Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

The quarterly provision for income taxes is based on applying the estimated annual effective tax rate to the year to date pre-tax income (loss), plus any discrete items. The Company updates its estimate of its annual effective tax rate at the end of each quarterly period. The estimate takes into account annual forecasted income (loss) before income taxes, the geographic mix of income (loss) before income taxes and any significant permanent tax items.

The following table presents the provision for income taxes and the effective tax rates for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(in thousands)
Income (loss) before income taxes	$	12,911		$	2,046		$	19,119		$	(1,479	)
Income tax expense		(52	)		(23	)		(120	)		(63	)
Effective tax rate		0	%		1	%		1	%		4	%

The Company’s effective tax rate may vary from the U.S. federal statutory tax rate due to the change in the mix of earnings in tax jurisdictions with different statutory rates, benefits related to tax credits and the tax impact of non-deductible expenses, existence of full valuation allowance on its deferred tax assets, and other permanent differences between income (loss) before income taxes and taxable income (loss).

A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning strategies and recent financial results. Based on management’s assessment of the realizability of deferred tax assets, the Company continues to maintain a full valuation reserve on its deferred tax assets as of June 30, 2022 .

The income tax provision was less than $0.1 million for both the three months ended June 30, 2022 and 2021, and $0.1 million for both the six months ended June 30, 2022 and 2021. The effective tax rate for the three months ended June 30, 2022 was less than 1%, compared to 1% for the three months ended June 30, 2021, and was 1% and 4% for the six months ended June 30, 2022 and 2021, respectively. The provision for income taxes primarily comes from the foreign subsidiaries’ local country obligations. The U.S. effective tax rate is less than 1% and is due to minimum state tax. There is no federal provision for income taxes because the Company has incurred operating losses since inception and has projected an operating loss in the current year.

The Company's tax provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter, the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision.

As of June 30, 2022 and December 31, 2021, the Company had $2.4 million and $2.4 million, respectively, of total unrecognized tax benefits. If the Company is able to eventually recognize these uncertain tax positions, none of the unrecognized benefit would reduce the Company’s effective tax rate due to the full valuation allowance on the Company’s deferred tax assets.

The Company’s policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. For the three and six months ended June 30, 2022 and 2021, the Company had immaterial amounts related to the accrual of interest and penalties.