NOTE 11 — INCOME TAXES

As described in Note 1 — Basis of Presentation and Summary of Significant Accounting Policies, effective for the year ended December 31, 2025, the Company adopted ASU 2023-09 and applied the disclosure requirements on a prospective basis. In accordance with prospective application, the Company did not recast prior period disclosures.

Income Tax Expense (Benefit)

Components of income tax expense (benefit) were as follows (in thousands):

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Reconciliation

The reconciliation of income taxes computed at the U.S. federal statutory tax rate of 21% to these effective tax rates is as follows (in thousands):

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The Company’s income tax (benefit) expense for 2024 and 2023 resulted in effective tax rates of 10.3% and 54.0%, respectively. The reconciliation of income taxes computed at the U.S. federal statutory tax rate of 21% to these effective tax rates is as follows (in thousands):

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Income Taxes Paid

Income taxes paid, net of refunds received, were as follows (in thousands):

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Income tax (refunds) payments were $(2.0) million and $2.4 million in 2024 and 2023, respectively.

As of December 31, 2025, income taxes receivable of $0.5 million were included in Prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets.

Deferred Tax Assets and Liabilities

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. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

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Valuation Allowance

Changes to the Company’s valuation allowance are as follows (in thousands):

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Deferred tax assets are recorded related to net operating losses (“NOLs”) and temporary differences between the book and tax basis of assets and liabilities expected to produce tax deductions in future periods. The Company records valuation allowances when it is more likely than not that some portion or all of its deferred tax assets will not be realized. As of each reporting date, the Company assesses available positive and negative evidence regarding its ability to realize its deferred tax assets, including reversing temporary differences and projections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses, to evaluate the realizability of its net deferred tax asset position. The realization of these assets depends on recognition of sufficient future taxable income in specific tax jurisdictions in which those temporary differences or NOLs are deductible.

The amount of the Company’s deferred tax assets considered realizable was reduced in 2025 mainly due to negative evidence regarding its ability to realize its deferred tax assets. The Company can support a portion of its deferred tax assets through the generation of income from future reversals of existing taxable temporary differences and recorded a valuation allowance against the remaining unsupported deferred tax assets.

Net Operating Loss and Interest Expense Limitation Carryover

The table below presents the details of the Company’s net operating loss and interest expense limitation carryover as of December 31, 2025 (in thousands):

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Uncertain Tax Positions

The Company’s tax filings are subject to examination by federal and state tax authorities where it conducts its business. These examinations may result in assessments of additional tax that are resolved with the authorities or through the courts. The Company has evaluated whether any material tax positions it has taken will more likely than not be sustained upon examination by the appropriate taxing authority. As the Company believes that all such material tax positions it has taken are supportable by existing laws and related interpretations, the Company believes there are no material uncertain tax positions to consider.

Years Open to Examination

The Company and its subsidiaries are subject to income taxes in both the U.S. federal jurisdiction and state jurisdictions in which it conducts its business, each of which may have multiple open years subject to examination. As of December 31, 2025, the tax years 2022 through 2025 remain open to examination by the federal and state tax jurisdictions where the Company conducts its business.