Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

On a quarterly basis, the Company computes an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income before income tax expense excluding significant, unusual or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs.

The Company has assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. In assessing the realizability of the Company’s deferred tax assets, the Company considered whether it is more likely than not that some or all of the deferred tax assets will be realized through the generation of future taxable income. In making this determination, the Company assessed all of the evidence available at the time, including recent earnings, forecasted income projections, historical performance, and that substantial doubt exists about the Company’s ability to continue as a going concern. The Company determined that the negative evidence outweighed the objectively verifiable positive evidence and continues to maintain a valuation allowance against deferred tax assets. The Company’s valuation allowance is $46.3 million and $54.3 million as of September 30, 2024 and December 31, 2023, respectively.

The effective tax rate for the three and nine months ended September 30, 2024 was 1.6% and 2.9%, respectively, compared to an effective tax rate for the three and nine months ended September 30, 2023 of 1.9% and 2.9%. The effective tax rates for all periods were significantly different than the applicable U.S. statutory tax rate. For both the three and nine months ended September 30, 2024, the difference between the effective and statutory tax rates was primarily due to the Company’s full valuation allowance.