Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.0.1
Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

6. Income taxes

The components of the Company’s income (loss) before provision for income taxes are as follows:

 

 

 

Years ended December 31,

 

(amounts in thousands)

 

2021

 

 

2020

 

 

2019

 

United States

 

$

7,621

 

 

$

(6,464

)

 

$

22,553

 

Foreign

 

 

1,038

 

 

 

1,184

 

 

 

1,719

 

Income (loss) before provision for income taxes

 

$

8,659

 

 

$

(5,280

)

 

$

24,272

 

 

The provision for income taxes consists of the following:

 

 

 

Years ended December 31,

 

(amounts in thousands)

 

2021

 

 

2020

 

 

2019

 

Current tax expense (benefit)

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 

 

$

(74

)

 

$

(330

)

State

 

 

271

 

 

 

198

 

 

 

136

 

Foreign

 

 

266

 

 

 

381

 

 

 

560

 

Total current tax expense

 

 

537

 

 

 

505

 

 

 

366

 

Deferred tax expense (benefit)

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

10,263

 

 

 

309

 

 

 

3,497

 

State

 

 

4,194

 

 

 

(193

)

 

 

(396

)

Foreign

 

 

(22

)

 

 

(72

)

 

 

(145

)

Total deferred tax expense

 

 

14,435

 

 

 

44

 

 

 

2,956

 

Interest and penalties

 

 

20

 

 

 

 

 

 

 

Provision for income taxes

 

$

14,992

 

 

$

549

 

 

$

3,322

 

 

 

The components of deferred tax assets and liabilities consist of the following:

 

(amounts in thousands)

 

As of December 31,

 

Deferred tax assets (liabilities)

 

2021

 

 

2020

 

Accrued expenses

 

$

10,575

 

 

$

8,346

 

Net operating loss and credit carryforward

 

 

21,138

 

 

 

20,145

 

Allowance, reserves and other

 

 

2,668

 

 

 

1,381

 

Stock-based compensation

 

 

2,665

 

 

 

3,379

 

Lease liability

 

 

6,507

 

 

 

2,427

 

Deferred tax assets

 

 

43,553

 

 

 

35,678

 

Property, plant, and equipment

 

 

(7,664

)

 

 

(4,805

)

Intangible amortization

 

 

(12,389

)

 

 

(14,292

)

Right-of-use asset

 

 

(6,077

)

 

 

(2,139

)

Deferred tax liabilities

 

 

(26,130

)

 

 

(21,236

)

Valuation allowance

 

 

(17,423

)

 

 

 

Total

 

$

 

 

$

14,442

 

 

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

 

 

 

Years ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

U.S. Statutory rate

 

 

21.00

%

 

 

21.00

%

 

 

21.00

%

State income taxes, net of federal benefit

 

 

-1.39

%

 

 

-3.86

%

 

 

3.70

%

Stock-based compensation

 

 

-21.72

%

 

 

-16.80

%

 

 

-0.81

%

R&D credit, net of reserve

 

 

-5.95

%

 

 

-8.11

%

 

 

-8.97

%

Change in fair value

 

 

-28.19

%

 

 

-4.19

%

 

 

0.70

%

Nondeductible compensation

 

 

7.04

%

 

 

 

 

 

 

Valuation allowance

 

 

201.69

%

 

 

 

 

 

 

Other

 

 

0.63

%

 

 

1.57

%

 

 

-1.94

%

Effective income tax rate

 

 

173.11

%

 

 

-10.39

%

 

 

13.68

%

The Company operates in several taxing jurisdictions, including U.S. federal, multiple U.S. states and the Netherlands. The statute of limitations has expired for all tax years prior to 2018 for federal and prior to 2016 for various state tax purposes. However, the net operating loss generated on the Company’s federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.

As of December 31, 2021, the Company had $60,239 and $26,193 of federal and state net operating loss carryforwards, respectively, and $52,443 of the total federal net operating loss carryforwards have an indefinite life while the remaining federal and state net operating loss carryforwards begin to expire in 2033 and 2028, respectively, if not utilized. As of December 31, 2021, the Company had federal and California research and development credit carryforward of $4,365 and $4,327, respectively. The federal credit will begin to expire in 2022; the California credit has indefinite carryforward.

Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitations arising from ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization.

The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced. As of December 31, 2021, the Company determined that net deferred tax assets are not more likely than not realizable based on projected future taxable losses primarily due to planned strategic investments in future periods and the impact of the COVID-19 pandemic, including related supply chain impacts on parts availability and cost inflation. Accordingly, the Company recorded a valuation allowance of $17,423 as of December 31, 2021. The Company’s valuation allowance may increase or decrease during the next 12 months based on future operating results.

The Company recognizes interest and penalties on taxes, within its income tax provision on its consolidated statements of comprehensive income (loss).

Included in the balance of unrecognized tax benefits as of December 31, 2021, 2020 and 2019, were $2,078, $1,932 and $1,889, respectively, of tax benefits that, if recognized, would affect the effective tax rate. The Company believes that there will be no significant increases or decreases to unrecognized tax benefits within the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

 

(amounts in thousands)

 

December 31,

 

Reconciliation of liability for unrecognized tax benefits

 

2021

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

1,932

 

 

$

1,889

 

 

$

1,294

 

Additions based on tax positions related to current year

 

 

146

 

 

 

70

 

 

 

595

 

Reductions based on tax positions related to prior year

 

 

 

 

 

(181

)

 

 

 

Additions based on tax positions related to prior year

 

 

 

 

 

154

 

 

 

 

Balance at end of period

 

$

2,078

 

 

$

1,932

 

 

$

1,889