GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

The Company’s policy is to assess goodwill and indefinite-lived intangible assets for impairment annually as of April 1, with more frequent assessments if events or changes in circumstances indicate an asset might be impaired. Impairment charges are recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

Impairment during the Three Months Ended March 31, 2024

In the three months ended March 31, 2024, the Company 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 were 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, the Company recorded an indefinite-lived intangible asset impairment charge of $6 million for the three months ended March 31, 2024.

Impairment during the Three Months Ended September 30, 2024

The Company identified indicators of a more likely than not impairment in the three months ended September 30, 2024 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.

Impairment during the Three Months Ended December 31, 2024

In the quarter ended December 31, 2024, the Company identified indicators of a more likely than not impairment for its Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment. The decline in fair value of this reporting unit was driven by a weaker trend in sales volumes, particularly in North America, increased competition from lower-priced alternatives impacting global markets, and adverse macroeconomic pressures impacting demand for elective dental procedures and premium implant solutions. These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. The fair value of the Implant & Prosthetic Solutions reporting unit was computed using a discounted cash flow model with inputs developed using both internal and market-based data. The discounted cash flow model uses ten-year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate. Significant assumptions used in the discounted cash flow model included, but were not limited to, the discount rate of 12.5%, revenue growth rates (including perpetual growth rates), operating margin percentages, and net working capital changes of the reporting unit’s business. 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.

Additionally, in the quarter ended December 31, 2024, the Company also identified indicators of more likely than not impairments for certain indefinite-lived intangible assets including trade names and trademarks within the Connected Technology Solutions segment, and certain trade names within the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment. The decline in fair value of the trade names and trademarks was driven by weakened demand for the Company’s premium equipment and implant products, competitive pricing pressures, and a sustained higher cost of capital, which are contributing to reduced forecasted revenues. These indefinite-lived intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty methodology. The Company’s significant assumptions in the relief from royalty method include, but are not limited to, discount rates ranging from 12.5% to 14.5%, revenue growth rates (including perpetual growth rates), and royalty rates. 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.

As a result of suspending sales of Byte clear aligner and impression kits during the fourth quarter, and subsequently announcing plans that the Byte aligners would no longer be offered to new patients, the Company recorded a full write-off of the Byte trademark intangible asset within the Orthodontic and Implant Solutions segment, resulting in a charge of $152 million based on a determination that the trademark will not be used in the future operating model for aligners. The Company plans to continue to use technology associated with approximately $178 million in other intangible assets acquired with the Byte

business, primarily developed technology acquired in the initial purchase of Byte, to support other product offerings and enhance customer experience elsewhere in the Company. See Note 18, Restructuring and Other Costs for additional information.

The remaining goodwill balance of the Implant & Prosthetic Solutions reporting unit was $503 million as of December 31, 2024, and the carrying values of indefinite-lived intangible assets with impairments in the fourth quarter were $76 million and $149 million for the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, as of December 31, 2024. As the fair values of the Implant & Prosthetic Solutions reporting unit and the indefinite-lived assets within the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, continue to approximate carrying value as of December 31, 2024, any further decline in key assumptions could result in additional impairments in future periods.

Based on quantitative and qualitative analyses performed for the other reporting units and the Company’s other indefinite-lived intangible assets, the Company believes there is no indication that the carrying value more likely than not exceeds the fair value in each case as of December 31, 2024. For the Company’s reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis by increasing the discount rate of these reporting units by 50 basis points. The results of this sensitivity analysis at December 31, 2024 indicate that none of the other reporting units would be impaired.

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, actual financial results that are lower than forecasts, an adverse change 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 the Company’s future asset impairment testing will not result in a material charge to earnings.

2023 Goodwill and Indefinite-Lived Intangibles Impairment and Testing

In the quarter ended September 30, 2023, the Company identified indicators of a more likely than not impairment related to its Connected Technology Solutions reporting unit, which comprises all the Connected Technology Solutions segment. The decline in fair value for this reporting unit was driven by adverse macroeconomic factors because of weakened demand, particularly in European markets, and increased discount rates. These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows in the near term, particularly in relation to demand for products which are commonly financed by end customers and are therefore adversely impacted by an environment of higher interest rates. The reporting unit was evaluated for impairment using an income approach, specifically a discounted cash flow model. As a result, the Company recorded a pre-tax goodwill impairment charge for the three months ended September 30, 2023 related to the Connected Technology Solutions reporting unit of $291 million, resulting in a full write-off of the remaining goodwill balance for the Connected Technology Solutions segment.

Additionally, in conjunction with the third quarter test in 2023, the Company conducted an impairment test on the indefinite-lived intangible assets related to the businesses within the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment. The Company also identified an indicator of impairment for the indefinite-lived intangible assets within the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment and determined certain trade names and trademarks were impaired. These indefinite-lived intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty method. As a result, the Company recorded indefinite-lived intangible asset impairment charges of $14 million and $2 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended September 30, 2023. The impairment charge was primarily driven by macroeconomic factors such as weakened demand, higher cost of capital, and cost inflation, which are contributing to reduced forecasted revenues.

2022 Goodwill and Indefinite-Lived Intangibles Impairment and Testing

In the third and fourth quarters of 2022, the Company identified indicators of a more likely than not impairment related to its former Digital Dental Group and former Equipment & Instruments reporting units within the former Technologies & Equipment segment and certain indefinite-lived intangible assets within these former reporting units as well as the former Consumables reporting unit within the former Consumables segment. The decline in fair value for these reporting units was driven by weakened global demand, higher cost of capital, unfavorable foreign currency impacts, and increased raw material, supply chain, and service costs, which contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. The reporting unit was evaluated for impairment using an income approach, specifically a discounted cash flow model. As a result, the Company recorded a pre-tax goodwill impairment charge related to the former Digital Dental Group and former Equipment & Instruments reporting units within the former Technologies & Equipment segment of $1,100 million and $87 million, respectively, for the three months ended September 30, 2022. This charge was recorded in Goodwill and intangible asset impairment in the Consolidated Statements of Operations. The fair values of intangible assets were computed using either an income approach, specifically a relief from royalty method, or a qualitative assessment. As a result, the Company recorded impairment charges for its indefinite-lived intangible assets of $66 million and $28 million for the former Digital Dental Group and former Equipment & Instruments reporting units, respectively, within the former Technologies & Equipment segment, and a $6 million charge for the former Consumables reporting unit within the former Consumables segment, for the year ended December 31, 2022.

A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:


(in millions)	Connected Technology Solutions		Essential Dental Solutions		Orthodontic and Implant Solutions		Wellspect Healthcare		Total

Balance at December 31, 2023
Goodwill	$	291	$	840	$	1,323	$	275	$	2,729
Accumulated impairment losses	(291)		—		—		—		(291)
Goodwill, net December 31, 2023	$	—	$	840	$	1,323	$	275	$	2,438

Impairment	—		—		(773)		—		(773)
Translation	—		(11)		(47)		(10)		(68)

Balance at December 31, 2024
Goodwill	$	291	$	829	$	1,276	$	265	$	2,661
Accumulated impairment losses	(291)		—		(773)		—		(1,064)
Goodwill, net at December 31, 2024	$	—	$	829	$	503	$	265	$	1,597

Identifiable definite-lived and indefinite-lived intangible assets were as follows:


	Year Ended December 31,
	2024						2023
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Developed technology and patents	$	1,639	$	(1,079)	$	560	$	1,697	$	(1006)	$	691
Trade names and trademarks	79		(73)		6		271		(102)		169
Licensing agreements	29		(28)		1		30		(27)		3
Customer relationships	1,019		(716)		303		1,070		(680)		390
Total definite-lived	$	2,766	$	(1,896)	$	870	$	3,068	$	(1,815)	$	1,253

Indefinite-lived trade names and trademarks	332		—		332		447		—		447
In-process R&D (a)	5		—		5		5		—		5
Total indefinite-lived	337		—		337		452		—		452

Total identifiable intangible assets	$	3,103	$	(1,896)	$	1,207	$	3,520	$	(1,815)	$	1,705

(a) Intangible assets acquired in a business combination that are in-process and used in R&D activities are considered indefinite-lived until the completion or abandonment of the R&D efforts. The useful life and amortization of those assets will be determined once the R&D efforts are completed.

Amortization expense for definite-lived intangible assets for the years ended December 31, 2024, 2023 and 2022 was $216 million, $211 million and $209 million, respectively. The estimated annual amortization expense related to these intangible assets for each of the five succeeding calendar years is $204 million, $132 million, $114 million, $119 million and $120 million for 2025, 2026, 2027, 2028 and 2029, respectively.

During the second quarter of 2021, the Company acquired certain developed technology rights for an initial payment of $3 million. During the fourth quarter of 2024, regulatory and commercial milestones related to the acquisition were achieved, triggering an additional payment of $7 million. As of December 31, 2024, the Company recognized a liability of $10 million for contractual future payments associated with this acquisition that were deemed probable. Both the payment and future obligation were recorded as increases to the developed technology asset for the year ended December 31, 2024.