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Item 1A. Risk Factors

2025-02-25 compared with 2024-02-28 · 129 added, 118 removed, 351 unchanged (41% of the section changed)

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The continuing worldwide macroeconomic and geopolitical uncertainty may adversely affect our business and prospects.

Geopolitical instability and other macroeconomic factors, including inflation, supply chain disruptions, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could negatively impact our business, financial condition, and results of operations.

Global economic disruptions have continued to impact the global supply chain, primarily through constraints on raw materials and electronic components.

Additionally, we have observed a reduction in both inbound and outbound transportation capacity as a result of port closures, shipping lane disruptions and delays since the Coronavirus Disease ("COVID-19") pandemic, all of which is causing longer lead times in receiving raw materials, as well as increased freight costs.

These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to adversely impact our profitability.

Continued concerns about the systemic impact of potential long-term and wide-spread recession and geopolitical issues, including wars and acts of terrorism, have contributed to increased market volatility and diminished expectations for economic growth in the world.

The United States and foreign countries have experienced recessionary pressures and face continued concerns about the systemic impacts of adverse economic conditions and geopolitical issues.

Any negative impact on economic conditions and international markets, including increased geopolitical instability and other macroeconomic factors, including inflation, supply chain disruptions, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could negatively impact our business, financial condition, and results of operations.

Continued concerns about the systemic impact of potential long-term and wide-spread recession and geopolitical issues, including wars, such as the war between Russia and Ukraine and the conflicts in the Middle East involving Israel, and acts of terrorism, have contributed to increased market volatility and diminished expectations for economic growth in the world.

Our business and results of operations have been and may continue to be adversely impacted by changes in macroeconomic conditions, including inflation, rising interest rates, bank failures and the accessibility of capital markets.

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Economic uncertainty, an increase in unemployment rates, as well as increasing health insurance premiums, co-payments and deductibles may adversely affect demand for our products and procedures.

Furthermore, governments and other third-party payors around the world facing tightening budgets could move to further reduce the reimbursement rates or the scope of coverage offered, which could adversely affect sales of our products.

RISKS RELATING TO OUR BUSINESS

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• the impact of acquisitions, our ability to integrate acquisitions, and our restructuring activities including portfolio rationalization, and divestitures;

• inspections of our manufacturing facilities for compliance with Quality System Regulations (Good Manufacturing Practices), which could result in Form 483 observations, warning letters, injunctions or other adverse findings from the FDA or from equivalent regulatory bodies, and corrective actions, procedural changes and other actions that we determine are necessary or appropriate to address the results of those inspections, any of which may affect production and our ability to supply our customers with our products;

• the increased regulatory scrutiny of certain of our products, including products which we manufacture for others, could result in removal from the market or involve field corrective actions that could affect the marketability of our products;

• expenditures for major initiatives, including acquired businesses and integrations thereof and restructuring;

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• potential backorders, lost sales and expenses incurred in connection with product recalls or field corrective actions;

• disruption of our operations and sales resulting from political instability, war, insurrections, extreme weather conditions, the outbreak of disease, natural disasters, or other events outside our control that damage our manufacturing, distribution, or infrastructure of those facilities, or the suppliers and service providers for those facilities;

• disruption of our operations and sales resulting from political instability, war, including the war between Russia and Ukraine and the conflicts in the Middle East involving Israel, insurrections, extreme weather conditions, the outbreak of disease, natural disasters, or other events outside our control that damage our manufacturing, distribution, or infrastructure of those facilities, or the suppliers and service providers for those facilities;

• our ability to manufacture and ship our products efficiently or in sufficient quantities to meet sales demands;

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• the timing of our research and development expenditures;

• reimbursement for our products by third-party payors such as Medicare, Medicaid, private and public health insurers and foreign governmental health systems;

• risks related to epidemics or similar widespread health concerns;

• reimbursement for our products by private and public health insurers, such as Medicare and Medicaid, and foreign governmental health systems;

• risks related public health concerns or crises, including epidemics and pandemics such as COVID-19, which may negatively impact certain aspects of our business, including the demand for and supply of certain of our products, operations, supply chains and distribution systems, and our ability to generate cash flow;

• the ability to maintain existing distribution rights to and from certain third parties;

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• peer-reviewed publications discussing the clinical effectiveness of the products we sell;

• changes in regulations or guidelines that impact the sales and marketing practices for products that we sell;

• enforcement or defense of intellectual property rights;

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There is intense competition among medical device companies.

We compete with established medical technology companies in many of our product areas.

We compete with established medical technology companies in many of our products.

Competition also comes from early-stage companies, universities, research institutions and other non-profit entities.

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They may be able to gain market share by offering lower-cost products or products that enjoy better reimbursement from third-party payors and foreign governmental health systems.

Our competitive position depends on our ability to achieve market acceptance for our products, develop new products, enhance existing products, implement marketing plans, secure regulatory approval for products under development and maintain previously-obtained approvals, demonstrate clinical and economic effectiveness, obtain and maintain reimbursement coverage and funding under third-party payors and foreign governmental health systems, obtain patent protection and produce products consistently in sufficient quantities to meet demand.

Our competitive position depends on our ability to achieve market acceptance for our products, develop new products, enhance existing products, implement marketing plans, secure regulatory approval for products under development and maintain previously-obtained approvals, demonstrate clinical and economic effectiveness, obtain and maintain funding, coverage and reimbursement under third-party payors and foreign governmental health systems, obtain patent protection and produce products consistently in sufficient quantities to meet demand.

We may need to develop new applications for our products to remain competitive.

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Our future success will depend upon our ability to compete effectively against current technology as well as to respond effectively to technological advances, changes in customers' requirements or in payor or regulatory evidence requirements.

Additionally, purchasing decisions of our customers may be based on clinical evidence or comparative effectiveness studies and, because of our vast array of products, we might not be able to fund the studies necessary to gain entry or maintain our position or provide the required information to compete effectively.

Additionally, purchasing decisions of our customers may be based on clinical evidence or

comparative effectiveness studies and, because of our vast array of products, we might not be able to fund the studies necessary to gain entry or maintain our position or provide the required information to compete effectively.

Other companies may have more resources available to fund such studies.

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and other countries in which we do business are placing increased emphasis on the delivery of more cost-effective medical therapies that could adversely affect the sale and/or the prices of our products.

• third-party payors of hospital services and hospital outpatient services, including Medicare, Medicaid, private and public health insurers and foreign governmental health systems, annually revise their payment methodologies, which can result in stricter standards for reimbursement of hospital charges for certain medical procedures or the elimination of reimbursement;

• third-party payors of hospital and physician services, including private and public health insurers, such as Medicare and Medicaid, and foreign governmental health systems, annually revise their payment methodologies, which can result in stricter standards for reimbursement of hospital charges for certain medical procedures or the elimination of reimbursement;

• several foreign countries have implemented reforms of their respective healthcare sectors in an effort to reduce healthcare spending, including restricting funding to only those medical technologies and procedures with proven effectiveness, increasing patient co-payments and providing for payback measures.

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• in the U.S., we are party to contracts with group purchasing organizations, which negotiate pricing for many member hospitals, require us to discount our prices for certain of our products and limit our ability to raise prices for certain of our products, particularly surgical instruments;

• there is economic pressure to contain healthcare costs in domestic and international markets, and, regardless of the consolidation discussed above, providers generally are exploring ways to cut costs by eliminating purchases or driving reductions in the prices that they pay for medical devices, implementing national and provincial tender pricing, as recently implemented in China, or increasing clinical or economic evidence thresholds for product formularies;

• there is economic pressure to contain healthcare costs in domestic and international markets, and, regardless of the consolidation discussed above, providers generally are exploring ways to cut costs by eliminating purchases or driving reductions in the prices that they pay for medical devices, implementing national and provincial tender pricing, such as the volume-based procurement policy implemented in China, or increasing clinical or economic evidence thresholds for product formularies;

• there are proposed and existing laws, regulations and industry policies in domestic and international markets regulating the sales and marketing practices and the pricing and profitability of companies in the healthcare industry;

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In addition to internally generated growth, our current strategy involves growth through acquisitions.

Between January 1, 2021 and December 31, 2023, we have acquired two businesses at a total cost of approximately $358.4 million which amount includes our acquisition of ACell, Inc.

in January 2021 for $306.9 million and our acquisition of Surgical Innovation Associates, Inc.

for $51.5 million in December 2022.

Both of these acquisitions added products to our complex wound management and plastic and reconstructive surgery product portfolios, respectively, and provides additional growth opportunities for our TT segment.

In December 2023, we entered into a definitive agreement to acquire Acclarent from Johnson & Johnson, for $275.0 million in cash, subject to customary purchase price adjustments, and a cash payment of $5.0 million upon the achievement of a regulatory milestone.

Completion of our pending acquisition of Acclarent is conditioned upon the receipt of certain regulatory approvals, and we cannot provide assurance that these approvals will be obtained.

If any conditions, including with respect to divestitures, or changes to the proposed structure of the acquisition are required to obtain these regulatory approvals, they may have the effect of jeopardizing or delaying completion of the pending acquisition or reducing the anticipated benefits of the pending acquisition.

If we are required to agree to any material conditions in order to obtain any approvals required to complete the pending acquisition, the business and results of operations of our company following the closing may be adversely affected.

Between January 1, 2022 and December 31, 2024, we have acquired two businesses at a total cost of approximately $329.3 million, which includes our acquisition of Surgical Innovation Associates, Inc.

for $51.5 million in December 2022 and our acquisition of Acclarent, Inc.

for $277.8 million in April 2024.

In addition, on October 2, 2024, we acquired the product rights for Durepair ® Regeneration

Matrix for total consideration of $45.0 million.

These acquisitions added products to our plastic and reconstructive surgery, ENT, neurosurgery and complex wound management product portfolios and provides additional growth opportunities for our TT segment.

We may be unable to continue to implement our growth strategy and it may ultimately be unsuccessful.

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We engage in evaluations of potential acquisitions and are in various stages of discussion regarding possible acquisitions, certain of which, if consummated, could be significant to us.

Failure to complete the Acclarent acquisition, on a timely basis or at all, could negatively impact our future business and financial results and those of the acquired business.

Any new acquisition could result in material transaction expenses, increased operating, amortization and interest expenses, and possible in-process research and development charges for acquisitions that do not meet the definition of a “business”, any of which could have a material, adverse effect on our operating results.

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We may not be able to identify suitable acquisition candidates in the future, obtain acceptable financing or consummate any future acquisitions.

Certain potential acquisitions are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic acquisitions and could result in mandated divestitures.

Certain potential acquisitions are subject to antitrust and competition laws that could impact our ability to pursue strategic acquisitions and could result in mandated divestitures.

If we are unsuccessful in our acquisition strategy, we may be unable to meet our financial targets and our financial performance could be materially and adversely affected.

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Many of these factors are also outside of our control.

For example, following the anticipated consummation of the Acclarent acquisition, the ongoing conflict in Israel, including any escalation or expansion thereof, and the measures enacted by the Israeli and other governments in response may make it more difficult for us to both integrate Acclarent and realize the anticipated benefits of the acquisition.

Even if the operations of the businesses are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or sales or growth opportunities that we expect.

For example, the conflicts in the Middle East involving Israel, including any escalation or expansion thereof, and the measures enacted by the Israeli and other governments in response, may make it more difficult for us to both integrate Acclarent and realize the anticipated benefits of that acquisition.

Even if the operations of an acquired business are integrated successfully, we may not realize the full benefits of such acquisition, including the synergies, cost savings or sales or growth opportunities, that we expect.

These benefits may not be achieved within the anticipated time frame, or at all.

Additional unanticipated costs could be incurred in the integration of the businesses.

All of these factors could cause a reduction to our earnings per share, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of our common stock.

Additional unanticipated costs could be incurred in the integration of a business.

All of these factors could cause a reduction to our earnings per share, decrease or delay the expected accretive effect of a transaction, and negatively impact the price of our common stock.

Our global business exposes us to operational and economic risks.

A significant portion of our current operations are conducted and located outside the United States, and our growth strategy involves expanding our existing foreign operations and entering into new foreign jurisdictions.

We have significant manufacturing and distribution sites in North America and Europe.

We have significant manufacturing and distribution sites in North America, Europe, China and Japan.

Our international operations subject us to laws regarding sanctioned countries, entities and persons, customs, import-export, laws regarding transactions in foreign countries, the U.S.

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As we seek to continue to expand and strengthen our international operations, we may experience difficulty in growing our sales in certain new markets and other international markets in which we are attempting to increase our presence due to, among other things, customer acceptance, undeveloped and/or unfamiliar distribution channels, regulatory restrictions and changes, and business knowledge of these markets.

Changes in U.S.

and international trade policies, particularly with respect to China, may adversely impact our business and operating results.

From time to time, proposals are made to significantly change existing trade agreements and relationships between the U.S.

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goods into China.

In addition, the United States has assessed or proposed supplemental tariffs and quantitative restrictions on U.S.

imports of certain products from other countries as well.

It is unknown whether and to what extent new tariffs, export controls, or other new laws or regulations will be adopted, or the effect that any such actions would have on us or our industry.

For example, the recently proposed BIOSECURE Act targets U.S.

government contracts, grants, and loans for entities that use equipment and services from certain named Chinese biotech companies, and authorize the U.S.

government to name additional Chinese biotechnology companies of concern.

If the bill becomes law, or similar laws are passed, they would have the potential to severely restrict the ability of companies to work with certain Chinese biotechnology companies of concern without losing the ability to contract with, or otherwise receive funding from, the U.S.

Owing to the complex relationships between the U.S.

and such other countries, political, diplomatic, military, or other events could result in business disruptions, including increased regulatory enforcement against companies, tariffs, trade embargoes, export restrictions and the termination or modification of existing trade agreements.

and such other countries, political, diplomatic, military, or other events could result in business disruptions, including increased regulatory enforcement against companies, tariffs, trade embargoes, capital controls, export restrictions and the termination or modification of existing trade agreements.

The imposition of such restrictions could increase the cost of the Company’s products and the components and raw materials that go into making them, require the Company to change its operations and the products it offers and negatively impact consumer confidence and spending, all of which, both individually and in the aggregate, could materially and adversely affect our business, results of operations and financial condition.

The Russia-Ukraine conflict and resulting sanctions and export restrictions are creating barriers to doing business in Russia and adversely impacting global supply chains.

While we have no manufacturing, distribution or direct material suppliers in the region, we are closely monitoring the potential raw material or supplier impact in both Russia and Ukraine.

Materials like palladium and neon, which are both dependent on Russian supply, are part of broader semiconductor shortages in industry.

Additional sanctions, export restrictions, and potential countermeasures within Russia may lead to greater uncertainty and geopolitical shifts in Asia that could cause additional adverse impacts on global supply chains and our business, results of operations, financial condition and cash flows.

Exchange rate fluctuations and foreign currency hedges could adversely affect our financial results.

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Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective.

For a description of our use of derivative financial instruments, see Note 6, Derivative Instruments to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K).

For a description of our use of derivative financial instruments, see Note 6.

Derivative Instruments to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K).

Our future financial results could be adversely affected by impairments or other charges.

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We are also required to test goodwill and indefinite-lived intangible assets for impairment between annual tests if an event occurs such as a significant decline in revenues or cash flows for certain products, or the discount rates used in the calculations of discounted cash flows change significantly, or circumstances change that would more likely than not reduce our enterprise fair value below its book value.

If such a decline, rate change or circumstance were to materialize, we may record an impairment of these intangible assets that could be material to the financial

See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” of this Annual Report on Form 10K, and Note 7, Goodwill and Other Intangible Assets to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K).

If such a decline, rate change or circumstance were to materialize, we may record an impairment of these intangible assets that could be material to the financial statements.

See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” of this Annual Report on Form 10-K, and Note 7.

Goodwill and Other Intangibles to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K).

The guidance on long-lived assets requires that we assess the impairment of our long-lived assets, including finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying value may not be recoverable as measured by the sum of the expected future undiscounted cash flows.

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For example, the use of autograft tissue is a well-established means for repairing the dermis, and it competes for acceptance in the market with our collagen-based wound care products.

In addition, unfavorable payment amounts or adverse coverage determinations of third-party payors, including Medicare, Medicaid, private and public health insurers, and foreign governmental health systems, regarding our products or third-party determinations that favor a competitor’s product over ours, could harm acceptance or continued use of our products.

In addition, unfavorable payment amounts or adverse coverage determinations of private and public health insurers, such as Medicare and Medicaid, and foreign governmental health systems, regarding our products or third-party determinations that favor a competitor’s product over ours, could harm acceptance or continued use of our products.

For example, greater market acceptance of our wound graft products may ultimately depend on our ability to demonstrate that coverage and reimbursement are available and favorable, or because they are an attractive, cost-effective alternative to other treatment options.

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To the extent these suppliers are unable to provide sterilization services, whether due to lack of capacity, regulatory requirements, environmental concerns such as those relating to ethylene oxide or otherwise, we may be unable to transition sterilization to other suppliers in a timely or cost-effective manner, or at all, which could have an adverse impact on our operating results.

Our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as global economic disruptions, electronic component shortages, fear of future or ongoing pandemics, inflation, including wage inflation, recessionary conditions and geopolitical events, including the wars in Ukraine and Israel, all of which are beyond our control or the control of our suppliers.

For example, there is increased focus on the use and emission of ethylene oxide by the EPA and state environmental regulatory agencies.

Additional regulatory requirements associated with the use and emission of ethylene oxide for sterilization may be imposed in the future, both domestically and outside the U.S.

This increased regulation has required certain of the sterilization suppliers we use to temporarily suspend operations and it is possible that additional sterilization suppliers we use might also have to suspend operations, install additional emissions control technology, limit the use of ethylene oxide or take other actions, which would impact or further reduce the available capacity to sterilize medical devices and healthcare products.

Although Integra has business continuity plans in place to mitigate the impact of any such disruptions, these plans may not be able to fully offset the full impact of such regulations.

Our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as global economic disruptions, electronic component shortages, trade wars, inflation, including wage inflation, recessionary conditions and geopolitical events, including the war in Ukraine, the conflicts in the Middle East involving Israel and fear of future or ongoing pandemics, all of which are beyond our control or the control of our suppliers.

While it is our policy to maintain sufficient inventory of components so that our production will not be significantly disrupted even if a particular component or material is not available for a period of time, we remain at risk that we will not be able to qualify new components or materials quickly enough to prevent a disruption if one or more of our suppliers ceases production of important components or materials.

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In recent years, we consolidated several facilities or transferred manufacturing operations from third parties to our existing internal manufacturing facilities and may further undertake similar consolidations or transfers in the future in order to improve our cost structure, achieve increased operating efficiencies, and improve our competitive standing or results of operations and/or to address unfavorable economic conditions.

For example, in the second quarter of 2024, the Company announced its plans to operationalize its Braintree, Massachusetts manufacturing facility (the “Braintree facility”) by the first half of 2026 and to transition the restart of the manufacture of PriMatrix and SurgiMend to the Braintree facility rather than attempt to restart the manufacture of these products at the Company’s Boston, Massachusetts manufacturing facility (the “Boston facility”).

As part of these initiatives, we may also lose favorable tax incentives or not be able to renew leases on acceptable terms.

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Glo bal supply constraints have and may continue to adversely affect our ability to meet customer demand, and increase our costs to manufacture, transport and warehouse a certain subset of our products.

In addition, global supply constraints have resulted in increases to the costs of production of certain of our products that we may not be able to pass on to our customers.

In addition, global supply constraints have

resulted in increases to the costs of production of certain of our products that we may not be able to pass on to our customers.

We expect these factors will continue to impact us in the future and obtaining alternative sources of raw materials and components could involve significant costs and regulatory challenges and may not be available to us on commercially reasonable terms, if at a ll.

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The third parties with whom we have entered into agreements might terminate these agreements for a variety of reasons, including developing other sources for the products that we supply.

In addition, the voluntary global recall of all products manufactured in our Boston, Massachusetts facility (" the Boston recall") and manufacturing stoppage impacted certain of our private label products and, following the anticipated resumption of the commercialization of products manufactured at the Boston facility, we are unable to predict the effect that the Boston recall will have on our relationships for such private label products.

The diminution or termination of our most important relationships could adversely affect our expectations for the growth of private label products.

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Before a new medical device, or a new use of an existing product can be marketed in the United States, it must first receive either premarket clearance under Section 510(k) of the FD&C Act, a grant of a request for de novo classification, or a PMA from the FDA, unless an exemption applies.

The process of obtaining marketing approval or clearance from the FDA and comparable foreign regulatory agencies for new products, or for enhancements or modifications to existing products could be costly, time consuming and burdensome, lead to failed clinical trials or weakened clinical evidence, involve modifications, repairs or replacements of our products and result in limitations on the indicated use of our products, which may negatively impact our ability to market our products and services, result in delays or prevent full commercial realization of future products or service.

Furthermore, failure to obtain timely approvals or renewals may result in significant penalties and fines.

The process of obtaining marketing approval or clearance from the FDA and comparable foreign regulatory agencies for new products, or for enhancements or modifications to existing products could be costly, time consuming and burdensome, may be impacted by failed clinical trials or weakened clinical evidence, involve modifications, repairs or replacements of our products and result in limitations on the indicated use of our products, which may negatively impact our ability to market our products and services, result in delays or prevent full commercial realization of future products or service.

Furthermore, failure to obtain timely approvals, certifications or renewals may result in penalties and fines.

Additional regulations govern the approval, initiation, conduct, monitoring, documentation and reporting of clinical studies to regulatory agencies in the countries or regions in which they are conducted.

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We cannot assure that access to clinical investigators, sites and subjects, documentation and data will be available on the terms and timeframes necessary.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

Further, changes or shortages in FDA staffing resulting from the change in the federal administration could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all, which could negatively impact our business.

We are subject to extensive complex regulatory requirements by domestic and foreign government agencies and any failure to comply with our ongoing responsibilities under their applicable laws and regulations could result in a material adverse impact on our business.

Failure to comply with applicable regulations could result in future product recalls, injunctions preventing the shipment of products or other enforcement actions that could have a material adverse effect on our business.

In addition, the FDA has taken the position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the approved product labeling, and any failure to comply could subject us to significant civil or criminal

exposure, administrative obligations and costs, and/or other potential penalties from, and/or agreements with, the federal government.

We also are subject to the European Medical Device Regulation (“MDR”), which was adopted by the European Union (“EU”) as a common legal framework for all EU member states.

The implementation for Class I products occurred on May 26, 2021 and the European Commission recently extended the implementation period to the end of 2027 for high-risk devices and to the end of 2028 for medium and low risk devices.

Under the EU MDR, companies that wish to manufacture and distribute medical devices in EU member states must meet certain quality system, and safety requirements as well as ongoing product monitoring responsibilities.

Companies must also obtain a “CE” marking (i.e., a mandatory conformity marking for certain products sold within the European Economic Area) for their products.

In addition, the FDA has taken the position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the cleared or approved product labeling, and any failure to comply could subject us to significant civil or criminal exposure, administrative obligations and costs, and/or other potential penalties from, and/or agreements with, the federal government.

Similar restrictions exist in many other countries where we do business, included EEA.

We also are subject to the EU MDR, which was adopted by the EU as a common legal framework for all EU Member States (and also applies to Norway, Iceland and Liechtenstein).

The EU MDR became applicable on May 26, 2021, repealing the EU MDD.

The EU MDR sets out certain transitional provisions that allow for medical devices covered by the repealed EU MDD (called “legacy devices”) to still be marketed in the EEA for a certain period of time.

Most Class I medical devices had to comply with the EU MDR from May 26, 2021.

However, the European Commission has recently extended the transition periods to December 31, 2027, for high-risk legacy devices (all Class III devices, and Class IIb implantable devices except sutures, staples, dental fillings, dental braces, tooth crowns, screws, wedges, plates, wires, pins, clips and connectors) and to December 31, 2028 for medium and low-risk devices (other Class IIb devices, Class IIa devices, and Class I devices placed on the market in sterile condition or having a measuring function).

Under the EU MDR, companies that wish to manufacture and distribute medical devices in EEA must meet certain quality system, performance and safety requirements as well as ongoing product monitoring responsibilities.

Companies must also affix a “CE” marking to their products.

The right to affix the “CE” marking requires that the manufacturer has previously undergone a conformity assessment procedure for the relevant medical devices, in most cases involving a Notified Body (an organization accredited by the competent authority of an EEA country to conduct conformity assessments).

Complying with the requirements of these regulations may require us to incur significant expenditures.

Expenditures for EU MDR compliance activities amounted to $46.6 million for the year ended December 31, 2023 and we anticipate incurring additional expenditures in connection with our on-going efforts to obtain certification for our products under the European Medical Device Regulation.

Various penalties exist for non-compliance with the laws implementing the European Medical Device Regulations which if incurred, could have a material adverse impact on our business, results of operations and cash flows.

Expenditures for EU MDR compliance activities amounted to $44.6 million for the year ended December 31, 2024 and we anticipate incurring additional expenditures in connection with our on-going efforts to obtain certification for our products under the EU MDR.

Various penalties exist for non-compliance with the requirements of the EU MDR and the related laws of EEA countries which, if incurred, could have a material adverse impact on our business, results of operations and cash flows.

Further, the regulatory environment in China continues to evolve, and officials in the Chinese government exercise broad discretion in deciding how to interpret and apply regulations.

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Please refer to “Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations – FDA Matters" (Part II, Item 7 of this Annual Report on Form 10-K) for more information relating to the warning letter we received from the FDA related to inspection observations of the quality systems at our Boston facility and our remediation efforts and expectations regarding the operationalization of our Braintree facility and the transition of manufacturing activities from the Boston facility to the Braintree facility and the warning letter we received from the FDA in December 2024 (the “December 2024 Warning Letter”) related to quality system issues identified during FDA inspections at three of the Company’s facilities located in Mansfield, Massachusetts, Plainsboro, New Jersey, and Princeton, New Jersey.

We or our contractors may fail to satisfy these regulatory requirements in the future, and any failure to do so may prevent us from selling our products.

Further, there can be no assurance that the Company will build and operationalize the Braintree facility, transition manufacturing activities to the Braintree facility or realize the anticipated benefits of the Company’s consolidation of its efforts at Braintree on the planned timeline, or at all, which could have a material adverse effect on our business and financial results.

Some of our activities may subject us to risks under federal and state laws prohibiting “kickbacks” and false or fraudulent claims.

We are subject to laws and regulations that govern the means by which companies in the healthcare industry may market their products to healthcare professionals and may compete by discounting the prices of their products, including for example, the federal Anti-Kickback Statute, the federal False Claims Act, the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), state law equivalents to these federal laws that are meant to protect against fraud and abuse and analogous laws in foreign countries.

Violations of these laws are punishable by criminal and civil sanctions, including, but not limited to, in some instances civil and criminal penalties, damages, fines, and exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid.

We are subject to laws and regulations that govern the means by which companies in the healthcare industry may market their products to healthcare professionals and may compete by discounting the prices of their products, including for example, the federal AKS, the False Claims Act, HIPAA, state law equivalents to these federal laws that are meant to protect against fraud and abuse and analogous laws in foreign countries.

Violations of these laws are punishable by criminal and civil sanctions, including, but not limited to, in some instances civil and criminal penalties, damages, fines, restitution and exclusion from

participation in federal and state healthcare programs, including Medicare and Medicaid.

For a more detailed discussion of these laws, see “Item 1.

Business — Government Regulation and Compliance — Other Regulations — Healthcare Fraud and Abuse Laws.”

Our international operations are subject to the provisions of the U.S.

Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), which prohibits U.S.

FCPA of 1977, which prohibits U.S.

companies and their representatives from offering or making improper payments to foreign officials for the purpose of obtaining or retaining business.

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Our international operations are also subject to various other international anti-bribery laws such as the UK Anti-Bribery Act.

In addition, the Chinese government recently launched a campaign to combat corruption in healthcare with a focus on pharmaceutical and medical device companies covering production, supply, sales, usage, and reimbursement.

The target of the campaign is kickbacks to hospitals and healthcare professionals with a focus on transfers of value to healthcare professionals in the form of grants, donations, event sponsorships, honoraria, and consulting fees.

Despite meaningful measures that we undertake to facilitate lawful conduct, which include training and compliance programs and internal policies and procedures, we may not always prevent unauthorized, reckless or criminal acts by our employees or agents, or employees or agents of businesses or operations we may acquire.

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Moreover, our failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product, recalls, seizures, and withdrawal of an approved product from the market.

We have in place policies and procedures for compliance that we believe are at least as stringent as those set forth in the AdvaMed Code of Ethics which was developed by AdvaMed, a trade association that represents the medical device industry, and which is intended to represent best practices with respect to medical device companies' interactions with healthcare providers.

We regularly train our sales and marketing personnel on our policies regarding sales and marketing practices.

Pursuant to the AdvaMed Code, we have certified our adoption of the AdvaMed Code.

The sales and marketing practices of our industry have been the subject of increased scrutiny from federal and state government agencies, and we believe that this trend will continue.

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governments for exports, and/or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health, and in certain rare circumstances, ban medical devices.

We may, under own initiative, recall a product if a reasonable possibility of serious injury or any material deficiency in a device is found, or withdraw a product to improve device performance or for other reasons.

For example, in May 2023, after consultation with the FDA, we initiated a voluntary global recall of all products manufactured in our Boston, Massachusetts facility distributed between March 1, 2018 and May 22, 2023.

For more information concerning the Boston recall, including our remediation efforts and expectations regarding the resumption of commercial distribution of products manufactured at the Boston facility, please see "Item 7.

We may voluntarily recall a product if a reasonable possibility of serious injury or any material deficiency in a device is found, or withdraw a product to improve device performance or for other reasons.

For example, in May 2023, after consultation with the FDA, we initiated a voluntary global recall of all products manufactured in our Boston facility distributed between March 1, 2018 and May 22, 202 3.

Additionally, in response to Form 483s issued to the Company by the FDA at the conclusion of the FDA’s inspection of three of the Company’s facilities located in Mansfield, Massachusetts, Plainsboro, New Jersey, and Princeton, New Jersey during June and August of 2024, the Company took a number of voluntary actions including the initiation of shipping holds for several products and a voluntary recall of certain disposable cottonoid patties and strips.

In July 2024, we announced plans to impleme nt an enterprise-wide CMP, a systematic and holistic approach to improving our quality management system across our manufacturing and supply network.

We currently cannot predict with certainty whether we will be able to effectively implement the CMP and realize the benefits contemplated thereby within the anticipated timeframe, or at all.

For more information concerning our remediation efforts, including the implementation of the CMP, and our expectations regarding the Company’s plans to build and operationalize the Braintree manufacturing facility and to transition manufacturing activities from the Boston facility to the Braintree facility and respond to the December 2024 Warning Letter, please see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - FDA Matters" in this Annual Report on Form 10-K.

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In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis.

For example, over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.

The adoption of some or all of these initiatives could have a material, adverse effect on our financial condition and results of operations.

We cannot predict what impact ongoing uncertainty regarding federal and state health reform proposals, instability of the insurance markets, changes in the U.S.

administration and policy, an expansion in government’s role in and/or additional proposals and/or changes to the U.S.

health care system or its legislation will have on our customer’s purchasing decisions and/or reimbursement which could have a material adverse effect on our business.

We expect that additional state and federal and

foreign health care reform measures will be adopted in the future, including those initiatives affecting coverage and reimbursement for our products, any of which could limit the amounts that federal and state governments will pay for health care products and services, which could adversely affect the growth of the market for our products or demand for our products, or result in additional pricing pressures.

We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

administration, laws and policies, an expansion in government’s role in and/or additional proposals and/or changes to the U.S.

health care system will have on our customer’s purchasing decisions and/or reimbursement which could have a material adverse effect on our business.

We expect that additional state and federal and foreign health care reform measures will be adopted in the future, including those initiatives affecting coverage and reimbursement for our products, any of which could limit the amounts that federal and state governments will pay for health care products and services, which could adversely affect the growth of the market for our products or demand for our products, or result in additional pricing pressures.

We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or policies or the impact on us.

We continue to monitor the implementation of such legislation and, to the extent new market or industry trends or new governmental programs evolve, we will consider implementing or implement programs in response.

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Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.

If we do not adapt to or comply with new regulations, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company, and customers may choose to stop purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.

In addition, collecting, measuring and reporting environmental data is subject to evolving reporting standards, including the SEC’s climate-related reporting requirements, if such reporting requirements survive pending judicial review, California’s disclosure requirements and similar regulations established by other international regulatory bodies, such as the Corporate Sustainability Reporting Directive in the European Union.

In addition, a number of our customers who are payors or distributors have adopted, or may adopt, procurement policies that include environmental provisions applicable to us.

If we do not adapt to or comply with new regulations, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, we may incur increased compliance costs, investors may reconsider their capital investment in our Company, and customers may choose to stop purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.

If we do not retain our key personnel and attract and retain other highly skilled employees, our business could suffer.

If we fail to recruit, develop and retain the necessary personnel, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer.

If we fail to recruit, develop and retain the necessary personnel, our business and our ability to obtain new customers, develop new products, provide acceptable levels of customer service and achieve our research and development, operational or strategic or business objectives could suffer.

The success of our business is heavily dependent on the leadership of our key management personnel.

Our success also depends on our ability to recruit, develop and retain and motivate highly skilled sales, marketing, manufacturing and scientific personnel.

Our success also depends on our ability to recruit, develop and retain and motivate highly skilled sales, marketing, manufacturing, quality, regulatory and scientific personnel.

Competition for these persons in our industry is intense, and we may not be able to successfully recruit, train or retain qualified personnel.

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We also continue to face the challenges of maintaining employee well-being, recognizing that the continued additional financial, family and health burdens that many employees may be experiencing due to macroeconomic uncertainties, including inflation, and other factors, may adversely impact job performance, employee engagement and employee retention.

Additionally, in our industry, there is substantial competition for key personnel in the regions in which we operate.

Labor shortages and competition for qualified personnel, particularly as employees are increasingly able to work remotely, could cause disruptions in our business operations.

Additionally, in our industry, there is substantial competition for key personnel in the regions in which we operate and plan to expand our business.

Labor shortages and competition for

qualified personnel, particularly as employees are increasingly able to work remotely, could cause disruptions in our business operations.

Also, facilitating seamless leadership transitions for key positions is a critical factor in sustaining the success of our organization.

If we fail to effectively manage any organizational and/or strategic changes, our financial condition, results of operations, and reputation, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.

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Taxes could significantly increase due to changes in tax laws or changes in our interpretation of those laws.

For example, the Organization for Economic Co-operation and Development, a global policy forum, released model rules related to a new 15% global minimum tax regime.

Several of the jurisdictions that we operate in have already adopted these rules, which could impact the amount of taxes that we pay.

For example, several countries, including the United States and other members of the Organization for Economic Cooperation and Development (“OECD”) have reached agreement on a global minimum tax initiative (“Pillar Two”).

Other OECD countries are also actively considering changes to existing tax laws or have proposed new laws to align with the recommendations and guidelines proposed by the OECD, including Pillar Two.

Enactment of such tax laws could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

Beginning in 2024, Pillar Two is in effect in some of the jurisdictions in which we operate.

The Pillar Two impact on 2024 was immaterial.

However, we cannot provide any assurance that there will not be a material impact to our effective tax rate because of these developments and evolving tax legislation in 2025 and beyond.

Taxes could also significantly increase due to changes in accounting guidance.

about certain tax agreements in a particular jurisdiction, a change in our geographic earnings mix, and/or to the jurisdictions in which we operate, or a change in the measurement of our deferred taxes.

Our future effective tax rate could be unfavorably affected by numerous factors including a change in, or the interpretation of, tax rules and regulations in the jurisdictions in which we operate (including changes in legislation currently being considered), the expiration of or disputes about certain tax agreements in a particular jurisdiction, a change in our geographic earnings mix, and/or to the jurisdictions in which we operate, or a change in the measurement of our deferred taxes.

Our leverage and debt service obligations could adversely affect our business.

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As of December 31, 2024, our total consolidated external debt was approximately $1.8 billion (See Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 5, Debt , to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K) for a discussion of our consolidated external debt).

Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 5.

Debt , to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K) for a discussion of our consolidated external debt).

We may also incur additional indebtedness in the future.

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• limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate or other purposes;

• result in greater interest rate risk and volatility.

Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes, including funding future expansion of our business, acquisitions, and ongoing capital expenditures, which could impede our growth.

In addition, our ability to comply with, renegotiate or extend the Company’s debt obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and financial, business and other factors beyond our control.

In addition, the Convertible Senior Notes due 2025 (the “2025 Notes”) will mature in August 2025, unless earlier converted, redeemed, or repurchased.

Our ability to comply with, renegotiate or extend the Company’s debt obligations will depend on various factors, including the accessibility of the capital markets and our operating and financial performance, which, in turn, is subject to prevailing economic conditions and financial, business and other factors beyond our control.

Any disruptions in our operations, the financial markets, or the overall economy, may adversely affect the availability and cost of credit to us and/or our ability to comply with our existing obligations.

GLOBAL PUBLIC HEALTH CONCERNS

Public health crises, such as the COVID-19 pandemic, have had, and could in the future have, a negative effect on our business.

Our global operations and interactions with healthcare systems, providers and patients around the world expose us to risks associated with public health crises, including epidemics and pandemics.

Such pandemics or disease outbreaks, such as the COVID-19 pandemic, have created and may continue to create significant volatility, uncertainty and economic disruption in the markets in which we sell our products and in which we operate.

In response to the COVID-19 pandemic, governments around the world imposed measures designed to reduce the transmission of COVID-19 and individuals responded to the fear of contracting COVID-19.

Additionally, the impact of the COVID-19 pandemic and its aftermath on general macroeconomic conditions has led to disruptions in the global supply chain, primarily through a lack of availability of raw materials and electronic components.

We have experienced challenges associated with material and component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of our products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services.

The direct and indirect disruptions caused by the pandemic and the responses of both governments and individuals could negatively impact the number of surgical and medical intervention procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The extent to which fear of exposure to or actual effects of COVID-19, new variants, disease outbreak, epidemic or a similar widespread health concern impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the speed and extent of geographic spread of the disease, the duration of the outbreak, travel restrictions, the efficacy of vaccination and treatment; impact on the U.S.

and international healthcare systems, the U.S.

economy and worldwide economy; the timing, scope and effectiveness of U.S.

and international governmental response; and the impact on the health, well-being and productivity of our employees.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

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We own or have licensed patents that cover aspects of some of our product lines.

Our patents, however, may not

provide us with any significant competitive advantage.

Our patents, however, may not provide us with any significant competitive advantage.

Others may challenge our patents and, as a result, our patents could be narrowed, invalidated or rendered unenforceable.

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RISKS RELATED TO CYBERSECURITY AND DATA PRIVACY

Cyber-attacks or other disruptions to our information technology systems could adversely affect our business.

Cybersecurity incidents or other disruptions to our information technology systems could adversely affect our business.

We are increasingly dependent on sophisticated information technology for our infrastructure and to support business decisions.

Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns.

Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing expectations regarding protection of patient, customer, and employee information, and changing customer patterns.

An experienced third party maintains the enterprise business system used to support our transaction processing, accounting and financial reporting, and supply chain and manufacturing processes.

Any significant breakdown, intrusion, interruption, corruption, or destruction of these systems, as well as any data breaches, could have a material, adverse effect on our business.

Third parties may attempt to breach our systems and may obtain data relating to patients, proprietary or sensitive information.

We may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

If we, or third parties on whom we rely, fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty attracting new customers, suffer backlash from negative public relations, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences.

Any significant breakdown, intrusion, interruption, corruption, or destruction of these systems, as well as any other cybersecurity incident, could have a material, adverse effect on our business.

Third parties may attempt to compromise our systems and may obtain data relating to patients, proprietary or other sensitive information.

We may face increased cybersecurity risks due to our reliance on internet technology and the number of our

employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

We have programs, processes (including ongoing improvements) and technologies in place to prevent, detect, contain, respond to and mitigate security related threats and potential incidents.

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We are also dependent on third party vendors to supply and/or support certain aspects of our information technology systems which may contain defects in design or manufacture or other problems that could result in system disruption or unexpectedly compromise the information security of our own systems.

In addition, as we grow in part through new acquisitions we may face risks due to implementation, modification, or remediation of controls, procedures, and policies relating to data privacy and cybersecurity at the acquired business that may or may not have been identified as part of due diligence or encounter issues as part of integration.

We continue to consolidate and integrate the number of systems we operate, and to upgrade and expand our information system capabilities for stable and secure business operations.

Despite our implementation of controls to protect our systems and sensitive, confidential or personal data or information, we may be vulnerable to material security breaches, theft, misplaced, lost or corrupted data, employee errors and/or malfeasance (including misappropriation by departing employees) that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions.

In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.

Despite our implementation of controls to protect our systems and information, we remain vulnerable to cybersecurity incidents such as theft, misplaced, lost or corrupted data, employee errors and/or malfeasance (including misappropriation by departing employees), ransomware, and evolving attacks such as with the assistance of the use of AI tools or involving open source software vulnerabilities, that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions.

In addition, a cybersecurity incident could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.

Failure to comply with laws relating to the confidentiality of sensitive personal information or standards related to the transmission of electronic health data, may require us to make significant changes to our products, or incur penalties or other liabilities .

State, federal and foreign laws, such as HIPAA or the California Consumer Privacy Act of 2018, regulate the confidentiality of sensitive personal information and the circumstances under which such information may be released.

These measures may govern the disclosure and use of personal and patient medical record information and may require users of such information to implement specified security measures, and to notify individuals in the event of privacy and security breaches.

Evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or disseminate patient information, or could require us to incur significant additional costs to re-design our products in a timely manner, either of which could have an adverse impact on our results of operations.

Other health information standards, such as regulations under HIPAA, establish standards regarding electronic health data transmissions and transaction code set rules for specified electronic transactions, for example transactions involving submission of claims to third-party payors.

State, federal and foreign laws, such as HIPAA, Section 5 of the FTC Act, or the California Consumer Privacy Act, as amended by the CCPA, and other similar state laws regulate the confidentiality of personal information, including sensitive information and the circumstances under which such information may be released.

Evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or disseminate patient information, or could require us to incur additional costs to re-design our products in a timely manner, either of which could have an adverse impact on our results of operations.

Other health information standards, such as regulations under HIPAA and FDA guidance and requirements, establish standards regarding device security, electronic health data transmissions and transaction code set rules for specified electronic transactions, for example transactions involving submission of claims to third-party payors.

These standards also continue to evolve and are often unclear and difficult to apply.

We have incurred and expect that we will continue to incur significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new federal, state and international laws governing the unauthorized disclosure or exfiltration of confidential and personal information which are continuously being enacted and proposed.

Outside the U.S., we are impacted by privacy and data security requirements at the international, national and regional level, and on an industry specific basis.

More privacy and security laws and regulations are being adopted, and more are being enforced, with potential for significant financial penalties.

In the EU, increasingly stringent data protection and privacy rules have been enacted.

The EU General Data Protection Regulation (GDPR) applies uniformly across the EU and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances.

The GDPR also requires companies processing personal data of individuals residing in the EU to comply with EU privacy and data protection rules.

Failure to maintain the confidentiality of sensitive personal information in accordance with the applicable regulatory requirements, or to abide by electronic health data transmission standards, could expose us to breach of contract claims, fines and penalties, costs for remediation and harm to our reputation.

We have incurred and expect that we will continue to incur costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new federal, state and international laws governing data privacy and cybersecurity which are continuously being enacted and proposed.

Moreover, as a result of the broad scale release and availability of AI technologies such as generative AI, there is a global trend towards more regulation (e.g., the EU AI Act and AI laws passed in U.S.

states) to ensure the ethical use, privacy, and security of AI and the data that it processes.

Compliance with such laws will likely be an increasing and substantial cost in the future.

Outside the U.S., we are also impacted by privacy and data security requirements at the international, national and regional level, and on an industry specific basis.

More privacy and cybersecurity laws and regulations are being adopted and enforced, with the potential for financial penalties.

The EU GDPR, including as implemented in the UK, applies across the EU and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances as well as requirements prior to transferring personal data to other jurisdictions.

The GDPR also requires companies processing personal data of individuals in the EU to comply with EU data protection rules.

The GDPR, and its United Kingdom equivalent, is also influential for a growing number of jurisdictions who have adopted, or contemplated adoption, of similar data protection laws.

Failure to maintain the confidentiality of personal data in accordance with the applicable regulatory requirements, or to abide by electronic health data transmission standards, could expose us to breach of contract claims, regulatory fines and penalties, litigation expenses, costs for remediation and harm to our reputation.

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 1A. Risk Factors