Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 28, 2025, or the 2024 Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Item 1A. Risk Factors" section of this Quarterly Report on Form 10-Q and the "Item 1A. Risk Factors" section of our 2024 Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a global provider of medical devices and human tissue cryopreservation services largely used in the treatment of peripheral vascular disease, end-stage renal disease, and cardiovascular disease. We develop, manufacture, and market vascular devices to address the needs of vascular surgeons and, to a lesser degree, other specialties such as cardiac surgeons, general surgeons, and neurosurgeons. Our diversified portfolio of devices consists of brand name products that are used in arteries and veins and are well known to vascular surgeons. Our principal product offerings are sold globally, primarily in the United States, Europe, Canada, and Asia Pacific, or APAC. We estimate that the annual worldwide market for peripheral vascular devices exceeds $5 billion, within which we estimate that the market for our products is approximately $1 billion. We have grown our business using a three-pronged strategy: 1) pursuing a focused call point, 2) competing for sales of low-rivalry, niche products, and 3) expanding our worldwide direct sales force while acquiring complementary devices. We have used acquisitions as a primary means of further penetrating the peripheral vascular device market, and we expect to continue this strategy in the future. We currently manufacture most of our products in our Burlington, Massachusetts headquarters.

Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and therefore can provide a wider range of treatment options to their patients. Recently we have also begun to explore adjacent market customers, such as cardiac surgeons and interventional cardiologists.

Our principal product lines include the following: anastomotic clips, biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, embolectomy and occlusion catheters, radiopaque marking tape, synthetic vascular and dialysis grafts, and valvulotomes. Through our RestoreFlow allografts business, we also process and cryopreserve human vascular and cardiac tissue.

Our principal biologic offerings include vascular and cardiac patches as well as vascular and dialysis grafts. In Q2 2025, biologics represented 51% of our worldwide sales. We believe our biologic devices represent differentiated and, in many cases, growing product segments.

To assist us in evaluating our business strategies, we monitor long-term technology trends in the peripheral vascular device market. Additionally, we consider the information obtained from discussions with the medical community in connection with the demand for our products, including potential new product launches. We also use this information to help determine our competitive position in the peripheral vascular device market and our manufacturing capacity requirements.

Our business opportunities include the following:

	•	growing our direct sales force in North America, Europe, and APAC, including replacing distributors with our direct sales personnel;
	•	increasing the average selling prices of our devices;
	•	introducing our products into new territories upon receipt of regulatory approvals or registrations;
	•	acquiring complementary products and the transition of distributor sales to LeMaitre;
	•	updating existing products and introducing new products through research and development; and
	•	consolidating product manufacturing into our Burlington, Massachusetts facilities.

We sell our products and services primarily through a direct sales force. Our worldwide headquarters is located in Burlington, Massachusetts, and we also have a North American sales office in Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, and we also have European sales offices in Milan, Italy; Madrid, Spain; Hereford, England; Dublin, Ireland; Maisons-Alfort, France; and Zurich, Switzerland. Our APAC headquarters is located in Singapore, and we also have APAC sales offices in Tokyo, Japan; Shanghai, China; Docklands, Australia; Seoul, Korea; and Bangkok, Thailand. During the quarter ended June 30, 2025, approximately 95% of our net sales were generated in territories in which we employ direct sales representatives. We sell our products in other countries through distributors. As of June 30, 2025, our sales force comprised 163 sales representatives and export managers in North America, Europe, and APAC.

Historically we have experienced success in lower-rivalry niche segments. In the valvulotome market, for example, our differentiated devices have historically allowed us to increase average selling prices without incurring significant unit share loss. In contrast, we have experienced less success in competitive markets such as the polyester vascular graft market, where we face competition from larger companies with greater resources and lower per unit costs.

We have also experienced success in international markets, such as Europe, where we have a significant sales force, and sometimes offer lower average selling prices than in North America. If we continue to seek growth opportunities outside of North America, we may experience downward pressure on our gross margin.

We obtain regulatory approvals for our devices and services in new product categories and geographies to further access the broader peripheral device market and select other markets, thus extending our geographic reach. We received approvals to sell the XenoSure patch for carotid indication in Japan in May 2023, and the Pruitt Irrigation Occlusion Catheter in China in October 2023. We received approvals to sell the Artegraft bovine graft in Thailand and Malaysia in August 2024 and South Africa in October 2024, and the XenoSure patch for cardiac indications in China in December 2024. We received approvals to sell the Artegraft bovine graft in the European Union (EU) in April 2025 and Australia in June 2025, the Pruitt Aortic Occlusion Catheter in the EU in May 2025, and the Pruitt Occlusion Catheter in China in June 2025.

Separately, our regulatory efforts to maintain approvals in the EU and the United Kingdom (UK) have shown steady progress and success as the EU transitions from the Medical Device Directive (MDD) to the Medical Device Regulation (MDR) and the UK transitions to the United Kingdom Conformity Assessed (UKCA) marks. In 2024, we received MDR CE and UKCA marks allowing for the continued sale of 11 devices into the EU and UK. In January 2025, we received MDR CE and UKCA marks to market Burlington-manufactured CardioCel and VascuCel devices in the EU and UK. As of June 30, 2025, we have 19 MDR CE marks and UKCA approvals, and expect to hold 22 approvals by the end of 2025. Those 22 CE and UKCA marks will represent substantially all of our product offerings in the EU and UK. The European Commission has designated the end of 2028 as the final MDR CE mark transition deadline.

Our strategy for growing our business includes acquisitions of complementary product lines and companies, which can be difficult to identify, negotiate, and purchase. There can be no assurance that we will be able to do so in the future.

•

In June 2020, we entered into an agreement with Artegraft to purchase the assets of their bovine graft business for $72.5 million plus additional payments of up to $17.5 million, contingent upon future unit sales.

Occasionally we discontinue or divest products that are no longer complementary to our business or not commercially viable.

	•	During 2021, we made decisions to wind down the TRIVEX powered phlebectomy systems, remote endarterectomy devices, and surgical glue. These product lines totaled approximately $2.2 million in 2021 revenues.
	•	During 2022, we made the decision to wind down the ProCol graft, AlboSure polyester patch, LeverEdge, and Latis graft cleaning catheter product lines. These products totaled approximately $0.7 million in 2022 revenues.
	•	During 2024, we made the decision to wind down the PeriVu Angioscope product line. This product totaled approximately $0.9 million in 2024 revenues.
	•	During 2025, we made the decision to end our cardiovascular porcine patch distribution agreement with Elutia. Previously, in April 2023, we had entered into an agreement with Elutia to become the exclusive U.S. distributor of their cardiovascular porcine patches. Under the agreement, we could distribute the products for three years with an option to acquire Elutia's worldwide cardiovascular porcine patch business during the second and third years of the agreement. This product totaled approximately $1.8 million in 2025 revenues.

From time to time we may undertake SKU reductions and attempt to transition sales to other SKUs or products with similar features. For example, in 2022, we initiated the transition of sales of our Syntel spring tip catheter to our Syntel regular tip catheter. Any of these actions may result in inventory write-offs and temporary or permanent negative impacts to our sales, gross margin, and customer relationships.

Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with country-specific distributors to transition their sales of our medical devices into our direct sales organization:

•

In May 2022, we entered into a distribution transition agreement with our Korean distributor to sell products directly in Korea and dissolve the existing distribution arrangement. We have been selling direct-to-hospital in Korea since December 2022. The distribution termination fees totaled approximately $0.5 million.

	•	In March 2023, we entered into a distribution transition agreement with our Thai distributor to sell products directly in Thailand and dissolve the existing distribution arrangement. We have been selling direct-to-hospital in Thailand since August 2023. The distribution termination fees totaled approximately $0.7 million.
	•	In March 2025, we entered into a distribution transition agreement with our Portuguese distributor to sell products directly in Portugal and dissolve the existing distribution arrangement. We have been selling direct-to-hospitals in Portugal since May 2025. The distribution termination fees are expected to total approximately $0.2 million.
	•	In June 2025, we entered into a distribution transition agreement with our Czech distributor to sell products directly in Czechia and dissolve the existing distribution arrangement. We plan to be selling direct-to-hospitals in Czechia in Q3 2025. The distribution termination fees are expected to total approximately $0.1 million.

We also benefit, to a lesser extent, from internal product development efforts to bring differentiated technologies and next-generation products and services to market:

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In March 2022, we received FDA clearance to market PhasTIPP, a portable powered phlebotomy device used to remove varicose veins in the leg. The device was launched in the United States in April 2024.

In addition to our sales growth strategies, we have also executed several operational initiatives designed to consolidate manufacturing into our Burlington facilities. We expect these plant consolidations and manufacturing transfers will result in improved control over production quality as well as reduced costs. Our most recent manufacturing transfer was:

•

In October 2019, we acquired the CardioCel and VascuCel biologic patch businesses from Anteris. The transfer to Burlington was substantially completed in 2023. In June 2023, the MDR CE mark application for these Burlington-produced devices was submitted, and we obtained approval in January 2025, allowing for distribution of these patches in the EU in 2025. We began distributing these Burlington-produced patches in the United States, Canada, and select APAC markets in 2024.

Our execution of these initiatives may affect the comparability of our financial results and may cause fluctuations from period to period.

In February 2024, we began implementing a new enterprise resource planning, or ERP, system to replace our financial reporting and planning system. We expect that the new ERP system will be beneficial in a number of areas, including inventory management, pricing programs, financial operations, and real-time reporting. We have been preparing for this transition since 2022 and hired an experienced consulting team to assist in this transition. In the United States, we transitioned from our legacy ERP system to our newly implemented Microsoft Dynamics D365 system in February 2024. In February 2025, we implemented this new system in the UK. As of June 30, 2025, we have capitalized costs on our balance sheet of $4.9 million associated with this ERP system.

Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the six months ended June 30, 2025, approximately 43% of our sales took place outside of the United States, largely in currencies other than the U.S. dollar. We expect foreign currencies will represent a significant percentage of future sales. Selling, marketing, and administrative costs related to these sales are also denominated in foreign currencies, thereby partially mitigating our bottom-line exposure to exchange rate fluctuations. If there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require less of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases we will record more revenue in U.S. dollars than we would have if the exchange rate had not changed. For the six months ended June 30, 2025, we estimate that the effects of changes in foreign exchange rates increased our reported sales by approximately $0.3 million, as compared to rates in effect for the six months ended June 30, 2024.

Net Sales and Expense Components

The following is a description of the primary components of our net sales and expenses:

Net sales. We derive our net sales from the sale of our products and services, less discounts and returns. Net sales include the shipping and handling fees paid for by our customers. Most of our sales are generated by our direct sales force and are shipped and billed to hospitals or clinics throughout the world. In countries where we do not have a direct sales force, sales are primarily to distributors, who in turn sell to hospitals and clinics. In certain cases our products are held on consignment at a hospital or clinic prior to purchase; in those instances we recognize revenue at the time the product is used in surgery rather than at shipment.

Cost of sales. We manufacture the majority of the products that we sell. Our cost of sales consists primarily of manufacturing personnel, raw materials and components, depreciation of property and equipment, and other allocated manufacturing overhead, as well as the freight expense we pay to ship products to customers.

Sales and marketing. Sales and marketing expense consists primarily of salaries, commissions, stock-based compensation, travel and entertainment, sales meetings, attendance at vascular and cardiac congresses, training programs, advertising and product promotions, direct mail, and other marketing costs.

General and administrative. General and administrative expense consists primarily of executive, finance and human resource salaries, stock-based compensation, legal and accounting fees, information technology expense, intangible asset amortization expense, and insurance expense.

Research and development. Research and development expense primarily includes costs associated with obtaining and maintaining regulatory approval of our products, salaries, laboratory testing, and supply costs. It also includes costs associated with the design and execution of clinical studies, costs to register, maintain, and defend our intellectual property, and costs to transfer the manufacturing of acquired product lines to our Burlington facility. Also included are costs associated with the design, development, testing, and enhancement of new or existing products.

Other income (expense). Other income (expense) primarily includes interest income and expense, foreign currency gains (losses), and other miscellaneous gains (losses).

Income tax expense. We are subject to federal and state income taxes for earnings generated in the United States, which include operating losses or profits in certain foreign jurisdictions for certain years depending on tax elections made, and foreign taxes on earnings of our wholly-owned foreign subsidiaries. Our consolidated tax expense is affected by the mix of our taxable income (loss) in the United States and foreign subsidiaries, permanent items, discrete items, unrecognized tax benefits, and amortization of goodwill for U.S. tax reporting purposes.

Results of Operations

Comparison of the three- and six-month periods ended June 30, 2025, to the three- and six-month periods ended June 30, 2024:

The following table sets forth for the periods indicated our net sales by geography and the change between the specified periods expressed as a percentage increase or decrease:

		Three months ended June 30,												Six months ended June 30,
(unaudited)										Percent												Percent
		2025				2024				change				2025				2024				change
		(in thousands)												(in thousands)
Net sales		$	64,232			$	55,849				15	%		$	124,103			$	109,327				14	%
Net sales by geography:
Americas		$	41,321			$	36,907				12	%		$	80,279			$	72,152				11	%
Europe, Middle East and Africa			18,840				15,298				23	%			35,799				29,693				21	%
Asia Pacific			4,071				3,644				12	%			8,025				7,482				7	%
Total		$	64,232			$	55,849				15	%		$	124,103			$	109,327				14	%

Net sales. Net sales increased by $8.4 million, or 15%, to $64.2 million for the three months ended June 30, 2025, compared to $55.8 million for the three months ended June 30, 2024. The increase was driven primarily by higher average selling prices, higher unit volumes shipped to customers, and additional sales representatives. Graft sales increased $3.6 million, catheter sales increased $1.6 million, valvulotome sales increased $1.3 million, and shunt sales increased $0.8 million. We estimate that the weaker U.S. dollar increased net sales by $1.0 million during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.

Direct-to-hospital net sales were 95% of our total net sales for both the three months ended June 30, 2025 and 2024.

Net sales increased by $14.8 million, or 14%, to $124.1 million for the six months ended June 30, 2025, compared to $109.3 million for the six months ended June 30, 2024. The increase was driven primarily by higher average selling prices, higher unit volumes shipped to customers, and additional sales representatives. Graft sales increased $6.7 million, valvulotome and catheter sales increased $2.0 million each, patch sales increased $1.7 million, and shunt sales increased $1.5 million. We estimate that the weaker U.S. dollar increased net sales by $0.3 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.

Direct-to-hospital net sales were 94% and 95% of our total net sales for the six months ended June 30, 2025 and 2024, respectively.

Net sales by geography. Net sales in the Americas increased $4.4 million, or 12%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The increase was driven primarily by increased sales of grafts of $2.9 million, catheters of $0.7 million, and valvulotomes of $0.6 million.

Net sales in the Americas increased $8.1 million, or 11%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The increase was driven primarily by increased sales of grafts of $4.6 million, valvulotomes of $1.3 million, catheters of $0.7 million, and patches and clips of $0.4 million each.

Europe, Middle East, and Africa, or EMEA, net sales increased $3.5 million, or 23%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The increase was driven primarily by increased sales of catheters of $1.0 million, patches and shunts of $0.7 million each, and valvulotomes of $0.6 million.

EMEA net sales increased $6.1 million, or 21%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The increase was driven primarily by increased sales of grafts of $1.9 million, catheters of $1.4 million, shunts of $1.2 million, and patches of $1.1 million.

APAC net sales increased $0.4 million, or 12%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The increase was driven primarily by increased sales of grafts and patches of $0.2 million each.

APAC net sales increased $0.5 million, or 7%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The increase was driven primarily by increased sales of grafts, patches, and valvulotomes of $0.2 million each, offset by decreased sales of catheters of $0.1 million.

Gross Profit. The following table sets forth the change in our gross profit and gross margin for the periods indicated:

		Three months ended June 30,																Six months ended June 30,
(unaudited)														Percent																Percent
		2025				2024				Change				change				2025				2024				Change				change
		(in thousands)																(in thousands)
Gross profit		$	44,974			$	38,468			$	6,506				17	%		$	86,394			$	75,133			$	11,261				15	%
Gross margin			70.0	%			68.9	%			1.1	%			*				69.6	%			68.7	%			0.9	%			*

*Not applicable

Gross profit increased $6.5 million, or 17%, to $45.0 million for the three months ended June 30, 2025, as compared to $38.5 million for the three months ended June 30, 2024, and gross margin increased by 110 basis points to 70.0% in the period, as compared to 68.9% for the three months ended June 30, 2024. The increase in gross profit was driven primarily by increased sales, particularly from grafts, catheters, and valvulotomes. The increase in gross margin was driven primarily by greater manufacturing efficiencies, sales price increases, and favorable product mix, including decreased sales of comparatively lower margin porcine patches due to the decision to end our distribution agreement with Elutia. The increase was partially offset by increased shipping and warehousing costs.

Gross profit increased $11.3 million, or 15%, to $86.4 million for the six months ended June 30, 2025, as compared to $75.1 million for the six months ended June 30, 2024, and gross margin increased by 90 basis points to 69.6% in the period, as compared to 68.7% for the six months ended June 30, 2024. The increase in gross profit was driven primarily by increased sales, particularly from grafts, catheters, and valvulotomes. The increase in gross margin was driven primarily by greater manufacturing efficiencies, sales price increases, and decreased scrap and excess and obsolescence charges, partially offset by increased shipping and warehousing costs and unfavorable product mix, including increased sales of our comparatively lower margin allograft preservation services.

Operating Expenses. The following tables set forth changes in our operating expenses for the periods indicated and the change between the specified periods expressed as a percentage increase or decrease:

		Three months ended June 30,																Six months ended June 30,
(unaudited)														Percent																Percent
		2025				2024				$ Change				change				2025				2024				$ Change				change
		(in thousands)																(in thousands)
Sales and marketing		$	14,895			$	10,984			$	3,911				36	%		$	29,107			$	22,670			$	6,437				28	%
General and administrative			10,396				8,820				1,576				18	%		$	20,883			$	17,833				3,050				17	%
Research and development			3,541				4,284				(743	)			(17	%)		$	7,636			$	8,376				(740	)			(9	%)
Total		$	28,832			$	24,088			$	4,744				20	%		$	57,626			$	48,879			$	8,747				18	%

		Three months ended June 30,												Six months ended June 30,
		2025				2024								2025				2024
		% of Net Sales				% of Net Sales				Change				% of Net Sales				% of Net Sales				Change
Sales and marketing			23	%			20	%			3	%			23	%			21	%			2	%
General and administrative			16	%			16	%			0	%			17	%			16	%			1	%
Research and development			6	%			8	%			(2	%)			6	%			8	%			(2	%)

Sales and marketing. For the three months ended June 30, 2025, sales and marketing expenses increased 36% to $14.9 million. The increase was driven primarily by higher sales representative headcount and wage increases, which resulted in increased compensation and related expenses of $2.8 million. Additionally, travel and training expenses increased $0.6 million and professional fees and outside services expenses increased $0.5 million. Sales force headcount was 163 as of June 30, 2025, a 10% increase from June 30, 2024. As a percentage of sales, sales and marketing expenses increased to 23% for the three months ended June 30, 2025, up from 20% for the three months ended June 30, 2024.

For the six months ended June 30, 2025, sales and marketing expenses increased 28% to $29.1 million. The increase was driven primarily by higher sales representative headcount and wage increases, which resulted in increased compensation and related expenses of $4.3 million. Additionally, professional fees and outside services expenses increased $1.0 million and travel and training expenses increased $0.9 million. As a percentage of sales, sales and marketing expenses increased to 23% for the six months ended June 30, 2025, up from 21% for the six months ended June 30, 2024.

General and administrative. For the three months ended June 30, 2025, general and administrative expenses increased 18% to $10.4 million. The increase was driven primarily by higher headcount and wage increases, which resulted in increased compensation and related expenses of $1.2 million. Additionally, travel and training expenses increased $0.2 million. As a percentage of sales, general and administrative expenses remained consistent at 16% for the three months ended June 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025, general and administrative expenses increased 17% to $20.9 million. The increase was driven primarily by higher headcount and wage increases, which resulted in increased compensation and related expenses of $2.4 million. Additionally, facilities expenses increased $0.6 million and travel and training expenses increased $0.2 million. As a percentage of sales, general and administrative expenses increased to 17% for the six months ended June 30, 2025, up from 16% for the six months ended June 30, 2024.

Research and development. For the three months ended June 30, 2025, research and development expenses decreased 17% to $3.5 million. The decrease was driven primarily by lower third-party service fees, which resulted in decreased professional fees and outside services expenses related to MDR related activities of $0.9 million, partially offset by increased facilities expenses of $0.1 million. As a percentage of sales, research and development expenses decreased to 6% for the three months ended June 30, 2025, down from 8% for the three months ended June 30, 2024.

For the six months ended June 30, 2025, research and development expenses decreased 9% to $7.6 million. The decrease was driven primarily by lower third-party service fees, which resulted in decreased professional fees and outside services expenses related to MDR related activities of $1.3 million, partially offset by increased compensation and related expenses of $0.3 million and facilities expenses of $0.2 million. As a percentage of sales, research and development expenses decreased to 6% for the six months ended June 30, 2025, down from 8% for the six months ended June 30, 2024.

Income tax expense. We recorded a tax provision of $4.3 million on pre-tax income of $18.1 million for the three months ended June 30, 2025, compared to a $3.7 million tax provision on pre-tax income of $15.5 million for the three months ended June 30, 2024. We recorded a tax provision of $7.5 million on pre-tax income of $32.3 million for the six months ended June 30, 2025, compared to a tax provision of $6.6 million on pre-tax income of $28.3 million for the six months ended June 30, 2024. Our effective income tax rate was 23.7% and 23.3% for the three- and six-month periods ended June 30, 2025. Our tax expense for the current period is based on an estimated annual effective tax rate of 23.8%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

Our effective income tax rate was 23.7% and 23.3% for the three- and six-month periods ended June 30, 2024. Our 2024 provision was based on the estimated annual effective tax rate of 24.3%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for the three- and six-month periods ended June 30, 2024 varied from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

We monitor the mix of profitability by tax jurisdiction and adjust our annual expected rate on a quarterly basis as needed. While it is often difficult to predict the final outcome or timing of the resolution for any particular tax matter, we believe our tax reserves reflect the probable outcome of known contingencies.

We assess the likelihood that our deferred tax assets will be realized through future taxable income and record a valuation allowance to reduce gross deferred tax assets to an amount that we believe is more likely than not to be realized. As of June 30, 2025, we have provided a valuation allowance of $1.7 million for deferred tax assets primarily related to Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected to be realized.

Liquidity and Capital Resources

As of June 30, 2025, our cash and cash equivalents were $27.2 million, as compared to $25.6 million as of December 31, 2024. We had $292.3 million in short-term marketable securities as of June 30, 2025, and $274.1 million as of December 31, 2024. Our cash and cash equivalents are liquid investments with maturities of 90 days or less at the date of purchase and consist primarily of operating bank accounts. Our short-term marketable securities consist of a U.S. government money market fund investing mainly in high-quality, short-term securities that are issued or guaranteed by the U.S. government or by U.S. government agencies and instrumentalities, and a short-duration bond fund. As of June 30, 2025, our short-term marketable securities reflected an unrealized loss of $0.7 million as a result of increasing market interest rates.

On February 18, 2025, our Board of Directors authorized the repurchase of up to $75.0 million of our common stock through transactions on the open market, in privately negotiated purchases, or otherwise until February 17, 2026. The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this or any prior program.

Convertible Senior Notes

On December 19, 2024, we issued $172.5 million aggregate principal amount of convertible senior notes due 2030, or the Convertible Notes, in a Rule 144A private placement to qualified institutional buyers pursuant to an indenture dated December 19, 2024, by and between us and U.S. Bank Trust Company, National Association, or the Indenture.

The Convertible Notes will mature on February 1, 2030, unless earlier repurchased, redeemed or converted. The proceeds from the issuance of the Convertible Notes were approximately $167.7 million, net of debt issuance costs totaling $4.8 million. The Convertible Notes bear interest at a rate of 2.50% per year, and interest is payable semiannually in arrears on August 1 and February 1 of each year. The initial conversion rate is 8.3521 shares of common stock per $1,000 principal amount of the Convertible Notes, which represents an initial conversion price of approximately $119.73 per share of common stock and a premium of approximately 30% over the closing price of our common stock on December 16, 2024. In connection with the payment by us on May 29, 2025 of a quarterly cash dividend of $0.20 per share (an increase from the quarterly dividend amount of $0.16 per share as of the time of issuance of the Convertible Notes), the conversion rate of the Convertible Notes was increased to 8.3602 shares of common stock per $1,000 principal amount of the Convertible Notes, which represents a conversion price of approximately $119.61 per share of common stock. A similar adjustment to the conversion rate will be made upon payment of the quarterly cash dividend of $0.20 on September 4, 2025, and upon payment of subsequent quarterly dividends in excess of $0.16 per share. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events as described in the Indenture.

Noteholders may convert all or a portion of their Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2025, if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the our common stock, as described in the Indenture; (4) if we call (or are deemed to have called) any Convertible Notes for redemption; and (5) at any time from, and including, August 1, 2029, until the close of business on the second scheduled trading day immediately before the maturity date. We have the right to elect to settle conversions either in cash, shares of common stock, or in a combination of cash and shares of our common stock.

Prior to February 5, 2028, the Convertible Notes will not be redeemable. On or after February 5, 2028, until the 40^th scheduled trading day immediately before the maturity date, we may redeem for cash all or any portion of the Convertible Notes (subject to the partial redemption limitation set forth in the Indenture), at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. In addition, calling any Convertible Note for redemption will constitute a "Make-Whole Fundamental Change" (as defined in the Indenture) with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.

Operating and Capital Expenditure Requirements

We require cash to pay our operating expenses, make capital expenditures, and pay our long-term liabilities. Since our inception, we have funded our operations through public offerings and private placements of equity securities, short-term and long-term borrowings, and funds generated from our operations.

We recognized operating income of $28.8 million for the six months ended June 30, 2025, compared to $26.3 million for the six months ended June 30, 2024. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

	•	revenues generated by sales of our products and services;
	•	payments associated with potential future quarterly cash dividends to our common stockholders;
	•	future acquisition-related payments;
	•	payments associated with income and other taxes;
	•	costs associated with expanding our manufacturing, marketing, sales, and distribution efforts;
	•	costs associated with our initiatives to sell direct-to-hospital in new countries;
	•	costs of obtaining and maintaining FDA and other regulatory clearances;
	•	costs associated with obtaining European MDR CE mark approvals;

	•	the number, timing, and nature of acquisitions, divestitures, and other strategic transactions; and
	•	potential future share repurchases.

We believe that our cash, cash equivalents, investments, and the interest we earn on these balances will enable us to fund our operating expenses, capital expenditures requirements, and Convertible Note payments for at least twelve months following the filing of this Form 10-Q and, together with our anticipated future cash, cash equivalents, and investments, to meet our known long-term cash requirements.

We may need to raise additional funding, which might not be available on desirable terms or at all. See "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Cash Flows

		Six months ended June 30,
		2025				2024				Net Change
		(in thousands)
Cash and cash equivalents		$	27,177			$	22,268			$	4,909
Cash flows provided by (used in):
Operating activities		$	29,330			$	14,696			$	14,634
Investing activities			(20,669	)			(13,364	)			(7,305	)
Financing activities			(8,003	)			(2,831	)			(5,172	)

Net cash provided by operating activities. Net cash provided by operating activities was $29.3 million for the six months ended June 30, 2025, consisting of $24.8 million in net income, adjustments for non-cash or non-operating items of $12.9 million (including primarily depreciation and amortization of $5.2 million, stock-based compensation of $4.0 million, interest and debt offering expense of $2.6 million, and provision for inventory write-offs and credit losses of $1.4 million), and a net use of working capital of $8.3 million. The net cash used for working capital was driven by an increase in accounts receivable of $5.3 million, an increase in inventory and other deferred costs of $3.5 million, and payments of accounts payable and other liabilities of $1.3 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $1.7 million.

Net cash provided by operating activities was $14.7 million for the six months ended June 30, 2024, consisting of $21.7 million in net income, adjustments for non-cash or non-operating items of $10.4 million (including primarily depreciation and amortization of $4.8 million, stock-based compensation of $3.2 million, provisions for inventory write-offs and credit losses of $1.7 million, and foreign currency effect on net income of $0.7 million), and a net use of working capital of $17.4 million. The net cash used for working capital was driven by an increase in accounts receivable of $6.5 million, an increase in inventory and other deferred costs of $7.3 million, and payments of accounts payable and other liabilities of $4.3 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $0.7 million.

Net cash used in investing activities. Net cash used in investing activities was $20.7 million for the six months ended June 30, 2025, consisting of purchases of marketable securities of $17.8 million, expenditures on property and equipment of $2.7 million, and payments related to acquisitions of $0.1 million.

Net cash used in investing activities was $13.4 million for the six months ended June 30, 2024, consisting of purchases of marketable securities of $10.1 million and expenditures on property and equipment of $3.2 million.

Net cash used in financing activities. Net cash used in financing activities was $8.0 million for the six months ended June 30, 2025, consisting primarily of dividend payments of $9.0 million and deferred payments for acquisitions of $1.4 million. This use of cash was offset by stock option exercises of $2.5 million, net of shares repurchased used to pay employee payroll taxes.

Net cash used in financing activities was $2.8 million for the six months ended June 30, 2024, consisting of proceeds from stock option exercises of $4.4 million, net of shares repurchased used to pay employee payroll taxes. This proceed of cash was offset by dividend payments of $7.2 million.

Dividends

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

Record Date		Payment Date		Per Share Amount				Dividend Payment
								(in thousands)
Fiscal Year 2025
March 13, 2025		March 27, 2025		$	0.20			$	4,517
May 15, 2025		May 29, 2025		$	0.20			$	4,520
Fiscal Year 2024
March 14, 2024		March 28, 2024		$	0.16			$	3,589
May 16, 2024		May 30, 2024		$	0.16			$	3,593
August 15, 2024		August 29, 2024		$	0.16			$	3,596
November 21, 2024		December 5, 2024		$	0.16			$	3,600

On July 30, 2025, our Board of Directors approved a quarterly cash dividend on our common stock of $0.20 per share payable on September 4, 2025, to stockholders of record at the close of business on August 21, 2025.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our consolidated financial statements and the related notes and other financial information included in our 2024 Form 10-K.

Recent Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations, or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.