OLAPLEX HOLDINGS, INC.OLPX
OLAPLEX HOLDINGS, INC. Income Taxes Disclosure
INCOME TAXES
The Company’s breakdown of its (loss) income before provision for income taxes for the years ended December 31, 2025, 2024 and 2023 was as follows:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| U.S. | $ | (6,581) | $ | 26,719 | $ | 76,580 | |||||||||||
| Foreign | 404 | 193 | 140 | ||||||||||||||
| Total (loss) income before taxes | $ | (6,177) | $ | 26,912 | $ | 76,720 | |||||||||||
The components of the provision for income taxes were as follows:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| Current provision: | |||||||||||||||||
| Federal | $ | 1,259 | $ | 3,895 | $ | 10,701 | |||||||||||
| State & Local | 349 | 623 | 2,618 | ||||||||||||||
| Foreign | 190 | 77 | 40 | ||||||||||||||
| Total current provision | 1,798 | 4,595 | 13,359 | ||||||||||||||
| Deferred provision: | |||||||||||||||||
| Federal | 1,309 | 2,091 | 1,395 | ||||||||||||||
| State & Local | (25) | 738 | 379 | ||||||||||||||
| Foreign | (7) | (34) | — | ||||||||||||||
| Total deferred provision | 1,277 | 2,795 | 1,774 | ||||||||||||||
| Total provision for income taxes | $ | 3,075 | $ | 7,390 | $ | 15,133 | |||||||||||
Significant components of the Company’s deferred tax assets and liabilities were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||
Deferred tax assets: | |||||||||||
| Inventory adjustments | $ | 3,727 | $ | 4,057 | |||||||
| Capitalized transaction costs | 1,664 | 2,006 | |||||||||
| Deferred revenue | 86 | 94 | |||||||||
| Accrued expenses and other current liabilities | 9,031 | 5,470 | |||||||||
| Capitalized research & development expense | 2,742 | 3,518 | |||||||||
| Interest expense limitation | 8,173 | 8,837 | |||||||||
| Lease liability | 442 | 557 | |||||||||
| Share-based compensation | 1,919 | 2,100 | |||||||||
Net operating losses | 8,857 | 22 | |||||||||
Research and development tax credits | 194 | — | |||||||||
| Other | 80 | 602 | |||||||||
| Total deferred tax assets | $ | 36,915 | $ | 27,263 | |||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | $ | 24,896 | $ | 17,780 | |||||||
| Goodwill | 13,739 | 11,563 | |||||||||
Prepaid expenses and other current assets | 1,891 | 1,005 | |||||||||
Property and equipment | 1,201 | 1,535 | |||||||||
Right-of-use asset | 425 | 544 | |||||||||
| Total deferred tax liabilities | 42,152 | 32,427 | |||||||||
Net deferred tax liabilities | $ | (5,237) | $ | (5,164) | |||||||
The Company adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements To Income Tax Disclosures" on a prospective basis beginning with the year ended December 31, 2025. See “Note 2 - Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements” to the Company’s Consolidated Financial Statements of this Annual Report for further detail. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to the Company’s actual global effective amount and rate for the year ended December 31, 2025:
| December 31, 2025 | |||||||||||
| U.S. federal statutory income tax rate | $ | (1,297) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect* | 220 | (3.6) | |||||||||
| Foreign tax effect | 14 | (0.2) | |||||||||
Effect of cross-border tax laws: | |||||||||||
| Foreign derived intangible income deduction | (163) | 2.6 | |||||||||
| Foreign branch income | 85 | (1.4) | |||||||||
| Tax credits: | |||||||||||
| Research and development tax credits | (127) | 2.1 | |||||||||
Nontaxable or nondeductible items: | |||||||||||
| Share-based compensation | 1,992 | (32.2) | |||||||||
| Tax Receivable Agreement | (2,545) | 41.2 | |||||||||
Purvala acquisition-related costs | 2,074 | (33.6) | |||||||||
| Meals and entertainment | 81 | (1.3) | |||||||||
| Changes in unrecognized tax benefits | 2,203 | (35.7) | |||||||||
Other adjustments: | |||||||||||
| Changes in prior year estimates | 498 | (8.1) | |||||||||
Other | 40 | (0.6) | |||||||||
| Effective Tax Rate | $ | 3,075 | (49.8) | % | |||||||
* State taxes in California and Texas made up the majority (greater than 50 percent) of the tax effect in this category.
The following table provides a reconciliation between the U.S. federal statutory rate and the Company’s effective tax rates for the years ended December 31, 2024 and 2023:
| December 31, 2024 | December 31, 2023 | ||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| Foreign derived intangible income deduction | (4.3) | (3.9) | |||||||||
Changes in prior year estimates | (4.4) | (0.4) | |||||||||
| State and local income taxes, net of federal benefit | 4.9 | 4.0 | |||||||||
Share-based compensation | 6.6 | (0.1) | |||||||||
| Tax Receivable Agreement | 3.1 | (2.0) | |||||||||
| Other | 0.6 | 1.1 | |||||||||
| Effective Tax Rate | 27.5 | % | 19.7 | % | |||||||
The Company assesses positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of December 31, 2025 and 2024, no valuation allowance was recorded as the Company has concluded that its deferred tax assets are more likely than not to be realized.
As of December 31, 2025, the Company had pretax U.S. federal net operating loss (“NOL”) carryforwards of $40.0 million and state NOL carryforwards of $9.1 million, the tax effect of which was $8.4 million and $0.5 million, respectively. The federal NOL may be carried forward indefinitely, and the state NOL carryforwards expire at various dates through tax year 2045. As of December 31, 2025, the Company had $0.2 million of U.S. federal research and development credits, which will expire in 2045 if not utilized. Additionally, as of December 31, 2025, the Company had a tax-effected interest expense limitation carryforward of $8.2 million.
The Company’s ability to utilize any federal NOL and research and development credit carryforwards may be limited under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, which provide that if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change in its ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research and development credits) to offset its post-change income may be limited. In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| December 31, 2025 | |||||
Balance at January 1 | $ | — | |||
Additions for tax positions related to current year | 2,251 | ||||
Additions for tax positions for prior years | 2,426 | ||||
Reductions for tax positions of prior years | — | ||||
Lapse of statute of limitations | — | ||||
Balance at December 31 | $ | 4,677 | |||
The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority based on the technical merits. As of December 31, 2025, there were $4.7 million of unrecognized tax benefits that, if recognized, would affect the Company’s annual effective tax rate. There were no unrecognized tax benefits prior to 2025. The Company recognizes interest and penalties related to unrecognized tax benefits in Income tax provision in the Consolidated Statements of Operations and Comprehensive (Loss) Income. For the year ended December 31, 2025, the Company recognized $0.1 million of interest and penalties. The Company had approximately $0.1 million of interest and penalties accrued as of December 31, 2025.
In the normal course of business, the Company and its subsidiaries may be examined by various taxing authorities, including the U.S. Internal Revenue Service. As of December 31, 2025, the Company remained subject to examination in the U.S. and the U.K. for the 2020 through 2025 tax years. The Company is currently under examination in the State of California for 2020 and 2021.
The components of federal, state and foreign taxes (refunded) paid, net for the year ended December 31, 2025 were as follows:
| December 31, 2025 | |||||
Federal | $ | (57) | |||
State | (141) | ||||
Foreign | 107 | ||||
Total taxes refunded, net | $ | (91) | |||
The following table provides a breakdown of jurisdictions exceeding 5% of income taxes (refunded) paid, net for the year ended December 31, 2025:
| December 31, 2025 | |||||
State: | |||||
Alabama | $ | (50) | |||
California | (600) | ||||
Connecticut | (25) | ||||
Florida | 11 | ||||
Mississippi | 1,204 | ||||
New Jersey | 14 | ||||
New York | (141) | ||||
Tennessee | (50) | ||||
Utah | (180) | ||||
Virginia | (444) | ||||
Texas | 115 | ||||
Foreign: | |||||
United Kingdom | $ | 107 | |||
Tax Receivable Agreement
During the years ended December 31, 2025 and 2024, the Company had a net payment to the Pre-IPO Stockholders of $12.1 million and $12.8 million, respectively, as required pursuant to the terms of the Tax Receivable Agreement. The tax liability is calculated based on current tax laws and the assumption that the Company and its subsidiaries earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement. Updates to the Company’s blended state tax rate, allocation of U.S. versus foreign sourced income and changes in tax rules on the amortization and depreciation of assets may significantly impact the established liability and changes would be recorded to other expense (income) in the period the Company made the determination. The Company expects that future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets could aggregate to $165.1 million, with payments expected to continue through 2038. Payments under the Tax Receivable Agreement, which began in fiscal year 2022, are not conditioned upon the parties’ continued ownership of equity in the Company.
During the years ended December 31, 2025, 2024 and 2023, the Company recognized other income of $12.1 million, other expense of $3.9 million and other income of $7.4 million, respectively, for changes to the liability for the Tax Receivable Agreement resulting primarily from updates to the blended state income tax rate and changes in the effective federal tax rate used to measure the obligation. The changes in the effective federal tax rate were due to a change in the portion of federal taxable income that is eligible for the FDII deduction. Additionally, during the year ended December 31, 2025, the Company recognized the effects of the OBBBA on the Tax Receivable Agreement liability, which represented $9.5 million of the net $12.1 million reduction to the Tax Receivable Agreement liability. The reduction was primarily due to a decrease in the expected tax savings in the fiscal year ending December 31, 2026 and beyond due to the increase in the deduction allowed for FDII enacted by the OBBBA. The Tax Receivable Agreement liability as of December 31, 2025 was $165.1 million, of which $155.9 million was recorded in long term liabilities and $9.2 million was recorded in current liabilities. The Tax Receivable Agreement liability as of December 31, 2024 was $189.3 million, of which $177.5 million was recorded in long term liabilities and $11.8 million was recorded in current liabilities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 4, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 8, 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.