Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The computation of the provision for (benefit from) income taxes for interim periods is determined by applying the estimated annual effective tax rate to year-to-date earnings from recurring operations and adjusting for discrete tax items recorded in the period. The Company's ability to estimate the geographic mix of earnings is impacted by the relatively high-growth nature of the business, fluctuations of business operations by country, and implementation of tax planning strategies.

The Company recorded an income tax benefit of $3.5 million and an income tax benefit of $0.2 million for the three months ended September 30, 2020 and 2019, respectively. The Company recorded an income tax benefit of $5.8 million and an income tax provision of $0.5 million for the nine months ended September 30, 2020 and 2019, respectively. The income tax benefit in the three and nine months ended September 30, 2020 was primarily driven by the partial release of the U.S. valuation allowance in connection with the acquisition of S2 in the first three months of the year and excess tax benefits from stock-based compensation deductions in the United Kingdom, offset by withholding taxes in the U.S. and income tax expense from profitable foreign jurisdictions.

In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are realizable. Accordingly, there is no valuation allowance in the foreign jurisdictions. A full valuation allowance has been established in the U.S. and no deferred tax assets and related tax benefits have been recognized in the condensed consolidated financial statements.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The CARES Act provides for a number of tax relief provisions applicable to businesses including relaxed limitations on the use of net operating losses and interest deductibility. The Company does not expect there to be a material tax impact, but will continue to assess the tax implications of the CARES Act and its continuing developments and interpretations.