INCOME TAXES

9 Months Ended

Sep. 30, 2023

INCOME TAXES

INCOME TAXES

(13)   INCOME TAXES

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to excess tax benefits or expense from stock option exercises, the tax impact of the change in fair value of contingent consideration, and true ups related to the filed tax return. For the three months ended September 30, 2023 and 2022 discrete items adjusted were $1.1 million and $0.2 million, respectively. For the nine months ended September 30, 2023 and 2022 discrete items adjusted were ($2.1) million and ($0.2) million, respectively. At September 30, 2023 and 2022, the Company is estimating an

annual effective tax rate of approximately 25% and 23%, respectively. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors.

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 20% and 23% for the nine months ended September 30, 2023 and 2022, respectively. The decrease in the Company’s effective income tax rate for the nine months ended September 30, 2023 compared to the same period in 2022, is primarily related to the tax impact of discrete items, in particular the change in fair value of contingent consideration recorded during the year which is not expected to be taxable. The Company recorded income tax expense of $1.4 million and $2.1 million for the three and nine months ended September 30, 2023, respectively, and income tax expense of $1.5 million and $2.9 million for the three and nine months ended September 30, 2022, respectively.

Taxes of $3.5 million and $5.0 million were paid during the nine months ended September 30, 2023 and 2022, respectively.