Artivion(AORT) - 2025 Q2 - Quarterly Report

Part I – FINANCIAL INFORMATION Item 1. Financial Statements. This section presents Artivion, Inc.'s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025 and 2024, including statements of operations, balance sheets, cash flows, and stockholders' equity, along with detailed notes explaining significant accounting policies, financial instruments, debt, and segment information Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Three Months Ended June 30, 2025 vs. 2024 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :----- | :----- | :----- | :------- | | Total Revenues | $112,972 | $98,019 | $14,953 | 15.25% | | Gross Margin | $73,112 | $63,324 | $9,788 | 15.46% | | Operating Income | $8,384 | $6,507 | $1,877 | 28.85% | | Net Income (Loss) | $1,345 | $(2,121) | $3,466 | -163.41% | | Basic EPS | $0.03 | $(0.05) | $0.08 | -160.00% | | Diluted EPS | $0.03 | $(0.05) | $0.08 | -160.00% | | Comprehensive Income (Loss) | $17,113 | $(4,444) | $21,557 | -485.09% | Six Months Ended June 30, 2025 vs. 2024 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :----- | :----- | :----- | :------- | | Total Revenues | $211,950 | $195,450 | $16,500 | 8.44% | | Gross Margin | $136,689 | $126,270 | $10,419 | 8.25% | | Operating Income | $10,529 | $31,818 | $(21,289) | -66.91% | | Net Income (Loss) | $840 | $5,412 | $(4,572) | -84.48% | | Basic EPS | $0.02 | $0.13 | $(0.11) | -84.62% | | Diluted EPS | $0.02 | $0.13 | $(0.11) | -84.62% | | Comprehensive Income (Loss) | $22,939 | $1,561 | $21,378 | 1369.51% | Condensed Consolidated Balance Sheets Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total Current Assets | $318,820 | $290,080 | $28,740 | | Total Assets | $838,387 | $789,101 | $49,286 | | Total Current Liabilities | $66,670 | $66,823 | $(153) | | Long-term Debt, net | $215,538 | $314,152 | $(98,614) | | Total Liabilities | $418,485 | $512,901 | $(94,416) | | Total Stockholders' Equity | $419,902 | $276,200 | $143,702 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------ | :----- | :----- | :----- | | Net cash flows from operating activities | $(1,942) | $642 | $(2,584) | | Net cash flows from investing activities | $(6,925) | $(6,124) | $(801) | | Net cash flows from financing activities | $6,535 | $556 | $5,979 | | Effect of exchange rate changes | $2,345 | $1,005 | $1,340 | | Increase (decrease) in cash | $13 | $(3,921) | $3,934 | | Cash and cash equivalents end of period | $53,476 | $55,019 | $(1,543) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' Equity Changes (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :-------------------------------- | :----- | | Balance at December 31, 2024 | $276,200 | | Net income | $840 | | Other comprehensive income, net of tax | $22,099 | | Settlement of convertible senior notes | $102,137 | | Equity compensation | $14,167 | | Exercise of options | $3,498 | | Employee stock purchase plan | $961 | | Balance at June 30, 2025 | $419,902 | - Total stockholders' equity increased from $276.2 million at December 31, 2024, to $419.9 million at June 30, 2025, primarily driven by the settlement of convertible senior notes and other comprehensive income[18] Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation and Summary of Significant Accounting Policies - The financial statements are prepared in accordance with US GAAP for interim information and SEC rules, with all necessary adjustments included. Operating results for the three and six months ended June 30, 2025, are not indicative of the full year[23] - Foreign currency translation adjustments resulted in a net gain of $4.5 million and $7.4 million for the three and six months ended June 30, 2025, respectively, compared to net losses in the prior year[24] - Artivion early adopted ASU 2024-04, 'Induced Conversions of Convertible Debt Instruments,' as of June 30, 2025, on a prospective basis, as part of the Convertible Senior Notes settlement[26] 2. Agreements with Endospan - Artivion holds an exclusive distribution agreement for the NEXUS family of products in certain European countries, which was fully amortized by December 31, 2024[29] - An amendment to the Endospan Option in July 2024 reduced the acquisition price for Endospan's securities or assets from $250.0 million to $175.0 million, with an upfront acquisition purchase price of $135.0 million[31] Endospan Loan Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Endospan Loan Fair Value | $0.3 | $0.3 | | Additional Endospan Loan Fair Value | $10.0 | $9.2 | | Total Endospan Loans | $10.3 | $9.5 | 3. Financial Instruments Fair Value of Financial Instruments (June 30, 2025, in thousands) | Item | Level 1 | Level 2 | Level 3 | Total | | :---------------------- | :------ | :------ | :------ | :------ | | Money market funds | $5,715 | — | — | $5,715 | | Certificates of deposit | $2,074 | — | — | $2,074 | | Endospan Loans | — | — | $10,290 | $10,290 | | Contingent consideration | — | — | $52,670 | $52,670 | - The contingent consideration liability for the Ascyrus acquisition was $52.7 million as of June 30, 2025, and is estimated using a probability-weighted scenario approach with a discount rate of approximately 17%[40][41] Changes in Level 3 Fair Value (in thousands) | Item | Balance Dec 31, 2024 | Change in Valuation | Balance June 30, 2025 | | :----------------------- | :------------------- | :------------------ | :-------------------- | | Contingent Consideration | $52,880 | $(210) | $52,670 | | Endospan Loans | $9,535 | $755 | $10,290 | 4. Inventories and Deferred Preservation Costs Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Raw materials and supplies | $36,246 | $35,295 | | Work-in-process | $17,821 | $13,926 | | Finished goods | $32,656 | $30,545 | | Total Inventories | $86,723 | $79,766 | | Deferred preservation costs | $52,817 | $51,701 | - Consignment inventory of On-X heart valves, aortic stent grafts, and AMDS products totaled $12.6 million as of June 30, 2025, with 65% in international locations[44] 5. Goodwill and Other Intangible Assets Indefinite Lived Intangible Assets (in thousands) | Asset | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Goodwill | $253,802 | $240,958 | | In-process R&D | $2,285 | $2,026 | | Procurement contracts and agreements | $2,013 | $2,013 | - Goodwill increased by $12.8 million due to foreign currency translation, all related to the Medical Devices segment[48] Definite Lived Intangible Assets (Net Carrying Value, in thousands) | Asset Class | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Acquired technology | $129,257 | $128,051 | | Customer lists and relationships | $16,463 | $16,994 | | Patents | $1,104 | $968 | | Other | $7,318 | $6,331 | | Total Other intangibles, net | $24,885 | $24,293 | Amortization Expense (in thousands) | Period | 2025 | 2024 | | :------------------- | :----- | :----- | | Three Months Ended June 30 | $3,427 | $3,793 | | Six Months Ended June 30 | $6,815 | $7,660 | 6. Income Taxes Effective Income Tax Rate | Period | 2025 | 2024 | | :------------------- | :--- | :--- | | Three Months Ended June 30 | 61% | (13)% | | Six Months Ended June 30 | 29% | 48% | - The effective income tax rate was significantly impacted by state income taxes, non-deductible executive compensation, changes in valuation allowance against net deferred tax assets, and foreign provision to return adjustments[51] - The company is assessing the impact of the recently enacted 'One Big Beautiful Bill Act' (OBBBA) on its consolidated financial statements, with provisions effective from 2025 through 2027[52] 7. Debt Debt Composition (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Term Loan Facility | $190,000 | $190,000 | | Revolving Credit Facility | $30,000 | $30,000 | | Convertible Senior Notes | $460 | $100,000 | | Other | $73 | $195 | | Total Principal Debt | $220,533 | $320,195 | | Long-term Debt, net | $215,538 | $314,152 | - The company entered into new credit facilities in January 2024, consisting of a $190.0 million Term Loan Facility, a $100.0 million Delayed Draw Term Loan Facility, and a $60.0 million Revolving Credit Facility, with proceeds used to repay old credit facilities[55] - In May 2025, Artivion settled approximately $99.5 million of Convertible Senior Notes by exchanging them for 4,334,347 shares of common stock and a cash payment of $1.7 million for accrued interest, resulting in a $2.7 million inducement expense[63][64] - The remaining $0.5 million Convertible Senior Notes were settled on July 1, 2025, and the Delayed Draw Term Loan Facility was terminated on July 2, 2025[65] 8. Commitments and Contingencies - Artivion is involved in legal proceedings in the normal course of business and maintains claims-made insurance policies to mitigate financial exposure to product and tissue processing liability claims[69] - The company estimates probable losses and anticipated recoveries for incurred but not reported claims related to products sold and services performed prior to the balance sheet date[69] 9. Revenue Recognition Net Revenues by Geographic Location (in thousands) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $57,569 | $48,662 | $105,362 | $99,590 | | EMEA | $38,713 | $34,145 | $75,758 | $67,733 | | APAC | $11,131 | $9,653 | $19,345 | $17,262 | | LATAM | $5,559 | $5,559 | $11,485 | $10,865 | | Total Revenues | $112,972 | $98,019 | $211,950 | $195,450 | - North America and EMEA are key markets for direct sales, while APAC and LATAM primarily involve sales through distributors, except for Brazil where direct sales also occur[71] 10. Stock Compensation - During the six months ended June 30, 2025, the company authorized equity awards totaling 897,000 shares with an aggregate grant date fair value of $23.2 million, an increase from 762,000 shares and $15.7 million in the prior year[73][74] - Employees purchased 44,000 shares through the ESPP in the six months ended June 30, 2025, compared to 51,000 shares in the prior year[75] 11. Income (Loss) Per Common Share Basic and Diluted Income (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) allocated to common stockholders | $1,343 | $(2,117) | $839 | $5,399 | | Basic weighted-average common shares outstanding | 44,296 | 41,683 | 43,270 | 41,487 | | Basic income (loss) per common share | $0.03 | $(0.05) | $0.02 | $0.13 | | Diluted weighted-average common shares outstanding | 45,378 | 41,683 | 44,503 | 42,405 | | Diluted income (loss) per common share | $0.03 | $(0.05) | $0.02 | $0.13 | - Stock options and awards were excluded from diluted EPS calculations if their inclusion would be antidilutive, affecting 178,000 and 150,000 potential common shares for the three and six months ended June 30, 2025, respectively[77] 12. Segment Information - Artivion operates in two reportable segments: Medical Devices (aortic stent grafts, On-X products, surgical sealants, other) and Preservation Services (cardiac and vascular tissues)[78] Segment Revenues and Gross Margins (Three Months Ended June 30, in thousands) | Segment | 2025 Revenues | 2024 Revenues | 2025 Gross Margin | 2024 Gross Margin | | :------------------ | :------------ | :------------ | :---------------- | :---------------- | | Medical Devices | $87,444 | $73,210 | $59,129 | $48,665 | | Preservation Services | $25,528 | $24,809 | $13,983 | $14,659 | | Total | $112,972 | $98,019 | $73,112 | $63,324 | Segment Revenues and Gross Margins (Six Months Ended June 30, in thousands) | Segment | 2025 Revenues | 2024 Revenues | 2025 Gross Margin | 2024 Gross Margin | | :------------------ | :------------ | :------------ | :---------------- | :---------------- | | Medical Devices | $166,242 | $144,324 | $112,664 | $96,029 | | Preservation Services | $45,708 | $51,126 | $24,025 | $30,241 | | Total | $211,950 | $195,450 | $136,689 | $126,270 | Product Revenues (Three Months Ended June 30, in thousands) | Product | 2025 | 2024 | | :------------------ | :----- | :----- | | Aortic stent grafts | $39,841 | $32,190 | | On-X | $25,572 | $20,645 | | Surgical sealants | $19,288 | $18,545 | | Other | $2,743 | $1,830 | | Preservation services | $25,528 | $24,809 | | Total Revenues | $112,972 | $98,019 | Product Revenues (Six Months Ended June 30, in thousands) | Product | 2025 | 2024 | | :------------------ | :----- | :----- | | Aortic stent grafts | $76,443 | $64,293 | | On-X | $47,146 | $40,326 | | Surgical sealants | $37,394 | $35,526 | | Other | $5,259 | $4,179 | | Preservation services | $45,708 | $51,126 | | Total Revenues | $211,950 | $195,450 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Artivion's financial performance, condition, and operational results for the three and six months ended June 30, 2025, compared to the prior year. It details revenue drivers, cost changes, operating expenses, liquidity, and capital resources, including the impact of foreign exchange rates and recent debt restructuring Overview - Artivion, Inc. is a leader in medical devices and implantable human tissues for cardiac and vascular surgical procedures, with major product families including aortic stent grafts, On-X mechanical heart valves, surgical sealants, and implantable tissues[86] Total Revenues (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $112,972 | $98,019 | 15% | | Constant Currency (3 months) | $98,692 | $98,019 | 14% | | Six Months Ended June 30 | $211,950 | $195,450 | 8% | | Constant Currency (6 months) | $194,155 | $195,450 | 9% | Presentation - Management uses non-GAAP constant currency revenues to assess operational performance and for strategic planning, defining it as revenues adjusted for year-over-year foreign currency movements[129][130] Results of Operations Revenues - Product revenues increased 19% and 15% for the three and six months ended June 30, 2025, respectively, driven by increases across all product categories[93] - Foreign currency fluctuations impacted reported revenues; the US Dollar weakened against major currencies in Q2 2025, increasing reported revenues, but strengthened over the six-month period, decreasing reported revenues[94] Revenues by Product (Three Months Ended June 30, in thousands) | Product | 2025 | 2024 | % Change | | :---------------- | :----- | :----- | :------- | | Aortic stent grafts | $39,841 | $32,190 | 24% | | On-X | $25,572 | $20,645 | 24% | | Surgical sealants | $19,288 | $18,545 | 4% | | Other | $2,743 | $1,830 | 50% | | Total products | $87,444 | $73,210 | 19% | | Preservation services | $25,528 | $24,809 | 3% | | Total | $112,972 | $98,019 | 15% | Revenues by Product (Six Months Ended June 30, in thousands) | Product | 2025 | 2024 | % Change | | :---------------- | :----- | :----- | :------- | | Aortic stent grafts | $76,443 | $64,293 | 19% | | On-X | $47,146 | $40,326 | 17% | | Surgical sealants | $37,394 | $35,526 | 5% | | Other | $5,259 | $4,179 | 26% | | Total products | $166,242 | $144,324 | 15% | | Preservation services | $45,708 | $51,126 | -11% | | Total | $211,950 | $195,450 | 8% | Aortic Stent Grafts - Aortic stent graft revenues increased 24% for the three months and 19% for the six months ended June 30, 2025, primarily due to increased unit volume[96] - Constant currency revenues for aortic stent grafts increased 22% and 20% for the three and six months, respectively, with significant growth in North America (due to AMDS HDE approval) and EMEA (higher-priced products)[97] On-X Products - On-X product revenues increased 24% for the three months and 17% for the six months ended June 30, 2025, driven by increased unit volume and average sales price[98][99] - Constant currency revenues for On-X products increased 24% and 18% for the three and six months, respectively, with North America showing market share gains and EMEA increasing unit sales in indirect markets[100] Surgical Sealants - Surgical sealant revenues increased 4% for the three months and 5% for the six months ended June 30, 2025, primarily due to increased volume of milliliters sold and higher average sales prices[103][104] - Constant currency revenues for surgical sealants increased 4% and 6% for the three and six months, respectively, with North America and APAC driving three-month growth, and LATAM driving six-month growth[105] Other - Other revenues, including PhotoFix and PerClot, increased 50% and 26% for the three and six months ended June 30, 2025, respectively, due to increased sales of both products[107] Preservation Services - Preservation services revenues increased 3% for the three months ended June 30, 2025, primarily due to the release of a backlog of higher-priced tissues following the 2024 cybersecurity incident[110] - For the six months ended June 30, 2025, preservation services revenues decreased 11%, mainly due to the tissue backlog from the cybersecurity incident, which began to release in Q2[111] Cost of Products and Preservation Services Cost of Products Cost of Products (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $28,315 | $24,545 | 15% | | Six Months Ended June 30 | $53,578 | $48,295 | 11% | - The increase in cost of products for both periods was primarily due to an increase in the volume of all products shipped[113] Cost of Preservation Services Cost of Preservation Services (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $11,545 | $10,150 | 14% | | Six Months Ended June 30 | $21,683 | $20,885 | 4% | - The increase in cost of preservation services for the three months was due to higher costs of certain tissues shipped, while the six-month increase was due to higher tissue costs partially offset by lower volume[115] Gross Margin Gross Margin (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $73,112 | $63,324 | 15% | | Six Months Ended June 30 | $136,689 | $126,270 | 8% | Gross Margin as a Percentage of Total Revenues | Period | 2025 | 2024 | | :------------------- | :--- | :--- | | Three Months Ended June 30 | 65% | 65% | | Six Months Ended June 30 | 64% | 65% | - Gross margin increased 15% for the three months and 8% for the six months, driven by increased volume, higher average sales prices, and favorable product mix, partially offset by unfavorable costs[117][118] Operating Expenses General, Administrative, and Marketing Expenses General, Administrative, and Marketing Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $57,665 | $49,320 | 17% | | Six Months Ended June 30 | $112,369 | $80,009 | 40% | As a Percentage of Total Revenues | Period | 2025 | 2024 | | :------------------- | :--- | :--- | | Three Months Ended June 30 | 51% | 50% | | Six Months Ended June 30 | 53% | 41% | - Increases were due to investments in sales and marketing (including AMDS launch), information technology (including $1.2M and $5.7M for 2024 cybersecurity incident for three and six months respectively), and increased non-cash stock compensation[119][120] Research and Development Expenses Research and Development Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $7,063 | $7,497 | -6% | | Six Months Ended June 30 | $13,791 | $14,443 | -5% | As a Percentage of Total Revenues | Period | 2025 | 2024 | | :------------------- | :--- | :--- | | Three Months Ended June 30 | 6% | 8% | | Six Months Ended June 30 | 7% | 7% | - R&D expenses decreased 6% and 5% for the three and six months, respectively, with focus on clinical work for aortic stent graft regulatory approvals[122] Interest Expense Interest Expense (in thousands) | Period | 2025 | 2024 | % Change | | :------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $7,270 | $8,304 | -12.5% | | Six Months Ended June 30 | $14,933 | $16,130 | -7.4% | - Interest expense decreased due to lower variable interest rates on credit facilities[123] Losses on Inducement/Extinguishment of Debt - A $2.7 million loss on inducement of convertible debt was recorded for the three and six months ended June 30, 2025, related to the settlement of Convertible Senior Notes[124] - A $3.7 million loss on extinguishment of debt was recorded for the six months ended June 30, 2024, due to the repayment of previously existing credit facilities[125] Other (Income) Expense, Net Other (Income) Expense, Net (in thousands) | Period | 2025 | 2024 | | :------------------- | :----- | :----- | | Three Months Ended June 30 | $5,000 (income) | $1,000 (expense) | | Six Months Ended June 30 | $8,000 (income) | $2,400 (expense) | - Income for 2025 periods primarily included net gains from foreign currency effects ($4.5M and $7.4M) and fair value adjustments to Endospan loans ($0.5M and $0.8M)[126] Income Tax Expense Effective Income Tax Rate | Period | 2025 | 2024 | | :------------------- | :--- | :--- | | Three Months Ended June 30 | 61% | (13)% | | Six Months Ended June 30 | 29% | 48% | - The effective tax rate was influenced by state income taxes, non-deductible executive compensation, changes in valuation allowance, and foreign provision to return adjustments[127] Non-GAAP Measures of Financial Performance - Artivion uses constant currency revenues, a non-GAAP measure, to provide a more accurate assessment of ongoing operations and consistent performance measurement across periods, adjusting for foreign currency exchange rate effects[129][130] Seasonality - Demand for aortic stent grafts and surgical sealants is typically seasonal, declining in Q3 due to European summer holidays, with surgical sealants seeing stronger demand in Q4[132] - Cardiac preservation services traditionally peak in Q3 for school-aged patient surgeries, while vascular preservation services see lowest demand in Q4 due to winter holidays[134][135] - Demand for On-X and other products is not believed to be seasonal[133] Liquidity and Capital Resources - As of June 30, 2025, liquidity included $53.5 million in cash and cash equivalents, $30.0 million unused revolving credit, and $100.0 million unused delayed draw term loan facility[137] - The company believes cash from operations and available credit facilities will meet obligations for the next twelve months, but significant business development activities may require additional debt or equity financing[137][138] Significant Sources and Uses of Liquidity Credit Facilities - In January 2024, Artivion secured $350.0 million in senior secured credit facilities, including a $190.0 million Term Loan, a $100.0 million Delayed Draw Term Loan, and a $60.0 million Revolving Credit Facility[139] - The Delayed Draw Term Loan Facility was terminated on July 2, 2025, after the Convertible Senior Notes were settled[139] - The Credit Facilities mature on January 18, 2030, with no scheduled principal repayments before maturity, and bear interest at Adjusted Term SOFR plus applicable margins (10.55% for Term Loan, 8.30% for Revolving Credit as of June 30, 2025)[140] Convertible Senior Notes - Artivion issued $100.0 million of 4.25% Convertible Senior Notes in June 2020, maturing July 1, 2025, convertible into cash, stock, or a combination at the company's discretion[141] - In May 2025, approximately $99.5 million of these notes were exchanged for 4,334,347 shares of common stock and a $1.7 million cash payment for accrued interest[142] - The remaining $0.5 million in principal was settled on July 1, 2025, by issuing 19,605 shares of common stock[143] Cash Flows Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------ | :----- | :----- | :----- | | Operating activities | $(1,942) | $642 | $(2,584) | | Investing activities | $(6,925) | $(6,124) | $(801) | | Financing activities | $6,535 | $556 | $5,979 | | Effect of exchange rate changes | $2,345 | $1,005 | $1,340 | | Increase (decrease) in cash | $13 | $(3,921) | $3,934 | Net Cash Flows from Operating Activities - Net cash used in operating activities increased by $2.6 million for the six months ended June 30, 2025, primarily due to increased working capital, professional fees for the 2024 cybersecurity incident, and changes in interest payment timing[145] Net Cash Flows from Investing Activities - Net cash used in investing activities was $6.9 million for the six months ended June 30, 2025, mainly for capital expenditures[146] Net Cash Flows from Financing Activities - Net cash provided by financing activities was $6.5 million for the six months ended June 30, 2025, primarily from stock option exercises ($4.5M) and financing insurance premiums ($3.1M), partially offset by debt payments[147] Scheduled Contractual Obligations and Future Payments - No material changes to contractual obligations outside the ordinary course of business were reported as of June 30, 2025, compared to the Annual Report on Form 10-K for December 31, 2024[148] Capital Expenditures - Capital expenditures were $6.9 million for the six months ended June 30, 2025, primarily for manufacturing and tissue processing equipment, computer software, and leasehold improvements[149] Off-Balance Sheet Commitments and Arrangements - No material changes to indemnification obligations were reported as of June 30, 2025[150] Recent Accounting Pronouncements - Refer to Note 1 for a discussion of recent accounting pronouncements, including the early adoption of ASU 2024-04[151] Risks and Uncertainties - Refer to Item 1A, 'Risk Factors,' for a comprehensive discussion of risks and uncertainties affecting the company[152] Item 3. Quantitative and Qualitative Disclosures About Market Risk. Artivion is exposed to market risks from changes in interest rates and foreign currency exchange rates, which are managed through operating and financing activities. No material changes in market risk disclosures were reported as of June 30, 2025, compared to the prior annual report - The company is exposed to market risks from changes in interest rates (including credit spreads) and foreign currency exchange rates[153] - No material changes in market risk disclosures were reported as of June 30, 2025, compared to the Annual Report on Form 10-K for December 31, 2024[153] Item 4. Controls and Procedures. Management, including the CEO and CFO, concluded that Artivion's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. No material changes in internal controls over financial reporting occurred during the quarter Evaluation of Disclosure Controls and Procedures - Artivion maintains disclosure controls designed to ensure timely and accurate reporting of information required in Exchange Act reports[154] - As of June 30, 2025, the CEO and CFO concluded that the disclosure controls were effective at a reasonable assurance level, based on criteria from the COSO 'Internal Control-Integrated Framework (2013)'[156] Changes to Disclosure Controls and Procedures - No material changes in internal controls over financial reporting occurred during the three months ended June 30, 2025[157] Part II – OTHER INFORMATION Item 1. Legal Proceedings. Artivion is involved in various legal proceedings arising from its business activities but does not believe any pending matters will have a material adverse effect on its financial condition or operations. However, adverse outcomes in any legal proceeding could be material - Artivion is involved in legal proceedings in the normal course of business and regularly evaluates their status to assess potential losses[158] - Based on current knowledge, no pending matters are believed to have a material adverse effect on the business, financial condition, results of operations, or cash flows[159] Item 1A. Risk Factors. This section outlines various risks and uncertainties that could materially and adversely impact Artivion's business, including international operations, intense market competition, dependence on specific product lines (tissue preservation, BioGlue, aortic stent grafts, On-X), supply chain vulnerabilities, regulatory compliance, and financial risks related to indebtedness and common stock ownership Risks Relating to Our Business Business and Economic Risks - International operations expose Artivion to risks such as staffing difficulties, compliance obligations (e.g., FCPA, GDPR), conflicting regulatory requirements, longer collection cycles, currency exchange rate fluctuations, inflationary pressures, and geopolitical conflicts (e.g., Ukraine war, Middle East instability)[162][164] - The company faces intense competition from larger medical device companies and tissue service providers with greater resources, potentially impacting its ability to compete effectively[165][166] - Significant dependence on tissue preservation services means risks related to tissue sourcing, processing, contamination, and regulatory changes (e.g., FDA guidances on tuberculosis transmission)[167][168][169][170] - Dependence on BioGlue, aortic stent grafts, and On-X products means risks related to regulatory approvals, animal-based components, market adoption, and competition[171][172][173][174] - Fluctuations in foreign currencies, particularly the Euro against the US Dollar, could materially and adversely affect revenues, financial condition, profitability, and cash flows[175] - Intellectual property risks include maintaining trade secrets, patent validity, potential infringement by others, and dependence on in-licensed IP, with disputes being costly[176][177] - Public health crises can negatively impact healthcare system capacity, procedure volumes, staffing, and R&D timelines, similar to the COVID-19 pandemic[178] Operational Risks - Heavy dependence on suppliers and contract manufacturers for quality products means risks from regulatory non-compliance, material failures, recalls, and supply chain disruptions (e.g., geopolitical issues, labor shortages)[179][180][182] - Reliance on single and sole-source suppliers for critical materials (e.g., BioGlue components, On-X grafts, collagen suspension) and single manufacturing facilities (Austin, Hechingen, Kennesaw, Slovakia, North Carolina, Israel) poses significant disruption risks[183][185][186][187][188](index=188&type=chunk] - Dependence on a specialized workforce, including key personnel and qualified staff, means risks from talent loss, inadequate performance, and competition for skilled employees[190] - Growth through acquisitions, licenses, and distribution arrangements carries risks such as equity dilution, cash usage, debt incurrence, unfavorable tax consequences, inability to realize anticipated benefits, and assumption of unknown liabilities[191][193] - Significant disruptions of IT systems or breaches of information security, like the 2024 cybersecurity incident, can disrupt business operations, impact revenue, manufacturing, and incur ongoing expenses, with limited insurance coverage[197][199][201] - Environmental, social, and governance (ESG) matters pose risks due to evolving and sometimes contradictory regulations and stakeholder expectations, potentially impacting reputation, employee retention, customer relationships, and financial results[202] Legal, Quality, and Regulatory Risks - Products and tissues are highly regulated, leading to risks of product recalls, liability claims, regulatory scrutiny of operations, reclassification or suspension of approvals, and adverse publicity[203] - The EU Medical Device Regulation (MDR) imposes stricter requirements, causing delays and uncertainties in product classifications, clinical studies, and CE Mark renewals, potentially impacting product supply in Europe[204][205] - Potential FDA reclassification of CryoValve SG pulmonary heart valve to Class III medical device could make continued processing commercially infeasible due to significant PMA application costs and delays[206][207] - Failure to obtain clinical results or regulatory approvals for new/existing products, or achieve market acceptance, could materially affect financial performance, as seen with the PROACT Xa and PROACT Mitral trials[209][210][213] - Increased environmental regulations and litigation related to EtO sterilization and PFAS substances could lead to facility closures, supply disruptions, and financial/reputational harm[214][215][216] - Risks of fines and sanctions for promoting unapproved ('off-label') uses of products, and breaches of US and international bribery, anti-kickback, false claims, and data privacy laws (e.g., GDPR)[217][218][226] - US policy changes (e.g., international trade, tariffs, tax policy, federal spending, regulatory agency capabilities) could negatively impact business operations and financial performance[220][221][222] - Exposure to product liability claims, with existing claims-made insurance potentially insufficient to cover all losses or punitive damages, could lead to costly litigation and reputational harm[223][224][225] Risks Relating to Our Indebtedness - Debt agreements contain restrictive covenants limiting operational flexibility, including restrictions on incurring additional debt, paying dividends, disposing of assets, and making investments[228][231] - High indebtedness could adversely affect the ability to raise additional capital, limit operational flexibility, and expose the company to interest rate fluctuations due to variable rate borrowings[229] - Defaulting on credit agreements could lead to acceleration of debt repayment and seizure of substantially all US assets pledged as collateral, with no assurance of sufficient assets to repay in full[230][232] Risks Relating to Ownership of our Common Stock - Stockholder activism could disrupt business, divert management attention, create uncertainty, and impact stock price or talent retention[233] - No dividends are anticipated for the foreseeable future, meaning stockholders may only receive returns through stock appreciation, and credit facility restrictions limit future dividend payments[234] - Delaware law and anti-takeover provisions in organizational documents may discourage or prevent a change of control, even if beneficial to stockholders, potentially affecting share price and management removal attempts[235] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Artivion did not repurchase any equity securities during the three months ended June 30, 2025. Repurchases are generally prohibited under credit facilities, with exceptions for stock tendered in payment of taxes or stock option exercise prices - The Company did not repurchase any of its equity securities during the three months ended June 30, 2025[236] - Repurchases of common stock are prohibited under credit facilities, except for stock tendered by employees/directors for taxes or stock option exercise prices, subject to certain requirements[236] Item 3. Defaults Upon Senior Securities. There were no defaults upon senior securities reported - No defaults upon senior securities were reported[237] Item 4. Mine Safety Disclosures. This item is not applicable to Artivion, Inc. - Mine Safety Disclosures are not applicable to the registrant[238] Item 5. Other Information. This section provides other information, including details on insider trading arrangements and policies Insider Trading Arrangements and Policies - No director or officer notified the company of the adoption or termination of a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[240] Item 6. Exhibits. This section lists all exhibits filed with the Form 10-Q, including certifications, XBRL documents, and other required filings - The exhibit index includes certifications by J. Patrick Mackin and Lance A. Berry, XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File[243] Signatures The report is duly signed on behalf of Artivion, Inc. by its Chairman, President, and Chief Executive Officer, J. Patrick Mackin, and its Chief Financial Officer and Executive Vice President, Finance, Lance A. Berry, on August 8, 2025 - The report is signed by J. Patrick Mackin, Chairman, President, and Chief Executive Officer, and Lance A. Berry, Chief Financial Officer and Executive Vice President, Finance, on August 8, 2025[247]