What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-17 compared with 2025-02-18 · 97 added, 75 removed, 221 unchanged (44% of the section changed)

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Discussion of 2023 results and year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 18, 2025.

We are a medical technology company that develops and provides innovative medical devices for the treatment of underserved chronic diseases.

We are a medical technology company that develops and commercializes medical devices in the United States.

Our mission is to help people suffering from chronic diseases live better and care for themselves at home.

We focus our efforts on advancing the standard of care in treating underserved chronic diseases in the home setting to improve patient outcomes and quality of life and help control rising healthcare expenditures.

We focus our efforts on advancing the standard of care in treating underserved chronic diseases in the home to improve patient outcomes and quality of life and help control rising healthcare expenditures.

Our areas of therapeutic focus are (1) vascular disease, with a goal of advancing the standard of care in treating lymphedema and chronic venous insufficiency, (2) oncology, where lymphedema is a common consequence among cancer survivors and (3) providing airway clearance therapy for those suffering from chronic respiratory conditions.

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Our solutions deliver cost-effective, clinically proven, long-term treatment for people with these chronic diseases.

Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl systems and our airway clearance product is the AffloVest.

A predecessor to our Flexitouch system received 510(k) clearance from the U.S.

Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy.

We began selling our more advanced Flexitouch system after receiving 510(k) clearance from the FDA in October 2006.

We generally employ a direct-to-patient and -provider model within our lymphedema portfolio, through which we obtain patient referrals 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.

This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education.

For our respiratory therapy product, we have a durable medical equipment (“DME”) distribution model, through which we sell the AffloVest product to accredited DME providers, whose representatives gather and submit documentation for payer reimbursement, train patients on use of the device, and provide ongoing patient support.

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.

In June 2017, we announced that we received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of our Flexitouch system.

In December 2020, we received 510(k) clearance for two new indications for our Flexitouch Plus system:

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.

We introduced our Entre system in the United States in February 2013 and our Entre Plus system in March 2023.

The Entre Plus system is sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device such as our Flexitouch Plus system.

Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and, beginning in October 2024, is commercially available throughout the United States for the treatment of upper extremity lymphedema with planned expansion to lower extremity in 2025.

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.

Nimbl has replaced most orders for our Entre system and we

expect to continue to do so.

Sales and rentals of our lymphedema products represented 84% and 89% of our revenue in the years ended December 31, 2025 and 2024, respectively.

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For the years ended December 31, 2025 and 2024, sales of AffloVest represented 16% and 11% of our revenue, respectively.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of our direct sales force, DME sales team, patient education team, reimbursement capabilities and clinical expertise.

We market our lymphedema products in the United States using a direct-to-patient and -provider model.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of a separate lymphedema and respiratory sales force, marketing team including clinical education programs, patient 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 also 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.

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 December 31, 2025, we employed 166 account managers and 166 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products.

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We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota.

We manufacture and ship the AffloVest device from our Minnesota-based facility.

In July 2022, we launched Kylee™, a free mobile application that allows for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources.

For the year ended December 31, 2024, we generated revenue of $293.0 million and had net income of $17.0 million, compared to revenue of $274.4 million and net income of $28.5 million for the year ended December 31, 2023, and revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022.

We also manufacture and ship the AffloVest device from our Minnesota-based facility.

In 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 year ended December 31, 2025, we generated revenue of $329.5 million and had net income of $19.1 million, compared to revenue of $293.0 million and net income of $17.0 million for the year ended December 31, 2024, and revenue of $274.4 million and net income of $28.5 million for the year ended December 31, 2023.

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.

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We derive revenue from sales and rentals of our Flexitouch Plus, Entre Plus and Nimbl systems to patients in the United States.

Revenue growth has been driven by increased clinician, patient and payer awareness of lymphedema and the clinical efficacy of our Flexitouch Plus system, and the launch of our Entre Plus system in March 2023.

Revenue growth has been driven by increased clinician, patient and payer awareness of lymphedema and the clinical efficacy of our Flexitouch Plus system, the launch of our Entre Plus system in March 2023, and the launch of Nimbl in October 2024.

We have expanded our direct sales force, which helps us drive and support our revenue growth and intend to continue this expansion.

However, any reversal in these recent trends could have a negative impact on our future revenue.

We sell or rent our Flexitouch Plus, Entre Plus and Nimbl systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, clinical lymphatic therapists or nurses.

We sell or rent our lymphedema systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, clinical lymphatic therapists or nurses.

We bill payers, such as private insurers, Medicare, or Medicaid, on behalf of our patients and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance.

We bill the Veterans Administration directly for the purchase or lease of our product on behalf of the patient.

Approximately 11% of our revenue in 2024 and 10% of our revenue in 2023

came from the Veterans Administration.

Approximately 9% of our revenue in 2025 and 11% of our revenue in 2024 came from the Veterans Administration.

Approximately 24% of our revenue in 2025 and 18% of our revenue in 2024 came from Medicare patients.

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Respiratory DME partners serve the role of receiving prescriptions, verifying coverage criteria, shipping, billing and training the patient.

We intend to expand and support our respiratory DME partners, in an effort to help demonstrate High Frequency Chest Wall Oscillation (“HFCWO”) as a staple among the host of treatments they bring to chronic respiratory patients, thereby allowing us to continue to grow revenue from this product offering.

We intend to expand and support our respiratory DME partners, in an effort to help demonstrate HFCWO as a staple among the host of treatments they bring to chronic respiratory patients, thereby allowing us to continue to grow revenue from this product offering.

Our revenue has fluctuated, and we expect our revenue to continue to fluctuate, from quarter to quarter due to a variety of factors, including seasonality.

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Our gross margin has been and will continue to be affected by a variety of factors, including product and payer mix, production volumes, manufacturing costs, and cost-reduction strategies.

We continue to work to reduce product manufacturing costs through enhanced product design efforts as well as supply chain initiatives in an effort to offset anticipated price erosion.

We continue to work to reduce product manufacturing costs through enhanced product design efforts, supply chain initiatives in an effort to offset anticipated price erosion and improving product quality.

Our gross margin will likely fluctuate from quarter to quarter.

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General and administrative expenses also include professional services such as legal, consulting and accounting services, stock-based compensation, travel expenses, insurance and acquisition costs.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income related to investment income earned on our invested capital portfolio and interest expense related to our debt obligations.

Interest Income (Expense)

Interest income consists primarily of interest income related to investment income earned on our invested capital portfolio and interest expense consists primarily of interest expense related to our debt obligations.

Income Tax Expense (Benefit)

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Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and related disclosure of contingent

assets and liabilities, revenue and expenses at the date of the financial statements.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the financial statements.

Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances.

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Reimbursement, general and administrative

Intangible asset amortization and earn-out

Intangible asset amortization

Total operating expenses

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Income before income taxes

Income tax expense (benefit)

“N.M.” Not Meaningful

Income tax expense

Revenue increased $36.5 million, or 12%, to $329.5 million in the year ended December 31, 2025, compared to $293.0 million in the year ended December 31, 2024.

The increase in revenue was attributable to an increase of $19.0 million, or 7%, in sales and rentals of the lymphedema product line and an increase of $17.5 million, or 52%, in sales of the airway clearance product line in the year ended December 31, 2025, compared to the year ended December 31, 2024.

The increase in the lymphedema product line revenue in the year ended December 31, 2024, was attributable to the growth of our field sales team and ongoing technology and workflow initiatives.

The increase in the airway clearance product line revenue was primarily attributable to the onboarding of a new DME partner in 2024.

The increase in the lymphedema product line revenue in the year ended December 31, 2025, was driven by accelerating commercial momentum from our strong partnerships, execution of our go-to-market commercial strategy and disciplined focus on sales force productivity.

The increase in the airway clearance product line revenue was primarily driven by strong partnerships and prioritized placement agreements with our top 10 respiratory DME providers.

Revenue from the Veterans Administration represented 9% and 11% of total revenue for the years ended December 31, 2025 and 2024, respectively.

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Airway clearance products

Percentage of total revenues

Percentage of total revenue

Lymphedema products

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Cost of Revenue and Gross Margin

Cost of revenue decreased $3.0 million, or 4%, to $76.3 million during the year ended December 31, 2024, compared to $79.3 million during the year ended December 31, 2023.

The decrease in cost of revenue was primarily attributable to lower manufacturing and warranty costs.

Cost of revenue increased $3.1 million, or 4%, to $79.4 million during the year ended December 31, 2025, compared to $76.3 million during the year ended December 31, 2024.

The increase in cost of revenue was primarily attributable to higher sales.

Gross margin was 76% and 74% in the years ended December 31, 2025 and 2024, respectively.

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● $0.4 million increase in expenses related to meetings and tradeshows ;

● $0.4 million increase in general office and printing expenses.

These increases were partially offset by a $0.2 million decrease in educational grants.

● $0.2 million increase in expenses for demonstration units;

● $0.1 million increase in educational grants expense.

Research and Development Expenses

Research and development (“R&D”) expenses increased $1.0 million, or 13%, to $8.8 million during the year ended December 31, 2024, compared to $7.8 million during the year ended December 31, 2023, which was primarily attributable to a $0.6 million increase in professional fees and a $0.5 million increase in personnel-related expenses.

These increases were partially offset by a $0.1 million decrease in clinical studies.

Research and development (“R&D”) expenses decreased $0.4 million, or 4%, to $8.5 million during the year ended December 31, 2025, compared to $8.8 million during the year ended December 31, 2024, which was primarily attributable to a $0.9 million decrease in clinical study-related expenses and a $0.1 million decrease in personnel-related expenses.

These decreases were partially offset by a $0.6 million increase in professional fees.

Reimbursement, General and Administrative Expenses

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● $1.0 million increase occupancy costs, depreciation expense and professional fees;

Intangible Asset Amortization and Earn-out

Intangible asset amortization and earn-out expense increased $2.4 million to $2.5 million during the year ended December 31, 2024, compared to $0.1 million during the year ended December 31, 2023.

The increase was related to there being no earn-out expense in the twelve months ended December 31, 2024, as final payment under the AffloVest acquisition earn-out arrangement was made on November 28, 2023, and therefore there was no change in fair value of an earn-out expense recorded in the twelve months ended December 31, 2024, compared to a decrease in the fair value of the earn-out expense of $2.5 million for the twelve months ended December 31, 2023, due to the lower than expected airway clearance product revenue.

● $0.8 million increase in expenses related to meetings and seminars.

Intangible Asset Amortization

Intangible asset amortization expense decreased $0.1 million to $2.4 million during the year ended December 31, 2025, compared to $2.5 million during the year ended December 31, 2024.

Interest Income and Interest Expense

Interest income increased $1.5 million, or 81%, to $3.4 million during the year ended December 31, 2024, compared to $1.9 million during the year ended December 31, 2023, primarily due to a higher cash balance and the movement of cash into a higher yielding Institutional Insured Liquid Deposit demand account in August 2023.

Interest income decreased $0.3 million, or 8%, to $3.1 million during the year ended December 31, 2025, compared to $3.4 million during the year ended December 31, 2024, primarily due to a lower cash balance and the higher yielding Institutional Insured Liquid Deposit demand account decreasing the rates.

Interest expense decreased $1.0 million, or 50%, to $1.0 million during the year ended December 31, 2025, compared to $2.1 million during the year ended December 31, 2024, primarily due to the decrease in the outstanding balance of our term loan.

Income Tax Expense

We recorded an income tax expense of $6.5 million and an income tax benefit of $12.7 million for the years ended December 31, 2024 and 2023, respectively.

The primary driver of the change was the fact that we did not have a release of a valuation allowance on our deferred tax assets for 2024, while in 2023 there was a release of a valuation allowance to recognize the full value of our deferred tax assets because there was sufficient positive evidence to conclude that it was more likely than not that additional deferred taxes were realizable.

Income tax expense increased $5.7 million, or 88%, to $12.3 million during the year ended December 31, 2025, compared to $6.5 million during the year ended December 31, 2024.

The primary drivers of the increase were the increase to net income in 2025 and an out-of-period adjustment of $2.8 million recorded to income tax expense during the year ended December 31, 2025.

For additional information regarding the out-of-period adjustment, see Note 3 – “Summary of Significant Accounting Policies” of the consolidated financial statements contained in this report.

Our business is affected by seasonality.

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Financing activities

Net increase in cash

Net (decrease) increase in cash

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the year ended December 31, 2025, was $42.8 million, resulting from non-cash net income adjustments of $23.6 million, net income of $19.1 million and a change in operating assets and liabilities of $0.1 million.

The positive non-cash net income adjustments consisted primarily of $8.5 million of deferred income taxes, $8.4 million of stock-based compensation expense, $6.6 million of depreciation and amortization expense and $0.1 million of loss on disposal of property and equipment and intangibles.

Cash provided relating to minimal change in operating assets and liabilities primarily consisted of a decrease in inventories of $4.6 million, an increase in accrued payroll and related taxes of $1.5 million, an increase in income taxes payable of $1.2 million, a decrease in accounts receivable of $1.1 million and an increase in accrued expenses and other liabilities of $0.8 million, partially offset by an increase in prepaid expenses and other assets of $6.9 million, an increase in net investment in leases of $1.2 million, a decrease in accounts payable of $0.8 million and an increase in right of use operating leases of $0.1 million.

Net cash provided by operating activities during the year ended December 31, 2024, was $40.7 million, resulting from net income of $17.0 million, non-cash net income adjustments of $16.0 million and a change in operating assets and liabilities of $7.7 million.

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Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in accounts receivable of $9.2 million, a decrease in inventories of $3.9 million and an increase in accrued payroll and related taxes of $1.1 million, partially offset by an increase in prepaid expenses and other assets of $3.9 million, a decrease in income taxes payable of $1.4 million and a decrease in accounts payable of $1.1 million.

Net cash provided by operating activities during the year ended December 31, 2023, was $35.9 million, resulting from net income of $28.5 million and a change in operating assets and liabilities of $15.1 million, which were partially offset by non-cash net income adjustments of $7.8 million.

Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in accounts receivable of $23.8 million, a decrease in net investment in leases of $1.9 million and a decrease in inventories of $0.6 million, partially offset by a decrease in accrued expenses of $6.5 million, a decrease in accounts payable of $3.9 million, a decrease in income taxes payable of $0.7 million and a decrease in accrued payroll and related taxes of $0.3 million.

The negative non-cash net income adjustments consisted primarily of $19.4 million of deferred income taxes and a $2.5 million change in the fair value of earn-out liability, partially offset by $7.5 million of stock-based compensation expense and $6.5 million of depreciation and amortization expense.

Net Cash Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2025, was $2.5 million, primarily consisting of $2.4 million in purchases of property and equipment primarily related to tenant improvements, production tooling and office equipment and $0.2 million related to the acquisition of patents and other intangible assets.

Net cash used in investing activities during the year ended December 31, 2023, was $2.5 million, primarily consisting of $2.3 million in purchases of property and equipment primarily related to production tooling and office equipment and $0.2 million related to the acquisition of patents and other intangible assets.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities during the year ended December 31, 2024, was $4.8 million, primarily consisting of payments of $3.5 million for the repurchase of our common stock and payments of $3.0 million on our term loan, partially offset by $1.7 million in proceeds from the issuance of common stock under our Employee Stock Purchase Plan (the “ESPP”).

Net cash provided by financing activities during the year ended December 31, 2023, was $5.7 million, primarily consisting of net proceeds from the offering of our common stock of $34.6 million, $8.3 million in borrowings under our term loan, and $1.5 million in proceeds from the issuance of common stock under the ESPP, partially offset by payments of $25.0 million on the revolving credit facility, $10.6 million on the AffloVest earn-out, and $3.0 million on our term loan.

Net cash used in investing activities during the year ended December 31, 2024, was $2.5 million, primarily consisting of $2.4 million in purchases of property and equipment primarily related to tenant improvements, production tooling and office equipment and $0.1 million related to the acquisition of patents and other intangible assets.

Net Cash Used in Financing Activities

Net cash used in financing activities during the year ended December 31, 2025, was $51.2 million, primarily consisting of payments of $26.6 million for the repurchase of our common stock and payments of $26.2 million on our term loan, partially offset by $1.4 million in proceeds from the issuance of common stock

under our Employee Stock Purchase Plan (the “ESPP”) and $0.2 million in proceeds from exercises of common stock options.

Credit Agreement

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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.

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 permits the Company to make payments to repurchase shares of its common stock, as long as the Company is not in default before and after giving effect to such repurchases, and as long as such repurchases do not exceed $30.0 million.

On December 21, 2023, we made a payment of $16.8 million to repay in full the outstanding balance on the revolving credit facility.

As of December 31, 2024, we had outstanding borrowings of $26.3 million under the Credit Agreement, comprised entirely of the term loan.

The principal of the term loan is required to be repaid in quarterly installments of $750,000.

For additional information regarding the Credit Agreement, including interest rates, fees and maturities, see Note 11 – “Credit Agreement” of the consolidated financial statements contained in this report.

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 December 31, 2025, we had no outstanding borrowings under the 2025 Restated Credit Agreement.

Our obligations under the 2025 Restated Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary.

As of December 31, 2025, the 2025 Restated Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio and a minimum fixed charge coverage ratio.

As of December 31, 2025, we were in compliance with all covenants under the 2025 Restated Credit Agreement.

For additional information regarding the 2025 Restated Credit Agreement, including interest rates, fees and maturities, see Note 10 – “Credit Agreement” of the 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 common stock.

On November 4, 2024, we announced that our board of directors authorized a program to repurchase shares of our common stock in the open market or in privately negotiated purchases, or both, in an aggregate amount not to exceed $30.0 million.

The share repurchase program became effective on October 30, 2024 and was scheduled to expire on October 31, 2026.

Upon purchase of the shares, we reduce our common stock for the par value of the shares with the excess cost applied against additional paid-in capital.

As of June 24, 2025, the Company had utilized substantially all of the repurchase authorization under the program and therefore completed the share repurchase program.

In aggregate under the program, the Company repurchased a total of 2,338,617 shares of common stock at a total cost of $30.0 million.

Repurchases were funded through available cash balances and ongoing business operating cash generation and could have been suspended or discontinued at any time.

Shares of stock repurchased under the program were immediately retired.

Repurchases under our share repurchase program reduce the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

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 our common stock, general business and market conditions and other investment considerations and factors.

The share repurchase program expires on October 31, 2026.

The program does not obligate us to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice.

During the three months ended December 31, 2024, we repurchased 195,518 shares for approximately $3.5 million.

We used cash on hand to fund these repurchases.

As of December 31, 2024, approximately $26.5 million remained authorized under the stock repurchase program.

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.

We made repurchases under the share repurchase program in the following periods, which include the market price of the shares, commissions and excise tax:

(In thousands, except share and per share data)

Number of shares repurchased

Total shares repurchased cost

Average total cost per repurchased share

Future Cash Requirements

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Operating lease obligations (2)

Note payable payments (3)

Interest payments (4)

Commitment Fees (3)

(1) We issued purchase orders in 2025 totaling $31.9 million for goods that we expect to receive and pay for in 2026.

(2) We currently lease approximately 150,000 square feet of office space for our corporate headquarters in Minneapolis, Minnesota, under a lease that expires in February 2031 and approximately 63,000 square feet of office, assembly and warehouse space at another facility in Minneapolis, Minnesota, under a lease that expires in March 2027.

(2) We currently lease approximately 150,000 square feet of office space for our corporate headquarters in Minneapolis, Minnesota, under a lease that expires in February 2031 and approximately 63,000 square feet of office, assembly and warehouse space at another facility near Minneapolis, Minnesota, under a lease that expires in March 2027.

Furthermore, we lease office equipment from time-to-time based on our needs and these commitments are classified as operating leases.

(3) Reflects principal payment obligations under our term loan.

Refer to Note 11 ‘‘Credit Agreement’’ to our consolidated financial statements included in this report for additional information regarding the maturities of debt principal.

(4) Interest payment amounts on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2024.

(3) Represents commitment fees under the 2025 Restated Credit Agreement, due to no amounts outstanding under the agreement as of December 31, 2025.

Adequacy of Resources

12 unchanged sentences

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.

We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditures, debt repayment and related obligations, and other cash requirements for at least the next twelve months.

Inflation and changing prices did not have a material effect on our business during the year ended December 31, 2025, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.

4 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis