INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES [ABSTRACT]

Income Tax Disclosure [Text Block]

(10)INCOME TAXES

The sources of pre-tax operating income are as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Domestic	$	(259,737)	$	(39,871)	$	52,887
Foreign		23,220		80,595		91,561
Total	$	(236,517)	$	40,724	$	144,448

The Company’s selection of an accounting policy with respect to both the GILTI and BEAT rules is to compute the related taxes in the period the entity becomes subject to either. A reasonable estimate of the effects of these provisions has been included in the 2024 annual financial statements.

During the fourth quarter of 2023, the Company released its indefinite reinvestment assertion related to earnings for all foreign operations. As a result, in 2024, the Company recorded additional taxes of $3.3 million related to the earnings of its foreign subsidiaries as required. The Company generally intends to limit distributions from non-U.S. subsidiaries to cash balances available in foreign jurisdictions.

No additional income taxes have been provided for any remaining outside basis difference inherent in the Company’s foreign subsidiaries as these amounts continue to be indefinitely reinvested in foreign operations. The Company has an estimated $151 million of outside basis differences as of December 31, 2024. Determination of any unrecognized deferred tax liability related to the outside basis difference in investments in foreign subsidiaries is not practicable due to the inherent complexity of the multi-national tax environment in which the Company operates.

The Organization for Economic Co-operation and Development (OECD), supported by 140 of their member countries, have agreed to implement a minimum 15% tax rate on certain multinational enterprises and have released model guidance. This global minimum tax, known as the Pillar 2 framework, became effective across various countries in 2024, and each country works to enact legislation influenced by the OECD Pillar 2 rules. The Company does not expect the adoption of the Pillar Two framework to have a material impact on its effective tax rate, but continues to evaluate additional guidance released by the OECD, along with the pending and adopted legislation in each of the countries in which the Company operates.

The components of the Company’s Provision for (benefit from) income taxes are as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Current provision for (benefit from)
Federal	$	229	$	3,625	$	10,816
State		—		1,893		5,245
Foreign		15,341		24,470		22,055
Total current provision for (benefit from)		15,570		29,988		38,116
Deferred provision for (benefit from)
Federal		51,389		(14,357)		(3,128)
State		3,494		(848)		(192)
Foreign		3,647		7,677		(7,681)
Total deferred provision for (benefit from)		58,530		(7,528)		(11,001)
Total provision for (benefit from) income taxes	$	74,100	$	22,460	$	27,115

The following reconciles the Company’s effective tax rate to the federal statutory rate (in thousands):

	Year Ended December 31,
	2024		2023		2022
Income tax per U.S. federal statutory rate (21%, 21%, 21%)	$	(49,668)	$	8,552	$	30,334
State income taxes, net of federal deduction		(9,581)		(1,355)		2,717
Change in valuation allowances		110,753		14,917		(3,278)
Foreign income taxes at different rates than the U.S.		7,495		208		1,202
Foreign withholding taxes		3,771		—		—
Taxes related to compensation		3,515		1,542		(66)
Liabilities for uncertain tax positions		616		1,759		(1,435)
Impacts of foreign branch operations		(2,378)		(283)		2,315
Non-taxable earnings of noncontrolling interest		(1,810)		(1,508)		(2,638)
Foreign dividend less foreign tax credits		(1,209)		(1,294)		(1,616)
Impacts of impairments		10,586		—		—
State and Federal income tax credits and NOL's		(3,585)		(4,611)		(4,604)
Foreign earnings taxed currently in U.S.		5,221		2,409		2,978
Taxes related to prior year filings		(850)		675		(432)
Other		1,224		1,449		1,638
Income tax per effective tax rate	$	74,100	$	22,460	$	27,115
Effective tax rate percentage		(31.3)%		55.2%		18.8%

The Company’s deferred income tax assets and liabilities are summarized as follows (in thousands):

	Year Ended December 31,
	2024		2023
Deferred tax assets, gross
Accrued compensation and employee benefits	$	8,436	$	12,687
Allowance for credit losses, insurance and other accruals		6,580		7,855
Amortization of deferred lease liabilities		15,817		21,683
Net operating losses		22,099		22,241
Equity compensation		2,206		—
Customer acquisition and deferred revenue accruals		13,307		15,991
Federal and state tax credits, net		8,818		3,456
Investments		—		7,626
Depreciation and amortization		29,059		19,570
Unremitted foreign earnings		31,026		13,412
Interest expense		30,286		14,957
Unrealized gains on derivatives		867		—
Partnership deferred investment		3,464		—
Other		1,038		630
Total deferred tax assets, gross		173,003		140,108
Valuation allowances		(157,383)		(39,902)
Total deferred tax assets, net		15,620		100,206
Deferred tax liabilities
Intangible assets		(10,232)		(41,447)
Operating lease assets		(12,559)		(18,362)
Other		(1,789)		(5,383)
Total deferred tax liabilities		(24,580)		(65,192)
Net deferred tax assets	$	(8,960)	$	35,014

Quarterly, the Company assesses the likelihood by jurisdiction that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized.

As of December 31, 2024 the Company had approximately $15.1 million of net deferred tax liabilities in the U.S. and $6.2 million deferred tax assets across their foreign operations. As of December 31, 2024 the deferred tax valuation allowance was $157.4 million related primarily to tax losses in jurisdictions which do not meet the “more-likely-than-not” standard under current accounting guidance.

When there is a change in judgment concerning the recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred. In 2024, the Company made adjustments to its deferred tax assets and corresponding valuation allowances. The net change to the valuation allowance consisted of the following: a $115.8 million increase in the United States, a $3.2 million increase in Canada, and a $1.9 million increase in various other jurisdictions for deferred tax assets that do not meet the “more-likely-than-not” standard offset by a $1.3 million decrease of valuation allowance in Canada, and a $2.2 million decrease of valuation allowance in various other jurisdictions related to the utilization or write-off of deferred tax assets.

Activity in the Company’s valuation allowance accounts consists of the following (in thousands):

	Year Ended December 31,
	2024		2023		2022
Beginning balance	$	39,902	$	24,944	$	29,620
Additions of deferred income tax expense		121,085		18,410		2,248
Reductions of deferred income tax expense		(3,604)		(3,452)		(6,924)
Ending balance	$	157,383	$	39,902	$	24,944

As of December 31, 2024, after consideration of all tax loss carry back opportunities, the Company had tax affected tax loss carry forwards worldwide expiring as follows (in thousands):

2025	$	37
2026		603
2027		265
2028		245
After 2028		11,081
No expiration		9,868
Total	$	22,099

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of the Philippines and Costa Rica. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted multiple agreements under local laws which result in an overall reduced tax rate. These incentives have varying benefit year over year and expire at various times beginning in 2031. The aggregate benefit to income tax expense for the years ended December 31, 2024, 2023 and 2022 was approximately $2.8 million, $2.3 million and $1.6 million, respectively, which had a favorable impact on diluted net income (loss) per share of $0.06, $0.05 and $0.04, respectively.

Accounting for Uncertainty in Income Taxes

In accordance with ASC 740, the Company has recorded a reserve for uncertain tax positions. The total amount of interest and penalties recognized in the accompanying Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss) as of December 31, 2024, 2023 and 2022 was approximately $3.4 million, $2.7 million and $1.8 million, respectively.

The Company had a reserve for uncertain tax benefits, on a net basis, of $6.5 million and $6.6 million for the years ended December 31, 2024 and 2023, respectively.

The tabular reconciliation of the reserve for uncertain tax benefits on a gross basis without interest for the three years ended December 31, 2024 is presented below (in thousands):

Balance as of December 31, 2021	$	6,903
Additions for current year tax positions		143
Reductions in prior year tax positions		(479)
Balance as of December 31, 2022		6,567
Additions for current year tax positions		212
Reductions in prior year tax positions		(203)
Balance as of December 31, 2023		6,576
Additions for current year tax positions		218
Reductions in prior year tax positions		(275)
Balance as of December 31, 2024	$	6,519

At December 31, 2024, the amount of uncertain tax benefits including interest, that, if recognized, would reduce tax expense was $9.9 million. Within the next 12 months, it is expected that the amount of unrecognized tax benefits may be reduced by $9.3 million as a result of the expiration of various statutes of limitation or other confirmations of tax positions.

The Company and its domestic and foreign subsidiaries (including Percepta LLC and its domestic and foreign subsidiaries) file income tax returns as required in the U.S. federal jurisdiction and various state and foreign jurisdictions. The following table presents the major tax jurisdictions and tax years that are open as of December 31, 2024 and subject to examination by the respective tax authorities:

Tax Jurisdiction	Tax Year Ended
United States	2017, 2018, and 2021 - Present
Netherlands	2020 - Present
India	2017 - Present
Canada	2020 - Present
Mexico	2019 - Present
Philippines	2021 - Present

The Company’s U.S. income tax returns filed for the tax years ending December 31, 2017, 2018 and 2021 to present, remain open tax years. The Company has been notified of the intent to audit, or is currently under audit of, income taxes for the United States for tax year 2017 and 2018, and India for tax years 2017 through 2022. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements.