Note 1 - Significant Accounting Policies and Related Matters

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1. Significant Accounting Policies and Related Matters

Description of Business

Unless the context requires otherwise, references to LeMaitre, LeMaitre Vascular, and the Company refer to LeMaitre Vascular, Inc. and its subsidiaries. The Company develops, manufactures, and markets medical devices and implants used primarily in the field of vascular surgery. The Company also derives revenues from the processing and cryopreservation of human tissues for implantation in patients. The Company operates in a single segment in which its 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. The Company’s offices and production facilities are located in Burlington, Massachusetts; Fox River Grove, Illinois; North Brunswick, New Jersey; Vaughan, Canada; Sulzbach, Germany; Milan, Italy; Madrid, Spain; Hereford, England; Dublin, Ireland; Maisons-Alfort, France; Kensington, Australia; Tokyo, Japan; Shanghai, China; Singapore; Seoul, Korea; and Bangkok, Thailand.

Principles of Consolidation

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

Foreign Currency Translation

Balance sheet accounts of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. Operating accounts are translated at average exchange rates for each year. Net translation gains or losses are adjusted directly to a separate component of other comprehensive income (loss) within stockholders’ equity. Foreign exchange transaction gains (losses), substantially all of which relate to intercompany activity between the Company and its foreign subsidiaries, are included in other income (expense) in the accompanying consolidated statements of operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company is not aware of any specific event or circumstance that would require an update to its accounting estimates or adjustments to the carrying value of its assets and liabilities. The Company’s estimates and assumptions, including those related to credit losses, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes, are reviewed on an ongoing basis and updated as appropriate. Actual results could differ from those estimates.

Revenue Recognition

The Company’s revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. The Company sells primarily directly to hospitals and to a lesser extent to international distributors, as described below, and during the periods presented in its consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on a limited basis. The Company also derives revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.

The Company records revenue under the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard explains that to achieve the core principle, an entity should take the following actions:

Step 1: Identify the contract with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations

Step 5: Recognize revenue when or as the entity satisfies a performance obligation

Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), the Company made the policy election allowed under Topic 606 to account for these activities as fulfillment costs and not as performance obligations.

The Company generally references customer purchase orders to determine the existence of a contract. Orders that are not accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. The Company allocates the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per the Company’s published price lists. In cases where the Company discounts products or provides certain items free of charge, the Company allocates the discount proportionately to all performance obligations, unless the Company can demonstrate that the discount should be allocated entirely to one or more, but not all, of the performance obligations.

The Company records revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which the Company has elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to the Company’s customers and the Company has a present right to receive payment for the goods.

Below is a disaggregation of the Company’s revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):

	Year ended December 31,
	2024		2023		2022
Americas	$	144,583	$	130,308	$	109,439
Europe, Middle East and Africa		59,969		51,099		41,854
Asia Pacific		15,311		12,077		10,358
Total	$	219,863	$	193,484	$	161,651

The Company does not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers under contracts for which the Company has partially satisfied performance obligations, or amounts received from customers for which the Company has not satisfied performance obligations. The Company satisfies its performance obligations under revenue contracts within a short time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of fulfillment of the orders, except in certain geographies such as Italy, Spain, and France, where the payment cycle is customarily longer, but less than 12 months. Accordingly, there is no significant financing component to the Company’s revenue contracts. Additionally, the Company has elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

Customers returning products may be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least 18 months remaining prior to its expiration date, or 12 months for the Company’s hospital customers in Europe, and generally be returned within 30 days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to the Company, either for exchange or credit, has not been material. Nevertheless, the Company provides for an allowance for future sales returns based on the percentage of 12 months historical returns applied against the Company’s recognized period sales, which requires judgment. The Company’s cost of replacing defective products has not been material and is accounted for at the time of replacement.

Research and Development Expense

The Company expenses research and development costs, principally compensation and related expenses, outside services, professional fees, testing, and supplies, as incurred.

Shipping and Handling Costs

The Company records shipping and handling fees paid by customers within net sales, with the related expense recorded in cost of sales as incurred.

Advertising Costs

The Company expenses advertising costs as incurred and includes them as a component of sales and marketing expense in the accompanying consolidated statements of operations. Advertising costs are as follows:

	Year ended December 31,
	2024		2023		2022
			(in thousands)
Advertising expense	$	330	$	240	$	195

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with maturity dates of 90 days or less to be cash equivalents. Cash and cash equivalents are primarily invested in money market funds. These amounts are stated at cost, which approximates fair value.

Short-term Marketable Securities

The Company’s short-term marketable securities are available-for-sale securities carried at fair value, with unrealized gains and losses recorded in other comprehensive income. The Company’s short-term marketable securities consist of a U.S. government money market fund investing mainly in high-quality, short-term securities that are issued or guaranteed by the U.S. government or by U.S. government agencies and instrumentalities, and a short-duration bond fund.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash equivalents represent highly liquid investments with maturities of 90 days or less at the date of purchase. Credit risk related to cash and cash equivalents are limited based on the creditworthiness of the financial institutions at which these funds are held. The Company maintains cash balances in several banks. Accounts located in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Certain account balances exceed the FDIC limit. Cash balances held outside the United States totaled approximately $10.9 million as of December 31, 2024.

Accounts Receivable and Allowance for Credit Losses

The Company’s accounts receivable are with customers based in the United States and internationally. Accounts receivable generally are due within 30 to 60 days of invoice and are stated at amounts due from customers, net of an allowance for credit losses and sales returns, other than in certain European markets where the payment cycle is customarily longer. Opening balance accounts receivable at January 1, 2023 was $22.0 million. The Company performs ongoing credit evaluations of the financial condition of its customers and adjusts credit limits based upon payment history and the current creditworthiness of the customers, as determined by a review of their current credit information. The Company continuously monitors aging reports, collections, and payments from customers, and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues the Company identifies.

The Company closely monitors outstanding receivables for potential collection risks, including those that may arise from economic conditions, in both the United States and international economies. The Company’s European sales to government-owned or supported customers such as hospitals, distributors and agents, particularly in Italy, Spain, and France, may be subject to significant payment delays due to government austerity measures impacting funding and payment practices. As of December 31, 2024, the Company’s receivables in Italy, Spain, and France totaled $1.1 million, $0.9 million and $1.8 million, respectively. Receivables balances with certain government-owned hospitals and government-supported customers in these countries can accumulate over a period of time and then subsequently be settled as lump sum payments. While the Company believes its allowance for credit losses in these countries is adequate as of December 31, 2024, if significant changes were to occur in the payment practices of these European governments or if government funding becomes unavailable, the Company may not be able to collect on receivables due to it from these customers and the Company’s write offs of uncollectible amounts may increase.

The Company writes off accounts receivable when they become uncollectible. Such credit losses have historically been within the Company’s expectations and allowances. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company reviews its allowance for credit losses on a monthly basis and examines all past due balances individually for collectability. The Company records the provision for the allowance for credit losses in general and administrative expenses. The following is a summary of the Company’s allowance for credit losses and sales returns:

	Balance at		Additions		Deductions		Balance at
	Beginning		charged		from		End of
	of Period		to Income		Reserves		Period
	(in thousands)
Allowance for credit losses and sales returns:
Year ended December 31, 2024	$	941	$	813	$	385	$	1,369
Year ended December 31, 2023	$	835	$	344	$	238	$	941
Year ended December 31, 2022	$	679	$	637	$	481	$	835

Concentration of Customers

For the years ended December 31, 2024, 2023 and 2022 no single customer accounted for more than 2% of the Company’s net sales.

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, short-term marketable securities, accounts receivable, and trade payables. The fair value of these instruments approximates their carrying value based upon their short-term nature or variable rates of interest. The Company records unrealized gains and losses on its short-term marketable securities in other comprehensive income. As of December 31, 2024 and 2023, the Company’s short-term marketable securities reflected an unrealized loss of $1.0 million and $1.2 million, respectively, as a result of increasing market interest rates.

Inventory and Other Deferred Costs

Inventory and other deferred costs consists of finished products, work-in-process, raw materials and costs deferred in connection with human tissue cryopreservation services of the Company’s RestoreFlow allograft business. The Company values inventory and other deferred costs at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) and net realizable value. Inventory costs include direct materials, direct labor, and manufacturing overhead. On a quarterly basis, the Company reviews inventory quantities on hand and analyzes the provision for excess and obsolete inventory based primarily on product expiration dating and the Company’s estimated sales forecast, which is based on sales history and anticipated future demand. The Company’s estimates of future product demand may not be accurate, and the Company may understate or overstate the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the value of the Company’s inventory and results of operations.

Cloud Computing Arrangements

The Company capitalizes qualifying set-up and implementation costs related to the Company’s cloud computing arrangements. The deferred costs are amortized over the term of the associated cloud computing arrangement on a straight-line basis which is representative of the pattern in which the Company expects to benefit from access to the cloud computing arrangement.

The Company includes capitalized cloud computing implementation costs in prepaid expenses and other current assets and other assets on the consolidated balance sheet. The following is a summary of the Company’s capitalized cloud computing arrangements:

	As of December 31,
	2024			2023
	(in thousands)
Gross cloud computing arrangements	$	5,121		$	3,619
Less accumulated amortization		(374	)		-
Cloud computing arrangements, net	$	4,747		$	3,619

Property and Equipment

The Company states property and equipment at cost, net of accumulated depreciation. The Company computes depreciation over the estimated useful lives of the related assets using straight-line method as follows:

Description	Useful Life (in years)
Computer hardware	3	–	5
Machinery and equipment	3	–	10
Building and leasehold improvements	The shorter of its useful life or remaining lease term

When assets are retired or disposed, the Company eliminates the asset’s original cost and related accumulated depreciation from the accounts and any gain or loss is reflected in the statement of operations. The Company charges maintenance and repairs to operations as incurred.

Valuation of Business Combinations

The Company assigns the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. The Company assesses the fair value of assets, including intangible assets, using a variety of methods. The Company typically engages an independent appraiser to perform the assessment, so as to measure fair value from the perspective of a market participant.

The Company has accounted for acquisitions using the acquisition method, and the acquired companies’ results have been included in the accompanying consolidated financial statements from their respective dates of acquisition. The Company has recorded acquisition transaction costs in general and administrative expenses and expensed such costs as incurred. The Company bases allocation of the purchase price for acquisitions on estimates of the fair value of the net assets acquired, subject to adjustment upon finalization of the purchase price allocation.

The Company’s acquisitions have historically been made at prices above the fair value of the acquired assets, resulting in goodwill due to expectations of synergies of combining the businesses. These synergies include use of the Company’s existing commercial infrastructure to expand sales of the acquired businesses’ products, use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of the Company’s products, and the elimination of redundant facilities, functions, and staffing.

Contingent Consideration

The Company recognizes contingent consideration for acquisitions at the date of acquisition, based on the fair value at that date, and then re-measures periodically, which may result in adjustments to net income.

Impairment of Long-lived Assets

The Company reviews its long-lived assets (primarily property and equipment, intangible assets, and right-of-use assets) subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, the Company tests the intangible asset for recoverability. The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company measures impairment based on the fair market value of the affected asset using discounted cash flows.

Goodwill

Goodwill represents the amount of consideration paid in connection with business acquisitions in excess of the fair value of assets acquired and liabilities assumed. The Company evaluates goodwill for impairment annually, or more frequently if indicators of impairment are present or changes in circumstances suggest that an impairment may exist. The Company evaluates the December 31 balance of the carrying value of goodwill based on a single reporting unit annually. The Company performs an assessment of qualitative factors to determine if it is “more likely than not” that the fair value of the Company’s reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. The “more likely than not” threshold is defined as having a likelihood of more than 50 percent. The quantitative goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company has determined that no goodwill impairment charges were required for the years ended December 31, 2024, 2023, or 2022.

Intangible Assets

Intangible assets consist primarily of patents, trademarks, technology licenses, and customer relationships acquired in connection with business acquisitions and asset acquisitions. The Company amortizes intangible assets over their estimated useful lives, ranging from 2 to 16 years.

Stock-based Compensation

The Company recognizes as expense the estimated fair value of stock options to employees determined using the Black-Scholes option pricing model. The Company records share-based compensation charges across the consolidated statement of operations based upon the grantee’s primary function. The Company has elected to recognize the compensation cost of all share-based awards on a straight-line basis over the vesting period of the award. Reversal of expense for forfeited awards due to the termination of an employee are recognized in the period of termination. In periods that the Company grants stock options, fair value assumptions are based on volatility, interest, dividend yield, and expected term over which the stock options will be outstanding. The computation of expected volatility is based on the historical volatility of the Company’s stock. The Company bases the interest rate for periods within the contractual life of the award on the U.S. Treasury risk-free interest rate in effect at the time of grant. Historical data on exercise patterns is the basis for estimating the expected life of an option. The Company calculates the expected annual dividend rate by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the closing price of the Common Stock on the grant date.

The Company also issues restricted stock units (RSUs) and performance-based restricted stock units (PSUs) as additional forms of equity compensation to its employees, officers, and directors, pursuant to its stockholder-approved 2006 Stock Option and Incentive Plan (as subsequently amended and restated, the “2006 Stock Incentive Plan”). RSUs entitle the grantee to an issuance of stock at no cost to the grantee and generally vest over a period of time determined by the Company’s Board of Directors at the time of grant. PSUs granted are based on achievement of the Company’s operating income compared to budgeted operating income as approved by the Company’s Board of Directors. The Company determines the fair market value of the award based on the number of RSUs and PSUs granted and the market value of the Company’s common stock on the grant date. The Company amortizes the fair market value of the award to expense over the period of vesting. Unvested RSUs and PSUs are forfeited and canceled as of the date that employment or service to the Company terminates. RSUs and PSUs are settled in shares of the Company’s common stock upon vesting. The Company typically repurchases common stock upon its employees’ vesting in RSUs and PSUs in order to cover any minimum tax withholding liability as a result of the awards having vested.

Leases

The Company determines if an arrangement is or contains a lease at contract inception by assessing whether the arrangement contains an identified asset and whether the lessee has the right to control such asset. The Company is required to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification.

The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. The Company determines the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter, if modified.

For its operating leases with a lease term of 12 months or greater, the Company recognized a right-of-use asset and a lease liability on its consolidated balance sheets. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise.

Operating lease cost for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations. The Company elected the practical expedients to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases).

Commitments and Contingencies

In the normal course of business, the Company is subject to proceedings, lawsuits, and other claims and assessments for matters related to, among other things, patent infringement, business acquisitions, employment, commercial matters and product recalls. The Company assesses the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. The Company makes a determination of the amount of reserves required, if any, for these contingencies after careful analysis of each individual issue. The required reserves may change in the future due to new developments or changes in approach, such as a change in settlement strategy in dealing with each matter. The Company records charges for anticipated losses in connection with litigation and claims against it when the Company concludes a loss is probable and can be reasonably estimated. The Company expenses legal costs associated with loss contingencies as incurred. During the years ended December 31, 2024, 2023, and 2022, the Company was not subject to any material litigation or claims and assessments.

Sales of medical devices outside the U.S. are subject to international regulatory requirements that vary from country to country. These requirements and the amount of time required for approval may differ from the Company’s experiences with the U.S. Food and Drug Administration (“FDA”). In the European Union (“EU”), the Company is required to obtain Conformité Européenne (“CE”) marks for its products, which denote conformity to essential requirements for manufacturers of higher-risk devices. Failure to obtain, retain or maintain these CE marks would impact the Company’s ability to sell our products in certain EU countries and could cause our business to suffer.

Income Taxes

The Company accounts for income taxes under the asset and liability method of accounting for income taxes. Under the asset and liability method, the Company determines deferred taxes based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The provision for income taxes includes taxes currently payable and deferred taxes resulting from the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities. The Company maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company includes changes in the valuation allowances in the Company’s tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

The Company recognizes, measures, presents, and discloses in its financial statements, uncertain tax positions that it has taken or expects to take on a tax return. The Company recognizes in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.

Comprehensive Income (Loss)

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other than reported net income, comprehensive income includes foreign currency translation adjustments and unrealized gains and losses on the Company’s marketable securities, which are disclosed in the accompanying consolidated statements of comprehensive income. There were no reclassifications out of comprehensive income for the years ended December 31, 2024, 2023, or 2022.

Restructuring

The Company records restructuring charges incurred in connection with consolidation or relocation of operations, exited business lines, reductions in force, or distributor terminations. The Company bases these restructuring charges, which reflect the Company’s commitment to a termination or exit plan, on estimates of the expected costs associated with site closure, legal matters, contract terminations, severance payments, or other costs directly related to the restructuring. If the actual cost incurred exceeds the estimated cost, an additional charge to earnings will result. If the actual cost is less than the estimated cost, the Company will recognize a credit to earnings.

Net Income Per Share

The Company computes basic net income per common share by dividing the net income by the weighted average number of shares of common stock outstanding for the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock awards, using the treasury stock method, and outstanding convertible notes, using the if-converted method.

The Company has excluded potential dilutive securities from the computation of diluted net loss per share that would be anti-dilutive to net income per share. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income per share attributable to common stockholders for the periods indicated above because including them would have had an anti-dilutive effect:

	Year ended December 31,
	2024		2023		2022
Options to purchase common stock		8,939		294,580		291,753
Restricted stock units		3,769		-		1,300
Convertible senior notes		1,440,737		-		-
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		1,453,445		294,580		293,053

The computation of basic and diluted net income per share was as follows:

	Year ended December 31,
	2024		2023		2022
	(in thousands, except per share data)
Basic:
Net income available for common stockholders	$	44,038	$	30,105	$	20,636
Weighted average shares outstanding		22,452		22,217		21,975
Basic earnings per share	$	1.96	$	1.36	$	0.94
Diluted:
Net income available for common stockholders	$	44,038	$	30,105	$	20,636
Weighted-average shares outstanding		22,452		22,217		21,975
Common stock equivalents, if dilutive		327		206		196
Shares used in computing diluted earnings per common share		22,779		22,423		22,171
Diluted earnings per share	$	1.93	$	1.34	$	0.93
Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		1,453		295		293

Convertible Debt

The Company applies the provisions of ASU 2020-06, which simplify the accounting related to convertible debt instruments by removing major separation models required under current GAAP. Accordingly, the Company does not bifurcate the liability and equity components of the convertible debt on its consolidated balance sheets. The Company’s convertible debt is reflected as a liability on the Company’s consolidated balance sheets, with the initial carrying amount equal to the principal amount of the debt, net of issuance costs. The issuance costs are treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the instruments utilizing the effective interest method. The Company accounts for its convertible debt as a single liability with no separate accounting for embedded conversion features.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures.

The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis. The adoption of 2023-07 did not change the way that the Company identifies its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures. Refer to Note 12 for further information on the Company’s reportable segment.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures.

In November 2024, the FASB issued ASU 2024-04, Induced Conversions of Convertible Debt Instruments. The new guidance clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. The guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted, and it can be adopted either on a prospective or retrospective basis. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures.