Health Catalyst, Inc.HCAT
Health Catalyst, Inc. Income Taxes Disclosure
Income Taxes
For the years ended December 31, 2025, 2024, and 2023, loss before income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (161,556) | $ | (65,059) | $ | (118,098) | |||||||||||
Foreign | (15,702) | (4,110) | 307 | ||||||||||||||
Loss before income taxes | $ | (177,258) | $ | (69,169) | $ | (117,791) | |||||||||||
For the years ended December 31, 2025, 2024, and 2023, the income tax provision consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current taxes: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| Foreign | 454 | 62 | 204 | ||||||||||||||
| State | 181 | 194 | 144 | ||||||||||||||
| Total current tax provision | 635 | 256 | 348 | ||||||||||||||
| Deferred taxes: | |||||||||||||||||
| Federal | 69 | 61 | 8 | ||||||||||||||
| Foreign | (2) | 4 | (1) | ||||||||||||||
| State | 14 | 12 | 1 | ||||||||||||||
Total deferred provision | 81 | 77 | 8 | ||||||||||||||
Total income tax provision | $ | 716 | $ | 333 | $ | 356 | |||||||||||
The amount of cash income taxes we paid were as follows (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
U.S. federal income taxes paid, net | $ | — | |||
States and local income taxes paid, net | |||||
Tennessee | 42 | ||||
Texas | 41 | ||||
Louisiana | 38 | ||||
Massachusetts | 25 | ||||
New York | 24 | ||||
Other | 36 | ||||
Foreign income taxes paid, net | |||||
India | 144 | ||||
United Kingdom | 27 | ||||
Other | 18 | ||||
Total income taxes paid, net | $ | 395 | |||
We paid cash income taxes of $0.3 million during each of the years ended December 31, 2024 and 2023.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory U.S. federal income tax rate of 21% to loss before income taxes after the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
(in thousands) | Percent | ||||||||||
Tax at U.S. statutory rate | $ | (37,224) | 21.0 | % | |||||||
State and local income tax, net of federal tax effect(1) | 157 | (0.1) | % | ||||||||
Foreign tax effects | |||||||||||
United Kingdom | |||||||||||
Goodwill impairment | 2,022 | (1.1) | % | ||||||||
Change in valuation allowance | 2,870 | (1.6) | % | ||||||||
Other | (1,225) | 0.7 | % | ||||||||
Other foreign jurisdictions | 75 | — | % | ||||||||
Change in valuation allowance | 13,490 | (7.6) | % | ||||||||
Nontaxable or nondeductible items | |||||||||||
Goodwill impairment | 17,487 | (9.9) | % | ||||||||
Stock-based compensation | 3,698 | (2.1) | % | ||||||||
Other nondeductible items | (1,064) | 0.6 | % | ||||||||
Other adjustments | 430 | (0.2) | % | ||||||||
| Effective income tax rate | $ | 716 | (0.4) | % | |||||||
_________________________
(1)The state jurisdictions that contribute to a majority (greater than 50%) of the tax effect in this category included Texas and Tennessee.
A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate for years prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Tax at U.S. statutory rate | 21.0 | % | 21.0 | % | |||||||
State and local income tax, net of federal tax effect | (0.2) | (0.1) | |||||||||
| Stock-based compensation | (7.1) | (7.0) | |||||||||
| Contingent consideration | 0.5 | — | |||||||||
Transaction costs | (0.8) | — | |||||||||
| Change in valuation allowance | (13.6) | (14.0) | |||||||||
| Other, net | (0.2) | (0.2) | |||||||||
| Effective income tax rate | (0.4) | % | (0.3) | % | |||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows as of December 31, 2025 and 2024 (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 223,002 | $ | 194,572 | |||||||
| Research and development credits | 27,134 | 27,273 | |||||||||
Code 174 capitalized research and development | 27,533 | 36,806 | |||||||||
| Operating lease liabilities | 4,222 | 4,768 | |||||||||
| Intangible assets | 4,208 | 3,725 | |||||||||
| Accrued expenses | 3,520 | 2,384 | |||||||||
| Interest limitation carryforward | 5,244 | 2,115 | |||||||||
| Property and equipment | 2,175 | 1,807 | |||||||||
| Stock-based compensation | 1,005 | 1,691 | |||||||||
| Allowance for bad debt | 933 | 1,055 | |||||||||
| Deferred revenue | 313 | 804 | |||||||||
Foreign non-trading loss carryforward | 1,495 | 481 | |||||||||
Debt-related costs | 728 | 318 | |||||||||
| Other | 89 | 82 | |||||||||
| Total deferred income tax assets | 301,601 | 277,881 | |||||||||
| Valuation allowance | (294,882) | (268,589) | |||||||||
| Net deferred income tax assets | 6,719 | 9,292 | |||||||||
| Deferred income tax liabilities: | |||||||||||
Foreign intangible assets | (2,472) | (3,256) | |||||||||
| Operating lease right-of-use assets | (1,277) | (2,724) | |||||||||
| Prepaid expenses | (1,915) | (2,112) | |||||||||
| Deferred commissions | (1,055) | (1,201) | |||||||||
| Indefinite-lived intangible assets | (227) | (154) | |||||||||
| Total deferred income tax liabilities | (6,946) | (9,447) | |||||||||
| Net deferred income tax liabilities | $ | (227) | $ | (155) | |||||||
We account for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, legislative developments, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.
We have provided a valuation allowance for our net deferred tax assets, absent differences related to intangible assets with indefinite lives, at December 31, 2025 and 2024, due to the uncertainty surrounding the future realization of such assets and the cumulative losses we have generated. Therefore, no benefit has been recognized in the financial statements for the net operating loss carryforwards and other deferred tax assets, apart from an immaterial deferred tax liability as noted previously. The net deferred income tax liability balance is recorded under Other Liabilities on the consolidated balance sheets. During the years ended December 31, 2025 and 2024, respectively, the valuation allowance increased by $26.3 million and $42.3 million, respectively.
As of December 31, 2025, we had approximately $787.8 million of consolidated federal net operating loss carryforwards and $647.7 million of apportioned state net operating loss carryforwards available to offset future taxable income, respectively. If unused, the federal and state net operating loss carryforwards will begin to expire in 2032 and 2026, respectively. We have federal research and development credit carryforwards of $25.5 million and state research and development credit carryforwards of $10.7 million, which if not utilized will begin to expire in 2032 and 2026, respectively. To the extent we do not utilize our carryforwards within the applicable statutory carryforward periods, either because of ownership changes and limitations under Code Sections 382 and 383 and similar state laws or the lack of sufficient taxable income, the carryforwards will expire unused.
Utilization of net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Code, and similar state provisions. The Company most recently performed a detailed analysis in December 2021 to determine whether an ownership change under Section 382 of the Code had occurred or will occur that resulted in limitations pursuant to Section 382 and Section 383 due to pre-acquisition changes in ownership identified. It is possible that additional limitations may arise in future years due to future changes in the ownership of the Company.
We file federal and state income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, including unutilized net operating loss and research and development credit carryforwards, we are no longer subject to federal or state income tax examinations by tax authorities for tax years prior to 2022 and 2021, respectively.
We recognize tax benefits from uncertain tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The following table summarizes the activity related to unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 6,818 | $ | 6,818 | $ | 6,821 | |||||||||||
| Decrease in unrecognized tax benefits taken in prior years | (12) | — | (3) | ||||||||||||||
| Ending balance | $ | 6,806 | $ | 6,818 | $ | 6,818 | |||||||||||
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is zero due to the valuation allowance. We do not anticipate material changes in the total amount of our unrecognized tax benefits within 12 months of the reporting date. Our policy is to accrue interest and penalties related to unrecognized tax benefits within the provision for income taxes. However, as of December 31, 2025 and 2024, we have not accrued interest and penalties because we have net operating loss carryforwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
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.