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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The domestic and foreign components of loss before provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
202420232022
Domestic$(110,860)$(191,132)$(287,569)
Foreign6,679 2,711 1,104 
Total$(104,181)$(188,421)$(286,465)
The provision for income taxes is comprised of the following (in thousands):
Year Ended December 31,
202420232022
Current:
State$1,094 $709 $442 
Foreign1,562 1,333 307 
Total2,656 2,042 749 
Deferred:
Federal9 4 (34)
State13 6 93 
Foreign(903)(779)(342)
Total(881)(769)(283)
Provision for income taxes$1,775 $1,273 $466 
The following table provides a reconciliation between income taxes computed at the U.S. federal statutory rate and the Company’s provision for income taxes (in thousands):
Year Ended December 31,
202420232022
Computed expected income tax benefit$(21,890)$(39,568)$(60,120)
State income taxes - net of federal income tax benefit(5,230)(6,175)(10,197)
Change in valuation allowance50,681 42,855 81,251 
Non-deductible expenses1,859 4,489 2,687 
Non-deductible base erosion expenses4,481 11,403 — 
Non-deductible officers’ compensation
9,885 12,775 3,648 
Stock-based compensation(8,676)(9,678)135 
Tax credits (federal and state)(21,049)(18,226)(16,853)
Foreign rate differential(102)40 35 
Return-to-provision(8,127)3,110 (7)
Other(57)248 (113)
Provision for income taxes$1,775 $1,273 $466 
Significant components of the Company’s deferred tax assets and liabilities are presented below (in thousands):
December 31,
20242023
Deferred tax assets: 
Net operating loss$206,684 $215,915 
Tax credits96,711 76,504 
Lease liabilities17,108 20,213 
Stock-based compensation9,824 14,899 
Capitalized software cost91,563 59,487 
Other9,011 5,531 
Total deferred tax assets430,901 392,549 
Valuation allowance(372,901)(324,422)
Total deferred tax assets, net58,000 68,127 
Deferred tax liabilities:
Lease assets(12,264)(16,376)
Acquired intangible assets(23,545)(32,120)
Contract cost asset(18,922)(16,868)
Prepaid and accrued expenses(3,816)(3,184)
Other(897)(1,201)
Total deferred tax liabilities(59,444)(69,749)
Total$(1,444)$(1,622)
In assessing the realizability of deferred tax assets, management considers whether it is “more likely than not” that some portion or all of the deferred tax assets will be realized. Realization of future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Based on all available objective evidence management believes it is “more likely than not” that the net deferred tax assets will not be fully realizable in the U.S. as of December 31, 2024 and 2023. Accordingly, the Company’s U.S. net deferred tax assets have been fully offset by a valuation allowance. The Company periodically evaluates the recoverability of the deferred tax assets and when it is determined to be “more likely than not” that the deferred tax assets are realizable, the valuation allowance is reduced. The net deferred tax liability position at December 31, 2024 and 2023 was primarily related to the Company’s Australia and Canada tax jurisdictions.
The following table summarizes the activity related to the valuation allowance (in thousands):
Year Ended December 31,
202420232022
Beginning balance$324,422 $282,337 $204,182 
Current year change48,479 40,810 78,155 
Increase in valuation allowance as a result of purchase accounting for business combinations— 1,275 — 
Ending balance$372,901 $324,422 $282,337 
The current year change in the valuation allowance for the year ended December 31, 2024, resulted primarily from a net increase in our U.S. federal and state deferred tax assets. The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries
as they are considered indefinitely reinvested outside the U.S. At December 31, 2024 and 2023, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes have not been provided is immaterial to these consolidated financial statements.
As of December 31, 2024, the Company had federal net operating loss carryforwards (“NOL carryforwards”) of $822.6 million, which are comprised of definite and indefinite net operating losses. At December 31, 2024, the Company had federal NOL carryforwards of approximately $73.5 million, which expire at various intervals from the years 2036 through 2037 and had NOL carryforwards of $749.2 million which do not expire. As of December 31, 2024, the Company has state net operating losses of $626.7 million, which will begin to expire in 2029. The Internal Revenue Code (the “IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits when a Company experiences a cumulative change in ownership of more than 50% over a three-year period. The Company has identified a portion of net operating losses and credit carryovers are subject to annual limitations, which the Company has also determined that it should be able to fully utilize these net operating losses and credit carryovers before they expire, provided the Company generates sufficient taxable income.
As of December 31, 2024, the Company had credits for research activities available for carryforward for federal income tax purposes of $96.2 million and for state income tax purposes of $39.2 million, which are available to offset future income tax in those jurisdictions and which began to expire in 2024 for federal and have no expiration for state.
The following table summarizes the activity related to unrecognized tax benefits (in thousands):
Year Ended December 31,
202420232022
Beginning balance$29,041 $21,727 $17,010 
Increases related to current period positions8,564 7,513 5,915 
Increases (decreases) related to prior period positions625 (199)(1,198)
Ending balance$38,230 $29,041 $21,727 
Due to the Company’s full valuation allowance on federal and state taxes, none of the unrecognized tax benefits would affect the Company’s effective tax rate, if recognized. The Company does not anticipate any significant increases or decreases to its unrecognized tax positions within the next 12 months. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2024 and 2023, accrued interest and penalties related to income tax positions were immaterial.
The Company files U.S. federal, various state, and foreign income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. The tax years from 2005 forward remain subject to examination for federal purposes. Generally, state and foreign tax authorities may examine the Company’s tax returns for four years and five years, respectively, from the date an income tax return is filed. However, the taxing authorities may continue to examine the Company’s federal and state NOL carryforwards until the statute of limitations closes on the tax years in which the federal and state net operating losses are utilized. At December 31, 2024, tax years 2016 to 2020 were under examination by the Egyptian Taxing Authority. Our foreign operations in Egypt represent an immaterial portion of our overall business.