Income taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income taxes

11. Income taxes

The provision for income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into consideration in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment to the provision.

The income tax provision resulted in an effective tax rate of (1.1)% and 5.6% for the three months ended September 30, 2022 and 2021, respectively, and (1.1)% and (1.3)% for the nine months ended September 30, 2022 and 2021, respectively. During the three and nine months ended September 30, 2022, as compared to the same periods in the prior year, the effective tax rate decreased primarily due to changes in foreign tax expense and foreign withholding taxes. The difference between the 21% statutory federal tax rate and the effective tax rate was primarily a result of income earned in jurisdictions with higher statutory tax rates, foreign withholding taxes, and tax credits offset by change in valuation allowance.

As of September 30, 2022 and December 31, 2021, the Company has provided a valuation allowance against U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

The Company recognizes interest and penalties associated with uncertain tax benefits as part of the income tax provision. To date, the Company has not recognized any interest and penalties in its condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

The Company is subject to taxation in the U.S. and various foreign jurisdictions. Due to net operating loss (“NOL”) carryforwards and tax credit carryforwards, the statutes of limitations remain open for tax years from inception of the Company through 2021. There are currently no income tax audits underway by U.S. federal or state taxing authorities.