Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Note 13. Income Taxes
The Company’s effective income tax rate reflects changes resulting from the Reorganization and IPO. In connection with the Reorganization, a portion of one of the Arxis Businesses that had previously operated as a partnership for U.S. federal income tax purposes became subject to U.S. federal and state corporate income taxes as part of the Company's consolidated group. Also, as a result of the Reorganization, the Company recognized a discrete tax benefit of $1.4 million (tax-effected) during the three months ended June 30, 2026 related to the establishment of deferred tax assets. The IPO resulted in several impacts to the annual effective tax rate, including a material and adverse impact due to nondeductible share-based compensation expense and a nonmaterial impact under the separate return limitation year (“SRLY”) rules. The IPO did not result in the establishment of any additional valuation allowances or the release of any material valuation allowances.
The Company's effective income tax rate was (247.2%) for the three months ended June 30, 2026, compared to 200.6% for the three months ended June 30, 2025. The Company's effective income tax rate was 28.4% for the six months ended June 30, 2026, compared to 250.9% for the six months ended June 30, 2025. The change in the effective tax rate for the three months ended June 30, 2026 was primarily due to IPO-related items, including nondeductible share-based compensation, which resulted in a near break-even pre-tax book basis. The effective tax rates for the three and six months ended June 30, 2026 and 2025 differed from the U.S. federal statutory tax rate of 21% primarily due to IPO-related items, including nondeductible share-based compensation, and the mix of earnings and losses across jurisdictions subject to different tax rates. Based on its analysis, the Company’s pre-IPO tax attribute carryforwards, including net operating losses, tax credits, and disallowed interest under IRC Section 163(j) are subject to the lesser of the SRLY or Section 382 annual limitation. The Company does not expect these limitations to cause any tax attributes to expire before they are utilized and thus does not expect to establish any additional valuation allowances.
Based on the current earnings, it is reasonably possible that, within the next twelve months, sufficient sources of income may become available to support the release of a portion of the valuation allowance. Any such release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recognized. The Company recognized certain tax effects associated with the Convertible-Related Tax Receivable Agreement entered into in connection with the Reorganization and IPO. Refer to “Note 14. Equity” for additional information. |