v3.25.4
Income taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income taxes
9. Income taxes
Income (loss) before income taxes consisted of the following:
Year ended December 31,
(in thousands)
202520242023
United States$(99,883)$(142,195)$(79,514)
Foreign8,435 9,106 11,781 
Loss before income taxes$(91,448)$(133,089)$(67,733)
Income tax expense (benefit) consisted of the following:
Year ended December 31,
(in thousands)
202520242023
Current
Federal$1 $1 $3 
State72 (28)162 
Foreign1,689 2,478 3,176 
Total current$1,762 $2,451 $3,341 
Deferred
Federal$87 $222,087 $(14,018)
State— 74,886 (3,828)
Foreign190 (202)(45)
Total deferred$277 $296,771 $(17,891)
Total income tax expense (benefit)
Federal$88 $222,088 $(14,015)
State72 74,858 (3,666)
Foreign1,879 2,276 3,131 
Total income tax expense (benefit)$2,039 $299,222 $(14,550)
Income taxes paid (net of refunds) that equal or exceed 5% of total income taxes paid (net of refunds received) consisted of the following:
Year ended December 31,
(in thousands)
202520242023
U.S. federal$— $— $— 
States
Arkansas(91)71 87 
California(47)— 102 
Illinois(80)— 156 
Minnesota— — 28 
Montana— (100)125 
New York— — 44 
Pennsylvania— (88)55 
Texas— — 117 
Other66 (17)97 
(152)(134)811 
Foreign
Australia191 — 160 
China— 234 65 
Germany - Munich— — (39)
Japan - federal171 390 179 
Japan - local130 235 139 
Netherlands236 229 (2,171)
Philippines— — 44 
Romania75 — 95 
United Kingdom156 99 211 
Other39 40 (31)
998 1,227 (1,348)
Total$846 $1,093 $(537)
Income tax expense (benefit) at the effective tax rate consisted of the following:
Year ended December 31,
202520242023
$%$%
$
%
(in thousands, except percentages)
Tax at U.S. federal statutory rate (21%)$(19,204)21.0 %$(27,949)21.0 %$(14,224)21.0 %
State income taxes, net of federal benefit(415)0.5 74,864 (56.3)(3,699)5.5 
Foreign tax effects
France
Non-taxable and nondeductible items(873)1.0 (631)0.5 (881)1.3 
Other, net363 (0.4)(10)— 156 (0.3)
Other foreign jurisdiction(164)0.2 184 (0.1)260 (0.4)
Effects of cross-border tax laws
Federal taxation of foreign disregarded entities1,361 (1.5)1,546 (1.2)2,123 (3.1)
Tax credits
Research tax credits(1,317)1.4 (3,569)2.7 (3,736)5.5 
Changes in valuation allowance - federal14,356 (15.7)247,750 (186.1)— — 
Non-taxable and nondeductible items
Tax effect on share-based compensation3,722 (4.1)5,132 (3.9)3,125 (4.6)
Goodwill impairment2,537 (2.8)— — — — 
Other, net75 (0.1)508 (0.4)656 (1.0)
Worldwide changes in unrecognized tax benefits1,598 (1.7)1,397 (1.0)1,670 (2.4)
Income tax provision at effective tax rate$2,039 (2.2)%$299,222 (224.8)%$(14,550)21.5 %
The negative effective tax rate of 2.2% for 2025 primarily resulted from a change in the valuation allowance on the United States federal and state net deferred tax assets, nondeductible equity tax expense from employee stock-based compensation, and tax expense from goodwill impairment, partially offset by a tax benefit on a pre-tax net loss and the federal and California research and development credits. The negative effective tax rate of 224.8% for 2024, primarily resulted from the establishment and the current year change in the valuation allowance on the United States federal and state net deferred tax assets, partially offset by a tax benefit on a pre-tax net loss, and the release of a portion of uncertain tax positions as a result of a lapse in the statute of limitations in certain jurisdictions.
The state income tax rate reconciliation amount is primarily attributable to state income taxes in Kentucky and Texas, which, in the aggregate, represent more than 50% of the total state income tax effect for the year.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities were as follows:
Year ended December 31,
(in thousands)
20252024
Deferred tax assets:
Net operating loss carryforwards$190,968 $110,724 
Tax credit carryforwards104,319 101,895 
Stock-based compensation3,163 4,531 
Allowance for returns1,098 1,706 
Intangible assets2,536 1,873 
Depreciation and amortization1,455 1,177 
Operating lease liabilities4,532 6,784 
Capitalized research and development costs19,697 80,310 
Accruals and reserves19,361 21,944 
Total deferred tax assets347,129 330,944 
Valuation allowance(344,611)(327,367)
Net deferred tax assets, net of valuation allowance$2,518 $3,577 
Deferred tax liabilities:
Operating lease right-of-use assets$(2,635)$(3,424)
Total deferred tax liabilities(2,635)(3,424)
Net deferred tax assets (liabilities)$(117)$153 
Each quarter, the Company assesses the realizability of its existing deferred tax assets under ASC Topic 740. The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize its deferred tax assets. In the assessment for the period ended December 31, 2025, the Company concluded that it remains more likely than not that the Company will not be able to realize its deferred tax assets. As of December 31, 2025, the total valuation allowance on United States federal and state net deferred tax assets was $344.6 million. The Company will continue to monitor its future financial results, expected projections and their potential impact on the Company’s assessment regarding the recoverability of its deferred tax asset balances and in the event there is a need to release the valuation allowance, a tax benefit would be recorded. The Company’s foreign deferred tax assets in each jurisdiction are supported by taxable income or in the case of acquired companies, by the future reversal of deferred tax liabilities. It is more likely than not that the Company’s foreign deferred tax assets will be realized and thus, a valuation allowance is not required on its foreign deferred tax assets.
As of December 31, 2025, the Company’s federal, California, and other state net operating loss carryforwards for income tax purposes were $752.5 million, $261.8 million, and $283.5 million, net of reserves, respectively. Also, the Company’s federal and California state tax credit carryforwards were $58.1 million and $58.4 million, net of reserves, respectively. If not utilized, federal net operating losses that arose before 2018 and California loss carryforwards will begin to expire from 2035 to 2045, while federal credit and other state loss carryforwards will begin to expire primarily from 2026 to 2045. Federal net operating losses that arose after 2017 and all California tax credits will be carried forward indefinitely.
Uncertain income tax positions. The Company had gross unrecognized tax benefits of $29.7 million, $27.0 million, and $25.8 million, as of December 31, 2025, 2024, and 2023, respectively. For fiscal year 2025, 2024, and 2023, total unrecognized income tax benefits were $15.2 million, $11.6 million, and $10.9 million, respectively, and if recognized, would reduce income tax expense. A material portion of the Company’s gross unrecognized tax benefits, if recognized, would increase the Company’s net operating loss carryforward.
The Company conducts business globally and as a result, files income tax returns in the United States and foreign jurisdictions. The Company’s unrecognized tax benefits relate primarily to unresolved matters with taxing authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its reserves reflect the more likely outcome.
A reconciliation of the beginning and ending amount of gross unrecognized income tax benefits are as follows:
Year ended December 31,
(in thousands)
202520242023
Balance at January 1$27,019 $25,836 $23,414 
Increase related to current year tax positions5,815 4,665 4,948 
Decrease related to prior year tax positions(3,173)(3,482)(2,526)
Balance at December 31$29,661 $27,019 $25,836 
The Company’s policy is to account for interest and penalties related to income tax liabilities within the provision for income taxes. The balances of accrued interest and penalties recorded in the balance sheets and provision were not material for any period presented.
The Company files income tax returns in the United States and in foreign jurisdictions. As of December 31, 2025, the Company continues to assert indefinite reinvestment to the extent of any foreign withholding taxes on the undistributed earnings related to these foreign branches. Any foreign withholding tax on these earnings is deemed not to be material.