v3.25.4
Income Taxes
 12 Months Ended
Jan. 03, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company has adopted ASU 2023-09 on a prospective basis, which resulted in additional income tax disclosures for
the rate reconciliation and related to income taxes paid for 2025. Given that the Company has elected to adopt ASU
2023-09 prospectively, the 2024 and 2023 rate reconciliation is not disaggregated in accordance with ASU 2023-09 and
the income taxes paid are not presented by jurisdiction.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law. The OBBBA makes permanent key
elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the
business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on
deferred tax balances to be recognized in the period in which the legislation is enacted. which occurred during the
Company’s second quarter of fiscal 2025. Therefore, the Company has reflected the effect of the OBBBA within the
provision for income taxes for the fiscal year ended January 3, 2026.
Provision for Income Taxes
Income tax expense (benefit) consisted of the following (in thousands):
2025
2024
2023
Current:
Federal
$428
$6,904
$5,474
State
2,380
1,256
3,106
2,808
8,160
8,580
Deferred:
Federal
24,057
(12,568)
(10,151)
State
9,119
(754)
(2,895)
33,176
(13,322)
(13,046)
Income tax expense (benefit)
$35,984
$(5,162)
$(4,466)
The following table is a reconciliation of the U.S. federal statutory tax rate of 21 percent to the Company’s effective tax
rate for the year ended January 3, 2026 in accordance with the guidance in ASU 2023-09, which was adopted
prospectively in 2025.
2025
Statutory federal income tax
$(20,154)
21.0%
State and local income taxes(1)
  State and local income taxes
835
(0.8)
  Changes in valuation allowance
9,512
(9.9)
Tax credits - research and development tax credit
(1,449)
1.5
Changes in valuation allowance
45,006
(46.9)
Nontaxable or nondeductible items
  Stock-based compensation
2,218
(2.3)
  Other
548
(0.7)
Changes in unrecognized tax benefits
(361)
0.4
Other
(171)
0.2
Effective income tax
$35,984
(37.5)%
(1) State taxes in California, Texas and Minnesota make up the majority of the effect of the state and local tax category.
The following table is a reconciliation of the U.S. federal statutory tax rate of 21 percent to our effective tax rate for the
years ended December 28, 2024 and December 30, 2023 prior to the adoption of the guidance in ASU 2023-09
2024
2023
Statutory federal income tax
21.0%
21.0%
State income taxes, net of federal benefit
0.8
(3.5)
R&D tax credits
9.0
14.1
Return to provision
6.2
6.1
Investment tax credit
—
1.1
Stock-based compensation
(9.5)
(6.2)
Non-deductible compensation
(2.6)
(5.7)
Non-deductible expenses
(2.1)
(2.8)
Changes in unrecognized tax benefits
(0.5)
(0.5)
Valuation allowance
(3.0)
—
Other
0.9
(1.0)
Effective income tax rate
20.2%
22.6%
The Company files income tax returns with the U.S. federal government and various state jurisdictions. In the normal
course of business, the Company is subject to examination by federal and state taxing authorities. The Company is no
longer subject to federal income tax examinations for years prior to 2022 or state income tax examinations prior to 2021.
Deferred Income Taxes
The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):
2025
2024
Deferred tax assets:
Stock-based compensation
$5,243
$7,090
Operating lease liabilities
88,673
97,604
Warranty and returns liabilities
4,139
5,880
Net operating loss carryforwards and credits
11,203
2,327
Compensation and benefits
6,172
7,220
Research and development
11,544
19,017
Interest
19,182
9,503
Other
7,705
4,163
Total gross deferred tax assets
153,861
152,804
Valuation allowance
(55,323)
(806)
Total gross deferred tax assets after valuation allowance
98,538
151,998
Deferred tax liabilities:
Property and equipment
15,302
23,240
Operating lease right-of-use assets
77,923
89,276
Deferred revenue
1,453
2,516
Other
3,461
3,391
Total gross deferred tax liabilities
98,139
118,423
Net deferred tax assets
$399
$33,575
At January 3, 2026, the Company had net operating loss carryforwards for federal purposes of $30.4 million and have an
indefinite carryforward period. At January 3, 2026, the Company had net operating loss carryforwards for state purposes
of $25.5 million which expire from 2030 through 2055.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income
will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence
evaluated was the cumulative loss incurred over the three-year period ended January 3, 2026. Such objective evidence
limits the ability to consider other subjective evidence, such as our projections for future growth.
On the basis of this evaluation, as of January 3, 2026, a valuation allowance of $55.3 million has been recorded to
recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred
tax asset considered realizable, however, could be adjusted if additional objectively verifiable positive evidence
materializes in future reporting periods, such as a demonstrated operating profitability.
Income Taxes Paid
In accordance with the guidance in ASU 2023-09 (which was adopted prospectively in 2025), net income tax paid in 2025
to the following jurisdictions were as follows (in thousands):
2025
Cash paid for income taxes, net:
Federal
$7,036
State and local
Texas
700
Illinois
194
Other
694
1,588
Total cash paid for income taxes, net:
$8,624
We paid net income tax and related interest of $4 million and $14 million in 2024 and 2023, respectively.
Unrecognized Tax Benefits
Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows (in thousands):
Federal and State Tax
2025
2024
2023
Beginning balance
$3,658
$3,671
$3,645
Increases related to current-year tax positions
419
639
753
Increases related to prior-year tax positions
121
51
40
Decreases related to prior-year tax positions
—
(15)
—
Lapse of statute of limitations
(957)
(688)
(601)
Settlements with taxing authorities
—
—
(166)
Ending balance
$3,241
$3,658
$3,671
At January 3, 2026 and December 28, 2024, the Company had $3.2 million and $3.5 million, respectively, of unrecognized
tax benefits, which if recognized, would affect its effective tax rate.