What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-05 compared with 2024-11-04 · 127 added, 198 removed, 389 unchanged (46% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(In thousands, except share and per share data)

Current assets

Cash and cash equivalents

Accounts receivable

Accounts receivable, net

Net investment in leases

Income taxes receivable

Prepaid expenses and other current assets

4 unchanged sentences

Intangible assets, net

Accounts receivable, non-current

Deferred income taxes

19 unchanged sentences

Preferred stock, $ 0.001 par value, 50,000,000 shares authorized;

none issued and outstanding as of September 30, 2024 and December 31, 2023

none issued and outstanding as of March 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value, 300,000,000 shares authorized;

23,997,089 shares issued and outstanding as of September 30, 2024;

23,584,471 shares issued and outstanding as of March 31, 2025;

23,883,475 shares issued and outstanding as of December 31, 2024

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except share and per share data)

14 unchanged sentences

Total operating expenses

Income from operations

Other income (expense)

Income before income taxes

Income tax expense (benefit)

Net income per common share

Weighted-average common shares used to compute net income per common share

Loss from operations

Interest income

Interest expense

Loss before income taxes

Income tax benefit

Net loss per common share

Weighted-average common shares used to compute net loss per common share

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands, except share data)

Balances, June 30, 2024

Stock-based compensation

Exercise of common stock options and vesting of performance and restricted stock units

Net income for the period

Balances, September 30, 2024

Balances, December 31, 2024

1 unchanged sentence

Exercise of common stock options and vesting of performance and restricted stock units

Common shares issued for employee stock purchase plan

Net income for the period

Balances, September 30, 2024

Balances, June 30, 2023

Stock-based compensation

Exercise of common stock options and vesting of performance and restricted stock units

Net income for the period

Balances, September 30, 2023

Share repurchases

Net loss for the period

Balances, March 31, 2025

Balances, December 31, 2023

1 unchanged sentence

Exercise of common stock options and vesting of performance and restricted stock units

Sale of common stock from follow-on public offering, net of offering expenses

Common shares issued for employee stock purchase plan

Net income for the period

Balances, September 30, 2023

Net loss for the period

Balances, March 31, 2024

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

2 unchanged sentences

Loss on disposal of property and equipment and intangibles

Change in fair value of earn-out liability

Changes in assets and liabilities, net of acquisition:

Accounts receivable

Accounts receivable, net

Net investment in leases

8 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Intangible assets expenditures

1 unchanged sentence

Cash flows from financing activities

Proceeds from issuance of note payable

Payments on earn-out

Payments on note payable

Payments on revolving line of credit

Payments of deferred debt issuance costs

Proceeds from exercise of common stock options

Proceeds from the issuance of common stock from the employee stock purchase plan

Proceeds from issuance of common stock at market

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents – beginning of period

Cash and cash equivalents – end of period

Payments for repurchases of common stock

Net cash used in financing activities

Net decrease in cash

Cash – beginning of period

Cash – end of period

Supplemental cash flow disclosure

1 unchanged sentence

Cash paid for taxes

Accrued excise tax on stock repurchases

Capital expenditures incurred but not yet paid

5 unchanged sentences

(“we,” “us,” “our,” and the “Company”) manufactures and distributes medical devices for the treatment of patients with underserved chronic diseases at home.

We provide our Flexitouch® Plus and Entre™ Plus systems, which help control symptoms of lymphedema, a chronic progressive medical condition, through our direct sales force for use in the home following receipt of prescriptions from vascular, wound and lymphedema clinics throughout the United States.

We provide our Flexitouch® Plus, Entre™ Plus and Nimbl systems, which help control symptoms of lymphedema, a chronic progressive medical condition, through our direct sales force for use in the home and sell or rent them through oncology-related clinicians, vascular disease clinicians and wound, vein and lymphatic massage clinics throughout the United States.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance business (“AffloVest Acquisition”).

18 unchanged sentences

In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.

The results for the nine months ended September 30, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year.

The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

The results for the three months ended March 31, 2025, are not necessarily indicative of results to be expected for the year ending December 31, 2025, or for any other interim period or for any future year.

The condensed consolidated interim financial statements should be read in conjunction with the audited financial

statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Principles of Consolidation

7 unchanged sentences

Significant Accounting Policies

There were no material changes in our significant accounting policies during the nine months ended September 30, 2024.

There were no material changes in our significant accounting policies during the three months ended March 31, 2025.

See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, for information regarding our significant accounting policies.

Business Segments

The Company operates as one operating segment.

The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated net income (loss) as the measure of segment profit or loss.

Significant segment expenses are those expenses reported in the Consolidated Statement of Operations.

The CODM assesses performance for the segment, allocates resources and monitors budget versus actual results using consolidated revenue and net income (loss) which is reflected in the Consolidated Statement of Operations.

Accounting Pronouncement Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting.

The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” which requires entities to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis.

The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

5 unchanged sentences

(In thousands)

At September 30, 2024

At March 31, 2025

At December 31, 2024

7 unchanged sentences

Our patents and other intangible assets are summarized as follows:

At September 30, 2024

At March 31, 2025

(In thousands)

17 unchanged sentences

Total intangible assets

Amortization expense was $ 0.9 million for each of the three months ended September 30, 2024 and 2023, and $ 2.8 million and $ 2.9 million for the nine months ended September 30, 2024 and 2023, respectively, of which $ 0.3 million in each of the three months ended September 30, 2024 and 2023, and $ 0.9 million in each of the nine months ended September 30, 2024 and 2023, were recorded in cost of sales revenue.

Amortization expense was $ 1.0 million and $ 0.9 million for the three months ended March 31, 2025 and 2024, respectively, of which $ 0.3 million in each of the three months ended March 31, 2025 and 2024, was recorded in cost of sales revenue.

Future amortization expenses are expected as follows:

(In thousands)

2024 (October 1 - December 31)

2025 (April 1 - December 31)

In the third quarter of 2024, we performed our annual goodwill impairment test utilizing both the qualitative and quantitative approach described in FASB ASU No.

2021-03, “Intangibles—Goodwill and Other (Topic 350) – Accounting Alternative for Evaluating Triggering Events.” Based on the testing using the qualitative approach, it was determined that it was not more likely than not that the fair value of the reporting

unit was less than the carrying value.

As a result, it was not deemed necessary to proceed to the quantitative test and no impairment was recognized.

2 unchanged sentences

(In thousands)

At September 30, 2024

At March 31, 2025

At December 31, 2024

Legal and consulting

In-transit inventory

Clinical studies

Sales and use tax

Legal and consulting

Clinical studies

Warranty Reserves

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

23 unchanged sentences

except that, pursuant to the Second Amendment and the Third Amendment, during the period commencing on February 22, 2022 and ending on the last day of the fiscal quarter ending June 30, 2023, the applicable margin for LIBOR rate loans and Adjusted Term SOFR loans, as applicable, was 3.50 % .

As of March 31, 2025, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 6.14 % .

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 under the Credit Agreement such that the undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.125 % to 0.200 % , depending on our consolidated leverage ratio, and eliminated the language providing that the applicable margin for Adjusted Term SOFR loans was 3.50 % , such that the interest rates are in effect as set forth in the above paragraph.

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, such that the financial covenants now include a maximum consolidated total leverage ratio covenant, a minimum consolidated EBITDA covenant and a minimum fixed charge coverage ratio covenant.

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.

now include a maximum consolidated total leverage ratio covenant, a minimum consolidated EBITDA covenant and a minimum fixed charge coverage ratio covenant.

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.

1 unchanged sentence

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 September 30, 2024, we had outstanding borrowings of $ 27.0 million under the Credit Agreement, comprised entirely of the term loan.

At September 30, 2024, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 7.10 % .

As of March 31, 2025, we had outstanding borrowings of $ 25.5 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 .

Maturities of the term loan for the next three years as of September 30, 2024, were as follows:

Maturities of the term loan for the next three years as of March 31, 2025, are as follows:

(In thousands)

2024 (October 1 - December 31)

2025 (April 1 - December 31)

Deferred financing fees

3 unchanged sentences

Our obligations under the 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 September 30, 2024, the Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio, a minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant.

As of September 30, 2024, we were in compliance with all covenants under the Credit Agreement.

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

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

Commitments and Contingencies

13 unchanged sentences

These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheets, with rent expense recognized on a straight-line basis over the term of the lease.

The remaining lease terms vary from approximately one to seven years as of September 30, 2024.

The remaining lease terms vary from approximately one to six years as of March 31, 2025.

We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota.

8 unchanged sentences

We also have operating lease agreements for certain computer and office equipment.

The remaining lease terms as of September 30, 2024, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The remaining lease terms as of March 31, 2025, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The leases provide an option to purchase the related equipment at fair market value at the end of the lease.

3 unchanged sentences

(In thousands)

At September 30, 2024

At March 31, 2025

At December 31, 2024

4 unchanged sentences

Weighted average discount rate

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information for our operating leases:

Cash paid for operating lease liabilities

Non-cash right of use assets obtained in exchange for new operating lease obligations

The table below reconciles the undiscounted cash flows for the periods presented to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented:

(In thousands)

2024 (October 1 - December 31)

2025 (April 1 - December 31)

Total minimum lease payments

3 unchanged sentences

Non-current obligations under operating lease liabilities

Operating lease costs were $ 0.9 million for each of the three months ended September 30, 2024 and 2023.

Operating lease costs were $ 2.6 million and $ 2.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Operating lease costs were $ 0.9 million for each of the three months ended March 31, 2025 and 2024.

Major Vendors

We had purchases from one vendor that accounted for 22 % of our total purchases for the three months ended September 30, 2024, and purchases from one vendor that accounted for 20 % of our total purchases for the nine months ended September 30, 2024.

We had purchases from one vendor that accounted for 29 % of our total purchases for the three months ended September 30, 2023, and purchases from one vendor that accounted for 26 % of our total purchases for the nine months ended September 30, 2023.

We had purchases from one vendor that accounted for 13 % of our total purchases for the three months ended March 31, 2025 and 23 % of our total purchases for the three months ended March 31, 2024.

Purchase Commitments

We issued purchase orders prior to September 30, 2024, totaling $ 24.8 million for goods that we expect to receive within the next year.

We issued purchase orders prior to March 31, 2025, totaling $ 24.4 million for goods that we expect to receive within the next year.

Retirement Plan

We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation.

We recorded an expense related to our discretionary contributions to the 401(k) plan of $ 0.6 million and $ 0.4 million for the three months ended September 30, 2024 and 2023, respectively, and $ 1.7 million and $ 1.1 million for the nine months ended September 30, 2024 and 2023, respectively.

We recorded an expense related to our discretionary contributions to the 401(k) plan of $ 0.7 million for each of the three months ended March 31, 2025 and 2024.

Legal Proceedings

1 unchanged sentence

Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On May 24, 2022, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of the Company against certain of our present and former officers and directors and the Company (as a nominal defendant), captioned Jack Weaver v.

Moen, et al., File No.

0:22-cv-01403-NEB-BRT (the “Weaver Lawsuit”).

The Weaver Lawsuit generally arises out of the same subject matter as a previously settled securities class action captioned Brian Mart v.

Tech., Inc., et al., File No.

0:20-cv-02074-NEB-BRT (D.

Minn.) (the “Mart Lawsuit”), which alleged, inter alia, that we and eight of our former officers and directors made materially false or misleading statements about our business, operational and compliance policies.

The Weaver Lawsuit alleges the following claims under the Exchange Act and common law:

(1) that the director defendants made materially false or misleading public statements in proxy statements in violation of Section 14(a) of the Exchange Act;

(2) that the director defendants’ stock and option awards should be rescinded under Section 29(b) of the Exchange Act;

(3) that the officer defendants’ employment contract compensation should be rescinded under Section 29(b) of the Exchange Act;

(4) that certain officer defendants are liable for contribution arising out of any liability incurred in the Mart Lawsuit, under Sections 10(b) and 21D of the Exchange Act;

(5) that the individual defendants breached their fiduciary duties;

and (6) that the individual defendants were unjustly enriched.

The Weaver Lawsuit seeks unspecified damages.

In August 2022, the matter was transferred to the United States District Court for the District of Delaware by order granting the Parties Stipulation to Transfer.

On February 10, 2023, we filed a motion to dismiss the action.

The plaintiff filed an Amended Complaint on March 3, 2023.

On March 31, 2023, we filed a motion to dismiss the Amended Complaint.

On July 31, 2023, the plaintiff filed a Joint Notice of Preliminary Settlement indicating that the parties had reached a non-binding settlement-in-principal on most of the material terms that would resolve all claims between the parties and requested that the Court temporarily stay all deadlines, hearings, and conferences while the parties continued to finalize settlement.

On June 6, 2024, the parties entered into a Stipulation of Settlement in the Weaver Lawsuit.

On June 7, 2024, the plaintiff filed an unopposed motion for preliminary approval of the settlement.

On June 27, 2024, the Court entered an order granting the motion for preliminary approval of the settlement.

The final settlement hearing occurred on August 28, 2024, and on September 4, 2024, the Court entered its order approving the settlement, including the agreed upon attorneys’ fees and expense awards to plaintiffs’ counsel and service awards to the shareholder plaintiffs.

Pursuant to the settlement, we are adopting, implementing, and maintaining certain corporate governance reforms.

The attorneys’ fees and expense award of approximately $ 0.5 million was covered by insurance and has been paid.

The settlement does not constitute an admission of liability or wrongdoing by us or any of our current or former directors or officers.

This matter is now concluded.

On October 25, 2024, the United States District Court, District of Massachusetts (Boston) unsealed two qui tam complaints against us.

On October 25, 2024, the United States District Court, District of Massachusetts (Boston) unsealed two qui tam complaints against us, and we were served with these complaints on January 14, 2025 and January 21, 2025.

The United States has indicated that it is not intervening in either matter at this time.

The first complaint is captioned United States ex.

2 unchanged sentences

1:21-cv-10813-IT, and was filed under seal on May 17, 2021, on behalf of the United States by a former employee (the “Scarborough Complaint”).

The Scarborough Complaint alleges that we submitted false claims and made false statements in connection with the Medicare

programs, in violation of the Federal False Claims Act.

The Scarborough Complaint alleges that we submitted false claims and made false statements in connection with the Medicare programs, in violation of the Federal False Claims Act.

The second complaint is captioned United States ex.

4 unchanged sentences

Both complaints seek damages, statutory penalties, attorneys’ fees, and costs.

On February 24, 2025, the parties (the relators under both complaints and the Company) filed a joint motion requesting that both actions be stayed until November 25, 2025, to provide time for the government to review and assess sample claims for the purpose of assessing the allegations.

On February 25, 2025, the Court granted the motion and issued orders that stay both actions until November 25, 2025.

We will defend the actions as they proceed .

Stockholders' Equity

Share Repurchase Program

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 expires 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.

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

Three Months Ended

(In thousands, except share and per share data)

Number of shares repurchased

Total share repurchased cost

Average total cost per repurchased share

As of March 31, 2025, approximately $ 16.5 million of authorized share repurchases were remaining under the share repurchase program.

The timing and amount of future repurchases will be determined based on an evaluation of market conditions and other factors.

Repurchases will be funded through available cash balances and ongoing business operating cash generation and may be suspended or discontinued at any time.

Shares of stock repurchased under the program are 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.

Stock-Based Compensation

7 unchanged sentences

Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2025.

As of September 30, 2024, 6,462,956 shares were available for future grant pursuant to the 2016 Plan.

As of March 31, 2025, 5,966,176 shares were available for future grant pursuant to the 2016 Plan.

On March 25, 2025, our Board of Directors approved, on the recommendation of the Compensation and Organization Committee, the Tactile Systems Technology, Inc.

2025 Equity Incentive Plan (the “2025 Plan”), subject to stockholder approval at the 2025 annual meeting of stockholders, which is scheduled for May 7, 2025.

If approved by our stockholders, 1,850,000 shares of our common stock will be reserved for issuance under the 2025 Plan, plus the number of shares subject to any awards under the 2016 Plan that are outstanding on the date our stockholders approve the 2025 Plan, that later expires, is cancelled or forfeited, is settled for cash or otherwise does not result in the issuance of all of the shares subject to such award.

If our stockholders approve the 2025 Plan, no additional grants will be made under 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated.

However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms.

We recorded stock-based compensation expense of $ 2.1 million and $ 1.8 million for the three months ended September 30, 2024 and 2023, respectively, and $ 6.0 million and $ 5.6 million for the nine months ended September 30, 2024 and 2023, respectively.

We recorded stock-based compensation expense of $ 2.1 million and $ 2.0 million for the three months ended March 31, 2025 and 2024, respectively.

This expense was allocated as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 0.0 million and $ 0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 0.2 million and $ 0.8 million for the nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024, there was approximately $ 42,100 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.0 years.

Our stock option activity for the nine months ended September 30, 2024, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 0.0 million and $ 0.1 million for

the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, there was approximately $ 20,358 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 0.6 years.

Our stock option activity for the three months ended March 31, 2025, was as follows:

Exercise Price

(In thousands except options and per share data)

Per Share (1)

Contractual Life

1 unchanged sentence

Cancelled/Expired

Balance at September 30, 2024

Options exercisable at September 30, 2024

(1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

Balance at March 31, 2025

Options exercisable at March 31, 2025

(1) The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise.

The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Options exercisable of 400,484 as of September 30, 2023, had a weighted-average exercise price of $ 43.45 per share.

Options exercisable of 395,952 as of March 31, 2024, had a weighted-average exercise price of $ 41.94 per share.

Time-Based Restricted Stock Units

1 unchanged sentence

Time-based restricted stock units granted under the 2016 Plan vest over one to three years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.5 million and $ 1.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 4.4 million and $ 3.8 million for the nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024, there was approximately $ 7.7 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.9 years.

Our time-based restricted stock unit activity for the nine months ended September 30, 2024, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.5 million and $ 1.4 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, there was approximately $ 9.5 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.3 years.

Our time-based restricted stock unit activity for the three months ended March 31, 2025, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2024

Balance at September 30, 2024

Balance at March 31, 2025

(1) The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

3 unchanged sentences

The PSUs granted in 2024 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2024 and 2025 (ranging from 25 % to 175 % of target), and one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2026 (ranging from 25 % to 175 % of target).

achieved in 2024 (ranging from 25 % to 175 % of target), one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2025 (ranging from 25 % to 175 % of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2026.

The PSUs granted in 2025 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue and adjusted EBITDA margin are achieved

in 2025 (ranging from 25 % to 175 % of target), one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2026 (ranging from 25 % to 175 % of target), and one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2027 (ranging from 25 % to 175 % of target).

All earned and vested PSUs will be settled in shares of common stock.

Stock-based compensation expense recognized for PSUs was $ 0.4 million and $ 0.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 1.0 million and $ 0.6 million for the nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024, there was approximately $ 2.0 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.2 years.

Our PSU activity for the nine months ended September 30, 2024, was as follows:

Stock-based compensation expense recognized for PSUs was $ 0.4 million for each of the three months ended March 31, 2025 and 2024.

As of March 31, 2025, there was approximately $ 3.4 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.6 years.

Our PSU activity for the three months ended March 31, 2025, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2024

Balance at September 30, 2024

Balance at March 31, 2025

(1) The aggregate intrinsic value of PSUs outstanding was based on our closing stock price on the last trading day of the period.

6 unchanged sentences

This share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (a) 1 % of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine.

Pursuant to the automatic increase feature of the ESPP, 236,003 shares were added as available for issuance thereunder on January 1, 2024.

Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2023.

As of September 30, 2024, 1,497,964 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.2 million and $ 0.1 million for the three months ended September 30, 2024 and 2023, respectively, and $ 0.4 million for each of the nine months ended September 30, 2024 and 2023.

Pursuant to the automatic increase feature of the ESPP, 240,780 shares were added as available for issuance thereunder on January 1, 2025 and 236,003 shares were added as available for issuance thereunder on January 1, 2024.

As of March 31, 2025, 1,685,685 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.2 million and $ 0.1 million for the three months ended March 31, 2025 and 2024, respectively.

We derive our revenue from the sale and rental of our products to our customers in the United States.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Airway clearance products

Our revenue by channel, inclusive of sales and rental revenue, for the three and nine months ended September 30, 2024 and 2023, are summarized in the following table:

Our revenue by channel, inclusive of sales and rental revenue, for the three months ended March 31, 2025 and 2024, are summarized in the following table:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

14 unchanged sentences

Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Rental revenue for the three and nine months ended September 30, 2024 and 2023, was primarily from private insurers.

Sales-type lease revenue and the associated cost of revenue for the three and nine months ended September 30, 2024 and 2023, was:

Three Months Ended September 30,

Nine Months Ended September 30,

Rental revenue for each of the three months ended March 31, 2025 and 2024, was primarily from private insurers.

Sales-type lease revenue and the associated cost of revenue for the three months ended March 31, 2025 and 2024, was:

Three Months Ended March 31,

(In thousands)

5 unchanged sentences

Our provision for income taxes includes current federal and state income tax expense, as well as deferred federal and state income tax expense.

The effective tax rate for the three months ended September 30, 2024, was an expense of 28.7 % , compared to a benefit of 194.0 % for the three months ended September 30, 2023.

The primary driver of the change in our effective tax rate was attributable to the fact that we did not have a full valuation allowance on our deferred tax assets for the current year period, while the prior year period released a valuation allowance to recognize the full value of its deferred tax assets.

We recorded income tax expense of $ 2.1 million and an income tax benefit of $ 14.7 million for the three months ended September 30, 2024 and 2023, respectively.

The effective tax rate for the nine months ended September 30, 2024, was an expense of 31.0 % , compared to a benefit of 407.1 % for the nine months ended September 30, 2023.

We recorded an income tax expense of $ 3.3 million and an income tax benefit of $ 16.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The effective tax rate for the three months ended March 31, 2025, was a benefit of 26.9 % , compared to a benefit of 21.4 % for the three months ended March 31, 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.

We recorded an income tax benefit of $ 1.1 million and $ 0.6 million for the three months ended March 31, 2025 and 2024, respectively.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more-likely-than-not to sustain the position following an audit.

1 unchanged sentence

The Company currently is not under examination in any jurisdictions.

Net Income Per Share

The following table sets forth the computation of our basic and diluted net income per share:

Net Loss Per Share

The following table sets forth the computation of our basic and diluted net loss per share:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except share and per share data)

Weighted-average shares outstanding

Weighted-average shares used to compute diluted net income per share

Net income per share - Basic

Net income per share - Diluted

The following common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because including them would have been anti-dilutive:

Weighted-average shares used to compute diluted net loss per share

Net loss per share - Basic

Net loss per share - Diluted

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:

Three Months Ended

Nine Months Ended

September 30,

Restricted stock units

9 unchanged sentences

The lowest priority is given to unobservable inputs (Level 3).

As of September 30, 2024, our obligations under the AffloVest Acquisition earn-out arrangements had been paid in full.

Prior to the determination of the actual amount of the earn-out, the earn-out liability was valued by employing a Monte Carlo Simulation model in a risk-neutral framework, which is a Level 3 input.

The underlying simulated variable included recognized revenue.

The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies.

The model included other assumptions including the market price of risk, which was calculated as the weighted average cost of capital less the long-term risk-free rate.

The earn-out liability was adjusted to fair value at each reporting date until the end of the earn-out period, which was September 30, 2023.

Changes in fair value were included in intangible asset amortization and earn-out expenses in our Condensed Consolidated Statements of Operations.

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:

(In thousands)

Earn-out liability at December 31, 2022

Payment on earn-out

Fair value adjustments

Earn-out liability at September 30, 2023

On May 25, 2023, the Company paid $ 5.0 million, plus an imputed interest payment of $ 250,000 , relating to the initial earn-out.

Subsequent to September 30, 2023, it was determined that the calculated amount of the second earn-out payment was $ 5.6 million, which was paid by the Company on November 28, 2023.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items.

The carrying amounts of financial instruments such as accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items.

Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired.

Subsequent Event

On October 30, 2024, our Board of Directors authorized a program to repurchase up to $ 30.0 million of 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.

The share repurchase program expires on October 31, 2026.

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.

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

What changed 10-Q

Item 1. Financial Statements