Income Taxes

12 Months Ended

Dec. 29, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes, excluding loss for noncontrolling interests, consists of the following:

	December 29, 2023		December 30, 2022		December 31, 2021
Domestic	$	(34,398)	$	(3,866)	$	(44,650)
Foreign	989		(6,219)		1,606
Total	$	(33,409)	$	(10,085)	$	(43,044)

The components of income tax benefit for the years ended December 29, 2023, December 30, 2022, and December 31, 2021, were as follows:

	December 29, 2023		December 30, 2022		December 31, 2021
Current
Federal	$	1,703	$	2,794	$	—
State	2,466		2,289		1,005
Foreign	492		1,110		330
Total	4,661		6,193		1,335
Deferred
Federal	(12,733)		(5,954)		(5,708)
State	(3,359)		(1,790)		(1,963)
Foreign	(610)		92		(306)
Total	(16,702)		(7,652)		(7,977)
Income tax benefit	$	(12,041)	$	(1,459)	$	(6,642)

The tax effects of temporary differences and carryforwards that gave rise to deferred tax assets and liabilities as of December 29, 2023 and December 30, 2022, are as follows:

	December 29, 2023		December 30, 2022
Deferred Tax Assets
Net operating loss	$	2,727	$	3,845
Interest carryforward	12,029		7,793
Accrued liabilities and reserves	17,969		14,545
Uniform capitalization	449		593
Capital loss carryforward	9,080		8,719
R&D credits	6,144		17,296
Deferred revenue	3,716		3,422
Depreciable property	1,904		1,690
Stock compensation	10,291		8,020
Section 174 research and expenditures	31,239		18,046
Total deferred tax assets	95,548		83,969
Valuation allowance	(13,705)		(15,554)
Total deferred tax assets, net of valuation allowance	81,843		68,415
Deferred Tax Liabilities
Amortization of intangibles	(86,400)		(93,489)
Amortization of goodwill	(20,692)		(17,072)
Transaction Costs	(28)		(55)
Other	(550)		(321)
Total deferred tax liabilities	(107,670)		(110,937)
Net deferred tax liabilities	$	(25,827)	$	(42,522)

The components of the Company’s net deferred tax liabilities as of December 29, 2023 and December 30, 2022, are as follows:

	December 29, 2023		December 30, 2022
Domestic deferred tax liabilities	$	(24,416)	$	(40,505)
Foreign deferred tax liabilities	(2,559)		(3,010)
Foreign deferred tax assets	1,148		993
Net deferred tax liabilities	$	(25,827)	$	(42,522)

The Company’s deferred tax assets related to net operating losses and credits are shown net of their related unrecognized tax benefit.

Significant judgment is required in determining the Company’s provision for income taxes and recording valuation allowances against deferred tax assets. In evaluating the ability to recover its deferred tax assets, in full or in part, the Company considers all available positive and negative evidence, including past operating results, forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies.

The Company determined, based on all the available evidence, that it is uncertain whether certain of its jurisdictions will generate sufficient future taxable income and of the correct character to recognize certain of these deferred tax assets. As a result, the Company’s deferred tax asset for net operating losses, capital loss carryforwards and credits reflect a valuation allowance of $13,705 and $15,554 as of December 29, 2023 and December 30, 2022, respectively.

The Company expects to fully utilize its state net operating loss carryforward balances, with the exception of a portion of the Utah state net operating loss. However, the Company expects a portion of their U.S. federal research and development credits to expire unused in future years along with all of their remaining state research and equipment credits.

A partial valuation allowance has been established for the portion of credits expected to expire unused. The Company will continue to maintain a full valuation allowance against the foreign tax credit carryovers. In 2020, the Company sold the stock of their fully owned subsidiary, Autonomic Controls, Inc., for $1,104, incurring a capital loss of $35,039 for tax purposes. The Company has determined the capital loss will not be utilized due to insufficient capital gains. A full valuation allowance has been recorded against this asset for both federal and state.

Net operating loss and tax credit carryforwards as of December 29, 2023 are as follows (gross of valuation allowance and uncertain tax positions):

	Amount		Expiration Years
Net operating losses, state	$	7,400	2030-2041
Net operating losses, state	$	28,650	Indefinite
Net operating losses, foreign	$	4,477	2024-2033
Net operating losses, foreign	$	62	Indefinite
Tax credit carryforwards, federal	$	14,577	2024-2043
Tax credit carryforwards, state	$	1,574	2024-2028
Capital loss carryforwards, federal	$	35,039	2025
Capital loss carryforwards, state	$	22,640	2025

The Company has performed Section 382 analyses to determine whether it experienced one or more ownership changes, as defined by Section 382, during the analysis period (the acquisition date in 2017 through the IPO effective date in July 2021) as well as other ownership changes. While an annual limitation does exist related to the net operating losses and credits carried forward, the Company does not anticipate that this limitation will cause any net operating losses and credits to expire before their utilization. U.S. Federal net operating losses incurred after 2017 are subject to an 80% limitation on taxable income. The Company does not have any U.S. Federal net operating losses subject to this limitation.

The Company recorded gross unrecognized tax benefit of $1,176, $591 and $161 during the years ended December 29, 2023, December 30, 2022, and December 31, 2021, respectively. Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by an immaterial amount within the next 12 months. The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of an immaterial amount at December 29, 2023 and none accrued as of December 30, 2022.

Changes in the Company’s unrecognized tax benefits for the years ended December 31, 2021, December 30, 2022 and December 29, 2023, were as follows:

Balance - December 25, 2020	$	8,094
Additions for tax position of the current year	400
Reduction for tax positions of prior years for:
Changes in judgment	(162)
Lapses of applicable statutes of limitations	(76)
Balance - December 31, 2021	8,256
Additions for tax position of the current year	528
Reduction for tax positions of prior years for:
Changes in judgment	148
Lapses of applicable statutes of limitations	(85)
Balance - December 30, 2022	8,847
Additions for tax position of the current year	866
Reduction for tax positions of prior years for:
Changes in judgment	392
Lapses of applicable statutes of limitations	(82)
Balance - December 29, 2023	$	10,023

The total amount (including both interest and any related federal benefit) of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $10,023 and $8,847 at December 29, 2023 and December 30, 2022, respectively. The Company files income tax returns in the United States, including various state and local jurisdictions. The Company’s subsidiaries file income tax returns in the United Kingdom, Australia, China, Germany, India, New Zealand, Switzerland, Serbia, and Canada. The Company is subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company is no longer subject to income tax examinations for the following jurisdictions and years: federal, for years before 2020; state and local, for years before 2018; or foreign, for years before 2017. However, federal net operating loss and credit carryforwards from all years are subject to examination and adjustments for at least three years following the year in which the attributes are used.

The Company's position is that its overseas subsidiaries will not invest undistributed earnings indefinitely. Future undistributed earnings are anticipated to be categorized as either GILTI or Sub F distributions. Consequently, any such earnings will be classified as previously taxed income or qualify for a 100% dividends received deduction. If the earnings are repatriated there could be additional taxes which are not considered material. As a result, there is no requirement to record deferred tax liability associated with these undistributed earnings.

The reconciliation of the Company’s effective income tax rate with the statutory rate is as follows:

	December 29, 2023		December 30, 2022		December 31, 2021
Federal income tax rate	21.00	%	21.00	%	21.00	%
State income taxes	2.17	%	(2.33)	%	1.04	%
Foreign income taxes	1.00	%	(0.10)	%	(0.07)	%
Deferred rate change	—	%	(3.78)	%	0.46	%
Foreign tax rate differences	(0.05)	%	(1.71)	%	0.42	%
Incentive stock compensation	(5.07)	%	(12.73)	%	(2.23)	%
Cash in lieu of TRA	—	%	—	%	(5.06)	%
TRA adjustments/amortization	(1.59)	%	(0.31)	%	—	%
Research and development tax credits	18.38	%	33.50	%	2.84	%
Valuation allowance	4.25	%	(25.52)	%	1.42	%
Changes in uncertain tax positions	(3.75)	%	(7.36)	%	(0.41)	%
Contingent value rights	0.12	%	9.25	%	(1.47)	%
Foreign-derived intangible income	1.42	%	9.35	%	—	%
Global intangible low-taxed income	(0.80)	%	(2.51)	%	(0.66)	%
Meals and entertainment	(0.44)	%	(1.93)	%	(0.22)	%
Other items, net (a)	(0.60)	%	(0.35)	%	(1.64)	%
Effective income tax rate	36.04	%	14.47	%	15.42	%

(a)Global intangible low-taxed income, contingent value rights, and meals and entertainment were grouped in other items, net for fiscal year 2021 as it was not material to require separate statement. The Company has updated the rate reconciliation for fiscal year 2021 to separately state these items for consistency purposes.

Due to pretax losses in the years ended December 29, 2023, December 30, 2022 and December 31, 2021, the effective rate items listed above with negative signs represent increases to income tax expense and positive amounts represent decreases to income tax expense.

On December 15, 2022, the European Union (EU) Members States formally adopted the EU’s Pillar Two Directive, which generally provided for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025 for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. The Company is continuing to evaluate the potential impact of future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries.