Penumbra Inc

1. Organization and Description of Business

Penumbra, Inc. (the “Company”), the world’s leading thrombectomy company, is focused on developing the most innovative technologies for challenging medical conditions such as ischemic stroke, venous thromboembolism such as pulmonary embolism, and acute limb ischemia. The Company’s broad portfolio, which includes computer assisted vacuum thrombectomy (CAVT), centers on removing blood clots from head-to-toe with speed, safety and simplicity. The Company focuses on developing, manufacturing and marketing novel products for use by specialist physicians and other healthcare providers to drive improved clinical and health outcomes.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated balance sheet as of September 30, 2025, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2025 and 2024, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2024 was derived from the audited financial statements as of that date.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of September 30, 2025, the results of its operations for the three and nine months ended September 30, 2025 and 2024, the changes in its comprehensive income (loss) and stockholders’ equity for the three and nine months ended September 30, 2025 and 2024, and its cash flows for the nine months ended September 30, 2025 and 2024. The results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 18, 2025. There have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2025, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, non-marketable investments, allowances for credit losses, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, intangibles, operating and financing lease right-of-use (“ROU”) assets and liabilities, income taxes, the fair value of long-lived assets tested for impairment, potential liabilities related to pending claims and litigation, and other contingencies, including the probability of achieving performance targets associated with equity awards with performance conditions, among others. The Company bases its estimates on historical experience and on various other 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 data. Actual results could differ from those estimates.

Segments

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company hasone business activity: the design, development, manufacturing and marketing of innovative medical products, and operates asone operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance. Refer to Note “15. Segment Reporting” and Note “16. Revenues” for the Company’s segment reporting and entity-wide disclosures, respectively.

Recently Issued Accounting Standards

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes— Improvements to Income Tax Disclosures. It requires the disclosure of additional information, including specified categories and disaggregation of information in the rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact on its disclosures within the consolidated financial statements and does not elect to early adopt as of September 30, 2025.

In November 2024, the FASB issued ASU No. 2024-03 Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard enhances disclosures by requiring disaggregated disclosures of an entity’s income statement expense captions. Public business entities are required to disaggregate expense captions into specified categories within the footnotes to the financial statements. The amendments in ASU 2024-04 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The standard is required to be applied on a prospective basis, with the option for retrospective application. Early adoption is permitted. The Company is evaluating the impact the new guidance will have on the disclosures within its consolidated financial statements and does not elect to early adopt as of September 30, 2025.

In September 2025, the FASB issued ASU No. 2025-06 Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The standard removes references to software development project stages and requires that capitalization of software costs begin once management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. Entities are required to consider whether there is significant uncertainty associated with a project when evaluating whether it is probable the project will be completed. The guidance is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Entities are permitted to apply the new guidance using a prospective, retrospective or modified transition approach. The Company does not expect that adoption will have a material impact on its consolidated financial statements.

3. Investments and Fair Value of Financial Instruments

Marketable and Non-Marketable Investments

The Company’s marketable and non-marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable and non-marketable investments as of September 30, 2025 and December 31, 2024 were as follows (in thousands):

As of September 30, 2025, the total amortized cost basis of the Company’s available-for-sale debt securities, excluding non-marketable debt securities, in an unrealized loss position exceeded its fair value by $0.2 million. The Company reviewed its available-for-sale securities in an unrealized loss position and concluded that the decline in fair value was not related to credit losses and is recoverable. As of September 30, 2025, the Company’s non-marketable available-for sale debt securities were not in an unrealized loss position. During the three and nine months ended September 30, 2025, no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive income (loss).

The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than and more than twelve months as of September 30, 2025 and December 31, 2024 (in thousands):

The contractual maturities of the Company’s marketable investments as of September 30, 2025 (in thousands):

Non-Marketable Investments

During the three months ended March 31, 2024, the Company completed a strategic investment in a privately held company. Under the terms of the investment, the Company paid $10.0 million in exchange for shares of Series B preferred stock which represented an immaterial investment in the outstanding equity securities of the privately held company. The Company determined that the investment did not meet the criteria to be accounted for as an equity method investment under ASC 323. The investment was accounted for as an available-for-sale debt security in accordance with ASC 320 as the preferred stock contains a contingent redemption feature at the Company’s option. The investment is included in other non-current assets on the condensed consolidated balance sheet and changes in fair value are recorded in total other comprehensive (loss) income, net of tax.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company classifies its cash equivalents and marketable investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs. The Company classifies its non-marketable investments in preferred stock in privately held companies within Level 3, as they do not have a readily determinable fair value.

The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

Non-marketable investments classified within Level 3 of the fair value hierarchy are valued based on unobservable inputs that are supported by little or no market activity. Current financial information of private companies may not be available and consequently the Company estimates the fair value using inputs that are based on the best available information at the measurement date. Key inputs may include the most recent financial information, financial projections, and financing transactions available for the investee and other quantitative and qualitative factors. Additionally, based on the timing, volume, and other characteristics of the available information, the Company may supplement this information by using one or more valuation techniques, including market and income approaches. There was no change in the fair value of the Company’s non-marketable debt securities as of September 30, 2025 from December 31, 2024.

The Company did not hold any Level 3 marketable investments as of September 30, 2025 or December 31, 2024. During the nine months ended September 30, 2025 and 2024, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy for marketable or non-marketable investments. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2025 or December 31, 2024.

The following tables set forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy as of September 30, 2025 and December 31, 2024 (in thousands):

4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the three and nine months ended September 30, 2025, there were no events or circumstances that indicated the need to test for impairment and as such there was no impairment charge recorded during the period.

During the three months ended June 30, 2024, the Company made the strategic decision to explore alternative avenues for its immersive healthcare business; as a consequence to this decision, the Company tested the immersive healthcare asset group’s long-lived assets for impairment. Prior to the three months ended June 30, 2024, there were no events or circumstances that indicated the need to test for impairment.

The immersive healthcare asset group included substantially all the assets and liabilities associated with the immersive healthcare business, which primarily consisted of finite-lived developed technology intangible assets, inventory, and property and equipment associated with the developed technology. Prior to performing a recoverability test for the asset group, the Company recorded a $33.4 million charge to cost of revenue in the unaudited condensed consolidated statements of operations during the three months ended June 30, 2024 for the write-down of immersive healthcare inventory to net realizable value.

The Company then performed a recoverability test for the asset group, comparing the carrying amount of the asset group to the sum of its estimated undiscounted future cash flows. The carrying amount of the asset group was determined to be not recoverable, as it exceeded the undiscounted future cash flows.

Accordingly, the Company measured the impairment loss by calculating the excess of the asset group's carrying amount over its fair value. The fair value of the asset group was determined using a discounted cash flow approach, which is considered a Level 3 measurement within the fair value hierarchy and utilized significant Level 3 inputs such as expected future cash flows, including forecasted sales, gross profit and operating expenses, and the use of an appropriate discount rate. As a result of this assessment, the Company recorded a pre-tax impairment charge of $76.9 million during the three months ended June 30, 2024, which was primarily comprised of $58.9 million in finite-lived intangible assets and $18.0 million in property and equipment.

During the third quarter of 2024, the Company made the decision to wind down and exit its immersive healthcare business. As a result, during the three and nine months ended September 30, 2024, the Company incurred $5.0 million in restructuring and related charges for severance and other costs related to the wind down of the immersive healthcare business. These costs were included in research and development and sales, general and administrative within the condensed consolidated statements of operations. During the three and nine months ended September 30, 2025, there wereno restructuring and related charges for severance and other costs related to the wind down of the immersive healthcare business andno amounts remained unpaid as of September 30, 2025 and December 31, 2024.

5. Balance Sheet Components

Inventories

The components of inventories consisted of the following (in thousands):

Accrued Liabilities

The components of accrued liabilities consisted of the following (in thousands):

The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, for the nine months ended September 30, 2025 and twelve months ended December 31, 2024, respectively (in thousands):

Acquisition of Property

On February 14, 2025, the Company entered into agreements to acquire property in Costa Rica and construct a manufacturing facility and warehouse, totaling approximately 330,000 square feet, for the production of medical devices. The capital project is expected to cost approximately $35 million. On July 10, 2025, the Company entered into an additional agreement related to certain improvements to the facility which is expected to cost approximately $23 million. During the nine months ended September 30, 2025, the Company made payments of $21.5 million related to the Costa Rica capital project and $6.8 million related to the facility improvements. In accordance with ASC 360, the Company capitalized these payments within property and equipment, net, in the condensed consolidated balance sheets, as they represent costs directly attributable to acquiring the assets and preparing them for their intended use, including the cost of land, work performed and advance payments that are capitalizable as part of the project.

6. Intangible Assets

The following table presents details of the Company’s acquired intangible assets as of September 30, 2025 and December 31, 2024 (in thousands):

During the nine months ended September 30, 2025, the Company disposed of intangible assets related to its immersive healthcare business that had been previously impaired during the year ended December 31, 2024, resulting in the write-off of developed technology and the corresponding accumulated amortization of $83.3 million.

(1)During the year ended December 31, 2024, the Company recorded an impairment of developed technology charge of $58.9 million included within accumulated amortization in the table above. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more information.

The gross carrying amount and accumulated amortization of the customer relationships are the only intangible assets subject to foreign currency translation effects. The Company’s $5.3 million trade secrets and processes intangible asset was recognized in connection with a royalty buyout agreement in 2018.

The following table presents the amortization recorded related to the Company’s finite-lived intangible assets for the three and nine months ended September 30, 2025 and 2024 (in thousands):

(1)This does not include the impairment charge of $58.9 million related to the Company’s immersive healthcare developed technology during the three months ended June 30, 2024. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more information.

7. Goodwill

The following table presents the changes in goodwill during the nine months ended September 30, 2025 (in thousands):

Goodwill Impairment Review

The Company reviews goodwill for impairment annually as of October 31, or more frequently if events or circumstances indicate that an impairment loss may have occurred. The Company operates asone segment, which is the sole reporting unit of the Company, and therefore goodwill is tested for impairment at the consolidated level. Accordingly, when assessing whether an impairment test is required more frequently than on its annual testing date, the Company considers whether events or circumstances have taken place that indicate it is more likely than not that the Company’s enterprise fair value is less than the carrying amount of itsone reporting unit, including goodwill. The Company determined there were no impairment indicators as of or during the nine months ended September 30, 2025.

8. Commitments and Contingencies

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business. In many such arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The Company also agrees to indemnify many indemnified parties for product defect and similar claims. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.

The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with any of these indemnification requirements has been recorded to date.

Litigation

From time to time, the Company is subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The Company reviews the status of each significant matter quarterly and assesses its potential financial exposure. If the potential loss from a claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company records a liability and an expense for the estimated loss and discloses it in the Company’s financial statements if it is material. If the Company determines that a loss is possible and the range of the loss can be reasonably determined, the Company does not record a liability or an expense but the Company discloses the range of the possible loss. The Company bases its judgments on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to its pending claims and litigation and may revise its estimates.

On April 7, 2023, a former contractor who had been retained by the Company through a third party staffing agency filed a putative class action lawsuit as well as a Private Attorney General Act (“PAGA”) representative action complaint against the Company in the Superior Court of the State of California for the County of Alameda, on behalf of the contractor and similarly situated Company contractors and employees in California, alleging various claims pursuant to the California Labor Code related to wages, overtime, meal and rest breaks, reimbursement of business expenses, wage statements and records, and other similar allegations. Additionally, on April 10, 2023, a current employee of the Company filed a PAGA representative action complaint against the Company in the Superior Court of the State of California for the County of Alameda, on behalf of the employee and similarly situated Company employees in California, alleging similar claims. The complaints sought payment of various alleged unpaid wages, penalties, interest and attorneys’ fees in unspecified amounts. Following mediation in April 2024, in May 2024 the parties entered into a formal agreement to settle the claims for an aggregate amount of $4.6 million, subject to approval by the court. The proposed settlement agreement was initially submitted to the court for preliminary approval on June 18, 2024, and the court granted preliminary approval of the settlement agreement on October 14, 2024 and final approval on March 12, 2025. In the prior period, the Company recorded an accrual of $4.6 million in its financial statements for the three months ended March 31, 2024 related to these matters. The Company completed substantially all payments under the settlement agreement during the three months ended June 30, 2025.

9. Stockholders’ Equity

Stock-based Compensation

Stock-based compensation expense is associated with restricted stock units (“RSUs”), RSUs with performance conditions (“PSUs”), stock options, and the Company’s Employee Stock Purchase Plan (“ESPP”).

Certain PSUs granted to senior management during the nine months ended September 30, 2025, will vest subject to the achievement of pre-established financial performance targets for the year ending December 31, 2025, and continued service. The fair value of these PSUs is based on the closing price of the Company's common stock on the date of grant. Stock-based compensation costs associated with these PSUs are recognized over the requisite service period of 4.25 years using graded vesting which results in more accelerated expense recognition compared to traditional time-based vesting over the same vesting period. Each reporting period, the Company monitors the probability of achieving the performance targets and may adjust periodic stock-based compensation expense based on its determination of the likelihood of achieving these performance targets and the estimated number of shares of common stock that will vest. The actual number of PSUs awarded is based on the actual performance during the performance period compared to the performance targets.

The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations for thethree and nine months ended September 30, 2025 and 2024 (in thousands):

As of September 30, 2025, total unrecognized compensation cost related to unvested share-based compensation arrangements, excluding PSUs, was $59.1 million, which is expected to be recognized over a weighted average period of 3.0 years.

As of September 30, 2025, total unrecognized compensation cost related to unvested PSU share-based compensation arrangements was $27.6 million, which is expected to be recognized over a weighted average period of 3.1 years.

The total stock-based compensation cost capitalized in inventory was $1.6 million and $1.2 million as of September 30, 2025 and December 31, 2024, respectively.

10. Share Repurchase Program

On August 5, 2024, the Company’s Board of Directors approved a share repurchase authorization in the amount of up to $200.0 million, allowing the Company to repurchase its common stock from time to time at such prices as it deems appropriate through open market purchases, block transactions, privately negotiated transactions, including accelerated share repurchase transactions, or otherwise. The repurchase authorization originally expired on July 31, 2025.

Under this authorization, the Company entered into an accelerated share repurchase agreement (“ASR”) with JPMorgan Chase Bank, National Association (the “Dealer”) to repurchase $100.0 million of the Company’s common stock during the three months ended September 30, 2024. Under the ASR, the Company made an initial payment of $100.0 million to the Dealer and received an initial delivery of 473,962 shares of common stock. The ASR program concluded on September 16, 2024 and the Company received an additional 43,801 shares, which was determined using a price of $193.14 based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR, less a discount pursuant to the terms of the ASR. The Company received an aggregate of 517,763 shares of common stock for a total cost of $100.4 million, including legal and financial advisor fees of $0.4 million associated with the repurchase. Additionally, the Company recorded an excise tax of $0.6 million, which has been included in retained earnings as part of the cost basis of the stock repurchased, and accrued liabilities in the condensed consolidated balance sheets.

All shares repurchased were immediately retired and reduced the weighted-average number of shares of common stock outstanding used in the computation of basic and diluted earnings per share. The forward contract upon final settlement did not impact weighted average common shares outstanding used in the computation of diluted earnings per share. During the three months ended September 30, 2025, the Company’s Board of Directors extended the repurchase authorization for the remaining $100.0 million to December 31, 2025. As of September 30, 2025, the Company had remaining authority to purchase $100.0 million of its common stock under the share repurchase authorization.

11. Accumulated Other Comprehensive Income (Loss)

Other comprehensive (loss) income consists of two components: unrealized gains or losses on the Company’s available-for-sale marketable investments, non-marketable investments, and gains or losses from foreign currency translation adjustments. Until realized and reported as a component of consolidated net income (loss), these comprehensive income (loss) items accumulate and are included within accumulated other comprehensive income (loss). Unrealized gains and losses on our marketable and non-marketable investments are reclassified from accumulated other comprehensive income (loss) into earnings when realized upon sale, and are determined based on specific identification of securities sold. Gains and losses from the translation of assets and liabilities denominated in non-U.S. dollar functional currencies are included in accumulated other comprehensive loss.

The following table summarizes the changes in the accumulated balances during the period, and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive loss into earnings affect our condensed consolidated statements of comprehensive income (loss) (in thousands):

12. Income Taxes

The Company’s income tax expense (benefit), deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the United States and foreign jurisdictions. Significant judgment and estimates are required in determining the consolidated income tax expense (benefit).

During interim periods, the Company generally utilizes the estimated annual effective tax rate (“AETR”) method which involves the use of forecasted information. Under the AETR method, the provision is calculated by applying the estimated AETR for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Jurisdictions with tax assets for which the Company believes a tax benefit cannot be realized are excluded from the computation of its AETR.

During the nine months ended September 30, 2024, the Company recorded a pre-tax impairment charge of $76.9 million for finite-lived intangible assets and property and equipment, and another $33.4 million charge to cost of revenue, related to its immersive healthcare asset group. Refer to Note “4. Impairment and Restructuring Costs of Immersive Healthcare Asset Group” for more information. According to ASC 740-270-30-8 guidance for significant unusual or infrequently occurring items that are separately reported, the $26.5 million income tax benefit as a result of the impairment charge was excluded from the calculation of the Company’s estimated annual effective tax rate.

The Company’s income tax expense was $6.5 million and $11.1 million for the three and nine months ended September 30, 2025, respectively, which was primarily due to tax expenses attributable to its worldwide profits offset by discrete tax benefits from stock-based compensation attributable to the U.S. jurisdiction. For the three months ended September 30, 2024, the Company’s income tax expense was $10.3 million, primarily due to tax expenses attributable to its worldwide profits. For the nine months ended September 30, 2024, the Company’s income tax benefit was $3.8 million, primarily due to a discrete tax benefit from the impairment charge related to the immersive healthcare asset group, partially offset by tax expenses attributable to its worldwide profits.

The Company’s effective tax rate changed from 25.8% for the three months ended September 30, 2024 to 12.4% for the three months ended September 30, 2025. The rate change was primarily due to an increase in excess tax benefits from stock-based compensation attributable to the U.S jurisdiction in 2025. The Company’s effective tax rate changed from 16.2% for the nine months ended September 30, 2024 to 7.9% for the nine months ended September 30, 2025. The rate change was primarily due to a discrete tax benefit from the impairment charge related to the immersive healthcare asset group in 2024 and an increase in excess tax benefits from stock-based compensation attributable to the U.S jurisdiction in 2025.

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law, which extends and modifies various domestic and international business tax framework originally enacted under the Tax Cuts and Jobs Act (“TCJA”). The legislation includes multiple effective dates, with certain provisions taking effect in 2025 and others through 2027. During the three and nine months ended September 30, 2025, the enactment of the OBBBA resulted in an immaterial impact to the consolidated financial statements. The Company will continue to assess the full impact of these legislative changes as additional guidance becomes available.

The Company evaluates all available positive and negative evidence, objective and subjective in nature, in each reporting period to determine if sufficient taxable income will be generated to realize the benefits of its DTAs and, if not, a valuation allowance to reduce the DTAs is recorded. As of September 30, 2025, the Company maintains a valuation allowance primarily against its California R&D tax credit DTAs for which the Company does not believe a tax benefit is more likely than not to be realized.

The Company maintains that all foreign earnings, with the exception of a portion of the earnings of its German subsidiary, are permanently reinvested outside the United States and therefore deferred taxes attributable to such earnings are not provided for in the Company’s condensed consolidated financial statements as of September 30, 2025.

13. Net Income (Loss) per Share

The Company computed basic net income (loss) per share based on the weighted average number of shares of common stock outstanding during the period. The Company computed diluted net income (loss) per share based on the weighted average number of shares of common stock outstanding plus potentially dilutive common stock equivalents outstanding during the period. For the purposes of this calculation, stock options, restricted stock units, performance stock units, and stock sold through the ESPP are considered common stock equivalents.

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income (loss) per share is as follows (in thousands, except share and per share amounts):

For the three months ended September 30, 2025 and 2024, outstanding stock-based awards of 11 thousand shares and 11 thousand shares, respectively, were excluded from the computation of diluted net income (loss) per share because their effect would have been anti-dilutive in the relevant period. For the nine months ended September 30, 2025 and 2024, outstanding stock-based awards of an immaterial amount and 1,226 thousand shares, respectively, were excluded from the computation of diluted net income (loss) per share because their effect would have been anti-dilutive in the relevant period.

14. Interest and other income (expense), net

The following table shows the components of interest and other income (expense), net for the three and nine months ended September 30, 2025 and 2024 and (in thousands):

(1)Consists primarily of the effects of foreign currency gains or losses.

15. Segment Reporting

The Company derives revenue by selling our medical devices to healthcare providers, direct sales organizations, and distributors. The Company operates asone operating and reportable segment and its sole business activity consists of the design, development, manufacturing and marketing of innovative medical products. The Company provides similar innovative medical products to our customers in the regions that the Company operates in and manages its business activities on a consolidated basis.

The accounting policies of the segment are the same as those described in Note “2. Summary of Significant Accounting Policies”. The Company’s CODM uses net income (loss) to measure segment profit or loss and assesses performance against expectations to make resource allocation decisions. Additionally, the CODM reviews and uses functional expenses included in net income (loss) to manage the Company’s operations and assess operating profitability. The Company operates asone operating and reportable segment, and as such the significant segment expenses regularly provided to the CODM are those presented on the consolidated statements of operations. These significant segment expense include cost of revenue, research and development, and sales, general and administrative expenses. Other segment items that are presented on the consolidated statements of operations include interest and other income (expense), net, provision for (benefit from) income taxes, and non- recurring items such as an impairment charge. The Company’s entity-wide disclosures, including the breakout of revenue between products are included in Note “16. Revenues”.

16. Revenues

Revenue Recognition

Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers.

The Company’s revenues disaggregated by geography, based on the destination to which the Company ships its products, for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

The Company’s revenues disaggregated by product category for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

Performance Obligations

Delivery of products - The Company’s contracts with customers, other than the China licensing arrangements described below, typically contain a single performance obligation, delivery of the Company’s products. Satisfaction of that performance obligation occurs when control of the promised goods transfers to the customer, which is generally upon shipment or receipt by the customer for non-consignment sale agreements and upon utilization for consignment sale agreements.

Payment terms - The Company’s payment terms vary by the type and location of our customer. The timing between fulfillment of performance obligations and when payment is due is not significant and does not give rise to financing transactions. The Company did not have any contracts with significant financing components as of September 30, 2025 and 2024.

Product returns - The Company may allow customers to return products purchased at the Company’s discretion. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period in which the related product revenue is recognized. The Company currently estimates product return liabilities using its own historic sales information, trends, industry data, and other relevant data points.

Warranties - The Company offers its standard warranty to all customers and it is not available for sale on a standalone basis. The Company’s standard warranty represents its guarantee that its products function as intended, are free from defects, and comply with agreed-upon specifications and quality standards. This assurance does not constitute a service and is not a separate performance obligation.

Transaction Price

Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns utilizing historical return rates, rebates, discounts, and other adjustments to net revenue. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price. When determining if variable consideration should be constrained, management considers whether there are factors that could result in a significant reversal of revenue and the likelihood of a potential reversal. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are reassessed each reporting period as required. During the three and nine months ended September 30, 2025 and 2024, the Company made no material changes in estimates for variable consideration. When the Company performs shipping and handling activities after control of goods is transferred to the customer, they are considered as fulfillment activities, and costs are accrued for when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Contract assets

The following information summarizes the Company’s contract assets (in thousands):

Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative standalone selling price of the related performance obligations satisfied and the contractual billing terms in the licensing arrangements.

China Distribution and Technology Licensing Agreement

In December 2020, the Company entered into a distribution and technology licensing arrangement with its existing distribution partner in China. In addition to modifying the Company’s standard distribution agreement with its partner in China, the Company agreed to license the technology for certain products to its partner in China to permit the manufacturing and commercialization of such products in China as well as provide certain regulatory support. During the three months ended March 31, 2022, the Company further amended the distribution agreement and entered into an additional license arrangement, pursuant to which the Company agreed to license the technology for additional products to its partner in China on substantially the same terms as the existing license arrangement. Apart from the standard distribution agreement, the Company will receive fixed payments upon transferring its distinct licensed technology and providing related regulatory support. During the three months ended September 30, 2023, the Company entered into an additional licensing arrangement, pursuant to which the Company agreed to license the technology for additional products to its partner in China and will receive fixed payments upon transferring its distinct licensed technology and providing related regulatory support and royalty payments on the down-stream sale of the licensed products. During the three months ended March 31, 2024, the Company entered into an additional licensing agreement, pursuant to which the Company agreed to license the technology for additional products to its partner in China and will receive fixed payments upon transferring its distinct licensed technology and providing related regulatory support. During the three months ended September 30, 2025 and 2024, the Company did not enter into any additional distribution or technology licensing arrangements with its partner in China.