Corsair Gaming, Inc. Income Taxes Disclosure
12. Income Taxes
Loss before income tax consisted of the following (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 (1) |
|
|
2023 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
(30,356 |
) |
|
$ |
(73,238 |
) |
|
$ |
(21,833 |
) |
Foreign |
|
|
18,207 |
|
|
|
11,580 |
|
|
|
18,354 |
|
Loss before income tax |
|
$ |
(12,149 |
) |
|
$ |
(61,658 |
) |
|
$ |
(3,479 |
) |
(1) Income (loss) before income taxes is attributed to domestic and foreign operations based on the location of the legal entity generating the earnings. Intercompany dividends are included in separate legal entity for purposes of determining income before income taxes for the respective domestic and foreign operations. However, all such intercompany dividends and related income are eliminated in consolidation to arrive at the consolidated loss before income taxes. The classification of the 2024 amounts presented in the table above have been adjusted to conform with the classification of such intercompany dividends and income in 2025. There were no such intercompany dividend and related income in 2023.
Income tax benefit (expense) consisted of the following (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
U.S. federal taxes: |
|
|
|
|
|
|
|
|
|
|||
Current |
|
$ |
652 |
|
|
$ |
(406 |
) |
|
$ |
624 |
|
Deferred |
|
|
(102 |
) |
|
|
(23,036 |
) |
|
|
4,235 |
|
U.S state taxes: |
|
|
|
|
|
|
|
|
|
|||
Current |
|
|
105 |
|
|
|
(222 |
) |
|
|
(477 |
) |
Deferred |
|
|
73 |
|
|
|
(5,874 |
) |
|
|
863 |
|
Foreign taxes: |
|
|
|
|
|
|
|
|
|
|||
Current |
|
|
(10,086 |
) |
|
|
(9,692 |
) |
|
|
(4,037 |
) |
Deferred |
|
|
6,542 |
|
|
|
17,494 |
|
|
|
1,234 |
|
Income tax benefit (expense) |
|
$ |
(2,816 |
) |
|
$ |
(21,736 |
) |
|
$ |
2,442 |
|
A reconciliation of the income tax expense 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 (in thousands, except percentages):
|
|
Year Ended December 31, 2025 |
|
|
|||||
|
|
|
|
|
|
|
|
||
Pre-tax book loss |
|
$ |
(12,149 |
) |
|
|
|
|
|
Provision at U.S. federal statutory rate |
|
|
2,551 |
|
|
|
21.0 |
% |
|
State and local income taxes, net of federal income tax effect (1) |
|
|
(24 |
) |
|
|
(0.2 |
)% |
|
Foreign Tax Effects: |
|
|
|
|
|
|
|
||
United Kingdom: |
|
|
|
|
|
|
|
||
Statutory tax rate difference between United Kingdom and United States |
|
|
(159 |
) |
|
|
(1.3 |
)% |
|
Patent box benefit at lower rate |
|
|
1,118 |
|
|
|
9.2 |
% |
|
Prior return to provision adjustment |
|
|
(339 |
) |
|
|
(2.8 |
)% |
|
Other |
|
|
(86 |
) |
|
|
(0.7 |
)% |
|
Taiwan: |
|
|
|
|
|
|
|
||
Statutory tax rate difference between Taiwan and United States |
|
|
151 |
|
|
|
1.2 |
% |
|
Taiwan Hynix tax |
|
|
(305 |
) |
|
|
(2.5 |
)% |
|
Nondeductible stock-based compensation |
|
|
(124 |
) |
|
|
(1.0 |
)% |
|
Other |
|
|
(10 |
) |
|
|
(0.1 |
)% |
|
Germany: |
|
|
|
|
|
|
|
||
Statutory tax rate difference between Germany and United States |
|
|
50 |
|
|
|
0.4 |
% |
|
Germany trade tax |
|
|
(166 |
) |
|
|
(1.4 |
)% |
|
Bargain purchase gain |
|
|
(847 |
) |
|
|
(7.0 |
)% |
|
Germany statutory adjustment |
|
|
951 |
|
|
|
7.8 |
% |
|
Other |
|
|
(3 |
) |
|
|
— |
|
|
Other foreign jurisdiction |
|
|
23 |
|
|
|
0.2 |
% |
|
Effect of cross-border tax laws: |
|
|
|
|
|
|
|
||
Subpart F |
|
|
(1,264 |
) |
|
|
(10.4 |
)% |
|
Global intangible low-taxed income (GILTI) |
|
|
(78 |
) |
|
|
(0.6 |
)% |
|
Foreign-derived intangible income (FDII) |
|
|
789 |
|
|
|
6.5 |
% |
|
Sec.986c adjustment |
|
|
(497 |
) |
|
|
(4.1 |
)% |
|
Tax credits: |
|
|
|
|
|
|
|
||
Research and development credit |
|
|
402 |
|
|
|
3.3 |
% |
|
Change in valuation allowance |
|
|
(208 |
) |
|
|
(1.7 |
)% |
|
Non taxable or nondeductible items: |
|
|
|
|
|
|
|
||
Nondeductible stock-based compensation |
|
|
(1,866 |
) |
|
|
(15.4 |
)% |
|
Section 162(m) limitation |
|
|
(1,908 |
) |
|
|
(15.7 |
)% |
|
Other |
|
|
(27 |
) |
|
|
(0.2 |
)% |
|
Changes in unrecognized tax benefits |
|
|
834 |
|
|
|
6.9 |
% |
|
Other: |
|
|
|
|
|
|
|
||
Endor America liquidation impact (2) |
|
|
(924 |
) |
|
|
(7.6 |
)% |
|
Effect of change in assertion of indefinite reinvestment |
|
|
(850 |
) |
|
|
(7.0 |
)% |
|
Total income tax benefit (expense) |
|
$ |
(2,816 |
) |
|
|
(23.2 |
)% |
|
(1) State taxes in California and New Jersey represented more than 50% of the tax effect in this reconciling item.
(2) Endor America was one of the non-German subsidiaries acquired as part of the September 2024 Fanatec Acquisition.
A reconciliation of the income tax expense to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes before the adoption of ASU 2023-09 is as follows (in thousands):
|
|
Years Ended December 31 |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Provision at federal statutory rate |
|
$ |
12,913 |
|
|
$ |
731 |
|
State taxes |
|
|
1,636 |
|
|
|
116 |
|
Foreign rate differential |
|
|
(15,027 |
) |
|
|
(413 |
) |
Taxes on foreign operations |
|
|
14,035 |
|
|
|
4,210 |
|
Research and development credits |
|
|
1,291 |
|
|
|
1,151 |
|
Tax impact from intercompany transfer of intangible assets |
|
|
10,652 |
|
|
|
— |
|
Change in valuation allowance |
|
|
(41,252 |
) |
|
|
41 |
|
Section 162(m) limitation |
|
|
(2,102 |
) |
|
|
(1,529 |
) |
Deferred tax assets adjustments |
|
|
— |
|
|
|
(1,242 |
) |
Stock base compensation |
|
|
(2,073 |
) |
|
|
(333 |
) |
Other |
|
|
(1,809 |
) |
|
|
(290 |
) |
Total income tax benefit (expense) |
|
$ |
(21,736 |
) |
|
$ |
2,442 |
|
We were not subject to any tax holidays or tax holiday terminations subject to disclosure during these periods that impacted earnings per share.
Components of deferred tax assets and liabilities consisted of the following (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Accrued expenses and reserves |
|
$ |
13,842 |
|
|
$ |
14,351 |
|
Lease liabilities |
|
|
10,568 |
|
|
|
10,244 |
|
Stock-based compensation |
|
|
6,911 |
|
|
|
5,642 |
|
NOL and capital losses |
|
|
15,203 |
|
|
|
4,778 |
|
Capitalized research expenditures |
|
|
15,526 |
|
|
|
29,754 |
|
Tax credits |
|
|
1,654 |
|
|
|
2,060 |
|
Uniform capitalization |
|
|
1,633 |
|
|
|
1,325 |
|
Foreign currency translation adjustments |
|
|
1,566 |
|
|
|
1,859 |
|
Other |
|
|
267 |
|
|
|
508 |
|
Total deferred tax assets |
|
|
67,170 |
|
|
|
70,521 |
|
Less: Valuation allowance |
|
|
(42,156 |
) |
|
|
(43,654 |
) |
Deferred tax liabilities: |
|
|
|
|
|
|
||
Intangible assets |
|
|
(8,461 |
) |
|
|
(16,548 |
) |
Right-of-use assets |
|
|
(8,005 |
) |
|
|
(7,711 |
) |
Effect of change in assertion of indefinite reinvestment |
|
|
(1,071 |
) |
|
|
— |
|
Depreciation & amortization |
|
|
(2,177 |
) |
|
|
(3,519 |
) |
Net deferred tax (liabilities) assets |
|
$ |
5,300 |
|
|
$ |
(911 |
) |
We have established a valuation allowance of $42.2 million and $43.7 million as of December 31, 2025 and 2024, respectively, against our net deferred tax assets. We determine valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. A significant piece of objective negative evidence considered in this assessment was our three-year cumulative loss position in the United States as of December 31, 2025 and 2024. Although management considered the projections of future taxable income, the weight of this historical objective evidence led management to conclude that the majority of its U.S. deferred tax assets are not more likely than not to be realized, resulting in the initial recognition of the valuation allowance in 2024. Based on our continued evaluation of all available evidence as of December 31, 2025, management concluded that the valuation allowance remains necessary in 2025.
As of December 31, 2025, we had net operating loss (“NOL”) carryforwards for federal, state and foreign tax purposes of $52.5 million, $42.0 million, and $9.3 million, respectively. The federal NOL carry forward indefinitely; however, under current tax law, the utilization of federal NOL generated in taxable years beginning after December 31, 2017, is limited to 80% of taxable income in the year of utilization. State and foreign NOL will begin to expire in 2042 and 2030, respectively. As defined under Internal Revenue Code Section 382 (“Section 382”), certain tax attributes are subject to an annual limitation as a result of our change in ownership in August 2017. If an ownership change has occurred or occurs in the future, our ability to use pre-change tax attributes to offset future taxable income would be subject to an annual limitation based on the Company’s value at the time of the change.
We intend to indefinitely reinvest the majority of our foreign subsidiary earnings to support international operations; accordingly, no deferred tax liabilities have been recognized for these outside basis differences. During the current period, we reassessed our assertion under APB 23 with respect to the indefinite reinvestment of undistributed foreign earnings. As a result of this reassessment, we changed our assertion for certain subsidiaries in the United Kingdom and Canada to no longer indefinitely reinvest their undistributed earnings in order to satisfy domestic liquidity needs and settle intercompany receivables. This change resulted in the recognition of a $1.0 million deferred tax liability in 2025, which was fully offset by a corresponding valuation allowance, resulting in no impact to our 2025 consolidated tax provision.
Changes in gross unrecognized tax benefits, excluding interest and penalties, as a result of uncertain tax positions were as follows (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Beginning balance |
|
$ |
3,212 |
|
|
$ |
3,538 |
|
|
$ |
3,606 |
|
Tax position related to current year |
|
|
|
|
|
|
|
|
|
|||
Increase |
|
|
161 |
|
|
|
345 |
|
|
|
317 |
|
Decrease |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Tax position related to prior year |
|
|
|
|
|
|
|
|
|
|||
Increase |
|
|
1,621 |
|
|
|
— |
|
|
|
1 |
|
Decrease |
|
|
(1,163 |
) |
|
|
(671 |
) |
|
|
(386 |
) |
|
|
$ |
3,831 |
|
|
$ |
3,212 |
|
|
$ |
3,538 |
|
All of these unrecognized tax benefits would favorably impact our effective tax rate in future periods to the extent benefits are recognized.
Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. We did not recognize any material interest or penalties related to uncertain tax positions for the years ended December 31, 2025, 2024 and 2023. We file income tax returns with the U.S. federal government, various U.S. states and foreign jurisdictions including Germany, Hong Kong, Taiwan, and the United Kingdom. Our income tax returns in the U.S., various U.S. states and foreign jurisdictions remain open to examination by taxing authorities for years 2018 through .
The amounts of cash income taxes paid, net of refunds, for the year ended December 31, 2025 were as follows:
|
Year Ended December 31 |
|
|
|
2025 |
|
|
|
|
|
|
Federal taxes |
$ |
(771 |
) |
State taxes |
|
(269 |
) |
Foreign taxes: |
|
|
|
U.K. |
|
6,632 |
|
Taiwan |
|
3,727 |
|
Other foreign jurisdictions |
|
817 |
|
Total cash income taxes paid (net of refunds) |
$ |
10,136 |
|
The amount of cash income taxes paid, net of refunds, during the years ended December 31, 2024 and 2023 was $5.1 million and $7.4 million, respectively.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, introducing significant federal tax law changes, including the permanent restoration of 100% bonus depreciation, immediate expensing of domestic R&D costs under Section 174A, and a more favorable interest deduction limit under Section 163(j). While these provisions generally reduce current taxable income and increase our NOL carryforwards, the enactment did not have a material impact on our 2025 consolidated financial statements or
effective tax rate. This was due to the full valuation allowance maintained against our U.S. deferred tax assets, which offset the financial statement effects of the resulting changes in deferred tax assets and liabilities in the period of enactment.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 11, 2021 | |
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.