What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-04-24 compared with 2024-10-30 · 177 added, 331 removed, 555 unchanged (48% of the section changed)

4 unchanged sentences

(In thousands)

September 30,

Current assets:

27 unchanged sentences

(In thousands)

September 30,

LIABILITIES AND STOCKHOLDERS’ EQUITY

7 unchanged sentences

Deferred income tax liabilities

Long-term income taxes payable

Liabilities related to unrecognized tax benefits

7 unchanged sentences

Preferred stock — 5,000 shares authorized;

no shares issued as of September 30, 2024 and December 31, 2023

no shares issued as of March 31, 2025 and December 31, 2024

Common stock, no par value — 100,000 shares authorized;

issued and outstanding as of September 30, 2024 - 58,274 and December 31, 2023 - 57,858

issued and outstanding as of March 31, 2025 - 59,078 and December 31, 2024 - 58,743

Retained earnings

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of sales

2 unchanged sentences

Research and development

Impairment charges

Contingent consideration expense

Acquired in-process research and development

Contingent consideration expense (benefit)

Total operating expenses

3 unchanged sentences

Interest expense

Other income (expense) — net

Other expense — net

Total other expense — net

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss):

12 unchanged sentences

Balance — January 1, 2025

Other comprehensive loss

Other comprehensive income

Stock-based compensation expense

3 unchanged sentences

Shares surrendered in exchange for payment of payroll tax liabilities

Shares surrendered in exchange for exercise of stock options

Balance — March 31, 2025

Other comprehensive loss

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares issued from time-vested restricted stock units

Balance — June 30, 2024

Other comprehensive income

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Balance — September 30, 2024

See condensed notes to consolidated financial statements.

MERIT MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands - unaudited)

Accumulated Other

1 unchanged sentence

Balance — January 1, 2024

Other comprehensive income

Other comprehensive loss

Stock-based compensation expense

4 unchanged sentences

Balance — March 31, 2024

Other comprehensive income

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares issued from time-vested restricted stock units

Balance — June 30, 2023

Other comprehensive loss

Stock-based compensation expense

Options exercised

Issuance of common stock under Employee Stock Purchase Plan

Shares surrendered in exchange for payment of payroll tax liabilities

Shares surrendered in exchange for exercise of stock options

Balance — September 30, 2023

See condensed notes to consolidated financial statements.

3 unchanged sentences

(In thousands - unaudited)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Write-off of certain intangible assets and other long-term assets

Acquired in-process research and development

Amortization of right-of-use operating lease assets

1 unchanged sentence

Amortization of deferred credits

Amortization of long-term debt issuance costs

Amortization and write-off of long-term debt issuance costs

Stock-based compensation expense

Changes in operating assets and liabilities, net of acquisitions and divestitures:

Changes in operating assets and liabilities, net of acquisitions:

Trade receivables

1 unchanged sentence

Prepaid expenses and other current assets

Prepaid income taxes

Income tax refund receivables

11 unchanged sentences

Intangible assets

Proceeds from the sale of property and equipment

Issuance of note receivables

Cash paid in acquisitions and investments, net of cash acquired

Cash paid for notes receivable and other investments

Cash paid in acquisitions, net of cash acquired

Net cash, cash equivalents, and restricted cash used in investing activities

4 unchanged sentences

(In thousands - unaudited)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Proceeds from issuance of long-term debt

Payments on long-term debt

Long-term debt issuance costs

Contingent payments related to acquisitions

Payment of taxes related to an exchange of common stock

Net cash, cash equivalents, and restricted cash (used in) provided by financing activities

Net cash, cash equivalents, and restricted cash provided by (used in) financing activities

Effect of exchange rates on cash, cash equivalents, and restricted cash

21 unchanged sentences

The interim consolidated financial statements of Merit Medical Systems, Inc.

("Merit," "we" or "us") for the three and nine-month periods ended September 30, 2024 and 2023 are not audited.

("Merit," "we" or "us") for the three-month periods ended March 31, 2025 and 2024 are not audited.

Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America.

In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2024 and December 31, 2023, and our results of operations and cash flows for the three and nine-month periods ended September 30, 2024 and 2023.

The results of operations for the three and nine-month periods ended September 30, 2024 and 2023 are not necessarily indicative of the results for a full-year period.

In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, 2025 and December 31, 2024, and our results of operations and cash flows for the three-month periods ended March 31, 2025 and 2024.

The results of operations for the three-month periods ended March 31, 2025 and 2024 are not necessarily indicative of the results for a full-year period.

Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts.

These interim consolidated financial statements should be read in conjunction with the financial statements and risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”).

We elected to change the presentation of investments in privately held companies within the statements of cash flows to be included within Cash paid for notes receivable and other investments .

Previously, amounts paid to acquire such investments were presented within Cash paid in acquisitions, net of cash acquired .

The change in presentation had no material impact on previously reported financial information and comparative periods have been adjusted to reflect this change in presentation.

Recently Issued Accounting Standards.

In November 2023, the Financial Accounting Standards Board (“FASB’) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The provisions of this update must be applied retrospectively to all periods presented in the financial statements.

We are currently assessing the anticipated impact of this standard on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

We currently believe there are no other issued and not yet effective accounting standards that are materially relevant to our financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires a public entity to disclose certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization on an annual and interim basis.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The provisions within the update may be applied retrospectively for all periods presented in the financial statements.

While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

Revenue from Contracts with Customers.

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Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures.

The following tables present revenue from contracts with customers by reporting segment, product category and geographic region for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):

The following tables present revenue from contracts with customers by reporting segment, product category and geographic region for the three-month periods ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

September 30, 2024

September 30, 2023

United States

International

United States

International

Cardiovascular

Peripheral Intervention

Cardiac Intervention

Custom Procedural Solutions

Endoscopy Devices

Nine Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024*

United States

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Endoscopy Devices

*Commencing January 1, 2025, we reorganized our sales teams and product categories to include the sale of our spine devices under our OEM product categories.

Revenue figures for 2024 have been recast to reflect the realignment of Merit’s portfolio of spine products, representing approximately $ 5.3 million in revenue, within the OEM product category to provide comparability between the reported periods.

Acquisitions and Investments.

On July 1, 2024, we entered into an Asset Purchase Agreement (the “EGS Purchase Agreement”) with EndoGastric Solutions, Inc., a Delaware corporation (“EGS”), pursuant to which we acquired the EsophyX® Z+ device and various assets related thereto (collectively, the “EGS Acquisition”), which are designed to deliver a durable, minimally invasive non-pharmacological treatment option for patients suffering from gastroesophageal reflux disease.

We acquired the purchased assets identified under the EGS Purchase Agreement for a purchase price of $ 105 million, which amount we financed at closing through current borrowings under our long-term debt obligations, plus the assumption or reimbursement of certain liabilities of EGS.

On November 1, 2024, pursuant to the terms of the Asset Purchase Agreement (the “Cook Purchase Agreement”) dated September 18, 2024 between Merit and Cook Medical Holdings LLC, (“Cook”), we acquired Cook’s lead management business, which is composed of a comprehensive end-to-end portfolio of medical devices and accessories used in lead management procedures for patients who need a pacemaker or an implantable cardioverter-defibrillator lead removed or replaced.

We acquired the portfolio for a purchase price of $ 210 million, plus the assumption of certain liabilities.

We accounted for this transaction under the acquisition method of accounting as a business combination.

The sales related to the acquisition have been included in our Cardiovascular segment since the acquisition date and were $ 9.2 million for the three-month period ended March 31, 2025.

It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our cardiovascular business segment.

Acquisition-related costs associated with the transaction, which were included in selling, general and administrative expenses in the consolidated statements of income were approximately $ 5.4 million during the year ended December 31, 2024.

The purchase price was allocated as follows (in thousands):

Assets Acquired

Intangible assets

Developed technology

Customer list

Total assets acquired

Liabilities Assumed

Accrued expenses

Total liabilities assumed

Total net assets acquired

We are amortizing Cook developed technology intangible assets over ten years , the trademark intangible assets over 12 years , and the customer list intangible asset on an accelerated basis over 12 years .

We have estimated the weighted average life of the intangible assets acquired from Cook to be 10.3 years.

The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes.

The pro forma effects on our consolidated results of operations of the Cook acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information to determine earnings associated with the acquired product lines which represent only a small portion of the product lines of a large, consolidated company without standalone financial information .

On July 1, 2024, we entered into an Asset Purchase Agreement (the “EGS Purchase Agreement”) with EndoGastric Solutions, Inc.

(“EGS”), pursuant to which we acquired the EsophyX® Z+ device and various assets related thereto (collectively, the “EGS Acquisition”), which are designed to deliver a durable, minimally invasive non-pharmacological treatment option for patients suffering from gastroesophageal reflux disease.

We acquired the purchased assets identified under the EGS Purchase Agreement for a purchase price of $ 105 million.

We accounted for the EGS Acquisition under the acquisition method of accounting as a business combination.

The sales related to the EGS Acquisition have been included in our endoscopy segment since the acquisition date and were $ 6.8 million for the three and nine-month periods ended September 30, 2024.

The sales related to the EGS Acquisition have been included in our endoscopy segment since the acquisition date and were $ 6.6 million for the three-month period ended March 31, 2025.

It is not practical to separately report earnings related to the EGS Acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our endoscopy business segment.

Acquisition-related costs associated with the EGS Acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income were approximately $ 1.8 million.

The purchase price was preliminarily allocated as follows (in thousands) :

Acquisition-related costs associated with the EGS Acquisition, which were included in selling, general and administrative expenses in the consolidated statements of were approximately $ 3.4 million during the year ended December 31, 2024.

The purchase price was allocated as follows (in thousands) :

Assets Acquired

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The pro forma effects to our consolidated results of operations of the EGS Acquisition are not material in relation to reported sales .

On May 17, 2024, Merit Medical Ireland Limited (“MM Ireland”), our indirect wholly-owned subsidiary, entered into a Subscription and Shareholder Agreement (the “CrannMed Agreement”) with CrannMed Limited, a company organized under the laws of Ireland (“CrannMed”).

Pursuant to the terms of the CrannMed Agreement, MM Ireland paid € 3.0 million to purchase preferred shares of CrannMed.

At CrannMed’s election at any time after August 16, 2024, MM Ireland is obligated to pay an additional € 3.0 million to acquire additional preferred shares of CrannMed, subject to certain conditions (the “Second Tranche Investment”);

no additional amount has been distributed to CrannMed as of September 30, 2024.

Additionally, upon the request of CrannMed and subject to the completion of the Second Tranche Investment and other conditions, MM Ireland may pay to CrannMed up to an additional € 2.0 million in the form of equity, debt or other investment for the purpose of funding clinical trial activities of CrannMed.

MM Ireland’s investment in CrannMed has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because MM Ireland is not able to exercise significant influence over the operations of CrannMed.

MM Ireland’s total current investment in CrannMed represented an ownership interest of approximately 10.8 % of the outstanding capital stock of CrannMed at the date of the initial purchase.

On March 8, 2024, we entered into an asset purchase agreement with Scholten Surgical Instruments, Inc.

2 unchanged sentences

We have accounted for this transaction as an asset purchase, and recorded the amount paid and deferred payments as a developed technology intangible asset, which we are amortizing over eight years .

During March 2024, we paid $ 0.3 million to acquire additional Series A Preferred Stock of Fluidx Medical Technology, Inc.

("Fluidx"), owner of certain technology proposed to be used in the development of embolic and adhesive agents for use in arterial, venous, vascular graft and cardiovascular applications inside and outside the heart and related appendages.

We had previously purchased and continue to hold $ 4.7 million of participating preferred shares of Fluidx.

Our investment has been recorded as an equity investment accounted for at cost and reflected within other assets in the accompanying consolidated balance sheets because we are not able to exercise significant influence over the operations of Fluidx.

Our total current investment in Fluidx represented an ownership interest of approximately 19.9 % of the outstanding capital stock of Fluidx at the date of this investment.

On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc.

(“AngioDynamics”) to acquire the assets associated with a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System for a purchase price of $ 100 million (collectively, the “AngioDynamics Acquisition”) .

We accounted for the AngioDynamics Acquisition under the acquisition method of accounting as a business combination.

The sales related to the AngioDynamics Acquisition have been included in our cardiovascular segment since the acquisition date and were $ 21.0 million and $ 8.3 million for the nine-month periods ended September 30, 2024 and 2023, respectively.

It is not practical to separately report earnings related to the AngioDynamics Acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our cardiovascular business segment.

Acquisition-related costs associated with the AngioDynamics Acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income included in the 2023 Annual Report on Form 10-K, were approximately $ 4.9 million.

The purchase price was allocated as follows (in thousands) :

Assets Acquired

Prepaid expenses

Property and equipment

Intangible assets

Developed technology

Customer list

Total net assets acquired

We are amortizing the AngioDynamics developed technology intangible assets over ten years , the trademark intangible assets over 11 years , and the customer list intangible asset on an accelerated basis over ten years .

We have estimated the weighted average life of the intangible assets acquired from AngioDynamics to be 10.5 years.

The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes.

The pro forma effects to our consolidated results of operations of the AngioDynamics Acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information to determine earnings associated with the acquired product lines which represent only a small portion of the product lines of a large, consolidated company without standalone financial information.

On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc.

(“Bluegrass”), for a purchase price of $ 32.7 million.

Prior to the acquisition, we held an equity investment of 1,251,878 Bluegrass common shares, representing an approximately 19.5 % ownership interest in Bluegrass.

The fair value of this previously-held equity investment of approximately $ 245,000 is included in the purchase price allocation.

We accounted for this transaction under the acquisition method of accounting as a business combination.

The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material.

Acquisition-related costs associated with the Bluegrass acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income included in the 2023 Annual Report on Form 10-K, were not material.

The purchase price was allocated as follows (in thousands):

Assets Acquired

Intangible assets

Developed technology

Total net assets acquired

We are amortizing the Bluegrass developed technology intangible asset over 15 years and the related trademarks over 13 years .

We have estimated the weighted average life of the intangible assets acquired from Bluegrass to be 14.9 years.

The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes.

The pro forma effects to our consolidated results of operations of the Bluegrass acquisition are not material.

Inventories at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

September 30, 2024

Inventories at March 31, 2025 and December 31, 2024 consisted of the following (in thousands):

March 31, 2025

December 31, 2024

4 unchanged sentences

Goodwill and Intangible Assets.

The change in the carrying amount of goodwill by segment for the nine-month period ended September 30, 2024 is detailed as follows (in thousands):

The change in the carrying amount of goodwill by segment for the three-month period ended March 31, 2025 is detailed as follows (in thousands):

Cardiovascular

1 unchanged sentence

Effect of foreign exchange

Additions and adjustments as the result of acquisitions

Goodwill balance at September 30

Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of September 30, 2024 and December 31, 2023, respectively.

We did no t have any goodwill impairments for the nine-month periods ended September 30, 2024 or 2023.

Other intangible assets at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

September 30, 2024

Goodwill balance at March 31

Total accumulated goodwill impairment losses aggregated to $ 8.3 million as of March 31, 2025 and December 31, 2024, respectively.

We did no t have any goodwill impairments for the three-month periods ended March 31, 2025 or 2024.

Other intangible assets at March 31, 2025 and December 31, 2024 consisted of the following (in thousands):

March 31, 2025

Gross Carrying

7 unchanged sentences

Customer lists

Aggregate amortization expense for the three and nine-month periods ended September 30, 2024 was $ 16.9 million and $ 46.4 million, respectively.

Aggregate amortization expense for the three and nine-month periods ended September 30, 2023 was $ 15.4 million and $ 41.1 million, respectively.

Aggregate amortization expense for developed technology and other intangible assets for the three-month periods ended March 31, 2025 and 2024 was $ 20.0 million and $ 14.6 million, respectively.

We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

1 unchanged sentence

If a triggering event is identified, we determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities.

We did no t identify indicators of impairment for our intangible assets based on our consideration of triggering events for the nine-month periods ended September 30, 2024 and 2023, respectively.

Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of September 30, 2024 (in thousands):

We did no t identify indicators of impairment for our intangible assets based on our consideration of triggering events for the three-month periods ended March 31, 2025 and 2024, respectively.

Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of March 31, 2025 (in thousands):

Year ending December 31,

Estimated Amortization Expense

1 unchanged sentence

Income Taxes.

Our provision for income taxes for the three-month periods ended September 30, 2024 and 2023 was a tax expense of $ 8.2 million and $ 4.4 million, respectively, which resulted in an effective tax rate of 22.4 % and 14.5 %, respectively.

Our provision for income taxes for the nine-month periods ended September 30, 2024 and 2023 was a tax expense of $ 24.4 million and $ 13.8 million, respectively, which resulted in an effective tax rate of 20.9 % and 17.2 %, respectively.

The increase in the effective income tax rate for the three and nine-month periods ended September 30, 2024, when compared to the respective prior-year periods, was primarily due to decreased benefit from discrete items such as share-based compensation and decreased foreign tax credit utilization.

The increase in the income tax expense for the nine-month period ended September 30, 2024, when compared to the prior-year period, was primarily due to increased pre-tax book income.

Our provision for income taxes for the three-month periods ended March 31, 2025 and 2024 was a tax expense of $ 7.8 million and $ 6.1 million, respectively, which resulted in an effective tax rate of 20.6 % and 17.8 %, respectively.

The increase in the effective income tax rate for the three-month period ended March 31, 2025, when compared to the prior-year period, was primarily due to decreased benefit from discrete items such as deferred compensation and increased impact of foreign income inclusions.

The increase in income tax expense for the three-month period ended March 31, 2025, when compared to the prior-year period, was primarily due to increased pre-tax book income.

Our effective tax rate differs from the U.S.

statutory rate primarily due to the impact of global intangible low-taxed income (“GILTI”) inclusions, state income taxes, foreign taxes, other nondeductible permanent items and discrete items (such as share-based compensation).

statutory rate primarily due to the impact of global intangible low-taxed income (“GILTI”) and Subpart F inclusions, state income taxes, foreign taxes, other nondeductible permanent items and discrete items (such as share-based compensation).

The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024.

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We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules.

Principal balances outstanding under our long-term debt obligations as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

September 30, 2024

December 31, 2023

Revolving credit loans

Principal balances outstanding under our long-term debt obligations as of March 31, 2025 and December 31, 2024 consisted of the following (in thousands):

Convertible notes

3 unchanged sentences

Long-term portion

Future minimum principal payments on our long-term debt, as of September 30, 2024, were as follows (in thousands):

Future minimum principal payments on our long-term debt, as of March 31, 2025, were as follows (in thousands):

Future Minimum

7 unchanged sentences

The Fourth A&R Credit Agreement provides for a term loan of $ 150 million and a revolving credit commitment of up to an aggregate amount of $ 700 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans.

On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth Amended Credit Agreement are payable in full.

On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth A&R Credit Agreement are payable in full.

At any time prior to the maturity date, we may repay any amounts owing under all term loans and revolving credit loans in whole or in part, without premium or penalty.

On December 5, 2023, we executed an amendment to the Fourth Amended Credit Agreement (as amended, the "Amended Fourth A&R Credit Agreement") to facilitate the issuance of our Convertible Notes described below.

Among other things, the amendment also updated the definition of the “Applicable Margin” as used in the Amended Fourth A&R Credit Agreement to determine the interest rates and amended the financial covenants, all as described below.

Term loans made under the Amended Fourth A&R Credit Agreement bear interest, at our election, at either (i) the Base Rate plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement) or, (ii) Adjusted Term SOFR plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement).

On December 5, 2023, we executed an amendment to the Fourth A&R Credit Agreement (as amended, the "Amended Fourth A&R Credit Agreement”) to facilitate the issuance of our Convertible Notes described below.

Among other things, the amendment also updated the definition of the Applicable Margin used in determining the interest rates and amended the financial covenants, all as described below.

Term loans made under the Amended Fourth A&R Credit Agreement, as amended, bear interest, at our election, at either (i) the Base Rate plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement) or, (ii) Adjusted Term SOFR plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement).

Revolving credit loans bear interest, at our election, at either (a) the Base Rate plus the Applicable Margin, (b) Adjusted Term SOFR plus the Applicable Margin, (c) Adjusted Eurocurrency Rate plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement), or (d) Adjusted Daily Simple SONIA plus the Applicable Margin (as defined in the Amended Fourth A&R Credit Agreement).

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(3) Minimum ratio of Consolidated EBITDA (as defined in the Amended Fourth A&R Credit Agreement and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Amended Fourth A&R Credit Agreement) for any period of four consecutive fiscal quarters.

We were in compliance with these financial covenants set forth in the Amended Fourth A&R Credit Agreement as of September 30, 2024.

As of September 30, 2024, we had outstanding borrowings of $ 23.0 million and issued letter of credit guarantees of $ 2.4 million under the Amended Fourth A&R Credit Agreement, with additional available borrowings of approximately $ 697 million, based on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Amended Fourth A&R Credit Agreement.

Our interest rate as of September 30, 2024 was a variable rate of 6.70 % with respect to the outstanding principal amount.

Our interest rate as of December 31, 2023 was a fixed rate of 3.39 % on $ 75 million as a result of an interest rate swap and a variable floating rate of 7.21 % on $ 24.1 million.

The foregoing interest rates do not reflect potential future changes in the Applicable Margin.

We were in compliance with these financial covenants set forth in the Amended Fourth A&R Credit Agreement as of March 31, 2025.

As of March 31, 2025, we had no outstanding borrowings and issued letter of credit guarantees of $ 2.9 million under the Amended Fourth A&R Credit Agreement, with additional available borrowings of approximately $ 697 million, based on the maximum net leverage ratio required pursuant to the Amended Fourth A&R Credit Agreement.

Convertible Notes

In December 2023, we issued convertible notes which bear interest at 3.00 % per year, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2024 (the “Convertible Notes”).

In December 2023, we issued convertible notes which bear interest at 3.00 % per year, payable semi-annually in arrears on February 1 and August 1 of each year, which commenced August 1, 2024 (the “Convertible Notes”).

The Convertible Notes are senior unsecured obligations (as defined in the indenture governing the Convertible Notes (the “Indenture”)) of Merit and will mature on February 1, 2029, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

1 unchanged sentence

The initial conversion rate of the notes will be 11.5171 shares of our common stock (the “Common Stock”) per $ 1,000 principal amount of notes, which equates to an initial conversion price of approximately $ 86.83 per share of Common Stock, subject to adjustments as provided in the Indenture upon the occurrence of certain specified events.

In addition, holders of the Convertible Notes (“Holders”) will have the right to require Merit to repurchase all or a part of their notes upon the occurrence of a “fundamental change” (as defined in the Indenture) in cash at a fundamental change repurchase price of 100 % of their principal amount plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

Conversion can occur at the option of the Holders at any time on or after October 1, 2028.

Conversion can occur at the option of the holders of the Convertible Notes (“Holders”) at any time on or after October 1, 2028.

Prior to October 1, 2028, Holders may only elect to convert the Convertible Notes under the following circumstances:

(1) During the five business day period after any ten consecutive trading day period in which, for each day of that period, the trading price per $ 1,000 principal amount of the Convertible Notes for such trading day was less than 98 % of the product of the last reported sale price of the Common Stock and the applicable conversion rate on such trading day;

(2) Merit issues to common stockholders any rights, options, or warrants, entitling them, for a period of not more than 60 days , to purchase shares of Common Stock at a price per share less than the average closing sale price of 10 consecutive trading days, or Merit’s election to make a distribution to common stockholders exceeding 10 % of the previous day’s closing sale price;

(2) Merit issues to common shareholders any rights, options, or warrants, entitling them, for a period of not more than 60 days , to purchase shares of Common Stock at a price per share less than the average closing sale price of 10 consecutive trading days, or Merit’s election to make a distribution to common shareholders exceeding 10 % of the previous day’s closing sale price;

(3) Upon the occurrence of a Fundamental Change, as set forth in the Indenture;

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or (5) Prior to the related redemption date if Merit calls any Convertible Notes for redemption.

As of September 30, 2024, none of the conditions permitting the Holders to convert their Convertible Notes early had been met.

As of March 31, 2025, none of the conditions permitting the Holders to convert their Convertible Notes early had been met.

Therefore, the Convertible Notes are classified as long-term debt obligations.

On or after February 7, 2027, we may redeem for cash all or part of the Convertible Notes, at our option, if the last reported sales price of Common Stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related notice of the redemption.

Upon conversion, Merit will (1) pay cash up to the aggregate principal amount of the Convertible Notes to be converted and (2) pay or deliver, as the case may be, cash, shares of Common Stock, or a combination of cash and shares of Common Stock, at Merit’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

In addition, Holders will have the right to require Merit to repurchase all or a part of their notes upon the occurrence of a “fundamental change” (as defined in the Indenture) in cash at a fundamental change repurchase price of 100 % of their principal amount plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

Capped Call Transactions

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The cost of the Capped Call Transactions was approximately $ 66.5 million.

The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Common Stock.

The Capped Call Transactions do not meet the criteria for separate

accounting as a derivative as they are indexed to the Common Stock.

The premiums paid for the Capped Call Transactions have been included as a net reduction to Common Stock within stockholders' equity.

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Changes in the fair value of derivative instruments not designated as hedging instruments are recorded in earnings throughout the term of the derivative.

Interest Rate Risk.

Our debt bears interest at variable interest rates.

Therefore, we are subject to variability in the cash payable for interest expense.

In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Amended Fourth A&R Credit Agreement that varies in accordance with changes in the benchmark interest rate.

Derivatives Designated as Cash Flow Hedges

On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo.

In June 2023, certain terms under the swap agreement were amended to reflect the transition from LIBOR to SOFR, an alternative reference rate.

Under the interest rate swap agreement, we fixed the one-month SOFR rate on that portion of our borrowings under the Amended Fourth A&R Credit Agreement at 1.64 % for the period from June 1, 2023 to July 31, 2024.

The variable portion of the interest rate swap is tied to the one-month SOFR rate (the benchmark interest rate).

On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid.

As of September 30, 2024, the term of our interest rate swap has expired.

On December 31, 2023, our interest rate swap qualified as a cash flow hedge.

The fair value of our interest rate swap as of December 31, 2023 was an asset of $ 1.5 million, partially offset by $ 0.4 million in deferred taxes.

In December 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo wherein we fixed the one-month SOFR rate on that portion of our borrowings under the Amended Fourth A&R Credit Agreement.

The term of the interest rate swap expired on July 31, 2024.

Foreign Currency Risk.

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The objective of the forward contracts is to reduce the variability of cash flows associated with the forecasted purchase or sale of the foreign currencies.

As of September 30, 2024 and December 31, 2023, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 155.4 million and $ 141.1 million, respectively.

As of March 31, 2025 and December 31, 2024, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 179.9 million and $ 117.5 million, respectively.

Derivatives Not Designated as Cash Flow Hedges

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure.

As of September 30, 2024 and December 31, 2023, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 115.6 million and $ 108.4 million, respectively.

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate a portion of that exposure.

As of March 31, 2025 and December 31, 2024, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 100.6 million and $ 95.7 million, respectively.

Balance Sheet Presentation of Derivative Instruments.

As of September 30, 2024 and December 31, 2023, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets.

As of March 31, 2025 and December 31, 2024, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets.

We are not subject to any master netting agreements.

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Balance Sheet Location

September 30, 2024

March 31, 2025

December 31, 2024

Interest rate swap

Prepaid expenses and other assets

Foreign currency forward contracts

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Balance Sheet Location

September 30, 2024

March 31, 2025

December 31, 2024

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Reclassified from AOCI

Three Months Ended September 30,

Derivative instrument

Location in statements of income

Interest rate swap

Interest expense

Foreign currency forward contracts

Cost of sales

Amount of Gain/(Loss)

Consolidated Statements

Amount of Gain/(Loss)

Recognized in OCI

Reclassified from AOCI

Nine Months Ended September 30,

Three Months Ended March 31,

Derivative instrument

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Cost of sales

As of September 30, 2024, $ 2.0 million, or $ 1.5 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.

As of March 31, 2025, $ 1.1 million, or $ 0.8 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months.

Derivative Instruments Not Designated as Hedging Instruments

The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Derivative Instrument

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In the ordinary course of business, we are involved in various claims and litigation matters.

T hese proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries or other matters, including the matter described below.

These proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries or other matters, including the matter described below.

These matters generally involve inherent uncertainties and often require prolonged periods of time to resolve.

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Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred.

We have received requests from the Division of Enforcement of the U.S.

Commencing in January 2022, we have received requests from the Division of Enforcement of the U.S.

Securities and Exchange Commission (“SEC”) seeking the voluntary production of information relating to the business activities of Merit’s subsidiary in China, including interactions with hospitals and health care officials in China (the “SEC Inquiry”).

We are cooperating with the requests and investigating the matter.

We are cooperating with the requests, investigating the matter and are in discussions with the SEC Staff regarding a potential resolution to the matter.

Currently, we are unable to predict the scope, timing, significance or outcome of the SEC Inquiry or estimate a reasonably possible loss or range of loss associated with the matter.

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Earnings Per Common Share (EPS).

The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three and nine-month periods ended September 30, 2024 and 2023 consisted of the following (in thousands, except per share amounts):

The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three-month periods ended March 31, 2025 and 2024 consisted of the following (in thousands, except per share amounts):

Three Months Ended

Nine Months Ended

September 30,

Average common shares outstanding

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Convertible Notes

For our Convertible Notes, the dilutive effect is calculated using the if-converted method.

For our Convertible Notes, the dilutive effect has been calculated using the if-converted method.

Upon surrender of the Convertible Notes for conversion, Merit will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at Merit’s election, in respect of the remainder, if any, of Merit’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

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The convertible notes only have an impact on diluted earnings per share when the average share price of our Common Stock exceeds the conversion price of $ 86.83 .

The average closing price of the Common Stock for the period ended September 30, 2024 was used as the basis for determining the dilutive effect on EPS.

The average closing price of the Common Stock for the three-month periods ended March 31, 2025 and 2024, respectively, was used as the basis for determining the dilutive effect on EPS.

Stock-Based Compensation Expense.

Stock-based compensation expense before income tax expense for the three and nine-month periods ended September 30, 2024 and 2023 consisted of the following (in thousands):

Stock-based compensation expense before income tax expense for the three-month periods ended March 31, 2025 and 2024 consisted of the following (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Cost of sales

Nonqualified stock options

Restricted stock units

Total cost of sales

Research and development

Nonqualified stock options

Restricted stock units

Total research and development

Selling, general and administrative

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Nonqualified Stock Options

During the nine-month period ended September 30, 2023, we granted stock options representing 401,535 shares of our Common Stock.

We did no t grant any stock options during the nine-month period ended September 30, 2024.

We use the Black-Scholes methodology to value the stock-based compensation expense for options.

In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below:

Nine Months Ended

September 30,

Risk-free interest rate

3.6 % - 4.6 %

Expected option term

Expected dividend yield

Expected price volatility

44.6 % - 47.1 %

The average risk-free interest rate is determined using the U.S.

Treasury rate in effect as of the date of grant, based on the expected term of the stock award.

We determine the expected term of stock options using the historical exercise behavior of employees.

The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option term and implied volatility based on recent trends of the daily historical volatility.

For awards with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.

As of September 30, 2024, the total remaining unrecognized compensation cost related to non-vested stock options was $ 13.2 million, which was expected to be recognized over a weighted average period of 1.9 years.

During the three months ended March 31, 2025 and 2024, we did no t grant any stock options.

As of March 31, 2025, the total remaining unrecognized compensation cost related to non-vested stock options was $ 9.0 million, which was expected to be recognized over a weighted average period of 1.5 years.

Stock-Settled Performance-Based Restricted Stock Units (“Performance Stock Units”)

During the nine-month periods ended September 30, 2024 and 2023, we granted performance stock units which represented up to 364,810 and 286,863 shares of Common Stock, respectively.

Conversion of the performance stock units occurs at the end of the relevant performance periods, or one year after the agreement date, whichever is later.

The number of shares delivered upon vesting at the end of the performance periods are based upon performance against specified financial performance metrics and relative total shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements.

During the three-month periods ended March 31, 2025 and 2024, we granted Performance Stock Units which represented awards of up to 290,120 and 364,810 shares of Common Stock, respectively.

Settlement of the Performance Stock Units into shares of Common Stock occurs at the end of the relevant performance periods.

The actual number of shares of Common Stock issuable at the end of the performance periods is based upon Company performance towards specified financial performance targets and relative total shareholder return as compared to the Russell 2000 Index (“rTSR”), all as more specifically set forth in the Performance Stock Unit award agreements.

We use Monte-Carlo simulations to estimate the grant-date fair value of the Performance Stock Units linked to total shareholder return.

The fair value of each performance stock unit was estimated as of the grant date using the following assumptions for awards granted in the periods indicated below:

Nine Months Ended

September 30,

Three Months Ended

Risk-free interest rate

3.9 % - 4.6 %

Performance period

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Expected price volatility

31.4 % - 32.6 %

The risk-free interest rate of return was determined using the U.S.

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At the end of the performance period, cumulative expense is calculated based on the actual performance metrics achieved.

As of September 30, 2024, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 17.5 million, which is expected to be recognized over a weighted average period of 1.9 years.

As of March 31, 2025, the total remaining unrecognized compensation cost related to stock-settled Performance Stock Units was $ 38.8 million, which is expected to be recognized over a weighted average period of 1.8 years.

Cash-Settled Performance-Based Awards

During the nine-month periods ended September 30, 2024 and 2023, we granted performance stock units to our Chief Executive Officer that provide for settlement in cash upon achievement of specific metrics (“Liability Awards”), with total target cash incentives in the amount of $ 1.6 million and $ 1.3 million, respectively.

During the three-month periods ended March 31, 2025 and 2024, we granted Performance Stock Units to our Chief Executive Officer that provide for settlement in cash upon achievement of specific metrics (“Liability Awards”), with total target cash incentives in the amount of $ 1.7 million and $ 1.6 million, respectively.

The Liability Awards entitle him to a target cash payment based upon our level of rTSR performance and achievement of other performance metrics, as defined in the award agreements.

During the nine-month periods ended September 30, 2024 and 2023, we granted additional performance stock units to certain employees that provide for settlement in cash upon our achievement of specified financial metrics.

The cash payable upon vesting at the end of the service period is based upon performance against specified financial performance metrics and relative total shareholder return as compared to the rTSR, as defined in the award agreements.

Compensation expense is recognized for the cash payment likely to be awarded based on the performance metrics.

The potential maximum payout of these Liability Awards is 250 % of the target cash incentive, resulting in a total potential maximum payout of $ 4.4 million and $ 4.6 million for Liability Awards granted during the nine-month periods ended September 30, 2024 and 2023, respectively.

During the three-month periods ended March 31, 2025 and 2024, we granted additional Performance Stock Units to certain employees that provide for settlement in cash upon our achievement of specified financial metrics.

The cash payable upon vesting at the end of the service period is based upon performance against specified financial performance targets and relative total shareholder return as compared to the rTSR, as defined in the award agreements.

Compensation expense is recognized in an amount equal to the cash payment likely to be awarded based on the performance metrics.

The potential maximum payout of these Liability Awards is 250 % of the target cash incentive, resulting in a total potential maximum payout of $ 4.8 million and $ 4.5 million for Liability Awards granted during the three-month periods ended March 31, 2025 and 2024, respectively.

The settlement generally occurs at the end of three-year performance periods based upon the same performance metrics and vesting period as our Performance Stock Units.

The fair value of these Liability Awards is measured at each reporting period until the awards are settled.

As of September 30, 2024 and December 31, 2023, the recorded balance associated with these Liability Awards is $ 4.1 million and $ 3.4 million, respectively, which are classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheets.

As of September 30, 2024, the total remaining unrecognized compensation cost related to Liability Awards was $ 3.8 million, which is expected to be recognized over a weighted average period of 1.8 years.

As of March 31, 2025 and December 31, 2024, the recorded balance associated with these Liability Awards is $ 3.8 million and $ 5.1 million, respectively, which have been classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheets.

As of March 31, 2025, the total remaining unrecognized compensation cost related to Liability Awards was $ 7.1 million, which was expected to be recognized over a weighted average period of 1.9 years.

Restricted Stock Units

During the nine-month periods ended September 30, 2024 and 2023, we granted restricted stock units to certain employees and non-employee directors representing 158,719 and 20,358 shares of Common Stock, respectively.

During the three-month periods ended March 31, 2025 and 2024, we granted restricted stock units to certain employees and non-employee directors representing 109,515 and 134,553 shares of Common Stock, respectively.

The expense recognized for restricted stock units is equal to the closing stock price on the date of grant, which is recognized over the vesting period.

Restricted stock units granted to each employee are subject to such employee’s continued employment through the vesting date, which is four years from the date of grant.

Restricted stock units granted to each employee are subject to such employee’s continued employment

through the vesting date, which is four years from the date of grant.

Restricted stock units granted to each non-employee director are subject to such director’s continued service through the vesting date, which is one year from the grant date.

As of September 30, 2024, the total remaining unrecognized compensation cost related to restricted stock units was $ 9.1 million, which will be recognized over a weighted average period of 3.1 years.

As of March 31, 2025, the total remaining unrecognized compensation cost related to restricted stock units was $ 31.4 million, which was expected to be recognized over a weighted average period of 3.1 years.

Segment Reporting.

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Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures.

Our chief operating decision maker is our Chief Executive Officer.

We evaluate the performance of our operating segments based on net sales and income from operations.

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and nine-month periods ended September 30, 2024 and 2023, were as follows (in thousands):

Our chief operating decision maker is our Chief Executive Officer, who uses segment profit or loss to assess performance and allocate resources to each segment, primarily through periodic budgeting and segment performance reviews.

See Note 3, Revenues from Contracts with Customers for a detailed breakout of our sales by operating segment and product category, disaggregated between domestic and international sales.

Total assets by segment are not used by the CODM to assess performance or allocate resources to the Company’s segments;

therefore, total assets by segment are not disclosed.

Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three-month periods ended March 31, 2025 and 2024, were as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended

March 31, 2025

March 31, 2024

Cardiovascular

Total net sales

Income from operations

Cardiovascular

Total income from operations

Cost of sales standard (1)

Cost of sales other (2)

Selling, general and administrative expenses

Research and development expenses

Other operating expenses (3)

Income from operations

Total other expense — net

Income tax expense

Income before income taxes

(1) Cost of sales standard represents costs of goods sold measured at the internal standard cost for production of inventory.

Inventory standard costs include material, labor and manufacturing overhead.

(2) Cost of sales other for all segments includes amortization expense associated with our developed technology and license agreements intangible assets, freight and handling associated with shipments to customers, provisions based on estimated excess, slow moving and obsolete inventories, manufacturing and price variances, and royalties.

(3) Other operating expenses include contingent consideration expense (benefit) related to the changes in fair value of contingent payments associated with acquisitions.

Total depreciation and amortization by operating segment for the three-month periods ended March 31, 2025 and 2024, consisted of the following (in thousands):

Three Months Ended

Cardiovascular

Fair Value Measurements.

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of March 31, 2025 and December 31, 2024 consisted of the following (in thousands):

Fair Value Measurements Using

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unobservable inputs

September 30, 2024

Marketable securities (1)

March 31, 2025

Money market funds (1)

Foreign currency contract assets, current and long-term (2)

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December 31, 2024

Money market funds (1)

Marketable securities (4)

Interest rate contract asset, current (2)

Foreign currency contract assets, current and long-term (2)

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Contingent consideration liabilities

(1) Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets.

Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

(2) The fair value of the interest rate contract is determined using Level 2 fair value inputs and is recorded as prepaid and other current assets in the consolidated balance sheets.

(1) Our money market fund represents a bank-managed money market fund which permits daily redemptions.

The fund is recorded as cash equivalents in the consolidated balance sheets.

(2) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as a prepaid expense and other current asset or other long-term asset in the consolidated balance sheets.

(3) The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expense or other long-term obligation in the consolidated balance sheets.

(4) Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets.

Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Certain of our past business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones.

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We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements.

Changes in the fair value of our contingent consideration liabilities during the three and nine-month periods ended September 30, 2024 and 2023 consisted of the following (in thousands):

Changes in the fair value of our contingent consideration liabilities during the three-month periods ended March 31, 2025 and 2024 consisted of the following (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Beginning balance

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Ending balance

As of September 30, 2024, $ 3.0 million in contingent consideration liability was included in other long-term obligations and $ 0.4 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet.

As of March 31, 2025, $ 1.6 million in contingent consideration liability was included in other long-term obligations and $ 2.8 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet.

As of December 31, 2024, $ 3.1 million in contingent consideration liability was included in other long-term obligations and $ 0.4 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet.

Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 0.2 million and $ 3.5 million for the nine-month periods ended September 30, 2024 and 2023, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 0.1 million and $ 12.7 million for the nine-month periods ended September 30, 2024 and 2023, respectively, are reflected as operating cash flows.

The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at September 30, 2024 and December 31, 2023 (amounts in thousands):

Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 0.1 million and $ 0.1 million for the three-month periods ended March 31, 2025 and 2024, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

Payments related to increases in the contingent consideration liability subsequent to the date of acquisition are reflected as operating cash flows.

The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at March 31, 2025 and December 31, 2024 (amounts in thousands):

Fair value at

September 30,

Contingent consideration liability

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Discount rate

14.0 % - 16.0 %

Projected year of payments

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Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs.

We intend to record any such change in fair value to operating expenses in our consolidated statements of income.

We intend to record any such change in the fair value of contingent consideration liability to operating expenses in our consolidated statements of income.

Fair Value of Other Assets (Liabilities)

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Our long-term debt under our Amended Fourth A&R Credit Agreement re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value.

We believe the fair value our long-term debt under our Convertible Notes approximates carrying value as the notes were issued in December 2023.

The fair value of our long-term debt under our Convertible Notes was $ 1,016.6 million as of March 31, 2025 and was determined based on quoted prices in markets that are not active, which is considered a Level 2 valuation input.

The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which use Level 1 inputs.

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All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.

Our equity investments in privately-held companies were $ 22.6 million and $ 19.1 million at September 30, 2024 and December 31, 2023, respectively, which are included within other long-term assets in our consolidated balance sheets.

Our equity investments in privately-held companies were $ 25.9 million and $ 22.8 million at March 31, 2025 and December 31, 2024, respectively, which are included within other long-term assets in our consolidated balance sheets.

We analyze our investments in privately-held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the investment.

Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments .

During the nine-month period ended September 30, 2023, we recorded impairment charges of $ 0.3 million associated with our previously-held equity investment in Bluegrass in connection with the asset acquisition completed on May 4, 2023 (see Note 4).

During the nine-month period ended September 30, 2024, we recorded no impairment charges related to our equity investments.

For the three-month periods ended March 31, 2025 and 2024, we recorded no impairment charges related to our equity investments.

Current Expected Credit Losses

Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 9.3 million and $ 3.2 million as of September 30, 2024 and December 31, 2023, respectively.

Long-term notes receivable issued were $ 6.7 million for the nine-month period ended September 30, 2024 and were related to loans issued to Selio Medical Limited (“Selio”) of $ 1.7 million, Solo Pace Inc.

(“Solo Pace”) of $ 2.0 million and Fluidx of $ 3.0 million.

As of September 30, 2024 and December 31, 2023, we had an allowance for current expected credit losses of $ 1.6 million and $ 0.6 million, respectively, associated with these notes receivable.

Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 13.5 million and $ 9.4 million as of March 31, 2025 and December 31, 2024, respectively.

Long-term notes receivable increased $ 4.0 million for the three-month period ended March 31, 2025 related to a loan issued to Protaryx Medical Inc.

(“Protaryx”).

As of March 31, 2025 and December 31, 2024, we had an allowance for current expected credit losses of $ 1.6 million and $ 1.4 million, respectively, associated with these notes receivable.

We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities, and other security specific factors.

The table below presents a roll-forward of the allowance for current expected credit losses on our notes receivable for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):

The table below presents a roll-forward of the allowance for current expected credit losses on our notes receivable for the three-month periods ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Beginning balance

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Accumulated Other Comprehensive Income (Loss).

The changes in each component of accumulated other comprehensive income (loss) for the three and nine-month periods ended September 30, 2024 and 2023 were as follows:

Cash Flow Hedges

Foreign Currency Translation

Balance as of July 1, 2024

Other comprehensive income (loss)

Reclassifications to:

Cost of sales

Interest expense

Net other comprehensive income (loss)

Balance as of September 30, 2024

Cash Flow Hedges

Foreign Currency Translation

Balance as of July 1, 2023

Other comprehensive income (loss)

Reclassifications to:

Cost of sales

Interest expense

Net other comprehensive loss

Balance as of September 30, 2023

The changes in each component of accumulated other comprehensive income (loss) for the three-month periods ended March 31, 2025 and 2024 were as follows:

Cash Flow Hedges

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Cost of sales

Interest expense

Net other comprehensive income (loss)

Balance as of September 30, 2024

Balance as of March 31, 2025

Cash Flow Hedges

6 unchanged sentences

Net other comprehensive income (loss)

Balance as of September 30, 2023

Subsequent Events.

On September 16, 2024, we entered into an Asset Purchase Agreement (the “Cook Purchase Agreement”) with Cook Medical Holdings LLC, an Indiana limited liability company (“Cook Medical”), to purchase Cook Medical’s lead management portfolio of medical devices and certain related assets for total cash consideration of approximately $ 210 million (collectively, the “Cook Acquisition”).

The closing of the proposed Cook Acquisition is expected to occur during the fourth quarter of 2024, subject to the receipt or waiver (in accordance with the provisions of the Cook Purchase Agreement) of certain closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and other customary closing conditions.

We expect to fund the Cook Acquisition through a combination of cash on hand and borrowings under our long-term credit facility.

In connection with the projected closing of the Cook Acquisition, we propose to enter into a transition services agreement with Cook Medical, pursuant to which Cook Medical would provide manufacturing and other services to us during a two-year transition period.

We are currently evaluating the accounting treatment of the Cook Acquisition, as well as performing the valuation of the assets acquired and the related purchase price allocation.

Balance as of March 31, 2024

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What changed 10-Q

Item 1. Financial Statements