A.K.A. BRANDS HOLDING CORP.AKA
A.K.A. BRANDS HOLDING CORP. Income Taxes Disclosure
Income Taxes
Loss before income taxes consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | (22,090) | $ | (5,016) | $ | (8,904) | |||||||||||
Foreign | (7,225) | (16,645) | (88,061) | ||||||||||||||
Loss before income taxes | $ | (29,315) | $ | (21,661) | $ | (96,965) | |||||||||||
The components of the provision for income taxes consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 1,261 | $ | 1,588 | $ | 1,496 | |||||||||||
State | 702 | 826 | 649 | ||||||||||||||
Foreign | 116 | 424 | 465 | ||||||||||||||
Total | 2,079 | 2,838 | 2,610 | ||||||||||||||
| Deferred: | |||||||||||||||||
Federal | — | 1,654 | (2,305) | ||||||||||||||
State | — | (115) | 467 | ||||||||||||||
Foreign | 40 | (48) | 1,149 | ||||||||||||||
| Total | 40 | 1,491 | (689) | ||||||||||||||
Provision for income taxes | $ | 2,119 | $ | 4,329 | $ | 1,921 | |||||||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Benefit from income taxes at U.S. statutory rate | $ | (4,549) | $ | (20,363) | |||||||
State income taxes, net of federal income tax benefit | 558 | 512 | |||||||||
Permanent differences | 618 | 555 | |||||||||
Foreign tax rate differential | (1,532) | (8,220) | |||||||||
Equity-based compensation | 240 | 1,082 | |||||||||
Goodwill impairment | — | 21,444 | |||||||||
Change in valuation allowance | 9,186 | 6,987 | |||||||||
Other | (192) | (76) | |||||||||
Provision for (benefit from) income taxes | $ | 4,329 | $ | 1,921 | |||||||
The foreign tax rate differential relates to differences between the income tax rates in effect in the foreign countries in which the Company operates, in particular Australia where the corporate tax rate is 30%.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
Amount | Percent | ||||||||||
Benefit from income taxes at U.S. federal statutory rate | $ | (6,256) | 21 | % | |||||||
State and local income tax, net of federal income tax effect1 | 419 | (1) | % | ||||||||
Foreign tax effects: | |||||||||||
| Australia | |||||||||||
Rate differential | (707) | 2 | % | ||||||||
Changes in Valuation Allowance | 4,032 | (14) | % | ||||||||
Nontaxable or nondeductible items | (1,564) | 5 | % | ||||||||
Other foreign jurisdiction | 12 | — | % | ||||||||
| Effect of cross border tax laws | |||||||||||
Subpart F income inclusion | 1,125 | (4) | % | ||||||||
Changes in valuation allowance | 4,344 | (15) | % | ||||||||
Nontaxable or nondeductible items | 542 | (2) | % | ||||||||
Changes in unrecognized tax benefits | 172 | (1) | % | ||||||||
Provision for income taxes | $ | 2,119 | (7) | % | |||||||
1 The states and local jurisdictions that contribute to the majority (greater than 50%) of the effect in this category include California and New York.
The components of net deferred tax assets were as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Transaction costs | $ | 4 | $ | 341 | |||||||
| Accruals and reserves | 4,894 | 6,175 | |||||||||
| Lease liabilities | 26,207 | 18,742 | |||||||||
Inventory | 2,593 | 3,462 | |||||||||
| Foreign exchange gains / losses | 2,635 | 653 | |||||||||
Interest limitation | 5,557 | 2,811 | |||||||||
Loss carryforwards | 14,994 | 9,949 | |||||||||
Other | 1,294 | 679 | |||||||||
| Subtotal | 58,178 | 42,812 | |||||||||
| Less: Valuation allowance | (29,135) | (18,777) | |||||||||
| Total deferred tax assets | 29,043 | 24,035 | |||||||||
| Deferred tax liabilities: | |||||||||||
Property and equipment | (4,282) | (754) | |||||||||
| Intangible assets | (41) | (5,069) | |||||||||
Right-of-use assets | (24,475) | (18,066) | |||||||||
Other | (128) | — | |||||||||
Asset retirement obligations | (109) | (99) | |||||||||
| Total deferred tax liabilities | (29,035) | (23,988) | |||||||||
Net deferred tax assets | $ | 8 | $ | 47 | |||||||
The amount of income taxes paid (net of refunds received) were as follows:
| Year Ended December 31, | |||||
| 2025 | |||||
Federal | $ | 1,125 | |||
State and local | |||||
California | 315 | ||||
New York State | 279 | ||||
New York City | 152 | ||||
Texas | 150 | ||||
Other | 139 | ||||
New Zealand | 394 | ||||
Total income taxes paid (net of refunds received) | $ | 2,554 | |||
The Company had gross deferred tax assets of $58.2 million and $42.8 million and gross deferred tax liabilities of $29.0 million and $24.0 million at December 31, 2025 and 2024, respectively. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. When weighing all available evidence associated with the realizability of its deferred tax assets, in particular, uncertainties related to the future generation of taxable income, the Company determined that it was not “more likely than not” that it would be able to realize the tax benefits associated with certain of its net deferred tax assets. Based on this evaluation, a full valuation allowance of $29.1 million has been recorded on the net deferred tax assets in the Company’s United States and Australian businesses. For the year ended December 31, 2025, the valuation allowance increased by $10.4 million, primarily due to increased net operating losses.
As of December 31, 2025, the Company had a $23.6 million Australian net operating loss carryforward and a $15.4 million Australian capital loss carryforward, as well as a U.S. capital loss carryforward of $1.0 million on the sale of Rebdolls. As of December 31, 2024, the Company had a $18.0 million Australian net operating loss carryforward and a $14.3 million Australian capital loss carryforward, as well as a U.S. capital loss carryforward of $1.0 million on the sale of Rebdolls. The net operating losses and the Australian capital loss carryforwards have no expiration. The U.S. capital loss carryforward will expire in 2028.
The Company has not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries that have been considered permanently reinvested. As of December 31, 2025, there are no unremitted earnings from these operations.
As of December 31, 2025 the Company has recorded unrecognized tax benefits related to certain state income tax returns that have not yet been filed for prior tax years. These unrecognized tax benefits primarily relate to the uncertainty associated with the Company’s filing positions and nexus determinations in various state jurisdictions. Management has evaluated these positions under the more-likely-than-not recognition threshold prescribed by ASC 740 and has concluded that certain tax benefits do not meet the recognition criteria. Accordingly, the Company has recorded a liability for unrecognized tax benefits within other noncurrent liabilities on the consolidated balance sheets as of December 31, 2025. Because certain state income tax returns have not been filed, the applicable tax years remain open and subject to examination until the statute of limitations expires following the filing of such returns. In general, the Company’s major state tax jurisdictions remain open for examination in jurisdictions where returns have not been filed beginning in tax year 2021. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2024, the Company had no uncertain tax positions.
The following table summarizes the Company’s uncertain tax positions:
| Year Ended December 31, | |||||
| 2025 | |||||
| Gross unrecognized tax benefits at the beginning of the year | $ | — | |||
Increases related to tax positions taken during the current periods | 24 | ||||
Increases related to tax positions taken during the prior periods | 194 | ||||
| Gross unrecognized tax benefits at the end of the year | $ | 218 | |||
The Company is subject to taxation in the United States, Cayman Islands and Australia. For U.S. federal income tax purposes, 2022 and later tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For major U.S. states, 2021 and later tax years remain open for examination by the tax authorities under a four-year statute of limitations. For Australia, 2021 and subsequent tax years remain subject to examination.
Tax Contingencies
The Company is subject to income taxes in the United States and Australia. Significant judgment is required in evaluating the Company’s tax positions and determining the provision for income taxes. During the ordinary course of business, the Company considers tax positions for which the ultimate tax determination is uncertain for the purpose of determining whether a reserve is required, despite the Company’s belief that the tax positions are fully supportable. To date the Company has not established a reserve provision because the Company believes that all tax positions are highly certain.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 1, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.