xray-20241231
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number0-16211
DENTSPLY SIRONA Inc.
(Exact name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (844) 848-0137
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $.01 per share XRAY The Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yesx No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes oNox
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesx No o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No x
The aggregate market value of the voting common stock held by non-affiliates of the registrant computed by reference to the closing price as of the last business day of the registrant’s most recently completed second quarter ended June 30, 2024, was $5,036,994,579. For purpose of this calculation only, without determining whether the following are affiliates of the registrant, the registrant has assumed that (i) its directors and executive officers are affiliates, and (ii) no party who has filed a Schedule 13D or 13G is an affiliate.
The number of shares of the registrant’s common stock outstanding as of the close of business on February 14, 2025 was 198,991,963.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of DENTSPLY SIRONA Inc. (the “Proxy Statement”) to be used in connection with the 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K to the extent provided herein. Except as specifically incorporated by reference herein the Proxy Statement is not deemed to be filed as part of this Form 10-K.
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DENTSPLY SIRONA Inc.
Table of Contents
PART I
Page
Item 1 Business 3
Item 1A Risk Factors 14
Item 1B Unresolved Staff Comments 35
Item 1C Cybersecurity 35
Item 2 Properties 37
Item 3 Legal Proceedings 38
Item 4 Mine Safety Disclosures 38
PART II
Item 6 [Reserved] 40
Item 7A Quantitative and Qualitative Disclosures About Market Risk 60
Item 8 Financial Statements and Supplementary Data 62
Item 9A Controls and Procedures 138
Item 9B Other Information 138
Item 9C Disclosure Regarding Foreign Jurisdiction that Prevent Inspections 138
PART III
Item 10 Directors, Executive Officers and Corporate Governance 139
Item 11 Executive Compensation 139
Item 14 Principal Accountant Fees and Services 139
PART IV
Item 15 Exhibits and Financial Statement Schedule 140
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PART I
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
All statements included or incorporated by reference in this Form 10-K and other filings with the U.S. Securities and Exchange Commission (the “SEC”) that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control. No assurance can be given that any expectation, belief, goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events.
You should carefully consider these and other relevant factors, including those risk factors in Item 1A, “Risk Factors” of this Form 10-K and any other information included or incorporated by reference in this report, and information which may be contained in the Company’s other filings with the SEC, when reviewing any forward-looking statement. Investors should understand it is impossible to predict or identify all such factors or risks. As such, you should not consider either the foregoing lists, or the risks identified in the Company’s SEC filings, to be a complete discussion of all potential risks or uncertainties associated with an investment in the Company.
GENERAL
Unless otherwise stated herein or the context otherwise indicates, references throughout this Form 10-K to “Dentsply Sirona,” or the “Company,” “we,” “us” or “our” refer to DENTSPLY SIRONA Inc., together with its subsidiaries on a consolidated basis.
Item 1. Business
Overview
DENTSPLY SIRONA Inc. (“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 solutions, 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. The Company introduced the first dental electric drill approximately 133 years ago, the first dental X-ray unit approximately 100 years ago, the first hydrophilic catheter and the first dental computer-aided design/computer-aided manufacturing (“CAD/CAM”) system approximately 40 years ago, and numerous other significant innovations, including pioneering ultrasonic scaling to increase the speed, effectiveness and comfort of cleaning and revolutionizing both file and apex locater technology to make root canal procedures easier and safer. Dentsply Sirona continues to make significant investments in research and development (“R&D”), and its track record of innovative and profitable new products continues today. Dentsply Sirona’s worldwide headquarters is located in Charlotte, North Carolina and its shares of common stock are listed in the United States on Nasdaq under the symbol XRAY.
Dentsply Sirona’s headquarters and principal operations are located in the United States of America (“U.S.” or “United States”) and the Company sells products globally through its foreign subsidiaries to customers in approximately 150 countries. Dentsply Sirona has a long-established presence in the European market, particularly in Germany, Sweden, France, the United Kingdom (“UK”), Italy, and Switzerland. The Company also has a significant market presence in the Asia-Pacific region, Central and South America, the Middle East region, and Canada.
Our Company’s mission is to transform oral health and continence care with innovative products, solutions and services through an engaged workforce. We conduct our business in accordance with that goal using the following core operating principles:
•Approach customers as one: The Company has an integrated approach to customer service, direct and indirect selling, and clinical education to strengthen relationships with customers and better serve customers’ needs.
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•Create innovative solutions that customers love to use: We manage a comprehensive R&D program that prioritizes strategic spending, builds the next generation of digital workflow technologies and service offerings, and results in impactful innovations that grow our business.
•Think and act with positive intent and the highest integrity: We execute our business in a way that empowers our people, respects the communities in which we do business, and establishes trust with our partners and stakeholders.
•Use size and global breadth to our advantage: We are focused on integrating our dental product portfolios to unlock operational efficiencies, and on enhancing our healthcare consumables product portfolio, with an emphasis on performance improvements in procurement, logistics, manufacturing, sales force and marketing programs, while at the same time simplifying our business on a worldwide scale. In combination, these initiatives will improve organizational efficiency and better leverage our selling, general and administrative infrastructure.
•Operate sustainably in everything we do: We take a thoughtful, proactive approach to creating a sustainable company through investments in our employees, customers, and the environment.
Principal Products and Product Categories
The professional dental industry encompasses the diagnosis, treatment and prevention of disease and ailments of the teeth, gums and supporting bone. The Company offers a broad suite of dental products which together provide digital workflows for dental practitioners to make the highest use of technological advancements throughout each stage of patient care. Dentsply Sirona’s principal dental product categories are dental technology and equipment products, dental implants, clear aligners, and dental consumable products. Additionally, the Company manufactures and sells healthcare consumable products for urological and enterological applications. As part of its dental technology and equipment solutions, the Company also offers an open, cloud-based platform for digital services, DS Core. These products and solutions are produced by the Company globally and are distributed throughout the world under some of the most well-established brand names and trademarks in these industries, including but not limited to: AH PLUS, ANKYLOS, AQUASIL ULTRA, ARTICADENT, ASTRA TECH, ATLANTIS, AXANO, AXEOS, BYTE, CALIBRA, CAULK, CAVITRON, CELTRA, CERAMCO, CERCON, CEREC, CITANEST, CONFORM FIT, DAC, DELTON, DENTSPLY, DETREY, DS CORE, DYRACT, ENERGO, ESTHET.X, FRIOS, HELIODENT, EV, INLAB, INTEGO, IPN, LOFRIC, LUCITONE, MAILLEFER, MIDWEST, MIS, NAVINA, NUPRO, OMNITAPER, ORAQIX, ORIGO, ORTHOPHOS, OSSEOSPEED, OSSIX, PALODENT, PRIME & BOND, PROFILE, PRIMEMILL, PRIMEPRINT, PRIMESCAN, PRIMESCAN CONNECT, PRIMETAPER, PROGLIDER, PROTAPER, RECIPROC, PUREVAC, SCHICK, SDR FLOW+, SIDEXIS, SIMPLANT, SINIUS, SIROLASER, SIRONA, SLIMLINE, SMARTLITE, SPECTRA ST, STYLUS, SULTAN, SURESMILE, SYMBIOS, T1, T2, T3, T4, THERMAFIL, TRIODENT, TRUBYTE, TRUNATOMY, VDW, VIPI, WAVEONE, WELLSPECT, XENO, XIOS, X SMART, XYLOCAINE and ZHERMACK.
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The Company conducts business through four reportable segments: (1) Connected Technology Solutions, (2) Essential Dental Solutions, (3) Orthodontic and Implant Solutions, and (4) Wellspect Healthcare. For the year ended December 31, 2024, the Company’s net sales of each reportable segments and the product categories of these reportable segments as a percent of total net sales were as follows:
Connected Technology Solutions
This segment includes the design, manufacture and sales of the Company’s dental technology and equipment products. These products include the Equipment & Instruments and CAD/CAM product categories.
Equipment & Instruments
The Equipment & Instruments product category consists of basic and high-tech dental equipment such as imaging equipment, motorized dental handpieces, treatment centers, and other instruments for dental practitioners and specialists. Imaging equipment serves as a key point of entry to the Company’s digital workflow offerings and consists of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intraoral applications, as well as cone-beam computed tomography systems (“CBCT”). Treatment centers comprise a broad range of products from basic dental chairs to sophisticated chair-based units with integrated diagnostic, hygienic and ergonomic functionalities, as well as specialist centers used in preventive treatment and for training purposes. This product group also includes other lab equipment, such as amalgamators, mixing machines and porcelain furnaces.
CAD/CAM
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. This product category includes intraoral scanners, 3-D printers, mills, and certain software and services, as well as a full-chairside economical restoration of esthetic ceramic dentistry offering called CEREC, which enables dentists to practice same-day or single visit dentistry.
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 by dental professionals for the treatment of patients. Offerings in this segment also include specialized treatment products including products used in the creation of dental appliances.
Essential Dental Solutions products are designed to operate in an integrated system to provide solutions for high-tech dental procedures. The endodontic products include motorized endodontic handpieces, files, sealers, irrigation needles and other tools or single-use solutions which support root canal procedures. The restorative products include dental ceramics and other materials used in prosthetic restorations including crowns and veneers.
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The preventive products include small equipment products such as curing light systems, dental diagnostic systems and ultrasonic scalers and polishers, as well as other dental supplies including dental anesthetics, prophylaxis paste, dental sealants and impression materials.
Orthodontic and Implant Solutions
This segment includes the design, manufacture, and sales of the Company’s various digital implant systems and innovative dental implant products, digital dentures and dental professional-directed aligner solutions. Offerings in this segment also include application of our digital services and technology, including those provided by DS Core, our cloud-based platform.
Orthodontics
The Orthodontics product category includes SureSmile, a clear aligner solution provided through clinician offices and Byte, a direct-to-consumer clear aligner solution. The Orthodontics product category includes a High Frequency Vibration technology device known as VPro, as well as the SureSmile Simulator which uses intraoral scanners and our DS Core platform to create a 3D visualization of patient outcomes, and SureSmile aligner solutions, which include whitening kits and retainers. The aligner offerings also include software technology that enables aligner treatment planning and the seamless connectivity of a digital workflow from diagnostics through treatment delivery. Byte operations were significantly reduced after October 24, 2024 and limited to supporting patients already undergoing treatment, following a decision to voluntarily suspend sales and marketing of Byte aligners and impression kits. In January 2025, the Company subsequently announced it will no longer offer the Byte direct-to-consumer clear aligner solution to new patients, and it has decided to leverage technologies developed by Byte elsewhere in the aligners portfolio to create orthodontic demand, support a digital clinical workflow, enhance the customer experience, and improve patient monitoring.
Implants & Prosthetics
The Implants & Prosthetics product category includes technology to support the Company’s digital workflows for implant systems, a portfolio of innovative dental implant products, digital dentures, crown and bridge porcelain products, bone regenerative and restorative solutions, treatment planning software and educational programs. The Implants & Prosthetics product category is supported by key technologies including custom abutments, advanced tapered immediate load screws and regenerative bone growth factor. Offerings in this category also include dental prosthetics such as artificial teeth and precious metal dental alloys.
Wellspect Healthcare
This segment includes the design, manufacture, and sales of the Company’s innovative continence care solutions for both urinary and bowel management. Wellspect Healthcare is a leading global provider of innovative medical devices that help people suffering from urinary retention or chronic constipation. Wellspect is one of the world’s leading manufacturers of intermittent urinary catheters, with LoFric as the most known brand. To help those with chronic or severe constipation, Wellspect also offers an advanced irrigation system, Navina, which combines a high degree of user convenience, clinical effectiveness and connectivity into one smart system.
Industry Growth Drivers
The Company believes that the dental industry is attractive and will grow over the long-term based on the following factors:
•Increasing worldwide population, including a shift toward aging demographics, which will require greater dental care.
•Natural teeth are being retained longer - individuals with natural teeth are much more likely to visit a dentist than those without any natural teeth.
•Increasing demand for aesthetic dentistry and the use of clear aligners as an orthodontic treatment.
•Continued opportunities in emerging markets related to the rise in discretionary incomes making dental services an increasing priority.
•Growing preference for single visit dentistry versus historical multi-visit procedure requirements, and for higher quality of patient care in terms of comfort and ease of product use and handling.
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•Increasing demand for earlier preventive care - dentistry has evolved from a profession primarily dealing with pain, infections, and tooth decay to one with increased emphasis on earlier diagnosis, preventive care, and the role oral health plays in overall health.
•Increasing opportunity for digital collaboration between General Practitioners (“GPs”), specialists, labs, and patients is creating widening demand for fully integrated solutions such as cloud-based platforms and services facilitated by GPs.
•Increasing demand for more efficiency and better workflow in the dental office, including digital tools such as diagnostic equipment enhanced through the power of 3D imaging. The rapid pace of digital technology adoption, including the digitization of clinical workflows, is becoming a category standard versus traditional manual processes.
•An accelerating trend, predominately in the United States, toward consolidation of dental practices into group affiliations, often called Dental Support Organizations (“DSOs”), which may expand access for underserved patient populations, remove administrative and capital burdens on providers, and allow more opportunities for investment in dental technology and patient care.
Similarly, we believe that the healthcare consumables market for urology and enterology products will grow over the long-term based on the following:
•Aging demographics, together with an increasing incidence of chronic diseases such as diabetes, requiring greater continence care.
•An expansion of the population covered by medical insurance and the trend toward more supportive reimbursement policies by governments and insurers encouraging the use of continence care products and related therapies.
•The growth in specialized care facilities, technical advancements pertaining to the identification and treatment of chronic renal ailments, and the increasing awareness of incontinence diseases.
Sales and Distribution
As of December 31, 2024, Dentsply Sirona employed approximately 4,600 highly trained, sales and technical staff specialized in each of our various products and solutions to provide comprehensive marketing, sales, and technical support services to meet the needs of our distributors and end-users.
The Company remains focused on its strategy of enabling dentists to utilize superior integrated workflows through our robust market offerings in all key areas of dental procedures (implants, endodontic, restorative and aligners) as well as digital infrastructure (CAD/CAM and imaging) utilized in dental practices around the globe. In 2024, the Company continued a rigorous portfolio management process to simplify and optimize our suite of product offerings, gain efficiencies through optimized product life-cycle management, and improve overall customer experience. The program, which has the potential to be expanded in future years, had an initial focus on endodontic and restorative consumable products, including a goal of achieving additional efficiency from optimizing our geographic footprint.
Dentsply Sirona distributes approximately two-thirds of its dental consumable and technology and equipment products through third-party distributors. Certain products such as endodontic instruments and materials, dental implants and orthodontic aligners and appliances are often sold directly to dental laboratories or dental professionals in some markets. Our continence care products are primarily sold to distributors of medical supplies, with the remaining sales being made directly to patients and medical providers.
For the year ended December 31, 2024, no customer accounted for 10% or more of consolidated net sales or consolidated accounts receivable.
Customers that accounted for 10% or more of net sales or accounts receivable for the years ended December 31, 2023 and 2022 were as follows:
% of net sales % of accounts receivable % of net sales % of accounts receivable
Patterson Companies, Inc. N/A 10 % N/A 12 %
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Although a significant portion of the Company’s sales are made to distributors, Dentsply Sirona focuses much of its marketing efforts on the orthodontists, dentists, dental specialists, dental hygienists, dental assistants, dental laboratories and dental schools which are the end-users of its products. As part of this end-user “pull through” marketing strategy, the Company conducts extensive marketing programs with a combined approach that also engages DSOs and distributors.
Product Development
While the Company enjoys market leadership in several of its product categories, continuous innovation and product development are critical for it to continue to grow its share in markets it serves. We continue to focus efforts on successfully launching innovative products that have a significant impact on how dental and clinical professionals treat their patients. The Company’s plans for investment in product development include maintaining a level of R&D spending that is at approximately 4% of annual net sales, with a focus on innovation in and expansion of digital workflow solutions and other platform offerings. In particular, the Company has continued to prioritize investments supporting digitally connected solutions and enhanced workflows through each stage of patient care, including software for improved collaboration and treatment planning, imaging and scanning technologies used in diagnosis, and products which are customizable and scalable.
During 2022, the Company unveiled its cloud solution, DS Core, an open platform developed in collaboration with Google Cloud that integrates digital dentistry workflows across its devices, services, and technologies. DS Core supports access of end users to case files, orders, and messages through a web browser without any software licenses. The DS Core digital platform is designed to enable simplified cloud storage, optimize diagnostic capabilities, and streamline existing workflows with laboratory partners. Innovations include: the Company’s Primeprint Solution, which provides medical-grade 3D printing; Primescan Connect, which offers a laptop-based version of Primescan; the SmartLite Pro EndoActivator which serves as a new irrigation solution for root canal procedures; and the Axano treatment center combining smart design with efficient workflows. During 2022, the Company also introduced its premium EV Implants System for providing implants that are simplified and digitally enabled and introduced SureSmile Solutions, an enhanced orthodontic offering that includes a whitening kit, retainers, and the VPro orthodontic device.
During 2023, the Company launched key digital dentistry offerings within the DS Core platform including the SureSmile Simulator and several updates to DS Core. The SureSmile Simulator creates a 3D visualization of patients’ potential new smile to be achieved in clear aligner treatment using uploads from a Primescan intraoral scanner. The DS Core Communication Canvas allows for communication with patients through images and scans along with annotations by the dentist. DS Core’s lab connectivity features enable digital collaboration between dentists and their preferred lab. Also in 2023, the Company released expanded milling and printing materials to enhance the Primeprint and Primemill Solutions and workflows for patient-specific nightguards and splints. The Company continued to expand its innovative endodontic solutions with the X-Smart Pro+ motor, the Midwest Energo series of electric handpiece instruments, and the Ossix Agile, an innovative, pericardium-based membrane for periodontic procedures.
During 2024, the Company introduced additional key offerings in digital dentistry with Primescan 2 and further updates to DS Core. Primsescan 2 is the next generation of intraoral scanners and features a cloud-native and wireless design. The new technology performs scans, which are then captured directly on the DS Core cloud platform, enabling dental professionals additional mobility when treating patients. The newly launched DS Core Enterprise provides DSOs a cloud-based platform for digital workflows to centralize management and monitoring of equipment, giving DSOs transparency over all equipment connected to DS Core across their practices. The Company also introduced the Axano Pure treatment center, which incorporates an enhanced touch display screen, allowing dental professionals to integrate DS Core directly for processing and displaying patient scans and patient communication. In 2024, the Company also expanded its implant business with the MiS Lynx implant, a new, conical connection implant technology, the PrimerTaper Guided Surgery and Atlantis for BLX and Neodent. The Company also added a multi-layer abutment block to the CEREC Zirconia offering within the restorative business and the Oryx product within the endodontic business.
Research and Development (“R&D”) investments include activities to accelerate product and clinical innovation and discipline and to develop potential improvements to the manufacturing process. These investments also support engineering efforts that incorporate customer feedback into continuous improvement for current and next-generation products, with the objective to achieve more frequent development and release cycles. The Company also undertakes pre-commercialization trials and testing of technological improvements prior to inception of the manufacturing process. As is true across its other functions, the Company regularly enhances how R&D is conducted by identifying best practices, driving efficiencies, and optimizing cost structure to enable a more effective development process with a strategic focus on innovation process discipline. We are also looking to increasingly utilize an enterprise approach to funding that employs a returns-based mindset with the goal of allocating R&D spending to those areas with the highest return. In addition to internal product development, the Company also pursues external R&D opportunities, including acquisitions, licensing, or other arrangements with third parties.
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Clinical Education
In 2024, the Company continued its investments in clinical education as a key value driver to leverage its global footprint, enhance digital content, and strengthen its clinical network. As part of this objective, the Company remains committed to participation in clinical research demonstrating the efficacy of its products prior to market introduction, and in supporting the clinical education and technical training of dental professionals. Dentsply Sirona has 57 academies and education centers in 35 countries worldwide that are home to state-of-the-art training facilities which provide training both directly and through third-party content for dental professionals seeking clinical and technical continuing education. The academies offer hands-on teaching, live lectures, and on-demand webinars and courses which are taught by a diverse range of internationally recognized experts in all fields of dentistry. In 2024, we partnered in the delivery of thousands of training courses to dental professionals through in-person, online, and hybrid formats. As part of these courses, the Company trains laboratory technicians, dental hygienists, dental assistants and dentists in the proper use of its products and introduces them to the latest technological developments. Additionally, we maintain ongoing consulting and educational relationships with various dental associations and recognized worldwide opinion leaders in the dental field. Initiatives to support clinical education also include partnerships with research institutions and dental and medical schools. The Company offers education tracks at its premier DS World trade and professional education events, which hosted over 7,000 participants at six DS World events across the globe in 2024. These investments in clinical education allow us to reinforce and develop relationships with dental professionals. We also annually support the achievements of dental students conducting innovative research through our Student Competition for Advancing Dental Research and its Application Awards program.
Through our internal research centers as well as through our collaborations with external research institutions, dental and medical schools, the Company directly invests in the development of new products, the improvement of existing products, and advancements in technology. These investments include an emphasis on research in digital data sharing technology, including the incorporation of long-term artificial intelligence and machine learning. The continued development of these areas is a critical step in meeting the Company’s strategic goal to be a leader in defining the future of dentistry and preparing the next generation of dental practitioners.
Competition
The Company conducts its global operations under highly competitive market conditions. Competition in the industries for dental technology and equipment, dental consumables, orthodontics and continence care products is based primarily upon product performance, quality, safety and ease of use, as well as price, customer service, innovation and acceptance by clinicians, technicians and patients. Dentsply Sirona believes that its principal strengths include its well-established brand names, its end-to-end dental portfolio, its reputation for high quality and innovative products, its leadership in product development and manufacturing, its global sales force, the breadth of its distribution network, its commitment to customer satisfaction and the support of the Company’s products by dental and medical professionals.
The size and number of the Company’s competitors vary by product line and from region to region. There are many companies that produce some of the same types of products as those produced by the Company, but no single competitor produces the breadth of products that are produced by the Company.
Regulation
The development, manufacture, sales and distribution of the Company’s products are subject to comprehensive governmental regulation within the United States and internationally. The following sections describe some, but not all, of the significant regulations that apply to the Company. For a description of the risks related to the regulations that the Company is subject to, please refer to Item 1A, “Risk Factors,” of this Form 10-K.
The majority of the Company’s products are classified as medical devices and are subject to restrictions under domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders, including, but not limited to, the U.S. Food, Drug, and Cosmetic Act (the “FDCA”), Council Directive 93/42/EEC on Medical Devices (“MDD”) in the European Union (“EU”), which was updated to the EU Medical Device Regulation (“MDR”), and similar international laws and regulations. The FDCA requires these products, when sold in the United States, to be safe and effective for their intended use and to comply with the regulations administered by the U.S. Food and Drug Administration (“FDA”). Certain medical device products are also regulated by comparable agencies in non-U.S. countries in which they are produced or sold.
Dental and medical devices sold by the Company in the United States are generally classified by the FDA into a category that renders them subject to the same controls that apply to all medical devices, including regulations regarding alteration,
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misbranding, notification, record-keeping and good manufacturing practices. In the EU, the Company’s products are subject to the medical device laws of the various member states, which are based on a Directive of the European Commission. Such laws generally regulate the safety of the products in a similar way to the FDA regulations. The Company’s products in Europe bear the CE mark showing that such products comply with European regulations. The Company’s products classified by the EU MDD were mandated to be certified under the MDR. These regulations also applied to all medical device manufacturers who market their medical devices in the EU and all such manufacturers had to perform significant upgrades to quality systems and processes including technical documentation and subject them to certification under the EU MDR in order to continue to sell those products in the EU. Although all medical device manufacturers were required to certify their Class I products by May 2021, on March 15, 2023, the EU extended the MDR transition periods to December 31, 2027 for Class III and implantable Class IIb devices and December 31, 2028 for non-implantable Class IIb and lower risk devices and for Class I devices (each such Class as defined in the EU MDR regulations) that are a higher class under the MDR. The Company completed required certifications of its quality management systems in 2024. The Company remains focused on ensuring that all its products that are considered to be medical devices will be fully certified as required by the EU MDR dates and timelines.
Beginning in late 2022, the Chinese government launched a national program for volume-based, centralized medical device and consumables procurement with minimum quantity commitments in an attempt to negotiate lower prices from drug manufacturers and reduce the price of medical devices and other products. Under the program, the government will award contracts to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sales volume for at least a year, giving the winner an opportunity to gain or increase market share. The volume guarantee is intended to make manufacturers more willing to cut their prices in order to win a bid and may also enable successful bidders to lower their distribution and commercial costs. The program, which took effect in the first half of 2023, resulted in a temporary reduction in net sales of our implants products during that period due to reduced prices, which was offset by higher volume of net sales in the second half of 2023. In 2024, the program resulted in increased volumes for implants products, particularly during the first half of the year, with a decline in the second half of the year due to current macroeconomic conditions. Although significant changes to the program were not made in 2024, China’s volume-based procurement strategy is expected to evolve further in future years, including a formal updated program policy expected in 2026, which may include expansion to new categories, new incentives for innovation, changes to the bidding process which could increase price competition, and possible implementation of stricter quality standards. It is expected that the government may also move to prioritize domestic production and the purchase of products from domestic companies in certain categories, aligning with the country’s “Made in China 2025” initiative, which may result in additional competitive pressures from the sale of implants made locally. Future expansion of the program by the Chinese government could also result in reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges.
The Company is also subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders regarding anti-bribery and anti-corruption, including, but not limited to, the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.S. Federal Anti-Kickback Statute (“AKS”), the UK’s Bribery Act 2010 (c.23), Brazil’s Clean Company Act 2014 (Law No. 12,846) China’s National Health and Family Planning Commission (“NHFPC”) circulars No. 40 and No. 50, and similar international laws and regulations. The FCPA and similar anti-bribery and anti-corruption laws applicable in non-U.S. jurisdictions generally prohibit companies and their intermediaries from improperly offering or paying anything of value to foreign government officials for the purpose of obtaining or retaining business. Some of the Company’s customer relationships are with governmental entities and therefore may be subject to such anti-bribery laws. The AKS and similar fraud and abuse laws applicable in non-U.S. jurisdictions prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a health care program, such as, in the United States, Medicare or Medicaid.
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The Company’s production and sales of products are further subject to regulations concerning the use of conflict minerals, various environmental regulations such as the Federal Water Pollution Control Act (the “Clean Water Act”) and others enforced by the Environmental Protection Agency (“EPA”) or equivalent state agencies, and the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the “Health Care Reform Law”). In the manufacture, sale, delivery and servicing of the Company’s products internationally, the Company must also comply with various domestic and foreign import and export control and economic sanctions, laws, and regulations, including those administered by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the Department of Commerce’s Bureau of Industry and Security (“BIS”) and similar foreign governmental agencies, which may require licenses or other authorizations for transactions relating to certain products, certain countries and regions, and/or with certain individuals and entities identified by the respective government. Despite the Company’s internal compliance program, policies and procedures may not always protect it from negligent, reckless, or criminal acts committed by its employees or agents. Violations of these requirements are punishable by criminal and civil sanctions, including substantial fines and imprisonment. The Company’s Byte aligner business in the United States is subject to various state laws, rules and policies which govern the practice of dentistry within such states, particularly based on the direct-to-consumer model that leverages teledentistry, which is no longer a model applicable to products offered to new patients as of October 24, 2024. Byte has historically contracted with an expansive nationwide network of independent licensed dentists and orthodontists for the provision of clinical services, including the oversight and control of each customer’s clinical treatment in order to comply with these regulations and to ensure that the business does not violate rules pertaining to the corporate practice of dentistry.
The Company is subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders governing data privacy and transparency, including, but not limited to, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (the “HITECH Act”), the California Consumer Privacy Act, the California Privacy Rights Act, the European General Data Protection Regulation (“GDPR”), China’s Personal Information Protection Law (“PIPL”), Brazil’s Lei Geral de Protecäo de Dados (“LPGD”), the Physician Payments Sunshine Provisions of the Patient Protection and Affordable Care Act, EU Directive 2002/58/EC (and implementing and local measures adopted thereunder), France’s Data Protection Act of 1978 (rev. 2004) and France’s Loi Bertrand, certain rules issued by Denmark’s Health and Medicines Authority, and similar international laws and regulations. Applicable privacy laws around the world restrict the use and disclosure of personal information, and mandate the adoption of standards relating to the privacy and security of individually identifiable information such as data minimization, access control, providing transparent notice of our privacy practices, and respecting data subject rights. Privacy laws also require the reporting of certain breaches of individually identifiable information. The Physician Payments Sunshine Provisions of the Patient Protection and Affordable Care Act require the Company to record all transfers of value to physicians and teaching hospitals and to report this data to the Centers for Medicare and Medicaid Services for public disclosure. Similar reporting requirements have also been enacted in several states, and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals.
The Company believes it is in substantial compliance with the laws and regulations that regulate its business. There are, however, significant uncertainties involving the application of various legal requirements, the violation of which could result in, among other things, sanctions. See Item 1A, “Risk Factors,” of this Form 10-K for additional detail.
Sources and Supply of Raw Materials and Finished Goods
The Company manufactures the majority of the products that it sells. The Company sources the necessary raw materials from various suppliers, and no single supplier accounts for more than 10% of our supply requirements.
Intellectual Property
Products manufactured by Dentsply Sirona are sold primarily under its own trade names and trademarks. Dentsply Sirona also owns and maintains more than 5,000 patents throughout the world and has also licensed a number of patents owned by others.
Our policy is to protect the Company’s products and technology through patents and trademark registrations in the United States and in significant international markets. The Company monitors trademark use worldwide and promotes enforcement of its patents and trademarks in a manner that is designed to balance the cost of such protection against obtaining the greatest value for the Company. Dentsply Sirona believes its patents and trademark properties are important and contribute to the Company’s marketing position but it does not consider its overall business to be materially dependent upon any individual patent or trademark. Additional information regarding certain risks related to our intellectual property is included in Item 1A, “Risk Factors” of this Form 10-K and is incorporated herein by reference.
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Human Capital
Every day, our people create innovative solutions that transform lives. Our inclusive, agile & high-performance culture equips us to build, grow, and win as one. Together, we are shaping the future and delivering value to customers and patients. As of December 31, 2024, our organization and its subsidiaries employed approximately 14,000 employees globally. Of these employees, approximately 3,000 were employed in the United States. Employees outside of the United States, particularly in Europe, may be covered by collective bargaining agreements, union contracts, worker councils or other similar programs. At Dentsply Sirona, we believe our global talent strategy enables our employees to reach their highest performance.
High-Performance Culture
We deliver a consistent, high-quality talent selection process in alignment with our desired culture. We offer Emerging Talent programs focused on attracting early-career employees through university relationships, including partnerships with Historically Black Colleges and Universities and local trade schools. These programs provide options for apprenticeships, rotational assignments, on-the-job experiences, networking, development, and executive interactions. New employees participate in our custom Enterprise Orientation module that introduces our culture and instills pride in what we do.
Our Performance Feedback Process includes performance and development goal-setting and regular reviews between the employee and manager. Every employee has access to our Own Your Journey career development pathing toolkit to explore their career aspirations. We offer access to an OnDemand learning library available in multiple languages to develop skills and capabilities through our partnership with LinkedIn Learning, and we also provide an additional eLearning training program through Cornell University. All employees globally can utilize our automated matching system for internal mentoring and coaching. To ensure employees know what development resources are available, we offer live sessions on self-development at our organization.
In 2024, we began a partnership with Prosci, the industry leader in Change Management methodology and research, to provide a consistent set of tools and processes for leading the people side of change. Our Change Management training strategy focuses on building our internal change capabilities to support our business priorities. We internally deliver courses to project teams, front-line employees, and managers.
We prioritize preparing our internal talent for available opportunities. All aspiring and existing managers have access to participate in our Manager Fundamentals course options to develop leadership skills. We utilize regular talent reviews to identify successors and high-potential employees to participate in our nomination-based Leadership Development program, delivered in partnership with Cornell University. Our executives each commit to sponsoring high potential employees to accelerate their growth and visibility.
Compensation and Benefits
As part of our total rewards strategy, we offer competitive compensation and benefit programs designed to attract, retain, and reward top talent. We are committed to providing and administering these programs in a way that treats our employees at all levels fairly and equitably. Our total rewards offerings vary by country and include an array of programs that support our employees’ financial, physical, and mental well-being, including annual performance incentive opportunities, pension and retirement savings programs, health and welfare benefits, paid time off (including for charitable actions), leave programs, flexible work schedules, and employee assistance programs.
Inclusion & Engagement
One of our greatest strengths and competitive advantages as an organization is our global diversity. To further build on this strength, we are concentrating our diversity, equity, and inclusion efforts to focus on inclusion and engagement. This shift reflects the deep significance we place on creating a workplace where every employee feels valued, heard, and empowered to contribute. By integrating inclusion and engagement more closely, we aim to enhance the experience of our employees and ensure meaningful progress toward our desired culture.
Diversity, Equity & Inclusion Council
Our Diversity, Equity & Inclusion Council is a group of diverse employees in terms of perspectives, experience, background, geography, and function within the organization dedicated to championing an environment where all employees can reach their highest performance.
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Employee Resource Groups
Our Employee Resource Groups (“ERGs”) encourage an inclusive work environment, cultivate collaboration, and offer development opportunities. As of December 31, 2024, we have nine established ERGs consisting of approximately 3,800 members globally.
Training and Awareness
We offer a catalog of optional training courses aimed at strengthening our inclusive work environment. Our ongoing “Conversations of Understanding” sessions are a standout offering. Employees can choose to participate in group discussions where internal volunteers share experiences on varying topics to generate awareness.
We keep employees connected, engaged, and informed through regular town hall meetings and live video chats. These events provide multiple opportunities for our global workforce to submit questions and interact with our executive leadership team. We deploy an annual global engagement survey to all employees, share the results internally and commit to prioritizing actions and communicating progress throughout the year. We also monitor multiple stages of the employee experience through lifecycle and pulse surveys.
Employee Health & Safety Matters
The health and safety of our employees are of utmost importance to us. We have a dedicated Employee Health & Safety (“EHS”) program that provides global processes and trainings and monitors our progress against set goals. Our actions are in line with EHS frameworks and certifications such as OHSAS 1800 and ISO 45001. We also have a corporate Crisis Management Team and a newly implemented crisis response platform which prepare us to respond in a prompt and efficient manner to crisis situations which we may face on a local or global scale.
Other Factors Affecting the Business
The Company’s business is subject to quarterly fluctuations in demand due to price changes, marketing and promotional programs, management of inventory levels by distributors, and implementation of strategic initiatives which may impact sales levels in any given period. More broadly, our business is impacted by macroeconomic conditions including changes in global supply chain constraints, growth rates, interest rate variability, labor and energy costs, and geopolitical conflicts, which can impact manufacturing costs as well as demand for our products. Demand can also fluctuate based on the timing of dental trade shows where promotions are offered, major new product introductions, and variability in dental patient traffic, which can be exacerbated by seasonal or severe weather patterns, or other disruptions such as global pandemics. Some dental practices in certain countries may also delay purchasing equipment and restocking consumables until year-end due to tax planning which can impact the timing of our consolidated net sales, net income and cash flows. Sales for the industry and the Company are generally strongest in the second and fourth quarters and weaker in the first and third quarters, due to the effects of the items noted above and due to the impact of holidays and vacations, particularly throughout Europe.
Although the backlog on products is generally not material to the Company’s financial statements due in part to the Company’s efforts to maintain short lead times within its manufacturing, levels can fluctuate and affect sales in certain periods due to supply chain disruption and unavailability of required inputs.
Available Information
Dentsply Sirona maintains a primary website, www.dentsplysirona.com, and makes available free of charge through the investor section of its website the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after such materials are filed with or furnished to the SEC. The information contained on, or that may be accessed through, the Company’s website is not incorporated by reference into, and is not a part of, this report. All filings with the Securities and Exchange Commission (“SEC”) are also available at the SEC’s website, www.sec.gov.
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Item 1A. Risk Factors
Summary
The following is a summary of the significant risk factors that could materially impact our business, financial condition or future results, including risks related to our businesses, our international operations, our regulatory environments, ownership of our common stock, and other general risks:
•We rely heavily on information and technology to operate our businesses and product portfolios, and any cyber incidents could harm our operations and have a material impact on our business and financial results.
•Evolving governmental oversight of the use of personal information, cross-border data transfer restrictions and the use of emerging technologies, including AI, as well as other technology regulations, may adversely affect our business.
•We may be unable to develop innovative products and solutions to stimulate customer demand.
•Damage to our reputation or brand could negatively impact our business, financial condition or results of operations.
•Our ongoing business operations may be disrupted for a significant period of time, resulting in material operating costs and financial losses.
•We may be unable to execute key strategic initiatives due to competing priorities and strategies of our distribution partners and other factors, which may result in financial losses and operational inefficiencies.
•Our acquisitions, exiting of businesses, divestitures or strategic investments may result in financial results that are different than expected and create certain risks for our business and operations.
•We may fail to realize the expected benefits of our strategic initiatives, including executed, announced, or potential future restructuring and other business transformation efforts.
•We have recognized substantial goodwill and indefinite-lived intangible asset impairment charges and may be required to recognize additional goodwill and indefinite-lived intangible asset impairment charges in the future.
•Our failure to protect our proprietary technology could have an adverse impact on our competitive position.
•Our financial results may be adversely impacted if our products or services are found to infringe upon the intellectual property rights of others.
•Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options.
•Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt or contractual obligations.
•Our foreign currency hedging and cash management transactions may be ineffective or only partially mitigate the impact of exchange rate fluctuations, exposing us to unexpected volatility.
•Due to the global nature of our business, including increasing exposure to markets outside of the United States, political or economic changes or other factors could harm our business and financial performance.
•Management previously identified material weaknesses in our internal control over financial reporting, some of which resulted in errors in previously issued financial statements. These material weaknesses were all remediated as of December 31, 2023. If we experience additional material weaknesses in the future, we may be unable to accurately and timely report financial results or comply with the requirements for public companies, which could cause the price of our common stock to decline or limit our access to the capital markets.
•Lack of global standardized processes could result in control deficiencies and adversely impact management’s assertions and financial reporting.
•We may be subject to additional litigation and regulatory examinations, investigations, proceedings or court orders relating to the completed 2022 internal investigation regarding certain financial reporting matters. If any of these items are resolved adversely to us, it could harm our business, financial condition and results of operations.
•We may be unable to obtain necessary product approvals and marketing clearances.
•Changes in tax rules or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations and tax investigations, audits, or other proceedings that we are subject to may harm our business, financial condition and results of operations, including by adversely affecting our effective tax rate.
•We voluntarily suspended the sale and marketing of our direct-to-consumer Byte aligner systems and impression kits, and subsequently determined to cease offering these aligners to new patients while repurposing Byte technologies and capabilities to support other products within our aligner portfolio. As a result, we have experienced a material impact on our results of operations, and we may be required to take additional significant impairment charges if we are unsuccessful in our efforts to reposition Byte.
•Inadequate levels of reimbursement from governmental or other third-party payors for procedures using our products may cause our revenue to decline.
•Challenges may be asserted against our products due to real or perceived quality, health or environmental issues.
•If we fail to comply with laws and regulations relating to health care fraud, we could suffer penalties or be required to make significant changes to our operations, which could adversely affect our business.
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•Our business is subject to extensive, complex and changing domestic and foreign laws, rules, regulations, self-regulatory codes, directives, circulars and orders which, if not complied with, subject us to civil or criminal penalties or other liabilities.
•The market price for our common stock may continue to be volatile as a result of a number of factors, including our quarterly operating results.
•Certain provisions in our governing documents, and of Delaware law, may make it more difficult for a third party to acquire us.
•Our business may be adversely affected by changes in global economic conditions, including inflation, rising interest rates, and supply chain shortages.
•Talent gaps and failure to manage and retain top talent may impact our ability to manage our operations, execute strategic initiatives and grow our business.
•We face the inherent risk of legal actions, including litigation, product liability claims, and other regulatory or compliance matters.
•Climate change and related natural disasters could negatively impact our business and financial results.
•Expectations relating to environmental, social and governance considerations may expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
Below is a full description of each of such significant risk factors.
RISKS RELATED TO OUR BUSINESSES
We rely heavily on information technology to operate our businesses and product portfolios, and any cyber incidents could harm our operations and have a material impact on our business and financial results.
We are exposed to the risk of cyber incidents, which can result from deliberate attacks or unintentional events, in the normal course of business. We use integrated information and technology systems to manage our business and deliver products and services to customers. In particular, the 2022 launch of DS Core, our cloud platform that integrates digital dentistry workflows across devices, and the 2024 launch of Primescan 2, a cloud-native intraoral scanner, have introduced new potential vulnerabilities to cyber attacks. The breadth and complexity of our information and technology systems have increased and we expect that they will continue to increase as we expand the services enabled by DS Core and further develop our ERP systems and product offerings to utilize artificial intelligence (“AI”) and analytics. As a result, we will increasingly be exposed to risks inherent in the development, integration and operation of the evolving information and technology supporting our product platforms, as well as our own internal infrastructure, including:
• security breaches, viruses, cyberattacks, ransomware or other malware or other failures, cyber incidents or malfunctions;
• disruption, impairment or failure of data centers or hardware, telecommunications facilities or other infrastructure, including due to natural disasters;
• failures during the process of upgrading or replacing software, databases or components;
• the compromise or unauthorized disclosure of sensitive, personal, proprietary or intellectual property information related to our business and customers;
• excessive costs, excessive delays or other deficiencies in systems development and deployment; and
• an unintentional event that involves a third party gaining unauthorized access to our systems or proprietary information.
We also utilize systems, applications and data storage provided and maintained by third parties, including those delivered through cloud-based solutions. Any disruptions to or deterioration of our distribution partners’ or service providers’ information and technology infrastructures could pose a threat to our operations and harm our business.
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Like other large, global companies, during the normal course of business, we have experienced and expect to continue to experience cyber threats, attacks and other attempts to compromise our information systems, with such attacks and threats rapidly increasing in both sophistication and frequency. However, none, to our knowledge, have had a material adverse effect on our business, financial condition or results of operations to date. Our policies, required employee training (including that which relates to phishing prevention), procedures and technical safeguards may be insufficient to prevent or detect improper access to confidential, proprietary or sensitive data, including personal data. Cyberattacks could also cause us to incur significant costs, disrupt key business operations and divert attention of management and key information technology resources. We also face the ongoing challenge of controlling access to our information and technology infrastructure. We have experienced various cyber incidents in the past and have implemented new controls, governance, protections and procedures as a result. If we do not successfully manage these access controls, it could expose us to the risk of security breaches or disruptions. Although past cybersecurity incidents have not had a material effect on our business or operations, and although we and our service providers take efforts to ensure the integrity of our systems and anticipate, detect, avoid or mitigate such threats, we cannot provide assurances that a future cyberattack would not result in material harm to our business and results of operations. Disaster recovery plans, where in place, might not adequately protect us in the event of a system failure. Further, we currently do not have excess or standby computer processing or network capacity everywhere in the world to avoid disruption in the event of a system failure. Despite any precautions we take, damage from natural disasters, telecommunications failures, computer viruses, break-ins, human error or similar events at our computer facilities could result in interruptions in the flow of data to our servers, although we have not yet experienced such an interruption. While we have invested and continue to invest in information technology risk management and disaster recovery plans, these measures cannot fully insulate us from cyber incidents, technology disruptions or data loss and the resulting adverse effect on our operations and financial results. If our information systems are breached again, sensitive and proprietary data is compromised, surreptitiously modified, rendered inaccessible for any period of time or made public, or if we fail to make adequate or timely disclosures to affected individuals, appropriate state and federal regulatory authorities or law enforcement agencies, it could result in significant fines, penalties, court orders, sanctions and proceedings or actions against us by governmental or other regulatory authorities, customers or third parties. We may incur substantial costs and suffer other negative consequences such as liability, reputational harm and significant remediation costs and experience material harm to our business and financial results if we experience cyber incidents in the future.
AI-based platforms and tools are increasingly being used in the consumer health industries, and our use of this technology, as well as its use by our business partners, may continue to increase and could lead to the unintentional release of our confidential information, which could negatively impact us, including our ability to realize the benefits of our intellectual property. Additionally, the advancement of AI and large language models has given rise to additional vulnerabilities and potential entry points for cyber threats; threat actors may have additional tools to automate breaches or persistent attacks, evade detection, generate sophisticated phishing emails, or impersonate employees or senior management. Our use of AI in our products and processes and the use of AI by our business partners may lead to novel cybersecurity, legal and regulatory risks, which could have a material adverse effect on our operations and reputation as well as the operations of our business partners.
Additionally, we seek to maintain insurance coverage for cybersecurity risks, but such insurance has become increasingly difficult to secure and, in some cases, policies may not provide adequate coverage for possible losses. Further, as cybersecurity risks evolve, such insurance may not be available to us on commercially reasonable terms, or at all. Uninsured losses or operational losses that result from large deductible payments under commercial insurance coverage might have an adverse impact on our business operations, financial position or results of operations.
Evolving governmental oversight of the use of personal information, cross-border data transfer restrictions and the use of emerging technologies, including AI, as well as other technology regulations, may adversely affect our business.
We collect and process personally identifiable information (“PII”) and other data as part of our business processes and activities. This data is subject to an increasing number of U.S. and foreign laws and regulations, including oversight by regulatory or governmental bodies. The EU General Data Protection Regulation (“GDPR”), for example, imposes stringent data protection requirements and provides significant penalties for noncompliance. Fines for noncompliance can amount to up to €20 million or 4% of the total worldwide annual sales from the preceding financial year (whichever is higher) and may be imposed in conjunction with the exercise of the authority’s investigatory and corrective powers. The GDPR’s extraterritorial scope makes it applicable to our U.S.-based legal entities whenever our business activities process the personal data of EU residents. Privacy laws, rules and regulations are also rapidly developing in other regions, including China, Brazil and South Korea, and the United States.
In the United States, the federal Health Insurance Portability and Accountability Act of 1996, as amended, and its implementing regulations (collectively, “HIPAA”) impose certain requirements on covered entities and their business associates
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to protect the privacy and security of protected health information (“PHI”) and to provide notification in the event of a breach of PHI. The U.S. Department of Health and Human Services Office for Civil Rights (“OCR”), which is responsible for enforcing HIPAA, also may enter into resolution agreements requiring the payment of civil money penalties and/or the establishment of corrective action plans to address violations of HIPAA. Pursuant to HIPAA, OCR has adopted privacy regulations to govern the use and disclosure of PHI and data security regulations that require the implementation of safeguards to protect electronic PHI.
Our Company, through its various subsidiaries, functions as both a covered entity and a business associate under HIPAA. Where necessary, we have segregated our data to ensure that PHI is handled in accordance with HIPAA requirements. We believe that we have implemented appropriate policies and procedures and security measures necessary to comply with HIPAA. However, despite our compliance efforts, we may suffer a serious breach of PHI or be subject to a cyberattack that compromises the PHI that we maintain.
Additionally, federal and state privacy and security-related laws may be more restrictive than HIPAA and could impose additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to alleged privacy violations and data breaches. The California Consumer Privacy Act (“CCPA”) created additional data privacy obligations for covered companies and a private right of action with statutory damages for certain data breaches. In addition, the California Privacy Rights Act further expanded the CCPA to provide even greater rights to California consumers with respect to their data. Other states have followed California by implementing data privacy laws, including, but not limited to, Colorado, Connecticut, Utah, Virginia, and Washington. If we suffer a serious breach of personal data, we may be subject to breach notification requirements, government investigations, media inquiries, civil and criminal fines and penalties, litigation, and negative public perception, and we may be required to expend substantial financial and personnel resources. Any liability from failing to comply with applicable privacy and data protection laws could adversely affect our operations and our financial condition.
These varying laws, rules, regulations and industry standards impact our businesses to the extent we rely on the use of personal data, including PHI, and create significant compliance challenges. In addition, certain privacy and data protection laws may apply to us indirectly through our customers, manufacturers, suppliers or other third-party partners. For example, non-compliance with applicable laws or regulations by a third-party partner that is processing personal data on our behalf may be deemed to be non-compliance or a failure to conduct proper due diligence. Any inability, or perceived inability, to adequately address privacy and data protection concerns or to comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations (including at newly acquired companies) could result in additional cost and liability to us or our officers, damage our reputation, inhibit sales, and otherwise adversely affect our business.
Moreover, global regulation related to the provision of services on the Internet is increasing, as governments continue to adopt new laws and regulations addressing data privacy and the collection, processing, storage and use of personal information. Such laws and regulations are subject to new and differing interpretations and may be inconsistent among jurisdictions. These and other requirements could restrict our ability to store and process data or impact our ability to offer future digital dentistry products and services in certain locations. The costs of compliance with and other burdens imposed by these types of laws, regulations and standards may limit the adoption of our products or services or lead to significant fines, penalties or liabilities for noncompliance, any of which could harm our business.
In addition, the legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, especially in the areas of intellectual property, cybersecurity, and privacy and data protection. For example, there is uncertainty around the validity and enforceability of intellectual property rights related to the use, development, and deployment of AI. Compliance with new or changing laws, regulations or industry standards relating to AI may impose significant operational costs and may limit the ability of the Company and our business partners to develop, deploy or use AI technologies. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm.
New and more stringent multinational, national and state technology legislation and regulations may be adopted in 2025 and beyond. We cannot predict the scope of new legislation, regulation or enforcement, the jurisdictions that may be involved, or impact. Failure to comply with technology laws and regulations could result in enforcement actions (which could include substantial penalties), private litigation and/or adverse publicity and could have a material adverse impact on our business, financial condition or results of operations.
Although we currently maintain liability insurance intended to cover cyber and certain other privacy and security breach-related claims, we cannot ensure that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us in the future if the outcomes of such claims are unfavorable to us. Liabilities in excess of our insurance coverage,
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including coverage for cyber liability and certain other privacy and security breach-related claims, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities.
We may be unable to develop innovative products and solutions to stimulate customer demand.
The worldwide markets for dental and continence care products are highly competitive and are subject to rapid and significant technological disruption. There can be no assurance that our products will not lose their competitive advantage or become obsolete as a result of such factors, or that we will be able to generate any economic return on our investment in product development. If product demand or sales effectiveness decreases, or if our newly introduced products are not accepted by our customers, our revenue and profit could be negatively impacted. Important factors that could cause demand for our products to decrease include changes in:
•business conditions, including downturns in the dental industry, regional economies, and the overall economy;
•the level of customers’ inventories;
•evolving industry practices;
•competitive and pricing pressures, including actions taken or new products introduced by competitors;
•customer product needs and preferences and customer/patient lifecycle; and
•patient reimbursement trends which could lead to a drop in patient volumes at our customers’ dental practices.
If we fail to innovate existing technologies or develop new technologies consistent with changing consumer preferences and security requirements or fail to differentiate our products from our competition, our technology or products may become obsolete and cause us to lose market share and revenue. While we have identified the development of new technologies and products as an important part of our growth strategy, there is no assurance that new technology, products or approaches to dental treatment will not render our products obsolete, and there is no assurance that capital allocated to R&D will yield expected benefits. Additionally, the rapid pace of technological advancements may accelerate amortization faster than we anticipated or impair investments in our software technology, which could negatively impact our results.
Damage to our reputation or brand could negatively impact our business, financial condition or results of operations.
We seek to maintain our reputation, and successful promotion of our brand depends on multiple factors, including our marketing efforts and our ability to deliver a superior customer experience, develop innovative products, and differentiate our offerings from those of our competitors. Additionally, the strength of our brand relies on continued effective use of our distribution network and customer service platforms. The promotion of our brand requires us to make substantial expenditures, including continued investments in enhancing customer experience. Our brand promotion activities may not be successful in maintaining or increasing our current level of revenue. If we do not successfully position our brand and reputation as an industry leader, our business and operating results may be adversely affected.
Additionally, our brand depends on our reputation for offering high-quality solutions meeting the highest of safety standards. A serious breach of our quality assurance or quality control procedures, deterioration of our quality image, impairment of our customer or consumer relationships or failure to adequately protect the relevance of our brands may lead to litigation, customers purchasing from our competitors, other brands or private labels not manufactured by us, or regulatory enforcement action, any of which could have a material negative impact on our business, financial condition or results of operations.
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Our ongoing business operations may be disrupted for a significant period of time, resulting in material operating costs and financial losses.
We operate in approximately 150 countries and our suppliers’ manufacturing facilities are located in multiple locations around the world. Potential events such as extreme weather, natural disasters, regional epidemics or global pandemics, worker strikes and social and political actions, such as trade wars, regional wars or conflicts or other events beyond our control, could impact our ongoing business operations, including due to disruptions at critical third-party vendors or the loss of critical information technology and telecommunications systems. Although we maintain multiple manufacturing facilities, a large number of the products manufactured by us are manufactured in facilities that are the sole source of such products. As there are a limited number of alternative third-party suppliers for these products, any disruption at a particular Company manufacturing facility could lead to delays and increased expenses and may damage our business and results of operations. If our incident response, disaster recovery and business continuity plans do not resolve these issues in an effective and timely manner, such events could result in an interruption in our operations and could cause material negative impacts on our business, financial condition or results of operations.
Additionally, a significant portion of our injectable anesthetic products, orthodontic products, certain dental cutting instruments, catheters, nickel titanium products and certain other products and raw materials are purchased from a limited number of suppliers and in certain cases single source suppliers pursuant to agreements that are subject to periodic renewal, some of which may also compete with us. As there are a limited number of suppliers for these products, there can be no assurance that we will be able to obtain an adequate supply of these products and raw materials in the future at acceptable prices. Any delays in delivery of or shortages in these products could interrupt and delay manufacturing of our products and result in the cancellation of orders. In addition, these suppliers could discontinue the manufacture or supply of these products to us or supply products to competitors. We may not be able to identify and integrate alternative sources of supply in a timely fashion, or at all. Any transition to alternate suppliers may result in delays in shipment, increase expenses and limit our ability to deliver products to customers.
We may be unable to execute key strategic initiatives due to competing priorities and strategies of our distribution partners and other factors, which may result in financial losses and operational inefficiencies.
We may be unable to execute our key strategic activities and investments due to operational disruptions impacting our distributors or the competing priorities of our distribution partners, which may introduce additional products that compete with our products at lower price points. If these competing products capture significant market share or result in a decrease in market prices overall, there could be negative impacts on our results of operations and financial condition.
We generate a substantial portion of our revenue through a limited number of distributors that provide important support to end-users. Together, our two largest distributors, Patterson Companies, Inc. (“Patterson”) and Henry Schein, Inc. (“Henry Schein”), accounted for approximately 13% of our annual revenue for the year ended December 31, 2024. In July 2024, we delivered a one-year notice of non-renewal to Patterson in connection with its non-exclusive distribution agreements for the distribution of dental equipment in the United States and Canada. It is anticipated that Patterson will continue to be one of our two largest distributors as a percentage of our global revenue during the one-year notice period. We intend to engage in discussions for new distribution agreements with Patterson. However, failure to successfully renegotiate the distribution agreements or secure new agreements with another distributor could have a material adverse effect on our business, operating results and financial condition. We have not incurred any charges against earnings in 2024 related to non-renewal of the distribution agreements.
Additionally, the dental market continues to be impacted by price competition, driven in part by the consolidation of dental practices, the growing significance of DSOs, innovation, and end-user price sensitivity. There can be no assurance that our distribution partners will purchase any minimum quantity of products from us or that they will continue to purchase any products at all. If Patterson or Henry Schein ceases to purchase a significant volume of products from us, or if changes in our promotional strategies and investments result in changes in our distributor relationships, it could have a material adverse effect on our results of operations and financial condition. In addition, changes in the capital structure or ownership of distributors could result in changes to our relationship, including shifts in strategies related to inventory management, customer service and servicing the installed base of Dentsply Sirona products. Changes to agreements with distributors, including expiration of existing agreements, could result in a reduction in the amount of inventory ordinarily held in the absence of contractual minimum inventory requirements.
We rely in part on our distributor and customer relationships and predictions of distributor and customer inventory levels in projecting future demand levels and financial results. These inventory levels may fluctuate, and may differ from our predictions, resulting in our projections of future results being different than expected. These changes may be influenced by
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changing relationships with distributors and customers, economic conditions, and customer preference for particular products. There can be no assurance that distributors and customers will maintain levels of inventory in accordance with our predictions or past history or that the timing of customers’ inventory changes will be in accordance with our expectations. Any disruptions to our distributors’ operations or systems may result in delays in orders and shipments and may prevent our products from being timely delivered to the market.
Our acquisitions, exiting of businesses, divestitures or strategic investments may result in financial results that are different than expected and create certain risks for our business and operations.
We intend to continue utilizing acquisitions, dispositions, and strategic investments as a part of our strategy for growth and to improve financial results. We have made, and may continue to make in the future, acquisitions to enhance our business and product portfolio, which require us to invest significant resources to integrate the businesses we acquire. We also periodically evaluate our businesses and assets for potential disposition as a key part of our strategy, including the previously disclosed evaluation of strategic alternatives for our Wellspect Healthcare business. The success of each acquisition or divestiture depends in part on our ability to realize opportunities and manage risks, including challenges executing transactions, higher operating expenses, litigation, adverse effects on existing business relationships with suppliers and customers, and the potential loss of key employees, customers, distributors, vendors, and other business partners. The process of continuing to evaluate acquisitions, divestitures or strategic investments may be costly, time-consuming and complex, including requiring management to devote significant time and attention to these types of transactions that may distract our management and disrupt our ongoing business operations or relationships. We may incur significant legal, accounting and advisory fees and other expenses, some of which may be incurred regardless of whether we successfully enter into a transaction. We may not achieve expected returns and benefits in connection with acquisitions as a result of various factors, including integration challenges, such as those relating to personnel and technology, and we may not achieve financial results consistent with revenue growth expectations and cost synergies anticipated from integration activities.
After reaching an agreement for the acquisition or disposition of assets or a business, the transaction may remain subject to regulatory and governmental approvals and the satisfaction of pre-closing conditions, which may prevent us from completing a given transaction in a timely manner, or at all. Acquisitions may require us to incur debt, assume contingent liabilities and/or additional risks, or create additional expenses to consummate the transaction, any of which might adversely affect our financial results.
When we pursue the divestiture of a business, we may encounter difficulty in finding buyers or executing alternative exit strategies in a timely manner, which could delay the accomplishment of our strategic objectives. Alternatively, we may dispose of a business at a valuation or on terms that are less favorable than we had anticipated, or with the exclusion of select assets. Dispositions may also involve continued involvement in a divested business, such as through continuing equity ownership, transition service agreements, guarantees, indemnities or other financial obligations. Under these arrangements, the performance of the divested business, or other conditions outside our control, could affect our future financial results. If we are not successful in setting forth a new strategic vision for Wellspect, or if our plans are not executed in a timely fashion, this may cause reputational harm with our stockholders and the value of our securities may be adversely impacted.
We may fail to realize the expected benefits of our strategic initiatives, including executed, announced, or potential future restructuring and other business transformation efforts.
In order to improve performance and drive value creation, we implemented a restructuring plan during 2024 (the “2024 Plan”). In connection with the 2024 Plan, we anticipate a net reduction in our global workforce of approximately 2% to 4%. The proposed changes are subject to co-determination processes with employee representative groups in countries where required. Actions taken under the 2024 Plan will seek to further streamline our operations and global footprint, as well as improve alignment of our cost structure with strategic growth objectives.
In addition, we made restructuring changes during 2023 (the “2023 Plan”). The 2023 Plan plans included implementation of a new operating model with five global business units designed to align our product portfolio with our growth strategy, infrastructure optimization to support efficiency, and other initiatives aimed at delivering cost savings.
We are also in the process of implementing a new global ERP system, which will upgrade and standardize our existing information systems. Beginning in 2023 and continuing through 2024, we made capital investments in this system, which has resulted in significant costs and uses of cash that are expected to continue in the future. Implementation is expected to take several years to complete, and cost overruns or any disruptions, delays or complications could lead to higher than anticipated capital investments and related costs, distract from our core business, or result in failures to produce financial information accurately and timely and may adversely impact our financial results. The failure to either deliver the application on time or
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anticipate readiness and training needs could lead to business disruptions. The quarterly timing of sales may also be impacted as distributors adjust their buying patterns and inventory levels in anticipation of potential business disruptions related to the implementation of our new ERP system.Failure or abandonment of any part of the ERP system could result in a write-off of part or all of the costs that have been capitalized on the project.
Additionally, our ability to achieve benefits from our strategic initiatives within the expected timeframe is subject to many estimates, assumptions, and other factors that we may not be able to control. We may also incur charges related to restructuring plans that are higher than anticipated, which would reduce our profitability in the periods such charges are incurred.
Due to the complexities inherent in implementing these types of cost reduction and restructuring activities, and the timing of strategic investments, we may fail to realize expected efficiencies and benefits or may experience a delay in realizing such efficiencies and benefits, and our operations and business could be disrupted. Company management may be required to divert their focus to these disruptions, and implementation may require the agreement of third parties, such as labor unions or works councils. Risks associated with these actions and other workforce management issues include delays in workforce reductions, additional unexpected costs, changes in restructuring plans that modify the number of employees affected, negative impacts on our relationship with labor unions or works councils, adverse effects on employee morale, and failure to meet operational targets due to the loss of employees, any of which may impair our ability to achieve anticipated cost reductions or may otherwise harm our business, and could have a material adverse effect on our sales growth and other results of operations, cash flows or financial condition, or competitive position.
We have recognized substantial goodwill and indefinite-lived intangible asset impairment charges and may be required to recognize additional goodwill and indefinite-lived intangible asset impairment charges in the future.
We have acquired other companies and intangible assets and may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangibles. We review amortizable intangible assets for impairment when events indicate the carrying value may not be recoverable. We test goodwill and indefinite-lived intangibles for impairment at least annually. The valuation models used to determine the fair value of goodwill or indefinite-lived intangible assets are dependent upon various assumptions and reflect management’s best estimates.
The goodwill and indefinite-lived intangible asset impairment analyses are sensitive to changes in key assumptions used, such as discount rates, revenue growth rates, perpetual revenue growth rates, operating margin percentages, and net working capital assumptions of the business as well as current market conditions affecting the dental and medical device industries. Given the uncertainty in the marketplace and other factors affecting management’s assumptions, there is a risk of future impairment charges if there is a decline in the fair value of the reporting units or indefinite-lived intangible assets as a result of, among other things, financial results lower than forecasts, adverse changes in valuation assumptions, a decline in equity valuations, increases in interest rates, or changes in the use of intangible assets. There can be no assurance that our future asset impairment testing will not result in a material charge to earnings.
In the quarter ended March 31, 2024, we identified indicators of a more likely than not impairment related to certain indefinite-lived imaging product trade names within the Connected Technology Solutions segment. The decline in fair value of these indefinite-lived trade names was driven by declines in volumes during the three months ended March 31, 2024, which was due in part to a loss in market share from competitive pricing pressures, as well as unfavorable economic conditions in certain markets. These factors contributed to a reduction in forecasted revenues in the near term. The trade names were evaluated for impairment using an income approach, specifically a relief from royalty method. As a result, we recorded an indefinite-lived intangible asset impairment charge of $6 million for the three months ended March 31, 2024.
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 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
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dental procedures and premium implant solutions. These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. 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. 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.
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 our premium equipment and implant products, competitive pricing pressures, and a sustained higher cost of capital, which are contributing to reduced forecasted revenues. 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. 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.
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 future additional impairment. At December 31, 2024, we have $337 million of indefinite-lived intangible assets and $1,597 million of goodwill recorded on our balance sheet.
Our failure to protect our proprietary technology could have an adverse impact on our competitive position.
Our financial results may be adversely impacted if third parties infringe upon our intellectual property rights or misappropriate our technologies and trademarks. To protect our rights to our intellectual property, we rely on a combination of patent and trademark law, trade secret protection, confidentiality agreements and contractual arrangements with our employees, strategic partners, and others. We cannot assure you that any of our patents, the patents we license or any patents which we receive or license in the future will provide us with a competitive advantage or afford us protection against infringement, or that the patents will not be successfully challenged or circumvented by third parties. The protective steps that we have taken may be inadequate to detect, protect against or deter misappropriation. Effective patent, trademark and trade secret protection may not be available in every country in which we will offer our products. In addition, there is a risk of employees inadvertently inputting trade secret information into AI technologies, thereby enabling third parties to access such information. Any failure to adequately protect our intellectual property rights could devalue our proprietary content and impair our ability to compete effectively. Further, defending or enforcing our intellectual property rights could result in the expenditure of significant resources.
Litigation may be necessary to assert claims against others, enforce patents owned by or licensed to us, protect our trade secrets or know-how, or determine the enforceability, scope, and validity of our proprietary rights. An adverse determination in such proceedings could subject us to significant liabilities, allow our competitors to market competitive products without obtaining a license from us, prohibit us from marketing our products or require us to seek licenses from third parties. If we cannot obtain such licenses, we may be restricted or prevented from commercializing our products. If we become involved in litigation, we may incur substantial expense, and the proceedings may divert the attention of key personnel, even if we ultimately prevail. Our success will depend in part on our ability to obtain patents for technology in our products and defend infringement on our patents by third parties that relate to our products, technologies, and processes, both in the United States and in other countries. Risks and uncertainties that we face with respect to our patents and patent applications include the following:
•pending patent applications may not result in issued patents or may take longer than we expect to result in issued patents;
•the allowed claims of any patents that are issued may not provide meaningful protection;
•other companies may challenge patents licensed or issued to us;
•disputes may arise regarding inventions and corresponding ownership rights in inventions and know-how resulting from the joint creation or use of intellectual property by us and our respective licensors; and
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•other companies may design around the technologies patented by us.
Our financial results may be adversely impacted if our products or services are found to infringe upon the intellectual property rights of others.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights. Litigation may be necessary to defend against any such claims of infringement asserted against us. In addition, it may be necessary to participate in proceedings declared by the U.S. Patent and Trademark Office, the European Patent Office or other foreign patent offices to determine the priority of inventions, which could result in substantial costs. Acquisitions by us of products, technologies or processes that are found to infringe upon others’ intellectual property rights could further increase the risk of litigation or other proceedings and related costs.
The enforcement, defense and prosecution of intellectual property rights involve complex legal and factual questions. As a result, these proceedings are costly and time-consuming, and their outcome is uncertain.
Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options.
We utilize short and long-term debt markets to obtain capital from time to time. Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global credit markets, the availability of sufficient amounts of financing, operating performance, and credit ratings. Macroeconomic impacts, including natural disasters, pandemics, geopolitical conditions or other catastrophic events, may result in significant disruption in the credit markets, which may adversely affect our ability to refinance existing debt or obtain additional financing to support operations or to fund new acquisitions or capital-intensive internal initiatives.
Any adverse changes in our credit ratings may result in increased borrowing costs for future long-term debt or short-term borrowing facilities which may in turn limit financing options, including access to the unsecured borrowing market. There is no guarantee that additional debt financing will be available in the future to fund obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.
Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt or contractual obligations.
We now have and expect to continue to have a significant amount of debt. Our indebtedness could have important consequences to us including the following:
•making it more difficult or even impossible for us to satisfy our debt or contractual obligations;
•exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, are at variable rates of interest;
•restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
•requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which would reduce the funds available for working capital, capital expenditures, investments, acquisitions and other general corporate purposes;
•limiting our flexibility in planning for, or reacting to, changes in our business, future business opportunities and the industry in which we operate;
•placing us at a competitive disadvantage compared to any of our less leveraged competitors;
•increasing our vulnerability to a downturn in our business and both general and industry-specific adverse economic conditions; and
•limiting our ability to obtain additional financing, which could worsen if any adverse changes in our credit ratings occur.
We have debt securities outstanding of approximately $1.7 billion as of December 31, 2024. We also can incur up to $700 million of indebtedness under the multi-currency revolving credit facility (“2023 Credit Facility”), as discussed below, and may incur significantly more indebtedness in the future. Our credit facilities contain restrictive covenants, including some which require that we maintain certain ratios, that could limit our ability to engage in activities that may be in our long-term best interests. We may need to reduce the amount of our indebtedness outstanding from time to time to comply with the ratios
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required by such covenants, although no assurance can be given that we will be able to do so. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt, which could adversely affect our business, earnings and financial condition. Such failure to comply with covenants may also hurt our reputation and credibility with our stockholders and our debt holders and may compromise our future ability to finance our operations through the public equity or debt markets.
There is no guarantee that we will be able to renew or replace our existing debt agreements as they become due, including debt instruments with principal of $128 million maturing in December 2025. A failure to renew or replace such agreements and instruments would harm our overall liquidity.
Our foreign currency hedging and cash management transactions may be ineffective or only partially mitigate the impact of exchange rate fluctuations, exposing us to unexpected volatility.
Due to the global nature of our business, movements in foreign exchange rates may impact our consolidated statements of operations, consolidated balance sheets and consolidated statement of cash flows. With approximately two-thirds of our sales located outside the United States, our consolidated net sales are impacted negatively by the strengthening and positively by the weakening of the U.S. dollar as compared to certain foreign currencies. Additionally, movements in certain foreign exchange rates may impact our results of operations, financial condition, and liquidity since a number of our manufacturing and distribution operations are located outside of the United States. Although we currently use and may in the future use certain financial instruments to attempt to mitigate market fluctuations in foreign exchange rates, there can be no assurance that such measures will be effective or available.
We use foreign currency exchange forward contracts to reduce the effects of exchange rate fluctuations. Should our counterparties to such transactions or the sponsors of the exchanges through which these transactions are offered fail to honor their obligations, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions.
We enter into interest rate swap agreements from time to time to manage our exposure to interest rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing our exposure to changes in interest rates. If such events occur, our results of operations may be adversely affected.
Most of our cash deposited with banks is not insured and would be subject to the risk of bank failure. Our total liquidity also depends in part on the availability of funds under our 2023 Credit Facility. The failure of any bank in which we deposit our funds or that is part of our 2023 Credit Facility could reduce the amount of cash we have available.
RISKS RELATED TO OUR GLOBAL OPERATIONS
Due to the global nature of our business, including increasing exposure to markets outside of the United States, political or economic changes or other factors could harm our business and financial performance.
Approximately two-thirds of our sales are in regions outside the United States, and we anticipate that sales outside of the United States will continue to increase. Operating internationally is subject to uncertainties, including, but not limited to, those related to, the following:
•economic and political instability;
•import or export licensing requirements;
•compliance-related risks;
•trade restrictions and tariffs;
•product registration requirements;
•longer payment cycles;
•changes in regulatory requirements and tariffs, including restrictions in China on the proportion of certain medical equipment which can be imported;
•potentially adverse tax consequences; and
•trade policy changes.
Changes in or the imposition of tariffs, including the tariffs imposed or proposed by the Trump Administration in early 2025 and retaliatory tariffs imposed or proposed by other countries, could make it significantly more difficult or costly for us to export our products to other countries. In particular, these tariffs currently affect some of the components of our products we
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import from China and other countries, and we may be required to raise our prices on those products due to these tariffs or share the cost of such tariffs with our customers, which could harm our operating performance. We monitor and evaluate the potential impact of the effective and proposed tariffs as well as other recent changes in foreign trade policy on our supply chain, costs, sales and profitability, and we seek to implement strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants to seek to minimize products coming from China and other countries, both for existing products and for new product development, and we seek to select suppliers in low cost regions where tariff issues are less challenging. These measures could also result in increased costs for goods imported into the United States, supply chain inefficiencies and decreased availability of certain materials with respect to other countries. This could require us to increase prices to our customers, which may reduce demand. If we are unable to increase prices at a sufficient level to offset tariffs, we would be required to lower our margin on products sold. We cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, what products may be subject to such actions (including subject to United States export control restrictions), or what actions may be taken by other countries in retaliation. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to trade policies has the potential to impact demand for our products, our costs, our customers and our suppliers, which could adversely impact our business, financial condition and results of operations.
Specifically, the Chinese government has implemented a volume-based procurement process designed to decrease prices for medical devices and other products, which has in the past resulted in, and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, or an incurrence of inventory-related charges. For further information, see Part 1. Item 1, “Business - Regulation.” We cannot predict future impacts of the volume-based procurement program on our business, including any expansion of the program to include additional products within our portfolio.
Certain of these risks may be heightened because of changing political climates. For example, due to the invasion of Ukraine by Russia, various countries and international organizations have imposed sanctions on Russia, including its major financial institutions and certain other businesses and individuals, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Russia also imposed currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed restrictions on transacting with non-Russian parties, banned exports of various products, and imposed other restrictions, including reducing the ability of companies toremit cash from their Russian-based operations to locations outside of Russia. 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. The continuation of the conflict may result in additional sanctions being imposed on Russia and related individuals and entities, with Russia potentially responding in kind. The length, impact, and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, which, along with the spillover effect of ongoing civil, political, and economic disturbances on surrounding areas, may significantly devalue currencies we use or have other adverse impacts, including increased costs of raw materials, manufacturing or shipping delays or increases in inflation rate, cyberattacks and supply chain challenges. Export controls implemented as part of sanctions could also restrict the sale of products containing U.S.-developed software and technology into Russia.
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 $39 million of cash and cash equivalents held within Russia as of December 31, 2024, as well as inventory and trade accounts receivable. A significant escalation or expansion of economic disruption 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.
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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 within that region. During 2024, the state of Israel has also been a target of coordinated missile and drone attacks launched by the Republic of Iran and its proxies. In January 2025, a cease-fire agreement was signed between Hamas and the Israeli government; however, its potential to lead to a long-term peace deal or greater stability remains uncertain. A potential resumption of 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 represent approximately 1% of our global sales of Implant & Prosthetic Solutions reporting unit, but this product category is an area of relatively high potential growth. It is not clear when these restrictions will be lifted or if other countries will institute similar restrictions.
Our operations in Israel consist of two manufacturing facilities for implant products, with one site in northern Israel and one in southern Israel, which together employ approximately 350 associates. These facilities continue to operate. We could face future production slowdowns or closures due to the impacts of the war, including having employees 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% of our consolidated net sales and 13% of the net sales attributed to our 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 country. Our operations in Israel have not been materially impacted by the conflict, and consequently, we have not recorded any allowance for doubtful accounts, inventory reserves, or fixed asset impairments through the year ended December 31, 2024. The Company continues to monitor developments and prepare contingency plans to limit potential disruptions.
Additionally, we sell products from across our portfolio to distributors and dental practices within Israel and its neighbors 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.
While Israel does not constitute a material portion of our business, a significant escalation or expansion of the conflict 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.
Additionally, other events, such as the outbreak of a global pandemic or other adverse public health developments could materially affect our business in a number of ways, including:
•reduced demand for our products in certain regions or our inability to timely meet our customer’s orders,
•the failure of third parties to meet their obligations to us, or significant disruptions in their ability to do so, and
•uncertainty in the global financial markets.
RISKS RELATED TO OUR INTERNAL CONTROLS
Management previously identified material weaknesses in our internal control over financial reporting, some of which resulted in errors in previously issued financial statements, which have been remediated as of December 31, 2023. If we experience additional material weaknesses in the future, we may be unable to accurately and timely report financial results or comply with the requirements for public companies, which could cause the price of our common stock to decline or limit our access to the capital markets.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In 2022 and 2023, we identified material weaknesses in our internal control over financial reporting, some of which resulted in errors in previously issued financial statements. These material weaknesses were all remediated as of December 31, 2023.
Although we devote substantial resources to prevent material weaknesses from occurring, it cannot be assured that our measures will be sufficient. Accordingly, there is a reasonable possibility that a reoccurrence of the material weaknesses previously identified or the occurrence of other material weaknesses or deficiencies identified in the future could result in a
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material misstatement of our financial statements, potentially causing us to fail to meet our obligations under securities laws, stock exchange listing rules, or debt instrument covenants to file periodic financial reports on a timely basis. Any material weaknesses identified in the future could adversely affect investor confidence in our financial statements, cause the price of our common stock to decline, or limit our access to the capital markets.
Lack of global standardized processes could result in control deficiencies and adversely impact management’s assertions and financial reporting.
We currently use disparate systems, including Enterprise Resource Planning (“ERP”) systems, across the organization, which may reduce our ability to obtain and analyze business data in a timely manner, increase costs for system upgrades, and pose business partner connection challenges. Non-standardized processes may lead to inaccurate, incomplete or delayed financial and management reporting, which may result in misleading or inaccurate reporting for key business decisions or noncompliance with applicable business and regulatory requirements, potentially causing penalties or fines. We continue to focus on standardizing our processes, improving our financial systems, maintaining effective internal controls and centralizing transaction management and execution to provide continued assurance with respect to our financial reports and prevent financial misstatement or fraud. In 2024, we continued implementing a new global ERP system, which will upgrade and standardize our existing information systems. However, this new system will take several years and require significant resources to implement, and may not be fully successful in providing standardization sufficient to address these risks even once completed.
RISKS RELATED TO OUR REGULATORY ENVIRONMENTS
We may be subject to additional litigation and regulatory examinations, investigations, proceedings or court orders relating to the completed 2022 internal investigation regarding certain financial reporting matters. If any of these items are resolved adversely to us, it could harm our business, financial condition and results of operations.
As a result of the previously reported material weaknesses in internal control over financial reporting which were remediated as of December 31, 2023, which partially arose from the independent investigation regarding certain financial reporting matters conducted by the Audit and Finance Committee (“AFC”) of the Company’s Board of Directors. Several securities class action lawsuits were filed against us following our announcement on May 10, 2022 of the AFC’s internal investigation. We may face additional litigation and regulatory examinations, investigations, proceedings or court orders, including additional cease and desist orders, the suspension of trading of our securities, delisting of our securities, the assessment of civil monetary penalties and other equitable remedies. Our management has devoted and may be required to further devote significant time and attention to these matters. If any of these matters are resolved against us, it could harm our reputation, business, financial condition and results of operations. Additionally, while we cannot estimate our potential exposure to these matters at this time, we have already expended a significant amount of time and resources investigating and defending against the claims underlying these matters and expect to continue to do so. Accordingly, the ongoing SEC investigation and any related litigation could distract management and entail risks and uncertainties, the outcome of which could adversely affect our results of operations and our reputation. For further information, see Note 21, Commitments and Contingencies, discussing the securities class action lawsuits, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
We may be unable to obtain necessary product approvals and marketing clearances.
We must obtain certain approvals and marketing clearances from, governmental authorities, including the FDA and similar health authorities in foreign countries to market and sell select products in those countries. These agencies regulate the marketing, manufacturing, labeling, packaging, advertising, sales and distribution of medical devices. The FDA enforces additional regulations regarding the safety of X-ray emitting devices. Various U.S. states also impose manufacturing, licensing, and distribution regulations.
The FDA review process for new medical devices typically requires extended proceedings pertaining to the safety and efficacy of new products. A 510(k) application is required to market certain classes of new or modified medical devices. If specifically required by the FDA, a pre-market approval, or PMA, may be necessary. Such proceedings are potentially expensive and time consuming and may hinder a product’s entry into the marketplace. Moreover, there can be no assurance that the review or approval process for these products by the FDA or any other governmental authority will occur in a timely fashion, if at all, or that additional regulations will not be adopted or current regulations amended in a manner that will adversely affect us. The FDA also oversees the content of advertising and marketing materials relating to medical devices that received FDA clearance. Failure to comply with the FDA’s advertising guidelines may result in the imposition of penalties, enforcement actions, or import bans, and other negative consequences.
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We are also subject to other federal, state, and local laws, regulations and recommendations relating to safe working conditions, and to laboratory and manufacturing practices. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted, and inadequate employee training may result in the failure to adhere to applicable laws, rules, and regulations.
Similar to the FDA review process, the EU review process typically requires extended proceedings on the safety and efficacy of new products. Such proceedings are potentially expensive and time consuming and may hinder a product’s entry into the marketplace.
Our products that fall into the category of Class I under the EU MDD were mandated to be certified under the EU MDR. These regulations applied to all medical device manufacturers who market their medical devices in the EU, and manufacturers were required to perform significant upgrades to quality systems and processes On March 20, 2023, the EU Commission extended the MDR transitional periods until December 31, 2027 for higher risk devices and until December 31, 2028 for other medical devices. We remain focused on ensuring that all our medical device products will be fully certified by the deadlines. Additionally, given the exit of the UK from the EU, the EU CE marking will be recognized in the UK through the earlier of the expiration of the product’s CE certificate or June 2028. After such date, the UK may impose its own differing regulatory requirements for products imported from the EU.
Failure to comply with these rules, regulations, self-regulatory codes, circulars, and orders could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse impact on our business. Also, these regulations may be interpreted in a manner that requires us to make changes in operations or incur substantial defense expenses. Even unsuccessful challenges by regulatory authorities or private regulators could result in reputational harm and the incurring of substantial costs.
Changes in tax rules or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations and tax investigations, audits or other proceedings that we are subject to may harm our business, financial condition and results of operations, including by adversely affecting our effective tax rate.
As a company with global operations, we are subject to income and non-income-based taxes around the world. Significant judgment is required in determining our worldwide tax liabilities. Although we believe our estimates are reasonable at the time made, the actual outcome could differ materially from the amounts recorded in our financial statements. The Company has significant tax positions in a variety of countries including the United States and Germany. If the U.S. Internal Revenue Service (the “IRS”) or other tax authorities disagree with our tax positions, we could have additional tax liability, which may have a material impact on our results of operations and financial position. Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations, and changes in interpretations of tax laws.
Certain governments are considering, and may adopt, tax reform measures that could significantly increase our worldwide tax liabilities. The Organisation for Economic Co-operation and Development (“OECD”) and other government bodies have focused on the taxation of multi-national corporations, including in the area of “base erosion and profit shifting,” where payments are made from affiliates in jurisdictions with high tax rates to affiliates in jurisdictions with lower rates. Some of these proposals include a two-pillar approach to global taxation, focusing on global profit allocation and a global minimum tax rate (“Pillar Two”). On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, which became effective as of January 2024. Other countries have made, or are actively considering, changes to their tax laws to adopt certain parts of the OECD’s proposals. Due to the large scale of our global business activities, the enactment of Pillar Two legislation could increase tax uncertainty and have a material effect on the Company’s effective tax rate, financial position, results of operations, and cash flows.
The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.
German tax authorities are currently performing a criminal investigation related to a series of intercompany loans from 2016 and 2017 (the “German Tax Investigation”). As of the date of this filing, there have been no charges against the Company or current or former employees. Potential outcomes of the German Tax Investigation involve a number of uncertainties, including those relating to the application of tax law and regulations, and there can be no assurance that the German Tax Investigation will be resolved favorably. Our management has devoted and may be required to further devote significant time
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and attention to the German Tax Investigation. If the German Tax Investigation is resolved against us, it could harm our reputation, business, ability to attract talent, particularly professionals with backgrounds in international tax and tax accounting, financial condition and results of operations. Additionally, while we cannot estimate our potential exposure at this time, we have already expended a significant amount of time and resources investigating and supporting requests for information from German tax authorities, and we expect to continue to do so. Accordingly, this investigation and any related litigation could distract management and entail risks and uncertainties, the outcome of which could adversely affect our results of operations and our reputation. For further information regarding the German Tax Investigation, see Note 21, Commitments and Contingencies, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
We voluntarily suspended the sale and marketing of our direct-to-consumer Byte aligner systems and impression kits, and subsequently determined to cease offering these aligners to new patients while repurposing Byte technologies and capabilities to support other products within our aligner portfolio. As a result, we have experienced a material impact on our results of operations, and we may be required to take additional significant impairment charges if we are unsuccessful in our efforts to reposition Byte.
On October 24, 2024, we announced the voluntary suspension of the sale and marketing of our direct-to-consumer Byte aligner systems and impression kits. In January 2025, we announced that Byte aligners would no longer be offered to new patients, and we now plan 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.
The initial suspension and subsequent decisions regarding Byte products has had a material impact on our results of operations. The sales of Byte aligner systems and impression kits represented approximately 3% of our annual revenue for the year ended December 31, 2024, and the assets related to the Byte aligner business are approximately 1% of the Company’s assets as of December 31, 2024. We also incurred charges relating to customer refunds and asset write-offs. For further information, see Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
There is no guarantee that we will be successful in our endeavor to leverage Byte technologies and capabilities in a manner that is accretive to sales and profit. If we are unsuccessful in these efforts, we may be required to incur additional significant impairment charges.
In addition, although we have not accepted any new patients since October 24, 2024, we will continue to provide support for non-contraindicated Byte aligner patients currently undergoing treatment. With respect to these patients, we continue to experience regulatory uncertainties. For example, some state legislatures have passed legislation and other state legislatures have proposed legislation designed to preclude or significantly limit teledentistry, and various state legislatures are continuing to consider such legislation. Furthermore, our ability to conduct business in each state is dependent, in part, upon that state dental board’s regulation of the practice of dentistry. Some state dental boards established rules in a manner that purports to limit or restrict our Byte business, which currently focuses on the provision of Byte aligners to certain existing patients. It is possible that the laws, rules and regulations governing the practice of dentistry and orthodontics in one or more states may change or be interpreted in a manner unfavorable to our business. If adverse laws or regulations are adopted or any such claims are successful, and we were unable to adapt our business model accordingly, our current operations in such states would be disrupted, which could have a material adverse effect on our business, financial condition, and results of operations.
Inadequate levels of reimbursement from governmental or other third-party payors for procedures using our products may cause our revenue to decline.
Third-party payors, including government health administration authorities, private health care insurers and other organizations, regulate the reimbursement of fees related to certain diagnostic procedures or medical treatments. Third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. While we cannot predict what effect the policies of government entities and other third-party payors will have on future sales of our products, there can be no assurance that such policies would not cause our revenue to decline.
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Challenges may be asserted against our products due to real or perceived quality, health or environmental issues.
We manufacture and sell a wide portfolio of dental and medical device products. While we endeavor to ensure that our products are safe and effective, there may be challenges from time to time regarding the quality, health or environmental impact of our products or certain raw material components. Adverse publicity about the quality or safety of our products may have an adverse effect on our brand, reputation and operating results. Legal and regulatory developments in this area may lead to litigation and/or product limitations or discontinuation.
We manufacture and sell dental filling materials that may contain bisphenol-A, commonly called BPA. BPA is found in many everyday items, such as plastic bottles, foods, detergents, and toys, and may be found in certain dental composite materials or sealants either as a by-product of other ingredients that have degraded, or as a trace material left over from the manufacture of other ingredients used in such composites or sealants. The FDA currently allows the use of BPA in dental materials, medical devices, and food packaging. Nevertheless, public reports and concerns regarding the potential hazards of BPA could contribute to a perceived safety risk for our products that contain BPA or other substances.
If we fail to comply with laws and regulations relating to health care fraud, we could suffer penalties or be required to make significant changes to our operations, which could adversely affect our business.
We are subject to federal, state, local and foreign laws, rules, regulations, self-regulatory codes, circulars, and orders relating to health care fraud (“Healthcare Fraud Laws”). Some of these laws, referred to as “false claims laws,” prohibit the submission, or causing the submission, of false or fraudulent claims for reimbursement to health care payors and programs. Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving, or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are paid for by health care payors and programs.
The U.S. government has expressed concerns about financial relationships between suppliers and physicians and dentists. Under the reporting and disclosure obligations of the U.S. Physician Payment Sunshine Act and similar Healthcare Fraud Laws, the general public and government officials will be provided with access to detailed information with regard to payments or other transfers of value to certain practitioners (including physicians, dentists and teaching hospitals) by applicable drug and device manufacturers, including us. This information may lead to greater scrutiny, which may result in modifications to established practices and additional costs.
Failure to comply with Healthcare Fraud Laws could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in governmental health care programs, and could have a material adverse impact on our business. Also, these laws may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs. In addition, many of these laws are vague or indefinite and have not been interpreted by courts, and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing compliance risks.
We cannot predict whether changes in Healthcare Fraud Laws, or the interpretation thereof, or changes in our services or practices in response, could adversely affect our business.
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Our business is subject to extensive, complex, and changing domestic and foreign laws, rules, regulations, self-regulatory codes, directives, circulars and orders which, if not complied with, subject us to civil or criminal penalties or other liabilities.
We are subject to extensive domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders which are administered by various international, federal and state governmental authorities, including, among others, the FDA, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), the U.S. Federal Trade Commission, the U.S. Department of Justice, the Environmental Protection Agency (“EPA”), and other similar domestic and foreign authorities. These laws, rules, regulations, self-regulatory codes, circulars and orders include, but are not limited to, the U.S. Food, Drug and Cosmetic Act, the EU MDD (and implementing and local measures adopted thereunder), the Federal Health Information Technology for Economic and Clinical Health Act (“HITECH Act”), the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), France’s Data Protection Act of 1978 (rev. 2004), the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.S. Federal Anti-Kickback Statute and similar international anti-bribery and anti-corruption laws, the Physician Payments Sunshine Act, regulations concerning the supply of conflict minerals, various and increasingly fragmented environmental regulations, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Health Care Reform Law”), regulations relating to trade, import and export controls and economic sanctions, and regulations relating to cybersecurity, including the EU’s Network and Information Security Directives, the EU’s Artificial Intelligence Act, and China’s Personal Information Protection Law. Such laws, rules, regulations, self-regulatory codes, circulars and orders (“Applicable Laws”) are complex and are subject to change.
The FCPA generally prohibits companies and their affiliates from making improper payment to non-U.S. officials for the purpose of obtaining or retaining business, and also includes books and records and internal accounting controls requirements. Our internal policies, procedures and Code of Ethics and Business Conduct mandate compliance with these anti-corruption laws. However, we operate in some countries known to experience corruption. Despite our training and compliance programs, we cannot provide assurance that our internal policies and procedures will always protect us from violations of such anti-corruption laws committed by our employees or affiliated entities or their respective officers, directors, employees and agents. Failure to comply with the FCPA and other laws governing the conduct of business with government entities, may subject us to criminal and civil penalties and other remedial measures, which could have a material adverse impact on our business, financial condition, results of operations and liquidity. Any ongoing investigation of potential violations of the FCPA or other anti-corruption laws by the United States or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations.
Compliance with numerous applicable existing and new Applicable Laws could require us to incur substantial regulatory compliance costs. For example, we are currently in the process of implementing enhancements to our post-market surveillance processes and reportability criteria, which has resulted in an increase in the number of regulatory reports that we have filed, including retrospective reports, for complaints regarding medical devices. There can be no assurance that governmental authorities will not raise compliance concerns or perform audits to confirm compliance with such Applicable Laws. For example, most of our products are classified as medical devices or pharmaceuticals, which are subject to extensive regulations globally, including the requirement to obtain licenses for the manufacture or distribution of such products. Failure to comply with Applicable Laws could result in a range of governmental enforcement actions, including fines or penalties, injunctions and/or criminal or other civil proceedings. Any such actions could result in higher than anticipated costs or lower than anticipated revenue and could have a material adverse effect on our reputation, business, financial condition and results of operations.
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RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
The market price for our common stock may continue to be volatile as a result of a number of factors, including our quarterly operating results.
We may experience significant fluctuations in quarterly sales and earnings due to several factors, some of which are substantially outside of our control, including but not limited to:
•general economic conditions, as well as those specific to the healthcare industry and related industries;
•changes in income tax laws and incentives that could create adverse tax consequences;
•the execution of restructuring plans;
•the complexity of our organization;
•our ability to supply products to meet customer demand;
•the timing of new product introductions by us and our competitors;
•the timing of industry trade shows;
•changes in customer inventory levels;
•developments in government or third-party payor reimbursement policies;
•changes in customer preferences and product mix;
•fluctuations in manufacturing costs;
•competitors’ sales promotions; and
•fluctuations in currency exchange rates.
As a result, we may fail to meet the expectations of investors and securities analysts, which could cause our stock price to decline.
Certain provisions in our governing documents, and of Delaware law, may make it more difficult for a third party to acquire us.
Certain provisions of our Certificate of Incorporation and By-laws and of Delaware law could have the effect of making it difficult for a third party to acquire a controlling interest in us. Such provisions include, among others, a provision allowing the Board of Directors to issue preferred stock having rights senior to those of our common stock and certain requirements which make it difficult for stockholders to amend our By-laws and prevent them from calling special meetings of stockholders. Delaware law imposes some restrictions on mergers and other business combinations between us and any “interested stockholder” with beneficial ownership of 15% or more of our outstanding common stock.
GENERAL RISKS
Our business may be adversely affected by changes in global economic conditions, including inflation, rising interest rates, and supply chain shortages.