What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 111 added, 76 removed, 241 unchanged (44% 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, 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 beliefs and expectations regarding macroeconomic conditions, including fluctuations in currency exchange rates, higher interest rates, elevated gasoline and other energy costs, market volatility, uncertainty surrounding future United States trade policies, tariffs, customs duties and fees, and retaliatory actions by other nations, 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;

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our marketing and efforts to build our brand awareness;

our estimates regarding the size and opportunities of our target markets along with our expectations for growth in those markets and potential collaboration opportunities;

our estimates regarding the size and opportunities of our target markets along with our expectations for growth in those markets;

our beliefs regarding the general impact of technological innovation and on our particular solutions and products;

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our intentions regarding expansion of our business and any impacts on our operational flexibility and responsiveness to customer demand;

our expectations regarding our tax positions and the judgments we make related to our tax obligations;

our beliefs regarding the importance of our manufacturing operations on our success;

our expectations regarding the timing and amount of future stock repurchases;

our expectations regarding our tax positions and the judgments we make related to our tax obligations, including value-added tax positions and related contingent liabilities;

our beliefs regarding the importance of our manufacturing operations on our success and our plans to open a manufacturing facility in Hyderabad, India in 2027;

our beliefs regarding the need for and benefits of our technological development on Invisalign treatment, the areas of development in which we focus our efforts, and the advantages of our intellectual property portfolio;

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our expectations regarding impacts or staying in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States and internationally;

our beliefs regarding our culture and commitment and its impact on our financial and operational performance and its importance to our future success;

our expectations regarding the outcomes and timing of ongoing litigation matters and regulatory developments;

our expectations for future investments in and benefits from sales and marketing activities;

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our expectations for our expenses and capital obligations and expenditures in particular;

our expectations regarding restructuring plans, workforce reductions, and related charges and savings;

our expectations regarding acquisitions, dispositions, divestitures, held-for-sale classifications, and related fair-value estimates and measurement-period adjustments;

our intentions to control spending and for investments, our intentions regarding the investment of and ability to repatriate foreign earnings;

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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.

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:

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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.

Recent Developments

New Manufacturing Facility :

During the second quarter, we announced plans to expand our global manufacturing network with a new facility in Hyderabad, India, which is expected to commence operations in 2027 and will represent our first manufacturing facility in India.

We expect to invest approximately $200 million over the next several years in connection with the project, including both capital expenditures and operating costs.

The planned expansion is intended to support growth in high-demand markets, enhance supply chain resiliency, increase manufacturing capacity, improve operational efficiency, and further diversify our global manufacturing footprint.

UK VAT Update :

On July 7, 2026, the Upper Tribunal (Tax and Chancery Chamber) of the United Kingdom issued a decision reversing the April 24, 2025 decision of the First-tier Tribunal and holding that clear aligners are not “dental prostheses” and are therefore subject to value added tax in the United Kingdom at the standard rate.

We have recorded an estimated liability of approximately $37.5 million as of June 30, 2026, which reflects management’s best estimate of the obligation as of the reporting date.

We intend to exhaust all available appeals and vigorously defend our position, but the ultimate resolution of this matter remains subject to significant uncertainty.

For more information, see Note 7 “ Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements.

Trends and Uncertainties

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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.

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 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.

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.

Additionally, we believe that the ongoing military conflicts in the Middle East, including the hostilities involving Israel, Iran, and the United States that began or escalated in 2025 and 2026, together with elevated gasoline and energy costs and related market volatility, have and may continue to contribute 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.

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 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.

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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 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.

In the second quarter of 2026, foreign currency movements favorably impacted our revenues compared to the prior-year period.

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.

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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.

As of June 30, 2026, we incurred a total of approximately $40.2 million in restructuring charges under this plan, of which $2.5 million remained unpaid.

We do not expect to incur additional restructuring expenses in connection with the 2025 restructuring plan.

For more information, see Note 14.

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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 March 31, 2026, our business operations reflect the following:

For the three months ended June 30, 2026, our business operations reflect the following:

• Revenues of $1,056 million, an increase of 4.3% year-over-year;

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• Clear Aligner case volume increased 7.4% year-over-year and Clear Aligner case volume for teens and growing patients increased from 223.2 thousand shipments to 239.2 thousand or 7.2% year-over-year;

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

• Imaging Systems and CAD/CAM services revenues of $185 million, a decrease of 10.8% year-over-year;

• Income from operations of $154 million and operating margin of 14.6%;

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• Net income of $108 million with diluted net income per share of $1.51;

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

• Cash and cash equivalents of $1,103 million as of June 30, 2026;

• Cash provided by operating activities of $193 million;

• Capital expenditures of $36 million, primarily related to investments in our manufacturing capacity and facilities;

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

• Number of employees was 20,435 as of June 30, 2026, a decrease of 4.9% year-over-year primarily due to workforce reduction associated with the 2025 restructuring plan.

Other Statistical Data and Trends

• 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.

• As of June 30, 2026, approximately 23 million people worldwide have been treated with our Invisalign system.

• For the second quarter of 2026, the total number of Invisalign-trained doctors that submitted cases and received shipments (doctor submitters) was 89.2 thousand compared to 86.3 thousand in the second quarter of 2025, a 3.4% increase.

• The total utilization rate (case shipments divided by the number of doctor submitters) in the second quarter of 2026 increased to 7.8 cases per doctor compared to 7.5 cases per doctor in the second quarter of 2025.

• Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) increased from $1,250 in the second quarter of 2025 to $1,260 in the second 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 months ended March 31, 2026 and 2025 are as follows (in millions):

Net revenues for our Clear Aligner and Systems and Services segments for the three and six months ended June 30, 2026 and 2025 are as follows (in millions):

Three Months Ended

Net Revenues 2026 2025 Change

June 30, Six Months Ended

Net Revenues 2026 2025 Change 2026 2025 Change

Clear Aligner net revenues

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Clear Aligner Case Volume

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

Case volume data which represents Clear Aligner case shipments for the three and six months ended June 30, 2026 and 2025 is as follows (in thousands):

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Total case volume 691.8 644.4 47.4 7.4 % 1,377.4 1,286.7 90.8 7.1 %

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Certain tables may not sum or recalculate due to rounding.

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.

For the three and six months ended June 30, 2026, total net revenues increased by $44 million and $105 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 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.

For the three months ended June 30, 2026, Clear Aligner net revenues increased by $66 million compared to the same period in 2025, primarily due to an increase in volume, which increased net revenues by $53 million and an increase of $13 million from favorable foreign exchange rates and price increases.

For the six months ended June 30, 2026, Clear Aligner net revenues increased by $125 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 $102 million and $49 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 $26 million.

Systems and Services

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.

For the three months ended June 30, 2026, Systems and Services net revenues decreased by $23 million compared to the same period in 2025, primarily due to decrease of $27 million from mix shift to lower-priced products and $15 million from lower scanner wand sales.

These decreases were partially offset by higher system volume of $11 million and an increase of $8 million from higher non-system sales and favorable foreign exchange.

For the six months ended June 30, 2026, Systems and Services net revenues decreased by $21 million compared to the same period in 2025, primarily due to decrease of $46 million from mix shift to lower-priced products, and $28 million from lower scanner wand sales.

These decreases were partially offset by higher system volume of $35 million and an increase of $18 million from higher non-systems sales and favorable foreign exchange.

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

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 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 six months ended June 30, 2026, our gross margin percentage increased as compared to the same periods in 2025 primarily due to tariff refunds, roll-off of accelerated depreciation and higher clear aligner ASPs.

Clear Aligner

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.

For the three and six months ended June 30, 2026, our gross margin increased compared to the same period in 2025, primarily due to higher ASPs, roll-off accelerated depreciation and operational efficiencies, partially offset by higher freight costs.

Systems and Services

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.

For the three and six months ended June 30, 2026, our gross margin increased compared to the same period in 2025, primarily due to lower Cost of net revenues from tariff refunds and operational efficiencies, partially offset by lower ASPs.

Selling, general and administrative (in millions):

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Selling, general and administrative $ 462.7 $ 448.7 $ 14.0 $ 928.0 $ 896.3 $ 31.7

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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 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.

For the three months ended June 30, 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 maintenance costs, partially offset by lower advertising and marketing expense, and stock-based compensation.

For the six months ended June 30, 2026, selling, general and administrative expense increased compared to the same period in 2025, primarily due to higher spend on outside services, litigation, 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

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Research and development $ 102.0 $ 96.4 $ 5.6 $ 200.7 $ 193.6 $ 7.1

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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 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):

For the three months ended June 30, 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, outside services, and depreciation on capitalized labor costs related to internal-use software, partially offset by lower stock-based compensation.

For the six months ended June 30, 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, depreciation on capitalized labor costs related to internal-use software, and cloud tool spending, partially offset by lower stock-based compensation, and reduced outside service provider spend.

Legal settlements and contingencies (in millions):

Three Months Ended

2026 2025 Change

Legal settlements

$ 30.6 $ 4.2 $ 26.5

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Legal settlements and contingencies $ 38.7 $ — $ 38.7 $ 69.3 $ 4.2 $ 65.2

% of net revenues 3.7 % — % 3.3 % 0.2 %

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Certain tables may not sum or recalculate due to rounding.

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.

For the three months ended June 30, 2026, we recorded $1.2 million and $37.5 million related to legal settlements and UK VAT contingency loss, respectively.

Refer to Note 6 “ Legal Proceedings ” and Note 7 “Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements for more information.

For the six months ended June 30, 2026, we recorded $31.8 million and $37.5 million related to legal settlements and UK VAT contingency loss, respectively.

Refer to Note 6 “ Legal Proceedings ” and Note 7 “Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements for more information.

Income from operations (in millions):

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Clear Aligner

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Clear Aligner

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.

For the three months ended June 30, 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.

For the six months ended June 30, 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 equipment.

Systems and Services

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.

For the three months ended June 30, 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 advertising and marketing costs.

For the six months ended June 30, 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, advertising and outside services partially offset by an increase in credit card transaction fees and equipment.

Interest income (in millions):

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Interest income $ 4.6 $ 2.9 $ 1.8 $ 8.5 $ 8.2 $ 0.4

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

For the three and six months ended June 30, 2026, interest income increased compared to the same period in 2025, primarily due to interest earned on cash and cash equivalent balances.

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

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Other income (expense), net $ (10.0) $ 7.6 $ (17.6) $ (6.9) $ 11.7 $ (18.6)

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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 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.

For the three months ended June 30, 2026, other income (expense), net decreased compared to the same period in 2025, primarily due to an unfavorable impact from foreign exchange rates.

For the six months ended June 30, 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

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Provision for income taxes $ 40.4 $ 48.9 $ (8.5) $ 76.5 $ 96.1 $ (19.6)

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Certain tables may not sum or recalculate due to rounding.

Our effective tax rate differs from the U.S.

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.

Our effective tax rate differed from the U.S.

statutory federal income tax rate of 21% for the three and six months period ended June 30, 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.

The decrease in our effective tax rate for the three months ended June 30, 2026 compared to the same period in 2025 is primarily attributable to the change in our jurisdictional mix of income.

The decrease in our effective tax rate for the six months ended June 30, 2026 compared to the same period in 2025 is primarily attributable to the change in our jurisdictional mix of income, a decrease in the state income taxes and higher tax deduction from stock-based compensation.

Liquidity and Capital Resources

Liquidity and Trends

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.

As of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $1,103 million and $1,095 million, respectively, of which approximately $861 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 March 31, 2026 are as follows:

Our material cash requirements as of June 30, 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 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.

There have been no material changes to our purchase commitments for goods and services during the six months ended June 30, 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 six months ended June 30, 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.

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

We repurchased approximately $98 million during the first half of 2026, leaving $733 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 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.

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

• As of June 30, 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 three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended

The following table summarizes our Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (in thousands):

Six Months Ended

Net cash provided by (used in):

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(6,689) 35,876

Net decrease in cash, cash equivalents and restricted cash

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

Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,797 $ (142,621)

During the quarter ended June 30, 2026, we announced plans to construct a new manufacturing facility in Hyderabad, India, expected to commence operations in 2027.

The project represents a multi‑year investment of approximately $200 million, including both capital expenditures and operating costs.

We do not currently expect this investment to have a material impact on our short-term liquidity position.

Operating Activities

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:

For the six months ended June 30, 2026, cash flows from operations of $344 million resulted primarily from our net income of approximately $221 million as well as the following:

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

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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 $72 million in accounts receivable due to timing of collections;

• Net outflow of $26 million in prepaid expenses and other assets primarily due to the renewal of enterprise technology service agreements;

• Net inflow of $61 million in accrued and other long-term liabilities;

• Net outflow of $64 million in deferred revenue.

Investing Activities

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.

Net cash used in investing activities was $214 million for the six months ended June 30, 2026, primarily driven by $66 million of purchases of property, plant and equipment, a $100 million additional investment in Heartland, $70 million for our investment in convertible notes, and $19 million related to an immaterial acquisition, offset by $42 million of proceeds from the sale of property, plant and equipment.

Financing Activities

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.

Net cash used in financing activities was $116 million for the six months ended June 30, 2026, primarily driven by outflows of $98 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

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Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract to the individual performance obligations is the result of various factors, such as historical prices, changing trends and market conditions, costs and gross margins.

While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations.

This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.

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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