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Item 2. Management’s Discussion and Analysis

2025-05-05 compared with 2024-11-04 · 204 added, 236 removed, 215 unchanged (67% of the section changed)

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We have made statements in this Quarterly Report that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).

All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility and plans to operationalize the Company's Braintree facility, transition the manufacture of SurgiMend® and PriMatrix® to the Braintree facility, and to obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction;

our expectations regarding CMP (as defined below) implementation and engagement;

restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts, are forward-looking statements.

All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, our growth and growth strategies, developments in the markets for our products and services, financial results, our planned product launches and effectiveness, our research and development strategy, regulatory approvals, our competitive strengths, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility and plans to operationalize the Company's

manufacturing facility in Braintree, Massachusetts (“the Braintree facility”), our transition of the manufacture of SurgiMend® and PriMatrix® to the Braintree facility, our ability to obtain a pre-market approval (“PMA”) of SurgiMend PRS in implant-based breast reconstruction and to obtain a PMA for Durasorb® in 2026 for multiple indications for implant-based breast reconstruction, our expectations regarding the Compliance Master Plan (“the CMP”) implementation and engagement, our restructuring and cost-saving initiatives, our intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations and compliance with restrictive and financial covenants of our outstanding indebtedness, working capital adequacy, value of our investments, our effective tax rate, estimates regarding the impact of tariffs adopted or implemented by the U.S.

or other countries on our business, financial condition and results of operations, our expected returns to shareholders, and our sales efforts, are forward-looking statements.

In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or the negative version of these words or other similar words and expressions in this Quarterly Report.

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Such risks and uncertainties include, but are not limited, to the following:

the ongoing and possible future effects of global challenges, including macroeconomic uncertainties, inflation, supply chain disruptions, trade regulation and tariffs, other economic disruptions and U.S.

the ongoing and possible future effects of global challenges, including macroeconomic uncertainties, inflation, supply chain disruptions, trade regulation and tariffs, political instability, violent conflicts, and other macroeconomic disruptions and U.S.

and global recession concerns, on the Company’s customers and on the Company’s business, financial condition, results of operations and cash flows;

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the ability of third-party suppliers to supply us with raw materials and finished products;

global macroeconomic and political conditions, including the war in Ukraine and the conflict in Israel and Gaza;

the Company’s ability to manage its direct sales channels effectively;

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the Company’s ability to remediate quality systems violations;

difficulties or delays in obtaining and maintaining required regulatory approvals related to the transition of the manufacturing to the Braintree facility and obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction;

difficulties or delays in obtaining and maintaining required regulatory approvals related to the transition of manufacturing SurgiMend and PriMatrix to the Braintree facility and obtain pre-market approval of SurgiMend PRS in implant-based breast reconstruction;

the possibility that costs or difficulties related to building and the operationalization of the Braintree facility or the transition of manufacturing activities from the Company’s Boston facility to the Braintree facility will be greater than expected;

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the Company’s ability to comply with regulations regarding products of human origin and products containing materials derived from animal source;

difficulties in controlling expenses, including costs to procure and manufacture our products;

the impact of changes in management or staff levels;

the impact of goodwill and intangible asset impairment charges if future operating results of acquired businesses are significantly less than the results anticipated at the time of the acquisitions, the Company’s ability to leverage its existing selling organizations and administrative infrastructure;

the Company’s ability to increase product sales and gross margins, and control non-product costs;

the Company’s ability to achieve anticipated growth rates, margins and scale and execute its strategy generally;

the Company’s ability to increase product sales and gross margins, and control both product and non-product costs and expenses;

the amount and timing of divestiture, acquisition and integration-related costs;

the geographic distribution of where the Company generates its taxable income;

and foreign government laws and regulations, and changes in existing laws, regulations and enforcement guidance, which affect areas of our operations including, but not limited to, those affecting the health care industry, including the EU Medical Devices Regulation;

the scope, duration and effect of additional U.S.

and international

governmental, regulatory, fiscal, monetary and public health responses to public health crises;

and international governmental, regulatory, fiscal, monetary and public health responses to public health crises;

fluctuations in foreign currency exchange rates;

the amount of our bank borrowings outstanding and other factors influencing liquidity;

our ability to comply with the covenants under the agreements governing our indebtedness and the potential negative consequences caused by non-compliance;

potential negative impacts resulting from environmental, social and governance matters;

disruptions at the FDA, including due to a reduction in the FDA's and CMS' workforce and/or inadequate funding for the FDA or CMS;

and the potential impact of our compliance with governmental regulations and accounting guidance.

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These forward-looking statements speak only as of the date of this Quarterly Report and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

You should carefully consider forward-looking statements and understand that such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a variety of risks and uncertainties.

We are a leading global medical technology company innovating treatment pathways in surgical, neurologic and regenerative care to advance patient outcomes and set new standards of surgical, neurologic and regenerative care.

Founded in 1989 with the acquisition of an engineered collagen technology platform used to repair and regenerate tissue, our common stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “IART.” We have developed numerous product lines from this technology for applications ranging from burn and deep tissue wounds to the repair of dura mater in the brain, as well as nerves and tendons.

We have expanded our base regenerative technology business to include surgical instruments, neurosurgical products and advanced wound care through global acquisitions and product development to meet the evolving needs of our customers and enhance patient care.

Our products are sold in more than 120 countries through a direct sales force as well as distributors and wholesalers.

You should carefully consider forward-looking statements and understand that such forward-

looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a variety of risks and uncertainties.

Integra LifeSciences Holdings Corporation was founded in 1989 and is a leading global medical technology company innovating treatment pathways to advance patient outcomes and set new standards of surgical, neurologic, ear, nose, and throat (“ENT”) and regenerative care.

Our common stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “IART.” We have developed numerous product lines from our technologies for applications ranging from burn and deep tissue wounds to the repair of dura mater in the brain, as well as nerves and tendons.

We have expanded our base regenerative technology business to include ENT, surgical instruments, neurosurgical products and advanced wound care through global acquisitions and product development to meet the evolving needs of our customers and enhance patient care.

Integra products are sold in more than 120 countries through a direct sales force as well as distributors and wholesalers.

We manufacture and sell medical technologies and products in two reportable business segments:

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The CSS segment, which represents approximately two-thirds of our total revenue, consists of market-leading technologies and instrumentation used for a wide range of specialties, such as neurosurgery, neurocritical care and otolaryngology.

We are the world leader in neurosurgery and one of the top three providers in instruments used in precision, specialty, and general surgical procedures.

We are the world leader in neurosurgery and one of the top three providers in the U.S.

in instruments used in precision, specialty, and general surgical procedures.

Our TT segment generates about one-third of our overall revenue and focuses on three main areas:

complex wound surgery, surgical reconstruction, and peripheral nerve repair.

We have key manufacturing and research facilities located in California, Maryland, Massachusetts, New Jersey, Ohio, Puerto Rico, Tennessee, Utah, France, Germany, Ireland and Switzerland.

We have key manufacturing and research facilities located in California, Maryland, Massachusetts, New Jersey, Ohio, Puerto Rico, Tennessee, Utah, France, Germany, Ireland, Israel and Switzerland.

We source most of our handheld surgical instruments and dural sealant products through specialized third-party vendors.

Our strategies are focused around five pillars.

Of these five pillars, we have identified three core growth drivers:

Of these five pillars, three are core growth drivers:

(1) innovating for outcomes, (2) growing internationally, and (3) broadening our impact on care pathways.

Our execution of the core growth drivers is enabled by two key levers:

Our execution of the core growth drivers is enabled by two additional pillars:

(4) driving operational and customer excellence and (5) cultivating a high-performance culture.

As outlined in greater detail below, we believe these five pillars will enable us to realize and advance our integrated growth strategy.

To this end, our executive leadership team has established the following key priorities aligned to the following five pillars:

To this end, our executive leadership team has established the following key priorities aligned to our five pillars:

Innovating for Outcomes .

An important part of Integra’s growth strategy is introducing new products to strengthen and expand our portfolio through clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the world, including new indications for existing technologies.

For example, in 2021, we filed a pre-market approval (“PMA”) application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction.

We cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree, Massachusetts facility (the "Braintree facility"), where Surgimend® will be manufactured.

We are also pursuing a PMA for DuraSorb for use in implant-based breast reconstruction (“IBBR”).

In 2021, we filed a PMA application for a specific indication for SurgiMend in the use of post-mastectomy implant-based breast reconstruction (“IBBR”).

We currently anticipate PMA approval following the completion of the construction, FDA approval and operationalization of our Braintree facility, which is expected in the first half of 2026.

We are also pursuing a PMA for DuraSorb for multiple indications in the use in IBBR.

We completed enrollment for the DuraSorb U.S.

investigational device exemption clinical study for two-stage breast reconstruction in June 2023 and are conducting the primary follow-up one year after device implantation.

We hope to secure approval for DuraSorb in 2025.

In addition, in March 2024, we expanded our urinary bladder matrix platform with the U.S.

investigational device exemption (“IDE”) clinical trial for two-stage breast reconstruction in 2023 and we continue to advance the PMA application.

Currently, we hope to secure PMA approval for DuraSorb in 2026.

In 2024 we expanded our urinary bladder matrix platform with the U.S.

launch of MicroMatrix® Flex, a dual-syringe system enabling the convenient mixing and precise delivery of MicroMatrix paste to provide convenient access to hard-to-reach spaces and to help prepare an even wound surface in challenging wound areas.

We also continued to advance the development of pioneering neurosurgical technologies with the expansion of our product offerings.

In 2023, we launched additional CUSA® Clarity tips for use in surgical procedures requiring the controlled fragmentation, emulsification and aspiration of bone as well as in laparoscopic liver surgery.

Additionally, in 2024, we successfully re-launched our CereLink ® intracranial pressure (“ICP”) monitor system.

CereLink provides advanced continuous ICP monitoring when treating patients with traumatic brain injuries and offers enhanced accuracy, usability and advanced data presentation compared to other leading ICP monitoring systems.

Growing Internationally.

Over the years, we have been significantly expanding our global footprint through investments in our commercial and manufacturing organizations, the expansion and development of international markets and new product introductions.

As part of our In-China-For-China strategy, we continue the build out of our assembly capabilities in our new facility in Suzhou, China.

As part of our In-China-For-China strategy, we continue to build out our assembly capabilities in our facility in Suzhou, China.

Several new products were introduced in select international markets in 2023 and 2024, including MicroMatrix and Certas Plus® Programmable Valve, which were launched in Europe, and CUSA Clarity laparoscopic tip, which was launched in Australia, New Zealand, Japan, Canada, South Africa and Israel.

In addition, DuraGen® Secure received approval in Japan, while DuraGen Plus, an absorbable and sutureless collagen onlay indicated as a dura substitute for the repair of dura mater, and Certas Plus were approved in China.

We also continued to strengthen our presence in South Asia, Southeast Asia and South Korea with key leadership appointments.

Broadening Impact on Care Pathways .

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We are well-established in acute care in the hospital setting and continue to leverage that strong position to grow in this segment and shape treatment pathways into preoperative care and additional sites of care.

On April 1, 2024, the Company successfully completed the acquisition of Acclarent from Ethicon, Inc., a subsidiary of Johnson & Johnson.

Acclarent is an innovator and market leader in ear, nose and throat (“ENT”) procedures and the acquisition of Acclarent has positioned Integra as one of the leading providers of ENT products and technologies.

In April 2024, we successfully completed the acquisition of Acclarent, Inc.

(“Acclarent”).

Acclarent is an innovator and market leader in ENT procedures and the acquisition of Acclarent has positioned Integra as one of the leading providers of ENT products and technologies.

Furthermore, we believe that, owing to the ENT business being an anatomical adjacency to neurosurgery, the acquisition will allow Integra to deliver future innovation both within the ENT business and across our other CSS technology platforms.

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We also continue to invest in our capacity expansion.

This includes ongoing projects of transferring our Boston manufacturing to a new location in Braintree, Massachusetts, validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey and increasing capacity in our Memphis, Tennessee location.

This includes ongoing projects of transferring manufacturing from our Boston facility to our Braintree facility in Massachusetts and further investing in capacity and validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey.

We are implementing the CMP, a systematic and holistic approach to improving our quality management system across our manufacturing and supply network.

The primary objectives of the CMP are to remediate quality system gaps, harmonize the quality management system across the Company, and enhance the quality culture at the Company.

Cultivating a High-Performance Culture.

In seeking to sustain a culture of excellence and accountability, we have focused on employee empowerment and agility and building a diverse and inclusive workplace.

These efforts resulted in our being named in several best workplace lists globally in 2023 and 2024.

Additionally, we have been making further strides in advancing our environmental, social and governance (“ESG”) agenda to drive sustainability across the organization and recently published our third annual ESG report in the third quarter of 2024.

In seeking to sustain a culture of excellence and accountability, we focus on employee empowerment, professional development and building an environment where all employees can contribute to their fullest potential.

These efforts have been recognized through our inclusion in several best workplace lists globally.

Additionally, we continue to advance our broader organizational sustainability initiatives and published our third annual environmental, social and governance (“ESG”) report.

For more information on our ESG strategy, goals, performance, and achievements, please visit “Our Company—ESG Report” at https://www.integralife.com/esg-report.

Information on our website is not incorporated by reference herein and is not part of this Quarterly Report.

Information on our website is not incorporated by reference herein and is not part of this Quarterly Report on Form 10-Q.

New Product Introductions and Research and Development Updates

We continue to invest in collecting clinical evidence to support our existing products and new product launches, and to ensure that we obtain market access for broader and more cost-effective solutions.

Neurosurgical Solutions and Surgical Instruments.

The CSS business consists of a broad portfolio of market-leading brands, such as Codman®, DuraGen®, DuraSeal®, CUSA®, Mayfield®, Bactiseal®, and Certas® Plus, which are used for the management of multiple disease states, including brain tumors, traumatic brain injury, hydrocephalus and other neurological conditions.

Neurosurgical Solutions, Surgical Instruments, and ENT Solutions.

The CSS neurosurgical business consists of a broad portfolio of market-leading brands, such as Codman®, DuraGen, DuraSeal®, CUSA®, CereLink, Mayfield®, Bactiseal®, and Certas Plus, which are used for the management of multiple disease states, including brain tumors, traumatic brain injury, hydrocephalus and other neurological conditions.

The growth in this business in recent years has been fueled by geographic expansion and new product registrations in markets, such as China, Japan, and Europe, which we expect to continue in the near-to-long term.

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We have several active programs focused on life cycle management and innovation for capital and disposable products in our portfolio.

Our product development efforts are focused on core clinical applications in cerebrospinal fluid (“CSF”) management, neuro-critical care monitoring, minimally invasive instruments and electrosurgery and ultrasonic medical technologies, as well as our ambition to transform the standard of care in neurosurgery with product advancements in minimally invasive surgery (“MIS”) and the surgical management of intracerebral hemorrhage (“ICH”).

Our product development efforts are focused on core clinical applications in cerebrospinal fluid management, neuro-critical care monitoring, minimally invasive instruments and electrosurgery and ultrasonic medical technologies, as well as our ambition to transform the standard of care in neurosurgery with product advancements in minimally invasive surgery and the surgical management of intracerebral hemorrhage.

Our lighting franchise is among the most dynamic in the industry.

We are focused on the development of core clinical applications in our electromechanical technologies portfolio.

We continue to update our CUSA® Clarity platform by incorporating new ultrasonic handpiece and integrated electrosurgical capabilities.

We have made several enhancements to our CUSA® Clarity Tissue Ablation System.

The extended laparoscopic tip was launched in the U.S.

to enhance laparoscopic liver procedures.

In addition, a single-sided bone tip received 510(k) clearance from the FDA.

Commercial launch was completed successfully in early 2023.

In August 2023, we launched a modified 23 kHz CUSA® Electrosurgery Module (“CEM”) for Clarity handpieces that can be used with additional electrosurgery generators.

We continue to work with several instrument partners to bring new surgical instrument platforms to the market.

We also continued to advance the early-stage technology platforms we acquired in 2019.

We continue to advance the early-stage technology platforms we acquired in 2019.

Through the acquisition of Arkis Biosciences, Inc.

(“Arkis”) we added a platform technology, CerebroFlo® external ventricular drainage (“EVD”), a catheter with Endexo® technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation.

(“Arkis”) we added a platform technology, CerebroFlo® external ventricular drainage (“EVD”), a catheter with Endexo® technology, a permanent additive which has shown to be effective in reducing platelet adhesion in-vitro, reducing thrombus accumulation in-vitro and in vivo, and reducing the clinical incidence of thrombus formation.

The CerebroFlo EVD catheter has demonstrated an average of 99% less thrombus accumulation onto its surface, in vitro, compared to a market leading EVD catheter.

Our work to combine our Bactiseal® antimicrobial technology with the Endexo anti-occlusive technology continues to progress for both a silicone-based hydrocephalus and EVD project.

We also continued to advance our innovation from the Rebound Therapeutics Corporation (“Rebound Therapeutics”), which was acquired in 2019.

Our work to combine our Bactiseal antimicrobial technology with the Endexo anti-occlusive technology continues to progress for both a silicone-based hydrocephalus and EVD product.

We also continue to advance our innovation from the Rebound Therapeutics Corporation (“Rebound Therapeutics”), which was acquired in 2019.

Rebound Therapeutics specializes in a single-use medical device, known as the Aurora® Surgiscope, which is the only tubular retractor system designed for cranial surgery with an integrated access channel, camera and lighting.

The 9mm Surgiscope received 510(k) clearance from the FDA in the fourth quarter of 2023.

The 15mm x 60mm and 15mm x 80mm Aurora Surgiscope System received 510(k) clearance from the FDA in 2025.

In 2024 we acquired Acclarent, expanding our capabilities in the U.S.

Acclarent pioneered the balloon sinuplasty market and has a broad portfolio including the RELIEVA SPINPLUS® Balloon Sinuplasty System.

Acclarent also pioneered eustachian tube balloon dilation and currently markets the AERA® Eustachian Tube Dilation System, which received 510(k)

clearance for expanded pediatric indications in 2023.

Acclarent also sells the TruDi® Navigation System, which includes a portfolio of navigated surgical instrumentation.

Regenerative Technologies .

We were the first company to receive an FDA claim for regeneration of dermal tissue and are a world leader in regenerative technology.

We were the first company to receive FDA approval for regeneration of dermal tissue and are a world leader in regenerative technology.

Our regenerative technology development program applies our expertise in bioengineering to a range of biomaterials including natural materials such as purified collagen, intact human or animal tissues, honey as well as resorbable synthetic polymers with our DuraSorb and DuraSeal product lines.

These unique product designs are used for neurosurgical and reconstructive surgical applications, as well as dermal regeneration, including the healing of chronic and acute wounds, tendon and nerve repair.

These unique product designs are used for neurosurgical and reconstructive surgical applications, as well as dermal regeneration, including the management of chronic and acute wounds, tendon and nerve repair.

Our regenerative technology platform includes our legacy Integra® Dermal Regeneration Template (“IDRT”) products and complementary technologies that we have acquired.

Our collagen manufacturing capability, combined with our history of innovation, including our launch of NeuraGen 3D, provides us with strong platform technologies for multiple indications.

In the third quarter of 2021, we filed a PMA application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction and in July 2024 received approvable pending GMP status from FDA, which approved and closed out the clinical portion of this PMA application.

In 2022, we acquired SIA, which has also submitted a PMA application for DuraSorb with IBBR, and in June 2023 we completed enrollment in the DuraSorb U.S.

investigational device exemption clinical study for two-stage breast reconstruction;

the primary follow-up period is one year after device implantation.

By offering two distinct product solutions, we believe we have the opportunity to build a leading position in the IBBR market.

We hope to secure approval for DuraSorb in 2025.

For SurgiMend®, we cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility.

Additionally, in 2022, we launched NeuraGen 3D Nerve Guide Matrix, a resorbable implant for repair of peripheral nerve discontinuities and engineered to create an optimized environment for nerve regeneration.

Following the completion of design control activities in 2022, we launched both Cytal and MicroMatrix in Europe in 2023.

In 2023, the Company received 510(k) clearance from the FDA for MicroMatrix® Flex, which is now commercially available in the U.S.

as of March 2024.

Our collagen manufacturing capability, combined with our history of innovation, provides us with strong platform technologies for multiple indications.

In 2021, we filed a PMA application for a specific indication for SurgiMend for use in post-mastectomy IBBR and in 2024 received approvable pending GMP status from FDA, which approved and closed out the clinical portion of this PMA application.

We anticipate PMA approval following FDA approval and operationalization of the Braintree facility, which is expected in the first half of 2026.

In 2022, we acquired SIA, which also submitted a PMA application for multiple indications for DuraSorb for use in IBBR.

In 2023 we completed enrollment in the DuraSorb U.S.

IDE clinical trial for two-stage breast reconstruction;

and continue to advance the PMA application.

Currently, we hope to secure PMA approval for DuraSorb for use in IBBR in 2026.

By offering two distinct product solutions for multiple indications for use in IBBR, we believe we have the opportunity to build a leading position in the IBBR market.

In 2024, MicroMatrix Flex, used in the management of wounds with hard-to-reach geometries, such as deep wounds that present with tunneling or undermining, became commercially available in the U.S.

In 2024, we also acquired the product rights for Durepair Dural Regeneration Matrix, which is expected to strengthen our dural repair product portfolio and will be manufactured at the Braintree facility.

European Union Medical Device Regulation Updates

As part of our ongoing efforts to remain compliant, the Company continues to work towards European Union Medical Device Regulation (“EU MDR”) certifications.

In 2023, the Company received EU MDR certification in the CSS segment for Hakim Programmable Valves, Certas Plus without Bactiseal catheters, and DuraSeal Dural, as well as IDRT and BioPatch for the TT segment.

In 2024, the Company also received EU MDR certification for DuraGen Suturable for the CSS segment and MicroMatrix, as well as Cytal for the TT segment.

We continue to work towards certifying our products under the EU MDR.

In recent years, we received EU MDR certification in our CSS segment for Hakim Programmable Valves, Certas Plus with and without Bactiseal catheters, Surgical Patties & Strips, DuraSeal Dural, and DuraGen Suturable, as well as IDRT, BioPatch, MicroMatrix, and Cytal in our TT segment.

Although we do not currently anticipate any disruption to our commercial activities in Europe related to EU MDR, we cannot provide assurance of our ability to timely comply with all applicable requirements of EU MDR and our failure to meet the applicable EU MDR requirements could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

On December 19, 2024, a subsidiary of the Company received a warning letter from the FDA (the “2024 Warning Letter”).

The 2024 Warning Letter relates to quality system issues identified during FDA inspections at three of the Company’s facilities located in Mansfield, Massachusetts;

Plainsboro, New Jersey;

and Princeton, New Jersey.

The 2024 Warning Letter did not identify any new observations that had not already been provided in the Form 483s previously issued to the Company by the FDA at the conclusion of its three inspections in June and August of 2024 (the “2024 Form 483s”).

In the 2024 Form 483s, the FDA deemed certain of the Company's devices, including cranial perforators, disposable cottonoid patties and strips, and collagen-based products, to be out of compliance with respect to quality system regulations.

At that time, the Company took a number of voluntary actions including the initiation of shipping holds for several products and a voluntary recall of the disposable patties and strips.

The 2024 Warning Letter does not restrict the Company’s ability to manufacture or ship products, require recall of any products, nor restrict the Company’s ability to seek FDA 510(k) clearance of products.

The 2024 Warning Letter states that premarket approval applications for Class III devices to which the quality system regulation violations are reasonably related will not be approved until the violations have been corrected.

The Company has submitted several responses to the 2024 Form 483s issued to each of the three manufacturing facilities to the FDA and has submitted two updates to the 2024 Warning Letter in the first quarter of 2025.

On March 7, 2019, TEI Biosciences, Inc.

(“TEI”), one of our wholly-owned subsidiaries, received a Warning Letter (the “2019 Warning Letter”), dated March 6, 2019, from the FDA.

The 2019 Warning Letter related to quality systems issues at TEI’s manufacturing facility located in Boston, Massachusetts (the “Boston facility”).

The 2019 Warning Letter was related to quality systems issues at TEI’s manufacturing facility located in Boston, Massachusetts (the “Boston facility”).

The Boston facility manufactures extracellular bovine matrix products in our TT segment that are sold both in wound reconstruction and care and in private label channels.

The letter resulted from an inspection held at that facility in October and November 2018 and did not identify any new observations that were not already provided in the Form 483 that followed the inspection.

We submitted our initial response to the 2019 Warning Letter on March 28, 2019 and provide regular progress reports to the FDA as to its corrective actions.

We submitted our initial response to the 2019 Warning Letter on March 28, 2019 and provide regular progress reports to the FDA as to our corrective actions.

On October 28, 2021, the FDA initiated an inspection of the facility and at the conclusion of the inspection, issued an FDA Form 483 on November 12, 2021 (the “2021 Form 483”).

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Although the warning letters do not restrict the Company’s ability to seek FDA 510(k) clearance of products, PMAs for Class III devices to which the quality system regulation violations are reasonably related will not be approved until the violations have been addressed.

We cannot give any assurances that the FDA will be satisfied with our response to the issues identified by the FDA or as to the expected date of the resolution of such issues.

Following its assessment of the results of a third-party audit of the Boston facility, the Company announced in the second quarter of 2024 that it no longer plans to restart the manufacture of PriMatrix and SurgiMend at its Boston facility and will, instead, restart manufacturing of these products at its new tissue manufacturing at the Braintree facility.

In addition, the Company also plans to manufacture Durepair Dural Regeneration Matrix at the Braintree facility.

The Company anticipates the Braintree facility to be operational with FDA approval in the first half of 2026.

We cannot give any assurances that the FDA will be satisfied with our response to the issues identified by the FDA in any of the foregoing Form 483s or warning letters or as to the expected date of the resolution of such issues.

Until the issues cited by the FDA are resolved to the FDA’s satisfaction, the FDA may initiate additional regulatory action without further notice.

Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.

As required by the 2023 Warning Letter, we retained an outside expert consultant to perform an audit of the Boston facility in March 2024.

Since receiving the third-party audit findings for the Boston facility in March, the Company has reassessed its plans and timeline to resume the manufacture of PriMatrix® and SurgiMend®.

In parallel, the Company has been furthering its plans to complete the construction and operationalization of its new tissue manufacturing facility in Braintree, Massachusetts.

The Company announced in the second quarter of 2024 that it no longer plans to restart the manufacture of PriMatrix® and SurgiMend® at its Boston facility and will, instead, restart manufacturing of these products at the Braintree facility.

The Company expects to operationalize the Braintree facility in the first half of 2026.

As a result of these decisions, in the second quarter of 2024, the Company recorded a $4.6 million impairment charge, comprised of a $1.7 million impairment of an operating lease right-of-use asset and a $2.9 million write-off of fixed assets, which was recorded as a component of cost of goods sold in the condensed consolidated statements of operations.

For further detail on the impairment, see Note 10.

Leases and Related Party Leases .

The Company elected to perform impairment testing on certain definite-lived intangibles and goodwill in the first quarter of 2024, which resulted in an intangible impairment of $7.1 million.

For further detail on the impairment testing, see Note 5.

Goodwill and Other Intangible Assets .

Revenues of products manufactured in the Boston facility for the year ended December 31, 2022 were approximately 5.3% of consolidated revenues.

Optimization and Integration Activities

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These efforts are expected to continue and while we expect a positive impact from ongoing restructuring, integration, and manufacturing transfer and expansion activities, such results remain uncertain.

As a result of both audits by regulatory agencies as well as our own reviews of the company’s quality management system, we are in the process of implementing a Compliance Master Plan (the “CMP”), a systematic and holistic approach to improving our quality management system across our manufacturing and supply network.

As a result of both audits by regulatory agencies as well as our own reviews of the Company’s quality management system, we are in the process of implementing the CMP, a systematic and holistic approach to improving our quality management system across our manufacturing and supply network.

The primary objectives of the CMP are to remediate quality system gaps, harmonize the quality management system across the Company, and enhance the quality culture at the Company.

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Executive Summary

Net loss for the three and nine months ended September 30, 2024 was $(10.7) million and $(26.4) million, or $(0.14) and $(0.34) per diluted share, as compared to net income of $19.5 million and $47.9 million or $0.24 and $0.59 per diluted share for the three and nine months ended September 30, 2023.

The decrease in net income for the three and nine months ended September 30, 2024, was driven by impacts from quality and operational issues, along with costs related to the Acclarent acquisition.

Net loss for the three months ended March 31, 2025 was $(25.3) million, or $(0.33) per diluted share, as compared to net loss of $(3.3) million or $(0.04) per diluted share for the three months ended March 31, 2024.

The decrease in net income for the three months ended March 31, 2025, was primarily driven by the impact of quality and operational issues on revenue and associated costs.

Special Charges

Income before taxes includes the following special charges :

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Dollars in thousands 2025 2024

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Boston recall / Braintree transition (1)

9,933 7,800 33,676 38,841

Total $ 42,641 $ 30,230

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The items reported above are reflected in the condensed consolidated statements of operations as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Dollars in thousands 2025 2024

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Total $ 42,641 $ 30,230

We typically define special charges as items for which the amounts and/or timing of such expenses may vary significantly from period to period, depending upon our acquisition, divestiture, integration and restructuring activities, and for which the amounts are non-cash in nature and are not expected to recur at the same magnitude.

items for which the amounts are non-cash in nature;

and items which are not expected to recur at the same magnitude.

We believe that given our ongoing strategy of seeking acquisitions, our continuing focus on rationalizing our existing manufacturing and distribution infrastructure and our continuing review of various product lines in relation to our current business strategy, some of the special charges discussed above could recur with similar materiality in the future.

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The Company’s revenues and gross margin on product revenues were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Dollars in thousands 2025 2024

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Gross margin as a percentage of total revenues 50.8 % 56.1 %

Three Months Ended September 30, 2024 as Compared to Three Months Ended September 30, 2023

Three Months Ended March 31, 2025 as Compared to Three Months Ended March 31, 2024

Revenues and Gross Margin

For the three months ended September 30, 2024, total revenues decreased by $1.6 million to $380.8 million from $382.4 million for the same period in 2023.

Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues declined low double digits compared to the same period in the previous year, driven by impacts from quality and operational issues.

For the three months ended March 31, 2025, total revenues increased by $13.8 million to $382.7 million from $368.9 million for the same period in 2024.

Excluding the impacts of the Acclarent acquisition and foreign currency impact, revenues declined low single digits compared to the same period in the previous year, driven by impacts from quality and operational issues.

In the CSS segment, revenues were $280.7 million which was an increase of $24.2 million, or 9% as compared to the prior-year period, inclusive of $29.1 million related to the Acclarent acquisition.

Excluding the impact of the Acclarent acquisition, the Neurosurgery portfolio declined low double digits, primarily driven by lower sales due to temporary shipping holds in CSF Management and Dural Access & Repair.

In the TT segment, revenues were $110.1 million which was an decrease of $4.2 million, or 3.6% from the prior-year period.

Excluding the impact of the Boston recall, the TT segment decreased high single-digits as compared to the same period in the prior year.

This is primarily attributable to a decline in Integra Skin due to production challenges, partially offset by growth in our private label business, MicroMatrix® & Cytal, and Durasorb.

Gross margin was $200.2 million for the three months ended September 30, 2024, a decrease of $18.1 million from $218.3 million for the same period in 2023.

Gross margin as a percentage of revenues was 52.6% for the three months ended September 30, 2024 and 57.1% for the same period in 2023.

For the three months ended September 30, 2024, gross margins were impacted by expenses associated with quality and operational issues.

For the three months ended September 30, 2023, gross margins were impacted by expenses associated with the Boston recall.

Excluding the impact of the Acclarent acquisition, the Neurosurgery portfolio decreased low single digits, primarily driven by a decline in Dural Access and Repair, Advanced Energy and Neuro Monitoring, offset by strong performance in our Instrument business.

In the TT segment, revenues were $102.0 million which was a decrease of $10.4 million, or 9% as compared to the prior-year period.

This is primarily attributable to declines in Integra Skin and our private label business due to production and supply challenges, partially offset by growth in MicroMatrix & Cytal, and Durasorb.

Gross margin was $194.4 million for the three months ended March 31, 2025, a decrease of $12.4 million from $206.8 million for the same period in 2024.

Gross margin as a percentage of revenues was 50.8% for the three months ended March 31, 2025 and 56.1% for the same period in 2024.

For the three months ended March 31, 2025, gross margins were impacted by expenses associated with quality and operational issues.

For the three months ended March 31, 2024, gross margins were impacted by expenses associated with the Boston recall, as well as additional manufacturing expenses across our manufacturing sites.

Operating Ex penses

The following is a summary of operating expenses as a percent of total revenues:

Three Months Ended September 30,

Three Months Ended March 31,

Research and development 6.5 % 7.3 %

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Total operating expenses 54.9 % 54.9 %

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $16.6 million, or 8.7%, to $208.4 million in the three months ended September 30, 2024, compared to $191.8 million in the same period in 2023.

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $7.1 million, or 3.5%, to $209.9 million in the three months ended March 31, 2025, compared to $202.9 million in the same period in 2024.

Research and Development

Research and development expenses for the three months ended September 30, 2024 increased by $0.8 million as compared to the same period in the prior year.

Research and development expenses for the three months ended March 31, 2025 decreased by $2.2 million as compared to the same period in the prior year, primarily attributable to lower spend on EU MDR and other research and development projects.

Selling, General and Administrative

Selling, general and administrative costs for the three months ended September 30, 2024 increased by $15.2 million as compared to the same period in the prior year due to higher spending in commercial selling activities for both legacy and Acclarent products.

Selling, general and administrative costs for the three months ended March 31, 2025 increased by $15.7 million as compared to the same period in the prior year, primarily driven by Acclarent commercial costs.

Intangible Asset Amortization

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended September 30, 2024 was $3.8 million compared to $3.2 million for the same period in the prior year.

Amortization expense (which does not include amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended March 31, 2025 was $3.7 million compared to $10.1 million for the same period in the prior year.

The decrease is primarily due to the impairment of customer relationship intangible related to our Boston facility, which was recorded during the three months ended March 31, 2024.

Non-Operating Income and Expenses

The following is a summary of non-operating income and expenses:

Three Months Ended September 30,

The following is a summary of non-operating income and expense:

Three Months Ended March 31,

Dollars in thousands 2025 2024

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Interest expense (18,815) (13,624)

Other income, net 2,112 471

Other expense, net (144) (610)

Total non-operating income and expense $ (14,539) $ (9,194)

Interest Income

Interest income for the three months ended September 30, 2024 increased by $0.4 million as compared to the same period in the prior year .

Interest income for the three months ended March 31, 2025 decreased by $0.6 million as compared to the same period in the prior year .

Interest Expense

Interest expense for the three months ended September 30, 2024 increased by $6.3 million as compared to the same period in the prior year primarily due to incremental borrowing to fund the Acclarent acquisition.

Other Income, net

Other income, net for the three months ended September 30, 2024 increased by $1.6 million compared to the same period in the prior year, primarily driven by favorable foreign exchange impact.

Three Months Ended September 30,

Interest expense for the three months ended March 31, 2025 increased by $5.2 million as compared to the same period in the prior year primarily due to the expiration of interest rate swap derivative instruments with a notional value of $350.0 million during 2024 that are no longer hedging interest expense in 2025.

Other Expense, net

Other expense, net for the three months ended March 31, 2025 decreased by $0.5 million compared to the same period in the prior year, primarily driven by foreign exchange impact.

Three Months Ended March 31,

Dollars in thousands 2025 2024

Income before income taxes $ (20,362) $ 18,609

Income tax (benefit) expense (9,667) (888)

Loss before income taxes $ (30,036) $ (5,230)

Benefit provision for income taxes (4,743) (1,949)

Effective tax rate 15.8 % 37.3 %

The Company’s effective income tax rates for the three months ended September 30, 2024 and 2023 were 47.5% and (4.8)%, respectively.

For the three months ended September 30, 2024, the higher tax rate is primarily due to the limitation of foreign tax credits in the U.S.

and the limitation of federal tax credits in Switzerland, caused by lower three month book income, as compared to the previous year.

For the three months ended September 30, 2023,the primary drivers of the lower tax rate relate to a reduction to book income in higher-taxed jurisdictions and a $3.3 million benefit related to the filing of prior year tax returns.

The Company’s effective income tax rates for the three months ended March 31, 2025 and 2024 were 15.8% and 37.3%, respectively.

For the three months ended March 31, 2025, the Company’s effective tax rate was driven by federal, state, and international tax benefits generated from operating losses in certain jurisdictions, offset by the inclusion of U.S.

Global Intangible Low-Taxed Income (“GILTI”) and additional taxes to meet the global minimum tax in certain foreign jurisdictions.

For the three months ended March 31, 2024, the Company’s effective tax rate was driven by a $1.5 million shortfall from stock based compensation, offset by a tax benefit for intangible asset impairment.

The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of taxable earnings and losses, tax planning and settlements with various taxing authorities.

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The current U.S.

administration has proposed tax reform which, if enacted, may increase the Company’s U.S.

federal income tax liability.

Further, legislation in foreign jurisdictions may be enacted, in response to the base erosion and profit-shifting project begun by the Organization for Economic Cooperation and Development (“OECD”).

Such changes in the U.S.

jurisdictions could have an adverse effect on the Company's effective tax rate.

administration and legislators are considering new tax legislation, which may impact the Company's income tax provision.

Further, legislation in foreign jurisdictions may be enacted, in continued response to the base erosion and profit-sharing project begun by the Organization for Economic Cooperation and Development (“OECD”).

The OECD released model rules related to a new 15% global minimum tax regime (“Pillar 2”).

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The rules are complex and provide for delays for implementing the tax during the early transition years, if certain conditions are met.

At this time, the Company is projecting an immaterial expense related to Pillar 2 tax liability for the 2024 year.

At this time, the Company is projecting a $2.7 million expense related to Pillar 2 tax liability for the 2025 year.

The Company will continue to analyze the new Pillar 2 laws and any related guidance to determine potential impacts.

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jurisdictions could have an adverse effect on the Company’s effective tax rate.

The Company will continue to monitor legislative activity across its U.S.

jurisdictions.

While it is often difficult to predict the outcome or the timing of the resolution of a particular matter with the various federal, state, and foreign tax authorities, we believe that our reserves reflect the most probable outcome of known tax contingencies.

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The Company’s tax reserves are presented in the balance sheet within other liabilities, except for amounts relating to items that we expect to pay in the coming year, which would be classified as current income taxes payable.

Nine Months Ended September 30, 2024 as Compared to Nine Months Ended September 30, 2023

Revenues and Gross Margin

For the nine months ended September 30, 2024, total revenues increased by $23.3 million to $1,167.9 million from $1,144.5 million for the same period in 2023.

Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues declined low single digits compared to the same period in the prior year, primarily driven by impacts from quality and operational issues.

In the CSS segment, revenues were $829.0 million, an increase of $41.6 million, or 5.3% from the prior period, inclusive of $62.3 million related to the Acclarent acquisition, and $5.2 million unfavorable foreign currency impact on revenue.

Excluding these impacts, the Neurosurgery portfolio revenues declined low single digits, primarily driven by lower sales due to temporary shipping holds in CSF Management and Dural Access & Repair.

In the TT segment, revenues were $338.9 million, a decrease of $18.3 million, or 5.1% from the prior-year period.

Excluding the impact of the Boston recall, the TT segment decreased mid single digits as compared to the same period in the prior year.

This is primarily attributable to a decline in Integra Skin due to production challenges, partially offset by growth in our private label business, MicroMatrix® & Cytal, and Durasorb.

Gross margin was $633.0 million for the nine months ended September 30, 2024, a decrease of $25.3 million from $658.2 million for the same period in 2023.

Gross margin as a percentage of total revenue decreased to 54.2% for the nine months ended September 30, 2024 from 57.5% in the same period in 2023.

For the nine months ended September 30, 2024, gross margins were impacted by impairment charges associated with the Boston recall, Acclarent inventory step up, and expenses associated with quality and operational issues.

For the nine months ended September 30, 2023 gross margins were impacted by expenses associated with the Boston recall.

Operating Expenses

The following is a summary of operating expenses as a percent of total revenues:

Nine Months Ended September 30,

Research and development 7.2 % 7.0 %

Selling, general and administrative 46.1 % 43.1 %

Intangible asset amortization 1.5 % 0.8 %

Total operating expenses 54.8 % 50.9 %

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, increased by $57.4 million, or 9.8% to $640.2 million in the nine months ended September 30, 2024, compared to $582.8 million in the same period in 2023.

Research and Development

Research and development expenses for the nine months ended September 30, 2024 increased by $4.3 million as compared to the same period in the prior year primarily due to the Acclarent acquisition.

Selling, General and Administrative

Selling, general and administrative costs increased by $45.0 million as compared to the same period in the prior year driven primarily by Acclarent acquisition costs and related commercial activities, as well as higher spending in commercial selling activities for legacy products.

Intangible Asset Amortization

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the nine months ended September 30, 2024 was $17.6 million compared to $9.3 million for the same period in the prior year.

The increase is driven by the impairment of customer relationship intangible related to our Boston facility of $7.1 million.

We expect total annual amortization expense to be approximately $25.6 million for the remainder of 2024, $102.4 million in 2025, $102.2 million in 2026, $101.2 million in 2027, $97.6 million in 2028, $92.4 million in 2029 and $511.8 million thereafter.

Non-Operating Income and Expenses

The following is a summary of non-operating income and expenses:

Nine Months Ended September 30,

Dollars in thousands 2024 2023

Interest income $ 15,147 $ 12,653

Interest expense (51,648) (37,626)

Other income, net 2,939 1,705

Total non-operating income and expense $ (33,562) $ (23,268)

Interest Income

Interest income for the nine months ended September 30, 2024 increased by $2.5 million as compared to the same period in the prior year due to higher interest rates.

Interest Expense

Interes t expense for the nine months ended September 30, 2024 increased by $14.0 million as compared to the same period in the prior year mainly due to incremental borrowing for the Acclarent acquisition.

Other Income, net

Other income, net for the nine months ended September 30, 2024, increased by $1.2 million as compared to the same period in the prior year, primarily driven by favorable foreign exchange impact.

Nine Months Ended September 30,

Dollars in thousands 2024 2023

Income before income taxes $ (40,778) $ 52,211

Income tax (benefit) expense (14,399) 4,304

Effective tax rate 35.3 % 8.2 %

The Company’s effective income tax rates for the nine months ended September 30, 2024 and 2023 were 35.3% and 8.2%, respectively.

For the nine months ended September 30, 2024, the higher tax rate is primarily due to the limitation of foreign tax credits in the U.S.

and the limitation of federal tax credits in Switzerland, caused by lower book income and a $1.9 million shortfall from stock-based compensation, as compared to the prior year.

For the nine months ended September 30, 2023, the primary drivers of the lower tax rate relate to a reduction to book income in higher-taxed jurisdictions and a $3.8 million benefit related to the filing of prior year tax returns.

GEOGRAPHIC PRODUCT REVENUES AND OPERATIONS

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Total revenue by major geographic area consisted of the following:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Dollars in thousands 2025 2024

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Local economic conditions, regulatory compliance or political considerations, the effectiveness of our sales representatives and distributors, local competition and changes in local medical practice all may combine to affect our sales into markets outside the U.S.

Domestic revenues increased by $20.4 million for the three months ended September 30, 2024 compared to the same period in the prior year.

European sales decreased by $7.2 million for the three months ended September 30, 2024 compared to the same period in the prior year.

Sales to customers in Asia Pacific decreased by $11.7 million for the three months ended September 30, 2024.

Sales to customers in the the Rest of World for the three months ended September 30, 2024 decreased by $3.1 million compared to the same period in the prior year .

The increase in domestic revenues for the three months ended September 30, 2024 is primarily the result of the Acclarent acquisition, offset by a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management.

The decrease in international revenues for the three months ended September 30, 2024 was also the result of a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management.

Domestic revenues increased by $39.0 million for the nine months ended September 30, 2024 compared to the same period in the prior year.

European sales decreased by $3.4 million for the nine months ended September 30, 2024 compared to the same period in the prior year.

Sales to customers in Asia Pacific decreased by $14.4 million for the nine months ended September 30, 2024.

Sales to customers in the Rest of World for the nine months ended September 30, 2024 increased by $2.1 million compared to the same period in the prior year.

The increase in domestic revenues for the nine months ended September 30, 2024 is primarily the result of the Acclarent acquisition, offset by a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management.

The decrease in international revenues for the nine months ended September 30, 2024 was also the result of a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management.

The international revenues were impacted by $5.2 million of unfavorable foreign exchange impact.

Domestic revenues increased by $26.0 million for the three months ended March 31, 2025 compared to the same period in the prior year.

European sales decreased by $6.3 million for the three months ended March 31, 2025 compared to the same period in the prior year.

Sales to customers in Asia Pacific decreased by $4.4 million for the three months ended March 31, 2025 .

Sales to customers in the Rest of World for the three months ended March 31, 2025 decreased by $1.5 million compared to the same period in the prior year .

The increase in domestic revenues for the three months ended March 31, 2025 is primarily the result of the Acclarent acquisition, partially offset by a decline in sales of Integra Skin and our private label business.

The decrease in international revenues for the three months ended March 31, 2025 was the result of a decline in sales of Dural Access & Repair, Advanced Energy and Neuro Monitoring.

LIQUIDITY AND CAPITAL RESOURCES

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Working capital consists of total current assets less total current liabilities as presented in the consolidated balance sheets.

The Company’s working capital as of September 30, 2024 and December 31, 2023 was $187.0 million and $751.1 million, respectively.

The decrease in working capital as compared to the prior year is primarily driven by $572.4 million of convertible notes, which became current during the year.

Cash and Cash Equivalents

The Company had cash and cash equivalents totaling approximately $215.2 million and $276.4 million at September 30, 2024 and December 31, 2023 respectively, which are valued based on Level 1 measurements in the fair value hierarchy.

Level 1 inputs represent quoted prices in active markets for identical assets or liabilities.

At September 30, 2024, our non-U.S.

The Company’s working capital as of March 31, 2025 and December 31, 2024 was $188.8 million and $159.6 million, respectively.

Cash and Marketable Securities

The Company had cash and cash equivalents totaling approximately $239.1 million and $246.4 million at March 31, 2025 and December 31, 2024, respectively, which are valued based on Level 1 measurements in the fair value hierarchy .

At March 31, 2025, our non-U.S.

subsidiaries held approximately $182.7 million of cash and cash equivalents that are available for use outside the U.S.

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Short Term Investments

The Company had short term investments, primarily consisting of time deposits, which are valued based on Level 1 measurements in the fair value hierarchy, totaling approximately $62.4 million at September 30, 2024 compared to $32.7 million at December 31, 2023.

Nine Months Ended September 30,

The Company had short term investments, primarily consisting of time deposits, which are valued based on Level 1 measurements in the fair value hierarchy, totaling approximately $34.2 million at March 31, 2025 compared to $27.2 million at December 31, 2024.

Three Months Ended March 31,

Dollars in thousands 2025 2024

Net cash provided by operating activities $ 78,642 $ 81,205

Net cash (used in) provided by operating activities $ (11,257) $ 15,756

Net cash used in investing activities (35,920) (53,965)

Net cash provided by (used in) financing activities 245,013 (223,035)

Net cash used in financing activities 35,377 358,676

Effect of exchange rate fluctuations on cash 4,529 (4,963)

Cash Flows Provided by Operating Activities

Operating cash flows for the nine months ended September 30, 2024 decreased by $2.6 million compared to the same period in 2023.

Within operating cash flows, net income less non-cash adjustments decreased for the nine months ended September 30, 2024 by approximately $75.2 million as compared to the same period in 2023 primarily driven by costs related to the Acclarent acquisition, as well as costs associated with quality and operational issues.

The changes in assets and liabilities for the nine months ended September 30, 2024, net of business acquisitions, decreased cash flows by $19.0 million, mainly attributable to increases in prepaid and other current assets, and inventory, offset by decreases in accounts receivable.

The changes in assets and liabilities for the nine months ended September 30, 2023, net of business acquisitions, decreased cash flows by $91.7 million, mainly attributable to increases in inventory, other current assets, and decreases in accrued expenses and other current liabilities due to reduced payments processed during the year.

Cash Flows Provided by or Used in Operating Activities

Operating cash flows for the three months ended March 31, 2025 decreased by $27.0 million compared to the same period in 2024.

Within operating cash flows, net income less non-cash adjustments decreased for the three months ended March 31, 2025 by approximately $25.7 million as compared to the same period in 2024 due to the impact of quality and operational issues on revenue and associated costs.

The changes in assets and liabilities for the three months ended March 31, 2025, net of business acquisitions, decreased cash flows by $24.7 million, mainly attributable to decreases in accrued expenses and other current liabilities due to payment of employee bonuses.

The changes in assets and liabilities for the three months ended March 31, 2024, net of business acquisitions, decreased cash flows by $23.4 million, mainly attributable to increases in inventory, and decreases in other current liabilities and accounts receivable.

Cash Flows Used in Investing Activities

Uses of cash from investing activities for the nine months ended September 30, 2024 were $74.8 million paid for capital expenditures to support the investment in the new Braintree facility, as well as improvement initiatives at a number of our manufacturing facilities, and other technology investments, $282.0 million related to the Acclarent acquisition, and $49.0 million related to short term investments.

Sources of cash from investing activities for the nine months ended September 30, 2024 were $19.3 million for short term investments converted to cash.

Uses of cash from investing activities for the nine months ended September 30, 2023 related to $42.3 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

Sources of cash from investing activities for the nine months ended September 30, 2023 were $5.4 million in proceeds from settlement of our net investment hedges.

Uses of cash from investing activities for the three months ended March 31, 2025 were $28.9 million paid for capital expenditures to support improvement initiatives at a number of our manufacturing facilities, and other technology investments, as well as $7.0 million related to short term investments.

There were no sources of cash from investing activities for the three months ended March 31, 2025.

Uses of cash from investing activities during the three months ended March 31, 2024 related to $38.5 million related to short term investments, and $15.5 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

There were no sources of cash from investing activities during the three months ended March 31, 2024.

Cash Flows Provided by or Used in Financing Activities

Uses of cash from financing activities in the nine months ended September 30, 2024 related to the repayments of $147.2 million under our Senior Credit Facility and Securitization Facility, $50.0 million related to the repurchase of treasury stock of under the share repurchase agreements, and $11.9 million related to payment of a contingent consideration.

Uses of cash from financing activities in the three months ended March 31, 2025 related to the repayments of $15.2 million under our Senior Credit Facility and Securitization Facility, as well as $2.6 million related to payment of contingent consideration in connection with our acquisition of Arkis.

In addition, the Company had $2.1 million in cash taxes paid for net equity settlements.

Sources of cash from financing activities for the nine months ended September 30, 2024 were $451.1 million proceeds from borrowings of long-term indebtedness and $6.4 million proceeds from the exercise of stock options.

Uses of cash from financing activities in the nine months ended September 30, 2023 related to the repurchase of treasury stock of $275.0 million under the share repurchase agreements, repayments of $85.9 million under our Senior Credit Facility and Securitization Facility.

In addition, there was $7.6 million attributable to debt issuance costs, as well as $5.5 million in cash taxes paid for net equity settlements.

Sources of cash from financing activities for the nine months ended September 30, 2023 were $146.9 million borrowing under our Senior Credit Facility and Securitization Facility and $4.1 million proceeds from the exercise of stock options.

Sources of cash from financing activities for the three months ended March 31, 2025 were $54.4 million of proceeds from borrowings of long term indebtedness and $1.0 million related to the proceeds from the exercise of stock options.

Uses of cash from financing activities in the three months ended March 31, 2024 related to the repayments of $15.1 million under our Senior Credit Facility and Securitization Facility.

In addition, the Company had $3.1 million in cash taxes paid for net equity settlements.

Sources of cash from financing activities for the three months ended March 31, 2024 were $370.5 million of proceeds from borrowings of long-term indebtedness and $6.4 million related to the proceeds from the exercise of stock options.

Tariffs and Macroeconomic Environment

In April 2025, the U.S.

government announced new tariffs on goods imported into the U.S.

from dozens of countries, including China and the European Union member states.

In response, governments have threatened or imposed reciprocal tariffs or taken other measures, and the United States is in the process of negotiating trade agreements with certain governments.

Uncertainty remains with respect to trade policies and treaties between the U.S.

and other countries and we continue to monitor and evaluate the situation.

Tariffs could result in an increase in certain product costs or have adverse impacts on, among other things, demand for our products and supply chains.

Any tariff costs will be reported within our cost of goods sold and will be capitalized in inventory and recognized as those products are sold.

Particularly, the U.S.

import tariffs and reciprocal measures by China, are expected to increase the Company’s cost of goods sold.

The Company anticipates that some of its suppliers will incur incremental tariff-related costs, which may be passed on to the Company.

Approximately half of our global revenue is generated from products manufactured in the United States.

In China, which accounts for approximately 5 percent of our total revenue, roughly half of the products we sell are manufactured in the United States.

The overall macroeconomic and geopolitical environment, including tariffs or changes in trade policies, slower economic growth or recession, market volatility and inflation, and uncertainty regarding all of the foregoing, pose risks that could impact our business, results of operations, financial condition and cash flows.

The extent and duration of the tariffs and the resulting impact on general economic conditions and on the business are uncertain and are expected to be impacted by various factors, such as negotiations between the U.S.

and affected countries, the responses of other countries or regions, exemptions or exclusions that already exist or may be granted, availability and cost of alternative sources of our products and materials, and our ability to offset the effects of any tariffs that might be imposed.

For additional information on the risks that tariffs pose to the Company, please see Part II, Item 1A.

“Risk Factors” of this Quarterly Report and Part I, Item 1A.

“Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Credit Agreement, Convertible Senior Notes, Securitization and Related Hedging Activities

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Derivative Instruments , to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for discussion of our hedging activities.

The Senior Credit Facility is subject to various financial and negative covenants and, at September 30, 2024, the Company was in compliance with all such covenants.

Our Consolidated Total Leverage Ratio was 3.99, with the covenant requirement at 4.5 at the end of September 30, 2024.

Based on our current forecast for the next twelve months we expect to remain in compliance with the financial and negative covenants.

The Senior Credit Facility is subject to various financial and negative covenants and, at March 31, 2025, the Company was in compliance with all such covenants.

Our Consolidated Total Leverage Ratio was 4.30, with the covenant requirement at 5.00 at the end of March 31, 2025.

As outlined in the table in Note 6.

Debt, the covenant requirement will drop from 5.00 to 4.25 for the fiscal quarter ended December 31, 2025.

The recent tariff changes imposed by the U.S.

and other countries have created increased risks and uncertainties surrounding the Company’s future results of operations.

The impact of tariffs in the first quarter of 2025 was not material.

However, should universal tariffs be implemented as initially announced in April 2025, the Company anticipates a significant adverse impact on its future costs of revenue, which will impact its results of operations.

Based on the Company’s current financial projections and assuming the successful implementation of management’s plans to mitigate the risks and uncertainties regarding the impact of tariffs on the Company’s future results of operations described in Note 1.

Basis of Presentation , management believes the Company will maintain compliance with its financial covenants and the Company’s existing cash, projected operating cash flows, and available borrowing capacity under its revolving credit facility component of the Senior Credit Facility (as defined in Note 6.

Debt ) are adequate to meet its operating needs, liabilities and commitments over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements.

The 2025 Notes are scheduled to mature on August 15, 2025.

We have sufficient capacity under the revolving credit facility of the Senior Credit Facility to repay the outstanding principal and accrued interest on the 2025 Notes upon maturity.

Share Repurchase Plan

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Capital Resources

We believe that our cash and available borrowings under the Senior Credit Facility are sufficient to finance our operations and capital expenditures for the next 12 months and foreseeable future.

We believe that our cash, cash equivalents, short term investments and available borrowings under the Senior Credit Facility are sufficient to finance our operations, capital expenditures and potential repayment of the 2025 Notes for the next twelve months and foreseeable future.

Our future capital requirements will depend on many factors, including the growth of our business, the timing and introduction of new products and investments, strategic plans and acquisitions, and the potential impact of tariffs on our cost of goods sold and consumer demand for our products, among others.

Additional sources of liquidity available to us include short term borrowings and the issuance of long term debt and equity securities.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements during the nine months ended September 30, 2024 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

We do not have any off-balance sheet financing arrangements during the three months ended March 31, 2025 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Contractual Obligations and Commitments

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Our primary obligations include principal and interest payments on the revolving credit facility and t erm loan component of the Senior Credit Facility, Securitization Facility and 2025 Notes.

Debt , to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details.

We also lease some of our manufacturing facilities and office buildings which have future minimum lease payments.

Leases and Related Party Leases , to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for a schedule of our future minimum lease payments.

Amounts related to our other obligations, including employment agreements and purchase obligations were not material.

Debt , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details.

The Company also leases some of our manufacturing facilities and office buildings which have required future minimum lease payments.

Leases and Related Party Leases , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for a schedule of our future minimum lease payments.

Amounts related to the Company’s other obligations, including employment agreements and purchase obligations were not material.

The Company has contingent consideration obligations related to prior and current year acquisitions and future pension contribution obligations.

Retirement Plans , and Note 16.

Commitments and Contingencies , to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details.

Commitments and Contingencies , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details.

The associated obligations are not fixed.

We also have a liability for uncertain tax benefits including interest and penalties.

We cannot make a reliable estimate of the period in which the uncertain tax benefits may be realized.

The Company also has a liability for uncertain tax benefits including interest and penalties.

Income Taxes to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details.

The Company cannot make a reliable estimate of the period in which the uncertain tax benefits may be realized.

OTHER MATTERS

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The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses.

The critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 did not materially change in the nine months ended September 30, 2024.

The critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 did not materially change in the three months ended March 31, 2025.

Recently Issued Accounting Standards

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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