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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following is a geographical breakdown of income (loss) before income taxes:
Year Ended December 31,
202420232022
Domestic$(363,347)$(86,724)$(116,964)
Foreign3,419 1,701 3,140 
$(359,928)$(85,023)$(113,824)
The provision (benefit) for income taxes consisted of the following:
Year Ended December 31,
202420232022
Current provision:
Federal$— $— $— 
State2 3 7 
Foreign2,934 3,881 755 
Total current provision$2,936 $3,884 $762 
Deferred provision:
Federal$(10,492)$— $— 
State(1,701)— — 
Foreign10 30 2,127 
Total deferred provision$(12,183)$30 $2,127 
Total provision (benefit) for income taxes$(9,247)$3,914 $2,889 
Effective income tax expense rate2.6 %(4.6)%(2.5)%

The Company has incurred net pre-tax losses in the United States only for all periods presented. The Company recorded an income tax expense (benefit) of $(9.2) million, $3.9 million, and $2.9 million for the years ended December 31, 2024, 2023, and 2022, respectively. The 2024 tax benefit relates to tax benefits from acquisitions, partially offset by withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries. The 2023 and 2022 tax expense relates to withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.
The provision (benefit) for income taxes differed from the amount computed by applying the federal statutory rate to our income before income taxes as follows:
Year Ended December 31,
202420232022
Federal statutory income tax rate21.0 %21.0 %21.0 %
Tax provision at statutory rate$(75,585)$(17,855)$(23,903)
State income tax rate2 3 7 
Benefits from acquisition(12,189)— — 
Foreign withholding and income tax2,561 3,689 2,298 
Foreign rate differential(338)(136)(115)
Research and development credits(4,888)(2,105)(1,731)
Change in valuation allowance39,083 18,604 24,272 
Stock based compensation(15,224)2,899 1,540 
Permanent book tax differences*1,180 246 751 
Sec. 162(m) disallowance*9,457 270 — 
Change in fair value of contingent acquisition liabilities46,761 — — 
Other deferred adjustments(67)(1,701)— 
Other— — (230)
$(9,247)$3,914 $2,889 
*The 2023 amounts have been conformed to the 2024 presentation.
The components of our deferred tax assets and liabilities were as follows:
Year Ended December 31,
20242023
Deferred tax assets:
Net operating loss carryforwards$127,680 $89,880 
Research and development credits23,934 17,825 
Property and equipment*1,936 223 
Deferred revenue5,260 767 
Intangible assets*— 4 
Interest expense5,484 — 
Stock-based compensation2,704 2,246 
Operating lease liabilities1,014 1,333 
Section 174 research and development capitalization40,648 21,186 
Accruals and reserves2,780 588 
Other2 — 
Total deferred tax assets211,442 134,052 
Valuation allowance(170,219)(132,873)
Total deferred tax assets, net41,223 1,179 
Deferred tax liabilities:
Right-of-use assets(1,017)(1,168)
Intangible assets(40,202)— 
Total deferred tax liabilities(41,219)(1,168)
Net deferred tax assets$4 $11 
*The 2023 amounts have been conformed to the 2024 presentation.
Based on available objective evidence, management believes it is more-likely-than-not that the domestic federal and state deferred tax assets; and excess Canadian SR&ED tax credits will not be fully realized due to the Company’s cumulative losses arising in the United States, and its inability to utilize excess tax credits in Canada. Accordingly, the Company has recorded a valuation allowance on deferred tax assets in excess of deferred tax liabilities against its federal and state deferred tax assets and excess Canadian SR&ED tax credits as of December 31, 2024, and 2023. The valuation allowance increased by $37.3 million from the year ended December 31, 2023 to December 31, 2024.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2024 because it intends to indefinitely reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will not be material.
As of December 31, 2024, the Company had net operating loss carryforwards of $548.4 million of U.S. federal and $208.1 million of state net operating loss carryforwards available to reduce future taxable income. The federal and state net operating loss carryforwards will start to expire in 2025 and 2028, respectively, with the exception of $403.3 million federal net operating loss carryforwards and $11.0 million state net operating loss carryforwards, which can be carried forward indefinitely.
The Company had federal and state research and development credit carryforwards of $21.4 million and $13.3 million, respectively, as of December 31, 2024. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. The Company also had Canadian SR&ED tax credits of $1.6 million, which will expire starting in 2038 if not utilized.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state tax laws, utilization of net operating loss carryforwards and tax credits may be subject to annual limitations due to certain ownership changes. The Company’s net operating loss carryforwards and tax credits could expire before utilization if subject to annual limitations.
The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. As of December 31, 2024, the tax years 2005 through the current period remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.
Changes in gross unrecognized tax benefits during the periods presented were as follows (in thousands):
Balance as of December 31, 2021$5,068 
Increase for tax positions of prior years— 
Increase for tax positions of current year1,062 
Balance as of December 31, 2022$6,130 
Increase for tax positions of prior years370 
Increase for tax positions of current year1,095 
Balance as of December 31, 20237,595 
Increase for tax positions of prior years
877 
Decrease for tax positions of prior years(4)
Increase for tax positions of current year2,784 
Balance as of December 31, 2024$11,252 

$0.9 million of the unrecognized tax benefits, if recognized, would affect the effective tax rate. $10.4 million of the unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. As of December 31, 2024, the Company has accrued $0.2 million interest and penalties related to unrecognized tax benefits. The Company does not anticipate any significant change in the Company’s uncertain tax positions within 12 months of this date.