TACTILE SYSTEMS TECHNOLOGY INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this report. Overview We are a medical technology company that develops and commercializes medical devices in the United States. Our mission is to reveal and treat people with underserved chronic conditions and help them care for themselves at home. We focus our efforts on advancing the standard of care in home-based solutions for patients with lymphedema and chronic respiratory conditions by improving clinical, patient and economic outcomes. In our lymphedema product line, our sales and marketing channel focus includes (1) oncology-related clinicians who treat cancer survivors diagnosed with secondary lymphedema related to their cancer treatments, (2) vascular disease clinicians who support patients with lymphedema, chronic venous insufficiency, and lipedema and (3) wound, vein and lymphatic massage clinics. In our airway clearance product line, we support patients suffering from chronic, severe respiratory conditions, particularly bronchiectasis, and we sell our products indirectly through home medical equipment and DME providers. We generally employ a direct-to-patient and -clinician business model within our lymphedema portfolio, through which we obtain patient referrals and prescriptions from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions directly to patients and train them on the proper use of our solutions. Across our two product lines, our home-based solutions deliver cost-effective, clinically proven and long-term treatment for indicated patients. Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl pneumatic compression pump systems and our airway clearance product is a High-Frequency Chest Wall Oscillation (“HFCWO”) device called AffloVest. The Flexitouch system product line is considered an advanced pneumatic compression device. The first generation Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, introducing a medical device technology to address the many limitations of self-administered home-based manual lymphatic drainage therapy. A second generation Flexitouch system received 510(k) clearance from the FDA in October 2006. In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. A third generation, Flexitouch Plus, received 510(k) clearance from the FDA in June 2017. In December 2020, we received 510(k) clearance from the FDA for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. The Entre system product line and Nimbl product line are considered basic, or simple, pneumatic compression devices. These systems are sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device e.g., a Flexitouch Plus system. We introduced the Entre system in the United States in February 2013, this device was manufactured by Thermotek, Inc. and received FDA clearance in 2010. In 2015, we received FDA clearance for our own first generation Entre system and the second generation, Entre Plus, was released in March 2023. Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and was commercially launched for upper extremity lymphedema in October 2024 and was commercially launched for lower extremity lymphedema in February 2025. Sales and rentals of our lymphedema products represented 84% and 88% of our revenue in the nine months ended September 30, 2025 and 2024, respectively. On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line. AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders. For the nine months ended September 30, 2025 and 2024, sales of AffloVest represented 16% and 12% of our revenue, respectively. To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of a lymphedema and respiratory sales force, marketing team including clinical education programs, patient 23 Table of Contents education team, reimbursement capabilities and clinical expertise. We market our lymphedema products using a direct-to-patient and -clinician model. The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. As of September 30, 2025, we employed 167 account managers and 162 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products. This compares to 167 account managers and 103 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products as of September 30, 2024. We invest in our reimbursement function to improve operational efficiencies and enhance individual payer expertise, while continuing our strategic focus of payer development. Our payer relations function focuses on payer policy development, education, contract negotiations, and data analysis. Our reimbursement operations function is responsible for verifying patient insurance benefits, individual patient case development, prior authorization submissions, case follow-up, and appeals when necessary. We also have a clinical team, consisting of a scientific advisory board, in-house therapists and nurses, and a Chief Medical Officer, that serves as a resource to clinicians and patients and guides the development of clinical evidence in support of our products. Most clinical studies require observation and interaction with clinicians and patients to monitor results and progress. We rely on third-party contract manufacturers for the sourcing of parts, the assembly of our controllers and the manufacturing of the garments used with our systems. We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota. We also manufacture and ship the AffloVest device from our Minnesota-based facility. I n July 2022, we launched Kylee™ a free mobile app that makes it easier for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. Flexitouch Plus and Nimbl devices include Bluetooth technology, which is viewable using Kylee. For the three months ended September 30, 2025, we generated revenue of $85.8 million and had net income of $8.2 million, compared to revenue of $73.1 million and net income of $5.2 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, we generated revenue of $225.9 million and had net income of $8.5 million, compared to revenue of $207.4 million and net income of $7.2 million for the nine months ended September 30, 2024. Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023. We operate in one segment for financial reporting purposes. ​ ​ 24 Table of Contents Results of Operations Comparison of the Three and Nine Months Ended September 30, 2025 and 2024 The following table presents our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ Change (In thousands) ​ 2025 ​ 2024 ​ $ ​ % Condensed Consolidated Statement ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ of Operations Data: ​ ​ ​ ​ revenue ​ ​ ​ ​ revenue ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales revenue ​ $ 76,890 ​ 90 % ​ $ 63,168 ​ 86 % ​ $ 13,722 ​ 22 % Rental revenue ​ ​ 8,865 ​ 10 % ​ ​ 9,925 ​ 14 % ​ ​ (1,060) ​ (11) % Total revenue ​ ​ 85,755 ​ 100 % ​ ​ 73,093 ​ 100 % ​ ​ 12,662 ​ 17 % Cost of revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales revenue ​ ​ 17,896 ​ 21 % ​ ​ 15,603 ​ 21 % ​ ​ 2,293 ​ 15 % Cost of rental revenue ​ ​ 2,858 ​ 3 % ​ ​ 2,703 ​ 4 % ​ ​ 155 ​ 6 % Total cost of revenue ​ ​ 20,754 ​ 24 % ​ ​ 18,306 ​ 25 % ​ ​ 2,448 ​ 13 % Gross profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit - sales revenue ​ ​ 58,994 ​ 69 % ​ ​ 47,565 ​ 65 % ​ ​ 11,429 ​ 24 % Gross profit - rental revenue ​ ​ 6,007 ​ 7 % ​ ​ 7,222 ​ 10 % ​ ​ (1,215) ​ (17) % Gross profit ​ ​ 65,001 ​ 76 % ​ ​ 54,787 ​ 75 % ​ ​ 10,214 ​ 19 % Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ ​ 29,809 ​ 35 % ​ ​ 26,838 ​ 37 % ​ ​ 2,971 ​ 11 % Research and development ​ ​ 2,191 ​ 3 % ​ ​ 2,417 ​ 3 % ​ ​ (226) ​ (9) % Reimbursement, general and administrative ​ ​ 21,442 ​ 25 % ​ ​ 18,118 ​ 25 % ​ ​ 3,324 ​ 18 % Intangible asset amortization ​ ​ 596 ​ 1 % ​ ​ 633 ​ 1 % ​ ​ (37) ​ (6) % Total operating expenses ​ ​ 54,038 ​ 64 % ​ ​ 48,006 ​ 66 % ​ ​ 6,032 ​ 13 % Income from operations ​ ​ 10,963 ​ 12 % ​ ​ 6,781 ​ 9 % ​ ​ 4,182 ​ 62 % Interest income ​ ​ 667 ​ 1 % ​ ​ 969 ​ 2 % ​ ​ (302) ​ (31) % Interest expense ​ ​ (193) ​ — % ​ ​ (517) ​ (1) % ​ ​ 324 ​ (63) % Other income ​ ​ — ​ — % ​ ​ — ​ — % ​ ​ — ​ — % Income before income taxes ​ ​ 11,437 ​ 13 % ​ ​ 7,233 ​ 10 % ​ ​ 4,204 ​ 58 % Income tax expense ​ ​ 3,228 ​ 4 % ​ ​ 2,078 ​ 3 % ​ ​ 1,150 ​ 55 % Net income ​ $ 8,209 ​ 9 % ​ $ 5,155 ​ 7 % ​ $ 3,054 ​ 59 % ​ ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ Change (In thousands) ​ 2025 ​ 2024 ​ $ ​ % Condensed Consolidated Statement ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ of Operations Data: ​ ​ ​ ​ revenue ​ ​ ​ ​ revenue ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales revenue ​ $ 199,890 ​ 88 % ​ $ 180,742 ​ 87 % ​ $ 19,148 ​ 11 % Rental revenue ​ ​ 26,038 ​ 12 % ​ ​ 26,657 ​ 13 % ​ ​ (619) ​ (2) % Total revenue ​ ​ 225,928 ​ 100 % ​ ​ 207,399 ​ 100 % ​ ​ 18,529 ​ 9 % Cost of revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales revenue ​ ​ 49,270 ​ 22 % ​ ​ 46,810 ​ 23 % ​ ​ 2,460 ​ 5 % Cost of rental revenue ​ ​ 7,518 ​ 3 % ​ ​ 8,270 ​ 4 % ​ ​ (752) ​ (9) % Total cost of revenue ​ ​ 56,788 ​ 25 % ​ ​ 55,080 ​ 27 % ​ ​ 1,708 ​ 3 % Gross profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit - sales revenue ​ ​ 150,620 ​ 66 % ​ ​ 133,932 ​ 64 % ​ ​ 16,688 ​ 12 % Gross profit - rental revenue ​ ​ 18,520 ​ 9 % ​ ​ 18,387 ​ 9 % ​ ​ 133 ​ 1 % Gross profit ​ ​ 169,140 ​ 75 % ​ ​ 152,319 ​ 73 % ​ ​ 16,821 ​ 11 % Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ ​ 87,364 ​ 39 % ​ ​ 82,803 ​ 40 % ​ ​ 4,561 ​ 6 % Research and development ​ ​ 5,950 ​ 3 % ​ ​ 6,794 ​ 3 % ​ ​ (844) ​ (12) % Reimbursement, general and administrative ​ ​ 63,474 ​ 28 % ​ ​ 51,158 ​ 24 % ​ ​ 12,316 ​ 24 % Intangible asset amortization ​ ​ 1,848 ​ 1 % ​ ​ 1,898 ​ 1 % ​ ​ (50) ​ (3) % Total operating expenses ​ ​ 158,636 ​ 71 % ​ ​ 142,653 ​ 68 % ​ ​ 15,983 ​ 11 % Income from operations ​ ​ 10,504 ​ 4 % ​ ​ 9,666 ​ 5 % ​ ​ 838 ​ 9 % Interest income ​ ​ 2,412 ​ 1 % ​ ​ 2,437 ​ 1 % ​ ​ (25) ​ (1) % Interest expense ​ ​ (1,027) ​ — % ​ ​ (1,614) ​ (1) % ​ ​ 587 ​ (36) % Other income ​ ​ 1 ​ — % ​ ​ 9 ​ — % ​ ​ (8) ​ (89) % Income before income taxes ​ ​ 11,890 ​ 5 % ​ ​ 10,498 ​ 5 % ​ ​ 1,392 ​ 13 % Income tax expense ​ ​ 3,438 ​ 1 % ​ ​ 3,254 ​ 2 % ​ ​ 184 ​ 6 % Net income ​ $ 8,452 ​ 4 % ​ $ 7,244 ​ 3 % ​ $ 1,208 ​ 17 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue Revenue increased $12.7 million, or 17%, to $85.8 million in the three months ended September 30, 2025, compared to $73.1 million in the three months ended September 30, 2024. The increase in total revenue was attributable to an increase of $7.1 million, or 11%, in sales and rentals of the lymphedema product line and an increase of $5.6 million, or 71%, in sales of the airway clearance product line in the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Revenue increased $18.5 million, or 9%, to $225.9 million in the nine months ended September 30, 2025, compared to $207.4 million in the nine months ended September 30, 2024. The increase in total revenue was attributable to an increase of $11.9 million, or 47%, in sales of the airway clearance product line and an increase of $6.6 million, or 4%, in sales and rentals of the lymphedema product line in the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in the airway clearance product line revenue in the three and nine months ended September 30, 2025, was primarily attributable to increased placements of AffloVest among our DME partners. The increase in the lymphedema product line revenue in the three and nine months ended September 30, 2025 was primarily attributable to operational execution and meaningful progress across business transformation, product innovation and market leadership initiatives. 26 Table of Contents The following table summarizes our revenue by product line for the three and nine months ended September 30, 2025 and 2024, both in dollars and percentage of total revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ ​ ​ ​ September 30, ​ Change (In thousands) 2025 ​ 2024 ​ $ ​ % Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ $ 72,381 ​ $ 65,282 ​ $ 7,099 ​ 11% Airway clearance products ​ ​ 13,374 ​ ​ 7,811 ​ ​ 5,563 ​ 71% Total ​ $ 85,755 ​ $ 73,093 ​ $ 12,662 ​ 17% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of total revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ 84% ​ 89% ​ ​ ​ ​ Airway clearance products ​ ​ 16% ​ ​ 11% ​ ​ ​ ​ ​ Total ​ 100% ​ 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ ​ ​ September 30, ​ Change (In thousands) 2025 ​ 2024 ​ $ ​ % Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ $ 188,905 ​ $ 182,278 ​ $ 6,627 ​ 4% Airway clearance products ​ ​ 37,023 ​ ​ 25,121 ​ ​ 11,902 ​ 47% Total ​ $ 225,928 ​ $ 207,399 ​ $ 18,529 ​ 9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of total revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ 84% ​ 88% ​ ​ ​ ​ Airway clearance products ​ ​ 16% ​ ​ 12% ​ ​ ​ ​ ​ Total ​ 100% ​ 100% ​ ​ ​ ​ ​ Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and have an increasing desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products. Cost of Revenue and Gross Margin Cost of revenue increased $2.4 million, or 13%, to $20.8 million in the three months ended September 30, 2025, compared to $18.3 million in the three months ended September 30, 2024. Cost of revenue increased $1.7 million, or 3%, to $56.8 million in the nine months ended September 30, 2025, compared to $55.1 million in the nine months ended September 30, 2024. The increase in cost of revenue for both the three- and nine- month periods was primarily attributable to the increase in revenue. Gross margin was 76% and 75% in the three months ended September 30, 2025 and 2024, respectively, and 75% and 73% in the nine months ended September 30, 2025 and 2024, respectively. Sales and Marketing Expenses Sales and marketing expenses increased $3.0 million, or 11%, to $29.8 million in the three months ended September 30, 2025, compared to $26.8 million in the three months ended September 30, 2024. The increase was primarily attributable to a $2.3 million increase in personnel-related compensation expenses, a $0.3 million increase in travel and entertainment expenses, a $0.2 million increase in expenses for demo units, 27 Table of Contents a $0.1 million increase in expenses related to meetings and seminars and a $0.1 million increase in general office and printing expenses. Sales and marketing expenses increased $4.6 million, or 6%, to $87.4 million in the nine months ended September 30, 2025, compared to $82.8 million in the nine months ended September 30, 2024. The increase was primarily attributable to a $3.2 million increase in personnel-related compensation expenses, a $0.9 million increase in travel and entertainment expenses, a $0.4 increase in expenses related to meetings and seminars, and a $0.1 million increase in expenses related to educational grants. Research and Development Expenses Research and development (“R&D”) expenses decreased $0.2 million, or 9%, to $2.2 million in the three months ended September 30, 2025, compared to $2.4 million in the three months ended September 30, 2024. The decrease was primarily attributable to a $0.2 million decrease in clinical study related expenses and a $0.1 million decrease in personnel-related compensation expenses, partially offset by a $0.1 million increase in IT-related expenses. R&D expenses decreased $0.8 million, or 12%, to $6.0 million in the nine months ended September 30, 2025, compared to $6.8 million in the nine months ended September 30, 2024. The decrease was primarily attributable to a $0.8 million decrease in clinical study related expenses and a $0.3 million decrease in personnel-related compensation expenses, partially offset by a $0.3 million increase in IT-related expenses. Reimbursement, General and Administrative Expenses Reimbursement, general and administrative expenses increased $3.3 million, or 18%, to $21.4 million in the three months ended September 30, 2025, compared to $18.1 million in the three months ended September 30, 2024. This increase was primarily attributable to a $2.8 million increase in personnel-related compensation expenses and a $0.6 million increase in IT-related expenses, partially offset by a $0.1 million decrease in occupancy costs, depreciation expense and professional fees. Reimbursement, general and administrative expenses increased $12.3 million, or 24%, to $63.5 million in the nine months ended September 30, 2025, compared to $51.2 million in the nine months ended September 30, 2024. This increase was primarily attributable to a $8.1 million increase in personnel-related compensation expenses, a $2.7 million increase in IT-related expenses, and a $1.5 million increase in occupancy costs, depreciation expense and professional fees. Intangible Asset Amortization Intangible asset amortization remained consistent at $0.6 million for each of the three months ended September 30, 2025 and 2024. Intangible asset amortization was $1.8 and $1.9 million for the nine months ended September 30, 2025 and 2024, respectively. Interest Income and Interest Expense Interest income decreased $0.3 million, or 31%, to $0.7 million in the three months ended September 30, 2025, compared to $1.0 million in the three months ended September 30, 2024, primarily due to a lower cash balance in an Institutional Insured Liquid Deposit demand account due to the repayment of debt. Interest expense decreased $0.3 million, or 63%, to $0.2 million in the three months ended September 30, 2025, compared to $0.5 million in the three months ended September 30, 2024, primarily due to the repayment of debt. Interest income decreased $25,000, or 1%, to $2.4 million in the nine months ended September 30, 2025, compared to $2.4 million in the nine months ended September 30, 2024. Interest expense decreased $0.6 million, or 36%, to $1.0 million in the nine months ended September 30, 2025, compared to $1.6 million in 28 Table of Contents the nine months ended September 30, 2024, primarily due to the decrease in the outstanding balance and repayment of our term loan. Income Taxes We recorded an income tax expense of $3.2 million and $2.1 million for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate for the three months ended September 30, 2025 was an expense of 28.2%, compared to an expense of 28.7% for the three months ended September 30, 2024. The primary driver of the change in our effective tax rate was attributable to the Company recording less expense related to stock-based compensation discrete items when compared to the prior year period. We recorded an income tax expense of $3.4 million and $3.3 million for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate for the nine months ended September 30, 2025 was an expense of 28.9%, compared to an expense of 31.0% for the nine months ended September 30, 2024. The primary drivers of the change in the Company’s effective tax rate were attributable to a lower discrete expense in the current year period as compared to true-ups recognized in the prior year period and rate changes in the current year period compared to prior year period. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. We have evaluated the financial implications of the OBBBA and have reflected its effects in the three months ended September 30, 2025. The OBBBA is expected to have no impact on our effective tax rate and a favorable impact on the timing of cash taxes. We currently expect our full-year 2025 cash tax benefit will be approximately $4.5 million. Liquidity and Capital Resources Cash Flows On September 30, 2025, our principal sources of liquidity were cash of $ 66.0 million and net accounts receivable of $ 37.3 million. This compares to cash of $82.1 million and net accounts receivable of $43.2 million at September 30, 2024. The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, (In thousands) 2025 2024 Net cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities $ 25,515 ​ $ 24,322 Investing activities ​ ​ (1,958) ​ ​ (2,005) Financing activities ​ ​ (51,959) ​ ​ (1,204) Net (decrease) increase in cash $ (28,402) ​ $ 21,113 ​ ​ Operating Activities Net cash provided by operating activities during the nine months ended September 30, 2025 was $25.5 million, resulting from non-cash net income adjustments of $12.5 million, net income of $8.5 million, and a net increase in operating assets and liabilities of $4.6 million. Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in net accounts receivable of $7.7 million, a $1.0 million increase in accrued expenses and other liabilities, a decrease in inventories of $2.6 million, a $2.1 million increase in accounts payable and a decrease in income taxes payable of $1.0 million, partially offset by a decrease in accrued payroll and related taxes of $3.2 million, an increase in prepaid expenses and other assets of $6.0 million, an increase in net investment in leases of $0.3 million and an increase in right of use operating lease assets of $0.3 million. The positive non-cash net income adjustments consisted primarily of $5.8 million 29 Table of Contents of stock-based compensation expense, $5.0 million of depreciation and amortization, $1.6 million of deferred income taxes, and $0.1 million of loss on disposals. Net cash provided by operating activities during the nine months ended September 30, 2024 was $24.3 million, resulting from non-cash net income adjustments of $11.0 million, net income of $7.2 million and a net increase in operating assets and liabilities of $6.1 million. The positive non-cash net income adjustments consisted primarily of $6.0 million of stock-based compensation expense and $5.1 million of depreciation. Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in accounts receivable of $10.5 million, a decrease in inventories of $1.4 million and a $0.6 million increase in accounts payable, partially offset by a decrease in accrued payroll and related taxes of $3.7 million, an increase in prepaid expenses and other assets of $1.8 million, a decrease in income taxes payable of $0.8 million and a decrease in accrued expenses and other liabilities of $0.3 million. Investing Activities Net cash used in investing activities during the nine months ended September 30, 2025, was $2.2 million, consisting of purchases of property and equipment and patent costs. Net cash used in investing activities during the nine months ended September 30, 2024, was $2.0 million, consisting of purchases of property and equipment primarily related to tenant improvements, and patent costs. Financing Activities Net cash used in financing activities during the nine months ended September 30, 2025, was $52.0 million, primarily consisting of payments of $26.6 million for the repurchase of our common stock and a payment of $26.3 million made on our term loan, partially offset by $0.8 million in proceeds from the issuance of common stock under the ESPP . Net cash used in financing activities during the nine months ended September 30, 2024, was $1.2 million, primarily consisting of a $2.3 million payment made on our term loan, partially offset by $1.0 million in proceeds from the issuance of common stock under the ESPP. Credit Agreement On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “2021 Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The 2021 Restated Credit Agreement amended and restated in its entirety our prior credit agreement. On September 8, 2021, we entered into a First Amendment Agreement (the “Amendment”), which amended the 2021 Restated Credit Agreement (as amended by the Amendment, the “Credit Agreement”) with the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment, among other things, added a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the 2021 Restated Credit Agreement. The term loan is reflected on our condensed consolidated financial statements as a note payable. The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million. On September 8, 2021, in connection with the closing of the acquisition of the AffloVest business, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price. 30 Table of Contents On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amends the Credit Agreement. The Second Amendment modified the maximum leverage ratio, the minimum fixed charge coverage ratio and the minimum consolidated EBITDA covenants under the Credit Agreement, and added a minimum liquidity covenant, through the quarter ended June 30, 2023. The Second Amendment also increased the applicable margin for LIBOR rate loans under the Credit Agreement during the period commencing on the date of the Second Amendment and ending on the last day of the fiscal quarter ending June 30, 2023. Pursuant to the Second Amendment, we made a mandatory principal prepayment of the term loan of $3.0 million on February 22, 2022. On June 21, 2023, we entered into a Third Amendment Agreement (the “Third Amendment”) that replaced the interest rate benchmark under the Credit Agreement from LIBOR to the term Secured Overnight Financing Rate (“SOFR”). All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”). On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amended the Credit Agreement. The Fourth Amendment, among other things, decreased the commitment fees payable under the revolving credit facility and eliminated the temporary increase in the applicable margin for Adjusted Term SOFR loans. The Fourth Amendment also eliminated the liquidity financial covenant and modified the remaining financial covenants to reflect the termination of the temporary covenant relief period that was in place until June 30, 2023 pursuant to the Second Amendment. In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown of the revolving credit facility. The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024 to August 1, 2026. On November 1, 2024, we entered into a Fifth Amendment Agreement (the “Fifth Amendment”), which further amended the Credit Agreement. The Fifth Amendment permitted the Company to make payments to repurchase shares of its common stock, subject to certain limitations. On July 31, 2025, we entered into an Amended and Restated Credit Agreement (the “2025 Restated Credit Agreement”), which amended and restated the Credit Agreement in its entirety. The 2025 Restated Credit Agreement, among other things, revised the applicable margin payable based on pricing levels determined by our consolidated total leverage ratio that range from 1.75% to 2.75% under the revolving credit facility, and revised the commitment fee to a rate per annum ranging from 0.125% to 0.250% for the unused portion of the revolving credit facility, also depending on our consolidated total leverage ratio. The 2025 Restated Credit Amendment also expanded the revolving credit facility from $25.0 million to $40.0 million and extended the maturity date of the revolving credit facility from August 1, 2026, to July 31, 2028. The 2025 Restated Credit Agreement also eliminated the minimum consolidated EBITDA financial covenant, such that the financial covenants now consist of a maximum consolidated total leverage ratio covenant and a minimum fixed charge coverage ratio covenant. In addition, the 2025 Restated Credit Agreement revised certain negative covenants, including the restricted payment covenant, which now permits the Company to repurchase shares of its common stock and make certain other payments, as long as the Company is not in default under the 2025 Restated Credit Agreement, has a consolidated total leverage ratio of no greater than 1.75 to 1.00, and has liquidity of not less than $30.0 million, in each case both before and after giving effect to such stock repurchases or the making of such payments. In connection with the entry into the 2025 Restated Credit Agreement, on July 31, 2025, we paid off the full amount outstanding under the term loan, which was $24.4 million (inclusive of principal and interest), using cash on hand. The 2025 Restated Credit Agreement removes the provisions from the Credit Agreement related to a committed term loan, such that the only term loan related provisions in the 2025 Restated Credit Agreement relate to our ability to request uncommitted incremental term loan facilities and/or an increase in the amount of the revolving loans available under the 2025 Restated Credit Agreement in an amount not to exceed $25.0 million in the aggregate, subject to the satisfaction of certain conditions. As of September 30, 2025, we had no outstanding borrowings under the 2025 Restated Credit Agreement. 31 Table of Contents For additional information regarding the 2025 Restated Credit Agreement, including interest rates, fees and maturities, see Note 8 – “Credit Agreement” of the condensed consolidated financial statements contained in this report. Share Repurchase Program ​ On October 30, 2024, our Board of Directors authorized a program to repurchase up to $30.0 million of our common stock. Under the program, purchases could be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased was based on the price of our common stock, general business and market conditions and other investment considerations and factors. The share repurchase program was scheduled to expire on October 31, 2026. As of June 24, 2025, we had utilized substantially all of the repurchase authorization under the program and therefore completed the share repurchase program. In aggregate under the program, we repurchased a total of 2,338,617 shares of common stock at a total cost of $30.0 million. The program did not obligate us to repurchase any specific number of shares and could have been suspended or discontinued at any time without prior notice. During the nine months ended September 30, 2025, we repurchased 2,143,099 shares for approximately $26.6 million. We used cash on hand to fund these repurchases. On October 16, 2025, our Board of Directors authorized a new program to repurchase up to $25.0 million of our common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. This share repurchase program expires on November 3, 2027. The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. Future Cash Requirements For a discussion of our material estimated future cash requirements under our contractual obligations and commercial commitments, in total and disaggregated into current and long-term , see “Future Cash Requirements” included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes since December 31, 2024. Adequacy of Resources Our future cash requirements may vary significantly from those now planned and will depend on many factors, including: ● the impacts of inflation, rising interest rates or a recession on our business; ● sales and marketing resources needed to further penetrate our market; ● expansion of our operations; ● IT investments to scale our business; ● response of competitors to our solutions and applications; ● costs associated with clinical research activities; ● increases in interest rates; ● labor shortages and wage inflation; 32 Table of Contents ● component price inflation; ● costs to develop and implement new products and revisions to existing products; and ● use of capital for acquisitions or licenses, if any. Historically, we have experienced increases in our expenditures consistent with the growth in our revenue, operations and personnel, and we anticipate that our expenditures will continue to increase as we expand our business. We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure, debt repayment and related interest, and other cash requirements for at least the next twelve months. Inflation, changing prices, and tariffs did not have a material effect on our business during the quarter ended September 30, 2025. However, recent changes and announcements in U.S. and global tariff frameworks have negatively impacted, and could continue to negatively impact, our supply chain and increase our cost of goods sold. The ultimate impact of tariffs, including any related responses, are uncertain and will depend on various factors, including which tariffs are ultimately implemented, the timing of implementation, any exemptions available, whether exemptions are granted and maintained, and the amount, scope and nature of the tariffs. We continue to analyze the potential impact of recently announced tariffs, trade actions and related effects on our business and, at this time, we estimate that the impacts on our cost of goods sold could be up to $1.0 million for the year ended December 31, 2025, of which approximately $0.9 million was incurred through September 30, 2025. While we continue to actively work to mitigate tariff impacts, there is no assurance that such actions will be effective. Recent Accounting Pronouncements Refer to Note 3 – “Summary of Significant Accounting Policies” of the condensed consolidated financial statements contained in this report for a description of recently issued accounting pronouncements that are applicable to our business. Critical Accounting Estimates Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. For additional information, please see the discussion of our most critical accounting estimates under “Critical Accounting Estimates ” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. Item 3. Quantitative and Qualitative Disclosures About Market Risk For a discussion on our market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes since December 31, 2024.