14. Income Taxes

Our effective tax rate for the three months ended March 31, 2026 and 2025 was 4.8% and 3.6%, respectively, which resulted in an income tax benefit/(provision) of $(29) and $(44), respectively.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the evidence available, it is more-likely-than-not that such assets will not be realized. In making the assessment under the more-likely-than-not standard, appropriate consideration must be given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods by jurisdiction, unitary versus stand-alone state tax filings, our experience with loss carryforwards expiring unutilized, and all tax planning alternatives that may be available. As of December 31, 2025, management reviewed the weight of all the positive and negative evidence available. Management reviewed positive evidence such as three years of cumulative pretax income in the U.S. federal tax jurisdiction, and projections of future pretax income and the duration of statutory carry-forward periods and negative evidence such as the impact of future acquisitions on our cumulative pretax net income in the U.S. federal tax jurisdiction. As of December 31, 2025 the Company has a cumulative pretax income for the three-year lookback, excluding the gain on the sale of property and equipment, which is considered significant objectively verifiable negative evidence. Management also evaluated projections of future pretax income and the duration of statutory carry-forward periods to determine if the NOL carryforwards could be utilized in whole or in part before they expire unutilized. In our forecast and projections of future income, we also consider the impact of probable future acquisitions, and the impact additional intangible asset amortization expenses will have on our future pretax income. Forecasts and projections of future income are inherently subjective and therefore generally are given less weight, based on the extent to which the assumptions can be objectively verified based on historical experience. Although historical trends utilized in our projections are objectively verifiable, we assigned less weight to this positive evidence given the subjective nature of assumptions in projections and the unknown impact of the additional intangible asset amortization expense will have in future periods from the acquisition closed during the quarter ended March 31, 2026. Management reviewed negative evidence related to experience of credits and loss carryforwards expiring unutilized, and determined that although negative evidence exists, it was not significant evidence, as the current loss carryforwards do not begin to expire until 2034 and therefore risk is minimal. After reviewing the weight of the positive and negative evidence, management determined that the positive evidence was not sufficient enough to overcome the negative evidence of potentially returning to a cumulative pretax loss position for the three-year lookback in future periods as a result of additional intangible asset amortization expense from the business combination completed during the quarter ended March 31, 2026. Therefore, management determined that it is more likely than not that deferred tax assets of $7,687 are not realizable. Therefore, a valuation allowance of $7,687 was recorded against our gross deferred tax asset balance as of during the quarter ended March 31, 2026 and December 31, 2025.