PROVISION FOR INCOME TAXES

3 Months Ended

Mar. 31, 2025

PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES

10. PROVISION FOR INCOME TAXES:

Income-tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for certain discrete items which are fully recognized in the period they occur. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 was 11.1% and 0.5%, respectively. The effective tax rate in these periods were lower than the statutory federal income-tax rate of 21% due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal research tax credits. In the three months ended March 31, 2025, the Company’s effective tax rate was unfavorably impacted by the recognition of share-based payments and foreign income subject to U.S. tax, known as global intangible low-taxed income (“GILTI”). In the three months ended March 31, 2024, the Company’s effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments and the release of unrecognized tax benefits and unfavorably impacted by foreign income subject to U.S. tax (GILTI). The Company’s primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction. Income earned in other foreign jurisdictions was not material. The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

As of March 31, 2025, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

Determining the consolidated provision for income-tax expense, income-tax liabilities and deferred tax assets and liabilities involves judgment. The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction. The estimates used could differ from actual results, which may have a significant impact on operating results in future periods.