Income Tax

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Tax

12. Income Tax

The effective tax rate for the three months ended March 31, 2024 was (20.3%) compared to 61.1% for the same period in 2023. The change in the effective tax rate between the periods resulted primarily due to the change in earnings mix by geography and tax jurisdiction as compared to the prior period, changes in valuation allowances in the United States, foreign withholding tax, and changes in nondeductible expenses. In the United States, significant transaction costs in connection with the proposed merger with Innovex Downhole Solutions Inc. were incurred which were partially deductible. As such, these costs had a larger impact to the earnings mix as compared to previous periods.

The Company had no outstanding NOL carryback claims as of December 31, 2023 including the estimated carryback claim relating to the 2020 tax year, which was reflected in “Other current assets” on the condensed consolidated balance sheets. During the three months ended March 31, 2024, the Company received no refunds.

Except with respect to our operations in Canada, the Company no longer asserts the indefinite reinvestment assertion. We maintain a deferred foreign tax liability, which had a balance of $1.8 million as of March 31, 2024. It is primarily related to estimated foreign withholding tax associated with repatriating non-U.S. earnings back to the United States. The indefinite reinvestment assertion with respect to Canada pertains to earnings of $3.0 million as of March 31, 2024.

The Company operates in multiple jurisdictions with complex tax and regulatory environments and our tax returns are periodically audited or subjected to review by tax authorities. We monitor tax law changes and the potential impact to our results of operations.