MiniMed Group Inc.
06/29/2026 | Press release | Distributed by Public on 06/29/2026 10:11
Annual Report for Fiscal Year Ending 4/24, 2026 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of MiniMed Group, Inc. and its subsidiaries ("MiniMed Group, Inc.," "MiniMed," the "Company," or "we," "us," or "our"). For a full understanding of financial condition and results of operations, you should read the following discussion and analysis together with the "Consolidated Financial Statements and Supplementary Data" in Part II, Item 8 of this Annual Report. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those described in the Part I, Item 1A. "Risk Factors" and the section entitled "Cautionary Note Regarding Forward-Looking Statements" at the beginning of this Annual Report.
Overview
We are a scaled global medical technology company that develops, manufactures, and markets a comprehensive suite of solutions for the management of diabetes, including automated insulin delivery ("AID") systems and smart multiple daily injection ("Smart MDI") systems. Our AID systems integrate insulin delivery, glucose sensing, and proprietary dosing algorithms to improve glycemic outcomes and reduce the burden of diabetes management for PWD. Our AID systems are composed of an insulin pump that administers insulin, consumable insulin infusion sets and reservoirs, a continuous glucose monitoring ("CGM") sensor that measures blood glucose levels and a Smart Dosing algorithm. The MiniMed 780G system is our flagship AID system. For PWDs that prefer to self-administer insulin by manual injections or seek freedom from on-body devices, our Smart MDI systems offer an integrated solution for sensing, dosing, and administration. Our Smart MDI system includes a Smart Insulin Pen for insulin administration (which connects to our Smart Dosing software), a CGM sensor that measures blood glucose levels, and wraparound applications and services.
Historically, MiniMed operated as Medtronic plc's ("Medtronic") global diabetes business (the "Diabetes Business"). As a result, the consolidated financial statements for periods presented have been prepared on a carve-out basis and reflect the historical results of the Diabetes Business as managed within Medtronic. These financial statements include allocations of certain corporate and shared services expenses from Medtronic, which management believes are reasonable. Such allocations may not be indicative of the Company's future cost structure as a standalone public company.
On March 6, 2026, in connection with our initial public offering ("IPO") MiniMed became a publicly traded company. Following the completion of our IPO on March 9, 2026, MiniMed began operating as a standalone entity, although it continues to maintain transitional and ongoing relationships with Medtronic pursuant to various separation-related agreements, including transition services and manufacturing arrangements. The Company is incurring incremental costs associated with operating as a standalone public company, including costs related to corporate governance, internal controls, information systems, and public company compliance. In addition, results for the periods presented do not reflect the full impact of the Company's standalone capital structure, separation-related costs, or changes in commercial strategy that may occur following the IPO.
Separation from Medtronic and Initial Public Offering
Our IPO followed from Medtronic's 2025 announcement of its intention to separate its diabetes business, primarily representing the Diabetes Business of Medtronic (also referred to as the "Diabetes Operating Unit"), and the incorporation of MiniMed Group, Inc. ("MiniMed") to ultimately hold the Diabetes Business (the "Separation").
Since our IPO, we have operated as a standalone public company, with Medtronic owning approximately 90% of the outstanding shares of our common stock. As part of the Separation, we entered into a series of agreements with Medtronic that govern the allocation of assets and liabilities and provide for certain transitional and ongoing services, including manufacturing, information technology, and other support services for a limited period following the Separation.
Under these arrangements, Medtronic will continue to provide certain services to us on a transitional basis, and we will provide certain services to Medtronic, for specified periods, subject to agreed-upon terms. The costs associated with these arrangements are expected to change over time as we transition to standalone operations.
The terms of these agreements may differ from those that could have been obtained in arm's-length transactions with unaffiliated third parties. For additional information regarding these arrangements, see Note 14. "Related Party Transactions," and the 2026 Proxy Statement.
We are incurring incremental costs associated with operating as a standalone public company, including costs related to corporate governance, internal controls, information systems, and public company compliance. In addition, results for the periods presented do not reflect the full impact of our standalone capital structure, separation-related costs, or changes in commercial strategy that may occur following the IPO.
The consolidated financial statements for the periods presented prior to the IPO reflect the historical results of the Diabetes Business and do not include all of the costs we expect to incur as a standalone public company. Management expects our cost structure, capital structure, and operating model to evolve as we complete our transition away from Medtronic.
Medtronic previously informed its shareholders that it intends to make a generally tax-free distribution to its shareholders of all or a portion of its remaining equity interest in us, which may be structured as a spin-off, in which Medtronic would make a pro rata distribution of our common stock to all Medtronic shareholders, a split-off, in which Medtronic would effect an exchange of Medtronic shares for shares of our common stock, or any combination thereof (the "Divestment"). Medtronic has no obligation to pursue or consummate any further dispositions of its equity interest in us, including through the Divestment, by any specified date or at all.
Recent Developments
During the periods presented, we continued to advance our core diabetes technology platforms, including our MiniMed 780G automated insulin delivery system, Smart MDI offerings, and CGM portfolio. We also continued to invest in research and development activities and to expand regulatory approvals for certain products and indications across geographies.
On March 18, 2026, we announced that the U.S. FDA had cleared the MiniMed Flex, a next-generation discreet, smartphone-controlled insulin pump, and in June 2026 we launched MiniMed Flex in the U.S. In February 2026, we also submitted the MiniMed Flex for CE Mark approval. MiniMed Flex currently supports our Simplera Sync sensor and we expect that it will also support the Instinct sensor, made by Abbott by the end of the second quarter of fiscal 2027. In connection with the U.S. FDA clearance of MiniMed Flex, we recognized a one-time charge of $157 million during the fourth quarter of fiscal year 2026 related to future minimum royalty payment obligations under our research and development funding arrangement with Blackstone. See Note 11. "Research and Development Funding Arrangements" to the consolidated financial statements for additional information.
In February 2026, we launched the MiniMed Go, our Smart MDI system in Europe and in May 2026, we continued the global rollout of the MiniMed Go with commercial launch in the U.S.
On June 3, 2026, we announced an extension to our partnership with Abbott Laboratories, to commercialize dual glucose-ketone sensors designed to integrate exclusively with our MiniMed smart dosing systems. The sensors are currently under development and not commercially available.
Trends and Uncertainties Impacting Financial Results
We believe our future performance will be influenced by a number of factors, including those described in the section, "Risk Factors" of this Annual Report, and elsewhere in this report as well as the factors described below. While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations.
Industry Trends
We believe the main driver of our market's expected rate of growth is increased penetration of Smart Dosing solutions, such as AID, over traditional therapies like unconnected MDI or standalone CGMs. They are becoming the gold standard of care in our space because of their proven ability to improve clinical outcomes and reduce user burden.
We believe that the adoption of these Smart Dosing technologies has room for growth. While some existing products may be seen as complex, costly, and not meaningfully more effective than alternatives, this opens the door for innovation to enhance these technologies in ways to better serve PWD and HCPs who prescribe these devices.
Additional secular drivers may also contribute to the growth of our addressable population. Our market exhibits many of the same secular growth drivers as the broader disease population, including prevalence of Western diets and healthcare development in emerging markets.
CGM Pricing Pressure
We have observed increasing pricing pressure on CGMs globally, particularly in certain international markets. Differences in reimbursement and pricing dynamics across geographies and sales channels can result in variability in average selling prices and gross margins, particularly as changes in sales mix occur. Additionally, as competition in the CGM market intensifies, lower-cost CGM options in the market may contribute to further pricing pressure over time. We are focused on continuing to invest in our pipeline to deliver differentiated solutions that reinforce our competitive positioning and our long-term growth.
Product Launches and Investment in Pipeline
We believe the success of our products correlates to the continued acceptance and growth of our product offerings, such as the MiniMed 780G system, next-generation AID systems, and Smart MDI systems. Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval or clearance of, and commercialize the products within our pipeline is essential to our results of operations. Timing and successful launch of partnerships such as our agreement with Abbott may also contribute meaningfully to our go-forward market performance. For example, we believe the early FDA clearance of MiniMed Flex shifted demand of customers who preferred to wait for the new system, which resulted in a reduction of pump sales following the announcement of the FDA clearance in the fourth quarter of fiscal 2026. In addition, the delayed launch of Simplera CGM in the United states limited our ability to grow NPS in the first half of fiscal year 2026. Following the launch of Simplera and Instinct CGM in the United States, domestic pump sales returned to growth, which was driven by these new sensor launches.
The ability to sustain ongoing investment in our pipeline will be required as we progress towards developing and launching our next generation of products. We strive to develop ways in which we can make our research and development process as efficient as possible and reduce the amount of investment needed to progress a product to approval.
Users, New Patient Adoption, and Sales of CGMs and Other Consumables
Our strategy also relies on our ability to maintain and grow our existing base of users that utilize our insulin pumps and smart pens. We consider this to be a function of multiple priorities.
First, we seek to maintain our core base of existing users. We do this by offering attractive warranty terms for insulin pumps, typically over a four-year period, and differentiated customer service. In addition, we communicate often with our existing users and their providers about our innovative products to drive continued preference. This encourages users to continue utilizing our offerings and, for insulin pump users, often leads to the renewal of their warranty arrangements.
Second, we seek to add users by winning share of new patients. We do this through our various commercial efforts and new product introductions, targeting three main pools of patients who may adopt our products: (1) patients utilizing other treatment options, such as MDI, (2) patients using competitor pumps, often those reaching the end of their pump warranty periods, and (3) patients new to insulin therapy. As the rate of sales of our products to new patients has impacted our financial performance, and will continue to do so in the future, we monitor and evaluate our performance on the share of new patients that we are winning from these various groups. "New Pumps Sold" are a key indicator of our current business success, and we anticipate that this metric will grow as we increase our market share in existing markets and expand into emerging ones.
We sell into this growing base of insulin pump and smart pen users an assortment of consumable companion products, such as CGMs and infusion sets. We track the attachment rate of our CGM sensors to evaluate how often a pump user chooses to utilize our full ecosystem of technology solutions. Since our CGM sensors are compatible with our pump dosing algorithm and Smart MDI dosing applications, we expect a relatively stronger rate of adoption among our user base. Sensor performance and user preference can have an impact on this attachment rate, and we find in the months since launching our newest-generation Simplera Sync sensor that we are exhibiting higher attachment rates than we have historically.
Competition
The diabetes medical device industry is highly competitive and constantly evolving, especially with the rapid introduction of competing pumps, CGMs, and other consumables in an expanding global market. We anticipate that new diabetes devices and treatments from both us and our competitors will impact our business. The Smart MDI market is also evolving, with increasing competition from new entrants and expanding digital health integrations, which may impact our positioning and growth opportunities in this segment. To maintain our competitive edge in the market, we plan to continue investing in innovative technologies, such as the MiniMed Fit patch pump and our next-generation Vivera dosing algorithm. Additionally, we are focused on expanding the adoption of AID across our addressable market for a broader range of patient populations as well as growing the addressable market for MiniMed 780G through expanded indication labeling.
Regulatory Approvals and Actions
The medical devices we manufacture are subject to extensive regulation by numerous government agencies, including the U.S. FDA, the EU MDR, and various other individual country regulatory bodies and agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution, and post-market surveillance of our products. The requirements and timelines to receive regulatory clearance can vary substantially from country to country, and any delays may impact our ability to expand our worldwide customer base and bring products to market in a competitive timeframe. Such delays, or a failure to receive regulatory approval, could adversely affect our revenue and results of operations.
Additionally, any adverse event involving products that we distribute could result in future corrective actions, such as recalls or customer notifications, or regulatory agency actions, which may include inspections, mandatory recalls, or other enforcement measures. Any action taken by regulatory bodies against us, along with any regulatory challenges we encounter, could negatively impact our product sales.
See "Item 1. Business-Government Regulation and Product Approval Process" for a more detailed description of regulations and approval processes relevant to our business.
Manufacturing and Supply
Our business model requires the ability to produce high volumes of our products and reliably ship to various geographies in a time-efficient manner. Disruptions to our supply lines or shipping channels may impact our customer experience and ability to meet market demand. We also continue to invest in expanding our manufacturing capacity as a key strategic priority of our business as we strive to meet significant demand for our CGM sensors and drive profitable growth.
Impact of Increased CGM Share of Product Mix on Profit Margin
Relative to sales of our insulin pumps, pens, and other consumables, sales of our CGMs, particularly our Simplera and Simplera Sync products, have historically contributed to a lower profit margin. As a result, we expect that an increased volume of sales with Simplera and Simplera Sync will likely have a negative impact on our profit margin, as we have observed in recent periods. However, as we continue to ramp our manufacturing capacity to meet demand, we are focused on optimizing manufacturing efficiencies, driving innovation, and expanding premium offerings to help offset expected margin impacts while sustaining growth.
Reimbursement
Our results of operations may be impacted by the failure to obtain or retain sufficient coverage from third-party payors for our current and future products as well as changes in medical reimbursement policies and programs.
Our reimbursement channel expertise and deep relationships with payors and providers represent a key part of our business strategy, driving revenue stickiness, differentiation, and scale. Changes in the nature of these relationships or reimbursement policies around channel categorization (for example, DME or pharmacy) can materially impact our business. For more information on channel categorization, see "Item 1. Business-Our Commercial Organization."
Cost Reduction Measures
We expect our future financial results will be impacted by the degree to which we are able to execute on efficiency initiatives. We expect these initiatives to contribute to our go-forward profit margins and are a part of our Ways of Working transformation in recent years. For more information on our Ways of Working, see "Item 1. Business-Human Capital." As part of these initiatives, we aim to find savings in variable and overhead costs in our Cost of Products Sold and other operating expenses. In addition, we are focused on developing high-volume and automated manufacturing capabilities to continue to optimize our cost base.
Macroeconomic and Geopolitical Factors
Our costs are subject to fluctuation, and we continue to evaluate contributing factors, specifically those leading to inflationary cost increases in logistics, price of raw materials, cost of labor, transportation, and operating supplies. Global macroeconomic risks include changes in global trade policies and fluctuations in currency exchange rates, general price inflation, changes in interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, replacement cycle challenges, supply chain challenges, and tender pricing in certain countries.
Our production of certain products requires custom components that are sourced internationally. We do not currently anticipate tariffs imposed by the United States to significantly impact our manufacturing operations due to the duty-free treatment offered by the Nairobi Protocol, which provides duty-free treatment for items that benefit handicapped persons. While the extent of the tariffs levied by the United States remains uncertain, recent government actions have not limited the use of the Nairobi Protocol.
Seasonality
Our total revenues vary slightly from quarter to quarter. Based on historical experience, we generally have higher revenues toward calendar year end and our fiscal year end. The trend is primarily driven by annual insurance deductible resets and unfunded flexible spending account dynamics in the U.S. market, which is partially counteracted by lower pump sales as our competitors push for a strong end to their fiscal years, which align to calendar years. Sales of our single-use products such as infusion sets, reservoirs, and CGMs have generally mitigated quarterly seasonal fluctuations in pump sales.
Foreign Currency
A significant portion of the Company's revenues and expenses are denominated in currencies other than the U.S. dollar. As a result, changes in foreign currency exchange rates may impact reported revenue, gross margin, and operating results from period to period. The Company continues to evaluate its exposure to foreign currency risk as it transitions to standalone operations.
Components of Results of Operations
Sales
Our net sales are generated primarily from the sale of reusable and single-use products which collectively comprise our AID and Smart MDI systems.
Our insulin pumps and pens are considered reusable products as patients are able to continue their use of these products for a period of one year or more. Patients are generally eligible for reimbursement coverage of a new insulin pump every four to five years depending on both geography and payer type. Not all patients elect to replace their pump on this cycle and some use their pumps for longer than the replacement period because they can continue to operate as the patient continues to purchase consumables. Patients using durable insulin pens typically obtain replacements on an annual cycle due to reimbursement and product life span.
Our CGMs and the consumable components comprised of infusion sets and reservoirs associated with pumps are considered single-use products as these products are required to be replaced frequently for uninterrupted operation of our AID and Smart MDI systems. Patients using AID systems as well as Smart MDI systems typically replace their sensors either on a weekly basis as the Guardian 4 sensor and Simplera Sync sensors are indicated for up to 7 days of use, or on a bi-weekly basis as the Instinct sensor is indicated for up to 15 days of use. Patients using AID systems also replace their infusion sets and reservoirs either weekly or multiple times per week, depending on the type of infusion sets and reservoirs they use.
Cost of Products Sold
Cost of products sold includes raw materials, labor costs, manufacturing overhead expenses, shipping and handling costs incurred to store, move, and prepare products for shipment, amortization of purchased technology intangible assets, import tariffs and duties, reserves for expected warranty costs, scrap and excess, and obsolete inventory. Manufacturing overhead expenses include expenses relating to manufacturing engineering, material procurement, inventory and quality control, facilities, depreciation, information technology, and operations supervision and management.
Selling, General and Administrative
Selling, general, and administrative expense primarily consists of salaries and wages, benefits, other administrative costs, such as professional fees and marketing expenses, stock-based compensation, and restructuring associated expenses. Selling, general, and administrative expense also includes amortization expense related to our customer list and tradename intangible assets.
Research and Development
Research and development costs include costs of research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses.
Certain Litigation Charges
We classify specified certain litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of operations.
Other Operating Income and Expense, Net
Other operating expense (income), net primarily includes restructuring expense, currency remeasurement, and income from research and development funding arrangements.
Other Non-operating Income and Expense, Net
Other non-operating expense, net includes investment gains and losses.
Income Tax Provision
Income tax provision includes current and deferred income tax expense related to federal, state, and international jurisdictions.
Key Business Metrics
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. In assessing the performance of our business, in addition to considering a variety of measures in accordance with U.S. GAAP, we also consider a variety of other key business metrics, including non-GAAP measures.
We believe that these key business metrics provide useful information to users of our financial statements in understanding and evaluating our results of operations in the same manner as our management team. The presentation of these key business metrics, including Organic Revenue Growth, Adjusted Gross Profit, and Adjusted EBITDA, which are non-GAAP financial measures, is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. See "Non-GAAP Measures" below.
The following table sets forth our key business metrics, including non-GAAP measures, for the periods indicated:
| Fiscal Year Ended | |||||||||||||||||
| (Dollars in millions) | April 24, 2026 | April 25, 2025 | April 26, 2024 | ||||||||||||||
| Net Sales | $ | 3,102 | $ | 2,715 | $ | 2,469 | |||||||||||
| Gross Profit | $ | 1,680 | $ | 1,528 | $ | 1,436 | |||||||||||
|
Net Loss
|
$ | (317) | $ | (198) | $ | (107) | |||||||||||
| New Pumps Sold (in thousands) | 145 | 145 | 143 | ||||||||||||||
| Global CGM Attachment Rate | 66 | % | 59 | % | 52 | % | |||||||||||
| Net Sales Growth | 14.2 | % | 10.0 | % | 10.0 | % | |||||||||||
|
Organic Revenue Growth (1)
|
8.0 | % | 11.5 | % | 8.6 | % | |||||||||||
|
Adjusted Gross Profit (1)
|
$ | 1,787 | $ | 1,573 | $ | 1,463 | |||||||||||
|
Adjusted EBITDA (1)
|
$ | 202 | $ | 253 | $ | 147 | |||||||||||
(1) See "Non-GAAP measures" below for a discussion of Organic Revenue Growth, Adjusted Gross Profit, Adjusted EBITDA, and a reconciliation with the most directly comparable U.S. GAAP measure.
Gross Profit
Gross profit is our net sales, less cost of products sold.
New Pumps Sold
A leading indicator of our pump user base growth is the number of new pumps sold. We define New Pumps Sold ("NPS") as the number of new pumps sold to patients in a given period, inclusive of pumps sold to new patients and renewals by existing patients. This metric illustrates the number of new pump starts and renewals during each period presented, highlighting our capability to identify, attract, and retain users.
Global CGM Attachment Rate
Because we commercialize all parts of the smart dosing insulin therapy ecosystem, we are uniquely positioned to capture greater revenue per user than our competitors that only offer certain components of such systems. A key growth driver is our ability to increase CGM revenue per pump user which is reflected by our CGM Attachment Rate. We define CGM Attachment Rate as the percentage of total pump user base that is also using an integrated MiniMed CGM.
Organic Revenue Growth
Organic Revenue Growth measures our revenue growth trends excluding the impacts of foreign currency rate fluctuations and adjustments to the Company's Italian payback accrual for certain prior years since 2015, which is further described in Note 12. "Commitments and Contingencies," to the consolidated financial statements. We use Organic Revenue Growth to assess our performance on a consistent basis by removing the impacts of foreign currency rate fluctuations and adjustments to the Italian payback accrual that we believe do not directly reflect our underlying operations. See "Non-GAAP Measures" below for a reconciliation of Organic Revenue Growth to Net Sales Growth, its most directly comparable U.S. GAAP measure.
Adjusted Gross Profit
Adjusted Gross Profit is a non-GAAP measure that we use to assess our overall performance. We define Adjusted Gross Profit as U.S. GAAP gross profit, excluding amortization of intangible assets and certain other non-operational items. We believe Adjusted Gross Profit provides consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics eliminate the effects of the adjustments that are unrelated to overall operating performance. See "Non-GAAP Measures" below for a reconciliation of Adjusted Gross Profit to gross profit, its most directly comparable U.S. GAAP measure.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure, calculated as net loss adjusted to exclude interest expense, provision for income taxes, and depreciation and amortization, further adjusted to exclude the impact of certain other non-operational items. We use Adjusted EBITDA to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. See "Non-GAAP Measures" below for a reconciliation of Adjusted EBITDA to net loss, its most directly comparable U.S. GAAP measure.
RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated results of operations for the fiscal year ended April 24, 2026 and April 25, 2025, and the changes between periods. A discussion of the results of operations for fiscal year ended April 25, 2025 compared to the fiscal year ended April 26, 2024 is included in the Company's final prospectus filed with the SEC on March 6, 2026 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, relating to our Registration Statement on Form S-1, which is incorporated herein by reference.
| Fiscal Year Ended | Change | ||||||||||||||||||||||
| (Dollars in millions) | April 24, 2026 | April 25, 2025 | Amount | Percent | |||||||||||||||||||
| Net Sales | $ | 3,102 | $ | 2,715 | $ | 387 | 14 | % | |||||||||||||||
| Cost of products sold | 1,422 | 1,187 | 236 | 20 | % | ||||||||||||||||||
| Gross profit | 1,680 | 1,528 | 152 | 10 | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development expense | 448 | 436 | 12 | 3 | % | ||||||||||||||||||
| Selling, general, and administrative expenses | 1,183 | 1,080 | 103 | 10 | % | ||||||||||||||||||
| Certain litigation charges, net | 18 | 165 | (147) | (89) | % | ||||||||||||||||||
| Other operating expense (income), net | 221 | (8) | 229 | 2,860 | % | ||||||||||||||||||
| Operating (loss) profit | (190) | (146) | (46) | 31 | % | ||||||||||||||||||
| Other non-operating expense (income), net | (1) | 1 | (2) | (150) | % | ||||||||||||||||||
| (Loss) profit before income taxes | (189) | (147) | (43) | 30 | % | ||||||||||||||||||
| Income tax provision | 128 | 52 | 76 | 145 | % | ||||||||||||||||||
| Net loss | $ | (317) | $ | (198) | $ | (119) | (60) | % | |||||||||||||||
| Net income attributable to noncontrolling interests | $ | (16) | $ | (15) | $ | (1) | (8) | % | |||||||||||||||
| Net loss attributable to the Company | $ | (333) | $ | (213) | $ | (120) | (56) | % | |||||||||||||||
NET SALES
The table below includes net sales by product category for the fiscal year ended April 24, 2026 and April 25, 2025:
| Fiscal Year Ended | Change | ||||||||||||||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | Amount | Percent | |||||||||||||||||||
| Pumps | $ | 546 | $ | 541 | $ | 5 | 1 | % | |||||||||||||||
| Consumables | 956 | 854 | 102 | 12 | % | ||||||||||||||||||
| CGM | 1,553 | 1,313 | 240 | 18 | % | ||||||||||||||||||
|
Other (1)
|
46 | 6 | 40 | NM | |||||||||||||||||||
| Total net sales | $ | 3,102 | $ | 2,715 | $ | 387 | 14 | % | |||||||||||||||
(1)Primarily includes net sales generated from the sale of smart insulin pens and services. Also reflects adjustments to the Company's Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy and the Legislative Decree published by the Italian government on June 30, 2025 for certain prior years since 2015. Refer to Note 12. "Commitments and Contingencies," to the consolidated financial statements.
The table below includes net sales by market geography for the fiscal year ended April 24, 2026 and April 25, 2025:
| Fiscal Year Ended | Change | ||||||||||||||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | Amount | % | |||||||||||||||||||
|
U.S.(1)
|
$ | 917 | $ | 903 | $ | 14 | 2 | % | |||||||||||||||
|
International(2)
|
2,185 | 1,812 | 373 | 21 | % | ||||||||||||||||||
| Total | $ | 3,102 | $ | 2,715 | $ | 387 | 14 | % | |||||||||||||||
(1) U.S. includes the United States and U.S. territories.
(2) International includes all other non-U.S. countries.
Net sales for the fiscal year ended April 24, 2026 was $3.1 billion as compared to $2.7 billion for the fiscal year ended April 25, 2025. International sales increased by 21% and U.S. sales increased 2% primarily as a result of increased volumes. International net sales growth benefited from 6% growth in pumps, 16% growth in consumables, 24% growth in CGM, positive changes in our Italian payback accrual, and favorable impacts of foreign currency fluctuations. U.S. net sales were negatively impacted by timing effects associated with early FDA clearance of MiniMed Flex, which we believe led to certain customers deferring pump decisions, resulting in a 7% decline in pumps. We also experienced a 1% decline in consumables, offset by an 8% improvement in CGM. For the fiscal year ended April 24, 2026, the impact of the Italian payback adjustment resulted in an increase to net sales of $7 million as compared to a decrease in net sales of $20 million for the fiscal year ended April 25, 2025. This was due to changes in estimates relating to our Italian payback accrual resulting from the two July 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government in June 2025, and formalized into law in August 2025 for certain prior years since 2015.
Pump sales grew 1% for the fiscal year ended April 24, 2026. While we experienced continued growth of 6% in international pump sales following the launch of the Simplera CGM in Europe in fiscal year 2025, we experienced a 7% decline in the U.S. impacted by timing effects associated with the early U.S. FDA clearance of MiniMed Flex, which we believe led to certain customers deferring pump decisions, and the delayed launch of Simplera CGM in the U.S., which resulted in a competitive disadvantage and limited our ability to grow NPS in the first half of fiscal year 2026. However, following the launch of Simplera and Instinct CGM in the U.S. in the third quarter of fiscal year 2026, domestic pump sales grew in the second half of the fiscal year, reducing year-to-date pump sales decline to 7% for the fiscal year ended April 24, 2026, as compared to a 15% decline in the first half of fiscal year 2026.
Consumables sales increased 12% for the fiscal year ended April 24, 2026, as a result of 16% growth internationally and offset by a 1% decline in the U.S. Our international growth was the result of increased volume of patients using our AID systems which require frequent replacement of the infusion sets and reservoirs for uninterrupted operation. The increase in the volume of patients using our AID systems in international markets was due to the competitive strength of the MiniMed 780G system which has enabled us to attract new patients as well as retain our existing patient base. Fewer NPS in the U.S. resulted in reduced consumables sales during the fiscal year ended April 24, 2026.
CGM sales increased 18% for the fiscal year ended April 24, 2026, as a result of the continued increase in the Global CGM Attachment Rate, which rose from 59% in the fiscal year ended April 25, 2025, to 66% in the fiscal year ended April 24, 2026. Higher CGM Attachment Rate and pump user base in international markets drove 24% growth in international CGM sales which was primarily attributable to the introduction of the Simplera CGM in Europe in fiscal year 2025. CGM sales in the U.S. grew 8% during the fiscal year ended April 24, 2026, as a result of a sustained upward trend in CGM Attachment Rate and the launch of Simplera and Instinct CGM in the third quarter of fiscal year 2026. We have experienced a sustained upward trend in CGM Attachment Rate in the U.S. since the launch of the MiniMed 780G system in fiscal year 2024 as the automation algorithm is only compatible with our MiniMed CGMs.
COSTS AND EXPENSES
The following is a summary of cost of products sold, research and development, and selling, general and administrative expenses as a percentage of net sales for the fiscal year ended April 24, 2026 and April 25, 2025:
| Fiscal Year Ended | % of Net Sales | ||||||||||||||||||||||
|
(Dollars in millions)
|
April 24, 2026 | April 25, 2025 | April 24, 2026 | April 25, 2025 | |||||||||||||||||||
|
Cost of products sold
|
$ | 1,422 | $ | 1,187 | 45.8 | % | 43.7 | % | |||||||||||||||
| Research and development expense | $ | 448 | $ | 436 | 14.5 | % | 16.1 | % | |||||||||||||||
| Selling, general, and administrative expenses | $ | 1,183 | $ | 1,080 | 38.1 | % | 39.8 | % | |||||||||||||||
Cost of Products Sold
Cost of products sold for the fiscal year ended April 24, 2026 was $1.4 billion as compared to $1.2 billion for the fiscal year ended April 25, 2025. The increase in cost of products sold for both periods was driven by the increased volume of products sold as well as changes in product mix as further described below. Additionally, the increase was driven by $84 million of asset write offs associated with the termination of a third-party manufacturing agreement, and $20 million of warranty expense during the fiscal year ended April 24, 2026.
The increase in cost of products sold as a percentage of net sales for the fiscal year ended April 24, 2026 was primarily driven by a 290 bps increase from the asset write offs and a 20 bps increase from the warranty expense, product mix from CGMs, which have a lower gross profit margin relative to our insulin pumps and other consumables. The increase was partially offset by favorable currency impact on net sales in addition to changes in the Italian payback accruals impacting net sales for the fiscal year ended April 24, 2026 and April 25, 2025,.
For additional information about the asset write-offs, refer to Note 4. "Restructuring," in the consolidated financial statements.
Research and Development Expense
Research and development expense for the fiscal year ended April 24, 2026 was $448 million as compared to $436 million for the fiscal year ended April 25, 2025. The increase was primarily driven by an $10 million acquisition of technology not yet approved by regulators.
Selling, General, and Administrative Expense
Selling, general, and administrative expense for the fiscal year ended April 24, 2026 was $1.2 billion as compared to $1.1 billion for the fiscal year ended April 25, 2025. The increase was primarily driven by $56 million for incremental commercialization activities to support higher sales of the Company, particularly Simplera Sync outside the United States, and increased marketing expenses in the U.S., a $16 million increase for short-term and long-term incentives, and a $7 million increase in provision for credit losses.
Certain Litigation Charges, Net
Certain litigation charges, net were $18 million for the fiscal year ended April 24, 2026 compared with $165 million for the fiscal year ended April 25, 2025. The fiscal year 2026 amount primarily relates to charges associated with the retainer ring matter, while the year-over-year decrease was primarily due to the $165 million charges recognized in fiscal 2025 in connection with the resolution of the contractual dispute under a product funding arrangement, for which there were no corresponding charges in fiscal year 2026. For additional information, refer to Note 12. "Commitments and Contingencies."
Other Operating Expense (Income), Net
Other operating expense (income), net was $221 million of expense for the fiscal year ended April 24, 2026 as compared to $8 million of income for the fiscal year ended April 25, 2025. The increase was primarily driven by a one-time charge of $157 million during the fourth quarter of fiscal year 2026 related to future minimum royalty payment obligations under a research and development funding arrangement with Blackstone, as well as a $27 million increase in restructuring charges primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives. For more information on our restructuring charges and research and development arrangements, refer to Note 4. "Restructuring Charges," and Note 11. "Research and Development Funding Arrangements."
Other Non-Operating Expense (Income), Net
Other non-operating expense (income), net primarily includes investment gains and losses. Other non-operating expense (income), net was insignificant for the fiscal years ended April 24, 2026 and April 25, 2025.
INCOME TAXES
Income tax provision includes current and deferred income tax expense related to federal, state, and international jurisdictions.
The income tax provision was $128 million for the fiscal year ended April 24, 2026, as compared to $52 million for the fiscal year ended April 25, 2025. The change in the effective tax rate and income tax provision primarily relates to year-over-year changes in operational results by jurisdiction and the impact of valuation allowances in certain jurisdictions.
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act (OBBBA) of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for the Company beginning fiscal year 2026 and the impact for the fiscal year ended April 24, 2026 was not material.
NON-GAAP MEASURES
In addition to our financial results determined in accordance with U.S. GAAP, we present certain financial measures that facilitate management's review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with U.S. GAAP. These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance with U.S. GAAP. These include Organic Revenue Growth, Adjusted Gross Profit, and Adjusted EBITDA. We believe that non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.
In addition to our financial results determined in accordance with U.S. GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook.
In particular, we believe that the use of Organic Revenue Growth, Adjusted Gross Profit, and Adjusted EBITDA are helpful to our investors as they are metrics used by management to assess the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In evaluating the non-GAAP financial information presented, investors should be aware that in the future that the Company may incur expenses that are the same as or similar to some of the adjustments in such presentation and the Company's presentation of non-GAAP information should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Organic Revenue Growth
Organic Revenue Growth measures our revenue growth trends excluding the impacts of foreign currency rate fluctuations and adjustments to the Company's Italian payback accrual for certain prior years since 2015, which is further described in Note 12. "Commitments and Contingencies," to the consolidated financial statements. We use Organic Revenue Growth to assess our performance on a consistent basis by removing the impacts of foreign currency rate fluctuations and adjustments to the Italian payback accrual that we believe do not directly reflect our underlying operations.
The following table presents a reconciliation of U.S. GAAP net sales to Organic Revenue Growth for the fiscal year ended April 24, 2026 and April 25, 2025:
| Fiscal Year Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Reported net sales | Adjustments | Organic Revenue | |||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | Growth |
April 24, 2026(2)
|
April 25, 2025(3)
|
April 24, 2026(2)
|
April 25, 2025(3)
|
Growth | |||||||||||||||||||||||||||||||||||||||
|
U.S.(1)
|
$ | 917 | $ | 903 | 1.5 | % | $ | - | $ | - | $ | 917 | $ | 903 | 1.5 | % | |||||||||||||||||||||||||||||||
|
International(1)
|
2,185 | 1,812 | 20.6 | % | 147 | (20) | 2,038 | 1,832 | 11.2 | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 3,102 | $ | 2,715 | 14.2 | % | $ | 147 | $ | (20) | $ | 2,955 | $ | 2,735 | 8.0 | % | |||||||||||||||||||||||||||||||
(1) U.S. includes the United States and U.S. territories. International includes all other non-U.S. countries.
(2) The fiscal year ended April 24, 2026 excludes $147 million of revenue adjustments, including a $7 million adjustment in the Italian payback accruals due to changes in estimates as a result of the Legislative Decree published by the Italian government on June 30, 2025 for years 2015 to 2018 and $140 million of favorable currency impact on the remaining net sales. The currency impact to net sales measures the change in net sales between current and prior year periods using constant exchange rates.
(3) The fiscal year ended April 25, 2025 excludes $20 million of Italian payback accruals as a result of the two July 22, 2024 rulings by the Constitutional Court of Italy for certain prior years since 2015
Adjusted Gross Profit
Adjusted Gross Profit measures our gross profit excluding the impact of factors unrelated to overall operating performance. Management uses Adjusted Gross Profit to assess our overall performance on a consistent basis by removing the impact of certain items that we believe do not directly reflect our underlying operations. We calculate Adjusted Gross Profit as U.S. GAAP gross profit, adjusted for the amortization of intangible assets and certain other non-operational items.
The following table presents a reconciliation of U.S. GAAP gross profit to Adjusted Gross Profit for the fiscal years ended April 24, 2026 and April 25, 2025:
| Fiscal Year Ended | |||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | |||||||||
|
Gross profit
|
$ | 1,680 | $ | 1,528 | |||||||
| Adjustments: | |||||||||||
|
Restructuring and associated costs (1)
|
90 | - | |||||||||
| Amortization of intangible assets | 24 | 24 | |||||||||
|
Other adjustments (2)
|
(7) | 20 | |||||||||
|
Costs to comply with medical device regulations (3)
|
- | 1 | |||||||||
| Adjusted Gross Profit (Non-GAAP) | $ | 1,787 | $ | 1,573 | |||||||
(1) Primarily relates to asset write-offs associated with the December 2025 plan to terminate a third-party manufacturing agreement.
(2) Reflects adjustments to the Company's Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government on June 30, 2025 for certain prior years since 2015.
(3) The charges represent incremental costs of complying with the new European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we use to assess our overall performance. Management uses Adjusted EBITDA for business planning purposes as this measure facilitates internal comparisons of our historical operating performance on a more consistent basis. We calculate Adjusted EBITDA as Net Loss before interest, taxes, depreciation, and amortization, further adjusted to remove the impact of certain other non-operational items.
The following table presents a reconciliation of U.S. GAAP net loss to Adjusted EBITDA for the fiscal year ended April 24, 2026 and April 25, 2025.
| Fiscal Year Ended | |||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | |||||||||
|
Net loss
|
$ | (317) | $ | (198) | |||||||
| Non-operating and interest expense | (1) | - | |||||||||
| Income tax provision | 128 | 52 | |||||||||
| Depreciation and amortization | 156 | 143 | |||||||||
| Adjustments: | |||||||||||
| Stock-based compensation | 46 | 41 | |||||||||
|
Restructuring and associated costs (1)
|
142 | 25 | |||||||||
|
Certain litigation charges, net (2)
|
18 | 165 | |||||||||
|
Transaction costs (3)
|
36 | 3 | |||||||||
|
Other adjustments (4)
|
(7) | 20 | |||||||||
|
Losses on minority investments (5)
|
1 | 1 | |||||||||
|
Costs to comply with medical device regulations (6)
|
- | 1 | |||||||||
| Adjusted EBITDA | $ | 202 | $ | 253 | |||||||
(1) The fiscal year ended April 24, 2026 primarily includes asset write-offs and contract termination costs associated with the December 2025 plan to terminate a third-party manufacturing agreement. Additionally, all periods presented include charges related to employee termination benefits and consulting expenses directly related to the restructuring efforts.
(2) The fiscal year ended April 24, 2026 charges primarily relate to the Diabetes Pump Retainer Ring litigation. The fiscal year ended April 25, 2025 changes relate to a contractual dispute resolution under a product funding arrangement.
(3) These charges represent costs incurred associated with the Separation.
(4) Reflects adjustments to the Company's Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government on June 30, 2025 for certain prior years since 2015.
(5) We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.
(6) The charges represent incremental costs of complying with the new European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As of April 24, 2026, we had $298 million in cash and cash equivalents. We believe that our cash and cash equivalents, future cash flows from operations, and availability under our revolving credit facility, will be sufficient to fund our ongoing core business activities for at least the next twelve months.
Historically, our working capital requirements, capital expenditures, and investment opportunities were satisfied as part of Medtronic's centralized cash management and funding programs. Following our IPO and separation from Medtronic, we no longer participate in Medtronic's cash management strategy, and our capital structure, sources of liquidity, and operating needs differ from those historically reflected in our consolidated financial statements.
As part of the Separation, we used a portion of the net proceeds from the IPO to repay intercompany debt owed to Medtronic. After giving effect to the settlement of this intercompany debt and other transactions contemplated by certain separation agreements, we retained approximately $309 million of the net proceeds of the IPO, plus cash on hand at the completion of the IPO.
In connection with the Separation, we entered into a five-year senior secured revolving credit facility (the "Revolving Credit Facility") providing for aggregate commitments of $500 million, available in U.S. dollars and certain approved alternative currencies. Commitments under the revolving credit facility became available upon completion of the IPO and were undrawn at closing. For further information, see Note 7. "Debt" to the consolidated financial statements.
Following the Separation, our ability to fund our operating needs depends primarily on cash on hand, net proceeds from the IPO, cash generated from operations, and borrowings available under the revolving credit facility, as well as our ability to obtain additional debt financing or issue additional equity or equity-linked securities, if necessary. For additional information regarding the net proceeds of our IPO, see Note 1. "Description of the Business and Basis of Presentation" to the consolidated financial statements.
The following is a summary of cash (used in) provided by operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:
| Fiscal Year Ended | |||||||||||||||||
| (in millions) | April 24, 2026 | April 25, 2025 | April 26, 2024 | ||||||||||||||
| Cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | (197) | $ | 140 | $ | 41 | |||||||||||
| Investing activities | (233) | (193) | (157) | ||||||||||||||
| Financing activities | 716 | 10 | 112 | ||||||||||||||
| Net change in cash and cash equivalents | $ | 287 | $ | (43) | $ | (4) | |||||||||||
Operating Activities
The $337 million increase in net cash used in operating activities was primarily driven by changes in assets and liabilities as a result of the Separation, including a net negative $318 million cash impact from changes in receivables and payables to Medtronic.
Investing Activities
The $40 million increase in net cash used in investing activities was primarily due to an increase in net additions to property, plant, and equipment of $30 million.
Financing Activities
There was a $706 million increase in net cash provided by financing activities. The financing activities cash flows primarily reflect the issuance of common stock in connection with our IPO for a total of $538 million, offset by distributions to Medtronic of $228 million, resulting in net cash retained from the IPO of approximately $309 million. Transfers from Medtronic were $407 million for the fiscal year ended April 24, 2026 compared to $12 million for the fiscal year ended April 25, 2025. The increase in transfers was due to the Company's separation from Medtronic. For further details on the transfers from Medtronic, refer to Note 1. "Description of the Business and Basis of Presentation" to the consolidated financial statements.
Contractual Obligations and Commitments
Leases
We have entered into various operating leases for certain office, manufacturing, and research facilities and warehouses, as well as transportation and other equipment. For a description of our contractual obligations related to leases, refer to Note 10. "Leases," to the consolidated financial statements in Part II, Item 8 of this Annual Report.
Purchase Order Commitments
We have agreements with suppliers and other parties to purchase inventory, other goods and services and long-lived assets. For a description of our contractual obligations related to purchase order commitments as of April 24, 2026, see Note 12. "Commitments and Contingencies," to the consolidated financial statements in Part II, Item 8 of this Annual Report.
Revolving Credit Facility
The Company is party to certain indebtedness arrangements, including the Revolving Credit Facility due 2031 providing up to $500 million of revolving borrowings for which none was outstanding as of April 24, 2026. See Note 7. "Debt," to the consolidated financial statements for more detailed discussion of the material terms of the Revolving Credit Facility.
Research and Development Arrangements
The development of certain products, including MiniMed Flex, has been funded in part through research and development funding arrangements with Blackstone. Under these arrangements, following U.S. regulatory approval and commercial launch, we may be required to make future payments to Blackstone. On March 18, 2026, the FDA cleared MiniMed Flex. During the first two years following U.S. regulatory approval and commercial launch, Blackstone is entitled to receive the greater of (i) a mid-to-high single-digit royalty percentage of applicable net sales or (ii) a minimum payment of $157 million. As a result, we recognized a one-time charge of $157 million in the fourth quarter of fiscal year 2026 related to these future payment obligations. The related cash payments are expected to represent a material liquidity requirement during the initial commercialization period and will be funded from available liquidity resources.
Critical Accounting Estimates
We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect our best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
While our significant accounting policies are described in more detail in Note 2. "Summary of Significant Accounting Policies," to the consolidated financial statements, we believe that the following accounting policies are the most critical to the judgments and estimates used in the preparation of our consolidated financial statements
Revenue Recognition
Revenue recognition on our products varies depending on the amount of consideration we ultimately receive due to return terms, sales rebates, discounts, and other incentives, which are accounted for as variable consideration. The estimate of variable consideration for rebates and other adjustments is considered critical due to the materiality of the balances and use of estimates. Estimates for rebates and other adjustments are based on sales terms, historical experience, expected volumes, and trend analysis. The Company considers the lag time between the point of sale and payment of the rebate claim, the stated rebate rates, and other relevant information to estimate rebates.
Refer to Note 3. "Revenue," to the consolidated financial statements for further information.
Litigation Contingencies
As further described in Note 12. "Commitments and Contingencies," to the consolidated financial statements, we are involved in a number of legal actions from time to time involving product liability, employment, intellectual property and commercial disputes, environmental proceedings, tax disputes, and governmental proceedings and investigations.
Litigation and product liability matters are inherently uncertain, and the outcomes of individual matters are difficult to predict and quantify. As such, significant judgment is required in determining our legal and product liability accruals, including determination of whether a potential loss is probable, reasonably possible, or remote as well as whether a potential exposure is reasonably estimable. We base our judgments on the best information available at the time. Our estimates related to our legal and product liability accruals may change as additional information becomes available to us, including information related to the nature or existence of claims against us, trial court or appellate proceedings, and mediation, arbitration or settlement proceedings. Any revision of our estimates of potential liability could have a material impact on our financial position and operating results.
Income Tax Reserves
We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and that we may or may not prevail. Under U.S. GAAP, if we determine that a tax position will more likely than not be sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50 percent likely to be realized upon settlement. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations.
We regularly monitor our tax positions and tax liabilities. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) a completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) the expiration of the applicable statute of limitations. These reserves are subject to a high degree of estimation and management judgment. Although we believe that we have adequately reserved for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on our financial position and operating results.
Valuation of Goodwill
Goodwill attributed to the Company represents the historical goodwill balances in Medtronic's Diabetes business arising from acquisitions specific to the Company. Goodwill is the excess of the purchase price over the estimated fair value of identified net assets of acquired businesses. Determining the fair value requires us to make significant estimates. These estimates include the amount and timing of projected future cash flows of each project or technology, the discount rate used to discount those cash flows to present value, and the assessment of the asset's life cycle. The estimates could be impacted by legal, technical, regulatory, economic, and competitive risks.
We have one goodwill reporting unit. We assess the impairment of goodwill at the reporting unit level annually as of the first day of the third quarter and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The test for impairment of goodwill requires us to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting unit. We estimated the fair value of the reporting unit using the income and the market approaches, weighted 50% each. Fair value under the income approach was determined by discounting to present value the estimated future cash flows of the reporting unit. Fair value under the market approach utilized revenue multiples using comparable public company information, which uses valuation indicators determined from other businesses that are similar to our reporting unit. We use estimates that are consistent with the highest and best use of the assets based on a market participant's view of the assets being evaluated.
The most critical assumptions used in the calculation of the fair value of each reporting unit are the projected revenue, projected future cash flows, and discount rate. Our forecast of future cash flows is based on estimates of projected revenue, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve our earnings. The fair value of the reporting unit's goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue and discount rate used to evaluate the fair value of the reporting unit.
Subsequent to our IPO, our stock price experienced a decline. We did not view this event as a triggering event, as we do not believe this to be a sustained drop in share price. Further, there are other macroeconomic factors that have caused the market to be down overall over this same time frame. As of the date of this filing, after evaluating macroeconomic conditions, our market capitalization and our current and future results of operations, we concluded that there were no triggering events and it was not more likely than not that the fair values of our goodwill exceeded their carrying value and, therefore, did not have any impairment.
Refer to Note 5. "Composition of Certain Financial Statement Items," to the consolidated financial statements for further information.
Warranty Reserve
The estimates for warranty is considered critical due to the materiality of the balances and use of estimates. The Company estimates future warranty costs by analyzing historical and anticipated rates of warranty claims and the number and cost of units sold. Changes to the actual replacement rate or expected product replacement cost could cause a material increase or decrease to the estimated warranty reserve and related cost of products sold. The Company assesses the adequacy of the warranty reserves on a quarterly basis and adjusts these amounts as necessary.
At April 24, 2026, and April 25, 2025, there were $63 million and $57 million of accrued warranties recorded in the consolidated balance sheets, respectively. During the periods presented, adjustments to warranties recorded in prior periods were not material. Refer to Note 5. "Composition of Certain Financial Statement Items," to the consolidated financial statements for further information.
New Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 2. "Summary of Significant Accounting Policies," to the consolidated financial statements.
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