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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 221 added, 263 removed, 307 unchanged (61% of the section changed)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s operations and business environment.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s operations and business environment.

MD&A is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

The following discussion includes forward-looking statements that involve certain risks and uncertainties.

See Part I, Item 1, “Business - Forward-Looking Statements and Associated Risks” in the beginning of this Form 10-K.

The MD&A includes the following sections:

• Business - a general description of Dentsply Sirona’s business and how performance is measured;

• Results of Operations - an analysis of the Company’s consolidated results of operations for the years ended December 31, 2023 and 2022;

• Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates;

• Liquidity and Capital Resources - an analysis of cash flows;

debt and other obligations;

off-balance sheet arrangements;

and aggregate contractual obligations.

2023 Operational Highlights

See Part I, Item 1, “Business - Forward-Looking Statements and Associated Risks.”

2024 Operational Summary

For the year ended December 31, 2024,

• Net sales increased 1.1% compared to the prior year.

On an organic basis (a Non-GAAP measure as defined under the heading “Key Performance Measurements” below) net sales increased 2.2% for the year ended December 31, 2023 compared to the prior year.

• Net sales decreased 4.3% compared to the prior year.

On an organic basis (a Non-GAAP measure as defined under the heading “Key Performance Measurements” below) net sales decreased 3.5% for the year ended December 31, 2024 compared to the prior year.

Net sales were negatively impacted by approximately 0.8% due to the strengthening of the U.S.

dollar over the prior year period.

• Net loss was $132 million as compared to net loss of $950 million for the prior year primarily due to lower goodwill and intangible asset impairment charges of $307 million compared to $1,287 million in the prior year.

Diluted loss per share was $0.62 per share compared to diluted loss per share of $4.41 in the prior year.

• Net loss was $910 million as compared to net loss of $132 million for the prior year primarily due to higher goodwill and intangible asset impairment charges of $1,014 million compared to $307 million in the prior year.

Diluted loss per share was $4.48 compared to diluted loss per share of $0.62 in the prior year.

• Cash from operations was $461 million, as compared to $377 million in the prior year.

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DENTSPLY SIRONA Inc.

(“Dentsply Sirona” or the “Company”), is the world’s largest manufacturer of professional dental products and technologies, with a 137-year history of innovation and service to the dental industry and patients worldwide.

Dentsply Sirona develops, manufactures, and markets a comprehensive solutions offering including dental equipment and dental consumable products under a strong portfolio of world class brands.

The Company also manufactures and markets certain healthcare consumable products for continence care.

Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry.

(“Dentsply Sirona” or the “Company”), is the world’s largest diversified manufacturer of professional dental products and technologies, with a 138-year history of innovation and service to the dental industry and a vision of improving oral health and continence care globally.

Dentsply Sirona develops, manufactures, and markets comprehensive solutions, including technologically advanced dental equipment supported by cloud-enabled software solutions as well as dental products and healthcare consumable products in urology and enterology under a strong portfolio of world-class brands.

Dentsply Sirona’s innovative products provide high-quality, effective, and connected solutions to advance patient care and deliver better, safer, and faster dentistry.

Dentsply Sirona’s worldwide headquarters is located in Charlotte, North Carolina.

The Company’s shares of common stock are listed in the United States on Nasdaq under the symbol XRAY.

Effective April 1, 2023, the Company realigned its reporting structure due to certain organizational changes.

As a result, the Company’s reportable segments changed from Technology & Equipment and Consumables to (i) Connected Technology Solutions, (ii) Essential Dental Solutions, (iii) Orthodontic and Implant Solutions, and (iv) Wellspect Healthcare.

All comparative segment information and disaggregated revenue information has been recast to reflect the Company’s new segment structure and current period presentation.

The Company’s shares of common stock are listed in the United States on the Nasdaq stock market under the symbol XRAY.

Segment Descriptions

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These products include the Equipment & Instruments and CAD/CAM product categories.

Dental CAD/CAM technologies are products designed for dental professionals to support numerous digital workflows for procedures such as dental restorations through integrations with DS Core, our cloud-based platform.

Essential Dental Solutions

This segment includes the development, manufacture, and sales of the Company’s value-added endodontic, restorative, and preventive consumable products and small equipment used in dental offices for the treatment of patients.

Offerings in this segment also include specialized treatment products including products used in the creation of dental appliances.

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This category consists mainly of urology catheters and other healthcare-related consumable products.

Recent Developments

As previously disclosed in the Company’s Current Report on Form 8-K filed February 11, 2025, the Company has initiated a process to evaluate strategic alternatives for its Wellspect Healthcare business.

There is no deadline or definitive timetable set for completion of the strategic alternatives process or assurance that the process will result in a transaction.

The Company does not intend to make further announcements regarding the review of strategic alternatives unless and until the Board of Directors approves a course of action or otherwise determines further disclosure is appropriate or necessary.

The impact of global economic conditions

Markets in several regions, particularly Europe, continue to experience varying degrees of recessionary pressures and face concerns about the systemic impacts of adverse economic conditions and geopolitical issues.

Changes in economic conditions, supply chain constraints, higher energy costs, labor shortages, the conflict in Ukraine, and geopolitical tensions in the Middle East, have all contributed to a period of higher inflation across the industry and the regions in which the Company operates.

As a result, the Company has experienced higher prices for certain raw materials, particularly for electronic components which have in some cases required incremental procurement costs such as brokers’ fees during the year, and consequently a negative impact on margins.

Although these trends improved in most regions in the second half of 2023, we expect a continuation of inflationary pressure on the cost of both raw materials and wages into 2024, the effect of which will depend on the Company’s ability to successfully mitigate and offset the related impacts.

The deterioration in macroeconomic conditions has also negatively impacted demand for the Company’s products and may continue to do so in the future.

Specifically, higher interest rates have put pressure on the ability and willingness of our customers to obtain financing for equipment purchases, which affects volumes for these products.

The impact of macroeconomic declines and high interest rates has been particularly apparent in Germany, which accounts for 11% of the Company’s sales.

Markets in several regions, particularly Europe, continue to experience varying degrees of pressures inhibiting growth and face concerns about the systemic impacts of adverse economic conditions and geopolitical events.

Changes in economic conditions, supply chain constraints, higher energy costs, labor shortages, the conflict in Ukraine, and geopolitical tensions in the Middle East and Russia, have all contributed to a period of higher inflation across the industry and the regions in which the Company operates.

As a result, the Company has experienced higher prices for certain raw materials, including electronic components, which have led to a negative impact on margins.

We expect a continuation of inflationary pressure on the cost of both raw materials and wages into 2025, the effect of which will depend on our ability to successfully mitigate and offset the related impacts.

The challenging macroeconomic conditions have also negatively impacted demand for the Company’s products and may continue to do so in the future.

Specifically, higher interest rates have put pressure on the ability and willingness of our customers to obtain financing for equipment purchases, which adversely affects volumes for these products.

The higher cost of borrowing has also reduced patient demand for elective dental procedures, which affects sales of the Company’s offerings more broadly.

The Company has also faced additional competitive pressure for lower-priced options for equipment and other products by dental practices, in particular for imaging products and implants.

While the Company has taken steps to address competitive pressures, such as the reintroduction of its Orthophos SL 2D and 3D products, these trends may continue.

While patient volumes have largely remained stable in the United States, the impact of macroeconomic declines and high interest rates has been particularly a pparent in Germany, which represented 11% of the Company’s sales for the year ended December 31, 2024.

Germany was in a recession for most of 2023, largely due to persistent high inflation and falling household spending.

In Germany and in other markets, pressures on discretionary consumer spending have depressed demand for elective dental procedures including sales of implants products.

Additionally, these trends lead to additional competitive pressure for lower-priced options for investments in new equipment by dental practices.

The Company believes the challenging conditions in Germany are likely to persist into 2024, which may further impact the Company’s sales of products in this market.

In anticipation of a continued inflationary trend and potentially deteriorating macroeconomic environment, the Company has attempted to mitigate these pressures through the following actions, among others:

Although conditions, including inflation, marginally improved in 2024, demand for investments in new dental equipment continued to be weak, and economic forecasts by the German government project limited growth in 2025.

The Company anticipates that the challenging macroeconomic and market conditions in Germany are likely to persist and negatively impact sales of equipment into next year.

In anticipation of a continued inflationary trend and potentially deteriorating macroeconomic environment, we have attempted to mitigate these pressures through the following actions, among others:

• Driving strategic procurement initiatives to leverage alternative sources of raw materials and transportation;

• Implementing cost-containment measures, as well as intensifying continuous improvement and restructuring programs in our manufacturing and distribution facilities and other areas of our business;

• Implementing cost-containment measures, as well as intensifying continuous improvement and restructuring programs in our manufacturing and distribution facilities and other areas of our business, including the most recent restructuring plan approved by the Board of Directors on July 29, 2024;

• Optimizing our customer management and implementing strategic investments in our commercial sales organization in key markets, particularly the United States;

• Refining our focus on developing a winning portfolio with global scale to maximize market share in a competitive pricing environment.

As explained further in the Results of Operations section below, the Company has partially offset elevated costs in certain areas of the business with price increases during the year.

Should the higher inflationary environment continue, the Company may be unable to raise the prices of our products and services sufficiently or may engage in other cost cutting measures to keep up with the rate of inflation which could have a material adverse effect on our results of operations and financial condition.

The impact of the Israel-Hamas war

The terrorist attacks by Hamas militants crossing the border from Gaza to Israel in October 2023 and the subsequent military response by the Israeli government resulted in significant unrest and uncertainty within that region, including the possibility that escalating violence and involvement of other terrorist groups from neighboring countries may further impact our employees and operations.

The Company’s operations in Israel consist of two manufacturing facilities for implants products, with one site in northern Israel and one in southern Israel, which employ approximately 300 associates.

The terrorist attacks by Hamas militants crossing the border from Gaza to Israel in October 2023 and the subsequent military response by the Israeli government in Gaza has resulted in significant unrest and uncertainty within that region.

During the course of 2024, the state of Israel has also been a target of coordinated missile and drone attacks launched by the Republic of Iran and by Iran’s terrorist proxy organization in Lebanon.

Although a cease-fire agreement was signed between Hamas and the Israeli government in January 2025, the potential for a long-term peace deal and greater stability remains uncertain.

A resumption of the violence or the involvement of other terrorist groups or foreign powers in the region could impact our employees and operations in future periods.

Additionally, in May 2024, in response to ongoing military actions, the government of Turkey implemented restrictions on the import of goods manufactured within Israel for sale in the Turkish market.

Sales of our products made in Israel and sold in Turkey have historically represented approximately 1% of our global sales of the Implant & Prosthetic Solutions reporting unit, but this product category is an area of relatively high potential growth.

The loss of sales to Turkey in 2024 was partially offset by sales of implants produced outside of Israel.

It is not clear when these restrictions will be lifted or if other countries will institute similar restrictions.

The Company’s operations in Israel consist of two manufacturing facilities for implants products, with one site in northern Israel and one site in southern Israel, which together employ approximately 350 associates.

These facilities remain open and continue to operate.

We may, however, determine to discontinue production for the safety of our employees, or we could face future production slowdowns or interruptions at either location due to the impacts of the war including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

For the year ended December 31, 2023, net sales of products produced at these sites comprise approximately 3% of our consolidated net sales and 13% of the net sales attributed to our Orthodontic and Implant Solutions segment.

Net assets within Israel total $197 million as of December 31, 2023, consisting primarily of acquired technology, cash, inventory, and property, plant and equipment associated with our operations in country.

While the conflict did not have a material impact on results for the year ended December 31, 2023, the Company continues to monitor developments and prepare contingency plans to limit the potential disruption to our operations for the fiscal year 2024.

Additionally, the Company sells products from across our portfolio to distributors of dental products and direct to dental practices within Israel and its neighboring countries which may face reduced patient traffic and demand for our products in the near term.

Net sales for products sold to our customers in Israel comprise less than 1% of our consolidated net sales for the year ended December 31, 2023.

While Israel does not constitute a material portion of our business, a significant escalation or expansion of the conflict’s current scope and economic disruption could result in loss of sales and market position, disrupt our supply chain, broaden inflationary costs including energy prices, and have a material adverse effect on our results of operations, including impairment of the net assets in Israel or the goodwill associated our Implants & Prosthetics reporting unit.

We may, however, decide to discontinue production at these facilities for the safety of our employees, or we could face future production slowdowns or interruptions at either location due to the impacts of the war, including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

For the year ended December 31, 2024, net sales of products produced at these sites comprised approximately 3% o f our consolidated net sales an d 13% of the net sales of the Orthodontic and Implant Solutions segment.

Net assets within Israel totaled $180 million as of December 31, 2024, consisting primarily of acquired technology, property, plant and equipment, cash, and inventory associated with our operations in the country.

Overall, the Company’s operations in Israel have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or fixed asset impairments for the year ended December 31, 2024 due to the conflict.

The Company continues to monitor developments and prepare contingency plans to limit potential disruption to its operations in the future.

Additionally, we sell products from across our portfolio to distributors of dental products and direct to dental practices within Israel and its neighboring countries which may face reduced patient traffic and demand for our products in the near term.

Net sales for products sold to our customers in Israel comprised approximately 1% of our consolidated net sales for the year ended December 31, 2024.

The impact of the war in Ukraine

In February 2022, because of the invasion of Ukraine by Russia, economic sanctions were imposed by the United States, the European Union, and certain other countries on Russian financial institutions and businesses.

Due to the medical nature of our products, the current sanctions have not materially restricted the Company’s ability to continue selling many of our products to customers located in Russia.

Due to the medical nature of our products, the current sanctions have not materially restricted our ability to continue selling many of our products to customers located in Russia.

The Company also sources certain raw materials and components from Russia and Ukraine and has taken actions to minimize any adverse impacts from disrupted supply chains related to these items.

The Company’s operations in Ukraine consist primarily of R&D activities, which continue uninterrupted from other locations to focus on the safety of employees.

Overall, the Company’s operations in Russia and Ukraine have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or asset impairments through the year ended December 31, 2023 as a result of the conflict.

The Company’s operations in Ukraine consist primarily of R&D activities, which continue from locations that focus on the safety of employees.

Ov erall, the Company’s operations in Russia and Ukraine have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or asset impairments for the year ended December 31, 2024 as a result of the conflict.

For the year ended December 31, 2024, net sales in Russia and Ukraine were approximately 2% of our consolidated net sales, and net assets in these countries were $64 million.

These net assets include $42 million of cash and cash equivalents held within Russia as of December 31, 2023.

Due to currency control measures imposed by the Russian government which include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia, we may be limited in our ability to transfer this cash balance out of Russia without incurring substantial costs, if at all.

While neither Russia nor Ukraine constitutes a material portion of our business, a significant escalation or expansion of economic disruption or the conflict’s current scope could result in a loss of sales, disrupt our supply chain, broaden inflationary costs, and have a material adverse effect on our results of operations.

For additional discussion of associated risks, refer to Part I, Item 1A, “Risk Factors” - Risks Related to Our International Operations.

These net assets include $39 million of cash and cash equivalents held within Russia as of December 31, 2024 , as well as inventory and trade accounts receivable.

Due to currency control measures imposed by the Russian government, which include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia, we continue to be limited in our ability to transfer this cash balance out of Russia without incurring substantial costs.

Additionally, beginning in September 2024, as a result of further restrictions by European financial institutions on receiving payments from Russia, our capacity to receive intercompany payments for the delivery of our products into Russia has been partially reduced, which further limits our ability to use cash received from sales in Russia for our general purposes.

It is unclear whether the remaining financial institutions which the Company relies upon for bank transfers from Russia will ultimately be able to continue facilitating payments, or for how long.

If these restrictions on cash transfers from Russia worsen, or if we are not able to obtain long-term relief from these restrictions, we may need to take additional actions, including potential suspension of our business in Russia.

A significant escalation or expansion of the economic disruption from the conflict could interrupt our supply chain, broaden inflationary costs, impair our assets located in Russia, result in a loss of sales, and have a material adverse effect on our results of operations.

For additional discussion of associated risks, refer to Part I, Item 1A, “Risk Factors” - Risks Related to Our Global Operations.

Business Drivers

The primary drivers of organic sales (as defined below) include macroeconomic factors, global dental industry demand, innovation and new product launches by the Company, as well as continued investments in sales and marketing resources to drive demand creation, including clinical education.

Management believes that the Company’s ability to execute its strategies should allow it to grow faster than the underlying dental industry over time.

On a short-term basis, sudden changes in the macroeconomic environment, supply chain challenges, or changes in distributor inventory levels can and have impacted the Company’s sales.

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The Company has a focus on maximizing operational excellence on a global basis.

The Company has expanded the use of technology as well as process improvement initiatives to enhance global efficiency.

The Company has expanded the use of technology and has undertaken process improvement initiatives to enhance global efficiency.

In addition, management continues to evaluate the worldwide consolidation and simplification of operations and functions to further reduce costs.

While the Company continues consolidation initiatives which can have an adverse impact on reported results in the short term, the Company expects that the continued benefits from these global efficiency efforts will optimize its cost structure.

While the Company continues consolidation initiatives, which can have an adverse impact on reported results in the short term, the Company expects that the continued benefits from these global efficiency efforts will improve its cost structure in the long-term.

Meanwhile, the Company intends to continue pursuing opportunities to expand the Company’s product and solutions offerings, technologies, and sales and service infrastructure through partnerships.

Although the professional dental market has experienced consolidation, it remains fragmented.

Management believes there will continue to be opportunities to participate as a consolidator in the industry for the foreseeable future.

The Company’s business is subject to quarterly fluctuations in net sales and operating income.

Annual price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation.

Distributor inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase, although these fluctuations are mitigated by limits on purchases ahead of these increases.

The timing of annual price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation.

Also, the Company distributes approximately two-thirds of its dental consumable and technology and equipment products through third-party distributors whose inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase, although these fluctuations are mitigated by limits on purchases ahead of these increases.

Changes in distributors’ inventory levels have impacted the Company’s consolidated net sales in the past and may continue to do so in the future.

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Restructuring Programs

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the Company’s business to improve operational performance and drive shareholder value creation, which is expected to result in the Company incurring between $115 to $135 million in one-time charges and achieving approximately $200 million in annual cost savings.

On July 29, 2024, the Board of Directors of the Company approved an additional plan to restructure the Company’s business to improve operational performance and drive stockholder value creation (the “2024 Plan”).

The Company expects to incur between $35 million and $50 million in non-recurring charges under the 2024 Plan.

The Company anticipates that the 2024 Plan will be substantially completed by the end of 2025 and result in $80 million to $100 million in annual cost savings.

For details on this plan including the nature of the non-recurring charges incurred during the year, refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K, and to the discussion under the heading “Material Trends in Capital Resources” within MD&A.

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Due to the Company’s global footprint, movements in foreign currency exchange rates may have a material impact on its reported net sales and pre-tax income.

With approximately two-thirds of the Company’s net sales originating from regions outside the U.S, the Company’s net sales and results of operations are negatively impacted by the strengthening, or positively impacted by the weakening, of the U.S.

With approximately two-thirds of the Company’s net sales originating from regions

outside the United States, the Company’s net sales and results of operations are negatively impacted by the strengthening, or positively impacted by the weakening, of the U.S.

dollar compared to the primary currencies in which the Company operates.

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dollar could continue to adversely impact the Company’s results.

Distribution Arrangements

In July 2024, the Company delivered a one-year notice of non-renewal in connection with its non-exclusive distribution agreements with Patterson Companies, Inc.

(“Patterson”) for the distribution of dental equipment in the United States and Canada.

It is anticipated that Patterson will continue to be one of the Company’s two largest distributors as a percentage of the Company’s global revenue during the one-year notice period.

The Company intends to continue to engage in discussions for new distribution agreements with Patterson.

However, failure to successfully renegotiate the distribution agreements or secure potential new agreements with another distributor could have a material adverse effect on the Company’s business, operating results and financial condition.

The Company has not incurred any charges against earnings in 2024 related to non-renewal of the distribution agreements.

For additional information, see Part 1, Item 1A, “Risk Factors.”

Byte Aligners Business

On October 24, 2024, the Company announced the voluntary suspension of the sale and marketing of its Byte aligner system and impression kits while the Company conducted a review of certain regulatory requirements related to these products.

The Company’s decision was made in communication with the U.S.

Food and Drug Administration (the “FDA”) and resulted in suspension of the shipment and processing of new and recently placed orders for Byte aligners and impression kits through the remainder of 2024.

In January 2025, the Company announced plans that the Byte aligners would no longer be offered to new patients, and the Company now plans to utilize certain Byte resources elsewhere in the aligners portfolio to create orthodontic demand, support a digital clinical workflow, enhance the customer experience, and improve patient monitoring.

As a result of these developments, in the fourth quarter of 2024, the Company recorded $187 million in impairments of assets pertaining to the Byte business including a trademark, fixed assets, capitalized software and working capital.

In addition to these impairments, the Company recorded an accrual for expected customer refund and other reimbursement payments stemming from the cessation of sales and business realignment, which resulted in a $35 million reduction to net sales.

The suspension of sales in the fourth quarter of 2024 also resulted in a decline in aligner revenues as compared to the prior period.

For additional information refer to Item 8, Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements of this Form 10-K, as well as the Results of Operations discussion below.

RESULTS OF OPERATIONS

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and (3) the impact of foreign currency changes, which is calculated by translating current period net sales using the comparable prior period’s currency exchange rates.

Our measure of organic sales may differ from those used by other companies and should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with U.S.

Organic sales is an important internal measure for the Company, and its senior management receives a monthly analysis of operating results that includes organic sales.

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was led by positive performance in the Essential Dental Solutions segment, primarily driven by price increases, and positive performance in the Orthodontic and Implant Solutions segment, primarily driven by price increases and higher volumes of orthodontic aligners.

These increases were partially offset by lower volumes in the Connected Technology Solutions segment.

The decrease in organic sales was primarily driven by lower volumes in the Connected Technology Solutions segment across all regions, lower volumes of orthodontic and lab products within the Orthodontic and Implant Solutions segment, and lower volumes in the Essential Dental Solutions segment, primarily in the United States.

These decreases were partially offset by growth in the Wellspect Healthcare segment.

Net Sales by Segment

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Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily due to lower volumes of imaging and instrument products, particularly in the United States and Europe, due to the unfavorable macroeconomic environment and competitive pressure for imaging products.

This trend of lower volumes for these products is expected to continue into 2024.

These decreases were partially offset by sales of new CAD/CAM products.

Sales of CAD/CAM products in the United States were also positively impacted by the timing of sales to distributors relative to the year ended December 31, 2022, as explained below in our discussion of net sales within the United States.

The decrease in organic sales was primarily due to lower volumes of imaging equipment, instruments, CAD/CAM equipment, and treatment centers across all three regions, driven in part by competitive pressures particularly from lower-cost competitors, as well as unfavorable economic conditions.

The trend of lower volumes for these products is expected to continue into 2025.

Essential Dental Solutions

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was due to price increases across the segment and higher volumes of preventive consumable products, particularly in the United States, as well as the favorable impact of new product launches.

These increases were partially offset by lower volumes of restorative and endodontic consumables products.

The decrease in organic sales was due to lower volumes of preventive consumable products across all three regions and lower volumes of restorative and endodontic products in the United States.

The decrease was partially offset by higher volumes for endodontic products in Rest of World.

Orthodontic and Implant Solutions

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was primarily driven by higher volumes of both our in-office and direct-to-consumer orthodontic aligner solutions, particularly in the United States, coupled with an increase in the volume of implants and prosthetics products in the Rest of World, particularly in China.

Organic sales also benefited from price increases for orthodontic aligners during the year.

These increases were partially offset by lower volumes of implants and prosthetics products in the United States and Europe.

The decrease in organic sales for the year was primarily driven by a decrease in volume for implants and prosthetics products across the United States and Europe, and weaker sales of aligners in the United States which were negatively impacted by the suspension of the sale and marketing of Byte aligner system and impression kits.

The decrease was partially offset by increased sales of SureSmile aligners in Europe and of implants products in Rest of World.

Wellspect Healthcare

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Net sales $ 304 $ 288 $ 16 5.9 %

Unfavorable foreign exchange impact

Favorable foreign exchange impact 0.1 %

Organic sales 5.8 %

Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was primarily driven by higher volumes across all regions, particularly in Europe, the favorable impact of new product launches and price increases.

The increase in organic sales was primarily driven by higher volumes across all regions, particularly in Europe, primarily driven by new product launches.

Net Sales by Region

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Net sales $ 1,348 $ 1,437 $ (89) (6.2 %)

Favorable foreign exchange impact 0.2 %

Foreign exchange impact — %

Organic sales (6.2 %)

Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was driven primarily by price increases and higher demand for Essential Dental Solutions products and orthodontics aligners.

This was partially offset by lower volumes of imaging, instruments and implants products.

Organic sales were also positively affected by wholesale volumes for CAD/CAM products relative to the year ended December 31, 2022 due in part to timing of sales to distributors in prior year.

The level of inventory for CAD/CAM units held by distributors at year end 2023 remained consistent with the beginning of 2023, compared to a reduction in distributor inventory levels of approximately $60 million in 2022.

Distributor inventory levels for CAD/CAM products remained low as of December 31, 2023 relative to historical averages.

The decrease in organic sales was primarily due to changes in the operation of our direct-to-consumer aligners business during the course of the year, and particularly during the fourth quarter as described above under the heading “Byte Aligners Business.” Prior to the suspension of sales of aligners and impression kits beginning in October 2024, legislative trends relating to teledentistry in certain states had already prompted us to make adjustments to the Byte business model which resulted in reductions of sales of aligners by approximately $15 million during the first nine months of 2024.

The subsequent suspension of sales in October resulted in a decline in revenues relative to the prior year, and we also recorded an estimate of customer refund and other reimbursement payments stemming from these actions which resulted in an additional $35 million reduction to revenue for the year ended December 31, 2024.

In addition to the impact from Byte, the decrease in sales in the United States was also due to lower volumes for consumables products within the Essential Dental Solutions segment, lower volumes for implants and prosthetics products, and lower volumes of products within the Connected Technology Solutions segment.

These decreases were partially offset by lower

customer incentives and higher volumes of Wellspect products as a result of new product launches.

Organic sales were also negatively affected by wholesale volumes for CAD/CAM products relative to the year ended December 31, 2023 due in part to timing of distributor orders.

Volumes of CAD/CAM units held by distributors at December 31, 2024 decreased $8 million compared to the beginning of 2024, whereas volumes of CAD/CAM inventory held by distributors at December 31, 2023 remained consistent with the beginning of 2023.

Volumes of imaging products held by distributors at December 31, 2024 decreased $7 million compared to the beginning of 2024, whereas volumes of imaging products held by distributors at December 31, 2023 increased by $1 million compared to the beginning of 2023.

Distributor inventory levels for both CAD/CAM and imaging products remained low as of December 31, 2024 relative to historical averages.

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

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Net sales $ 1,518 $ 1,550 $ (32) (2.1 %)

Unfavorable foreign exchange impact

Favorable foreign exchange impact 0.1 %

Organic sales (2.2 %)

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily driven by lower volumes of CAD/CAM, imaging, and instruments products because of unfavorable market and macroeconomic trends, particularly in Germany, partially offset by positive performance in the Wellspect Healthcare segment, price increases and higher volumes of orthodontic aligners.

The decrease in organic sales was primarily due to lower volumes of products within the Connected Technology Solutions segment and lower volumes of implants and prosthetics products within the Orthodontic and Implant Solutions segment.

These decreases were partially offset by positive performance in the Wellspect Healthcare segment with new product launches, and higher volumes of SureSmile aligners in the Orthodontic and Implant Solutions segment.

Rest of World

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was primarily driven by higher volumes of implant products, price increases and improved demand for Essential Dental Solutions products.

Organic sales also benefited from higher volumes of certain Connected Technology Solutions products, including treatment centers and imaging.

Additionally, local volume-based procurement policies in China, which were implemented in 2023 resulted in increased volumes of implants products, partially offset by price reductions.

The decrease in organic sales was primarily driven by lower volumes and unfavorable pricing for Connected Technology Solutions products, particularly in Japan, which saw lower volumes due to competitive pressures.

These decreases were partially offset by increased volumes for implant and endodontic products, particularly in China.

The local volume-based procurement program in China resulted in increased volumes for implants products during 2024, particularly during the first half of the year, with a decline in the second half of the year due to current macroeconomic conditions.

Year Ended December 31,

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Percentages are based on actual values and may not recalculate due to rounding.

Gross profit declined due to higher manufacturing and input costs, an increase in warranty costs, and inventory obsolescence charges driven by the Company’s product rationalization initiatives.

Margins were also negatively affected by foreign currency translation headwinds of $16 million.

Gross profit declined due to lower volumes and the impact of the Byte refunds as described above, higher manufacturing and input costs, and unfavorable mix, particularly within the Connected Technology Solutions segment.

These drivers were partially offset by lower customer incentives, and a decrease in warranty costs and inventory obsolescence charges.

Operating Expenses

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Goodwill and intangible asset impairments 1,014 307 707 NM

Restructuring and other costs 67 14 53 NM

Restructuring costs 53 67 (14) NM

SG&A as a percentage of net sales 42.3 % 40.7 % 160 bps

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SG&A Expenses

SG&A expenses as a percentage of net sales increased in part due to higher headcount costs which were primarily due to incremental investments in the Company’s customer-facing roles, inflationary increases, and incentive compensation, partially offset by savings from the restructuring initiatives.

Expenses were also negatively impacted by an increase in clinical education, travel, and trade event costs as more customer-related interactions have returned to in-person format.

The overall increase in expenses was partially offset by a benefit from lower than expected severance costs due to a settlement, lower professional service costs, and lower advertising costs.

R&D expenses increased compared to the year ended December 31, 2022.

The Company continues to prioritize ongoing investments in digital workflow solutions, product development initiatives, software development for improved collaboration, cloud connectivity of devices, and a clinical application suite.

The Company expects to maintain a level of investment in R&D that is approximately 4% of annual net sales.

SG&A expenses decreased primarily due to lower headcount costs, lower travel costs, and lower professional service costs.

The decrease was also due to lower sales and advertising costs for Byte products after the suspension of sales noted above.

The overall decrease in expenses was partially offset by an increase in general and administrative costs within the Orthodontic and Implant Solutions segment, primarily as a result of bad debt expense for the write-off of Byte receivables.

R&D expenses decreased compared to the prior year as the Company continues to take a disciplined approach with ongoing investments in digital workflow solutions, product development initiatives, and software development, including the clinical application suite and cloud deployment.

The Company expects to continue to maintain a level of investment in R&D that is at least 4% of annual net sales.

Goodwill and Intangible Asset Impairments

Goodwill and intangible asset impairments decreased compared to the year ended December 31, 2022, due to a lower level of impairment charges.

For further details see Item 8, Note 11, Goodwill and Intangible Assets, in the Notes to the Consolidated Financial Statements of this Form 10-K.

Goodwill and intangible asset impairments increased compared to the prior year, due to a higher level of impairment charges, specifically related to the goodwill pertaining to the Implant & Prosthetic Solutions reporting unit, a write-off of the Byte trademark, and certain intangible assets within the Connected Technology Solutions segment.

For further information, see Item 8, Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements of this Form 10-K.

Restructuring and Other Costs

During the year ended December 31, 2023, we recorded net expense of $67 million of Restructuring and other costs which consist primarily of charges associated with the restructuring plan announced in February 2023.

For further details see Item 8, Note 18, Restructuring and O ther Costs, in the Notes to the Consolidated Financial Statements of this Form 10-K.

During the year ended December 31, 2024, we recorded net expense of $53 million of restructuring costs which consist primarily of charges associated with the restructuring plans announced in February 2023 and July 2024.

For further information, see Item 8, Note 18, Restructuring and O ther Costs, in the Notes to Consolidated Financial Statements of this Form 10-K.

Segment Adjusted Operating Income

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Percentages are based on actual values and may not recalculate due to rounding.

(a) See Note 6, Segment and Geographic Information, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for a reconciliation from segment adjusted operating income to consolidated U.S.

Connected Technology Solutions

The decrease in segment adjusted operating income is due to the organic sales decrease noted above, increased warranty costs, unfavorable impact from product mix, manufacturing and input cost inflation, and increased headcount primarily for key customer-facing roles.

These increases were partially offset by reductions in professional services costs.

The decrease in segment adjusted operating income is due to the lower sales volumes noted above, unfavorable manufacturing leverage from lower volumes, and unfavorable product mix as a result of lower sales for certain higher margin CAD/CAM equipment products.

These decreases were partially offset by lower headcount-related costs and product warranty and return costs.

Essential Dental Solutions

The increase in segment adjusted operating income is due to the organic sales increase noted above, the favorable impact of foreign currency exchange partially offset by manufacturing and input cost inflation and an increase in SG&A expenses including an increase in headcount for customer-facing roles and trade event related expenses.

Segment adjusted operating income is flat due to favorable product mix and favorable pricing being offset primarily by the lower volumes noted above.

Orthodontic and Implant Solutions

The decrease in segment adjusted operating income is due to an increase in SG&A costs including increased headcount for key customer-facing roles particularly personnel supporting implants sales in the United States, the unfavorable impact of foreign currency exchange, and manufacturing and input cost inflation, partially offset by the organic sales increase.

The decrease in segment adjusted operating income is due to the impact from suspending sales of Byte clear aligners to new customers in October 2024 as previously described, the Byte refunds and inventory write-offs, and higher distribution and manufacturing costs.

As noted above, operating income was also unfavorably impacted by a decline in sales for implant and prosthetics products, as well as higher general and administrative costs primarily as a result of bad debt expense for the write-off of Byte receivables, partly offset by lower sales and advertising costs for Byte products.

Wellspect Healthcare

The increase in segment adjusted operating income resulted from the increase in organic sales noted above, as well as margin improvements due to favorable manufacturing leverage from higher volumes, partially offset by unfavorable foreign currency translation.

The increase in segment adjusted operating income was driven by the increase in organic sales noted above due to new product launches, as well as margin improvements due to favorable manufacturing leverage from higher volumes.

Other Income and Expenses

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Interest expense, net $ 69 $ 81 $ (12) (14.5 %)

Other expense (income), net 9 53 (44) NM

Other (income) expense, net (12) 9 (21) NM

Net interest and other expense $ 57 $ 90 $ (33)

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Interest expense, net

Net interest expense for the year ended December 31, 2023 increased as compared to the year ended December 31, 2022, driven primarily by higher interest rates on short-term and other borrowings.

Other expense (income), net

Other expense (income), net for the year ended December 31, 2023 compared to the year ended December 31, 2022 was as follows:

Net interest expense for the year ended December 31, 2024 decreased as compared to the year ended December 31, 2023, driven primarily by lower short-term and other borrowings.

Other (income) expense, net

Other (income) expense, net for the year ended December 31, 2024 compared to the year ended December 31, 2023 was as follows:

Year Ended December 31,

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2024 2023 $ Change

Loss on sales or disposal of non-core businesses $ — $ 3 $ (3)

Foreign exchange (gains) losses (a)

Foreign exchange gains (a)

(21) (3) (18)

Loss from equity method investments — 4 (4)

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Other non-operating loss 1 1 —

Other expense (income), net $ 9 $ 53 $ (44)

(a) Foreign exchange (gains) losses are primarily related to the revaluation of intercompany payables and loans.

Loss from equity method investments decreased compared to the year ended December 31, 2022 due to the write-off in 2022 of the Company’s ownership position in a privately-held dental investment company following impairment of underlying investments held by the investment company and the Company’s determination that the remaining investment was not recoverable.

Other (income) expense, net $ (12) $ 9 $ (21)

(a) Foreign exchange gains include a benefit from our Swiss franc net investment hedge totaling $22 million, offset by revaluation of short-term intercompany receivables and payables of $1 million.

Income Taxes and Net Loss

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Benefit for income taxes

We recorded an income tax benefit of $43 million and $105 million for the years ended December 31, 2023 and December 31, 2022, respectively.

The decrease in tax benefit is primarily due to the impairment of goodwill recorded in 2022.

An income tax benefit of $26 million and $43 million was recorded for the years ended December 31, 2024 and December 31, 2023, respectively.

The increase in tax benefit is primarily due to additional impairments recorded in the year ended December 31, 2024.

Further information regarding the details of income taxes is presented in Note 16, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

2023 Compared to 2022

Discussion of the results of operations for the year ended December 31, 2022 as compared to December 31, 2021 was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023.

Effective April 1, 2023 the Company realigned its reporting structure due to certain organizational changes.

As a result, the reportable segments changed from Technology & Equipment and Consumables to (i) Connected Technology Solutions, (ii) Essential Dental Solutions, (iii) Orthodontic and Implant Solutions, and (iv) Wellspect Healthcare.

A discussion of the results of operations for the year ended December 31, 2022 as compared to December 31, 2021 for net sales and segment adjusted operating income based on the realigned segments is presented below.

Net Sales by Segment

Connected Technology Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

Year Ended December 31,

(in millions, except percentages) 2022 2021

$ Change % Change

Net sales $ 1,219 $ 1,348 $ (129) (9.6 %)

Unfavorable foreign exchange impact

Organic sales (0.8 %)

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily due to the im pact of ongoing global supply chain constraints and lower volumes due to product availability, particularly for certain products which rely on electronic components , as well as the impact of COVID-19 reducing demand in certain markets, particularly China.

These decreases were partially offset by sales of new CAD/CAM products and higher volumes of treatment center and imaging products.

Sales of CAD/CAM products in the United States were also negatively impacted by high distributor inventory levels at the start of fiscal year 2022 which were subsequently reduced throughout the year.

The level of inventory for CAD/CAM units held by distributors was reduced by approximately $60 million during 2022, compared to a build in inventory levels of approximately $50 million in 2021, partly as a result of incremental incentives offered during the latter half of that period which did not recur in 2022.

Essential Dental Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

Year Ended December 31,

(in millions, except percentages) 2022 2021

$ Change % Change

Net sales $ 1,427 $ 1,516 $ (89) (5.8 %)

Unfavorable foreign exchange impact

Organic sales (0.6 %)

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was due to lower volumes for endodontic and restorative products, particularly in the United States and China, with sales volumes in the latter having been negatively impacted by government regulations stemming from the COVID-19 pandemic.

This decrease was partially offset by higher volumes of preventive consumable products, as well as price increases across the segment.

Orthodontic and Implant Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

Year Ended December 31,

(in millions, except percentages) 2022 2021

$ Change % Change

Net sales $ 1,006 $ 1,064 $ (58) (5.5 %)

Unfavorable foreign exchange impact

Acquisitions 0.3 %

Divestitures and discontinued products (0.3 %)

Organic sales (0.1 %)

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily driven by lower volumes of implants products, particularly in China during the second half of 2022, due to reduced demand in advance of the local volume based procurement program taking effect in 2023, as well as from the impact of the COVID-19 pandemic .

This decrease was partially offset by higher volumes of orthodontic aligners, particularly in the United States and Europe, as well as price increases across the segment.

Wellspect Healthcare

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

Year Ended December 31,

(in millions, except percentages) 2022 2021

$ Change % Change

Net sales $ 270 $ 303 $ (33) (11.0 %)

Unfavorable foreign exchange impact

Organic sales 0.3 %

Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was primarily driven by higher volumes, primarily in Europe and Rest of World, mostly offset by the impact of a one-time price adjustment matter with the Italian government.

Segment Adjusted Operating Income

Year Ended December 31,

(in millions, except percentages) (a)

$ Change % Change

Connected Technology Solutions $ 161 $ 267 $ (106) (39.5 %)

Essential Dental Solutions 467 511 (44) (8.6 %)

Orthodontic and Implant Solutions 193 217 (24) (11.3 %)

Wellspect Healthcare 73 87 (14) (16.9 %)

Percentages are based on actual values and may not recalculate due to rounding.

Connected Technology Solutions

The decrease in segment adjusted operating income was due to the organic sales decrease noted above, higher costs for raw materials, labor, and distribution costs in 2022 as a result of supply chain constraints, and higher headcount and professional services costs.

These increases were partially offset by favorable product sales mix.

Essential Dental Solutions

Orthodontic and Implant Solutions

The decrease in segment adjusted operating income was due to the organic sales decrease noted above, the unfavorable impact of foreign currency translation, higher manufacturing and distribution costs, and higher advertising costs, partially offset by the improved profitability of orthodontics products from higher volumes and price increases.

Wellspect Healthcare

The decrease in segment adjusted operating income was due to the unfavorable impact of foreign currency translation and higher manufacturing costs, partially offset by the organic sales increase noted above.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with U.S.

GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes.

Discussion of the results of operations for the year ended December 31, 2023 as compared to December 31, 2022 was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes.

Future events and their effects cannot be determined with absolute certainty.

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Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

The process of determining significant estimates is fact specific and considers factors such as historical experience, current and expected economic conditions, product mix and in some cases, actuarial techniques.

The process of determining significant estimates is fact-specific and, when determining significant estimates, management considers factors such as historical experience, current and expected economic conditions, product mix and in some cases, actuarial techniques.

The Company evaluates these significant factors as facts and circumstances dictate.

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If there are unfavorable changes in these assumptions, particularly changes in the Company’s discount rates, revenue growth rates, and operating margins, the Company may be required to recognize impairment charges.

In particular, the determination of fair value involves uncertainties around the forecasted cash flows as it requires management to make assumptions and apply judgment to estimate future business expectations.

Those future expectations include, but are not limited to, distribution channel changes, impact from competition, and new product developments for these reporting units.

The determination of fair value involves uncertainties around the forecasted cash flows as it requires management to make assumptions and apply judgment to estimate future business expectations.

Those future expectations relate to, among other things, distribution channel changes, impact from competition, and new product developments.

The Company also considers the current and projected market and economic conditions for dental and medical device industries, both in the United States and globally, when determining its assumptions.

Operating cash flow assumptions may also be impacted by assumptions regarding costs and benefits from restructuring initiatives, tax rates, foreign exchange rates, capital spending and working capital changes.

A change in any of these estimates and assumptions used in the annual test, as well as unfavorable changes in the overall markets served by these reporting units, among other factors, could have a negative material impact to the fair value of the reporting units and indefinite-lived intangible assets and could result in a future impairment charge.

There can be no assurance that the Company’s future goodwill and indefinite-lived impairment testing will not result in a material adverse impact to the Company’s results of operations.

Information with respect to the Company’s significant accounting policies on goodwill and indefinite-lived intangible assets are included in Note 1, Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Goodwill represents the excess cost over the fair value of the identifiable net assets of business acquired.

A change in any of the estimates and assumptions used in the Company’s annual goodwill impairment test as described below or unfavorable changes in the overall markets served by the Company’s reporting units, among other factors, could have a negative material impact to the fair value of the Company’s reporting units and indefinite-lived intangible assets and could result in a future impairment charge.

Goodwill represents the excess cost over the fair value of the identifiable net assets of business acquired and is allocated among the Company’s reporting units.

Goodwill is not amortized;

instead, it is tested for impairment annually or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired, or if a decision is made to sell a business.

instead, it is tested for impairment at the reporting unit level annually at April 1 or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired, or if a decision is made to sell a business.

Judgment is involved in determining if an indicator of impairment has occurred during the year.

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Goodwill is allocated among reporting units and evaluated for impairment at that level.

The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with U.S.

The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with US GAAP.

The quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill.

The Company uses a discounted cash flow model (“DCF model”) as its valuation technique to measure the fair value for its reporting units when testing for impairment, as management believes forecasted operating cash flows are the best indicator of such fair value.

The discounted cash flow model uses five- to ten- year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate.

The discounted cash flow model uses ten-year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate.

The significant assumptions and estimates involved in the application of the DCF model to forecast operating cash flows include, but are not limited to the discount rates, revenue growth rates (including perpetual growth rates), and future operating margin percentages of the reporting unit’s business.

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Discount rates are estimated for geographic regions and applied to the reporting units located within the regions.

These rates are developed based on market participant data, which included assumptions regarding the Company’s weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows.

These rates are developed based on market participant data, which include assumptions regarding the Company’s weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows.

As part of the annual test, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions.

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Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist of tradenames, trademarks and in-process R&D and are not subject to amortization;

instead, they are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired or if a decision is made to sell a business.

Indefinite-lived intangible assets consist of trade names, trademarks, and in-process R&D and are not subject to amortization;

instead, they are tested for impairment annually at April 1 or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired or if a decision is made to discontinue or divest a business.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred during the year.

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It is important to note that fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of indefinite-lived assets.

The fair value of acquired tradenames and trademarks is estimated using a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through the ownership of an asset.

The fair value of acquired trade names and trademarks is estimated using a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through the ownership of an asset.

Under this method, an owner of an indefinite-lived intangible asset determines the arm’s length royalty that likely would have been charged if the owner had to license the asset from a third party.

The royalty rate, which is based on the estimated rate applied against forecasted sales, is tax-affected and discounted at present value using a discount rate commensurate with the relative risk of achieving the cash flow attributable to the asset.

The royalty rate, which is based on the estimated rate applied against forecasted sales, is tax-effected and discounted at present value using a discount rate commensurate with the relative risk of achieving the cash flow attributable to the asset.

Management judgment is necessary to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates.

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Goodwill and Indefinite-Lived Intangible Asset Impairment Results

On April 1, 2023, the Company realigned its reporting structure due to certain organizational changes.

Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified.

As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments.

Goodwill was reassigned to each of the new reporting units using a relative fair value approach.

The Company assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023.

Based on this test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment.

For both the former and new structure goodwill impairment tests as of April 1, 2023, the fair values of reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data.

In the quarter ended September 30, 2023, the Company identified indicators of a more likely than not impairment related to its Connected Technology Solutions reporting unit, which comprises all the Connected Technology Solutions segment.

The decline in fair value for this reporting unit was driven by adverse macroeconomic factors because of weakened demand, particularly in European markets, and increased discount rates.

Core underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 110 bps between the annual impairment test and the interim test during the third quarter of 2023.

These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows in the near term, particularly demand for products which are commonly financed by end customers which are adversely impacted by an environment of higher interest rates.

The higher inflationary environment also impacted the discretionary spending behavior of our customers more generally, further reducing global demand for certain products in favor of lower cost options.

As such, an impairment test was performed in the third quarter of 2023 (the “third quarter test”).

As a result, the Company recorded a pre-tax goodwill impairment charge for the three months ended September 30, 2023 related to the Connected Technology Solutions reporting unit of $291 million, resulting in a full write-off of the remaining goodwill balance for the Connected Technology Solutions segment.

The Company assessed the goodwill of its reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2024.

Based on the Company's April 1 impairment test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment.

In the quarter ended September 30, 2024, the Company identified indicators of a more likely than not impairment for two of its reporting units, Orthodontic Aligner Solutions and Implant & Prosthetic Solutions, which together comprise all of the Orthodontic and Implant Solutions segment.

As a result, the Company recorded pre-tax goodwill impairment charges as of September 30, 2024 of $145 million for the Orthodontic Aligner Solutions reporting unit and $359 million for the Implant & Prosthetic Solutions reporting unit, both within the Orthodontic and Implant Solutions segment.

The charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

The impairment charge related to the Orthodontic Aligner Solutions reporting unit resulted in a full write-off of the remaining goodwill balance for this reporting unit.

In the quarter ended December 31, 2024, the Company identified indicators of a more likely than not impairment for its Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment.

The decline in fair value of this reporting unit was driven by a weaker trend in sales volumes, particularly in North America, increased competition from lower-priced alternatives impacting global markets, and adverse macroeconomic pressures impacting demand for elective dental procedures and premium implant solutions.

These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows.

The fair value of the Implant & Prosthetic Solutions reporting unit was computed using a discounted cash flow model with inputs developed using internal projections and market-based data.

As a result, the Company recorded a pre-tax goodwill impairment charge as of December 31, 2024 of $269 million for the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment.

This charge was recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

Additionally, in conjunction with the third quarter test, the Company tested the long-lived intangible assets related to the businesses within the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment for impairment.

The Company also identified an indicator of impairment for the indefinite-lived intangible assets within the Implants & Prosthetics reporting unit within the Orthodontic and Implant Solutions segment, and determined certain tradenames and trademarks were impaired.

As a result, the Company recorded indefinite-lived intangible asset impairment charges of $14 million and $2 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended September 30, 2023.

The impairment charges were primarily driven by macroeconomic factors such as weakened demand, higher cost of capital, and cost inflation, which are contributing to reduced forecasted revenues.

Additionally, in the quarter ended December 31, 2024, the Company also identified indicators of more likely than not impairments for certain indefinite-lived intangible assets including trade names and trademarks within the Connected Technology Solutions segment, and certain trade names within the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment.

The decline in fair value of the trade names and trademarks was driven by weakened demand for the Company’s premium equipment and implant products, competitive pricing pressures, and a sustained higher cost of capital, which are contributing to reduced forecasted revenues.

These indefinite-lived intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty methodology.

As a result, the Company recorded indefinite-lived intangible asset impairment charges of $82 million and $1 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended December 31, 2024.

These charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statements of Operations.

As the fair value of these indefinite-lived intangible assets approximate carrying value as of December 31, 2023, any further decline in key assumptions could result in additional impairment in future periods.

For further information on our annual and interim tests, see Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

The remaining goodwill balance of the Implant & Prosthetic Solutions reporting unit was $503 million as of December 31, 2024, and the carrying values of indefinite-lived intangible assets with impairments in the fourth quarter were $76 million and $149 million for the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, as of December 31, 2024.

As the fair values of the Implant & Prosthetic Solutions reporting unit and the indefinite-lived assets within the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, continue to approximate carrying value as of December 31, 2024, any further decline in key assumptions could result in additional impairments in future periods.

Based on quantitative and qualitative analyses performed for the other reporting units and the Company’s other indefinite-lived intangible assets, the Company believes there is no indication that the carrying value more likely than not exceeds the fair value in each case as of December 31, 2024.

For the Company's reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis by increasing the discount rate of these reporting units by 50 basis points.

The results of this sensitivity analysis at December 31, 2024, indicate that none of the other reporting units would have been impaired.

For further information, see Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Income taxes are determined using the liability method of accounting for income taxes.

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The Company operates within multiple taxing jurisdictions throughout the world and in the normal course of business is examined by taxing authorities in those jurisdictions.

Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed, statutes of limitation are closed, changes in tax laws occur or as new information comes to light regarding the technical merits of the tax position.

Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed,

statutes of limitation are closed, changes in tax laws occur or as new information comes to light regarding the technical merits of the tax position.

LIQUIDITY AND CAPITAL RESOURCES

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Effect of exchange rate changes on cash and cash equivalents (24) (12) (12)

Net (decrease) increase in cash and cash equivalents

$ (31) $ 26 $ (57)

Cash provided by operating activities decreased primarily because of changes in working capital including lower collections from sales during the current period, higher cost of sales and operating expenses, and timing of payments to vendors.

These decreases in operating cash were offset by other changes in working capital including the impact of inventory levels remaining flat during the current period as compared to build in inventory in the prior year.

For the year ended December 31, 2023, the number of days for sales outstanding in accounts receivable increased by 4 days to 59 days at December 31, 2023 as compared to 55 days at December 31, 2022, and the number of days of sales in inventory decreased by 11 days to 126 days at December 31, 2023 as compared to 137 days at December 31, 2022.

The decrease in cash used in investing activities was primarily due to higher cash received on derivative contract settlements of $26 million and proceeds of $13 million from the sale of the Company’s minority investment in a provider of healthcare consumables.

Capital expenditures were $149 million in both 2023 and 2022.

The Company estimates capital expenditures to be in the range of approximately $170 million to $200 million for the twelve months ending December 31, 2024 and expects these investments to include implementation expenses for a new global Enterprise Resource Planning (“ERP”) system, equipment upgrades, and capacity expansion to support product innovation and consolidate operations for enhanced efficiencies.

The decrease in cash used in financing activities was primarily driven by higher net borrowings on short-term debt during 2023 of $190 million compared to prior year, partially offset by higher capital returned to shareholders through increased share repurchases of $150 million and increased dividends paid of $12 million.

Primarily because of this activity, combined with an increase of $46 million due to exchange rate fluctuations on debt denominated in foreign currencies, the Company’s total borrowings increased by a net $174 million during the year ended December 31, 2023.

Net decrease in cash and cash equivalents $ (62) $ (31) $ (31)

Cash provided by operating activities increased compared to the prior year primarily as a result of changes in working capital, including higher collections on accounts receivable due largely to timing of customer remittances, decreased inventory levels, and timing of estimated tax payments.

These increases in operating cash were offset by other changes in working capital including the timing of payments to vendors compared to the prior year.

For the year ended December 31, 2024, the number of days for sales outstanding in accounts receivable decreased by 4 days to 55 days at December 31, 2024 as compared to 59 days at December 31, 2023, and the number of days of sales in inventory decreased by 2 days to 124 days at December 31, 2024 as compared to 126 days at December 31, 2023.

The cash used in investing activities increased compared to the prior year primarily due to higher capital expenditures of $31 million, lower net cash proceeds on settlement of derivatives of $38 million, and in the prior year, the Company’s sale of a minority interest investment resulted in proceeds of $13 million.

For the year ended December 31, 2023, capital expenditures were $149 million, and for the year ended December 31, 2024, capital expenditures were $180 million.

The Company estimates capital expenditures to be in the range of appr oximately $160 million to $190 million for the twelve months ending December 31, 2025 and expects these investments to include expenses for the ongoing implementation of a new global Enterprise Resource Planning (“ERP”) system, equipment upgrades, and capacity expansion to support product innovation and consolidate operations for enhanced efficiencies.

The decrease of cash used in financing activities compared to the prior year was primarily driven by an increase in net borrowings of $51 million on short-term debt compared to the prior year and a decrease in cash paid on share repurchases of $50 million compared to the prior year.

The decrease of cash used in financing activities was mostly offset by an increase of $10 million in dividends paid compared to the prior year and an increase of $81 million in payments on long-term borrowings compared to the prior year.

The Company’s total borrowings increased by a net $17 million during the year ended December 31, 2024.

During the year ended December 31, 2024, the Company repurchased approximately 9.4 million shares under its open market share repurchase plan for a cost of $250 million at a volume-weighted average price of $26.65.

On November 7, 2023, the Board of Directors approved an increase to the authorized share repurchase program of $1.0 billion.

At December 31, 2023, $1,440 million of authorization remains available for future share repurchases.

At December 31, 2024, $1.2 billion of authorization remains available for future share repurchases.

Additional share repurchases, if any, may be made through open market purchases, Rule 10b5-1 plans, accelerated share repurchases, privately negotiated transactions, or other transactions in such amounts and at such times as the Company considers appropriate based upon prevailing market and business conditions and other factors.

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Total net debt to total capitalization ratio 48.9 % 35.1 %

At December 31, 2023, the Company had a total remaining borrowing capacity of $499 million under lines of credit, including lines available under its short-term arrangements and revolving credit facility.

The Company’s borrowing capacity includes a $700 million multi-currency revolving credit facility that expires on May 12, 2028.

The Company also has available an aggregate $500 million U.S.

dollar commercial paper facility.

At December 31, 2024, the Company had $313 million of borrowings available under lines of credit, including lines available under its short-term arrangements and revolving credit facility.

The Company’s borrowing capacity includes a $700 million multi-currency revolving credit facility which expires in May 2028.

The Company also has access to an aggregate $700 million under a U.S.

dollar commercial paper facility, which was expanded in December 2024 from its previous capacity of $500 million.

The $700 million revolver serves as a back-up to the commercial paper facility, thus the total available credit under the commercial paper facility and the multi-currency revolving credit facility in the aggregate is $700 million.

The Company had $410 million outstanding borrowings under the commercial paper facility at December 31, 2024 resulting in $290 million remaining available under the revolving credit and commercial paper facilities.

The Company also has access to $44 million in uncommitted short-term financing under lines of credit from various financial institutions.

The Company also has access to $34 million in uncommitted short-term financing under lines of credit from various financial institutions, the availability of which is reduced by other short-term borrowings.

The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions.

At December 31, 2024, the Company has $11 million outstanding under these short-term borrowing arrangements.

The Company’s multi-currency revolving credit facility, term loans and senior notes contain certain covenants relating to the Company’s operations and financial condition.

The Company’s revolving credit facility, term loans and senior notes contain certain covenants relating to the Company’s operations and financial condition.

The most restrictive of these covenants are:

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The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries’ operating activities and future foreign investments.

The Company can repatriate cash to the United States, which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S.

The Company has the ability to repatriate cash to the United States, which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S.

state income taxes, and the impact of foreign currency movements.

At December 31, 2023 , management believed that sufficient liquidity was available in the United States and expects this to remain for the next twelve months.

At December 31, 2024, management believed that sufficient liquidity was available in the United States and expects this to continue for the next twelve months.

The Company has repatriated and expects to continue repatriating certain funds from its non-U.S.

subsidiaries that are not needed to finance local operations, however, these repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

subsidiaries that are not needed to finance local operations.

Repatriation activities both performed and contemplated to date have not resulted in, and are not expected to result in, any significant incremental tax liability to the Company.

The Company continues to review its debt portfolio and may refinance additional debt or add debt in the near-term based on strategic capital management.

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At December 31, 2024, the Company held $34 million of precious metals on consignment from several financial institutions.

Under these consignment arrangements, the financial institutions own the precious metal, and, accordingly, the Company does not report this consigned inventory as part of its inventory on the Consolidated Balance Sheets.

Under these consignment arrangements, the financial institutions own the precious metal, and, accordingly, the

Company does not report this consigned inventory as part of its inventory on the Consolidated Balance Sheets.

These consignment agreements allow the Company to acquire the precious metal at market rates at a point in time, which is approximately the same time, and for the same price as alloys are sold to the Company’s customers.

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Material Trends in Capital Resources

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the Company’s business to improve operational performance and drive shareholder value creation.

The plan includes a restructuring of the business through a new operating model with five global business units, optimization of central functions and overall management infrastructure, and other efforts aimed at cost savings.

The restructuring plan anticipates a reduction in the Company’s global workforce of approximately 8% to 10%, subject to co-determination processes with employee representative groups in countries where required.

The plan is expected to be substantially completed in 2024 and result in approximately $200 million in annual cost savings.

The reduction in headcount and cost savings related to this plan is expected to be offset as the Company makes additional investments in sales personnel, our new global ERP system, and other transformation initiatives.

As of December 31, 2023, in conjunction with this plan the Company has incurred $66 million in restructuring charges primarily related to employee transition, severance payments, employee benefits, and facility closure costs and $20 million in other non-recurring costs related to restructuring activities which mostly consist of consulting, legal and other professional service fees.

The Company expects to incur between $115 to $135 million in one-time charges, comprising $80 to $100 million in restructuring expenditures and charges and $35 million in other non-recurring charges.

The estimates of these charges and their timing are subject to several assumptions, including local law requirements in various jurisdictions and co-determination aspects in countries where required.

In connection with the 2024 Plan, the Company anticipates a net reduction in the Company’s global workforce of approximately 2% to 4%.

The Company anticipates that the 2024 Plan will be substantially completed by the end of 2025 and result in $80 million to $100 million in annual cost savings.

The proposed changes are subject to co-determination processes with employee representative groups in countries where required.

As of December 31, 2024, in conjunction with the 2024 Plan, the Company has incurred $28 million in restructuring charges from inception, primarily related to employee transition, severance payments and employee benefits.

Actions taken under the 2024 Plan seek to further streamline the Company’s operations and global footprint, as well as improve alignment of the Company’s cost structure with its strategic growth objectives.

The Company expects to incur between $35 million and $50 million in non-recurring restructuring charges under the 2024 Plan which are expected to be expensed and paid in cash by the end of 2025.

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the business through a new operating model with five global business units, optimize central functions and overall management infrastructure, and implement other efforts aimed at cost savings (the “2023 Plan”).

The Company estimated a reduction in its global workforce of approximately 8% to 10% and annual cost savings of approximately $200 million pursuant to the 2023 Plan.

The target for cost savings has been substantially met, with the benefits mostly offset in the short term by additional investments in sales personnel, the Company’s new global ERP system, and other transformation initiatives.

As of December 31, 2024, in conjunction with the 2023 Plan, the Company incurred $87 million in restructuring charges, from inception, primarily related to employee transition, severance payments, employee benefits, and facility closure costs, and $20 million in other non-recurring costs related to restructuring activities, which mostly consist of consulting, legal and other professional service fees.

Remaining restructuring charges attributable to the 2023 Plan are not expected to be material.

The estimates of the charges and expenditures that the Company expects to incur in connection with the 2024 Plan, and the timing thereof, are subject to several assumptions, including local law requirements in various jurisdictions and co-determination aspects in countries where required.

Actual amounts may differ materially from estimates.

In addition, the Company may incur other charges or cash expenditures in connection with this plan which are not currently contemplated.

For further details refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Beginning in the second quarter of 2022, the Company’s financial results have also been impacted by the costs associated with the internal investigation conducted and completed by the Audit and Finance Committee and subsequently, the external investigation by the SEC which is currently in progress.

These costs have included legal expenses as well as third party accounting and other professional service fees in conjunction with the investigations and subsequent remediation activities.

Additionally, the Company has incurred severance costs associated with its remedial personnel actions, as well as special one-time costs in connection with retention of key personnel.

These costs totaled approximately $61 million for the year ended December 31, 2022, with additional costs of $19 million incurred for the year ended December 31, 2023.

In addition, the Company may incur additional charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the 2024 Plan.

For further information, refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Beginning in the second quarter of 2022, the Company’s financial results have also been impacted by the costs associated with the internal investigation conducted by the Audit and Finance Committee of the Company’s Board of Directors, along with associated litigation and an external investigation by the SEC, both of which are ongoing.

For the year ended December 31, 2022, these costs totaled approximately $61 million.

For the year ended December 31, 2023, these costs totaled $19 million.

The costs in 2023 were offset by a $17 million gain from release of employee compensation accruals resulting from a settlement in the three months ended September 30, 2023.

The Company expects that it will continue to incur legal defense costs into 2024 pertaining to the matters described in Note 21, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

For the year ended December 31, 2024, these costs totaled $11 million.

The Company expects that it will continue to incur such costs into 2025 pertaining to the matters described in Note 21, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

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

What changed 10-K

Item 7. Management’s Discussion and Analysis