Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 11. Income Taxes The Company’s income tax expense (benefit), deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the United States and foreign jurisdictions. Significant judgment and estimates are required in determining the consolidated income tax expense (benefit). During interim periods, the Company generally utilizes the estimated annual effective tax rate (“AETR”) method which involves the use of forecasted information. Under the AETR method, the provision is calculated by applying the estimated AETR for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Jurisdictions with tax assets for which the Company believes a tax benefit cannot be realized are excluded from the computation of its AETR. During the three months ended June 30, 2024, the Company recorded a pre-tax impairment charge of $76.9 million for finite-lived intangible assets, property and equipment, and another $33.4 million charge to cost of revenue. Refer to Note “4. Impairment of Immersive Healthcare Asset Group” for more information. According to ASC 740-270-30-8 guidance for significant unusual or infrequently occurring items that are separately reported, the $26.5 million income tax benefit as a result of the impairment charge was excluded from the calculation of the Company’s estimated annual effective tax rate. The Company’s benefit from income taxes was $17.7 million and $14.1 million for the three and six months ended June 30, 2024, respectively, which was primarily due to tax expenses attributable to its worldwide profits offset by a discrete tax benefit from the impairment charge related to the immersive healthcare asset group. The Company’s provision for income taxes was $0.6 million and $0.7 million for the three and six months ended June 30, 2023, respectively, which was primarily due to tax expenses attributable to its worldwide profits offset by excess tax benefits from stock-based compensation attributable to its U.S. jurisdiction. The Company’s effective tax rate changed to 22.7% for the three months ended June 30, 2024, from 2.9% for the three months ended June 30, 2023, and to 22.2% for the six months ended June 30, 2024, compared to 2.4% for the six months ended June 30, 2023, which were primarily due to decrease in excess tax benefits from stock-based compensation attributable to its U.S. jurisdiction for the three and six months in 2024. Significant domestic deferred tax assets (“DTAs”) were generated in recent years, primarily due to excess tax benefits from stock option exercises and vesting of restricted stock units. The Company evaluates all available positive and negative evidence, objective and subjective in nature, in each reporting period to determine if sufficient taxable income will be generated to realize the benefits of its DTAs and, if not, a valuation allowance to reduce the DTAs is recorded. As of June 30, 2024, the Company maintains a valuation allowance primarily against its California R&D tax credit DTAs for which the Company does not believe a tax benefit is more likely than not to be realized due to the computation of California taxes under the single sales factor and non-conformity of the Section 174 capitalization rule. The Company maintains that all foreign earnings, with the exception of a portion of the earnings of its German subsidiary, are permanently reinvested outside the United States and therefore deferred taxes attributable to such earnings are not provided for in the Company’s condensed consolidated financial statements as of June 30, 2024.
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