Income Taxes

9 Months Ended

Sep. 28, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Income tax expense was $2.0 million and $3.4 million for the three months ended September 28, 2024 and September 30, 2023, resulting in effective tax rates of (7.6)% and 24.7%, respectively. Income tax expense was $38.3 million and $23.5 million for the nine months ended September 28, 2024 and September 30, 2023, resulting in effective tax rates of (29.7)% and 40.0%, respectively. The change in the provision for income taxes for the three and nine months ended September 28, 2024 is primarily due to the establishment of a valuation allowance against certain of the Company’s U.S. and Singapore deferred tax assets during the three months ended June 29, 2024. Because of the valuation allowance, the Company is unable to recognize the full tax benefit of the pre-tax losses incurred in those jurisdictions in the current year.

For the three and nine months ended September 28, 2024, the Company’s provision for income taxes includes $3.8 million and $48.1 million of non-cash tax expense related to the valuation allowance. The Company establishes a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. During the three months ended June 29, 2024, the Company determined a need for the valuation allowance due to a forecasted three-year cumulative pre-tax loss for the current and two preceding years in conjunction with the downturn in the semiconductor industry. The Company intends to maintain the valuation allowance until its ability to forecast sufficient future sources of taxable income is reestablished.

Uncertain Tax Positions

As of September 28, 2024, the Company had gross unrecognized tax benefits, inclusive of interest, of $6.3 million, of which $5.3 million would affect the effective tax rate if recognized. During the nine months ended September 28, 2024, the Company did not release any unrecognized tax benefits.

Tax years 2015 through 2024 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company’s 2021 and 2022 tax years are currently under examination in India. Although the outcome of tax audits is always uncertain, the Company believes that the results of the examination will not materially impact its financial position or results of operations. The Company is not currently under audit in any other major taxing jurisdiction.

The Company's gross unrecognized tax benefits will decrease by approximately $1.8 million, inclusive of interest, in the next 12 months due to the lapse of the statute of limitations.