Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

11. Income Taxes

Income tax expense and effective income tax rates consist of the following:

	December 31,
	2024			2023
Current taxes:
Domestic	$	9,318		$	10,126
Foreign		9			20
		9,327			10,146
Deferred taxes:
Domestic		(3,821)			331
Foreign		—			—
		(3,821)			331
Income tax expense	$	5,506		$	10,477
Income before income taxes:
Domestic income	$	24,987		$	34,400
Foreign income		40			62
Total	$	25,027		$	34,462
Effective income tax rate		22.0	%		30.4	%

The Company’s effective tax rates on pre-tax income were 22.0% and 30.4% for the years ended December 31, 2024 and 2023, respectively. The decrease in the Company’s effective tax rate for the year ended December 31, 2024 compared to the prior year related to increased deductibility of stock-based compensation realized upon certain stock option exercises and restricted stock unit vesting, and a decrease in unrecognized tax benefits due to the lapse of statute of limitations. The effective tax rate for the year ended December 31, 2023 was impacted by limitation of executive compensation deductibility related to the former CEO’s retention agreement.

For the years ended December 31, 2024 and 2023, the effective tax rate differs from the U.S. federal statutory income tax rate as follows:

	December 31,
	2024		2023
Tax at federal statutory rate	21.0	%	21.0	%
State taxes, net	5.4		4.4
Expiration of capital loss carryover	7.1		—
Valuation allowance	(7.1)		—
Unrecognized tax benefits	(2.8)		0.1
Tax credits	(1.4)		(0.5)
Permanent items(1)	(0.2)		5.3
Other	—		0.1
Effective income tax rate	22.0	%	30.4	%

(1) Includes the deductibility limitations on excess compensation.

For the year ended December 31, 2024, the effective tax rate differs from the federal statutory rate primarily due to state income taxes, which had a tax rate impact of 5.4%. Other items impacting the effective tax rate in 2024 include unrecognized tax benefits, tax deductibility limitations on executive compensation and permanent items. For the year ended December 31, 2023, the effective tax rate differs from the federal statutory rate primarily due to state income

taxes, which had a tax rate impact of 4.4%. Other items impacting the effective tax rate in 2023 include tax deductibility limitations on executive compensation and permanent items.

The components of the deferred tax assets and liabilities are as follows:

	December 31,
	2024		2023
Deferred tax assets:
Accrued expense	$	3,414	$	1,928
Net operating loss carryforward		133		130
Stock-based compensation		2,400		1,798
Interest limitation		2,424		1,689
Lease liability		2,730		3,026
Capital loss carryover		—		2,110
Research and development costs		2,070		1,350
Other		2,772		3,244
Total gross deferred tax assets		15,943		15,275
Valuation allowance		(872)		(2,616)
Net deferred tax assets		15,071		12,659
Deferred tax liabilities:
Plant, equipment and leasehold improvements		(8,552)		(8,825)
Intangible assets		(6,075)		(6,745)
Right-of-use assets		(2,511)		(2,851)
Other		(1,251)		(1,377)
Total gross deferred tax liabilities		(18,389)		(19,798)
Net deferred tax liabilities	$	(3,318)	$	(7,139)

The valuation allowance as of December 31, 2024, is primarily relating to the use of state interest deductions that may generate future state net operating losses, which may not be fully recognized. The valuation allowance as of December 31, 2023 related to a capital loss realized on the sale of a foreign subsidiary whereby the Company did not anticipate a capital gain in the foreseeable future that would allow for the recognition of the capital loss carryover. The capital loss carryover expired after five years, which was December 31, 2024.

Under a provision in the 2017 U.S. Tax Cuts and Jobs Act, beginning in 2022, research and development costs incurred are no longer allowed as an immediate deduction for federal income tax purposes. Rather, these expenditures incurred must be capitalized and amortized over a five-year period for activities conducted in the United States and a 15 year period for activities conducted outside the United States.

The Company has a minimal amount of state and local operating loss carryforwards which will expire at various dates from 2033 to 2038. The Company does expect to be able to utilize these losses prior to expiration.

The Company has recorded compensation for certain covered employees in excess of $1.0 million per year. Under Internal Revenue Code (IRC) Section 162(m), the Company is prohibited from deducting the amount of tax compensation that exceeds $1.0 million per year for these employees. The covered employees are defined as the CEO, Chief Financial Officer (“CFO”), and the three next-highest-compensated officers of the Company. The Company considers the impact of the estimated IRC Section 162(m) limitations on the future deductibility of existing temporary differences.

Unrecognized Tax Benefits

Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements, and are reflected in “Accrued expenses” and “Other long-term liabilities” on the Company’s consolidated balance sheets. The Company accounts for

uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination.

Balance as of December 31, 2023	$	1,317
Increase related to current year tax position		82
Increase related to prior year tax position		37
Decrease related to lapse of statute of limitations		(767)
Balance as of December 31, 2024	$	669

The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits was $0.1 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively.

The Company believes that it is reasonably possible that approximately $0.5 million of its unrecognized tax benefits may be recognized by the end of 2025 as a result of a lapse of the statute of limitations, which is reflected in “Accrued expenses” on the Company’s consolidated balance sheets as of December 31, 2024.