Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and international components of loss before income taxes are presented as follows:
Year Ended December 31,
2025 2024 2023
(in thousands)
Domestic $ (121,898) $ (74,358) $ (85,032)
Foreign (18,996) (164,359) 21,222 
Loss before income taxes $ (140,894) $ (238,717) $ (63,810)
The income tax provision (benefit) consists of the following:
Year Ended December 31,
2025 2024 2023
(in thousands)
Current:
Federal $ 4,816  $ 893  $ 3,827 
State 5  16  65 
Foreign (436) 4,739  9,896 
Total current 4,385  5,648  13,788 
Deferred:
Federal (13,689) (10,781) (371)
State (3,113) (3,536) (4,942)
Foreign 4,274  (10,889) (6,910)
Change in valuation allowance 3,930  26,039  7,772 
Total deferred (8,598) 833  (4,451)
Total income tax provision (benefit) $ (4,213) $ 6,481  $ 9,337 
The actual income tax provision (benefit) differs from the amount computed using the federal statutory rate as follows:
Year Ended December 31,
2024 2023
(in thousands)
Provision (benefit) at statutory rate $ (50,135) $ (13,288)
State income taxes (net of federal benefit) 10  7 
Research and development credits (7,720) (10,066)
Foreign rate differential 28,939  (375)
Stock compensation 7,855  2,213 
Foreign income inclusion 558  27,678 
Provision to return 381  (4,741)
Uncertain tax positions 300  1,272 
Permanent and other 812  (377)
Foreign unremitted earnings (558) (758)
Valuation allowance 26,039  7,772 
Total income tax provision $ 6,481  $ 9,337 
The actual income tax provision (benefit) differs from the amount computed using the federal statutory rate as follows:
Year Ended December 31, 2025
Amount
(in thousands)		 Percent
U.S. federal statutory tax rate $ (29,592) 21.0  %
State and local income taxes, net of federal income tax effect(1) 8  —  %
Foreign tax effects
   Singapore
      Statutory tax rate difference between Singapore and United States 5,773  (4.1) %
      Changes in valuation allowance (2,861) 2.0  %
      Withholding taxes 1,279  (0.9) %
      Other 1,385  (1.0) %
   Spain
      Statutory tax rate difference between Spain and United States 266  (0.2) %
      Changes in valuation allowance (2,092) 1.5  %
      Tax credits 1,971  (1.4) %
      Nontaxable or nondeductible items (1,904) 1.4  %
   Other foreign jurisdictions 3,296  (2.3) %
Tax credits
   Research and development tax credits (136) 0.1  %
Changes in valuation allowance 5,885  (4.2) %
Nontaxable or nondeductible items
   Equity compensation 8,475  (6.0) %
   Nondeductible compensation under Section 162(m) 3,011  (2.1) %
   Other 743  (0.5) %
Changes in unrecognized tax benefits 144  (0.1) %
Other adjustments 136  (0.1) %
Effective tax rate $ (4,213) 3.0  %
__________________
(1) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
The following tables present cash paid for income taxes, net of refunds received, by jurisdiction:
Year Ended December 31, 2025
Amount
(in thousands)		 Percent
United States
   Federal $ —  —  %
   State 154  3  %
Foreign 5,638  97  %
Total $ 5,792  100  %
Year Ended December 31, 2025
Amount
(in thousands)		 Percent
Israel $ 1,792  31  %
India 1,431  25  %
Singapore 1,386  24  %
Germany 556  10  %
Rest of the world 627  11  %
Total $ 5,792  100  %
The components of the deferred income tax assets are as follows:
December 31,
2025 2024
(in thousands)
Deferred tax assets:
Net operating loss carryforwards $ 53,689  $ 39,258 
Research and development credits 86,074  85,659 
Foreign tax credit carryforwards 527  1,578 
Accrued expenses and other 14,937  17,727 
Lease obligation 1,718  2,446 
Accrued compensation 6,898  2,991 
Stock-based compensation 12,327  11,923 
Intangible assets 7,740  9,698 
183,910  171,280 
Less valuation allowance (104,525) (100,131)
79,385  71,149 
Deferred tax liabilities:
Fixed assets (572) (497)
Leased right-of-use assets (1,244) (1,749)
Pension liability (426) (355)
Net deferred tax assets $ 77,143  $ 68,548 
At December 31, 2025, the Company had federal, state and foreign tax net operating loss carryforwards of approximately $162.1 million, $88.8 million and $250.9 million, respectively. The federal and state tax loss carryforwards will begin to expire in 2028 and 2030, and foreign tax loss will not expire, unless previously utilized.
At December 31, 2025, the Company had federal, state and foreign tax credit carryforwards of approximately $32.9 million, $113.6 million and $2.0 million, respectively. The federal, state and foreign tax credit carryforwards will begin to expire in 2026, 2030 and 2029, respectively, unless previously utilized. The Company also has foreign incentive deductions of approximately $9.7 million that do not expire.
The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse. The Company records a valuation allowance to reduce its deferred taxes to the amount it believes is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Based upon the Company’s review of all positive and negative evidence, the Company continues to have a valuation allowance on its state deferred tax assets, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes. The Company does not incur expense or benefit in certain tax-free jurisdictions in which it operates.
The Company recorded an income tax benefit of $4.2 million in the year ended December 31, 2025, an income tax provision of $6.5 million in the year ended December 31, 2024, and an income tax provision of $9.3 million in the year ended December 31, 2023.
The difference between the Company’s effective tax rate and the 21.0% United States federal statutory rate for the year ended December 31, 2025 primarily related to the mix of pre-tax income among jurisdictions and impact of the valuation allowance on Singapore deferred tax assets, permanent tax items including tax credits, stock based compensation, tax deficiencies related to stock-based compensation, and the release of uncertain tax positions under ASC 740-10.
The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the year ended December 31, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including tax credits, stock based compensation, tax deficiencies related to stock-based compensation, release of uncertain tax positions under ASC 740-10 and the recognition of a valuation allowance on the Singapore deferred tax assets.
The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the year ended year ended December 31, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal research and development credits. The permanent tax item related to global intangible low-taxed income, or GILTI, also reflects the then recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.
Income tax positions must meet a more-likely-than-not threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are de-recognized in the first financial reporting period in which that threshold is no longer met. The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.
At December 31, 2025, the Company’s unrecognized tax benefits totaled $69.4 million, $58.7 million of which, if recognized at a time when the valuation allowance no longer exists, would affect the effective tax rate. At December 31, 2025, the Company had accrued approximately $0.1 million of interest and penalties. The total amounts of interest and penalties recognized for the years ended December 31, 2025, 2024 and 2023 were not material.
The following table summarizes the changes to the unrecognized tax benefits during 2025, 2024 and 2023:
Amount
(in thousands)
Balance as of December 31, 2022 $ 67,134 
Additions based on tax positions related to the current year 3,032 
Decreases based on tax positions of prior year (1,528)
Balance as of December 31, 2023 68,638 
Additions based on tax positions related to the current year 2,277 
Decreases based on tax positions of prior year (2,032)
Balance as of December 31, 2024 68,883 
Additions based on tax positions related to the current year 2,039 
Decreases based on tax positions of prior year (1,552)
Balance as of December 31, 2025 $ 69,370 
The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At December 31, 2025, the statutes of limitations for the assessment of federal, state, and foreign income taxes are closed for the years before 2022, 2021, and 2018, respectively.
The Company’s subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2027, and are conditional upon meeting certain employment and investment thresholds in Singapore. Under the incentives, qualifying income derived from certain sales of the Company’s integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period. The Company recorded a tax benefit in Singapore in the years ended December 31, 2025, 2024 and 2023 at the incentive rate.