Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the Company’s income tax provision (benefit) are as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Current:
Federal	$	—	$	—	$	—
State	15		17		(202)
Total current provision (benefit)	15		17		(202)
Deferred:
Federal	—		—		(2,046)
State	—		—		(312)
Total deferred provision (benefit)	—		—		(2,358)
Total income tax provision (benefit)	$	15	$	17	$	(2,560)

The 2024 and 2023 income tax expense of less than $0.1 million reflects state income taxes.

The 2022 income tax benefit of $2.6 million primarily reflects the release of valuation allowance resulting from net deferred tax liabilities recorded in Digital Motors acquisition accounting providing a source of income in assessing realization of consolidated net deferred tax assets.

The overall effective income tax rate differs from the statutory federal rate as follows:

	Year Ended December 31,
	2024		2023		2022
Income tax benefit based on the federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	6.8		3.3		1.8
Nondeductible expenses	(1.8)		(1.3)		(0.3)
Change in valuation allowance	(21.5)		(20.8)		(12.7)
Stock-based compensation	(4.5)		(6.0)		(1.3)
Uncertain tax positions	—		—		0.6
Goodwill impairment	—		—		(7.0)
Other	—		3.8		—
Overall effective income tax rate	—	%	—	%	2.1	%

The components of deferred tax assets (liabilities) are as follows (in thousands):

	December 31,
	2024		2023
Deferred income tax assets:
Net operating loss carryforwards	$	90,369	$	87,872
Stock-based compensation	3,743		4,666
Accrued expenses	1,886		1,417
Research and development tax credits	6,558		6,558
Operating lease liabilities	2,731		3,432
Intangible assets and goodwill	4,695		3,663
Property, equipment and software	5,297		5,323
Capitalized research and development costs	12,458		9,711
Other	596		547
Gross deferred tax assets	128,333		123,189
Valuation allowance	(126,873)		(120,197)
Net deferred tax assets	1,460		2,992
Deferred tax liabilities:
Capitalized commissions	(872)		(533)
Operating lease assets	(588)		(2,459)
Gross deferred tax liabilities	(1,460)		(2,992)
Total net deferred tax assets (liabilities)	$	—	$	—

At December 31, 2024, the Company had federal and state net operating loss carryforwards of $346.6 million and $276.9 million, respectively. Of the Company’s federal net operating loss carryforwards, $248.2 million will begin to expire in 2034 and $98.4 million does not expire. The Company’s state net operating loss carryforwards began to expire in 2022. At December 31, 2024, the Company had federal and state research and development tax credit carryforwards of approximately $1.1 million and $11.2 million, respectively. The federal tax credit carryforwards begin to expire in the year ending December 31, 2040. The state tax credit carryforwards can be carried forward indefinitely. Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitations arising from ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation, at December 31, 2024, a valuation allowance of $126.9 million has been recorded since it is more likely than not that the deferred tax assets will not be realized.

The change in the valuation allowance for the years ended December 31, 2024, 2023, and 2022 is as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Valuation allowance, at beginning of year	$	120,197	$	109,876	$	94,117
Increase in valuation allowance	6,676		10,321		15,759
Valuation allowance, at end of year	$	126,873	$	120,197	$	109,876

The $6.7 million increase in valuation allowance is primarily related to the increase in deferred tax assets for net operating loss carryforwards and capitalized research and development costs and the decrease in deferred tax liabilities for operating lease assets.

The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2024		2023		2022
Unrecognized tax benefit, beginning of year	$	4,570	$	4,570	$	5,237
Decrease based on tax positions in prior period	—		—		(1,101)
Increase based on tax positions in current period	—		—		434
Unrecognized tax benefit, end of year	$	4,570	$	4,570	$	4,570

The December 31, 2024 balance includes $0.3 million, that if recognized, would affect the effective income tax rate. The December 31, 2024, 2023, and 2022 balances each include tax benefits of $3.4 million, which if recognized, would be in the form of net operating loss or tax credit carryforwards and expected to require a full valuation allowance based on present circumstances. These amounts are net of offsetting benefits from other tax jurisdictions.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in the income tax provision. At December 31, 2024, no interest and penalties related to uncertain tax positions have been accrued.

The Company is subject to United States federal and state taxation. Due to the presence of net operating loss carryforwards, all income tax years remain open for examination by the Internal Revenue Service and various state taxing authorities. The Company is not currently under Internal Revenue Service or state tax examination.