Annual and transition report of foreign private issuers [Sections 13 or 15(d)]

Income taxes

v3.25.0.1
Income taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Basis of taxation
The Israeli corporate tax rate was 23% for the years ended December 31, 2022, 2023 and 2024.
The Law for the Encouragement of Capital Investments, 1959, (the "Israeli Investment Law"), provides certain incentives for capital investments in production facilities (or other eligible assets).

Amendment 73 to the Israeli Investment Law provides for a preferred income tax rate of either 6% or 12% on income derived from certain intangible assets, subject to certain eligibility criteria. Amendment 73 provides that a technology company satisfying certain conditions should qualify as a “Preferred Technology Enterprises" ("PTE"), granting a 12% tax rate in central Israel on income deriving from Benefited Intangible Assets, subject to certain conditions, including a minimal amount or ratio of annual R&D expenditure and R&D employees, as well as having at least 25% of annual income derived from exports to large markets. PTE is defined as an enterprise which meets the aforementioned conditions and for which total consolidated revenue of its parent company and all subsidiaries is less than NIS 10 billion. The Company is currently assessing its eligibility for these tax benefits due to its net loss position.

The Company’s subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.
The Company’s income tax returns in Israel are considered final through the year ended December 31, 2019.
The Company is qualified as an “industrial company” under the Israeli Law for the Encouragement of Industry (Taxation), 1969, and is eligible for certain tax benefits including amortization of goodwill arising from business combinations that are asset acquisitions.
The components of the loss before the provision for income taxes for the years ended December 31, 2022, 2023 and 2024 were as follows:
2022 2023 2024
Domestic $ (84,778) $ (31,021) $ (12,180)
Foreign 1,633  3,155  2,650 
Total loss before income taxes $ (83,145) $ (27,866) $ (9,530)
The provision for income taxes for the years ended December 31, 2022, 2023 and 2024 was as follows:
2022 2023 2024
Current:
   Domestic
 $ 109  $ 56  $ 448 
   Foreign
 1,933  646  1,090 
Total current income tax expense 2,042  702  1,538 
Deferred:
   Domestic
 (24) (126) — 
   Foreign
 (1,502) 931  389 
Total deferred income tax expense (1,526) 805  389 
Total provision for income taxes $ 516  $ 1,507  $ 1,927 
The provision for income taxes consisted primarily of income taxes related to the United States, the United Kingdom and other foreign jurisdictions in which the Company conducts business.
A reconciliation of the Company’s theoretical income tax expense to actual income tax expense for the years ended December 31, 2022, 2023 and 2024 is as follows:
2022 2023 2024
Tax Rate Tax Rate Tax Rate
Theoretical tax benefit $ (19,123) 23  % $ (6,409) 23  % $ (2,192) 23  %
Increase (decrease) in effective tax rate due to:
Change in valuation allowance 16,187  (20) % 3,498  (12) % (655) 7  %
Effect of entities with different tax rates 125  0  % 48  0  % 145  (2) %
Non-deductible expenses, net 3,442  (4) % 4,368  (16) % 4,455  (47) %
Income in zero tax rate (67) 0  % —  0  % —  0  %
Change in tax reserve for uncertain tax positions 12  0  % 145  (1) % 202  (2) %
Other (60) 0  % (143) 1  % (28) 1  %
Total effective income taxes $ 516  (1) % $ 1,507  (5) % $ 1,927  (20) %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The following table presents the significant components of the Company’s deferred tax assets and liabilities:
December 31,
2023 2024
Deferred tax assets:
Net operating loss carryforwards $ 60,582  $ 61,014 
Research and development expenses 12,000  11,028 
Lease liabilities 10,077  9,208 
Accruals and reserves 1,375  1,282 
Share-based compensation 668  401 
Deferred revenue 82  120 
Other 503  554 
Gross deferred tax assets 85,287  83,607 
Valuation allowance (73,960) (73,305)
Total deferred tax assets $ 11,327  $ 10,302 
Deferred tax liabilities:
Intangible assets (966) (977)
Deferred contract acquisition costs (3,123) (3,747)
Property and equipment (1,108) (683)
Right-of-use-assets (8,208) (7,945)
Other comprehensive income (201) (89)
Other (9) (137)
Gross deferred tax liabilities (13,615) (13,578)
Net deferred taxes $ (2,288) $ (3,276)
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The Company has established a valuation allowance to offset certain deferred tax assets at December 31, 2023 and 2024 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. The net change in the total valuation allowance for the years ended December 31, 2023 and 2024 was an increase of $3,142 and $(655), respectively.
As of December 31, 2024, $17,848 of undistributed earnings held by the Company’s foreign subsidiaries are designated as indefinitely reinvested. The Company did not recognize deferred taxes liabilities on undistributed earnings of its foreign subsidiaries as the Company intends to indefinitely reinvest those earnings.
Net operating loss carryforwards
As of December 31, 2024, the Company had generated Israeli net operating loss carryforwards (“NOLs”) of approximately $262,569, which may be carried forward and offset against taxable income in the future for an indefinite period.
Unrecognized tax positions
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The following table shows the changes in the gross amount of unrecognized tax positions as of December 31, 2022, 2023 and 2024.
Unrecognized tax
positions
Balance as of January 1, 2022 $ 403 
Increases related to current year tax positions 12 
Additions related to business combinations 193 
Balance as of December 31, 2022 608 
Increases related to current year tax positions 145 
Balance as of December 31, 2023 753 
Increases related to current year tax positions 202 
Additions related to business combinations — 
Balance as of December 31, 2024 $ 955 
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2022, 2023 and 2024 the Company recorded $56, $32 and $26, respectively, in interest and penalties related to uncertain tax positions.
The Company currently does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of settlements with tax authorities, the likelihood and timing of which is difficult to estimate.