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Income Taxes
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

4. INCOME TAXES

The Company's effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022, as well as the release of our domestic valuation allowance during the fourth quarter of 2022.

The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of March 31, 2023, the Company had net deferred tax assets totaling $35.0 million, and a valuation allowance totaling $5.2 million against those deferred tax assets. The remaining $29.8 million in deferred tax assets are primarily related to capitalized R&D expenses in the U.S., partially offset by net purchase price intangibles from the Business Combination closed with ADVA during the third quarter of 2022. Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies. Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements.

 

Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:

 

 

 

As of March 31, 2023

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

75,432

 

 

$

(3,177

)

 

$

72,255

 

International

 

 

(40,450

)

 

 

(2,024

)

 

 

(42,474

)

Total

 

$

34,982

 

 

$

(5,201

)

 

$

29,781

 

 

 

 

As of December 31, 2022

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

61,726

 

 

$

(3,177

)

 

$

58,549

 

International

 

 

(50,315

)

 

 

(2,024

)

 

 

(52,339

)

Total

 

$

11,411

 

 

$

(5,201

)

 

$

6,210