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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-28 · 160 added, 130 removed, 255 unchanged (53% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 is presented under Results of Operations of this Form 10-K.

A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 is presented under Results of Operations of this Annual Report on Form 10-K.

Discussions regarding our financial condition and results of operations for fiscal 2024 compared to 2023 have been omitted from this Annual Report on Form 10-K, but can be found in “ Item 7.

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Executive Overview of Results

Trends and Uncertainties

Our strategic priorities focus on four principal pillars for growth:

(i) international expansion;

(ii) general dental practitioners (“GP”) treatment;

(iii) patient demand;

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 Strategic Growth Drivers

We strive to help our doctor customers move their practices forward by connecting them with new patients, providing digital solutions to help increase practice efficiency and helping them deliver the best possible treatment outcomes and experiences to millions of people around the world.

We strive to achieve this through our continued focus on, and execution of, our strategic growth drivers:

International Expansion :

Continually increasing the presence of our operations and commercial organization globally, expanding our products and service offerings and training and educating more doctors in more markets.

General Practitioner dentists (“GP”) treatment :

Making teeth straightening more relevant for GPs by enabling them to effectively scan, identify, treat, and monitor malocclusion.

Patient Demand :

Making the Invisalign ® system the most recognized brand name in orthodontics by creating awareness and preference among consumers and motivating potential patients to start treatment.

Orthodontist Utilization :

Continually innovating in digital orthodontics to increase product applicability and predictability to address a range of malocclusion, especially for teens and growing patients, enabling doctors to confidently diagnose and treat more patients.

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.

We strive to deliver on each of our strategic growth drivers through a variety of interrelated enterprise-wide efforts including:

• Continuing penetration and adoption of Invisalign clear aligners, intraoral scanners and CAD/CAM solutions in international markets by investing in manufacturing operations, research and development, clinical treatment planning, sales and marketing and building our quality and regulatory capabilities in existing and emerging markets globally.

For instance, we have fabrication facilities in three key regions as a part of our strategy to bring operational facilities closer to customers to serve them more quickly and respond to their needs more effectively as well as new treatment planning operations in targeted regional geographies.

• Continuing penetration and adoption of Invisalign ® clear aligners, iTero Element™ and Lumina™ intraoral scanners and exocad™ CAD/CAM solutions in international markets by investing in manufacturing operations, research and development, clinical treatment planning, sales and marketing and building our quality and regulatory capabilities in existing and emerging markets globally.

Our fabrication facilities in our three key regions and treatment planning operations in targeted regional geographies brings our operations closer to our customers and enables us to serve them more quickly and respond to their needs more effectively.

We have also diversified our research and development activities, which has created a longer term, more stable environment for consistent hiring, retention and innovation in a variety of high technology locations.

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We continue to expand our clear aligner customer base by educating new doctors on the benefits of digital dentistry through the Invisalign System.

We furthermore demonstrate to GPs and orthodontists how the iTero portfolio of intraoral scanners, products like Invisalign Go™ treatment, and CAD/CAM restorative services and workflows can increase revenues and profitability for their dental practices by enhancing patient experiences and creating operational practice efficiencies.

We furthermore demonstrate to GPs and orthodontists how the iTero portfolio of intraoral scanners, products like Invisalign Go™ treatment, and exocad™ CAD/CAM restorative services and workflows can increase revenues and profitability for their dental practices by enhancing patient experiences and creating operational practice efficiencies.

DSOs represent a large and growing opportunity to help drive adoption of digital technology across the dental industry.

We have well established relationships with many DSOs globally that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the Align TM Digital Platform, including increased practice efficiency and profitability, as well as delivering a better patient experience from shorter cycle times and customer proximity.

We have and may continue to financially invest in or explore collaborations with key ecosystem partners, including DSOs, whose missions and visions align with our own vision, strategy, business model and goals.

We have and may continue to financially invest in or explore collaborations with key ecosystem partners, including DSOs, whose missions and visions align with our vision, strategy, business model and goals.

• Investing in research and development that allows us to innovate, develop and bring to market products and solutions that deliver the ever-increasing clinical precision and predictability that doctors expect with the speed and convenience their patients require.

• Creating demand and enabling patient conversion with targeted investments in advertising and public relations through social media, influencers and other forms of digital communications to encourage treatment by Invisalign trained doctors.

For instance, in 2025, we announced several new enhancements to the Align TM Digital Platform, including (i) restorative capabilities to our iTero Lumina™ intraoral scanner (without iTero NIRI technology) and the new iTero Lumina™ Pro dental imaging system (with iTero NIRI technology), and (ii) iTero Digital Solutions, a comprehensive ecosystem that includes intraoral scanners and integrated software tools, including enhancements to the Align™ Oral Health Suite, Invisalign ® Outcome Simulator Pro with ClinCheck ® Smile Video, and the iTero™ Design Suite.

Additionally, we continue to invest in AI infrastructure, specialized talent, and strategic partnerships to further enhance the capabilities of the Align™ Digital Platform and differentiate our product portfolio from traditional and emerging competitors.

We believe our commitment to AI can unlock new and adjacent market opportunities, and sharpen our operational focus and capital efficiency by driving automation, scalability, and productivity across our operations, while enabling doctors and their patients to benefit from more efficient and predictable treatment experiences.

We maintain governance frameworks, internal controls, and oversight mechanisms designed to promote responsible AI development and deployment, mitigate associated risks, and ensure alignment with applicable laws.

• Creating demand and enabling patient conversion with targeted investments in advertising and public relations through television, film, print, social media and alliances with professional sports teams, athletes, social media influencers and other strategic partners, to encourage treatment by Invisalign trained doctors.

We believe that well-designed, targeted sales and marketing promotions that build on our strong brand awareness allow us to differentiate our products and solutions from traditional and emerging competitors.

To increase awareness and educate young adults, parents and teens about the benefits of Invisalign treatment, in 2025, we continued to invest in and create campaigns across markets in media platforms such as TikTok, Instagram, YouTube, SnapChat, WeChat, and Douyin.

We expect to make further investments to create additional demand for Invisalign System treatment driving more consumers to dental professionals for those treatments.

We expect to make further investments to stimulate additional demand for Invisalign System treatment and drive more consumers to dental professionals for those treatments.

• Pursuing new product lines that complement our doctor-prescribed principal products currently available in certain e-commerce and retail channels in the United States.

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• Increasing global orthodontic utilization rates as doctors’ clinical confidence in the efficacy and predictability of the Invisalign System increases with advancements in products and technology and as patients and doctors demand treatments that emphasize convenience and safety through fewer visits and less invasive and quicker treatments.

In addition, the teenage and younger market makes up about 70% of the approximately 22 million total annual global orthodontic case starts.

We continue to emphasize the benefits of the Invisalign System for teenage and younger patient treatments through education, training and sales and marketing programs.

In 2024, we had record shipments to teenage and younger patients.

In addition, the teenage and younger market makes up approximately 70% of the estimated 22 million total annual global orthodontic case starts.

We offer early interceptive treatment to this patient population with products designed to acclimate them to wearing removable devices.

Included in these treatments are the Invisalign First Phase 1 Package, designed specifically for younger patients generally between the ages of six and ten.

Also included are Invisalign Palatal Expanders, a series of removable devices that treat the most common skeletal and dental malocclusions in growing children, and the Invisalign System with mandibular advancement featuring occlusal blocks, which addresses Class II skeletal and dental correction for growing patients in the late mixed or early permanent dentition stages (ages 10-16).

We furthermore continue to emphasize the benefits of the Invisalign System for teenage and younger patient treatments through education, training and sales and marketing programs.

In 2025, a record number of teens and kids started treatment with Invisalign clear aligners.

We expect utilization rates to continue to rise.

However, our utilization rates will fluctuate from period to period due to a variety of factors, which may include seasonal trends in our business, consumer demand due to macroeconomic factors, and adoption rates for new products and features.

Trends and Uncertainties

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

Macroeconomic Challenges and Military Conflicts in Ukraine and the Middle East

Our revenues are susceptible to fluctuations resulting from events and circumstances, including macroeconomic conditions, fluctuations in foreign currency exchange rates, inflation, higher interest rates, actual and threatened wars and military actions, 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, employment levels, 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 our costs and those of our suppliers through higher raw material prices, transportation costs, labor costs, supply and distribution operations.

During 2024, we believe sales of our products were adversely impacted by macroeconomic conditions that negatively affected disposable income and consumer demand.

We believe this trend will continue in 2025.

We also expect the military conflict between Russia and Ukraine to continue to create market uncertainties and dampen consumer sentiment and demand, particularly in Europe.

Additionally, government actions in various countries relating to implemented or proposed tariffs, particularly the United States, China, Mexico, and Europe are expected to adversely impact our revenue and cost of goods sold if implemented.

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

The impact of declining demand may vary by time and region, making operational results uncertain and difficult to predict.

We continue to closely monitor the foregoing issues, assess their potential impact on our operations and financial results, and implement plans to mitigate the impact of any adverse events.

Macroeconomic Challenges, Trade Impediments and Geopolitical Tensions

Our revenues may fluctuate as a result of events and circumstances impacting customer confidence, consumer sentiment, discretionary spending and ultimately demand for dental services and our products.

These events and circumstances include, but are not limited to, macroeconomic conditions, fluctuations in foreign currency exchange rates, tariffs or proposed tariffs, customs duties or fees, and any retaliatory tariffs or protectionist trade measures taken in response to such tariffs or as a result of trade and international disputes, inflation, elevated interest rates, actual or potential slowdowns or recessions, wages, employment levels and health insurance coverage, debt obligations, discretionary income, supply chain challenges, market volatility, and other factors.

For more information on events and circumstances that could impact our revenues, refer to Part II, Item 1A “Risk Factors—Macroeconomic and External Risks.”

Many of these factors may contribute to, among other things, higher raw material prices, increased transportation and labor costs, and interruptions in supply and distribution operations, each of which can 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.

For example, we believe that in the beginning of the second quarter of 2025, sales of our products were adversely impacted compared to the same period in prior years by certain macroeconomic conditions, including global tariff volatility, inflation, and higher interest rates, which we believe may continue to impede dental patient demand.

For example, patient traffic growth has been 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 and recommendations that doctors make, especially doctors who offer both clear aligners and wires and brackets in their practices and have the additional time to treat patients with wires and brackets when orthodontic starts are slowing or diminishing.

We believe this has resulted in an increase in orthodontic starts using wires and brackets in lieu of clear aligners that was more pronounced in the second quarter of 2025.

However, we believe these trends are continuing and will impede future sales for so long as consumer economic uncertainty persists, particularly to the extent it impairs discretionary spending.

We also anticipate 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 actual 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 depends 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.

The impact may vary by time and region, making operational results uncertain and difficult to predict.

These events may also cause a shift in public opinion about companies based in the United States and this may have an adverse impact on our reputation and business.

We continue to closely monitor the foregoing issues, assess their potential impact on our operations and financial results, and implement plans to seek to mitigate the impact of any adverse events.

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 2025, the U.S.

dollar remained strong against major currencies, which negatively impacted our financial condition and results of operations for the year.

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

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

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 the Middle East may further exacerbate general and regional macroeconomic instability, particularly if fighting intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise may materially impact our operations.

For instance, 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, the ongoing conflict in Ukraine and unstable environment in the Middle East, 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 planning and business continuity measures to mitigate these 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.

2025 Restructuring

Beginning in the third quarter of 2025 and continuing into the fourth quarter, we initiated a series of restructuring actions to streamline our operations, realign parts of our organization, and optimize our global manufacturing footprint in response to the current macro environment.

These actions included realigning certain business groups and reducing our global workforce, disposing of certain manufacturing assets prior to the end of their useful lives, and committing to the sale of a manufacturing facility and related assets.

As part of these restructuring efforts, we incurred $41 million of expenses through December 31, 2025, primarily related to involuntary termination benefits, including employee severance and other post‑employment costs.

We also recorded $76.9 million of accelerated depreciation associated with certain manufacturing assets we planned to dispose of other than by sale.

In addition, we undertook actions to optimize our manufacturing footprint, including the planned sale of our manufacturing facility in Juarez, Mexico, consisting of land, building, and building improvements (the “disposal group”).

During the third quarter of 2025, we determined that the disposal group met the criteria for classification as held for sale under ASC 360‑10.

Accordingly, the disposal group was measured at its fair value less estimated costs to sell, resulting in an impairment charge of $23.1 million.

As of December 31, 2025, we had $28.0 million of assets classified as held for sale.

We may incur additional costs not currently contemplated due to events related to or resulting from these restructuring actions.

Refer to Note 1 “Summary of Significant Accounting Policies,” Note 17 “Restructuring and Other Charges,” and Note 18 “Assets Held for Sale,” in the Notes to Consolidated Financial Statements for further discussion.

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.

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.

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.

This may result in larger and unpredictable variations in geographic and product mix and selling prices, which could result in uncertain impacts on our financial statements and business operations.

For example, we have and may continue to experience a shift from certain products with higher ASPs to those with lower ASPs.

We strive to manage the challenges presented by the foregoing 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 by implementing strategic product innovations, introductions and pricing actions, implementing cost saving measures and evaluating hiring needs.

Further discussion of the impact of these challenges on our business may be found in Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.”

Key Financial and Operating Metrics

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

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

For the year ended December 31, 2025, our business operations reflect the following:

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◦ Clear Aligner revenues of $3,245.4 million, an increase of 0.5% year-over-year;

▪ Americas Clear Aligner case revenues of $1,426.3 million, a decrease of 2.5% year-over-year;

▪ International Clear Aligner case revenues of $1,500.5 million, an increase of 3.5% year-over-year;

▪ Clear Aligner volume increase of 3.5% year-over-year and Clear Aligner volume increase for kids and teens of 7.7% year-over-year;

◦ Clear Aligner case volume increase of 4.7% year-over-year and Clear Aligner volume increase for teens and growing patients from 868.1 thousand shipments to 935.8 thousand or 7.8% year-over-year;

◦ Imaging Systems and computer-aided design and computer-aided manufacturing (“CAD/CAM”) services revenues of $789.6 million, an increase of 2.7% year-over-year;

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◦ Capital expenditures of $102.4 million, primarily related to investments in our manufacturing capacity and facilities;

◦ Number of employees of 20,945 as of December 31, 2024, a decrease of 3.1% year-over-year.

◦ Number of employees was 20,290 as of December 31, 2025, a decrease of 3.1% year-over-year.

Other Statistical Data and Trends

• As of December 31, 2025, over 22 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.

• The total number of Invisalign trained doctors cases were shipped to (doctor submitters) in 2024 was 130.4 thousand compared to 125.8 thousand in 2023, a 3.6% increase.

GP and orthodontist doctor submitters increased by approximately 3% and 4%, respectively, in 2024 compared to 2023.

• Our total utilization rate in 2024 of 19.1 cases per doctor was flat compared to 2023 and slightly down from 19.3 cases per doctor in 2022.

• For the year ended 2025, the total number of Invisalign-trained doctors cases were shipped to (doctor submitters) was 130.0 thousand compared to 130.4 thousand in 2024, a 0.3% decrease.

GP and orthodontist doctor submitters decreased by approximately 2% and increased by approximately 2%, respectively, in 2025 compared to 2024.

• The total utilization rate in 2025 was 20.1 cases per doctor compared to 19.1 in both 2024 and 2023.

Our utilization rates have been impacted by the macroeconomic conditions and other factors as described in the “Trends and Uncertainties” section above.

In general, we expect utilization rates to rise over time although they are likely to fluctuate from period to period.

• North America:

The utilization rate among our North American orthodontist customers was 95.0 cases per doctor in 2024 compared to 94.5 cases per doctor in 2023 and 94.9 cases per doctor in 2022 and the utilization rate among our North American GP customers was 14.3 cases per doctor in 2024 compared to 14.0 cases per doctor in 2023 and 13.9 cases per doctor in 2022.

• International:

International doctor utilization rate was 16.2 cases per doctor in 2024 compared to 16.3 cases per doctor in 2023 and 16.2 cases per doctor in 2022 .

* Invisalign utilization rates are calculated by the number of cases shipped divided by the number of doctors to whom cases were shipped.

Our International region includes Europe, Middle East and Africa ( “ EMEA ” ) and Asia Pacific ( “ APAC ” ).

Latin America ( “ LATAM ” ) is excluded from the International region based on its immateriality to the year;

however is included in the Total utilization.

• Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) decreased by 3.9% from $1,295 in 2024 to $1,245 in 2025.

Results of Operations

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• Non-Case revenues include, but are not limited to, retention products including retention aligners ordered through the Doctor Subscription Program, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Invisalign Accessory Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain commerce channels in select markets.

• 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, upgrades and 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 by region for the year ended December 31, 2024, 2023 and 2022 are as follows (in millions):

• 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 years ended December 31, 2025, 2024 and 2023 are as follows (in millions) 1 :

Year Ended December 31, Year Ended December 31,

Net Revenues 2025 2024 Change 2024 2023 Change

Clear Aligner revenues:

Americas $ 1,426.3 $ 1,463.0 $ (36.6) (2.5) % $ 1,463.0 $ 1,471.9 $ (9.0) (0.6) %

International 1,500.5 1,449.5 51.1 3.5 % 1,449.5 1,349.0 100.5 7.4 %

Non-case 303.3 286.9 16.4 5.7 % 286.9 251.7 35.2 14.0 %

Total Clear Aligner net revenues

Clear Aligner net revenues

$ 3,245.4 $ 3,230.1 $ 15.3 0.5 % $ 3,230.1 $ 3,199.3 $ 30.8 1.0 %

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Certain tables may not sum or recalculate due to rounding.

1 Beginning with our 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 year ended December 31, 2024, 2023 and 2022 is as follows (in thousands):

Case volume data which represents Clear Aligner case shipments for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):

Year Ended December 31, Year Ended December 31,

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Certain tables may not sum or recalculate due to rounding.

Total net revenues increased by $137 million in 2024 as compared to 2023, primarily due to an increase in Systems and Services net revenues from higher scanner ASP, increase in non-system sales and services revenue.

Clear Aligner net revenues increased primarily from an increase in volume, partially offset by lower Clear Aligner ASP.

Clear Aligner - Americas

Americas net revenues decreased by $37 million in 2024 as compared to 2023, primarily due to a 3.0% decrease in ASP, resulting in a decrease of net revenues of $44 million.

The decrease in ASP was primarily driven by a mix shift to lower priced products and countries which reduced net revenues by $88 million and higher promotional discounts which decreased net

revenues by $66 million and unfavorable foreign exchange rates that decreased net revenues by $9 million.

These decreases were partially offset by lower net deferrals which increased net revenues by $94 million and price changes which increased net revenues by $19 million.

The decrease in ASP was partially offset by an increase in volume which increased net revenues by $7 million.

Clear Aligner - International

International net revenues increased by $51 million in 2024 as compared to 2023 due to a 7.0% increase in volume, resulting in increased net revenues of $101 million.

This increase was partially offset by a decrease of 3.3% in ASP which decreased net revenues by $50 million.

Lower ASP was due to unfavorable foreign exchange rates that decreased net revenues by $21 million and a price reduction for sales in the United Kingdom (“UK”) to offset VAT we began charging in 2024, which decreased net revenues by $32 million, a mix shift to lower priced products and countries which reduced net revenues by $60 million and higher promotional discounts which reduced net revenues by $114 million.

The decreases in ASP were partially offset by lower net deferrals and price changes which increased net revenues by $99 million and $72 million, respectively.

Clear Aligner - Non-Case

Non-case net revenues increased by $16 million in 2024 compared to 2023 mainly due to increased volume of Vivera retainers which includes retention aligners ordered through our Doctor Subscription Program.

Total net revenues increased by $36 million in 2025 as compared to the same period in 2024, primarily due to an increase in Clear Aligner volume, partially offset by a decrease in ASP and an increase in Systems and Services net revenues driven by strong scanner wand sales.

Clear Aligner

Clear Aligner net revenues increased by $15 million in 2025 as compared to the same period in 2024, primarily due to higher Clear Aligner volume, resulting in an increase of net revenues of $138 million.

Clear Aligner net revenues were further positively impacted by $4 million due to favorable foreign exchange rates.

These increases were partially offset by a decrease in ASP, driven by product mix shift to lower priced products and higher discounts, resulting in a decrease of net revenue of $127 million.

Systems and Services

Systems and Services net revenues increased by $106 million in 2024 as compared to 2023 primarily due to higher scanner ASP which increased net revenues by $45 million, an increase in sales of upgrade scanner systems which increased net revenues by $38 million, higher services revenue which increased net revenues by $19 million and higher volume which increased net revenues by $4 million.

Additionally, CAD/CAM software revenues increased net revenues by $7 million.

These increases were partially offset by unfavorable foreign exchange rates which decreased net revenues by $7 million.

Systems and Services net revenues increased by $21 million in 2025 as compared to the same period in 2024 primarily due to an increase of $26 million in sales of scanner wands, driven by strong volume partially offset by lower scanner wand ASP, a $19 million increase from non-system sales and a $1 million positive impact from favorable foreign exchange rates.

These increases were partially offset by lower scanner system sales of $25 million, driven by lower system volume and ASP.

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

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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 year ended 2025, our gross margin decreased as compared to the same period in 2024 primarily due to an increase in Clear Aligner Cost of net revenues driven by restructuring charges, impairment losses on Assets held for sale and depreciation on assets disposed of other than by sale.

Our gross margin was further impacted negatively by an impairment loss on inventory recorded in our Systems and Services segment.

We also experienced a decline in ASPs in both reportable segments.

These decreases were partially offset by lower Cost of net revenues, excluding the items noted previously, from operational efficiencies.

Clear Aligner

The gross margin percentage decreased in 2024 as compared to 2023 primarily due to lower ASPs and higher restructuring expense.

The gross margin percentage decreased in 2025 as compared to the same period in 2024 primarily due to accelerated depreciation on assets disposed of other than by sale of $77 million and lower ASPs.

These decreases were partially offset by operational efficiencies.

Systems and Services

The gross margin percentage increased in 2024 as compared to 2023 primarily due to higher ASPs and lower cost of net revenues leverage, partially offset by lower service revenue mix.

The gross margin percentage decreased in 2025 as compared to the same period in 2024 primarily due to lower ASPs and an impairment loss on inventory of $15 million.

These decreases were partially offset by lower Cost of net revenues, excluding the impairment loss, from operational efficiencies.

Selling, general and administrative (in millions):

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Certain tables may not sum or recalculate due to rounding.

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 Information Technology (“IT”).

Selling, general and administrative expense increased in 2024 compared to 2023 primarily due to higher employee costs, including salaries, fringe benefits, stock-based compensation and bonus partially offset by lower outside services expense.

Selling, general and administrative expense decreased in 2025 compared to the same period in 2024 primarily due to lower employee costs, including salaries, fringe benefits, and bonus, and lower marketing and outside services expense.

The decrease was partially offset by higher clinical education expense.

Research and development (in millions):

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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.

Research and development expense increased in 2024 compared to 2023 primarily due to higher employee costs, including salaries, fringe benefits, stock-based compensation, net of capitalized labor costs related to internal use software, and bonus, partially offset by lower outside services expense.

Research and development expense increased in 2025 compared to the same period in 2024 primarily due to higher employee costs, including salaries, fringe benefits, stock-based compensation, offset by lower capitalized labor costs related to internal use software and lower bonus cost.

Restructuring and other charges (in millions):

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Certain tables may not sum or recalculate due to rounding.

Restructuring and other charges increased in 2024 compared to 2023 due to higher severance and other one-time post-employment benefits, driven by a more significant restructuring plan initiated in 2024.

Restructuring and other charges increased in 2025 compared to the same period in 2024 due to higher severance and other one-time post-employment benefits, driven by a more significant restructuring plan initiated in 2025.

Refer to Note 17 “ Restructuring and Other Charges” of the Notes to Consolidated Financial Statements for more information.

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Certain tables may not sum or recalculate due to rounding.

Legal settlement loss incurred during 2024 was due to litigation and other settlements.

Legal settlement losses were incurred in 2025 and 2024 due to litigation and other settlements.

For the year ended 2025, we recorded losses of $4 million due to such legal settlements.

Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements for more information.

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1 Refer to Note 16 “Segments and Geographical Information” of the Notes to Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to consolidated Income from operations.

Total operating margin percentage decreased in 2024 compared to 2023 primarily due to increased legal settlement losses, restructuring and other charges and employee costs.

Refer to Note 8 “ Legal Proceedings ” of the Notes to Consolidated Financial Statements .

Total operating margin percentage decreased in 2025 compared to the same period in 2024 primarily due to lower gross margin and higher restructuring and other charges, offset by lower legal settlement loss.

Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements for more information.

Clear Aligner

Operating margin percentage decreased in 2024 compared to 2023 primarily due to a decrease in gross margin and an increase in employee costs.

Operating margin percentage decreased in 2025 compared to the same period in 2024 primarily due to a decrease in gross margin and an increase in marketing and media expense and credit card transaction fees.

Systems and Services

Operating margin percentage increased in 2024 compared to 2023 primarily due to higher gross margin, partially offset by an increase in employee costs .

Operating margin percentage increased in 2025 compared to the same period in 2024 primarily due to higher operating income driven by higher revenue and lower operating expenses related to a decrease in employee costs .

Interest income (in millions):

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

Interest income increased in 2024 compared to 2023 primarily due to primarily due to higher cash and cash equivalents.

Interest income decreased in 2025 compared to the same period in 2024 primarily due to lower interest rates earned on cash and cash equivalent balances.

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

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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.

Other income (expense), net increased in 2024 compared to 2023 primarily due to gains recorded on our equity investments, offset by the unfavorable impact of foreign exchange rates.

Other income (expense), net increased in 2025 compared to the same period in 2024 primarily due to gains recorded on our equity investments and changes in foreign exchange rates.

Provision for income taxes (in millions):

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Certain tables may not sum or recalculate due to rounding.

The increase in our effective tax rate for the year ended December 31, 2024 compared to the same period in 2023 is primarily attributable to an increase in U.S.

taxes on foreign earnings, partially offset by a change in our jurisdictional mix of income and release of unrecognized tax benefits due to a lapse of the statute of limitation.

The decrease in our effective tax rate for the year ended December 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in U.S.

taxes on foreign earnings, release of unrecognized tax benefits due to statute of limitation lapse, partially offset by the remeasurement of the deferred tax asset due to tax rate change and change in our jurisdictional mix of income.

Liquidity and Capital Resources

Liquidity and Trends

As of December 31, 2024 and 2023, we had the following cash and cash equivalents and short-term and long-term marketable securities (in thousands):

As of December 31, 2025 and 2024, we had the following cash and cash equivalents (in thousands):

Cash and cash equivalents $ 1,094,908 $ 1,043,887

Marketable securities, short-term — 35,304

Marketable securities, long-term — 8,022

Total $ 1,043,887 $ 980,764

As of December 31, 2024 and 2023, approximately $855 million and $785 million, respectively, of cash, cash equivalents and marketable securities were held by our foreign subsidiaries.

Our principal source of liquidity is cash provided by our operations.

As of December 31, 2025 and 2024, we had cash and cash equivalents of $1,095 million and $1,044 million, respectively, of which approximately $929 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.

We do not expect to incur significant additional costs upon repatriation of these foreign earnings.

We generate sufficient domestic operating cash flow and have access to $300 million under our revolving line of credit.

We generate sufficient operating cash flow from our domestic operations and have access to $300 million under our revolving line of credit.

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 December 31, 2024 are as follows:

Our material cash requirements as of December 31, 2025 and material trends and uncertainties for the fiscal year 2026 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.

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• We expect our investments in capital expenditures to be between $125 million and $150 million for the next 12 months.

Capital expenditures primarily relate to building construction and improvements as well as additional manufacturing capacity.

Despite the challenging market conditions, we intend to expand our investments in research

and development, manufacturing, treatment planning, sales and marketing operations to meet actual and anticipated demand.

Capital expenditures primarily relate to technology upgrades, additional manufacturing capacity as well as ongoing maintenance.

• We committed to a plan to dispose of, other than by sale, specifically identified manufacturing assets prior to the end of their estimated useful lives during the third quarter of 2025.

We have materially completed the disposition of these assets as of December 31, 2025.

Accordingly, we have revised the estimated useful lives of these assets to reflect our use through the disposal date.

For the year ended December 31, 2025, we recorded $77 million of accelerated depreciation expense related to these assets.

The increase in depreciation expense negatively impacted Net income, net of tax, by $54 million or $0.74 per basic and diluted share.

• We have future operating lease payments of $184 million, which includes $58 million for leases that have not yet commenced as of December 31, 2025.

Refer to Note 4 “ Leases ” of the Notes to Consolidated Financial Statements for details on the lease payments.

• We have approximately $297 million, inclusive of approximately $72 million repurchased in January 2025, available for repurchases of our common stock under the stock repurchase program authorized by our Board of Directors in January 2023 (“January 2023 Repurchase Program”).

Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, taking into account prevailing market conditions.

Refer to Note 11 “ Common Stock Repurchase Programs ” of the Notes to Consolidated Financial Statements for details on our stock repurchase activity.

• In 2024, we agreed, in principle, to settle certain legal matters.

As of December 31, 2024, a total of $27.5 million remained unpaid.

Settlement payments will be made in accordance with the terms and conditions as set forth in the settlement agreement.

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

Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, taking into account

prevailing market conditions.

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”).

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

We repurchased $466 million during the year ended 2025, under both the April 2025 Repurchase Program and the January 2023 Repurchase Program (“January 2023 Repurchase Program”).

The January 2023 Repurchase Program was completed in its entirely in the second quarter of 2025.

We had approximately $831 million available as of year end, of which approximately $31 million was repurchased in January 2026, leaving $800 million available for future repurchase under the April 2025 Repurchase Program.

Refer to Note 11 “Common Stock Repurchase Program” of the Notes to Consolidated Financial Statements for details on our stock repurchase programs.

• In 2025, we settled certain legal matters and issued a payment for the full settlement amount of $32 million, Settlement payments were made in accordance with the terms and conditions as set forth in the settlement agreement.

Refer to Note 8 “ Legal Proceedings ” of the Notes to Consolidated Financial Statements for more information.

• In the third quarter of 2025, we initiated a restructuring plan to realign certain business groups and reduce our global workforce.

This plan represents our continued effort to right size our labor force with the current macroeconomic environment.

We incurred $41 million in total restructuring expenses, primarily related to involuntary termination benefits, including employee severance and other post-employment benefits.

We may also incur additional costs not currently contemplated due to events related to or resulting from any such action.

Refer to Note 17 “ Restructuring and Other Charges ” of the Notes to Consolidated Financial Statements for more information.

• We may be required to adjust the valuation allowance for deferred tax assets if we determine, based on available evidence at the time of the determination, that it is more likely than not that some portion or all of the deferred tax assets will not be realized.

This assessment includes deferred tax assets associated with our Switzerland tax deductible basis created from our 2020 intra-entity transfer of intellectual property, which have a finite utilization period and depend on our ability to generate sufficient taxable income in that jurisdiction.

Any changes to the valuation allowance, particularly those related to our Switzerland deferred tax assets, could have a material adverse effect on our results of operations.

Refer to Note 13 “Income Taxes” of the Notes to Consolidated Financial Statements for more information.

• As of December 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.

Sources and Uses of Cash

The following table summarizes our Consolidated Statements of Cash Flows for the year ended December 31, 2024, 2023 and 2022 (in thousands):

The following table summarizes our Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Year Ended December 31,

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Significant changes in working capital

• Net inflow of $90 million from accrued and other long-term liabilities primarily due to timing of payments;

• Net inflow of $68 million from prepaid expenses and other assets primarily due to settlement of tax matter.

Refer to Note 8 “Legal Proceeding s ” of the Notes to Consolidated Financial Statements .

• Net outflow of $96 million from accrued and other long-term liabilities primarily due to timing of payments related to the payment of fiscal year 2024 bonuses in the first quarter of 2025;

• Net outflow of $112 million from deferred revenues;

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Significant changes in working capital

• Net inflow of $46 million from accrued and other long-term liabilities primarily due to higher incentive accruals for 2023, as well as timing of payments of other activities;

• Net inflow of $87 million from deferred revenues due to the deferral of revenue on shipments;

• Net inflow of $30 million from inventories primarily due to lower purchases of materials used in manufacturing;

• Net outflow of $105 million, net from accounts receivable due to timing of collections and increased revenues.

• Net inflow of $90 million from accrued and other long-term liabilities primarily due to timing of payments;

• Net inflow of $68 million from prepaid expenses and other assets primarily due to settlement of tax matter.

Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements .

• Net outflow of $80 million from deferred revenues;

• Net outflow of $153 million from accounts receivable due to timing of collections and increased revenues.

Investing Activities

Net cash used in investing activities was $112 million for the year ended December 31, 2025 which was primarily related to an outflow of $102 million for purchases of property, plant and equipment and a $10 million additional investment in SD Holding Company.

Net cash used in investing activities was $255 million for the year ended December 31, 2024 which primarily consisted of $116 million for purchases of property, plant and equipment, $77 million for the Cubicure acquisition and $106 million for investments in privately held companies, partially offset by sales and maturities of marketable securities of $44 million.

Net cash used in investing activities was $196 million for the year ended December 31, 2023 which primarily consisted of purchases of property, plant and equipment of $178 million which included a building acquisition for $25 million, an investment in equity of a privately held company of $77 million and purchases of marketable securities of $3 million, partially offset by sales and maturities of marketable securities of $61 million.

Financing Activities

Net cash used in financing activities was $465 million for the year ended December 31, 2025 which consisted of payments to repurchase shares of our common stock of $466 million and payroll taxes paid for equity awards through share withholdings of $20 million, which were partially offset by proceeds from the issuance of common stock for $22 million.

Net cash used in financing activities was $598 million for the year ended December 31, 2023 which consisted of payments to repurchase shares of our common stock of $602 million and payroll taxes paid for equity awards through share withholdings of $23 million, which were partially offset by proceeds from the issuance of common stock for $27 million of proceeds from the issuance of common stock.

Net cash used in financing activities was $356 million for the year ended December 31, 2024 which consisted of payments to repurchase shares of our common stock of $353 million and payroll taxes paid for equity awards through share withholdings of $28 million, which were partially offset by proceeds from the issuance of common stock for $25 million.

Critical Accounting Estimates

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We generally determine the fair value of a reporting unit via a discounted cash flow (“DCF”) analysis and allocate our net assets to each reporting unit to determine carrying value.

The use of a DCF model requires management to exercise significant judgement related to operating assumptions and estimates including, revenue growth rates, terminal growth rates, operating margins and discount rates, among others.

Additionally, management exercises judgement when determining the methodology used to allocate net assets to each reporting unit.

The use of a DCF model requires management to exercise significant judgment related to operating assumptions and estimates including, revenue growth rates, terminal growth rates, operating margins and discount rates, among others.

Additionally, management exercises judgment when determining the methodology used to allocate net assets to each reporting unit.

We will record an impairment charge when our quantitative impairment analysis indicates that the carrying value of a reporting unit exceeds its fair value.

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However, when our recoverability test results in undiscounted cash flows that are less than carrying value, we determine the fair value of the asset (asset group) and reduce the carrying amount of the asset (asset group), through an impairment charge, to its fair value.

The process of identifying impairment indicators, preparing an undiscounted cash flow and determining the fair value of the asset (asset group) require management to exercise significant judgement related to various assumptions and estimates.

If we were to have impairments to goodwill or finite-lived intangible assets, it could adversely affect our operating results.

During the year ended 2024 and 2023, we did not have any impairment charges related to our goodwill or finite-lived intangible assets.

During the years ended 2025 and 2024, we did not have any impairment charges related to our goodwill or finite-lived intangible assets.

Accounting for Income Taxes

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Realization of our deferred tax assets is dependent on our ability to generate future taxable income which is determined based on assumptions such as estimated growth rates in revenues, gross margins, future cash flows and discount rates in the jurisdictions in which we operate.

We may, in the future, be required to increase the valuation allowance to take into account additional deferred tax assets that we may be unable to realize.

The accuracy of these estimates could be affected by unforeseen events or actual results, and the sustainability of our future tax benefits is dependent upon the acceptance of these valuation estimates and assumptions by the taxing authorities, particularly with respect to our Switzerland operation, where our deferred tax assets have a finite utilization period.

While we currently believe that it is more likely than not that these deferred tax assets will be realized and that a valuation allowance is not required, this conclusion remains sensitive to changes in our operational performance, taxable income forecasts, and other relevant factors.

We may, in the future, be required to increase the valuation allowance to take into account deferred tax assets that we may be unable to realize, which would result in a material increase to our income tax provision in the period the determination is made.

Accounting for Legal Proceedings

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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-K

Item 7. Management’s Discussion and Analysis