Item 1A. Risk Factors
Item 1A. Risk Factors
Certain risk factors that we believe could affect our business and prospects are described in our Annual Report on Form 10-K for the year ended December 31, 2024 and supplemented by the risk factors set forth in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2025 and June 30, 2025. Through September 30, 2025, there have been no material changes in the risk factors described in such Annual Report and Quarterly Reports, with the exception of the following added or revised risk factors:
The recent notice of termination from a large commercial Payor could negatively impact our financial condition, results of operations, cash flows, capital resources and liquidity.
A commercial Payor, with which we have multiple separately managed contracts, recently notified us that it intends to terminate certain of our agreements with them. As a result of this notice of termination, we expect net neutral impacts to our financial results through the end of 2025, as the transitions of agreements and services are expected to start late in the fourth quarter of 2025. While the transitions of agreements and services are expected to continue throughout the first half of 2026, the specific timing of when these contracts will wind down is highly dependent on the Payor’s successor provider’s ability to successfully transition customers among other factors. The agreements expected to be terminated reflected 12% of our net revenue for the nine months ended September 30, 2025. If we are unable to win new business to substitute this loss, effectively execute cost reduction actions, or maintain volume-based supplier
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discounts, the loss of this contractual relationship could adversely affect our business, results of operations, and financial condition.
A recent determination from the Centers for Medicare and Medicaid Services (CMS) would reduce reimbursement qualification for non-invasive ventilation products, which could negatively impact our financial condition, results of operations, cash flows, capital resources and liquidity.
In June 2025, CMS released a final national coverage determination for non-invasive positive pressure ventilation (NIPPV) in the home for the treatment of chronic respiratory failure due to chronic obstructive pulmonary disease (COPD). This determination may make qualifying for NIPPV more difficult for new COPD patients seeking this treatment, as patients must meet a number of criteria before qualifying for coverage of an initial six-month period for respiratory assist devices and home mechanical ventilation. This CMS determination could adversely affect our business, results of operations, and financial condition.
Risks Related to the Sale of Our Products & Healthcare Services Segment
We plan to sell our P&HS segment, and there may be negative impacts on our business, financial results, and operations.
On February 28, 2025, we announced that we are actively engaged in discussions regarding the anticipated sale of our P&HS segment. On October 7, 2025, we announced that we entered into the Purchase Agreement. Unanticipated developments, including disruptions to our business due to macro-economic factors or otherwise, market conditions, the uncertainty of the financial markets, changes in the law, could delay or prevent the sale of the P&HS segment.
Following the anticipated sale of the P&HS segment, we will be a smaller, less diversified company with a single segment, Patient Direct. If we complete the sale of our P&HS segment, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, the diversification of revenue, costs, and cash flows will diminish, such that our results of operations, cash flows, working capital, effective tax rate, and financing requirements may be subject to increased volatility and our ability to fund capital expenditures and investments and service debt may be diminished. Following the anticipated sale of the P&HS segment, we may be unable to achieve the full strategic and financial benefits that we believe we may be able to achieve through the sale of our P&HS segment, or such benefits may be delayed or may never occur at all. For example, we believe the sale could provide the following benefits, among others:
● directing capital toward the higher growth and higher margin Patient Direct segment;
● applying proceeds from any such sale to repay certain of our indebtedness; and
We may not achieve these or other anticipated benefits for a variety of reasons, including, among others: (i) the possibility that the Purchase Agreement will not be completed, (ii) the possibility that we may not benefit as expected from the increased focus on our Patient Direct segment and simpler business model made possible by the sale, (iii) the risk of litigation, injunctions or other legal proceedings relating to the sale, (iv) unforeseen costs and expenses that will be incurred in connection with the sale process and (v) the sale will require significant amounts of management time and effort, which may divert management attention from operating and growing the Patient Direct segment. If we fail to achieve some or all of the benefits we expect to achieve as a result of the sale of our P&HS segment, or if such benefits are delayed, our business, results of operations, financial condition and cash flows could be materially and adversely affected.
We have already incurred expenses in connection with the exploration and negotiation of the anticipated sale of the P&HS segment and expect that the process of ultimately consummating the Purchase Agreement will be time-consuming and involve significant additional costs and expenses. Furthermore, we expect that the anticipated sale of P&HS segment will result in significant separation costs, and we are obligated to reimburse Purchaser for the first $65 million of such costs.
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Furthermore, the sale process could cause disruptions and create uncertainty surrounding our business and affect our relationships with our customers, suppliers and teammates. Although we intend to take actions to reduce any adverse effects, these uncertainties could cause customers, suppliers and others that deal with us to seek to change existing business relationships. In addition, teammate retention could be negatively impacted. If key teammates depart because of concerns relating to the uncertainty, our business could be harmed. Investor perceptions about the announcement could have a negative impact on the trading prices of our common stock or debt. Additionally, until the market has fully analyzed our valuation following the sale of the P&HS segment, the price of our common stock may fluctuate. Furthermore, the sale is expected to decrease the diversification of our revenues, costs and cash flows, our operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility, and our ability to fund capital expenditures and investments, pay dividends and meet debt obligations and other liabilities may be diminished.
In connection with the anticipated sale of the P&HS segment, we will be required to provide certain transitional services which may divert management’s attention and harm our business.
In connection with the Purchase Agreement, we will be required to provide certain services to the Purchaser for a transitional period. Such transitional services arrangements may be in exchange for fees that do not fully compensate us for the cost of providing such transitional services and may also divert management’s attention and resources, away from the existing business, which could harm our business.
Certain contracts used in our business may need to be transferred or replaced in connection with the anticipated sale of the P&HS segment and failure to obtain such replacement contracts could increase our expenses or otherwise adversely affect our results of operations.
In connection with the anticipated sale of the P&HS segment, we may be required to replace certain shared contracts. It is possible that, in connection with the replacement process, some parties may seek more favorable contractual terms from us. If we are unable to obtain such replacement contracts, the loss of these contracts could increase our expenses or otherwise materially adversely affect our business, results of operations and financial condition.
The anticipated sale of certain assets associated with the P&HS segment could negatively impact our business, and retained liabilities from businesses or assets that we have sold could adversely affect our financial results.
The anticipated asset sales in connection with the P&HS segment pose risks and challenges that could negatively impact our business, including retained liabilities related to divested businesses and sold assets, obligations to indemnify buyers against contingent liabilities and potential disputes with buyers. If post-completion liabilities and obligations related to divestitures and asset sales are substantial and exceed our expectations, our financial position, results of operations and cash flows could be negatively impacted. Any divestiture or asset sale may result in a dilutive impact to our future earnings if we are unable to offset the dilutive impact from the loss of revenue and profits associated with the divestiture or sold asset, as well as significant write-offs, including those related to goodwill and other intangible assets, which could have a material adverse effect on our results of operations or financial condition.
Risks Related to Our A bility to Comply with Environmental, Health and Safety Regulations
We may be subject to environmental, health and safety regulations, personal injury and litigation, which could adversely affect our financial results.
Our sterilization process in our manufacturing facilities within the P&HS segment includes the use of ethylene oxide (EtO). Potential environmental, health and safety risks associated with exposure to EtO subject us to risk of liability claims being made against us by workers, contractors, employees of our customers and individuals who have resided or otherwise spent time within miles of our EtO sterilization facilities. If we are the subject of litigation related to use of EtO there could be a material adverse effect on our results of operations or financial condition .
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