Income Taxes

12 Months Ended

Dec. 28, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes:

The components of income tax expense are as follows:

	Year Ended
	December 28, 2024			December 30, 2023			December 31, 2022
	(in thousands)
Current:
Federal	$	40,688		$	28,326		$	47,963
State		1,156			879			987
Foreign		3,409			4,647			2,901
		45,253			33,852			51,851
Deferred:
Federal		(25,287	)		(22,429	)		(31,622	)
State		(871	)		242			(1,506	)
Foreign		(318	)		(242	)		(473	)
		(26,476	)		(22,429	)		(33,601	)
Total income tax expense	$	18,777		$	11,423		$	18,250

The income before tax is comprised of the following:

	Year Ended
	December 28, 2024		December 30, 2023		December 31, 2022
	(in thousands)
Domestic operations	$	207,747	$	107,640	$	239,527
Foreign operations	$	12,700	$	24,942	$	2,057

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 21% for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, to income before provision for income taxes as follows:

	Year Ended
	December 28, 2024			December 30, 2023			December 31, 2022
	(in thousands, except for percentages)
Federal income tax provision at statutory rate	$	46,294		$	27,842		$	50,732
State taxes, net of federal effect		2,171			1,389			467
Foreign taxes, net of federal effect		854			(2,000	)		(481	)
Foreign Derived Intangible Income (“FDII”) Deduction		(16,960	)		(12,662	)		(25,445	)
US tax on foreign source income		(207	)		184			1,423
Tax effect of share-based compensation		(6,883	)		(2,288	)		(2,497	)
Non-deductible officer's compensation		3,412			2,301			1,910
Research and development tax credit		(6,640	)		(6,410	)		(7,146	)
Change in tax reserves		(2,648	)		(1,133	)		(1,084	)
Change in valuation allowance		(1,790	)		2,180			(276	)
Withholding taxes		785			640			937
Other		389			1,380			(290	)
Provision for income taxes	$	18,777		$	11,423		$	18,250
Effective tax rate		9	%		9	%		8	%

Prior year amounts were reclassified to conform to current year classification requirements for comparability purposes. The total tax provision amounts remained unchanged.

Deferred tax assets and liabilities are comprised of the following:

	December 28, 2024			December 30, 2023
	(in thousands)
Deferred tax assets:
Reserves and accruals	$	20,315		$	16,658
Deferred revenue		4,677			4,082
Share-based compensation		3,792			3,495
Tax credit carryforward		12,170			13,960
Net operating losses		1,618			1,088
Depreciation and amortization		162			156
Capitalized research and development		48,943			34,165
Operating lease liabilities		2,968			3,744
Other		1,162			2,875
Gross deferred tax assets		95,807			80,223
Less: valuation allowance		(12,170	)		(13,960	)
Total deferred tax assets after valuation allowance		83,637			66,263
Deferred tax liabilities:
Depreciation and amortization		(38,144	)		(43,908	)
Operating lease right of use assets		(2,682	)		(3,519	)
Other		(4	)		—
Gross deferred tax liabilities		(40,830	)		(47,427	)
Net deferred tax assets	$	42,807		$	18,836

At December 28, 2024 and December 30, 2023, the Company had recorded valuation allowances of $12.2 million and $14.0 million, respectively, on a certain portion of the Company’s deferred tax assets to reflect the deferred tax assets at the net amount that is more likely than not to be realized. The Company maintains a valuation allowance against its federal foreign tax credit carryforwards of $0.3 million and state research and development credits of $11.9 million.

In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard. If it is determined that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of the assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies when making this assessment. In making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December 28, 2024, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.

At December 28, 2024, the Company had tax effected federal, state, and foreign net operating loss carryforwards of $0.5 million, $0.9 million and $0.2 million, respectively. The federal, state and foreign net operating loss carryforwards expire on various dates beginning in 2033 through 2049.

At December 28, 2024, the Company had foreign tax credit carryforwards and state research & development credits of $0.3 million, and $16.8 million, respectively. The foreign tax credit carryforwards are set to expire at various dates beginning December 31, 2032. The state research & development credit carryforwards are set to expire at various dates beginning December 31, 2028.

As of December 28, 2024, the Company has not provided U.S. income taxes on all its foreign earnings. The Company continues to permanently reinvest the cash held offshore to support its working capital needs. The Company has accrued $0.5 million for additional foreign withholding taxes from an expected liquidating distribution from its Israel entity.

The total amount of unrecognized tax benefits are as follows:

	Year Ended
	December 28, 2024			December 30, 2023			December 31, 2022
	(in thousands)
Balance, beginning of the period	$	13,142		$	13,010		$	12,373
Gross increases—tax positions in prior period		1,416			29			456
Gross decreases—tax positions in prior period		(33	)		(100	)		—
Gross increases—current-period tax positions		1,761			1,785			1,729
Closure of audit/statute limitation		(3,291	)		(1,582	)		(1,548	)
Balance, end of the period	$	12,995		$	13,142		$	13,010

The unrecognized tax benefits at December 28, 2024 and December 30, 2023 were $13.0 million and $13.1 million, respectively, of which $6.7 million and $7.2 million, respectively, would be reflected as an adjustment to income tax expense if recognized. The year over year decrease from 2023 to 2024 is primarily due to expiring tax statutes, offset by additional unrecognized tax benefits related to foreign net operating losses. It is reasonably possible that certain amounts of unrecognized tax benefits may reverse in the next 12 months; however, the Company does not expect such reversals to have a significant impact on its results of operations or financial position.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company recognized approximately $(223) thousand, $146 thousand and $149 thousand, respectively, in interest and penalties (benefit) expense associated with uncertain tax positions. As of December 28, 2024 and December 30, 2023, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $564 thousand and $823 thousand, respectively.

The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The Company is subject to ordinary statute of limitation rules of three and four years for federal and state returns, respectively. However, due to tax attribute carryforwards, the Company is subject to examination for tax years 2015 forward for U.S. federal tax purposes with respect to carryforward amounts. The Company is also subject to examination in various states for tax years 2003 forward with respect to carryforward amounts. The Company is subject to examination for tax years 2016 forward for various foreign jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from any future examinations of these years.

In the normal course of business, the Company is subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income taxes or other taxes against it. Although the Company believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from the Company’s historical income tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on the Company’s results of operations or cash flows in the period or periods for which that determination is made.