INCOME TAXES

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

14. INCOME TAXES

During the three and nine months ended September 30, 2024, the Company recorded an income tax provision of $0.4 million and $12.8 million, representing an effective tax rate of 1.2% and 14.4%, respectively. The income tax provision primarily relates to the current tax provision on taxable profits, including in certain states which restrict the amount of net operating loss carryforwards which may be utilized to offset taxable income.

On a periodic basis, the Company reassesses the valuation allowance on its deferred tax assets, weighing positive and negative evidence to assess the recoverability of such deferred tax assets. In assessing the Company’s ability to realize its net deferred tax assets, the Company considered various factors, including future reversals of existing taxable temporary differences, projected future taxable income, potential carryback claims and tax planning strategies to determine whether it is more likely than not that some portion or all of its net deferred tax assets will not be realized. Based upon these factors, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need to maintain a full valuation allowance against its net deferred tax assets as of September 30, 2024. It is possible that with continued positive performance of the business in future periods, there may be sufficient positive evidence to release a portion or all of the Company’s valuation allowance. The release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, the Company’s level of profitability, revenue growth, and expectations regarding future profitability. Release of the valuation allowance

would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The total deferred tax asset balance subject to the valuation allowance was approximately $897.0 million as of September 30, 2024. The Company will continue to monitor the need for a full or partial valuation allowance on a quarterly basis.

During the three and nine months ended September 30, 2023, the Company recorded an income tax provision of $7.8 million and $21.2 million, respectively, representing an effective tax rate of (23.4%) and (3.8%), respectively. For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize the costs over five years for research activities performed in the U.S. and 15 years for research activities performed outside the U.S. The requirement to capitalize research and development costs for tax purposes resulted in the Company having taxable profits and recording federal and state tax expense of $4.1 million and $17.1 million, respectively. The state tax expense of $17.1 million is primarily related to state taxable income, partially offset by net operating loss carryforwards.