Artivion Inc.

11/07/2025 | Press release | Distributed by Public on 11/07/2025 10:42

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Artivion, Inc. ("Artivion," the "Company," "we," or "us"), is a leader in the manufacturing, processing, and distribution of medical devices and implantable human tissues used in cardiac and vascular surgical procedures for patients with aortic disease. We have four major product families: aortic stent grafts, On-X®mechanical heart valves and related surgical products ("On-X" products), surgical sealants, and implantable cardiac and vascular human tissues. Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita®Open NEO, E-vita Open Plus, AMDSTM, the NEXUS ONETM, NEXUS DUOTM, and NEXUS TRETMaortic arch stent graft systems (the "NEXUS family of products"), and E-vita Thoracic 3G. Abdominal stent grafts include our E-xtra Design Engineering, E-nsideTM, ArtivexTM, E-tegraTM, E-ventusTMBX, TuvaTM BX, and E-liacTMproducts. Surgical sealants include BioGlue Surgical Adhesive ("BioGlue") products. In addition to these four major product families, we sell or distribute PhotoFix bovine surgical patches ("PhotoFix"). We began to manufacture and supply PerClot®hemostatic powder ("PerClot") during the second quarter of 2023 (as part of our Transitional Manufacturing and Supply Agreement with Baxter International, Inc.).
We reported quarterly revenues of $113.4 million for the three months ended September 30, 2025, an 18% increase from the three months ended September 30, 2024. The increase in revenues for the three months ended September 30, 2025 was due to an increase in revenues from aortic stent grafts, On-X products, surgical sealants, and preservation services, partially offset by a decrease in revenues from other products. Constant currency revenues, as defined below, increased 16% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.
See the "Results of Operations" section below for additional analysis of the three and nine months ended September 30, 2025.
Presentation
In addition to the corresponding measures under generally accepted accounting principles ("US GAAP"), management uses non-GAAP measures in reviewing and disclosing our financial results. The foreign exchange neutral revenues ("constant currency revenues") discussed below are non-GAAP financial measures and are not in accordance with, or an alternative to, measures prepared in accordance with US GAAP. Accordingly, the constant currency revenues appearing in the following discussion of our results of operations should be read in conjunction with the information provided in "Non-GAAP Measures of Financial Performance" below, which includes a reconciliation of constant currency financial measures to the most directly comparable US GAAP measure.
Results of Operations
($ in thousands)
Revenues
Revenues for the
Three Months Ended
September 30, 		Revenues as a Percentage of
Total Revenues for the
Three Months Ended
September 30,
2025 2024 Percent Change 2025 2024
Products:
Aortic stent grafts $ 39,585 $ 28,643 38% 35% 30%
On-X 26,797 21,478 25% 23% 22%
Surgical sealants 18,893 18,437 2% 17% 19%
Other 2,390 2,686 -11% 2% 3%
Total products 87,665 71,244 23% 77% 74%
Preservation services 25,723 24,535 5% 23% 26%
Total $ 113,388 $ 95,779 18% 100% 100%
Revenues for the
Nine Months Ended
September 30, 		Revenues as a Percentage of
Total Revenues for the
Nine Months Ended
September 30,
2025 2024 Percent Change 2025 2024
Products:
Aortic stent grafts $ 116,028 $ 92,936 25% 36% 32%
On-X 73,943 61,804 20% 23% 21%
Surgical sealants 56,287 53,963 4% 17% 19%
Other 7,649 6,865 11% 2% 2%
Total products 253,907 215,568 18% 78% 74%
Preservation services 71,431 75,661 -6% 22% 26%
Total $ 325,338 $ 291,229 12% 100% 100%
Revenues increased 18% and 12% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. The increase in revenues for the three months ended September 30, 2025 was due to an increase in revenues from aortic stent grafts, On-X products, preservation services, and surgical sealants, partially offset by a decrease in revenues from other products. The increase in revenues for the nine months ended September 30, 2025 was due to an increase in revenues from all products, partially offset by a decrease in revenues from preservation services.
The following table reconciles revenues to constant currency revenues for the periods presented:
Revenues for the
Three Months Ended
September 30, 		Percent
Change
From Prior
Year
2025 2024
US GAAP US GAAP Exchange Rate Effect Constant Currency Constant Currency
Products:
Aortic stent grafts $ 39,585 $ 28,643 $ 1,583 $ 30,226 31%
On-X 26,797 21,478 263 21,741 23%
Surgical sealants 18,893 18,437 319 18,756 1%
Other 2,390 2,686 7 2,693 -11%
Total products 87,665 71,244 2,172 73,416 19%
Preservation services 25,723 24,535 (2) 24,533 5%
Total $ 113,388 $ 95,779 $ 2,170 $ 97,949 16%
North America 58,315 49,089 - 49,089 19%
Europe, the Middle East, and Africa 36,224 30,423 2,050 32,473 12%
Asia Pacific 12,237 10,366 - 10,366 18%
Latin America 6,612 5,901 120 6,021 10%
Total $ 113,388 $ 95,779 $ 2,170 $ 97,949 16%
Revenues for the
Nine Months Ended
September 30, 		Percent
Change
From Prior
Year
2025 2024
US GAAP US GAAP Exchange Rate Effect Constant Currency Constant Currency
Products:
Aortic stent grafts $ 116,028 $ 92,936 $ 859 $ 93,795 24%
On-X 73,943 61,804 32 61,836 20%
Surgical sealants 56,287 53,963 63 54,026 4%
Other 7,649 6,865 7 6,872 11%
Total products 253,907 215,568 961 216,529 17%
Preservation services 71,431 75,661 (86) 75,575 -5%
Total $ 325,338 $ 291,229 $ 875 $ 292,104 11%
North America 163,677 148,679 (198) 148,481 10%
Europe, the Middle East, and Africa 111,982 98,156 1,931 100,087 12%
Asia Pacific 31,582 27,628 - 27,628 14%
Latin America 18,097 16,766 (858) 15,908 14%
Total $ 325,338 $ 291,229 $ 875 $ 292,104 11%
A detailed discussion of the changes in product revenues and preservation services revenues for the three and nine months ended September 30, 2025 is presented below.
Products
Revenues from products increased 23% and 18% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. The increase for the three months ended September 30, 2025 was due to an increase in revenues from aortic stent grafts, On-X products, and surgical sealants, partially offset by a decrease in revenues from other products. The increase for the nine months ended September 30, 2025 was due to an increase in revenues from all products. A discussion of the changes in product revenues for aortic stent grafts, On-X products, surgical sealants, and other product revenues is presented below.
Sales of certain products through our direct sales force and distributors across Europe and various other countries are denominated in a variety of currencies including Euros, Brazilian Reals, Polish Zlotys, British Pounds, Canadian Dollars, and Swiss Francswith a concentration denominated in Euros. Each currency is subject to exchange rate fluctuations. For the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, the US Dollar weakened in comparison to major currencies, resulting in revenue increases when these foreign currency denominated transactions were translated into US Dollars. Future changes in these exchange rates could have a material, adverse effect on our revenues denominated in these currencies. Additionally, our sales to many distributors around the world are denominated in US Dollars, and although these sales are not directly impacted by currency exchange rates, we believe that some of our distributors may delay or reduce purchases of products in US Dollars depending on the relative price of these goods in their local currencies.
Aortic Stent Grafts
Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts, and original equipment manufacturing ("OEM") aortic stent graft products. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS family of products, and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, Artivex, E-tegra, E-ventus BX, Tuva BX, and E-liac products. Aortic stent grafts are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases. Our aortic stent grafts are primarily distributed in international markets.
Revenues from the sales of aortic stent grafts increased 38% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase was primarily due to an increase in the volume of units sold.
Revenues from the sales of aortic stent graft increased 25% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. This increase was primarily due to an increase in the volume of units sold.
Constant currency revenues from the sales of aortic stent grafts increased 31% and 24% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. Revenues for the three and nine months ended September 30, 2025 increased in all geographies, with the most significant increases in North America and Europe, the Middle East, and Africa (collectively, "EMEA"). The revenue increase in EMEA for the three and nine months ended September 30, 2025 was primarily due to an increase in volume of higher priced products within the aortic stent graft product line in direct (to hospitals) markets. The revenue increase in North America for the three and nine months ended September 30, 2025 was primarily due to sales of AMDS as a result of humanitarian device exemption ("HDE") granted by the FDA in December 2024 for use of the AMDS™ Hybrid Prosthesis in acute DeBakey Type I dissections in the presence of malperfusion. The HDE allows for, subject to certain restrictions, commercial distribution of AMDS in the United States ("US") prior to the approval of a Premarket Approval Application, which we currently anticipate receiving in 2026 allowing for full commercial distribution of AMDS in the US.
On-X Products
The On-X products include the On-X aortic and mitral heart valves and the On-X ascending aortic prosthesis ("AAP") for heart valve replacement. Revenues from the sales of On-X products include revenues from the distribution of CarbonAid®CO2diffusion catheters and from the sale of Chord-X®ePTFE sutures for mitral chordal replacement. On-X product revenue also includes revenue generated from pyrolytic carbon coating services for OEM customers.
Revenues from the sales of On-X products increased 25% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase was primarily due to an increase in the volume of units sold as well as an increase in average sales price.
Revenues from the sales of On-X products increased 20% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. This increase was primarily due to an increase in the volume of units sold as well as an increase in average sales price.
Constant currency revenues from the sales of On-X products increased 23% and 20% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. Revenues for the three and nine months ended September 30, 2025 increased in all geographies, with the most significant increases in North America and EMEA. The increase in revenues in North America and EMEA for the three and nine months ended September 30, 2025was impacted by gains in the market share. The increase in revenues from EMEA for the three and nine months ended September 30, 2025was primarily due to an increase in unit sales in both indirect and direct markets.
Domestic revenues from the sales of On-X products accounted for 60% and 62% of total On-X revenues for the three and nine months ended September 30, 2025, respectively, as compared to 59% and 60% for the three and nine months ended September 30, 2024, respectively.
Surgical Sealants
Surgical sealants include BioGlue products used as an adjunct to standard methods of achieving hemostasis (such as sutures and staples) in adult patients in open surgical repair of large vessels (such as aorta, femoral, and carotid arteries).
Revenues from the sales of surgical sealants increased 2% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase was primarily due to an increase in the average sales prices, partially offset by a decrease in the volume of milliliters sold.
Revenues from the sales of surgical sealants increased 4% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. This increase was primarily due to an increase in the volume of milliliters sold and, to a lesser extent, an increase in average sales prices.
Constant currency revenues from the sales of surgical sealants increased 1% and 4% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. The increase in revenues for the three months ended September 30, 2025 was primarily due to revenue increases in Latin America ("LATAM"), Asia Pacific ("APAC"), and North America, with the most significant increase in LATAM. The increase in revenues in LATAM for the three months ended September 30, 2025 was primarily due to an increase in the volume of units sold in both indirect and direct markets. The increase in revenues in LATAM, APAC, and North America for the three months ended September 30, 2025 were partially offset by a revenue decrease in EMEA, which was primarily due to a decrease in unit sales in direct markets. The increase in revenues for the nine months ended September 30, 2025 was due to revenue increases in LATAM, North America, and APAC, with the most significant increase in LATAM. The increase in revenues in LATAM for the nine months ended September 30, 2025 was primarily due to an increase in unit sales in indirect markets. The increase in revenues in LATAM, APAC, and North America for the nine months ended September 30, 2025 were partially offset by a revenue decrease in EMEA, which was primarily due to a decrease in unit sales in direct markets.
Domestic revenues from the sales of surgical sealants accounted for 44% and 47% of total surgical sealant revenues for both the three and nine months ended September 30, 2025 and 2024, respectively.
Other
Other revenues are comprised of revenues from PhotoFix and PerClot.
Other revenues decreased 11% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease was due to a decrease in PerClot product revenues, partially offset by an increase in PhotoFix product revenues.
Other revenues increased 11% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The increase was due to an increase in PerClot and PhotoFix product revenues.
Preservation Services
Preservation services include service revenues from processing cardiac and vascular tissues. Our cardiac valves are primarily used in cardiac replacement and reconstruction surgeries, including the Ross procedure, for patients with endocarditis or congenital heart defects. Our cardiac tissues are primarily distributed in domestic markets. The majority of our vascular preservation services revenues are related to shipments of saphenous veins, which are mainly used in peripheral vascular reconstruction surgeries to avoid limb amputations. Competition with synthetic product alternatives and the availability of tissues for processing are key factors affecting revenue volume that can fluctuate from quarter to quarter. Our vascular tissues are primarily distributed in domestic markets.
We continue to evaluate modifications to our tissue processing procedures in an effort to improve tissue processing throughput and yields, reduce costs, and maintain quality across our tissue processing business. Preservation services revenues, particularly revenues for certain high-demand cardiac tissues, can vary from quarter to quarter and year to year due to a variety of factors, including quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, timing of the release of tissues for implant, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services.
Revenues from tissue processing increased 5% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The increase was primarily due to an increase in the volume of higher priced tissues shipped primarily due to the release of a backlog of tissues that resulted from the 2024 cybersecurity incident. The tissue backlog released during the second and third quarters of 2025 and tissue shipments have now returned to normal levels.
Revenues from tissue processing decreased 6% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The decrease was primarily due to a backlog of tissues to be released for shipments as a result of the 2024 cybersecurity incident as discussed above.
Cost of Products and Preservation Services
Cost of Products
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Cost of products $ 27,811 $ 24,412 $ 81,389 $ 72,707
Cost of products increased 14% and 12% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. Cost of products for the three and nine months ended September 30, 2025 and 2024 included costs related to aortic stent grafts, On-X products, surgical sealants, and other products.
The increase in cost of products for the three months ended September 30, 2025 was primarily due to an increase in the volume of all products shipped except for surgical sealants, as compared to the three months ended September 30, 2024.
The increase in cost of products for the nine months ended September 30, 2025 was primarily due to an increase in the volume of all products shipped, as compared to the nine months ended September 30, 2024.
Cost of Preservation Services
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Cost of preservation services $ 11,182 $ 10,358 $ 32,865 $ 31,243
Cost of preservation services increased 8% and 5% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024. Cost of preservation services included costs for cardiac and vascular tissue preservation services.
The increase in cost of preservation services for the three months ended September 30, 2025 was primarily due to an increase in cost of tissues shipped and volume of certain tissues shipped, as compared to the three months ended September 30, 2024.
The increase in cost of preservation services for the nine months ended September 30, 2025 was primarily due to an increase in the cost of tissues shipped, partially offset by a decrease in the volume of tissues shipped, as compared to the nine months ended September 30, 2024.
Gross Margin
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Gross margin $ 74,395 $ 61,009 $ 211,084 $ 187,279
Gross margin as a percentage of total revenues 66% 64% 65% 64%
Gross margin increased 22% and 13% for the three and nine months ended September 30, 2025, respectively, as compared to the three and nine months ended September 30, 2024.
The increase in gross margin for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily due to an increase in the volume of all products shipped as well as the increase in the average sales price of certain products and tissues shipped and favorable mix of certain products shipped for the three months ended September 30, 2025. The increase was partially offset by unfavorable cost of certain products and tissues shipped, as compared to the three months ended September 30, 2024. Gross margin as a percentage of total revenues increased for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. Gross margin as a percentage of total revenues was positively impacted by a favorable geography and product mix as well as favorable pricing of certain products shipped, including On-X products and certain aortic stent grafts, partially offset by unfavorable costs of certain products and tissues shipped during the three months ended September 30, 2025.
The increase in gross margin for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily due to an increase in the volume of all products shipped as well as the increase in the average sales price of certain products and tissues shipped and favorable mix of certain products shipped for the nine months ended September 30, 2025. The increase was partially offset by unfavorable cost of certain products and tissues shipped as well as an unfavorable mix of tissues shipped, as compared to the nine months ended September 30, 2024. Gross margin as a percentage of total revenues increased for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. Gross margin as a percentage of total revenues was positively impacted by a favorable geography and product mix as well as favorable pricing of certain products shipped, partially offset by an unfavorable mix of tissues shipped and an unfavorable cost of certain products and tissues shipped during the nine months ended September 30, 2025.
Operating Expenses
General, Administrative, and Marketing Expenses
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
General, administrative, and marketing expenses $ 57,281 $ 50,017 $ 169,650 $ 130,026
General, administrative, and marketing expenses as a percentage of total revenues 51% 52% 52% 45%
General, administrative, and marketing expenses increased 15% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, which includes the impact of the Ascyrus contingent consideration fair value adjustment loss of $2.6 million and $3.5 million for the three months ended September 30, 2025 and 2024, respectively. The remaining general, administrative, and marketing expenses for the three months ended September 30, 2025 increased $8.2 million as a result of investments in sales and marketing, including expenses associated with the AMDS launch in the US, as well as investments in information technology, including $0.7 million of expenses associated with the 2024 cybersecurity incident, and increased non-cash stock compensation expenses.
General, administrative, and marketing expenses increased 30% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, which includes the impact of the Ascyrus contingent consideration fair value adjustment loss of $2.4 million and gain of $12.2 million for the nine months ended September 30, 2025 and 2024, respectively. The remaining general, administrative, and marketing expenses for the nine months ended September 30, 2025 increased $25.1 million as a result of investments in information technology, including $6.4 million of expenses associated with the 2024 cybersecurity incident, as well as investments in sales and marketing, including expenses associated with the AMDS launch in the US, and increased non-cash stock compensation expenses.
Research and Development Expenses
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Research and development expenses $ 8,078 $ 6,605 $ 21,869 $ 21,048
Research and development expenses as a percentage of total revenues 7% 7% 7% 7%
Research and development expenses increased 22% and 4% for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, respectively. Research and development spending for the three and nine months ended September 30, 2025 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts.
Gain from Sale of Non-Financial Assets
Gain from sale of non-financial assets for the three and nine months ended September 30, 2025 consisted of a net $3.5 million gain as part of the Baxter Transaction upon Baxter's achievement of certain cumulative worldwide net sales of PerClot. See Part I, Item 1, Note 2 of the "Notes to Condensed Consolidated Financial Statements" for further discussion of the Baxter Transaction.
Interest Expense
Interest expense was $6.1 million and $21.1 million for the three and nine months ended September 30, 2025, respectively, as compared to $8.4 million and $24.5 million for the three and nine months ended September 30, 2024, respectively. Interest expense for the three and nine months ended September 30, 2025 decreased primarily due to lower variable interest rates on our credit facilities and reduced interest expense as a result of the settlement of the Convertible Senior Notes. See Part I, Item 1, Note 8 of the "Notes to Condensed Consolidated Financial Statements" for further discussion of the settlement of the Convertible Senior Notes.
Losses on Inducement/Extinguishment of Debt
During the nine months ended September 30, 2025 we recorded a loss on inducement of convertible debt of $2.7 million in connection with the settlement of our Convertible Senior Notes. See Part I, Item 1, Note 8 of the "Notes to Condensed Consolidated Financial Statements" for further discussion of our Convertible Senior Notes.
During the nine months ended September 30, 2024 we recorded a loss on extinguishment of debt of $3.7 million in connection with the extinguishment of our previously existing credit facilities. See Part I, Item 1, Note 8 of the "Notes to Condensed Consolidated Financial Statements" for further discussion of our credit facilities.
Other (Income) Expense, Net
Other (income) expense, net was $0.4 million and $8.4 million of income for the three and nine months ended September 30, 2025, respectively, as compared to $2.4 million of income and less than $0.1 million of expense for the three and nine months ended September 30, 2024, respectively. Other (income) expense, net for the three months ended September 30, 2025 primarily included a $0.5 million gain associated with fair value adjustments to loans issued pursuant to our Endospan agreements, partially offset by a net $0.1 million loss from realized and unrealized effects of foreign currency gains and losses. Other (income) expense, net for the nine months ended September 30, 2025 primarily included a net $7.3 million gain from realized and unrealized effects of foreign currency gains and losses and a $1.2 million gain associated with fair value adjustments to loans issued pursuant to our Endospan agreements. Other (income) expense, net for the three and nine months ended September 30, 2024 primarily included net gains of $2.4 million and less than $0.1 million, respectively, from realized and unrealized effects of foreign currency gains and losses.
Income Tax Expense
Our effective income tax rate was an expense of 8% and 11% for the three and nine months ended September 30, 2025, respectively, as compared to an expense of 81% and 66% for the three and nine months ended September 30, 2024, respectively. Our income tax rate was primarily impacted by state income taxes, non-deductible executive compensation, and changes in our valuation allowance against our net deferred tax assets, partially offset by excess tax deductions on stock based compensation and foreign provision to return adjustments.
On July 4, 2025 the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We have reflected the impact of the enactment in our results for the three and nine months ended September 30, 2025. As a result, we are not anticipating significant cash tax obligations in the US federal and state jurisdictions for the 2025 tax year.
Non-GAAP Measures of Financial Performance
To supplement our Condensed Consolidated Financial Statements presented in accordance with US GAAP, we use constant currency revenues, which is a non-GAAP financial measure. We define constant currency revenues as revenues adjusted for the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using current period foreign currency rates applied to prior period transactional currency amounts.
We have provided non-GAAP financial measures in this report as we believe that these figures are helpful in allowing management and investors to more accurately assess the ongoing nature of our operations and measure our performance more consistently across periods. Management uses constant currency revenues internally to assess the operational performance of the Company, as a component in compensation metrics, and as a basis for strategic planning.
We believe the provided non-GAAP measures are meaningful in addition to the information contained in the US GAAP presentation of financial performance. Investors should consider this non-GAAP information in addition to, and not as a substitute for, financial measures prepared in accordance with US GAAP. In addition, this non-GAAP financial information may not be the same as similar measures presented by other companies.
Seasonality
Historically, we believe the demand for most of our aortic stent grafts is seasonal, with a decline in demand generally occurring in the third quarter due primarily to the summer holiday season in Europe.
Historically, we believe the demand for surgical sealants is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. We believe that this trend may be due to the summer holiday season in Europe and the US.
We do not believe the demand for our On-X and other products is seasonal.
Demand for our cardiac preservation services has traditionally been seasonal, with peak demand generally occurring in the third quarter. We believe this trend for cardiac preservation services is primarily due to the high number of surgeries scheduled during the summer months for school-aged patients. Based on experience in recent years, we believe that this trend is lessening as we are distributing a higher percentage of our tissues for use in adult populations.
Demand for our vascular preservation services has also traditionally been seasonal, with lowest demand generally occurring in the fourth quarter. We believe this trend for vascular preservation services is primarily due to fewer vascular surgeries being scheduled during the winter holiday months.
Liquidity and Capital Resources
Our primary uses of liquidity include the payment of operating expenses, capital expenditures, servicing of debt and the funding of acquisitions or other collaborative arrangements. Our primary sources of funding are operating cash flows and borrowings under our debt facilities. As of September 30, 2025 we had approximately $220.0 million of total principal indebtedness outstanding.
Our liquidity as of September 30, 2025 consisted of cash and cash equivalents of $73.4 million, unused commitments of $30.0 million under a revolving credit facility, and unused commitments of $150.0 million on the new delayed draw term loan facility (see "Credit Facilities" below). As of September 30, 2025 approximately 31% of our cash and cash equivalents were held in foreign jurisdictions. Our practice is to maintain sufficient liquidity through cash from operations and our revolving credit facility to mitigate the impacts of any adverse financial market conditions on our operations. We believe that cash generated from operations, together with amounts available under our Term Loan Facilities, as defined below, will be sufficient to meet working capital requirements and anticipated capital expenditures, and other strategic uses of cash, if any, and debt payments, if any, over the next twelve months.
Our future cash requirements are expected to include interest payments under our credit facilities, expenditures for clinical trials, research and development expenditures, general working capital needs, capital expenditures, other corporate purposes and may include cash to fund business development activities including obligations pursuant to arrangements with Endopsan and the acquisition of Ascyrus. These items may have a significant effect on our future cash flows during the next twelve months. Subject to the terms of our credit facilities, we may seek additional borrowing capacity or financing, pursuant to our current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements. If we undertake any further significant business development activity, we may need to finance such activities by obtaining additional debt financing or using a registration statement to sell equity securities. There can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us.
Significant Sources and Uses of Liquidity
Credit Facilities
On January 18, 2024 we entered into a credit and guaranty agreement with Ares Management Credit funds (the "Ares Credit Agreement") for $350.0 million of senior secured, interest-only, credit facilities, consisting of a $190.0 million secured term loan facility (the "Term Loan Facility"), a $100.0 million secured delayed draw term loan facility (the "Delayed Draw Term Loan Facility" and, together with the Term Loan Facility, the "Term Loan Facilities") and a $60.0 million "senior-priority" secured revolving credit facility with a priority claim ahead of the other secured facilities (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Credit Facilities"). Upon closing, we borrowed $190.0 million under the Term Loan Facility and $30.0 million under the Revolving Credit Facility. The proceeds of the initial borrowings were used along with cash on hand to pay off our previously existing credit agreement and pay related fees and expenses. The Delayed Draw Term Loan Facility remained undrawn and was terminated on July 2, 2025 as weentered into separate, privately negotiated exchange agreements with the Holders of the Convertible Senior Notes as discussed below.
On September 12, 2025 we entered into a Second Amendment to the credit and guaranty agreement (the "Amendment"), with Ares Management Credit funds, which amends the credit and guaranty agreement dated as of January 18, 2024. The Amendment provides for (i) an extension of the maturity date of the existing term loans (the "Existing Term Loan Facility") and the existing revolving credit facility (the "Existing Revolving Credit Facility") under the Credit Agreement by one year to January 18, 2031, (ii) a reduction in the interest rate margin applicable to the Existing Term Loan Facility and the Existing Revolving Credit Facility and (iii) a new $150.0 million secured delayed draw term loan facility (the "New Delayed Draw Term Loan Facility" and, together with the Existing Term Loan Facility, the "Term Loan Facilities").
The final scheduled maturity date of the Credit Facilities is January 18, 2031. There are no scheduled repayments of principal required to be made prior to the final maturity date. We have the right to prepay loans under the Credit Agreement in whole or in part at any time, subject to certain premium payment requirements. Amounts repaid in respect of loans under the Term Loan Facilities may not be reborrowed. The Credit Facilities currently bear interest at the Secured Overnight Financing Rate ("SOFR")plus applicable margins. As of September 30, 2025 the aggregate interest rate was 9.04% and 7.79% per annum for the Term Loan Facility and Revolving Credit Facility, respectively. See Part I, Item 1, Note 8 of the "Notes to Consolidated Financial Statements" for further discussion of our new Ares Credit Agreement.
Convertible Senior Notes
On June 18, 2020 we issued $100.0 million aggregate principal amount of 4.25% Convertible Senior Notes with a maturity date of July 1, 2025 (the "Convertible Senior Notes"). In May 2025 we entered into separate, privately negotiated exchange agreements ("Exchange Agreements") with the Holders of the Convertible Senior Notes. The transactions contemplated by the Exchange Agreements closed on May 28, 2025. Under the terms of the Exchange Agreements, the Holders exchanged an aggregate principal amount of approximately $99.5 million of the Convertible Senior Notes held by the Holders in exchange for an aggregate of 4,334,347 shares of our common stock. In addition, pursuant to the Exchange Agreements, we made a cash payment of approximately $1.7 million to the Holders in respect of accrued and unpaid interest on the exchanged Convertible Senior Notes. The remaining $0.5 million in aggregate principal amount of theConvertible Senior Notes were settled on July 1, 2025 resulting in the issuance of 19,605shares of our common stock.
Cash Flows
The following table summarizes cash flows from operating activities, investing activities, and financing activities for the periods indicated (in thousands):
Nine Months Ended
September 30,
2025 2024
Cash flows provided by (used in):
Operating activities $ 20,320 $ 12,097
Investing activities (11,534) (16,763)
Financing activities 8,852 2,029
Effect of exchange rate changes on cash and cash equivalents 2,325 (130)
Increase (decrease) in cash and cash equivalents $ 19,963 $ (2,767)
Net Cash Flows from Operating Activities
Net cash provided by operating activities increased $8.2 million during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, primarily due to an increase in cash collected from customers due to an increase in revenues, which was partially offset by an increase in professional fees related to the 2024 cybersecurity incident, an increase in inventories and deferred preservation costs to support the increase in revenues, and a change in timing of interest payments on our credit facilities executed in January 2024. We expect to continue to incur professional fees in the remainder of 2025 in connection with enhanced ongoing cybersecurity services.
Net Cash Flows from Investing Activities
Net cash used in investing activities was $11.5 million and $16.8 million for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025 cash flows used in investing activities included $11.5 million of cash used for capital expenditures.
Net Cash Flows from Financing Activities
Net cash provided by financing activities was $8.9 million and $2.0 million for the nine months ended September 30, 2025 and 2024, respectively. The current year cash provided by financing activities was primarily due to $9.6 million of proceeds from the exercise of stock options and issuances of common stock and $3.1 million of proceeds from financing insurance premiums, partially offset by $1.8 million for payment of debt issuance cost and $1.4 million for principal payments on short-term notes payable.
Scheduled Contractual Obligations and Future Payments
As of September 30, 2025 there have been no material changes outside of the ordinary course of business with respect to our material cash requirements for our contractual and other obligations as set forth in the table included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Capital Expenditures
Capital expenditures were $11.5 million and $9.8 million for the nine months ended September 30, 2025 and 2024, respectively. Capital expenditures for the nine months ended September 30, 2025 were primarily related to routine purchases of manufacturing and tissue processing equipment, computer software, computer equipment, and leasehold improvements to support our business.
Off-Balance Sheet Commitments and Arrangements
As of September 30, 2025 there have been no material changes to our indemnification obligations as disclosed in Part II, Item 8, Note 11 -"Commitments and Contingencies" in our Annual Report on Form 10-K for the year ended December 31, 2024. For information concerning contingencies, see Note 9 -"Commitments and Contingencies" in Part I, Item 1 of this Form 10-Q.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 1 -"Basis of Presentation and Summary of Significant Accounting Policies" in Part I, Item 1 of this Form 10-Q.
Risks and Uncertainties
See the "Risk Factors" identified in Part II, Item 1A of this Form 10-Q.
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