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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
The components of loss before income taxes are as follows (in thousands):
Year Ended December 31,
202420232022
Domestic$(63,221)$(64,497)$(49,177)
Foreign1,920 (1,281)(697)
Loss before income taxes$(61,301)$(65,778)$(49,874)
The components of income tax expense (benefit) are as follows (in thousands):
Year Ended December 31,
202420232022
Current taxes
Federal
$— $— $— 
State
13 — — 
Foreign
657 820 366 
Current tax expense (benefit)
670 820 366 
Deferred taxes
Federal
86 — — 
State
— — — 
Foreign
(86)(171)— 
Deferred tax expense (benefit)
— (171)— 
Income tax expense (benefit)
$670 $649 $366 
A reconciliation of the difference between the federal statutory rate and the effective income tax rate as a percentage of income before taxes for the years ended December 31, 2024, 2023, and 2022 is as follows (in thousands):
Year Ended December 31,
202420232022
AmountTax RateAmountTax RateAmountTax Rate
Federal statutory income tax$(12,873)21.00 %$(13,813)21.00 %$(10,474)21.00 %
State income tax, net of federal tax benefit(329)0.54 (2,423)3.68 (1,863)3.74 
Foreign tax79 (0.13)(75)0.11 43 (0.09)
Section 162(m) limitation845 (1.38)1,693 (2.57)2,371 (4.75)
Other337 (0.54)304 (0.46)687 (1.38)
Valuation allowance net of deferred tax assets5,367 (8.76)18,389 (27.96)12,075 (24.21)
Stock-based compensation10,817 (17.65)2,051 (3.12)(2,412)4.84 
R&D Credit(2,696)4.40 (6,100)9.27 — — 
Acquisitions— — 603 (0.92)— — 
Return to provision(877)1.43 20 (0.03)(61)0.12 
Effective income tax rate$670 (1.1)%$649 (1.0)%$366 (0.7)%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company’s deferred taxes at December 31, 2024 and 2023 are as follows (in thousands):
As of December 31,
20242023
Deferred tax assets
Net operating loss carryforwards$79,172 $77,309 
Research & Development Costs22,629 15,001 
Operating lease liability4,487 4,677 
Stock-based compensation4,555 6,073 
Research & Development Credits9,753 7,368 
Other2,543 1,892 
Total deferred tax assets123,139 112,320 
Deferred tax liabilities
Fixed assets
(1,747)(1,671)
Intangible assets
(4,939)(6,056)
Deferred commissions and bonus(18,634)(13,261)
Operating lease right-of-use asset(2,785)(2,145)
Other(1,303)(823)
Total deferred tax liabilities(29,408)(23,956)
Less: Valuation allowance(94,037)(88,670)
Net deferred tax asset (liability)$(306)$(306)
The Company assesses all available positive and negative evidence to evaluate the realizability of its deferred tax assets and whether or not a valuation allowance is necessary. The Company’s three-year cumulative loss position was significant negative evidence in assessing the need for a valuation allowance. The weight given to positive and negative evidence is commensurate with the extent such evidence may be objectively verified. Given the weight of objectively verifiable historical losses from operations, the Company has recorded a full valuation allowance on its deferred tax assets related to domestic operations and certain deferred tax assets related to foreign operations. The Company may be able to reverse the valuation allowance when sufficient positive evidence exists to support the reversal of the valuation allowance.
The net change in the valuation allowance for deferred tax assets was approximately $5.4 million increase for the year ended December 31, 2024, $19.4 million increase for the year ended December 31, 2023, and $12.1 million increase for the year ended December 31, 2022. The net change in the valuation allowance was primarily due to an increase in capitalized research and development (R&D) costs and tax credits and an increase in the net operating loss deferred tax asset, offset by an increase in the deferred tax liabilities with known reversal periods that will generate future sources of taxable income.
The Company elected to account for Global Intangible Low-Taxed Income (“GILTI”) as a current-period expense when incurred. Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in the future periods. Unremitted earnings of foreign subsidiaries were immaterial at December 31, 2024.
As of December 31, 2024, the Company has gross federal net operating losses of $308.5 million which begin to expire in 2034, state net operating losses of $215.8 million which begin to expire in 2031, and foreign net operating losses of $2.1 million which begin to expire in 2026. The operating loss carryforwards may be limited due to a change in control in the Company’s ownership as defined by the Internal Revenue Code Sections 382. Any future changes in the Company’s ownership may limit the use of such carryforward benefits.
The Company recognizes tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained by the tax authority upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not threshold, the Company measures the tax position as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement.
The reconciliation of uncertain tax positions at the beginning and end of the years below is as follows (in thousands):
As of December 31,
20242023
Beginning balance2,456 — 
Gross increase (decrease) related to prior year positions— — 
Gross decrease related to settlements— — 
Gross increase related to current year positions898 2,456 
Ending balance3,354 2,456 
At December 31, 2024, approximately $3.4 million would reduce the Company’s annual effective tax rate, if recognized. The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties related to uncertain tax positions are recorded as a component of income tax expense. In the years ended December 31, 2024, 2023, and 2022, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Due to its operating loss carryforwards, the U.S. federal statute of limitations remains open for tax year 2010 and onward and the Company continues to be subject to examination by the Internal Revenue Service for tax years 2010 and later. The resolutions of any examinations are not expected to be material to these financial statements.