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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 income tax (provision) benefit were as follows:
Years Ended December 31,
202420232022
(in thousands)
Domestic$(36,068)$(80,480)$(123,521)
Foreign(28,690)(27,327)(18,693)
Loss before income tax (provision) benefit
$(64,758)$(107,807)$(142,214)
The components of income tax (provision) benefit attributable to continuing operations were as follows:
Years Ended December 31,
202420232022
(in thousands)
Current:
Federal$— $— $6 
State(303)(456)(154)
Foreign(3,891)(3,799)(1,894)
Total current provision
(4,194)(4,255)(2,042)
Deferred:
Federal(97)(130)268 
State(17)80 170 
Foreign611 2,026 2,517 
Total deferred benefit497 1,976 2,955 
Total income tax (provision) benefit
$(3,697)$(2,279)$913 
The income tax (provision) benefit differs from the amount of income tax benefit determined by applying the statutory U.S. federal income tax rate to pretax loss due to the following:
Years Ended December 31,
202420232022
Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %
State income tax benefit, net of federal tax effect— 1.2 2.5 
Permanent differences(0.2)(0.1)0.1 
Foreign rate differential1.6 1.0 (0.6)
Remeasurement gain/loss— 0.7 — 
Tax credits4.6 3.2 2.0 
Valuation allowance(15.3)(19.8)(21.5)
Stock-based compensation(10.9)(6.1)(1.6)
Transaction costs(0.3)(0.2)(0.4)
Deferred rate change— — 0.4 
Section 162(m)(4.4)(1.4)(1.9)
Foreign withholding taxes(2.7)(1.3)(0.5)
Other0.9 (0.3)1.1 
Effective tax rate(5.7 %)(2.1 %)0.6 %
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
December 31,
20242023
(in thousands)
Deferred tax assets:
Accrued compensation$4,646 $3,582 
Deferred revenue13,542 15,878 
Section 174 capitalization27,366 17,947 
Stock-based compensation19,345 18,949 
Federal tax credits13,815 11,739 
Net operating losses51,180 54,052 
State tax credits3,303 2,901 
Business interest limitation6,173 9,398 
Operating lease liabilities2,679 3,607 
2026 Notes3,126 4,914 
Other2,863 2,713 
Gross deferred tax assets148,038 145,680 
Valuation allowance(94,923)(85,256)
Total deferred tax assets53,115 60,424 
Deferred tax liabilities:
Deferred contract costs(21,547)(19,087)
Operating lease right-of-use assets(1,194)(2,017)
Intangibles and other(34,021)(43,571)
Other(35)(10)
Gross deferred tax liabilities(56,797)(64,685)
Net deferred tax liabilities$(3,682)$(4,261)
The components giving rise to the net deferred tax liabilities detailed above have been included in the consolidated balance sheets as follows:
December 31,
20242023
(in thousands)
Non-current deferred tax assets (1)
$1,498 $1,691 
Non-current deferred tax liabilities(5,180)(5,952)
Net deferred tax liabilities$(3,682)$(4,261)
(1) Included in other assets in the consolidated balance sheets.
As of December 31, 2024 and 2023, the Company established a valuation allowance against certain deferred tax assets in the U.S. and UK to reduce the total to an amount management believes are more likely than not to be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to be available to reduce taxable income. The valuation allowance increased by $9.7 million, $21.7 million, and $32.0 million during the years ended December 31, 2024, 2023, and 2022, respectively.
As of December 31, 2024, the Company had a U.S. federal NOL carryforward of approximately $85.5 million, a foreign NOL carryforward of approximately $110.7 million, federal research and development credits of approximately $13.7 million, and foreign research and development credits of approximately $1.9 million. The Company also had tax effected state NOL carryforwards of approximately $5.5 million and state credits for research and development of approximately $4.7 million. Approximately $24.2 million of the federal NOL carryforwards will begin to expire in 2037. The remainder of the federal NOLs of $61.3 million and the foreign NOLs are carried forward indefinitely. The state NOL carryforwards began expiring in 2024 and are available to offset future taxable income or reduce taxes payable through 2041. The federal research and development credits and state research and development credits will begin expiring in 2033 and 2026, respectively.
A company’s ability to utilize a portion of its NOL carryforwards to offset future taxable income may be subject to certain limitations under Section 382 of the Code due to changes in the equity ownership of the company. The Company conducted a Section 382 analysis and determined that although an ownership change occurred in a prior period, all NOLs will be fully available for utilization before expiration.
The Company has not provided for deferred taxes on outside basis differences for investments in its international subsidiaries that are unrelated to unremitted earnings as these basis differences will be indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of outstanding basis difference is not practicable to calculate.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:
Years Ended December 31,
202420232022
(in thousands)
Balance, January 1$1,636 $1,272 $1,003 
Additions based on tax positions related to the current year303 312 230 
Additions based on tax positions related to prior years29 52 39 
Balance, December 31$1,968 $1,636 $1,272 
Under the provision for uncertainty in income taxes, the total gross amount of unrecognized tax benefits as of December 31, 2024 and 2023 was approximately $2.3 million and $1.8 million, respectively. As of December 31, 2024 and 2023, the realization of unrecognized tax benefits was not expected to impact the effective rate due to a full valuation allowance on federal and state deferred taxes.
The Company files income tax returns in the U.S. federal jurisdiction, Minnesota, the UK, and various other state and foreign jurisdictions. With few exceptions, the Company is not subject to U.S. federal, foreign, state, and local income tax examinations by tax authorities for years before 2021. It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on the Company’s assessment of many factors, including past experience and complex judgements about future events, the Company does not currently anticipate significant changes in its uncertain tax positions over the next 12 months.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income tax expense. The Company did not recognize material income tax expense related to interest and penalties during the years ended December 31, 2024, 2023, and 2022.