NLIGHT, INC.LASR
NLIGHT, INC. Income Taxes Disclosure
Income Taxes
Loss before income taxes was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (24,874) | $ | (62,368) | $ | (46,602) | |||||||||||
| Foreign | 2,106 | 1,500 | 3,954 | ||||||||||||||
| Loss before income taxes | $ | (22,768) | $ | (60,868) | $ | (42,648) | |||||||||||
Income tax expense (benefit) was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense (benefit): | |||||||||||||||||
| US state and local | $ | 23 | $ | (7) | $ | 53 | |||||||||||
| Foreign | 460 | 557 | (985) | ||||||||||||||
| Total current tax expense (benefit) | 483 | 550 | (932) | ||||||||||||||
| Deferred tax expense (benefit): | |||||||||||||||||
| Foreign | $ | 216 | $ | (626) | $ | (46) | |||||||||||
| Total deferred tax expense (benefit): | 216 | (626) | (46) | ||||||||||||||
| Total income tax expense (benefit): | |||||||||||||||||
| US state and local | 23 | (7) | 53 | ||||||||||||||
| Foreign | 676 | (69) | (1,031) | ||||||||||||||
| Total Income tax expense (benefit) | $ | 699 | $ | (76) | $ | (978) | |||||||||||
The income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate of 21% to the loss before income taxes as a result of the following differences (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||||
| Tax computed at federal statutory rate | $ | (4,781) | 21.0% | $ | (12,782) | 21.0% | $ | (8,956) | 21.0% | |||||||||||||||||
| State and local tax, net of federal tax benefit (1) | 19 | (0.1) | (5) | — | 42 | (0.1) | ||||||||||||||||||||
| Research and development tax credits | (1,078) | 4.7 | (718) | 1.2 | (1,370) | 3.2 | ||||||||||||||||||||
| Change in valuation allowance | 5,448 | (23.9) | 9,967 | (16.4) | 7,382 | (17.3) | ||||||||||||||||||||
| Worldwide changes in unrecognized tax benefits | 211 | (0.9) | (1,215) | 2.0 | (1,167) | 2.7 | ||||||||||||||||||||
| Effects of cross-border tax laws: | ||||||||||||||||||||||||||
| Global intangible low-taxed income | 295 | (1.3) | — | — | — | — | ||||||||||||||||||||
| Nontaxable/nondeductible items: | ||||||||||||||||||||||||||
| Stock based compensation | (2,969) | 13.0 | 10 | (0.2) | 1,639 | (3.8) | ||||||||||||||||||||
| Officer’s compensation | 2,538 | (11.2) | 285 | (0.5) | 158 | (0.4) | ||||||||||||||||||||
| Other | 128 | (0.6) | 180 | (0.3) | 56 | (0.1) | ||||||||||||||||||||
| Foreign tax effects: | ||||||||||||||||||||||||||
| China: | ||||||||||||||||||||||||||
| Expiration of net operating losses | — | — | 2,188 | (3.6) | — | — | ||||||||||||||||||||
| Valuation allowance | (186) | 0.8 | (1,520) | 2.5 | (311) | 0.7 | ||||||||||||||||||||
| Other | 320 | (1.4) | 65 | (0.1) | (230) | 0.5 | ||||||||||||||||||||
| Other foreign jurisdictions | 57 | (0.3) | 206 | (0.3) | 11 | — | ||||||||||||||||||||
| Other Adjustments: | ||||||||||||||||||||||||||
| Transfer pricing adjustments | — | — | 1,051 | (1.7) | — | — | ||||||||||||||||||||
| Expiration of net operating losses | 667 | (2.9) | 1,927 | (3.2) | 1,810 | (4.2) | ||||||||||||||||||||
| Other | 30 | (0.2) | 285 | (0.5) | (42) | 0.1 | ||||||||||||||||||||
| Total income tax expense (benefit) | $ | 699 | (3.1)% | $ | (76) | (0.1)% | $ | (978) | 2.3% | |||||||||||||||||
(1) State taxes in Oregon made up the majority (greater than 50%) of the tax effect in this category for 2025 - 2023
The income tax expense recorded for 2025 and 2024 primarily relates to operations in China and Finland, offset by income tax reserve reversals.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Net operating loss carryforwards | $ | 49,889 | $ | 42,058 | $ | 39,714 | |||||||||||
| Research and alternative minimum tax credits | 9,361 | 8,432 | 7,822 | ||||||||||||||
| Accrued expenses and other | 7,136 | 5,240 | 4,365 | ||||||||||||||
| Lease liabilities | 3,190 | 2,534 | 2,854 | ||||||||||||||
| Inventory | 3,090 | 3,712 | 3,283 | ||||||||||||||
| Property and equipment | 922 | 707 | 387 | ||||||||||||||
| Intangible assets | 16,789 | 21,720 | 16,612 | ||||||||||||||
| Total gross deferred tax assets | 90,377 | 84,403 | 75,037 | ||||||||||||||
| Less: valuation allowance | (86,956) | (81,480) | (72,461) | ||||||||||||||
| Total deferred tax assets | 3,421 | 2,923 | 2,576 | ||||||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Right-of-use assets | (2,896) | (2,213) | (2,487) | ||||||||||||||
| Total deferred tax liabilities | (2,896) | (2,213) | (2,487) | ||||||||||||||
| Net deferred tax assets | $ | 525 | $ | 710 | $ | 89 | |||||||||||
Net deferred tax assets are included in Other assets, net in our Consolidated Balance Sheets.
In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Due to uncertainty with respect to ultimate realizability of deferred tax assets, we have provided a full valuation allowance against the U.S. deferred tax assets and a partial valuation allowance against the China deferred tax assets. The net change in the total valuation allowance for the years ended December 31, 2025, 2024 and 2023 were increases of $5.5 million, $9.0 million and $7.7 million, respectively.
At December 31, 2025, we had U.S. and state net operating loss (NOL) carryforwards of, $205.5 million, and $60.1 million, respectively. These carryforwards will expire from 2026 to 2045 if not used by us to reduce taxable income in future periods. We have U.S. research and development credit carryforwards of $11.0 million. These carryforwards will expire from 2026 to 2045 if not used by us to reduce income taxes payable in future periods.
Utilization of NOL carryforwards, credit carryforwards and certain deductions have been subject to annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended. We have had three "change in ownership" events that limit the utilization of NOL carryforwards, which occurred twice in August of 2000 and once in January of 2001, and resulted in NOL carryforward limitations totaling $0.5 million. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examination from various taxing authorities.
The following table presents a reconciliation of the changes in the unrecognized tax benefit (in thousands):
| Balance at December 31, 2023 | $ | 8,475 | |||
| Additions based on tax positions related to the current year | 150 | ||||
| Reductions for tax positions of prior years | (30) | ||||
| Reductions as a result of a lapse of applicable statute of limitations | (33) | ||||
| Other | (75) | ||||
| Balance at December 31, 2024 | 8,487 | ||||
| Additions based on tax positions related to the current year | 174 | ||||
| Reductions as a result of a lapse of applicable statute of limitations | (59) | ||||
| Other | 114 | ||||
| Balance at December 31, 2025 | $ | 8,716 | |||
At December 31, 2025, we had $2.7 million of unrecognized tax benefits (excluding interest and penalties) in Non-Current Income Taxes Payable and $6.0 million of unrecognized tax benefits as an offset to our long-term deferred tax assets embedded in Other Assets, Net on the accompanying Consolidated Balance Sheets. Of our unrecognized tax benefits, $2.7 million, if recognized, would impact the effective tax rate. At December 31, 2024, we had $2.7 million of unrecognized tax benefits (excluding interest and penalties) in Non-Current Income Taxes Payable and $5.8 million of unrecognized tax benefits as an offset to our long-term deferred tax assets embedded in Other Assets, Net on the accompanying Consolidated Balance Sheets.
We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. We recognized a net increase (decrease) in penalties and interest during the years ended December 31, 2025, and 2024 and 2023, of $0.1 million, $0.2 million, and $(1.0) million, respectively. At December 31, 2025, 2024, and 2023, interest and penalties associated with unrecognized tax benefits were $1.2 million, $1.1 million, and $0.9 million, respectively.
At December 31, 2025, our tax years 2022 through 2025, 2021 through 2025, and 2015 through 2025, remain open for examination in the federal, state and foreign jurisdictions, respectively. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and to make adjustments up to the net operating loss and credit carryforward amounts. We are not currently under federal, state, or foreign tax examination.
Net income taxes paid by jurisdiction were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| US Federal | $ | — | $ | — | $ | — | |||||||||||
| Domestic state and local | |||||||||||||||||
| Oregon | 20 | 38 | 55 | ||||||||||||||
| Other | 6 | 3 | 6 | ||||||||||||||
| Subtotal | 26 | 40 | 61 | ||||||||||||||
| Foreign | |||||||||||||||||
| Finland | 54 | 15 | 20 | ||||||||||||||
| Italy | 44 | 43 | 39 | ||||||||||||||
| Korea | 40 | * | 92 | ||||||||||||||
| Other | 7 | 1 | 1 | ||||||||||||||
| Subtotal | 145 | 59 | 152 | ||||||||||||||
| Total | $ | 171 | $ | 99 | $ | 213 | |||||||||||
(*) The amount of income taxes paid during the year does not meet the five percent disaggregation threshold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 9, 2020 | |
| 2018 | Mar 15, 2019 | |
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.