v3.25.0.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the years ended December 31, 2024, 2023 and 2022 income (loss) before income taxes included the following components:
Year Ended December 31,
202420232022
Domestic$97,051 $16,501 $(60,099)
Foreign5,255 1,276 1,463 
Total$102,306 $17,777 $(58,636)
For the years ended December 31, 2024, 2023 and 2022 the Company recognized the following provision for income taxes:
Year Ended December 31,
202420232022
Current:
Federal$10,652 $895 $302 
State2,639 607 327 
Foreign284 341 524 
Total$13,575 $1,843 $1,153 
Deferred:
Federal$— $— $— 
State— — — 
Foreign157 (133)(215)
Total$157 $(133)$(215)
Total provision for income taxes$13,732 $1,710 $938 
The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the years ended December 31, 2024, 2023 and 2022:
202420232022
Expected income tax expense at federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of Federal income tax effect(3.8)(35.1)6.7 
Section 162(m) limitation58.1 56.5 (15.2)
Equity compensation(97.9)(208.4)28.4 
Meals and entertainment1.2 5.6 (1.2)
Foreign-Derived Intangible Income deduction(13.5)(13.4)— 
Other permanent adjustments1.8 2.2 0.3 
Research and development credit(23.5)(76.4)11.7 
Valuation allowance70.0 257.6 (53.3)
Effective income tax rate13.4 %9.6 %(1.6)%
The 2024 and 2023 effective tax rate differs from the statutory rate as a result of an increase in tax deductible stock-based compensation and the generation of research and development tax credits offset by an increase in the valuation allowance for the Company’s net deferred tax assets. For 2022, the
effective tax rate is less than the statutory rate primarily as a result of the valuation allowance for the Company’s net deferred tax assets.
The Company has the following deferred tax assets (liabilities) as of December 31, 2024 and 2023:
20242023
Net operating loss carryforwards$4,491 $15,533 
Stock-based compensation4,755 5,207 
Research and development credits61,198 38,146 
Lease liability13,004 5,739 
Section 174 research and development capitalization190,768 102,055 
Marketing and advertising674 766 
Sales tax / Value added tax ("VAT") reserve560 397 
Other deferred tax assets70 65 
Valuation allowance(256,728)(156,870)
Total deferred tax assets18,792 11,038 
ROU asset(10,757)(4,354)
Property and equipment(2,885)(2,164)
Capitalized software(4,444)(3,716)
Other deferred tax liabilities(322)(38)
Total deferred tax liabilities(18,408)(10,272)
Net deferred taxes$384 $766 
The Company has provided a full valuation allowance for its U.S. federal and state net deferred tax asset as it is not more likely than not that the asset will be realized. The movement in valuation allowance of $99,858 is primarily related to the:
•increase to the deferred tax assets for the capitalization of research and development expenditures under Section 174, which was a change in tax law from the Tax Cuts and Job Acts of 2017, which went into effect in January 2022,
•an increase in the generation of research and development tax credits, and
•a reduction in the Company’s net operating losses.
The Company has a deferred tax asset with respect to its China subsidiary, against which no valuation allowance has been recorded.
Given the Company’s recent history of earnings, management believes that there is a reasonable possibility that, within the next twelve months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance recorded against the deferred tax assets held will be reversed. The reversal would result in an income tax benefit for the quarterly and annual fiscal period in which the Company releases the valuation allowance. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company actually achieves.
The following table represents the activity in our valuation allowance for the years ended December 31, 2024 and 2023:
Year Ended December 31,
20242023
Beginning balance—January 1$(156,870)$(108,504)
Valuation allowances established(99,858)(48,366)
Release of valuation allowances— — 
Ending balance—December 31$(256,728)$(156,870)
The Company has utilized its remaining federal net operating loss carryforwards in 2024 and has approximately $60,683 in state net operating loss carryforwards. Certain of these loss carryforwards have an indefinite life and other amounts are available to offset future taxable income through 2043. The Company has approximately $61,198 in federal and state general business credits that are available to offset future taxable income through 2043. The Company has analyzed the impact of IRC Sections 382 and 383 on these tax attributes and has determined that no prior ownership changes have occurred which would limit the Company’s ability to utilize the NOLs and research and development tax credits.
The Company’s tax years through the 2024 tax year remain subject to examination by federal and state tax authorities.
The Company utilizes a more-likely-than-not standard in recognizing a tax benefit in its financial statements. No uncertain tax benefits have been recorded in 2024, 2023, and 2022, respectively.