What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-05 · 87 added, 138 removed, 230 unchanged (49% of the section changed)

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These statements include, among other things, our expectations and intentions regarding our strategic objectives, business strategy and growth drivers, and the means to achieve them;

our beliefs and expectations regarding macroeconomic conditions, including fluctuations in currency exchange rates, higher interest rates, market volatility, threats or actual imposition of tariffs, customs duties and fees by nations and retaliatory actions, inflation, threats of or actual economic slowdowns or recessions, or trade wars and geopolitical tensions;

our beliefs and expectations regarding macroeconomic conditions, including fluctuations in currency exchange rates, higher interest rates, market volatility, uncertainty surrounding future United States trade policies, tariffs, customs duties and fees, and retaliatory actions by other nations in light of recent U.S.

Supreme Court decision on the constitutionality of tariffs, inflation, threats of or actual economic slowdowns or recessions and geopolitical tensions;

our expectations and beliefs regarding customer and consumer confidence, purchasing behavior and demand for dental services 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;

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our expectations regarding the sales growth of our clear aligners, intraoral scanners and other products;

our expectations regarding the impact of the military conflicts in Ukraine and the Middle East, including military actions in Israel and increased geopolitical tensions involving Taiwan and the South China Sea, on our employees, operations and assets, particularly in Israel and Russia;

our ability to implement and realize the anticipated benefits currently expected from our restructuring plan initiated in the third quarter of 2025, as well as the anticipated expenses we will incur pursuant to the plan;

our expectations regarding the impact of the military conflicts in the Middle East, Ukraine and China, on our employees, operations and assets;

our marketing and efforts to build our brand awareness;

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Executive Overview of Results

Trends and Uncertainties

Our strategic priorities focus on four principal pillars for growth:

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:

(i) International Expansion;

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

(ii) General Practitioner dentists (“GP”) treatment;

(iii) Patient Demand;

and (iv) Orthodontic Utilization.

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.

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.

Trends and Uncertainties

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

Macroeconomic Challenges, Trade Impediments and Geopolitical Tensions

Our revenues and other results of operations are susceptible to fluctuations resulting from various events and circumstances, including macroeconomic conditions, threats or actual or proposed 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, discretionary spending and ultimately demand for dental services and our products.

Moreover, we rely on the operations of the U.S.

federal government to obtain and maintain necessary clearances or approvals for the offer, sale and delivery of our products, including from the Patent and Trademark Office, Food and Drug Administration, Customs and Border Protection, and similar agencies.

A prolonged government shutdown or reductions in government personnel may impede our ability to sell or deliver our products which could have a material adverse effect on our business, financial condition and results of operations.

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.

We believe that since the second quarter of 2025, sales of our products have been adversely impacted by certain macroeconomic conditions, including global tariff volatility, inflation, and higher interest rates, which we believe have and may continue to impede dental patient demand.

Our revenues may fluctuate as a result of various 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, uncertainty surrounding the durability, scope, and enforceability of existing and future tariff measures, retaliatory tariffs or protectionist trade measures taken in response to such tariffs, 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, geopolitical conditions, military actions, 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.

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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.

We believe that in the first quarter of 2026, the outbreak of military conflict between the United States and Iran on February 28, 2026, together with elevated gasoline and energy costs and related market volatility, contributed to declines in widely reported measures of consumer confidence, and we anticipate these conditions 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.

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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 third quarter of 2025, the U.S.

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

In the first quarter of 2026, the U.S.

dollar remained 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.

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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.

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 in the third quarter of 2025 and continuing into the fourth quarter, we initiated a plan to realign certain business groups and reduce our global workforce in response to the current macroeconomic environment.

We anticipate incurring between $40.0 million and $50.0 million in total restructuring expenses, primarily related to involuntary termination benefits, including employee severance and other post-employment benefits.

The foregoing estimates that we anticipate incurring in connection with these actions are contingent upon various assumptions and actual results may differ.

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

Our management or board of directors may determine not to pursue certain portions of any of these actions and any actions ultimately pursued may not achieve the benefits currently anticipated.

In the third quarter of 2025, we initiated a plan to realign certain business groups and reduce our global workforce as part of our continued effort to right size our labor force in response to the current macroeconomic environment.

As of March 31, 2026, we incurred a total of approximately $42 million in restructuring charges under this plan, of which $6.3 million remained unpaid.

These charges were primarily related to involuntary termination benefits, including employee severance and other post-employment benefits in connection with the 2025 restructuring plan, which was substantially completed in the fourth quarter of 2025.

For more information, see Note 14.

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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.

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, such as streamlined Clear Aligner configurations with limited or no additional aligners.

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.

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

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

For the three months ended March 31, 2026, our business operations reflect the following:

• Revenues of $1,040 million, an increase of 6.2% year-over-year;

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• Clear Aligner case volume increased 6.7% year-over-year and Clear Aligner case volume for teens and growing patients increased from 225.8 thousand shipments to 236.6 thousand or 4.8% year-over-year;

• Imaging Systems and CAD/CAM services revenues of $190 million, a decrease of 0.6% year-over-year;

• Imaging Systems and CAD/CAM services revenues of $184 million, an increase of 0.9% year-over-year;

• Income from operations of $142 million and operating margin of 13.6%;

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• Net income of $113 million with diluted net income per share of $1.57;

• Cash and cash equivalents of $1,005 million as of September 30, 2025;

• Cash and cash equivalents of $1,060 million as of March 31, 2026;

• Cash provided by operating activities of $151 million;

• Capital expenditures of $31 million, primarily related to investments in our manufacturing capacity and facilities;

• Number of employees was 21,065 as of September 30, 2025, a decrease of 2.9% year-over-year.

• Number of employees was 20,275 as of March 31, 2026, a decrease of 4.4% year-over-year.

Other Statistical Data and Trends

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

• For the third quarter of 2025, the total number of Invisalign trained doctors cases were shipped to (doctor submitters) was 88.2 thousand compared to 87.4 thousand in the third quarter of 2024, a 0.9% increase.

• The total utilization rate in the third quarter of 2025 increased to 7.3 cases per doctor compared to 7.1 cases per doctor in the third quarter of 2024.

• Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) decreased from $1,275 in the third quarter of 2024 to $1,245 in the third quarter of 2025, a 2.4% decrease.

• As of March 31, 2026, approximately 23 million people worldwide have been treated with our Invisalign system.

• For the first quarter of 2026, the total number of Invisalign trained doctors cases were shipped to (doctor submitters) was 88.1 thousand compared to 85.3 thousand in the first quarter of 2025, a 3.3% increase.

• The total utilization rate in the first quarter of 2026 increased to 7.8 cases per doctor compared to 7.5 cases per doctor in the first quarter of 2025.

• Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) increased from $1,240 in the first quarter of 2025 to $1,250 in the first quarter of 2026, a 0.8% increase.

Results of Operations

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▪ 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 and nine months ended September 30, 2025 and 2024 are as follows (in millions) 1 :

Net revenues for our Clear Aligner and Systems and Services segments for the three months ended March 31, 2026 and 2025 are as follows (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

Net Revenues 2025 2024 Change 2025 2024 Change

Net Revenues 2026 2025 Change

Clear Aligner net revenues

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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 three and nine months ended September 30, 2025 and 2024 is as follows (in thousands):

Case volume data which represents Clear Aligner case shipments for the three months ended March 31, 2026 and 2025 is as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Total case volume 685.7 642.3 43.3 6.7 %

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Certain tables may not sum or recalculate due to rounding.

For the three months ended September 30, 2025, total net revenues increased by $18 million as compared to the same period in 2024, primarily due to an increase in Clear Aligner volume.

For the nine months ended September 30, 2025, total net revenues decreased by $16 million as compared to the same period in 2024, primarily driven by a decrease in Clear Aligner ASP, partially offset by an increase in Systems and Services net revenues primarily driven by strong scanner wand sales.

For the three months ended March 31, 2026, total net revenues increased by $61 million compared to the same period in 2025, primarily due to an increase in Clear Aligner volume and increased ASPs.

Clear Aligner

For the three months ended September 30, 2025, Clear Aligner net revenues increased by $19 million as compared to the same period in 2024, primarily due to an increase in volume and favorable foreign exchange rates, which increased net revenues by $35 million and $13 million, respectively.

These increases were partially offset by a decrease in ASP, driven by a product mix shift to lower priced countries and products and higher discounts, resulting in a decrease of net revenues of $29 million.

For the nine months ended September 30, 2025, Clear Aligner net revenues decreased by $29 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 $103 million.

Clear Aligner net revenues were further negatively impacted by $8 million due to unfavorable foreign exchange rates.

These decreases were partially offset by an increase in volume which increased net revenues by $82 million.

For the three months ended March 31, 2026, Clear Aligner net revenues increased by $59 million compared to the same period in 2025, primarily due to an increase in volume and favorable foreign exchange rates, which increased net revenues by $49 million and $38 million, respectively.

These increases were partially offset by higher discounts and product mix shift to lower-priced countries and products resulting in a decrease in net revenues of $28 million.

Systems and Services

For the three months ended September 30, 2025, Systems and Services net revenues decreased by $1 million as compared to the same period in 2024, due to lower scanner system sales of $10 million, primarily driven by lower scanner system volume.

This decrease was partially offset by an increase of $3 million from sales of scanner wands, driven by strong volume, a $3 million increase from non-system sales and a $3 million favorable impact from foreign exchange rates.

For the nine months ended September 30, 2025, Systems and Services net revenues increased by $12 million as compared to the same period in 2024, primarily due to an increase of $27 million in sales of scanner wands, driven by strong volume partially offset by lower scanner wand ASP, and a $13 million increase from non-system sales.

These increases were partially offset by lower scanner system sales of $25 million, driven by lower volume and ASP, and a $2 million negative impact from unfavorable foreign exchange rates.

For the three months ended March 31, 2026, Systems and Services net revenues increased by $2 million compared to the same period in 2025, primarily due to $7 million from favorable foreign exchange rates, $5 million from higher scanner system sales, driven by increased scanner system volume, and $3 million from higher non-system sales.

These increases were partially offset by a decrease of $14 million from mix shift to lower priced products and lower sales of scanner wands.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Clear Aligner

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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 three and nine months ended September 30, 2025, our gross margin decreased as compared to the same periods 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 ASP ’ s 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

For the three and nine months ended September 30, 2025, our gross margin decreased as compared to the same period in 2024 primarily due to restructuring charges of $5 million, impairment losses on Assets held for sale of $23 million and depreciation on assets disposed of other than by sale of $14 million.

Clear Aligner gross margin was also negatively impacted by lower ASP ’ s.

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

For the three months ended March 31, 2026, our gross margin increased compared to the same period in 2025, primarily due to higher ASPs and operational efficiencies.

Systems and Services

For the three and nine months ended September 30, 2025, our gross margin decreased as compared to the same periods in 2024 primarily due to lower ASP's 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.

For the three months ended March 31, 2026, our gross margin increased compared to the same period in 2025, primarily due to lower Cost of net revenues from operational efficiencies, partially offset by lower ASPs.

Selling, general and administrative (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Selling, general and administrative $ 465.3 $ 447.6 $ 17.7

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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 September 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 marketing expense.

For the nine months ended September 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 clinical education expense.

For the three months ended March 31, 2026, selling, general and administrative expense increased compared to the same period in 2025, primarily due to higher spend on outside services, higher employee costs, including salaries, fringe benefits and bonus, and higher equipment and software costs, partially offset by lower advertising and marketing expense, commissions, and stock-based compensation.

Research and development (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Research and development $ 98.7 $ 97.2 $ 1.5

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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.

For the three and nine months ended September 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.

Restructuring and other charges (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

Restructuring and other charges $ 31.8 $ — $ 31.8 $ 31.8 $ — $ 31.8

% of net revenues 3.2 % — % 1.1 % — %

Changes and percentages are based on actual values.

Certain tables may not sum or recalculate due to rounding.

For the three and nine months ended September 30, 2025, restructuring and other charges increased compared to the same period in 2024.

Refer to Note 15 "Restructuring and other charges" of the Notes to the Condensed Consolidated Financial Statements for more information .

Legal settlement loss (in millions):

For the three months ended March 31, 2026, research and development expense increased compared to the same period in 2025 , primarily due to higher employee costs, including salaries, fringe benefits and bonus costs, partially offset by lower capitalized labor costs related to internal-use software, lower stock-based compensation, and reduced outside service provider spend.

Legal settlements (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

Legal settlement loss

2026 2025 Change

Legal settlements

$ 30.6 $ 4.2 $ 26.5

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Certain tables may not sum or recalculate due to rounding.

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

For the three months ended March 31, 2026, we recorded $31 million related to legal settlements.

Refer to Note 6 “ Legal Proceedings ” of the Notes to Condensed Consolidated Financial Statements for more information.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Clear Aligner

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Operating margin % 13.6 % 13.4 %

1 Refer to Note 13 “Segments and Geographical Information” of the Notes to Condensed Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to Income from Operations.

Changes and percentages are based on actual values.

Certain tables may not sum or recalculate due to rounding.

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 Income from Operations.

For the three and nine months ended September 30, 2025, our operating margin decreased compared to the same periods in 2024 primarily due to lower gross margin and higher restructuring and other charges.

Clear Aligner

For the three and nine months ended September 30, 2025, our operating margin decreased compared to the same periods in 2024 primarily due to a decrease in gross margin.

For the three months ended March 31, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and lower advertising and marketing expense, partially offset by an increase in employee costs and credit card transaction fees.

Systems and Services

For the three months ended September 30, 2025, our operating margin decreased compared to the same period in 2024 primarily due to a decrease in gross margin.

For the nine months ended September 30, 2025, our operating margin increased compared to the same period in 2024 primarily due to improved operating leverage primarily from lower employee spend, partially offset by a decrease in gross margin.

For the three months ended March 31, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and a decrease in operating expenses related to lower employee costs.

Interest income (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Interest income $ 3.9 $ 5.3 $ (1.4)

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

For the three and nine months ended September 30, 2025, interest income decreased slightly compared to the same period in 2024 primarily due to lower interest rates earned on cash and cash equivalent balances.

For the three months ended March 31, 2026, interest income decreased compared to the same period in 2025, primarily due to lower interest rates earned on cash and cash equivalent balances.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Other income (expense), net $ 3.0 $ 4.0 $ (1.0)

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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.

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

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

For the three months ended March 31, 2026, other income (expense), net decreased compared to the same period in 2025, primarily due to an unfavorable impact from foreign exchange rates, partially offset by a gain recorded on our equity investment.

Provision for income taxes (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 Change 2025 2024 Change

2026 2025 Change

Provision for income taxes $ 36.1 $ 47.2 $ (11.1)

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Our effective tax rate differs from the U.S.

statutory federal income tax rate of 21% for the three and nine month periods ended September 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 increase in our effective tax rate for the three months ended September 30, 2025 compared to the same period in 2024 is primarily attributable to the change in our jurisdictional mix of income, partially offset by the decrease in U.S.

taxes on foreign earnings.

The increase in our effective tax rate for the nine months ended September 30, 2025 compared to the same period in 2024 is primarily attributable to the change in our jurisdictional mix of income, lower tax deduction from stock-based compensation, partially offset by the decrease in U.S.

taxes on foreign earnings.

statutory federal income tax rate of 21% for the three month period ended March 31, 2026 and 2025, primarily due to the recognition of additional tax expense resulting from U.S.

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

The decrease in our effective tax rate for the three months ended March 31, 2026 compared to the same period in 2025 is primarily attributable to the change in our jurisdictional mix of income, and decreases in U.S.

taxes on foreign earnings and state income taxes.

Liquidity and Capital Resources

Liquidity and Trends

As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $1,005 million and $1,044 million, respectively, of which approximately $814 million and $855 million, respectively, were held by our foreign subsidiaries.

As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $1,060 million and $1,095 million, respectively, of which approximately $853 million and $929 million, respectively, were held by our foreign subsidiaries.

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

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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 September 30, 2025 are as follows:

Our material cash requirements as of March 31, 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.

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

• We anticipate our investments in capital expenditures for fiscal year 2025 to be approximately $100 million.

Capital expenditures primarily relate to technology upgrades and investments in manufacturing and treatment planning to meet actual and anticipated demand.

There have been no material changes to our purchase commitments for goods and services during the three months ended March 31, 2026 as compared to the year ended December 31, 2025.

• There have been no material changes to our future operating lease payments, including leases that have not yet commenced, during the three months ended March 31, 2026 as compared to the year ended December 31, 2025.

• We expect our investments in capital expenditures for fiscal year 2026 to be $125 million to $150 million.

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

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

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

We expect to repurchase $128.4 million during the fourth quarter of 2025 and through January 2026 pursuant to the open market repurchase program announced in August 2025.

We repurchased approximately $31 million during the first quarter of 2026, leaving $800 million available for future repurchase under the April 2025 Repurchase Program.

We expect to repurchase up to $200 million of our common stock over a six-month period beginning on May 1, 2026.

Refer to Note 9 “Common Stock Repurchase Program” of the Notes to Condensed Consolidated Financial Statements for details on our stock repurchase programs.

• As of September 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.

• In the third quarter of 2025, we initiated a restructuring plan which will continue through the fourth quarter of 2025.

We anticipate incurring between approximately $40.0 million and $50.0 million in total restructuring expenses, primarily related to involuntary termination benefits, including employee severance and other post-employment benefits.

• As of March 31, 2026, 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 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Nine Months Ended

September 30,

The following table summarizes our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended

Net cash provided by (used in):

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Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

(6,387) 8,480

Net decrease in cash, cash equivalents and restricted cash

$ (35,054) $ (170,889)

Operating Activities

For the nine months ended September 30, 2025, cash flows from operations of $370 million resulted primarily from our net income of approximately $275 million as well as the following:

For the three months ended March 31, 2026, cash flows from operations of $151 million resulted primarily from our net income of approximately $113 million as well as the following:

Significant adjustments to reconcile net income to net cash provided by operating activities

• Deferred taxes of $41 million related to a decrease in our long term deferred tax position;

• Depreciation and amortization of $57 million related to our investments in property, plant and equipment and intangible assets;

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• Non-cash operating lease costs of $10 million;

• Other non-cash operating activities of $29 million primarily related to an impairment loss on inventory and an increase in our bad debt allowance;

• Impairment loss on Assets held for sale of $23 million.

• Gain on Assets held for sale of $12 million resulting from an increase in fair value less costs to sell;

• Fair value adjustment gain of $8 million related to our investment in Heartland;

• Other non-cash operating activities of $7 million primarily related to an increase in our bad debt allowance.

Significant changes in working capital

• Net outflow of $44 million in prepaid expenses and other assets primarily due to the renewal of enterprise technology service agreements;

• Net outflow of $41 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 in the first quarter of 2025;

• Net outflow of $31 million in deferred revenue.

Investing Activities

Net cash used in investing activities was $77 million for the nine months ended September 30, 2025 which was primarily related to an outflow of $67 million for purchases of property, plant and equipment and $10 million for our additional investment in SD Holding Company.

Net cash used in investing activities was $132 million for the three months ended March 31, 2026, primarily driven by $31 million of purchases of property, plant and equipment, a $50 million additional investment in Heartland, $31 million for our investment in convertible notes, and $19 million related to an immaterial acquisition.

Financing Activities

Net cash used in financing activities was $367 million for the nine months ended September 30, 2025 which was primarily related to outflows of $369 million for share repurchases and $20 million for payroll taxes paid for vested equity awards, partially offset by $22 million of proceeds from the issuance of common stock under our employee stock purchase plan.

Net cash used in financing activities was $48 million for the three months ended March 31, 2026, primarily driven by outflows of $31 million for share repurchases and $29 million for payroll taxes paid for vested equity awards, offset by $12 million of proceeds from the issuance of common stock under our employee stock purchase plan.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements which have been prepared in accordance with accounting principles generally accepted in the U.S.

Management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures at the date of the financial statements.

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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-Q

Item 2. Management’s Discussion and Analysis