What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-08 · 107 added, 81 removed, 200 unchanged (48% of the section changed)

2 unchanged sentences

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These statements include, among other things, our expectations and intentions regarding our strategic objectives and the means to achieve them, our beliefs and expectations regarding macroeconomic conditions, including fluctuations in currency exchange rates, inflation, higher interest rates, market volatility, threats or actual imposition of tariffs, customs duties and fees by nations and retaliatory actions, threats of or actual economic slowdowns or recessions, or escalating trade wars and geopolitical tensions, our expectations and beliefs regarding customer and consumer purchasing behavior and changes in consumer spending habits, our expectations regarding implemented or proposed tariffs and retaliatory actions or other trade restrictions or measures taken by the United States and other countries that have or could impact our products and product sales, our expectations regarding product mix, product launches, product pilots and product adoption, our expectations regarding competition and our ability to compete in our target markets, our expectations regarding the sales growth of our intraoral scanners, clear aligners and other products, our expectations regarding the impact of the military conflicts in the Middle East and Ukraine and increased geopolitical tensions involving Taiwan and the South China Sea and our operations and assets in Israel and Russia, our marketing and efforts to build our brand awareness, our estimates regarding the size and opportunities of the markets we are targeting along with our expectations for growth in those markets and potential collaboration opportunities, our beliefs regarding the impact of technological innovation in general, and in our solutions and products in particular, on target markets and patient care, our beliefs regarding digital dentistry and its potential to impact our business, our intentions regarding expanding our business, including its impact on our operational flexibility and responsiveness to customer demand, our expectations regarding our tax positions and the judgements we make related to our tax obligations, our beliefs regarding the importance of our manufacturing operations on our success, our beliefs regarding the need for and benefits of our technological development on Invisalign treatment, the areas of development in which we focus our efforts, and the advantages of our intellectual property portfolio, our beliefs regarding our business strategy and growth drivers, our expectations regarding the utilization rates for our products, including the impact of marketing on those rates and causes for periodic fluctuations of the rates, our expectations regarding the existence and impact of seasonality, our expectations regarding the productivity impact sales representatives will have on our sales and the impact of specialization of those representatives in sales channels, our expectations regarding the continued expansion of our international markets and their growth, our expectations regarding impacts or staying in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States and internationally, our beliefs regarding our culture and commitment and its impact on our financial and operational performance and its importance to our future success, our expectations for future investments in and benefits from sales and marketing activities, our preparedness and our customers’ preparedness to react to changing circumstances and demand, our expectations for our expenses and capital obligations and expenditures in particular, our intentions to control spending and for investments, our intentions regarding the investment of and ability to repatriate foreign earnings, our belief regarding the sufficiency of our cash and investment balances and borrowing capacity, our judgments regarding the estimates used in our revenue recognition and assessment of goodwill and intangible assets, our predicted level of operating expenses and gross margins and other factors beyond our control, as well as other statements regarding our future operations, financial condition and prospects and business strategies.

our expectations regarding implemented or proposed tariffs and retaliatory actions or other trade restrictions or measures taken by the United States and other countries that have or could impact our products and product sales, our expectations regarding product mix, product launches, product pilots and product adoption, our expectations regarding competition and our ability to compete in our target markets, our expectations regarding the sales growth of our intraoral scanners, clear aligners and other products, our expectations regarding the impact of the military conflicts in the Middle East and Ukraine and increased geopolitical tensions involving Taiwan and the South China Sea and our operations and assets in Israel and Russia, our ability to implement and realize the anticipated benefits currently expected from actions to streamline operations and reallocate resources to better align our long-term growth with our profitability objectives, our marketing and efforts to build our brand awareness, our estimates regarding the size and opportunities of the markets we are targeting along with our expectations for growth in those markets and potential collaboration opportunities, our beliefs regarding the impact of technological innovation in general, and in our solutions and products in particular, on target markets and patient care, our beliefs regarding digital dentistry and its potential to impact our business, our intentions regarding expanding our business, including its impact on our operational flexibility and responsiveness to customer demand, our expectations regarding our tax positions and the judgments we make related to our tax obligations, our beliefs regarding the importance of our manufacturing operations on our success, our beliefs regarding the need for and benefits of our technological development on Invisalign treatment, the areas of development in which we focus our efforts, and the advantages of our intellectual property portfolio, our beliefs regarding our business strategy and growth drivers, our expectations regarding the utilization rates for our products, including the impact of marketing on those rates and causes for periodic fluctuations of the rates, our expectations regarding the existence and impact of seasonality, our expectations regarding the productivity impact sales representatives will have on our sales and the impact of specialization of those representatives in sales channels, our expectations regarding the continued expansion of our international markets and their growth, our expectations regarding impacts or staying in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States and internationally, our beliefs regarding our culture and commitment and its impact on our financial and operational performance and its importance to our future success, our expectations for future investments in and benefits from sales and marketing activities, our preparedness and our customers’ preparedness to react to changing circumstances and demand, our expectations for our expenses and capital obligations and expenditures in particular, our intentions to control spending and for investments, our intentions regarding the investment of and ability to repatriate foreign earnings, our belief regarding the sufficiency of our cash and investment balances and borrowing capacity, our judgments regarding the estimates used in our revenue recognition and assessment of goodwill and intangible assets, our predicted level of operating expenses and gross margins and other factors beyond our control, as well as other statements regarding our future operations, financial condition and prospects and business strategies.

These statements may contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or other words indicating future results.

2 unchanged sentences

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read together with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission (the “SEC”).

Executive Overview of Results

5 unchanged sentences

and (iv) orthodontic utilization.

Our growth strategy depends on our ability

to facilitate the digital transformation of dentistry happening around the world, our continuous focus on innovation, and expansion to meet and exceed evolving customer expectations as the array of products and services available to them increases.

Our growth strategy depends on our ability to facilitate the digital transformation of dentistry, our continuous focus on innovation, and expansion to meet and exceed evolving customer expectations as the array of products and services available to them increases.

Below is a discussion of the significant trends and uncertainties that could impact our operations:

Macroeconomic Challenges, Trade Impediments and Geopolitical Tensions

Our revenues are susceptible to fluctuations resulting from events and circumstances, including macroeconomic conditions, fluctuations in foreign currency exchange rates, inflation, threats or actual imposition of tariffs, customs duties and fees by nations and retaliatory actions, threats of or actual slowdowns or recessions, supply chain challenges, market volatility, higher interest rates, employment levels, health insurance coverage, wages, debt obligations, discretionary income and other factors, each of which impacts customer confidence, consumer sentiment and demand.

Many of these same factors also impact the availability of certain raw materials, parts and components used in our products as well as our costs and those of our suppliers through higher raw material prices, transportation costs, labor costs, supply and distribution operations.

In the first quarter of 2025, we believe sales of our products were adversely impacted by macroeconomic conditions that negatively affected disposable income and consumer demand.

We believe this will continue for the remainder of 2025, particularly if tariffs or the threat of tariffs and retaliatory actions impair discretionary spending.

We also expect the geopolitical conflicts involving Ukraine, the Middle East, China and other regions to continue to create market uncertainties and dampen consumer sentiment and demand.

Specifically, government actions in key strategic countries or regions relating to implemented or proposed tariffs and retaliatory actions, particularly in the United States, China, Europe, Israel and Mexico are expected to adversely impact our revenue and cost of goods sold.

Additionally, the escalating trade war and geopolitical tensions between the United States and China may result in the limitation or prohibition of the availability of certain raw materials, components and parts necessary for our products or the products of our suppliers.

Our revenues are susceptible to fluctuations resulting from events and circumstances, including macroeconomic conditions, threats or actual imposition of tariffs, inflation, higher interest rates, customs duties and fees by nations and retaliatory actions, threats of or actual slowdowns or recessions, wages, debt obligations, discretionary income, fluctuations in foreign currency exchange rates, supply chain challenges, market volatility, employment levels, health insurance coverage, and other factors, each of which impacts customer confidence, consumer sentiment and ultimately demand for dental services.

Many of these factors also impact the availability of certain raw materials, parts and components used in our products as well as our costs and those of our suppliers through higher raw material prices, transportation costs, labor costs, supply and distribution operations.

In the second quarter of 2025, we believe sales of our products were adversely impacted by certain macroeconomic conditions, including global tariff volatility, inflation, and higher interest rates, that negatively affected dental patient demand.

Patient traffic growth remained uneven for many doctors, with orthodontic starts down for four consecutive years.

We believe uncertainty not only impacts consumer purchasing decisions but also the decisions that doctors make, especially those doctors who offer both clear aligners and wires and brackets and who have existing inventories of wire and brackets and the time to treat patients when orthodontic starts are slowing or diminishing.

In the second quarter of 2025, we believe this resulted in an increase in orthodontic starts using brackets and wires in lieu of clear aligners.

We believe these trends may continue as long as consumer economic uncertainty persists, particularly if tariffs or the threat of tariffs and retaliatory actions impair discretionary spending.

We also expect the geopolitical conflicts involving Ukraine, the Middle East, China and other regions will continue to add to market uncertainties and dampen consumer sentiment and demand.

More directly, we believe government actions relating to implemented or proposed tariffs and retaliatory actions in key strategic countries or regions, particularly in the United States, China, Europe, Brazil, Canada, Israel and Mexico may adversely impact our revenue and cost of goods sold.

Additionally, the trade war and geopolitical tensions between the United States and China may result in the limitation or prohibition of the availability of certain raw materials, components and parts necessary for our products or the products of our suppliers.

The degree of our exposure is dependent on, among other things, the type of goods subject to any tariffs or trade restrictions enacted, the tariff rates or limits imposed, the timing of the tariffs or restrictions and any other retaliatory measures enacted.

3 unchanged sentences

Additionally, a material amount of our revenues are derived internationally and many of our international operations are denominated in currencies other than the U.S.

In the first quarter of 2025, the U.S.

dollar strengthened against major currencies, which negatively impacted our financial condition and results of operations for the quarter.

In the second quarter of 2025, the U.S.

dollar weakened against major currencies, which positively impacted our financial condition and results of operations for the quarter.

Foreign exchange volatility and the subsequent strengthening or weakening of the U.S dollar against other currencies remains uncertain and unpredictable.

We continue to monitor the potential for violence and military actions that may directly or indirectly impact our personnel, manufacturing, supply chain, and sales.

For instance, ongoing conflicts in Ukraine and the Middle East as well as increased geopolitical tensions involving Taiwan and the South China Sea may further exacerbate general and regional macroeconomic instability, particularly if fighting erupts, intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise materially impacts our operations or consumer spending.

Our iTero business is headquartered in Israel and, although the sales, delivery times and cost of shipping our products have not been materially impacted and we have put measures in place to help reduce the future risks, it remains uncertain if there will be impacts on our sales, delivery times or cost of shipping our products.

For instance, ongoing conflicts in Ukraine and the Middle East, including military actions in Iran and Israel, as well as increased geopolitical tensions involving Taiwan and the South China Sea may further exacerbate general and regional macroeconomic instability.

This is particularly true if fighting erupts, intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise materially impacts our operations or consumer spending.

Our iTero business is headquartered in Israel and, although the sales, delivery times and cost of shipping have not been materially impacted to date, the situation remains fluid.

We have implemented contingency measures to help reduce future risks, but it is uncertain whether further escalation could disrupt our operations.

While there have been export and import restrictions imposed against products originating from and businesses operating in Israel, they have not materially impacted our sales or operations to date although we continue to monitor the risk.

We expect to take a series of actions in the second half of fiscal 2025 to streamline operations and reallocate resources to better align with our long-term growth and profitability objectives.

Further discussion of these potential actions may be found in Part II, Item 5 “Other Information.”

Changing Product Preferences

As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we continue to anticipate customer and patient expectations and demands will continue to evolve.

We expect to meet customer demands with innovative treatment options that include more choices to address a wider scope of treatment goals and budgets based on our existing and new products.

As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we anticipate customer and patient expectations and demands will continue to evolve.

We expect to meet customer

demands with innovative treatment options that include more choices to address a wider scope of treatment goals and budgets based on our existing and new products.

This may result in larger and unpredictable variations in geographic and product mix and selling prices with uncertain implications on our financial statements and business operations.

For instance, we continue to experience a shift from certain of our higher average selling priced comprehensive products to lower average selling priced products such as our Invisalign Comprehensive 3in3 product.

We strive to manage the challenges from the trends and uncertainties, including the macroeconomic conditions, tariffs and retaliatory measures, military conflicts and the evolution of our target markets, by focusing on improving our operations, further increasing flexibility and efficiencies in our processes, adjusting our business models to changing circumstances and offering products that meet market demand.

Specifically, we are managing financial impacts through strategic product innovations, introductions and pricing actions, implementing cost saving measures and evaluating hiring needs.

As an example, there was significant adoption of the Invisalign Comprehensive 3in3 product after it was introduced in 2023 that continued in 2024.

The 3in3 configuration offers doctors Invisalign Comprehensive treatment with a three-year treatment expiration date and three additional clear aligners included prior to the treatment expiration date.

The 3in3 product also allows us to recognize more revenue up front while doing so at a lower price as compared to our traditional Invisalign comprehensive product that has a five-year treatment expiration date with unlimited additional clear aligners prior to the treatment end date.

Further discussion of the impact of these challenges on our business may be found in Part II, Item 1A “Risk Factors.”

1 unchanged sentence

We measure our performance against the foregoing strategic priorities by the achievement of key financial and operating metrics.

For the three months ended March 31, 2025, our business operations reflect the following:

For the three months ended June 30, 2025, our business operations reflect the following:

• Revenues of $1,012 million, a decrease of 1.6% year-over-year;

1 unchanged sentence

• Clear Aligner case volume increased 0.3% year-over-year and Clear Aligner case volume for teens and growing patients increased from 216.7 thousand shipments to 223.2 thousand or 3.0% year-over-year;

• Imaging Systems and computer-aided design and computer-aided manufacturing (“CAD/CAM”) Services revenues of $182 million, an increase of 1.2% year-over-year;

• Imaging Systems and CAD/CAM services revenues of $208 million, an increase of 5.6% year-over-year;

• Income from operations of $163 million and operating margin of 16.1%;

1 unchanged sentence

• Net income of $125 million with diluted net income per share of $1.72;

• Cash and cash equivalents of $873 million as of March 31, 2025;

• Cash and cash equivalents of $901 million as of June 30, 2025;

• Cash provided by operating activities of $129 million;

• Capital expenditures of $21 million, primarily related to investments in our manufacturing capacity and facilities;

• Number of employees was 21,200 as of March 31, 2025, a decrease of 2.2% year-over-year.

• Number of employees was 21,485 as of June 30, 2025, a decrease of 1.5% year-over-year.

Other Statistical Data and Trends

• As of March 31, 2025, approximately 20 million people worldwide have been treated with our Invisalign system.

• As of June 30, 2025, approximately 21 million people worldwide have been treated with our Invisalign system.

Management measures these results by comparing to the millions of people who can benefit from straighter teeth and uses this data to target opportunities to expand the market for orthodontics by educating consumers about the benefits of straighter teeth using the Invisalign system.

• For the first quarter of 2025, the total number of Invisalign trained doctors cases were shipped to (doctor submitters) was 85.3 thousand compared to 83.5 thousand in first quarter of 2024, a 2.1% increase.

• The total utilization rate in the first quarter of 2025 increased to 7.5 cases per doctor compared to 7.2 in the first quarter of 2024.

This increase was primarily driven by improved utilization in our international markets.

• The clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) decreased from $1,350 in the first quarter of 2024 to $1,240 in the first quarter of 2025, an 8.1% decrease.

• For the second quarter of 2025, the total number of Invisalign trained doctors cases were shipped to (doctor submitters) was 86.3 thousand compared to 86.1 thousand in the second quarter of 2024, a 0.1% increase.

• The total utilization rate in the second quarter of 2025 remained flat at 7.5 cases per doctor compared to the second quarter of 2024.

• The clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) decreased from $1,295 in the second quarter of 2024 to $1,250 in the second quarter of 2025, a 3.5% decrease.

Results of Operations

10 unchanged sentences

▪ Our Systems and Services segment consists of sales related to our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options, scanner wand upgrades, and non-system revenues from leases of scanner systems, sales of pre-owned scanner systems, subscription software, disposables, pay per scan services, as well as exocad ’ s CAD/CAM software solutions that integrate workflows to dental labs and dental practices.

Net revenues for our Clear Aligner and Systems and Services segments for the three months ended March 31, 2025 and 2024 are as follows (in millions) 1 :

Net revenues for our Clear Aligner and Systems and Services segments for the three and six months ended June 30, 2025 and 2024 are as follows (in millions) 1 :

Three Months Ended

Net Revenues 2025 2024 Change

June 30, Six Months Ended

Net Revenues 2025 2024 Change 2025 2024 Change

Clear Aligner net revenues

4 unchanged sentences

Certain tables may not sum or recalculate due to rounding.

1 Beginning with this quarterly report on Form 10-Q for the quarter ended March 31, 2025, we are no longer disclosing Clear Aligner net revenues for Americas, International and Non-case.

1 Beginning with the quarterly report on Form 10-Q for the quarter ended March 31, 2025, we are no longer disclosing Clear Aligner net revenues for Americas, International and Non-case.

Rather our disclosure will align with our Clear Aligner reportable segment in total.

Clear Aligner Case Volume

Case volume data which represents Clear Aligner case shipments for the three months ended March 31, 2025 and 2024 is as follows (in thousands):

Case volume data which represents Clear Aligner case shipments for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Total case volume 644.4 642.7 1.6 0.3 % 1,286.7 1,247.8 38.9 3.1 %

1 unchanged sentence

Certain tables may not sum or recalculate due to rounding.

For the three months ended March 31, 2025, total net revenues decreased by $18 million as compared to the same period in 2024, primarily due to a decrease in Clear Aligner net revenues from lower average selling prices (“ASP”).

The decrease in Clear Aligner net revenues was partially offset by an increase in Systems and Services net revenue primarily due to an increase in sales of scanner wands.

For the three and six months ended June 30, 2025, total net revenues decreased by $16 million and $34 million, respectively, as compared to the same periods in 2024, primarily due to a decrease in Clear Aligner net revenues driven by a decrease in average selling price (“ASP”).

The decrease in Clear Aligner net revenues was partially offset by an increase in Systems and Services net revenues primarily due to an increase in sales of scanner wands.

Clear Aligner

For the three months ended March 31, 2025, Clear Aligner net revenues decreased by $20 million as compared to the same period in 2024, primarily due to a decrease in ASP, driven by higher discounts and a product mix shift to lower priced products, resulting in a decrease of net revenues of $40 million and a net revenue decrease of $26 million from unfavorable

foreign exchange rates.

These decreases were partially offset by an increase in volume which increased net revenue by $46 million.

For the three months ended June 30, 2025, Clear Aligner net revenues decreased by $27 million as compared to the same period in 2024, primarily due to a decrease in ASP, driven by a product mix shift to lower priced products and higher discounts,

resulting in a decrease of net revenues of $34 million.

The decrease from ASP was partially offset by favorable foreign exchange rates and an increase in volume, which increased net revenues by $5 million and $2 million, respectively.

For the six months ended June 30, 2025, Clear Aligner net revenues decreased by $48 million as compared to the same period in 2024, primarily due to a decrease in ASP, driven by a product mix shift to lower priced products and higher discounts, resulting in a decrease of net revenues of $73 million.

Clear Aligner net revenues were further negatively impacted by $21 million due to unfavorable foreign exchange rates.

These decreases were partially offset by an increase in volume which increased net revenues by $47 million.

Systems and Services

For the three months ended March 31, 2025, Systems and Services net revenues increased by $2 million as compared to the same period in 2024, primarily due to an increase of $12 million in sales of scanner wands, driven by strong volume partially offset by lower ASP, and a $4 million increase from non-system sales.

These increases were partially offset by lower scanner system sales of $9 million, driven by lower volume and ASP, and $5 million lower net revenues from unfavorable foreign exchange rates.

For the three months ended June 30, 2025, Systems and Services net revenues increased by $11 million as compared to the same period in 2024, primarily due to an increase of $11 million in sales of scanner wands, driven by strong volume partially offset by lower scanner wand ASP, a $5 million increase from non-system sales and a $1 million favorable impact from foreign exchange rates.

These increases were partially offset by lower scanner system sales of $6 million, primarily driven by lower scanner system ASP.

For the six months ended June 30, 2025, Systems and Services net revenues increased by $13 million as compared to the same period in 2024, primarily due to an increase of $23 million in sales of scanner wands, driven by strong volume partially offset by lower scanner wand ASP, and a $10 million increase from non-system sales.

These increases were partially offset by lower scanner system sales of $15 million, driven by lower volume and ASP, and a $4 million negative impact from unfavorable foreign exchange rates.

Cost of net revenues and gross profit (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Clear Aligner

15 unchanged sentences

Cost of net revenues includes personnel-related costs including payroll and stock-based compensation for staff involved in the production process, the cost of materials, packaging, freight and shipping, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs.

For the three and six months ended June 30, 2025, our gross margin percentage decreased as compared to the same periods in 2024 primarily due to lower clear aligner ASP partially offset by operational efficiencies.

Clear Aligner

For the three months ended March 31, 2025, our gross margin percentage decreased as compared to the same period in 2024 primarily due to lower ASPs partially offset by lower manufacturing spend.

For the three months ended June 30, 2025, our gross margin percentage decreased as compared to the same period in 2024 primarily due to lower ASPs partially offset by lower freight costs.

For the six months ended June 30, 2025, our gross margin percentage decreased as compared to the same period in 2024 primarily due to lower ASPs partially offset by lower manufacturing spend and freight costs.

Systems and Services

For the three months ended March 31, 2025, our gross margin percentage decreased as compared to the same period in 2024 primarily due to a decrease in scanner wand and scanner system ASPs, partially offset by lower manufacturing spend and services efficiency.

For the three and six months ended June 30, 2025, our gross margin percentage increased as compared to the same periods in 2024 primarily due to an increase in operational efficiencies partially offset by lower scanner wand and scanner system ASPs and tariffs.

Selling, general and administrative (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Selling, general and administrative $ 448.7 $ 452.3 $ (3.6) $ 896.3 $ 904.1 $ (7.8)

3 unchanged sentences

Selling, general and administrative expense generally includes personnel-related costs, including payroll, stock-based compensation and commissions for our sales force, marketing and advertising expenses including media, market research, marketing materials, clinical education, trade shows and industry events, legal and outside service costs, equipment, software and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT.

For the three months ended March 31, 2025, selling, general and administrative expense decreased compared to the same period in 2024 primarily due to lower employee costs, including salaries, fringe benefits, stock-based compensation and bonus and lower outside services, partially offset by higher marketing expense.

For the three months ended June 30, 2025, selling, general and administrative expense decreased compared to the same period in 2024 primarily due to lower employee costs, including salaries, fringe benefits, stock-based compensation and bonus, partially offset by higher marketing expense and outside services.

For the six months ended June 30, 2025, selling, general and administrative expense decreased compared to the same period in 2024 primarily due to lower employee costs, including salaries, fringe benefits, and bonus and lower outside services, partially offset by higher marketing expense.

Research and development (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Research and development $ 96.4 $ 92.2 $ 4.2 $ 193.6 $ 184.1 $ 9.5

3 unchanged sentences

Research and development expense generally includes personnel-related costs, including payroll and stock-based compensation, outside service costs associated with the research and development of new products and enhancements to existing products, software, equipment, material and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT.

For the three months ended March 31, 2025, research and development expense increased compared to the same period in 2024 primarily due to higher employee costs, including salaries, fringe benefits, bonus, stock-based compensation, net of capitalized labor costs related to internal use software.

For the three and six months ended June 30, 2025, research and development expense increased compared to the same periods in 2024 primarily due to higher employee costs, including salaries, fringe benefits and stock-based compensation, partially offset by lower bonus cost.

Legal settlement loss (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Legal settlement loss

3 unchanged sentences

Certain tables may not sum or recalculate due to rounding.

For the three months ended March 31, 2025, we recorded losses of $4.2 million due to legal settlements.

For the six months ended June 30, 2025, we recorded losses of $4 million due to legal settlements.

Refer to Note 7 “ Legal Proceedings ” of the Notes to Condensed Consolidated Financial Statements for more information.

1 unchanged sentence

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Clear Aligner

10 unchanged sentences

1 Refer to Note 14 “Segments and Geographical Information” of the Notes to Condensed Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to Condensed Consolidated Income from Operations.

For the three months ended March 31, 2025, our operating margin percentage decreased compared to the same period in 2024 primarily due to lower gross margin from our clear aligner reportable segment and an increase in legal settlement losses.

Refer to Note 7 “ Legal Proceedings ” of the Notes to Condensed Consolidated Financial Statements for more information.

For the three months ended June 30, 2025, our operating margin percentage increased compared to the same period in 2024 primarily due to legal settlement losses incurred in 2024 partially offset by lower gross margin from our clear aligner reportable segment.

For the six months ended June 30, 2025, our operating margin percentage decreased slightly compared to the same period in 2024 primarily due to lower gross margin from our clear aligner reportable segment partially offset by a decrease in legal settlement losses.

Clear Aligner

For the three months ended March 31, 2025, our operating margin percentage decreased compared to the same period in 2024 primarily due to a decrease in gross margin and a decrease in operating leverage primarily due to higher marketing spend.

For the three and six months ended June 30, 2025, our operating margin percentage decreased compared to the same periods in 2024 primarily due to a decrease in gross margin and a decrease in operating leverage primarily due to higher marketing spend.

Systems and Services

For the three months ended March 31, 2025, our operating margin percentage increased compared to the same period in 2024 primarily due to operating leverage partially offset by lower gross margin.

For the three and six months ended June 30, 2025, our operating margin percentage increased compared to the same periods in 2024 primarily due to higher gross margin and improved operating leverage primarily from lower employee spend.

Interest income (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Interest income $ 2.9 $ 3.3 $ (0.4) $ 8.2 $ 7.7 $ 0.5

3 unchanged sentences

Interest income generally includes interest earned on cash, cash equivalents and investment balances.

For the three months ended March 31, 2025, interest income increased compared to the same period in 2024 primarily due to higher cash and cash equivalents.

For the three months ended June 30, 2025, interest income decreased compared to the same period in 2024 primarily due to lower interest rates partially offset by higher cash and cash equivalents.

For the six months ended June 30, 2025, interest income increased compared to the same period in 2024 primarily due to higher cash and cash equivalents partially offset by lower interest rates.

Other income (expense), net (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Other income (expense), net $ 7.6 $ (6.5) $ 14.1 $ 11.7 $ (6.6) $ 18.3

3 unchanged sentences

Other income (expense), net, generally includes foreign exchange gains and losses, gains and losses on foreign currency forward contracts, interest expense, gains and losses on equity investments and other miscellaneous charges.

For the three months ended March 31, 2025, other income (expense), net increased compared to the same period in 2024 primarily due to the favorable impact of foreign exchange rates partially offset by a gain recorded on our equity investments in the first quarter of 2024.

For the three months ended June 30, 2025, other income (expense), net increased compared to the same period in 2024 primarily due to favorable foreign exchange rates.

For the six months ended June 30, 2025, other income (expense), net increased compared to the same period in 2024 primarily due to favorable foreign exchange rates partially offset by a gain recorded on our equity investments in the first quarter of 2024.

Provision for income taxes (in millions):

Three Months Ended

2025 2024 Change

June 30, Six Months Ended

2025 2024 Change 2025 2024 Change

Provision for income taxes $ 48.9 $ 47.3 $ 1.6 $ 96.1 $ 100.7 $ (4.5)

2 unchanged sentences

Certain tables may not sum or recalculate due to rounding.

Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three month periods ended March 31, 2025 and 2024 primarily due to the recognition of additional tax expense resulting from U.S.

Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three and six month periods ended June 30, 2025 and 2024 primarily due to the recognition of additional tax expense resulting from U.S.

taxes on foreign earnings, foreign income taxed at different rates, state income taxes and non-deductible expense in the U.S.

The decrease in our effective tax rate for the three months ended March 31, 2025 compared to the same period in 2024 is primarily attributable to the change in our jurisdictional mix of income, a decrease in U.S.

taxes on foreign earnings, partially offset by remeasurement of Switzerland deferred tax asset due to Swiss tax rate change in 2024 and lower excess tax benefits from stock-based compensation.

The decrease in our effective tax rate for the three months ended June 30, 2025 compared to the same period in 2024 is primarily attributable to a decrease in U.S.

taxes on foreign earnings, partially offset by the change in our jurisdictional mix of income.

The decrease in our effective tax rate for the six months ended June 30, 2025 compared to the same period in 2024 is primarily attributable to a decrease in U.S.

taxes on foreign earnings, partially offset by the change in our jurisdictional mix of income, remeasurement of Switzerland deferred tax assets due to a tax rate change in 2024 and lower tax deductions from stock-based compensation.

Liquidity and Capital Resources

Liquidity and Trends

As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $873 million and $1,044 million, respectively, of which approximately $740 million and $855 million, respectively, were held by our foreign subsidiaries.

As of June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $901 million and $1,044 million, respectively, of which approximately $708 million and $855 million, respectively, were held by our foreign subsidiaries.

We continue to evaluate opportunities to repatriate our foreign earnings if or when needed.

2 unchanged sentences

We believe that our current cash balances and the borrowing capacity under our credit facility, if necessary, will be sufficient to fund our business for at least the next 12 months.

Our material cash requirements as of March 31, 2025 are as follows:

Our material cash requirements as of June 30, 2025 are as follows:

• Our purchase commitments consist primarily of open purchase orders for goods and services, including manufacturing inventory, supplies and services, sales and marketing, research and development services and technological services, issued in the normal course of business.

There have been no material changes to our purchase commitments for goods and services during the three months ended March 31, 2025 as compared to the year ended December 31, 2024.

• There have been no material changes to our future operating lease payments during the three months ended March 31, 2025 as compared to the year ended December 31, 2024.

There have been no material changes to our purchase commitments for goods and services during the six months ended June 30, 2025 as compared to the year ended December 31, 2024.

• There have been no material changes to our future operating lease payments during the six months ended June 30, 2025 as compared to the year ended December 31, 2024.

• We expect our investments in capital expenditures for fiscal year 2025 to be between $100 million and $125 million.

1 unchanged sentence

Despite the challenging market conditions, we intend to continue to invest in research and development, manufacturing and treatment planning to meet actual and anticipated demand.

• In April 2025, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock, none of which has been utilized.

• In April 2025, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock.

The April 2025 Repurchase Program is expected to be completed over a period of up to three years.

We continually evaluate opportunities to repurchase shares of our common stock depending on various factors including our share price and current liquidity requirements.

Refer to Note 10 “Common Stock Repurchase Program” of the Notes to Condensed Consolidated Financial Statements for details on our stock repurchase programs.

• As of March 31, 2025, we had no material off-balance sheet arrangements that have or are reasonably likely to have, a current or future material impact on our liquidity or capital resources.

• As of March 31, 2025, we agreed, in principle, to settle a legal matter for a total of $31.75 million.

We expect to seek court or administrative approvals, as applicable, in the second quarter of 2025.

Settlement payments will be made in accordance with the terms and conditions as set forth in the settlement agreements and/or court approvals.

• As of June 30, 2025, we had no material off-balance sheet arrangements that have or are reasonably likely to have, a current or future material impact on our liquidity or capital resources.

• On July 7, 2025, we issued a payment for $31.75 million to an escrow agency to settle an antitrust matter.

Refer to Note 7 “ Legal Proceedings ” of the Notes to Condensed Consolidated Financial Statements for more information.

Sources and Uses of Cash

The following table summarizes our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

The following table summarizes our Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (in thousands):

Six Months Ended

Net cash flow provided by (used in):

6 unchanged sentences

Operating Activities

For the three months ended March 31, 2025, cash flows from operations of $53 million resulted primarily from our net income of approximately $93 million as well as the following:

For the six months ended June 30, 2025, cash flows from operations of $181 million resulted primarily from our net income of approximately $218 million as well as the following:

Significant adjustments to net income

• Deferred taxes of $34 million related to a decrease in our long term deferred tax position;

• Depreciation and amortization of $80 million related to our investments in property, plant and equipment and intangible assets;

• Stock-based compensation of $93 million related to equity awards granted to employees and directors;

• Non-cash operating lease costs of $9 million related to operating lease cost;

• Non-cash operating lease costs of $19 million;

• Other non-cash operating activities of $8 million primarily related to an increase in our bad debt allowance.

1 unchanged sentence

• Net outflow of $121 million in accounts receivable due to timing of collections;

• Net outflow of $68 million in accrued and other long-term liabilities primarily due to the payment of fiscal year 2024 bonuses;

• Net outflow of $36 million in accrued and other long-term liabilities primarily due to the payment of fiscal year 2024 bonuses in the first quarter of 2025;

• Net outflow of $65 million in deferred revenue.

Investing Activities

Net cash used in investing activities was $25 million for the three months ended March 31, 2025 which was solely related to purchases of property, plant and equipment.

Net cash used in investing activities was $57 million for the six months ended June 30, 2025 which was primarily related to an outflow of $47 million for purchases of property, plant and equipment and $10 million for our additional investment in SD Holding Company.

Financing Activities

Net cash used in financing activities was $207 million for the three months ended March 31, 2025 and primarily consisted of an outflow of $201 million for share repurchases and payroll taxes paid for equity awards through share withholdings of $20 million which were partially offset by $14 million of proceeds from the issuance of common stock under our employee stock purchase plan.

Net cash used in financing activities was $303 million for the six months ended June 30, 2025 and primarily consisted of an outflow of $297 million for share repurchases and payroll taxes paid for equity awards through share withholdings of $20 million which were partially offset by $14 million of proceeds from the issuance of common stock under our employee stock purchase plan.

Critical Accounting Estimates

12 unchanged sentences

We allocate consideration for each clear aligner treatment plan based on each unit’s SSP.

Management considers a variety of factors such as same or similar product historical sales, costs and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates.

Management considers a variety of factors such as same or similar product historical sales, costs and gross margin, which may vary over time depending upon

the unique facts and circumstances related to each performance obligation in making these estimates.

In addition to historical data, we take into consideration changing trends and market conditions.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis