ARTIVION INC

Previous wording

We reported quarterly revenues of $98.0 million for the three months ended June 30, 2024, a 10% increase from the three months ended June 30, 2023. The increase in revenues for the three months ended June 30, 2024 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 10% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Current wording

We reported quarterly revenues of $95.8 million for the three months ended September 30, 2024, a 9% increase from the three months ended September 30, 2023. The increase in revenues for the three months ended September 30, 2024 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 10% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Previous wording

See the “Results of Operations” section below for additional analysis of the three and six months ended June 30, 2024.

Current wording

See the “Results of Operations” section below for additional analysis of the three and nine months ended September 30, 2024.

Previous wording

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 information 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.

Current wording

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.

Previous wording

Revenues increased 10% and 13% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. The increase in revenues for the three months ended June 30, 2024 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. The increase in revenues for the six months ended June 30, 2024 was due to an increase in revenues from aortic stent grafts, preservation services, On-X products, and surgical sealants, partially offset by a decrease in revenues from other products.

Current wording

Revenues increased 9% and 12% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. The increase in revenues for the three and nine months ended September 30, 2024 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.

Previous wording

Constant currency revenues increased 10% and 13% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. See “Non-GAAP Measures of Financial Performance” below for further background on our non-GAAP measures.

Current wording

Constant currency revenues increased 10% and 12% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. See “Non-GAAP Measures of Financial Performance” below for further background on our non-GAAP measures.

Previous wording

A detailed discussion of the changes in product revenues and preservation services revenues for the three and six months ended June 30, 2024 is presented below.

Current wording

A detailed discussion of the changes in product revenues and preservation services revenues for the three and nine months ended September 30, 2024 is presented below.

Previous wording

Revenues from products increased 11% and 12% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. The increase for the three and six months ended June 30, 2024 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. A discussion of the changes in product revenues for aortic stent grafts, On-X products, surgical sealants, and other product revenues is presented below.

Current wording

Revenues from products increased 12% for both the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023. The increase for the three and nine months ended September 30, 2024 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. A discussion of the changes in product revenues for aortic stent grafts, On-X products, surgical sealants, and other product revenues is presented below.

Previous wording

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 Francs with a concentration denominated in Euros. Each currency is subject to exchange rate fluctuations. For the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, 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.

Current wording

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 Francs with a concentration denominated in Euros. Each currency is subject to exchange rate fluctuations. For the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, the US Dollar strengthened in comparison to major currencies, resulting in revenue decreases when these foreign currency denominated transactions were translated into US Dollars. For the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, 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.

Previous wording

Constant currency revenues from the sales of aortic stent grafts increased 13% and 16% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. Revenues for the three and six months ended June 30, 2024 increased primarily in Europe, the Middle East, and Africa (collectively, “EMEA”) and, to a lesser extent, in Latin America and Asia Pacific (“APAC”). The revenue increase in EMEA for the three and six months ended June 30, 2024 was primarily due to an increase in buying patterns in direct (to hospitals) markets.

Current wording

Constant currency revenues from the sales of aortic stent grafts increased 13% and 15% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. Revenues for the three and nine months ended September 30, 2024 increased primarily in Europe, the Middle East, and Africa (collectively, “EMEA”) and, to a lesser extent, in Latin America and Asia Pacific (“APAC”). The revenue increase in EMEA for the three and nine months ended September 30, 2024 was primarily due to an increase in buying patterns in direct (to hospitals) markets.

Previous wording

Revenues from the sales of On-X products increased 15% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. This increase was primarily due to an increase in the volume of units sold and, to a lesser extent, an increase in average sales prices.

Current wording

Revenues from the sales of On-X products increased 15% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. This increase was primarily due to an increase in the volume of units sold and, to a lesser extent, an increase in average sales prices, partially offset by the effect of foreign exchange rates.

Previous wording

Revenues from the sales of aortic stent grafts increased 14% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. This increase was primarily due to an increase in the volume of units sold and, to a lesser extent, an increase in average sales prices.

Current wording

Revenues from the sales of On-X products increased 14% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This increase was primarily due to an increase in the volume of units sold and, to a lesser extent, an increase in average sales prices.

Previous wording

Constant currency revenues from the sales of On-X products increased 15% and 13% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. Revenues for the three and six months ended June 30, 2024 increased in all geographies, with the most significant increase in North America. The increase in revenues in North America for the three and six months ended June 30, 2024 was impacted by customer buying patterns.

Current wording

Constant currency revenues from the sales of On-X products increased 15% and 14% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. Revenues for the three months ended September 30, 2024 increased primarily in North America, EMEA, and APAC, with the most significant increase in North America. Revenues for the nine months ended September 30, 2024 increased in all geographies, with the most significant increase in North America. The increase in revenues in North America for the three and nine months ended September 30, 2024 was impacted by recent gains in the market share.

Previous wording

Domestic revenues from the sales of On-X products accounted for 59% and 61% of total On-X revenues for the three and six months ended June 30, 2024, respectively, as compared to 58% and 59% of total On-X revenues for the three and six months ended June 30, 2023, respectively.

Current wording

Domestic revenues from the sales of On-X products accounted for 59% and 60% of total On-X revenues for the three and nine months ended September 30, 2024, respectively, as compared to 61% and 60% of total On-X revenues for the three and nine months ended September 30, 2023, respectively.

Previous wording

Revenues from the sales of surgical sealants increased 12% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. 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.

Current wording

Revenues from the sales of surgical sealants increased 14% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. 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.

Previous wording

Revenues from the sales of surgical sealants increased 7% for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This increase was primarily due to an increase in average sales prices and an increase in the volume of milliliters sold.

Current wording

Revenues from the sales of surgical sealants increased 9% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. 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.

Previous wording

Constant currency revenues from the sales of surgical sealants increased 12% and 6% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. The increase in revenues for the three months ended June 30, 2024 was due to revenue increases in all geographies, with the most significant increase in North America. The increase in revenues for the six months ended June 30, 2024 was primarily due to revenue increases in EMEA and North America, partially offset by revenue decrease in APAC. The increase in revenues in EMEA for the three and six months ended June 30, 2024 was primarily due to an increase in buying patterns in direct markets. The increase in North America was due to customer buying patterns. The decrease in revenues in APAC for the six months ended June 30, 2024 was impacted by customer buying patterns in certain markets.

Current wording

Constant currency revenues from the sales of surgical sealants increased 14% and 9% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. The increase in revenues for the three months ended September 30, 2024 was due to revenue increases in all geographies, with the most significant increase in APAC. The increase in revenues in APAC for the three months ended September 30, 2024 was impacted by customer buying patterns in certain markets. The increase in revenues for the nine months ended September 30, 2024 was due to revenue increases in all geographies, with the most significant increase in EMEA. The increase in revenues in EMEA for the nine months ended September 30, 2024 was primarily due to an increase in buying patterns in direct markets.

Previous wording

Domestic revenues from the sales of surgical sealants accounted for 47% and 49% of total surgical sealant revenues for the three and six months ended June 30, 2024, respectively, as compared to 48% and 50% of total surgical sealant revenues for the three and six months ended June 30, 2023, respectively.

Current wording

Domestic revenues from the sales of surgical sealants accounted for 44% and 47% of total surgical sealant revenues for the three and nine months ended September 30, 2024, respectively, as compared to 48% and 49% of total surgical sealant revenues for the three and nine months ended September 30, 2023, respectively.

Previous wording

Other revenues decreased 42% and 15% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. The decrease in other revenues for the three and six months ended June 30, 2024 was due to a decrease in PerClot product revenues as a result of timing of shipments.

Current wording

Other revenues decreased 17% and 16% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. The decrease in other revenues for the three and nine months ended September 30, 2024 was primarily due to a decrease in PerClot product revenues as a result of timing of shipments.

Previous wording

Revenues from tissue processing increased 7% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. This increase was primarily due to an increase in average sales prices, partially offset by a decrease in certain tissues shipped.

Current wording

Revenues from tissue processing increased 2% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. This increase was primarily due to an increase in average sales prices, partially offset by a decrease in certain tissues shipped.

Previous wording

Revenues from tissue processing increased 16% for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This increase was primarily due to an increase in average sales prices, and, to a lesser extent, a change in the mix of tissues shipped.

Current wording

Revenues from tissue processing increased 11% for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This increase was primarily due to an increase in average sales prices, and, to a lesser extent, a change in the mix of tissues shipped.

Previous wording

Cost of products increased 17% and 19% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. Cost of products for the three and six months ended June 30, 2024 and 2023 included costs related to aortic stent grafts, On-X products, surgical sealants, and other products.

Current wording

Cost of products increased 13% and 17% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. Cost of products for the three and nine months ended September 30, 2024 and 2023 included costs related to aortic stent grafts, On-X products, surgical sealants, and other products.

Previous wording

The increase in the cost of products for the three months ended June 30, 2024 was primarily due to an increase in the cost of certain aortic stent grafts shipped, and the volume of all products shipped except for other products, as compared to the three months ended June 30, 2023.

Current wording

The increase in the cost of products for the nine months ended September 30, 2024 was primarily due to an increase in the volume of all products shipped and the cost of certain aortic stent grafts and other products shipped, as compared to the nine months ended September 30, 2023.

Previous wording

Cost of preservation services was flat for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Cost of preservation services increased 4% for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. Cost of preservation services included costs for cardiac and vascular tissue preservation services.

Current wording

Cost of preservation services increased 3% and 4% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. Cost of preservation services included costs for cardiac and vascular tissue preservation services.

Previous wording

Cost of preservation services for the three months ended June 30, 2024 was impacted by an increase in the cost of certain tissues shipped, partially offset by a decrease in the volume of tissues shipped, as compared to the three months ended June 30, 2023.

Current wording

Cost of preservation services for the three and nine months ended September 30, 2024 was impacted by an increase in the cost of certain tissues shipped, partially offset by a decrease in the volume of certain tissues shipped as compared to the three and nine months ended September 30, 2023.

Previous wording

The increase in gross margin for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was due to an increase in the volume and favorable pricing of certain aortic stent grafts, surgical sealants, and On-X products shipped as well as favorable pricing of certain tissues shipped during the three months ended June 30, 2024. This increase was partially offset by an increase in the cost of certain aortic stent grafts and tissues shipped during the three months ended June 30, 2024.

Current wording

The increase in gross margin for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was due to an increase in the volume and favorable pricing of surgical sealants, On-X products, certain aortic stent grafts, and tissues shipped during the three months ended September 30, 2024. The gross margin for the three months ended September 30, 2024 was also favorably impacted by a reduction in the cost of On-X products and surgical sealants shipped. This increase was partially offset by an increase in the cost of certain aortic stent grafts and tissues shipped as well as unfavorable geography mix of On-X products during the three months ended September 30, 2024. Gross margin as a percentage of total revenues was flat for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. Gross margin as a percentage of total revenues was positively impacted by favorable product mix of On-X products shipped and favorable pricing of certain tissues shipped, surgical sealants, and On-X products shipped, offset by unfavorable geography mix of On-X products and an increase in the cost of certain aortic stent grafts and tissues shipped during the three months ended September 30, 2024.

Previous wording

The increase in gross margin for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was due to an increase in the volume and favorable pricing of certain aortic stent grafts, On-X products, and certain tissues shipped as well as favorable pricing of surgical sealants shipped during the six months ended June 30, 2024. This increase was partially offset by an increase in the cost of certain aortic stent grafts and tissues shipped during the six months ended June 30, 2024.

Current wording

The increase in gross margin for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was due to an increase in the volume and favorable pricing of certain aortic stent grafts, surgical sealants, On-X products, and tissues shipped during the nine months ended September 30, 2024. This increase was partially offset by an increase in the cost of certain aortic stent grafts and certain tissues shipped as well as unfavorable geography mix of On-X products and certain aortic stent grafts shipped during the nine months ended September 30, 2024. Gross margin as a percentage of total revenues decreased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. Gross margin as a percentage of total revenues was negatively impacted by an increase in the cost of certain aortic stent grafts and certain tissues as well as unfavorable geography mix of On-X products shipped, partially offset by favorable product mix of certain aortic stent grafts shipped and favorable pricing of certain tissues, certain aortic stent grafts, On-X products, and surgical sealants shipped during the nine months ended September 30, 2024.

Previous wording

General, administrative, and marketing expenses decreased 14% and 26% for the three and six months ended June 30, 2024, respectively, as compared to the three and six months ended June 30, 2023. The decrease in General, administrative, and marketing expenses for the three and six months ended June 30, 2024 was primarily due to a decrease in business development expense, partially offset by an increase in personnel-related costs.

Current wording

General, administrative, and marketing expenses decreased 2% and 18% for the three and nine months ended September 30, 2024, respectively, as compared to the three and nine months ended September 30, 2023. The decrease in General, administrative, and marketing expenses for the three and nine months ended September 30, 2024 was primarily due to a decrease in business development expense, partially offset by an increase in personnel-related costs.

Previous wording

General, administrative, and marketing expenses included $2.0 million of business development expense and $15.4 million of business development income for the three and six months ended June 30, 2024, respectively, as compared to $11.1 million and $16.1 million of business development expense for the three and six months ended June 30, 2023, respectively. We incurred $1.8 million of business development expense and $15.7 million of business development income during the three and six months ended June 30, 2024, respectively, related to the fair value adjustments for the Ascyrus contingent consideration, as compared to $10.9 million and $15.7 million of business development expense during the three and six months ended June 30, 2023, respectively. The reduction in the fair value for the six months ended June 30, 2024 was primarily due to an increase in the credit risk spread resulting from the change in the inputs related to the newly issued Credit Facilities further discussed in Part I, Item 1, Note 9 of the “Notes to Condensed Consolidated Financial Statements.”

Current wording

General, administrative, and marketing expenses included $3.4 million of business development expense and $11.9 million of business development income for the three and nine months ended September 30, 2024, respectively, as compared to $6.4 million and $22.5 million of business development expense for the three and nine months ended September 30, 2023, respectively. We incurred $3.5 million of business development expense and $12.2 million of business development income during the three and nine months ended September 30, 2024, respectively, related to the fair value adjustments for the Ascyrus contingent consideration, as compared to $6.2 million and $21.9 million of business development expense during the three and nine months ended September 30, 2023, respectively. The reduction in the fair value for the nine months ended September 30, 2024 was primarily due to an increase in the credit risk spread resulting from the change in the inputs related to the newly issued Credit Facilities further discussed in Part I, Item 1, Note 9 of the “Notes to Condensed Consolidated Financial Statements.”

Previous wording

Research and development expenses increased 1% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Research and development expenses decreased 1% for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. Research and development spending for the three and six months ended June 30, 2024 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts and other products.

Current wording

Research and development expenses increased 3% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. Research and development expenses were flat for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. Research and development spending for the three and nine months ended September 30, 2024 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts.

Previous wording

Gain from sale of non-financial assets for the three and six months ended June 30, 2023 consisted of the net $14.3 million received as part of the Baxter Transaction upon receipt of the PerClot PMA in May 2023.

Current wording

Gain from sale of non-financial assets for the nine months ended September 30, 2023 consisted of the net $14.3 million received as part of the Baxter Transaction upon receipt of the PerClot PMA in May 2023.

Previous wording

Interest expense was $8.3 million and $16.1 million for the three and six months ended June 30, 2024, respectively, as compared to $6.4 million and $12.5 million for the three and six months ended June 30, 2023, respectively. Interest expense for the three and six months ended June 30, 2024 and 2023 primarily relates to interest on debt. The increase in interest expense for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, was primarily due to an increase in the interest rate on the Credit Facilities as a result of our debt refinancing in January 2024.

Current wording

Interest expense was $8.4 million and $24.5 million for the three and nine months ended September 30, 2024, respectively, as compared to $6.6 million and $19.1 million for the three and nine months ended September 30, 2023, respectively. Interest expense for the three and nine months ended September 30, 2024 and 2023 primarily relates to interest on debt. The increase in interest expense for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, was primarily due to an increase in the interest rate on the Credit Facilities as a result of our debt refinancing in January 2024.

Previous wording

During the six months ended June 30, 2024 we recorded a loss on extinguishment of debt of $3.7 million in connection with the extinguishment of our previously existing term loan. See Part I, Item 1, Note 9 of the “Notes to Condensed Consolidated Financial Statements” for further discussion of our new credit and guaranty agreement.

Current wording

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 term loan. See Part I, Item 1, Note 9 of the “Notes to Condensed Consolidated Financial Statements” for further discussion of our new credit and guaranty agreement.

Previous wording

Other expense, net was $1.0 million and $2.4 million for the three and six months ended June 30, 2024, respectively, as compared to $4.2 million and $3.3 million for the three and six months ended June 30, 2023, respectively. Other expense, net for the three and six months ended June 30, 2024 primarily included the realized and unrealized effects of foreign currency gains and losses. Other expense, net for the three and six months ended June 30, 2023 primarily included a $5.0 million expense related to a payment to Endospan for achievement of certain milestones related to the NEXUS products.

Current wording

Other (income) expense, net was $2.4 million of income and $6,000 of expense for the three and nine months ended September 30, 2024, respectively, as compared to other expense, net of $1.9 million and $5.2 million for the three and nine months ended September 30, 2023, respectively. Other (income) expense, net for the three and nine months ended September 30, 2024 primarily included the realized and unrealized effects of foreign currency gains and losses. Other expense, net for the nine months ended September 30, 2023 primarily included a $5.0 million expense related to a payment to Endospan for achievement of certain milestones related to the NEXUS products.

Previous wording

We incurred a loss before income taxes for the three months ended June 30, 2024 and 2023. We incurred income before income taxes for the six months ended June 30, 2024, as compared to a loss before income taxes for the six months ended June 30, 2023. The loss before income taxes for the three months ended June 30, 2024 was impacted by an increase in certain operating expenses to support revenue expansion, an increase in interest expense, and the change in fair value of our financial instruments. The income before income taxes for the six months ended June 30, 2024 was positively impacted by the change in fair value of our financial instruments, partially offset by an increase in certain operating expenses to support revenue expansion, debt extinguishment costs, and an increase in interest expense. The loss before income taxes for the three and six months ended June 30, 2023 was impacted by the change in fair value of our financial instruments, an increase in certain operating expenses to support revenue expansion, and an increase in interest expense.

Current wording

We incurred a loss before income taxes for the three months ended September 30, 2024 and 2023. We incurred income before income taxes for the nine months ended September 30, 2024, as compared to a loss before income taxes for the nine months ended September 30, 2023. The loss before income taxes for the three months ended September 30, 2024 was impacted by certain operating expenses to support revenue expansion, interest expense related to the Credit Facilities, and expenses related to the fair value adjustment of our financial instruments. The income before income taxes for the nine months ended September 30, 2024 was positively impacted by income related to the fair value adjustments of our financial instruments, partially offset by certain operating expenses to support revenue expansion, debt extinguishment costs, and interest expense related to the Credit Facilities. The loss before income taxes for the three and nine months ended September 30, 2023 was impacted by expenses related to the fair value adjustments of our financial instruments, certain operating expenses to support revenue expansion, and interest expense related to our previously existing credit agreement.

Previous wording

Our effective income tax rate was a benefit of 13% and an expense of 48% for the three and six months ended June 30, 2024, respectively, as compared to an expense of 27% and 46% for the three and six months ended June 30, 2023, respectively. The change in the tax rate for the three and six months ended June 30, 2024 was primarily due to changes in pre-tax book profit, valuation allowance against our net deferred tax assets, non-deductible executive compensation, the foreign derived intangible income deduction, the research and development tax credit, changes in our uncertain tax position liabilities, and tax-effected impact of stock based compensation, as compared to the three and six months ended June 30, 2023.

Current wording

Our effective income tax rate was an expense of 81% and 66% for the three and nine months ended September 30, 2024, respectively, as compared to an expense of 4% and 27% for the three and nine months ended September 30, 2023, respectively. The change in the tax rate for the three and nine months ended September 30, 2024 was primarily due to changes in anticipated full year pre-tax operating results, profit mix among jurisdictions, valuation allowance against our net deferred tax assets, non-deductible executive compensation, the foreign derived intangible income deduction, the research and development tax credit, changes in our uncertain tax position liabilities, and tax-effected impact of stock based compensation, as compared to the three and nine months ended September 30, 2023.

Previous wording

We incurred a net loss and a diluted loss per common share for the three months ended June 30, 2024 and 2023. We incurred a net income and a diluted income per common share for the six months ended June 30, 2024, as compared to a net loss and a diluted loss per common share for the six months ended June 30, 2023. Net loss and diluted loss per common share for the three months ended June 30, 2024 was primarily due to loss before income taxes, as discussed above. Net income and diluted income per common share for the six months ended June 30, 2024 was primarily due to income before income taxes, as discussed above.

Current wording

We incurred a net loss and a diluted loss per common share for the three months ended September 30, 2024 and 2023. Net loss and diluted loss per common share for the three months ended September 30, 2024 was primarily due to loss before income taxes, as discussed above. We incurred net income and diluted income per common share for the nine months ended September 30, 2024, as compared to a net loss and diluted loss per common share for the nine months ended September 30, 2023. Net income and diluted income per common share for the nine months ended September 30, 2024 was primarily due to income before income taxes, as discussed above. Net loss and diluted loss per common share for the nine months ended September 30, 2023 was primarily due to loss before income taxes, as discussed above.

Previous wording

As of June 30, 2024 net working capital (current assets of $285.0 million less current liabilities of $50.6 million) was $234.4 million, with a current ratio (current assets divided by current liabilities) of 6 to 1, as compared to net working capital of $222.8 million and a current ratio of 5 to 1 at December 31, 2023.

Current wording

As of September 30, 2024 net working capital (current assets of $288.0 million less current liabilities of $152.8 million) was $135.2 million, with a current ratio (current assets divided by current liabilities) of 2 to 1, as compared to net working capital of $222.8 million and a current ratio of 5 to 1 at December 31, 2023. The decrease in current ratio as of September 30, 2024, as compared to December 31, 2023, was primarily due to an increase in current portion of long-term debt. This increase was driven by the reclassification of the Convertible Senior Notes to current liabilities, which are scheduled to mature on July 1, 2025. We may use the proceeds from the Delayed Draw Term Loan Facility, as described in the Significant Sources and Uses of Liquidity section below, to fund the repurchase or repayment of the Convertible Senior Notes.

Previous wording

Our primary cash requirements for the six months ended June 30, 2024 were for the payoff of our previously existing credit agreement, debt issuance costs and interest payments under our Credit Facilities (defined below), interest payments under our Convertible Senior Notes (defined below), general working capital needs, and capital expenditures for facilities and equipment.

Current wording

Our primary cash requirements for the nine months ended September 30, 2024 were for the payoff of our previously existing credit agreement, debt issuance costs and interest payments under our Credit Facilities (defined below), interest payments under our Convertible Senior Notes (defined below), general working capital needs, and capital expenditures for facilities and equipment.

Previous wording

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 “Initial Term Loan Facility”), a $100.0 million secured delayed draw term loan facility(the “Delayed Draw Term Loan Facility” and, together with the Initial 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 Initial Term Loan Facility and $30.0 million under the Revolving Credit Facility.

Current wording

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 “Initial Term Loan Facility”), a $100.0 million secured delayed draw term loan facility(the “Delayed Draw Term Loan Facility” and, together with the Initial 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 Initial Term Loan Facility and $30.0 million under the Revolving Credit Facility. The $100.0 million of undrawn availability under the Delayed Draw Term Loan Facility can be used solely to fund the repurchase or repayment of the Convertible Senior Notes on or prior to scheduled maturity date of July 1, 2025.

Previous wording

We recognized $6.9 million and $12.7 million of interest expense on the Credit Facilities for the three and six months ended June 30, 2024, respectively, of which $298,000 and $639,000 represent non-cash amortization of debt issuance costs for the three and six months ended June 30, 2024, respectively. There was approximately $6.0 million of unamortized debt issuance costs related to the Initial Term Loan Facility as of June 30, 2024.

Current wording

We recognized $7.1 million and $19.8 million of interest expense on the Credit Facilities for the three and nine months ended September 30, 2024, respectively, of which $358,000 and $997,000 represent non-cash amortization of debt issuance costs for the three and nine months ended September 30, 2024, respectively. There was approximately $5.7 million of unamortized debt issuance costs related to the Initial Term Loan Facility as of September 30, 2024.