v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
11.
Income Taxes

Provision for income taxes consisted of the following (in thousands):

 

Years ended December 31,

 

 

2025

 

 

2024

 

 

2023

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

11,586

 

 

$

23,695

 

 

$

35,434

 

State

 

 

8,231

 

 

 

11,441

 

 

 

8,999

 

 

 

19,817

 

 

 

35,136

 

 

 

44,433

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

(817

)

 

 

(2,424

)

 

 

(3,638

)

State

 

 

(3,470

)

 

 

(1,826

)

 

 

(8,806

)

 

 

(4,287

)

 

 

(4,250

)

 

 

(12,444

)

Total provision for income taxes

 

$

15,530

 

 

$

30,886

 

 

$

31,989

 

 

The table below provides the updated requirements of ASU 2023-09 for 2025. The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate as follows (in thousands):

 

 

Year ended December 31, 2025

 

 

Amount

 

 

Percentage

 

Provision for income taxes at U.S. federal statutory rate

 

$

8,316

 

 

 

21.0

%

State and local income taxes, net of federal benefit

 

 

3,131

 

 

 

7.9

 

Tax credits:

 

 

 

 

 

 

Research and development ("R&D") credits

 

 

(1,238

)

 

 

(3.1

)

Changes in valuation allowance

 

 

62

 

 

 

0.2

 

Non-taxable or non-deductible items:

 

 

 

 

 

 

Nondeductible officer's compensation

 

 

3,955

 

 

 

10.0

 

Equity compensation

 

 

3,106

 

 

 

7.8

 

Transaction cost

 

 

738

 

 

 

1.7

 

Other

 

 

503

 

 

 

1.2

 

Changes in unrecognized tax benefits

 

 

577

 

 

 

1.5

 

Other adjustments:

 

 

 

 

 

 

Variable interest entities

 

 

(1,388

)

 

 

(3.5

)

Return to provision

 

 

(691

)

 

 

(1.7

)

Allowance for doubtful account

 

 

(690

)

 

 

(1.7

)

Other

 

 

(851

)

 

 

(2.1

)

Total tax provision and effective tax rate

 

$

15,530

 

 

 

39.2

%

The following table represents cash paid for income taxes, net of refunds received, by jurisdiction (in thousands):

 

Year ended December 31, 2025

 

 

 

Amount

 

 

Percentage

 

United States

 

 

 

 

 

 

Federal

 

$

12,298

 

 

 

139

%

State

 

 

(3,446

)

 

 

(39

)%

Total

 

$

8,852

 

 

 

100

%

 

 

Year ended December 31, 2025

 

 

Amount

 

 

Percentage

 

State

 

 

 

 

 

 

California

 

$

(4,434

)

 

 

129

%

Connecticut

 

 

193

 

 

 

(6

)%

Texas

 

 

630

 

 

 

(18

)%

Other states

 

 

165

 

 

 

(5

)%

Total

 

$

(3,446

)

 

 

100

%

 

As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:

 

Years ended December 31,

 

 

2024

 

 

2023

 

Tax provision at U.S. federal statutory rates

 

 

21.0

%

 

 

21.0

%

State income taxes net of federal benefit

 

 

9.5

 

 

 

11.6

 

Non-deductible permanent items

 

 

3.8

 

 

 

2.5

 

Variable interest entities

 

 

1.1

 

 

 

(2.1

)

Stock-based compensation

 

 

3.9

 

 

 

2.8

 

Change in valuation allowance

 

 

(0.8

)

 

 

(2.6

)

Gain on sale of investment

 

 

—

 

 

 

8.5

 

Tax credits

 

 

(1.3

)

 

 

—

 

NOL adjustment

 

 

(0.8

)

 

 

0.2

 

Undistributed dividend

 

 

—

 

 

 

(11.5

)

Spin-off transaction

 

 

—

 

 

 

3

 

Uncertain tax position

 

 

0.8

 

 

 

—

 

Tax rate change

 

 

(0.3

)

 

 

—

 

Return-to-provision

 

 

(0.4

)

 

 

2.4

 

Accrual to cash true-up

 

 

1.3

 

 

 

—

 

Other

 

 

0.4

 

 

 

(0.3

)

Effective income tax rate

 

 

38.2

%

 

 

35.5

%

The Company’s effective tax rate differs from the Federal statutory rate of 21% primarily due to state taxes, non-deductible permanent items, and stock-based compensation, offset by a change in valuation allowance and R&D credits from increased R&D activities.

Significant components of the Company’s deferred tax assets (liabilities) are shown below (in thousands):

 

 

December 31,

 

 

2025

 

 

2024

 

Deferred tax assets

 

 

 

 

 

 

State taxes

 

$

2,125

 

 

$

2,435

 

Accrued expenses

 

 

638

 

 

 

1,110

 

Allowance for bad debts

 

 

7,908

 

 

 

3,741

 

Net operating loss carryforward

 

 

7,055

 

 

 

6,775

 

Lease liability

 

 

9,348

 

 

 

8,644

 

Unrealized gain

 

 

860

 

 

 

1,488

 

Stock options

 

 

1,520

 

 

 

1,731

 

Transaction costs

 

 

4,870

 

 

 

—

 

Other

 

 

725

 

 

 

—

 

Deferred tax assets before valuation allowance

 

 

35,049

 

 

 

25,924

 

Valuation allowance

 

 

(5,028

)

 

 

(5,267

)

Net deferred tax assets

 

 

30,021

 

 

 

20,657

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

Property and equipment

 

 

(3,502

)

 

 

(1,031

)

Acquired intangible assets

 

 

(21,006

)

 

 

(13,493

)

Right-of-use assets

 

 

(8,405

)

 

 

(7,721

)

Debt issuance cost

 

 

—

 

 

 

(375

)

Investment in other entities

 

 

(2,599

)

 

 

(1,701

)

Other

 

 

—

 

 

 

(891

)

Deferred tax liabilities

 

 

(35,512

)

 

 

(25,212

)

Net deferred tax liabilities

 

$

(5,491

)

 

$

(4,555

)

Activity related to the Company’s valuation allowance consisted of the following (in thousands):

 

Years Ended December 31,

 

 

2025

 

 

2024

 

 

2023

 

Balance, beginning of year

 

$

5,267

 

 

$

5,904

 

 

$

8,292

 

Allowance taken or written off

 

 

(239

)

 

 

(637

)

 

 

(2,388

)

Balance, end of year

 

$

5,028

 

 

$

5,267

 

 

$

5,904

 

As of December 31, 2025, the Company had federal and California tax net operating loss carryforwards of approximately $14.1 million and $41.1 million, respectively. The federal and California net operating loss carryforwards will expire at various dates from 2027 through 2045; however, $2.3 million of the federal net operating loss carryforwards do not expire and will be carried forward indefinitely. The Company has determined certain net operating losses are limited pursuant to Internal Revenue Code Sections 382 and 383, but does not anticipate these net operating losses will expire before utilization.

The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be sustained upon examination by the relevant income tax authorities. The following table summarizes the activity related to the Company’s unrecognized tax benefits.

 

 

2025

 

 

2024

 

Gross unrecognized tax benefits at January 1,

 

$

718

 

 

$

—

 

Increases for tax positions taken in the current year

 

 

439

 

 

 

359

 

Increases for tax positions taken in the prior year

 

 

79

 

 

 

359

 

Gross unrecognized tax benefits at December 31,

 

$

1,236

 

 

$

718

 

If recognized, $1.2 million and $0.7 million of the unrecognized tax benefits as of December 31, 2025 and 2024, respectively, would reduce the annual effective tax rate. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.

The Company is subject to U.S. federal income tax, as well as income tax in several states. The Company and its subsidiaries’ state and federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2021 through December 31, 2024, and for the years ended December 31, 2022 through December 31, 2024, respectively. The Company is currently under audit by the California Franchise Tax Board for tax years ended December 31, 2019 through December 31, 2022.

Recent Tax Legislation

On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law in the U.S., which includes a broad range of tax reform provisions. Beginning in 2025, the OBBBA provides an elective deduction for domestic research and development expenses, a reinstatement of elective 100% first-year bonus depreciation and repeal of non-U.S. corporations' fiscal year end. The impact of this legislation was not material to the Company's consolidated financial position and results of operation for the year ended December 31, 2025.