Income taxes |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Income taxes | 8. Income taxes The following table provides the income tax expense amount:
The Company recorded an income tax expense of $1.8 million for the three months ended March 31, 2026 on a pre-tax net loss of $79.0 million. The Company’s income tax expense for the three months ended March 31, 2026 primarily resulted from a tax expense of $1.2 million on pre-tax book income in certain tax jurisdictions and discrete items that included $1.3 million of nondeductible equity tax expense for employee stock-based compensation and $0.6 million from the establishment of valuation allowance on foreign deferred tax assets due to the substantial doubt about the Company’s ability to continue as a going concern, partially offset by a net decrease in the domestic valuation allowance of $1.2 million. The Company recorded an income tax expense of $1.7 million for the three months ended March 31, 2025 on pre-tax net loss of $45.1 million. The Company’s income tax expense for the three months ended March 31, 2025 primarily resulted from a tax expense of $1.6 million on pre-tax book income in certain tax jurisdictions and discrete items that included $2.1 million of nondeductible equity tax expense for employee stock-based compensation, partially offset by a net decrease in the valuation allowance of $1.6 million and an income tax benefit of $0.5 million related to restructuring charges. The Company evaluated the impact of goodwill impairment on tax-deductible goodwill and determined that it did not materially impact the tax provision due to a full valuation allowance on its United States federal and state net deferred tax assets. 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 March 31, 2026, 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 March 31, 2026, the total valuation allowance on United States federal and state net deferred tax assets was $344.6 million. In the assessment for the period ended March 31, 2026, the Company concluded that the substantial doubt about its ability to continue as a going concern as discussed in Note 1 Summary of business and significant accounting policies constituted significant negative evidence of the recoverability of its foreign deferred tax assets. Therefore, the Company established a full valuation allowance of $0.6 million against its foreign deferred tax assets, as it is more likely than not that those assets will not be realized. 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. As of March 31, 2026 and December 31, 2025, the Company’s gross unrecognized tax benefits were $30.4 million and $29.7 million, respectively. If recognized, $13.1 million of these unrecognized tax benefits (net of United States federal benefit) as of March 31, 2026 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, which would be offset by a full valuation allowance based on present circumstances. 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. In 2021, the Organization for Economic Co-operation and Development (OECD) established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution (Pillar Two) to global taxation, focusing on global profit allocation and a 15% global minimum effective tax rate. On December 15, 2022, the EU member states agreed to implement the OECD’s global minimum tax rate of 15%. The OECD issued Pillar Two model rules and continues to release guidance on these rules. The inclusive framework calls for tax law changes by participating countries to take effect in 2024 and 2025. Various countries have enacted or have announced plans to enact new tax laws to implement the global minimum tax. The Company assessed the impact of Pillar Two and determined that there is no material impact on the provision for income taxes for the three months ended March 31, 2026. The Company will continue to monitor future guidance issued and assess the potential impact on the Company’s condensed consolidated financial statements.
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