Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 — Income Taxes

The Company is a corporation that is subject to U.S. federal, state and foreign income taxes.

For the three months ended June 30, 2022, the Company recognized an income tax expense of $2.6 million for an effective tax rate of 1.3%. The Company’s effective tax rate of 1.3% is different than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance for its deferred tax assets. For the three months ended June 30, 2021, the Company recognized an income tax expense of $0.5 million for an effective tax rate of negative 0.4%. The Company’s effective tax rate of negative 0.4% is lower than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance for its deferred tax assets.

For the six months ended June 30, 2022, the Company recognized income tax expense of $2.1 million for an effective tax rate of 1.6%. The Company’s effective tax rate of 1.6% is lower than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance for its deferred tax assets. For the six months ended June 30, 2021, the Company recognized an income tax expense of $1.1 million for an effective tax rate of negative 0.4%. The difference between the Company’s effective tax rate of negative 0.4% and federal statutory income tax rate of 21% is primarily due to recording a valuation allowance for its deferred tax assets.

The Company evaluates and updates the estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of the Company’s actual earnings compared to annual projections, the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The quarterly income tax provision is generally comprised of tax expense on income or benefit on loss at the most recent estimated annual effective tax rate. The tax effect of discrete items is recognized in the period in which they occur at the applicable statutory rate.

Deferred income tax assets and liabilities are recorded related to net operating losses and temporary differences between the book and tax basis of assets and liabilities expected to produce deductions and income in the future. The Company reduces deferred tax assets by a valuation allowance when, based on estimates, it is more likely than not that a portion of those assets will not be realized in a future period. The deferred tax asset estimates are subject to revision, either up or down, in future periods based on new facts or circumstances. In evaluating the Company’s valuation allowance, the Company considers cumulative losses, the reversal of existing temporary differences, the existence of taxable income in carryback years, tax optimization planning and future taxable income for each of its taxable jurisdictions. The Company assesses the realizability of its deferred tax assets quarterly; changes to the Company’s assessment of its valuation allowance in future periods could materially impact its results of operations. As of June 30, 2022, the Company maintains a full valuation allowance for U.S. federal, state and foreign net deferred tax assets.