What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-04-09 compared with 2024-01-08 · 124 added, 85 removed, 153 unchanged (58% of the section changed)

45 unchanged sentences

On June 8, 2023 and in connection with the completion of the Divestiture, the Company repaid all amounts outstanding under its existing Credit Agreement, and as a result, the Credit Agreement was extinguished.

On January 5, 2024, the Company announced a restructuring of its manufacturing footprint and a shift to an outsourced model (the "Plan").

This Plan will transfer all product manufacturing processes to third-party manufacturers.

The restructuring activities associated with the Plan are expected to be completed in the third quarter of fiscal year 2026 and will allow the Company to more effectively compete in chosen markets and fundamentally change its corporate gross margin profile.

On February 15, 2024, the Company completed the sale of the PICC and Midline businesses to Spectrum Vascular.

The Company also entered into various agreements to facilitate the transition to Spectrum, including a Transition Services Agreement and Contract Manufacturing Agreement.

Total consideration received by the Company for the Divestiture was $34.5 million in cash and resulted in a pre-tax book gain of $6.7 million.

Included in the agreement is a $5.5 million earn-out related to the sales of divested products over a two year period and a milestone payment of $5.0 million paid upon final transfer of the manufacturing to a third-party.

In the third quarter of fiscal year 2024, the Company concluded that the sustained decline in our stock price was a triggering event for the Med Tech reporting unit.

The Company utilized the income approach to determine the fair value of the remaining Med Tech reporting unit.

Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $159.5 million for the quarter ended February 29, 2024 to write down the carrying value of the Med Tech reporting unit to fair value.

On March 31, 2024, the Company and BD entered into a Settlement Agreement as described in Note 14 "Commitments and Contingencies" set forth in the Notes to our consolidated financial statements in this Quarterly Report on Form 10 -Q.

The Company will make a one-time lump sum payment to BD in the amount of $7.0 million, $3.0 million of which will be payable within 5 business days, and the remainder of which will be payable in installments over the next 12 months.

The Company will also make six minimum annual payments to BD of $2.5 million through February, 2029, and potential additional payments if six percent (6%) of annual net sales of AngioDynamics’ port products exceed the minimum payment.

The parties will participate in the pending appeal before the Federal Circuit of the case titled C.R.

and Bard Peripheral Vascular, Inc.

AngioDynamics, Inc.

15-00218–JFB;

and CAFC appeal No.

23-2056) and a contingent payment of $3.0 million will be due from AngioDynamics to BD if the Federal Circuit reverses or vacates the District Court’s findings of invalidity with respect to the patent claims at issue in the case.

Neither party admitted any liability and the agreement contains mutual covenants not to sue and releases.

The agreement contains mutual covenants not to sue and releases.

As of February 29, 2024,

Table of Content

the present value of the lump sum and minimum annual payments of $19.3 million was recorded in "Acquisition, restructuring and other items, net" on the accompanying consolidated statements of operations and a long-term asset of $1.3 million, other current liabilities of $8.5 million and other long-term liabilities of $12.0 million was recorded on the consolidated balance sheets.

In evaluating the operating performance of our business, management focuses on company-wide and segment revenue and gross margin and company-wide operating income, earnings per share and cash flow from operations.

A summary of these key financial metrics for the three and six months ended November 30, 2023 compared to the three and six months ended November 30, 2022 are as follows:

Three months ended November 30, 2023:

A summary of these key financial metrics for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023 are as follows:

Three months ended February 29, 2024:

• Revenue decreased by 6.9% to $75.2 million

4 unchanged sentences

• Loss per share increased by $4.43 to $4.67

Six months ended November 30, 2023:

Nine months ended February 29, 2024:

• Revenue decreased by 6.0% to $232.9 million

1 unchanged sentence

• Gross profit decreased 170 bps to 49.9%

• Med Tech gross profit was consistent at 63.5% and Med Device gross profit decreased 300 bps to 44.9%

• Net income increased by $38.3 million to $16.8 million

• Earnings per share increased by $0.97 to $0.42

• Med Tech gross profit decreased 100 bps 62.8% and Med Device gross profit decreased 330 bps to 43.5%

• Net loss increased by $139.9 million to $170.9 million

• Loss per share increased by $3.47 to $4.26

• Cash used in operations increased by $17.3 million to $33.2 million

For the three and six months ended November 30, 2023, the decrease in revenue is due to the sale of the dialysis and BioSentry businesses, which closed on June 8, 2023 and impacted sales by $8.4 million and $16.2 million compared to the same periods in the prior year, respectively.

Our Med Tech revenue, comprised of Auryon, the thrombus management platform and NanoKnife, grew 3.5% in the second quarter of fiscal year 2024.

For the three and nine months ended February 29, 2024, the decrease in revenue is partially due to the sale of the PICCs, Midline, dialysis and BioSentry businesses which impacted sales by $9.6 million and $25.6 million compared to the three and nine months ended February 28, 2023, respectively.

Our Med Tech revenue, comprised of Auryon, the thrombus management platform and NanoKnife, grew 13.0% in the third quarter of fiscal year 2024.

The growth in Auryon and NanoKnife was partially offset by continued softness in the thrombus management platform.

Our Med Device revenue declined by 11.8% in the second quarter of fiscal year 2024 driven mainly by the sale of the dialysis and BioSentry businesses.

Table of Content

Our Med Device revenue declined by 14.7% in the third quarter of fiscal year 2024 driven mainly by the sale of the PICCs, Midlines, dialysis and BioSentry businesses.

Results of Operations

For the three months ended November 30, 2023, the Company reported net loss of $29.0 million, or diluted loss per share of $0.72, on net sales of $79.1 million, compared with a net loss of $8.5 million, or a loss of $0.21 per diluted share, on net sales of $85.4 million during the same quarter of the prior year.

For the six months ended November 30, 2023, the Company reported net income of $16.8 million, or diluted earnings per share of $0.42, on net sales of $157.8 million, compared with a net loss of $21.5 million, or a loss of $0.55 per diluted share, on net sales of $167.0 million during the same quarter of the prior year.

For the three months ended February 29, 2024, the Company reported net loss of $187.7 million, or diluted loss per share of $4.67, on net sales of $75.2 million, compared with a net loss of $9.5 million, or a loss of $0.24 per diluted share, on net sales of $80.7 million during the same quarter of the prior year.

For the nine months ended February 29, 2024, the Company reported net loss of $170.9 million, or diluted loss per share of $4.26, on net sales of $232.9 million, compared with a net loss of $31.0 million, or a loss of $0.79 per diluted share, on net sales of $247.7 million during the same quarter of the prior year.

Net sales - Net sales are derived from the sale of products and related freight charges, less discounts, rebates and returns.

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 $ Change Nov 30, 2023 Nov 30, 2022 $ Change

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 $ Change Feb 29, 2024 Feb 28, 2023 $ Change

Med Tech $ 25,844 $ 22,874 $ 2,970 $ 77,068 $ 70,193 $ 6,875

1 unchanged sentence

Total $ 75,182 $ 80,712 $ (5,530) $ 232,934 $ 247,678 $ (14,744)

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 $ Change Nov 30, 2023 Nov 30, 2022 $ Change

Table of Content

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 $ Change Feb 29, 2024 Feb 28, 2023 $ Change

United States $ 62,342 $ 67,620 $ (5,278) $ 190,743 $ 208,274 $ (17,531)

1 unchanged sentence

Total $ 75,182 $ 80,712 $ (5,530) $ 232,934 $ 247,678 $ (14,744)

For the three months ended November 30, 2023, net sales decreased $6.4 million to $79.1 million compared to the same period in the prior year.

For the six months ended November 30, 2023, net sales decreased $9.2 million to $157.8 million compared to the same period in the prior year.

At November 30, 2023, the Company had a backlog of $2.0 million, a decrease of $1.3 million from August 31, 2023.

The Med Tec h segment net sales increased $0.9 million and $3.9 million fo r the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

For the three months ended February 29, 2024, net sales decreased $5.5 million to $75.2 million compared to the three months ended February 28, 2023.

For the nine months ended February 29, 2024, net sales decreased $14.7 million to $232.9 million compared to the nine months ended February 28, 2023.

At February 29, 2024, the Company had a backlog of $1.2 million, a decrease of $0.9 million from November 30, 2023.

The Med Tec h segment net sales increased $3.0 million and $6.9 million fo r the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively.

The change in sales for both periods was primarily driven by:

• Increased Auryon sales of $1.3 million and $3.6 million compared to the same periods in the prior year, respectively;

• Decreased sales of the thrombus management platform of $0.6 million and $1.3 million compared to the same period in the prior year, respectively.

This was driven by a decrease in AngioVac sales of $0.6 million and $1.2 million compared to the same periods in the prior year, respectively, partially offset by increased AlphaVac sales of $0.3 million and $0.3 million compared to the same periods in the prior year, respectively;

• Increased NanoKnife sales of $0.2 million and $1.6 million compared to the same periods in the prior year, respectively, which was driven by increased capital sales for the three months ended November 30, 2023 and increased capital and disposable sales for the six months ended November 30, 2023.

The Me d Device segment net sales decreased $7.2 million and $13.1 million for the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

The backlog, which primarily impacted sales of Core and Vascular Access products, was $2.0 million, a decrease of $1.3 million from August 31, 2023.

The change in sales for the three months ended November 30, 2023 compared to the same period in the prior year was primarily driven by:

• Increased Auryon sales of $1.5 million and $5.0 million compared to the three and nine months ended February 28, 2023, respectively;

• Decreased sales of the thrombus management platform of $0.5 million and $1.8 million compared to the three and nine months ended February 28, 2023, respectively.

This was driven by AngioVac sales remaining consistent and decreasing $1.2 million compared to the three and nine months ended February 28, 2023, respectively.

This was also driven by AlphaVac sales decreasing $0.9 million and $0.6 million, respectively;

• Increased NanoKnife sales of $1.9 million and $3.5 million compared to the three and nine months ended February 28, 2023, respectively, which was driven by increased capital and disposable sales for the three and nine months ended February 29, 2024.

The Me d Device segment net sales decreased $8.5 million and $21.6 million for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively .

The backlog, which primarily impacted sales of Core and Vascular Access products, was $1.2 million, a decrease of $0.9 million from November 30, 2023.

The change in sales for the three months ended February 29, 2024 compared to the three months ended February 28, 2023, respectively, was primarily driven by:

• Decreased sales of PICCs and Midline products of $1.6 million and $0.5 million, respectively, which was due to the divestiture of these businesses on February 15, 2024;

• Decreased sales of dialysis and BioSentry products of $5.7 million and $1.8 million, respectively, which was due to the divestiture of these businesses on June 8, 2023;

• Decreased sales of Microwave and Other Oncology and Vascular Access sales of $0.4 million and $0.1 million, respectively.

These decreases were partially offset by increased sales of Core, PICCS and Ports products of $0.4 million, $0.1 million and $0.4 million, respectively.

The change in sales for the six months ended November 30, 2023 compared to the same period in the prior year was primarily driven by:

Table of Content

• Decreased sales of RadioFrequency Ablation and Syntrax of $0.9 million and $0.1 million, respectively.

These products were discontinued as of February 29, 2024;

• Increased sales of Core, Venous and Ports of $1.2 million, $1.2 million and $0.4 million, respectively.

This increase was partially offset by decreased sales of Microwave and Other VA and Oncology products of $0.4 million and $0.5 million, respectively.

The change in sales for the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023, respectively, was primarily driven by:

• Decreased sales of PICCs and Midline products of $2.3 million and $0.2 million, respectively, which was due to the divestiture of these businesses on February 15, 2024;

• Decreased sales of dialysis and BioSentry products of $17.9 million and $5.2 million, respectively, which was due to the divestiture of these businesses on June 8, 2023;

• Decreased sales of PICCs and Other Oncology and Vascular Access sales of $0.7 million and $0.7 million, respectively.

These decreases were partially offset by increased sales of Core, Midlines, Ports and Microwave products of $0.3 million, $0.3 million, $2.0 million and $0.7 million, respectively.

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 $ Change Nov 30, 2023 Nov 30, 2022 $ Change

• Decreased sales of RadioFrequency Ablation and Syntrax of $1.5 million and $0.1 million, respectively.

These products were discontinued as of February 29, 2024;

• Increased sales of Core, Ports, Venous and Microwave of $1.6 million, $2.4 million, $1.7 million and $0.3 million, respectively.

This increase was partially offset by decreased sales of Other VA and Oncology products of $0.5 million.

Table of Content

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 $ Change Feb 29, 2024 Feb 28, 2023 $ Change

Med Tech $ 15,857 $ 14,774 $ 1,083 $ 48,400 $ 44,816 $ 3,584

5 unchanged sentences

Gross profit - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead, exclusive of intangible amortization.

Total Company gross profit decreased by $4.8 million and $7.1 million for the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

Total Company gross profit decreased by $4.6 million and $11.7 million for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively.

The change for both periods was primarily driven by:

• The sale of the dialysis and BioSentry businesses, which negatively impacted gross profit by $5.3 million and $9.4 million, respectively;

• The sale of the PICCs, Midline, dialysis and BioSentry businesses, which negatively impacted gross profit by $5.4 million and $15.3 million, respectively;

• Sales volume, which positively impacted gross profit by $2.5 million and $6.5 million, respectively;

• Production volume, price and other incentives which positively impacted gross profit by $0.1 million and $1.0 million, respectively;

• Price, which positively impacted gross profit by $1.1 million and $1.1 million, respectively;

• Production volume and other costs, which negatively impacted gross profit by $1.9 million and $0.7 million, respectively and is inclusive of a $1.0 million recall reserve that was recorded in the third quarter of fiscal year 2024;

• Sales mix, which negatively impacted gross profit by $0.8 million and $1.7 million, respectively;

• Inflationary costs on raw materials, labor shortages and freight costs, which negatively impacted gross profit by $0.5 million and $0.9 million, respectively;

• Inflationary costs on raw materials, labor shortages and freight costs had a consistent impact on gross profit for the three months ended February 29, 2024 compared to the three months ended February 28, 2023, and which negatively impacted gross profit by $0.7 million for the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023;

• Incremental depreciation on placement units of $0.2 million and $0.8 million, respectively.

The Med Tech segment gross profit increased by $0.2 million and $2.5 million for the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

The Med Tech segment gross profit increased by $1.1 million and $3.6 million for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively.

The change for both periods was primarily driven by:

3 unchanged sentences

• Incremental depreciation on placement units of $0.1 million and $0.5 million, respectively.

The Med Device segment gross profit decreased by $5.0 million and $9.6 million for the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

The Med Device segment gross profit decreased by $5.7 million and $15.3 million for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively.

The change for both periods was primarily driven by:

• The sale of the dialysis and BioSentry businesses, which negatively impacted gross profit by $5.3 million and $9.4 million, respectively;

• The sale of the PICCs, Midline, dialysis and BioSentry businesses, which negatively impacted gross profit by $5.4 million and $15.3 million, respectively;

• Sales volume, which positively impacted gross profit by $1.0 million and $2.3 million, respectively;

• Production volume and price, which negatively impacted gross profit by $0.1 million for the three months ended November 30, 2023 compared to the same period in the prior year, and which positively impacted gross profit by $0.1 million for the six months ended November 30, 2023 compared to the same period in the prior year;

• Production volume, price and other incentives, which negatively impacted gross profit by $0.9 million and $0.2 million, respectively and is inclusive of a $1.0 million recall reserve that was recorded in the third quarter of fiscal year 2024;

• Sales mix, which negatively impacted gross profit by $0.4 million and $0.9 million, respectively;

• Inflationary costs on raw materials, labor shortages and freight costs, which negatively impacted gross profit by $0.5 million and $0.8 million, respectively;

• Incremental depreciation on placement units of $0.1 million and $0.1 million, respectively.

• Inflationary costs on raw materials, labor shortages and freight costs had a consistent impact on gross profit for the three months ended February 29, 2024 compared to the three months ended February 28, 2023, and which negatively impacted gross profit by $0.9 million for the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023;

Table of Content

• Incremental depreciation on placement units remained consistent for the three months ended February 29, 2024 compared to the same period in the prior year, and negatively impacted gross profit by $0.2 million for the nine months ended February 29, 2024 compared to the same period in the prior year.

Operating Expenses and Other Income (Expense)

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 $ Change Nov 30, 2023 Nov 30, 2022 $ Change

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 $ Change Feb 29, 2024 Feb 28, 2023 $ Change

Research and development $ 8,189 $ 6,852 $ 1,337 $ 24,788 $ 22,023 $ 2,765

5 unchanged sentences

Research and development expense - Research and development (“R&D”) expense includes internal and external costs to develop new products, enhance existing products, validate new and enhanced products, and manage clinical, regulatory and medical affairs.

R& D expense increased $1.8 million and $1.4 million for t he three and six months ended November 30, 2023 compared to the same period in the prior year, respectively.

R& D expense increased $1.3 million and $2.8 million for t he three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively .

The change for both periods was primarily driven by:

2 unchanged sentences

Sales and marketing expense - Sales and marketing (“S&M”) expense consists primarily of salaries, commissions, travel and related business expenses, attendance at medical society meetings, product promotions and marketing activities.

S&M expense decreased $0.5 million and increased $0.3 million for t he three and six months ended November 30, 2023 compared to the same period in the prior year.

S&M expense remained consistent for the three months ending February 29, 2024 compared to the three months ended February 28, 2023, and increased $0.3 million for t he nine months ended February 29, 2024 compared to the nine months ended February 28, 2023 .

The change for both periods was primarily driven by:

• Compensation and benefits expense, which increased by $1.1 million and $3.1 million, respectively;

• Trade show expenses, which increased $0.1 million and $0.2 million, respectively.

• Trade show expenses, which decreased $0.1 million and increased $0.1 million, respectively.

This was partially offset by travel and other selling expenses, which decreased $0.8 million and $2.7 million, respectively.

General and administrative expense - General and administrative (“G&A”) expense includes executive management, finance, information technology, human resources, business development, legal, and the administrative and professional costs associated with those activities.

G&A e xpense decreased $1.5 million and $0.8 million for th e three and six months ended November 30, 2023 compared to the same period in the prior year.

G&A e xpense increased $1.7 million and $0.9 million for th e three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively .

The change for both periods was primarily driven by:

• Compensation and benefits expenses, which decreased $1.4 million and $0.5 million, respectively.

The decrease for the six months ended November 30, 2023 was partially offset by a change in the vesting of equity grants to members of the Board from a one-year vest period to immediate vesting which resulted in additional expense of $1.1 million in the first quarter of fiscal year 2024;

• Other outside consultant spend for legal and IT, which decreased $0.2 million and $0.1 million, respectively along with decreased travel expenses of $0.1 million and $0.3 million, respectively.

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 $ Change Nov 30, 2023 Nov 30, 2022 $ Change

• Compensation and benefits expenses, which increased $1.5 million and $1.0 million, respectively;

• Other outside consultant spend for legal and IT, which increased $0.1 million for the three months ending February 29, 2024 compared to the three months ended February 28, 2023 and remained consistent for the nine months ending February 29, 2024 compared to the nine months ended February 28, 2023, along with increased travel expenses of $0.3 million for the three months ending February 29, 2024.

Table of Content

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 $ Change Feb 29, 2024 Feb 28, 2023 $ Change

Amortization of intangibles $ 3,287 $ 4,739 $ (1,452) $ 10,474 $ 14,384 $ (3,910)

Goodwill impairment $ 159,476 $ — $ 159,476 $ 159,476 $ — $ 159,476

Change in fair value of contingent consideration $ 112 $ 227 $ (115) $ 203 $ 2,084 $ (1,881)

1 unchanged sentence

Other expense, net $ 156 $ (736) $ 892 $ 489 $ (2,228) $ 2,717

Table of Content

Amortization of intangibles - Represents the amount of amortization expense that was taken on intangibles assets held by the Company.

• Amortization expense decreased $1.2 million and $2.5 million for the three and six months ended November 30, 2023 compared to the same period in the prior year, respectively, due to the intangible assets that were included in the sale of the dialysis and BioSentry businesses.

• Amortization expense decreased $1.5 million and $3.9 million for the three and nine months ended February 29, 2024 compared to the three and nine months ended February 28, 2023, respectively, due to the intangible assets that were included in the sale of the dialysis, BioSentry, PICCs and Midlines businesses and the abandonment of the Syntrax product line.

Goodwill impairment - Represents the impairment charge taken on goodwill.

• The Company recorded a non-cash goodwill impairment charge of $159.5 million for the three and nine months ended February 29, 2024 as the fair value of the Med Tech reporting unit was less than its carrying value.

Change in fair value of contingent consideration - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.

• The change in the fair value for the three and six months ended November 30, 2023 is related to the Eximo contingent consideration.

• The change in the fair value for the three and nine months ended February 29, 2024 is related to the Eximo contingent consideration.

Acquisition, restructuring and other items, net - Represents costs associated with mergers and acquisitions, restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.

Acquisition, restructuring and other item s, net, increased by $3.1 million and $0.8 million for the three and six months ended November 30, 2023, compared to the same period in the prior year, respectively.

Acquisition, restructuring and other item s, net, increased by $32.0 million and $32.8 million for the three and nine months ended February 29, 2024, compared to the three and nine months ended February 28, 2023, respectively.

The change for both periods was primarily driven by:

• Legal expense, re lated to litigation that is outside of the normal course of business, which increased $2.9 million and $2.9 million, respectively;

• Legal expense, related to litigation that is outside of the normal course of business, which increased $20.7 million and $23.6 million, respectively was driven by the $19.3 million settlement between the Company and BD;

• Mergers and acquisition expense, which increased $0.1 million and $0.4 million, respectively;

• Manufacturing relocation expense related to the move of certain manufacturing lines from Queensbury, New York to a third party, which increased $0.1 million and $0.5 million, respectively;

• A transition services agreement that was entered into as a result of the sale of the dialysis and BioSentry businesses.

• Plant closure expense, related to the restructuring of our manufacturing footprint which was announced on January 5, 2024, which increased $5.4 million and $6.1 million, respectively;

• An impairment of $3.4 million on the Syntrax product technology intangible asset and an inventory write-off of $2.9 million was taken in the third quarter of fiscal year 2024 related to the abandonment of the Syntrax and RF product lines;

• Transaction services agreements that were entered into as a result of the sale of the PICCs, Midline, dialysis and BioSentry businesses.

The Company invoiced Spectrum $0.1 million and $0.1 million for the three and nine months ended February 29, 2024, respectively.

The Company invoiced Merit Medical Systems, Inc.

$0.2 million and $0.3 million for the three and six months ended November 30, 2023, respectively ;

$0.2 million and $0.5 million for the three and nine months ended February 29, 2024, respectively;

• Manufacturing relocation expense related to the move of certain manufacturing lines from Queensbury, New York to a third party, which decreased $0.3 million and $0.5 million, respectively;

• The payment to the Israeli Innovation Authority of $3.5 million related to grant funds that were provided to Eximo to develop the Auryon laser prior to the acquisition in the second quarter of fiscal year 2020.

These grant funds were fully repaid in the first quarter of fiscal year 2023 to satisfy the obligation which was otherwise being paid as a royalty based on a percentage of sales;

• $0.9 million of deferred financing fees that were written-off in conjunction with the sale of the Dialysis and BioSentry businesses and concurrent extinguishment of the debt for the six months ended November 30, 2023, compared to the same period in the prior year.

Table of Content

• $0.9 million of deferred financing fees that were written-off in conjunction with the sale of the Dialysis and BioSentry businesses and concurrent extinguishment of the debt for the nine months ended February 29, 2024, compared to the same period in the prior year.

Other expense, net - Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.

• The change in other expe nse of $1.4 million and $1.8 million for the three and six months ended November 30, 2023, compared to the same period in the prior year, respectively, is primarily due to decreased interest expense of $0.6 million and $0.9 million, respectively, increased interest income of $0.5 million and $0.7 million, respectively and unrealized foreign currency fluctuations of $0.3 million and $0.1 million, respectively.

• The change in other expe nse of $0.9 million and $2.7 million for the three and nine months ended February 29, 2024, compared to the three and nine months ended February 28, 2023, respectively , is primarily due to decreased interest expense of $0.8 million and $1.7 million, respectively, increased interest income of $0.3 million and $1.0 million, respectively and unrealized foreign currency fluctuations of $0.2 million and $0.1 million, respectively.

Income Tax Benefit

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

Income tax benefit (expense) $ (12.0) $ (0.2) $ (6.6) $ (1.6)

Effective tax rate including discrete items 6.0 % 1.9 % 3.7 % 4.9 %

Our effective tax rate including discrete items for the three months ended November 30, 2023 and 2022 was (130.2)% and 6.2%, respectively.

Our effective tax rate including discrete items for the six months ended November 30, 2023 and 2022 was 24.3% and 6.2%, respectively.

Our effective tax rate including discrete items for the three months ended February 29, 2024 and February 28, 2023 was 6.0% and 1.9%, respectively.

Our effective tax rate including discrete items for the nine months ended February 29, 2024 and February 28, 2023 was 3.7% and 4.9%, respectively.

In fiscal year 2024, the Company’s effective tax rate differs from the U.S.

statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation and non-deductible share-based compensation).

Table of Content

Liquidity and Capital Resources

We regularly review our liquidity and anticipated capital requirements and we believe that our current cash on hand provides sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months.

Our cash and cash equivalents totaled $60.9 million as of November 30, 2023, compared with $44.6 million as of May 31, 2023.

As of November 30, 2023 there was no outstanding debt as the Credit Agreement was extinguished in connection with the Divestiture (see Note 7 "Long-Term Debt" set forth in the Notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q).

Our cash and cash equivalents totaled $78.5 million as of February 29, 2024, compared with $44.6 million as of May 31, 2023.

As of February 29, 2024 there was no outstanding debt as the Credit Agreement was extinguished in connection with the Divestiture (see Note 7 "Long-Term Debt" set forth in the Notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q).

As of May 31, 2023, total debt outstanding related to the Credit Agreement was $50.0 million.

The fair value of contingent consideration liability as of November 30, 2023 and May 31, 2023, was $9.4 million and $19.3 million, respectively.

The fair value of contingent consideration liability as of February 29, 2024 and May 31, 2023, was $9.5 million and $19.3 million, respectively.

The table below summarizes our cash flows:

Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022

Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023

Cash provided by (used in):

4 unchanged sentences

Net change in cash and cash equivalents $ 33,831 $ 1,286

During the quarters ended November 30, 2023 and 2022, cash flows consisted of the following:

During the quarters ended February 29, 2024 and February 28, 2023, cash flows consisted of the following:

Cash used in operating activities

Six months ended November 30, 2023 and 2022:

• Net income of $16.8 million and a net loss of $21.5 million, respectively, plus the non-cash items, primarily driven by depreciation and amortization and stock based compensation, along with the changes in working capital below, contributed to cash used in operations of $20.6 million and $17.2 million, respectively, for these periods.

• For the period ended November 30, 2023, working capital was unfavorably impacted by decreased accounts payable, accrued liabilities and other liabilities of $1.0 million, along with increased in ventory and prepaid expenses of $8.8 million and $5.0 million, respectively.

Nine months ended February 29, 2024 and February 28, 2023:

• Net loss of $170.9 million and a net loss of $31.0 million, respectively, plus the non-cash items, primarily driven by depreciation and amortization and stock based compensation, along with the changes in working capital below, contributed to cash used in operations of $33.2 million and $15.9 million, respectively, for these periods.

• For the period ended February 29, 2024, working capital was unfavorably impacted by decreased accounts payable, accrued liabilities and other liabilities of $16.7 million, along with increased in ventory and prepaid expenses of $6.8 million and $7.6 million, respectively.

This was partially offset by decreased accounts rec eivable of $2.3 million .

• For the period ended November 30, 2022, working capital was unfavorably impacted by decreased accounts payable, accrued liabilities and other liabilities of $2.8 million, along with increased receivables, inventory and prepaid expenses of $1.0 million, $11.8 million and $3.9 million, respectively.

Table of Content

• For the period ended February 28, 2023, working capital was unfavorably impacted by decreased accounts payable, accrued liabilities and other liabilities of $7.1 million, along with increased inventory and prepaid expenses of $12.3 million and $0.4 million, respectively.

This was partially offset by decreased accounts rec eivable of $0.8 million .

Cash provided by (used in) investing activities

Six months ended November 30, 2023 and 2022:

Nine months ended February 29, 2024 and February 28, 2023:

• $2.0 million and $2.8 million, respectively, of cash was used for fixed asset additions;

1 unchanged sentence

• $100.0 million of cash was received for the divestiture of the dialysis and BioSentry businesses in the first quarter of fiscal year 2024;

• $0.5 million of cash was used for the acquisition of an exclusive license in the first quarter of fiscal year 2023.

• $34.5 million of cash was received for the divestiture of the PICCs and Midline businesses in the third quarter of fiscal year 2024;

• $3.3 million and $0.5 million, respectively, of cash was used for the acquisition of exclusive licenses.

Cash (used in) provided by financing activities

Six months ended November 30, 2023 and 2022:

Nine months ended February 29, 2024 and February 28, 2023:

• $50.0 million repayment of the Credit Agreement in connection with the completion of the dialysis and BioSentry divestiture in the first quarter of fiscal year 2024;

3 unchanged sentences

• $0.8 million and $1.2 million, respectively, of proceeds from stock option and ESPP activity.

Table of Content

On June 8, 2023 and in connection with the completion of the dialysis and BioSentry divestiture, the Company repaid all amounts outstanding under its existing Credit Agreement, and as a result, the Credit Agreement was extinguished.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis