Axogen, Inc.AXGN
Axogen, Inc. Income Taxes Disclosure
Income Taxes
Deferred income taxes are accounted for using the balance sheet approach, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as measured by enacted state and federal tax rates. Deferred tax assets and deferred tax liabilities are as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 46,519 | $ | 37,323 | |||||||
| Inventory write down | 570 | 423 | |||||||||
| Interest limitation | 1,208 | — | |||||||||
| Allowance for doubtful accounts | 245 | 204 | |||||||||
| Lease obligations | 4,977 | 5,489 | |||||||||
| Stock-based compensation | 4,435 | 7,371 | |||||||||
| Capitalized research and development costs | 7,370 | 14,785 | |||||||||
| Debt derivative liabilities | 1,005 | 622 | |||||||||
| Charitable contributions | 17 | 31 | |||||||||
| Accrued compensation | 21 | 49 | |||||||||
| Total deferred tax assets | 66,367 | 66,297 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | (1,423) | (949) | |||||||||
| Amortization | (741) | (99) | |||||||||
| Right-of-use asset | (3,305) | (3,708) | |||||||||
| Contract liabilities | — | (86) | |||||||||
| Total deferred tax liabilities | (5,469) | (4,842) | |||||||||
| Net deferred tax assets | 60,898 | 61,455 | |||||||||
| Valuation allowance | $ | (60,898) | $ | (61,455) | |||||||
A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more-likely-than-not that a portion or none of the deferred tax assets will be realized. As of December 31, 2025 and 2024, management assessed the realizability of deferred tax assets. After consideration of all the evidence, including reversal of deferred tax liabilities, future taxable income and other factors, management determined that a full valuation allowance was necessary as of December 31, 2025 and 2024. The valuation allowance decreased by $557 and increased by $315 during 2025 and 2024, respectively. During 2025, the decrease was primarily driven by changes in depreciation expense and research and development costs resulting from the introduction of the One Big Beautiful Bill Act. During 2024, the increase was primarily due to higher capitalized research and development costs for tax purposes.
The difference between the financial statement income tax benefit and the income tax benefit using statutory rates is primarily due to the valuation allowance and non-deductible permanent items such as meals, entertainment and equity compensation. The Company’s effective income tax rate differs from the statutory federal income tax rate as follows:
Year Ended December 31, 2025 | |||||||||||
(dollars in thousands) | % Impact | $ Impact | |||||||||
| 21.0 | % | $ | (3,296) | ||||||||
| State taxes, net of federal benefit | (0.6) | 90 | |||||||||
| Nontaxable and nondeductible items: | |||||||||||
| Nondeductible executive compensation under IRC 162(m) | (40.8) | 6,403 | |||||||||
| Nondeductible equity-based compensation permanent items | 20.2 | (3,165) | |||||||||
| Other | (2.7) | 417 | |||||||||
| Other | (0.7) | 108 | |||||||||
| Change in valuation allowance | 3.6 | (557) | |||||||||
| Effective income tax rate | — | % | $ | — | |||||||
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| 21.0 | % | 21.0 | % | ||||||||
| State taxes, net of federal benefit | 1.0 | 1.5 | |||||||||
Nontaxable and nondeductible items | (16.1) | (8.7) | |||||||||
| Other | (2.7) | (0.8) | |||||||||
| Change in valuation allowance | (3.2) | (13.0) | |||||||||
| Effective income tax rate | — | % | — | % | |||||||
As of December 31, 2025, the Company had tax-effected net operating loss (“NOL”) carryforwards of $46,519 to offset future taxable income. The TCJA enacted significant changes to NOL utilization. NOLs generated after January 1, 2018 limit the NOL utilization to 80% of taxable income. The remaining 20% is carried forward to subsequent years. NOLs incurred in tax years beginning on or after January 1, 2018 are carried forward indefinitely. NOLs incurred in tax years prior to January 1, 2018 are subject to a twenty-year carryforward before expiring. A portion of the NOL carryforwards may expire due to limitations imposed by Section 382 of the Internal Revenue Code. Future utilization of the available NOL carryforwards may be limited under Internal Revenue Code Section 382 as a result of changes in ownership.
The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business, the Company is subject to examination by taxing authorities throughout the U.S. These examinations could include examining the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with federal, state, and local laws. The Company’s remaining open tax years subject to examination by federal tax authorities include the years ended December 31, 2021 through 2024. The Internal Revenue Service is currently examining the Company’s 2021 federal income tax return. The Company’s remaining open tax years subject to examination by state and foreign tax authorities include the years ended December 31, 2020 through 2024. However, for tax years 2004 through 2017, federal and state taxing authorities may examine and adjust loss carryforwards in the years in which those loss carryforwards are ultimately utilized.
The TCJA, enacted in 2018, subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to account for GILTI in the year the tax is incurred.
The Company has not recorded material income tax expense or income tax benefit for the years ended December 31, 2025, 2024 and 2023 due to the generation of net operating losses. The Company is in a three-year cumulative loss and net deferred tax asset position, the benefits of which have been fully reserved as of December 31, 2025. The Company does not believe there are any additional material tax refund opportunities currently available.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
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.