Backblaze, Inc.BLZE
Backblaze, Inc. Income Taxes Disclosure
Income Taxes
The following table presents the components of net loss before income taxes (in thousands):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | (25,628) | $ | (48,656) | $ | (59,713) | |||||||||||
Non-U.S. | 100 | 131 | — | ||||||||||||||
Loss before provision for income taxes | $ | (25,528) | $ | (48,525) | $ | (59,713) | |||||||||||
The provision for income taxes included in the consolidated statements of operations and comprehensive loss is comprised of the following (in thousands):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
State | 56 | 6 | — | ||||||||||||||
Non-U.S. | 28 | — | — | ||||||||||||||
Total current | 84 | 6 | — | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | — | — | — | ||||||||||||||
State | — | — | — | ||||||||||||||
Non-U.S. | — | — | — | ||||||||||||||
| Total deferred | — | — | — | ||||||||||||||
Total provision | $ | 84 | $ | 6 | $ | — | |||||||||||
The following table presents a reconciliation of the statutory federal rate of 21% and the Company’s effective tax rate:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Statutory federal income (benefit) rate | (21) | % | (21) | % | (21) | % | |||||||||||
Increase (decrease) resulting from: | |||||||||||||||||
State income tax rate | (3) | % | (4) | % | (4) | % | |||||||||||
Change in valuation allowance | 29 | % | 37 | % | 29 | % | |||||||||||
Stock-based compensation | 3 | % | (4) | % | 2 | % | |||||||||||
Tax credits | (7) | % | (7) | % | (6) | % | |||||||||||
Other | (1) | % | — | % | — | % | |||||||||||
Effective tax rate | — | % | — | % | — | % | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The components of the Company’s deferred tax assets and liabilities consisted of (in thousands):
December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss (“NOL”) carryforwards | $ | 42,537 | $ | 31,417 | |||||||
R&D credit carryforwards | 15,710 | 13,829 | |||||||||
Stock-based compensation | 2,635 | 2,646 | |||||||||
| Research and experimental expenditures under IRC Section 174 | 13,523 | 19,382 | |||||||||
Lease liabilities | 6,219 | 4,189 | |||||||||
| Disallowed interest expense | 3,965 | 3,438 | |||||||||
Accruals and other | 1,461 | 1,335 | |||||||||
| Total gross deferred tax assets | 86,050 | 76,236 | |||||||||
Valuation allowance | (69,974) | (62,492) | |||||||||
Total net deferred tax assets | 16,076 | 13,744 | |||||||||
Deferred tax liabilities: | |||||||||||
Property and equipment, net | (2,012) | (1,024) | |||||||||
Right of use assets, net | (5,602) | (3,936) | |||||||||
Capitalized internal-use software | (8,462) | (8,784) | |||||||||
Total deferred tax liabilities | (16,076) | (13,744) | |||||||||
Net deferred tax liabilities | $ | — | $ | — | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Based on evidence of Company's earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance.
The valuation allowance increased by $7.5 million, $17.9 million, and $17.6 million during the years ended December 31, 2025, 2024, and 2023, respectively.
As of December 31, 2025, the Company had federal and state NOL carryforwards of $172.5 million and $109.7 million, respectively. The federal NOL carryforwards consisted of $16.0 million generated before January 1, 2018, which will begin to expire in 2030 and are able to offset 100% of taxable income. The NOLs generated after December 31, 2017 of $156.5 million carryforward indefinitely, and can only offset 80% of taxable income when utilized with exception of NOLs generated in 2018 to 2020 which carryforward indefinitely and can offset 100% of taxable income for tax years beginning before January 1, 2021, as provided by the CARES Act.
State net operating loss carryforwards in the amount of $90.6 million begin expiring in 2029 and approximately $19.1 million have an indefinite life.
The Company has federal research and development (“R&D”) credit carryforwards of $13.1 million which will begin to expire in 2032 and California R&D credit carryforwards of $6.6 million which do not expire. The Company also has $0.1 million of California enterprise zone credits which will begin to expire in 2028.
Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 (specifically Section 382), as amended, and similar state provisions. The Company performed a Section 382 analysis through December 31, 2024 and determined that ownership changes occurred in the year 2007, 2009, 2012, and 2024. The ownership changes identified had no significant
impact on federal and state net operating losses. The annual limitations may result in the expiration of net operating losses and credits before utilization in the future.
Uncertain Income Tax Positions
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Balance at beginning of year | $ | 2,467 | $ | 1,889 | $ | 1,239 | |||||||||||
Tax positions related to the current year: | |||||||||||||||||
Additions | 316 | 628 | 649 | ||||||||||||||
Reductions | — | — | — | ||||||||||||||
Tax positions related to the prior year: | |||||||||||||||||
Additions | 20 | — | 1 | ||||||||||||||
Reductions | — | (50) | — | ||||||||||||||
Balance at end of year | $ | 2,803 | $ | 2,467 | $ | 1,889 | |||||||||||
The total amount of unrecognized tax benefits as of December 31, 2025 was $2.8 million, all related to federal and state tax jurisdictions. If recognized, these unrecognized tax benefits would not affect the effective tax rate because the Company maintains a full valuation allowance against its deferred tax assets.
As of December 31, 2025, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes. The Company does not anticipate any significant change within twelve months of this reporting date.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal and state income tax examination for calendar tax years beginning in 2007 due to NOLs that are being carried forward for tax purposes.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 28, 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.