Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

10.Income Taxes

The components of income before income taxes are as follows:

	For the Years Ended December 31,
	2022		2021		2020
	(Amounts in thousands)
Domestic	$	153,446	$	81,984	$	27,545
Foreign		65,694		71,559		31,672
Income before income taxes	$	219,140	$	153,543	$	59,217

The components of the income tax provision are as follows:

	For the Years Ended December 31,
	2022			2021		2020
	(Amounts in thousands)
Components of the income tax provision (benefit):
Current	$	34,800		$	20,166	$	5,193
Deferred		(1,619	)		5,086		(5,902	)
Total	$	33,181		$	25,252	$	(709	)
Jurisdictional components of the income tax provision (benefit):
Federal	$	17,662		$	8,321	$	(4,741	)
State		1,381			1,251		(3,011	)
Foreign		14,138			15,680		7,043
Total	$	33,181		$	25,252	$	(709	)

At December 31, 2022, the Company had federal net operating loss carryforwards of $42.9 million, state net operating loss carryforwards of $0.8 million, and foreign net operating loss carryforwards of $4.9 million. Federal net operating loss carryforwards of $7.3 million will expire at various dates through 2037. The state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire. The other $35.6 million of federal net operating loss carryforwards have unlimited carryforward periods. At December 31, 2022, the Company had state business tax credits carryforwards of $3.8 million available to reduce future domestic income taxes. The business tax credit carryforwards will expire at various dates through 2042. 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,
	2022			2021
	(Amounts in thousands)
Deferred tax assets:
Stock-based compensation expense	$	5,323		$	5,144
Operating leases		31,564			26,264
Capitalized research and development		9,102			—
Inventory		5,983			3,082
Net operating loss carryforwards		9,808			10,841
Business tax credit carryforwards		2,639			1,834
Other		4,440			3,504
Total deferred tax assets		68,859			50,669
Less: valuation allowance		(19	)		(718	)
Net deferred tax assets		68,840			49,951
Deferred tax liabilities:
Fixed assets		(18,965	)		(7,779	)
Acquired intangible assets		(43,549	)		(43,227	)
Operating lease right of use assets		(28,486	)		(24,114	)
Conversion option on convertible notes		—			(6,408	)
Total deferred tax liabilities		(91,000	)		(81,528	)
Total net deferred tax liabilities	$	(22,160	)	$	(31,577	)

The net change in the total valuation allowance for the year ended December 31, 2022 and 2021 was a decrease of approximately $0.7 million and a decrease of $9,000, respectively.

The reconciliation of the federal statutory rate to the effective income tax rate for the years ended December 31, 2022, 2021 and 2020 is as follows:

	For the Years Ended December 31, 2022
	2022						2021						2020
	Amount			%			Amount			%			Amount			%
	(Amounts in thousands, except percentages)
Income before income taxes	$	219,140					$	153,543					$	59,217
Expected tax at statutory rate		46,020			21.0	%		32,247			21.0	%		12,436			21.0	%
Adjustments due to:
Difference between U.S. and foreign      tax		1,024			0.5	%		530			0.3	%		618			1.0	%
State income and franchise tax		3,509			1.6	%		1,462			1.0	%		133			0.2	%
Business tax credits		(5,139	)		(2.3	%)		(2,239	)		(1.5	%)		(4,660	)		(7.9	%)
Stock-based compensation expense		(5,638	)		(2.6	%)		(9,049	)		(5.9	%)		(9,243	)		(15.6	%)
U.S. taxation of foreign earnings		83			0.0	%		30			0.0	%		51			0.1	%
Foreign-derived intangible income		(5,042	)		(2.3	%)		(2,547	)		(1.7	%)		—			0.0	%
Executive compensation		5,441			2.5	%		3,397			2.2	%		1,401			2.4	%
Contingent consideration		(6,033	)		(2.8	%)		1,232			0.8	%		—			0.0	%
Change in U.S. and foreign tax rates		2			0.0	%		32			0.0	%		(2,650	)		(4.5	%)
Uncertain tax provisions		234			0.1	%		(443	)		(0.3	%)		(168	)		(0.3	%)
Change in valuation allowance		(688	)		(0.3	%)		(48	)		(0.0	%)		(12	)		(0.0	%)
Other		(592	)		(0.3	%)		648			0.4	%		1,385			2.3	%
Income tax provision	$	33,181			15.1	%	$	25,252			16.4	%	$	(709	)		(1.2	%)

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	2018-2022
Sweden	2017-2022

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

	For the Years Ended December 31, 2022
	2022		2021
	(Amounts in thousands)
Balance of gross unrecognized tax benefits, beginning of period	$	2,786	$	3,200
Gross amounts of increases in unrecognized tax benefits as a result      of tax positions taken in the current period		146		133
Gross amounts of increases and (decreases) in unrecognized tax benefits as a result      of tax positions taken in the prior period		64		(500	)
Gross amounts of decreases due to release		—		(47	)
Balance of gross unrecognized tax benefits, end of period	$	2,996	$	2,786

Included in the balance of unrecognized tax benefits as of December 31, 2022, are $3.0 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 2022, a net expense of approximately $24,000 was recorded to the income tax provision related to interest and penalties while in 2021 and 2020, net (benefit)/expenses of approximately ($29,000) and $17,000, respectively, were recorded. The amount of interest and penalties recorded in the accompanying consolidated balance sheets was approximately $52,000 and $29,000 as of December 31, 2022 and 2021, respectively. The Company does not anticipate the amount of unrecognized tax benefits to change over the next twelve months.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"), which, among other things, implements a 15% alternative minimum tax on global adjusted financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy and will become effective beginning in

2023. The Company evaluated the provisions of the IRA and no provision had, or will have a material effect on our consolidated financial position or results of operations as of December 31, 2022.

As of December 31, 2022, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $148.2 million. Because $5.7 million of such earnings have previously been subject to the one-time transition tax on foreign earnings required by the Tax Cuts and Jobs Act enacted in December 2017, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. At December 31, 2022, the Company has not provided for taxes on outside basis differences of its foreign subsidiaries as it is not practicable and 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.