holdco resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the “TRA Payments”). The Company expects to benefit from the remaining 15% of any tax benefits that may actually realize.
As of December 31, 2022, the Company acquired an aggregate of 330 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of its investment in S1 Holdco subject to the provisions of the Tax Receivable Agreement. The Company recognized a liability in the amount of $1,036 for the TRA Payments due to the redeeming members, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on estimates of future taxable income. During the year ended December 31, 2022, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement. As of December 31, 2022, the total amount of TRA Payments due under the Tax Receivable Agreement, was $1,036.