Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

10.Income Taxes

The components of income before income taxes are as follows:

	For the Years Ended December 31,
	2021		2020		2019
	(Amounts in thousands)
Domestic	$	81,984	$	27,545	$	(5,432	)
Foreign		71,559		31,672		31,583
Income before income taxes	$	153,543	$	59,217	$	26,151

The components of the income tax provision are as follows:

	For the Years Ended December 31,
	2021		2020			2019
	(Amounts in thousands)
Components of the income tax provision (benefit):
Current	$	20,166	$	5,193		$	8,290
Deferred		5,086		(5,902	)		(5,287	)
Equity		—		—			1,737
Total	$	25,252	$	(709	)	$	4,740
Jurisdictional components of the income tax provision (benefit):
Federal	$	8,321	$	(4,741	)	$	(965	)
State		1,251		(3,011	)		(1,764	)
Foreign		15,680		7,043			7,469
Total	$	25,252	$	(709	)	$	4,740

At December 31, 2021, the Company had federal net operating loss carryforwards of $46.2 million, state net operating loss carryforwards of $4.0 million, and foreign net operating loss carryforwards of $6.1 million. Federal net operating loss carryforwards of $19.1 million will expire at various dates through 2037. The total state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire. The other $27.1 million of the federal net operating loss carryforwards have unlimited carryforward periods. At December 31, 2021, the Company had state business tax credits carryforwards of $2.7 million available to reduce future domestic income taxes. The business tax credit carryforwards will expire at various dates through 2041. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant shareholders.

The components of deferred income taxes are as follows:

	December 31,
	2021			2020
	(Amounts in thousands)
Deferred tax assets:
Temporary timing differences:
Stock-based compensation expense	$	5,144		$	3,320
Operating leases		26,264			7,257
Other		6,586			5,774
Total temporary timing differences		37,994			16,351
Net operating loss carryforwards		10,841			1,539
Tax business credits carryforwards		1,834			5,553
Total deferred tax assets		50,669			23,443
Less: valuation allowance		(718	)		(727	)
Net deferred tax assets		49,951			22,716
Deferred tax liabilities:
Fixed assets		(7,779	)		(4,233	)
Acquired intangible assets		(43,227	)		(28,639	)
Operating lease right of use assets		(24,114	)		(5,744	)
Conversion option on convertible notes		(6,408	)		(8,651	)
Total deferred tax liabilities		(81,528	)		(47,267	)
Total net deferred tax liabilities	$	(31,577	)	$	(24,551	)

The net change in the total valuation allowance for the year ended December 31, 2021 and 2020 was a decrease of approximately $9,000 and an increase of $0.7 million, respectively.

The reconciliation of the federal statutory rate to the effective income tax rate for the years ended December 31, 2021, 2020 and 2019 is as follows:

	For the Years Ended December 31,
	2021						2020						2019
	Amount			%			Amount			%			Amount			%
	(Amounts in thousands, except percentages)
Income before income taxes	$	153,543					$	59,217					$	26,151
Expected tax at statutory rate		32,247			21.0	%		12,436			21.0	%		5,492			21.0	%
Adjustments due to:
Difference between U.S. and foreign      tax		530			0.3	%		618			1.0	%		436			1.7	%
State income and franchise tax		1,462			1.0	%		133			0.2	%		(179	)		(0.7	%)
Business tax credits		(2,239	)		(1.5	%)		(4,660	)		(7.9	%)		(2,746	)		(10.5	%)
Permanent differences:
Stock-based compensation expense		(9,049	)		(5.9	%)		(9,243	)		(15.6	%)		(1,877	)		(7.2	%)
U.S. taxation of foreign earnings		30			0.0	%		51			0.1	%		3,096			11.8	%
Foreign-derived intangible income		(2,547	)		(1.7	%)		—			0.0	%		(869	)		(3.3	%)
Executive compensation		3,397			2.2	%		1,401			2.4	%		841			3.2	%
Other		1,930			1.3	%		896			1.5	%		92			0.4	%
Change in U.S. and foreign tax rates		32			0.0	%		(2,650	)		(4.5	%)		(193	)		(0.7	%)
Uncertain tax provisions		(443	)		(0.3	%)		(168	)		(0.3	%)		1,069			4.1	%
Change in valuation allowance		(48	)		(0.0	%)		(12	)		(0.0	%)		(125	)		(0.5	%)
Return to provision adjustments		(50	)		(0.0	%)		(89	)		(0.2	%)		(79	)		(0.3	%)
Other		(0	)		(0.0	%)		578			1.0	%		(218	)		(0.9	%)
Income tax provision	$	25,252			16.4	%	$	(709	)		(1.2	%)	$	4,740			18.1	%

The Company’s tax returns are subject to examination by federal, state and foreign tax authorities. The Company’s two major tax jurisdictions are subject to examination for the following periods:

Jurisdiction	Fiscal Years Subject to Examination
United States - federal and state	2017-2021
Sweden	2016-2021

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

	For the Years Ended December 31,
	2021			2020
	(Amounts in thousands)
Balance of gross unrecognized tax benefits, beginning of period	$	3,200		$	3,422
Gross amounts of increases in unrecognized tax benefits as a result      of tax positions taken in the current period		133			154
Gross amounts of decreases in unrecognized tax benefits as a result      of tax positions taken in the prior period		(500	)		(337	)
Gross amounts of decrease due to release		(47	)		(39	)
Balance of gross unrecognized tax benefits, end of period	$	2,786		$	3,200

Included in the balance of unrecognized tax benefits as of December 31, 2021 are $2.8 million of tax benefits that, if recognized, would affect the effective tax rate. The Company classifies interest and penalties related to income taxes as components of its income tax provision. In 2021, a net benefit of approximately $29,000 was recorded to the income tax provision related to interest and penalties while in 2020 and 2019, net expenses of approximately $17,000 and $5,000, respectively, were recorded. The amount of interest and penalties recorded in the accompanying consolidated balance sheets was approximately $29,000 and $58,000 as of December 31, 2021 and 2020, respectively. The Company does not anticipate the amount of unrecognized tax benefits to change over the next twelve months.

On March 27, 2020, President Trump signed the $2.2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, the third congressional bill to address COVID-19, provides for loans and other benefits to businesses, expanded unemployment insurance, direct payments to those with middle-income and below wages, new appropriations funding for healthcare and other priorities, and tax changes, including deferrals of employer payroll tax liabilities, coupled with an employee retention tax credit and rollbacks of TCJA limitations on net operating losses (“NOLs”) and the Section 163(j) business interest limitation and a TCJA technical correction on qualified improvement property. The Company evaluated the provisions of the CARES Act and no provision had a material effect on the Company’s financial position or results of operations at December 31, 2020 and for the year then ended.

The Company is subject to a territorial tax system under the Tax Cuts and Jobs Act (“TCJA”) enacted in December 2017 (the “2017 Tax Act”), in which the Company is required to provide for tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company has adopted an accounting policy to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense.

The Company also considered the impact of the newly issued tax regulations in recording its income tax accounts for the year ended December 31, 2020 which reduced the foreign earnings subject to taxation under GILTI provisions for the year ended December 31, 2018 and prospectively.

As of December 31, 2021, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $93.3 million. Because $5.7 million of such earnings have previously been subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of the Company’s foreign investments would generally be limited to foreign and state taxes. At December 31, 2021, the Company has not provided for taxes on outside basis differences of its foreign subsidiaries, as the Company has the ability and intent to indefinitely reinvest the undistributed earnings of its foreign subsidiaries, and there are no needs for such earnings in the United States that would contradict its plan to indefinitely reinvest.