INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 15:     INCOME TAXES

a. Income before taxes on income   Income before taxes on income is comprised as follows:

	Year ended December 31,
	2024		2023		2022
Domestic	$	5,873	$	127,535	$	106,332
Foreign		9,609		7,706		5,586
Total	$	15,482	$	135,241	$	111,918

b. Taxes on income   Taxes on income are comprised as follows:

	Year ended December 31,
	2024			2023			2022
Current taxes	$	5,905		$	21,623		$	16,758
Deferred tax benefit		(2,151	)		(734	)		(1,525	)
Taxes in respect of previous years		(886	)		(611	)		(794	)
Total	$	2,868		$	20,278		$	14,439

Taxes on income by jurisdiction were as follows:

	Year ended December 31,
	2024			2023			2022
Domestic	$	1,058		$	19,466		$	14,378
Foreign		1,810			812			61
Total	$	2,868		$	20,278		$	14,439
Domestic:
Current taxes	$	4,205		$	21,106		$	15,938
Deferred tax benefit		(2,394	)		(1,594	)		(860	)
Taxes in respect of previous years		(753	)		(46	)		(700	)
Total - Domestic	$	1,058		$	19,466		$	14,378
Foreign:
Current taxes	$	1,700		$	517		$	820
Deferred tax expense (benefit)		243			860			(665	)
Taxes in respect of previous years		(133	)		(565	)		(94	)
Total - Foreign	$	1,810		$	812		$	61
Total income tax expense	$	2,868		$	20,278		$	14,439

c. Deferred Taxes   Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2024			2023
Deferred tax assets:
Net operating loss and other losses carry forwards	$	10,029		$	6,077
Research and development		3,504			3,345
Share-based compensation		3,061			2,125
Lease liabilities		3,273			1,514
Other temporary differences mainly relating to reserve and allowances		1,047			1,142
Deferred tax assets, before valuation allowance	$	20,914		$	14,203
Valuation allowance	$	(3,676	)		(2,119	)
Deferred tax liability:
Right of use assets	$	(2,835	)	$	(1,261	)
Intangible assets		(5,886	)		(6,643	)
Deferred tax liability, before valuation allowance	$	(8,721	)	$	(7,904	)
Total deferred tax assets, net	$	8,517		$	4,180
Domestic:
Long term deferred tax asset, net	$	3,122		$	722
	$	3,122		$	722
Foreign:
Long term deferred tax asset, net	$	5,395		$	3,458
	$	5,395		$	3,458
Total deferred tax asset, net	$	8,517		$	4,180

The $340 and $1,557 change in the total valuation allowance for the year ended December 31, 2023 and 2024, respectively, relates to the projected utilization of certain operating loss carry-forwards and temporary differences for which a full valuation allowance was previously recorded and measurement period adjustments.

d. Reconciliation of the Company’s effective tax rate to the statutory tax rate in Israel   A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company, and the actual tax expense as reported in the statement of income is as follows:

	Year ended December 31,
	2024			2023			2022
Income before taxes on income	$	15,482		$	135,241		$	111,918
Statutory tax rate in Israel		23.0	%		23.0	%		23.0	%
Theoretical tax expense	$	3,561		$	31,105		$	25,741
Increase (decrease) in tax expenses resulting from:
"Preferred Enterprise" benefits *		(2,415	)		(15,753	)		(11,255	)
Non-deductible expenses		1,395			928			(2,306	)
Tax adjustment in respect of different tax rate of foreign subsidiaries		741			407			313
Deferred taxes related to prior years		27			667			(55	)
Previous years taxes		1,291			42			(136	)
Change in valuation allowance		(319	)		(340	)		(185	)
Change in unrecognized tax benefits		(1,422	)		3,319			2,480
Other		9			(97	)		(158	)
Taxes on income	$	2,868		$	20,278		$	14,439
* Benefit per ordinary share from "Preferred Enterprise" status:
Basic	$	0.05		$	0.33		$	0.25
Diluted	$	0.05		$	0.31		$	0.23

e. Income tax rates   Taxable income of Israeli companies was generally subject to corporate tax at the rate of 23% in 2024, 2023 and 2022. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise or a Preferred Technological Enterprise (as discussed below) may be considerably lower.   Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

Deferred taxes were not provided for undistributed earnings of the Company’s foreign subsidiaries. Currently, the Company does not intend to distribute any amounts of its undistributed earnings as dividends. Accordingly, no deferred income taxes have been provided in respect of these subsidiaries. If these earnings were distributed to Israel in the form of dividends or otherwise, the Company would be subject to additional Israeli income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. As of December 31, 2024, certain foreign subsidiaries of the Company had undistributed earnings of $12.8 million, which were designated as indefinitely reinvested. If these earnings were repatriated to Israel, it would be subject to income taxes and to an adjustment for foreign tax credits and foreign withholding taxes. The Company has estimated the amount of unrecognized deferred tax liability related to these earnings to be approximately $2,100.

f. Law for the Encouragement of Capital Investments, 1959   The Law for Encouragement of Capital Investments, 1959 (the "Investment Law") provides tax benefits for Israeli companies meeting certain requirements and criteria. The Investment Law has undergone certain amendments and reforms in recent years.   The Israeli parliament enacted a reform to the Investment Law, effective January 2011 (which was amended in August 2013). According to the reform, a flat rate tax applies to Preferred Income of companies eligible for the "Preferred Enterprise" status. In order to be eligible for Preferred Enterprise status, a company must meet minimum requirements to establish that it contributes to the country’s economic growth and is a competitive factor for the gross domestic product.   The Company’s Israeli operations elected “Preferred Enterprise” status, starting in 2011.   Benefits granted to a Preferred Enterprise include reduced tax rates. As part of the Economic Efficiency Law (Legislative Amendments for Accomplishment of Budgetary Targets for Budget Years 2017-2018), 5777-2016, the tax rate is 16% for all areas other than Development Area A (which was 7.5% from 2017 onward).   A distribution from a Preferred Enterprise out of the "Preferred Income" would be subject to 20% withholding tax for Israeli-resident individuals and non-Israeli residents (subject to applicable treaty rates), for dividends which are distributed on or after January 1, 2014 and from “Preferred Income” that was produced or accrued after such date. A distribution from a Preferred Enterprise out of the "Preferred Income" would be exempt from withholding tax for an Israeli-resident company.

g. Technological Enterprise Incentives Regime (Amendment 73 to the Investment Law)   In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("Amendment 73") was published and came into effect in May 2017. According to Amendment 73, a Preferred Technological Enterprise, as defined in Amendment 73, with total consolidated revenue of less than NIS 10 billion, shall be subject to 12% tax rate on income derived from intellectual property (in development area A—a tax rate of 7.5%). In order to qualify as a Preferred Technological Enterprise certain criteria must be met, such as a minimum ratio of annual R&D expenditure and R&D employees, as well as having at least 25% of annual revenue derived from exports.   Any dividends distributed from income from the preferred technological enterprises will be subject to tax at a rate of 20%. Amendment 73 further provides that, in certain circumstances, a dividend distributed to a foreign corporate shareholder, would be subject to a 4% tax rate (if the percentage of foreign shareholders exceeds 90%).

The Company assessed the criteria for qualifying as a “Preferred Technological Enterprise,” status and concluded that the Company and certain of its Israeli subsidiaries are eligible to the above-mentioned benefits.

h. Uncertain tax positions   A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	December 31,
	2024			2023
Balance at the beginning of the year	$	12,722		$	9,400
Decrease related to prior year tax positions, net		(3,652	)		(755	)
Increase related to current year tax positions, net		725			4,077
Balance at the end of the year	$	9,795		$	12,722

In 2024, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax expenses. The Company had $1,022 and $910 for the payment of interest and penalties accrued at December 31, 2024, and 2023, respectively which are included in the balance at the end of the year.

The Company does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of settlements with tax authorities, the likelihood and timing of which are difficult to estimate.

The Company’s tax assessments in Israel and the U.S. Federal for tax years prior to 2020 and 2021 respectively are considered final. The Company is currently under Israeli Tax authority audit for the years 2020-2022. Some of the Company’s US subsidiaries are under IRS audit for the year 2022. The Company has net operating losses in the U.S. from prior tax periods beginning in 2015 which may be subject to examination upon utilization in future tax periods.

i. Tax loss carry-forwards   As of December 31, 2024, the Company’s U.S. subsidiaries have Federal net operating loss carry-forwards of $8,984 and States net operating loss carry-forwards of $9,964. Net operating losses generated in fiscal years prior to 2018 in the U.S. may be carried forward through periods which will expire in 2035. Net operating losses generated in 2018 and subsequent years in the U.S. may be carried forward indefinitely for Federal tax purposes yet are subject to certain limitations. Different states have varying rules regarding utilization and expiration of net operating losses. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

As of December 31, 2024, the Company’s European subsidiaries have net operating loss carry-forwards of $5,922 which may be carried forward indefinitely.

The Company has accumulated capital losses for tax purposes as of December 31, 2024, of approximately $6,805, which may be carried forward and offset against taxable capital gains in the future for an indefinite period.