Adjusted EBITDA for Q2 was $155.5 million with a margin of 19.4%, slightly down from 20.5% in Q2 2024 but at the high end of guidance.
Free cash flow was $73.3 million, ahead of expectations, with cash flow from operations at $162 million and CapEx at $88.7 million (11.1% of revenue).
Net debt reduced by $150 million in Q2, totaling $175 million year-to-date and $345 million over six quarters, with net leverage ratio improving to 2.81x from 2.98x.
Q2 2025 revenue was $800.4 million, slightly down 0.7% year-over-year but flat excluding divested assets, meeting expectations.
Segment performance: Sleep Health revenue up 0.9% to $334.7 million; Respiratory Health up 5.6% to $170.5 million; Diabetes Health down 4.1% to $145 million; Wellness at Home down 7.2% to $150.3 million due to asset sales.
Strategic Patent Settlement and Its Financial Impact
The company settled worldwide patent litigation with Bruker on favorable terms, recognizing a $68 million upfront payment.
Excluding the settlement-related revenue, Q2 revenue was $146 million, indicating the settlement's influence on financials.
The settlement included a significant gain of approximately $41 million recognized as part of the revenue, impacting operating income and net income positively.
XDEMVY's Rapid Market Penetration and Early DTC Impact
The launch remains predominantly an NRx (new prescription) business with minimal refills, yet growth is strong.
The company expects continued growth despite seasonal headwinds, with prescriptions projected to increase into Q3 and beyond.
The success of the DTC campaign is accelerating market penetration faster than typical launches, which usually take multiple quarters to show traction.
Cash and securities ended at $319.5 million, up $17 million for the quarter, with record cash from operations of $20.3 million.
Gross margin improved to 70%, up 110 basis points from the prior year, supported by higher average selling prices, manufacturing efficiencies, and favorable product mix.
Net income increased 17% to $13.8 million, and fully diluted EPS grew 16% to $0.60.
Operating income rose 12% to $16.1 million, with an operating margin of 25%.
Q2 2025 sales increased 15% year-over-year, driven by strong growth in catheters (27%), grafts (19%), Valvulotomes and Chunnt (both 13%).
Revised Financial Outlook and Impact of Portfolio Actions
The company now expects a $6.5 billion increase in 2025 medical costs versus initial estimates, with specific impacts in Medicare ($3.6 billion), commercial ($2.3 billion), and Medicaid.
Approximately $1 billion of previously planned portfolio actions are no longer being pursued, affecting the outlook.
Recognition of $850 million in unfavorable prior period items and one-time settlements, indicating a more challenging financial environment than initially projected.
Dafinchi
