Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 – Income taxes

The components of income tax expense for the years ended December 31, 2023 and 2022 are presented below (in thousands):

	Year Ended December 31, 2023		Year Ended December 31, 2022
Current
Federal	$	—	$	—
State		70		56
Foreign		832		885
Deferred
Federal		307		370
State		999		697
Foreign		751		(296	)
Total income tax provision	$	2,959	$	1,712

The actual income tax expense amounts for the years ended December 31, 2023 and 2022 differed from the expected tax amounts computed by applying the U.S. federal corporate income tax rate of 21% for 2023 and 2022 to the amounts of loss before income taxes as presented below (in thousands):

	Year Ended December 31, 2023			Year Ended December 31, 2022
Pre-tax book loss	$	(31,854	)	$	(41,462	)
Tax at Federal statutory rate of 21%		(6,690	)		(8,707	)
State taxes		1,069			754
Taxes on Foreign Earnings		709			1,162
Foreign rate differential		(1,227	)		(635	)
Unrecognized tax benefit		(283	)		—
Other adjustments		252			805
Valuation allowance		9,129			8,333
Total income tax provision (benefit)	$	2,959		$	1,712

The domestic and foreign components of loss before income taxes for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	Year Ended December 31, 2023			Year Ended December 31, 2022
Domestic	$	(35,259	)	$	(40,326	)
Foreign		3,405			(1,136	)
Total	$	(31,854	)	$	(41,462	)

The tax effects of temporary differences at December 31, 2023 and 2022 are as follows (in thousands):

	Year Ended December 31, 2023			Year Ended December 31, 2022
Net operating losses and other carryforwards	$	38,603		$	42,084
Interest expense carryforward		69,762			53,204
Property and equipment		4,302			3,884
Lease liability		2,599			3,409
Accrued expenses		919			720
Payroll tax deferral		—			—
Allowance for doubtful accounts		827			1,307
Stock-based compensation		3,288			2,786
Other		332			491
Deferred tax asset		120,632			107,885
Valuation allowance		(103,291	)		(91,866	)
Total deferred tax assets, net of valuation allowance		17,341			16,019
Right of Use Asset		(1,793	)		(2,029	)
Intangible assets		(24,068	)		(20,419	)
Prepaid expenses		(21	)		(21	)
Other		(400	)		(474	)
Deferred tax liability		(26,282	)		(22,943	)
Net deferred tax liability	$	(8,941	)	$	(6,924	)

At December 31, 2023 and 2022, the Company had tax effected U.S. federal net operating loss carryforwards of approximately $29.2 million and $31.5 million, respectively, of which $0.5 million begin to expire in 2027, approximately $20.2 million begin to expire between 2028 and 2036, and $8.5 million have no expiration. At December 31, 2023 and 2022, the Company had tax effected state net operating loss carryforwards of approximately $7.0 million and $7.4 million, respectively. The majority of the state tax losses will not begin expiring until 2035 or later.

The tax effected foreign net operating loss at December 31, 2023 and 2022 is approximately $2.4 million and $3.0 million, respectively, the majority of which has an unlimited carryforward period.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities. The Company is subject to examination by U.S. tax authorities beginning with the year ended December 31, 2020. The Company is also subject to examination in various foreign jurisdictions. In material foreign jurisdictions, the statute of limitations ranges one – four years from the filing of a tax return.

Valuation Allowance

As of December 31, 2023 and 2022, the Company had a valuation allowance of $103.3 million and $91.9 million, respectively, against certain deferred tax assets. The valuation allowance relates to the deferred tax assets of the Company’s U.S. entities, including federal and state tax attributes and timing differences, as well as the deferred tax assets of certain foreign subsidiaries. The increase in the valuation allowance during 2023 is primarily related to operating losses incurred during the year and the limitation on deductibility of interest expense. To the extent the Company determines that, based on the weight of available evidence, all or a portion of its valuation allowance is no longer necessary, the Company will recognize an income tax benefit in the period such determination is made for the reversal of the valuation allowance. If management determines that, based on the weight of available evidence, it is more-likely-than-not that all or a portion of the net deferred tax assets will not be realized; the Company may recognize income tax expense in the period such determination is made to increase the valuation allowance. It is possible that such reduction of or addition to the Company’s valuation allowance may have a material impact on the Company’s results from operations. The U.S. federal and foreign changes to valuation allowance of approximately $9.1 million is presented in the effective tax rate reconciliation as part of the valuation allowance. The U.S. state changes to valuation allowance of approximately $3.2 million is presented as part of the state taxes in the effective tax rate reconciliation. As of December 31, 2023, there is approximately $0.1 million of valuation allowance movement that is attributable to translation adjustment and $1.0 million of valuation allowance included in the effective tax rate reconciliation as part of the other adjustments.

A summary of the deferred tax asset valuation allowance is as follows (in thousands):

	Year Ended December 31, 2023			Year Ended December 31, 2022
Beginning Balance	$	91,866		$	80,449
Additions		12,302			11,425
Reductions		(877	)		(8	)
Ending Balance	$	103,291		$	91,866

Uncertain Tax Positions

As of December 31, 2023 and 2022, the total amount of unrecognized tax benefits was $0.5 million and $1.0 million, respectively, that would favorably impact the Company’s effective income tax rate if realized. However, due to the Company’s determination that the deferred tax asset would not more-likely-than-not be realized, a full valuation allowance would be recorded if the unrecognized tax benefits were realized. The Company’s uncertain income tax position liability has been recorded to deferred income taxes to offset the tax attribute carryforward amounts. There was no change to the uncertain tax position liability during the year.