v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before income tax provision (benefit) consisted of the following (in thousands):
Year ended December 31,
202420232022
United States$(56,114)$(125,715)$(91,210)
Foreign6,673 1,617 2,210 
Total
$(49,441)$(124,098)$(89,000)
The provision (benefit) for income taxes consisted of the following (in thousands):
Year ended December 31,
202420232022
Current
Federal
$87 $700 $— 
State
1,153 937 327 
Foreign
5,003 1,838 1,020 
Total Current6,243 3,475 $1347 
Deferred
Foreign
(642)(48)600 
Total Deferred$(642)$(48)$600 
Total$5,601 $3,427 $1,947 
The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for income taxes consisted of the following (in thousands):
Year ended December 31,
202420232022
Federal statutory rate21.0 %21.0 %21.0 %
Effect of:
Tax benefit at federal statutory rate
$(10,383)$(26,061)$(18,690)
State taxes, net of federal benefit
(3,113)(8,397)(5,722)
Section 162(m) limitations5,518 11,715 6,083 
Stock-based compensation(3,052)(9,652)(9,250)
Net impact of global intangible low-taxed income inclusion
911 2,259 2,850 
Induced conversion
— 8,834 — 
Meals & entertainment
971 821 263 
Base erosion waived deductions
3,452 — — 
Permanent items
502 (108)85 
Tax benefit of federal R&D credit
(7,271)(8,036)(6,406)
Effect of foreign operations
3,194 1,337 (194)
Valuation allowance
15,385 30,636 32,896 
Other
(513)79 32 
Total income tax provision$5,601 $3,427 $1,947 
The components of deferred tax assets and liabilities were as follows (in thousands):
As of December 31,
20242023
Deferred tax assets:
Property and equipment
$3,133 $3,018 
Accruals and reserves
255 124 
Lease liability
6,554 6,815 
Compensation and benefits
20,720 16,756 
Deferred revenue
50,163 42,332 
Net operating loss and credits
99,037 120,021 
IRC 174 Capitalization101,865 73,680 
Other
2,287 654 
Total deferred tax assets
284,014 263,400 
Valuation allowance
(266,956)(248,279)
Total deferred tax assets
17,058 15,121 
Deferred tax liabilities:
Right-of-use asset(6,412)(6,589)
Acquired intangibles
(2,920)(604)
Deferred commissions(6,572)(7,265)
Other deferred tax liabilities
(441)(566)
Deferred tax liabilities
(16,345)(15,024)
Total$713 $97 
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, we recognized a full valuation allowance against our net US deferred tax assets at December 31, 2024, because we believe it is more likely than not that these benefits will not be realized.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) amended Internal Revenue Code Section 174 to require specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years (U.S. R&E) or fifteen years (non-U.S. R&E). Because of this amendment, we generated U.S. taxable income and have recorded a deferred tax asset related to the Section 174 amortization of $101.9 million at December 31, 2024. We were able to partially offset this income with a combination of net operating loss carryforwards and federal and state credits.
As of December 31, 2024, we have federal and state net operating loss carryforwards of approximately $191.2 million and $285.1 million, respectively, available to reduce future taxable income. Federal and some state net operating losses incurred after 2017 will have an indefinite carryforward. The state net operating loss carryforwards will expire in varying amounts beginning in 2026. Additionally, we have total net operating loss carryforwards from international operations of $1.2 million that do not expire. We also have approximately $37.5 million of federal and $6.0 million of state tax credit carryforwards as of December 31, 2024. The federal credits will expire in varying amounts between the years 2036 and 2044. The state credits expire beginning in 2026. Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change
limitations provided by Section 382 of the Internal Revenue Code, as amended, and similar state provisions.
A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
Year ended December 31,
202420232022
Unrecognized tax benefits-beginning of period$2,276 $1,870 $180 
Additions for tax positions related to prior year—2001,400
Reductions for tax positions related to prior year
(100)——
Foreign currency adjustments
(10)6(10)
Additions for tax positions related to current year
600200300
Unrecognized tax benefits-end of period$2,766 $2,276 $1,870 
We have analyzed our inventory of tax positions taken with respect to all applicable income tax issues for all open tax years. The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of December 31, 2024.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. As of December 31, 2024, tax years for 2020 through 2023 are subject to examination by the tax authorities. Generally, as of December 31, 2024, we are no longer subject to federal, state, local or foreign examinations by tax authorities for years before 2020. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward.