Xometry, Inc. Income Taxes Disclosure

(9) Income Taxes

For the year ended December 31, 2025, the Company had an income tax expense of $0.6 million. For the years ended December 31, 2024 and 2023, the Company had an income tax benefit of approximately $0.1 million and $0.4 million, respectively. The Company's tax expense is comprised of a current (provision) and a deferred state tax benefit of $(0.7) million and $0.1 million, respectively for the year ended December 31, 2025, and a current (provision) and a deferred state tax benefit of $(0.1) million and $0.1 million, respectively for the year ended December 31, 2024. This estimated annual effective tax rate of (1.0)% differs from the U.S. federal statutory rate primarily due to the effects of certain permanent items, foreign tax rate differences, and increases in the valuation allowance against deferred tax assets.

The Company adopted ASU 2023-09 prospectively on January 1, 2025 to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation disclosure.

Under GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax assets and liabilities are measured at the enacted tax rate. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below (in thousands):

Tax Valuation Allowance

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers scheduled reversals of deferred tax liabilities, projecting future taxable income, and tax planning strategies that can be implemented by the Company in making the assessment.

As of December 31, 2025, and 2024, the Company had a valuation allowance of $105.4 million and $85.2 million, respectively, against certain deferred tax assets. The valuation allowance relates to the deferred tax assets of the Company’s U.S. entities, including federal and state tax attributes and timing differences, as well as the deferred tax assets of its foreign subsidiaries. The increase in the valuation allowance during 2025 is primarily related to the pre-tax losses generated in the U.S. and non-U.S. operations.

Net Operating Loss and Credit Carryforwards

As of December 31, 2025, the Company has net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes, and similar state amounts, of approximately $291.3 million available to reduce future income subject to income taxes before limitations. As of December 31, 2025, the Company had a net operating loss carryforward for tax purposes related to its foreign subsidiaries of $79.0 million. U.S. federal net operating carryforwards generated prior to 2018 in the approximate amount of $48.7 million will begin to expire, if not utilized, in 2026. Our non-U.S. net operating loss and U.S. federal net operating losses post 2017 have an indefinite life. Under the provisions of U.S. Internal Revenue Code Section 382, certain substantial changes in the Company’s ownership may result in a limitation in the amount of U.S. net operating loss carryforwards that can be utilized annually to offset future taxable income.

Of the total loss carryforward available, approximately $44.4 million of net operating losses were attributable to the acquisition of Thomas Publishing Company and its subsidiaries (collectively, “Thomas”). In 2022, management completed its evaluation of any limitations on the ability of the Company to utilize the Thomas net operating loss carryforward. As a result of this evaluation, management has determined that the annual limitation, as determined under Section 382 of the Internal Revenue Code, would not prevent the Company from utilizing the net operating losses before expiration to the extent the Company is able to generate sufficient future taxable income.

Uncertain Tax Positions

For uncertain tax positions, the Company uses a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefits determined on a cumulative probability basis, which are more-likely-than-not to be realized upon ultimate settlement in the financial statements. Our gross unrecognized tax benefits related to uncertain tax positions were not material to the Company’s financial position or operations for all periods presented.

The Company’s federal and state income tax returns are subject to examination by income taxing authorities, generally for three years after the returns are filed. However, tax attribute carryforwards may still be adjusted upon examination by tax authorities. The Company is not currently under examination by any tax jurisdiction for federal or state income taxation.