PROCEPT BioRobotics CorpPRCT
PROCEPT BioRobotics Corp Income Taxes Disclosure
Income Taxes
Loss before provision for income taxes consisted of the following (in thousands):
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Federal | $ | (95,890) | $ | (91,462) | $ | (106,068) | ||||||||||||||
Foreign | 508 | 417 | 251 | |||||||||||||||||
Total loss before provision for income taxes | $ | (95,382) | $ | (91,045) | $ | (105,817) | ||||||||||||||
The provision for income taxes consisted of the following (in thousands):
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Current: | ||||||||||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||||||||||
State | — | — | — | |||||||||||||||||
Foreign | 190 | 368 | 80 | |||||||||||||||||
Total provision for income taxes | $ | 190 | $ | 368 | $ | 80 | ||||||||||||||
Income taxes paid, net of refunds, consisted of the following (in thousands):
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||||||||||
State | — | — | — | |||||||||||||||||
Foreign | 118 | 80 | 90 | |||||||||||||||||
Total cash paid for income taxes, net of refunds | $ | 118 | $ | 80 | $ | 90 | ||||||||||||||
Reconciliation between taxes at the federal statutory rate and the income tax provision, subsequent to the adoption of ASU 2023-09, for the year ended December 31, 2025, was as follows (amount in thousands):
Year Ended December 31, 2025 | |||||||||||||||||
Amount | Percentage | ||||||||||||||||
| U.S. federal statutory tax rate | $ | (20,030) | 21 | % | |||||||||||||
| State and local income taxes, net of federal income tax effect | — | — | |||||||||||||||
| Foreign tax effects | 83 | — | |||||||||||||||
| Effect of cross-border tax laws | 89 | — | |||||||||||||||
| Tax credits: | |||||||||||||||||
| Research and development tax credits | (1,956) | 2 | |||||||||||||||
| Changes in valuation allowance | 21,715 | (23) | |||||||||||||||
| Nontaxable or nondeductible items | 289 | — | |||||||||||||||
| Changes in unrecognized tax benefits | — | — | |||||||||||||||
Effective tax rate | $ | 190 | — | % | |||||||||||||
Reconciliation between the tax provision computed at the federal statutory income tax rate and the Company's actual effective income tax rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, was as follows:
Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
U.S. federal statutory tax rate | 21 | % | 21 | % | ||||||||||
| R&D tax credit | 2 | 1 | ||||||||||||
Stock-based compensation | 9 | (1) | ||||||||||||
Other permanent differences | (1) | — | ||||||||||||
| Change in valuation allowance | (31) | (21) | ||||||||||||
Total | — | % | — | % | ||||||||||
The Company’s income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.
Significant components of net deferred tax assets are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 109,932 | $ | 96,477 | |||||||
| Property and equipment | 874 | 583 | |||||||||
| R&D tax credit | 16,152 | 12,849 | |||||||||
| Stock-based compensation | 6,864 | 5,041 | |||||||||
| Capitalized R&D expenses | 39,750 | 32,306 | |||||||||
| Inventory | 3,960 | 2,747 | |||||||||
| Lease liability | 6,582 | 7,059 | |||||||||
| Accruals and reserves | 3,290 | 3,738 | |||||||||
| Total deferred tax assets | 187,404 | 160,800 | |||||||||
| Valuation allowance | (182,986) | (156,145) | |||||||||
| Net deferred tax assets | 4,418 | 4,655 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | (4,418) | (4,655) | |||||||||
| Total deferred tax liabilities | (4,418) | (4,655) | |||||||||
Net deferred tax assets | $ | — | $ | — | |||||||
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. The valuation allowance increased by $26.8 million during the year ended December 31, 2025. This increase primarily reflects additional deferred tax assets generated during the year, principally related to net operating loss carryforwards, capitalized research and development expenses, and research and development tax credits. The valuation allowance increased by $34.7 million during the ended December 31, 2024, primarily due to similar factors. The valuation allowance increased by $27.4 million during the year ended December 31, 2023, primarily due to similar factors.
As of December 31, 2025 and 2024, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $446.9 million and $391.9 million, respectively, expiring beginning 2028. As of December 31, 2025 and 2024, the Company has U.S. state and local NOL carryforwards of approximately $281.5 million and $242.2 million, respectively, expiring beginning 2028.
As of December 31, 2025 and 2024, the Company has federal research and development credit carryforwards of approximately $13.2 million and $10.6 million, respectively, available to reduce future taxable income, if any. As of December 31, 2025 and 2024, the Company has California research and development credit carryforwards of approximately $10.6 million and $8.3 million, respectively, available to reduce future taxable income, if any.
The federal research and development credit carryforwards expire beginning 2028 and California research and development credit carryforwards are indefinite.
Internal Revenue Code section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carryovers in excess of the Section 382 limitation. The Company has not performed an analysis to determine if a limitation applies and whether the limitation would cause the net operating losses to expire un-utilized.
The Company files federal, state, and foreign income tax returns. The tax periods 2008 through 2025 remain open in most jurisdictions. In addition, any tax losses that were generated in prior years and carried forward may also be subject to examination by respective authorities. The Company is not currently under examination by federal, state or foreign income tax authorities.
On July 4, 2025, new federal tax legislation was signed into law. The legislation includes significant revisions to U.S. corporate income tax laws, including, among other provisions, restoring the option for immediate expensing of certain U.S.-based research and development expenditures and making permanent the ability to claim first-year bonus depreciation on qualified property. The legislation also modifies certain aspects of U.S. taxation of foreign earnings, including changes to the taxation of Net CFC Tested Income (formerly referred to as global intangible low-taxed income (“GILTI”)) and foreign-derived deduction eligible income, as well as revisions to foreign tax credit rules. The enactment of the legislation did not have a material impact on the Company’s consolidated financial statements due to the Company’s cumulative losses and full valuation allowance position.
A reconciliation of the change in the unrecognized tax benefit during the year is as follows (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning of year | $ | 4,719 | $ | 3,392 | $ | 2,700 | |||||||||||
| Additions for tax positions related to: | |||||||||||||||||
| Current year | 1,243 | 1,327 | 842 | ||||||||||||||
| Prior years | (22) | — | (150) | ||||||||||||||
| End of year | $ | 5,940 | $ | 4,719 | $ | 3,392 | |||||||||||
As of December 31, 2025, the Company had a total of $5.9 million of gross unrecognized tax benefits, none of which would affect the effective tax rate upon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.
The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2025, the Company has not accrued interest or penalties related to uncertain tax positions.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
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.