LEMAITRE VASCULAR INC

Previous wording

LeMaitre, AlboGraft, AnastoClip, AnastoClip GC, Artegraft, Cardial, CardioCel, DuraSure, Eze-Sit, Glow ‘N Tell, LeverEdge, LifeSpan, OmniFlow, PhasTipp, ProCol, Pruitt, Pruitt F3, RestoreFlow, TufTex, VascuCel, VascuTape, and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries, and Chevalier, DuraSure, Flexcel, Omniflow, PeriVu and Syntel are trademarks of LeMaitre Vascular. This Quarterly Report on Form 10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ®or TM symbols.

Current wording

LeMaitre, AlboGraft, AnastoClip, AnastoClip GC, Artegraft, Cardial, CardioCel, DuraSure, Eze-Sit, Glow ‘N Tell, LeverEdge, LifeSpan, OmniFlow, PhasTipp, ProCol, Pruitt, Pruitt F3, RestoreFlow, TufTex, VascuCel, VascuTape, and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries, and Chevalier, Flexcel, PeriVu and Syntel are trademarks of LeMaitre Vascular. This Quarterly Report on Form 10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ®or TM symbols.

Previous wording

Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and therefore can provide a wider range of treatment options to their patients. More recently, however, we have begun to explore adjacent market customers, or non-vascular surgeon customers, who can be served by our vascular device technologies, such as cardiac surgeons and neurosurgeons.

Current wording

Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and therefore can provide a wider range of treatment options to their patients. Recently we have also begun to explore adjacent market customers, or non-vascular surgeon customers, who can be served by our vascular device technologies, such as cardiac surgeons and interventional cardiologists.

Previous wording

Our principal product lines include the following: anastomotic clips, biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, embolectomy catheters, occlusion catheters, radiopaque marking tape, synthetic vascular and dialysis grafts, and valvulotomes. Through our RestoreFlow allografts business, we also provide services related to the processing and cryopreservation of human vascular and cardiac tissue.

Current wording

Our principal product lines include the following: anastomotic clips, biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, embolectomy and occlusion catheters, radiopaque marking tape, synthetic vascular and dialysis grafts, and valvulotomes. Through our RestoreFlow allografts business, we also process and cryopreserve human vascular and cardiac tissue.

Previous wording

Our principal biologic offerings include vascular and cardiac patches as well as vascular and dialysis grafts. In Q1 2024, biologics represented 51% of our worldwide sales. We view our biologic device offerings favorably, as we believe they represent differentiated and, in some cases, growing product segments.

Current wording

Our principal biologic offerings include vascular and cardiac patches as well as vascular and dialysis grafts. In Q2 2024, biologics represented 52% of our worldwide sales. We believe our biologic devices represent differentiated and, in some cases, growing product segments.

Previous wording

We sell our products and services primarily through a direct sales force. As of March 31, 2024, our sales force was comprised of 137 sales representatives in North America, Europe, the UK, and Asia Pacific, including four export managers. Our worldwide headquarters is located in Burlington, Massachusetts, and we also have North American sales offices in Chandler, Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, and we also have European sales offices in Milan, Italy; Madrid, Spain; Hereford, England; Dublin, Ireland; and Maisons-Alfort, France. Our Asia Pacific headquarters is located in Singapore, and we also have Asia Pacific sales offices in Tokyo, Japan; Shanghai, China; Kensington, Australia; Seoul, Korea; and Bangkok, Thailand. During the current quarter, approximately 95% of our net sales were generated in territories in which we employ direct sales representatives. We also sell our products in other countries through distributors.

Current wording

We sell our products and services primarily through a direct sales force. As of June 30, 2024, our sales force was comprised of 144 sales representatives in North America, Europe, the UK, and Asia Pacific, including four export managers. Our worldwide headquarters is located in Burlington, Massachusetts, and we also have North American sales offices in Chandler, Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, and we also have European sales offices in Milan, Italy; Madrid, Spain; Hereford, England; Dublin, Ireland; and Maisons-Alfort, France. Our Asia Pacific headquarters is located in Singapore, and we also have Asia Pacific sales offices in Tokyo, Japan; Shanghai, China; Kensington, Australia; Seoul, Korea; and Bangkok, Thailand. During the current quarter, approximately 95% of our net sales were generated in territories in which we employ direct sales representatives. We sell our products in other countries through distributors.

Previous wording

We have also experienced success in international markets, such as Europe, where we have a significant sales force, and sometimes offer comparatively lower average selling prices than in North America. If we continue to seek growth opportunities outside of North America, we may experience downward pressure on our gross margin.

Current wording

We have also experienced success in international markets, such as Europe, where we have a significant sales force, and sometimes offer lower average selling prices than in North America. If we continue to seek growth opportunities outside of North America, we may experience downward pressure on our gross margin.

Previous wording

From time to time we may undertake SKU reductions and transition sales to other SKUs or products with similar features. For example, in 2022, we initiated the transition of sales of our Syntel spring tip catheter to our Syntel regular tip catheter. Any of these actions may result in inventory write-offs and temporary or permanent negative impacts to our sales, gross margin and customer relationships.

Current wording

From time to time we may undertake SKU reductions and attempt to transition sales to other SKUs or products with similar features. For example, in 2022, we initiated the transition of sales of our Syntel spring tip catheter to our Syntel regular tip catheter. Any of these actions may result in inventory write-offs and temporary or permanent negative impacts to our sales, gross margin and customer relationships.

Previous wording

Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with our distributors to transition their sales of our medical devices into our direct sales organization:

Current wording

Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with country-specific distributors to transition their sales of our medical devices into our direct sales organization:

Previous wording

Finally, from time to time we enter into distribution agreements of complementary product lines with the option to acquire the product line in the future.

Current wording

Finally, from time to time we enter into distribution agreements of complementary product lines with an option to acquire the product line in the future.

Previous wording

In February 2024, we began implementing a new enterprise resource planning system (ERP) to replace our financial reporting and planning system. We expect that the new ERP system will be beneficial in a number of areas, including inventory management, pricing programs, financial operations and real time reporting. We have been preparing for this transition since 2022 and have hired an experienced consulting team to assist in this transition, and we transitioned from our legacy ERP system to our newly implemented Microsoft Dynamics D365 system in the first quarter of 2024. We expect to implement this new system in Europe in 2025. As of March 31, 2024, we have capitalized approximately $4.0 million of costs associated with this ERP system.

Current wording

In February 2024, we began implementing a new enterprise resource planning system (ERP) to replace our financial reporting and planning system. We expect that the new ERP system will be beneficial in a number of areas, including inventory management, pricing programs, financial operations and real-time reporting. We have been preparing for this transition since 2022 and have hired an experienced consulting team to assist in this transition, and in the U.S., we transitioned from our legacy ERP system to our newly implemented Microsoft Dynamics D365 system in Q1 2024. We expect to implement this new system in selected countries in Europe in 2025. As of June 30, 2024, we have capitalized costs on our balance sheet of approximately $3.9 million associated with this ERP system.

Previous wording

Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the three months ended March 31, 2024, approximately 42% of our sales took place outside of the U.S., largely in currencies other than the U.S. dollar. We expect foreign currencies will represent a significant percentage of future sales. Selling, marketing, and administrative costs related to these sales are also denominated in foreign currencies, thereby partially mitigating our bottom-line exposure to exchange rate fluctuations. However, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases we will record less revenue in U.S. dollars than we did before the exchange rate changed. For the three months ended March 31, 2024, we estimate that the effects of changes in foreign exchange rates increased our reported sales by less than $0.1 million, as compared to rates in effect for the three months ended March 31, 2023.

Current wording

Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the six months ended June 30, 2024, approximately 42% of our sales took place outside of the U.S., largely in currencies other than the U.S. dollar. We expect foreign currencies will represent a significant percentage of future sales. Selling, marketing, and administrative costs related to these sales are also denominated in foreign currencies, thereby partially mitigating our bottom-line exposure to exchange rate fluctuations. However, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases we will record less revenue in U.S. dollars than we did before the exchange rate changed. For the six months ended June 30, 2024, we estimate that the effects of changes in foreign exchange rates decreased our reported sales by $0.4 million, as compared to rates in effect for the six months ended June 30, 2023.

Previous wording

Comparison of the three-month period ended March 31, 2024 to the three-month period ended March 31, 2023:

Current wording

Comparison of the three- and six-month periods ended June 30, 2024 to the three- and six-month periods ended June 30, 2023:

Previous wording

Net sales. Net sales increased by $6.4 million, or 14%, to $53.5 million for the three months ended March 31, 2024, compared to $47.1 million for the three months ended March 31, 2023. The increase was driven primarily by higher average selling prices, elevated hospital procedure volumes, additional sales representatives, and $1.3 million in distribution sales related to the porcine patch product line. Allograft preservation services increased $1.3 million, carotid shunt sales increased $1.1 million and bovine vascular patch sales increased $1.0 million. We estimate that the weaker U.S. dollar increased net sales by less than $0.1 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Net sales. Net sales increased by $5.7 million, or 11%, to $55.8 million for the three months ended June 30, 2024, compared to $50.1 million for the three months ended June 30, 2023. The increase was driven primarily by higher average selling prices, strong hospital procedure volumes, and additional sales representatives. Allograft preservation services increased $1.3 million, carotid shunt sales increased $1.0 million, bovine vascular patch sales increased $0.9 million, and valvulotome sales increased $0.8 million. We estimate that the stronger U.S. dollar decreased net sales by $0.4 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Previous wording

Direct-to-hospital net sales were 95% and 97% of our total net sales for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Direct-to-hospital net sales were 95% and 96% of our total net sales for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Net sales by geography. Net sales in the Americas increased $3.1 million, or 10%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was driven primarily by increased sales of porcine patches of $1.3 million, allograft preservation services of $1.2 million, and bovine vascular patches of $0.4 million.

Current wording

Net sales by geography. Net sales in the Americas increased $3.4 million, or 10%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was driven primarily by increased sales of allograft preservation services of $1.0 million, bovine grafts and bovine vascular patches of $0.7 million each, and valvulotomes of $0.5 million.

Previous wording

EMEA net sales increased $2.1 million, or 17%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was driven primarily by increased sales of carotid shunts of $0.9 million, bovine vascular patches of $0.5 million, embolectomy catheters of $0.1 million, and ePTFE vascular grafts of $0.1 million.

Current wording

EMEA net sales increased $3.8 million, or 15%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was driven primarily by increased sales of carotid shunts of $1.6 million, bovine vascular patches of $0.7 million, allograft preservation services of $0.4 million, and polyester grafts of $0.3 million.

Previous wording

Asia Pacific net sales increased $1.2 million, or 44%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was driven primarily by increased sales of over-the-wire embolectomy catheters of $0.3 million, ePTFE vascular grafts of $0.2 million, occlusion catheters of $0.2 million, and embolectomy catheters, carotid shunts and bovine vascular patches of $0.1 million, respectively.

Current wording

Asia Pacific net sales increased $1.8 million, or 31%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was driven primarily by increased sales of over-the-wire embolectomy catheters of $0.5 million, ePTFE vascular grafts of $0.4 million, and occlusion catheters and embolectomy catheters of $0.2 million each.

Previous wording

Gross profit increased $5.8 million, or 19%, to $36.7 million for the three months ended March 31, 2024, and gross margin increased 300 basis points to 68.6% in the period. The increase in gross profit was driven primarily by increased sales, particularly from allograft preservation services, porcine patches and carotid shunts. The increase in gross margin was driven primarily by greater manufacturing efficiencies as our direct labor manufacturing team became more efficient, which was partially offset by increased excess and obsolescence charges and unfavorable product mix, including higher sales of comparatively lower margin allograft preservation services and porcine patches.

Current wording

Gross profit increased $12.2 million, or 19%, to $75.1 million for the six months ended June 30, 2024, and gross margin increased 390 basis points to 68.7% in the period. The increase in gross profit was driven primarily by increased sales, particularly from allograft preservation services, carotid shunts, bovine vascular patches and porcine patches. The increase in gross margin was driven primarily by greater manufacturing efficiencies and sales price increases, which was partially offset by increased shipping and warehousing costs, unfavorable product mix, including sales of comparatively lower margin porcine patches and sales of our existing allograft preservation services, and increased excess and obsolescence charges.

Previous wording

Sales and marketing*.* For the three months ended March 31, 2024, sales and marketing expenses increased 7% to $11.7 million. The increase was driven primarily by higher sales representative headcount, which resulted in increased compensation and related expenses of $0.3 million. Additionally, travel, training and sales meetings increased by $0.7 million. The increase was partially offset by lower outside services and general supplies of $0.2 million. Sales rep headcount was 137 as of March 31, 2024, a 7% increase from March 31, 2023. As a percentage of sales, sales and marketing expense decreased to 22% for the three months ended March 31, 2024, down from 23% in the prior period.

Current wording

Sales and marketing*.* For the three months ended June 30, 2024, sales and marketing expenses increased 8% to $11.0 million. The increase was driven primarily by higher sales representative headcount, which resulted in increased compensation and related expenses of $0.7 million. Additionally, travel and training expenses increased $0.2 million and facility expenses increased $0.1 million. The increase was partially offset by lower outside services and general supplies of $0.2 million. Sales rep headcount was 144 as of June 30, 2024, an 8% increase from June 30, 2023. As a percentage of sales, sales and marketing expenses remained consistent at 20% for the three months ended June 30, 2024 versus the prior year period.

Previous wording

General and administrative. For the three months ended March 31, 2024, general and administrative expenses increased 14% to $9.0 million. The increase was driven primarily by higher outside services and professional fees of $0.8 million. Additionally, compensation and related expenses increased $0.2 million due to an increase in personnel. As a percentage of sales, general and administrative expense remained consistent at 17% for the three months ended March 31, 2024.

Current wording

General and administrative. For the three months ended June 30, 2024, general and administrative expenses increased 14% to $8.8 million. The increase was driven primarily by higher outside services and professional fees, compensation and related expenses, and facilities expenses of $0.3 million each. Additionally, bad debt expenses increased $0.1 million due to increased uncertainty of accounts receivable collectability related to a small number of our customers. As a percentage of sales, general and administrative expenses increased to 16% for the three months ended June 30, 2024, up from 15% in the prior year period.

Previous wording

Research and development. For the three months ended March 31, 2024, research and development expenses increased 6% to $4.1 million. The increase was driven by higher compensation and related expenses of $0.2 million. As a percentage of sales, research and development expense remained consistent at 8% for the three months ended March 31, 2024.

Current wording

For the six months ended June 30, 2024, research and development expenses were unchanged at $8.4 million. Compensation and related expenses increased $0.4 million, offset primarily by lower outside services, professional fees and testing of $0.3 million and facilities expenses of $0.2 million. As a percentage of sales, research and development expenses decreased to 8% for the six months ended June 30, 2024, down from 9% in the prior year period.

Previous wording

Restructuring. For the three months ended March 31, 2024, there were no restructuring expenses. On June 30, 2022, we ceased operations at our St. Etienne, France factory. The closure resulted in a restructuring charge of $3.1 million for the year ended December 31, 2022. These charges consisted primarily of employment termination costs, impairment of fixed assets and inventory, and third-party costs. For the three months ended March 31, 2023, we recorded additional restructuring charges in conjunction with the St. Etienne, France factory closure of $0.3 million. The additional charges consisted primarily of employment termination, settlement, legal and other third-party costs.

Current wording

Restructuring. For the three and six months ended June 30, 2024, there were no restructuring expenses. On June 30, 2022, we ceased operations at our St. Etienne, France factory. The closure resulted in a restructuring charge of $3.1 million for the year ended December 31, 2022. These charges consisted primarily of employment termination costs, impairment of fixed assets and inventory, and third-party costs. For the three and six months ended June 30, 2023, we recorded additional restructuring expenses of $0.2 million and $0.5 million, respectively. The additional expenses consisted primarily of employment termination, settlement, legal and other third-party costs.

Previous wording

***Income tax expense.***We recorded a tax provision of $2.9 million on pre-tax income of $12.8 million for the three months ended March 31, 2024, compared to a $2.0 million tax provision on pre-tax income of $8.0 million for the three months ended March 31, 2023. Our effective income tax rate was 22.7% for the three-month period ended March 31, 2024. Our tax expense for the current period is based on an estimated annual effective tax rate of 24.9%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

Current wording

***Income tax expense.***We recorded a tax provision of $3.7 million on pre-tax income of $15.5 million for the three months ended June 30, 2024, compared to a $2.2 million tax provision on pre-tax income of $10.3 million for the three months ended June 30, 2023. We recorded a tax provision of $6.6 million on pre-tax income of $28.3 million for the six months ended June 30, 2024, compared to a tax provision of $4.2 million on pre-tax income of $18.3 million for the six months ended June 30, 2023. Our effective income tax rate was 23.7% and 23.3% for the three- and six-month periods ended June 30, 2024. Our tax expense for the current period is based on an estimated annual effective tax rate of 24.3%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

Previous wording

Our effective income tax rate was 24.5% for the three-month period ended March 31, 2023. Our 2023 provision was based on the estimated annual effective tax rate of 25.5%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for the three-month period ended March 31, 2023, varied from the statutory rate mainly due to permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

Current wording

Our effective income tax rate was 21.5% and 22.8% for the three- and six-month periods ended June 30, 2023. Our 2023 provision was based on the estimated annual effective tax rate of 25.6%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for the three- and six-month periods ended June 30, 2023 varied from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign entities, and a discrete item for stock option exercises.

Previous wording

As of March 31, 2024, our cash and cash equivalents were $26.6 million as compared to $24.3 million as of December 31, 2023. We had $81.7 million in short-term marketable securities as of March 31, 2024, and $80.8 million as of December 31, 2023. Our cash and cash equivalents are liquid investments with maturities of 90 days or less at the date of purchase, and consist primarily of operating bank accounts. Our short-term marketable securities consist of a managed income mutual fund investing mainly in short-term investment grade, U.S. dollar denominated fixed and floating-rate debt, and a short-duration bond fund. As of March 31, 2024, our short-term marketable securities reflected an unrealized loss of $1.3 million as a result of increasing market interest rates.

Current wording

As of June 30, 2024, our cash and cash equivalents were $22.3 million as compared to $24.3 million as of December 31, 2023. We had $90.8 million in short-term marketable securities as of June 30, 2024, and $80.8 million as of December 31, 2023. Our cash and cash equivalents are liquid investments with maturities of 90 days or less at the date of purchase and consist primarily of operating bank accounts. Our short-term marketable securities consist of a managed income mutual fund investing mainly in short-term investment grade, U.S. dollar denominated fixed and floating-rate debt, and a short-duration bond fund. As of June 30, 2024, our short-term marketable securities reflected an unrealized loss of $1.2 million as a result of increasing market interest rates.

Previous wording

We recognized operating income of $11.9 million for the three months ended March 31, 2024, compared to $7.9 million for the three months ended March 31, 2023. For the year ended December 31, 2023, we had operating income of $36.7 million. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

Current wording

We recognized operating income of $26.3 million for the six months ended June 30, 2024, compared to $17.3 million for the six months ended June 30, 2023. For the year ended December 31, 2023, we had operating income of $36.7 million. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

Previous wording

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, pay dividends, repurchase shares of our common stock and make deferred payments related to prior acquisitions. We believe that our cash, cash equivalents, investments and the interest we earn on these balances will be sufficient to meet our anticipated cash requirements for at least the next twelve months and to meet our known long-term cash requirements. If these sources of cash are insufficient to satisfy our liquidity requirements beyond the next twelve months, we may seek to sell additional equity or debt securities or take out a loan. The sale of additional equity and debt securities may result in dilution to our stockholders, as was the case with our July 2021 equity offering. If we raise additional funds through the issuance of debt securities, such securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations and possibly our ability to pay dividends. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all.

Current wording

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, pay dividends, repurchase shares of our common stock and make deferred payments related to prior acquisitions. We believe that our cash, cash equivalents, investments and the interest we earn on these balances will be sufficient to meet our anticipated cash requirements for at least the next twelve months and to meet our known long-term cash requirements. If these sources of cash are insufficient to satisfy our liquidity requirements beyond the next twelve months, we may seek to sell additional equity or debt securities or take out a loan. The sale of additional equity and debt securities may result in dilution to our stockholders, as was the case with our July 2021 equity offering. If we raise additional funds through the issuance of debt securities, such securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations and possibly our ability to pay dividends. We may require additional capital beyond our currently forecasted amounts. Any required additional capital may not be available on reasonable terms, if at all.

Previous wording

Net cash provided by operating activities. Net cash provided by operating activities was $5.1 million for the three months ended March 31, 2024, consisting of $9.9 million in net income, adjustments for non-cash or non-operating items of $5.0 million (including primarily depreciation and amortization of $2.4 million, stock-based compensation of $1.6 million and provisions for inventory write-offs and credit losses of $1.1 million), and a net use of working capital of $9.9 million. The net cash used for working capital was driven by an increase in accounts receivable of $5.8 million, an increase in inventory and other deferred costs of $3.5 million, and payments of accounts payable and other liabilities of $2.8 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $2.2 million.

Current wording

Net cash provided by operating activities. Net cash provided by operating activities was $14.7 million for the six months ended June 30, 2024, consisting of $21.7 million in net income, adjustments for non-cash or non-operating items of $10.4 million (including primarily depreciation and amortization of $4.8 million, stock-based compensation of $3.2 million, provisions for inventory write-offs and credit losses of $1.7 million, and foreign currency effect on net income of $0.7 million), and a net use of working capital of $17.4 million. The net cash used for working capital was driven by an increase in accounts receivable of $6.5 million, an increase in inventory and other deferred costs of $7.3 million, and payments of accounts payable and other liabilities of $4.3 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $0.7 million.

Previous wording

Net cash provided by operating activities was $2.3 million for the three months ended March 31, 2023, consisting of $6.0 million in net income, adjustments for non-cash or non-operating items of $4.4 million (including primarily depreciation and amortization of $2.4 million, stock-based compensation of $1.3 million, provisions for inventory write-offs and credit losses of $0.3 million, loss on divestiture of $0.3 million), and also a net use of working capital of $8.1 million. The net cash used for working capital was driven by an increase in accounts receivable of $3.2 million, an increase in inventory and other deferred costs of $3.8 million, and payments of accounts payable and other liabilities of $2.3 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $1.2 million.

Current wording

Net cash provided by operating activities was $14.2 million for the six months ended June 30, 2023, consisting of $14.1 million in net income, adjustments for non-cash or non-operating items of $8.6 million (including primarily depreciation and amortization of $4.7 million, stock-based compensation of $2.6 million, provisions for inventory write-offs and credit losses of $0.8 million, and loss on divestiture of $0.5 million), and a net use of working capital of $8.6 million. The net cash used for working capital was driven by an increase in accounts receivable of $4.2 million, an increase in inventory and other deferred costs of $4.3 million, and payments of accounts payable and other liabilities of $1.0 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $0.9 million.

Previous wording

Net cash used in investing activities. Net cash used in investing activities was $2.4 million for the three months ended March 31, 2024, consisting of expenditures on property and equipment of $1.4 million and purchases of marketable securities of $1.0 million.

Current wording

Net cash used in investing activities. Net cash used in investing activities was $13.4 million for the six months ended June 30, 2024, consisting of expenditures on property and equipment of $3.2 million and purchases of marketable securities of $10.1 million.

Previous wording

Net cash used in investing activities was $3.0 million for the three months ended March 31, 2023, consisting of expenditures on property and equipment of $2.1 million, purchases of marketable securities of $0.6 million, and acquisition related payments of $0.3 million.

Current wording

Net cash used in investing activities was $12.6 million for the six months ended June 30, 2023, consisting of expenditures on property and equipment of $4.9 million, purchases of marketable securities of $7.2 million, and acquisition related payments of $0.4 million.

Previous wording

Net cash provided by (used in) financing activities. Net cash provided by financing activities was less than $0.1 million for the three months ended March 31, 2024, consisting primarily of proceeds from stock option exercises of $3.6 million, net of shares repurchased used to pay employee payroll taxes. This proceed of cash was offset by a dividend payment of $3.6 million.

Current wording

Net cash used in financing activities. Net cash used in financing activities was $2.8 million for the six months ended June 30, 2024, consisting of proceeds from stock option exercises of $4.4 million, net of shares repurchased used to pay employee payroll taxes. This proceed of cash was offset by dividend payments of $7.2 million.

Previous wording

Net cash used in financing activities was $1.8 million for the three months ended March 31, 2023, consisting primarily of a dividend payment of $3.1 million. This use of cash was partly offset by proceeds from stock option exercises of $1.3 million, net of shares repurchased used to pay employee payroll taxes.

Current wording

Net cash used in financing activities was $1.3 million for the six months ended June 30, 2023, consisting of proceeds from stock option exercises of $4.9 million, net of shares repurchased used to pay employee payroll taxes. This proceed of cash was offset by dividend payments of $6.2 million.

Previous wording

We have adopted various accounting policies to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our most significant accounting policies are described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes in our critical accounting policies during the three months ended March 31, 2024. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to revenue recognition, inventory valuation, valuation of intangible assets and goodwill, contingent consideration and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results may differ from those estimates.

Current wording

We have adopted various accounting policies to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our most significant accounting policies are described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes in our critical accounting policies during the six months ended June 30, 2024. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to revenue recognition, inventory valuation, valuation of intangible assets and goodwill, contingent consideration and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results may differ from those estimates.