Hinge Health, Inc.HNGE
Hinge Health, Inc. Income Taxes Disclosure
Income Taxes
The components of loss before income taxes for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | (529,840) | $ | (12,396) | $ | (99,847) | ||||||||||||||
| Foreign | 2,577 | 1,140 | (8,698) | |||||||||||||||||
| Loss before provision for income taxes | $ | (527,263) | $ | (11,256) | $ | (108,545) | ||||||||||||||
The federal and state income tax provision (benefit) for the years ended December 31, 2025, 2024, and 2023 is summarized as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | 58 | $ | 329 | $ | — | ||||||||||||||
| State | 413 | 295 | — | |||||||||||||||||
| International | 474 | 638 | 68 | |||||||||||||||||
| Total current tax expense | $ | 945 | $ | 1,262 | $ | 68 | ||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | — | — | — | |||||||||||||||||
| International | 53 | (585) | (473) | |||||||||||||||||
| Total deferred tax benefit | $ | 53 | $ | (585) | $ | (473) | ||||||||||||||
| Total federal | $ | 58 | $ | 329 | $ | — | ||||||||||||||
| Total state | 413 | 295 | — | |||||||||||||||||
| Total international | 527 | 53 | (405) | |||||||||||||||||
| Total tax expense (benefit) | $ | 998 | $ | 677 | $ | (405) | ||||||||||||||
The Company's U.S. federal statutory income tax rate for the year ended December 31, 2025 was less than the U.S. federal statutory income tax rate of 21% primarily due to the valuation allowance on U.S. and foreign deferred tax assets as follows (in thousands, except percentages):
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| U.S. federal statutory income tax rate | $ | (110,725) | 21.0 | % | ||||||||||
| Domestic federal | ||||||||||||||
| Tax credits | (10,552) | 2.0 | % | |||||||||||
| Nontaxable or nondeductible items | ||||||||||||||
| Excess officer compensation | 58,488 | (11.1) | % | |||||||||||
| Stock-based compensation | (33,630) | 6.4 | % | |||||||||||
| Other | 527 | (0.1) | % | |||||||||||
| Changes in valuation allowance | 96,507 | (18.3) | % | |||||||||||
| Other | 58 | — | % | |||||||||||
Domestic state and local income taxes, net of federal effect (1) | 326 | (0.1) | % | |||||||||||
| Foreign tax effects | (1) | — | % | |||||||||||
| Total | $ | 998 | (0.2) | % | ||||||||||
(1)Income taxes in Texas make up the majority (greater than 50%) of the tax effect in this category.
The Company’s effective tax rate for the years ended December 31, 2024 and 2023 were less than the U.S. federal statutory income tax rate of 21.0% primarily due to the valuation allowance on U.S. and foreign deferred tax assets and permanent differences, offset by state taxes as follows:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| United States federal taxes at statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| State tax | 23.7 | % | 6.8 | % | ||||||||||
| Change in valuation allowance | (87.1) | % | (32.3) | % | ||||||||||
| Research Credits | 40.7 | % | 8.8 | % | ||||||||||
| Meals and entertainment | (4.3) | % | (0.3) | % | ||||||||||
| Stock-based compensation | (1.2) | % | (0.3) | % | ||||||||||
| Foreign rate differential | 1.3 | % | (5.1) | % | ||||||||||
| Other permanent differences | (0.1) | % | 1.8 | % | ||||||||||
| Total | (6.0) | % | (0.4) | % | ||||||||||
The Company paid the following cash taxes during the year ended December 31, 2025 (in thousands):
| Year Ended December 31, | ||||||||
| 2025 | ||||||||
| Federal | $ | 388 | ||||||
| State and local | ||||||||
| Illinois | 217 | |||||||
| Texas | 224 | |||||||
| Other | 213 | |||||||
| 654 | ||||||||
| Foreign | ||||||||
| India | 514 | |||||||
| Total | $ | 1,556 | ||||||
During the years ended December 31, 2024 and 2023, cash taxes paid were immaterial.
Deferred income taxes reflect the net tax effects of (1) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, (2) operating losses and tax credit carryforwards and (3) foreign withholding taxes.
The tax effects of significant items comprising the Company’s deferred tax assets as of December 31, 2025 and 2024 are as follows (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating losses | $ | 90,283 | $ | 76,012 | ||||||||||
| Capitalized research and development costs | 108,896 | 41,220 | ||||||||||||
| Research and development credits | 33,597 | 17,521 | ||||||||||||
| Lease liability | 1,919 | 2,581 | ||||||||||||
| Accruals and reserves | 7,471 | 4,438 | ||||||||||||
| Property and equipment and intangibles | 6,043 | 6,819 | ||||||||||||
| Foreign credits | 3,106 | 1,724 | ||||||||||||
| Stock-based compensation | 14,599 | 85 | ||||||||||||
| Other | 84 | 56 | ||||||||||||
| Total deferred tax assets | 265,998 | 150,456 | ||||||||||||
| Valuation allowance | (263,368) | (147,176) | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Right-of-use deferred tax liability | (1,625) | (2,222) | ||||||||||||
| Total deferred tax liabilities | (1,625) | (2,222) | ||||||||||||
| Net deferred tax assets | $ | 1,005 | $ | 1,058 | ||||||||||
| Classified as: | ||||||||||||||
| Other assets - non-current | $ | 1,005 | $ | 1,058 | ||||||||||
As of December 31, 2025 and 2024, the Company has not provided foreign withholding taxes on the undistributed earnings of its foreign operations because it intends to permanently reinvest such earnings outside the U.S. Due to a one-time transaction, however, the Company accrued foreign withholding taxes of $0.5 million during 2023.
Based on the cumulative operating losses to date, the Company believes it is more likely than not that the deferred tax assets will not be realized, such that a full valuation allowance has been recorded against its U.S. federal and state next deferred tax assets as of December 31, 2025.
During the years ended December 31, 2025, 2024, and 2023, the valuation allowance increased by $116.2 million, $16.8 million, and $27.4 million respectively.
Net operating losses and tax credit carryforwards as of December 31, 2025 are as follows (in thousands, except for years):
| Amount | Expiration Years | |||||||||||||
| Net operating losses, federal | $ | 345,741 | N/A | |||||||||||
| Net operating losses, foreign | 15,289 | 2036-2043 | ||||||||||||
| Net operating losses, state | 262,887 | 2026-2045 | ||||||||||||
| Tax credits, federal | 30,983 | 2034 | ||||||||||||
| Tax credits, state | 15,346 | N/A | ||||||||||||
Under Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), the Company’s ability to utilize net operating loss carryforwards or other tax attributes, such as research and development tax credits (under IRC Section 383), in any taxable year may be limited if it experiences an ownership change.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Balance, beginning of year | $ | 5,890 | $ | 4,238 | $ | 481 | ||||||||||||||
| Tax positions during the current year | ||||||||||||||||||||
| Additions | 4,043 | 1,216 | 1,525 | |||||||||||||||||
| Tax positions related to the prior year | ||||||||||||||||||||
| Additions | 276 | 436 | 2,232 | |||||||||||||||||
| Balance | $ | 10,209 | $ | 5,890 | $ | 4,238 | ||||||||||||||
The Company files federal, state and foreign tax returns in jurisdictions with varying statutes of limitations. Due to the Company’s net operating loss carryforwards, income tax returns generally remain subject to examination by federal and most state tax authorities. All tax years since inception remain subject to examination by the tax jurisdictions.
The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company does not have any liability for uncertain tax positions.
On July 4, 2025, the One, Big, Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA includes several changes to U.S. federal income tax law, including the repeal of the requirement to capitalize and amortize domestic research and development expenditures under Section 174, modifications to bonus depreciation, and changes to the U.S. international tax regime. The Company will continue to evaluate the impact of OBBBA and related guidance; however, given the Company’s full U.S. valuation allowance, the OBBBA does not have a material impact on the Company’s consolidated financial statements.
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.