INCOME TAXES

9 Months Ended

Sep. 30, 2024

INCOME TAXES:

INCOME TAXES

7. INCOME TAXES

Income tax expense decreased by $0.9 million for the nine months ended September 30, 2024, to $1.6 million as compared to $2.5 million for the nine months ended September 30, 2023. The Company’s effective tax rate was 31.1% and 53.1% for the nine months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate decreased in the nine months ended September 30, 2024, as compared to the same period in 2023, primarily due to changes in the foreign and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for full years. The Company’s provision for income taxes for the nine months ended September 30, 2024, was primarily attributable to foreign and state taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of September 30, 2024, was $16.6 million, of which $2.0 million, if recognized, would affect the Company’s effective tax rate. The Company’s total amount of unrecognized tax benefits, excluding interest, as of December 31, 2023, was $15.9 million, of which $2.0 million, if recognized, would affect the Company’s effective tax rate. As of September 30, 2024, the Company has recorded unrecognized tax benefits of $2.6 million, including interest of $0.6 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet. The remaining $14.6 million has been recorded within the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $64.2 million as of September 30, 2024, and December 31, 2023, which was related to U.S. net federal and state DTAs. The worldwide net DTAs balance as of September 30, 2024, and December 31, 2023, were not significant.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal and various state and foreign jurisdictions. For U.S. federal and California income tax purposes, the statute of limitations currently remains open for the tax years ended 2020 to present and 2019 to present, respectively. In addition, due to net operating loss carryback claims, the tax years 2013 through 2015 may be subject to federal examination and all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination. The Company is not currently under income tax examinations in the U.S. or any other of its major foreign subsidiaries’ jurisdictions.