Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

7.INCOME TAXES

The components of pretax (loss) income attributable to domestic and foreign operations are as follows (in thousands):

	Year Ended December 31,
		2023			2022			2021
Domestic		$	(80,486	)	$	54,799		$	(261,900	)
Foreign			(4,061	)		(4,937	)		(13,019	)
Pretax (loss) income		$	(84,547	)	$	49,862		$	(274,919	)

The goodwill and intangible asset impairment charges (see Note 12) recognized during the year ended December 31, 2023 are included in the domestic pretax loss in the table above.

The Company's income tax provision (benefit) consisted of the following (in thousands):

	Year Ended December 31,
		2023			2022			2021
Current provision:
Federal		$	41,804		$	37,470		$	15,263
State			10,053			8,387			5,620
Total current provision			51,857			45,857			20,883
Deferred provision (benefit):
Federal			(36,253	)		(26,570	)		(35,284	)
State			(10,080	)		(7,831	)		(11,599	)
Foreign			(502	)		1,054			(2,080	)
Change in valuation allowance			502			(1,054	)		2,080
Total deferred benefit			(46,333	)		(34,401	)		(46,883	)
Total income tax provision (benefit)		$	5,524		$	11,456		$	(26,000	)

The Company’s effective income tax rate differs from the federal statutory rate as follows (in thousands, except percentages):

	Year Ended December 31,
	2023					2022					2021
Federal income tax benefit at statutory rate	$	(17,755	)	21.0	%	$	10,471		21.0	%	$	(57,733	)	21.0	%
Goodwill impairment		16,255		(19.2	)		—		—			—		—
Executive compensation		12,555		(14.8	)		12,508		25.0			25,362		(9.2	)
Fair value of warrants		3,170		(3.7	)		(5,475	)	(11.0	)		13,545		(4.9	)
Stock-based compensation		(3,844	)	4.5			(4,074	)	(8.1	)		(3,647	)	1.3
Research and experimentation credit		(6,920	)	8.2			(3,510	)	(7.0	)		(2,914	)	1.1
Impact of foreign operations		1,794		(2.1	)		2,807		5.6			261		(0.1	)
Valuation allowance		502		(0.6	)		(1,054	)	(2.1	)		2,080		(0.8	)
State and local taxes-net of federal income tax effect		(22	)	0.0			439		0.9			(4,723	)	1.7
Other nondeductible expenses		836		(1.0	)		344		0.7			756		(0.3	)
Uncertain tax positions		396		(0.5	)		(303	)	(0.6	)		594		(0.2	)
Foreign rate difference		(164	)	0.2			(182	)	(0.4	)		(493	)	0.2
Other—net		(1,279	)	1.5			(515	)	(1.0	)		912		(0.3	)
Income tax provision (benefit)	$	5,524		(6.5	)%	$	11,456		23.0	%	$	(26,000	)	9.5	%

The Company made income tax payments of $43.0 million, $55.7 million and $15.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company received insignificant refunds from the Internal Revenue Service and various states during the years ended December 31, 2023, 2022 and 2021, respectively.

The approximate income tax effect of each type of temporary difference giving rise to deferred income tax assets and liabilities as of December 31, 2023 and 2022 was as follows (in thousands):

	Year Ended December 31,
	2023			2022
Deferred income tax assets:
Stock-based compensation	$	36,329		$	37,156
Operating lease liabilities		13,751			14,339
Accrued compensation		10,373			10,962
Net operating losses—foreign		10,875			10,373
Capitalized R&E—net of amortization		26,082			10,221
Sales allowances and doubtful accounts		1,393			1,339
Interest expense limitation		—			673
Net operating losses—domestic (state)		479			506
Research and experimental credit		373			386
Other		775			826
Total deferred income tax assets		100,430			86,781
Valuation allowance for deferred tax asset		(10,875	)		(10,373	)
Net deferred income tax assets		89,555			76,408
Deferred income tax liabilities:
Intangible asset amortization		255,572			282,032
Software, equipment and property depreciation and amortization		11,541			17,628
Deferred contract costs		10,044			9,235
Operating lease assets		7,078			7,604
Interest rate cap		685			1,607
Total deferred income tax liabilities		284,920			318,106
Net deferred income tax liabilities	$	195,365		$	241,698

Valuation Allowance—The Company has accumulated net operating losses related to its foreign subsidiaries of $10.9 million and $10.4 million at December 31, 2023 and 2022, respectively. A valuation allowance equal to 100% of the related tax benefit has been established as of December 31, 2023 and 2022. The valuation allowance increased $0.5 million during the year ended December 31, 2023, decreased $1.0 million during the year ended December 31, 2022 and increased $2.0 million during the year ended December 31, 2021. The changes in the valuation allowance during each year were due to foreign subsidiaries' net operating losses in the current year and the expiration of prior year's net operating losses. No amounts were released during the years ended December 31, 2023, 2022 and 2021. The net operating losses are set to expire in 2024 through 2028 as China allows for a five-year carryforward.

The state net operating losses at December 31, 2023 of $0.5 million are expected to be more likely than not fully utilized. Most states allow for a 20-year carryforward of net operating losses. All losses will expire in 2035-2042 if not fully utilized.

The change in unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2023 and 2022 was as follows (in thousands):

	2023			2022
Balance at beginning of year	$	3,723		$	3,722
Additions based on tax positions related to the current year		1,062			797
Additions based on adjustments to tax positions related to prior years		527			105
Reductions for tax positions of prior years		(897	)		(901	)
Balance at end of year	$	4,415		$	3,723

The Company believes its liability for unrecognized tax benefits, excluding interest and penalties, will not significantly change over the following twelve months. However, due to the open statute of limitations within the various jurisdictions in which the Company files tax returns, the amount of any change cannot be reasonably estimated and it is possible there could be significant changes in the amount of unrecognized tax benefits over the following twelve months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2023 and 2022, the amount accrued for interest and penalties was not material. The Company reflects its liability for unrecognized tax benefits within income taxes payable and other liabilities in its consolidated balance sheets. The amounts included in “reductions for tax positions of prior years” represent expirations of statutes of limitation and decreases in the unrecognized tax benefits relating to settlements reached with taxing authorities during each year shown.

With few US State exceptions, the major jurisdictions subject to examination by the relevant taxing authorities and open tax years, stated as the Company’s fiscal years, are as follows:

Jurisdiction	Open Tax Years
US Federal	2020 - 2022
US States	2020 - 2022
China	2020 - 2022
Canada	2020 - 2022