Insulet Corporation
02/18/2026 | Press release | Distributed by Public on 02/18/2026 15:04
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 our consolidated financial statements and the accompanying notes included in this annual report. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs, which are subject to risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed under the headings "Risk Factors" and "Forward-Looking Statements." Columns and rows within tables may not add due to rounding. Amounts have been calculated using actual, non-rounded figures; accordingly, amounts and percentages may not recalculate, and columns and rows within tables may not add due to rounding.
Overview
Our mission is to transform the lives of people with diabetes. We are primarily engaged in the development, manufacture, and sale of our proprietary Omnipod product platform, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod platform primarily includes our most recent generation Omnipod 5 and its predecessor Omnipod DASH, which eliminate the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing. Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system that integrates with a CGM to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller. It is indicated for type 1 diabetes and, in the United States, for type 2 diabetes for ages 18 and up. The CGM is sold separately by third parties. The Pod currently integrates with Dexcom, Inc.'s G6 and G7 CGMs and with Abbott Diabetes Care, Inc.'s ("Abbott") FreeStyle Libre 2 Plus sensor ("Libre 2 Plus") in various markets. Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like PDM with a color touch screen user interface.
Our financial objective is to sustain profitable growth. To achieve this, we launched Omnipod 5 in the United States in 2022, in the United Kingdom and Germany in 2023, and in the Netherlands and France in 2024. In 2025, we launched Omnipod 5 in nine additional countries. We are also working on further building our international teams and advancing our regulatory, reimbursement, and market development efforts so we can bring Omnipod 5 to new international markets.
During 2025, we completed the randomized portion of our RADIANT study in France, the United Kingdom, and Belgium. The RADIANT study is a randomized controlled trial of Omnipod 5 with Libre 2, designed to provide clinical data to support our pricing and market access initiatives as we roll out Omnipod 5 with multiple sensors across our international markets. In the U.S., we sell our products through the pharmacy channel, which expands access by improving affordable, as no upfront investment is required. We also continue to increase awareness of Omnipod products through our direct-to-consumer advertising programs.
In 2025, we also completed STRIVE, our pivotal study for the next generation hybrid closed loop system, and we finished enrollment for EVOLUTION 2, our safety and feasibility study for a fully closed loop AID system for type 2 diabetes. Additionally, we received 510(k) clearance for enhancements to the Omnipod 5 algorithm to include a lower target glucose set point. We also launched our Omnipod 5 app for iPhone compatible with Dexcom's G7 CGM sensor in the United States and integrated Omnipod 5 with Dexcom's G7 CGM sensor in five additional countries and with Abbott's FreeStyle Libre 2 Plus sensor in Australia. Following the launch of Omnipod 5 in several countries in the Middle East in early 2026, Omnipod 5 is now available in 19 countries. We continue to focus on our product development efforts, including choice of smartphone integration and CGM with Omnipod 5 and enhancing the customer experience through digital product and data capabilities. We are currently working to integrate Omnipod 5 with Abbott's FreeStyle Libre 3 Plus and developing Omnipod 6, our next generation AID product.
Finally, we continue to take steps to strengthen our global manufacturing capabilities. We began producing product at our new manufacturing plant in Malaysia in 2024 and are already investing in another manufacturing plant in Costa Rica to support our continued growth.
Results of Operations
The discussion of our results of operations for 2023 has been omitted from this Form 10-K but can be found in Item 7. Management's Discussion and Analysis and Results of Operations in our Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission on February 21, 2025.
Factors Affecting Operating Results
Our Pod is intended to be used continuously for up to three days, after which it may be replaced with a new disposable Pod. As of December 31, 2025, we had more than 600,000 estimated active Omnipod users globally. The unique patented design of the Omnipod allows us to provide Pod therapy at a relatively low or no up-front investment in regions where reimbursement allows
for it and our pay-as-you-go pricing model reduces the risk to third-party payors. As we grow our customer base, we expect to generate an increasing portion of our revenues through recurring sales of our disposable Pods, which provide recurring revenue.
In August 2024, we received FDA clearance for an expanded indication of Omnipod 5 for people with type 2 diabetes. Due to the positive results of our Omnipod 5 type 2 pivotal trial and the learnings from our commercial pilot of Omnipod GO, a basal-only Pod for certain individuals with type 2 diabetes, we made a strategic decision to drive growth in the type 2 diabetes market with Omnipod 5. Accordingly, we decided not to move forward with the commercialization of Omnipod GO. As a result, in 2024, we recorded a charge of $13.5 million related to certain inventory components that would not be utilized.
Comparison of the Years Ended December 31, 2025 and December 31, 2024
Revenue
| Years Ended December 31, | |||||||||||||||||||||||||||||
|
(in millions)
|
2025 | 2024 | % Change |
Currency Impact
|
Constant Currency(1)
|
||||||||||||||||||||||||
| U.S. | $ | 1,919.8 | $ | 1,509.3 | 27.2 | % | - | % | 27.2 | % | |||||||||||||||||||
| International | 754.3 | 523.4 | 44.1 | % | 4.8 | % | 39.3 | % | |||||||||||||||||||||
| Total Omnipod Products | 2,674.0 | 2,032.7 | 31.6 | % | 1.2 | % | 30.3 | % | |||||||||||||||||||||
| Drug Delivery | 34.1 | 38.9 | (12.3) | % | - | % | (12.3) | % | |||||||||||||||||||||
| Total | $ | 2,708.1 | $ | 2,071.6 | 30.7 | % | 1.2 | % | 29.5 | % | |||||||||||||||||||
(1) Constant currency revenue growth is a non-GAAP financial measure which should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. See "Management's Use of Non-GAAP Measures."
Total revenue increased $636.6 million, or 30.7%, to $2,708.1 million in 2025, compared with $2,071.6 million in 2024. Constant currency revenue growth of 29.5% was primarily driven by higher sales volume largely attributable to our growing customer base and, to a lesser extent, higher price.
U.S.
Revenue from the sale of Omnipod products in the U.S. increased $410.5 million, or 27.2%, in 2025 to $1,919.8 million, compared with $1,509.3 million in 2024. This increase primarily resulted from higher sales volume driven by growing our customer base. Revenue from the sale of Omnipod products in the U.S. includes $511.6 million of related party revenue in 2025, compared with $587.8 million in 2024. The $76.2 million decrease primarily resulted from one quarter less of related party sales in the current year, partially offset by growth through the pharmacy channel. Additional information regarding our related party transactions is provided in Note 2 to our consolidated financial statements.
In 2026, we expect strong U.S. revenue growth primarily driven by the benefits of our recurring revenue model and continued volume growth of Omnipod 5.
International
Revenue from the sale of Omnipod products in our international markets increased $230.9 million, or 44.1%, in 2025 to $754.3 million, compared with $523.4 million in 2024. Excluding the 4.8% favorable impact of currency exchange, the remaining 39.3% increase in revenue was primarily due to higher volumes from our growing customer base, largely resulting from the prior year launches of Omnipod 5. A higher average selling price for Omnipod 5, compared with Omnipod DASH, also contributed to the revenue increase.
In 2026, we expect higher International revenue due to continued volume growth driven by new customers and higher price resulting from conversions to Omnipod 5.
Drug Delivery
Substantially all of our Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta®Onpro®kit, a delivery system for Amgen's Neulasta to help reduce the risk of infection after intense chemotherapy. Drug Delivery revenue was $34.1 million and $38.9 million in 2025 and 2024, respectively.
Costs and Expenses
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
|
(in millions)
|
Amount | Percent of Revenue | Amount | Percent of Revenue | |||||||||||||||||||
| Cost of revenue | $ | 768.2 | 28.4 | % | $ | 625.9 | 30.2 | % | |||||||||||||||
| Research and development expenses | $ | 301.1 | 11.1 | % | $ | 219.6 | 10.6 | % | |||||||||||||||
| Selling, general and administrative expenses | $ | 1,165.0 | 43.0 | % | $ | 917.2 | 44.3 | % | |||||||||||||||
Cost of Revenue
Cost of revenue for 2025 increased $142.3 million, or 22.7%, to $768.2 million, compared with $625.9 million in 2024. Gross margin was 71.6% in 2025, compared with 69.8% in 2024. The 180 basis points increase in gross margin was primarily driven byimproved manufacturing and supply chain efficiencies, a higher average selling price, increased volume and a $13.5 million charge in the prior year related to certain components utilized in OmnipodGO, which we decided not to commercialize.
While we do not expect tariffs to have a significant impact on our gross margin in 2026, should the exemption that is currently in place for certain medical devices be eliminated, tariffs would have a material impact on our results of operations in future years.
Research and Development
Research and development expenses increased $81.5 million, or 37.1%, to $301.1 million for 2025, compared with $219.6 million for 2024. Research and development expenses as a percent of revenue increased to 11.1% in 2025 from 10.6% in 2024. The increase in research and development expense was primarily due to year-over-year headcount additions to support continued investment in our Omnipod and pipeline products, including a fully closed loop AID system for type 2 diabetes, the integration of Libre 3 with Omnipod 5, and Omnipod 6, our next generation AID system. To a lesser extent, the increase was driven by higher consulting costs to support our clinical trials and Omnipod and next generation products.
Selling, General and Administrative
Selling, general and administrative expenses increased $247.8 million, or 27.0%, to $1,165.0 million in 2025, compared with $917.2 million in 2024. This increase was primarily attributable to year-over-year headcount additions to support our business growth, mainly in our commercial and customer experience teams, and incremental advertising expense of $37.1 million. Increased investments in global marketing and training for the sales team to support demand generation also contributed to the increase in selling, general and administrative expenses, although to a lesser extent.
Non-Operating Items
Interest Expense and Income
Interest expense increased $16.7 million to $59.4 million in 2025, compared with $42.7 million in 2024 primarily due to the issuance of 6.5% senior unsecured notes in March 2025 and the renewal of interest rate swaps at higher rates in April 2025. The increase was partially offset by lower interest on our Term Loan B resulting from the refinancing in August 2024 and fees paid to amend our Term Loan B in the prior year, which did not repeat in the current year. Interest income decreased $4.9 million to $34.7 million in 2025, compared with $39.5 million in 2024 primarily driven by lower interest rates.
In 2026, we expect net interest expense to increase to $40 million or more, primarily due to lower interest income.
Loss on Extinguishment of Debt
During 2025, we repurchased $419.9 million million in principal ($417.6 million net of issuance costs) of our Convertible Senior Notes for $541.5 million in cash, which resulted in a $123.9 million loss on extinguishment. Refer to Note 13 to our consolidated financial statements for additional information.
Other Income (Expense), net
Other income, net of $14.3 million for 2025 primarily consists of a $12.5 million gain resulting from the change in fair value of the derivative asset associated with the redemption of our convertible debt discussed in Note 15. Other expense, net of $5.5 million for 2024 consists primarily of a $3.8 million loss related to fair value adjustments associated with a strategic debt investment.
Income Taxes
Our effective tax rate was 27.2% for 2025, compared with a tax benefit of 39.3% for 2024. The increase in our effective tax rate was primarily due to the absence of a valuation allowance against deferred tax assets that existed in the prior year and the loss
on extinguishment of our Convertible Senior Notes during 2025, the settlement of which resulted in non-deductible premiums, These impacts were partially offset by a nontaxable gain on the related derivative asset.
The Organization for Economic Co-operation and Development ("OECD") and participating countries continue to advance the implementation of a 15% global minimum corporate tax ("Pillar Two"). More than 50 countries, including the Netherlands and the United Kingdom, in which we operate, have enacted elements of the global minimum tax legislation with certain provisions effective in 2025. In January 2026, the OECD issued additional administrative guidance introducing a "side-by-side" framework applicable to U.S.-parented multinational groups. This framework provides an exemption from the application of certain Pillar Two charging provisions, including the Income Inclusion Rule and the Undertaxed Profits Rule, while such groups remain subject to Qualified Domestic Minimum Top-Up Taxes enacted by individual jurisdictions. We anticipate additional legislative activity and administrative guidance related to Pillar Two throughout 2026. Based on the legislation enacted as of December 31, 2025, the implementation of Pillar Two did not have a material impact on our consolidated financial statements for 2025. We are continuing to evaluate the potential impact on future periods.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA permanently extends certain provisions of the Tax Cuts and Jobs Act, modifies aspects of the international tax framework, and restores favorable tax treatment for certain business provisions, including the immediate expensing of domestic research and development expenditures. The OBBBA also provides accelerated tax deductions for certain qualified property. The legislation has multiple effective dates, with certain provisions effective in 2025 and others effective through 2027. In 2025, OBBBA resulted in a decrease in our deferred tax assets of approximately $70 million, primarily due to the immediate expensing of domestic research and development expenditures and a corresponding increase in both operating and free cash flow. The impact on our consolidated statement of income was insignificant. We continue to evaluate the optional tax elections available under OBBBA and their potential impact on our consolidated financial statements for 2026 and subsequent periods.
Adjusted EBITDA
The table below presents reconciliations of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"):
| Years Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Net income | $ | 247.1 | $ | 418.3 | |||||||
| Interest expense, net | 24.7 | 3.2 | |||||||||
|
Income tax expense (benefit)
|
92.4 | (118.1) | |||||||||
| Depreciation and amortization | 90.4 | 80.8 | |||||||||
|
Stock-based compensation(1)
|
62.7 | 69.3 | |||||||||
|
CEO and CFO transition(2)
|
9.3 | - | |||||||||
|
Loss on extinguishment of debt(3)
|
123.9 | - | |||||||||
|
Gain on derivative asset(4)
|
(12.5) | - | |||||||||
|
Loss on investments(5)
|
7.5 | 3.8 | |||||||||
| Adjusted EBITDA | $ | 645.5 | $ | 457.2 | |||||||
(1) 2025 includes $11.7 million reversal of stock-based compensation expense associated with the departure of the Company's former Chief Executive Officer and Chief Financial Officer.
(2) Represents severance benefits for the Company's former Chief Executive Officer and Chief Financial Officer.
(3)Relates to the repurchase of Convertible Senior Notes.
(4)Represents the change in fair value of the derivative asset associated with the redemption of Convertible Senior Notes.
(5)Represents losses associated with debt and equity investments.
Non-GAAP Financial Measures
Management uses the non-GAAP financial measures described below.
Constant currency revenue growth represents the change in revenue between current and prior year periods using the exchange rate in effect during the applicable prior year period. We present constant currency revenue growth because we believe it provides meaningful information regarding our results on a consistent and comparable basis. Management uses this non-GAAP financial measure, in addition to financial measures in accordance with GAAP, to evaluate our operating results. It is also one of the performance metrics that determines management incentive compensation.
Adjusted EBITDA represents net income plus net interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense and other significant transactions or events, such as legal settlements, gains (losses) on
investments, and loss on extinguishment of debt, which affect the period-to-period comparability of our performances, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our performance, and we believe that it is helpful to investors and other interested parties as a measure of our comparative performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.
Free cash flow is calculated as net cash provided by operating activities less capital expenditures. Management uses this non-GAAP measure, in addition to U.S. GAAP financial measures, to evaluate our operating results.
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.
Liquidity and Capital Resources
We believe that our current liquidity as further described below will be sufficient to meet our projected operating, investing, and debt service requirements for at least the next twelve months.
Capitalization
The following table contains several key measures to gauge our financial condition and liquidity at the end of each year:
| As of December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Cash and cash equivalents | $ | 716.1 | $ | 953.4 | |||||||
| Current portion of long-term debt | $ | 18.4 | $ | 83.8 | |||||||
| Long-term debt, net | $ | 930.8 | $ | 1,296.1 | |||||||
| Total debt, net | $ | 949.2 | $ | 1,379.8 | |||||||
| Total stockholders' equity | $ | 1,515.2 | $ | 1,211.6 | |||||||
| Debt-to-total capital ratio | 39 | % | 53 | % | |||||||
| Net debt-to-total capital ratio | 9 | % | 16 | % | |||||||
Credit Agreement
We have a $500 million senior secured revolving credit facility (the "Revolving Credit Facility"), which expires in 2030. At December 31, 2025, no amount was outstanding under the Revolving Credit Facility. The Revolving Credit Facility contains a covenant to maintain a specified leverage ratio when there are amounts of at least 35% of the aggregate Revolving Credit Facility outstanding. It also contains other customary covenants, none of which we consider restrictive to our operations. Additionally, we have a Term Loan B, which matures in 2031, that contains covenants restricting or limiting our ability to incur additional indebtedness, make asset dispositions, create or permit liens, sell, transfer or exchange assets, guarantee certain indebtedness, and make acquisitions and other investments.
Senior Unsecured Notes
Our $450 million aggregate principal amount of 6.5% senior unsecured notes, due 2033, contain leverage and fixed charge coverage ratio covenants, both of which are measured upon the incurrence of future debt, as well as other customary covenants, none of which we consider restrictive to our operations.
Share Repurchase Program
In March 2025, the Company's Board of Directors authorized a program to repurchase up to $125.0 million of common stock through December 31, 2026 to offset dilution from stock-based compensation. During 2025, we repurchased approximately 184 thousand shares for $59.6 million under this program. In February 2026, the Board of Directors extended the authorization of this program through December 31, 2027 and approved an additional $350 million in repurchases of common stock. We plan to utilize $300 million of existing cash to repurchase shares in the first quarter of 2026.
Additional information regarding our debt and equity is provided in Notes 13 and 17 to the consolidated financial statements.
Summary of Cash Flows
| Years Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | 569.3 | $ | 430.2 | |||||||
| Investing activities | (222.7) | (146.2) | |||||||||
| Financing activities | (595.3) | (28.0) | |||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
11.5 | (6.8) | |||||||||
|
Net (decrease) increase in cash and cash equivalents
|
$ | (237.3) | $ | 249.2 | |||||||
Operating Activities
Net cash provided by operating activities of $569.3 million in 2025 was primarily attributable to net income, as adjusted for loss on extinguishment of debt, depreciation and amortization, stock-based compensation expense, and deferred income taxes, partially offset by a $23.0 million working capital outflow. The working capital outflow was driven by a $140.2 million increase in accounts receivable and an $81.7 million increase in prepaid expenses and other assets, partially offset by a $160.2 million increase in accrued expenses and other liabilities and a $49.2 million increase in accounts payable. The increase in accounts receivable was primarily due to higher sales driven by our growing customer base. The increase in prepaid expenses and other assets was primarily driven by prepaid payroll, cloud computing costs, prepaid income taxes, and prepaid raw materials. The increase in accrued expenses and other liabilities was primarily driven by an increase in accrued compensation driven by higher incentive compensation achievement and headcount additions to support our growing business, and an increase in accrued rebates due to higher sales volume. Finally, the increase in accounts payable was driven by the timing of payments and continued growth of our business.
Investing Activities
Net cash used in investing activities was $222.7 million in 2025, compared with $146.2 million in 2024.
Capital Spending-Capital expenditures were $191.6 million and $124.9 million in 2025 and 2024, respectively. The $66.7 million increase primarily related to the investment in our third manufacturing plant in Costa Rica and the purchase of additional machinery and equipment for our Malaysia manufacturing facility to support continued business growth. We expect capital expenditures for 2026 to increase compared with 2025 as we continue to expand globally and optimize our manufacturing and supply chain operations. We expect to fund our capital expenditures using a combination of existing cash and financing.
Investments in Developed Software-Investments in developed software were $19.2 million and $9.1 million in 2025 and 2024, respectively, and primarily related to investments in projects to support our cloud-based capabilities.
Investments-In 2024, we made strategic investments in private companies in the amount of $12.2 million.
Financing Activities
Net cash used in financing activities was $595.3 million in 2025, compared with $28.0 million in 2024.
Debt Issuance and Repayments-In 2025, we received net proceeds of $440.7 million from the issuance of Senior Unsecured Notes and used the proceeds along with proceeds of $164.6 million from the unwinding the related capped call options to partially fund the $1,052.2 million repurchase and redemption of our Convertible Notes. In 2025, we also received proceeds of $15.5 million from the refinancing of our Term Loan B, and we repaid $99.6 million of our Term Loan B, equipment financings, and mortgage, compared with $26.3 million in 2024. In 2024, we refinanced our Term Loan B, which resulted in cash proceeds of $130.0 million, net of issuance costs, and the simultaneous repayment of $132.2 million of the Term Loan B.
Proceeds and Repayments from Secured Borrowing-During 2025, we repaid secured borrowing (net of cash advances) of $12.6 million to a third-party to whom we outsourced our insurance claim submissions process in a certain country. During 2024, we received cash advances (net of repayments) of $10.7 million from this third-party.
Finance Lease Repayments-During 2024, we made $22.7 million in finance lease repayments associated with our Malaysia manufacturing facility, including the amount associated with exercising our option to purchase the property.
Proceeds from Option Exercises-Proceeds from option exercises were $19.0 million and $8.2 million in 2025 and 2024, respectively. The $10.8 million increase was primarily driven by more options exercised during the current period and a higher average option exercise price resulting from an increase in our stock price.
Proceeds from Shares Issued Under Employee Stock Purchase Plan ("ESPP")-Proceeds from the issuance of shares under the ESPP were $14.9 million and $11.9 million in 2025 and 2024, respectively.
Payment of Taxes for Restricted Stock Net Settlements-Payments for taxes related to net restricted and performance stock unit settlements were $25.9 million and $7.6 million in 2025 and 2024, respectively. The $18.3 million increase was primarily driven by more RSUs vesting during the current period due to headcount additions to support the growth of the business and a higher fair market value of the restricted stock units that vested during the period.
Repurchase of Common Stock-During 2025, we paid $59.6 million to repurchase common shares to offset dilution from stock-based compensation.
Free Cash Flow
Free cash flow was $377.7 million in 2025, compared with $305.3 million in 2024. The $72.4 million increase in free cash flow primarily resulted from an increase in operating income, partially offset by an increase in capital expenditures and taxes paid.
Free cash flow is a non-GAAP measure, which should be considered supplemental to and not a substitute for our reported financial results prepared in accordance with U.S. GAAP. See "Non-GAAP Financial Measures."
A reconciliation between net cash provided by operating activities (the most comparable U.S. GAAP measure) and free cash flow is as follows:
| Years Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
|
Net cash provided by operating activities
|
$ | 569.3 | $ | 430.2 | |||||||
|
Capital expenditures
|
(191.6) | (124.9) | |||||||||
|
Free cash flow
|
$ | 377.7 | $ | 305.3 | |||||||
Commitments and Contingencies
Contractual Obligations-The following table summarizes our contractual obligations as of December 31, 2025:
| (in millions) | Short Term | Long Term | Total | ||||||||||||||
| Debt obligations | $ | 18.4 | $ | 944.0 | $ | 962.4 | |||||||||||
|
Interest payments(1)(2)
|
59.6 | 317.3 | 376.8 | ||||||||||||||
|
Purchase obligations(3)
|
353.1 | 114.1 | 467.2 | ||||||||||||||
|
Lease obligations(1)
|
5.8 | 67.4 | 73.2 | ||||||||||||||
| Total contractual obligations | $ | 436.9 | $ | 1,442.8 | $ | 1,879.7 | |||||||||||
(1)Interest on debt and lease obligations are projected for future periods using the interest rates in effect as of December 31, 2025. Certain of these projected interest payments may differ in the future based on changes in market interest rates. Additional information regarding our leases is provided in Note 12 to the consolidated financial statements.
(2)Excludes the impact of the interest rate swaps discussed in Note 15 to our consolidated financial statements.
(3)Purchase obligations include commitments for the purchase of components for our products, commitments related to establishing additional manufacturing capabilities, and other commitments for purchases of goods or services in the normal course of business. These commitments are derived from purchase orders, supplier contracts, and open orders based on projected demand information.
Legal Proceedings-In December 2024, a jury found that EOFlow Co., Ltd. ("EOFlow") and several other defendants misappropriated certain of our trade secrets and awarded us $452 million in damages. The Court subsequently upheld the jury verdict and further entered a permanent worldwide injunction. In view of the scope of the permanent injunction, the Court reduced our monetary award to $59.4 million to avoid a double recovery. We have not recorded the damages awarded in our consolidated statements of income as EOFlow has appealed and EOFlow's ability to satisfy the damages award is uncertain. Refer to Note 16 to our consolidated financial statements for additional information regarding this matter.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management's estimates are based on the relevant information available at the end of each period.
Pharmacy Rebates
We generally recognize revenue when control of our products is transferred to customers in an amount that reflects the net consideration we expect to receive. Our products are subject to pricing rebates under arrangements with managed care organizations, including pharmacy benefit managers, governmental payors, and third-party commercial payors, primarily in the United States. These rebates represent amounts owed pursuant to contractual agreements or legal requirements after the product is dispensed to a benefit plan participant. Provisions for these rebates, collectively referred to as pharmacy rebates, are treated as variable consideration and are recorded as a reduction to revenue using the expected value method. Although we record a rebate provision at the time of sale, the related rebate payments are generally made 30 to 90 days thereafter and, in certain cases, may extend up to one year. As a result of this timing difference, revenue recognized in a given period may include adjustments to rebate provisions recorded in prior periods. Estimates of pharmacy rebates are developed based on historical experience, sales trends, levels of inventory in the distribution channel, and contractual terms. A significant portion of our rebate provisions relate to sales of the Company's products in the United States. United States pharmacy rebate provisions charged against gross sales amounted to $654.7 million, $452.7 million, and $367.3 million in 2025, 2024, and 2023, respectively. To the extent that actual rebate payments differ from our estimates, we revise our assumptions and record the resulting adjustments to revenue in the period in which such differences become known.
Income Taxes
Significant judgment is required in determining whether it is probable that sufficient future taxable income will be available against which a deferred tax asset can be utilized. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including cumulative income in recent fiscal years, our forecast of future taxable income exclusive of certain reversing temporary differences and significant risks and uncertainties related to our business. In determining future taxable income, we are responsible for assumptions utilized including the amount of state, federal, and international pre-tax operating income, the reversal of certain temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income in applicable tax jurisdictions, which are based on our commercial experience to date and are consistent with the plans and estimates that we are using to manage our underlying business.
During 2024, we determined that it is more likely than not that we will realize substantially all of our net deferred tax assets after weighing positive and negative evidence to assess recoverability, including cumulative income (loss) position, revenue growth, current profitability, and expectations regarding future forecasted income. Accordingly, in 2024, we recorded a tax benefit of $182.5 million from the release of our valuation allowance. As of December 31, 2025, we have a valuation allowance of $30.6 million on certain U.S. state tax credits and state net operating loss carryforwards because it is more likely than not that those deferred tax assets will not be realized.
Accounting Standards Issued and Not Yet Adopted as of December 31, 2025
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement-Reporting Comprehensive Income-Expenses Disaggregation Disclosures(Subtopic 220-40). The new guidance requires disaggregated disclosure of expenses included in certain expense captions presented in the statements of incomes as well as additional disclosures about selling expenses. We intend to adopt these new disclosure requirements beginning with our annual filing for 2027, as required. The guidance may be applied prospectively or retrospectively.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The new guidance provides a practical expedient to simplify the measurement of credit losses for certain receivables and contract assets. We intend to adopt the practical expedient prospectively beginning with our first quarterly filing for 2026, when required. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the internal-use software guidance by eliminating references to prescriptive and sequential software development stages. The guidance is effective for us beginning in the first quarter of 2028, but early adoption is permitted. The guidance may be applied prospectively, modified prospectively or retrospectively. We are currently evaluating the impact of this guidance.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The new guidance simplifies certain aspects of hedge documentation, assessment of hedge effectiveness, and ongoing application requirements. The guidance is effective for us beginning in the first quarter of 2027, but early adoption is permitted. Once adopted, the guidance is applied prospectively. We are currently evaluating the impact of this guidance.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The new guidance includes technical corrections, clarifications and other improvements to various topics in the Accounting Standards Codification to improve clarity and consistency. The guidance is effective for us beginning in the first quarter of 2027, but early adoption is permitted. The guidance may be applied prospectively or retrospectively, except for the amendment related to diluted earnings per share, which must be applied retrospectively. We are currently evaluating the impact of this guidance.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The new guidance clarifies the scope of ASC 270, Interim Reporting, and provide additional guidance on interim disclosures. The guidance is effective for us beginning in the first quarter of 2028, but early adoption is permitted. The guidance may be applied prospectively or retrospectively. We are currently evaluating the impact of this guidance.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which provides guidance on the recognition, measurement, presentation, and disclosure of government grants received. The guidance is effective for us beginning in the first quarter of 2029, but early adoption is permitted. The guidance may be applied retrospectively, modified prospectively, or retrospectively. We are currently evaluating the impact of this guidance.
Forward-Looking Statements
This Form 10-K contains forward-looking statements relating to future events or future financial performance that are based on management's current expectations, estimates, and projections. Words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "would," "intends," "targets," "projects," "contemplates," "believes," "estimates," "predicts," "potential," "risk," or "continue" or the negative of these terms or other similar words or expressions are intended to identify these forward-looking statements. Forward-looking statements are only predictions and involve risks, uncertainties, and assumptions. Certain factors, including but not limited to those identified under "Item 1A. Risk Factors" of this Form 10-K, may cause actual results to differ materially from current expectations, estimates, projections, and forecasts, and from past results. You should not place undue reliance on any forward-looking statements. We expressly disclaim any obligation to update these forward-looking statements other than as required by law.
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