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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED December 31,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM to Commission File NumberRegistrant;State of Incorporation;Address andTelephone NumberI.R.S.Employer Identification No.001-32871COMCAST CORPORATION27-0000798PennsylvaniaOne Comcast CenterPhiladelphia,PA 19103-2838(215)286-1700SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:Title of Each ClassTrading symbol(s)Name of Each Exchange on Which RegisteredClass A Common Stock,$0.01 par valueCMCSA The Nasdaq Stock Market LLC0.000%Notes due 2026CMCS26The Nasdaq Stock Market LLC0.250%Notes due 2027CMCS27The Nasdaq Stock Market LLC1.500%Notes due 2029CMCS29The Nasdaq Stock Market LLC0.250%Notes due 2029CMCS29AThe Nasdaq Stock Market LLC0.750%Notes due 2032CMCS32The Nasdaq Stock Market LLC3.250%Notes due 2032CMCS32AThe Nasdaq Stock Market LLC1.875%Notes due 2036CMCS36The Nasdaq Stock Market LLC3.550%Notes due 2036CMCS36AThe Nasdaq Stock Market LLC1.250%Notes due 2040CMCS40The Nasdaq Stock Market LLC5.250%Notes due 2040CMCS40AThe Nasdaq Stock Market LLC5.50%Notes due 2029CCGBP29New York Stock Exchange2.0%Exchangeable Subordinated Debentures due 2029CCZNew York Stock ExchangeSECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:NONEIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No 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 No 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 forsuch 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.Yes No 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).Yes No 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 thedefinitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section404(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.Yes No 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 topreviously issued financial statements.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 registrants executiveofficers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of June 30,2024,the aggregate market value of the Comcast Corporation common stock held by non-affiliates of the registrant was$150.621 billion.Indicate the number of shares outstanding of each of the registrants classes of common stock,as of the latest practicable date:As of January 15,2025,there were 3,771,578,226 shares of Comcast Corporation Class A common stock and 9,444,375 shares of Class B common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEComcast Corporation Part III The registrants definitive Proxy Statement for its annual meeting of shareholders.Table of ContentsComcast Corporation2024 Annual Report on Form 10-KTable of ContentsPART IItem 1Business1Item 1ARisk Factors18Item 1BUnresolved Staff Comments25Item 1CCybersecurity26Item 2Properties27Item 3Legal Proceedings27Item 4Mine Safety Disclosures27PART IIItem 5Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities28Item 6Reserved29Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations30Item 7AQuantitative and Qualitative Disclosures About Market Risk54Item 8Comcast Corporation Financial Statements and Supplementary Data56Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure92Item 9AControls and Procedures92Item 9BOther Information92Item 9CDisclosure Regarding Foreign Jurisdictions that Prevent Inspections92PART IIIItem 10Directors,Executive Officers and Corporate Governance93Item 11Executive Compensation93Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters94Item 13Certain Relationships and Related Transactions,and Director Independence94Item 14Principal Accountant Fees and Services94PART IVItem 15Exhibits and Financial Statement Schedules95Item 16Form 10-K Summary98Signatures99Explanatory NoteThis Annual Report on Form 10-K is for the year ended December 31,2024.This Annual Report on Form 10-K modifies and supersedes documents filedbefore it.The U.S Securities and Exchange Commission(“SEC”)allows us to“incorporate by reference”information that we file with it,which means thatwe can disclose important information to you by referring you directly to those documents.Information incorporated by reference is considered to be partof this Annual Report on Form 10-K.In addition,information that we file with the SEC in the future will automatically update and supersede informationcontained in this Annual Report on Form 10-K.Unless indicated otherwise,throughout this Annual Report on Form 10-K,we refer to Comcast and itsconsolidated subsidiaries,as“Comcast,”“we,”“us”and“our.”Table of ContentsThis Annual Report on Form 10-K contains trademarks,service marks and trade names owned by us,as well as those owned by others.Numerical information in this report is presented on a rounded basis using actual amounts.Minor differences in totals and percentage calculations mayexist due to rounding.Table of ContentsPart IItem 1:BusinessWe are a global media and technology company that reaches customers,viewers and guests worldwide through the connectivity and platforms services weprovide and the content and experiences we create.We deliver broadband,wireless,video and voice services primarily under the Xfinity,ComcastBusiness,Sky and NOW brands;produce,distribute and stream leading entertainment,sports and news through brands including NBC,Telemundo,Universal,Peacock and Sky;and own and operate Universal theme parks.We operate two primary businesses:Connectivity&Platforms:Contains our broadband,wireless,video and wireline voice businesses in the United States,United Kingdom andItaly(collectively,the“Connectivity&Platforms markets”).Also includes the operations of our Sky-branded entertainment television networks inthe United Kingdom and Italy.Our Connectivity&Platforms business is reported in two segments,Residential Connectivity&Platforms andBusiness Services Connectivity.Content&Experiences:Contains our media and entertainment businesses that produce and distribute entertainment,sports,news and othercontent for global audiences and that own and operate theme parks and attractions in the United States and Asia.Our Content&Experiencesbusiness is reported in three segments,Media,Studios and Theme Parks.In November 2024,we announced our intention to create a new independent publicly traded company(“SpinCo”)comprised primarily of a strong portfolioof domestic cable television networks currently within our Media segment,including USA Network,E!,Syfy,MSNBC,CNBC,Oxygen and the GolfChannel along with complementary digital assets including Fandango,Rotten Tomatoes,GolfNow and SportsEngine,through a tax-free spin-off(the“Spin-off”).We are targeting to complete the Spin-off by the end of 2025,subject to the satisfaction of customary conditions,including obtaining finalapproval from our Board of Directors,satisfactory completion of SpinCo financings,receipt of tax opinions and receipt of any regulatory approvals.Therecan be no assurance that a separation transaction will occur,or,if one does occur,of its terms or timing.For additional information on our businesses and segments,refer to Item 7:Managements Discussion and Analysis of Financial Condition and Results ofOperations and Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K.Description of Our BusinessesConnectivity&Platforms BusinessResidential Connectivity&Platforms SegmentOur Residential Connectivity&Platforms segment primarily includes:Residential broadband and wireless services(collectively,“Residential Connectivity”)Residential and business video services,Sky-branded entertainment television networks and advertisingWe offer services to customers individually and as bundled services at a discounted rate.Residential ConnectivityBroadbandWe offer broadband services in the United States over our hybrid fiber-optic and coaxial(“HFC”)network,as well as through direct fiber-to-the-premisesconnections for certain customers,and internationally in the United Kingdom and Italy by leveraging networks owned by third-party telecommunicationsproviders.Our domestic broadband offerings have a range of service levels,including up to gigabit-plus downstream speeds that we offer across nearly our entirefootprint.As part of our low-income broadband adoption program,we offer qualifying domestic customers broadband services at discounted rates throughour Internet Essentials and Internet Essentials Plus services,with downstream speeds of up to 75 and 100 megabits per second,respectively.In 2024,webegan offering prepaid domestic broadband services with downstream speeds of up to 200 megabits per second marketed under the NOW brand.We alsooffer monthly access to our network of Wi-Fi hotspots.1Comcast 2024 Annual Report on Form 10-KTable of ContentsWe continue to evolve and enhance our domestic network capabilities,including deploying technology in select markets that will enable us to delivermultigigabit symmetrical broadband speeds(i.e.,comparable upstream and downstream speeds),as described in the Network and Technology discussionbelow.We offer Xumo Stream Box(formerly Flex)devices to our domestic customers.The Xumo Stream Box provides access to and integration of streamingcontent and music from certain internet-based apps,including direct-to-consumer streaming services(“DTC streaming services”)such as Peacock,Disney and Netflix,and certain pay-per-view and video on demand programming that is available over the internet.We also offer certain bundled DTC streamingservices to our broadband customers.We earn commission revenue from the sale of DTC streaming services when sold with our broadband services orthrough our video platforms,including X1 and Sky Q.The map below highlights our domestic network footprint and the markets where we had 250,000 or more domestic residential broadband customers as ofDecember 31,2024.Our international broadband services primarily include fiber-to-the-cabinet offerings,and increasingly fiber-to-the-premises offerings.As part of our domestic and international broadband services,we offer to customers our advanced,proprietary wireless gateways that combine an internetmodem with a Wi-Fi router to deliver reliable internet speeds and enhanced coverage through an in-and-out-of-home Wi-Fi network.In addition,customersmay personalize and manage their Wi-Fi network and connected devices with our mobile apps and online portal.Broadband customers have access to ourexpanding network of secure Wi-Fi hotspots.WirelessWe offer wireless services for wireless handsets,tablets and smart watches(“wireless devices”)to residential customers in the United States and the UnitedKingdom using mobile virtual network operator(“MVNO”)rights.Our domestic wireless services are offered over Verizons wireless network and ourexisting network of secure residential,outdoor and business Wi-Fi hotspots,and are offered initially only as part of our bundled service offerings tocustomers that subscribe to our qualifying broadband services.Wireless customers may activate multiple lines per account.We offer domestic customers services on an unlimited data plan,on shared data plans or pergigabyte of data used.In 2024,we began offering prepaid unlimited data plans marketed under the NOW brand.We offer international customers serviceson various gigabyte plans or an unlimited data plan.Customers may either bring their own device or purchase devices from us with the option to payupfront or finance the purchase interest-free over 24 months for domestic customers and over 24 to 48 months for international customers.Comcast 2024 Annual Report on Form 10-K2Table of ContentsVideoWe offer video services to residential and business customers primarily through our X1 platform in the United States over our network,and through ourSky Q platform internationally in the United Kingdom and Italy using a combination of satellite transmission and broadband connections.X1 and Sky Qare cloud-based platforms that provide integrated search functionality leveraging set-top boxes and voice-activated remote controls.The integrated featuresoperate across content in customers video service packages and content from internet-based streaming services that customers may access in a mannersimilar to our Xumo Stream Box.We offer a range of video packages from basic linear service to full linear service,which typically include free-to-airnetworks and a range of other linear television networks including premium,sports and news networks.Our international video packages also include Sky-branded entertainment television networks that offer entertainment,premium movie and free-to-air programming,as well as Sky Sports networks that arepart of our Media segment.Customers may also subscribe to digital video recorder(“DVR”)services or access our video on demand services withprogramming that is available for no additional cost or to rent or buy digitally.These viewing options are also available through our mobile apps and onlineportals.We also offer DTC streaming services marketed under the NOW brand,with an offering in the United States that launched in 2023.NOW services providevideo content over the internet and do not require a set-top box.Our international NOW service offerings include packages for monthly access toentertainment,sports and movie programming,as well as daily pass options for sports programming.Our domestic NOW TV service is only offered toqualifying residential broadband customers and includes monthly access to a variety of linear television networks;entertainment and movie programming;integrated access to free streaming channels from Xumo Play,NBC and Sky;and access to the ad-supported tier of Peacock.We also offer video services in the United Kingdom and Italy over a broadband connection without the need for a satellite dish.These services have anoperating system similar to Sky Q and are offered to customers through Sky Stream,which leverages a streaming device and Wi-Fi,or to customers thatpurchase our Sky Glass smart televisions.AdvertisingAs part of our distribution agreements with domestic cable networks,we generally receive an allocation of scheduled advertising time that our advertisingbusiness sells,and we also sell advertising on our Sky-branded entertainment television networks and on our digital platforms.We also enter intorepresentation agreements under which we sell advertising on behalf of third parties both domestically and internationally.Additionally,we offertechnology,tools,data-driven services and marketplace solutions to customers in the media industry to facilitate effective engagement of advertisers withtheir target audiences.OtherWe offer residential wireline voice services primarily using interconnected Voice over Internet Protocol(“VoIP”)technology,and we offer residentialsecurity and automation services.We also license our technology platforms to other multichannel video providers and distribute certain of our Sky-brandedentertainment television networks to third-party video service providers.Business Services Connectivity SegmentOur Business Services Connectivity segment consists of our domestic service offerings for small businesses,which include broadband,wireline voice andwireless services,as well as our enterprise solutions offerings for medium-sized customers and larger enterprises.Certain business customers subscribe toour video services,and the associated revenue is included in our Residential Connectivity&Platforms segment.We also have certain business connectivityservice offerings in the United Kingdom.Our domestic broadband offerings have a range of service levels,including fiber-based services that deliver symmetrical speeds ranging up to 100 gigabitsper second.Our small business broadband,wireline voice and wireless service offerings are similar to those provided to our residential customers and also includecloud-based cybersecurity services,wireless backup connectivity,advanced Wi-Fi solutions,video monitoring services and other cloud-based services.Our enterprise solutions offerings also include ethernet network services,which connect multiple locations and provide higher downstream and upstreamspeed options,advanced voice services,and a software-defined networking product.Larger enterprises may also receive support services related to Wi-Finetworks,router management,network security,business continuity risks and other services.These services are primarily provided to Fortune 1000companies and other large enterprises with multiple locations both within and outside of our distribution footprint,where we provide coverage outside ofour service areas through agreements with other companies to use their networks.3Comcast 2024 Annual Report on Form 10-KTable of ContentsNetwork and TechnologyThe segments within our Connectivity&Platforms business use our HFC network in the United States,which we believe is sufficiently flexible andscalable to support our future technology requirements and enables us to continue to grow capacity and capabilities over time.This network provides thetwo-way transmissions required to provide connectivity services and interactive video and entertainment services through our platforms,and consistsprimarily of headends,fiber-optic and coaxial cables owned or leased by us,and equipment such as lasers,routers,switches and content distributionservers.Across nearly our entire domestic footprint,we leverage DOCSIS 3.1 to offer up to gigabit-plus downstream broadband speeds to residential andbusiness customers.We also deploy fiber-to-the-premises with symmetrical speed offerings ranging up to 10 gigabits per second to residential customerswho request that service,subject to local construction constraints,and up to 100 gigabits per second to business customers.We offer domestic wirelessservices using an MVNO agreement that allows us to offer services using Verizons wireless network along with our existing network of Wi-Fi hotspotsacross our network.We continue to evolve and enhance our domestic network capabilities.In connection with a multiyear network transformation plan,in 2022 we beganrolling out downstream speeds of up to 2 gigabits per second to our residential customers,which are now available to approximately 50%of our HFCnetwork footprint.In 2023,we began deploying in select markets DOCSIS 4.0,which enables us to deliver multigigabit symmetrical broadband speedsover our existing HFC network.Additionally,as part of our network evolution,our engineering teams have been virtualizing and automating many corenetwork functions using various technologies to expand capacity,increase operating efficiency,and identify and fix network issues proactively before theyaffect our customers.Our investment in virtualizing the network helps maintain network reliability and operational efficiency regardless of whether weconnect a residence using either fiber or our HFC network.We continue to extend our networks reach to new homes and businesses within our existingservice areas,as well as edging-out to new service areas to expand the number of homes and businesses passed,and a significant portion of new homes andbusinesses passed are connected with fiber.We also partner with local,state and federal agencies when possible to provide services to unserved andunderserved communities leveraging governmental subsidies where available.The components of our domestic network require periodic maintenance and replacement and are primarily located on owned and leased properties,and inlocations under agreements with local public utilities and municipalities.We operate national and regional data centers with equipment that is used toprovide our services,and we maintain network operations centers with equipment necessary to monitor and manage the status of our services and network.Our international services are offered leveraging third-party networks,as well as our own core fiber network for broadband and wireline voice services inthe United Kingdom.The related operating plant and equipment used to provide our video and connectivity services include leased satellite system signalreceiving,encoding and decoding devices,and owned and leased headends and distribution networks,including coaxial,fiber-optic cables and other relatedequipment.For a majority of international customers,our video platform is delivered via one-way digital satellite transmission that uses satellites leasedfrom third parties for the distribution of television networks,augmented by a set-top box and two-way broadband connectivity.We offer broadband andwireline voice services in the United Kingdom and Italy using third-party networks.In many cases,the fee for us to access these networks is on regulatedterms.The ranges of service levels and speeds we offer are dependent upon the capabilities and reach of these third-party networks.We offer wirelessservices in the United Kingdom using a combination of a third-partys network and our own mobile core network.Our Connectivity&Platforms business engineering teams continue to focus on technology initiatives to develop and deploy next-generation media,contentdelivery,content aggregation and streaming platforms that support X1,Sky Q,NOW,Sky Stream,Sky Glass,Xumo and our cloud DVR technology.Theseplatforms are based on our global technology platform and integrate linear television networks,owned and third-party DTC streaming services and otherinternet-based apps,and on demand programming into a unified experience with voice-activated remote control search and interactive features.We alsocontinue to focus on leveraging our own cloud network services to deliver video and advanced search capabilities.Our Connectivity&Platforms businessalso pursues technology initiatives related to broadband and wireless services that leverage our global technology platform.We provide our customers within-and-out-of-home Wi-Fi,the ability to manage their Wi-Fi network and connected home with our mobile apps and online portal,advanced securitytechnology,and other features.ProgrammingTo offer video services,Residential Connectivity&Platforms licenses substantial amounts of linear television programming from third parties and fromour Media segment.The fees associated with these distribution agreements are generally based on the number of subscribers receiving the televisionnetwork programming and a per subscriber fee,although programming expenses for certain television networks are based on a fixed fee.Additionally,certain of our agreements include the rights to offer such programming through multiple delivery platforms,such as through our on demand services,onlineportal,mobile apps,the Xumo Stream Box,and our NOW and NOW TV streaming services.Comcast 2024 Annual Report on Form 10-K4Table of ContentsThe programming on our Sky-branded entertainment television networks includes content licensed from third parties and from our Studios segment,including certain original content.Our most significant agreements for the licensing of film and television entertainment content include exclusive rightswith Paramount,Warner Bros.and our Studios segment.Other Sources of Supply and OperationsWe purchase from a limited number of suppliers a significant amount of customer premise equipment,including wireless gateways and set-top boxes,network equipment,and services to provide our broadband and video services to residential and business customers.We also purchase from a limitednumber of suppliers a significant number of wireless devices.We use a limited number of vendors to provide customer billing for our residential andbusiness customers.Our technical services groups perform various tasks,including installations,plant maintenance and upgrades to our domestic network,and servicing andupgrades of customer premise equipment.The service vehicles used by our technical services groups are primarily owned.Our customer service teamsprovide primarily 24/7 call-answering capability and other services,and also offer our services to residential and business customers.CompetitionResidential Connectivity&PlatformsBroadbandWe compete with a number of companies,many with significant financial resources,that offer internet services,including:wireline telecommunications companieswireless telecommunications companiesmunicipal broadband networks and power companiessatellite broadband providersCertain wireline telecommunications companies,such as AT&T,Frontier,Lumen and Verizon in the United States and BT and Virgin Media O2 in theUnited Kingdom,have built and are continuing to build fiber-based wireline network infrastructure further into their networks,which enables them toprovide data transmission speeds that exceed those that can be provided with traditional copper digital subscriber line(“DSL”)technology,and are offeringservices with these higher speeds in many of our service areas.Certain companies that offer DSL service have increased data transmission speeds,loweredprices or created bundled services to compete with our broadband services.Various wireless companies are offering internet services using a variety of technologies,including 5G fixed wireless networks and 4G and 5G wirelessbroadband services.These networks work with devices such as smartphones,laptops,tablets,and mobile and fixed wireless routers,as well as wireless datacards.Other companies and municipalities have launched fiber-based or newer satellite-based broadband technologies that provide services in certain areas inwhich we operate.Domestic broadband-deployment funding initiatives at the federal and state levels may result in other service providers deploying subsidized internetaccess within our footprint.The availability of these and other offerings could negatively impact the demand for our domestic broadband services.WirelessWe compete with national and regional wireless service providers in the United States,including AT&T,T-Mobile and Verizon,and wireless serviceproviders in the United Kingdom that offer wireless service on both a stand-alone basis and with other services as bundled offerings.VideoWe compete with a number of companies offering video services in the Connectivity&Platforms markets,including:DTC streaming service providers and aggregators,including:subscription-based services,such as Disney and Netflix,that offer online services that enable internet streaming and downloading ofmovies,television shows and other video programmingvirtual multichannel video providers,such as Hulu Live TV and YouTube TV,that offer streamed linear television networksfree ad-supported television services5Comcast 2024 Annual Report on Form 10-KTable of Contentscompanies that offer streaming devices that access and integrate streaming contentdirect broadcast satellite(“DBS”)providers that transmit satellite signals to substantially all households in the Connectivity&Platforms marketsto provide video programming and other information similar to our video servicescompanies that have built and continue to build fiber-based networks that provide video services similar to ours and provide bundled offerings thatinclude wireless and/or broadband servicesother providers that build and operate communications systems and services in the same areas that we serve,including traditional providers oflinear television programminga broad array of other online content providers,such as social networking platforms and user-generated content providersother companies,such as broadcast television stations,that provide multiple free-to-air networksSimilar to the competitive environment in our Media segment,our Sky-branded entertainment television networks compete for the distribution of ourtelevision network programming to third-party video service providers and for viewers attention and audience share.AdvertisingWe compete for the sale of advertising with digital properties,including an increasing number of ad-supported DTC streaming service providers and otheronline content providers,such as social networking platforms and user-generated content providers,as well as with television networks and stations,and allother advertising platforms.Similar to the competitive environment in our Media segment,the willingness of advertisers to purchase advertising from usmay be adversely affected by declines in audience ratings and television viewership,difficulty in measuring fragmented audiences and the increasingnumber of entertainment choices available.Our advertising is sold to local,regional and national advertisers,and competition is affected by the marketconditions in the specific geographic locations in which we operate.We also compete with companies offering technology,tools and other services tocustomers in the media industry.Business Services ConnectivityBusiness Services Connectivity primarily competes with wireline telecommunications companies and wide area network managed service providers.Competition for our connectivity services for small business customers is generally similar to the Residential Connectivity&Platforms segment.Wecompete for the sale of enterprise solutions offerings primarily with wide area network managed service providers,cloud-based application serviceproviders and other telecommunication carriers.Seasonality and CyclicalityResults in our Residential Connectivity&Platforms segment are impacted by the seasonal nature of residential customers receiving our services,includingin college and vacation markets in the United States,and by the timing of the European football seasons in our international markets,which generally resultin negative impacts to net customer relationship additions/(losses)in the second quarter of each year.Similar to seasonal and cyclical variations in our Media segment,advertising revenue is subject to cyclical patterns and changes in viewership levels,driven by timing of the winter holiday season,political campaigns,sports seasons and when programming is aired.Content&Experiences BusinessMedia SegmentWe operate our Media segment as a combined television and streaming business,which primarily includes:NBCUniversals national and regional cable networksNBC and Telemundo broadcast networks and owned local broadcast television stationsPeacock DTC streaming serviceInternational television networks,including Sky Sports networks in the United Kingdom and ItalyWe distribute a wide variety of programming on our linear television networks and streaming services to appeal to consumers with varying preferencesacross demographics and geographic areas.Comcast 2024 Annual Report on Form 10-K6Table of ContentsRevenue is primarily generated from the sale of advertising and from the distribution of our television and streaming programming.We sell advertising on our linear television networks,Peacock and other digital properties.Our advertising sales are affected by the prices we charge foreach advertising unit,which are generally based on the size and demographics of our viewing audiences,audience ratings on our television networks,thenumber of advertising units we can place in our programming and on our digital properties,and our ability to sell advertising across our television andstreaming business.We receive fees from the distribution of our television networks to traditional multichannel video providers,such as our Residential Connectivity&Platforms segment,and virtual multichannel video providers that offer streamed linear television networks.Our distribution agreements are generallymultiyear,with revenue based on the number of subscribers receiving the programming on our television networks and a per subscriber fee,althoughrevenue for certain of our television networks is based on a fixed fee.These fees include amounts for our owned television networks,including under NBCand Telemundo retransmission consent agreements,as well as associated fees from NBC-affiliated and Telemundo-affiliated local broadcast televisionstations.We also receive monthly retail or wholesale subscription fees for Peacock.We also generate revenue from the licensing of our owned content and technology and from various digital properties.Domestic Cable NetworksWe operate a diversified portfolio of cable networks operating predominantly in the United States.The table below presents a summary of NBCUniversalsnational cable networks and their advertising reach to U.S.households.Cable NetworkApproximate U.S.Households as ofDecember 31,2024(in millions)Description of ProgrammingUSA Network66 General entertainment and sportsE!65 Entertainment and pop cultureSyfy65 Genre-based entertainmentMSNBC65 News,political commentary and informationBravo65 Lifestyle entertainmentCNBC64 Business and financial newsOxygen62 True crimeGolf Channel54 Golf competition and golf entertainmentUniversal Kids43 Childrens entertainmentUniverso16 Spanish-language entertainmentCNBC World16 Global financial news(a)Household data is based on information from The Nielsen Company as of December 31,2024 using its Cable Coverage Universe Estimates report and dynamic ad insertion estimates.TheNielsen estimates include subscribers to both traditional and certain virtual multichannel video providers.The Nielsen estimates are not based on information provided by us and are includedsolely to enable comparisons between our cable networks and those operated by our peers.Our regional sports networks serve approximately 11 million households across the United States,including in markets such as Boston,Philadelphia,Sacramento and San Francisco.Domestic Broadcast NetworksNBCThe NBC network features original entertainment,news and sports programming that reaches viewers in virtually all U.S.television households throughmore than 200 affiliated stations across the United States,including our 11 owned NBC local broadcast television stations.The NBC owned local broadcasttelevision stations include stations in 8 of the top 10 general markets and collectively reached approximately 35 million U.S.television households as ofDecember 31,2024,representing approximately 28%of U.S.television households.In addition to broadcasting the NBC networks national programming,local broadcast television stations deliver local news,weather,and investigative and consumer reporting.(a)7Comcast 2024 Annual Report on Form 10-KTable of ContentsTelemundoThe Telemundo network,a Spanish-language broadcast network,features original entertainment,news,live specials and sports programming that reachesviewers in over 96%of all U.S.Hispanic television households through 122 affiliated stations,including our 30 owned Telemundo local broadcasttelevision stations,and our national feed.The Telemundo owned local broadcast television stations include stations in all of the top 20 U.S.Hispanicmarkets and collectively reached approximately 71%of U.S.Hispanic television households as of December 31,2024.In addition to broadcasting theTelemundo networks national programming,local broadcast television stations deliver local news,weather,and investigative and consumer reporting.Wealso own an independent Telemundo station serving the Puerto Rico television market.PeacockPeacock is our DTC streaming service,featuring NBCUniversal and third-party content.Programming choices include exclusive Peacock originals,currentNBC,Bravo and Telemundo shows,news,late-night comedy,live sports and a library of television shows and movies,as well as several live channels.Theservice is available on internet-connected devices and offered through two subscription-based tiers:an ad-supported tier and a tier featuring the samecontent ad-free,with certain limited exceptions.The ad-free tier also allows customers to download and watch select programming offline and providescustomers with a live stream of their local NBC affiliate stations.We offer Peacock in the United States directly to customers or through arrangements withthird parties and our Residential Connectivity&Platforms segment,which offer Peacock to customers on our behalf.International NetworksWe operate a diversified portfolio of international television networks,including premium sports networks under the Sky Sports brand in the UnitedKingdom and Italy,with a majority of networks dedicated to a specific sport,such as European football.We also operate several NBCUniversalinternational television networks globally,including CNBC International,Studio Universal,Telemundo International and Universal TV.ProgrammingOur television networks and Peacock include content licensed from our Studios segment and from third parties,as well as content produced by Mediasegment businesses,such as live news and sports programming and certain original content,including late-night comedy for NBC and original telenovelasfor Telemundo.We have various multiyear agreements for the licensing of content,including contracts related to television and/or streaming rights for sporting events.Wegenerally seek to include in our sports rights agreements the rights to distribute content on one or more of our television networks and on digital properties,including Peacock.Our most significant sports rights agreements relate to the NBA,NFL,Olympics and English Premier League.The table below presents a summary ofthese and certain other sports rights:Television and/or Streaming RightsMarketRights ExpirationNBA and WNBAUnited States,United Kingdom and Italy2035-36 NBA season and 2036WNBA seasonNFLUnited States2033-34 seasonSummer and Winter Olympic GamesUnited States2032English Premier LeagueUnited Kingdom,Italy and United States2028-29,2027-28 and 2027-28seasons,respectivelyPGA Tour and other golf eventsUnited StatesBetween 2026 and 2031NASCARUnited States2031Big Ten football and basketballUnited States2029-30 seasonWorld Wrestling Entertainment(“WWE”)United States2029 on television and 2026 onPeacockFormula OneUnited Kingdom and Italy2029 and 2027,respectivelyEngland and Wales Cricket BoardUnited Kingdom2028English Football LeagueUnited Kingdom2028-29 seasonSerie AItaly2028-29 seasonFIFA World Cup(Spanish-language)United States2026Certain professional sports teams through our RegionalSports NetworksCertain regions in the United StatesBetween 2027 and 2040(a)(b)(c)Comcast 2024 Annual Report on Form 10-K8Table of Contents(a)Beginning with the 2025-26 NBA season and 2026 WNBA season,includes the rights to produce and distribute across our networks and on Peacock a specified number of NBA and WNBAregular season and playoff games,the NBA All-Star game and NBA All-Star Saturday Night each season,as well as six NBA Conference Finals series and three WNBA Finals series overthe term of the agreements.A certain number of NBA games will also be distributed in the Spanish language on Telemundo.(b)Includes the rights to produce and distribute on NBC and on Peacock a specified number of regular season games that includes Sunday Night Football games,Thursday Kickoff games andThanksgiving night games,playoff games,and three remaining Super Bowl games,the next of which is in February 2026.The agreement expires after the 2033-34 season,with a terminationright available to the NFL after the 2029-30 season.The agreement also includes rights to additional exclusive games on Peacock.All of the NFL games are also distributed in the Spanishlanguage on Universo or Telemundo.(c)Includes the unilateral right by the other party(i.e.,the licensor)to the agreement,under certain circumstances,to shorten the term of the agreement by one year.Our television and streaming business competes for the acquisition of content,including sports rights,and for on-air and creative talent primarily with othertelevision networks,DTC streaming providers,and local broadcast television stations.In Europe,major sports rights,which are significant to ourinternational networks,are usually tendered through a competitive auction process,with the winning bidder or bidders acquiring rights over a 3 to 5 yearperiod.Studios SegmentOur Studios segment primarily includes our NBCUniversal and Sky film and television studio production and distribution operations.Our studioproduction facilities primarily include our owned Universal City location in Los Angeles,California and our leased studios in Atlanta,Georgia and inElstree,United Kingdom.Revenue is generated primarily from the worldwide licensing of our owned film and television content and from the worldwidedistribution of our produced and acquired films for exhibition in movie theaters.We also generate revenue from the sale of physical and digital homeentertainment products,as well as the production and licensing of live stage plays and the distribution of content produced by third parties.Film StudiosOur film studios develop,produce,acquire,market and distribute filmed entertainment worldwide.Our films are produced primarily under the followingnames:Universal PicturesIlluminationDreamWorks AnimationFocus FeaturesWorking TitleWe distribute the majority of our films initially for exhibition in movie theaters,while other films are initially distributed through licensing agreements.After their initial release,we distribute films globally to different customers over multiple licensing windows.We license films,including recent films andselections from our film library,which is comprised of more than 6,500 movies in a variety of genres,to linear television networks and DTC streamingservice providers,and to video on demand services provided by multichannel video providers.This includes licenses to our Media and ResidentialConnectivity&Platforms segments.Certain films are also licensed to our Media segment and made available for viewing on Peacock on the same date asthe theatrical release.We also distribute films globally through the sale of physical and digital home entertainment products.Additionally,we acquiredistribution rights to films produced by third parties,which may be limited to particular geographic regions,specific forms of media or certain periods oftime.Theatrical revenue is significantly affected by the timing of each release and the number of films we distribute,their acceptance by audiences,thenumber of exhibition screens,ticket prices,the percentage of ticket sales retention by the exhibitors and the popularity of competing films at the time ourfilms are released.The success of a film in movie theaters is generally a significant factor in determining the revenue a film is likely to generate insucceeding licensing windows and through physical and digital home entertainment product sales.We develop and produce films both alone and jointly with other studios or production companies.In certain cases,we have also entered into film co-financing arrangements with third party studios and non-studio entities to jointly finance or distribute certain of our film productions.These arrangementscan take various forms,but in most cases involve the grant of an economic interest in a film to an investor.Investors generally assume the full risks andrewards of ownership proportionate to their ownership in the film.In connection with film studio productions,we typically owe“residuals”payments to individuals hired under collective bargaining agreements,which aregenerally calculated based on post-theatrical or content licensing revenue.We also typically owe“participations”payments to creative talent,to thirdparties under co-financing agreements and to other parties involved in content production,which are generally based on the financial performance of thecontent.9Comcast 2024 Annual Report on Form 10-KTable of ContentsTelevision StudiosOur television studios develop,produce and distribute original content,including scripted and unscripted television series.We also produce televisioncontent jointly as co-producers with third-party studios and production companies.Our television studios produce content primarily under the followingnames:Universal TelevisionUniversal Content ProductionsUniversal Television Alternative StudioUniversal International StudiosSky StudiosOur original content is primarily initially licensed to linear television networks and DTC streaming service providers,including those in our Media andResidential Connectivity&Platforms segments.We also license content after its initial airing,license older television content from our television library,and distribute owned and acquired content globally through the sale of physical and digital home entertainment products.The production and distributioncosts related to original broadcast television content generally exceed the revenue generated from the initial license,which means that obtaining additionallicenses following the initial network license is critical to the contents financial success.Similar to our film studios,we typically owe residuals andparticipations payments in connection with television studio productions.Theme Parks SegmentOur Theme Parks segment primarily includes the operations of the following Universal theme parks:Universal Orlando Resort:Includes two theme parks,Universal Studios Florida and Islands of Adventure,and our water park,Volcano Bay,all ofwhich are located in Orlando,Florida.Universal Orlando Resort also includes Universal CityWalk Orlando,a dining,retail and entertainmentcomplex,and features on-site themed hotels in which we own a noncontrolling interest,and will include an additional theme park,Epic Universe,that is expected to open in May 2025.Universal Studios Hollywood:Includes the Universal Studios Hollywood theme park located in Hollywood,California and Universal CityWalkHollywood,a dining,retail and entertainment complex.Universal Studios Japan:Includes the Universal Studios Japan theme park located in Osaka,Japan.Universal Beijing Resort:Includes the Universal Studios Beijing theme park,as well as Universal CityWalk Beijing,a dining,retail andentertainment complex,and on-site themed hotels,all of which are located in Beijing,China.Universal Beijing Resort is owned by us and aconsortium of Chinese state-owned companies(see Note 7 to the consolidated financial statements included in this Annual Report on Form 10-K).Our Theme Parks segment properties are primarily owned by us,although certain properties are leased,including land in Beijing,China and Osaka,Japan.We have invested and will continue to invest significantly in existing and new theme park attractions,hotels and infrastructure,as well as in newdestinations and experiences,such as Epic Universe;Universal Kids Resort,a smaller-scale theme park in Frisco,Texas expected to open in 2026;andUniversal Horror Unleashed,a year-round horror entertainment experience in Las Vegas,Nevada expected to open in 2025.Revenue is generated primarily from guest spending at our theme parks,including ticket sales and in-park spending on food,beverages and merchandise,and from our consumer products business.Revenue for our theme parks generally depends on the overall environment for travel and tourism,includingconsumer spending on leisure and other recreational activities.We also license the right to use the Universal Studios brand name and other intellectual property and provide other services to third parties,including theparty that owns and operates the Universal Studios Singapore theme park on Sentosa Island,Singapore.The themed elements in our rides,attractions,andmerchandising are based on intellectual property in our Studios and Media segments and intellectual property licensed from third parties under long-termagreements.CompetitionMediaOur Media segment competes for viewers attention and audience share with all forms of programming provided to viewers,including DTC streamingservice providers;television networks;local broadcast television stations;physical and digital home entertainment products;video on demand and pay-per-view services;online activities,such as social networking and viewing user-generated content;gaming products;and other forms of entertainment,newsand information.Comcast 2024 Annual Report on Form 10-K10Table of ContentsMedia competes for the sale of advertising with digital properties,including an increasing number of ad-supported DTC streaming service providers andother online content,such as social networking platforms and user-generated content,as well as with other television networks and stations,and all otheradvertising platforms.The willingness of advertisers to purchase advertising from us may be adversely affected by lower audience ratings and viewershipat the related networks,stations or digital properties.Declines in audience ratings can be caused by increased competition for the leisure time of viewersand by audience fragmentation resulting from the increasing number and forms of entertainment choices available.Additionally,it is increasinglychallenging to accurately measure fragmented audiences.Our domestic cable networks and international networks compete primarily with other cable networks and programming providers for carriage bymultichannel video providers and DTC streaming service providers.Our domestic broadcast networks compete with the other broadcast networks inmarkets across the United States to secure affiliations with independently owned local broadcast television stations,which are necessary to ensure theeffective distribution of broadcast network programming to a nationwide audience.Peacock competes for subscribers primarily with other DTC streamingservice providers,as well as with traditional providers of linear television programming.StudiosOur film and television studios compete for audiences with other major film and television studios,independent film producers and creators of content,aswell as with alternative forms of entertainment.The competitive position of our studios primarily depends on the number of films and television series andepisodes produced,their distribution and marketing success,and consumer response.Our studios also compete to obtain creative,performing and technicaltalent,including writers,actors,directors,and producers,as well as scripts for films and television shows,and for the distribution of,and consumer interestin,their content.We also compete with other major film and television studios and other producers of entertainment content for the exhibition of content intheaters,on demand,on television networks,and on DTC streaming services.Theme ParksOur theme parks compete with other multi-park entertainment companies as well as other providers of entertainment,tourism,recreational activities andlodging.The competitive position of our theme parks primarily depends on the quality and popularity of rides and attractions,including effective use ofintellectual property in themed attractions.There is increased competition in areas with high concentrations of theme parks and other attractions operatedby several companies.Macroeconomic conditions and other factors may also result in shifting consumer preferences toward other types of destinations,experiences and products.Seasonality and CyclicalityRevenue and costs and expenses in our Media segment are cyclical as a result of our periodic broadcasts of major sporting events,such as the OlympicGames and the Super Bowl.In particular,advertising revenue increases due to increased demand for advertising time for these events and distributionrevenue increases in the period of broadcasts of the Olympic Games.Costs and expenses also increase as a result of our production costs for thesebroadcasts and the recognition of the related rights fees.Revenue in Media is also subject to cyclical advertising patterns and changes in viewership levels.Domestic advertising revenue is generally higher in thesecond and fourth quarters of each year and in even-numbered years due to increases in advertising in the spring and in the period leading up to andincluding the winter holiday season,and advertising related to candidates running for political office and issue-oriented advertising,respectively.International advertising revenue typically has seasonally higher audience levels in winter months,with lower levels in summer months due to the timing ofEuropean football seasons,winter holidays and summer vacations.Revenue also fluctuates depending on the timing of when our programming is aired,which typically results in additional advertising revenue in the second and fourth quarters of each year.Revenue in Studios fluctuates due to the timing,nature and number of films released in movie theaters,through DTC streaming services and viewing ondemand,and on physical and digital home entertainment products.Release dates are determined by several factors,including competition and the timing ofvacation and holiday periods.As a result,revenue tends to be seasonal,with increases experienced each year during the summer months and around thewinter holiday season.We incur significant marketing expenses before and throughout the release of a film in movie theaters and as a result,we typicallyincur losses on a film prior to and during the films exhibition in movie theaters.Content licensing revenue also fluctuates due to the timing of when ourfilm and television content is made available to licensees.Revenue from our television studios fluctuates in part due to a correlation with the broadcastnetwork season beginning annually in September.Revenue in Theme Parks fluctuates with changes in theme park attendance that typically result from the seasonal nature of vacation travel and weathervariations,local entertainment offerings and the opening of new attractions,as well as with changes in currency exchange rates.Our theme parks generallyexperience peak attendance during the spring holiday period,the summer months when schools are closed and the winter holiday season.11Comcast 2024 Annual Report on Form 10-KTable of ContentsCorporate and OtherOur other business interests reported in Corporate and Other consist primarily of our Sky-branded video services and television networks in Germany,Comcast Spectacor,which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia,Pennsylvania,and Xumo,our consolidatedstreaming platform joint venture with Charter Communications formed in June 2022.Xumo is focused on developing and offering a streaming platform ona variety of devices,including Xumo TV smart televisions,which have an operating system that leverages our global technology platform,and alsooperates the Xumo Play streaming service.Legislation and RegulationOur businesses are subject to various federal,state,local,and international laws and regulations.In the United States in particular,the Communications Actof 1934,as amended(the“Communications Act”),and Federal Communications Commission(“FCC”)rules and regulations affect significant aspects ofour communications businesses.Beyond the more significant regulations summarized below,legislators and regulators at all levels of government frequently consider changing,andsometimes do change,existing statutes,rules or regulations,or interpretations of existing statutes,rules or regulations,or prescribe new ones,any of whichmay significantly affect our businesses and ability to effectively compete.Applying existing laws in novel ways to new technologies,including streamingservices and artificial intelligence(“AI”),may also affect our business.These legislators and regulators,along with some state attorneys general andforeign governmental authorities,have been active in conducting inquiries and reviews regarding our services.State legislative and regulatory initiativescan create a patchwork of different and/or conflicting state requirements,such as with respect to privacy and Open Internet/net neutrality regulations,thatcan affect our businesses and ability to effectively compete.Legislative and regulatory activity has increased in recent years,particularly with respect to broadband networks.For example,Congress has approved tensof billions of dollars in new funding for broadband deployment and adoption initiatives,and may consider other proposals that address communicationsissues,including whether it should rewrite the Communications Act to account for changes in the communications marketplace.Federal agencies haveconsidered adopting new regulations for communications services,including broadband,although it is uncertain whether those initiatives will continueunder the new Administration.States and localities are increasingly proposing new regulations impacting communications services,including broaderregulation of broadband networks.Regulators in various international jurisdictions are similarly considering changes to telecommunications and mediarequirements.Any of these regulations could significantly affect our business and our legal and compliance costs.In addition,United States and foreignregulators and courts could adopt new interpretations of existing competition or antitrust laws or enact new competition or antitrust laws or regulatory toolsthat could negatively impact our businesses.Any future legislative,judicial,regulatory or administrative actions may increase our costs or imposeadditional restrictions on our businesses,some of which may be significant.We are unable to predict the outcome or effects of any of these potential actionsor any other legislative or regulatory proposals on our businesses.The following paragraphs summarize the more significant legal and regulatory requirements and risks affecting our businesses.Communications-Related Regulations in the United StatesBroadbandOur broadband services are subject to a number of regulations and commitments.In 2023,the FCC adopted broad rules that prohibit digital discrimination of access to broadband service based on income level,race,ethnicity,color,religion and national origin;this order currently is subject to legal challenge in federal court.In 2024,the FCC reclassified broadband internet accessservices as a“telecommunications service”subject to traditional common carriage regulation under Title II of the Communications Act.However,a federalappellate court in January 2025 overturned that reclassification,ruling that broadband internet access service is an“information service”under Title I of theCommunications Act and that the FCC does not have authority to subject broadband services to utility-style regulations such as rate regulation and marketentry and exit requirements under Title II.As a Title I“information service,”broadband is only subject to light-touch regulation such as broadbanddisclosure requirements,and deployment,subscription,and pricing reporting requirements.States and localities have in the past enacted and may in thefuture periodically consider new broadband-related regulations,including those regarding government-owned broadband networks,net neutrality andbroadband affordability,which could create a patchwork of,and potentially inconsistent,federal,state and local regulatory regimes.New broadbandregulations,if adopted,may have adverse effects on our businesses,and we cannot predict the outcome of any pending or future litigation or how any ruleswill ultimately be interpreted and enforced and how they might affect our business.Comcast 2024 Annual Report on Form 10-K12Table of ContentsWe,from time to time,participate in broadband-deployment funding initiatives at the federal and state levels and may also become subject to additionalbroadband-related commitments as a condition of receiving federal or state broadband funding.We cannot predict how and to whom any such funds will beawarded,when the initiatives will be terminated or the impact of these initiatives on our businesses.A number of municipalities operate municipally owned broadband networks,and there may be further efforts by local governments to expand or creategovernment-owned networks,particularly in light of federal funding for broadband deployment.Certain states have enacted laws that restrict or prohibitlocal municipalities from operating municipally owned broadband networks,and there may be efforts in other state legislatures to restrict the developmentof government-owned networks.Other states,however,have amended or may amend such laws to facilitate such networks.Much of the federal fundingauthorized for broadband deployment is conditioned on states agreeing to make it available for potential use by government-owned networks,although thefunding prioritizes deployment to unserved and underserved areas and locations.We cannot predict how successful any of those efforts will be and howthey might affect our businesses.Video and MediaWe are subject to laws and regulations that apply to the cable services we provide through our Residential Connectivity&Platforms business and to ourcable networks and local broadcast television stations in our Media business.These laws and regulations can constrain our ability to compete,particularlyagainst DTC streaming service providers,which are not subject to these same requirements.Federal,state and local franchising rules and regulations may require us to provide adequate channel capacity,facilities and financial support for public,educational and governmental access programming;comply with certain renewal procedures for our franchise agreements;pay franchise fees;and complywith customer service,accessibility,and certain other requirements.In addition,the FCC and other federal agencies can impact the programming networksthat we carry,as well as how we price,package,bill and market our video services.FCC regulations also require cable operators to carry programmingtransmitted by certain local broadcast television stations(“must-carry”requirement)or to negotiate a“retransmission consent”agreement with certain otherstations that will frequently involve payments from cable operators to the station;govern program access by preventing cable networks affiliated with cableoperators from favoring affiliated cable operators over competing multichannel video providers;grant licenses to broadcast television stations for 8-yearcycles,which may not be renewed on favorable terms,or at all;limit local and national television ownership,as well as foreign ownership in a broadcasttelevision station;and regulate childrens programming.The FCC enforces these rules on a case-by-case basis based on complaints filed by consumers,state and local governments,and other entities.We havebeen involved in disputes at the FCC in some of these areas and may be involved in new disputes in the future,including potential disputes related tocontent moderation and free speech.We cannot predict the outcome of any such disputes or associated litigation.The FCC and Congress have previouslyconsidered proposals that would require companies that own multiple cable networks to make each of their networks available individually whennegotiating distribution agreements with MVPDs and potentially with DTC streaming and other OTT service providers.We currently offer our cablenetworks on a packaged basis(in“tiers”)and,in various cases,individually.We have been involved in program access disputes at the FCC and may besubject to new complaints in the future.Furthermore,certain states and localities have adopted laws to impose franchise or other fees on DTC streaming services.To date,courts have invalidatedthose laws,but we cannot predict the outcome of any future litigation.WirelessWe offer a wireless voice and data service primarily using our MVNO rights to provide the service over Verizons wireless network.MVNOs are subject tomany of the same FCC regulations as facilities-based wireless carriers,such as E911 services and local number portability,as well as certain state or localregulations.The FCC or other regulatory authorities may adopt new or different regulations for MVNOs and/or mobile broadband providers in the future,which could adversely affect our wireless phone service offering or our business generally.VoiceWe provide voice services using VoIP technology.The FCC has adopted a number of regulations for providers of nontraditional voice services such as ours,including regulations relating to privacy of customer proprietary network information,local number portability duties and benefits,disability access,E911,law enforcement assistance,outage reporting,Universal Service Fund contribution obligations,rural call completion,customer equipment back-up power,robocall mitigation,service discontinuance and certain regulatory filing requirements.State regulatory commissions and legislatures in other jurisdictionsmay continue to consider imposing regulatory requirements on our voice services as long as the regulatory classification of VoIP remains unsettled at thefederal level.13Comcast 2024 Annual Report on Form 10-KTable of ContentsSpectrum AllocationsThe FCC,the Department of Commerces National Telecommunications and Information Administration,and other federal agencies have taken,and insome cases are preparing to take,steps to evaluate and potentially modify certain spectrum allocations and rules to make available additional spectrum thatlikely will be used for licensed and/or unlicensed commercial services,including 5G and Wi-Fi services,which could impact our businesses.We cannotpredict the timing or outcome of these spectrum allocation actions.Additional commercial spectrum could impact current marketplace dynamics,includingthe ability of wireless providers to compete with our services.Further,if the FCC reallocates spectrum that our businesses currently use to provide services,we could be required to transition our operations to different frequencies in order to accommodate the reallocation of spectrum for 5G,which could disruptour services and impose additional costs.International Communications-Related and Other RegulationsCertain of our international businesses are subject to telecommunications and media-specific regulation,including those related to broadband and voiceservices and television networks,in Europe,Latin America,and other international jurisdictions,and all of our international businesses are subject toregulation under generally applicable laws,such as competition,consumer protection,data protection,and taxation in the jurisdictions where they operate.Our international businesses are currently,and may be in the future,subject to proceedings or investigations from regulatory and antitrust authorities in thejurisdictions in which those businesses operate.Other Areas of RegulationIntellectual PropertyCopyright,trademark,unfair competition,patent,trade secret and other proprietary-rights laws of the United States and other countries help protect ourintellectual property rights.In particular,unauthorized copying,distribution and piracy of programming and films over the internet,through devices,software and websites,counterfeit DVDs/Blu-rays and through other platforms interfere with the market for copyrighted works and present challenges forour content businesses.We have actively engaged in the enforcement of our intellectual property rights and likely will continue to expend substantialresources to protect our content.Although many legal protections exist to combat such practices,the extent of copyright protection is sometimesambiguous and the use of technological protections can be controversial.Modifications to existing laws,a weakening of these protections or theirenforcement or a failure of existing laws,in the United States or internationally,to adapt to new technologies could have an adverse effect on our ability tolicense and sell our programming.U.S.copyright laws establish a cable compulsory copyright license that requires our video distribution business to contribute a specified percentage ofrevenue to a federal copyright royalty pool in exchange for retransmitting copyrighted material included in broadcast signals.We also pay standard industrylicensing fees for the public performance of music in the programs we create or distribute.The cable compulsory copyright license and the royalties we payare subject to audits and possible regulatory and legislative changes that could impact the royalty fees we pay and our ability to retransmit broadcast signalsover cable systems.In addition,the landscape for music licensing is constantly changing,and music fees we pay are subject to new fee demands andnegotiations.We cannot predict how changes to the compulsory copyright license and music licensing will impact the fees that we pay.Privacy and Data Protection RegulationOur businesses are subject to laws and regulations that impose various restrictions and obligations related to privacy and the processing of individualspersonal information.In the United States,federal privacy laws and regulations,such as those found within the Communications Act or the Video PrivacyProtection Act,restrict companies collection,use,disclosure and retention of personal information.The proliferation of laws at the state level hasexpanded consumers rights to include individual rights of access,deletion,portability,correction,the right to appeal,and the individuals right to“opt in”to collection and use of certain types of“sensitive”personal information.Internationally,many of the laws that apply to our businesses are similar to theEuropean Unions General Data Protection Regulation and the United Kingdoms Data Protection Act of 2018,which broadly regulate the processing ofpersonal data collected from individuals in the European Union and United Kingdom,respectively.Comcast 2024 Annual Report on Form 10-K14Table of ContentsSome of our businesses are also subject to the FTCs general oversight of consumer privacy protections through its enforcement authority over unfair anddeceptive acts or practices,as well as through its enforcement authority over the Childrens Online Privacy Protection Act.The FTC has sought to expandits authority in this area through various rulemakings related to general privacy,targeted advertising and childrens privacy.There has been an increasedfocus on childrens privacy at both the state and federal levels within the United States,as well as internationally.These new laws may require changes toour products and services and could adversely affect our advertising businesses.In addition,many international data protection laws,some federal laws,and all 50 U.S.states have security breach notification requirements that obligatebusinesses to provide notice to consumers and government agencies if certain information has been accessed or exfiltrated by an unauthorized party;someof these laws also require documented information security programs.State and Local TaxesSome U.S.states and localities have imposed or are considering imposing,through both legislative and administrative channels,new or additional taxes orfees on,or limiting or eliminating incentives or credits earned or monetized by,our businesses,or imposing adverse methodologies by which taxes,fees,incentives or credits are computed,earned or monetized.These include combined reporting or other changes to general business taxes,central assessmentsfor property tax,and taxes and fees on the businesses operated or services provided by our businesses,most notably new taxes or fees on digital advertisingor other digital commerce.In some situations,DBS providers and other competitors(such as DTC streaming service providers)that deliver their servicesover a broadband connection do not face the same state and local tax and fee burdens.Congress has also considered,and may consider again,proposals tobar or limit states from imposing taxes on these DBS providers or other competitors(such as DTC streaming service providers)that are equivalent to thetaxes or fees that we pay.The Internet Tax Freedom Act(“ITFA”)prohibits most states and localities from imposing sales and other taxes on our internetaccess charges and discriminating against electronic commerce;however,some jurisdictions may challenge the ITFA or the application of the ITFA to ourbusiness,or may assert that certain taxes akin to right-of-way fees are not preempted by the ITFA or other federal laws.Other RegulationsU.S.states and localities,and various regulatory authorities,actively regulate other aspects of our businesses,including our Studios and Theme Parksbusinesses,accessibility to our video and voice services and broadcast television programming for people with disabilities,customer service standards,inside wiring,cable equipment,pole attachments,universal service fees,regulatory fees,public safety,telemarketing,leased access,indecency,loudness ofcommercial advertisements,advertising,political broadcasting,sponsorship identification,Emergency Alert System,equal employment opportunity andother employment-related practices,environmental-related matters,our equipment supply chain,and technical standards relating to the operation of cablesystems and television stations.In addition,our international businesses are subject to various similar regulations,including those that cover televisionbroadcasting,programming,and advertising.We are occasionally subject to enforcement actions and investigations at the FCC and other federal,state,andlocal agencies,as well as foreign governments and regulatory authorities,which can result in fines,sanctions and/or ongoing compliance plans andgovernment oversight.Human Capital ResourcesAs of December 31,2024,we had approximately 182,000 full-time and part-time employees calculated on a full-time equivalent basis.Approximately 30%of our employees were located in over 30 countries outside the United States,with larger workforce concentrations in the United Kingdom,WesternEurope,East Asia and South Asia.We also use freelance and temporary employees in the normal course of our business.A small overall portion of ourfull-time U.S.employees are unionized,although many of Content&Experiences freelance and temporary writers,directors,actors,technical andproduction personnel,as well as some on-air and creative talent employees,are covered by industry-wide collective bargaining agreements or workcouncils.Outside the United States,employees in certain countries,particularly in Europe,are represented by an employee representative organization,such as a union,works council or employee association.Our company has been built on a foundation of respect,integrity and trust,and we are committed to creating and fostering a work environment thatpromotes those values.As a global media and technology company,we have a wide range of employees,including management professionals,technicians,engineers,call center employees,theme park employees,and media talent and production employees.Some of our key workforce-related programs andinitiatives include the following.Employee EngagementWe seek to create an engaged workforce through proactive listening and constructive dialogue,including through employee engagement surveys,as well as through employee resource groups.15Comcast 2024 Annual Report on Form 10-KTable of ContentsWe are committed to creating an environment that encourages employees to ask questions,raise concerns and speak up about a workplace issue orsuspected illegal or unethical conduct.We provide several channels for speaking up without fear of retaliation,including a helpline and a webportal that are administered by an independent third-party company and allow for anonymous reporting when permitted by applicable laws.Talent DevelopmentWe provide a wide variety of opportunities for professional growth for all employees with in-classroom and online trainings and on-the-jobexperience.We offer education tuition assistance to full-time employees in the United States.Our Board of Directors discusses succession planning for our CEO and the remainder of our senior executive management team at least once ayear.Throughout the year,our senior executive management team,as well as a broader array of executives throughout our businesses,makepresentations to the Board and its committees and interact with our directors informally outside of regularly scheduled Board meetings,whichprovides directors with meaningful insight into our current pool of talent,what attracts and retains our executives,and our company culture.We promote a culture that embraces equal opportunity for all.Comcast has nine voluntary employee resource groups with more than 36,000 members in 240 chapters across the U.S.These employee-ledorganizations are open to all and contribute to business priorities,career development,and foster an inclusive and collaborative workplace.Health and Welfare BenefitsWe offer a robust portfolio of health and welfare programs and solutions designed to meet the unique needs of our employees and their families,delivered through a consistent and seamless member experience.Our offerings include comprehensive and affordable health care coverage options along with a variety of additional tools and resources,includingaccess to dedicated health care navigators,expert medical opinion services,virtual primary care services and a diabetes management program.Inaddition,we offer comprehensive family planning options,including for adoption and surrogacy,and provide specialized support teams to helpemployees manage all stages in the family planning journey including parenthood.We continue to invest in the emotional wellbeing of our employees and offer a broad array of tools and resources such as our Employee AssistanceProgram,which provides personal counseling sessions to support employees and their families and provide problem-solving support for a broadrange of issues,including stress,anxiety,depression,substance use and more.We also offer various digital emotional wellbeing tools,includingchild learning and behavior support,meditation,stress management,sleep issues,depression,chronic pain and substance use.Financial BenefitsWe focus on attracting and retaining employees by providing compensation and benefits packages that are competitive within the applicablemarket,taking into account the job positions location and responsibilities.We provide competitive financial benefits such as a 401(k)retirement plan in the United States with a company match and other retirementarrangements internationally.We have employee stock purchase plans in the United States,United Kingdom,India and several other European countries where most of our full-time and part-time employees can purchase our stock at a discount.We generally grant stock-based awards on an annual basis to a meaningful portion of our employees,with over 24,000 employees receiving suchawards in 2024.We offer financial literacy training and counseling to support employees in making their own financial decisions.Available Information and WebsitesOur phone number is(215)286-1700,and our principal executive offices are located at One Comcast Center,Philadelphia,PA 19103-2838.Our AnnualReports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and any amendments to such reports filed with or furnished to theSEC under Sections 13(a)or 15(d)of the Securities Exchange Act of 1934,as amended(the“Exchange Act”),are available free of charge on the SECswebsite at www.sec.gov and on our website at as soon as reasonably practicable after such reports are electronically filedwith the SEC.The information posted on our websites is not incorporated into our SEC filings.Comcast 2024 Annual Report on Form 10-K16Table of ContentsCaution Concerning Forward-Looking StatementsThis Annual Report on Form 10-K includes statements that may constitute“forward-looking statements”within the meaning of the Private SecuritiesLitigation Reform Act of 1995,Section 27A of the Securities Act of 1933,and Section 21E of the Securities Exchange Act of 1934.Forward-lookingstatements are not historical facts or statements of current conditions,but instead represent only our beliefs regarding future events,many of which,by theirnature,are inherently uncertain and outside of our control.These may include estimates,projections and statements relating to our business plans,objectives and expected operating results,which are based on current expectations and assumptions that are subject to risks and uncertainties that maycause actual results to differ materially.These forward-looking statements are generally identified by words such as“believe,”“project,”“expect,”“anticipate,”“estimate,”“intend,”“potential,”“strategy,”“future,”“opportunity,”“commit,”“plan,”“goal,”“may,”“should,”“could,”“will,”“would,”“will be,”“will continue,”“will likely result”and similar expressions.In evaluating these statements,you should consider various factors,including therisks and uncertainties we describe in“Risk Factors”and in other reports we file with the SEC.Any of these factors could cause our actual results to differ materially from those expressed or implied by our forward-looking statements,which couldadversely affect our businesses,results of operations or financial condition.Readers are cautioned not to place undue reliance on forward-lookingstatements,which speak only as of the date they are made.We undertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events or otherwise.17Comcast 2024 Annual Report on Form 10-KTable of ContentsItem 1A:Risk FactorsRisks Related to Our Business,Industry and OperationsOur businesses operate in highly competitive and dynamic industries,and our businesses and results of operations could be adversely affected ifwe do not compete effectively.Our businesses operate in intensely competitive,consumer-driven,rapidly changing environments.We compete with a growing number of companies thatprovide a broad range of communications products and services and entertainment,sports,news and information content to consumers.There can be noassurance that we will be able to compete effectively against our competitors or that competition will not have an adverse effect on our businesses.Below is a summary of our most significant sources of competition.Many of these competitors offer competitive pricing,packaging and/or bundling ofservices to customers,which further increases competition.For a more detailed description of the competition facing our businesses,see Item 1:Businessand refer to the“Competition”discussion within that section.Connectivity&Platforms broadband services compete primarily against wireline telecommunications companies,including many that areincreasing deployment of fiber-based networks;wireless telecommunications companies offering internet services(using a variety of technologies,including 5G fixed wireless networks and 4G and 5G wireless broadband services);electric cooperatives and municipalities in the United Statesthat own and operate their own broadband networks;and DBS and newer satellite broadband providers.Broadband-deployment funding initiativesat the federal and state level may result in other service providers deploying new subsidized internet access networks within our footprint,and incases where we receive subsidies,may impose constraints on how we conduct our businesses.For a more extensive discussion of the significantrisks associated with the regulation of our businesses,see“We are subject to regulation by federal,state,local and foreign authorities,whichimpose additional costs and restrictions on our businesses”below and Item 1:Business and refer to the“Legislation and Regulation”discussionwithin that section.Our wireless and voice services compete with both telecommunications and wireless telecommunication providers.Competition for video services consists primarily of DTC streaming service providers and aggregators,DBS providers and telecommunicationscompanies.Business Services Connectivity primarily competes with wireline telecommunications companies and wide area network managed serviceproviders.Our businesses in Content&Experiences,as well as our video business,face substantial and increasing competition from providers of similartypes of entertainment,sports,news and information content,as well as from other forms of entertainment,including from social networking anduser-generated content,as well as tourism,recreational activities and lodging.They must compete to obtain talent,popular content(includingsports programming),advertising and other resources required to successfully operate their businesses.This competition has further intensified ascertain DTC streaming service providers have commissioned,and may continue to commission,high-cost programming and acquire live sportsprogramming rights to attract viewers at significant costs.Competitors with significant resources,greater efficiencies of scale,fewer regulatory burdens and more competitive pricing and packaging continue toincreasingly compete with our businesses in all forms.Some of these competitors could also have preferential access to customer data or other competitiveinformation.Further,consolidation of,or cooperation between,our competitors may increase competition in all of these areas.For example,cooperationbetween competitors may allow them to offer a range of products and services,including aggregating certain content into a stand-alone offering,offeringfree or lower cost DTC streaming services,potentially on an exclusive basis,through unlimited data-usage plans for broadband and wireless services orbundling DTC streaming services on their platforms.Our competitive position may be negatively affected if we do not provide our customers with a satisfactory customer experience.In addition,our ability tocompete effectively depends on our perceived image and reputation among our various constituencies,including our customers,consumers,advertisers,business partners,employees,investors and government authorities.For example,some of these constituencies may have their own,and some haveconflicting,environmental,social and governance priorities,which may present risks to our reputation and brands if these constituencies perceivemisalignment.Changes in consumer behavior continue to adversely affect our businesses and challenge existing business models.Distribution platforms for viewing and purchasing content continue to challenge existing business models,increase the number of competitors that ourbusinesses face,and have driven,and will continue to drive,changes in consumer behavior as consumers seek control over when,where and how theyconsume content and access communications services,and how much or for how long they pay for such content.Comcast 2024 Annual Report on Form 10-K18Table of ContentsThe number of entertainment choices available to consumers,including DTC streaming service providers and aggregators,social networking and user-generated content platforms,and gaming and virtual reality products and services,continue to increase,intensify audience fragmentation and disaggregatehow content traditionally has been distributed to and viewed by consumers.The continuing trend of content owners,including us with Peacock,deliveringtheir content directly to consumers,rather than through,or in addition to,traditional video distribution channels also disrupts traditional media distributionbusiness models.As consumers increasingly turn to DTC streaming services in lieu of linear video services,which continue to experience accelerated netcustomer losses,our video customers and video revenues,and linear television network subscriber fees received from video service providers,eachdecrease.In addition to reducing traditional television viewership,these trends when coupled with time-shifting technologies,such as DVR and on demandservices,have caused,and likely will continue to cause,audience ratings declines for our television networks.Shifting content consumption patterns alsomay result in lower demand for home entertainment products or theatrical attendance.While we have adapted some of our video and content offerings tocompete in the evolving media distribution landscape,such as by offering Peacock and NOW,there also can be no assurance that we will be able tosuccessfully compete or that Peacock will grow or sustain its revenue or user base,successfully compete as a stand-alone DTC streaming service or fullyoffset decreases to our linear television networks results of operations.Our failure to effectively anticipate or adapt to emerging competitors or changes in consumer behavior,including among younger consumers,and shiftingbusiness models could have an adverse effect on our competitive position,businesses and results of operations.A decline in advertisers expenditures or changes in advertising markets could negatively impact our businesses.We compete for the sale of advertising time with digital properties,including an increasing number of ad-supported DTC streaming service providers asadvertisers have shifted,and may continue to shift,a larger portion of their total expenditures to digital media.We also compete with other online contentproviders,such as social networking platforms and user-generated content providers,television networks and stations,and all other advertising platforms.Because we derive substantial revenue from the sale of advertising,a decline in expenditures by advertisers,including through traditional linear televisiondistribution models or on Peacock,could negatively impact our results of operations.We have experienced,and may continue to experience,declinescaused by the economic prospects of specific advertisers or industries and economic conditions generally;increased competition for the leisure time ofviewers,audience fragmentation and viewing content on DTC streaming services;use of time-shifting or advertising-blocking technologies;and regulatoryintervention on advertising placement.Lower audience ratings and reduced viewership,which many of our linear television networks have experienced,and likely will continue to experience,as well as the level of popularity of Peacock,affect advertisers willingness to purchase advertising from us and therates paid.Advertising sales and rates also are dependent on the methodology used for audience measurement and could be negatively affected ifmethodologies do not accurately reflect actual viewership levels.Our success depends on consumer acceptance of our content,and our businesses may be adversely affected if our content fails to achieve sufficientconsumer acceptance.We create and acquire media,sports and entertainment content,the success of which depends substantially on consumer tastes and preferences that oftenchange in unpredictable ways.To meet the changing preferences of our consumer markets,we must consistently create,acquire,market and distribute abroad array of content and theme park attractions.We have invested,and will continue to invest,substantial amounts in content,such as the production offilms and original content for television networks and streaming services,and in the creation of new theme parks and theme park attractions,beforelearning the extent to which they will earn consumer acceptance.We obtain a significant portion of our content from third parties,such as movie studios,television production companies,sports organizations and othersuppliers,sometimes on an exclusive basis.Competition for popular content,particularly for sports programming,is intense.Entering into or renewingcontracts for such content rights or acquiring additional rights has in the past resulted,and may result in the future,in significantly increased costs,potentially over an extended contractual term.Particularly with respect to contracts for sports rights,our results of operations and cash flows over the termof a contract depend on a number of factors,including the strength of the advertising market,audience size,the timing and amount of rights payments,andthe ability to secure distribution from,impose surcharges on,or obtain carriage on multichannel video providers or to grow and retain subscribers to ourown DTC services.There can be no assurance that revenue generated from these contracts will exceed our costs for the rights and of producing anddistributing the programming.In addition,media companies may determine not to license popular content to us,and as more content owners offer theircontent directly to consumers through their own platforms,they may reduce the quantity and quality of the content they license to our linear televisionnetworks or Peacock.The inability to enter into or renew some or all of these contracts on acceptable terms could reduce the reach of our programming,which could adversely affect our results of operations and businesses.19Comcast 2024 Annual Report on Form 10-KTable of ContentsWe also create content for licensing to third parties and to our linear television networks or Peacock.The inability to license such content on acceptableterms or at all could negatively impact our business.Moreover,we may generate lower revenue when we opt to retain our content for our own use,including for Peacock,rather than licensing it to third parties who pay licensing fees for such content.If our content does not achieve sufficient consumer acceptance,or if we cannot obtain or retain rights to popular content on acceptable terms,or at all,ourbusinesses may be adversely affected.Programming expenses for our video services are increasing on a per subscriber basis,which could adversely affect our video businesses.We expect programming expenses for our video services to continue to be the largest single expense item for our Residential Connectivity&Platformsbusiness and to continue to increase on a per subscriber basis.Part of these programming expenses include payments to certain local broadcast televisionstations in exchange for their required consent for the retransmission of broadcast network programming to video services customers;we expect to continueto be subject to demands for payment and other concessions from local broadcast television stations.These market factors may be exacerbated byconsolidation in the media industry,which may further increase our programming expenses.If we are unable to offset programming cost increases throughrate increases,the sale of additional services,cost management or other initiatives,the increasing cost of programming could have an adverse effect on ourresults of operations.Moreover,as our contracts with programming providers expire,there can be no assurance that they will be renewed on acceptable terms,or at all,in whichcase we may be unable to provide such programming as part of our video services,and our businesses and results of operations could be adversely affected.The loss of programming distribution agreements,or the renewal of these agreements on less favorable terms,could adversely affect ourbusinesses.Our linear television networks depend on their ability to secure and maintain distribution agreements with traditional and virtual multichannel videoproviders.The number of subscribers to our television networks has been,and likely will continue to be,reduced as a result of fewer subscribers tomultichannel video providers as the media distribution business model changes.Similarly,multichannel video providers may elect not to enter intoagreements to distribute some or all of our linear television networks as a result of these changing market dynamics.In addition,our broadcast televisionnetworks depend on their ability to secure and maintain network affiliation agreements with third-party local broadcast television stations in the marketswhere we do not own the affiliated local broadcast television station.Our owned local broadcast television stations must elect,with respect toretransmission by certain multichannel video providers,either“must-carry”status,in which we require the provider to carry the station without paying anycompensation to us,or“retransmission consent,”in which we give up our right to mandatory carriage and instead seek to negotiate the terms andconditions of carriage,including the amount of compensation,if any,paid to us by such provider.For all of these types of arrangements,our ability to renew agreements on acceptable terms may be affected by evolving market dynamics and industryconsolidation.There can be no assurance that any of these agreements will be entered into or renewed in the future on similar terms.The inability to enterinto or renew some or all of these agreements could reduce our revenues and the reach of our programming,which could adversely affect our businesses.Our businesses depend on using and protecting certain intellectual property rights and on not infringing,misappropriating or otherwise violatingthe intellectual property rights of others.We rely on our intellectual property,such as patents,copyrights,trademarks and trade secrets,as well as licenses and other agreements with our vendorsand other third parties,to use various technologies,conduct our business operations and sell our products and services.Legal challenges to our intellectualproperty rights and claims of intellectual property infringement,misappropriation or other violation by third parties could require that we enter into royaltyor licensing agreements on unfavorable terms,incur substantial monetary liability,or be enjoined preliminarily or permanently from further use of theintellectual property in question,from importing into the United States or other jurisdictions in which we operate hardware or software that uses suchintellectual property or from the continuation of our businesses as currently conducted.We may need to change our business practices if any of these eventsoccur,which may limit our ability to compete effectively and could have an adverse effect on our results of operations.Even if we believe any suchchallenges or claims are without merit,they can be time-consuming,costly to defend and may divert managements attention and resources away from ourbusinesses.Moreover,if we are unable to obtain,or continue to obtain,licenses from our vendors and other third parties on reasonable terms,or at all,ourbusi
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-K_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 28,2024 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transi?on period from _ to _.Commission file number 001-16797_ADVANCE AUTO PARTS,INC.(Exact name of registrant as specified in its charter)_Delaware54-2049910(State or other jurisdic?on of incorpora?on or organiza?on)(I.R.S.Employer Iden?fica?on No.)4200 Six Forks Road,Raleigh,North Carolina 27609(Address of principal execu?ve offices)(Zip Code)(540)362-4911(Registrants telephone number,including area code)Securi?es Registered Pursuant to Sec?on 12(b)of the Act:Title of each classTrading symbolName of each exchange on which registeredCommon Stock,$0.0001 par valueAAPNew York Stock ExchangeSecuri?es Registered Pursuant to Sec?on 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securi?es Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Sec?on 13 or Sec?on 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Sec?on 13 or 15(d)of the Securi?es Exchange Act of 1934 duringthe 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 requirementsfor the past 90 days.Yes No Indicate by check mark whether the registrant has submi?ed electronically every Interac?ve Data File required to be submi?ed pursuant to Rule 405 ofRegistra?on 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).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller repor?ng company or anemerging growth company.See the defini?ons of“large accelerated filer,”“accelerated filer,”“smaller repor?ng company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller repor?ng companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transi?on period for complying with any new orrevised financial accoun?ng standards provided pursuant to Sec?on 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and a?esta?on to its managements assessment of the effec?veness of its internal controlover financial repor?ng under Sec?on 404(b)of the Sarbanes-Oxley Act(15 U.S.C 7262(b)by the registered public accoun?ng firm that prepared or issued itsaudit report.If securi?es are registered pursuant to Sec?on 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filingreflect the correc?on of an error to previously issued financial statements.Indicate by check mark whether any of those error correc?ons are restatements that required a recovery analysis of incen?ve-based compensa?on receivedby any of the registrants execu?ve officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of the last business day of the registrants most recently completed second fiscal quarter,July 13,2024,the aggregate market value of common stock heldby non-affiliates of the registrant was$2,350,271,465,based on the last sales price on July 13,2024,as reported by the New York Stock Exchange.As of February 21,2025,the number of shares of the registrants common stock outstanding was 59,792,946 shares.Documents Incorporated by Reference:Por?ons of the registrants defini?ve proxy statement for its 2025 Annual Mee?ng of Stockholders,to be held on May 14,2025,are incorporated by referenceinto Part III of this Form 10-K.Table of ContentsTABLE OF CONTENTS PagePart I.Item 1.Business2 Item 1A.Risk Factors7 Item 1B.Unresolved Staff Comments16Item 1C.Cybersecurity15 Item 2.Proper?es17 Item 3.Legal Proceedings17 Item 4.Mine Safety Disclosures17Part II.Item 5.Market for the Registrants Common Equity,Related Stockholder Ma?ers and Issuer Purchases of EquitySecuri?es18 Item 6.Selected Quarterly Financial Data20Item 7.Managements Discussion and Analysis of Financial Condi?on and Results of Opera?ons21 Item 7A.Quan?ta?ve and Qualita?ve Disclosures About Market Risks32 Item 8.Financial Statements and Supplementary Data32Item 9.Changes in and Disagreements with Accountants on Accoun?ng and Financial Disclosure32Item 9A.Controls and Procedures32Item 9B.Other Informa?on34Item 9C.Disclosure Regarding Foreign Jurisdic?ons that Prevent Inspec?ons34Part III.Item 10.Directors,Execu?ve Officers and Corporate Governance35Item 11.Execu?ve Compensa?on35Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Ma?ers35Item 13.Certain Rela?onships and Related Transac?ons,and Director Independence35Item 14.Principal Accountant Fees and Services35Part IV.Item 15.Exhibits,Financial Statement Schedules36Item 16.Form 10-K Summary79Signatures80Table of ContentsFORWARD-LOOKING STATEMENTSCertain statements herein are“forward-looking statements”within the meaning of the Private Securi?es Li?ga?on Reform Act of 1995.Forward-looking statements are usually iden?fiable by words such as“an?cipate,”“believe,”“could,”“es?mate,”“expect,”“forecast,“guidance,”“intend,”“likely,”“may,”“plan,”“posi?on,”“possible,”“poten?al,”“probable,”“project,”“should,”“strategy,”“target,”“will,”orsimilar language.All statements other than statements of historical fact are forward-looking statements,including,but not limited to,statements about the Companys strategic ini?a?ves,restructuring and asset op?miza?on plans,financial objec?ves,opera?onal plans andobjec?ves,statements about the sale of the Companys Worldpac business,including statements regarding the benefits of the sale and use ofproceeds therefrom,statements regarding expecta?ons for economic condi?ons,future business and financial performance,as well asstatements regarding underlying assump?ons related thereto.Forward-looking statements reflect the Companys views based on historicalresults,current informa?on and assump?ons related to future developments.Except as may be required by law,the Company undertakes noobliga?on to update any forward-looking statements made herein.Forward-looking statements are subject to a number of risks anduncertain?es that could cause actual results to differ materially from those projected or implied by the forward-looking statements.Theyinclude,among others,the Companys ability to hire,train and retain qualified employees,the?ming and implementa?on of strategicini?a?ves,risks associated with the Companys restructuring and asset op?miza?on plans,deteriora?on of general macroeconomic condi?ons,geopoli?cal factors including increased tariffs and trade restric?ons,the highly compe?ve nature of the industry,demand for the Companysproducts and services,risks rela?ng to the impairment of assets,including intangible assets such as goodwill,access to financing on favorableterms,complexi?es in the Companys inventory and supply chain and challenges with transforming and growing its business.Please refer to“Item 1A.Risk Factors”for a descrip?on of these and other risks and uncertain?es that could cause actual results to differ materially from thoseprojected or implied by the forward-looking statements.1Table of ContentsPART IItem 1.Business.Unless the context otherwise requires,the“Company,”“Advance,”and similar terms refer to Advance Auto Parts,Inc.,its subsidiaries and their respec?veopera?ons on a consolidated basis.The Companys fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31 each year.TheCompanys previous three fiscal years ended on December 28,2024(“2024”),December 30,2023(“2023”)and December 31,2022(“2022”)and eachincluded fi?y-two weeks of opera?ons.OverviewAdvance Auto Parts,Inc.and its subsidiaries is a leading automo?ve a?ermarket parts provider in North America,serving both professional installers(“professional”)and“do-it-yourself”(“DIY”)customers,as well as independently-owned operators.The Companys stores offer a broad selec?on of brandnames,original equipment manufacturer(“OEM”)and owned brand automo?ve replacement parts,accessories,ba?eries and maintenance items fordomes?c and imported cars,vans,sport u?lity vehicles and light and heavy duty trucks.As of December 28,2024,the Company operated 4,788 storesprimarily under the trade names“Advance Auto Parts”and“Carquest.”The Company was founded in 1929 as Advance Stores Company,Incorporated,and operated as a retailer of general merchandise un?l the 1980s.During the1980s,the Company began targe?ng the sale of automo?ve parts and accessories to DIY customers.The Company ini?ated the professional delivery programin 1996 and has served professional customers since 2000.The Company has grown significantly as a result of strategic acquisi?ons,new store openings andcomparable store sales growth.Advance Auto Parts,Inc.,a Delaware corpora?on,was incorporated in 2001 in conjunc?on with the acquisi?on of DiscountAuto Parts,Inc.In 2014,the Company acquired General Parts Interna?onal,Inc.(“GPI”),a privately-held company that was a leading distributor and supplierof original equipment and a?ermarket automo?ve replacement products for professional markets opera?ng under the Carquest and Worldpac trade names.On November 1,2024,the Company completed the sale of the Worldpac business for net proceeds of approximately$1.47 billion a?er transac?on costs andexcluding the impact of taxes.The transac?on reflects a strategic shi?in the Companys business with increased focus on the Advance blended-box model.Refer to Note 20.Discon?nued Opera?ons of the notes to the Consolidated Financial Statements included herein for further details.On November 13,2024,the Companys Board of Directors approved a restructuring and asset op?miza?on plan(“2024 Restructuring Plan”)designed toimprove the Companys profitability and growth poten?al and streamline its opera?ons.This plan is supplemental to other ongoing ini?a?ves to simplify theCompanys business and improve profitable growth and entails,among other items,certain store and independent loca?on closures as well as headcountreduc?ons and organiza?onal design changes to align the Companys workforce to the expected needs of the Companys business.The Company is alsopursuing efficiencies in procurement,pricing and professional and outside services,in addi?on to opera?onal efficiencies.Refer to Note 3.Restructuring ofthe notes to the Consolidated Financial Statements included herein for further details.StoresDuring 2024,42 stores were opened and 40 were closed,resul?ng in a total of 4,788 stores as of December 28,2024 compared with a total of 4,786 stores asof December 30,2023.On November 14,2024,the Company announced the 2024 Restructuring Plan,which includes the reduc?on of approximately 500stores,approximately 200 independent loca?ons and four distribu?on centers by mid-2025.The Company serves its professional and DIY customers through a variety of channels ranging from tradi?onal“brick and mortar”store loca?ons to self-service e-commerce sites.The Company believes it is be?er able to meet its customers needs by opera?ng under two trade names,which are as follows:Advance Auto Parts The Companys 4,507 stores,inclusive of 316 hubs,as of December 28,2024,are generally located in freestanding buildings with afocus on both professional and DIY customers.The average size of an Advance Auto Parts loca?on(including stores,hubs and market hubs)is approximately8,000 square feet.These stores carry a wide variety of products serving a?ermarket auto part needs for both domes?c and import vehicles with productofferings of approximately 23,600 stock keeping units(“SKUs”),consis?ng of a custom mix of products based on each stores market.Supplemen?ng theCompanys stores inventory on-hand,less common SKUs are also available on a same-day or next-day basis from any of the larger hub stores or market hubloca?ons.st2Table of ContentsCarquest The Companys 281 stores as of December 28,2024,including 149 stores in Canada,are generally located in freestanding buildings with aprimary focus on professional customers,but also serve DIY customers.The average size of a Carquest store is approximately 7,500 square feet.These storescarry a wide variety of products serving the a?ermarket auto part needs for both domes?c and import vehicles with a product offering of approximately16,400 SKUs.As of December 28,2024,934 independently-owned stores operated under the Carquest name.Store DevelopmentThe key factors used in selec?ng sites and market loca?ons in which the Company operates include popula?on,demographics,traffic count,vehicle profile,number and strength of compe?tors stores and the cost of real estate.As of December 28,2024,4,639 stores were located across 48 U.S.states and two U.S.territories,and 149 stores were located across six Canadian provinces.The Company serves the stores primarily from its execu?ve office in Raleigh,NC.Company ProductsThe following table shows some of the types of products that the Company sells by major category:Parts&Ba?eriesAccessories&ChemicalsEngine MaintenanceBa?eries and ba?ery accessoriesAir condi?oning chemicals and accessoriesAir filtersBelts and hosesAir freshenersFuel and oil addi?vesBrakes and brake padsAn?freeze and washer fluidFuel filtersChassis partsElectrical wire and fusesGrease and lubricantsClimate control partsElectronicsMotor oilClutches and drive sha?sFloor mats,seat covers and interior accessoriesOil filtersEngines and engine partsHand and specialty toolsPart cleaners and treatmentsExhaust systems and partsLigh?ngTransmission fluidHub assembliesPerformance partsIgni?on components and wireSealants,adhesives and compoundsRadiators and cooling partsTire repair accessoriesStarters and alternatorsVent shades,mirrors and exterior accessoriesSteering and alignment partsWashes,waxes and cleaning suppliesWiper bladesThe Company provides customers with quality products that are o?en offered at a good,be?er or best recommenda?on differen?ated by price and quality.The Company accepts customer returns for many new,core and warranty products.Customer returns have historically been immaterial.CustomersThe Companys professional customers primarily consist of customers for whom the Company delivers products to their places of business,including garages,service sta?ons and auto dealerships.The Companys professional sales represented approximately 50%of sales in 2024,2023 and 2022.The Company alsoserves 934 independently-owned Carquest stores with shipments directly from distribu?on centers.DIY customers are primarily served through theCompanys stores,but can also order online to pick up merchandise at a nearby store or have their purchases shipped directly to them.Except whereprohibited,the Company also provides a variety of services at its stores free of charge to customers,including:Ba?ery and wiper installa?on;Check engine light scanning;Electrical system tes?ng,including ba?eries,starters and alternators;Oil and ba?ery recycling;andLoaner tool programs.3Table of ContentsThe Company also serves customers online at www.AdvanceAutoP or on the Advance Mobile App.Professional customers can conveniently placetheir orders electronically,including through MyA,by phone or in-store,and the Company delivers products to their places of business.Supply ChainThe Companys supply chain consists of a network of distribu?on centers,hubs and stores that enable the Company to provide same-day or next-dayavailability to customers.As of December 28,2024,the Company operated 28 distribu?on centers,ranging in size from approximately 70,000 to 943,000square feet with total square footage of approximately 8.5 million,including one distribu?on center dedicated to reclama?ons.In 2024,the Companyconverted eight distribu?on centers to market hubs,closed four distribu?on centers as a result of the 2024 Restructuring Plan and closed one distribu?oncenter as part of the normal course of business.Addi?onally,nine distribu?on centers were sold as part of the Worldpac transac?on.Merchandise,Marke?ng and Adver?singIn 2024,the Company purchased merchandise from over 634 vendors.The Companys purchasing strategy involves nego?a?ng agreements with vendors topurchase merchandise over a specified period of?me along with other provisions,including pricing,rebates,volume and payment terms.The Company aims to carry a broad selec?on of high quality and reputable brand name automo?ve parts and accessories that the Company believes willappeal to professional customers and also generate DIY customer traffic.Some of the Companys brands include Bosch,Castrol,Dayco,Denso,Fram,Gates,Meguiars,Mobil 1,Moog,Monroe,NGK,Prestone,Purolator,Trico and Wagner.In addi?on to these branded products,the Company stocksa wide selec?on of high-quality owned brand products with a goal of appealing to value-conscious customers.These categories of merchandise includeba?eries,brakes,chassis,ride control,engine management,filtra?on,chemicals and other parts under various owned brand names such as Carquest,DieHard,Driveworks and Wearever.For the DieHard brand,the Company owns the right to sell ba?eries and to extend the DieHard brand into otherautomo?ve and vehicular categories.The Company granted the seller an exclusive royalty-free,perpetual license to develop,market and sell DieHardbranded products in certain non-automo?ve categories.The Companys marke?ng and adver?sing programs are designed to drive brand awareness,considera?on by consumers and omnichannel traffic by posi?onin the a?ermarket auto parts category.The Company strives to exceed its customers expecta?ons end-to-end through a comprehensive online and in-storepick up experience,extensive parts assortment,quality brands,experienced parts professionals,professional programs that are designed to build loyalty withcustomers and the DIY customer loyalty program.SeasonalityThe Companys business is somewhat seasonal in nature,with the highest sales usually occurring in the spring and summer months.In addi?on,theCompanys business can be affected by weather condi?ons.While unusually heavy precipita?on tends to so?en sales as elec?ve maintenance is deferredduring such periods,extremely hot or cold weather tends to cause automo?ve parts to fail at an accelerated rate which can lead to enhanced sales.Thefourth quarter is generally the most vola?le as weather and spending trade-offs typically influence the professional and DIY sales.Human CapitalAs of December 28,2024,the Company employed approximately 33,200 full-?me team members and 29,600 part-?me team members.The Companysworkforce consisted of 87.4%of team members employed in store-level opera?ons,8.9%in distribu?on and 3.7%in corporate offices.As of December 28,2024,approximately 1.5%of team members were represented by labor unions.Addi?onal informa?on about the Companys human capital resources can be found in the Corporate Sustainability and Social Report,which is available on theCompanys website.The Corporate Sustainability and Social Report is not,and will not be deemed to be,a part of this Annual Report on Form 10-K orincorporated by reference into any of the Companys other filings with the Securi?es and Exchange Commission(“SEC”).TMTM 4Table of ContentsIntellectual PropertyThe Company owns a number of trade names,service marks and trademarks,including“Advance Auto Parts,”“Advance Same Day,”“Carquest,”“CARQUEST Technical Ins?tute,”“DieHard,”“DriverSide,”“MotoLogic,”“MotoShop and“TECH-NET Professional Auto Service”,for use in connec?on withthe automo?ve parts business.In addi?on,the Company owns and has registered a number of trademarks for the owned brands.The Company believes thatthese trade names,service marks and trademarks are important to the merchandising strategy.The Company does not know of any infringing uses thatwould materially affect the use of these trade names and trademarks and will ac?vely defend and enforce them.Compe?onThe Company operates in both the professional and DIY markets of the automo?ve a?ermarket industry.The Companys primary compe?tors are(i)bothna?onal and regional chains of automo?ve parts stores,including AutoZone,Inc.,NAPA,OReilly Automo?ve,Inc.,The Pep Boys-Manny,Moe&Jack and AutoPlus(formerly Uni-Select USA,Inc.),(ii)internet-based retailers,(iii)discount stores and mass merchandisers that carry automo?ve products,(iv)wholesalersor jobbers stores,including those associated with na?onal parts distributors or associa?ons,(v)independently-owned stores and(vi)automobile dealers thatsupply parts.The Company believes that chains of automo?ve parts stores that,like the Company,have mul?ple loca?ons in one or more markets,havecompe?ve advantages in customer service,marke?ng,inventory selec?on,purchasing and distribu?on compared with independent retailers and jobbersthat are not part of a chain or associated with other retailers or jobbers.The principal methods of compe?on in the business include brand recogni?on,customer service,product offerings,availability,quality,service with speed,price and store loca?on.Environmental and Other Regulatory Ma?ersThe Company is subject to various federal,state and local laws and governmental regula?ons rela?ng to the opera?on of the business,including thosegoverning collec?on,transporta?on and recycling of automo?ve lead-acid ba?eries,used motor oil and other recyclable items and ownership and opera?onof real property.The Company sells products containing hazardous materials as part of the business.In addi?on,customers may bring automo?ve lead-acidba?eries,used motor oil or other recyclable items onto the proper?es.The Company currently provides collec?on and recycling programs for used lead-acidba?eries,used oil and other recyclable items at a majority of the stores as a service to its customers.Pursuant to agreements with third-party vendors,lead-acid ba?eries,used motor oil and other recyclable items are collected by team members,deposited onto pallets or into vendor supplied containers andstored by the Company un?l collected by the third-party vendors for recycling or proper disposal.The terms of the contracts with third-party vendors requirethat they are in compliance with all applicable laws and regula?ons.The Companys third-party vendors who arrange for the removal,disposal,treatment orother handling of hazardous or toxic substances may be liable for the costs of removal or remedia?on at any affected disposal,treatment or other siteaffected by such substances.Based on the Companys experience,the Company does not believe that there are any material environmental costs associatedwith the current business prac?ce of accep?ng lead-acid ba?eries,used oil and other recyclable items as these costs are borne by the respec?ve third-partyvendors.The Company owns and leases real property.Under various environmental laws and regula?ons,a current or previous owner or operator of real property maybe liable for the cost of removal or remedia?on of hazardous or toxic substances on,under or in such property.These laws o?en impose joint and severalliability and may be imposed without regard to whether the owner or operator knew of,or was responsible for,the release of such hazardous or toxicsubstances.Other environmental laws and common law principles also could be used to impose liability for releases of hazardous materials into theenvironment or work place,and third par?es may seek recovery from owners or operators of real proper?es for personal injury or property damageassociated with exposure to released hazardous substances.From?me to?me,the Company receives no?ces from the U.S.Environmental Protec?on Agencyand state environmental authori?es indica?ng that there may be contamina?on on proper?es that the Company owns,leases or operates or may haveowned,leased or operated in the past or on adjacent proper?es for which the Company may be responsible.Compliance with these laws and regula?ons andclean-up of released hazardous substances have not had a material impact on opera?ons to date.The Company is also subject to numerous regula?ons including those related to labor and employment,discrimina?on,an?-bribery/an?-corrup?on,falseclaims,product quality and safety standards,data privacy,taxes,workplace safety,consumer protec?on and trade compliance.Compliance with any suchlaws and regula?ons has not had a material adverse effect on the opera?ons to date.For more informa?on,see the following disclosures in“Part I.Item 1A.Risk Factors”in this report.5Table of ContentsAvailable Informa?onThe Companys internet address is www.AdvanceAutoP.The Companys website and the informa?on contained therein or linked thereto are not partof this Annual Report on Form 10-K for 2024.The Company makes available free of charge through the Investor Rela?ons website located ,the Companys annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,proxy statements,registra?on statements and amendments to those reports filed or furnished pursuant to the Securi?es Exchange Act of 1934(“Exchange Act”)as soon asreasonably prac?cable a?er the Company electronically files such materials with,or furnishes them to the SEC.The SEC maintains a website that containsreports,proxy statements and other informa?on regarding issuers that file electronically with the SEC.These materials may be obtained electronically byaccessing the SECs website at www.sec.gov.6Table of ContentsItem 1A.Risk Factors.One should consider carefully the risks and uncertain?es described below together with the other informa?on included in this Annual Report on Form 10-K,including without limita?on,the Companys consolidated financial statements and related notes thereto and Item 7.Managements Discussion and Analysisof Financial Condi?on and Results of Opera?ons-Cri?cal Accoun?ng Policies.The occurrence of any of the following risks could materially adversely affect theCompanys business,financial condi?on,results of opera?ons,cash flows and future prospects,which could in turn materially affect the price of theCompanys common stock.Risks Related to the Companys Opera?ons and StrategyIf we are unable to successfully implement our business strategy,our business,financial condi?on,results of opera?ons and cash flows could be adverselyaffected.The Company undertook a comprehensive strategic and opera?onal review to improve its performance of its business and create long-term value.This reviewresulted in,among other things,narrowed business priori?es and ini?a?ves aimed at improving core performance in key areas.The Company is currentlymaking and expects to con?nue to make significant investments to improve its business.If the Company is unable to implement ini?a?ves efficiently andeffec?vely,the Companys business,financial condi?on,results of opera?ons and cash flows could be adversely affected.The Company could also beadversely affected if it has not appropriately priori?zed and balanced its ini?a?ves or if the Company is unable to effec?vely manage change throughout theorganiza?on.Implemen?ng strategic ini?a?ves could disrupt or reduce the efficiency of the Companys opera?ons and may not provide the an?cipatedbenefits,or may provide them on a delayed schedule or at a higher cost.These risks increase when significant changes are undertaken and when mul?pleprojects with interdependencies and shared human resources are pursued simultaneously.Restructuring our opera?ons is a significant undertaking and introduces risk to the con?nuity and results of the Companys opera?ons.In November 2024,the Company announced a plan to restructure its opera?ons to improve profitability and growth poten?al and streamline the Companysopera?ons.This plan is supplemental to other ongoing ini?a?ves to simplify the Companys business and improve profitable growth and entails,among otheritems,certain store and independent loca?on closures as well as headcount reduc?ons and organiza?onal design changes to align the Companys workforceto the expected needs of the Companys business.The Company is also pursuing efficiencies in procurement,pricing and professional and outside services,inaddi?on to opera?onal efficiencies.These measures are subject to known and unknown risks and uncertain?es,including whether the Company has targetedthe appropriate areas for its cost-saving efforts and at the appropriate scale,the Companys ability to successfully execute the restructuring plan and achievethe cost-savings an?cipated while minimally disrup?ng our opera?ons and whether,if required in the future,the Company will be able to appropriately targetany addi?onal areas for its cost-saving efforts.The Company expects to incur restructuring charges and undertake other exit-related ac?vi?es as a result of such ini?a?ves.For example,execu?on of theCompanys plan is expected to result in the termina?on of certain leases,leading to exits of certain proper?es over?me and the incurrence of expenses,including but not limited to impairment charges and con?ngent obliga?ons,which could be material.The terms,scope and?ming of any addi?onal changesto our lease obliga?ons,as well as any other effects on our landlord rela?onships or reputa?on with other real estate owners,are uncertain.As a result of therestructuring plan,the Company currently expects to incur approximately$875 million to$960 million in total charges,which is es?mated to include$275 million to$310 million of cash charges and$600 million to$650 million of non-cash charges,primarily as a result of closure sites and the reduc?on inworkforce.The Companys expecta?ons for charges to be incurred and cash to be expended in connec?on with the restructuring ac?vi?es are based on anumber of assump?ons,and the Company may experience unan?cipated consequences,such as higher than an?cipated lease termina?on and facility closurecosts,asset impairment or other unforeseen expenses related to the restructuring.Implemen?ng any restructuring plan,including the one the Company has outlined,presents poten?al risks that may impair our ability to achieve or sustainan?cipated cost reduc?ons or opera?onal improvements.These risks include the poten?al for management distrac?on from ongoing business ac?vi?es,requirement of capital investment that could otherwise be used for the opera?on and growth of the Companys exis?ng business,inadequate support ofimportant business func?ons due to staffing changes and other cost reduc?on efforts,delays or inability to achieve targeted efficiencies as a result ofeconomic,compe?ve or other factors,failure to maintain adequate controls and procedures while execu?ng our restructuring plans,disrup?ons toimportant business rela?onships,and damage to our reputa?on and brand.Addi?onally,as a result of restructuring ini?a?ves,the Company may experiencea loss of con?nuity and accumulated knowledge or increased employee a?ri?on and difficulty a?rac?ng and retaining highly skilled employees,which may,among other things,slow the progress of7Table of Contentsour turnaround ini?a?ves or impair the Companys ability to maintain and enhance the Companys internal controls and procedures.The implementa?on of the Companys restructuring efforts,including the poten?al reduc?on of the Companys facili?es and workforce,may not improve ouropera?onal and cost structure or result in greater efficiency of the Companys organiza?on;and the Company may not be able to support sustainableprofitable growth following the Companys restructuring ac?ons.Failure to achieve or sustain the expected cost reduc?ons and other benefits related tothese restructuring ini?a?ves could have a material adverse effect on the Companys results of opera?ons,financial condi?on and cash flows.We are exposed to risks associated with poten?al dives?tures,which may impact our ability to fully realize the an?cipated benefits of those transac?ons.The Company recently sold its Worldpac business.Dives?tures are complex transac?ons involving inherent risks,including the poten?al for distrac?ons ofmanagement from the core remaining business of the Company and the occurrence of events that may impact our ability to fully realize the an?cipatedbenefits of the dives?tures.Transac?ons of this nature carry risks associated to varia?on from expecta?ons,including with respect to provision of transi?onservices and post-closing claims for liability.If we are unable to adequately design,implement,operate and maintain various informa?on and technology systems,our ability to conduct businesscould be nega?vely impacted.The Company is dependent on informa?on and technology systems to facilitate the day-to-day opera?ons of the business and to produce?mely,accurate andreliable informa?on on financial and opera?onal results.The company is in the process of designing,implemen?ng and upda?ng various systems.Theseini?a?ves will require significant investment of human and financial resources,and the Company may experience significant delays,increased costs and otherdifficul?es with these projects.Deficiencies in the design or implementa?on or maintenance of these systems could lead to inaccuracy of data and disrup?onto the Companys business opera?ons.In addi?on,the Company is u?lizing data analy?cs and pilo?ng the use of advance technological applica?ons tosupport various business ini?a?ves.Any inability on our part to properly capture or interpret data may impair our ability to successfully execute our businessplans.The efficacy of the Companys supply chain is important to its business opera?ons and ability to grow the Companys business,and if the Company isunable to maintain adequate supply chain capacity or improve supply chain efficiency,it could adversely affect its business,financial condi?on and resultsof opera?ons and cash flows.The Companys store inventories are primarily replenished by shipments from its network of distribu?on centers.The Companys strategy to improve supplychain efficiency includes developing a network of market hubs to create economies of scale and enhance service levels for our customers.If the Company isunable to maintain adequate capacity in its supply chain network,or improve the efficiency of its supply chain,through the implementa?on of its market hubstrategy or otherwise,the Company may experience higher inventory costs,lower availability,slower delivery speed and ul?mately a lower ability to meetconsumer product needs and channel preferences.The Company plans to further invest in its distribu?on center infrastructure to help ensure safety,reliability and efficiency across its opera?ons,which will require capital investments.The Company is also working to improve product lifecycle managementand address slower-moving inventory in its network.The Companys investments in supply chain may not provide the an?cipated benefits,and experiencingsub-op?mal inventory levels,inventory availability or increases in its costs could adversely affect its business,financial condi?on,results of opera?ons andcash flows.An unstable global economic and geopoli?cal landscape increases uncertainty about key areas of doing business interna?onally and may have a nega?veimpact on our business.The United States has recently enacted and proposed to enact significant new tariffs.Addi?onally,the current administra?on has directed various federalagencies to further evaluate key aspects of U.S.trade policy and there has been ongoing discussion and commentary regarding poten?al significant changesto U.S.trade policies,enforcement priori?es,sanc?ons,trea?es and tariffs.Some of the Companys merchandise is imported from various countries,includingCanada,China and Mexico,and newly proposed tariffs and any addi?onal tariffs on products sourced from these or other countries could materially increaseour costs.There con?nues to exist significant uncertainty about the future economic and poli?cal rela?onship between the U.S.and other countries.Thesedevelopments,or the percep?on that any of them could occur,may have a material effect on global economic condi?ons,the stability of global financialmarkets or global trade,which may in turn impact product cost,disrupt supply chains or otherwise nega?vely impact our business,financial condi?on andresults of opera?on.8Table of ContentsThe Companys reliance on suppliers,including freight carriers and other third par?es in the Companys global supply chain,subjects it to various risks anduncertain?es which could adversely affect its financial results.The Company sources the products it sells from a wide variety of domes?c and interna?onal suppliers,and places significant reliance upon various thirdpar?es to transport,store and distribute those products to the Companys distribu?on centers,stores and customers.The Companys financial results dependon it securing acceptable terms with its suppliers for,among other things,the price of merchandise the Company purchases from them,funding for variousforms of promo?onal programs,payment terms and provisions covering returns and factory warran?es.To varying degrees,the Companys suppliers may beable to leverage their compe?ve advantages-for example,their scale,financial strength,the strength of their brand with customers,their own stores oronline channels or their rela?onships with other retailers-to the Companys commercial disadvantage.Generally,the Companys ability to nego?atefavorable terms with its suppliers is more difficult with suppliers for whom the Company purchases represent a smaller propor?on of their total revenues,consequently impac?ng the Companys profitability from such vendor rela?onships.If the Company encounters any of these issues with its suppliers,itsbusiness,financial condi?on,results of opera?ons and cash flows could be adversely impacted.In addi?on,the Companys suppliers,including those within its global supply chain,are impacted by global condi?ons that in turn may impact the Companysability to source merchandise at compe?ve prices or?mely supply product at levels adequate to meet consumer demand.For example,disrup?ons to theglobal supply chain resul?ng from lack of carrier capacity,labor shortages,geopoli?cal unrest,changes in foreign trade policies,port conges?on and/orclosures,amongst other factors,may nega?vely impact costs,inventory availability and opera?ng results.If suppliers increase prices charged to the Companyfor products,including transporta?on and distribu?on,as a result of these or other factors such as tariffs,heightened trade compliance and sanc?onsenforcement,infla?on or the cost of par?cipa?ng in vendor financing programs,it may nega?vely impact the Companys results.If the Company experiencestransi?ons or changeover with any of its significant vendors,or if its vendors experience financial difficul?es or are otherwise unable to deliver merchandiseto the Company on a?mely basis,or at all,the Company could have product shortages in its stores that could adversely affect customers percep?ons of theCompany and cause the Company to lose customers and sales.If the Company is unable to keep its desired exis?ng store loca?ons or open new loca?ons in desirable places on favorable terms,it could adversely affectits business,financial condi?on,results of opera?ons and cash flows.The Company began undertaking a restructuring and asset op?miza?on plan in late 2024,whereby it targeted closing approximately 500 stores and 200independent loca?ons during 2025.However,it does intend to con?nue to open new stores in a?rac?ve markets as it improves its business.There isuncertainty about the profitability of newly opened loca?ons,including whether newly opened stores will harm the profitability or comparable store sales ofexis?ng loca?ons.The profitability of newly opened and exis?ng loca?ons will depend on the compe?on the Company faces as well as its ability to properlystock,market and price the products desired by customers in their markets.The actual number and format of any new loca?ons to be opened and thesuccess of the Companys strategy will depend on a number of factors,including,among other things:the availability of desirable loca?ons;the nego?a?on of acceptable lease or purchase terms for new loca?ons;the availability of financial resources,including access to capital at cost-effec?ve interest rates;the Companys ability to expand its online offerings and sales;andthe Companys ability to manage the expansion and to hire,train and retain qualified team members.The Company competes with other retailers and businesses for suitable loca?ons for its stores.Local land use and zoning regula?ons,environmentalregula?ons and other regulatory requirements may impact its ability to find suitable loca?ons and influence the cost of construc?ng,renova?ng andopera?ng its stores.In addi?on,real estate,zoning,construc?on and other delays may adversely affect store openings and renova?ons and increase theCompanys costs.Further,changing local demographics at exis?ng store loca?ons may adversely affect revenue and profitability levels at those stores.Theearly termina?on or expira?on of leases at exis?ng store loca?ons may adversely affect the Company if the renewal terms of those leases are unacceptable toit and the Company is forced to close or relocate stores.If the Company determines to close or relocate a store subject to a lease,the Company may remainobligated under the applicable lease for the balance of the lease term.In addi?on to poten?ally incurring costs related to lease obliga?ons,the Company mayalso incur employee-related severance or other facility closure costs for stores that are closed or relocated.9Table of ContentsOmnichannel growth in the Companys business is complex and if the Company is unable to successfully maintain a relevant omnichannel experience forits customers,its sales and results of opera?ons could be adversely impacted.Omnichannel and e-commerce retail are compe?ve and evolving environments.Opera?ng an e-commerce pla?orm is a complex undertaking and exposesthe Company to risks and difficul?es frequently experienced by internet-based businesses,including risks related to the Companys ability to a?ract and retaincustomers on a cost-effec?ve basis and its ability to operate,support,expand and develop its internet opera?ons,website,mobile applica?ons and so?wareand other related opera?onal systems.Enhancing the customer experience through omnichannel programs such as buy-online-pickup-in-store,new or expanded delivery op?ons,the ability to shopthrough a mobile applica?on or other similar programs depends in part on the effec?veness of the Companys inventory management processes and systems,the effec?veness of its merchandising strategy and mix,its supply chain and distribu?on capabili?es,and the?ming and effec?veness of its marke?ngac?vi?es,par?cularly its promo?ons.Website or catalog down?me and other technology disrup?ons in its omnichannel business,including interrup?ons dueto cyber-related issues,aging informa?onal technology infrastructure or natural disasters,as well as supply and distribu?on delays and other related issuesmay nega?vely affect the Companys opera?ons.If the Company is not able to successfully operate or improve its e-commerce pla?orm and omnichannelbusiness,the Company may not be able to provide a relevant shopping experience or improve customer traffic,sales or margins,and the Companysreputa?on,opera?ons,financial condi?on,results of opera?ons and cash flows could be materially adversely affected.The Company depends on the services of many qualified execu?ves and other team members,whom the Company may not be able to a?ract,developand retain.The Companys success,to a significant extent,depends on the con?nued engagement,services and experience of its execu?ves and other team members.The Companys ability to a?ract,develop and retain an adequate number of qualified team members depends on factors such as employee morale,theCompanys reputa?on,compe?on from other employers,availability of qualified personnel,its ability to offer compe?ve compensa?on and benefitpackages and its ability to maintain a safe working environment.Failure to recruit or retain qualified team members may impact the Companys ability toserve its customers,increase its costs and impair its efficiency and ability to pursue growth opportuni?es.Addi?onally,turnover in execu?ve or other keyposi?ons can disrupt progress in implemen?ng business strategies,result in a loss of ins?tu?onal knowledge,impair the Companys ability to execute,distractother team members from their key areas of focus or otherwise nega?vely impact the Companys business and results.If the Company is unable to a?ractand retain personnel with exper?se in the required areas,there may be disrup?ons in its financial processes and repor?ng,or higher likelihood of controldeficiencies or future material weaknesses in internal control over financial repor?ng.The Company operates in a compe?ve labor market and has been inves?ng in key roles in its frontline organiza?on,and there is a risk that increases incompensa?on could have an adverse effect on the Companys profitability.Addi?onally,government regulated increases to employee hourly wage rates,along with the Companys ability to implement corresponding adjustments within its labor model and wage rates,could have a nega?ve impact on itsprofitability.Approximately 1.5%of the Companys team members are represented by unions.If these team members,or if non-union team members,wereto engage in a strike,work stoppage,or other slowdown,or if the terms and condi?ons in labor agreements were renego?ated,the Company couldexperience a disrup?on in its opera?ons and higher ongoing labor costs.The Company has established policies and procedures to help maintain the privacy and security of its customers,suppliers,and team members,as well asthe security and func?oning of its technology(business informa?on,computer systems,website and other online offerings).In the event of a securitybreach or other cyber security event,the Company could experience adverse opera?onal effects or interrup?ons and/or become subject to legal orregulatory proceedings,any of which could result in substan?al costs and damage to its reputa?on in the marketplace.To date the Company is not awarethat it has experienced a material cyber security incident.The nature of the Companys business requires it to receive,retain and transmit certain personal informa?on(PI)about its customers,suppliers and teammembers.Some of this PI is managed by or shared with third-party service providers.The Company uses contractual provisions and certain third-party riskmanagement processes to protect such PI and other confiden?al informa?on and to help ensure that technology func?ons remain opera?onal.Despite these efforts,a compromise of the Companys data security systems or those of businesses it interacts is possible.This could result in informa?onbeing obtained by unauthorized persons,adverse opera?onal effects,interrup?ons or other failures that could have a material adverse effect on theCompanys business,financial condi?on,results of opera?ons and cash flows.The Company develops,maintains and updates processes and systems to helpreduce the likelihood of an occurrence.10Table of ContentsInforma?on Security controls are costly and require constant,ongoing a?en?on as technologies change,privacy and informa?on security regula?ons change,and efforts to overcome security measures by bad actors con?nue to become ever more sophis?cated.The Company leverages a risk-based approach toselec?ng controls to reduce the likelihood of a failure.The cost of complying with stricter and more numerous,complex state data privacy laws(such as the California Consumer Privacy Act),data collec?on andinforma?on security laws and standards is also significant to the Company.Such laws and standards increase the Companys responsibility and liability inrela?on to personal data that it processes,and the Company may be required to put in place addi?onal mechanisms ensuring compliance with privacy lawsand regula?ons.Addi?onally,since the Company does not control its third-party service providers and its ability to monitor their data security is limited,the Company cannotensure the security measures they take will be sufficient to protect the Companys data.Despite the Companys efforts,its security measures may be breached due to a cyber a?ack,computer malware viruses,exploita?on of hardware andso?ware vulnerabili?es,team member error,malfeasance,fraudulent inducement(including so-called“social engineering”a?acks and“phishing”scams)orother acts.The Company maintains insurance coverage that may,subject to policy terms and condi?ons,cover certain aspects of cyber risks,such insurance coveragemay be insufficient to cover losses in any par?cular situa?on.Any breach,damage to or interference with the Companys equipment,its network,third-party providers,or unauthorized access could result in significantopera?onal difficul?es including legal and financial exposure and damage to the Companys reputa?on that could poten?ally have an adverse effect on itsbusiness.If the Company is unable to successfully integrate future acquisi?ons into its exis?ng opera?ons or implement joint ventures or other strategicrela?onships,it could adversely affect the Companys business,financial condi?on,results of opera?ons and cash flows.The Company may con?nue to make strategic acquisi?ons and enter into strategic rela?onships as an element of its strategy.Acquisi?ons,joint ventures andother strategic rela?onships involve certain risks that could cause the Companys growth and profitability to differ from its expecta?ons.The success of theseacquisi?ons and rela?onships depends on a number of factors,including but not limited to:the Companys ability to con?nue to iden?fy and acquire suitable targets or strategic partners,or to acquire addi?onal companies or enter intostrategic rela?onships,at favorable prices and/or with favorable terms;the Companys ability to obtain the full benefits envisioned by strategic transac?ons or rela?onships;the risk that managements a?en?on may be distracted;the Companys ability to a?ract and retain key personnel;the Companys ability to successfully integrate the opera?ons and systems of the acquired companies,and to achieve the strategic,opera?onal,financial or other an?cipated synergies of the acquisi?on or other transac?on or rela?onship;the performance of the Companys strategic partners;significant transac?on or integra?on costs that may not be offset by the synergies or other benefits achieved in the near term or at all;addi?onal opera?onal risks,such as those associated with doing business interna?onally or expanding opera?ons into new territories,geographiesor channels,that may become applicable to the Company;andloss con?ngencies that the Company may assume or become subject to,whether known or unknown,of acquired companies,which could relate topast,present or future facts,events,circumstances or occurrences.11Table of ContentsThe Company is dependent on its suppliers to supply it with products that comply with safety and quality standards at compe?ve prices.The Company is dependent on its vendors con?nuing to supply it with quality products on payment terms that are favorable to the Company.The currentgeopoli?cal environment,including tariffs,customs and trade and economic sanc?ons,may require us to change our supply chain or to source products fromdifferent regions,which could come with risks.If the Companys merchandise offerings do not meet its customers expecta?ons regarding safety,innova?onand quality,the Company could experience lost sales,increased costs and exposure to legal and reputa?onal risk.The Companys suppliers are subject toapplicable product safety laws,and the Company is dependent on them to ensure that the products the Company buys comply with all safety and qualitystandards.The Company also has established standards for product safety and quality and workplace standards that it requires all its suppliers to meet.TheCompany does not condone human trafficking,forced labor,child labor,harassment or abuse of any kind,and it expects its suppliers to operate within thesesame principles and legal requirements.The Companys ability to find qualified suppliers who can supply products in a?mely and efficient manner that meetthe Companys standards,?meline and other needs can be challenging.Events that give rise to actual,poten?al or perceived product safety concerns couldexpose the Company to government enforcement ac?on and private li?ga?on and result in costly product recalls and other liabili?es.Suppliers may also failto invest adequately in design,produc?on or distribu?on facili?es,may reduce their customer incen?ves,adver?sing and promo?onal ac?vi?es or changetheir pricing policies.To the extent the Companys suppliers are subject to addi?onal government regula?on of their product design and/or manufacturingprocesses,or the imposi?on of new tariffs,the cost of the merchandise the Company purchases may rise.In addi?on,nega?ve customer percep?onsregarding the safety or quality of the products the Company sells could cause its customers to seek alterna?ve sources for their needs,resul?ng in lost sales.In those circumstances,it may be difficult and costly for the Company to regain the confidence of the Companys customers.Because the Company is involved in li?ga?on from?me to?me,and is subject to numerous laws and governmental regula?ons,the Company could incursubstan?al judgments,fines,legal fees and other costs.The Company is some?mes the subject of complaints or li?ga?on,which may include class ac?on li?ga?on from customers,team members or others forvarious ac?ons.From?me to?me,the company is involved in li?ga?on involving claims related to,among other things,breach of contract,tor?ous conduct,employment,discrimina?on,breach of laws or regula?ons(including The Americans With Disabili?es Act),payment of wages,exposure to asbestos orpoten?ally hazardous products,real estate and product defects.The damages sought against the Company in some of these li?ga?on proceedings aresubstan?al.Although the company maintains liability insurance for some li?ga?on claims,if one or more of the claims were to greatly exceed the Companysinsurance coverage limits or if the Companys insurance policies do not cover a claim,this could have a material adverse effect on the Companys business,financial condi?on,results of opera?ons and cash flows.For instance,the company is subject to a poten?al securi?es class ac?on regarding past publicdisclosures(See Item 3.Legal Proceedings of this Annual Report on Form 10-K)and to numerous lawsuits alleging injury as a result of exposure to asbestos-containing products(see Note 14.Con?ngencies,of the Notes to the Consolidated Financial Statements included herein).The Company is subject to numerous federal,state and local laws and governmental regula?ons rela?ng to,among other things,environmental protec?on,product quality and safety standards,weights and measures,building and zoning requirements,labor and employment,discrimina?on,an?-bribery/an?-corrup?on,false claims,data privacy,income taxes and trade sanc?ons and compliance.Compliance with exis?ng and future laws and regula?ons couldincrease the cost of doing business and adversely affect the Companys results of opera?ons.If the company fails to comply with exis?ng or future laws orregula?ons,the Company may be subject to governmental or judicial fines or sanc?ons while incurring substan?al legal fees and costs as well as reputa?onalrisk.In addi?on,the Companys capital and opera?ng expenses could increase due to remedia?on measures that may be required if the Company is found tobe noncompliant with any exis?ng or future laws or regula?ons.Business interrup?ons may nega?vely impact the Companys store hours,operability of our computer systems and the availability and cost ofmerchandise,which may adversely impact our sales and profitability.Hurricanes,tornadoes,earthquakes,wildfires or other natural disasters,war or acts of terrorism,civil or geopoli?cal unrest,public health issues,epidemics orpandemics or the threat of any of these incidents or others,may have a nega?ve impact on the Companys ability to obtain merchandise to sell in theCompanys stores,result in certain of stores being closed for an extended period of?me,nega?vely affect the lives of the Companys customers or teammembers,or otherwise nega?vely impact the Companys opera?ons.Some of the Companys merchandise is imported from other countries.If importedgoods become difficult or impossible to import into the United States due to business interrup?on(including regula?on of expor?ng or impor?ng),and if thecompany cannot obtain such merchandise from other sources at similar costs and without an adverse delay,sales and profit margins may be nega?velyaffected.12Table of ContentsIn the event that commercial transporta?on,including the global shipping industry,is curtailed or substan?ally delayed,the business may be adverselyimpacted due to difficulty receiving merchandise from the Companys suppliers and/or transpor?ng it to the Companys stores.Terrorist a?acks,warfare,geopoli?cal instability,or uncertainty or insurrec?on involving any oil producing country could result in an abrupt increase in theprice of crude oil,gasoline and diesel fuel.Such price increases would increase the cost of doing business for the Company and the Companys suppliers,andalso nega?vely impact customers disposable income,causing an adverse impact on the Companys business,sales,profit margins and results of opera?ons.The Company has extensive reliance on computer systems and the systems of business partners to manage data or inventory,process transac?ons and reportresults.These systems are subject to damage or interrup?on due to various reasons such as power outages,telecommunica?on failures,computer viruses,security breaches,malicious cyber a?acks and catastrophic events or occasional system breakdowns related to ordinary use or wear and tear.If computersystems of the Company or its business partners fail,the company may experience loss of cri?cal data and interrup?ons or delays in the Companys ability toprocess transac?ons and manage inventory.Any significant business interrup?ons may make it difficult or impossible to con?nue opera?ons,and any disasterrecovery or crisis management plans the Company may employ may not suffice in any par?cular situa?on to avoid a significant adverse impact to thebusiness,financial condi?on and results of opera?ons.Risks Related to the Companys Industry and the Business EnvironmentIf overall demand for the products that the Company sells declines,the Companys business,financial condi?on,results of opera?ons and cash flows willsuffer.Decreased demand could also nega?vely impact the Companys stock price.Overall demand for products the Company sells depends on many factors and may decrease due to any number of reasons,including:a decrease in the total number of vehicles on the road or in the number of annual miles driven or significant increase in the use of ride sharingservices,because fewer vehicles means less maintenance and repairs,and lower vehicle mileage,which decreases the need for maintenance andrepair;the economy,because as consumers reduce their discre?onary spending by deferring vehicle maintenance or repair,sales may decline and as newcar purchases increase,the number of cars requiring maintenance and repair may decrease;the weather,because milder weather condi?ons may lower the failure rates of automobile parts while extended periods of rain and winterprecipita?on may cause the Companys customers to defer elec?ve maintenance and repair of their vehicles;addi?onally,overall climate changescould create greater variability in weather events,which may result in greater vola?lity for the Companys business,or lead to other significantweather condi?ons that could impact the Companys business;the average dura?on of vehicle manufacturer warran?es and average age of vehicles driven,because newer cars typically require fewer repairs andwill be repaired by the manufacturers dealer networks using dealer parts pursuant to warran?es(which have gradually increased in dura?on and/ormileage expira?on over the recent past),while vehicles that are seven years old and older are generally no longer covered under manufacturerswarran?es and tend to need more maintenance and repair;an increase in internet-based retailers,because poten?ally favorable prices and ease of use of purchasing parts via other websites on the internetmay decrease the need for customers to visit and purchase their a?ermarket parts from the Companys physical stores and may cause fewercustomers to order a?ermarket parts on the Companys website;technological advances,including the rate of adop?on of electric vehicles,hybrid vehicles,ride sharing services,alterna?ve modes of transporta?on,autonomously driven vehicles and future legisla?on related thereto,and the increase in the quality of vehicles manufactured,because vehicles thatneed less frequent maintenance or have lower part failure rates will require less frequent repairs using a?ermarket parts and,in the case of electricand hybrid vehicles,do not require or require less frequent oil changes;andthe refusal of vehicle manufacturers to make available diagnos?c,repair and maintenance informa?on to the automo?ve a?ermarket industry thatthe Companys professional and DIY customers require to diagnose,repair and maintain their vehicles,because this may force consumers to have amajority of diagnos?c work,repairs and maintenance performed by the vehicle manufacturers dealer networks.13Table of ContentsThe Company may be adversely affected by legal,regulatory or market responses regarding technological adapta?on in the automo?ve industry.Policy makers in the U.S.may enact legisla?ve or regulatory proposals that would impose mandatory requirements on greenhouse gas emissions andencourage more rapid adop?on of vehicles that minimize emissions.Such laws,if enacted,are likely to impact the Companys business in a number of ways.For example,significant increases in fuel economy requirements,new federal or state restric?ons on emissions of carbon dioxide or new federal or stateincen?ve programs that may be imposed on vehicles and automobile fuels could adversely affect annual miles driven,purchases of used vehicles that arelikely to have a higher need for maintenance and repair,or the relevancy of the products the Company sells to new vehicles coming into produc?on.TheCompany may not be able to accurately predict,prepare for and respond to new kinds of technological innova?ons with respect to electric vehicles and othertechnologies that minimize emissions.Addi?onally,compliance with any new or more stringent laws or regula?ons,or stricter interpreta?ons of exis?ng laws,could require addi?onal expenditures by the Company or its suppliers.The Companys inability to appropriately respond to such changes,adapt theCompanys business to meet evolving demands or innovate to remain compe?ve could adversely impact the Companys business,financial condi?on,resultsof opera?ons or cash flows.If the Company is unable to compete successfully against other companies in the automo?ve a?ermarket industry,the Company may lose customers andmarket share and the Companys revenues may decline.The sale of automo?ve parts,accessories and maintenance items is highly compe?ve and influenced by a number of factors,including name recogni?on,loca?on,price,quality,product availability and customer service.The Company competes in both the professional and DIY categories of the automo?vea?ermarket industry,primarily with:(i)na?onal and regional chains of automo?ve parts stores,(ii)internet-based retailers,(iii)discount stores and massmerchandisers that carry automo?ve products,(iv)wholesalers or jobbers stores,including those associated with na?onal parts distributors or associa?ons,(v)independently owned stores and(vi)automobile dealers that supply parts.These compe?tors and the level of compe?on vary by market.Some of theCompanys compe?tors may possess advantages over the Company in certain markets the Company shares,including with respect to the level of marke?ngac?vi?es,number of stores,store loca?ons,store layouts,opera?ng histories,name recogni?on,established customer bases,vendor rela?onships,distribu?on network,product availability,employee staffing,prices and product warran?es.Internet-based retailers may possess cost advantages over theCompany due to lower overhead costs,?me and travel savings and ability to price compe?vely.In order to compete favorably,the Company may need toincrease availability,change inventory assortment,increase delivery speeds,incur higher shipping costs or lower prices,any of which could adversely impactthe Companys financial results.Consolida?on among the Companys compe?tors could enhance their market share and financial posi?on,provide them withthe ability to achieve be?er purchasing terms and allow them to provide more compe?ve prices to customers for whom the Company competes.In addi?on,the Companys reputa?on is cri?cal to the Companys con?nued success.Customers are increasingly shopping,reading reviews and comparingproducts and prices online.If the Company fails to maintain high standards for,or receive nega?ve publicity(whether through social media or tradi?onalmedia channels)rela?ng to,product safety and quality,as well as the Companys integrity and reputa?on,the Company could lose customers due tocompe?on.The products the Company sells are both third-party vendor brands and the Companys owned brands.If the perceived quality or value of thebrands the Company sells declines in the percep?on of its customers,the Companys results of opera?ons could be nega?vely affected.Compe?on may require the Company to reduce its prices below the Companys normal selling prices or increase the Companys promo?onal spending,which could lower the Companys revenue and profitability.Compe?ve disadvantages may also prevent the Company from introducing new product lines,require the Company to discon?nue current product offerings,or change some of the Companys current opera?ng strategies.If the Company does not havethe resources,exper?se and consistent execu?on,or otherwise fail to develop successful strategies,to address these poten?al compe?ve disadvantages,the Company may lose customers and market share,the Companys revenues and profit margins may decline and the Company may be less profitable orpoten?ally unprofitable.The Companys inventory and ability to meet customer expecta?ons may be adversely impacted by factors out of the Companys control.For the por?on of the Companys inventory manufactured and/or sourced outside the United States,geopoli?cal changes,changes in trade regula?ons ortariff rates,currency fluctua?ons,work stoppages,labor strikes,unionizing ac?vity,port delays,shipping disrup?ons,civil unrest,natural disasters,pandemicsand other factors beyond the Companys control may increase the cost of items the Company purchases,lead to lengthy delays in acquiring products orcreate shortages that could have a material adverse effect on the Companys sales and profitability.In addi?on,unan?cipated changes in consumerpreferences or any unforeseen hurdles in mee?ng the Companys customers needs for automo?ve products(par?cularly parts availability)in a?melymanner could undermine the Companys business strategy.14Table of ContentsDeteriora?on of general macroeconomic condi?ons,including unemployment,infla?on or defla?on,rising consumer debt levels,and/or high fuel andenergy costs,could have a nega?ve impact on the Companys business,financial condi?on,results of opera?ons and cash flows due to impacts on theCompanys suppliers,customers and opera?ng results.The Companys business depends on developing and maintaining close rela?onships with the Companys suppliers and on the Companys suppliers abilityand willingness to sell quality products to the Company at favorable prices and terms.Many factors outside the Companys control may harm theserela?onships and the ability or willingness of these suppliers to sell the Company products on favorable terms.Such factors include a general decline in theeconomy and economic condi?ons and prolonged recessionary condi?ons.These events could nega?vely affect the Companys suppliers opera?ons andmake it difficult for them to obtain the credit lines or loans necessary to finance their opera?ons in the short-term or long-term and meet the Companysproduct requirements.Financial or opera?onal difficul?es that some of the Companys suppliers may face could also increase the cost of the products theCompany purchases from them or the Companys ability to source products from them.The Company might not be able to pass its increased costs on to itscustomers.If the Companys suppliers fail to develop new products,the Company may not be able to meet the demands of the Companys customers andresults of opera?ons could be nega?vely affected.In addi?on,the trend towards consolida?on among automo?ve parts suppliers as well as the off-shoring of manufacturing capacity to foreign countries maydisrupt or end the Companys rela?onship with certain suppliers,and could lead to less compe?on and result in higher prices.The Company could also benega?vely impacted by suppliers who might experience bankruptcies,work stoppages,labor strikes,changes in foreign or domes?c trade policies,changes intariff rates or other interrup?ons to or difficul?es in the manufacture or supply of the products we purchase from them.Deteriora?on in macroeconomic condi?ons or an increase in fuel costs or proposed or addi?onal tariffs may have a nega?ve impact on the Companyscustomers net worth,financial resources,disposable income or willingness or ability to pay for accessories,maintenance or repairs for their vehicles,resul?ng in lower sales.An increase in fuel costs may also reduce the overall number of miles driven by the Companys customers,resul?ng in fewer partsfailures and a reduced need for elec?ve maintenance.Rising energy prices also directly impact the Companys opera?ng and product costs,including the Companys store,supply chain,professional delivery,u?lityand product acquisi?on costs.Risks Related to the Companys Common Stock and Financial Condi?onThe Companys level of indebtedness,a downgrade in the Companys credit ra?ngs or a deteriora?on in global credit markets could limit the cash flowavailable for opera?ons and could adversely affect the Companys ability to service its debt or obtain addi?onal financing.The Companys level of indebtedness could restrict the Companys opera?ons and make it more difficult for it to sa?sfy its debt obliga?ons.For example,theCompanys level of indebtedness could,among other things:affect the Companys liquidity by limi?ng the Companys ability to obtain addi?onal financing for working capital;limit the Companys ability to obtain financing for capital expenditures and acquisi?ons or make any available financing more costly;require the Company to dedicate all or a substan?al por?on of the Companys cash flow to service the Companys debt,which would reduce fundsavailable for other business purposes,such as capital expenditures,dividends or acquisi?ons;limit the Companys flexibility in planning for or reac?ng to changes in the markets in which the Company competes;place the Company at a compe?ve disadvantage rela?ve to the Companys compe?tors who may have less indebtedness;render the Company more vulnerable to general adverse economic and industry condi?ons;andmake it more difficult for the Company to sa?sfy the Companys financial obliga?ons.The indentures governing the Companys senior unsecured notes and credit agreement governing the Companys credit facili?es contain financial and otherrestric?ve covenants.The Companys failure to comply with those covenants could result in an event of default which,if not cured or waived,could result inthe accelera?on of all of its debt,including such notes.15Table of ContentsIn addi?on,the Companys overall credit ra?ng may be nega?vely impacted by the Companys performance,deteriora?ng and uncertain credit markets orother factors that may or may not be within the Companys control.The interest rates on the Companys revolving credit facility are linked directly to theCompanys credit ra?ngs and the interest rates on future debt the Company issues or incurs likely would be affected by the Companys credit ra?ngs in effectat the?me such debt is issued or incurred.Accordingly,nega?ve impact on the Companys credit ra?ngs may result in higher interest rates and interestexpense on any borrowings under the Companys revolving credit facility and less favorable terms on the Companys other opera?ng and financingarrangements,including addi?onal debt the Company may issue or incur in the future.In addi?on,it could reduce the a?rac?veness of certain vendorpayment programs whereby third-party ins?tu?ons finance arrangements to the Companys vendors based on the Companys credit ra?ng,which could resultin increased working capital requirements.Furthermore,the Companys revolving credit facility contemplates securi?za?on of the facility in the event offurther downgrade in credit ra?ngs.Securi?za?on of the Companys assets may make it more difficult for the Company to access financing on favorableterms.Condi?ons and events in the global credit market could have a material adverse effect on the Companys access to short-and long-term borrowings to financethe Companys opera?ons and the terms and cost of that debt.It is possible that one or more of the banks that provide the Company with financing under itsrevolving credit facility may fail to honor the terms of the Companys exis?ng credit facility or be financially unable to provide the unused credit as a result ofsignificant deteriora?on in such banks financial condi?on.An inability to obtain sufficient financing at cost-effec?ve rates could have a material adverse effecton the Companys business,financial condi?on,results of opera?ons and cash flows.The market price of the Companys common stock may be vola?le and could expose us to securi?es class ac?on li?ga?on.The stock market and the price of the Companys common stock may be subject to wide fluctua?ons based upon general economic and market condi?ons inaddi?on to the Companys public percep?on and performance.Downturns in the stock market may cause the price of the Companys common stock todecline.The market price of the Companys stock may also be affected by the Companys ability to meet analysts expecta?ons or financial guidance that theCompany provides to the investment community.Inability to accurately forecast the Companys opera?onal and financial performance could increasevola?lity in the Companys stock.Failure to meet expecta?ons set by the Company or its analysts,even slightly,could have an adverse effect on the price ofthe Companys common stock.In the past,following periods of vola?lity in the market price of a companys securi?es,securi?es class ac?on li?ga?on haso?en been ins?tuted against such a company.Such li?ga?on could result in substan?al costs and a diversion of the Companys a?en?on and resources,whichcould have an adverse effect on the Companys business.For example,a poten?al securi?es class ac?on regarding past public disclosures and a relatedderiva?ve shareholder li?ga?on suit have been filed against the Company following a period of significant decline in the Companys stock price(See Item 3.Legal Proceedings of this Annual Report on Form 10-K).The amount and frequency of the Companys share repurchases and dividend payments may fluctuate.The amount,?ming and execu?on of the Companys share repurchase program may fluctuate based on the Companys priori?es for the use of cash for otherpurposes such as opera?onal spending,capital spending,acquisi?ons or repayment or repurchase of debt.Changes in opera?onal results,cash flows,tax lawsand the Companys share price could also impact the Companys share repurchase program and other capital ac?vi?es.The Companys revolving credit facilitycontains restric?ons on the Companys ability to increase its dividend to shareholders and generally prohibits open market repurchases of the Companysstock.Addi?onally,decisions to return capital to stockholders,including through the Companys repurchase program or the issuance of dividends on theCompanys common stock,remain subject to determina?on of the Companys Board of Directors that any such ac?vity is in the best interests of theCompanys stockholders and is in compliance with all applicable laws and contractual obliga?ons.Item 1B.Unresolved Staff Comments.None.Item 1C.Cybersecurity.The Company has processes in place for assessing,iden?fying and managing risks from poten?al cyber threats and vulnerabili?es.To protect the Companysinforma?on systems from cyber threats,the Company uses a variety of tools,controls,technologies,methods,systems and other processes that are designedto prevent,detect,escalate,inves?gate,mi?gate and/or remediate data loss,the?,misuse,unauthorized access or other security incidents or vulnerabili?esaffec?ng informa?on systems and data.16Table of ContentsThe Companys Chief Informa?on Security Officer(“CISO”)and Vice President,Chief Audit Execu?ve,who oversees the Companys enterprise riskmanagement(“ERM”)framework,partner on defini?on and treatment of cyber risks.Cybersecurity is a component of the Companys ERM framework andprocesses.The Company u?lizes a range of capabili?es to help iden?fy and assess poten?al cyber threats and vulnerabili?es,which feed into thedevelopment and regular upda?ng of a risk mi?ga?on plan to help manage the Companys cybersecurity risk posture.The Company evaluates cyber securityrisks on an ongoing basis across several categories in terms of probability of the likelihood and magnitude of poten?al impact,using evalua?on results toinform areas of focus and priori?za?on.The Company evaluates risks associated with use of third-party providers through a lifecycle-based approach,conduc?ng risk-based due diligence beforeengagement,using contractual provisions to appor?on risk,and for certain third-party providers,engaging in architectural review and valida?on at thebeginning of engagement.The Company uses third par?es to assist with penetra?on tes?ng,simulated a?acks and survey and other threat intelligencerepor?ng on third par?es,as well as review and enhancement of associated response processes.The Companys cyber risk mi?ga?on plan is reviewed on a bimonthly cadence with a cross-func?onal Cyber Steering Commi?ee,the managerial governingbody that regularly reviews the top cyber risks and receives reports on progress on key cyber ini?a?ves.The Companys CISO leads the Cyber SteeringCommi?ee,which also includes individuals with experience iden?fying and managing enterprise risks,including the Companys President and Chief Execu?veOfficer,Execu?ve Vice President,Chief Financial Officer,Execu?ve Vice President,General Counsel and Corporate Secretary and Vice President,Chief AuditExecu?ve,as well as individuals with technical exper?se in informa?on technology,data governance and cyber ma?ers and/or experience in managing cyberincident responses,including the Companys Execu?ve Vice President,Chief Technology Officer,Vice President,Informa?on Technology Opera?ons and SeniorVice President,Deputy General Counsel and Chief Compliance Officer.The Internal Audit func?on assesses cyber security risks and audits components of cyber security on an annual basis.At least every three years,the Companyuses an external party to evaluate the maturity of the program against the Na?onal Ins?tute of Standards and Technology(“NIST”)Cybersecurity Framework.The Audit Commi?ee of the Companys Board of Directors is charged with reviewing,discussing with management and overseeing the Companys informa?ontechnology and cybersecurity risk.The Audit Commi?ee receives reports on cybersecurity risk and management thereof at least semi-annually,and the fullBoard of Directors receives such reports at least annually.As of December 28,2024,we are not aware of any instances of material cybersecurity incidents that impacted the Company in the last three years.Item 2.Proper?es.The following table summarizes the loca?on,ownership status and total square footage of space u?lized for distribu?on centers,principal corporate officeand retail stores as of December 28,2024:Square Footage(in thousands)Loca?onLeasedOwnedDistribu?on centers28 loca?ons in 22 U.S.states and three Canadian provinces3,929 4,591 Execu?ve officeRaleigh NC245 Stores4,639 stores in 48 U.S.states and two U.S.territories and 149 stores in sixCanadian provinces31,637 6,276 Item 3.Legal Proceedings.Refer to discussion in Note 14.Con?ngencies,of the Notes to the Consolidated Financial Statements included herein for informa?on rela?ng to legalproceedings.Item 4.Mine Safety Disclosures.Not applicable.17Table of ContentsPART IIItem 5.Market for Registrants Common Equity,Related Stockholder Ma?ers and Issuer Purchases of Equity Securi?es.The Companys common stock is listed on the New York Stock Exchange under the symbol“AAP.”As of February 21,2025,there were 1,112 holders of record of common stock,which does not include the number of beneficial owners whose shares wererepresented by security posi?on lis?ngs.The following table sets forth informa?on with respect to repurchases of the Companys common stock for the fourth quarter ended December 28,2024:PeriodTotal Number ofShares Purchased Average PricePaid per Share Total Number of SharesPurchased as Part ofPublicly AnnouncedProgramsMaximum Dollar Valuethat May Yet BePurchased Under thePrograms(in thousands)October 6,2024 to November 2,2024$947,339 November 3,2024 to November 30,202418,062$38.13$947,339 December 1,2024 to December 28,20244,615$43.66$947,339 Total22,677$39.26 All repurchases reported in this table relate to the withholding of shares upon the ves?ng of restricted stock units to se?le income tax liabili?es(“net se?lement”).The aggregate cost ofrepurchasing shares in connec?on with the net se?lement of shares issued as a result of the ves?ng of restricted stock units was$0.9 million,or an average price of$39.26 per share,during thetwelve weeks ended December 28,2024.On February 8,2022,the Board of Directors authorized an addi?onal$1 billion to the exis?ng share repurchase program.This authoriza?on is incremental to the$1.7 billion that was previouslyauthorized by the Board of Directors.Amendment No.5 to the Companys 2021 Credit Agreement currently generally prohibits open market share repurchases.(1)(1)(2)(1)(2)18Table of ContentsStock Price PerformanceThe following graph shows a comparison of the cumula?ve total return on the Companys common stock,the Standard&Poors(“S&P”)500 Index and theS&Ps Retail Index.The graph assumes that the value of an investment in the Companys common stock was$100.00 on December 28,2019,and that anydividends have been reinvested.The comparison in the graph below is based solely on historical data and is not intended to forecast the possible futureperformance of the Companys common stock.COMPARISON OF CUMULATIVE TOTAL RETURN AMONGADVANCE AUTO PARTS,INC.,S&P 500 INDEXAND S&P RETAIL INDEXCompany/IndexDecember 28,2019January 2,2021January 1,2022December 31,2022December 30,2023December 28,2024Advance Auto Parts$100.00$100.24$155.04$98.45$40.70$29.34 S&P 500 Index$100.00$118.08$151.98$124.46$157.17$199.46 S&P Retail Index$100.00$145.42$173.50$114.02$162.36$219.96 19Table of ContentsItem 6.Selected Quarterly Financial Data.The following table sets forth the Companys selected quarterly financial data.This data should be read along with“Managements Discussion and Analysis ofFinancial Condi?on and Results of Opera?ons”and the Companys consolidated financial statements and the related notes included elsewhere in this report.On August 22,2024,the Company entered into a defini?ve purchase agreement to sell Worldpac for$1.5 billion,with customary purchase price adjustmentsfor working capital and other items.The Companys sale of Worldpac was progress towards the changing landscape of the business with increased focus onthe Advance blended-box model.The transac?on closed on November 1,2024.Net proceeds from the transac?on a?er paying transac?on fees and excludingthe impact of taxes was approximately$1.47 billion.This was a strategic shi?in the Companys business,and as such,beginning in third quarter of 2024,Worldpac was presented as discon?nued opera?ons in the Companys Consolidated Financial Statements.As a result,the Company has recast its quarterlyresults for 2024 and 2023.For the year ended December 28,2024,the decline in opera?ng results was primarily due to inventory-related charges a?ributable to liquida?on sales as aresult of store closures and streamlining inventory assortment resul?ng from the Board-approved restructuring and asset op?miza?on plan(“2024Restructuring Plan”).Refer to Note 3.Restructuring of the Notes to the Consolidated Financial Statements included herein for further details.For the quarters ended(in thousands,except per share data)December 28,2024October 5,2024July 13,2024April 20,2024Net sales$1,996,025$2,147,991$2,177,836$2,772,475 Gross profit347,117 907,898 949,465 1,204,041 Net(loss)income from con?nuing opera?ons(609,531)(25,363)30,506 17,433 Net income from discon?nued opera?ons194,754 19,349 14,485 22,579 Net(loss)income$(414,777)$(6,014)$44,991$40,012 Basic(loss)earnings per common share from con?nuingopera?ons$(10.20)$(0.42)$0.51$0.29 Basic earnings per common share from discon?nued opera?ons3.26 0.32 0.24 0.38 Basic(loss)earnings per share$(6.94)$(0.10)$0.75$0.67 Diluted(loss)earnings per common share from con?nuingopera?ons$(10.16)$(0.42)$0.51$0.29 Diluted earnings per common share from discon?nued opera?ons3.24 0.32 0.24 0.38 Diluted(loss)earnings per share$(6.92)$(0.10)$0.75$0.67 20Table of ContentsFor the quarters ended(in thousands,except per share data)December 30,2023October 7,2023July 15,2023April 22,2023Net sales$2,014,405$2,218,205$2,190,407$2,786,058 Gross profit819,629 817,567 969,795 1,253,118 Net(loss)income from con?nuing opera?ons(35,190)(74,186)55,838 23,514 Net income from discon?nued opera?ons62 12,149 22,739 24,809 Net(loss)income$(35,128)$(62,037)$78,577$48,323 Basic(loss)earnings per common share from con?nuingopera?ons$(0.59)$(1.25)$0.94$0.40 Basic earnings per common share from discon?nued opera?ons 0.20 0.38 0.41 Basic(loss)earnings per share$(0.59)$(1.05)$1.32$0.81 Diluted(loss)earnings per common share from con?nuingopera?ons$(0.59)$(1.24)$0.94$0.39 Diluted earnings per common share from discon?nued opera?ons 0.20 0.38 0.42 Diluted(loss)earnings per share$(0.59)$(1.04)$1.32$0.81 Note:Quarterly balances presented may not add up to the totals disclosed on the Consolidated Statements of Opera?ons due to rounding.Item 7.Managements Discussion and Analysis of Financial Condi?on and Results of Opera?ons.The following discussion and analysis of financial condi?on and results of opera?ons should be read in conjunc?on with the Companys consolidated historicalfinancial statements and the notes to those statements that appear elsewhere in this report.The Companys discussion contains forward-looking statementsbased upon current expecta?ons that involve risks and uncertain?es,such as the Companys plans,objec?ves,expecta?ons and inten?ons.Actual results andthe?ming of events could differ materially from those an?cipated in these forward-looking statements as a result of a number of factors,including those setforth under the sec?on?tled“Part 1.Item 1A.Risk Factors”elsewhere in this report.The discussion of the Companys financial condi?on and changes in theCompanys results of opera?ons,liquidity and capital resources for the fiscal year ended December 30,2023(“2023”)compared with the fiscal year endedDecember 31,2022(“2022”)has been omi?ed from this Form 10-K,but are included in“Item 7.Managements Discussion and Analysis of Financial Condi?onand Results of Opera?ons”of the Companys Annual Report on Form 10-K for 2023,filed with the Securi?es and Exchange Commission(“SEC”)on March 12,2024,and the amended Annual Report on Form 10-K/A filed with the SEC on May 30,2024(collec?vely the“2023 Form 10-K”).Amounts are presented inthousands,except per share data,unless otherwise stated.Management OverviewOn August 22,2024,the Company entered into a defini?ve purchase agreement to sell Worldpac,and on November 1,2024,the Company completed thesale.As a result,Worldpac was presented as discon?nued opera?ons beginning in the third quarter of 2024.Unless otherwise noted,the discussion belowrelates to the Companys con?nuing opera?ons.A high-level summary of the Companys financial results and other highlights from 2024 includes:Net sales from con?nuing opera?ons during 2024 were$9.1 billion,a decrease of 1.2%compared with 2023,driven by a decrease in price and volumepar?ally offset by a favorable product mix.Comparable store sales declined 0.7%.Gross profit margin from con?nuing opera?ons for 2024 was 37.5%of net sales,a decrease of 444 basis points compared with 2023,primarily due toinventory-related charges a?ributable to the loca?on closures and streamlining product assortment resul?ng from the Board-approved restructuring andasset op?miza?on plan(“2024 Restructuring Plan”).Opera?ng loss from con?nuing opera?ons for 2024 was$713.3 million,a decrease of$752.2 million from 2023.As a percentage of net sales,opera?ngloss was 7.8%,a decrease of 827 basis points compared with 2023.This decrease was primarily a?ributable to gross margin decline and the impairmentof long-lived assets due to the 2024 Restructuring Plan.Cash flows provided by opera?ng ac?vi?es from con?nuing opera?ons was$140.5 million during 2024,a decrease of 0.9%compared with 2023,primarily a?ributable to an increase in net working capital offset by lower net income and provision for deferred income taxes compared with 2023 prioryear.Diluted earnings per share(“Diluted EPS”)from con?nuing opera?ons was a loss of$9.80 during 2024 compared with a loss of$0.50 in 2023.21Table of ContentsRefer to“Results of Opera?ons”and“Liquidity and Capital Resources”for further details on the Companys results.Business and Risk UpdateThe Company con?nues to make progress on the various elements of its business plan,which is focused on improving the customer experience,marginexpansion,and driving consistent execu?on for both professional and DIY customers.To achieve these improvements,the Company has undertaken plannedstrategic ac?ons to help build a founda?on for long-term success across the organiza?on,which include:The comple?on of the sale of Worldpac with net proceeds of approximately$1.47 billion a?er transac?on costs and excluding the impacts of taxes;Comple?ng an assessment of the produc?vity of all assets,including company-owned stores and Carquest Independents,to achieve merchandisingexcellence;The 2024 Restructuring Plan designed to improve the Companys profitability and growth poten?al and streamline its opera?ons;Reducing costs to remain compe?ve while reinves?ng in the frontline;Making organiza?onal changes to posi?on the Company for success;andConsolida?ng the Companys supply chain.On November 13,2024,the Companys Board of Directors approved the 2024 Restructuring Plan which is designed to improve the Companys profitabilityand growth poten?al and streamline its opera?ons.This plan is supplemental to other ongoing ini?a?ves to simplify the Companys business and improveprofitable growth and entails,among other items,certain store and independent loca?on closures,streamlining product assortment and headcountreduc?ons and organiza?onal design changes to align the Companys workforce to the expected needs of the Companys business.The Company is alsopursuing efficiencies in procurement,pricing and professional and outside services,in addi?on to opera?onal efficiencies.Refer to Liquidity and CapitalResources and Note 3.Restructuring for further details.Industry UpdateOpera?ng within the automo?ve a?ermarket industry,the Company is influenced by a number of general macroeconomic factors,many of which are similarto those affec?ng the overall retail industry.In addi?on to the“Business and Risk Update”sec?on included within this Managements Discussion and Analysisof Financial Condi?on and Results of Opera?ons,these factors include,but are not limited to:Infla?onary pressures,including logis?cs and laborGlobal supply chain disrup?onsCost of fuelMiles drivenUnemployment ratesInterest ratesConsumer confidence and purchasing powerCompe?onChanges in new car salesEconomic and geopoli?cal uncertaintyIncreased foreign currency exchange vola?lityWhile these factors tend to fluctuate,the Company remains confident in the long-term growth prospects for the automo?ve parts industry.22Table of ContentsResults of Opera?onsThe following table sets forth certain of the Companys opera?ng data from con?nuing opera?ons expressed as a percentage of net sales for the periodsindicated.Year Ended2024 vs.2023$ChangeBasisPoints2023 vs.2022$ChangeBasisPoints(in millions)December 28,2024December 30,2023December 31,2022Net sales$9,094.3 100.0%$9,209.1 100.0%$9,148.9 100.0%$(114.8)$60.2 Cost of sales5,685.8 62.5 5,349.0 58.1 4,916.0 53.7 336.8 443.7 433.0 435.0 Gross profit3,408.5 37.5 3,860.1 41.9 4,232.9 46.3(451.6)(443.7)(372.8)(435.0)SG&A exclusive ofrestructuring and relatedexpenses3,812.9 41.9 3,805.2 41.3 3,708.3 40.5 7.7 60.6 96.9 78.8 Restructuring and relatedexpenses308.9 3.4 16.0 0.2 292.9 322.3 16.0 17.4 SG&A4,121.8 45.3 3,821.2 41.5 3,708.3 40.5 300.6 382.9 113.0 96.2 Opera?ng(loss)income(713.3)(7.8)38.9 0.4 524.6 5.7(752.2)(826.6)(485.8)(531.2)Interest expense(81.0)(0.9)(88.0)(1.0)(50.8)(0.6)7.0 6.4(37.1)(40.0)Loss on debtex?nguishment (7.4)(0.1)7.4 8.1 Other income(expense),net26.2 0.3 1.9 0.0(6.2)(0.1)24.3 26.8 8.1 8.8 Provision for income taxes(181.1)(2.0)(17.2)(0.2)99.7 1.1(163.9)(180.6)(116.8)(127.6)Net(loss)income fromcon?nuing opera?ons$(587.0)(6.5)%$(30.0)(0.3)%$360.5 3.9%$(557.0)(612.8)$(390.6)(426.7)Note:Table amounts may not foot due to rounding.Cost of sales includes$431.5 million of inventory-related charges a?ributable to the loca?on closures and streamlining product assortment resul?ng from the 2024Restructuring Plan.Net SalesNet sales for 2024 were$9.1 billion,a decline of$114.7 million,or 1.2%,compared with 2023.Net sales was nega?vely impacted by strategic pricinginvestments coupled with volume decline,par?ally offset by favorable product mix.Comparable store sales declined 0.7%.Category growth was led byba?eries,filters and engine management.The Company calculates comparable store sales based on the change in store sales star?ng once a loca?on has been open for approximately one year and byincluding e-commerce sales and excluding sales fulfilled by distribu?on centers to independently owned Carquest loca?ons.Acquired stores are included inthe Companys comparable store sales one year a?er acquisi?on.The Company includes sales from relocated stores in comparable store sales from theoriginal date of opening.Closed stores and stores in process of closing under the 2024 Restructuring Plan are not included in the comparable store salescalcula?on.Comparable store sales is intended only as supplemental informa?on and is not a subs?tute for Net sales presented in accordance withaccoun?ng principles generally accepted in the United States of America(“GAAP”).Gross ProfitGross profit in 2024 was$3.41 billion,or 37.5%of net sales,compared with$3.86 billion,or 41.9%of net sales in 2023,a decrease of 444 basis points.Grossprofit as a percentage of net sales declined primarily due to$431.5 million of inventory-related charges a?ributable to the loca?on closures and streamliningproduct assortment associated with the 2024 Restructuring Plan and liquida?on sales at closing stores and distribu?on center loca?ons.(1)(1)23Table of ContentsSelling,General and Administra?ve Expenses,Exclusive of Restructuring and Related ExpensesSelling,general and administra?ve(“SG&A”)expenses,exclusive of restructuring expenses for 2024 was$3.81 billion,or 41.9%of net sales,compared with$3.81 billion,or 41.3%of Net sales for 2023,an increase of 61 basis points.The increase in SG&A expense as a percentage of net sales was primarily driven byhigher labor-related costs a?ributable to wage-investments in frontline team members and occupancy costs par?ally offset by a decline in marke?ngexpenses.Restructuring and Related ExpensesRestructuring and related expenses for 2024 was$308.9 million,or 3.4%of net sales.These expenses represent costs primarily a?ributable to the 2024Restructuring Plan and included$204.2 million of long-lived asset impairment and accelerated amor?za?on and deprecia?on charges,$19.7 million ofdistribu?on network op?miza?on,$24.7 million of incremental reserves of the collec?bility of receivables resul?ng from contract termina?ons withindependents,$15.2 million severance and other labor related expenses and third party professional fees.Refer to Note 3.Restructuring of the Notes to theConsolidated Financial Statements included for addi?onal detail.Interest ExpenseInterest expense for 2024 was$81.0 million,a decrease of$7.0 million compared with 2023.This decrease was a?ributable to an increase in interest incomedue to higher investment balances compared with the prior year.Refer to Note 7.Long-term Debt and Fair Value of Financial Instruments of the Notes to theConsolidated Financial Statements included herein for further details.Provision for Income TaxesThe Companys Provision for income taxes for 2024 was a benefit of$181.1 million compared with a benefit of$17.2 million for 2023,an increase of$164.0million primarily due to a decrease in taxable income.The Companys effec?ve tax rate was 23.6%for 2024 and 36.4%for 2023.In 2024.The tax ratedecreased compared with prior year primarily due to a tax benefit resul?ng from a discrete charge related to share-based compensa?on,the expira?on ofstatute of limita?ons for certain tax years in mul?ple states as well as enhanced u?liza?on of tax credits in the current year.Reconcilia?on of Non-GAAP Financial Measures“Managements Discussion and Analysis of Financial Condi?on and Results of Opera?ons”includes certain financial measures not derived in accordance withGAAP.Non-GAAP financial measures,including Adjusted Net income,Adjusted EPS,Adjusted SG&A Margin,and Adjusted Opera?ng Income,should not beused as a subs?tute for GAAP financial measures,or considered in isola?on,for the purpose of analyzing opera?ng performance,financial posi?on or cashflows.The Company has presented these non-GAAP financial measures as the Company believes that the presenta?on of the financial results that exclude(1)transforma?on expenses under the Companys turnaround plans,inclusive of the Worldpac dives?ture(2)other significant expenses and(3)nonrecurring 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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 29,2025ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission file number:0-12933LAM RESEARCH CORPORATION(Exact name of registrant as specified in its charter)Delaware 94-2634797(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)4650 Cushing Parkway,Fremont,California 94538(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(510)572-0200Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,Par Value$0.001 Per ShareLRCXThe Nasdaq Stock Market(Nasdaq Global Select Market)Securities registered pursuant to Section 12(g)of the Act:None(Title of class)_Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No 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 No 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 preceding12 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 past90 days.Yes No 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).Yes No 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 growthcompany.See the definitions of“large accelerated filer,”“accelerated filer”,“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financialreporting 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 thecorrection of an error to previously issued financial statements.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 theregistrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of the Registrants Common Stock,$0.001 par value,held by non-affiliates of the Registrant,as of December 29,2024,the last business day of themost recently completed second fiscal quarter,was$76,867,228,862.Common Stock held by each officer and director and by each person who owns 5%or more of theoutstanding Common Stock has been excluded from this computation based on the assumption that such persons may be deemed to be affiliates.This determination of affiliatestatus is not necessarily a conclusive determination of such status for other purposes.As of August 7,2025,the Registrant had 1,265,621 thousand outstanding shares of Common Stock._Documents Incorporated by ReferenceParts of the Registrants Proxy Statement for the Annual Meeting of Stockholders expected to be held on or about November 4,2025,are incorporated by reference into Part IIIof this Form 10-K.Except as expressly incorporated by reference herein,the Registrants proxy statement shall not be deemed to be part of this report.Table of Contents LAM RESEARCH CORPORATION2025 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS PagePart I.Item 1.Business3Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments25Item 1C.Cybersecurity25Item 2.Properties26Item 3.Legal Proceedings26Item 4.Mine Safety Disclosures26Part II.Item 5.Market for the Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities27Item 6.Reserved29Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations29Item 7A.Quantitative and Qualitative Disclosures About Market Risk36Item 8.Financial Statements and Supplementary Data37Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure70Item 9A.Controls and Procedures70Item 9B.Other Information70Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspection71Part III.Item 10.Directors,Executive Officers and Corporate Governance72Item 11.Executive Compensation72Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters72Item 13.Certain Relationships and Related Transactions,and Director Independence72Item 14.Principal Accountant Fees and Services72Part IV.Item 15.Exhibits,Financial Statement Schedules73Item 16.Form 10-K Summary73Exhibit Index74Signatures77Lam Research Corporation 2025 10-K 2Table of ContentsPART ICAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSWith the exception of historical facts,the statements contained in this discussion are forward-looking statements,which are subject to the safeharbor provisions created by the Private Securities Litigation Reform Act of 1995.Certain,but not all,of the forward-looking statements in thisreport are specifically identified as forward-looking,by use of phrases and words such as“believe,”“estimated,”“anticipate,”“expect,”“probable,”“intend,”“plan,”“aim,”“may,”“should,”“could,”“would,”“will,”“continue,”and other future-oriented terms.The identification ofcertain statements as“forward-looking”does not mean that other statements not specifically identified are not forward-looking.Forward-lookingstatements include,but are not limited to,statements that relate to:trends and opportunities in the global economic environment;trends andopportunities in the semiconductor industry,including in the end markets and applications for semiconductors,in device complexity,and in thecomplexity of device manufacturing;growth or decline in the industry and the market for,and spending on,wafer fabrication equipment;theanticipated levels of,and rates of change in,margins,market share,served available market,capital expenditures,research and developmentexpenditures,international sales,revenue(actual and/or deferred),operating expenses and earnings generally;managements plans andobjectives for our current and future operations and business focus;restructuring activities;business process improvements and initiatives;volatility in our quarterly results;the makeup of our customer base;customer and end user requirements and our ability to satisfy thoserequirements;the performance and benefits of our products and services;customer spending and demand for our products and services,andthe reliability of indicators of change in customer spending and demand;the effect of variability in our customers business plans or demand forour products and services;our competition,and our ability to defend our market share and to gain new market share;the success of jointdevelopment and collaboration relationships with customers,suppliers,or others;outsourced activities;our supply chain and the role ofsuppliers in our business,including the impacts of supply chain constraints and material costs;our leadership and competency,and our abilityto facilitate innovation;our research and development programs;the opportunities in our industry for,and our ability to create sustainabledifferentiation;technology inflections in the industry and our ability to identify those inflections and to invest in research and developmentprograms to meet them;our ability to deliver multi-product solutions;the resources invested to comply with evolving standards and the impactof such efforts;changes in state,federal and international tax laws,our estimated annual tax rate and the factors that affect our tax rates;legaland regulatory compliance;the estimates we make,and the accruals we record,in order to implement our critical accounting policies(including,but not limited to,the adequacy of prior tax payments,future tax benefits or liabilities,and the adequacy of our accruals relating to them);hedging transactions;debt or financing arrangements;our investment portfolio;our access to capital markets;uses of,payments of,and impactof interest rate fluctuations on,our debt;our intention to pay quarterly dividends and the amounts thereof,if any;our ability and intention torepurchase our shares;credit risks;controls and procedures;recognition or amortization of expenses;our ability to manage and grow our cashposition;our ability to scale our operations to respond to changes in our business;our goals and initiatives with respect to environmental,socialand governance matters,including emissions,and human capital;the value of our patents;the materiality of potential losses arising from legalproceedings;the probability of making payments under our guarantees;and the sufficiency of our financial resources or liquidity to supportfuture business activities(including,but not limited to,operations,investments,debt service requirements,dividends,and capital expenditures).Such statements are based on current expectations and are subject to risks,uncertainties,and changes in condition,significance,value,andeffect,including without limitation those discussed below under the heading“Risk Factors”within Item 1A and elsewhere in this report and otherdocuments we file from time to time with the Securities and Exchange Commission(“SEC”),such as our quarterly reports on Form 10-Q and ourcurrent reports on Form 8-K.Such risks,uncertainties,and changes in condition,significance,value,and effect could cause our actual results todiffer materially from those expressed in this report and in ways not readily foreseeable.Readers are cautioned not to place undue reliance onthese forward-looking statements,which speak only as of the date hereof and are based on information currently and reasonably known to us.We do not undertake any obligation to release the results of any revisions to these forward-looking statements,which may be made to reflectevents or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events.Item 1.BusinessIncorporated in 1980,Lam Research Corporation(“Lam Research,”“Lam,”“we,”“our,”“us,”or the“Company”)is a Delaware corporation,headquartered inFremont,California.We maintain a network of facilities throughout Asia,Europe,and the United States in order to meet the needs of our dynamic customerbase.Additional information about Lam Research is available on our website at .The content on any website referred to in this Form 10-K isnot a part of or incorporated by reference in this Form 10-K unless expressly noted.Our Annual Report on Form 10-K,Quarterly Reports on Forms 10-Q,Current Reports on Forms 8-K,Proxy Statements and all other filings we make with theSEC are available on our website,free of charge,as soon as reasonably practical after we file them with or furnish them to the SEC and are also availableonline at the SECs website at www.sec.gov.Lam Research Corporation 2025 10-K 3Table of ContentsThe Lam Research logo,Lam Research,and all product and service names used in this report are either registered trademarks or trademarks of LamResearch Corporation or its subsidiaries in the United States and/or other countries.All other marks mentioned herein are the property of their respectiveholders.We are a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry.We have built a strong global presence withcore competencies in areas such as nanoscale manufacturing enablement,chemistry,plasma and fluidics,advanced systems engineering,and a broadrange of operational disciplines.Our products and services are designed to help our customers build smaller and better performing devices that are used ina variety of electronic products,including mobile phones,personal computers,cloud and enterprise servers,wearables,automotive vehicles,and datastorage devices.Our customer base includes leading semiconductor memory,foundry,and integrated device manufacturers(“IDMs”)that make products such as non-volatilememory(“NVM”),dynamic random-access memory(“DRAM”),and logic devices.Their continued success is part of our commitment to drivingsemiconductor breakthroughs that define the next generation.Our core technical competency is integrating hardware,process,materials,software,andprocess control enabling results on the wafer.Semiconductor manufacturing,our customers business,involves the fabrication of multiple dies or integrated circuits(“ICs”)on a wafer.This involves therepetition of a set of core processes and can require hundreds of individual steps.Fabricating these devices requires a sequence of highly sophisticatedprocess technologies to integrate an increasing array of new materials with precise control at the atomic scale.Along with meeting technical requirements,wafer processing equipment must deliver high productivity and be cost-effective.Demand from cloud computing(the“Cloud”),artificial intelligence,5G,the Internet of Things(“IoT”),and other markets is driving the need for increasinglypowerful and cost-efficient semiconductors.At the same time,there are growing technical challenges with traditional two-dimensional scaling.These trendsare driving significant inflections in semiconductor manufacturing,such as the increasing importance of vertical scaling strategies like three-dimensional(“3D”)architecture as well as multiple patterning to enable shrinks.We believe we are in a strong position with our leadership and expertise in deposition,etch,and clean markets to facilitate some of the most significantinnovations in semiconductor device manufacturing.Several factors create opportunity for sustainable differentiation for us:(i)our focus on research anddevelopment,with several on-going programs relating to sustaining engineering,product and process development,and concept and feasibility;(ii)ourability to effectively leverage cycles of learning from our broad installed base;(iii)our collaborative focus with semi-ecosystem partners,including our close-to-customer focus;(iv)our ability to identify and invest in the breadth of our product portfolio to meet technology inflections;and(v)our focus on deliveringour multi-product solutions with a goal to enhance the value of Lams solutions to our customers.We also address processes for back-end wafer-level packaging(“WLP”),which is an alternative to traditional wire bonding and can offer a smaller formfactor,increased interconnect speed and bandwidth,and lower power consumption,among other benefits.We offer advanced packaging solutions thatsupport fan-out panel-level packaging,a process in which chips or chiplets are cut from a large format substrate sheet several times the size of a traditionalsilicon wafer,which increases yield and reduces waste and solutions that meet the need for 3D stacking of high bandwidth memory(“HBM”).In addition,ourproducts are well-suited for related markets that rely on semiconductor processes and require production-proven manufacturing capability,such ascomplementary metal-oxide-semiconductor image sensors(“CIS”)and micro-electromechanical systems(“MEMS”).Our Customer Support Business Group(“CSBG”)provides products and services to maximize installed equipment performance,predictability,andoperational efficiency.We offer a broad range of services to deliver value throughout the lifecycle of our equipment,including customer service,spares,upgrades,and new and refurbished non-leading edge products in our deposition,etch,and clean markets.Many of the technical advances that we introducein our newest products are also available as upgrades,which provide customers with a cost-effective strategy for extending the performance and capabilitiesof their existing wafer fabrication lines.Service offerings include fleet level Equipment Intelligence solutions to maximize the productivity of our customersthrough system uptime or availability optimization,throughput improvements,and defect reduction.Our spares product line offers running cost optimizationprograms and focuses on product life extension to help customers increase the return on their capital purchases.Additionally,within CSBG,our Reliantproduct line offers new and refurbished non-leading edge products in deposition,etch and clean markets for those applications that do not require the mostadvanced wafer processing capability.Lam Research Corporation 2025 10-K 4Table of ContentsProductsMarket Process/Application Technology ProductsDepositionMetal FilmsElectrochemical Deposition(“ECD”)(Copper&Other)SABRE family Chemical Vapor Deposition(“CVD”)Atomic Layer Deposition(“ALD”)(Tungsten&Molybdenum)ALTUS family Dielectric FilmsPlasma-enhanced CVD(“PECVD”)ALD Gapfill High-Density Plasma CVD(“HDP-CVD”)VECTOR familyStriker familySPEED familyEtchConductor EtchReactive Ion EtchKiyo family,Versys Metal familyDielectric EtchReactive Ion EtchFlex familyVantex familyThrough-silicon Via(“TSV”)EtchDeep Reactive Ion EtchSyndion familyCleanWafer CleaningWet CleanEOS,DV-Prime,Da Vinci,SP SeriesBevel CleaningDry Plasma CleanCoronus familyDeposition Processes and Product FamiliesDeposition processes create layers of dielectric(insulating)and metal(conducting)materials used to build a semiconductor device.Depending on the type ofmaterial and structure being made,different techniques are employed.Electrochemical deposition creates the copper wiring(interconnect)that links devicesin an integrated circuit(“IC”or“chip”).Plating of copper and other metals is also used for TSV and WLP applications.Tiny molybdenum or tungstenconnectors and thin barriers are made with the precision of chemical vapor deposition and atomic layer deposition,which adds only a few layers of atoms ata time.Plasma-enhanced CVD,high-density plasma CVD,and ALD are used to form the critical insulating layers that isolate and protect all of theseelectrical structures.Lastly,post-deposition treatments such as ultraviolet thermal processing are used to improve dielectric film properties.ALTUS Product FamilyTungsten and/or molybdenum deposition is used to form conductive features such as contacts,vias,and wordlines on a chip.These features are small,oftennarrow,and use only a small amount of metal,so minimizing resistance and achieving complete fill can be difficult.At these nanoscale dimensions,evenslight imperfections can impact device performance or cause a chip to fail.Our ALTUS systems combine CVD and ALD technologies to deposit the highlyconformal or selective films as needed for advanced tungsten or molybdenum metallization(ALTUS Halo)applications in both logic and memory.The Multi-Station Sequential Deposition architecture enables nucleation layer formation and bulk CVD/ALD fill to be performed in the same chamber(“in situ”).OurALD technologies are used in the deposition of barrier films to achieve high step coverage with reduced thickness at lower temperatures relative to aconventional process.SABRE Product FamilyCopper deposition lays down the electrical wiring for most semiconductor devices.Even the smallest defect-say,a microscopic pinhole or dust particle-inthese conductive structures can impact device performance,from loss of speed to complete failure.The SABRE ECD product family,which helped pioneerthe copper interconnect transition,offers the precision needed for copper damascene manufacturing in logic and memory.System capabilities include cobaltdeposition for logic applications and copper deposition directly on various liner materials,which is important for next-generation metallization schemes.Foradvanced packaging applications,such as forming conductive bumps,redistribution layers,TSV filing,and wafer level bonding,the SABRE 3D familycombines Lams SABRE Electrofill technology with additional innovation to deliver the high-quality films needed at high productivity.The modulararchitecture can be configured with multiple plating and pre/post-treatment cells,providing flexibility to address a variety of packaging applications,includingHBM.SPEED Product FamilyDielectric gapfill processes deposit critical insulation layers between conductive and/or active areas by filling openings of various aspect ratios betweenconducting lines and between devices.With advanced devices,the structures being filled can be very tall and narrow.As a result,high-quality dielectric filmsare especially important due to the ever-increasing possibility of cross-talk and device failure.Our SPEED HDP-CVD products provide a multiple dielectricfilm solution for high-quality gapfill with industry-leading throughput and reliability.SPEED products have excellent particle performance,and their designallows large batch sizes between cleans and faster cleans.Lam Research Corporation 2025 10-K 5Table of ContentsStriker Product FamilyThe latest memory,logic,and imaging devices require extremely thin,highly conformal dielectric films for continued device performance improvement andscaling.For example,ALD films are critical for low-k spacers for device power consumption/speed,dielectric gapfills in high aspect ratio features for isolationand device performance,as well as for spacer-based multiple patterning schemes where the spacers help define critical dimensions.These applicationshave little tolerance for voids and even the smallest defect.The Striker single-wafer ALD products provide dielectric film solutions for these challengingrequirements through application-specific material,process and hardware options that deliver film technology and defect performance.VECTOR Product FamilyDielectric film deposition processes are used to form some of the most difficult-to-produce insulating layers in a semiconductor device,including those usedin the latest transistors and 3D structures.In some applications,these films require dielectric films to be exceptionally uniform and defect free since slightimperfections are multiplied greatly in subsequent layers.Our VECTOR PECVD products are designed to provide the performance and flexibility needed tocreate these enabling structures within a wide range of challenging device applications.As a result of its design,VECTOR produces superior thin filmquality,along with exceptional within-wafer and wafer-to-wafer uniformity.Etch Processes and Product FamiliesEtch processes create chip features by selectively removing dielectric,metal,silicon and poly silicon materials,including films that have been added duringdeposition.Reactive ion etch processing enables device-critical formation steps to enable transistor performance,create storage capacitors,and memorycells.Low temperature,cryogenic etching enables the use of new,novel chemistries to deliver increased high aspect ratio etch capability.Flex Product FamilyDielectric etch carves patterns in insulating materials to create barriers between the electrically conductive parts of a semiconductor device.For advanceddevices,these structures can be extremely tall and thin and involve complex,sensitive materials.Slight deviations from the target feature profile-even at theatomic level-can negatively affect electrical properties of the device.To precisely create these challenging structures,our Flex product family offersdifferentiated technologies and application-focused capabilities for critical dielectric etch applications.Uniformity,repeatability,and tunability are enabled by aunique multi-frequency,small-volume,confined plasma design.Flex offers in situ multi-step etch and continuous plasma capability that delivers highproductivity with low defectivity.Vantex Product FamilyDielectric etch processes remove non-conductive materials during the manufacturing of a semiconductor device.Leading-edge memory devices haveespecially challenging structures,such as extremely deep holes and trenches,that must be manufactured with tight tolerances.Our latest dielectric etchsystem,Vantex creates high aspect ratio device features while maintaining critical dimension(“CD”)uniformity and selectivity.Vantex is part of ourSense.i platform and offers advanced RF technology and repeatable wafer-to-wafer performance enabled by Equipment Intelligence solutions to meet theneeds of advanced memory manufacturing,primarily in 3D NAND high aspect ratio hole,trench,contact,and capacitor cell applications.Kiyo Product FamilyConductor etch helps shape the electrically active materials used in the parts of a semiconductor device.Even a slight variation in these miniature structurescan degrade device performance.In fact,these structures are so tiny and sensitive that etch processes push the boundaries of the basic laws of physics andchemistry.Our Kiyo product family delivers the high-performance capabilities needed to precisely and consistently form these features precisely and withhigh productivity.Proprietary Hydra technology in Kiyo products improves CD uniformity by correcting for incoming pattern variability,and atomic-scalevariability control with production-worthy throughput.Syndion Product FamilyPlasma etch processes used to remove silicon and other materials deep into the wafer are collectively referred to as deep silicon etch.These may be deeptrenches for CMOS image sensors,trenches for power and other devices,TSVs for HBM and advanced packaging,and other high aspect ratio features.These are created by etching through multiple materials sequentially,where each new material involves a change in the etch process.The Syndion etchproduct family is optimized for deep silicon etch,providing the fast process switching with depth and cross-wafer uniformity control required to achieveprecision etch results.The systems support both conventional single-step etch and rapidly alternating process,which minimizes damage and deliversprecise depth uniformity.Versys Metal Product FamilyMetal etch processes play a key role in connecting the individual components that form an IC,such as forming wires and electrical connections.Theseprocesses can also be used to drill through metal hardmasks that are used to form the wiring for advanced devices.To enable these critical etch steps,theVersys Metal product family provides high-productivity capability on a flexible Lam Research Corporation 2025 10-K 6Table of Contentsplatform.Superior CD,profile uniformity,and uniformity control are enabled by a symmetrical chamber design with independent process tuning features.Clean Processes and Product FamiliesClean techniques are used between manufacturing steps to clear away particles,contaminants,residues and other unwanted material that could later lead todefects and to prepare the wafer surface for subsequent processing.Wet processing technologies can be used for wafer cleaning and etch applications.Plasma bevel cleaning is used to enhance die yield by removing unwanted materials from the wafers edge that could impact the device area.Coronus Product FamilyBevel cleaning removes unwanted masks,residues,and films from the edge of a wafer between manufacturing steps.If not cleaned,these materialsbecome defect sources.For instance,they can flake off and re-deposit on the device area during subsequent processes.Even a single particle that lands ona critical part of a device can ruin the entire chip.By inserting bevel clean processes at strategic points,these potential defect sources can be eliminated andmore functional chips produced.By combining the precise control and flexibility of plasma with technology that protects the active die area,the Coronusbevel clean family cleans the wafers edge to enhance die yield.The systems provide active die area protection by using plasma processing with proprietaryconfinement technology.Applications include post-etch,pre-and post-deposition,pre-lithography,and metal film removal to prevent arcing during plasmaetch or deposition steps.DV-Prime,Da Vinci,EOS,and SP Series Product FamiliesWafer cleaning is performed repeatedly during semiconductor device manufacturing and is a critical process that affects product yield and reliability.Unwanted microscopic materials-some no bigger than the tiny structures themselves-need to be cleaned effectively.At the same time,these processesmust selectively remove residues that are chemically similar to the device films.For advanced WLP,the wet clean steps used between processes that formthe package and external wiring have surprisingly complex requirements.These processes are called on to completely remove specific materials and leaveother fragile structures undisturbed.In IoT products that include power devices,MEMS and image sensors,there is a unique requirement for wafer backsidewet etch to uniformly thin the silicon wafer while protecting the device side of the wafer.Based on our pioneering single-wafer spin technology,the DV-Prime and Da Vinci products provide the process flexibility needed with high productivity toaddress a wide range of wafer cleaning steps throughout the manufacturing process flow.As the latest of Lams wet clean products,EOS deliversexceptionally low on-wafer defectivity and high throughput to address progressively demanding wafer cleaning applications.With a broad range of processcapability,our SP Series products deliver cost-efficient,production-proven wet clean and silicon wet etch solutions for challenging WLP and IoT applications.Fiscal Periods PresentedAll references to fiscal years apply to our fiscal years,which ended June 29,2025,June 30,2024,and June 25,2023.Research and DevelopmentThe market for semiconductor capital equipment is characterized by rapid technological change and product innovation.Our ability to achieve and maintainour competitive advantage depends in part on our continued and timely development of new products and enhancements to existing products.Accordingly,we devote a significant portion of our personnel and financial resources to research and development(“R&D”)programs and seek to maintain close andresponsive relationships with our customers and suppliers.We believe current challenges for customers at various points in the semiconductor manufacturing process present opportunities for us.We expect tocontinue to make substantial investments in R&D to meet our customers product needs,support our growth strategy,and enhance our competitive position.Marketing,Sales,and ServiceOur marketing,sales,and service efforts are focused on building long-term relationships with our customers and targeting product and service solutionsdesigned to meet their needs.These efforts are supported by a team of product marketing and sales professionals as well as equipment and processengineers who work closely with individual customers to develop solutions for their wafer processing needs.We maintain ongoing service relationships withour customers and have an extensive network of service engineers in place throughout the United States(“U.S.”),China,Europe,India,Japan,Korea,Southeast Asia,and Taiwan.We believe that comprehensive support programs and close working relationships with customers are essential to maintaininghigh customer satisfaction and our competitiveness in the marketplace.We provide standard warranties for our systems.The warranty provides that systems will be free from defects in material and workmanship and will conformto agreed-upon specifications.The warranty is limited to repair of the defect or replacement with new or like-new equivalent goods and is valid when thebuyer provides prompt notification within the warranty period of the claimed defect or non-conformity and also makes the items available for inspection andrepair.Lam Research Corporation 2025 10-K 7Table of ContentsInternational SalesA significant portion of our sales and operations occur outside the United States and,therefore,may be subject to certain risks,including but not limited tocompliance with U.S.and international laws and regulations,including U.S.export restrictions;tariffs and other barriers;difficulties in staffing and managingnon-U.S.operations;adverse tax consequences;foreign currency exchange rate fluctuations;changes in currency controls;and economic and politicalconditions.Any of these factors may have a material adverse effect on our business,financial position,and results of operations and cash flows.Forgeographical reporting,revenue is attributed to the geographic location in which the customers facilities are located.Refer to Note 19 of our ConsolidatedFinancial Statements,included in Part II,Item 8 of this 2025 Form 10-K,for the attribution of revenue by geographic region.Long-lived AssetsRefer to Note 19 of our Consolidated Financial Statements,included in Part II,Item 8 of this 2025 Form 10-K,for information concerning the geographiclocations of long-lived assets.CustomersOur customers include many of the worlds leading semiconductor manufacturers.Customers continue to establish joint ventures,alliances,and licensingarrangements which have the potential to positively or negatively impact our competitive position and market opportunities.Refer to Note 9 of ourConsolidated Financial Statements,included in Part II,Item 8 of this report,for information concerning customer concentrations.Our most significantcustomers during the fiscal years ending June 29,2025,June 30,2024,and June 25,2023 included Samsung Electronics Company,Ltd.and TaiwanSemiconductor Manufacturing Company.A material reduction in orders from our customers could adversely affect our results of operations and projected financial condition.Our business dependsupon the expenditures of semiconductor manufacturers.Semiconductor manufacturers businesses,in turn,depend on many factors,including theireconomic capability,the current and anticipated market demand for ICs,and the availability of equipment capacity to support that demand.ManufacturingOur manufacturing operations mainly consist of assembling and testing components,sub-assemblies,and modules that are then integrated into finishedsystems prior to shipment to or at the location of our customers.The assembly and testing of our products is conducted predominately in cleanroomenvironments.We have agreements with third parties to outsource certain aspects of our manufacturing,production warehousing,and logistics functions.Theseoutsourcing contracts may provide us more flexibility to scale our operations up or down in a timely and cost-effective manner.We believe that we haveselected reputable providers and have secured their performance on terms documented in written contracts.However,it is possible that one or more ofthese providers could fail to perform as we expect,and such failure could have an adverse impact on our business and have a negative effect on ouroperating results and financial condition.Overall,we believe we have effective mechanisms to manage risks associated with our outsourcing relationships.Refer to Note 17 of our Consolidated Financial Statements,included in Part II,Item 8 of this report,for further information concerning our outsourcingcommitments,reported as a component of purchase obligations.Certain components and sub-assemblies that we include in our products may only be obtained from a single supplier.We are engaged in efforts to obtainand qualify alternative sources to supply these products and in some circumstances protect against potential supply challenges by carrying inventory inexcess of current need.Any prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorablyimpact our customer relationships.Compliance with Government RegulationsAs a public company with global operations,we are subject to a variety of governmental regulations across multiple jurisdictions,including those related toexport controls,financial and other disclosures,corporate governance,anti-trust,intellectual property,privacy,anti-bribery,anti-corruption,anti-boycott,tax,tariffs,labor,health and safety,conflict minerals,human trafficking,the management of hazardous materials,and carbon emissions,among others.Each ofthese regulations imposes costs on our business and has the potential to divert our managements time and attention from revenue-generating and otherprofit maximizing activities to those associated with compliance.Efforts to comply with new and changing regulations have resulted in,and are likely tocontinue to result in,decreased net income and increased capital expenditures.If we are alleged or found by a court or regulatory agency not to be incompliance with regulations,we may be subject to fines,restrictions on our actions,reputational damage,and harm to our competitive position,and ourbusiness,financial condition,and/or results of operations could be adversely affected.For additional details,please refer to“Legal,Regulatory and Tax Risks We Are Exposed to Various Risks from Our Regulatory Environment”in Item 1A:Risk Factors.Regulations that impact trade,including tariffs,export controls,taxes,trade barriers,sanctions,the termination or modification of trade agreements,tradezones,and other duty mitigation initiatives,have the potential to increase our manufacturing costs,decrease margins,reduce the competitiveness of ourproducts,or inhibit our ability to sell products or purchase necessary equipment and supplies,which could have a material adverse effect on our business,results of operations,or financial condition.For additional details regarding the impacts of compliance with trade laws and regulations,please refer to“Business and Operational Risks OurLam Research Corporation 2025 10-K 8Table of ContentsFuture Success Depends Heavily on International Sales and the Management of Global Operations”and“Legal,Regulatory and Tax Risks Our Sales toCustomers in China,a Significant Region for Us,Have Been Impacted,and are Likely to be Materially and Adversely Affected by Export LicenseRequirements and Other Regulatory Changes,or Other Governmental Actions in the Course of the Trade Relationship Between the U.S.and China”in Item1A:Risk Factors.We are subject to income,transaction,and other taxes in the United States and various foreign jurisdictions that impact our tax rate and profitability.Foradditional details regarding the impacts of compliance with tax laws and regulations,please refer to“Legal,Regulatory and Tax Risks Our FinancialResults May Be Adversely Impacted by Higher than Expected Tax Rates or Exposure to Additional Tax Liabilities”in Item 1A:Risk Factors.An important element of our management strategy is to review acquisition prospects that would complement our existing products,augment our marketcoverage and distribution ability,enhance our technological capabilities,or accomplish other strategic objectives.However,for regulatory or other reasons,we may not be successful in our attempts to acquire or dispose of businesses,products,or technologies.For additional details regarding the impacts ofregulations on acquisitions or dispositions we may attempt,please refer to“Business and Operational Risks If We Choose to Acquire or Dispose ofBusinesses,Product Lines,and Technologies,We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance”in Item1A:Risk Factors.We are subject to a variety of domestic and international governmental regulations related to the handling,discharge,and disposal of toxic,volatile,orotherwise hazardous chemicals.For additional details regarding the impacts of compliance with environmental laws and regulations,please refer to“Legal,Regulatory and Tax Risks Increasing and Evolving Environmental Regulations May Adversely Affect Our Operating Results”in Item 1A:Risk Factors.Environmental,Social,and GovernanceWe strive to incorporate environmental,social and governance(ESG)considerations into everything we do from our operations and workplacepractices,to how we source our materials and design our products.Our Global Impact Report for calendar year 2024 details,among other items,a numberof ESG goals.One such goal is to achieve net zero emissions by 2050,which we are working to achieve in part by meeting a number of interim targetsrelated to our environmental impact.There have been no material impacts to capital expenditures or our results of operations associated with this goal,andthere are no material cash commitments associated with the goal as of the fiscal year ended June 29,2025.Information contained on our website or in our annual Global Impact Report is not incorporated by reference into this or any other report we file with theSecurities and Exchange Commission,or the SEC.Refer to Item 1A:Risk Factors for a discussion of risks and uncertainties we face related to ESG.CompetitionThe semiconductor capital equipment industry is characterized by rapid change and is highly competitive throughout the world.To compete effectively,weinvest significant financial resources targeted to strengthen and enhance our product and services portfolio and to maintain customer service and supportlocations globally.Semiconductor manufacturers evaluate capital equipment suppliers in many areas,including but not limited to process performance,productivity,defect control,customer support,and overall cost of ownership,which can be affected by many factors such as equipment design,reliability,software advancements,and similar factors.Our ability to succeed in the marketplace depends upon our ability to manufacture and ship products on atimeline that meets our customers needs,maintain existing products,and introduce product enhancements and new products that meet customerrequirements on a timely basis.In addition,semiconductor manufacturers must make a substantial investment to qualify and integrate new capital equipmentinto semiconductor production lines.As a result,once a semiconductor manufacturer has selected a particular suppliers equipment and qualified it forproduction,the manufacturer generally maintains that selection for that specific production application and technology node as long as the suppliersproducts demonstrate performance to specification in the installed base.Accordingly,we may experience difficulty in selling to a given customer if thatcustomer has qualified a competitors equipment.We must also continue to meet the expectations of our installed base of customers through the delivery ofhigh-quality and cost-efficient spare parts in the presence of competition from third-party spare parts providers.We face significant competition with all of our products and services.Our primary competitor in the dielectric and metals deposition market is AppliedMaterials,Inc.For ALD and PECVD,we also compete against ASM International and Wonik IPS.In the etch market,our primary competitors are AppliedMaterials,Inc.;Hitachi,Ltd.;and Tokyo Electron,Ltd.,and our primary competitors in the wet clean market are Screen Holding Co.,Ltd.;Semes Co.,Ltd.;and Tokyo Electron,Ltd.We face competition from a number of established and emerging equipment companies in the industry.We expect our competitors to continue to improvethe design and performance of their current products and processes,to introduce new products and processes with enhanced price/performancecharacteristics,and to provide more comprehensive offerings of products.If our competitors make acquisitions or enter into strategic relationships withleading semiconductor manufacturers,or other entities,covering products similar to those we sell,our ability to sell our products to those customers could beadversely affected.Government and other initiatives to encourage local semiconductor manufacturing and supply chain in countries outside of the U.S.,including China,could increase competition from domestic equipment and spare parts manufacturers in those countries.Additionally,the U.S.Governmenthas enacted a number of export controls regulating the sales of certain technologies to customers in China,including entity listings ofLam Research Corporation 2025 10-K 9Table of Contentsmultiple customers,thus restricting the sales of equipment and spare parts by U.S.equipment suppliers.This provides an advantage to our internationalcompetitors that are not subject to these restrictions.There can be no assurance that we will continue to compete successfully in the future.Patents and LicensesOur policy is to seek patents on inventions relating to new or enhanced products and processes developed as part of our ongoing research,engineering,manufacturing,and support activities.We currently hold a number of U.S.and foreign patents and applications covering various aspects of our products andprocesses.Our patents,which cover material aspects of our past and present core products,have current durations ranging from approximately one totwenty years.We believe that,although the patents we own and may obtain in the future will be of value,they alone will not determine our success.Oursuccess depends principally upon our research and development,engineering,marketing,support,and delivery skills.However,in the absence of patentprotection,we may be vulnerable to competitors who attempt to imitate our products,manufacturing techniques,and processes and may be more limited inour ability to exclude competitors than would otherwise be the case.In addition,other companies and inventors may receive patents that contain claimsapplicable to our products and processes.The sale of products covered by patents of others could require licenses that may not be available on termsacceptable to us,or at all.For further discussion of legal matters,see Item 3,“Legal Proceedings,”of this report.Human CapitalWe endeavor to be a great place to work globally by investing in a multi-faceted strategy that is rooted in building an inclusive workplace.To support ouremployees,we tailor our programs to meet the unique cultural needs and priorities within different regions around the world.As of August 7,2025,we had approximately 19,000 regular full-time employees,of which over 29%were engaged in research and development.Approximately 43%of our regular full-time employees are located in the United States,50%in Asia,and 7%in Europe.Employment,Recruitment and DevelopmentOur talented people are what makes our success possible.Many of our recruitment efforts are carried out through partnerships with key universities.In fact,many of our senior executives began their careers with us right out of college,demonstrating that programs that recruit university students have the potentialto contribute to our leadership pipeline.To tap into the best and brightest students,we prioritize core initiatives including an internship program,campusevents,and thesis awards and scholarships.Through the spirit of continuous improvement,we accelerate skill building and development,create careeropportunities,and expand professional networks for employees.We provide a wide range of opportunities globally to support our commitment to developingthe best talent.Our mentorship,coaching,and professional development programs support this commitment along with our self-directed online learningplatform that intelligently aligns content with skill building needs.Additionally,our leadership development programs are designed to scale leadership acrossour business,empowering leaders to motivate,inspire,and lead employees through change,ultimately accelerating business outcomes.Employee EngagementEmployee engagement(i.e.satisfaction)and voice are critical to Lams culture.We conduct a global survey at a regular cadence to gather input fromemployees on culture,career opportunity,and manager effectiveness.We also solicit employee feedback through in-person and online employee forums,engagement sessions,all-employee meetings,conversations with managers,and our Human Resource Support and Employee Relations programs.Total RewardsOur Total Rewards program incorporates a comprehensive compensation and benefits package aimed at supporting employees and their families withfinancial,physical,and mental well-being programs that meet their needs.We conduct an annual review of salaries and benefits packages using third-partybenchmarking surveys to ensure that our offerings are aligned with the marketplace and attractive to top talent.We offer our employees a competitive 401(k)benefit,an employee stock purchase plan,tuition reimbursement,and annual cash bonuses.Stock awards are offered to executives and select employees.We recognize the importance of time away from work,so we offer annual paid holidays and time off to relax and recharge or take care of personal business.Additionally,we offer paid parental leave benefits for parents welcoming a new child to the family through birth,adoption,or foster care placement.Employee Health and SafetyPrioritizing the health,safety,and well-being of our employees is critical to our ongoing success.We invest in education,awareness,monitoring,andprevention programs to help recognize and control safety hazards.Our goal is to apply our environmental health and safety(“EHS”)policies,programs,andresponse plans to anywhere we operate and to extend them to anyone who works on our sites with the intent to provide a safe environment during bothroutine and extraordinary circumstances.People managers in field support,manufacturing,R&D,warehouse,and logistics operations undergo formal safetyleadership training biannually to enhance their skills in safety management and communication.We screen contractors safety performance and requirecontractor compliance with specified safety standards.Lam Research Corporation 2025 10-K 10Table of ContentsWe monitor our safety performance at the enterprise,regional,and site levels.By using our global incident tracking system,our corporate EHS team canassess and monitor safety trends to report to business units and executive leadership as a part of quarterly reviews.We maintain multi-site certifications forISO 45001,the globally recognized standard for occupational health and safety management systems.Information about our Executive OfficersAs of August 7,2025,the executive officers of Lam Research were as follows:NameAgePosition(s)Timothy M.Archer58President,Chief Executive OfficerDouglas R.Bettinger58Executive Vice President,Chief Financial OfficerPatrick J.Lord59Executive Vice President,Chief Operating OfficerNeil J.Fernandes58Senior Vice President,Global Customer OperationsAva A.Harter55Senior Vice President,Chief Legal Officer and SecretaryVahid Vahedi59Senior Vice President,Chief Technology and Sustainability OfficerSeshasayee(Sesha)Varadarajan50Senior Vice President,Global Products GroupTimothy M.Archer has been our president and chief executive officer since December 2018.Prior to this,he served as our president and chief operatingofficer,from January 2018 to November 2018.Mr.Archer joined us in June 2012 as our executive vice president,chief operating officer.Prior to joining us,he spent 18 years at Novellus Systems,Inc.,(“Novellus”)in various technology development and business leadership roles,including most recently as chiefoperating officer from January 2011 to June 2012;executive vice president of Worldwide Sales,Marketing,and Customer Satisfaction from September 2009to January 2011;and executive vice president of the PECVD and Electrofill Business Units from November 2008 to September 2009.His tenure at Novellusalso included assignments as senior director of technology for Novellus Systems Japan from 1999 to 2001 and senior director of technology for the ElectrofillBusiness Unit from April 2001 to April 2002.He started his career in 1989 at Tektronix,where he was responsible for process development for high-speedbipolar ICs.Mr.Archer has served as a member of the board of directors of Johnson Controls International public limited company,a global provider ofbuilding technology,software,and services,since March 2024,where he is a member of the compensation and talent development committee.He alsoserves on the International Board of Directors for SEMI,the global industry association representing the electronics manufacturing and design supply chain.From 2020 to 2022,Mr.Archer served as chairman of the board for the National GEM Consortium,a nonprofit organization that is dedicated to increasingthe participation of underrepresented groups at the masters and doctoral levels in engineering and science.Mr.Archer completed the Program forManagement Development at the Harvard Graduate School of Business and earned a B.S.degree in applied physics from the California Institute ofTechnology.Douglas R.Bettinger is our executive vice president and chief financial officer with responsibility for Finance,Tax,Treasury,and Investor Relations andCorporate Analytics.Prior to joining the Company in 2013,Mr.Bettinger served as senior vice president and chief financial officer of Avago Technologies(now Broadcom Inc.)from 2008 to 2013.From 2007 to 2008,he served as vice president of Finance and corporate controller at Xilinx,Inc.,and from 2004 to2007,he was chief financial officer at 24/7 Customer,a privately held company.Mr.Bettinger worked at Intel Corporation from 1993 to 2004,where he heldseveral senior-level finance positions,including corporate planning and reporting controller and Malaysia site operations controller.Mr.Bettinger currentlyserves on the Board of Directors of Lattice Semiconductor Corporation,the SEMI Board of Industry Leaders,and the Industrial Advisory Board of theUniversity of Wisconsin College of Engineering.Mr.Bettinger earned an M.B.A.degree in finance from the University of Michigan and a B.S.degree ineconomics from the University of Wisconsin in Madison.Patrick J.Lord is our executive vice president and chief operating officer,a position he has held since March 2023.In this role,Dr.Lord is responsible forseveral functions including,Global Operations;Customer Support;Global Quality;Environmental Health and Safety;Global Government Affairs and Trade;Information Technology;Cybersecurity;and Global Resilience,Security,and Transformation.Dr.Lord previously served as executive vice president of CSBGand Global Operations from September 2020 to February 2023;and senior vice president and general manager of CSBG from December 2016 toSeptember 2020.Prior to that,Dr.Lord held the position of group vice president and deputy general manager of the Global Products Group from September2013 to December 2016.He served as the head of the Direct Metals,GapFill,Surface Integrity Group,and Integrated Metals(“DGSI”)Business Unitsbetween June 2012 and September 2013.Prior to our acquisition of Novellus in June 2012,Dr.Lord was senior vice president and general manager of theDGSI Business Units at Novellus.Additionally,Dr.Lord held the position of senior vice president of Business Development and Strategic Planning.He joinedNovellus in 2001 and held a number of other positions,including senior vice president and general manager of the CMP Business Unit,senior director ofBusiness Development,senior director of Strategic Marketing,and acting vice president of Corporate Marketing.Before joining Novellus,Dr.Lord spent sixyears at KLA-Tencor in various product marketing and management roles.He earned his Ph.D.,M.S.,and B.S.degrees in mechanical engineering from theMassachusetts Institute of Technology.Neil J.Fernandes is our senior vice president of Global Customer Operations,a position he has held since March 2023.Previously,he was group vicepresident of Business Development and Sales Operations and held other senior sales and customer-focused leadership positions at Lam.He joined thecompany in 2012 through the acquisition of Novellus,where he was the vice president ofLam Research Corporation 2025 10-K 11Table of ContentsSales Operations.Prior to that role,he held range of management positions in product marketing and process engineering at Novellus,Gasonics andWatkins-Johnson.Mr.Fernandes earned an M.S.degree in mechanical engineering from the University of Texas at Austin and a B.E.in mechanicalengineering from the Manipal Institute of Technology.Ava A.Harter is our senior vice president,chief legal officer and secretary.She joined us in July 2024 and is responsible for all global legal matters,ethicsand compliance,and corporate secretary work.Prior to joining us,she served as executive vice president and chief legal officer at Whirlpool Corporation,ahome appliance and consumer products company,from December 2020 to March 2024,and as senior vice president,general counsel,and corporatesecretary at Owens Corning,a building and construction materials company,from May 2015 to November 2020.Prior to that,she held legal roles at GeneralElectric and The Dow Chemical Company.She also worked at the law firms of Jones Day and Thompson Hine LLP and was an adjunct professor at theCase Western Reserve University Law School.Ms.Harter earned her J.D.from Northwestern University School of Law,an M.B.A.in sociology from theUniversity of Nebraska,and a B.A.in political science from Northwestern University.Vahid Vahedi is our senior vice president,chief technology and sustainability officer,a position he has held since March 2024.Dr.Vahedi previously servedas senior vice president and chief technology officer beginning March 2023;senior vice president and general manager of the Etch business unit beginningFebruary 2018;and group vice president of the Etch product group beginning March 2012.Previously,he served as vice president of Etch Business ProductManagement and Marketing,vice president of Dielectric Etch,vice president of Conductor and 3DIC Etch,and director of Conductor Etch TechnologyDevelopment.He joined us in 1995.He earned his Ph.D.,M.S.,and B.S.degrees in electrical engineering and computer science from the University ofCalifornia at Berkeley.Sesha Varadarajan is our senior vice president of the Global Products Group,a position he has held since March 2023.Mr.Varadarajan previously served assenior vice president and general manager of the Deposition Business Unit beginning February 2018;and group vice president of the Deposition productgroup beginning September 2013.Previously,he served as the head of the PECVD/Electrofill Business Unit between June 2012 and September 2013.Priorto our acquisition of Novellus in June 2012,Mr.Varadarajan was senior vice president and general manager of Novellus PECVD and Electrofill BusinessUnits.He joined Novellus in 1999 as a process engineer with the Electrofill Business Unit and held various roles in that business unit before being appointeddirector of technology in 2004.Between 2006 and 2008,he worked in the PECVD Business Unit,initially as director of technology,until being promoted toproduct general manager.In 2009,he returned to the Electrofill Business Unit as vice president and general manager.In mid-2011,he was promoted tosenior vice president and general manager,where he was also responsible for the PECVD Business Unit.Mr.Varadarajan earned an M.S.degree inmanufacturing engineering and material science from Boston University and a B.S.degree in mechanical engineering from the University of Mysore.Item 1A.Risk FactorsIn addition to the other information in this Annual Report on Form 10-K(“2025 Form 10-K”),the following risk factors should be carefully considered inevaluating us and our business because such factors may significantly impact our business,operating results,and financial condition.As a result of theserisk factors,as well as other risks discussed in our other SEC filings,our actual results could differ materially from those projected in any forward-lookingstatements.No priority or significance is intended by,nor should be attached to,the order in which the risk factors appear.INDUSTRY AND CUSTOMER RISKSWe Depend on Creating New Products and Processes and Enhancing Existing Products and Processes for Our Success;Consequently,We Are Subject to Risks Associated with Rapid Technological ChangeRapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enablethose processes.We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and tocontinue to enhance our existing products.If new products or existing products have reliability,quality,design,or safety problems,our performance may beimpacted by reduced orders,higher manufacturing costs,delays in acceptance of and payment for new products,and additional service and warrantyexpenses.We may be unable to develop and manufacture products successfully,or products that we introduce may fail in the marketplace.For more than25 years,the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design onsemiconductor chips.That driver could be approaching its technological limit,leading semiconductor manufacturers to investigate more complex changes inmultiple technologies in an effort to continue technology development.In addition,the emergence of“big data”and new tools such as machine learning andartificial intelligence(“AI”)that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers topursue new products and approaches that exploit those tools to advance technology development.In the face of uncertainty on which technology solutionswill become successful,we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customersrequirements.Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adverselyaffect our business in a material way.Our failure to commercialize new products in a timely manner could result in loss of market share,unanticipated costs,and inventory obsolescence,which would adversely affect our financial results.Lam Research Corporation 2025 10-K 12Table of ContentsIn order to develop new products and processes and enhance existing products and processes,we expect to continue to make significant investments inR&D,to investigate the acquisition of products and technologies,to invest in or acquire businesses or technologies,and to pursue joint developmentrelationships with customers,suppliers,or other members of the industry.Our investments and acquisitions may not be as successful as we may expect,particularly in the event that we invest in or acquire product lines and technologies that are new to us.We may find that acquisitions are not available to us,for regulatory or other reasons,and that we must therefore limit ourselves to collaboration and joint venture development activities that do not have the samebenefits as acquisitions.Pursuing development through collaboration and/or joint development activities rather than through an acquisition may posesubstantial challenges for management,including those related to aligning business objectives;sharing confidential information,intellectual property anddata;sharing value with third parties;and realizing synergies that might have been available in an acquisition but are not available through a jointdevelopment project.We must manage product transitions and joint development relationships successfully,as the introduction of new products couldadversely affect our sales of existing products and certain jointly developed technologies may be subject to restrictions on our ability to share thattechnology,which could limit our market for products incorporating those technologies.Future technologies,processes,or product developments may renderour current product offerings obsolete,leaving us with non-competitive products,obsolete inventory,or both.Moreover,customers may adopt newtechnologies or processes to address the complex challenges associated with next-generation devices.This shift may result in a reduction in the size of ouraddressable markets or could increase the relative size of markets in which we either do not compete or have relatively low market share.We Face a Challenging and Complex Competitive EnvironmentWe face significant competition from multiple competitors,and our competitors may be able to develop products comparable or superior to those we offer ormay adapt more quickly to new technologies or evolving customer requirements.In particular,while we continue to develop product enhancements that webelieve will address future customer requirements,we may fail in a timely manner to identify those future customer requirements,to devote appropriateresources to developing products to address those requirements,or to complete the development or introduction of these additional product enhancementssuccessfully,or these product enhancements may not achieve market acceptance or be competitive.Accordingly,competition may intensify,and we may beunable to continue to compete successfully in our markets,which could have a material adverse effect on our revenues,operating results,financialcondition,and/or cash flows.With increased consolidation efforts in our industry,as well as the emergence and strengthening of new,regional competitors,we may face increasingcompetitive pressures.Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and mayintroduce new products and product capabilities that may affect our ability to sell and support our existing products.We face a greater risk if our competitorsenter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop,as this couldadversely affect our ability to sell products to those manufacturers.We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers needs,to maintain customerservice and support centers worldwide,and to invest in product and process R&D.Technological changes and developing technologies have required,andare expected to continue to require,new and costly investments.Certain of our competitors,including those that are created and financially backed byforeign governments,have substantially greater financial resources and more extensive engineering,manufacturing,marketing,and customer service andsupport resources than we do and therefore have the potential to offer customers a more comprehensive array of products and/or product capabilities and totherefore achieve additional relative success in the semiconductor equipment industry.These competitors may deeply discount or give away products similarto those that we sell,challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products.We alsoface competition from our own customers,who in some instances have established affiliated entities that manufacture equipment similar to ours.In addition,we face competition from companies that exist in a more favorable legal or regulatory environment than we do,who are able to sell products for certainapplications at certain customers that we are prohibited from selling to under applicable export controls,allowing the freedom of action in ways that we maybe unable to match and potentially contributing to the strengthening of such companies ability to compete with us.In many cases,speed to solution isnecessary for customer satisfaction and our competitors may be better positioned to achieve these objectives.For these reasons,we may fail to continue tocompete successfully worldwide.Once a Semiconductor Manufacturer Commits to Purchase a Competitors Semiconductor Manufacturing Equipment,theManufacturer Typically Continues to Purchase That Competitors Equipment,Making It More Difficult for Us to Sell Our Equipmentto That CustomerSemiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line.We believe that once a semiconductor manufacturer selects a particular suppliers processing equipment,the manufacturer generally relies upon thatequipment for that specific production line application for an extended period of time,especially for customers that are more focused on tool reuse.Accordingly,we expect it to be more difficult to sell our products to a given customer for a product line application if that customer initially selects acompetitors equipment for the same product line application.Lam Research Corporation 2025 10-K 13Table of ContentsThe Semiconductor Capital Equipment Industry Is Subject to Variability and Periods of Rapid Growth or Decline;We Therefore FaceRisks Related to Our Strategic Resource Allocation DecisionsThe semiconductor capital equipment industry has historically been characterized by rapid changes in demand.Variability in our customers business plansmay lead to changes in demand for our equipment and services,which could negatively impact our results.The variability in our customers investmentsduring any particular period is dependent on several factors,including,but not limited to,electronics demand,economic conditions(both general and in thesemiconductor and electronics industries),industry supply and demand,prices for semiconductors,and our customers ability to develop and manufactureincreasingly complex and costly semiconductor devices.The changes in demand may require our management to adjust spending and other resourcesallocated to operating activities,which can be made more challenging due to the multi-year nature of investments made in certain technology programs andother initiatives.During periods of rapid growth or decline in demand for our products and services,we may face significant challenges in maintaining adequate financial andbusiness controls,management processes,information systems,and procedures for training,assimilating,and managing our workforce,and in appropriatelysizing our supply chain infrastructure and facilities,work force,and other components of our business on a timely basis.If we do not adequately meet thesechallenges during periods of increasing or declining demand,our gross margins and earnings may be negatively impacted.We continuously reassess our strategic resource allocation choices in response to the changing business environment.If we do not adequately adapt to thechanging business environment,we may lack the infrastructure and resources to scale up our business to meet customer expectations and competesuccessfully during a period of growth,or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demandenvironment,resulting in excess fixed costs.Especially during transitional periods,resource allocation decisions can have a significant impact on our future performance,particularly if we have notaccurately anticipated industry changes.Our success will depend,to a significant extent,on the ability of our executive officers and other members of oursenior management to identify and respond to these challenges effectively.Future Declines in the Semiconductor Industry,and the Overall World Economic Conditions on Which It Is Significantly Dependent,Could Have a Material Adverse Impact on Our Results of Operations and Financial ConditionOur business depends on the capital equipment expenditures of semiconductor manufacturers,which in turn depend on the current and anticipated marketdemand for integrated circuits.With the consolidation of customers within the industry,the semiconductor capital equipment market may experience rapidchanges in demand driven both by changes in the market generally and the plans and requirements of particular customers.The economic,regulatory,political,and business conditions occurring nationally,globally,or in any of our key sales regions,which are often unpredictable,have historically impactedcustomer demand for our products and services and normal commercial relationships with our customers,suppliers,and creditors.Additionally,in times ofeconomic uncertainty,our customers budgets for our products,or their ability to access credit to purchase them,could be adversely affected.This wouldlimit their ability to purchase our products and services.As a result,changing economic,regulatory,political or business conditions can cause materialadverse changes to our results of operations and financial condition,including,but not limited to:a decline in demand for our products and/or services;an increase in reserves on accounts receivable due to our customers inability to pay us;an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;valuation allowances on deferred tax assets;restructuring charges;asset impairments including the potential impairment of goodwill and other intangible assets;a decline in the value of our investments;exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come tofruition;andchallenges maintaining reliable and uninterrupted sources of supply.Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments,revenues,operating results,and earnings.Where appropriate,we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipatedrevenue streams,which sometimes result in restructuring charges.Even during periods of reduced revenues,we must continue to invest in R&D andmaintain extensive ongoing worldwide customer service and support capabilities to remain competitive,which may temporarily harm our profitability andother financial results.We Have a Limited Number of Key CustomersSales to a limited number of large customers constitute a significant portion of our overall shipments,revenue,cash flows and profitability.As a result,theactions of even one customer may subject us to variability in those areas that is difficult to predict.In addition,large customers may be able to negotiaterequirements that result in decreased pricing,increased costs,and/or lower margins for us and limitations on our ability to share technology with others.Similarly,significant portions of our credit risk may,at any given time,be concentrated among a limited number of customers so that the failure of even oneof these key customers to pay its obligations to us could significantly impact our financial results.Lam Research Corporation 2025 10-K 14Table of ContentsStrategic Alliances and Customer Consolidation May Have Negative Effects on Our BusinessSemiconductor manufacturing companies from time to time enter into strategic alliances or consolidate with one another to expedite the development ofprocesses and other manufacturing technologies and/or achieve economies of scale.The outcomes of such an alliance can be the definition of a particulartool set for a certain function and/or the standardization of a series of process steps that use a specific set of manufacturing equipment.In addition,theoutcomes of consolidation can potentially lead to an overall reduction in the market for semiconductor manufacturing equipment as customers operationsachieve economies of scale and/or increased purchasing power based on their higher volumes.In certain instances,this could work to our disadvantage if acompetitors tools or equipment become the standard equipment for such functions or processes.Additional outcomes of such consolidation may include ourcustomers re-evaluating their future supplier relationships to consider our competitors products and/or gaining additional influence over the pricing ofproducts and the control of intellectual property or data.Similarly,our customers may partner with,or follow the lead of,educational or research institutions that establish processes for accomplishing various tasksor manufacturing steps.If those institutions utilize a competitors equipment when they establish those processes,it is likely that customers will tend to usethe same equipment in setting up their own manufacturing lines.Even if they select our equipment,the institutions and the customers that follow their leadcould impose conditions on acceptance of that equipment,such as adherence to standards and requirements or limitations on how we license ourproprietary rights,that increase our costs or require us to take on greater risk.These actions could adversely impact our market share and financial results.BUSINESS AND OPERATIONAL RISKSOur Revenues and Operating Results Are VariableOur revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a number of factors,not all of which are in ourcontrol.We manage our expense levels based in part on our expectations of future revenues.Because our operating expenses are based in part onanticipated future revenues,and a certain amount of those expenses are relatively fixed,a change in the timing of recognition of revenue and/or the level ofgross profit from a small number of transactions can unfavorably affect operating results in a particular quarter or year.Factors that may cause our financialresults to fluctuate unpredictably include,but are not limited to:legal,tax,accounting,or regulatory changes(including,but not limited to,changes in import/export regulations and tariffs,such as regulationsimposed by the U.S.government restricting exports to China,or potential additional tariffs on imports,and tariffs imposed by other countries)orchanges in the interpretation or enforcement of existing requirements;macroeconomic,industry and market conditions,including those caused by war,conflict in the Middle East,bank failures;uncertainty regardingeconomic and other policies and priorities;and geopolitical issues;the impact of reductions in government spending;changes in average selling prices,customer mix,and product mix;foreign currency exchange rate fluctuations;economic conditions in the electronics and semiconductor industries in general and specifically the semiconductor equipment industry;the size and timing of orders from customers;changes in our deferred revenue balance,including as a result of factors such as volume purchase agreements,multi-year service contracts,back orders,and down payments toward purchases;consolidation of the customer base,which may result in the investment decisions of one customer or market having a significant effect ondemand for our products or services;procurement shortages;the failure of our suppliers or outsource providers to perform their obligations in a manner consistent with our expectations;manufacturing difficulties;customer cancellations or delays in shipments,installations,customer payments,and/or customer acceptances;the extent that customers continue to purchase and use our products and services in their business;our customers reuse of existing and installed products,to the extent that such reuse decreases their need to purchase new products orservices;our ability to develop,introduce,and market new,enhanced,and competitive products in a timely manner;our competitors introduction of new products;legal or technical challenges to our products and technologies;transportation,communication,demand,information technology,or supply disruptions based on factors outside our control,such as strikes,actsof God,wars,terrorist activities,international conflict,widespread outbreak of illness,or natural or man-made disasters(including disastersresulting from climate change),including earthquakes,wildfires,hurricanes,flooding,and heat waves;management of supply chain risks;effects of inflation or interest rates;andchanges in our estimated effective tax rate.Lam Research Corporation 2025 10-K 15Table of ContentsOur Business Relies on Technology,Data,Intellectual Property and Other Sensitive Information That is Susceptible to Cybersecurityand Other Threats or IncidentsOur business is dependent upon the use and protection of technology,data,intellectual property and other sensitive information,which may be owned by,orlicensed to,us or third parties,such as our customers and vendors.We maintain and rely upon certain critical information systems for the creation,transmission,use and storage of much of this information,and for the effective operation of our business.These information systems include,but are notlimited to,telecommunications,the Internet,our corporate intranet,various computer hardware and software applications(some of which may be integratedinto the products that we sell or be required in order to provide the services that we offer),network communications,and email.These information systemsmay be owned and maintained by us,our outsourced providers,or third parties such as vendors,contractors,customers and Cloud providers.In addition,wemake use of Software-as-a-Service(SaaS)products for certain important business functions that are provided by third parties and hosted on their ownnetworks and servers,or third-party networks and servers,all of which rely on networks,email and/or the Internet for their function.The technology,data,intellectual property and other sensitive information we seek to protect are subject to loss,release,misappropriation or misuse,andthe information systems containing or transmitting such technology,data,intellectual property and other sensitive information are subject to disruption,breach or failure,in each case as a result of various possible causes,any of which could have a material adverse effect on our business or operations.Suchcauses may include mistakes or unauthorized actions by our employees or contractors,phishing schemes and other third-party attacks,and degradation orloss of service or access to data due to viruses,malware,denial of service attacks,destructive or inadequate code,power failures,or physical damage tocomputers,hard drives,communication lines,or networking equipment,in each case with respect to us or the third-party product and service providers uponwhich we rely.Such causes may also include the use of techniques that change frequently or may be disguised or difficult to detect,or designed to remaindormant until a triggering event,or that may continue undetected for an extended period of time.In addition,to the extent AI capabilities improve and areincreasingly adopted,they may be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks.Further,the use of AI byus,our customers,suppliers,and third-party providers,among others,may also introduce unique vulnerabilities whose existence or exploitation could have amaterial adverse effect on our business or operations.We experience cybersecurity and other threats and incidents in the course of our operations.Although past threats and incidents have not resulted in amaterial adverse effect,we may incur material losses related to cybersecurity and other threats or incidents in the future.Cybersecurity or other incidentscould have a material adverse effect on our business.Such adverse effects might include:loss of(or inability to access,e.g.through ransomware)confidential and/or sensitive information stored on these critical information systems ortransmitted to or from those systems;the disruption of the proper function of our products,services and/or operations;the failure of our or our customers manufacturing processes;errors in the output of our work or our customers work;the loss or public exposure of the personal or other confidential information of our employees,customers or other parties;the public release of customer financial and business plans,customer orders and operational results;exposure to claims from our employees or third parties who are adversely impacted by such incidents;misappropriation or theft of our or a customers,suppliers or other partys assets or resources,including technology,data,intellectual propertyor other sensitive information and costs associated therewith;reputational damage;diminution in the value of our investment in research,development and engineering;orour failure to meet,or violation of,regulatory or other legal obligations,such as the timely publication or filing of financial statements,taxinformation,and other required communications.While we have implemented International Organization for Standardization(“ISO”)27001 compliant security procedures and virus protection software,intrusion prevention systems,identity and access control,and emergency recovery processes,and we carefully select our third-party providers of informationsystems,to mitigate risks to the information systems that we rely on and to the technology,data,intellectual property and other sensitive information we seekto protect,those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe,and we may still suffer cybersecurity andother incidents,which could have a material adverse effect on our business or operations.It has been difficult and may continue to be difficult to hire andretain employees with substantial cybersecurity acumen.In addition,there have been and may continue to be instances of our policies and procedures notbeing effective in enabling us to identify risks,threats and incidents in a timely manner,or at all,or to respond expediently,appropriately and effectively whenincidents occur and repair any damage caused by such incidents,and such occurrences could have a material adverse effect on our business.Our Future Success Depends Heavily on International Sales and the Management of Global OperationsNon-U.S.sales,as reflected in Part II Item 7.Results of Operations of this 2025 Form 10-K,accounted for approximately 93%,93%,and 91%of totalrevenue in fiscal years 2025,2024,and 2023,respectively.We expect that international sales will continue to account for a substantial majority of our totalrevenue in future years.Lam Research Corporation 2025 10-K 16Table of ContentsWe are subject to various challenges related to international sales and the management of global operations including,but not limited to:domestic and international trade regulations,policies,practices,relations,disputes and issues;domestic and international tariffs,export controls and other barriers;developing customers and/or suppliers,who may have limited access to capital resources;global or national economic and political conditions;changes in currency controls;differences in the enforcement of intellectual property and contract rights in varying jurisdictions;our ability to respond to customer and foreign government demands for locally sourced systems,spare parts,and services and develop thenecessary relationships with local suppliers;changes in and compliance with U.S.and international laws and regulations affecting foreign operations,including U.S.and international traderestrictions and sanctions,international data privacy regulations,such as the General Data Protection Regulation,anti-bribery,anti-corruption,anti-boycott,environmental,tax,and labor laws;fluctuations in interest and foreign currency exchange rates;the need for technical support resources in different locations;andour ability to secure and retain qualified people,and effectively manage people,in all necessary locations for the successful operation of ourbusiness.There is inherent risk,based on the complex relationships among the worlds major trading nations,that political,diplomatic and national security influencescan lead to trade disputes,impacts and/or disruptions,in particular those affecting the semiconductor industry.This can adversely affect our business withChina,Japan,Korea,and/or Taiwan and perhaps the entire Asia Pacific region or global economy.A significant trade dispute,impact,and/or disruption inany area where we do business could have a materially adverse impact on our future revenue and profits.Tariffs,export controls,additional taxes,trade barriers,sanctions,the termination or modification of trade agreements,trade zones,and other duty mitigationinitiatives,and any reciprocal retaliatory actions,can increase our manufacturing costs,decrease margins,reduce the competitiveness of our products,disrupt our supply chain operations,or inhibit our ability to sell products or provide services,which has had and in the future could have a material adverseeffect on our business,results of operations,or financial conditions.Certain of our international sales depend on our ability to obtain export licenses from theU.S.or foreign governments,and our inability to obtain such licenses,or an expansion of the number or kinds of sales for which export licenses are required,has limited and could in the future further limit the market for our products and has had and could in the future have an adverse impact on our revenues.Asis discussed below under the heading“Our Sales to Customers in China,a Significant Region for Us,Have Been Impacted,and are Likely to Be Materiallyand Adversely Affected by Export License Requirements and Other Regulatory Changes,or Other Governmental Actions in the Course of the TradeRelationship Between the U.S.and China,”the U.S.government has in recent years imposed new controls,including expanded export license requirementsand restrictions on sales to certain Chinese entities that significantly impact trade with China.In addition,the U.S.government has an ongoing process ofassessing technologies that may be subject to new or additional export controls,and it is possible that such additional controls,if and when imposed,couldfurther adversely impact our ability to sell our products outside the U.S.The implementation by the U.S.government of broad export controls restrictingaccess to our technology(such as recent controls limiting exports to China)may cause customers with international operations to reconsider their use of andreliance on our products,which could adversely impact our future revenue and profits and strengthen competitors who are not subject to such restrictions.Furthermore,there are risks that foreign governments may,among other things,take retaliatory actions;insist on the use of local suppliers;compelcompanies to partner with local companies to design and supply equipment on a local basis,requiring the transfer of intellectual property rights and/or localmanufacturing;utilize their influence over their judicial systems to respond to intellectual property disputes or issues;and provide special incentives togovernment-backed local customers to buy from local competitors,even if their products are inferior to ours;all of which could adversely impact our ability tocompete as well as our revenues and margins.Our customers(and their customers and other downstream parties)may also be adversely affected by the tariffs,export controls and other trade issuesdescribed above.Additionally,certain materials are primarily available in a limited number of countries,including rare earth elements,minerals,and metals.The supplies,equipment,raw materials and other inputs necessary for the businesses of our customers and other downstream parties could become moredifficult to obtain for various reasons not limited to business interruptions of suppliers,reduced availability of labor,transit disruptions,consolidation in theirsupply chain,export controls,sanctions,trade restrictions,tariffs,geopolitical tensions,economic circumstances,conflict,or political conditions.If the abilityof downstream parties to source the inputs needed to produce their products is impaired,then demand for our products may be adversely impacted.Thiscould have a material adverse effect on our business,results of operations or financial condition.We are exposed to potentially adverse movements in foreign currency exchange rates.The majority of our sales and expenses are denominated in U.S.dollars.However,we are exposed to foreign currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expensesdenominated in euro,Korean won,Malaysian ringgit,and Indian rupee.Currently,we hedge certain anticipated foreign currency cash flows,primarilyanticipated revenues denominated in Japanese yen and expenses denominated in euro,Korean won,Malaysian ringgit,and Indian rupee.In addition,weenter into foreign currency hedge contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on certain foreign currencydenominated monetary assets and liabilities,primarily third-party accounts receivables,accounts payables,and intercompany receivables and payables.Webelieve these are our primary exposures to currency rate fluctuation.We expect to continue to enter into hedging transactions,for theLam Research Corporation 2025 10-K 17Table of Contentspurposes outlined,for the foreseeable future.However,these hedging transactions may not achieve their desired effect because differences between theactual timing of the underlying exposures and our forecasts of those exposures may leave us either over or under hedged on any given transaction.Moreover,by hedging these foreign currency denominated revenues,expenses,monetary assets,and liabilities,we may miss favorable currency trends thatwould have been advantageous to us but for the hedges.Additionally,we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S.dollar-denominated monetary assets and liabilities(other than those currency exposures previously discussed),and currently we do not enter into foreigncurrency hedge contracts against these exposures.Therefore,we are subject to potential unfavorable foreign currency exchange rate fluctuations to theextent that we transact business(including intercompany transactions)in these currencies.The magnitude of our overseas business also affects where our cash is generated.Certain uses of cash,such as share repurchases,payment of dividends,or the repayment of our notes,can usually only be made with onshore cash balances.Since the majority of our cash is generated outside of the UnitedStates,this may impact certain business decisions and outcomes.Disruptions to Our Supply Chain and Outsource Providers Could Impact Our Ability to Meet Demand,Increase Our Costs,andAdversely Impact Our Revenue and Operating ResultsOur supply chain has played and will continue to play a key role in our product development,manufacturing operations,field installation and support.Ourbusiness depends on our timely supply of products and services to meet the demand from our customers,which depends in significant part on the timelydelivery of parts,materials and services,including components and subassemblies,from our direct suppliers to us,and to our direct suppliers by othercompanies.In addition,outsource providers have played and will continue to play a key role both in the manufacturing and customer-focused operationsdescribed above,and in many of our transactional and administrative functions,such as information technology,facilities management,and certain elementsof our finance organization.These providers and suppliers might suffer financial setbacks,be acquired by third parties,become subject to exclusivityarrangements that preclude further business with us,or be unable to meet our requirements or expectation due to their independent business decisions orforce majeure events that could interrupt or impair their continued ability to perform as we expect.We may also experience significant interruptions of ourmanufacturing operations,delays in our ability to deliver or install products or perform services or to recognize revenue,increased costs or customer ordercancellations as a result of:the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis;volatility in the availability and cost of parts,materials or services,including increased costs due to tariffs,rising inflation or interest rates or othermarket conditions;difficulties or delays in obtaining required import or export approvals;restrictions on the import and sale of products that incorporate technologies developed or manufactured in whole or in part in certain countries;shipment delays and increased costs of shipment due to transportation interruptions,capacity constraints,or fuel shortages;shortages of semiconductor or other components or materials as a result of increases in demand or decreases in supply,including as a result ofexport restrictions on particular parts or materials used by us or our direct or indirect suppliers;information technology or infrastructure failures,including those of a third-party supplier or service provider;andtransportation or supply disruptions based on factors outside our control,such as strikes,acts of God,wars,terrorist activities,internationalconflict,widespread outbreak of illness,or natural or man-made disasters(including disasters resulting from climate change),includingearthquakes,wildfires,hurricanes,flooding,and heat waves.Demand for electronic products and other factors,have resulted in,and may in the future result in,a shortage of parts,materials and services needed tomanufacture,deliver and install our products,as well as delays in and unpredictability of shipments due to transportation interruptions.Such shortages,delays and unpredictability have adversely impacted,and may in the future impact,our suppliers ability to meet our demand requirements.Difficulties inobtaining sufficient and timely supply of parts,materials or services,and delays in and unpredictability of shipments due to transportation interruptions,haveadversely impacted,and may in the future adversely impact,our manufacturing operations and our ability to meet customer demand.In addition,difficultiesin obtaining parts,materials or services necessary to deliver or install products or perform services have adversely impacted,and may in the future adverselyimpact,our ability to recognize revenue,our gross margins on the revenue we recognize,and our other operating results.Although we are endeavoring topass along some of the impact of increased costs to our customers to counteract adverse impacts to our gross margins and other operating results,suchmeasures could be unsuccessful,or could have the effect of reducing demand,which would adversely impact our revenue.Further,increased restrictions imposed on a class of chemicals known as per-and polyfluoroalkyl substances(“PFAS”),which are widely used in a largenumber of products,including parts and materials that are incorporated into our products,may negatively impact our supply chain due to the potentiallydecreased availability,or non-availability,of PFAS-containing products.Proposed regulations under consideration could require that we transition away fromthe usage of PFAS-containing products,which could adversely impact our business,operations,revenue,costs,and competitive position.There is noassuranc
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39345 QUANTUMSCAPE CORPORATION(Exact name of registrant as specified in its Charter)Delaware85-0796578(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)1730 Technology DriveSan Jose,California95110(Address of Principal Executive Offices)(Zip Code)Registrants telephone number,including area code:(408)452-2000 Securities registered pursuant to Section 12(b)of the Act:Title of each class TradingSymbol(s)Name of each exchange on which registeredClass A Common Stock,par value$0.0001 per share QS The New York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.YES NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.YES NO 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.YES NO 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).YES NO Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,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.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements 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.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 registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).YES NO As of June 30,2024,the last day of the registrants most recently completed second fiscal quarter,the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant,based on the closing price of the shares of common stock on The New York Stock Exchange,was approximately$1.8 billion.Shares of common stock held by each executive officer and director and by each person who owns 10%or more of the outstanding common stock have been excluded from the foregoing calculation in that such persons may be deemed affiliates.This determination of affiliate status is not necessarily a conclusive determination for other purposes.The number of shares of the registrants Class A Common Stock,par value$0.0001 per share outstanding was 503,667,649,and the number of shares of the registrants Class B Common Stock,par value$0.0001 per share outstanding was 43,241,267,as of February 19,2025.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants definitive proxy statement relating to its annual meeting of stockholders to be held in 2025,to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates,are incorporated herein by reference in Part III where indicated.Except with respect to information specifically incorporated by reference in this Annual Report on Form 10-K,such proxy statement is not deemed to be filed as part hereof.iTable of Contents PagePART I Item 1.Business3Item 1A.Risk Factors17Item 1B.Unresolved Staff Comments44Item 1C.Cybersecurity45Item 2.Properties45Item 3.Legal Proceedings45Item 4.Mine Safety Disclosures45 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities46Item 6.Reserved47Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations48Item 7A.Quantitative and Qualitative Disclosures About Market Risk56Item 8.Financial Statements and Supplementary Data57Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure87Item 9A.Controls and Procedures87Item 9B.Other Information88 Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections88 PART III Item 10.Directors,Executive Officers and Corporate Governance88Item 11.Executive Compensation88Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters88Item 13.Certain Relationships and Related Transactions,and Director Independence88Item 14.Principal Accounting Fees and Services88 PART IV Item 15.Exhibits and Financial Statement Schedules89Item 16Form 10-K Summary92 1CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSUnless the context otherwise requires,all references to“QuantumScape,”“we,”“us,”“our,”or the“Company”in this Annual Report on Form 10-K(this“Report”)refer to QuantumScape Corporation and its subsidiaries.The Company makes forward-looking statements in this Report and in documents incorporated herein by reference.All statements,other than statements of present or historical fact included in or incorporated by reference in this Report,regarding the Companys future financial performance,the development of the Companys battery technology,as well as the Companys strategy,future operations,financial position,estimated revenues and losses,projected costs,prospects,plans and objectives of management are forward-looking statements.When used in this Report,the words“anticipate,”“believe,”“continue,”“could,”“estimate,”“expect,”“intends,”“may,”“might,”“plan,”“possible,”“potential,”“predict,”“project,”“prospective,”“should,”“will,”“would,”the negative of such terms,and other similar expressions are intended to identify forward-looking statements,although not all forward-looking statements contain such identifying words.These forward-looking statements are based on managements current expectations,assumptions,hopes,beliefs,intentions and strategies regarding future events and are based on currently available information as to the outcome and timing of future events.The Company cautions you that these forward-looking statements are subject to risks and uncertainties,including those described in Part I,Item 1A,“Risk Factors”in this Annual Report on Form 10-K,most of which are difficult to predict and many of which are beyond the control of the Company and incident to its business.It is not possible for our management to predict all risks,nor can we assess the impact of all factors on our business or the extent to which any factor,or combination of factors,may cause actual results to differ materially from those contained in any forward-looking statements we may make.In addition,forward-looking statements in this Report and in any document incorporated herein by reference should not be relied upon as representing the Companys views as of any subsequent date,and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made,whether as a result of new information,future events or otherwise,except as may be required under applicable laws.As a result of a number of known and unknown risks and uncertainties,the Companys actual results or performance may be materially different from those expressed or implied by these forward-looking statements.Some factors that could cause actual results to differ include those discussed in the section titled“Risk Factors”in this Report and in our other filings with the Securities and Exchange Commission(“SEC”).2TECHNICAL GLOSSARYThroughout this Annual Report on Form 10-K,we use several technical terms which are explained as follows:A,B and C samplesThe designation of progressive prototype maturity during the battery cell development process for automotive qualification by OEMs.Delivery of an A sample marks the beginning of the qualification process.Each successive alphabetic designation(e.g.,B,C)represents advancement to the next development stage,while each numerical increment(e.g.,B0,B1)signifies progress within that stage.The specifications for each sample designation are determined jointly with the OEM.Anode The negative electrode in a batteryAnode-free cellsA battery cell that is manufactured without a host material for the anode or excess lithiumBattery cycle life The number of times a battery can be charged and discharged until its capacity is significantly reduced(e.g.to 70%or 80%of the initial capacity)Capacity(battery)The amount of energy a battery can store.May be measured in amp-hours(Ah)Cathode The positive electrode in a batteryCatholyteThe lithium-ion conductor in the cathode compartment of a battery DendritesGrowths of lithium metal that can pass through a separator and short circuit the cellEVElectric vehicle Energy density The amount of energy stored in a battery per unit volume(volumetric energy density which may be measured in Wh/L)or unit mass(specific energy,also known as gravimetric energy density which may be measured in Wh/kg)ICEInternal combustion enginesLFPLithium-iron-phosphate,a cathode active materialLithium-ion batteryA conventional battery which uses liquid electrolyte to transport lithium ions between the cathode and anode to charge and discharge the batteryLithium-metal batteryAdvanced battery technology that uses lithium metal as the anode NMC Nickel-manganese-cobalt,a cathode active materialOEM(s)Original Equipment Manufacturer(s),which in the context of this Annual Report on Form 10-K,are companies that design,produce and sell vehicles under their own brand namesPower(battery)The rate at which a battery can be discharged or chargedQSE-5Our first planned product,a 5 Amp hour solid-state lithium-metal battery cellQSE-5 TechnologyThe solid-state lithium-metal battery technology we intend to use in QSE-5SeparatorA material in between the cathode and anode that prevents physical contact between the positive and negative electrodes.Our cell design includes a separator that consists of an inorganic solid ceramic film that has characteristics of both a separator and an electrolyte,and we sometimes refer to it as“electrolyte-separator”.Solid-state batteryNext-generation battery technology that comprises a solid separator 3PART IItem 1.Business.OverviewQuantumScape is a leader in developing next-generation solid-state lithium-metal battery technology for electric vehicles(“EVs”)and other applications.QuantumScape Battery Inc.was founded in 2010 with the mission to revolutionize energy storage to enable a sustainable future.We are at the beginning of a forecasted once-in-a-century shift in automotive powertrains,from internal combustion engines(“ICE”)to clean EVs.After 30 years of gradual improvements in conventional lithium-ion batteries,the benefits of EVs have been demonstrated,principally in the premium passenger car market.However,there are fundamental limitations inhibiting widespread adoption of battery technology,and we believe the automotive market needs a step change in battery technology to make mass market EVs competitive with the fossil fuel alternative.We have spent over a decade developing a proprietary solid-state battery technology to meet this challenge.QuantumScapes solid-state lithium-metal battery technology is designed to offer greater energy density,faster charging,and enhanced safety when compared to todays conventional lithium-ion batteries.We believe no other lithium-metal battery technology has demonstrated the capability of achieving automotive rates of power(power is the rate at which a battery can be charged and discharged)with acceptable battery cycle life at modest levels of pressure(approximately 3 to 4 atmospheres(“atm”).Since 2012,we have developed a strong partnership with Volkswagen Group of America Investments,LLC(“VGA”)and certain of its affiliates(together with VGA,“Volkswagen”).Volkswagen is one of the largest car companies in the world and intends to be a leader in EVs.Over the last ten years Volkswagen has invested approximately$380 million in us.Over the course of our relationship,Volkswagen has successfully tested multiple generations of certain of our single-layer and multilayer prototype cells at automotive rates of power.In July 2024,we entered into a Collaboration Agreement(the“PowerCo Collaboration Agreement”)with PowerCo SE(“PowerCo”),a battery cell company wholly owned by Volkswagen,with the goal of industrializing the solid-state lithium-metal battery technology we intend to use in our first planned productthe QSE-5(the“QSE-5 Technology”)and concurrently entered into a Joint Venture Termination and Release Agreement(the“JV Termination Agreement”)and terminated the Joint Venture Agreement(as amended,the“JVA”)that VWGoA,VGA and QuantumScape originally executed in 2018.While we signed an agreement with PowerCo with the goal of commercializing our battery technology,we intend to continue working closely with automotive Original Equipment Manufacturers(“OEMs”)to make our solid-state battery cells widely available over time.In addition,we have signed customer sampling agreements with a number of OEMs,ranging from leading manufacturers by global revenue to premium performance and luxury carmakers,to collaborate with us in the testing and validating of our solid-state battery cells with the goal to include such cells into pre-production prototype vehicles and ultimately into serial production vehicles.We are currently focused on automotive EV applications,which have among the most stringent sets of requirements for batteries.However,we recognize that our solid-state battery technology has applicability in other large and growing markets,including stationary storage and consumer electronics,and intend to explore opportunities in those areas as appropriate.We are focusing on a technology licensing business model.Nevertheless,we believe that our technology may be utilized under a variety of business models and presents opportunities with a variety of potential customers,such as automotive OEMs,end-users,and licensees,as applicable.In addition to the collaboration with PowerCo,which contemplates a licensing arrangement,we may operate solely-owned manufacturing facilities,license technology to other manufacturers,or enter into joint venture arrangements,among other approaches.We intend to continue to invest in research and development to improve battery cell performance,improve manufacturing processes,and reduce cost.Industry BackgroundShift to EVsWe believe that evolving consumer preferences coupled with relevant government incentives and regulations are driving a once-in-a-century shift to EVs.4Countries around the world are promoting EVs.The dependence on gasoline-powered“ICE”vehicles has heightened environmental concerns,created reliance among industrialized and developing nations on large oil imports,and exposed consumers to unstable fuel prices and health concerns related to heightened emissions.Many national and regional regulatory bodies have adopted legislation to incentivize or require a shift to lower-emission and zero-emission vehicles.For example,over a dozen countries including the United Kingdom,the Netherlands,Sweden,Germany,France and Norway have announced intentions to either increase applicable environmental targets or outright ban the sale of new ICE vehicles in the next two decades.In 2023,the European Union approved a ban on the sale of new petrol and diesel cars beginning in 2035,other than ICE vehicles operating on carbon-neutral fuels.Furthermore,consumers are increasingly considering EVs for a variety of reasons including better performance,growing EV charging infrastructure,significantly lighter environmental impact,and lower maintenance and operating costs.Automakers such as Tesla,Inc.have demonstrated that premium EVs can deliver a compelling alternative to fossil fuels.As EVs become more competitive and more affordable,we believe that they will continue to take market share from ICE vehicles.We believe that this shift will occur across vehicle types and market segments.However,the inherent limitations of lithium-ion battery technology continue to impede improvements in EV competitiveness on range and charging times compared with ICE vehicles.Current Battery Technology Will Not Meet the Requirements for Broad Adoption of EVsDespite the significant progress in the global shift to EVs,in the U.S.the market remains dominated by ICE vehicles.According to Bloomberg,approximately 17%of global car sales in 2023 were electric including plug-in hybrids.For EVs to be adopted globally at scale across market segments,batteries need to improve.In particular,we believe there are five key requirements to drive broad adoption of EVs:Battery capacity(energy density).EVs need to be able to drive over 300 miles on a single charge to be competitive with ICE vehicles and achieve broad market adoption.The space required for conventional lithium-ion battery technology limits the range of many EVs.Higher energy density will enable automotive OEMs to increase battery pack energy without increasing the size and weight of the vehicles battery pack.Fast charging capability.EV batteries need to be fast charging to replicate the speed and ease with which a gasoline car can be refueled.We believe this objective is achieved with the ability to charge from 10%to 80pacity in approximately 15 minutes or less,faster than todays conventional batteries can deliver without materially degrading battery cycle life.Safety(nonflammable).EV batteries need to replace as many of the flammable components in the battery as possible with non-flammable equivalents to reduce the extent of damage caused by a fire.With current batteries,many failure conditions can result in fires,for example malfunctions that can result in short-circuits and battery damage from accidents.Battery cycle life.Batteries need to be usable for the life of the vehicle,typically 12 years or 150,000 miles.If the battery fades prematurely,EVs will not be an economically practical alternative.Cost.Mass market adoption of EVs requires a battery that is capable of high performance while remaining cost competitive.Since these requirements have complex interlinkages,most manufacturers of conventional lithium-ion batteries used in todays cars are forced to make trade-offs.For example,conventional batteries can be fast charged,but at the cost of adversely impacting their battery cycle life.We believe that a battery technology that can meet these requirements will enable an EV solution that is much more broadly competitive with ICE vehicles.According to the Organisation Internationale des Constructeurs dAutomobiles,approximately 93 million vehicles were produced in 2023 across the auto industry,representing a significant untapped demand for a battery that meets these requirements.Limitations of Conventional Lithium-ion Battery TechnologiesThe last significant development in battery technology was the commercialization of lithium-ion batteries in the early 1990s which created a new class of batteries with higher energy density.Lithium-ion batteries have enabled a new generation of mobile electronics,efficient renewable energy storage,and the start of the transition to electrified mobility.Since the 1990s,conventional lithium-ion batteries have gradually improved in energy density.Most increases in energy density have come from improved cell design and incremental improvements in cathode and anode technology.However,there is no Moores law in batteriesit has taken conventional lithium-ion batteries at least 10 years to double in energy density and it has been approximately 30 years since the introduction of a major new high-energy chemistry.As the industry approaches the theoretical limit of achievable energy density for lithium-ion batteries,we believe a new architecture is required to deliver meaningful gains in energy density.5Batteries have a cathode(the positive electrode),an anode(the negative electrode),a separator that prevents contact between the anode and cathode,and an electrolyte that transports ions but not electrons.A conventional lithium-ion battery(as shown in the figure below)uses a liquid electrolyte,a polymer separator,and an anode made principally of carbon(graphite)or a carbon/silicon composite.Lithium ions move from the cathode to the anode when the battery is charged and vice versa during discharge.Conventional Lithium-Ion Battery Architecture In a fully discharged lithium-ion cell,the lithium in the cell resides in the cathode.When the cell is charged,lithium ions move from the cathode to the anode,where they diffuse into the carbon particles that make up the anode.In the fully charged state,the lithium ions sit in the anode.When the battery is discharged,these lithium ions are allowed to move back from the anode to the cathode,and in the process,energy can be extracted from the system.One limit to the energy density of conventional lithium-ion batteries is imposed by the anode,which provides a host material made of carbon(graphite)and/or silicon to hold the lithium ions,preventing them from binding together into pure metallic lithium.Metallic lithium,when used with conventional liquid electrolytes and porous separators,can form growths of lithium known as dendrites,which can penetrate through the separator and short-circuit the cell.While using a host material in the anode is an effective way to prevent dendrites,this host material adds volume and mass to the cell,adds cost to the battery,and limits the battery cycle life due to side reactions at the interface with the liquid electrolyte.The rate at which lithium diffuses through the anode also limits the maximum cell power.The addition of silicon to a carbon anode provides a boost to energy density relative to a pure carbon anode.However,silicon is a host material that not only suffers from the limitations of carbon as discussed above,but also introduces cycle life challenges as a result of the repeated expansion and contraction of the silicon particles,since silicon undergoes significantly more expansion than carbon when hosting lithium ions.Furthermore,the voltage of the lithium-silicon reaction subtracts from the overall cell voltage,reducing cell energy.Lithium-Metal Anode Required to Unlock Highest Energy DensityWe believe that an anode-free lithium-metal cell is the most promising approach that can break out of the constraints inherent in conventional lithium-ion batteries and enable significant improvements in energy density.6Our battery cells have none of the host materials used in conventional anodes.Our cells are“anode-free”in that they are manufactured without anodes in a discharged state.When the cell is first charged,lithium moves out of the cathode,diffuses through our solid-state electrolyte-separator and plates in a thin metallic layer directly on the anode current collector,forming an anode.When the battery cell is discharged,the lithium diffuses back into the cathode.Eliminating the host material reduces the size and weight of the battery cell and eliminates the associated materials and manufacturing costs.This results in the highest theoretical gravimetric energy density for a lithium-based battery system if the system can be manufactured without excess lithium on the anode.Lithium-metal anodes are generally compatible with conventional cathode materials,and lithium-metal batteries will derive some benefit from continued improvement in conventional cathode materials.Moreover,lithium-metal anodes may enable future generations of higher energy cathodes,such as the metal fluorides,that may not achieve significant energy density gains when used with lithium-ion anodes,as shown in the figure below.Modeled Cell Specific Energy Source:Andre et al,J Mater Chem A.(2015)6709 Note:Modeled cell specific energy is based on traditional cell designs and architecturesAlthough the industry has understood for over 40 years the potential benefits of lithium-metal anodes,the industry has not been able to develop a separator that makes a lithium-metal anode practical for rechargeable applications.Solid-State Electrolyte-Separator Required to Enable Lithium-Metal AnodeWe believe that a lithium-metal battery requires that the porous separators used in conventional lithium-ion batteries be replaced with a solid-state electrolyte-separator capable of conducting lithium ions between the cathode and anode at rates comparable to conventional liquid electrolyte while also suppressing the formation of lithium dendrites,which are growths of lithium metal which can grow across the separator and short-circuit the cell.While various solid-state separators have been shown to operate at low power densities,such low power densities are not useful for most practical applications.To our best knowledge,we are the only company that has been able to demonstrate a solid-state separator for lithium-metal batteries capable of resisting dendrite formation at higher power densities such as those required for automotive applications,and fast charging,for at least 800 cycles at around 25 C.We believe that our ability to develop this proprietary solid-state electrolyte-separator will enable the shift from lithium-ion to lithium-metal batteries.7 Our Technology Our proprietary solid-state lithium-metal cell represents the next-generation of battery technology.Eliminating the anode host material found in conventional lithium-ion cells increases the volumetric energy density.A pure lithium-metal anode also enables the theoretically highest gravimetric energy density for a lithium battery system,if the system can be manufactured without excess lithium on the anode.Our cell design includes an inorganic solid ceramic film that has characteristics of both a separator and an electrolyte.This ceramic solid-state electrolyte-separator is our core technology breakthrough that enables reliable cycling of the lithium-metal anode battery.A working solid-state electrolyte-separator is needed to prevent the formation of dendrites that would normally grow through a traditional porous separator and short circuit the cell.An effective solid-state electrolyte-separator requires a solid material that has ionic conductivity in a range similar to liquid electrolytes,chemically stable next to lithium one of the most reactive elements in the periodic table and able to resist the formation of dendrites.Our team has worked over ten years to develop a composition that meets these requirements and to develop techniques necessary to manufacture the electrolyte-separator material at scale using a continuous process.We have a number of patents covering both the composition of this material and key steps of its manufacturing process.While current generations of our prototype battery cells contain our proprietary solid-state electrolyte-separator and an organic liquid cathode electrolyte(i.e.catholyte),solid catholyte materials are part of our ongoing research and development investigations.8Our Cells and SeparatorNote:Cell dimensions:approximately 85mm x 66mm x 5mmAll references to our“separator,”“electrolyte-separator,”“solid-state separator,”“solid-state electrolyte-separator,”in this Report refer to our proprietary solid-state electrolyte-separator.Our solid-state electrolyte-separator is a dense,entirely inorganic ceramic.As shown in the figure above,it is made into a film that is thinner than a human hair and then cut into pieces.Our separator is flexible because it has a low defect density and is thin.In contrast,typical household ceramics are less flexible and can break due to defects which can reduce structural integrity.The basic building block of our designed battery package is the unit cell,consisting of a double-sided cathode with a solid-state electrolyte-separator on either side.We stack these unit cells together to form multilayer cells.We first demonstrate new functionality using these unit cells.(1)For illustrative purposes only.Designs vary based on customer specifications.9In 2022,we shipped A0 prototype battery cells to multiple automotive OEMs for testing.In 2024,we began producing low volumes of our first B-sample cells,and we began shipping these cells for automotive customer testing.These are B-samples of our first product,QSE-5 a 5 amp-hour cell with measured performance of over 800 Wh/L,and 15 minute fast charge from 10%to 80%of capacity.However,our potential customers may require the development of cells with different capacity,layer count or dimensions.As we move from prototypes to commercial products,we will need to continue improving the quality and consistency of materials and processes for higher volume manufacturing.We need more production capacity to make the large number of multilayer cells needed for testing and for process optimization,including yield improvement and reliability.We have been designing and procuring new automation and higher-volume pre-pilot equipment that we expect will increase both output and reliability.Our cathodes use a combination of conventional cathode active materials such as nickel-manganese-cobalt(“NMC”)or a cobalt-free,nickel-free composition like lithium-iron-phosphate(“LFP”)with a catholyte made of an organic liquid.In the future,we may use other compositions of cathode active materials.Over the years,we have developed catholytes made of differing mixtures of organic liquid electrolyte to optimize performance across multiple metrics such as voltage,temperature,power,and safety,among others.We continue to test solid,gel and liquid catholytes from time to time in our cells.The solid catholyte is part of our ongoing research and development investigation into inorganic catholytes.Our separator platform is being designed to enable faster charge rates for thicker cathode electrodes,which,when combined with a lithium-metal anode,may further increase cell energy densities.We have developed a new cell format that combines features of a conventional pouch cell and a prismatic cell to address the challenges of lithium-metal expansion.This cell architecture is designed to accommodate expansion as the cell charges and the anodes of each layer are plated with lithium metal,and conversely,the contraction as the cell discharges.Additionally,the format is designed to allow the cell to simultaneously dissipate excess heat during fast charging,function with or without externally applied pressure,enable high-volume manufacturing and pack integration,and offer good packaging efficiency to achieve our cell-level energy density targets.We believe our battery technology may provide significant improvements in energy density compared to todays conventional lithium-ion batteries,as shown in the figure below.QS projections and targets based on existing estimates and model assumptions Sources:Li-ion cell energy density from database,charge times from ev-database.org and (for Rivian R1T)10Benefits of Our TechnologyWe believe our battery technology will enable significant benefits across battery capacity,charging rate,safety,and cycle life while minimizing cost.We believe these benefits will provide significant value to automotive OEMs by enabling greater customer adoption of their EVs.By solving key pain-points such as 15-minute fast charging from 10%to 80%of capacity,we believe our battery technology will enable the delivery of an EV experience that is significantly more competitive with fossil fuel vehicles than what todays EVs can achieve with conventional lithium-ion batteries.Our battery technology is intended to meet the five key requirements we believe will enable mass market adoption of EVs:Energy density.Our battery design is intended to increase volumetric and gravimetric energy density by eliminating the carbon/silicon anode host material found in conventional lithium-ion cells.This increased energy density will enable EV manufacturers to increase range without increasing the size and weight of the battery pack,or to reduce the size and weight of the battery pack which will reduce the cost of the battery pack and other parts of the vehicle.Fast charging capability.Our battery technology containing our solid-state separator material has been tested to demonstrate the ability to charge from 10%to 80pacity in approximately 15 minutes or less,which is generally faster than todays conventional batteries can deliver without materially degrading battery cycle life.In these conventional batteries,the limiting factor for charge rate is the rate of diffusion of lithium ions into the anode.If a conventional battery is charged at high rate,especially at high state-of-charge or low temperature,lithium can start plating on carbon particles of the anode rather than diffuse into the carbon particles.This causes a reaction between the plated lithium and liquid electrolyte which reduces cell capacity and increases the risk of dendrites that can short circuit the cell.With a lithium-metal anode,using our solid-state separator,we expect the lithium to be plated as fast as the cathode can deliver it.Nonetheless,repeated fast-charging of battery cells may result in cycle life degradation,as is the case in conventional lithium-ion batteries.Enhanced safety.Our solid-state battery cell uses a ceramic separator which is not combustible and we believe is therefore safer than conventional polymer separators.This ceramic separator is also capable of withstanding temperatures considerably higher than those that would melt conventional polymer separators,providing an additional measure of safety.Although additional safety tests need to be performed as our materials and processes evolve,in 2023 we ran a suite of safety tests on a limited number of our A0 prototype cells,including nail penetration,overcharge,external short circuit,and thermal stability testing up to 300C(higher than the 180C melting point of lithium).The A0 prototype cells successfully passed these automotive safety tests according to the specification set by a leading OEM,with hazard levels of 3 or lower as defined by EUCAR and SAE J2464 standards.One noteworthy result from prototype cell testing was demonstrating thermal stability up to 300C;for reference,we tested conventional high-energy lithium-ion cells,which burst into flames between 174C and 185C.In 2024,we again performed nail penetration,overcharge,external short circuit,and thermal stability testing up to 300C and our B0 samples passed these tests with hazard levels of 3 or lower as defined by EUCAR and SAE J2464 standards.Notwithstanding the foregoing,we note that although the A0 and B0 prototype cells have passed these automotive safety tests performed in our laboratories,we have been able to test these cells to the point of failure under additional modified test conditions.Moreover,these safety test results for the A0 and B0 prototype cells are not necessarily representative of those of subsequent generations of our cells since safety is a function of a cells materials composition,which changes from one generation of cells to the another.We will continue safety testing under different conditions,including on aged cells.We also need to test a much larger sampling of cells to ensure statistical significance.Battery cycle life.We are designing our technology to enable increased battery cycle life relative to conventional lithium-ion batteries.In a conventional cell,a reason that battery capacity fades over time is the gradual irreversible loss of lithium due to side reactions between the liquid electrolyte and the anode.By eliminating the anode host material,we expect to eliminate those anode side reactions to enable longer battery cycle life.Our top-performing A0 prototype cell in one prospective customers battery testing labs achieved over 1,000 full cycle equivalents with over 95%discharge energy retention,using customer-specified test conditions of C/3 charge and C/2 discharge with our standard temperature and pressure conditions,and 100pth of discharge.This performance exceeds the cycle life and capacity retention in battery warranties for some of the best-selling EVs in the U.S.market today,which require that cells retain at least 70%of the rated capacity for 150,000 miles.Cost.Our battery technology eliminates the anode host material and the associated manufacturing costs,providing a structural cost advantage compared to traditional lithium-ion batteries.When comparing manufacturing facilities of similar scale and upon achieving process maturity,we estimate that eliminating these costs has the potential to provide cost savings compared to the costs of building traditional lithium-ion batteries.11Our Competitive StrengthsOnly lithium-metal battery technology showing capability to meet automotive requirements for power,cycle life,and temperature range to our knowledge.We have built and tested single-layer and multilayer solid-state cells and have demonstrated that our technology shows the capability to meet automotive requirements for power,cycle life,temperature range,and safety.Since 2018 Volkswagen has tested multiple generations of our prototype cells,including single-layer and multilayer prototype cells.In 2024,Volkswagen announced it had successfully tested our A0 prototype cells at automotive rates of power,noting that the A0 prototype cell was also able to meet the requirements for other test criteria such as fast charging capability,safety and self-discharge.While we signed an agreement with PowerCo with the goal of commercializing our battery technology,we intend to continue working closely with automotive OEMs to make our solid-state battery cells widely available over time.In addition,we have signed customer sampling agreements with a number of OEMs,ranging from leading manufacturers by global revenue to premium performance and luxury carmakers,to collaborate with us in the testing and validating of our solid-state battery cells with the goal to include such cells into pre-production prototype vehicles and ultimately into serial production vehicles.Partnership with one of the worlds largest automotive OEMs.We are partnered with Volkswagen,one of the largest automakers in the world.Volkswagen has been a major investor since 2012 and has invested approximately$380 million in us.In addition,in July 2024,we entered into the PowerCo Collaboration Agreement,a battery cell company wholly owned by the Volkswagen Group,with the goal of industrializing the solid-state lithium-metal battery technology we intend to use in our first planned productthe QSE-5.High barriers to entry and extensive patent and intellectual property portfolio.As of December 31,2024,we owned,or licensed on an exclusive basis,approximately 350 U.S.and foreign patents and patent applications including broad fundamental patents around our core technology.Our proprietary solid-state separator uses the only material we know of that can cycle lithium at automotive-level current densities and room temperature without forming dendrites.We have a range of patents,including patents that cover:Material compositions,including the optimal compositions as well as wide-ranging coverage of a number of variations for the separator and other battery components;Enabling battery technology and methods required to incorporate a separator into a battery;Manufacturing technology,protecting the way to make the separator at scale without semiconductor-style vacuum production or batch processes used in traditional ceramics;andMaterial dimensions,including our proprietary separator,covering any separator with commercially practical thicknesses for a solid-state battery.Significant development focused on next-gen technology for automotive applications.We have spent over a decade developing our battery technology.Many of our technical team members have worked at large battery manufacturers and automotive OEMs.Through its experience,our team has significant technical know-how and is supported by extensive facilities and equipment,development infrastructure,and data analytics.Designed for volume production.Our battery cells are designed to use earth-abundant materials and processes suitable for higher volume production.Our earlier-generation manufacturing process for our proprietary solid-state separator used equipment that was already available at scale in the battery or ceramics industries.We are developing subsequent,proprietary higher-volume separator manufacturing processes that seek to further reduce cost,increase throughput,and improve quality.While preparing for scale production,we have purchased or tested production-intent equipment from the worlds leading vendors.In particular,we expect to produce our proprietary solid-state separator using scalable continuous-flow heat treatment to process separator films more rapidly while applying less total heat energy per film.Although our separator material is proprietary,the inputs are readily available and can be sourced from multiple suppliers across different geographies.Structural cost advantage leveraging industry cost trends.Aside from the solid-state separator,our battery is being designed to use many generally available materials and processes that are standard across todays battery manufacturers.As a result,we expect to benefit from the projected industry-wide cost declines for these materials that result from process improvements and economies of scale.We believe that the manufacturing of our solid-state battery cells at scale provides us with a structural cost advantage because our battery cells are manufactured without an anode.12Our Growth StrategyContinue to develop our commercial battery technology and manufacturing capabilities.We will continue developing our battery technology with the goal of enabling commercial production subsequent to the automotive qualification process,which generally involves several major delivery milestones of A,B and C samples.We have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer cell cycling data.In 2022,we shipped our first A0 prototype battery cells to multiple OEMs for testing.In 2024,we shipped B0 samples of our first commercial product,the QSE-5.As we move from prototypes to commercial products,we will need to continue improving the quality and consistency of materials and processes for higher volume manufacturing,including increased precision through automation and process control,quality of material inputs,and particle reduction across our process flow.We will continue to work to further develop and validate the volume manufacturing processes to enable higher volume manufacturing by us or our licensing partners and minimize manufacturing costs.We will continue to work on increasing the yield of our solid-state separator to reduce scrappage and to increase utilization of manufacturing equipment.Expand relationships with other automotive OEMs.While we expect Volkswagen will be the first to commercialize vehicles using our battery technology,we are,and over the next few years intend to continue,working closely with other automotive OEMs to make our solid-state battery cells widely available over time.Subject to the terms of the PowerCo Collaboration Agreement,we are not prohibited from working in parallel with other automotive OEMs or other non-automotive companies to commercialize our technology.We have signed customer sampling agreements with a number of OEMs,ranging from leading manufacturers by global revenue to premium performance and luxury carmakers,to collaborate with us in the testing and validation of our solid-state battery cells with the goal to include such cells into pre-production prototype vehicles and ultimately into serial production vehicles.Expand target markets.We are currently focused on automotive EV applications,which have the most stringent set of requirements for batteries.However,we recognize that our solid-state battery technology has applicability in other large and growing markets including stationary storage and consumer electronics such as smartphones and wearables.For example,we have signed agreements with companies to evaluate our batteries for inclusion in their stationary energy storage and consumer electronics applications.Expand commercialization models.Our technology is being designed to enable a variety of business models.In addition to collaboration with PowerCo,which contemplates a licensing arrangement,we may operate solely-owned manufacturing facilities,license technology to other manufacturers,or enter into joint venture arrangements,among other approaches.We intend to continue to invest in research and development to improve battery cells performance,improve manufacturing process and reduce cost.Where appropriate,we may build and sell solid-state separators or cell layers rather than complete battery cells.Manufacturing Process Development We are building a battery development pilot line at our facilities in San Jose,California to provide a sufficient quantity of separators and cells for internal development,customer sampling,and higher volumes of QSE-5 cells.Our pilot line is intended to consist of a continuous flow,automated line with sufficient capacity and process maturity to engage in automotive qualification.Ultimately,our pilot line is intended to serve as the basis for continued manufacturing process development for the subsequent scale up of our manufacturing capabilities,including to support collaboration and future technology transfer activities as part of the collaboration and licensing arrangements with PowerCo as well as potential future commercial arrangements.Our battery manufacturing process is being designed to be very similar to that of conventional lithium-ion battery manufacturing,with a few exceptions:We use a proprietary separator material instead of the porous polyolefin separator used in lithium-ion cells.We assemble our cell by stacking these separators together with cathodes and current collectors using proprietary joining methods.Our architecture eliminates the need for anode manufacturing,reducing capital investment and lowering operating costs.Our cell design allows us to shorten the weeks-long aging process required for conventional lithium-ion cells,thus decreasing manufacturing cycle time and reducing working capital needs.Our architecture depends on our proprietary solid-state separator.Though our separator design is unique,our manufacturing process leverages established or similar high-volume production processes already deployed in other industries.We are developing subsequent,proprietary higher-volume separator manufacturing processes that seek to further reduce cost,increase throughput,and improve quality.13We plan to source many input materials from industry leading suppliers to the lithium-ion battery industry,and we already have strategic relationships in place with the industrys leading vendors of cathode material,the most critical purchased input to our cell,along with leading vendors of other less critical inputs.Our solid-state separator is made from abundant materials produced at industrial scale in multiple geographies.Relative to conventional lithium-ion cells,our technology eliminates the anode material cost(e.g.,carbon/silicon host material,electrolyte in the anode)and reduces manufacturing costs(e.g.,no anode related manufacturing costs,reduced formation costs).This enables savings in materials,capital equipment and manufacturing time,as illustrated in the graphic below.PartnershipsVolkswagen CollaborationQuantumScape has had a strong collaborative relationship with Volkswagen since 2012.Our collaboration initially focused on the testing and evaluation of our battery technology with Volkswagen engineers working closely with our engineering team on our technology development efforts and battery testing.Volkswagen has made several rounds of equity investments in QuantumScape,and senior executives of Volkswagen joined our board of directors(the“Board”).During the early part of this collaboration we worked closely with members of Volkswagens global research and development team and then with Volkswagens Center of Excellence for Battery Cells,which was tasked with commercializing battery technologies within Volkswagen.Currently,Dr.Gnther Mendl,Head of Battery Center of Excellence,Volkswagen AG,and Sebastian Schebera,Head of Strategic Partnerships,Volkswagen AG,are members of the Board.14PowerCo Collaboration and Joint Venture TerminationQSV Operations LLC(“QSV”)was incorporated as a limited liability company in 2018.VWGoA,VGA and QuantumScape executed the JVA,effective September 2018,with the goal of jointly establishing a manufacturing facility to produce the pilot line of the Companys product through QSV.In connection with this agreement,the parties also entered into two operating agreements:(i)the Limited Liability Company Agreement of QSV to govern the respective rights and obligations as members of QSV and(ii)the Common IP License Agreement for the Company to license certain intellectual property pertaining to automotive battery cells as defined in the JVA to VWGoA,VGA and QSV.On July 5,2024,we entered into the PowerCo Collaboration Agreement with the goal of industrializing the solid-state lithium-metal battery technology we intend to use in our first planned productthe QSE-5 Technology.PowerCo was formed by Volkswagen in 2022 as a company intended to consolidate Volkswagens activities in the development and production of battery cells.In connection with the PowerCo Collaboration Agreement and subject to the completion of certain milestones,we and PowerCo intend to enter into a license agreement(the“PowerCo IP License Agreement”)under which we will grant PowerCo a non-exclusive,limited,royalty-bearing license to use the QSE-5 Technology for the purpose of manufacturing and selling batteries primarily for automotive applications,and PowerCo will pre-pay an initial royalty fee of$130 million,against which any future royalties due will be credited.The initial royalty is subject to a time-based diminishing clawback if the PowerCo IP License Agreement is terminated early by PowerCo under certain conditions.The PowerCo Collaboration Agreement supersedes the JVA,which was terminated concurrently.As compared to a joint venture arrangement of similar output volumes,we expect the licensing arrangement to result in less revenue,as well as lower costs and capital requirements.Research and DevelopmentWe conduct research and development at our headquarters facility in San Jose,California.Research and development activities concentrate on making further improvements to our battery technology including subsequent generations of prototype samples incorporating advances in cell functionality,process and reliability,and on improving the maturity of our production processes and pilot line.15Our research and development currently includes programs for the following areas:Continued improvement of the cathode.Our cathodes use a conventional cathode active material such as NMC mixed with a catholyte.We plan to benefit from industry cathode chemistry improvements and/or cost reduction,which in the future may include use of other cathode active materials,including cobalt-free compositions,including LFP,as well as cathode processing advances such as dry electrode processing.Over the years,we have developed catholytes made of differing mixtures of organic liquid electrolyte in an effort to optimize performance across multiple metrics such as voltage,temperature,power,and safety,among others.We have tested solid,gel and liquid catholytes in our cells.The solid catholyte is part of our ongoing research and development investigation into inorganic catholytes.Our solid-state cathode platform is being designed to enable high rates of charge and discharge for even thicker cathode electrodes,which,when combined with a lithium-metal anode,may further increase cell energy densities.Continued improvement in quality,consistency and reliability.We are working to improve the quality and uniformity of our cells,including our separators,to further improve,among other things,the cycling behavior,power,operating conditions,and reliability of our cells.For some of our early-generation processes,we used methods of continuous processing found at scale in both the battery and ceramic industries and we are working on continuous improvement of these processes,including better quality,consistency,and higher throughput through automation and process control(including specification tightening and adding or improving inspection points along the manufacturing process flow),quality of material inputs,and particle reduction across our process.We are also developing subsequent methods not typically used in ceramics that offer significant potential cost savings.Regarding consistency,we believe tightening the variability of separator quality will result in better yield.We plan to implement process improvements and controls necessary to manufacture higher quality,more consistent materials;we believe these activities will ultimately lead to higher reliability.Continued improvement in throughput.Increasing the volume of separator production results in the increased quantities required for prototypes and delivery of more test cells to prospective customers.We continue to invest and deploy resources to automate our manufacturing process,including purchasing larger-scale manufacturing equipment,that we expect will substantially improve our manufacturing processes and,as a result,increase throughput required for product qualification and to achieve the cost,performance and volume levels required for commercial shipments.Cell design.We have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer solid-state cells in commercially relevant areas(ranging from approximately 60 x75mm to 70 x85mm).In order to advance the maturity of our prototype cells and produce commercially viable solid-state battery cells,we must produce battery cells that achieve target cell design and capacities set by our customers and we may have to vary cell layer count and dimensions;while we target our first commercial product,the QSE-5,to have approximately 5 amp-hours of capacity,the exact number of layers and dimensions will vary and depend upon customer specifications,cell design considerations,and other factors.We will need to overcome production challenges to produce sufficient volumes of our separators and prototype battery cells to complete development of our first commercial product and for customer evaluation and product qualification purposes,as well as subsequent cell designs that may require different capacity,layer counts and dimensions.Intellectual PropertyThe success of our business and technology leadership is supported by our proprietary battery technology.We rely upon a combination of patents,trademarks and trade secrets in the United States and other jurisdictions,as well as license agreements and other contractual protections,to establish,maintain and enforce rights in our proprietary technologies.In addition,we seek to protect our intellectual property through nondisclosure and invention assignment agreements with our employees and consultants and through non-disclosure agreements with business partners and other third parties.We regularly file applications for patents and have a significant number of patents in the United States and other countries where we expect to do business.Our patent portfolio is deepest in the area of solid-state separators with additional areas of strength in anodes,next-generation cathode materials,and cell,module,and pack design specific to lithium-metal batteries.Our trade secrets primarily cover manufacturing methods.As of December 31,2024,we owned,or licensed on an exclusive basis,more than 160 issued U.S.patents and patent applications,and more than 190 granted foreign patents and patent applications.Patents issued to us start expiring in 2033.CompetitionThe EV market,and the battery segment in particular,is rapidly evolving and highly competitive.With the introduction of new technologies and the potential entry of new competitors into the market,we expect competition to increase in the future,which could harm our business,results of operations,or financial condition.16Our prospective competitors include major manufacturers currently supplying the industry,automotive OEMs and potential new entrants to the industry.Major companies now supplying batteries for the EV industry include Panasonic Corporation,Samsung SDI,Contemporary Amperex Technology Co.Limited,LG Energy Solutions,BYD Co.Limited,SK Innovation Co.Limited and E-One Moli Energy Corporation.They supply conventional lithium-ion batteries and in many cases are seeking to develop solid-state batteries,including potentially lithium-metal batteries.In addition,because of the importance of electrification,many automotive OEMs are researching and investing in solid-state battery efforts and,in some cases,in battery development and production.For example,Tesla,Inc.is building multiple battery gigafactories and potentially could supply batteries to other automotive OEMs,and Toyota Motors and a Japanese consortium have a multi-year initiative pursuing solid-state batteries.Additionally,in 2024,China announced the China All-Solid-State Battery Collaborative Innovation Platform,which brings together government,academia and industry to develop and manufacture solid-state batteries that can compete globally.A number of development-stage companies such as SES,Solid Power,Factorial,ION,Sakuu,ONE,Enovix,and Sila Nanotechonologies are also seeking to improve conventional lithium-ion batteries or to develop new technologies for solid-state and/or lithium-metal batteries.Potential new entrants are seeking to develop new technologies for cathodes,anodes,electrolytes and additives.Some of these companies have established relationships with automotive OEMs and are in varying stages of development.We believe our ability to compete successfully with lithium-ion battery manufacturers and with other companies seeking to develop solid-state batteries will depend on a number of factors including battery price,safety,energy density,charge rate and cycle life,and on non-technical factors such as brand,established customer relationships and financial and manufacturing resources.Many of the incumbents have,and future entrants may have,greater resources than we have and may also be able to devote greater resources to the development of their current and future technologies.They may also have greater access to larger potential customer bases and have and may continue to establish cooperative or strategic relationships amongst themselves or with third parties(including automotive OEMs)that may further enhance their resources and offerings.Government Regulation and ComplianceThere are government regulations pertaining to battery safety,transportation of batteries,use of batteries in cars,factory safety,and disposal of hazardous materials.We will ultimately have to comply with these regulations to sell our batteries into the market.The license and commercialization of our battery technologies abroad is likely to be subject to more stringent export controls in the future.Employees and Human CapitalWe pride ourselves on the quality of our world-class team and seek to hire only employees dedicated to our strategic mission.Many of our employees have significant experience working with large battery manufacturers and automotive OEMs.As of December 31,2024,we employed approximately 800 employees,based primarily in our headquarters in San Jose,California.Many of our employees in our research and development and related functions hold engineering and scientific degrees,including many from the worlds top universities.In order to align our work force with our operational focus,in January 2025 we had a reduction in force impacting approximately 7%of the Companys full-time employees at the time.To date,we have not experienced any work stoppages and we consider our relationship with our employees to be good.None of our employees are either represented by a labor union or are subject to a collective bargaining agreement.People and CultureWe seek team members who want to help solve a significant problem that will positively impact the world.We value diversity and recognize the importance of fostering a positive,inclusive culture.We seek to promote fair and equitable hiring and promotion processes and year-over-year improvements in diverse representation.Some of our actions to achieve this included delivering management training for our senior leaders,implementing a job leveling framework to ensure candidates are assessed against a consistent set of criteria,and making certain that our commitment to equal hiring and promotion opportunities is substantiated with equal pay for equal work by conducting an annual internal pay equity analysis.Attraction and RetentionWe are committed to maintaining equitable compensation programs including equity participation.We offer market-competitive salaries and strong equity compensation aimed at attracting and retaining team members capable of making exceptional contributions to our success.Our full-time regular employees hold equity in our company and are generally eligible for the employee stock purchase plan.Our compensation decisions are guided by the external market,role criticality,and the contributions of each team member.Our job-leveling framework and associated pay ranges allow us to maintain pay equity while offering the attractive and effective compensation needed as we grow and compete for talent.17Health and SafetyThe health and safety of our employees is mission critical.We emphasize a proactive safety culture and maintain a supportive organization and work culture that encourages personal health and work-life balance for our employees.Our Environmental,Health and Safety(EHS)department leads the programs that address workplace health and safety concerns through engineering controls,policies,procedures,training,monitoring and audits,and reports directly to our board of directors on a quarterly basis on such matters.Available InformationOur investor relations website is located at https:/,our X account handle is QuantumScapeCo,our investor relations X account handle is QuantumScapeIR,our Chief Executive Officers LinkedIn account is located at Chief Technology Officers X account handle is ironmantimholme,our Chief Marketing Officers X account handle is HussainAsim,and our corporate LinkedIn account is located at use our investor relations website,aforementioned X accounts and LinkedIn account to post important information for investors,including news releases,analyst presentations,and supplemental financial information,and as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.Accordingly,investors should monitor our investor relations website,aforementioned X accounts,and LinkedIn account in addition to following press releases,filings with the SEC and public conference calls and webcasts.We also make freely available,on our investor relations website under“SEC Filings,”our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after electronically filing or furnishing those reports to the SEC.Item 1A.Risk Factors.The following summary risk factors and other information included in this Report should be carefully considered.The summary risks and uncertainties described below are not the only ones we face.Additional risks and uncertainties not currently known to us or that we currently deem less significant may also affect our business operations or financial results.If any of the following risks actually materializes,our stock price,business,operating results and financial condition could be materially adversely affected.For more information,see below for more detailed descriptions of each risk factor.Risk Factor SummaryRisks Related to Our Technology Development,Manufacturing and PerformanceChallenges involving our development of solid-state battery cells.Challenges related to manufacturing and scale-up of our separator and solid-state battery cells.Any failure to meet targets around cost,performance characteristics or other specifications as set out by us or our customers.Reliance on third-party suppliers for necessary materials,components or equipment.An inability to control the costs associated with our operations and the price of raw materials.Any risk and uncertainty around the use of complex machinery for our operations and production.An inability to attract and retain customers during the development stage or for higher volume production.Any loss or early obsolescence of our manufacturing equipment.Customer Risks and Risks Related to Our Relationship with VolkswagenAny failure to meet requirements or achieve milestones under our collaboration with PowerCo.Increased reliance on PowerCo to scale up and commercialize our technology.Concentration of agreements and relationships that can restrict our business operations,commercialization opportunities and revenue generation.Challenges to accurately estimate the future supply and demand for our batteries.Our Intellectual Property Risks Any failure to protect or assert our intellectual property rights.Any intellectual property infringement claims or other litigation that we need to defend ourselves against.Adverse decisions related to our patent applications and contests to our patent rights.Other Business RisksChallenges to successfully compete in an evolving and highly competitive battery market.18Dependence on consumer adoption of EVs for future growth and success.Historical and continuing financial losses as an early-stage company.Risks and tradeoffs related to pursuing a variety of business models and arrangements.Changes to our objectives and targets due to unfavorable changes to our initial assumptions and analyses.Any issues with operations of or disruptions to our information technology and communications systems.Increased exposure to artificial intelligence related risks and challenges.Evolving scrutiny over our ESG practices and value propositions.Involvement in litigation,regulatory actions or government investigations and inquiries.Exposure to product liability claims due to third-party use of our batteries.Exposure to risks and regulations in various jurisdictions where we conduct activities.Adverse effects of inflation and increased interest rates.Challenges arising from managements limited experience in operating a public company.Any negative impacts from epidemics,pandemics,and other outbreaks.Our Regulatory RisksEvolving or unfavorable global trade policies and export/import regulations related to the battery and EV industry.Environmental and safety risks related to battery technology development and manufacturing.Risks Related to Ownership of Our Common Stock and Our Certificate of Incorporation and Bylaws Provisions Volatility of our Class A Common Stock.Dilution to stockholders in the event of sales of substantial amounts of our Class A Common Stock in the capital markets.Any failure to raise additional capital on attractive terms.Manipulative activity by short sellers.Changes to our reasonable estimates and probability-based assumptions that can affect our results of operations.Concentration of capital stock ownership among certain insiders.The dual class structure of our Common Stock.Provisions in our Certificate of Incorporation,Bylaws and Delaware law that can limit stockholders ability to change management.Limits to our stockholders ability to obtain a chosen judicial forum for disputes.No cash dividends to stockholders in the foreseeable future.General Risk FactorsChallenges attracting and retaining key employees and qualified personnel.Natural disasters and other catastrophic events outside of our control.Volatile global economic conditions due to real or perceived financial crises.Changes in U.S.or foreign tax policies.Limitations to our use of deferred tax assets to offset future taxable income.Insufficient insurance coverage for future losses or claims against us.Any inability to comply with NYSE continued listing standards.Significant expenses and administrative burdens as a public company.Any failure to maintain an effective system of internal controls which may lead to a material weakness.Limitations in our disclosure controls and procedures that may not prevent or detect all errors or acts of fraud.Any changes to analyst publications about us,our business,or the market.19 The following risk factors apply to our business and operations.These risk factors are not exhaustive,and investors are encouraged to perform their own investigation with respect to our business,financial condition,and prospects.We may face additional risks and uncertainties that are not presently known to us,or that we currently deem immaterial,which may also impair our business.The following discussion should be read in conjunction with the financial statements and notes to the financial statements included elsewhere in this Report.Risks Related to Our Technology Development,Manufacturing and Performance We face significant challenges in our attempt to develop a solid-state battery cell and produce it at higher volumes with acceptable performance,quality,consistency,reliability,throughput,safety,and costs.Delays or failures in accomplishing our development objectives may delay or prevent successful commercialization of our technology and negatively impact our business.Developing lithium-metal solid-state batteries that meet the requirements for wide adoption by automotive OEMs is a difficult undertaking and,as far as we are aware,has never been done before.We are still in the development stage and face significant challenges in completing the development of our battery cells and in producing battery cells in commercial volumes with acceptable performance,quality,consistency,reliability,throughput,safety,and costs.Some of the development challenges include increasing the quality,consistency,reliability and production throughput of our separators and cells,increasing the size and layer count of our multilayer cells,increasing manufacturing scale to produce the volume of cells needed for our technology development and customer applications,installing,bringing up and optimizing higher volume manufacturing equipment,packaging design and engineering to ensure adequate cycle life,pressure management,cost reduction,completion of the rigorous and challenging specifications required by our automotive partners,including but not limited to,calendar life,mechanical,safety,and abuse testing.Our solid-state separator is in the development stage and has never been used before for battery applications(or to our knowledge,for any other applications).There are significant quality,consistency,reliability and throughput,cost and manufacturing process challenges to be solved in order for the separators to be produced and used commercially.We have had and are likely to continue to encounter engineering challenges as we increase the lateral dimensions,reduce the thickness and defects and increase the production volume of our separators.In addition,we are continuously evaluating multiple cathode material compositions for inclusion in our battery cells and have not yet finalized the cathode composition or formulation,or the design of related cell assembly components.We also have not validated that the current cell design meets all automotive requirements.If we are not able to overcome these barriers in developing and producing separators and battery cells at commercial volumes,our business would likely fail.We have tested single-layer and multilayer cells in commercially relevant areas that measure approximately 60 x75mm to 70 x85mm,and shipped our first A0 prototype battery cells in 2022.In 2024,we shipped the first B0 prototype samples of our QSE-5 cell.While we target our first commercial product,the QSE-5,to have a capacity of approximately 5 amp-hours,the exact capacity,number of layers and dimensions may vary and depend upon specific customer preference,cell design considerations,and other factors.Any delay in the development or manufacturing scale-up of our solid-state battery cells would negatively impact our business as it will delay time to revenue and negatively impact our customer relationships.We need to overcome production challenges to produce higher volumes of our separators and prototype battery cells and we may encounter delays and cost overruns related to planning,permitting,construction,equipment installation and reliability,utilities infrastructure installation and operations start-up of our manufacturing facilities,which could delay or prevent the introduction of our product and negatively impact our business.We will need to overcome production challenges to produce sufficient volumes of our separators and prototype battery cells to complete development of our first commercial product and for customer evaluation and product qualification purposes,as well as subsequent cell designs that may require different capacity,layer counts or dimensions.We have not yet validated a manufacturing process or acquired the equipment necessary to produce higher volumes of our separator,cathode electrode or related cell assembly components that meet customer requirements.We will need to produce these cells at improved yields without compromising performance,and simultaneously solve related packaging and reliability challenges in a way that is scalable and low-cost.There are significant engineering and mechanical challenges that we must overcome to advance the scale up of our battery cells.In addition,we have been designing and procuring certain equipment to continue developing the manufacturing processes necessary to make these battery cells at higher volumes.If we are not able to overcome these developmental hurdles in building our cells,our business is likely to fail.In addition,we must advance our current manufacturing processes to include more automation,such as automated film handling and stacking,and use higher volume equipment and processes,such as moving to higher throughput continuous flow equipment.We must also continue process development and innovation efforts toward substantially shortening cycle time,improving process control and equipment reliability,and reducing consumables(including energy usage),with the target end goal of increasing the quality,consistency,reliability and throughput of our separators and battery cells.20Further,we must build our pilot line in San Jose,California,to provide a sufficient quantity of separators and cells for internal development,customer sampling,and higher volumes of QSE-5 cells.Ultimately,we need to build out our pilot line to serve as the basis for continued manufacturing process development for the subsequent scale up of our manufacturing capabilities,including to support collaboration and future technology transfer activities as part of the collaboration and licensing arrangements with PowerCo as well as potential future commercial arrangements.However,we could encounter significant delays and cost overruns related to planning,permitting,construction,equipment delivery,installation,qualification,and reliability,utilities infrastructure installation,and operations start-up of our manufacturing facilities,including those containing our pilot line.Examples include global supply chain issues that impact our equipment suppliers,supplier non-performance and equipment damage in transit.In particular,we have experienced short-term power outages at our San Jose facilities that have been resolved,but similar disruptions may occur in the future;delays associated with material shortage and backups at key shipping ports could impact the capacity at which we can run the facility;and certain of our construction contractors have previously reported delays due to labor strikes of their employees that were ultimately resolved but may reoccur in the future.If we are unable to substantially improve our manufacturing processes to increase yield and throughput to achieve the cost,performance and volume levels required for commercial shipments,our business could be materially impacted.If the cost,performance characteristics or other specifications of the battery fall short of our targets or our customer requirements,our ability to develop,market,and sell our batteries could be harmed.Even if we complete development and achieve volume production of our solid-state battery,if the cost,performance characteristics or other specifications of the battery fall short of our targets or our customer requirements,our sales,product pricing and margins would likely be adversely affected.In addition,our battery cells must simultaneously satisfy all the commercial and safety requirements of our customers.Our solid-state battery cell uses a ceramic separator which we believe is safer than conventional polymer separators.We have conducted,and we will continue to conduct,a suite of performance and safety tests on our prototype cells,including on a limited number of QSE-5 B-samples to date.Although certain of our cells tested in our laboratories have passed automotive performance and safety test levels,some of these cells have been subject to additional modified test conditions and tested to the point of failure.However,these performance and safety test results for our prototype cells are not necessarily representative of those of subsequent generations of our cells since performance and safety are a function of a cells materials composition,which changes from one generation of cells to another and depend on the final design of the battery package.Additional safety tests,with much larger samplings of cells,need to be performed as our materials and processes evolve to ensure efficacy and statistical significance.Once commercial production of our solid-state battery cells commences,our batteries may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs,recalls,and design changes.Our batteries are inherently complex and incorporate technology and components that have not been used for other applications and that may contain defects and errors,particularly when first introduced.We have a limited frame of reference from which to evaluate the long-term performance of our solid-state batteries.There can be no assurance that we will be able to detect and fix any defects in our solid-state batteries prior to the sale to potential consumers.If our batteries fail to perform as expected,we could lose design wins and customers may delay deliveries,terminate further orders or initiate product recalls,each of which could adversely affect our sales and brand and could adversely affect our business,prospects and results of operations.We may not be able to establish supply relationships for necessary materials,components or equipment,which could delay the introduction of our product and negatively impact our business.We rely on third-party suppliers for components and equipment necessary to develop and manufacture our solid-state batteries,including key supplies,such as our cathode material and manufacturing equipment for both our solid-state separator and solid-state battery cells.We are collaborating with key suppliers but have not yet entered into agreements for the supply of production quantities for many of these materials.To the extent that we are unable to enter into commercial agreements with these suppliers on beneficial terms,or these suppliers experience difficulties or delays ramping up their supply of materials to meet our requirements,the introduction of our battery will be delayed.For example,we have previously experienced minor disruptions to the supply of process gas due to the shortage of truck drivers related to the COVID-19 pandemic and due to an incident at our main suppliers facilities,and have also experienced and could continue to experience disruption to the supply of petroleum-derived products as a result of certain weather and geopolitical events and conflicts and any related political or economic responses and counter-responses or otherwise by various global actors.The war in Ukraine and resulting sanctions against Russia by certain countries has also led to,and a further escalation of the armed conflict in the Middle East could also lead to,an increase in the price of petroleum and petroleum-derived products,which has in certain instances increased and may in the future further increase the cost of manufacturing,input material pricing and logistics costs.These challenges may be exacerbated in situations where we source certain of our materials and equipment exclusively from one or a few suppliers.21Any disruption in the supply of components,equipment or materials could temporarily disrupt research and development activities or production of our batteries until an alternative supplier is able to supply the required material.Changes in business conditions,unforeseen circumstances,political,economic and social instability,governmental changes,disruptions caused by power outages,climate change and natural disasters,and other factors beyond our control or which we do not presently anticipate,could also affect our suppliers ability to deliver components or equipment to us on a timely basis.Any of the foregoing could materially and adversely affect our results of operations,financial condition and prospects.Currency fluctuations,trade barriers,tariffs or shortages and other general economic or political conditions may limit our ability to obtain key materials,components or equipment for our solid-state batteries or significantly increase freight charges,raw material costs and other expenses associated with our business,which could further materially and adversely affect our results of operations,financial condition and prospects.In particular,tariffswhether imposed as part of trade disputes,protective measures,or broader geopolitical strategiescould substantially drive up the cost of components and materials critical to our operations,putting significant pressure on our overall cost structure.For example,in February 2025,the U.S.imposed additional tariffs on imports from China.These tariffs,any additional tariffs imposed on foreign goods,as well as potential retaliation by a foreign government against such tariffs or policies may affect,directly or indirectly,the prices and supply of key materials necessary for our or our supply chain operations.We may also be subject to a number of geopolitical risks,including U.S.and foreign government trade restrictions or sanctions and any political or economic responses or counter-responses to such restrictions or sanctions.As global competition for raw materials continues to intensify,particularly in light of rising demand for battery technologies,we may face difficulties securing critical supplies on favorable terms or at all,which could materially harm our ability to produce batteries at scale and threaten the viability of our business.We may be unable to adequately control the costs associated with our operations and the components necessary to develop and commercialize our solid-state battery technology,and,if we are unable to control these costs and achieve cost advantages,our business will be adversely affected.We require significant capital to develop and grow our business and expect to incur significant expenses,including those relating to research and development,raw material procurement,leases,sales,distribution,and technology transfer as we build our brand and market our battery technology,and general and administrative costs as we scale our operations,including the costs of our activities under the PowerCo Collaboration Agreement and,if entered into,the PowerCo IP License Agreement.For example,there has been volatility in prices and availability of raw material such as cobalt,nickel,and lithium and such material may face industry-wide shortages.Our ability to become profitable in the future will not only depend on our ability to successfully market or license our solid-state battery technology,but also to control our costs and achieve our target cost projections,including our projected cost advantage when compared to the costs of building traditional lithium-ion batteries at scale or the costs of building solid-state batteries by other market players.If we or our partners,as applicable,are unable to cost efficiently design,manufacture,market,sell and distribute our solid-state battery technology,including under the PowerCo Collaboration Agreement,our margins,profitability and prospects would be materially and adversely affected.We have not yet produced any solid-state battery cells at commercial capacity or in volume and our forecasted cost advantage for the production of these cells at scale,compared to conventional lithium-ion cells,will require us to achieve rates of throughput,use of electricity and consumables,yield,and levels of automation that we have not yet achieved.If we are unable to achieve these targeted rates,our business will be adversely impacted.In particular,while we have estimated that eliminating the anode host material and the associated manufacturing costs will provide savings in production at scale compared to the costs of building traditional lithium-ion batteries at leading manufacturers,that estimate is subject to numerous assumptions and uncertainties.To achieve those savings,we or our partners,as applicable,will need to achieve significant cost savings in battery design and manufacturing,in addition to the cost savings associated with the elimination of an anode from our solid-state battery cells,while controlling costs associated with the manufacturing of our separator,including achieving substantial improvements in throughput and yield required to hit commercial targets.Further,we or our partners,as applicable,will need to capture industry-wide cost savings in the materials,components,equipment,facilities design,and processes that our technology shares with traditional lithium-ion battery manufacturing,notably in the cathode and cell design.We cannot be certain that we will achieve these cost savings or that future efficiency improvements in lithium-ion battery manufacturing will not reduce or eliminate these estimated cost savings.We expect to incur significant costs related to procuring materials required to manufacture and assemble our samples and batteries.We expect to use various materials in our batteries that will require us to negotiate purchase agreements and delivery lead-times on advantageous terms.We and our partners may not be able to control fluctuation in the prices for these materials or negotiate agreements with suppliers on terms that are beneficial to us or our partners.Our business depends on the continued supply of certain proprietary materials for our products.We are exposed to multiple risks relating to the availability and pricing of such materials and components,including reliance upon our vendors to construct and produce equipment to increase volumes,which may lead to delays or the requirement that we make additional upfront payments.Increases in the prices for our raw materials or components would increase our operating costs and negatively impact our prospects.For example,our shipping costs have increased in the past as suppliers have applied fuel surcharges.Costs for certain key raw materials and components have also increased due to fluctuations in global commodity prices.Our suppliers increasing labor costs have also contributed to rising prices.Given that we have yet to generate any revenue from our business operations,we are also limited in our ability to pass on the cost of any such increases to our customers.22In addition,the cost of producing battery cells depends in part upon the prices and availability of raw materials such as lithium,nickel,cobalt and/or other metals.The prices for these materials fluctuate and their available supply may be unstable,depending on market conditions and global demand for these materials.For example,demand for lithium has increased dramatically in recent years,and is expected to continue to increase,due to the ongoing rapid increase in use of lithium batteries in portable electronics and the growing EV and energy storage markets.Furthermore,significant sources of supply of certain raw and intermediate materials are available in countries that may be subject to political,economic and social instability or where there is an ongoing risk of tariffs or other prohibitions being imposed by the United States or the European Union on the import of such materials from such countries.Certain countries are also imposing controls on the export of such materials.There can be no assurance that suppliers of these materials may be able to meet our or our partners volume and other specific needs at reasonable prices,particularly as we ramp up our commercial operations.We rely on complex machinery for our operations,and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.We rely heavily on complex machinery for our operations and the production of our solid-state battery cells,and this equipment has not yet been qualified to operate at large-scale manufacturing.The work required to integrate this equipment into the production of our solid-state battery cells is time intensive and requires us to work closely with the equipment provider to ensure that it works properly for our unique battery technology.This integration work will involve a significant degree of uncertainty and risk and may result in a delay in the scaling up of production or result in additional cost to our battery cells.To achieve our commercialization goals,we will require larger-scale machinery.Such machinery is likely to suffer unexpected malfunctions from time to time and may require repairs and spare parts to resume operations,which may not be available when needed,particularly if global supply chain disruptions continue or are not fully resolved.Unexpected malfunctions of our production equipment may significantly affect the intended operational efficiency.In addition,because this equipment has not been used to build our solid-state battery cells before,the operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of our control,such as,but not limited to,failures by suppliers to deliver necessary components of our products in a timely manner and at prices and volumes acceptable to us,environmental hazards and remediation,difficulty or delays in obtaining governmental permits,damages or defects in systems,industrial accidents,fires,seismic activity and other natural disasters.Operational problems with our manufacturing equipment could result in the personal injury to or death of workers,the loss of production equipment,damage to manufacturing facilities,monetary losses,delays and unanticipated fluctuations in production.The potential risks of operational problems at our facilities also apply to individuals not employed and equipment not owned by us,such as third-party contractors,and our business partners personnel and equipment.In addition,operational problems may result in environmental damage,administrative fines,increased insurance costs and potential legal liabilities.These operational problems could have a material adverse effect on our business,results of operations,cash flows,financial condition or prospects.We may not succeed in attracting and retaining customers,including licensees,during the product development stage or for higher volume commercialization of our technology,and our future growth and success may be adversely affected.We may not succeed in attracting and retaining customers,including licensees,during the product development stage or for higher volume commercialization of our technology.If we are unable to attract new customers in need of our products or the licensing of our battery technology,whether due to inadequate product-market fit or for other reasons,our business may suffer.Conversely,we may not be able to retain existing customers in case of delays or capacity limitations in the development or manufacturing scale-up of our solid-state battery cells,which would negatively impact our business.23Many of our potential customers tend to be large enterprises that often undertake a significant evaluation process and are frequently subject to budget constraints,multiple approvals and unanticipated administrative,processing and other delays,that result in a lengthy sales or licensing cycle.Therefore,our future success will depend on our ability to effectively sell our products or license our technology to such large customers.Sales to these end-customers involve risks that may not be present(or that are present to a lesser extent)with sales to smaller customers.These risks include,but are not limited to,(i)increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us,including a greater ability to push back on attempts to pass on increased operating and procurement costs and require provisions that can lead to a delay in revenue recognition,(ii)longer sales and implementation cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions,and(iii)greater product functionality and scalability requirements,including a broader range of services.There are also only a limited number of OEMs in the automotive sector.All of these factors can add further risk to business conducted with these potential customers.While we have signed customer sampling agreements with a number of OEMs,we are still in the process of development and manufacturing scale-up of our solid-state battery cells and there is no assurance or guarantee that any of our customers or potential customers will be able to successfully complete their testing and validation processes and,therefore,enter into definitive volume production or license agreements with us,or conversely,that we can sufficiently scale up the manufacturing of our solid-state battery cells in the time frames required by such customers and potential customers.We may be negatively impacted by any early obsolescence of our manufacturing equipment.We depreciate the cost of our equipment over their expected useful lives.However,our cell design or manufacturing processes may change periodically,and we may decide to update our design or manufacturing processes more quickly than expected.Moreover,improvements in engineering and manufacturing expertise and efficiency may result in our ability to manufacture our cells using less of our currently installed equipment.Alternatively,as we develop our production processes,we may discontinue the use of already installed equipment in favor of different or additional equipment.The useful life of any equipment that would be retired early as a result would be shortened,causing the depreciation on such equipment to be accelerated,and our results of operations may be harmed.For example,during the year ended December 31,2024,we wrote off approximately$13.3 million of property and equipment for assets with no remaining future benefit.Customer Risks and Risks Related to Our Relationship with VolkswagenOur relationship with Volkswagen and PowerCo is subject to various risks which could adversely affect our business and future prospects.There are no assurances that we will be able to achieve the milestones for the commercialization of solid-state batteries under our collaboration with PowerCo or that we will enter into the PowerCo IP License Agreement.On July 5,2024,we entered into the PowerCo Collaboration Agreement with the goal of industrializing the solid-state lithium metal battery technology we intend to use in our first planned productthe QSE-5 Technology.Under the PowerCo Collaboration Agreement,the parties will collaborate to enable PowerCo to manufacture battery cells incorporating the QSE-5 Technology,including through a joint scale-up team that was established to facilitate the transfer of QSE-5 Technology into a cell size determined by PowerCo and by carrying out the activities set forth in statements of work(the“Project”).In connection with the Project and subject to the completion of certain milestones,the parties intend to enter into the PowerCo IP License Agreement under which we will grant PowerCo a non-exclusive,limited,royalty-bearing license to use the QSE-5 Technology for the purpose of manufacturing and selling batteries primarily for automotive applications,initially at one or more PowerCo facilities that together have an annual capacity of up to 40 GWh,expandable by an additional 40 GWh of annual capacity or such other capacity as may be agreed to by the parties.24There is no assurance that we will be able to complete the development of the solid-state battery cells or achieve the technical milestones in the time frame required by the PowerCo Collaboration Agreement or to satisfy PowerCos business needs,or that the joint scale-up team will cooperate successfully or complete in a timely and cost-effective manner the responsibilities assigned to them under the PowerCo Collaboration Agreement.If we do not complete this development in a timely manner,PowerCo may terminate the PowerCo Collaboration Agreement.If we are not able to reach certain milestones under the PowerCo Collaboration Agreement,PowerCo has no obligation to enter into the PowerCo IP License Agreement and we will not receive the initial royalty fee otherwise due to us thereunder and will not realize any of the benefits otherwise expected from this agreement.These factors could result in a material adverse effect on our business and financial results.The amou
2025-10-28
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5星级
Annual Securities Reportfor the fiscal year ended March 31,2025(the 118th Business Term)Panasonic Holdings CorporationFiled Document:Annual Securities Report(Yukashoken Hokokusho)Applicable Law:Article 24,Paragraph 1 of the Financial Instruments and Exchange Act of JapanFiled to:Director,Kanto Local Finance BureauFiling Date:June 20,2025Fiscal Year:The 118th Business Term(from April 1,2024 to March 31,2025)Company Name:Panasonic Holdings Kabushiki KaishaCompany Name in English:Panasonic Holdings CorporationPosition and Name of Representative:Yuki Kusumi,Representative Director,PresidentAddress of Head Office:1006 Kadoma,Kadoma City,Osaka,JapanPhone Number:06-6908-1121Contact Person:Yoshimasa Nagamachi,General Manager,Corporate Finance,Accounting&IR DepartmentContact Address:Panasonic Tokyo Shiodome Building,5-1,Higashi-shimbashi1-chome,Minato-ku,Tokyo,Japan(Panasonic Tokyo ShiodomeBuilding)Phone Number:03-3437-1121Contact Person:Tomoko Shima,Expert Corporate Finance,Accounting&IR DepartmentPlace Where the Filed Document is Available for Public Inspection:Panasonic Holdings Corporation(Panasonic Tokyo Shiodome Building,5-1,Higashi-shimbashi 1-chome,Minato-ku,Tokyo)Tokyo Stock Exchange,Inc.(2-1,Nihombashi Kabuto-cho,Chuo-ku,Tokyo)Nagoya Stock Exchange,Inc.(8-20,Sakae 3-chome,Naka-ku,Nagoya)CoverCertain References and InformationThis is an English translation of the Annual Securities Report(Yukashoken Hokokusho)submitted to the Director of the Kanto Local Finance Bureau via Electronic Disclosure for Investors Network(EDINET)on June 20,2025,pursuant to the Financial Instruments and Exchange Act of Japan.In this document,fiscal 2025 refers to the year ended March 31,2025.All information contained in this document is as of March 31,2025 or for fiscal 2025,unless otherwise indicated.Disclaimer Regarding Forward-Looking StatementsThis report includes forward-looking statements about Panasonic Holdings Corporation(Panasonic HD)and its Group companies(the Panasonic Group).To the extent that statements in this report do not relate to historical or current facts,they constitute forward-looking statements.These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it,and involve known and unknown risks,uncertainties and other factors.Such risks,uncertainties and other factors may cause the Panasonic Groups actual results,performance,achievements or financial position to be materially different from any future results,performance,achievements or financial position expressed or implied by these forward-looking statements.Panasonic HD undertakes no obligation to publicly update any forward-looking statements after the date of this report.Investors are advised to consult any further disclosures by Panasonic HD in its subsequent filings under the Financial Instrument and Exchange Act of Japan(the FIEA)and other publicly disclosed documents.The risks,uncertainties and other factors referred to above include,but are not limited to,economic conditions,particularly consumer spending and demands for corporate capital expenditures in the major markets including,but not limited to,the Americas,Europe,Japan,China and other Asian countries as well as changes of demands for a wide range of electronic products&parts from the industrial world and consumers in various regional markets;excessive currency rate fluctuations of the U.S.dollar,the euro,the Chinese yuan and other currencies against the yen having an impact on costs and prices of the Panasonic Groups products&services as well as certain other transactions that are denominated in these foreign currencies;increased costs of or limitations on raising funds,because of changes in the fund raising environment including interest rate fluctuations;current or future political or social trends in and outside Japan or changes in rules®ulations of international trade,commerce,R&Ds,production or sales having impact on the Panasonic Group or the business activities in its supply chain;introduction or enhancement of rules®ulations or abolition or reduction of tax benefit or subsidy related mainly to the environment issues including the climate change as well as to responsible supply chain(in terms of human rights,labor,health&safety global environmental conservation,information security,business ethics and others);increased costs resulting from a leakage of customers or confidential information from IT systems of the Panasonic Group or its supply chain or business suspension caused by unauthorized access,cyberattacks or any other form of malicious,actions on the IT systems or from vulnerability of network-connected products;failure to secure or retain enough workforces to execute its business strategy;failure to retain its competitiveness in a wide range of products&services or in major countries®ions;failure to produce expected results in alliances with other companies or M&A(mergers&acquisitions)activities;failure to produce expected results in current or future business transformations of the Panasonic Group;occurrence or lengthening of disruptions in its supply chain or logistics for or price hikes in parts&materials;downward price pressure or decrease in demands for the products at a level that can be offset with efforts by Panasonic HD;failure to respond to future changes in the market needs with technological innovations or to timely utilize new technologies such as AI(Artificial Intelligence);increased costs or losses caused by occurrence of events such as compliance violations(including those related human rights or labor issues)or serious health&safety accidents in workplaces;increased costs or losses resulting from any defects or quality frauds in products or services of the Panasonic Group;infringement by third parties of intellectual property owned by the Panasonic Group or restrictions on the use of intellectual property owned by third parties;administrative/criminal penalties or compensations/damages claims resulting from violations of laws and regulations;large-scale natural disasters,global pandemics of infectious diseases,terrorism or wars;fluctuations in market prices of securities and other financial assets in which the Panasonic Group has holdings,excessive fluctuations of valuation of non-financial assets,including property,plant and equipment,goodwill and deferred tax assets,or changes or tightening of accounting policies or rules;The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic HDs securities reports under the FIEA and any other documents which are disclosed on its website.Part Information on Panasonic Group.1 Overview of Panasonic Group.11.Key Financial Data(Consolidated).12.History.23.Description of Business.64.Information on Affiliates.75.Employees.10 Business Overview.131.Management Policy,Business Environment and Challenges of Panasonic Group.132.Disclosure of Sustainability-related Undertakings.163.Risk Factors.304.Management Analyses of Consolidated Financial Position,Operating Results and Cash Flows.455.Material Agreements,etc.516.Research and Development.52 Property,Plants and Equipment.571.Summary of Capital Investment.572.Major Property,Plants and Equipment.583.Plans for Capital Investment,Disposals of Property,Plants and Equipment,etc.60 Information on the Company.611.Information on the Companys Stock,etc.61(1)Total number of shares,etc.61(2)Information on the stock acquisition rights,etc.62(3)Information on moving strike convertible bonds,etc.67(4)Changes in the total number of issued shares and the amount of common stock,etc.68(5)Composition of issued shares by type of shareholders.70(6)Major shareholders.71(7)Information on voting rights.732.Information on Acquisition of Treasury Stock,etc.753.Dividend Policy.774.Corporate Governance,etc.78(1)Corporate governance.78(2)Member of the Board of Directors and Audit&Supervisory Board Members.95(3)Audit status.124(4)Compensation for Directors and Audit&Supervisory Board Members(A&SB Members).128(5)Information on shareholdings.137 Consolidated Financial Statements.143Independent auditors report.241Other information.246 Stock-related Administration for the Company.247 Reference Information on the Company.248Part Information on Guarantors,etc.for the Company.256(Translation)Independent Auditors Report on the Financial Statements and Internal Control Over Financial Reporting.257Confirmation Letter.263Internal Control Report.265ContentsFiscal year114thbusiness term115thbusiness term116thbusiness term117thbusiness term118thbusiness termYear endMarch 2021March 2022March 2023March 2024March 2025Net sales6,698,7947,388,7918,378,9428,496,4208,458,185Profit before income taxes260,820360,395316,409425,239486,289Net profit attributable to Panasonic Holdings Corporation stockholders165,077255,334265,502443,994366,205Comprehensive income attributable to Panasonic Holdings Corporation stockholders655,352630,527518,7841,012,295239,457Total Panasonic Holdings Corporation stockholders equity2,594,0343,164,9623,618,4024,544,0764,694,421Total equity2,768,5023,347,1713,789,9584,721,9034,874,829Total assets6,847,0738,023,5838,059,5279,411,1959,343,191Panasonic Holdings Corporation stockholders equity per share(yen)1,111.731,356.081,550.231,946.622,010.81Earnings per share attributable to Panasonic Holdings Corporation stockholders,basic(yen)70.75109.41113.75190.21156.87Earnings per share attributable to Panasonic Holdings Corporation stockholders,diluted(yen)70.72109.37113.72190.15156.83Panasonic Holdings Corporation stockholders equity/total assets(%)37.939.444.948.350.2Return on equity(%)7.28.97.810.97.9Price earnings ratio(times)20.1210.8610.397.6011.29Net cash provided by operating activities504,038252,630520,742866,898796,083Net cash provided by(used in)investing activities176,596(796,149)(344,033)(578,843)(859,926)Net cash provided by(used in)financing activities(177,704)58,910(607,013)(83,494)(190,347)Cash and cash equivalents at end of year1,593,2241,205,873819,4991,119,625847,561Number of employees(persons)(Average number of temporary employees)243,540(31,880)240,198(32,049)233,391(32,049)228,420(29,029)207,548(26,372)Part Information on Panasonic Group Overview of Panasonic Group1.Key Financial Data(Consolidated)(Millions of yen,unless otherwise stated)(Note)The Companys consolidated financial statements are prepared in conformity with International Financial Reporting Standards(IFRS).1Month/YearEventsMarch 1918Konosuke Matsushita founded Matsushita Denkikigu Seisakusho at Ohiraki-cho,Fukushima-ku,Osaka and started to manufacture wiring instrument.March 1923Bullet-shaped bicycle lamp developed and marketed.April 1927Established National brand.May 1933Relocated new head office and factory in Kadoma.Instituted divisional system.August 1935Established Matsushita Electric Trading Co.,Ltd.December 1935Incorporated as Matsushita Electric Industrial Co.,Ltd.on December 15,1935(10 million yen in capital).May 1949Listed on Tokyo Stock Exchange and Osaka Securities Exchange.September 1951Listed on Nagoya Stock Exchange.January 1952Formed a capital alliance with Nakagawa Kikai Kabushiki Kaisha(subsequently renamed Matsushita Refrigeration Company).December 1952Established Matsushita Electronics Corporation through a technology alliance with Philips in Netherlands,and transferred four lamp manufacturing factories to this establishment.May 1953Established the Central Research Laboratory.February 1954Formed a capital alliance with Victor Company of Japan Ltd.(JVC).December 1955Established Kyushu Matsushita Electric Co.,Ltd.(subsequently renamed Panasonic Communications Co.,Ltd.).May 1956Established Osaka Denki Seiki Kabushiki Kaisha(subsequently renamed Matsushita Seiko Co.,Ltd.).January 1958Established Matsushita Communication Industrial Co.,Ltd.(subsequently renamed Panasonic Mobile Communications Co.,Ltd.),and transferred communication equipment manufacturing section to this establishment.September 1959Established Matsushita Electric Corporation of America(currently Panasonic Corporation of North America).(Since then,established manufacturing and sales sites at various locations in the world.)January 1961Masaharu Matsushita became President of the Company.August 1962Formed a capital alliance with Toho Denki Kabushiki Kaisha(subsequently renamed Matsushita Graphic Communication Systems,Inc.).November 1969Established Matsushita Kotobuki Electronics Industries,Ltd.(subsequently Panasonic Healthcare Co.,Ltd.).December 1971Listed on New York Stock Exchange.December 1975Issued U.S.dollar-denominated convertible bonds(100 million U.S.dollars at face value).January 1976Established Matsushita Electronic Components Co.,Ltd.(subsequently renamed Panasonic Electronic Devices Co.,Ltd.),and transferred electronic device manufacturing section to this establishment.January 1977Established Matsushita Household Equipment Co.,Ltd.,and transferred household equipment manufacturing section to this establishment.Established Matsushita Industrial Equipment Co.,Ltd.and transferred industrial equipment manufacturing section to this establishment.February 1977Toshihiko Yamashita became President of the Company.January 1979Established Matsushita Battery Industrial Co.,Ltd.,and transferred battery manufacturing section to this establishment.2.History2Month/YearEventsJuly 1985Established a finance subsidiary in U.S.(In May 1986,established two finance subsidiaries in Europe.)October 1985Established Semiconductor Fundamental Research Laboratory.February 1986Akio Tanii became President of the Company.March 1987Changed the fiscal year end from November 20 to March 31.April 1988Absorbed Matsushita Electric Trading Co.,Ltd.April 1989The Companys founder Konosuke Matsushita passed away.December 1990Acquired MCA INC.(MCA),a leading entertainment company in the U.S.February 1993Yoichi Morishita became President of the Company.May 1993Dissolved partnership with Philips regarding Matsushita Electronics Corporation and purchased all shares of Matsushita Electronics Corporation which Philips held.April 1995Absorbed Matsushita Household Equipment Co.,Ltd.June 1995Sold 80%equity interest in MCA shares,which a subsidiary of the Company in U.S.held,to Seagram Company Ltd in Canada.February 1999Cancelled 50 million shares of treasury stock by 98.8 billion yen of retained earnings decided by resolution of 91st Ordinary General Meeting of Shareholders.April 2000Made Matsushita Refrigeration Company into a wholly-owned subsidiary through share-exchange.June 2000Kunio Nakamura became President of the Company.April 2001Absorbed Matsushita Electronics Corporation.April 2002Established a joint venture liquid crystal display panel manufacturing company,Toshiba Matsushita Display Technology Co.,Ltd.with Toshiba Corporation.October 2002Made Matsushita Communication Industrial Co.,Ltd.,Kyushu Matsushita Electric Co.,Ltd.,Matsushita Seiko Co.,Ltd.(currently Panasonic Ecology Systems Co.,Ltd.),Matsushita Kotobuki Electronics Industries,Ltd.and Matsushita Graphic Communication Systems,Inc.into wholly-owned subsidiaries through share-exchanges.January 2003Instituted business domain system through business restructuring.Kyushu Matsushita Electric Co.,Ltd.was merged with Matsushita Graphic Communication Systems,Inc.April 2003Established a joint venture cathode ray tubes manufacturing company,Matsushita Toshiba Picture Display Co.,Ltd.(subsequently renamed MT Picture Display Co.,Ltd.,liquidated in May 2019)with Toshiba Corporation.Made Matsushita Electronic Components Co.,Ltd.and Matsushita Battery Industrial Co.,Ltd.into wholly-owned subsidiaries through share-exchanges.Unified its corporate brands as Panasonic worldwide.April 2004Made Matsushita Electric Works,Ltd.(subsequently renamed Panasonic Electric Works Co.,Ltd.(PEW),PanaHome Corporation(subsequently became a wholly-owned subsidiary in fiscal 2018 and renamed Panasonic Homes Co.,Ltd.in April 2018.)and their subsidiaries into consolidated subsidiaries of the Company through additional purchase of shares of Matsushita Electric Works,Ltd.April 2005Absorbed Matsushita Industrial Information Equipment Co.,Ltd.February 2006Sold the remaining shares of affiliated company of Universal Studios(formerly MCA),which a subsidiary of the Company in U.S.held,to Vivendi Universal.June 2006Fumio Ohtsubo became President of the Company.March 2007Made Matsushita Toshiba Picture Display Co.,Ltd.into a wholly-owned subsidiary.3Month/YearEventsAugust 2007Excluded JVC and its subsidiaries from consolidated subsidiaries of the Company due to JVCs issuance of new shares and third party allotments.As a result,JVC became an associated company accounted for under the equity method.(Subsequently,in January 2011,JVC was excluded from an associated company accounted for under the equity method)April 2008Absorbed Matsushita Refrigeration Company.October 2008The Company changed its name from Matsushita Electric Industrial Co.,Ltd.to Panasonic Corporation.Absorbed Matsushita Battery Industrial Co.,Ltd.April 2009Sold all the shares of Toshiba Matsushita Display Technology Co.,Ltd.,which the Company held,to Toshiba Corporation.December 2009Acquired majority of the voting rights in SANYO Electric Co.,Ltd.(SANYO)and made SANYO and its subsidiaries into consolidated subsidiaries of the Company.January 2010Transferred the business of System Solutions Company,the Companys internal division company,to Panasonic Communications Co.,Ltd.,which was at the same time renamed Panasonic System Networks Co.,Ltd.April 2011Made PEW and SANYO into wholly-owned subsidiaries through share-exchanges.January 2012Absorbed PEW.Reorganized domain system to 9 domains and 1 marketing section through business restructuring.April 2012Absorbed companies including Panasonic Electronic Devices Co.,Ltd.June 2012Kazuhiro Tsuga became President of the Company.October 2012Established the Corporate Strategy Head Office.March 2013Panasonic System Solutions Japan Co.,Ltd.absorbed companies including Panasonic System Networks Co.,Ltd.,and was at the same time renamed Panasonic System Networks Co.,Ltd.(Subsequently,following certain reorganizations,in April 2022,merged into Panasonic Connect Co.,Ltd.)April 2013Transformed to new basic group formation through business division system from business domain system.Absorbed Panasonic Mobile Communications Co.,Ltd.subsequent to carrying out the incorporation-type company split of mobile phone terminal business and transferring mobile phone base station business to Panasonic System Networks Co.,Ltd.in the company split.Delisted from New York Stock Exchange.March 2014Transferred all the shares and other related assets of Panasonic Healthcare Co.,Ltd.(Subsequently renamed PHC Corporation)to PHC Holdings Co.,Ltd.and subscribed 20%of shares of PHC Holdings Co.,Ltd.(Subsequently renamed PHC Holdings Corporation and transferred a part of its shares.)June 2014Transferred semiconductor business to Panasonic Semiconductor Solutions Co.,Ltd.in the company split.(Subsequently,in September 2020,transferred all the shares and other related assets of semiconductor business.)January 2020Established Prime Life Technologies Corporation,a joint venture related to a town development business with Toyota Motor Corporation,and transferred all shares of Panasonic Homes Co.,Ltd.,and other subsidiaries to the joint venture by a joint share transfer.April 2020Established Prime Planet Energy&Solutions,Inc.,a joint venture automotive prismatic battery business,with Toyota Motor Corporation.June 2021Yuki Kusumi became Representative Director and President of the Company.September 2021Acquired the additional shares of Blue Yonder Holding,Inc.(its 20%shares were acquired in July 2020)and made Blue Yonder Holding,Inc.,together with its subsidiaries,a wholly-owned subsidiary of the Company.4Month/YearEventsOctober 2021Started the new virtual in-company structure toward the transition into an Operating Company system starting from April 2022.April 2022Became a holding company as a result of transferring each business of the Company to nine companies including the operating companies through an absorption-type company split,and changed its name from Panasonic Corporation to Panasonic Holdings Corporation.Transitioned to a new group organizational structure comprised of a holding company and operating companies.December 2024Transferred all the shares of Panasonic Automotive Systems Co.,Ltd.and acquired 20%of the shares of Star Japan Holdings Co.,Ltd.,which owns all the shares of the transferee.5As of March 31,20253.Description of BusinessThe Panasonic Group is comprised primarily of the parent,Panasonic Holdings Corporation and 500 consolidated subsidiaries in and outside of Japan,operating in close cooperation with each other.As a comprehensive electronics manufacturer,Panasonic is engaged in development,production,sales and service activities in a broad array of business areas.Panasonic Holdings Corporation is among specified listed companies,etc.as defined in Article 49,Paragraph 2 of the Cabinet Office Order on Restrictions on Securities Transactions.Therefore,the criteria to deem a material fact to be of minor importance under the insider trading regulations are determined based on figures on a consolidated basis.Panasonic Holdings Corporation(hereinafter,together with its consolidated subsidiaries as appropriate,referred to as the Company)supplies a full spectrum of electric/electronic equipment and related products,which is categorized into the following five reportable segments,Lifestyle,Automotive,Connect,Industry,Energy,and other operating segments which are not included in the reportable segments and other business activities.The details of each segment are described in Consolidated Financial Statements,Note 4.Segment information.As a result of the deconsolidation of Panasonic Automotive Systems Co.,Ltd.(PAS)upon completion of its share transfer on December 2,2024,the business performance of Automotiveis presented for the period until the deconsolidation of the deconsolidated business(approximately eight months in fiscal 2025).The Companys consolidated financial statements have been prepared in conformity with IFRS and the scope of affiliates is also disclosed based on the definitions of those accounting standards.The same applies to The Business Overview and Property,Plants and Equipment.(Panasonic Group)6As of March 31,2025NameLocationin JapanCommon stock(millions of yen)Principal businesses(Note 2)Ratio of voting rights(%)(Note 1)RelationshipRemarkInterlocking directorate,etc.(Note 3)AdvancestoBusiness transactionPanasonic CorporationKadoma city,Osaka500Lifestyle100.0YesYesManufacture and sale of Panasonic productsNote 4Note 5Panasonic Entertainment&Communication Co.,Ltd.Moriguchi-shi,Osaka500Other100.0YesYesManufacture and sale of Panasonic productsNote 5Panasonic Housing Solutions Co.,Ltd.Kadoma city,Osaka500Other100.0YesManufacture and sale of Panasonic productsPanasonic Connect Co.,Ltd.Hakata-ku,Fukuoka-shi500Connect100.0YesYesManufacture and sale of Panasonic productsPanasonic Industry Co.,Ltd.Kadoma city,Osaka500Industry100.0YesYesManufacture and sale of Panasonic productsPanasonic Energy Co.,Ltd.Moriguchi-shi,Osaka500Energy100.0YesYesManufacture and sale of Panasonic productsPanasonic Operational Excellence Co.,Ltd.Kadoma city,Osaka500Other100.0YesYesProviding professional services to PanasonicNote 4SANYO Electric Co.,Ltd.Kadoma city,Osaka400Lifestyle100.0(100.0)Sale of Panasonic productsNote 5Panasonic Marketing Japan Co.,Ltd.Chuo-ku,Osaka-shi100Lifestyle100.0(100.0)Sale of Panasonic products4.Information on Affiliates(1)Principal Consolidated Subsidiaries7NameLocationCommon stock(millions)Principal businesses(Note 2)Ratio of voting rights(%)(Note 1)RelationshipRemarkInterlocking directorate,etc.(Note 3)AdvancestoBusiness transactionPanasonic Corporation of North AmericaNew Jersey,U.S.A.US$537Lifestyle,Connect,Industry,Energy100.0(100.0)Manufacture and sale of Panasonic products etc.Note 4Note 7Blue Yonder Holding,Inc.Arizona,U.S.A.US$0Connect100.0(100.0)Collaboration on providing software services to customers and provision of IT servicesNote 9Panasonic Avionics CorporationCalifornia,U.S.A.US$22Connect100.0(100.0)Manufacture and sale of Panasonic productsHussmann CorporationMissouri,U.S.A.US$Lifestyle100.0(100.0)Manufacture and sale of Panasonic productsNote 8Panasonic Energy Corporation of North AmericaDelaware,U.S.A.US$1,820Energy100.0(100.0)Prepare to manufacture and sale of Panasonic productsNote 4Panasonic do Brasil LimitadaAmazonas,BrazilBRL 1,379Lifestyle100.0Manufacture and sale of Panasonic productsNote 4Panasonic Holding(Netherlands)B.V.Amsterdam,NetherlandsUS$0Corporate100.0YesControl of investment and financing etc.Note 4Note 9Panasonic Heating&Ventilation Air-conditioning Czech,s.r.o.Plzen,Czech RepublicKC 8,600Lifestyle100.0(100.0)Manufacture and sale of Panasonic productsNote 4Panasonic Asia Pacific Pte.Ltd.SingaporeUS$1,478Lifestyle,Industry,Other100.0(100.0)Manufacture and sale of Panasonic products etc.Note 4Panasonic Life Solutions India Pvt.Ltd.Gurugram,IndiaINR 2,511Lifestyle100.0(12.8)Manufacture and sale of Panasonic productsPanasonic Taiwan Co.,Ltd.New Taipei,TaiwanNT$3,422Lifestyle69.8YesManufacture and sale of Panasonic productsPanasonic Corporation of ChinaBeijing,ChinaRMB 12,838Lifestyle100.0YesSale of Panasonic products etc.Note 4Panasonic Appliances(China)Co.,Ltd.Guangzhou,ChinaJPY 14,099Lifestyle100.0(100.0)Manufacture and sale of Panasonic products8(As of March 31,2025)NameLocationCommon stock(millions)Principal businessesRatio of voting rights(%)(Note 1)RelationshipRemarkInterlocking directorate,etc.(Note 3)AdvancestoBusiness transactionPrime Planet Energy&Solutions,Inc.Chuo-ku,TokyoJPY 64,358Development,manufacture,and sale of automotive prismatic lithium-ion batteries49.0(49.0)Yesuse of patent related to development and manufacturing of automotive batteriesSumitomo Mitsui Trust Panasonic Finance Co.,Ltd.Minato-ku,TokyoJPY 25,584Total financial services15.1Lease and credit sale of Panasonic productsNote 6Prime Life Technologies CorporationMinato-ku,TokyoJPY 100Housing-related business50.0Sale of Panasonic products through its subsidiaries,etc.Star Japan Holdings Co.,Ltd.Minato-ku,TokyoJPY 0Automotive-related business20.0Sale of Panasonic products through its subsidiaries,etc.Note 9SANYO Electric Co.,Ltd.Panasonic CorporationPanasonic Entertainment&Communication Co.,Ltd.288,190 million yen42,666 million yen36,558 million yen(1)Sales(2)Profit before income tax.(3)Net profit(4)Equity(5)Assets1,133,313 million yen210,784 million yen224,312 million yen1,552,165 million yen2,109,907 million yen(2)Principal Companies under the Equity Method(Notes)1.A number in the parenthesis represents the ratio of indirect voting rights,which is a part of the ratio of voting rights.2.The column Principal businesses indicates the segment in which the subsidiaries are classified.Subsidiaries that do not belong to any segment are described as Other.Subsidiaries with headquarters functions(finance,etc.),are described as Corporate.3.Regarding the interlocking directorate,etc.,other than what is disclosed above,the Companys employees concurrently hold position of directors or officers in most of the consolidated subsidiaries or companies under the equity method.4.Subsidiaries that meet the criteria of the specified subsidiaries or Tokutei Kogaisya as defined in the Cabinet Office Ordinance on Disclosure of Corporate Affairs,etc.of Japan.5.Subsidiaries in the list above with insolvencyThe amount of liabilities in excess of assets as of March 31,2025 are shown below:6.Although the ratio of voting rights is 15.1%,Sumitomo Mitsui Trust Panasonic Finance Co.,Ltd.is treated as a company under the equity method because the Company holds significant influence over its decision on operating and financial policies.Sumitomo Mitsui Trust Panasonic Finance Co.,Ltd.issues the annual securities report.7.Sales of Panasonic Corporation of North America excluding internal sales within the Panasonic group accounts for more than 10%of consolidated sales.Its major financial data based on USGAAP(Generally Accepted Accounting Principles in the United States)are as follows:8.Common stock of Hussmann Corporation is zero.9.The common stock is displayed as zero,as it falls below the reporting unit(in millions of the relevant currency).9As of March 31,2025SegmentNumber of employeesLifestyle87,900(14,578)Connect28,801 (1,364)Industry35,467 (4,156)Energy18,344 (1,962)Other35,558 (4,164)Corporate1,478 (148)Total207,548(26,372)As of March 31,2025Number of employeesAverage ageAverage tenure(years)Average annualsalary(yen)1,478(148)44.017.99,561,8715.Employees(1)Consolidated basis(Notes)1.The number of employees refers solely to full-time employees of the Company on a consolidated basis.The annual average number of temporary employees is indicated in parentheses.2.The number of temporary employees includes contracted employees,part-time workers,and others but excludes temporary staff provided by agencies.3.The number of employees decreased by 20,872,compared with the end of last fiscal year.4.As a result of the share transfer of Panasonic Automotive Systems Co.,Ltd.,this company,and its subsidiaries are no longer consolidated subsidiaries of the Company,and the number of employees assigned to Automotive is now zero.Among the former Automotive segment businesses,those which remain to be subject to the Companys consolidated reporting are reclassified to Other.(2)Parent-alone basis(Notes)1.The number of employees refers solely to full-time employees of the parent company.The annual average number of temporary employees is indicated in parentheses.2.The number of temporary employees includes contracted employees,part-time workers,and others but excludes temporary staff provided by agencies.3.Average annual salary includes bonuses and extra wages.4.Employees of the parent company all belong to Corporate.(3)Relationship with labor unionThe federation of Panasonic group labor unions has 122 labor unions as of March 31,2025.The relationship between management and labor unions is quite stable and smooth.10Percentage of females in managerial position(%)(Note 2)Percentage ofmales taking childcare leave(%)(Note 3)Wage differences between male and female workers(%)(Note 2)All workersFull-time workersPart-time and fixed-term workers8.589.089.187.3110.7NamePercentage of females in managerial position(%)(Note 2)Percentage of males taking childcare leave(%)(Note 3)Wage differences between male and female workers(%)(Note 2)All workersFull-time workersPart-time and fixed-term workersPanasonic Corporation7.278.072.070.666.8Panasonic Entertainment&Communication Co.,Ltd.3.596.079.376.680.8Panasonic Housing Solutions Co.,Ltd.8.959.058.257.759.1Panasonic Connect Co.,Ltd.8.5101.080.078.282.7Panasonic Industry Co.,Ltd.4.888.077.576.775.0Panasonic Energy Co.,Ltd.7.183.080.480.559.2Panasonic Operational Excellence Co.,Ltd.18.085.077.476.268.1(4)Percentage of female workers in managerial positions,percentage of male workers taking childcare leave,and wage differences between male and female workersThere is no gender-based inequalities in the Panasonic Groups compensation system.However,the promotion of female employees to executive teams and managerial positions is lagging behind compared with that of male employees.In order to draw out the wisdom from a more diverse group of employees and create innovative products/services for the future,we are striving systematically to nurture and develop female leaders through strengthening our recruitment,expanding work style options,and supporting career development.The Company Consolidated subsidiaries(Notes)1.The indicators which were calculated in accordance with the provisions of the Act on the Promotion of Womens Active Engagement in Professional Life(Act No.64 of 2015)and the Act on Childcare Leave,Caregiver Leave,and Other Measures for the Welfare of Workers Caring for Children or Other Family Members(Act No.76 of 1991)are both indicated to the first decimal place with the calculation as follows:the second decimal place is rounded for the indicator related to Act No.64 of 2015,and the first decimal place is omitted for the indicator related to Act No.76 of 1991.2.These percentages are calculated in accordance with the provisions of the Act on the Promotion of Womens Active Engagement in Professional Life(Act No.64 of 2015).(The date for calculating the percentage of women in management positions is April 1,2025.Wage differences between male and female workers are calculated based on salaries and bonuses for fiscal 2025.)3.This percentage is calculated based on the ratios of childcare leave,etc.and time off for childcare taken in fiscal 2025 as specified in Article 71-6,item(ii)of the Ordinance for Enforcement of the Act on Childcare Leave,Caregiver Leave,and Other Measures for the Welfare of Workers Caring for Children or Other 11Family Members(Ordinance of the Ministry of Labour No.25 of 1991)in accordance with the provisions of the Act on Childcare Leave,Caregiver Leave,and Other Measures for the Welfare of Workers Caring for Children or Other Family Members(Act No.76 of 1991).The percentage is calculated as follows:The total number of male workers who took childcare leave,etc.as well as the number of male workers who took time off for the purpose of taking care of preschool children in fiscal 2025 divided by the number of male workers whose spouse gave birth in fiscal 2025.4.For consolidated subsidiaries other than those listed above,refer to VII Reference Information on the Company,2.Other Reference Information,(2)Percentage of female workers in managerial positions,percentage of male workers taking childcare leave,and wage differences between male and female workers.12 Business Overview1.Management Policy,Business Environment and Challenges of the Panasonic GroupThe outlook for the future included in this section is as of June 20,2025,the filing date of this annual securities report.(1)Basic Management PolicyThe Company,since its establishment,has operated its business under its business philosophy,contributing to the progress and development of society and the well-being of people worldwide through its business.The Company continues to directly address social issues as it strives to achieve an ideal society with affluence both in matter and mind,and takes up the challenge to eliminate the concerns of today and the future as it aims to create new value.The Company squarely addresses a wide range of social issues including global environmental issues in order to make a larger contribution to the advancement of society and solving societal issues.The Company will also further reinforce its business competitiveness and work to sustainably grow our corporate value by offering value that satisfies all of its stakeholders,including shareholders,investors,customers,business partners,and employees.(2)Management Strategy and Challenges of the Panasonic GroupToward achieving an ideal society with affluence both in matter and mind,a wide range of social issues including pressing global environmental issues,among other things,should be addressed and solved.Against this backdrop,the Company aims to make a Group-wide contribution to society in the fields of solving global environmental issues and well-being in society and peoples lives.The global economy from fiscal 2025 through fiscal 2026 continues to face increasing uncertainty with changes in the U.S.tariff policy,economic and trade policies adopted by other countries in response to such U.S.tariff policy changes,as well as continuing concerns over the situation in Ukraine and other geopolitical risks.Against this backdrop,the outlook for the global economy also remains uncertain.Under such management conditions,the Company was not able to achieve the targets for ROE(Return on Equity)and for cumulative operating profit among the three goals as KGIs(Key Goal Indicators)for its three-year medium-term strategy started in fiscal 2023,although it did achieve the target for cumulative operating cash flows.This was due to remaining issues of competitiveness&profitability and indirect cost at each business which resulted from the fact that investments including those for the priority investment area did not lead to certain profitability and competitiveness enhancement,as well as from the fact that fixed costs increased after the Companys shift to the group organizational structure comprised of a holding company and operating companies.In order to resolve structural and fundamental issues,the Company will focus on management reform in fiscal 2026.Specifically,the Company will accelerate profit improvement through fix-cost structure reform and business portfolio management from the following three viewpoints shown as(i)(ii)and(iii).(i)Fixed Cost Structure Reforms and Profit Improvement for a Lean Headquarters and Indirect DepartmentsFor a large cost reduction,the Company will work on optimizing the employment structure of Panasonic Holdings Corporation and other Group companies mainly for their headquarters and indirect departments.The Company also aims to reduce fixed costs through DX in indirect and sales departments to improve the profitability of the business areas where we have made investments with top priority.(ii)Implementation of Measures for Businesses with Issues(Identifying Low-Profit Businesses)By the end of fiscal 2026,the Company will determine the direction of businesses with issues(those with ROIC below WACC-by-business and with limited growth potential),of businesses that require reconstruction and of businesses with their business conditions to be scrutinized.13(iii)Focus on the Solutions AreaThe Company identified three focus areas which will be the foundation through which the Panasonic Group will contribute to the sustainable development of society and lifestyles by utilizing resources and energy efficiently through technology.The areas are the Solutions Area,which will be the Companys main focus,and the Devices Area and Smart Life Area,which will support its profit base.Solutions Area Area of focusBy leveraging the Companys globally competitive solution businesses,the Company will create synergies across the Company through customer-centric management,thereby driving growth by expanding our value to customers.Devices Area Profit Base AreaBy narrowing down the Companys product portfolio,the Company will focus on material-and process-based businesses,aiming for an adjusted operating profit(Notes)1 margin of over 15%.For automotive batteries,we will revise our growth scenarios and focus on profitability.Smart Life Area Profit Base AreaTo refresh our home appliance business,we will fundamentally review our business structure and systems,thoroughly optimize resources in development,manufacturing,and sales,and achieve global standard costs that can compete worldwide,based on Japan quality levels.Through these measures,we aim for an adjusted operating profit(Notes)1 margin of over 10%.Through this reform,the Company aims to improve profitability by more than 300 billion yen(Notes)2 by the end of fiscal 2029.For that end,the Company aims to improve profitability by more than 150 billion yen(Notes)2 by the end of fiscal 2027 with the following target amounts for some of the areas for the profit improvements as follows.Looking ahead to fiscal 2027,the Company will promote group management reforms centered on structural reforms and aim to build a management structure that can handle changes in our business environments.Profit improvement through structural reform 122 billion yen,including 70 billion yen from personnel optimization:-Headquarters reform 47 billion yenProfit improvement through consolidation and streamlining of indirect functions and operations,as well as selection and concentration of technology projects,etc.-Consumer electronics business reform 33 billion yenProfit improvement through consolidation and streamlining of sales and indirect departments operating across the Group,as well as building global-standard cost capabilities-Business sector reform 42 billion yenProfit improvement through the withdrawal or termination of loss-making businesses,consolidation and closure of sites,streamlining of Groupwide IT investments,and consolidation of indirect functions,etc.The Company aims to achieve profit improvement of a total of 150 billion yen or more with the above-mentioned factors as well as other factors including profit improvement in businesses where upfront investments were made such as the automotive battery business,deconsolidation of certain businesses with progress of business portfolio management,as well as the outcomes of investments in the areas of focus including the solution area.Furthermore,the Company aims to achieve an ROE of 10%or more and an adjusted operating profit margin of 10%or more by the end of fiscal 2029 through fixed-cost structural reforms and profit improvement from fiscal 2026 onward as well as further implementation of business portfolio management.14(Notes)1 Adjusted operating profit is calculated by deducting cost of sales and selling,general and administrative expenses from net sales.2 The above effects contribute to improvement in adjusted operating profit compared to the consolidated financial forecast for fiscal 2025 announced on February 4,2025.The impact of possible U.S.tariffs is not included in this forecast.152.Disclosure of Sustainability-related UndertakingsFuture expectations included in this section are as of June 20,2025,the filing date of this annual securities report.(1)Approach to sustainability managementThe Panasonic Groups mission is to achieve an ideal society with affluence both in matter and mind.This is grounded in the dream of achieving prosperity both in matter and mind,which is the ideal state of society that our founder Konosuke Matsushita envisioned and pursued.In 1932,the founder set forth a 250-year plan,consisting of ten successive phases of 25 years,to reach the ideal society he envisioned.For our Group,sustainability management is the pursuit of this mission.We will strive to address social issues through our business activities and contribute to a more prosperous and sustainable society thereby enhancing our corporate value.Through these consistent efforts,we aim to achieve our goal to realize an ideal society with affluence both in matter and mind.(2)GovernanceThe Group has established the Sustainability Management Committee under the supervision of the Board of Directors for the purpose of discussing,directing,and managing policies,strategies,indicators,and targets regarding essential themes related to sustainability.The Committee meets once a month,in principle.The Sustainability Management Committee is chaired by the Group CEO and comprises the Group CHRO,the Group CTO,the Group GC,the Group CSO,the Group CFO,and Group company directors and executive officers.Matters deliberated and decided by the Sustainability Management Committee are reported to the Board of Directors depending on their content.Moreover,any matters that need to be addressed by operating companies are shared and disseminated throughout the entire Group via the Group Management Meeting and other avenues.Meanwhile,to ensure the effectiveness of the Board of Directors oversight of sustainability-related matters,we have established sustainability management as one of the skills and knowledge that the Board of Directors should possess and have set non-financial indicators for the performance-based portion of compensation for directors.During this fiscal year,to strengthen the formulation and promotion of policies,strategies,and measures related to the Groups sustainability management,we established a new cross-functional project related to sustainability within Panasonic Holdings Corporation(hereinafter,PHD),built a sustainability promotion structure for each operating company,and strengthened the collaboration system throughout the Group.The main items discussed by the Sustainability Management Committee during this fiscal year are as follows:Setting of indicators and targets related to materialityConsideration of mid-term targets related to sustainabilityCompliance with sustainability-related laws and regulations in EuropeReview of value creation process and materiality(3)Risk managementIn fiscal 2024,the Group identified important opportunities and risks as materialities from the two perspectives of financial effects on the Group and impact on society.The identification process is as follows:1.List issues that could represent opportunities and risks based on demands from society and foreseeable futurechallenges2.Assess the importance of these issues from the perspective of the Group and its stakeholders and extractmaterialities3.Confirm the validity of this process and the extracted materialities through dialogue with multiple externalexperts4.Identify materialities after deliberation at the meetings of the Groups Sustainability Management Committeeand the Group Management Meeting and with the Board of Directors.Moreover,the Group is engaged in enterprise risk management(ERM)to manage risks that could affect the business activities of the entire Group,including risks related to sustainability.For more information,please see 3.Business Risks.16MaterialityIndicatorsTargetsResultsGroup commonstrategyGlobal warming andresource depletion CO2 reduction impact300 million tons(by 2050)Emissions reduction in our own value chain 39.20 million tons(18.28 million tons)*1,2Avoided CO2 emissions53.25million tons*2 CO2 emissions from all factoriesNet zero(by 2030)A total of 39 factories*2 Factory waste recycling rate99%or more99.4%*2Each customers life-long health,safety and comfortNot setFoundation for sustainable value creationBusiness integrityOccurrence of serious compliance violationsZeroZero*3Supply chain managementNot setEmployee well-beingOccurrence of serious or major accidentsZero7 serious accidentsZero major accidents(1)Employee engagement/(2)Employee enablement in the Employee Opinion SurveyThe highest global standard(80%FY2031)(1)68%(2)66%Corporate governanceEnhancement of constructive dialogue with shareholdersImplementedImplementedEvaluation of the effectiveness of the Board of Directors and implementation of improvement measuresImplementedImplementedRatio of outside directors in the PHD Board of Directors1/3 or more46.1%*4Adoption of non-financial indicators in performance-based compensation for directorsImplementedImplemented(4)Strategies,indicators,and targetsDuring this fiscal year,to improve the effectiveness of the Groups sustainability management,we set new indicators and targets for tracking the progress of each materiality identified in fiscal 2024 and worked to achieve and realize them.The actual results against materiality targets are as shown in the table below.For details of our strategies and other major initiatives for addressing global warming and resource depletion as well as human capital management including employee well-being,which are among the materialities in the table below,please refer to(5)Introduction of sustainability initiatives.FY2025 Materiality Indicators,Targets,and Results17Respect for human rightsPromotion of correction of issues identified in human rights due diligence for each Group company which may cause forced laborImplementedImplementedImplementation rate of in-person training on forced labour prevention provided to Group sites in Japan and overseas that employ foreign migrant workers100%(FY2027)40.6%Cyber securityProvision of education and training for all employees to improve security awareness and promote behavioral changeMore than four times a year5 timesCollection and monitoring of threat and vulnerability information by an expert team,and implementation of necessary measuresImplementedImplementedIncident response training by an expert team in anticipation of cyber attacksMore thanonce a year2 timesNumber of serious incidentsZeroZero*1 The figures in parentheses indicate the amount of CO2 reduction compared to fiscal 2021 for the businesses subject to measurement in fiscal 2025.*2 These are preliminary figures before the third-party verification is completed(as of June 20,2025,the submission date of this annual securities report).Final figures will be disclosed on our sustainability website at a later date.https:/holdings.panasonic/global/corporate/sustainability/environment/vision.html*3 It has been discovered that Panasonic Industries Co.,Ltd.(PID),a subsidiary of the Company,engaged in multiple irregularities during the previous fiscal year in the process of the certification by UL Solutions(UL),a third-party safety science organization in the U.S.,for electronic materials manufactured and sold by PID.In response to this,PID established an external investigation committee composed of external experts and conducted investigations into the irregularities in the process of the certification by UL and other quality irregularities.During this fiscal year,PID published the investigation report it received from the external investigation committee and the measures it formulated to prevent recurrence.*4 As an agenda item(resolution item)for the General Meeting of Shareholders scheduled for June 23,2025,we are proposing To Elect 13 Directors.If this resolution is approved,the figure will be 53.8%.Starting from this fiscal year,based on the Groups approach to sustainability management,we have narrowed down our materialities to priority issues for creating value for society and are reviewing them to ensure they are consistent with our future business direction and strategies.In line with this,among the existing materialities,those that have a large element of our own risk management will continue to be managed as material risks in our ERM activities.Meanwhile,as described in(2)Companys management strategies and issues to be addressed in 1.18Materiality*1IndicatorsTargetsBusinessmateriality*2Contributing to solving global environmental issuesContributing todecarbonizationCO2 reduction impact300 million tons(by 2050)Emissions reduction in our own value chain(FY2026)40.12 million tons(17.01 million tons)*4Avoided emissions(FY2026)47.50 million tonsCO2 emissions fromall factoriesNet zero(by 2030)Promotinga circular economy*5Amount of recycled materials usedAmount of recycled resins used25,000 tons(FY2026)Number of circular economy business modelsA total of 16 businesses(FY2026)Well-being in society and peoples livesWell-being in societyTo be determined in linewith the next medium-term strategyWell-being in peoples livesMaximizing the responsible use of AIEvolving products and solutions through the use of AITo be determined in linewith the next medium-term strategyPromoting operational and process innovation through the use of AIMaximizing the potential of diverse talent and organizationsOrganization culture transformationUNLOCK indicator*6FY2028:60%FY2031:70velop&appoint diverse,transformational leadersDiversity ratio of the management team(Diversity of PHD Executive Officers(Total ratios of female,non-Japanese citizens and mid-career hires)More than halfManagement Philosophy,Management Environment,and Issues to Be Addressed,etc.,along with the policy of focusing on the Solutions area set out in Panasonic Group Management Reform,we have set Well-being in society and peoples lives,which we will pursue in this area,as our business materiality.In addition,in line with our policy to make full use of AI across the Group going forward,we have added Maximizing the responsible use of AI to our fundamental materiality.We have also reviewed the items Global warming and resource depletion and Employee well-being in line with our future strategies.The revised contents,focusing on these items,are as shown in the table below.These considerations have been discussed at the meetings of the Sustainability Management Committee and the Group Management Meeting and with the Board of Directors.We will continue to work on these materialities in fiscal 2026.For the newly established items Well-being in society and peoples lives and Maximizing the responsible use of AI,as we are currently in the process of finalizing our strategies and initiatives for them,we will consider indicators and targets accordingly.Materiality List19Fundamentalmateriality*3Ratio of female managers(8 companies in Japan*7)12%(April 1,2028)16%(April 1,2031)Safe,secure and healthy work environmentThe number of serious or major accidentsZeroProductivity indicator(EBITDA divided by personnel expenses)Target(improvement rate)to be determined in line with the next medium-term strategyRespect for human rightsImplementation rate of in-person training on forced labour prevention provided to Group sites in Japan and overseas that employ foreign migrant workers100%(FY2027)Level of understanding of participants in Human Rights Due Diligence Promotion Training to develop the promotion leaders at each operating company*880%Business integrityOccurrence of serious compliance violationsZeroCorporate governanceEnhancing constructive dialogue with shareholdersImplementedRatio of outside directors in the PHD Board of DirectorsMore than halfChairperson of the Board of Directors to be Outside Director who are Independent DirectorImplementedAdoption of non-financial indicators in performance-based compensation for directorsImplemented*1 Of the materialities before the review,supply chain management will be addressed under the items contributing to solving global environmental issues and respect for human rights.Meanwhile,cyber security is a major element of our companys risk management and will be addressed as an important risk item in our ERM activities.Accordingly,these items have been excluded from the table above.*2 Priority issues for value creation through business activities*3 Priority issues for building and strengthening a management foundation that will enable sustainable value creation*4 The figures in parentheses indicate the amount of CO2 reduction compared to fiscal 2021 for the businesses subject to measurement in fiscal 2025.*5 The factory waste recycling rate,based on the definition we have used,has maintained a high level of more than 99%since the past.As we are reviewing the definition of this indicator to ensure its alignment with global trend of rules,this indicator is not listed in the table above.*6 Favorable response rate for both questions in the Employee Opinion Survey,Motivation from the company or supervisors and No significant barriers at work(Target:Group employees globally)*7 PHD,Panasonic Corporation,Panasonic Entertainment&Communication Co.,Ltd.,Panasonic Housing Solutions Co.,Ltd.,Panasonic Connect Co.,Ltd.,Panasonic Industry Co.,Ltd.,Panasonic Energy Co.,Ltd.,Panasonic Operational Excellence Co.,Ltd.2 0*8 The post-training questionnaire focuses on assessing the level of empathy towards business and human rights and the level of awareness regarding its promotion,in addition to the level of understanding of the content.(5)Initiatives for Sustainability1.Efforts to Solve Global Environmental IssuesThe Panasonic Group announced the Panasonic GREEN IMPACT,long-term environmental vision in 2022,aimed at achieving both a better life and a sustainable global environment.The goal is to create a CO2 reduction impact of 300 million tons(Note 1)or more,equivalent to approximately 1%of total global emissions in 2050.This will be done by achieving net zero CO2 emissions throughout the Group value chain(Note 2)which is equivalent to Scope 13(Note 3)to reduce emissions by 110 million tons as our responsibility,and by contributing to emissions reductions of 200 million tons in society through our business activities.The avoided emissions which account for 2/3 of the reduction impact of Panasonic GREEN IMPACT goal are indices which estimate the expected amounts of CO2 reduction effects resulting when our technologies,products,and services are used.The Sustainability Data Book discloses examples of avoided emissions,the calculation formulas,and other details.So that these avoided emissions are correctly evaluated as contributions to business decarbonization,the Panasonic Group involves national governments,industries,and the financial world,and has taken the lead in discussing the social importance of the avoided emissions and the need for international standardization.In November 2024,at COP29(Note 4),our company represented the International Electrotechnical Commission(IEC)in a panel discussion with international initiative organizations at an event hosted by the Ministry of Economy,Trade and Industry and the World Business Council for Sustainable Development(WBCSD).Regarding the international standard IEC 63372,which stipulates the calculation method for avoided emissions,we introduced our efforts to promote international standardization in collaboration with other companies and ISO(the International Organization for Standardization),while ensuring consistency with WBCSD guidance,in which our company participates in update.We expressed our expectation that international standardization will enable governments,financial institutions,and other organizations to evaluate companies that contribute to decarbonization appropriately and utilize avoided emissions when providing incentives and making investment decisions.We also expressed that international standardization will be significant for all industries.The goals of Panasonic GREEN IMPACT,which will contribute to resolving global environmental issues through our business,also include the achievement of carbon neutrality and circular economy(CE)(Note 5).In order to accelerate initiatives within the Group toward CE,we formulated the Circular Economy Group Policy.We are proceeding with identifying issues in our approaches based on the business characteristics of each company,and with the formulation of long-term strategies and medium-term action plans.In May 2023,at the G7 Hiroshima Summit,the Circular Economy and Resource Efficiency Principles(CEREP)were approved.Our company is actively participating in developing the WBCSD Global Circularity Protocol(GCP),a set of indicators and targets for evaluating and promoting companies circular economy initiatives.At COP29(Note 4),we participated in a panel discussion hosted by the Ministry of the Environment on Global Standards through CEREP&GCP where we introduced our companys concrete actions toward implementing the circular economy.So that people can continue to live with peace of mind on the earth in the next generation and future generations,the Group will continue working together to accelerate our initiatives aimed at achieving carbon neutrality and circular economy through our business activities in the future.The Panasonic Group endorsed the TCFD(Note 6)recommendations in May 2019.The Panasonic Group recognizes opportunities and risks concerning climate change as a critical management issue through processes of identification of material issues,we identify our business opportunities and risks and verify business resilience and strategy by thoroughly analyzing the scenarios,considering the TCFDs recommendation also disclose information on thematic areas recommended by TCFD,i.e.governance,strategy,risk management,and indices and targets,assuming future engagement with investors,etc.2 1GovernanceSustainability management is headed by board of directors,so that information on groupwide environmental sustainability management from all of the operating companies are reported to the board of directors.Also,the progress and results of activities for the key environmental targets we promised to society to achieve under the GREEN IMPACT PLAN 2024(GIP2024)are examined and determined on the directions,issues,and particularly key measures in the Group Management Meeting where Group CEO,presidents of operating companies,and senior managers participate.Matters of special importance are deliberated on by the Board of Directors Meeting.Our long-term environmental vision Panasonic GREEN IMPACT(PGI),was put through this process and was released in April 2022.In promoting our environmental sustainability management,we have built a system with which all operating companies and business sites members effectively collaborate and promote group-wide activities through determination by the Sustainability Management Committee(established in December 2021)led by the Group CEO.StrategyRegarding the impact of climate change,we evaluated the risks and opportunities of our business group,performed an impact analysis on items with the greatest impact,and created a social scenario for 2030 based on these items.We then used the scenario as the basis for examining strategies,and verified the business resilience in our strategy.RiskManagementAs a tool to continuously reduce environmental risks,Panasonic Group is working to establish operating company-specific Environmental Risk Management Systems,in accordance with the basic risk management policy for all Group companies.The management policy includes identification of environmental risks and group-wide risk management each year,and ensuring quick responses to reported environmental risks.In addition,The Panasonic Group is promoting risk management based on the same process at Panasonic Holdings Co.,Ltd.(PHD)and operating company.The PHD Enterprise Risk Management Committee conducts deliberations from the perspective of the Groups management and business strategies and social responsibilities,and decides the Groups significant risks.In fiscal 2025,strategic risks in Panasonic Groups significant risks such as climate change,environmental regulations,development of circular economy,and operational risks such as natural disasters and supply chain management have been addressed.Metrics and TargetsOur group has set greenhouse gas(GHG)reduction targets.In October 2017,we were certified as a 2.0C Science Based Target(SBT)(Note 7),and in May 2023,we updated our target aligned with the Paris Agreement and were certified as a 1.5C GHG reduction target.Moreover,in September 2024,we were certified as a Net-Zero Target in the long-term.(See the table below.)GHG emissions reduction targets(SBT 1.5C accreditation)TargetProgress RateEmissions from Panasonic Group business activities(Scope 1 and 2)Reduce 90%by 2030(compared to fiscal 2020)38%(Note 8)Emissions from use of Panasonic Group products(Scope 3)Reduce 30%by 2030(compared to fiscal 2020)(Note 9)Disclosure Based on TCFDs Recommendation2 2GHG emissions reduction targets(SBT certified Net-Zero Target)TargetProgress RateEmissions from the entire Panasonic Group value chain(Scope 1,2,3)Reduce 90%by 2050(compared to fiscal 2020)(Note 9)1.Scope 13:Emissions categories established within the Greenhouse Gas(GHG)Protocol,which is an international standard for calculating and reporting the amounts of greenhouse gas emissions.Scope 1 covers direct emissions of greenhouse gasses by the business operator(fuel combustion,industrial processes).Scope 2 covers indirect emissions resulting from the use of electricity,heat,and steam supplied by other companies.Scope 3 covers emissions by other companies that are related to the activities of the business operator and are not covered by Scope 1 and 2.2.Value chain:The series of business activities from procurement of raw materials to manufacturing,distribution,sale,and after-sale services3.300 million tons or more,equivalent to approximately 1%of total global emissions:According to 2020 CO2 emissions from energy sources(source:IEA)(The emissions coefficient for avoided CO2 emissions uses the 2020 standard.)4.COP29:The 29th Conference of the Parties to the United Nations Framework Convention on Climate Change.Around 200 nations,regions,and other entities participated in this international conference aimed at resolving the problem of climate change5.Circular economy(CE):An economic system that seeks to preserve and maintain the value of products,materials,and resources for as long as possible,minimize the production of waste materials,and effectively utilize resources through product sharing and services.6.TCFD:An abbreviation of Task Force on Climate-related Financial Disclosures.The task force was set up by the Financial Stability Board(FSB)in response to a request by the G20 Finance Ministers and Central Bank Governors.TCFD published its recommendations in 2017.7.SBT:An abbreviation of Science Based Target.It is a target to reduce GHG emissions in consistent with scientific knowledge toward the goals to limit the increase of global temperature to less than 2.0C above pre-industrial levels.8.38%:This is calculated based on the results from fiscal year 2024,since third-party verification has not yet been completed.The latest figures will be disclosed on Panasonics Sustainability website under the Response to TCFD section.9.:Progress rate not calculated due to increase in emissions because of expansion of products subject to calculation(Notes)2 32.Initiatives for Human Capital ManagementIn his management,the founder of our Group,Konosuke Matsushita,placed significance on nurturing and developing people so that they can thrive based on his philosophy of Develop people before making products.We inherit this philosophy and are practicing human capital management under an unwavering core of our Basic Business Philosophy to make the most of the human resources that we are entrusted by society as our capital.(i)Implementation of Basic Business PhilosophyThe management in our Group is not conducted by the top executives alone.Under the idea of“employee entrepreneurship,”each and every employee regards themselves as responsible for the tasks of their own.Furthermore,we also put emphasis on“the participative management through collective wisdom,”where the diversity and abilities of all employees are utilized for management.The Basic Business Philosophy shows how our“autonomous responsible management”is attained through both axes of“employee entrepreneurship”and“the participative management through collective wisdom.”Moreover,we promote a Groupwide initiative to promote Diversity,Equity and Inclusion(DEI)based on the Panasonic Group DEI Policy as we believe diverse viewpoints and values will lead to better growth in decision-making,as well as our business.In April 2023,we established Panasonic Leadership Principles(PLP)as a guideline of conduct to put our Basic Business Philosophy into practice.Under this guideline,every employee,regardless of their rank,aims for a higher level of leadership.(ii)Current ChallengesAt the Panasonic Group,we conduct an annual Employee Opinion Survey targeting approximately 150,000 employees globally.We have been working to improve for more favorable responses to the questions in employee engagement(the willingness for contribution by own will)and employee enablement(placing the right people in the right place,as well as a better working environment).Although the overall favorable response rates have been on the rise,the answers for the two particular questions remained at a lower level:Motivation from the company or supervisors and No significant barriers at work.This suggests we still have a large possibility for growth in making a better work environment where every employee can take on challenges by maximizing their potential.We have issues,particularly in the Japan region,for female employees,those in the younger generation,and career-hires.In the question regarding career development and opportunities at our Group,fewer female employees answered yes to the question,I can achieve my career goals at this company,compared with male employees.We feel the necessity of assigning more female employees to the top management and decision-making layer of the organization.Young employees and career-hires also should be assigned to the decision-making layer in an early stage of their careers by maintaining their high morale at a higher level right after onboarding and supplying them with the right place to work.Meanwhile,high productivity is indispensable to conducting high-quality measures and decision-making.As our 2 4human capital management includes the idea that human resources entrusted by society can thrive to their maximum abilities,we will thoroughly review the structure of fixed costs and build highly productive business processes in order to attain Best Work Processes(one of the Principles in the aforementioned PLP).(iii)Our GoalsTo further accelerate the transformation and growth of the Group,we need to face the challenges as mentioned above,encourage each and every employee to take on new challenges,and create a better environment in which people and the organization can grow together.Thus,to achieve an ideal society with affluence both in matter and mind,we determined to aim for a company where every employee can UNLOCK their potential by themselves,by taking bold and positive challenges beyond others expectations and maximizing their skills and abilities.The founder,Konosuke Matsushita once talked of an environment To be so immersed in work that time and fatigue are forgotten is a state of deep concentration and joy.This flow state is the greatest gift that the founder believed he could offer to employees,where they can take on challenges and maximize their skills and abilities.Our idea of UNLOCK comes from this founders philosophy that remains unchanged through the years.(iv)Critical IndicatorsTo that end,as mentioned above,we will continue monitoring materialities related to human capital management by establishing indicators listed as Materiality List,which are related to(4)Strategies,indicators,and targets in 2.Disclosure of Sustainability-related Undertakings.The grounds for indicators are as follows.2 5Organization culture transformation UNLOCK indicator is set with targets to realize the status where every employee takes bold and positive challenges and maximizes their skills and abilities,which is based on the two challenges analyzed from the Employee Opinion Survey as mentioned above(In fiscal 2025,UNLOCK indicator of the global regions is 43%.).Develop&Appoint Diverse,Transformational Leaders-We set the target for diversity(female employees,employees who are non-Japanese citizens,and mid-career hires)in the management team of each operating company to realize high-quality decision-making in our management(54%as of April 2025).-In the current situation of the Japan region,the ratio of female employees is lower in managerial positions in our Group,regardless of no difference in capability by gender.Therefore,this rate regarding female employees is also set as one of the materialities to make diversity into strength for a new set of values(7.9%as of April 2025).Safe secure and healthy work environment,We set the number of serious/major accidents as the materiality since we believe a safe,secure,and healthy work environment is a premise of our business activities(In fiscal 2025,the number of serious accidents and major accidents is seven and zero,respectively.).Moreover,we will conduct monitoring of the figure from the formula,EBITDA(Note 1)divided by personnel expenses,in order to have the best work processes by enhancing value-added labor productivity.(v)Initiatives Taken for Our Goals(a)Organization Culture TransformationTo earn the best business performance,an organizations culture should be designed by our own will.No matter how excellent a business strategy may be,its execution relies on people.The results are greatly influenced by an individuals behavior and the culture.If employees cannot UNLOCK their potential,it will not lead to their challenges or growth.Furthermore,if the culture does not align with the strategy,the whole organization will not be able to fully leverage its capabilities.Therefore,in order to clarify what our corporate culture should be,we have established the 6 Principles of Organization Design,which is based on the framework of the Organization Performance Model(OPM).The 6 Principles of Organization Design have mutual connection and alignment of each Principle that enables them to function effectively and supports the overall growth of the organization.Results must be rewarded appropriately based on clear and direct Evaluation&Compensation.For Information Sharing&Learning Process,employees are encouraged to gain wider perspectives.For Recruitment,Training&Selection of Leaders,the development and appointment of bold,diverse,and transformational leaders is essential.Design 2 6of Work should support the work of appointed leaders by supplying them with an environment to work in a flow state.All the principles must be interconnected and aligned for a greater impact.With this initiative,we aim for business growth as a result of individuals and the organization growing together.Among the 6 Principles of Organization Design,Organization Structure&Placement suggests the significance of establishing a simple,flat organizational structure,while Evaluation and Compensation includes the idea that results of actions and their results are rewarded with clear and direct compensation.As mentioned above,this will lead to the maximization of the skills and abilities of each and every employee whom we are entrusted by society.To that end,we will optimize the number of personnel in global regions in fiscal 2026 as part of the Groups management reform,since we believe that it is essential to build a highly productive business process while also making full use of the latest data technologies,such as generative AI.Furthermore,we will continue strict management of our workforce numbers to create a lean corporate structure that is resilient to changes in the business environment and enable the Group to achieve sustainable growth.(b)Develop&Appoint Transformational Leaders Shaping the FutureHigh-quality decision-making is indispensable to achieve an ideal society with affluence both in matter and mind through sustainable business growth.To that end,we will need to develop and appoint diverse,transformational leaders.In successor development of management candidates,in addition to the leadership behaviors outlined in our Groups Panasonic Leadership Principles,we emphasize the following elements as requirements for leaders expected of management:experience(business management,management of overseas business divisions,business creation,etc.)as well as knowledge and skills(decision-making and judgment,strategic planning and execution,etc.).To continuously develop such leaders,we are advancing the definition of human resource requirements for all critical Groupwide positions along with their succession plans,as well as the identification,development,and monitoring of successors from a medium-to long-term perspective.We clarified the personnel requirements for important positions and established the Group Talent Management Committee to promote the planned development and placement of successors who will become the next generation of leaders.From short-,medium-,and long-term perspectives,we are identifying,developing,and monitoring successors.The Panasonic Group has two frameworks for management positions as outlined below,with platforms established to develop successors for future initiatives.2 7As part of the top management succession plan,candidates for 23 key positions are categorized by assignment readiness:immediately assignable,assignable within 5 years,or within 10 years.Furthermore,to accelerate the development of next-generation leaders,we are implementing inclusive initiatives such as global top management development programs in collaboration with overseas regions,and selective training programs aimed at the early identification of young talent.Furthermore,in the Japan region,we are also focusing on attracting and systematically nurturing female leaders.In the Panasonic Groups compensation system,there are no inequalities due to attributes such as gender.However,promotion of female employees to management teams and managerial positions is lagging behind men.The Panasonic Group is working to acquire and develop female leaders by strengthening recruitment,offering more flexible work options,and supporting individual career developmentso that the insights of diverse employees can be harnessed to create innovative products and services for the future.For details of DEI initiatives in the Panasonic Group,please visit the company website at:https:/holdings.panasonic/global/corporate/sustainability/diversity-equity-inclusion.htmlIn the Panasonic Group,the PLP Assessment(360-degree assessment)is conducted for the Presidents of operating companies,including some executives,as well as those in PHD.This assessment is designed to monitor leadership behaviors as evaluated by superiors,peers,and subordinates,which support the implementation of our Basic Business Philosophy.The assessment will provide the opportunity to reflect on their daily actions and consider how they can be improved.In addition,candidates identified as immediately appointable,or within 5 or 10 years,are also assessed to help develop the next generation of top management.The results of the PLP Assessment in fiscal 2025 show that the strengths of top management are shared by the next generation:Builds Trust,and Ownership.Meanwhile,we must recognize the need for improvement in Best Work Processes,and Welcomes Uniqueness and Differences to further strengthen the process to nurture management candidates.(c)HR ModernizationHR Modernization is an initiative that leverages cutting-edge data technology to evolve the way employees work and how HR management functions.By utilizing HR data and generative AI,we aim to enhance the experience of all employees within the Panasonic Group while enabling the top management and managers to optimize the management of the organization and its human resources.By promoting the standardization and efficiency of HR operations,we are further transforming HR to support business strategy.We are creating an environment where each individual can focus on more creative work,maximizing the potential of every employee,sharing results across the entire group,and contributing to both strengthening employee growth and organizational competitiveness.2 8We will enhance our level to that of leading global companies for the number of HR employees that 1 FTE(Note 2)of HR employee is in charge of,as well as the rate of HR employees tasks related to strategy,and the development of talents/organization,through the advancement of the cutting-edge data technology in the HR function.The introduction of a portal site,the One-Stop HR Service unified HR information and its contacts,and the service includes the following functions:My Page provides personalized dashboard with notifications,Virtual Agent works as an AI chatbot for automated responses and applications,and Metaverse is a new form of reassurance that also provides digital face-to-face interactions.Through these multiple supporting means,we have achieved comfort with the convenience of self-directed automated service,as well as human support.(d)Creating a Safe and Secure WorkplaceSafety and compliance come first than anything else in our business operations.With regard to occupational safety and health,we are promoting equipment safety measures based on the Equipment Safety Standards in order to eliminate serious and major accidents at manufacturing sites,and are also developing preventive activities according to the analysis results of past serious accidents.In addition,with regard to hygiene management,we are strengthening the promotion of exposure reduction measures based on the results of risk assessments,in light of the current legal revisions requiring businesses to manage chemical substances.Regarding health,the Panasonic Group has announced a policy to strengthen health investments in order to create a workplace environment where every employee is healthy both physically and mentally and can work safely,and with peace of mind.In addition to Panasonic Health Promotion Activities,initiatives specific to each operating company are also promoted in Japan.The Group has been working on efforts toward being recognized as a Certified Health and Productivity Management Organization by the Ministry of Economy,Trade and Industry,Japan.As of March 2025,all the operating companies are recognized as being an Outstanding Organization.Furthermore,Panasonic Connect Co.,Ltd.and Panasonic Corporation are recognized as White 500(Note 3),three and two consecutive years,respectively.Moreover,for compliance,we provide employees with training on the laws and regulations related to the businesses and regions they are involved.In addition,we apply the global hotline EARS and other systems to thoroughly inform employees about the early detection and prevention of any issues while also working to strengthen awareness-raising activities to eradicate all forms of harassment.(Note 1)EBITDA:The total of operating profit,depreciation(physical assets/right-of-use assets),and amortization(intangible assets).(Note 2)Full Time Equivalent(FTE):a unit to express the workload by converting to the number of full-time employees.(Note 3)White 500:Top 500 companies excellent in their initiatives within the large enterprise category2 93.Risk FactorsPanasonic Group(hereinafter,the Group)has a wide range of businesses,including Lifestyle Segment,Connect,Industry,and Energy,and there are many different risks that could affect each of these business activities.The Group aims to strengthen its business competitiveness in the markets that each of its businesses faces and to achieve sustainable and stable development of the entire Group by promoting appropriate countermeasures and risk-taking against risks that may affect the achievement of business goals.The Group has established a company-wide risk management system and process based on the Panasonic Group Basic Rules for Risk Management.The Group Chief Risk Management Officer(hereinafter,Group CRO),who is the chief risk management officer for the Group,oversees risk management activities for the entire Group,and the Enterprise Risk Management Office of Panasonic Holdings,Inc.(hereinafter,PHD ERM Office and PHD)is in charge of process promotion.The PHD Enterprise Risk Management Committee(hereinafter,PHD ERM Committee)chaired by the Group CRO and consists of the heads of PHDs various functional divisions,is held regularly.The Group defines risk scenarios for the purpose of risk management,based on their respective scope and time horizon.Uncertain events that could result in losses or threats in the execution of short-term business plans and daily operations are defined as operational risks,while uncertain events that could result in opportunities or threats that should be considered in the execution of mid-to long-term business strategies are defined as strategic risks.The PHD ERM Office annually identifies risks that could affect the entire Group based on changes in the external and internal environment and managements perception of risks.Among the identified risks,operational risks are determined as Group Major Risks from the perspective of the Groups management and social responsibility,based on the results of a two-pronged assessment of the likelihood of occurrence and financial and non-financial impact of risks by the relevant functional divisions,and the necessary countermeasures are implemented.For strategic risks,in view of promoting appropriate risk-taking according to risk tolerance,we identify and evaluate events that could result in opportunities or threats or both,based on key agenda scenarios positioned as PHD Major Strategic Risks.Among events,those with low uncertainty are targeted for immediate countermeasures,while for other events,leading indicators are set to capture signs of their manifestation,and countermeasures are considered in response to changes in uncertainty.The PHD ERM Office confirms the effectiveness of risk controls for these risks by monitoring changes in the risks and the progress of countermeasures.The PHD ERM Committee reports regularly to the Group Management Meeting and the Board of Directors on important risks and the progress of countermeasures within the PDCA cycle of these risk management activities.Each operating company under the jurisdiction of PHD has also established an Operating Company ERM Committee to promote risk management activities focusing on important risks at individual companies and in their respective business areas.For these activities,the internal audit function conducts risk-based approach audits focusing on critical risks.Beyond these initiatives,the Group promotes initiatives to foster a risk culture where each employee possesses appropriate risk literacy and is committed to sound risk-taking.Training for employees at the time of joining Panasonic and prior to overseas assignments is designed to help them acquire both a mindset that supports organizational and individual growth without excessive fear of risk,and the basic responses to crisis situations.30(Risk Management Organization Chart)(Risk Management Process)Described below are some of the potential risks(including Group Major Risks and PHD Major Strategic Risks)to its business activities that may have a material impact on investors decisions.However,this is not an exhaustive list of all risks to the Group,and there can be unforeseeable risks that are not described below.These risks may substantially and adversely affect the Groups business,operating results,and financial condition.Among the matters described in the annual securities report including those related to the business as well as the consolidated financial statements,below are the risks that,management recognizes,may have a significant impact on the financial condition,business performance and cash flows of the Group.This section includes forward-looking statements and future expectations as of June 20,2025,the filing date of this annual securities report.31Disasters,accidents,and unpredictable eventsRisk scenariosThreats-Natural disasters such as earthquakes,tsunamis,and floods,or fires at business sites,may cause damage to employees,facilities,raw materials and parts,inventory,and other assets.Such damage can result from inadequate countermeasures,delays in recovery activities,or impacts beyond reasonable assumptions,leading to suspension of operations,production and shipping delays,and repair costs.Main initiatives-Corporate Emergency Management Rules stipulate the basic policy for response,including the escalation and decision-making process in the event of an emergency that could significantly impact the entire Group,as well as the system,roles,and procedures for the initial response.-A business continuity plan(BCP)will be reviewed based on the BCM Establishment Guideline,which focuses on three key areas:(1)the business continuity policy,including priority restoration projects and restoration processes;(2)contingency measures;and(3)disaster prevention and mitigation measures during normal times.-Thoroughly implement preventative measures at each workplace based on the Global Fire/Disaster Prevention Rules.Reinforce measures based on hazard information and fire risk assessments conducted under the Fire and Disaster Prevention Committee.Third-party inspections are conducted at workplaces where fires have occurred,and recurrence prevention measures are thoroughly implemented.-Quickly and accurately confirm the safety of employees through the use of a safety confirmation system,and operate system such as Disaster Portal to monitor the status of business locations,enabling prompt assessment of damage and requests for assistance.-Analyze the impact of a Nankai Trough earthquake or an earthquake directly beneath the Tokyo Metropolitan area as stress scenarios,and enhance countermeasures and risk communication based on these analyses results.-Conduct disaster prevention and evacuation drills at workplaces under various assumed scenarios,as well as group-wide drills involving Group CEOs and presidents of operating companies.To strengthen organizational preparedness,training exercises are regularly held at both the head office in Kadoma City,Osaka Prefecture,and the alternate head office in the Kanto region.-Recognizing that natural disasters can occur unpredictably,awareness-raising programs such as lectures and surveys are implemented to promote individual disaster preparedness.(1)Group Major Risks and PHD Major Strategic Risks*:PHD Major Strategic Risks Risks of Management Foundation32ComplianceRisk scenariosThreats-Address serious compliance violations such as breaches of antitrust or competition laws,bribery,and corruption and respond appropriately to the emergence of issues may result in administrative penalties(e.g.,surcharges),criminal sanctions,or civil litigation.This will also have a negative impact on the Groups social reputation.Main initiatives-Establish the Panasonic Group Code of Ethics&Compliance in recognition of our role as a public entity of society to ensure that all Group employees act in accordance with laws,regulations,and social norms,exercising sound ethical judgment and remaining free from self-serving motives.-Conduct basic compliance education for all employees throughout the year and risk-specific compliance education based on business and regional characteristics for those who need it,to establish a global awareness of ethical and legal compliance and to improve the ability to respond to risks.-Establish internal regulations to prevent cartels,bid rigging,and other potentially suspicious practices,as well as bribery and corruption,and ensure that all employees are fully informed and understand them thoroughly.-Implement and operate risk-based due diligence tools and screening processes to mitigate the risk of indirect bribery and corrupt practices.-Conduct compliance audits and other initiatives based on a risk-based approach to prevent and detect bribery and corruption at an early stage.-Establish a centralized global hotline accessible by domestic and overseas offices as well as business partners,to prevent and promptly resolve misconduct.Through appropriate internal investigations,detect and address issues at an early stage,and provide training to ensure that personnel involved in investigations possess a high level of investigative capability.Information security and cyber security risksRisk scenariosThreats-The leakage of trade secrets(such as technical information),customer privacy,or trust-related information including personal data due to intentional acts such as cyberattacks or negligence by employees or subcontractors may lead to a loss of social credibility and result in liability for damages.-Cyberattacks targeting information systems,production facilities,products,or services may disrupt business operations,lead to the suspension of products and services,and result in liability for damages.-The discovery of cybersecurity vulnerabilities in products or services may result in large-scale product recalls or prolonged suspension of offerings,potentially leading to substantial costs for countermeasures and other responses.-Cybersecurity incidents within the supply chain may disrupt the availability of raw materials and components,leading to the suspension or delay of the Groups product supply.Main initiatives-Strengthen the global and centralized security monitoring system by expanding anomaly detection to encompass networks,servers,PCs,and other infrastructure including those of domestic and overseas subsidiaries and by integrating these efforts with internal factory security monitoring.-Establish and operate an inspection system to ensure the security of products and services.-Provide periodic information security education to global employees through an information security education platform,and implement human resource measures such as regular security screenings for contractors involved in system operations.-Monitor laws,regulations,and trends related to personal information protection and cybersecurity in various countries,incorporate them into internal rules and regulations,and ensure group-wide awareness.-Verify collaboration and response procedures in times of crisis through cross-organizational incident response training.-Establish and operate the Cyber Security Office to provide a comprehensive and centralized response to complex cyber risks by integrating common functions related to information,product,and plant security.33QualityRisk scenariosThreats-Product defects may cause quality issues,including safety incidents or large-scale recalls,which could result in liability for damages both direct and indirect that are not fully covered by product liability insurance,or lead to significant countermeasure costs.In addition,such incidents may damage the Groups image and reputation and lead to a loss of customers.Main initiatives-In accordance with the basic management policy,ensuring the safety of products manufactured and sold,and delivering safety and peace of mind to customers,are regarded as not only key management priorities but also essential social responsibilities,under which the following the Groupwide Quality Policy has been established:truly serve customers by way of providing products and services that continuously meet and satisfy the needs of customers and society.-Establish and operate a quality management system based on the responsibilities of each operating company for the quality of their respective products,in alignment with the Groups quality policy.-Promote group-wide safety standards by disseminating knowledge on product safety and preventive measures against safety incidents to operating companies.-Clearly state in the Panasonic Group Code of Ethics&Compliance that prevention of quality irregularities is based not only on compliance with laws and regulations,but also on adherence to industry standards,customer expectations,and ethical principles.-Conduct a thorough internal investigation across the entire Group,targeting inappropriate acts related to quality compliance in collaboration with an external law firm.Industry businessIt has been revealed that our subsidiary,Panasonic Industry Co.,Ltd.(hereinafter PID),identified instances of irregularities(hereinafter,the Irregularities)in the process of third-party certification by UL Solutions(hereinafter,UL),a third-party safety science organization,for the electronic materials products manufactured and sold by PID in the previous fiscal year.In response to this,PID established an external investigation committee composed of outside experts and conducted an investigation into the UL certification and other quality irregularities.PID published the investigation report it received from the external investigation committee during the current fiscal year as well as the measures it formulated to prevent recurrence.In connection with the cases subject to the investigation,UL certifications for some products have been additionally withdrawn as of December 31,2024.Discussions are ongoing between PID and UL regarding the handling of UL certifications for some products.In addition,ISO 9001(Note 1)and IATF 16949(Note 2)certifications also have been withdrawn or suspended at some of the locations of PID or its subsidiaries as follows:-ISO 9001 certification withdrawal:Ise Factory(part of the applicable scope)-ISO 9001 certification suspension:Ise Factory(part of the applicable scope),Obihiro Factory(Note 3)-IATF 16949 certification suspension:Ise Factory,Obihiro Factory(Note 1)ISO(International Organization for Standardization)9001 is an international standard for quality management systems.(Note 2)IATF(International Automotive Task Force)16949 is an international standard for quality management systems for the automotive industry.(Note 3)Panasonic Switching Technologies Co.,Ltd.,a subsidiary of PID.34Threats-If UL certification is to be withdrawn for our products that need to be sold as UL certified products,and if PID will not be able to reobtain the certification,there will be an adverse effect on the Groups business.-If some ISO 9001 and IATF 16949 certifications that we need to maintain are withdrawn or suspended,and we are unable to reobtain those certifications or lift the suspension,there will be an adverse effect on the Groups business.Main initiatives-Formulate and implement measures to prevent recurrence based on an analysis of the causes of issues pointed out by the external investigation committee,including insufficient understanding of the nature of quality assurance,problems with the organizational culture,and deficiencies in the quality compliance system.-Continue to work toward obtaining certification for products that need to continue to be sold as UL certified products(some products have already been certified).-Continue to work towards obtaining certification or lifting the suspension regarding the ISO 9001 and IATF 16949 certifications that have been withdrawn or suspended.Occupational accidentsRisk scenariosThreats-Inadequate work environments,unsafe procedures,or improper labor management may lead to serious accidents,resulting in physical or mental harm to employees or related personnel.-Violation of labor-related laws and regulations,including the Labor Standards Act and the Industrial Safety and Health Act,may result in criminal or administrative penalties and lawsuits for damages due to a failure to exercise due care for employee safety.This will also have a negative impact on the Groups social reputation.Main initiatives-Establish health and safety organizations at each business company and worksite to proactively promote related activities.In addition,review relevant regulations and standards,and,in collaboration with a manufacturing division and the health insurance organization,formulate and implement key measures to address Group-wide issues and prevent recurrence of similar accidents.-Identify risks and implement risk reduction measures for occupational accidents and illnesses in the workplace based on periodic risk assessments in the occupational health and safety management system.-Analyze past serious occupational accidents to identify typical patterns of occurrence,share key checkpoints across the organization,and implement preventive and recurrence control measures.-Promote continuous employee awareness to prevent overwork and enhance the work management system.-Foster knowledge sharing and safety awareness by organizing the Health and Safety Forum for Group health and safety personnel and conducting training sessions for management.Risks of Business Operations35Human rights and labor complianceRisk scenariosThreats-Human rights violations committed by the Group or involvement in such violations within its value chain may result in administrative penalties(e.g.,surcharges),criminal sanctions,or claims for damages,and could negatively impact on the Groups social reputation.In addition,such incidents could damage the Groups image and reputation,lead to a loss of customers,and result in consumer boycotts.Main initiatives-The Panasonic Group Human Rights and Labour Policy and the Rules on Human Rights and Labour Compliance have been established,and specific efforts such as human rights due diligence are being promoted in accordance with the United Nations Guiding Principles on Business and Human Rights,to identify,prevent,and mitigate adverse human rights impacts related to the business oper
2025-10-20
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May 9,2025Panasonic Holdings CorporationFiscal 2025 Financial ResultsFiscal 2026 Financial ForecastNotes:1.This is an English translation from the original presentation in Japanese.2.In this presentation,“Fiscal 2025”or“FY3/25”refers to the year ended March 31,2025.In addition,“Fiscal 2026”or“FY3/26”refers to the year ending March 31,2026.1Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Summary of FY3/25 Financial Results FY3/25 Financial Results:Both sales and profit exceeded forecast as of Feb.4,2025Sales&profit*1increased YoY on the basis of excluding deconsolidation of Automotive(hereinafter,“excluding Automotive”)Overall sales:Increased excluding Automotive,with increased sales(Lifestyle,Connect,Industry)Adjusted operating profit&operating profit:Increased due to increased profit at all segments except for Automotive Net profit*3:Decreased due mainly to the absence of one-time gains with the liquidation of Panasonic Liquid Crystal Displayrecorded in FY3/24 Operating CF:Cumulative amount for 3 years(FY3/23-FY3/25)was 2.2 tr.yen,achieving medium-term target of 2 tr.yen Annual dividend:48 yen(YoY increase of 13 yen),payout ratio of 30.6%(Increase of 8 yen from forecast announced on Aug.30,2024)FY3/26 Forecast:Sales&profit*2expected to increase YoY excluding Automotive(Impact of US tariffs not yet factored in;details on page 13)Overall sales:Expected to increase YoY excluding Automotive,due to increased sales in Energy Adjusted operating profit:Expected to increase YoY,with increased profits(Lifestyle,Industry,Energy)Operating profit&net profit*3:Expected to decrease,factoring in restructuring expenses of 130.0 bil.yen(details on page 15) :Generative-AI related products(Industry,Energy)Process Automation,Avionics,Gemba Solutions(Connect)-:Price revisions of automotive batteries reflecting lower raw material prices(Energy)*1:Adjusted operating profit and operating profit*3:Net profit attributable to Panasonic Holdings Corporation stockholders*2:Adjusted operating profitFiscal 2025 Financial ResultsFiscal 2026 Financial Forecast3Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/25 Financial ResultsFY3/25ResultsFY3/24ResultsYoY(year-on-year)FY3/25(e)(Feb.4,2025)Difference from previous forecastExcl.Automotive*5Excl.Automotive*5Excl.Automotive*5Sales8,458.27,785.08,496.47,421.3100%(97%)*6-38.2(-242.9)*6105%(102%)*6 363.7( 182.0)*68,300.0 158.2Adjusted OP*1(%to sales)467.2(5.5%)442.7(5.7%)390.0(4.6%)351.5(4.7%)120% 77.2126% 91.2450.0(5.4%) 17.2Other income/loss*2-40.7-46.3-29.0-29.4-11.7-16.9-70.0 29.3OP(%to sales)426.5(5.0%)396.4(5.1%)361.0(4.2%)322.1(4.3%)118% 65.5123% 74.3380.0(4.6%) 46.5Profit before income taxes(%to sales)486.3(5.7%)-425.2(5.0%)-114% 61.1-430.0(5.2%) 56.3Net profit attributable to Panasonic Holdings Corporation stockholders(%to sales)366.2(4.3%)-444.0(5.2%)-82%-77.8-310.0(3.7%) 56.2EPS*3156.87 yen-190.21 yen-33.34 yen-132.80 yen 24.07 yenROE7.9-10.9%-3.0%-7.0% 0.9ITDA*4(%to sales)869.7(10.3%)812.7(10.4%)805.9(9.5%)719.6(9.7%)108% 63.8113% 93.1860.0(10.4%) 9.7Exchange rates1 US dollar 153 yen153 yen145 yen145 yen 8 yen 8 yen149 yen 4 yen1 Euro164 yen164 yen157 yen157 yen 7 yen 7 yen161 yen 3 yen1 Renminbi21.1 yen21.1 yen20.1 yen20.1 yen 1.0 yen 1.0 yen20.9 yen 0.2 yen*7YoY%figures represent the year-on-year change relative to the previous years figures*5:Except for businesses not subject to the share transfer*6:Excluding effect of exchange rates*7:Including recording of deferred tax assets,etc.(121.3 bil.yen)with the liquidation of Panasonic Liquid Crystal Display Co.,Ltd.(through Special Liquidation)and its debts waiver,resolved by the Board of Directors*1:Sales-Cost of sales-SG&A*2:“Other income(expenses),net” “Share of profit(loss)of investments accounted for using the equity method”as indicated in the Consolidated Statements of Profit or Loss of the news release*3:Basic earnings per share attributable to Panasonic Holdings Corporation stockholders*4:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets).Adjusted with amount equivalent to depreciation corresponding to underlying assets that are applied with Lease accounting treatment as a lessor,etc.(yen:billions)4Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.SalesYoY(excl.FX)Difference from previous forecastAdjustedOP(%)YoYDifference from previous forecastOther income/lossYoYDifference from previous forecastOP(%)YoYDifference from previous forecastEBITDA*1(%)YoYDifference from previous forecastLifestyle3,584.2104%(102%) 34.2136.23.8% 2.4 1.2-8.3 5.8-3.3127.93.6% 8.2-2.1250.97.0% 20.2-2.1Automotive*2*3805.064%(61%)0.024.53.0%-14.00.05.6 5.20.030.13.7%-8.80.057.07.1%-29.30.0Connect1,333.2111%(107%) 33.281.46.1% 37.8 21.4-4.2 0.3-2.277.25.8% 38.1 19.2156.111.7% 42.0 26.1Industry1,083.6104%(101%) 13.654.35.0% 23.1-5.7-11.1-11.0-1.143.24.0% 12.1-6.8104.89.7% 14.1-7.2Energy873.295%(91%) 0.2122.714.0% 28.1-3.3-2.5 3.3-0.5120.213.8% 31.4-3.8189.921.7% 29.5-5.1Other/Eliminations&adjustments*2779.0- 77.048.1-0.2 3.6-20.2-15.3 36.427.9-15.5 40.0111.0-12.7-2.0Total8,458.2100%(97%) 158.2467.25.5% 77.2 17.2-40.7-11.7 29.3426.55.0% 65.5 46.5869.710.3% 63.8 9.7Excl.Automotive*47,785.0105%(102%) 158.2442.75.7% 91.2 17.2-46.3-16.9 29.3396.45.1% 74.3 46.5812.710.4% 93.1 9.7FY3/25 Results by Segment*1:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets).Adjusted with amount equivalent to depreciation corresponding to underlying assets that are applied with Lease accounting treatment as a lessor,etc.*2:As a result of the share transfer of Panasonic Automotive Systems Co.,Ltd.,figures of businesses not subject to the transfer are recorded in“Other/Eliminations&adjustments.”Prior year amounts are reclassified accordingly.*3:FY3/25 figures of“Automotive”segment are based on 8 months(Apr.-Nov.2024)*4:Except for businesses not subject to the share transferYoY%figures represent the year-on-year change relative to the previous years figures(yen:billions)5Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/25 Sales Analysis by SegmentSales:Increased excluding Automotive,with increased sales(Lifestyle,Connect,Industry)FY3/24FY3/25LifestyleIncreased overall:Increased sales in electrical construction materials(e.g.Japan,India)and HVAC(e.g.room air conditioners mainly inJapan&Asia,environmental engineering,devices).Sales of consumer electronics in China and A2W in Europe largely decreased in 1H,but improved in 2HConnectIncreased:Increased sales of Process Automation,capturing demand for AI servers and by China market(EV,ICT),in addition to increased sales of Gemba Solutions,Avionics,Blue Yonder,and Mobile SolutionsIndustryIncreased:Increased sales of products(capacitors,multi-layer circuit board materials)for information&communication applications such as generative AI servers,despite decreased sales of automotive/industrial-use relays,etc.due to market slowdown mainly in EuropeEnergyIn-vehicle:Decreased with decreased demand at Japan factory and price revisions reflecting lower raw material prices,despite increased sales volume at North America factory Industrial/Consumer:Increased with significant growth of energy storage systems for data centers,backed by the growth of generative AI marketOther/Eliminations&adjustmentsEntertainment&Communication:Increased with increased sales of AV equipment and digital camera equipmentHousing:Increased with increased sales of high-end modular kitchen systems and bath systems for rental housing,etc.AutomotiveDeconsolidation impact(FY3/25 results based on 8 months;Apr.-Nov.2024)Major increase/decrease factors(excluding effect of exchange rates) 6.5-149.1 17.1 65.6 84.8 67.5 2.7 86.9 181.7-401.98,496.48,458.2Excl.Automotive and FX: 182.0(102%)Price revisions for lower raw materials:-80.3(yen:billions)Automotive-relatedLifestyleIndustryIn-vehicleIndustrial/Consumer,othersEnergyEffect of exchange ratesEntertainment&CommunicationHousingHeadquarter-related&EliminationsOther/Eliminations&adjustmentsConnectYoY%figures represent the year-on-year change relative to the previous years figures6Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/25 Adjusted Operating Profit Analysis by SegmentAdjusted OP:Increased due to increased profit at all segments except for Automotive 37.8-3.0 2.4 23.1 31.1-0.2-14.0FY3/24FY3/25 91.2(excl.Automotive)390.0467.2Major increase/decrease factorsLifestyleIncreased for full year:Turned to a YoY increase overall after a significant decrease in 1H due mainly to deteriorated market conditions for consumer electronics in China and market slowdown for A2W in Europe.In 2H,consumer electronics(Japan,Asia,China)and A2W(Europe)improved;electrical construction materials(Japan)continued to be favorableConnectIncreased:Increased sales(Process Automation,Avionics,Gemba Solutions,Blue Yonder,Mobile Solutions)and improved profitability,etc.IndustryIncreased:Increased sales of products(capacitors,multi-layer circuit board materials)for information&communication applications such as generative AI servers,rationalization and price revisions,etc.,despite decreased sales of automotive/industrial-use relays due to market slowdown as well as price hikes in raw materialsEnergyIn-vehicle:Decreased due to increased upfront costs for ramp-up of Kansas and Wakayama factories,despite improved productivity at North America factory,additional recording of US IRA tax credit for production costs of electrode active materials,and decreased provision for expenses related to quality issues Industrial/Consumer:Increased:Increased sales of energy storage systems for data centers,lower raw material prices and material rationalization,etc.Automotive Deconsolidation impact(FY3/25 results based on 8 months;Apr.Nov.2024)(yen:billions)LifestyleConnectIndustryIn-vehicleIndustrial/Consumer,othersEnergyOther/Eliminations&adjustmentsAutomotive7Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Lifestyle Segment:FY3/25 Results by Divisional CompanySalesYoY(excl.FX)Difference from previous forecastAdjustedOP(%)YoYDifference from previous forecastOther income/lossYoYDifference from previous forecastOP(%)YoYDifference from previous forecastEBITDA*2(%）YoYDifference from previous forecastLiving Appliances and Solutions Company(LAS)874.7101%(99%)-0.348.25.5% 0.1-1.80.0 5.10.048.25.5% 5.2-1.877.28.8% 7.2-2.8Heating&Ventilation A/C Company(HVAC)910.2112%(109%) 20.215.61.7% 0.9-1.4-4.2 2.7-3.211.41.3% 3.6-4.647.35.2% 9.8-3.7Cold Chain Solutions Company(CCS)408.4103%(99%) 8.420.14.9%-0.2-0.90.1 0.2 0.120.25.0%0.0-0.830.67.5% 0.8 0.6Electric Works Company(EW)1,071.5103%(102%) 11.576.77.2% 6.3 3.7-4.3 0.4 0.772.46.8% 6.7 4.4103.69.7% 8.8 3.6China and Northeast Asia Company(CNA)*1745.9102%(98%) 25.930.64.1%-4.9 1.14.0 7.8 2.034.64.6% 2.9 3.155.67.4% 3.5 3.1(yen:billions)*1:Sales and profit of CNA(except certain businesses)are also included in LAS,HVAC,and EW*2:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets)YoY%figures represent the year-on-year change relative to the previous years figures8Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved. 50.0 22.5 3.7 18.0-14.0 65.0-68.0-11.7FY3/25 Operating Profit Analysis(by Factor)Adjusted OP: 91.2(excl.Automotive)361.0426.5OP: 65.5FY3/24FY3/25Increased due to sales increase in real terms,rationalization,etc.,despite deconsolidation impact of Automotive,increased fixed costs(yen:billions)Salesincrease/decreasein real termsFixed costsRaw materials,logisticsPrice revisions,rationalization,etc.Blue Yonder Effect of exchange ratesAutomotiveOtherincome/lossShare transfer related expenses:-32.6(Automotive)Strategic investments:-30.0 Inflation(personnel expenses,energy costs):-50.0 Management structure improvements,etc.: 12.0Raw materials: 55.0 ：Energy -:Lifestyle,Industry Logistics:-5.0 Price revisions:-52.0-:Energy :Lifestyle,Industry Rationalization,etc.: 74.5 -Increased IRA tax credit-Rebound increase from expenses related to past manufacturing-process issues recorded in FY3/24(In-vehicle) :IndustryEnergyFY3/25FY3/24Year-on-Year excl.FXAdjusted OP(stand alone)excluding investments*24.511.9 12.6 11.3(1)Adjusted OP(stand alone)5.3 -0.8 6.1 5.8(2)Amortization expenses related to acquisition temporary accounting treatment-26.8-23.4-3.4-2.1Adjusted OP(consolidated)(1) (2)-21.5-24.2 2.7 3.7Blue Yonder Adjusted OP Breakdown*Excluding impact of strategic investment and synergy investment,etc.9Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/25 Cash Flows and Cash Positions FY3/24 Operat-ing CFCash FlowsGross cash&interest-bearing debt/Net cash1,180.6-653.2915.0-1,346.1-1,279.8-280.2-288.4-1,568.2-1,626.3866.9796.1NetprofitOthers-859.9-63.8*1:Total amount of transferable tax credit,effective use of credit with customers,and deductible tax creditFY3/23 Operat-ing CF520.73-year cumulative amount:2,183.7(yen:billions)(yen:billions)Share transfer of Automotive: 66.2Related to IRA tax credit*1: 103.1Operating CFInvestingCFFCFGross cash*2Net cash:-445.7Bonds,etc.Lease liabilitiesInterest-bearing debtEnd of FY3/24End of FY3/25*2:Gross cash:total of“Cash and cash equivalents”and time deposits and others included in“Other financial assets”Operating CF:Cumulative amount for 3 years(FY3/23-FY3/25)was 2.2 tr.yen,achieving medium-term target of 2 tr.yen Fiscal 2025 Financial ResultsFiscal 2026 Financial Forecast11Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/26 ForecastFY3/26(e)FY3/25YoYExcl.Automotive*5Excl.Automotive*5Sales7,800.08,458.27,785.092%(96%)*6-658.2(-358.2)*6100%(104%)*6 15.0( 315.0)*6Adjusted operating profit*1(%to sales)500.0(6.4%)467.2(5.5%)442.7(5.7%)107% 32.8113% 57.3Other income/loss*2-130.0*7-40.7-46.3-89.3-83.7Operating profit(%to sales)370.0(4.7%)426.5(5.0%)396.4(5.1%)87%-56.593%-26.4Profit before income taxes (%to sales)410.0(5.3%)486.3(5.7%)-84%-76.3-Net profit attributable to Panasonic Holdings Corporation stockholders(%to sales)310.0(4.0%)366.2(4.3%)-85%-56.2-EPS*3132.79 yen156.87 yen-24.08 yen-ROE6.5%7.9%-1.4%-EBITDA*4(%to sales)800.0(10.3%)869.7(10.3%)812.7(10.4%)92%-69.798%-12.7Exchange rates1 US dollar140 yen153 yen153 yen-13 yen-13 yen1 Euro150 yen164 yen164 yen-14 yen-14 yen1 Renminbi20.0 yen21.1 yen21.1 yen-1.1 yen-1.1 yen*5:Except for businesses not subject to the share transfer*6:Excluding effect of exchange rates*7:Including restructuring expenses(-130.0 bil.yen)(yen:billions)*1:Sales-Cost of sales-SG&A*2:“Other income(expenses),net” “Share of profit(loss)of investments accounted for using the equity method”as indicated in the Consolidated Statements of Profit or Loss of the news release*3:Basic earnings per share attributable to Panasonic Holdings Corporation stockholders*4:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets).Adjusted with amount equivalent to depreciation corresponding to underlying assets that are applied with Lease accounting treatment as a lessor,etc.YoY%figures represent the year-on-year change relative to the previous years figures12Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.SegmentChanges in DemandLifestyleConsumer Electronics:Slight decrease expected in Japan,broadly same level YoY in China with ongoing economic downturn,gradual recovery expected in other overseas markets mainly in Asia HVAC:A2W in Europe:after demand bottomed out in FY3/25 2H,gradual recovery expected to continue in FY3/26 Room air conditioners:slight decrease expected in Japan;increase expected in Asia and EuropeCold Chain:North America:Orders showing recovery trend with recovery in demand cycle Japan:Showing steady progress Electrical Construction Materials:Decrease expected in Japan with reduced number of housing starts,etc.,despite opportunities for solutions business orders expected to continue;GDP growth expected to continue overseas(mainly in India)ConnectSupply Chain Management:Continuous growth expected in SCM software marketAviation:Passenger demand expected to recover close to pre-COVID levels;continuing to monitor situation of quality&safety issues as well as supply chain issues in the aviation industry FA(mounting machines):Increased investment demand related to technology innovations centered on AI servers IndustryElectronic Devices(ICT):Growth expected in notebook PC with replacement demand;high growth expected to continue for generative AI servers Electronic Materials(ICT):Growth expected in ICT-infrastructure overall,mainly generative AI servers FA Solutions(in China market):Investment sentiment for the manufacturing industry bottoming outEnergyIn-vehicle:Even with slowing expansion of EV market,shift to electrification of vehicles expected to continue at a certain level,mainly with models in affordable price range Industrial/Consumer:Data centers:Growth expected to continue for data centers with effect of large-scale investments related to generative AI Consumer,power equipment:Upward trend for power equipment(e.g.electric assisted bicycles);sluggish demand persisting for consumer equipment Positive (YoY)Negative(YoY)FY3/26 Outlook of Changes in Demand by Segment(US tariff impact not factored in)13Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Apply additional tariff rates to assumed tariff-relevant transactions(reciprocal tariffs suspended for 90 days)As a general principle,address cost increases caused by additional tariffs through price revisionsImpact of US Tariffs Assumptions for estimating tariff impact Impact of US tariffs not yet factored into FY3/26 forecast;Continue to assess developments Aim to minimize impact of tariffs through measures from both short-term and medium-to long-term perspectivesFY3/25 US sales:Approx.1,570 bil.yenLifestyleConnectEnergyIndustryAutomotive,etc.Impact on adjusted operating profit estimated atless than 1%of consolidated salesNote:Sales composition ratio by segment is approximate14Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/26 Operating Profit Forecast Analysis(by Factor)-10.0 45.1-13.0-30.0-29.3 90.0-20.0-89.3426.5370.0 Adjusted OP:Expected to increase due to sales increase in real terms,price revisions,rationalization,etc.,despite deconsolidation impact OP:Expected to decrease due to restructuring expenses(yen:billions)FY3/25FY3/26Adjusted OP: 62.1(excl.deconsolidation impact)OP:-56.5Salesincrease/decreasein real termsFixed costsRaw materials,logisticsPrice revisions,rationalization,etc.Blue YonderEffect of exchange ratesDeconsolidationimpactOtherincome/loss Strategic investments:-20.0 Inflation(personnel expenses,energy costs):-35.0 Effect of restructuring: 35.0Raw materials:-3.0 ：Energy -:Lifestyle,Industry Logistics:-7.0 Price revisions: 5.0-:Energy :Lifestyle,Industry Rationalization,etc.: 40.1-:IndustryEnergy Automotive:-24.5 Projector business:-4.8 Restructuring expenses:-130.015Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Structural Reform in FY3/26-130.0 bil.yen(Recording in Other income/loss)Restructuring expenses(Recording in Other income/loss)Effect of restructuring(Recording in Adjusted OP)Lifestyle-62.0 13.0Connect-2.0 1.0Industry-16.0 6.0Energy0.00.0Other(including PHD*1 and PEX*2)-50.0 15.0Total-130.0 35.0 Personnel optimization Site integration/closure Streamlining&increasing efficiency of indirect functions,etc.Restructuring expenses(FY3/26)(yen:billions)*1:Panasonic Holdings Corporation*2:Panasonic Operational Excellence Co.,Ltd.16Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.SalesYoY(excl.FX)Adjusted OP(%to sales)YoYOther income/lossYoYOP(%to sales)YoYEBITDA*1(%to sales)YoYLifestyle3,535.099%(102%)176.05.0% 39.5-80.0-71.596.02.7%-32.02.2606.4%-25.0Connect1,200.091%(95%)77.06.4%-3.745.0 49.0122.010.2% 45.3197.016.4% 41.5Industry1,050.097%(102%)81.07.7% 26.7-16.0-4.965.06.2% 21.8130.012.4% 25.2Energy1,039.0119%(128%)168.016.2% 45.3-1.0 1.5167.016.1% 46.8251.024.2% 61.1Other/Eliminations&adjustments976.0-2.0-50.5-78.0-57.8-80.0-108.3-4.0-115.5Total7,800.092%(96%)500.06.4% 32.8-130.0-89.3370.04.7%-56.5800.010.3%-69.7Excl.Automotive*2-100%(104%)- 57.3-83.7-26.4-12.7FY3/26 Forecast by Segment*1:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets)*2:Except for businesses not subject to the share transfer(yen:billions)YoY%figures represent the year-on-year change relative to the previous years figures17Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/26 Sales Forecast Analysis by Segment 82.3-64.9 25.3 117.7 5.7-1.78,458.27,800.0-673.2-300.0Sales:Expected to increase YoY excluding Automotive,due to increased sales in Energy LifestyleIncreases:Increased sales of consumer electronics in Asia while Japan and China expected to stay broadly at the same level YoY,A2W in Europe and Cold Chain in North America turning to an increase,as well as electrical construction materials for overseas marketsConnectDecreases factoring in deconsolidation of projector business due to strategic capital partnership,despite increased sales of Process Automation with the increasing investment demand for AI servers and economic stimulus measures taken in ChinaIndustryIncreases:Increased sales of products(capacitors,multi-layer circuit board materials)related to ICT terminals and ICT infrastructure,etc.EnergyIn-vehicle:Increases with improved productivity at North America factory,while factoring in start of operations at Kansas and Wakayama factoriesIndustrial/Consumer:Increases with sales growth of energy storage systems for data centers and lithium-ion batteries for electric assisted bicyclesOther/Eliminations&adjustmentsEntertainment&Communication:Increases with increased sales of imaging solutionsHousing:Increases with initiatives to increase sales in remodeling,non-detached housing,and non-residential markets,as well as efforts for overseas marketsMajor increase/decrease factors(excluding effect of exchange rates)Excl.Automotive&effect of exchange rates: 315.0(104%)(yen:billions)LifestyleConnectIndustryIn-vehicleIndustrial/Consumer,othersEnergyEffect of exchange ratesEntertainment&CommunicationHousingHeadquarter-related&EliminationsOther/Eliminations&adjustmentsFY3/25FY3/26Projector business:-45.5Automotive-related 25.0 125.6YoY%figures represent the year-on-year change relative to the previous years figures18Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Adjusted OP:Expected to increase YoY due to increased profits(Lifestyle,Industry,Energy),despite decreased profit in ConnectLifestyleIncreases overall:Increased profit of overseas electrical construction materials(e.g.India)and showcases in North America(recovery of demand),A2W in Europe turning to an increase,improved profitability of room air conditioners,etc.,as well asincreased profit from consumer electronics(Japan,Asia,China)ConnectDecreases due to deconsolidation impact of projector business and additional strategic investment for Blue Yonder,despite increased sales of Process Automation IndustryIncreases:Increased sales of products(capacitors,multi-layer circuit board materials)related to ICT terminals and ICT infrastructure,price revisions,rationalization as well as fixed cost reductionsEnergyIn-vehicle:Increases:Increased sales and increased IRA tax credit resulting from increased sales volume,offsetting increased fixed costs related to start of operations at Kansas and Wakayama factories Industrial/Consumer:Increases:Increased sales,mainly of energy storage systems for data centers,despite increased fixed costs for new model development and production expansion 39.5-3.7 26.7 32.9 12.4-50.5-24.5 57.3(excl.Automotive)467.2500.0FY3/26 Adjusted Operating Profit Forecast Analysis by SegmentMajor increase/decrease factors Projector business:-4.8(yen:billions)FY3/25FY3/26LifestyleConnectIndustryIn-vehicleIndustrial/Consumer,othersOther/Eliminations&adjustmentsAutomotiveEnergy19Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.SalesYoYAdjusted OP(%to sales)YoYOther income/lossYoYOP(%to sales)YoYEBITDA*1(%to sales)YoYLiving Appliances and Solutions Company(LAS)885.0100%(102%)57.06.4% 7.9-6.0-8.151.05.8%-0.281.09.2% 0.5Heating&Ventilation A/C Company(HVAC)893.099%(103%)35.03.9% 18.8-13.0-8.822.02.5% 10.058.06.5% 11.2Cold Chain Solutions Company(CCS)420.0103%(104%)23.05.5% 2.9-2.0-2.121.05.0% 0.831.07.4% 0.4Electric Works Company(EW)1,087.0101%(103%)79.07.3% 2.3-22.0-17.757.05.2%-15.493.08.6%-10.6*1:Total amount of Operating profit,Depreciation(Tangible assets including property,plant and equipment/Right-of-use assets)and Amortization(Intangible assets)Lifestyle Segment:FY3/26 Forecast by Divisional Company(yen:billions)YoY%figures represent the year-on-year change relative to the previous years figures20Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.FY3/25 annual dividend at 48 yen;year-on-year increase of 13 yen (increased by 8 yen from the forecast announced on August 30,2024)Payout ratio:30.6%Annual Dividend Distribute stable and continuous dividends Achieve enhanced corporate value through business growth and profit increase48 yen(YoY increase of 13 yen)Payout ratio:30.6%Shareholder ReturnDisclaimer Regarding Forward-looking StatementsThis presentation includes forward-looking statements about Panasonic Holdings Corporation(the Company)and its Group companies(the Panasonic Group).To the extent that statements in this presentation do not relate to historical or current facts,they constitute forward-looking statements.These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it,and involve known and unknown risks,uncertainties and other factors.Such risks,uncertainties and other factors may cause the Panasonic Groups actual results,performance,achievements or financial position to be materially different from any future results,performance,achievements or financial position expressed or implied by these forward-looking statements.The Company undertakes no obligation to publicly update any forward-looking statements after the date of this presentation.Investors are advised to consult any further disclosures by the Company in its subsequent filings under the Financial Instrument and Exchange Act of Japan(the FIEA)and other publicly disclosed documents.The risks,uncertainties and other factors referred to above include,but are not limited to,economic conditions,particularly consumer spending and demands for corporate capital expenditures in the major markets including,but not limited to,the Americas,Europe,Japan,China and other Asian countries as well as changes of demands for a wide range of electronic products&parts from the industrial world and consumers in various regional markets;excessive currency rate fluctuations of the U.S.dollar,the euro,the Chinese yuan and other currencies against the yen having an impact on costs and prices of the Panasonic Groups products&services as well as certain other transactions that are denominated in these foreign currencies;increased costs of or limitations on raising funds,because of changes in the fund raising environment including interest rate fluctuations;current or future political or social trends in and outside Japan or changes in rules®ulations of international trade,commerce,R&Ds,production or sales having impact on the Panasonic Group or the business activities in its supply chain;introduction or enhancement of rules®ulations or abolition or reduction of tax benefit or subsidy related mainly to the environment issues including the climate change as well as to responsible supply chain(in terms of human rights,labor,health&safety global environmental conservation,information security,business ethics and others);increased costs resulting from a leakage of customers or confidential information from IT systems of the Panasonic Group or its supply chain or business suspension caused by unauthorized access,cyberattacks or any other form of malicious actions on the IT systems or from vulnerability of network-connected products;failure to secure or retain enough workforces to execute its business strategy;failure to retain its competitiveness in a wide range of products&services or in major countries®ions;failure to produce expected results in alliances with other companies or M&A(mergers&acquisitions)activities;failure to produce expected results in current or future business transformations of the Panasonic Group;occurrence or lengthening of disruptions in its supply chain or logistics for or price hikes in parts&materials;downward price pressure or decrease in demands for the products at a level that can be offset with efforts by the Company;failure to respond to future changes in the market needs with technological innovations or to timely utilize new technologies such as AI(Artificial Intelligence);increased costs or losses caused by occurrence of events such as compliance violations(including those related to human rights or labor issues)or serious health&safety accidents in workplaces;increased costs or losses resulting from any defects or quality frauds in products or services of the Panasonic Group;infringement by third parties of intellectual property owned by the Panasonic Group or restrictions on the use of intellectual property owned by third parties;administrative/criminal penalties or compensations/damages claims resulting from violations of laws and regulations;large-scale natural disasters,global pandemics of infectious diseases,terrorism or wars;fluctuations in market prices of securities and other financial assets in which the Panasonic Group has holdings,excessive fluctuations of valuation of non-financial assets,including property,plant and equipment,goodwill and deferred tax assets,or changes or tightening of accounting policies or rules;The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of the Companys securities reports under the FIEA and any other documents which are disclosed on its website.23Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Impact of US IRA Tax Credit(Section 45X)on Financial ResultsAmong monetization methods of“Deductible tax credit,”“Refundable tax credit(direct pay)”and“Transferable tax credit,”assuming to elect“Refundable tax credit(direct pay)”for FY3/25 and FY3/26Half of total tax credit amount recorded in adjusted OP,assuming effective use of credit with customers toward strengthening/expanding North America business,taking into consideration the aim of US IRA(reduce excessive inflation and promote energy policies in US)Amount recorded in profit*1:Recorded adjusted OP amount is based on IRA tax credit for FY3/25 sales results(38.1 GWh),FY3/26 sales forecast(46 GWh),and production costs of electrode active materials,taking into consideration the amount to be effectively used with customers,etc.IRA tax credit:-Battery cell:$35/kWh x sales volume-Electrode active material:10%of production costs Note:Production costs(e.g.labor,depreciation)of cathode/anode electrode materials,etc.produced in US*2:Recorded net profit amount is based on:“IRA tax credit”is a non-taxable income Deferred tax assets are recorded since the amount to be effectively used with customers is applicable for deferred tax accountingAdjusted OP(Energy Segment)Net profit attributable to Panasonic HoldingsCorporation stockholdersFY3/26Forecast110.0 bil.yen*1140.0 bil.yen*2FY3/25 Results94.0 bil.yen*1121.6 bil.yen*224Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Progress in EV Battery Production Capacity NevadaKansas1H of FY3/26Plan to finalize preparationfor mass-productionEnd of FY3/27Approx.30 GWhEnd of FY3/25 Approx.41 GWhContinuous improvement in production capabilityFY3/31Approx.44 GWh*End of FY3/2438-39 GWhOizumi(Gunma pref.)Wakayama(Wakayama pref.)End of FY3/24Approx.11 GWhFY3/28Convert production linesfrom 1865 to 2170 cells and new investmentsFY3/29New investments2170 cells2170 cells2170 cells Expand our capacity for strategic customer based on our achievementsas a leading company in North America and using IRA tax credit Suminoe,Kaizuka and Oizumi:Build up production capacity through collaboration with new customers in Japan Wakayama:Under final evaluation of 4680 cell supply for strategic customer1 lineadded4680 cellsAnnual Production CapacityFactoryStatusFY3/3114 GWh1865 cells2170 cells* 15%vs FY3/24End of FY3/26Several GWhNorth AmericaJapanSuminoe/Kaizuka(Osaka pref.)Plan to finalize preparation for mass-productionFY3/3116 GWh2Q of FY3/25Finalized preparationfor mass-productionOperation of additional equipment started in FY3/25 3QFurther capacity expansion with operational improvement and high-density technologyFinal phase of starting(In the process of final adjustments with strategic customer)Plan to reach full-capacity by the end of FY3/27Discussions with customers progressing smoothlyAccelerate conversion of its production from 1865 to 2170 cellsDiscussions with customer progressing smoothlyStarted personnel exchange for the construction of the new factoryOn standby for mass productionMass production set to start after final evaluation by strategic customerPlan to finalize preparation for mass-production25Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Future EV Battery Business in Japan(for New Customers)CustomerMazda Motor CorporationSUBARU CORPORATIONCollaborationSupply batteries in BEVs scheduled to be introduced by Mazda from 2027 onwards from Suminoe/KaizukaSupply batteries in BEVs which SUBARU plans to produce in the latter half of 2020s from Suminoe and new factory to be jointly established in GunmaProductCylindrical automotive lithium-ion batteriesCylindrical automotive lithium-ion batteriesProduction siteSuminoe/Kaizuka(Osaka pref.)Suminoe(Osaka pref.)Oizumi(Gunma pref.)Production capacity(2030)10 GWh/year4 GWh/year16 GWh/yearMass production startFY3/28FY3/28FY3/29Business planMETIs subsidy programSupport strengthening storage battery manufacturing supply chain(Ensuring stable supply)Aim Strengthen manufacturing supply chain to ensure stable supply,based on Japanese governments storage battery industry strategyContents Support CAPEX/R&D for storage batteries,parts,materials,or production equipment(Rate:one-third of CAPEX,half of R&D)Budget 495.8 bil.yen:2023 supplementary budget(265.8 bil.yen) 2024 budget(230.0 bil.yen)Total investment*Approx.83.3 bil.yen(For additional production capacity of 6.5 GWh)Approx.463.0 bil.yen(For new Gunma site of 16 GWh)Subsidy*Approx.28.3 bil.yen(maximum)Approx.156.4 bil.yen(maximum)*With Mazda:Includes investment/subsidy amount related to the supply other than this partnership(breakdown between both companies not disclosed)*With SUBARU:Does not include investment/subsidy amount for the 4 GWh to be produced at Suminoe(breakdown between both companies not disclosed)Total investment/subsidy amount in joint applicationScheme:Discussions in progress with each company Rebuild business foundation in Japan through strategic partnerships with Mazda Motor Corporation and SUBARU CORPORATION Both collaboration projects approved by Japans Ministry of Economy,Trade and Industry(METI)as part of its stable storage battery supply initiative(Details on press release announced September 6)Contribute to Japanese governments storage battery industry strategy:Plan to reach 150 GWh/year production capacity in Japan for storage battery and its materials26Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.20.0 29.7 40.0 200.0 bil.yenReference:Business Growth related to Generative AIHigh growth of generative AI-related businesses is expected to continueIndustryEnergyFY3/24FY3/26(e)1.3x(YoY)1.5x(YoY)FY3/25FY3/24FY3/26(e)FY3/25Reference:Briefings on Generative AI-related Businesses(Nov.27,2024)Links to:Presentation materials and Minutes(Previously disclosed)Products:Conductive polymer capacitors(Electronic Devices)Multi-layer circuit board materials(Electronic Materials)Usage:Generative AI servers Sales of products for generative AI servers Products:Energy storage systems(Industrial/Consumer)Usage:Data centers Total sales for data center(incl.generative AI-use)(yen:billions)27Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved. 6.4 3.5-2.4-4.7-6.6 5.8LifestyleReference:FY3/25 Segment Information*1:In real terms excluding the effect of exchange rates(yen:billions)FY3/25YoY(year-on-year)Sales3,584.2104%(102%)*1Adjusted operating profit(%to sales)136.2(3.8%) 2.4Other income/loss-8.3 5.8Operating profit(%to sales)127.9(3.6%) 8.2OverviewOther income/lossImpact of restructuring expenses in FY3/24,etc.Major increase/decrease factorsAdjusted OPLiving Appliancesand Solutions Company(LAS) :Increased sales of consumer electronics(Japan,Asia),rationalization-:Decreased demand in China,currency impact,price hikes in raw materialsHeating&VentilationA/C Company(HVAC) :Increased sales of room air conditioners,engineering business,device business,etc.-:Decreased demand of A2W in Europe(recovery trend in 2H),price hikes in raw materialsCold Chain Solutions Company(CCS) :Increased sales of showcases in Japan-:Trough of demand cycle in North AmericaElectric Works Company(EW) :Price revision effect for electrical construction materials(Japan),steady sales of solutions business,increased sales of electrical construction materials(e.g.India)-:Deteriorated conditions in some overseas marketsSales:Increased overall due to increased sales of electrical construction materials(e.g.Japan,India)and HVAC(e.g.room air conditioners mainly in Japan and Asia,environmental engineering,devices)OP:Increased overall due mainly to increased profit of consumer electronics(Japan,Asia)and HVAC(e.g.room air-conditioners),along with continued favorable sales of electrical construction materials(Japan)(yen:billions)(yen:billions)FY3/25FY3/24FY3/25FY3/24-6.0 73.3-3.2 25.7-24.23,456.53,584.2Living Appliances and SolutionsHeating&Ventilation A/CCold Chain SolutionsElectricWorksEffect of exchange ratesOthers*2Living Appliances and SolutionsHeating&Ventilation A/CCold Chain SolutionsElectricWorksOthers*2Effect of exchange ratesOther income/loss*2:Includes:Refrigeration devices,sales of other segment products,segment head office,eliminations,etc.119.7127.9Adjusted OP: 2.4OP: 8.2 62.1 6.228Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved. 26.4 29.4-13.6 3.2 28.9 12.4-1.9 10.1 16.7-4.5 3.6 6.9 3.7-0.4 1.7 0.3Reference:FY3/25 Segment Information*1:In real terms excluding the effect of exchange rates(yen:billions)FY3/25YoY(year-on-year)Sales1,333.2111%(107%)*1Adjusted operating profit(%to sales)81.4(6.1%) 37.8Other income/loss-4.2 0.3Operating profit(%to sales)77.2(5.8%) 38.1OverviewMajor increase/decrease factorsOther income/loss-ConnectSales:Increased with increased sales of Process Automation,capturingdemand for AI servers and by China market(EV,ICT),in addition to increased sales of Gemba Solutions,Avionics,Blue Yonder and Mobile SolutionsOP:Increased due to increased sales(Process Automation,Avionics,Gemba Solutions,Blue Yonder,Mobile Solutions)and improved profitability1,205.31,333.239.177.2OP: 38.1Adjusted OP: 37.8Adjusted OP Avionics :Increased sales of maintenance/repair services and connectivity(in-flight WiFi)Process Automation :Increased sales by capturing demand for AI servers and by China market(e.g.EV,ICT)MediaEntertainment-:Decreased sales due to deteriorated market conditions mainly in Europe Mobile Solutions :Increased sales of notebook PCs in line with discontinuation of Windows 10 support and improved profitability of products Gemba Solutions :Increased sales with steady orders of solution-type projects in JapanBlue Yonder(BY) :Increased sales with favorable sales of SaaSFY3/25FY3/24FY3/25FY3/24(yen:billions)BYOtherincome/lossMobileSolutionsEffect ofexchangeratesMediaEntertainmentOthersAvionicsProcessAutomationMediaEntertainmentMobileSolutionsGemba SolutionsGemba SolutionsOthersEffect ofexchangerates(yen:billions)ProcessAutomationAvionicsBY 43.129Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.ConnectReference:Blue Yonders KPIsSales/Adjusted OP(Stand alone)Recurring/SaaS sales ratioSaaS NRR(Net Revenue Retention)SaaSSaaSQ4FY3/25 Q1FY3/24 Q4100%Net revenue retention rate with existing customersQ2（M US$）SaaS137137Recurring sales ratioSaaS sales ratio145Q315272G%FY3/24 Q4Q2FY3/25 Q1Q3Q4FY3/25 Q1Q3FY3/24 Q4Q2-1 8 2 20 5AdjustedOP32672I4%YoY 4%pt154Q43301601015517771P3%YoY106YoY115Note:All figures except top-left chart are based on FY3/25(e)rates as of May 9,2024(USD:140 yen/Euro:150 yen)to exclude FX effectCompleted acquisition of One Network Enterprises,Inc.in August 2024,consolidation from FY3/25 2Q35518471R1%Recurring revenue business ratio in total revenue34517772Q3%SaaS ARR(Annual Recurring Revenue)（M US$）ARR indicates secured annualized revenue during the year starting next quarter Maintained double-digit growth in ARR with favorable SaaS booking667676736YoY114751FY3/24 Q4FY3/25 Q1Q2Q3Q4759 Steady growth of SaaS sales;maintained profitability of adjusted OP despite strategic investments and M&A costs SaaS ratio maintained above 50%due to increased SaaS sales NRR maintained YoY growth with steady upselling and cross-selling(YoY)30Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:FY3/26 Forecast of Blue YonderAdjusted EBITDA(a priority KPI)to be disclosed from FY3/26 as an indicator of profitability in real terms excluding investments,etc.Adjusted EBITDA expected to increase YoY by 1.9 bil.yen(excl.FX effect),despite increased strategic investments for security enhancement and migration to cloud（Excl.FX effect）FY3/26 forecastFY3/25ResultsYoYStand alone(Blue Yonder)Adjusted EBITDAABCD38.539.8-1.3EBITDAA11.320.8-9.5Strategic investments*1B-23.3-16.7-6.6Compensation(e.g.incentives/retention)C-2.6-3.5 0.9Restructuring expenses,non-recurring gain/lossD-1.31.2-2.5Adjusted OP(1)-2.05.3-7.3Panasonic Group consolidated-basisAmortization expenses related to acquisition,etc.(2)-29.9-26.8-3.1Adjusted OP(1) (2)-31.9-21.5-10.4（ 1.9）ConnectBreakdown of adjusted EBITDA(yen:billions)*1:Including the planned USD 200M R&D investment for three years from FY3/24 to FY3/26,as well as investments for security enhancement(e.g.,migration to the public cloud)and for synergy with the Panasonic Group31Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.-1.7 6.1 4.5 3.8-11.0 21.6-4.0 13.9-25.0 34.5Reference:FY3/25 Segment InformationOverviewMajor increase/decrease factors*1:Figures of PID(Panasonic Industry Co.,Ltd.)products exclude sales of other segment products(pressor),etc.*2:In real terms excluding the effect of exchange rates(yen:billions)FY3/25YoY(year-on-year)PIDProducts*1Sales1,083.6104%(101%)*2965.6Adjusted operating profit(%to sales)54.3(5.0%) 23.152.1(5.4%)Other income/loss-11.1-11.0-10.1Operating profit(%to sales)43.2(4.0%) 12.142.0(4.3%)IndustryOther income/loss Restructuring expenses 1,042.61,083.6(yen:billions)31.143.2OP: 12.1Adjusted OP: 23.1Adjusted OPElectronic Devices :-:Increased sales of products(capacitors)for information&communication applications such as generative AI serversDecreased sales(e.g.automotive/industrial-use relays),price hikes in raw materialsFA Solutions :Price revisions,rationalizationElectronic Materials :Increased sales of products(multi-layer circuit board materials)for information&communication applications such as generative AI servers(yen:billions)FY3/25FY3/24FY3/25FY3/24Sales:Increased due mainly to increased sales of products(capacitors,multi-layer circuit board materials)for information&communication applications such as generative AI servers,despite decreased sales of automotive/industrial-use relays with market slowdown mainly in EuropeOP:Increased with increased sales of products(capacitors,multi-layer circuit board materials)for information&communication applications such as generative AI servers,rationalization,and price revisions,despite decreased sales of automotive/industrial-use relays due to market slowdown as well as price hikes in raw materials*3:Sales of other segment products,etc.Effect of exchange ratesOther income/lossElectronic DevicesFASolutionsOthers*3Electronic MaterialsEffect of exchange ratesElectronic DevicesFASolutionsOthers*3Electronic Materials 10.432Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.1,266 1,339 1,342 1,233 1,395 1,397 1,437 1,350 5.57.58.75.08.18.77.55.40.05.010.015.020.025.030.005001000150020002500FY3/24 1Q2Q3Q4QFY3/25 1Q2Q3Q4QIndustryElectronic DevicesReference:Situation of Voluntarily Disclosed Businesses(FY3/25)CapacitorsIn FY3/25,sales increased and profit decreased(excluding effect of exchange rates):Sales increased with favorablesales of capacitors for ICT-related applications(e.g.generative AI servers),despite decreased sales of automotive-use and industrial-use relays caused by market slowdown mainly in Europe as well as impact of raw material price hikesRecent BB ratio on a recovery trend,despite Q4 sales decreasing QoQ due to seasonal factors and market slowdownIn FY3/26,aim for a YoY profit increase with increased sales of ICT-related products,along with fixed cost reduction and price revisionsOthers25%（0%）ICT Terminals10%（0%）ICTInfrastructure15%（ 5%）AutomotiveCASE50%（-5%）Sales&adjusted OPM trendFY3/25 sales composition by region*Adjusted OP(%)Sales(100 mil.yen)Relays(%):YoY sales composition ratio*Estimated by PID33Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.0100200300400500600700Reference:Situation of Voluntarily Disclosed Businesses(FY3/25)IndustryElectronic Devices:BB ratio*of capacitorsSalesOrder receivedOrder backlogFY3/22 4Q FY3/23 1Q 2Q 3Q 4Q FY3/24 1Q 2Q 3Q 4Q FY3/25 1Q 2Q 3Q4Q BB ratio1.250.880.810.780.891.020.960.911.081.181.040.951.10The BB ratio recovered to 1.10 in Q4.Orders mainly for general servers and PCs increased.Orders for automotive-use from Japanese companies remain steady,while there is a slight decline in orders from Europe and the US(100 million yen)*BB ratio:book-to-bill ratio 34Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Situation of Voluntarily Disclosed Businesses(FY3/25)IndustryFASolutionsJapan22(-7)Americas 3%(-1%)Europe 6(-1%)Asia13%（0%）China56%( 9%)*3C:Consumer,Computer,Communication Sales in FY3/25:Decreased YoY due to market slowdown(e.g.Japan,Europe),and seasonal factors in 4Q,despite steady market conditions for 3C*-related market in China Adjusted OP in FY3/25:Increased YoY with price revisions and rationalization efforts,despite 4Q AOP decreasing QoQ due to market slowdown For FY3/26:Considering the uncertainty in Chinese market,steadily pursue opportunities to capture demands from other regions and continue management structure enhancement through fixed-cost reduction and rationalization,etc.Sales&adjusted OPM trendFY3/25 sales composition by region*Adjusted OP(%)Sales(100 mil.yen)(%):YoY sales composition ratio*Estimated by PID287271243248293260252235-4.2-5.4-10.2-9.54.20.30.0-8.3-20.0-10.00.010.020.030.040.0050100150200250300350FY3/24 1Q2Q3Q4QFY3/25 1Q2Q3Q4Q35Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Situation of Voluntarily Disclosed Businesses(FY3/25)Industry6.6%Electronic MaterialsAutomotive CASE27(-2%)Information&communication(ICT)infrastructure42%( 11%)Others29%(-8)(%):YoY sales composition ratio*Estimated by PIDAdjusted OP(%)Sales(100 mil.yen)FY3/25 sales composition by region*FY3/25:Both sales and profit increased due to growing demand for generative AI servers as well as general-purpose servers and peripheral devices;efforts in rationalization,price revisions and material rationalization to offset price hikes in raw materialsFY3/26:Aim for both sales and profit increase with further sales expansion of products for ICT infrastructure(mainly generative AI servers)3614024133914554204494412.88.46.65.811.97.37.76.90.02.04.06.08.010.012.014.016.018.020.0050100150200250300350400450500FY3/24 1Q2Q3Q4QFY3/25 1Q2Q3Q4QSales&adjusted OPM trendICT terminals2%（-1%）36Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.-149.1 71.5-4.0 38.9-8.1 23.9 0.4 11.9 3.3EnergyReference:FY3/25 Segment Information(yen:billions)FY3/25YoY(year-on-year)Sales873.295%(91%)*1Adjusted operating profit(%to sales)122.7(14.0%) 28.1Other income/loss-2.5 3.3Operating profit(%to sales)120.2(13.8%) 31.4*1:In real terms excluding the effect of exchange rates OverviewOther income/lossRebound increase from recording quality-related expenses of batteries for electric assisted bicycles in FY3/24Sales:In-vehicle:Decreased with price revisions reflecting lower raw material prices and decreased demand at Japan factory,despite increased sales volume at North America factory Industrial/Consumer:Significant growth of energy storage systems for data centersOP:In-vehicle:Decreased due to increased upfront costs for ramp up of Kansas and Wakayama factories,despite improved productivity at Nevada factory in North America,increased IRA tax credit,and decreased provision for expenses related to quality issues Industrial/Consumer:Increased due to increased sales of energy storage systems for data centers915.9873.288.8120.2OP: 31.4Major increase/decrease factorsAdjusted OPIn-vehicle :Increased sales due to improved productivity at Nevada factory in North America Increased IRA tax credit of production costs for electrode active materials Decreased provision for quality-related expenses-:Increased ramp-up costs for Kansas and Wakayama factoriesIndustrial/Consumer :Increased sales of energy storage systems for data centers,lower raw material prices and material rationalization-:Increased costs for new model development and production expansionFY3/25FY3/24FY3/25FY3/24Segment head office,eliminations,etc.(yen:billions)Price revisions for lower raw materials:-80.3In-vehicleIndustrial/ConsumerEffect of exchange ratesIn-vehicleIndustrial/ConsumerSegment head office,eliminations,etc.Effect of exchangeratesOther income/loss(yen:billions)Adjusted OP: 28.137Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:Medium-term Management Indicators:KGINote:Initial target figures from presentation materials of Group CEO Briefing(April 1,2022)and IR Day(June 1&2,2022)Cumulative Operating CF(FY3/23 FY3/25)ROIC(FY3/25)Initial TargetResultsInitial TargetResultsLifestyle660.0522.310.0%or more6.0%Connect260.0278.14.6%2.8%Industry390.0 or more323.120.0%6.0%Energy330.0422.912.0.9%ROE(FY3/25)10.0%or more7.9%TargetCumulative Operating CF(FY3/23-FY3/25)2.0 trillion yenResults2.2 trillion yenCumulative OP(FY3/23-FY3/25)1.5 trillion yen1.1 trillion yenKGIKGI(Operating Companies)(yen:billions)38Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:FY3/25 List of Voluntarily Disclosed BusinessesLiving Appliances and Solutions Company(LAS)車載産業民生他Cold Chain Solutions Company(CCS)Heating&Ventilation A/C Company(HVAC)Electric Works Company(EW)China and Northeast Asia Company(CNA)OthersLifestyle(Panasonic Corporation)Businesses with Sales Disclosed(For underlined businesses,Adjusted OP also disclosed in Supplemental Financial Data)Major Business Divisions,etc.Kitchen Appliances Laundry Systems and Vacuum Cleaner Beauty and Personal Care-Sales disclosed by region(Europe,Japan,China&Northeast Asia)Lighting Electrical Construction Materials&Living EnergyAutomotive(Panasonic Automotive Systems Co.,Ltd.)Connect(Panasonic Connect Co.,Ltd.)Industry(Panasonic Industry Co.,Ltd.)Energy(Panasonic Energy Co.,Ltd.)OtherEliminations&adjustments:Kitchen Appliances BD:Laundry Systems and Vacuum Cleaner BD:Beauty and Personal Care BDMajor Business Divisions:HVAC BD Europe,Commercial Equipment Solutions BD,Residential System Equipment BD:Hussmann Corporation,Cold Chain BD:Lighting BD:Electrical Construction Materials&Living Energy BD:Sales of other segment products,segment head office,eliminations,etc.:Smart Life Appliances BD,Building and Housing Solutions BD,Taiwan BD Avionics Process Automation Media Entertainment Mobile Solutions Gemba Solutions Blue Yonder Others :Panasonic Avionics Corporation,Avionics BU:Circuit Formation Process BD,Welding Process BD:Media Entertainment BD :Mobile Solutions BD:Gemba Solutions Company:Blue Yonder Holding,Inc.:Other businesses,eliminations,etc.Electronic Devices FA Solutions Electronic Materials Others:Electromechanical Control BD,Industrial Devices BD,Device Solutions BD:Industrial Devices BD:Electronic Materials BD:Electromechanical Control BD,Sales of other segment products,eliminations,etc.In-vehicle Industrial/Consumer Others:Mobility Energy BD:Energy Device BD,Energy Solutions BD:Segment head office,eliminations,etc.Entertainment&Communication Housing Eliminations of intersegment transactions,adjustments of profits and losses not attributable to any segments,and adjustments of consolidations,etc.:Panasonic Entertainment&Communication Co.,Ltd.:Panasonic Housing Solutions Co.,Ltd.Note 1:Sales and profit of CNA(except certain businesses)are also included in LAS,HVAC,and EWNote 2:Media Entertainment BDs imaging business transferred from Panasonic Connect Co.,Ltd.to Panasonic Entertainment&Communication Co.,Ltd.as of April 1,2024 As a result of the share transfer of Panasonic Automotive Systems Co.,Ltd.(PAS)in Dec.2024,PAS became a company under the equity method and is excluded from the scope of consolidation.Accordingly,figures of businesses not subject to the transfer are recorded in“Other/Eliminations&adjustments.”(Figures for both FY3/25 and FY3/24 are reclassified in conformity with the changes).39Fiscal 2025 Financial Results/Fiscal 2026 Financial Forecast 2025 Panasonic Holdings Corporation.All Rights Reserved.Reference:FY3/26 List of Voluntarily Disclosed BusinessesBusinesses with Sales Disclosed(For underlined businesses,Adjusted OP also disclosed in Supplemental Financial Data)Major Business Divisions,etc.Living Appliances and Solutions Company(LAS)Industry(Panasonic Industry Co.,Ltd.)Connect(Panasonic Connect Co.,Ltd.)Energy(Panasonic Energy Co.,Ltd.)OtherEliminations&adjustmentsEntertainment&Communication HousingEliminations of intersegment transactions,adjustments of profits and losses not attributable to any segments,and adjustments of consolidations,etc.AvionicsProcess AutomationMobile SolutionsGemba SolutionsBlue YonderOthersElectronic Devices FA Solutions Electronic MaterialsOthersIn-vehicleIndustrial/ConsumerOthers:Panasonic Avionics Corporation,Avionics BU:Circuit Formation Process BD,Welding Process BD :Mobile Solutions BD:Gemba Solutions Company:Blue Yonder Holding,Inc.:Other businesses,eliminations,etc.:Electromechanical Control BD,Industrial Devices BD,Device Solutions BD:Industrial Devices BD:Electronic Materials BD:Electromechanical Control BD,Sales of other segment products,eliminations,etc.:Mobility Energy BD:Energy Device BD,Energy Solutions BD:Segment head office,eliminations,etc.:Panasonic Entertainment&Communication Co.,Ltd.:Panasonic Housing Solutions Co.,Ltd.Kitchen AppliancesLaundry Systems and Vacuum CleanerBeauty and Personal CareCold Chain Solutions Company(CCS)Heating&Ventilation A/C Company(HVAC)Sales disclosed by region(Europe,Japan,China&Northeast Asia)Major Business Divisions:HVAC BD Europe,Commercial Equipment Solutions BD,Residential System Equipment BD Electric Works Company(EW)LightingElectrical Construction Materials&Living Energy-:Kitchen Appliances BD:Laundry Systems and Vacuum Cleaner BD:Beauty and Personal Care BD:Hussmann Corporation,Cold Chain BD:Lighting BD:Electrical Construction Materials&Living Energy BDOthers:Sales of other segment products,segment head office,eliminations,etc.-Lifestyle(Panasonic Corporation)
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Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 _FORM 10-K(Mar.
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-KAnnual report pursuant to section 13 or 15(d)of the Securities Exchange Act of 1934.For the fiscal year ended April 25,2025.Transition report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934.For the transition period from _ to _Commission File No.1-36820Medtronic plc(Exact name of registrant as specified in its charter)Ireland 98-1183488(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)Building Two,Parkmore Business Park WestGalway,Ireland(Address of principal executive offices) 353 1 438-1700(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredOrdinary shares,par value$0.0001 per shareMDTNew York Stock Exchange0.250%Senior Notes due 2025MDT/25New York Stock Exchange0.000%Senior Notes due 2025MDT/25ANew York Stock Exchange2.625%Senior Notes due 2025MDT/25BNew York Stock Exchange1.125%Senior Notes due 2027MDT/27New York Stock Exchange0.375%Senior Notes due 2028MDT/28New York Stock Exchange3.000%Senior Notes due 2028MDT/28ANew York Stock Exchange3.650%Senior Notes due 2029MDT/29New York Stock Exchange1.625%Senior Notes due 2031MDT/31New York Stock Exchange1.000%Senior Notes due 2031MDT/31ANew York Stock Exchange3.125%Senior Notes due 2031MDT/31BNew York Stock Exchange0.750%Senior Notes due 2032MDT/32New York Stock Exchange3.375%Senior Notes due 2034MDT/34New York Stock Exchange3.875%Senior Notes due 2036MDT/36New York Stock Exchange2.250%Senior Notes due 2039MDT/39ANew York Stock Exchange1.500%Senior Notes due 2039MDT/39BNew York Stock Exchange1.375%Senior Notes due 2040MDT/40ANew York Stock Exchange4.150%Senior Notes due 2043MDT/43ANew York Stock Exchange1.750%Senior Notes due 2049MDT/49New York Stock Exchange1.625%Senior Notes due 2050MDT/50New York Stock Exchange4.150%Senior Notes due 2053MDT/53New York Stock ExchangeSecurities registered pursuant to section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No 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 No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or Section 15(d)of the Securities Exchange Act of 1934 during thepreceding 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.Yes No 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).Yes No 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 growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has led a report on and attestation to its managements assessment of the effectiveness of its internal control over financialreporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting rm 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 thecorrection of an error to previously issued financial statements.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 theregistrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Aggregate market value of voting and non-voting common equity of Medtronic plc held by non-affiliates of the registrant as of October 25,2024,based on the closing price of$90.59 as reported on the New York Stock Exchange:approximately$116.2 billion.Number of Ordinary Shares outstanding on June 17,2025:1,281,264,703DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Proxy Statement for its 2025 Annual General Meeting are incorporated by reference into Part III hereof.TABLE OF CONTENTSItem Description Page PART I 1.Business 31A.Risk Factors 131B.Unresolved Staff Comments 251C.Cybersecurity252.Properties 263.Legal Proceedings 264.Mine Safety Disclosures 26 PART II 5.Market for Medtronics Common Equity,Related Shareholder Matters,and Issuer Purchases of Equity Securities 276.(Reserved)287.Managements Discussion and Analysis of Financial Condition and Results of Operations 297A.Quantitative and Qualitative Disclosures About Market Risk 488.Financial Statements and Supplementary Data 49Report of Independent Registered Public Accounting Firm(PCAOB ID 238)49Consolidated Financial Statements51Notes to Consolidated Financial Statements569.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 1069A.Controls and Procedures 1069B.Other Information 1069C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspection106 PART III 10.Directors,Executive Officers,and Corporate Governance 10711.Executive Compensation 10812.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 10813.Certain Relationships and Related Transactions,and Director Independence 10814.Principal Accounting Fees and Services 108 PART IV 15.Exhibits and Financial Statement Schedules 10916.Form 10-K Summary116Signatures117Table of ContentCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K,and other written reports of Medtronic plc,organized under the laws of Ireland(together with its consolidated subsidiaries,Medtronic,the Company,or we,us,or our),and oral statements made by or with the approval of one of the Companys executive officers from time to time,may include“forward-looking”statements.All statements other than statements of historical fact contained in this Annual Report on Form 10-K,includingstatements regarding our future results of operations and financial position,business strategy and plans,objectives of management for future operations andcurrent expectations or forecasts of future results,are forward-looking statements.These statements involve known and unknown risks,uncertainties,andother important factors that may cause our actual results,performance,or achievements to be materially different from any future results,performance,orachievements expressed or implied by the forward-looking statements.Our forward-looking statements may include statements related to:our growth andgrowth strategies;developments in the markets for our products,therapies and services;financial results;product development launches and effectiveness;research and development strategy;regulatory approvals;competitive strengths;the potential or anticipated direct or indirect impact of public health crises,geopolitical conflicts,or changing governmental executive actions and regulations(including relating to global trade policies,enforcement priorities andcompliance requirements),on our business,results of operations and/or financial condition;restructuring and cost-saving initiatives;intellectual propertyrights;litigation and tax matters;governmental proceedings and investigations;mergers,acquisitions,and divestitures;market acceptance of our products,therapies and services;accounting estimates;financing activities;ongoing contractual obligations;working capital adequacy;the value of our investments;oureffective tax rate;our expected returns to shareholders;and sales efforts.In some cases,such statements may be identified by the use of terminology such as“anticipate,”“believe,”“could,”“estimate,”“expect,”“forecast,”“intend,”“looking ahead,”“may,”“plan,”“possible,”“potential,”“project,”“should,”“will,”and similar words or expressions.Forward-looking statements in this Annual Report include,but are not limited to,statements regarding:our ability todrive long-term shareholder value;development and future launches of products and continued or future acceptance of products,therapies and services in oursegments;expected timing for completion of research studies relating to our products;integration of new technologies,including artificial intelligence(AI)and data analytics,into our products,therapies and services;market positioning and performance of our products,including stabilization of certain productmarkets;divestitures and the potential benefits thereof;the costs and benefits of integrating previous acquisitions;anticipated timing for United States(U.S.)Food and Drug Administration(U.S.FDA)and non-U.S.regulatory approval of new products;increased presence in new markets,including markets outsidethe U.S.;changes in the market and our market share;our ability to meet growing demand for our existing products;acquisitions and investment initiatives,including the timing of regulatory approvals as well as integration of acquired companies into our operations;the resolution of tax matters;the effectiveness ofour development activities in reducing patient care costs and hospital stay lengths;our approach towards cost containment;our expectations regarding thepotential impact of changing governmental executive actions and regulations(including relating to global trade policies,enforcement priorities andcompliance requirements),on our business;our expectations regarding healthcare costs,including potential changes to reimbursement policies and pricingpressures;our expectations regarding changes to patient standards of care;our ability to identify and maintain successful business partnerships;the eliminationof certain positions or costs related to restructuring initiatives;outcomes in our litigation matters and governmental proceedings and investigations;generaleconomic conditions;the adequacy of available working capital and our working capital needs;our payment of dividends and redemption of shares;thecontinued strength of our balance sheet and liquidity;our accounts receivable exposure;our human capital management with respect to our global workforce;and the potential impact of our compliance with governmental regulations and accounting guidance.We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believemay affect our business,results of operations,financial condition,and/or cash flows.These forward-looking statements speak only as of the date of thisAnnual Report on Form 10-K and are subject to a number of risks,uncertainties and assumptions described in the“Risk Factors”section and elsewhere in ourAnnual Report on Form 10-K.Because forward-looking statements are inherently subject to risks and uncertainties,some of which cannot be predicted orquantified,you should not rely on these forward-looking statements as predictions of future events.One must carefully consider forward-looking statementsand understand that such forward-looking statements are inherently subject to risks and uncertainties,some of which cannot be predicted or quantified,andinvolve a variety of risks and uncertainties,known and unknown,including,among others,those discussed in the sections entitled“Government Regulation”within“Item 1.Business”and“Item 1A.Risk Factors”in our Annual Report on Form 10-K,as well as those related to:competition in the medical device industry,delays in regulatory approvals,reduction or interruption in our supply,failure to complete or achieve the intended benefits of acquisitions or divestitures,adverse regulatory action,laws and governmental regulations,litigation results,quality problems,healthcare policy changes,1Table of Contentpublic health crises,cybersecurity and privacy incidents,international operations,including the impact of armed conflicts,self-insurance,commercial insurance,changes in applicable tax rates,positions taken by taxing authorities,decreasing selling prices and pricing pressure,liquidity shortfalls,fluctuations in currency exchange rates,inflation,ordisruption of our current plans and operations.Consequently,no forward-looking statement may be guaranteed,and actual results may vary materially from those projected in the forward-lookingstatements.We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-lookingstatements and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-lookingstatements.While we may elect to update these forward-looking statements at some point in the future,whether as a result of any new information,futureevents,or otherwise,we have no current intention of doing so except to the extent required by applicable law.2Table of ContentPART IItem 1.BusinessMedtronic plc,headquartered in Galway,Ireland,is the leading global healthcare technology company.Medtronic was founded in 1949 and today serveshealthcare systems,physicians,clinicians,and patients in more than 150 countries worldwide.We remain committed to a mission written by our founder in1960 that directs us“to contribute to human welfare by the application of biomedical engineering in the research,design,manufacture,and sale of products toalleviate pain,restore health,and extend life.”Our Mission to alleviate pain,restore health,and extend life empowers us to engineer the extraordinary and deliver better outcomes for our world.Weare a company of dedication,honesty,integrity,and service.Building on this strong foundation,we are embracing our role as a healthcare technology leaderand evolving our business strategy in three key areas:Accelerate innovation-driven growth:The combination of our attractive end markets,recent product launches and robust pipeline is expected toenable continued strong revenue growth.We aim to bring inventive and disruptive technology to large healthcare opportunities which enables us tobetter meet patient needs.Patients around the world deserve access to our life-saving products,and we are driven to use our local presence and scaleto increase the adoption of our products and services in markets around the globe.Deliver superior outcomes and better experiences for patients and providers:We listen to our patients and customers to better understand thechallenges they face.From the patient journey,to creating agile partnerships that produce novel solutions,to making it easier for our customers todeploy our therapies what we do is anchored in deep insight,and creates simpler,superior experiences.Turn data,artificial intelligence(AI),and automation into action:We are confident in our ability to maximize new technology,AI,and data andanalytics to tailor therapies in real-time,facilitating remote monitoring and care delivery that conveniently manages conditions,and creates newstandards of care.We have four reportable segments that primarily develop,manufacture,distribute,and sell device-based medical therapies and services:the CardiovascularPortfolio,the Neuroscience Portfolio,the Medical Surgical Portfolio,and the Diabetes Operating Unit.For more information regarding our segments,pleasesee Note 19 to the consolidated financial statements in Item 8.Financial Statements and Supplementary Data in this Annual Report on Form 10-K.3Table of ContentCARDIOVASCULAR PORTFOLIOThe Cardiovascular Portfolio is made up of the Cardiac Rhythm&Heart Failure,Structural Heart&Aortic,and Coronary&Peripheral Vascular divisions.The primary medical specialists who use our Cardiovascular products include electrophysiologists,implanting cardiologists,heart failure specialists,cardiovascular,cardiothoracic,and vascular surgeons,and interventional cardiologists and radiologists.Cardiac Rhythm&Heart FailureOur Cardiac Rhythm&Heart Failure division includes the following Operating Units:Cardiac Rhythm Management and Cardiac Ablation Solutions.Thedivision develops,manufactures,and markets products for the diagnosis,treatment,and management of heart rhythm disorders and heart failure.Our productsinclude implantable devices,leads and delivery systems,products for the treatment of atrial fibrillation(AF),products designed to reduce surgical siteinfections,and information systems for the management of patients with Cardiac Rhythm&Heart Failure devices.Principal products and services offeredinclude:Implantable cardiac pacemakers including the Azure MRI SureScan,Adapta,Attesta MRI SureScan,and the Micra transcatheter pacing system.Azure pacemakers feature Medtronic-exclusive BlueSync technology,which enables automatic,secure wireless remote monitoring with increaseddevice longevity.The 3830 lead,with His-bundle and left bundle branch capabilities,effectively covers all current forms of conduction systempacing and sensing.The Micra transcatheter pacing system,which is leadless and does not have a subcutaneous device pocket like a conventionalpacemaker,includes the Micra VR and the Micra AV device families.Both pacemakers treat patients with atrioventricular block.Implantable cardioverter defibrillators(ICDs),including the Aurora Extravascular-ICD,Visia AF MRI SureScan,Evera MRI SureScan,Primo MRI,and the Cobalt and Crome family of BlueSync-enabled ICDs,as well as defibrillator leads,including the Sprint Quattro Secure lead.Implantable cardiac resynchronization therapy devices(CRT-Ds and CRT-Ps)including the Claria/Amplia/Compia family of MRI Quad CRT-DSureScan systems and the Cobalt and Crome portfolio of BlueSync-enabled CRT-Ds,as well as the Percepta/Serena/Solara family of MRI QuadCRT-P SureScan systems.Cardiac ablation products include a full suite of electrophysiology solutions to treat patients with arrhythmias,including paroxysmal and persistentAF.The portfolio includes the Arctic Front Advanced Cardiac Cryoblation System,PulseSelect single shot Pulsed Field Ablation catheter,theSphere-9 focal catheter,providing high density mapping capabilities combined with dual radio frequency and pulsed field energies to deliver ablationlesions,and Affera Mapping and Navigation System with Prism-1 software aimed at integrating clinical information to improve patient outcomes.Insertable cardiac monitoring systems,including the Reveal LINQ and LINQ II.These devices are for patients who experience transient symptomssuch as dizziness,palpitation,syncope(fainting)and chest pain,as well as Cryptogenic Stroke patients,which may indicate a cardiac arrhythmia thatrequires long-term monitoring or ongoing management.Both portfolio devices have unmatched accuracy and a streamlined workflow withAccuRhythm AI algorithms to reduce clinic workload and data burden.LINQ II,the premium portfolio device,offers extended device longevity andremote programming capabilities.TYRX products,including the Cardiac and Neuro Absorbable Antibacterial Envelopes,which are designed to stabilize electronic implantable devicesand help prevent infection associated with implantable pacemakers and defibrillators.Remote monitoring services and patient-centered software to enable efficient care coordination as well as services related to hospital operationalefficiency.Medtronic stopped the distribution and sale of the HVAD System in June 2021.We continue a support program for patients with HVAD devices,andfor caregivers and healthcare professionals who participate in their care.4Table of ContentStructural Heart&AorticOur Structural Heart&Aortic division includes the following Operating Units:Structural Heart&Aortic and Cardiac Surgery.The division includes therapiesto treat heart valve disorders and aortic disease.Our devices include products for the repair and replacement of heart valves,perfusion systems,positioningand stabilization systems for beating heart revascularization surgery,surgical ablation products,and a comprehensive line of products and therapies to treataortic disease,such as aneurysms,dissections,and transections.Principal products offered include:CoreValve family of aortic valves,including the Evolut PRO,Evolut PRO ,Evolut FX,and Evolut FX TAVR systems for transcatheter aortic valvereplacement.Surgical valve replacement and repair products for damaged or diseased heart valves,including both tissue and mechanical valves;blood-handlingproducts that form a circulatory support system to maintain and monitor blood circulation and coagulation status,oxygen supply,and bodytemperature during arrested heart surgery;and surgical ablation systems and positioning and stabilization technologies.Endovascular stent grafts and accessories,including the Endurant II Stent Graft System for the treatment of abdominal aortic aneurysms,the ValiantCaptivia Thoracic Stent Graft System for thoracic endovascular aortic repair procedures,and the Heli-FX EndoAnchor System.Transcatheter Pulmonary Valves,including Harmony Transcatheter Pulmonary Valve(TPV)and Delivery Catheter System and MelodyTPV/Ensemble II Delivery System.Coronary&Peripheral VascularOur Coronary&Peripheral Vascular division includes the following Operating Units:Coronary&Renal Denervation and Peripheral Vascular Health.Thedivision is comprised of a comprehensive line of products and therapies to treat coronary artery disease as well as peripheral vascular disease and venousdisease.Our products include coronary stents and related delivery systems,including a broad line of balloon angioplasty catheters,guide catheters,guidewires,diagnostic catheters,and accessories,peripheral drug coated balloons,stent and angioplasty systems,carotid embolic protection systems for thetreatment of vascular disease outside the heart,and products for superficial and deep venous disease.Principal products offered include:Percutaneous Coronary Intervention products including our Onyx Frontier and Resolute Onyx drug-eluting stents,Euphora balloons,and Launcherguide catheters.Products to treat hypertension including our Symplicity Spyral Renal Denervation(RDN)system.Percutaneous angioplasty balloons including the IN.PACT family of drug-coated balloons,vascular stents including the Abre venous stent,directional atherectomy products including the HawkOne directional atherectomy system,and other procedure support tools.Products to treat superficial venous diseases in the lower extremities including the ClosureFast radiofrequency ablation system and the VenaSealClosure System.NEUROSCIENCE PORTFOLIOThe Neuroscience Portfolio is made up of the Cranial&Spinal Technologies,Specialty Therapies,and Neuromodulation divisions.The primary medicalspecialists who use the products of this group include spinal surgeons,neurosurgeons,neurologists,pain management specialists,anesthesiologists,orthopedicsurgeons,urologists,urogynecologists,interventional radiologists,and ear,nose,and throat specialists.5Table of ContentCranial&Spinal TechnologiesOur Cranial&Spinal Technologies division and Operating Unit develops,manufactures,and markets an integrated portfolio of devices and therapiesfor surgical technologies designed to improve the precision and workflow of neurological procedures,and a comprehensive line of medical devices andimplants used in the treatment of the spine and musculoskeletal system.The division also provides biologic solutions for the orthopedic markets and offersunique and highly differentiated imaging,navigation,power instruments,and robotic guidance systems used in spine and cranial procedures.Principalproducts and services offered include:Neurosurgery products,including platform technologies,implant therapies,and advanced energy products through the AiBLE spine technologyecosystem.This includes our StealthStation S8 surgical navigation system,Stealth Autoguide cranial robotic guidance platform,O-arm ImagingSystem,Mazor robotic guidance systems used in robot-assisted spine procedures,UNiD adaptive spine intelligence AI-driven technology for surgicalplanning and personalized spinal implants,and our Midas Rex surgical drills,including our MR8 high-speed drill system.Products to treat a variety of conditions affecting the spine,including degenerative disc disease,spinal deformity,spinal tumors,fractures of thespine,and stenosis.These products include our CATALYFT PL expandable interbody spacers,CD Horizon ModuLeX spinal system,and T2STRATOSPHERE expandable corpectomy system.These products can also include titanium interbody implants and surface technologies,such asour Adaptix interbody system and incorporated Titan interbody fusion device with nanoLOCK technology.Products that facilitate less invasive thoracolumbar surgeries,including the CD Horizon Solera Voyager percutaneous fixation system and variousretractor systems to access the spine through smaller incisions.Products to treat conditions in the cervical region of the spine,including the ZEVO anterior cervical plate system,the Infinity Occipitocervical-UpperThoracic(OCT)System,and Prestige LP cervical discs.Biologic solutions products,including our Infuse Bone Graft(InductOs in the European Union(E.U.),which contains a recombinant human bonemorphogenetic protein-2,rhBMP-2,for certain spinal,trauma,and oral maxillofacial applications.Demineralized bone matrix products,including Magnifuse,GRAFTON/GRAFTON PLUS,and the Mastergraft family of synthetic bone graftproducts Matrix,Putty,Strip,and Granules.Specialty TherapiesOur Specialty Therapies division includes the following Operating Units:Neurovascular;Ear,Nose,and Throat(ENT);and Pelvic Health.The divisiondevelops,manufactures,and markets products and therapies to treat patients afflicted with acute ischemic and hemorrhagic stroke,ENT diseases,and patientssuffering from overactive bladder,and(non-obstructive)urinary retention.Principal products and services offered include:Neurovascular products to treat diseases of the vasculature in and around the brain.This includes coils,neurovascular stent retrievers,and flowdiversion products,as well as access and delivery products to support procedures.Products also include the Pipeline Flex and Pipeline Vantageembolization devices with Shield Technology,endovascular treatments for large or giant wide-necked brain aneurysms,the portfolio of Solitairerevascularization devices for treatment of acute ischemic stroke,the Riptide aspiration system,the Onyx Liquid Embolic System,and a portfolio ofassociated access catheters including our React aspiration catheters also for the treatment of acute ischemic stroke.ENT products,including the Straightshot M5 microdebrider handpiece,the Integrated Power Console(IPC)system,NIM Vital nerve monitoringsystems,Propel and Sinuva Sinus Implants,StealthStation ENT and StealthStation FlexENT navigation systems,as well as products for hearingrestoration.Pelvic health products,including our InterStim X and InterStim II recharge-free neurostimulators,InterStim Micro rechargeable neurostimulators,and SureScan MRI leads.Our NURO System delivers Percutaneous Tibial Neuromodulation therapy to treat overactive bladder,(non-obtrusive)urinary retention,and chronic fecal incontinence.NeuromodulationOur Neuromodulation division and Operating Unit develops,manufactures,and markets spinal cord stimulation and brain modulation systems,implantabledrug infusion systems for chronic pain,as well as interventional products.Principal products and services offered include:Spinal cord stimulation products,including rechargeable and recharge-free devices and a large selection of leads used to treat chronic back and/orlimb pain and chronic pain resulting from diabetic peripheral neuropathy.This includes the Inceptiv spinal cord stimulation system which offers aclosed-loop feature that senses biological signals along the spinal cord and automatically adjusts stimulation in real time,Intellis(rechargeable)andVanta(recharge-free)spinal cord stimulation systems,with6Table of ContentAdaptiveStim and SureScan MRI Technology,DTM(differential target multiplexed)proprietary waveform,and the Evolve workflow algorithm,andSnapshot reporting.Brain modulation products,including those for the treatment of Parkinsons disease,essential tremor,refractory epilepsy,severe,treatment-resistantobsessive-compulsive disorder(approved under a Humanitarian Device Exemption(HDE)in the U.S.),and chronic,intractable primary dystonia(approved under a HDE in the U.S.).Specifically,the Percept family of neurostimulators with proprietary adaptive BrainSense technology.Implantable drug infusion systems,including our SynchroMed III Implantable Infusion System,which deliver small quantities of drug directly intothe intrathecal space surrounding the spinal cord,to help manage chronic pain,cancer pain,and severe spasticity.Interventional products,including our full Kyphon portfolio of minimally invasive Kyphoplasty and Vertebroplasty solutions for the treatment ofvertebral compression fractures,including bipedicular and unipedicular access options,bone access tools,inflatable balloon tamps,cement anddelivery systems,as well as biopsy and specialty devices.The OsteoCool cooled radiofrequency ablation system with simultaneous,dual-probecapabilities and algorithms for the treatment of painful metastatic bone lesions.Emprint Microwave with Thermosphere technology for the treatmentof non-resectable liver tumors.As well as the Accurian nerve ablation system,which conducts radio frequency ablation of nerve tissues.MEDICAL SURGICAL PORTFOLIOThe Medical Surgical Portfolio includes the Surgical&Endoscopy and Acute Care&Monitoring divisions.Products and therapies of this group are usedprimarily by healthcare systems,physicians offices,ambulatory care centers,and other alternate site healthcare providers.While less frequent,some productsand therapies are also used in home settings.Surgical&EndoscopyOur Surgical&Endoscopy division includes the following Operating Units:Surgical and Endoscopy.The division develops,manufactures,and marketsadvanced and general surgical products,including advanced stapling devices,vessel sealing instruments,wound closure products,electrosurgery products,AI-powered surgical video and analytics platform,robotic-assisted surgery products,hernia mechanical devices,mesh implants,gynecology products,minimallyinvasive gastrointestinal and hepatologic diagnostics and therapies,and therapies to treat diseases and conditions that are typically,but not exclusively,addressed by surgeons.Principal products and services offered include:Advanced stapling and energy products,including the Tri-Staple technology platform for endoscopic stapling,including the Endo GIA reloads andreinforced reloads with Tri-Staple technology and the Endo GIA ultra universal stapler,the Signia powered stapling system,the LigaSure exactdissector and L-Hook Laparoscopic Sealer/Divider,and the Sonicision 7 curved jaw cordless ultrasonic dissection system.Electrosurgical hardware and instruments,including the Valleylab FT10 and FX8 energy platforms,the Valleylab FT10 vessel sealing generator,andthe Force TriVerse electrosurgical pencils.Robotic and digital surgery technologies,including the Hugo robotic-assisted surgery(RAS)system designed for a broad range of soft-tissueprocedures,and Touch Surgery Enterprise,an AI-powered surgical video management solution for the operating room.Products designed for the treatment of hernias,including the AbsorbaTack absorbable mesh fixation device for hernia repair,MaxTack motorizedfixation device designed for minimally invasive hernia fixation,the Symbotex composite mesh for surgical laparoscopic and open ventral herniarepair,and ProGrip laparoscopic self-fixating mesh,a self-gripping,biocompatible solution for inguinal hernias.Suture and wound closure products,including the V-Loc barbed sutures,the Polysorb braided absorbable sutures,and the Monosof absorbablemonofilament nylon sutures.7Table of ContentEndoscopy products,including the GI Genius intelligent endoscopy module,the PillCam capsule endoscopy systems,the Bravo calibration-freereflux testing systems,the Endoflip 300 Impedance Planimetry System,the Emprint ablation system with Thermosphere Technology,the ManoScanhigh-resolution manometry system,the Barrx platform through ablation with the Barrx 360 Express catheter,the Cool-tip radiofrequency ablationsystem,the Beacon delivery system,and the Nexpowder endoscopic hemostasis system.Acute Care&MonitoringOur Acute Care&Monitoring division develops,manufactures,and markets products in the fields of patient monitoring and airway management.Principalproducts and services offered include:Products focused on blood oxygen management and remote monitoring,including Nellcor pulse oximetry monitors and sensors,HealthcastConnectivity Solutions,and the RespArray patient monitor.Products focused on reducing perioperative complications,including Bispectral Index(BIS)brain monitoring technology,INVOS cerebral/somaticoximetry systems,and WarmTouch convective warming.Products focused on airway management and respiratory monitoring,including Microstream capnography monitors,McGRATH MAC videolaryngoscopes,Shiley endotracheal tubes,Shiley tracheostomy tubes,and DAR Breathing Systems.DIABETES OPERATING UNITThe Diabetes Operating Unit develops,manufactures,and markets products and services for the management of Type 1 and Type 2 diabetes.The primarymedical specialists who use and/or prescribe our Diabetes products are endocrinologists and primary care physicians.Principal products and services offered include:Insulin pumps and consumables,including the MiniMed 780G system,powered by SmartGuard technology.The MiniMed 780G system providessmartphone and Bluetooth connectivity,a meal-time detection system,an adjustable glucose target down to 100 mg/dl,and has the capability tocontinuously deliver background insulin and monitor sugar levels.Continuous glucose monitoring(CGM)systems include the Guardian Connect CGM system and Simplera platform.Both systems are worn bypatients capturing glucose data to reveal patterns and potential problems,such as hyperglycemic and hypoglycemic episodes.The Simplera platformsdiscreet design simplifies the insertion and wear experience through the integration of the Simplera CGM,as a Smart Multiple Daily Injections(MDI)system,and the InPen with the Simplera Sync sensor and the MiniMed 780G system,offering disposable capabilities.The InPen smart insulin pen system combines a reusable Bluetooth-enabled insulin pen with an intuitive mobile app that helps users administer theappropriate insulin dose.The InPen application integrates with our CGM data to provide real-time CGM readings alongside insulin dose information.In May 2025,we announced our intention to separate the Diabetes business,with the intention to create a new independent,publicly traded company.Theseparation is expected to be completed within 18 months of the initial announcement.HUMAN CAPITALMedtronic Workforce OverviewMedtronics employees deliver on our Mission every day.We empower insight-driven care,experiences that put people first,and better outcomes for ourworld.In everything we do,we are engineering the extraordinary.We strive to be the employer of choice for the best and brightest global talent,whereemployees can grow and develop fulfilling careers.We aspire to create an inclusive,diverse,and equitable workplace that fosters innovation and creativity,and where employees feel a sense of belonging and well-being.Medtronic has over 95,000 full-time employees,of which 44%are based in the U.S.or PuertoRico.8Table of ContentInclusionWe believe that improving health for people from all walks of life depends on our ability to unleash the creative power of our global employees.By breakingdown barriers,we open doors for everyone,driving opportunity,progress,and prosperity around the world.Our commitment to inclusion is a core element ofthe Medtronic Mission,and we integrate these principles throughout our Company to ensure every operating unit,team,and leader recognizes and celebratesthe value of diverse experiences and backgrounds.Additionally,Medtronic employee resource groups(ERGs)and Networks are employee-led affinity groupsthat provide career development and networking opportunities to all employees and strengthen ties between employees of many different backgrounds,cultures,and interests.Pay EquityIn our most recent reported period available,in the United States,we have achieved 100%pay equity for gender and ethnically diverse employees.Globallywe have achieved 99%pay equity for gender.We are actively working to resolve any remaining pay inequities by continuing to expand the annual pay equityanalyses for each country we operate in.Workforce CompensationOur compensation framework is designed to provide market competitive pay for the value and contributions of our employees.We are committed totransparent communications on compensation.Our competitive approach to compensation reflects industry benchmarks and local market standards.Ourprograms include annual and long-term equity-based incentives that provide the means to share in the Companys success,based on business and individualperformance.To attract and retain the best leaders,we offer competitive benefits and cash and equity incentives.We reward high-performing employees withan ownership stake in the Company through restricted stock,and employees have the opportunity to purchase stock at a significant discount through ourEmployee Stock Purchase Plan.Learning&DevelopmentThe skills and dedication of our employees drive our business performance.Our comprehensive professional development programs empower our people tobuild rewarding careers and help us attract world-class talent from global and diverse populations.Our suite of professional development programs ensuresthat our employees,regardless of level,location,language or learning preferences,have access to opportunities to develop and grow.In recent years,we have shifted away from degree requirements to focus on skills-based certification for certain roles within Medtronic.Additionally,asmembers of the Multiple Pathways Initiative,we have used a skills-based approach to offering opportunities to expanded pools of external talent that havepreviously been held back due to lack of access to undergraduate education.Internally,eligible U.S.and Puerto Rico employees can now participate throughMAPS(Medtronic Advancement Pathways and Skill-building)in undergraduate courses from top-tier universities to enhance or obtain new skills,at no costto the employee.We have opened opportunities for employees who have been otherwise restricted from career advancement due to degree requirements.Employee Engagement and CultureThrough our Organizational Health Survey,we gain valuable insight into the Medtronic employee experience and identify where we can improve in keypriority areas:1)Employee Engagement,2)Inclusion,3)Innovation,4)Ethics and 5)Quality culture as part of our commitment to Put Patients First in oureveryday decisions and actions.In our most recent survey ending in the fourth quarter of fiscal year 2025,more than 88%of our employees responded.Medtronic carefully reviews and implements actions based on employee feedback in order to partner and create an inclusive,innovative and supportiveenvironment.Our culture is critical to achieving our vision.The Medtronic Mindset builds on our core values of integrity,quality,inclusion,and collaboration.It urges us toact boldly,compete to win,move with speed and decisiveness,foster belonging,and deliver results the right way.Our culture helps us meet the needs of ourpatients and customers,and ensures our Mission endures for many years to come.Health&SafetyAs a large,global employer,our ability to attract and retain talent is based in part on our commitment to maintain a safe workplace and support the well-beingof our employees.Medtronic has a comprehensive approach to providing robust support for our employees and their families in natural disasters,public healthcrises,civil unrest and armed conflicts,bereavement,and other challenging events.Along with other programs,the Medtronic Employee Assistance Programand the Medtronic Employee Emergency Assistance Fund have historically supported employees and their families when faced with difficult times byproviding a variety of services such as mental health,safety,and financial resources and support at no cost.These programs have proven invaluable innavigating our employees through unique challenges,including in fiscal year 2025.The Medtronic Employee Emergency Assistance Fund is supported bydonations from employees and the Medtronic Foundation,and over the last five years has provided$4 million in grants to employees experiencing unexpectedevents creating a financial hardship.9Table of ContentFor more information on Human Capital Management at Medtronic,please refer to our 2024 Impact Report available on our company website.OTHER FACTORS IMPACTING OUR OPERATIONSResearch and DevelopmentThe markets in which we participate are subject to rapid technological advances and innovations.Constant improvement of existing products and introductionof new products is necessary to maintain market leadership.Our research and development(R&D)efforts are directed toward maintaining or achievingtechnological leadership in the markets we serve to help ensure that patients using our devices and therapies receive the most advanced and effective treatmentpossible.We remain committed to developing technological enhancements and new indications for existing products,and less invasive and new technologiesfor new and emerging markets to address unmet patient needs.That commitment leads to our initiation and participation in hundreds of clinical trials eachfiscal year as the demand for clinical and economic evidence remains high.Furthermore,our development activities are intended to help reduce patient carecosts and the length of hospital stays in the future.We have not engaged in significant customer or government-sponsored research.Our R&D activities include improving existing products and therapies,expanding their indications and applications for use,developing new therapies andprocedures,and entering into arrangements with third parties to fund the development of certain technologies.We continue to focus on optimizing innovation,improving our R&D productivity,driving growth in international markets,generating clinical evidence,and assessing our R&D programs based on theirability to address unmet clinical needs,produce better patient outcomes,and create new standards of care.Intellectual Property and LitigationWe rely on a combination of patents,trademarks,tradenames,copyrights,trade secrets,and agreements,including non-disclosure agreements,to protect ourbusiness and proprietary technology.In addition,we have entered into exclusive and non-exclusive licenses,and covenants not to sue,relating to a wide arrayof third-party technologies.In the aggregate,these intellectual property assets,agreements,and licenses are of material importance to our business;however,we believe that no single intellectual property asset,agreement,or license is material in relation to our business as a whole.We operate in an industry characterized by extensive intellectual property litigation.Intellectual property litigation may result in significant damage awardsand injunctions that could prevent the manufacture and sale of affected products or result in significant royalty payments in order to continue selling theproducts.At any given time,we are generally involved as both a plaintiff and a defendant in a number of intellectual property actions,the outcomes of whichmay not be known for prolonged periods of time.Sales and DistributionWe sell our medical devices and therapies through a combination of direct sales representatives and independent distributors globally.Additionally,a portionof the Companys revenue is generated from consignment inventory maintained at hospitals.Our medical supply products are used primarily in hospitals,ambulatory surgical centers,and alternate care facilities,such as home care and long-term care facilities,and are marketed to materials managers,grouppurchasing organizations(GPOs)and integrated delivery networks(IDNs).We often negotiate with GPOs and IDNs,which enter into supply contracts for thebenefit of their member facilities.Our four largest markets are the U.S.,Western Europe,China,and Japan.International markets are an area of increasingfocus and opportunity,as we believe they remain under-penetrated.Our marketing and sales strategy is focused on rapid,cost-effective delivery of high-quality products to a diverse group of customers worldwide.To achievethis objective,our marketing and sales teams are organized around physician specialties.This focus enables us to develop highly knowledgeable and dedicatedsales representatives who are able to foster strong relationships with physicians and other customers and enhance our ability to support our customers andcross-sell complementary products.We are not dependent on any single customer for more than 10 percent of our total net sales.Competition,Industry,and Cost ContainmentWe compete in both the therapeutic and diagnostic medical markets in more than 150 countries throughout the world.These markets are characterized by rapidchange resulting from technological advances,innovations and scientific discoveries.Our product lines face a mix of competitors ranging from largemanufacturers with multiple business lines to small manufacturers offering a limited selection of products.In addition,we face competition from providers ofother medical therapies,such as pharmaceutical companies,including those producing glucagon-like peptide-1s(GLP-1s).Major shifts in industry market share have occurred in connection with product corrective actions,physician advisories,safety alerts,results of clinical trials tosupport superiority claims,and publications about our products,reflecting the importance of product quality,product efficacy and quality systems in themedical device industry.In the current environment of managed care,economically motivated10Table of Contentcustomers,consolidation among healthcare providers,increased competition,declining reimbursement rates,and national and provincial tender pricing,competitively priced product offerings are essential to our business.In order to continue to compete effectively,we must continue to create or acquireadvanced technology,incorporate this technology into proprietary products,obtain regulatory approvals in a timely manner,maintain high-qualitymanufacturing processes,and successfully market these products.Government and private sector initiatives to limit the growth of healthcare costs,including price regulation,competitive pricing,bidding and tendermechanics,coverage and payment policies,comparative effectiveness of therapies,technology assessments and managed-care arrangements,are continuing inmany countries where we do business,including the U.S.These initiatives put increased emphasis on the delivery of more cost-effective medical devices andtherapies.Government programs,including Medicare and Medicaid,private healthcare insurance,managed-care plans,and volume-based procurement tendersin China,have attempted to control costs by limiting the amount of reimbursement they will pay for particular procedures or treatments,tying reimbursementto outcomes,shifting to population health management,and other mechanisms.Hospitals,which purchase our technology,are also seeking to reduce coststhrough a variety of mechanisms,including,for example,centralized purchasing,and in some cases,limiting the number of vendors that may participate in thepurchasing program.Hospitals are also aligning interests with physicians through employment and other arrangements,such as gainsharing,where a hospitalagrees with physicians to share any realized cost savings resulting from changes in practice patterns such as device standardization.This has created anincreased level of price sensitivity among customers for our products.Production and Availability of Raw MaterialsWe manufacture products at facilities located in various countries throughout the world.We purchase many of the components and raw materials used inmanufacturing our products from numerous suppliers in various countries.Certain components and raw materials are available only from a sole supplier.Wework closely with our suppliers and have plans and measures in place to help ensure continuity of supply while maintaining high quality and reliability.Generally,we have been able to obtain adequate supplies of such raw materials and components.However,due to the U.S.FDAs manufacturing requirementsand those of other regulatory authorities,we may not be able to quickly establish additional or replacement sources for certain components or materials if weexperience a sudden or unexpected reduction or interruption in supply and are unable to develop alternative sources.For additional information related to our manufacturing facilities refer to“Item 2.Properties”in this Annual Report on Form 10-K.Government RegulationOur operations and products are subject to extensive regulation by numerous government agencies,including the U.S.FDA,European regulatory authoritiessuch as the Medicines and Healthcare products Regulatory Agency in the United Kingdom,the Health Products Regulatory Authority in the Republic ofIreland and the Federal Institute for Drugs and Medical Devices in Germany,the China National Medical Product Administration(NMPA),and othergovernment agencies inside and outside the U.S.To varying degrees,each of these agencies requires us to comply with laws and regulations governing thedevelopment,testing,manufacturing,labeling,marketing,distribution,and post-marketing surveillance of our products.Our business is also affected by dataprivacy,security and digital health laws,such as the European Health Data Space(EHDS)regulation,as well as government payor cost containmentinitiatives,and environmental health and safety laws and regulations.In addition,as a result of the release and availability of Artificial Intelligence(AI)technologies,including generative AI platforms,we have seen a global trend toward more comprehensive regulation of AI designed to ensure the ethical use,security,and privacy of AI and create standards for transparency,accountability,and fairness,including the EU AI Act,which may impact our business.Product Approval and MonitoringIn many jurisdictions where we do business,including the U.S.,the E.U.,Japan,and China,our products are subjected to approval and other regulatoryrequirements regarding performance,safety,and quality.For instance,authorization to commercially distribute a new medical device in the U.S.is generallyobtained in one of two primary ways.The first,known as pre-market notification or the 510(k)process,requires us to demonstrate that our medical device issubstantially equivalent to a legally marketed medical device.The second,more rigorous process,known as pre-market approval,requires us to independentlydemonstrate that a medical device is safe and effective for its intended use.This process is generally much more time-consuming and expensive than the510(k)process.In the E.U.,conformity with the marketing authorization requirements is represented by the CE Mark.To obtain a CE Mark,defined products must meetminimum standards of performance,safety,and quality(i.e.,the essential requirements),and then,according to their classification,comply with one or moreof a selection of conformity assessment routes.The competent authorities of the E.U.countries separately regulate the clinical research for medical devicesand the market surveillance of products once they are placed on the market.The Medical Device Regulation was published by the E.U.in 2017,and it imposessignificant additional pre-market and post-market requirements(EU MDR).The regulation provided an implementation period and became effective on May26,2021.The European Commission extended the implementation period to the end of 2027 for high-risk devices and to the end of 2028 for medium and lowrisk devices.11Table of ContentThe global regulatory environment is increasingly stringent and unpredictable.While harmonization of global regulations has been pursued,requirementscontinue to differ among countries.We expect this global regulatory environment will continue to evolve,which could impact the cost,the time needed toapprove,and ultimately,our ability to maintain existing approvals or obtain future approvals for our products.In addition,reported potential workforcereductions and agency reorganization at the U.S.FDA,if implemented,could have an impact on product approval timelines.Regulations of the U.S.FDA andother regulatory agencies in and outside the U.S.impose extensive compliance and monitoring obligations on our business.These agencies review our designand manufacturing processes,labeling,record keeping,and manufacturers required reports of adverse experiences and other information to identify potentialproblems with marketed products.We are also subject to periodic inspections for compliance with applicable quality system regulations,which govern themethods used in,and the facilities and controls used for,the design,manufacture,packaging,and servicing of finished medical devices intended for humanuse.In addition,the U.S.FDA and other regulatory bodies,both in and outside the U.S.(including the Federal Trade Commission,the Office of the InspectorGeneral of the Department of Health and Human Services,the U.S.Department of Justice,and various state Attorneys General),monitor the promotion andadvertising of our products.Any adverse regulatory action,depending on its magnitude,may limit our ability to effectively market and sell our products,limitour ability to obtain future pre-market approvals or result in a substantial modification to our business practices and operations.For additional information,seeItem 1A.Risk Factors under,We are subject to extensive and complex laws and governmental regulations and any adverse regulatory action maymaterially adversely affect our financial condition and business operations.Trade RegulationsThe movement of products,services,technology,know-how,and investment across borders subjects us to extensive trade laws and regulations,including tariffregulations adopted by different countries or trading zones.These laws and regulations govern,among other things,our import,export and other internationaltrade activities.We are subject to the risk that these laws and regulations could change in a way that would expose us to additional costs and burdens,as wellas penalties if not complied with.Some governments impose economic sanctions and other trade restrictions against certain countries,persons or entities.Wealso sell and provide goods,technology and services to agents,representatives and distributors who may in turn sell or provide such items to customers andother end-users in their own countries or by means of their own cross-border transactions.If we,or the third parties through which we do business,are not incompliance with applicable import,export control or economic sanctions laws and regulations,we may be subject to civil or criminal enforcement action,andvarying degrees of liability.Such actions may disrupt or delay sales of our products or services or result in restrictions on our distribution and sales of productsor services that may materially impact our business.Anti-Boycott LawsUnder U.S.laws and regulations,U.S.companies and their subsidiaries and affiliates outside the U.S.are prohibited from participating or agreeing toparticipate in unsanctioned foreign boycotts in connection with certain business activities,including the sale,purchase,transfer,shipping or financing of goodsor services within the U.S.or between the U.S.and countries outside of the U.S.If we,or certain third parties through which we sell or provide goods orservices,violate anti-boycott laws and regulations,we may be subject to civil or criminal enforcement action and varying degrees of liability.Data Privacy and Security Laws and RegulationsAs a business with a significant global footprint,compliance with evolving regulations and standards in data privacy and cybersecurity has resulted,and maycontinue to result,in increased costs,new compliance challenges,and the threat of increased regulatory enforcement activity.Our business relies on the secureelectronic transmission,storage and hosting of sensitive information,including personal information,protected health information,financial information,intellectual property and other sensitive information related to our products and therapies,customers,patients,and workforce.Our global operational footprint comes with the obligation for compliance and adherence to individual data security,confidentiality and breach notificationlaws at the State,Federal,and International levels.Examples of those laws include,in the U.S.,the Health Insurance Portability and Accountability Act of1996(HIPAA),as amended,the Health Information Technology for Economic and Clinical Health Act of 2009(HITECH),and various State privacy laws.Wealso are subject to various other country-specific requirements around the world,such as the General Data Protection Regulation(GDPR)in the EuropeanEconomic Area,the United Kingdoms privacy laws,and Chinas Personal Information Protection Law(PIPL).Because the laws and regulations continue to expand,differ from jurisdiction to jurisdiction,and are subject to evolving(and at times inconsistent)governmental interpretation and different cross border data transfer rules,compliance may require significant additional cost expenditures or changes inproducts or business that increase competition or reduce revenue.Noncompliance could result in the imposition of fines,penalties,or orders to stopnoncompliant activities,withdrawal of noncompliant products from a market,and reputational harm.Regulations Governing ReimbursementThe delivery of our devices is subject to regulation by the U.S.Department of Health and Human Services(HHS)and comparable state and non-U.S.agenciesresponsible for reimbursement and regulation of healthcare items and services.U.S.laws and regulations are imposed12Table of Contentprimarily in connection with federally funded healthcare programs,such as the Medicare and Medicaid programs,as well as the governments interest inregulating the quality and cost of healthcare.Other governments also impose regulations in connection with their healthcare reimbursement programs and thedelivery of healthcare items and services.In addition,reported potential workforce reductions and agency reorganization at HHS,if implemented,could havean impact on reimbursement programs.U.S.federal healthcare laws apply when we or customers submit claims for items or services that are reimbursed under federally-funded healthcare programs,including laws related to kickbacks,false claims,self-referrals or other healthcare fraud.There are often similar state false claims,anti-kickback,and anti-self-referral and insurance laws that apply to state Medicaid and other healthcare programs and private third-party payors.In addition,as a manufacturer of U.S.FDA-approved devices reimbursable by federal healthcare programs,we are subject to the U.S.Physician Payments Sunshine Act(Open Payments),whichrequires us to annually report certain payments and other transfers of value we make to U.S.-licensed physicians,certain allied health professionals,and U.S.teaching hospitals.Similarly,other jurisdictions impose transparency reporting obligations relating to health care professional payments.Any failure tocomply with these laws and regulations could subject us or our officers and employees to criminal and civil financial penalties.Implementation of legislative or regulatory reforms to reimbursement systems,or adverse decisions relating to our products by administrators of these systemsin coverage or reimbursement,could significantly reduce reimbursement or result in the denial of coverage,which could have an impact on the acceptance ofand demand for our products and the prices that our customers are willing to pay for them.Environmental Health and Safety LawsWe are also subject to various environmental health and safety laws and regulations both within and outside the U.S.Like other companies in our industry,ourmanufacturing and other operations involve the use and transportation of substances regulated under environmental health and safety laws including thoserelated to the use,storage,transportation,and disposal of hazardous materials.Available InformationWe maintain a website at .Our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K,andamendments to those reports filed or furnished pursuant to Section 13(a)or 15(d)of the Securities Exchange Act of 1934,as amended(Exchange Act)aremade available under the“Our Company Investors”caption and“Financials SEC Filings”sub caption of our website as soon as reasonably practicableafter we electronically file them with,or furnish them to,the Securities and Exchange Commission(SEC).Information relating to our corporate governance,including our Principles of Corporate Governance,Code of Conduct(including our Code of Ethics forSenior Financial Officers and any related amendments or waivers),Code of Business Conduct and Ethics for Members of the Board of Directors,AI Compass,and information concerning our executive officers,directors and Board committees(including committee charters)is available through our website under the“Our Company Governance”caption.Information relating to transactions in Medtronic securities by directors and officers isavailable through our website at under the“Our Company Investors”caption and the“Financial Information SEC Filings”subcaption.Our website and the information contained on or connected to our website are not incorporated by reference into this Annual Report on Form 10-K.The SEC maintains a website that contains reports,proxy,and information statements,and other information regarding issuers,including the Company,thatfile electronically with the SEC.The public may obtain any documents that we file with the SEC at http:/www.sec.gov.We file annual reports,quarterlyreports,proxy statements,and other documents with the SEC under the Exchange Act.Item 1A.Risk FactorsInvesting in our securities involves a variety of risks and uncertainties,known and unknown,including,among others,those discussed below.Each of thefollowing risks should be carefully considered,together with all the other information included in this Annual Report on Form 10-K,including ourconsolidated financial statements and the related notes and in our other filings with the SEC.Furthermore,additional risks and uncertainty not presentlyknown to us or that we currently believe to be immaterial may also adversely affect our business.Our business,results of operations,financial condition,andcash flow and prospects could be materially and adversely affected by any of these risks or uncertainties.Business and Operational RisksWe operate in a highly competitive industry and we may be unable to compete effectively.We compete in both the therapeutic and diagnostic medical markets in more than 150 countries throughout the world.These markets are characterized by rapidchange resulting from technological advances,innovations and scientific discoveries.In the product lines in which we compete,we face a range ofcompetitors from large companies with multiple business lines to small,specialized manufacturers that offer a limited selection of niche products.Development by other companies of new or improved products,processes,technologies,or the13Table of Contentintroduction of reprocessed products or generic versions when our proprietary products lose their patent protection may make our existing or planned productsless competitive.In addition,we face competition from providers of alternative medical therapies,such as pharmaceutical companies,including thoseproducing GLP-1s.We believe our ability to compete depends upon many factors both within and beyond our control,including:product performance and reliability,product technology and innovation,product quality and safety,breadth of product lines,product support services,supplier and supply availability and performance,customer support,cost-effectiveness and price,reimbursement approval from healthcare insurance providers,andchanges to the regulatory environment.Competition may increase as additional companies enter our markets or modify their existing products to compete more directly with ours.In addition,academic institutions,governmental agencies and other public and private research organizations also may conduct research,seek patent protection andestablish collaborative arrangements for discovery,research,clinical development and marketing of products similar to ours.These companies and institutionscompete with us in recruiting and retaining qualified scientific and management personnel,as well as in acquiring necessary product technologies.From timeto time we have lost,and may in the future lose,market share in connection with product problems,physician advisories,safety alerts and publications aboutour products,which highlights the importance of product quality,product efficacy and quality systems to our business.In the current environment of managedcare,consolidation among healthcare providers,increased competition,declining reimbursement rates,and national and provincial tender pricing,as recentlyexperienced in China,competitively priced product offerings are essential to our success.Our success depends on our ability to differentiate our product and keep pace with emerging technologies.Our continued growth and success depend on our ability to develop,acquire and market new and differentiated products,technologies and intellectualproperty,and as a result we also face competition for marketing,distribution,and collaborative development agreements,establishing relationships withacademic and research institutions and licenses to intellectual property.In order to continue to compete effectively,we must continue to create,invest in oracquire advanced technology,incorporate this technology into our proprietary products,obtain regulatory approvals in a timely manner,and successfullymanufacture and market our products.For example,data science,machine learning and AI are all impacting our products and operations and the competitivelandscape in which we operate,and the application of these technologies is rapidly evolving at the same time as new laws and regulations of AI are beingdeveloped in jurisdictions around the world.Compliance with developing regulations may require significant expenditures or may limit our ability toeffectively use these technologies.There can be no assurance that the application of AI in our products and operations will be successful,or that we will notexperience data security and privacy incidents in connection with our use of these technologies.Given these factors,we cannot guarantee that we will be ableto compete effectively or continue our level of success.Reduction or interruption in supply or other manufacturing difficulties may adversely affect our manufacturing operations and related product sales.The manufacture of our products requires the timely delivery of a sufficient amount of quality components and materials and is highly exacting and complex,due in part to complex trade and strict regulatory requirements.We manufacture the majority of our products and procure critical third-party services,such assterilization services,at numerous facilities worldwide.We purchase many of the components,raw materials and services needed to manufacture theseproducts from numerous suppliers in various countries.We seek to maintain continuity of supply by use of multiple options for sourcing where possible.Wehave generally been able to obtain adequate supplies of such raw materials,components and services,although global shortages of certain components such assemiconductors and resins have previously caused,and may in the future cause,disruptions to our product manufacturing supply chain.In addition,forreasons of quality assurance,cost effectiveness,or availability,certain components,raw materials and services needed to manufacture our products areobtained from sole suppliers.Although we work closely with our suppliers to try to ensure continuity of supply while maintaining high quality and reliability,the supply of these components,raw materials and services may,at times,be interrupted or insufficient.In addition,due to the stringent regulations andrequirements of trade and regulatory agencies,including the U.S.FDA,regarding the manufacture of our products,we may not be able to quickly establishadditional or replacement sources.Additionally,many regulatory agencies are imposing new and evolving regulatory requirements on safe use of chemicals,including ethylene oxides(EtOs)and polyfluoroalkyl substances(PFAS),and their potential impact on health and the environment which also may impactsupply constraints.Furthermore,the prices of commodities and other materials used in our products,which are often volatile and outside of our control,andmay be subject to14Table of Contenttariffs,could adversely impact our supply.We use resins,other petroleum-based materials and pulp as raw materials in some of our products,and the prices ofoil and gas also significantly affect our costs for freight and utilities.A reduction or interruption in supply,and an inability to develop alternative sources forsuch supply,could adversely affect our ability to manufacture our products in a timely or cost-effective manner and could result in lost sales.Other disruptions in the manufacturing process or product sales,trade and fulfillment systems for any reason,including infrastructure,information andequipment malfunction,failure to follow specific protocols and procedures,supplier or Company facility shut-downs,defective raw materials,labor shortages,natural disasters such as hurricanes,tornadoes,earthquakes,or wildfires,property damage or facility closures from riots or public protests,and otherenvironmental factors and the impact of epidemics,pandemics,or other public health crises,and actions by businesses,communities and governments inresponse,could lead to launch delays,product shortages,unanticipated costs,lost revenues and damage to our reputation.For example,in the past we wereadversely impacted by the global COVID-19 pandemic,and may in the future be adversely impacted by other pandemics and the related responses ofgovernments and of our partners,including suppliers,manufacturers,distributors and other businesses.Furthermore,any failure to identify and addressmanufacturing problems prior to the release of products to our customers could result in quality or safety issues.In addition,many of our products require sterilization before sale and several of our key products are manufactured or sterilized at a particular facility,withconstrained capacity and limited options for alternate sterilization facilities.If an event occurs that causes damage to or closure of one or more of suchfacilities,we may be unable to manufacture or sterilize relevant products to the required quality specifications or at all.Due to the time required to approveand license a manufacturing or sterilization facility,a third-party may not be available on a timely basis to replace production capacity in the eventmanufacturing or sterilization capacity is reduced or lost.Public health crises have had,and may continue to have,an adverse effect on certain aspects of our business,results of operations,financial condition,and cash flows.The nature and extent of future impacts are highly uncertain and unpredictable.Our global operations and interactions with healthcare systems,providers and patients around the world expose us to risks associated with public health crises,including epidemics and pandemics.Public health crises may continue to have an adverse impact on certain aspects of our Company and business,includingthe demand for and supply of certain of our products,operations,supply chains and distribution systems,and our ability to generate cash flow.Our research and development efforts rely upon investments and investment collaborations,and we cannot guarantee that any previous or futureinvestments or investment collaborations will be successful.Our Mission is to provide a broad range of therapies to restore patients to fuller,healthier lives,which requires a wide variety of technologies,products andcapabilities.The rapid pace of technological development in the medical industry and the specialized expertise required in different areas of medicine make itdifficult for one company alone to develop a broad portfolio of technological solutions.In addition to internally generated growth through our research anddevelopment efforts,historically we have relied,and expect to continue to rely,upon investments and investment collaborations to provide us access to newtechnologies both in areas served by our existing businesses as well as in new areas.We expect to make future investments where we believe that we canstimulate the development or acquisition of new technologies and products to further our strategic objectives and strengthen our existing businesses.Investments and investment collaborations in and with medical technology companies and third-party funding sources are inherently risky,and we cannotguarantee that any of our previous or future investments or investment collaborations will be successful or will not materially adversely affect our business,results of operations,financial condition,and cash flows.The continuing development of many of our products depends upon us maintaining strong relationships with healthcare professionals.If we fail to maintain our working relationships with healthcare professionals,many of our products may not be developed and marketed in line with the needsand expectations of the professionals who use and support our products,which could cause a decline in our earnings and profitability.The research,development,marketing and sales of many of our new and improved products depends on our maintaining working relationships with healthcareprofessionals.We rely on these professionals to provide us with considerable knowledge and experience regarding the development,marketing and sale of ourproducts.Healthcare professionals assist us as researchers,marketing and product consultants,inventors,trainers,and public speakers.If we are unable tomaintain strong relationships with these professionals,the development and marketing of our products could suffer,which could have a material adverse effecton our business,results of operations,financial condition,and cash flows.We have debt obligations that create risk.We are required to use a portion of our operating cash flow to pay interest or principal on our outstanding indebtedness instead of for other corporate purposes,including funding future expansion of our business.We may also incur additional indebtedness in the future to supplement our existing liquidity and cashgenerated from operations to satisfy our needs for working capital and capital expenditures,to pursue growth initiatives,and to make returns of capital toshareholders.Changes in business and economic conditions will impact interest rates and can cause periods of tightened credit availability and volatility inborrowing terms.In addition,there can be no assurance that we will be able to maintain our credit rating.At the time we may incur such additionalindebtedness,or refinance or restructure existing15Table of Contentindebtedness,we may be unable to obtain capital market financing with similar terms and currency denomination to our existing indebtedness,or at all,whichcould have a material adverse effect on our business and results of operations.At any time,the fair value of our debt outstanding will fluctuate based onseveral factors including foreign currency exchange rate and interest rate movements,credit conditions and our credit rating.Failure to integrate acquired businesses into our operations successfully,or challenges related to the Companys strategic initiatives,includingdivestitures and third-party funding arrangements,as well as liabilities or claims relating to such acquired businesses,divestitures,or arrangements couldadversely affect our business.As part of our strategy to develop and identify new products and technologies and optimize our portfolio of products,we have made several significantacquisitions,divestitures and third-party research and development funding arrangements in recent years,and may make additional acquisitions,divestituresand arrangements in the future.Our integration of the operations of acquired businesses,or a divestiture of part of our existing businesses,including ourrecently announced intention to separate our Diabetes business from the Company,requires significant efforts,including the coordination of informationtechnologies,research and development,sales and marketing,operations,manufacturing,and finance.These efforts result in additional expenses and involvesignificant amounts of managements time that cannot then be dedicated to other projects.Our failure to manage and coordinate the growth of acquiredcompanies successfully could also have an adverse impact on our business.Further,acquired businesses may have liabilities,or be subject to claims,litigationor investigations that we did not anticipate or which exceed our estimates at the time of the acquisition.In addition,we cannot be certain that the businesseswe acquire will become profitable or remain so.Factors that will affect the success of our acquisitions include:the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies,our ability or inability to integrate information technology systems of acquired companies in a secure and reliable manner,liabilities,claims,litigation,investigations,or other adverse developments relating to acquired businesses or the business practices of acquiredcompanies,including investigations by governmental entities,potential Foreign Corrupt Practices Act(FCPA)or product liability claims,intellectualproperty disputes,earnout or other contingent payment disputes,or other unanticipated liabilities,any decrease in customer loyalty and product orders caused by dissatisfaction with the combined companies product lines and sales and marketingpractices,including price increases,our ability to retain key employees,andthe ability to achieve synergies among acquired companies,such as increasing sales of the integrated companys products,achieving cost savings,and effectively combining technologies to develop new products.We also could experience negative effects on our business,results of operations,financial condition,and cash flows from acquisition-related charges,amortization of intangible assets and asset impairment charges.In addition,the potential exists that expected strategic benefits from any planned or completed divestiture,including our recently announced intention toseparate our Diabetes business from the Company,or third-party funding arrangement,by the Company may not be realized or may take longer to realize thanexpected,and there can be no assurance that disputes will not arise under the Companys third-party funding arrangements,or transition service,or otheragreements that have or may be executed as part of a divestiture.Legal and Regulatory RisksWe are subject to extensive and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect ourfinancial condition and business operations.Our medical devices and technologies,as well as our business activities,are subject to a complex set of regulations and rigorous enforcement,including by theU.S.FDA,U.S.Department of Justice,Health and Human Services Office of the Inspector General,and numerous other federal,state,and non-U.S.governmental authorities.To varying degrees,each of these agencies requires us to comply with laws and regulations governing the development,testing,manufacturing,labeling,marketing and distribution of our products.As a part of the regulatory process of obtaining marketing clearance for new products andnew indications for existing products,we conduct and participate in numerous clinical trials or delays with a variety of study designs,patient populations,andtrial endpoints.Unfavorable clinical data from existing or future clinical trials or delays by regulators in approving or authorizing reimbursement for newproducts may adversely impact(a)our ability to obtain product approvals,(b)our position in,and share of,the markets in which we participate,and(c)ourbusiness,results of operations,financial condition,and cash flows.We cannot guarantee that we will be able to obtain or maintain marketing clearance for ournew products or enhancements or modifications to existing products,and the failure to maintain approvals or obtain approval or clearance could have amaterial adverse effect on our business,results of operations,financial condition,and cash flows.Even if we are able to obtain approval or clearance,it may:take a significant amount of time,require the expenditure of substantial resources,16Table of Contentinvolve stringent clinical and pre-clinical testing,as well as increased post-market surveillance,involve modifications,repairs or replacements of our products,andlimit the proposed uses of our products.Both before and after a product is commercially released,we have ongoing responsibilities under the U.S.FDA and other applicable non-U.S.governmentagency regulations.For instance,many of our facilities and procedures,and those of our suppliers,are subject to periodic inspections by the U.S.FDA toassess compliance with applicable regulations.The results of these inspections can include,and have in the past included,observations on the U.S.FDAsForm 483,warning letters,or other forms of enforcement,such as a consent decree.If the U.S.FDA were to conclude that we are not in compliance withapplicable laws or regulations,or that any of our medical products are ineffective or pose an unreasonable health risk,the U.S.FDA could detain or seize whatit believes to be adulterated or misbranded medical products,order a recall,repair,replacement,or refund of such products,refuse to grant pending pre-marketapproval applications or require certificates of non-U.S.governments for exports,and/or require us to notify health professionals and others that the devicespresent unreasonable risks of substantial harm to the public health,and in certain rare circumstances,ban medical devices.In addition,the U.S.FDA has takenthe position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the approved productlabeling,and any failure to comply could subject us to significant civil or criminal exposure,administrative obligations and costs,and/or other potentialpenalties from,and/or agreements with,the federal government.The U.S.FDA and other non-U.S.government agencies may also assess civil or criminal penalties against us,our officers or employees and impose operatingrestrictions on a company-wide basis.The U.S.FDA may also recommend prosecution to the U.S.Department of Justice.Any adverse regulatory action,depending on its magnitude,may restrict us from effectively marketing and selling our products and limit our ability to obtain future pre-market clearances orapprovals,and could result in a substantial modification to our business practices and operations.Furthermore,we occasionally receive subpoenas or otherrequests for information from various governmental agencies around the world,and while these investigations typically relate primarily to financialarrangements with healthcare providers,regulatory compliance and product promotional practices,we cannot predict the timing,outcome or impact of anysuch investigations.Any adverse outcome in one or more of these investigations could include the commencement of civil and/or criminal proceedings,substantial fines,penalties,and/or administrative remedies,including exclusion from government reimbursement programs and/or entry into CorporateIntegrity Agreements(CIAs)with governmental agencies.In addition,resolution of any of these matters could involve the imposition of additional,costlycompliance obligations.These potential consequences,as well as any adverse outcome from government investigations,could have a material adverse effecton our business,results of operations,financial condition,and cash flows.Governmental regulations in the U.S.and outside the U.S.are constantly changing and may become increasingly stringent.In the E.U,for example,theMedical Device Regulation(EU MDR)includes significant additional pre-market and post-market requirements.Penalties for regulatory non-compliancecould be severe,including fines and revocation or suspension of a companys business license,mandatory price reductions and criminal sanctions.Implementation of the EU MDR was extended to the end of 2027 for high-risk devices and to the end of 2028 for medium-and low-risk devices.Thedevelopment and implementation of future laws and regulations may have a material adverse effect on us.Quality problems have in the past and could in the future lead to recalls or safety alerts,product liability claims,reputational harm,adverse verdicts orcostly settlements,and could have a material adverse effect on our business,results of operations,financial condition,and cash flows.Quality is extremely important to us and our customers due to the impact on patients,and the serious and potentially costly consequences of adverse productperformance.Our business exposes us to potential product liability risks that are inherent in the design,manufacture,and marketing of medical devices.Inaddition,many of our products are often used in intensive care settings with seriously ill patients,and some of the medical devices we manufacture and sellare designed to be implanted in the human body for long periods of time or indefinitely.Component failures,manufacturing nonconformances,design issues,off-label use,or inadequate disclosure of product-related risks or product-related information with respect to our products,could result in an unsafe conditionor injury to,or death of,a patient.These problems have in the past and could in the future lead to recall of,or issuance of a safety alert relating to,ourproducts,as well as product liability claims and lawsuits,including class actions,which could ultimately result,in certain cases,in the removal from the bodyof such products and claims regarding costs associated therewith.Due to the strong name recognition of the Medtronic brand,a material adverse eventinvolving one of our products could result in diminished market acceptance and demand for all products within that brand and could harm our reputation andability to market products in the future.Strong product quality is critical to the success of our goods and services.If we fall short of these standards and our products are the subject of recalls orsafety alerts,our reputation could be damaged,we could lose customers,and our revenue and results of operations could decline.Our success also can dependon our ability to manufacture to exact specification precision-engineered components,subassemblies and finished devices from multiple materials.If ourcomponents fail to meet these standards or fail to adapt to evolving standards,our reputation,competitive advantage and market share could be harmed.Incertain situations,we may undertake a voluntary recall of products or temporarily shut down production lines based on performance relative to our owninternal safety and quality monitoring and testing data.17Table of ContentAny of the foregoing problems,including future product liability claims or lawsuits,brought either individually or in the aggregate,or recalls,regardless oftheir ultimate outcome,could harm our reputation and have a material adverse effect on our business,results of operations,financial condition,and cashflows.Our failure to comply with laws and regulations relating to reimbursement of healthcare goods and services may subject us to penalties and adverselyimpact our reputation,business,results of operations,financial condition,and cash flows.Our devices,products and therapies are purchased principally by hospitals or physicians that typically bill various third-party payors,such as governmentalhealthcare programs(e.g.,Medicare,Medicaid and comparable non-U.S.programs),private insurance plans and managed care plans,for the healthcareservices provided to their patients.The ability of our customers to obtain appropriate reimbursement for products and services from third-party payors iscritical because it affects which products customers purchase and the prices,they are willing to pay.As a result,our devices,products and therapies are subjectto regulation regarding quality and cost by HHS,including the Centers for Medicare&Medicaid Services(CMS),as well as comparable state and non-U.S.agencies responsible for reimbursement and regulation of health care goods and services,including laws and regulations related to fair competition,kickbacks,false claims,self-referrals and healthcare fraud.Many states have similar laws that apply to reimbursement by state Medicaid and other funded programs aswell as in some cases to all payors.In certain circumstances,insurance companies attempt to bring a private cause of action against a manufacturer for causingfalse claims.In addition,as a manufacturer of U.S.FDA-approved devices reimbursable by federal healthcare programs,we are subject to the PhysicianPayments Sunshine Act(Open Payments),which requires us to annually report certain payments and other transfers of value we make to U.S.licensedphysicians,certain allied health professionals,and U.S.teaching hospitals.Any failure to comply with these laws and regulations could subject us or ourofficers and employees to criminal and civil financial penalties.We also are subject to risks relating to changes in government and private medical reimbursement programs and policies,and changes in legal regulatoryrequirements in the U.S.and around the world.Implementation of further legislative or administrative reforms to these reimbursement systems,or adversedecisions relating to coverage of or reimbursement for our products by administrators of these systems,could have an impact on the acceptance of and demandfor our products and the prices that our customers are willing to pay for them.We are substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to ourrights or the rights of others may result in our payment of significant monetary damages and/or royalty payments,negatively impacting our ability to sellcurrent or future products.We are substantially dependent on patent and other proprietary rights and rely on a combination of patents,trademarks,tradenames,copyrights,trade secrets,and agreements(such as employee and non-disclosure)to protect our business and proprietary intellectual property.We also operate in an industrycharacterized by extensive intellectual property litigation.Intellectual property litigation can result in significant damage awards and injunctions that couldprevent our manufacture and sale of affected products or require us to pay significant royalties in order to continue to manufacture or sell affected products.Atany given time,we are generally involved as both a plaintiff and a defendant in a number of intellectual property actions,the outcomes of which may not beknown for prolonged periods of time.While it is not possible to predict the outcome of intellectual property litigation,it is possible that the results of suchlitigation could require us to pay significant monetary damages and/or royalty payments,negatively impact our ability to sell current or future products,or thatenforcement actions to protect our patent and proprietary rights against others could be unsuccessful,any of which could have a material adverse impact onour business,results of operations,financial condition,and cash flows.In addition,any public announcements related to litigation or administrativeproceedings initiated or threatened against us could cause our stock price to decline.While we intend to defend against any threats to our intellectual property,our patents,trademarks,tradenames,copyrights,trade secrets or agreements(suchas employee and non-disclosure agreements)may not adequately protect our intellectual property.Further,pending patent applications may not result inpatents being issued to us,patents issued to or licensed by us may be challenged or circumvented by competitors and such patents may be found invalid,unenforceable or too limited in scope to protect our technology or provide us with any competitive advantage.In addition,our patents will expire over time,our ability to protect novel business models is uncertain,and infringement may go undetected.Third parties could obtain patents that may require us tonegotiate licenses to conduct our business,and such licenses may not be available on reasonable terms or at all.In addition,license agreements could beterminated.We also rely on non-disclosure and non-competition agreements with certain employees,consultants and other parties to protect,in part,tradesecrets and other proprietary rights.We cannot be certain that these agreements will not be breached,that such provisions will be enforceable,that we willhave adequate remedies for any breach,that others will not independently develop substantially equivalent proprietary information,or that third parties willnot otherwise gain access to our trade secrets or proprietary knowledge.Moreover,in the U.S.the Federal Trade Commission and various states have adoptedlaws and regulations that purport to ban or severely restrict the use of non-competition agreements,which may limit our ability to use and enforce non-competition agreements with employees.In addition,the laws of certain countries in which we market or manufacture some of our products do not protect our intellectual property rights to the sameextent as the laws of the U.S.,which could make it easier for competitors to capture market position.For example,business in China comprises approximatelyseven percent of our total revenues.This may increase our vulnerability to our technology being reverse engineered or our trade secrets being compromised.Ifwe are unable to protect our intellectual property in China or other countries,it could have a material adverse effect on our business,results of operations,financial condition,and cash flows.Competitors also may18Table of Contentharm our sales by designing products that substantially mirror the capabilities of our products or technology without infringing our intellectual property rights.Healthcare policy changes may have a material adverse effect on us.There have been and continue to be actions and proposals by several governments,regulators and third-party payors globally,including the U.S.federal andstate governments and the government in China,to control healthcare costs and,more generally,to reform healthcare systems.Certain of these actions andproposals,among other things,limit the prices we are able to charge for our products or the amounts of reimbursement available for our products,increase theimportance of our ability to compete on cost,and could limit the acceptance and availability of our products.These actions and proposals could have amaterial adverse effect on our business,results of operations,financial condition,and cash flows.We rely on the proper function,security and availability of our information technology systems and data,as well as those of third parties throughout ourglobal supply chain and our customer and payor base,to operate our business,and a breach,cyber-attack or other disruption to these systems or datacould materially and adversely affect our business,results of operations,financial condition,cash flows,reputation or competitive position.We are increasingly dependent on sophisticated information technology systems to operate our business.That technology includes systems that could be usedto process,transmit and store sensitive data.Additionally,many of our products and services include integrated software and information technology thatcollects data regarding patients or connects to other internal systems.One of the most prevalent attacks on large organizations has been ransomware which canhave a devastating impact on an organizations operations.Our ransomware readiness program has required and will continue to require investment and willnot guarantee that we will be immune from an incident or be able to respond rapidly enough to prevent a negative impact on our business.Like allorganizations,we routinely experience attempted interference with the integrity of,and interruptions in,our technology systems via events such as cyber-attacks,malicious intrusions,or other breakdowns.The consequences could mean data breaches,interference with the integrity of our products and data,compromise of intellectual property or other proprietary information,or other significant disruptions.Furthermore,we rely on third-party vendors to supplyand/or support certain aspects of our information technology systems and resulting products,and customers and payors use information technology systems toprocess payments relating to our products and services.These third-party systems could also become vulnerable to cyber-attack,malicious intrusions,breakdowns,interference,or other significant disruptions,and may contain defects in design or manufacture or other problems that could result in systemdisruption or compromise the information security of our own systems.In addition,our global profile and international operations expose us to geopoliticalevents or issues which may increase cybersecurity risks on a global basis.Lastly,we continue to grow in part through new business acquisitions and,as aresult,may face risks associated with defects and vulnerabilities in acquired businesses systems,or difficulties or other breakdowns or disruptions inconnection with the integration of the acquisitions into our information technology systems.Our worldwide operations subject us to laws and regulations in many jurisdictions,including data protection and cybersecurity laws and regulations.Thevariety of U.S.and international privacy and cybersecurity laws and regulations impacting our operations are described in“Item 1.Business Other FactorsImpacting Our Operation
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2 0 2 4 I N T E G R A T E D R E P O R TIn 2024,a year that once again highlighted the scale of the challenges facing our societies,we stood by our clients more than ever.All over the world,we have offered advice and support while helping them to realise their projects and achieve their goals.Driven by a long-term commitment that we bring to life every day,we give impetus to all those who act for a better future.Believing that every action counts,we mobilise our teams,resources and expertise to create value for the economy and society.As Business Enablers,Innovation Catalysts,Transition Makers and Inclusion Advocates,we are working in unison to shape a more resilient and sustainable world.Together with our clients,our employees,our shareholders and our partners,we are driving this transformation.Driven by a long-term commitment which we bring to life every day,we give impetus to all those who act for a better future.04 VISION 28IMPETUS48 ACCELERATION 50BUSINESS ENABLERS REINFORCING OUR POSITIONS TO BETTER SERVE OUR CLIENTS58INNOVATION CATALYSTS INTEGRATING TECHNOLOGY INTO OUR SOLUTIONS66TRANSITION MAKERS SUPPORTING OUR CLIENTS IN THEIR TRANSITION PROJECTS74INCLUSION ADVOCATES ACTING FOR FINANCIAL AND SOCIAL INCLUSION06MESSAGE FROM JEAN LEMIERRE08INTERVIEW WITH JEAN-LAURENT BONNAF12BNP PARIBAS,A EUROPEAN LEADER SERVING A SUSTAINABLE ECONOMY16OUR FINANCIAL AND EXTRA-FINANCIAL INDICATORS 20THE CHALLENGES WE FACE COLLECTIVELY26LISTENING TO OUR STAKEHOLDERS30OUR STRATEGIC PLAN ENTERS ITS FINAL STAGE34A DIVERSIFIED AND INTEGRATED MODEL CREATING VALUE36THREE OPERATING DIVISIONS SERVING OUR CLIENTS42OUR GOVERNANCE BODIES43OUR SHAREHOLDERS AND INVESTORS44OUR BOARD OF DIRECTORS46OUR EXECUTIVE COMMITTEE32s a global European leader,BNP Paribas contributes to a sustainable economy by combining growth and positive impact.By placing the needs of our stakeholders at the heart of our strategic choices,we are harnessing our financial strength and the collective performance of our teams to continue our development across all our business lines and all our regions.IMPETUSVISION06 MESSAGE FROM JEAN LEMIERRE08 INTERVIEW WITHJEAN-LAURENT BONNAF12BNP PARIBAS,A EUROPEAN LEADER SERVING A SUSTAINABLEECONOMY 16OUR FINANCIAL AND EXTRA-FINANCIAL INDICATORS20 THE CHALLENGESWE FACE COLLECTIVELY26LISTENING TO OUR STAKEHOLDERSAACCELERATIONWero account-to-account digital payment service,the sovereign solution designed by and for Europeans as part of the European Payments Initiative(EPI).We back European champions in the race for innovation by engaging in developing artificial intelligence(AI).To ensure that Europe is not left behind in the AI market,we must support investment in projects and infrastructure.We furthermore actively seek to develop use cases,notably through our partnership with Mistral AI,to meet the challenges faced by corporate clients,such as improving the customer experience,generating additional revenues,optimising costs and reinforcing risk management.Financing the ecological transition is my next focus.While the effects of climate change and the collapse of biodiversity are increasingly tangible,as dramatically illustrated by the natural disasters in Spain,Mayotte and Runion,we must work alongside our corporate,institutional and individual clients to pursue the efforts needed to make our economies more sustainable.We are in line with our Sustainability trajectory,particularly in terms of supporting energy companies in their low-carbon projects.To conclude,it should be recalled that to meet the immense funding needs of these transformations,it is essential to create the unified European capital market that we have long been calling for.This is one of the conditions for restoring Europes competitiveness.At BNP Paribas,we are playing our full part in these changes by closely involving our stakeholders clients,partners,investors,shareholders and employees in giving impetus to all those who act for a better future.MESSAGE WRITTEN ON 18 MARCH 2025.Geopolitical tensions have been rising over several months.We are observing a world that is fragmenting and a new balance is emerging.In Ukraine,after three years of war,the population is exhausted.In the Middle East,the first phase of a truce ended with great uncertainty.In Syria,after the fall of Bashar al-Assad,the transition remains uncertain.In the United States,the Trump administrations rise to power has led to restructured global relations,both diplomatic,as we see on the issue of the war in Ukraine,and economic,with another sharp increase in trade tensions.EUROPE IN RELATION TO THE UNITED STATES AND CHINAIn this new world order,Europe must redefine its position to assert its interests,its values and its model.It can benefit from the negative effects,in the United States and China,of their fight for global leadership.As regards China,the tariffs imposed by the American administration will hamper an economic recovery that is already negatively impacted by a persistent real estate crisis,sluggish consumption and rising public debt.For the US economy,which has been in good shape until now,the trade war could lead to a resurgence in inflation,which could reduce Americans purchasing power.To reestablish a leading position on the international stage,Europe must overcome its structural problems:high debt,stagnating productivity against the backdrop of an ageing population,falling industrial output and declining exports.The internal market is Europes great asset.It must be constantly improved.European growth will remain low in 2025.However,nothing is set in stone,and positive signs are discernible.Among the most significant indicators,the European Central Bank(ECB)is continuing to lower interest rates as inflation is contained.The dynamism of southern European countries and the prospect of easing regulations are other factors to elicit optimism.In this regard,I hope that the European Commissions Competitiveness Compass(1)may serve as a roadmap to put the European economy back in the global race.Europe must reform by simplifying:bolstering its competitiveness and its capacity to innovate will make it more resilient in this new global order.BNP PARIBAS AT THE SERVICE OF EUROPEAN SOVEREIGNTYAs a leader in banking and financial services in Europe,BNP Paribas is strong,resilient and profitable and is a major player in financing the economy,the transformations under way,and in supporting Europes sovereignty in strategic sectors.Our very robust 2024 results exceeded our targets,and we are committed to an ambitious 2025-2026 trajectory based on the strength of our diversified and integrated model,our financial solidity,the quality of our client portfolio,the stability of our governance and the expertise of our teams.We use these resources to back the economy and help companies scale up.Present in 64 countries,we provide support for our clients,corporate and institutional,to expand internationally,to finance projects and to identify the best investment opportunities.We help strengthen European sovereignty by providing support for corporate clients in several strategic sectors.Notably,we contribute to financing defence companies,mainly in NATO countries,and principally in Europe.This support for large groups,mid-caps and SMEs in the sector takes various forms:loans,guarantees,bond issues,export financing,asset management and direct equity investments.We are also well positioned to reinforce Europes sovereignty in the strategic field of payments.BNP Paribas is one of the historical players in the European sovereignty in a new world order.”Jean Lemierre,Chairman of the Board of Directors of BNP Paribas“Europe must reform by simplifying:bolstering its competitiveness and its capacity to innovate will make it more resilient in this new global order.”(1)Launched in January 2025,the Competitiveness Compass aims to enable Europe to regain its economic growth and prosperity.For the 2024-2029 period,its Commission is focusing on three pillars:closing the innovation gap with the European Unions main competitors;joining decarbonisation with competitiveness;reducing dependencies and reinforcing security.CONTRIBUTING TO REINFORCING”VISIONBNP PARIBAS 2024 INTEGRATED REPORT67HE INTERNATIONAL CONTEXT IS CURRENTLY DOMINATED BY STRONG GEOPOLITICAL TENSIONS AND NEW POWER BALANCES.WHAT EFFECTS CAN WE EXPECT ON THE ECONOMY,PARTICULARLY IN EUROPE,AND WHAT IMPACT WILL THIS HAVE ON THE SUPPORT YOUR CLIENTS NEED?JEAN-LAURENT BONNAF:2024 and our current environment are indeed marked by an increasingly unstable international context.The United States and China are competing for global leadership.Hopes for lasting ceasefires remain fragile,in both Ukraine and Gaza.On a macroeconomic level,the increase in tariffs,initiated by the Trump administration,raises the spectre of a trade war.In the eurozone,the stagnation of 2024 should give way to modest growth in 2025.The causes of this sluggishness are both structural and cyclical.In terms of the former,the main reasons are industry difficulties,insufficient investment and high levels of debt.As for the latter,the uncertain economic climate is prompting caution and apprehension among economic players.Companies are reluctant to invest,and unemployment is on the rise again,especially in Germany and France.However,the landscape also shows signs that invite optimism,such as the sharp rebound in the real estate market following lowered interest rates.In this changing context,the role of BNP Paribas is to support its clients and help them project into the future.We continue to back companies as they develop and transition to a low-carbon economy.This requires continuous attention and vigilance in all our regions,so that we are always able to provide them with personalised solutions in terms of advice,management,financing and investment,as well as risk management.Through the power of our diversified and integrated model,we mobilise the expertise of our business lines in a coordinated manner to provide each corporate client with solutions adapted to its needs.Facing turbulence,we also stand alongside our most vulnerable T“We are committed to an ambitious trajectory which creates long-term value for all our stakeholders.”clients:BNP Paribas was named“Worlds Best Bank for Financial Inclusion”by Euromoney magazine in 2024.REGARDING 2024 RESULTS FOR BNP PARIBAS,WHAT IS YOUR ANALYSIS OF THE GROUPS PERFORMANCE?J.-L.B.:My first observation relates to the Groups tremendous resilience in this adverse environment.In 2024,the year was marked both by market share gains and strategic developments.Our results were very solid and exceeded our targets:we committed to a 2%increase in revenues compared to 2023,and they were up 4.1%.The measures we have taken to improve our operating efficiency enabled us to control our operating expenses,which were in progression by 2.1%compared to 2023,representing a positive jaws effect of 2 points,against a backdrop of business growth in most business lines.As a result of constant attention paid to the quality and diversification of our client portfolio,we have kept the cost of risk low.This value-creating performance underpins our financial strength:with a CET1(1)ratio of 12.9%,we continue to grow in a steady and disciplined manner.Our three operating divisions have made their full contribution to the Groups overall performance.Corporate&Institutional Banking(CIB)posted an excellent performance,with revenues of 17.9 billion,while gaining market share in its three business lines:Global Banking,Global Markets and Securities Services.Through its high-added-value platform,our division is established among the top 3 players in Europe and has consolidated its position as the leading European investment bank in the Europe,Middle East and Africa(EMEA)region.Commercial,Personal Banking&Services(CPBS)proved resilient in an unfavourable market environment.The strong momentum of our commercial&personal banking entities contributed to revenues of 26.8 billion,up slightly compared to 2023.Lastly,Investment&Protection Services(IPS)generated revenues of 5.8 billion,up 4.2%,with asset management and insurance posting strong performances.INTERVIEWJean-Laurent Bonnaf,Director and Chief Executive Officer of BNP ParibasVISIONBNP PARIBAS 2024 INTEGRATED REPORT89emissions in several sectors,is part of the Sustainability roadmap that we continue to roll out.Our desire is truly to help our clients carry out their projects:since 2022,we have mobilised 179 billion to support them in their transition to a low-carbon economy.We are a key player infinancingthistransition:forthesecondyear in a row,Dealogic ranked us as the world leader in sustainable bonds and loans,with US$69.2billionin2024(2).We actively support small and medium-sized enterprises(SMEs)and mid-caps through financial backing and consulting to help them make the investments necessary for their transition efforts,while preserving their economic viability.In addition to financing,we aim to support an economy and a society that are transforming.We also help individuals engage in the ecological transition,notably via financing offers for energy renovation,and via BNP Paribas Mobility,our centre of expertise dedicated to promoting sustainable mobility.At the end of 2024,we signed a memorandum of understanding with La Banque Postale for a distribution partnership under which its customers can access our entire mobility offering with associated financing and insurance solutions.WHAT IS THE LONGER-TERM PERSPECTIVE FOR BNP PARIBAS?J.-L.B.:We have a long-term growth project.With the support of our shareholders,we aim for ambitious strategic development with and for our clients,continuing to support their development,technological transformation and ecological transition.We are making this project a reality,together with our teams and external stakeholders,to create value for the economy and society as a whole.INTERVIEW CONDUCTED ON 7 APRIL 2025.YOUR STRATEGIC PLAN IS ENTERING ITS HOME STRETCH.IS IT IN LINE WITH THE PLANNED TRAJECTORY?J.-L.B.:Our solid results in 2024 place us in a favourable position to launch the 2025-2026 trajectory,which will create long-term value.We are fully committed to the last stage of our plan,setting ambitious targets that are well within our reach.We forecast average annual revenue growth of more than 5%for 2025 and 2026,with the cost of risk being kept below 40basis points and net income up by more than 7%per year.Based on these solid fundamentals,we confirm our trajectory of return on tangible equity(ROTE).I stress this indicator,which I think is very important,because it reflects the Groups level of profitability and the quality of its performance:it will reach 11.5%in 2025 and 12%in 2026.To this end,we rely on various assets and growth drivers.CIB will continue to be a powerful growth driver,with a strong and diversified client franchise and the potential to continue to gain market share.As for CPBS,commercial&personal banking revenues will be driven by a more favourable interest rate environment.This will be particularly beneficial to our division given the launch,by Commercial&Personal Banking in France(CPBF)and BNP Paribas Personal Finance,of a strategic roadmap aimed at increasing their profitability.For its part,IPS will build on the organic growth momentum of the insurance,asset management and private banking business lines while benefiting from the acceleration effect driven by our external growth transactions.This is the case in life insurance,through the acquisition of Neuflize Vie and the partnership with Neuflize OBC.In Private Banking,the planned acquisition of HSBCs activities in Germany is an accelerator of our goal to build a powerful private banking platform in Europe.Lastly,the planned acquisition of AXA Investment Managers,coupled with a long-term asset management partnership,marks a major turning point in our strategy to become a European leader in long-term savings management.AS REGARDS THE TECHNOLOGY PILLAR OF THE STRATEGIC PLAN,IN 2024 YOU EMBARKED ON A NEW ACCELERATION PHASE DRIVEN BY A TARGETED INVESTMENT POLICY.HOW ARE THINGS GOING?J.-L.B.:We do not see technology as an end in itself,but as a means to create more value.We continue to invest in payments to equip ourselves with the best technologies and guarantee the highest standards for our clients.We signed a strategic partnership with Groupe BPCE to create Estreem,the new French leader in payment processing,which will process all card payments in Europe for BNP Paribas and Groupe BPCE,representing 17 billion transactions per year.Moreover,the integration of artificial intelligence(AI)into our systems should enable us to generate 750 million in value creation by 2026.To do so,we are investing in cutting-edge partnerships,such as the one signed with Mistral AI in the field of generative AI,in the context of which we are developing use cases in various business lines.We also continue to invest in the modernisation of our IT infrastructures,particularly in the cloud.Our partnership with Oracle will allow us to centralise our databases it operates on a single secure platform to benefit from the automation advantages this solution offers,while reinforcing the security and confidentiality of our clients data.This approach is vital both for the robustness of our model and for the protection of our Group,and of our clients,against cyber risks.YOU ARE MAINTAINING YOUR SUSTAINABILITY ROADMAP.WHAT IS THE 2025 OUTLOOK FOR THIS PILLAR OF YOUR STRATEGIC PLAN?J.-L.B.:BNP Paribas has a long-standing commitment to backing the transition.In the energy sector,low-carbon accounted for more than three quarters of our stock of energy production financing at the end of September 2024,with the objective of reaching 90%by 2030.This approach,along with the alignment of our portfolio with targets to reduce the intensity of financed CO2(1)Common Equity Tier 1(CET1),fully loaded Basel 3.Solvency ratio.(2)Dealogic 2024:total GSS bonds(sustainable,green,social,sustainability-linked bonds)and GSS loans (green,social,ESG-linked loans/sustainability-linked loans).billionin sustainable bonds and loans in 2024.US$69.2 11.7billionin net income,Group share,in 2024.“We do not see technology as an end in itself,but as a means to create more value.”“Our desire is truly to help our clients carry out their projects.In addition to financing,we aim to support an economy and a society that are transforming.”VISIONBNP PARIBAS 2024 INTEGRATED REPORT1011BNP Paribas,ince its creation in 2000 through the merger of banks embedded in the European and global economy for over two centuries,the Group has set itself the task of contributing to a sustainable economy.Driven by this ambition,we ensure that our business has a positive impact in our own operations,in the solutions for our clients and in the role we play in society.WE SUPPORT OUR CLIENTS AROUND THE WORLDWe have built a European leader in banking and financial services,present in 64 countries and territories and able to advise and provide support for its clients around the world.In Europe,most of our business lines hold key positions,often among the leaders in their markets,such as our cash flow(Cash Management,Trade Finance and Factoring)and capital markets activities,as well as our specialised businesses,such as long-term leasing and asset management.Through its retail activity,our Group operates in four markets in the eurozone:France,Italy,Belgium and Luxembourg.It is also rolling out its integrated commercial&personal banking model in a number of other countries,notably Ukraine,Poland,Trkiye,Algeria,Morocco,Kosovo and China through its minority stake in Bank of Nanjing.As a leading banking player,BNP Paribas also has a strong presence in the Americas and an expanded capacity in Asia-Pacific.OUR FOUNDING VALUES HARD-BAKED INTO OUR CULTUREBNP Paribas can count on the commitment of its nearly 178,000(1)employees to support all its clients individuals,smallbusinesses,SMEs,largecorporates,institutional investors and associations at every stage of the economic cycle.At the heart of our collective dynamic,the sum of our expertise and the cohesion of our teams feed our responses to the needs and expectations of our clients.We also rely on the stability of our governance bodies,which ensure the long-term management of our strategy for controlled development and responsible growth.Our governance bodies act in the interest of our Group,while listening to our stakeholders.They ensure that every decision is made in accordance with our demand for ethical responsibility.To meet the key challenges of supporting and financing a just and sustainable transition,we are implementing a proactive and ambitious approach to social and environmental responsibility.This is reflected in our commitment to promoting and implementing responsible financing for a sustainable economy.S WE SUPPORT OUR CLIENTS ON ALL CONTINENTSCOUNTRIES AND TERRITORIES64EMPLOYEES(1)178,0004,855EMPLOYEES IN NORTH AMERICA3,230EMPLOYEES IN SOUTH AMERICA19,627EMPLOYEES IN ASIA-PACIFIC476EMPLOYEES IN THE MIDDLE EAST5,435EMPLOYEES IN AFRICA144,329EMPLOYEES IN EUROPEOUR TEAMS AROUND THE WORLD(1)Figures as at 31 December 2024.The number of employees is reported in Full-Time Equivalents(headcount in proportion to their working time)on permanent or temporary contracts,excluding employees on unpaid leave.Above figures have been rounded.NEARLYA EUROPEAN LEADER serving a sustainable economyVISIONBNP PARIBAS 2024 INTEGRATED REPORT1213OUR DISTINCTIVE MODEL UNDERPINS OUR PERFORMANCEOur diversified and integrated model is based on our three operating divisions.Their leading positions,combined with the fact that they complement each other so well,provide a comprehensive and coordinated response to our clients needs and fuel our commercial performance.The Corporate&Institutional Banking division brings together corporate clients with financing needs and institutional clients looking for investment opportunities.The Commercial,Personal Banking&Services division encompasses all our commercial&personal banking entities and a number of specialised businesses.The Investment&Protection Services division houses our protection,savings,investment and real estate services.By combining our global footprint with their local presence,our three divisions provide a wide range of products and solutions across all our regions.The synergies between all our business lines and our ability to respond in a coordinated way to the changing needs and habits of our clients give our business model its distinctive,high-performance character.This resilient model,which draws its power of execution from the close integration of all our areas of expertise,gives us a tangible competitive advantage and ensures that our clients receive long-term support at every stage of their development.BNP Paribas also stands out for its financial strength,as illustrated by the scale of its balance sheet,its so-called“hard”equity(Common Equity Tier 1),its revenues and its net income.WE PREVENT AND MANAGE RISKSIn a changing and challenging environment,we remain vigilant in managing all the risks to which BNP Paribas is exposed.By anchoring this risk management culture in our practices,we preserve and strengthen the Groups resilience over time.We continuously optimise our internal control system in order to identify the main risks we are exposed to,while anticipating emerging ones.This rigorous control,which operates at all levels,is based on three lines of defence.The first is carried out by the operational entities,business lines and functions.The second is the permanent control managed by the Compliance,Legal,Risk,Finance&Strategy functions.The third,under the responsibility of the“Inspection Gnrale”function,supplements their actions with periodic controls.This control system is reinforced by a strong compliance culture that is widely shared throughout the Group.The quality of our risk management,which is simultaneously prudent,proactive and forward-looking,is reflected in a low cost of risk of 33 basis points in 2024,and a cost of risk to gross operating income ratio that is one of the lowest among European banks.WE MOBILISE THE BEST OF TECHNOLOGYAs long-term partners of our clients,we listen to their needs to deliver innovative solutions,while ensuring a high level of security for their data and transactions.In this respect,we place technology at the heart of our goals,so that it helps to improve both the client and employee experiences,while optimising our operational performance.And because we are convinced that useful innovation comes from fruitful collaboration between a multitude of players,year after year we develop an ecosystem that brings together companies,institutions,start-ups,networks and associations.For many years now,we have been investing in future technologies linked to new applications,notably artificial intelligence,which we are working to integrate into our solutions,processes and tools.Rational data management is also a key issue and is one of the main areas of the Technology pillar of our strategic plan.Lastly,we are supporting the ongoing development of our teams skills in these areas to help them manage these changes.A DISTINCTIVE ANDPOWERFUL MODELA client-centric modelThe Group has a long-term approach to client relationships,relying specifically on strong risk management.An integrated modelThrough collaboration across all its business lines and its global presence,the Group is able to largely meet the needs of its clients and to support them in their development.A diversified modelThe Groups diversification in terms of client segments,regions,sectors and businesses ensures great stability.A model at scaleThe Groups development and expansion are bolstered by digitisation and new technologies,enabling powerful execution at marginal costs.ALONGSIDE OUR CLIENTS,WE ARE CONTRIBUTING TO A SUSTAINABLE FUTUREBuilding on the strength of our solid foundations and positions,our ongoing transformation process and the stability of our management teams,we are continuing on our development path.Its goal is to make BNPParibasaninnovativecompany,combiningthebestof people and technology,and a key partner in helping its clients make their transition to a sustainable model.The Group is fully mobilised to support them,in particular in their low-carbon projects,in line with the Paris Agreement.As an example,at the end of September 2024,76%of our stock of energy production financing was dedicated to low-carbon energies,with the goal of reaching 90%by 2030.Alongside our clients,we are determined to contribute to a just transition that leaves no one behind,and to achieve a sustainable economy that reconciles environmental and social concerns.VISIONBNP PARIBAS 2024 INTEGRATED REPORT1415For more information on all of our financial indicators,see the 2024 Universal Registration Document on invest.bnpparibashrough our diversified and integrated model,we are well positioned in this new phase of the economic cycle to fully engage the last stage of our strategic plan and trigger growth drivers beyond 2026.All three of our operating divisions contributed to the increase in our revenues,up 4.1%compared to 2023 on a distributable basis.Our gross operating income and net income,Group share,were also up by 7.4%and 4.1%respectively.At 33 basis points in 2024,the cost of risk is under control,thanks to the quality and diversification of our portfolio.Finally,we confirm our distribution policy,with a payout ratio of 60%,including at least 50%in the form of dividends,for 2024,2025 and 2026.In addition,we are introducing a semi-annual interim dividend beginning in 2025,based on 50%of the first half-year earnings per share,with an initial payment on 30 September 2025 for the first half of 2025.Our financialSHORT-TERM/LONG-TERM RATINGSA-1/A P-1/A1F1 /AA-R-1(Middle)/AA(Low)Standard&Poors Stable outlook24 April 2023Moodys Stable outlook17 December 2024Fitch Stable outlook16 October 2024DBRS Stable outlook20 June 2024(1)Based on restatement of quarterly series reported on 29 February 2024.Results serving as a basis for calculating the distribution in 2023 and reflecting the Groups intrinsic performance post impact of the Bank of the West sale and post contribution to the ramp-up of the Single Resolution Fund(SRF)excluding extraordinary items.(2)Common Equity Tier 1(CET1),fully loaded Basel 3.Solvency ratio.(3)Detachment on 19 May 2025 and payment on 21 May 2025;subject to approval by the Annual General Meeting of 13 May 2025.(4)Earnings per share calculated on the basis of 2024 net income adjusted for the remuneration of undated super-subordinated notes and the average end-of-period number of shares;calculated in 2023 on the basis of 2023 distributable income and the end-of-period number of shares.Supported by a solid capital structure,BNP Paribas achieved a very strong performance in 2024,exceeding its targets.11,688m202410,975m2023NET INCOME,GROUP SHARE7.809.219.574.79(3)20244.6020233.902022(in euros)NET DIVIDENDPER SHARE12.9 2413.2 2312.3 22COMMON EQUITY TIER 1(2)(CET 1)RATIO48,831m202445,874m2023REVENUESNET EARNINGSPER SHARE(4)(in euros)INDICATORS20242023 distributable(1)2022T46,927m2023 distributable(1)11,232m2023 distributable(1)VISIONBNP PARIBAS 2024 INTEGRATED REPORT1617(1)The definitions of the indicators are available on page 693 of the 2024 Universal Registration Document.(2)https:/ Knights is a leading Canadian trade magazine,as well as an independent investment research and advisory firm.(4)https:/ RATINGS In 2024,BNP Paribas was rated4.9/5 by FTSE Russell,placing itin the 1%of the best companiesof the banking sector.In 2024,BNP Paribas was awardeda score of 57/100 in the S&PGlobal Corporate SustainabilityAssessment,placing the Group inthe 2%of the best ranked playersin the banking sector,on the“Environment”dimension.Moodys ESG Solutions gavethe Group a score of 73/100in 2024,placing it in first placein the“Diversified banks inEurope”category.INCLUSION IN SUSTAINABILITY INDEXES BNP Paribas shares are included inthe main sustainable developmentbenchmarks,including EuronextSustainable World 120,Europe 120,Euro 120 and France 20 indices,FTSE4Good Index Series and StoxxGlobal ESG Leaders Index.OTHER CSR DISTINCTIONS AND COMMITMENTS BNP Paribas was named“WorldsBest Bank for Financial Inclusion”at the Euromoney(2)Awards forExcellence 2024.For the second consecutive year,BNP Paribas was appointed“ESGFinancing House of the Year”by thespecialised magazine InternationalFinancing Review,at the 2024 IFRAwards.BNP Paribas is the only Frenchbank in the 2025 ranking of the“100 most sustainable companiesin the world”,published by theCanadian magazine CorporateKnights(3),where the Group featuresfor the eleventh consecutive year.BNP Paribas is the top French bankin Equileaps international gender-equality ranking(4).BNP Paribas was recognisedby the NGO Global Canopy forits commitment to combattingdeforestation.The NGO placedthe Group among the leaders of the150 financial institutions,assessedin its Forest500 ranking for 2024(5).EXTRA-FINANCIAL RATINGS AND DISTINCTIONSOUR ECONOMIC RESPONSIBILITY20242025 OBJECTIVESAmount of sustainable loans133bn150bnAmount of sustainable bonds106bn200bnAmount of assets under management of open-ended funds,distributed in Europe and classified Article 8 and 9 according to the SFDR285bn300bnOUR SOCIAL RESPONSIBILITYShare of women among the SMP (Senior Management Position)population39%Number of solidarity hours performed by employees over two rolling years(#1MillionHours2Help)1,338,394(in 2023 and 2024)1 million(over 2 rolling years)Share of employees who completed at least four training courses during the year99%OUR CIVIC RESPONSIBILITYNumber of beneficiaries of products and services supporting financial inclusion5.0 million6.0 millionOUR ENVIRONMENTAL RESPONSIBILITYAmount of support enabling our clients to transition to a low-carbon economy179bn200bnAmount of financing to companies contributing to protect terrestrial and marine biodiversity5.4bn4.0bnGreenhouse gas emissions in tonnes of CO2 equivalent(CO2e)per Full-Time Equivalent(FTE)1.48t of CO2e/FTE1.85t of CO2e/FTECSR POLICY MANAGEMENT DASHBOARD(1)Our extra-financialIn 2024,the Group maintained its extra-financial performance trajectory,with a view to achieving the objectives set under its strategic plan.he Groups CSR strategy,in line with the 17 United Nations Sustainable Development Goals,consists of supporting all clients individuals,companies and institutions in their transition to a carbon-neutral economy that makes reasonable use of the planets resources,respects human rights and enables the inclusion of the most vulnerable.This strategy,which is part of a continuous improvement process,aims to help build a more sustainable world while ensuring the Groups stability and performance.To steer this strategy,BNP Paribas has set up a dashboard of 10 indicators,which is monitored on an annual basis by its Executive Committee and its Board of Directors.In 2024,BNP Paribas was still very well positioned to achieve the objectives set in its strategic plan and is continuing its trajectory,notably in financing the low-carbon transition.The main rating agencies rank BNP Paribas among the top financial institutions in the world.The scores obtained reflect our commitment to CSR and responsible practices,as well as the rigorous implementation of environmental,social and governance criteria in our activities.INDICATORSTFor more information on all of our extra-financial indicators,see the 2024 Universal Registration Document on invest.bnpparibasVISIONBNP PARIBAS 2024 INTEGRATED REPORT1819THECHALLENGESBNP Paribas must navigate a changing and complex environment.In this context,it is essential to take stock of current challenges in order to prepare for the future.We are taking a closer look at five major challenges:macroeconomic developments,technological opportunities,just transition,compliance and risks.WE FACE COLLECTIVELYAnalysis of developmentsMACROECONOMICFor its part,the US economy continued to take off in 2024,with a buoyant labour market and consumer spending,a strong dollar and a loose fiscal policy supporting forward-looking investment,notably in infrastructure and the energy transition.Meanwhile,China owed its resilient growth to a record level of exports,although domestic demand remained hindered by a persistent property crisis,historically high unemployment,especially among young people,and structural shortcomings in the social security safety net,leading to very high household savings.IN THIS CONTEXT,WHAT WILL 2025 LOOK LIKE?I.M.L.:At the beginning of the year,we thought that global growth would be around 3%.However,the policy of the new US administration has significantly changed the situation to date.In the United States,uncertainty prevails.The first signs of a slowdown are appearing;the dollar and interest rates have weakened and the stock markets have reversed.Household and business confidence indicators are falling sharply.All these data suggest that a significant slowdown in the US economy is likely.Conversely,the European Unions growth prospects have been significantly boosted by recent developments,notably Germanys historic decision to commit around 1 billion in public spending on infrastructure and defence over 10 years.And there are several other buoyant trends:Europe unlike the United States should benefit from an additional monetary easing.The European Union has become aware of its lack of competitiveness on a global scale and the urgent need to adapt to the new economic and strategic situation imposed by the United States.It has therefore launched two flagship initiatives:the ReArm Europe plan to stimulate its investments in defence capabilities and the Competitiveness Compass to address its structural weaknesses and simplify its regulatory burden.Lastly,China,faced with increasingly high trade barriers from many of its partners,is now considering whether it can boost its domestic consumption,which would be beneficial for both China and the rest of the world.Interview conducted on 26 March 2025.WHAT DO YOU TAKE AWAY FROM 2024 IN TERMS OF THE ECONOMY?Isabelle Mateos y Lago:In 2024,global growth managed to hold steady at 3.2%,i.e.a pace similar to that of 2023.However,this rate masks divergent trends between the worlds major economic centres.The eurozone posted a rate of 0.7%,while the United States and China reached 2.8%and 4.9%,respectively.The year was marked by the widespread easing of inflationary tensions,as a result of lower pressure on energy prices and the measures taken by central banks.The latter were thus able to implement a policy of interest rate reduction.WHATS BEHIND THE DESYNCHRONISATION OF TRENDS IN THE EUROPEAN UNION,THE UNITED STATES AND CHINA?I.M.L.:Despite the generally favourable effects of monetary policy,the eurozone economies face structural difficulties.High debt levels,a lack of coordination on budgetary policy,stagnating productivity in a context of ageing populations,falling industrial output and declining exports,particularly in Germany:all these factors are weighing on their level of and potential for growth,not to mention the political crises in France and Germany,which have hampered initiatives to revive the European economy.Throughout 2024,the global economy showed resilience,but growth disparities between the major regions widened.Ebbing inflation,diverging economies and structural weaknesses:all these contrasting signals raise questions about the future.What are the main challenges ahead and what opportunities could emerge?Isabelle Mateos y Lago,Chief Economist of BNP Paribas,analyses recent trends and sheds light on future prospects.Find the latest economic scenario and forecasts on the BNP Paribas Economic Research websiteIsabelle Mateos y Lago,Group Chief Economist and Head of Economic Research at BNP ParibasVISIONBNP PARIBAS 2024 INTEGRATED REPORT2021Seizing opportunities 200bnThe total amount of investments mobilised by the European Union to accelerate the development of AI in Europe,including 150 billion from large corporations.This alliance,called the EU AI Champions Initiative,brings together more than 60 companies,including BNP Paribas.Source:International Data Corporation(IDC)Worldwide Artificial Intelligence Spending Guide.“Technology is at the heart of our operations,from cloud to data,which is essential for the industrialisation of AI.With more than 800 use cases in production in 2024 and 750 million in value creation through to 2026,AI allows us to accelerate digitisation,enhance the client experience and place security and responsible technology at the forefront.”ASu Yang,Head of Artificial Intelligence and IT Innovation at BNP Paribas TECHNOLOGICALFinancing aJUST TRANSITION72%The percentage of Europeans who,in 2024,believed that efforts to combat global warming will generate inequalities between the wealthy and the most disadvantaged.Source:BNP Paribas Just Transition Observatory,2024.“To be accepted,the transition to a sustainable economy must be a just transition that leaves no one behind:neither companies,whose transformation must be sustainable in the long term,nor individuals,whose purchasing power must be protected.”Laurence Pessez,Global Chief Sustainability Officer and Deputy Head of Company Engagement at BNP ParibasWthat enable everyone to participate in this vital transformation.The Group is convinced that banks have a role to play in meeting the considerable investment needs of the transition and in financing just transition programmes.To make the transition accessible,BNP Paribas is helping its individual and corporate clients to make the necessary investments without jeopardising their purchasing power and economic viability.Dedicated teams offer clients innovative products and services with a positive impact.For example,we finance low-carbon mobility solutions and home energy renovations to reduce transition costs for individuals.But supporting a just transition also means empowering those most at risk to protect themselves by adapting their activities,not reluctantly,but deliberately.A good example of this is farmers who are significantly affected by climate change.BNP Paribas has placed regenerative agriculture at the heart of its strategy to support the agri-food sector because it contributes to restoring the soil and making it more productive over time,thus ensuring the sustainability of clients activities.For instance,the partnership between BNP Paribas and McCain in Poland supports famers in their transition in a very concrete manner(see page 68).It is a change in which they are fully involved,through a genuine just transition approach.hile the world must be able to adapt and reimagine itself by integrating the energy and ecological transitions,the role of the financial sector is multi-dimensional:it must support its institutional,corporate and individual clients in their projects without forgetting those who are most vulnerable as a result of climate change.A central question arises:how can the transition to a new,more sustainable economic model be achieved without reinforcing inequalities?THE KEY ROLE OF BANKS IN FINANCING AND ACCELERATING THE JUST TRANSITIONAccording to the International Labour Organization(ILO),“a just transition promotes environmentally sustainable economies in a way that is inclusive,by creating decent work opportunities,reducing inequality and leaving no one behind”.Social policies are needed to mitigate the impact of the transition on the most vulnerable sectors of the economy which will have to transform,adapt or even disappear while others will develop to serve a low-carbon economy.Since 2023,BNP Paribas has published an annual Just Transition Observatory to examine civil societys expectations on this complex issue at the European level and raise awareness among all stakeholders for the need to create solutions INNOVATING FOR GREATER EFFICIENCY AND GROWTHAfter gauging the extent of these changes early on,BNP Paribas focused on industrialising its systems,improving its operational efficiency and enhancing theclient experience.Since 2016,we have been integrating AI into our processes and tools.Today,having achieved a certain maturity,we are aiming to have 1,000 use cases in production in 2025,with four main benefits:knowledge of clients and optimisation of their experience;increased operational efficiency;the detection and prevention of risks,especially on the cyber front;and the invention of tomorrows banking services through generative AI.By signing a partnership with Oracle,BNP Paribas has also taken a new step in its cloud strategy in order to further strengthen the security and confidentiality of its clientsdata.Moreover,the Group has continued to develop targeted partnerships with the start-up ecosystem,notably with Mistral AI in 2024.At the same time,we are gradually integrating these new technologies into the day-to-day work of our teams to ensure that they enhance their working experience and skills.t the end of two decades of digital transformation,the way we live,work and consume has been radically transformed.Having taken stock of these new habits,companies have made significant progress in terms of operational efficiency,client relationships and innovation.Building on this progress,they are now turning to the latest technologies,in particular generative artificial intelligence(AI).The banking sector,given its major role in the economy,is both vigilant and ambitious in the face of these innovations.First and foremost,it is vigilant in maintaining service continuity.To enable their clients to carry out their transactions when they want to,banks must operate with the highest levels of quality,efficiency and security on a daily basis,in particular by protecting data confidentiality.Secondly,the sector has the ambition to continuously improve the client experience.To provide a simple,fluid and attractive customer journey,banks have invested heavily to enhance or even rethink their services,while developing the skills of their employees and their working environment.Notably,they have embraced the technological opportunities associated with the development of cloud services,which guarantee the resilience and security of information systems while providing agility and better control of data.More recently,they have turned to generative AI in order to anticipate client demands for speed and personalisation.Used responsibly and within a framework of good governance,AI can also optimise risk management and improve efficiency in the fight against fraud.VISIONBNP PARIBAS 2024 INTEGRATED REPORT2223TAnticipating and managing 5 trillionThe estimated amount of global value at risk due to potential cyberattacks between 2019 and 2023.Source:The World Bank,https:/www.worldbank.org/en/programs/cybersecurity-trust-fund/overview“The risk management culture is a differentiating factor,determining the solidity or vulnerability of banks.Even if it has been one of our major assets for a long time,it must never be taken for granted,and requires constant vigilance to ensure optimal resilience in the face of all scenarios.It must be part of our DNA,passed down from generation to generation.”World Economic Forum in identifying three key areas.First,growing geopolitical tensions impact global economic and financial stability.Secondly,environmental,social and governance(ESG)factors are redefining the positioning of many players,including political actors,regulators and financial institutions.Lastly,technology-related threats,such as cyberattacks and disinformation,are testing our resilience.The rise of AI,notably generative AI,is fundamentally transforming banking processes and raising new challenges in terms of security and ethics.These multidimensional factors require agile,systematic and adaptive responses.We remain vigilant and take a proactive approach in order to reap the benefits that some of these factors,such as AI,can provide,while preserving the resilience of our Group and our clients.REINFORCING OUR APPROACH THROUGH STRUCTURED COLLABORATIONTo meet these challenges,BNP Paribas relies on a partnership and a cross-cutting approach.Our business lines and functions play a key role in fostering a strong risk culture throughout the entire Group.In doing so,they ensure the sustainability of our activities and strengthen the relationship of trust that we maintain with our clients,our partners and all our stakeholders.Our goal is to combine rigour and innovation so as to anticipate future threats and ensure ever more robust risk management integrated across all our lines of defence.he World Economic Forums Global Risks Report 2025 describes an increasingly fragmented world,where the acceleration of geopolitical,environmental,societal and technological risks is profoundly reshaping economic and strategic balances.While geopolitical conflicts are identified as the predominant immediate danger,the climate and ecological crisis constitutes a structural risk that requires appropriate and sustainable responses.The loss of biodiversity threatens the integrity of ecosystems,while the recurrence of natural disasters calls for an overhaul of infrastructures and economic models.In addition to these concerns,there are growing technological risks,including disinformation and the challenges posed by artificial intelligence(AI).The report also highlights the growing interdependence between these risks,making risk management even more complex.PUTTING RISK MANAGEMENT AT THE HEART OF OUR STRATEGYAt BNP Paribas,risk management is an absolute priority,embedded across all levels of the Bank.We implement a rigorous control system to anticipate and respond to current and emerging risks.Our analyses focus on the management of so-called“primary risks“market,credit,counterparty,liquidityandoperationalrisksandalso on the emerging dimensions that could influence them.In this regard,BNP Paribas concurs with the conclusions of the OVER RISKSFrank Roncey,Chief Risk Officer at BNP ParibasCOMPLIANCEmanagement of these risks,regular reporting to the supervisory bodies,and the implementation of a comprehensive regulatory framework,as well as increased controls and corrective measures,when necessary.Innovation plays a key role in this risk management.Thecontrolleddevelopmentofartificialintelligencewillenable ustoimprovetheeffectivenessofourcomplianceframework.MAKING COMPLIANCE EVERYONES BUSINESSAsthefirstlineofdefenceinourinternalcontrolframework,the compliance culture of the business lines is essential,as compliance with regulations is a prerequisite for all.To disseminate this culture,the Compliance function relies on the solid expertise of its employees and their know-how to adopt the right behaviours,as well as on a continuous dialogue with the business lines,along with educational actions and training programmes.Respecting the rules,reporting non-compliant behaviour and adopting best practices are crucial habits.The Group raises the awareness of its employees and trains them to act in accordance with its Code of Conduct.This Code requires everyone to act with integrity and responsibility,to protect our customers,our colleagues and the Group itself,and to respect each other.The“Speak up”culture,which encourages the reporting of issues,is a key lever in ensuring a safe working environment.ince 2022,new economic and geopolitical balances have created an environment marked by growing instability.At the same time,new compliance risks are emerging,such as those related to new payment methods,the popularisation of crypto-assets and more sophisticated formsofabuseandfraud.Intheareaoffinancialsecurity,international sanctions regimes are becoming increasingly complex,while European AML/CFT(1)regulations are evolving with the creation of the AMLA(2).The protection of market integrity remains a major issue and a challenge,given the proliferation of communication channels and trading platforms.Expectations in terms of Conduct are increasing in order to ensure ethical and transparent behaviours.In this context,the Compliance function plays an essential role in ensuring the security of BNP Paribas,its clients and its employees,while supporting the Groups business strategy,and must constantly evolve to adapt to these numerous changes.REINFORCING OUR COMPLIANCE SYSTEM WITH RESILIENCEAt BNP Paribas,the Compliance function,as our second line of defence,monitorsseveralnon-compliancerisksrelatingtofinancialsecurity(moneylaunderingandterroristfinancing,non-compliancewithsanctions regimes,corruption,non-compliance with tax regimes),protection of client interests,market integrity,professional ethics,ESGandConduct.Complianceensuresbetteridentificationandoverall“The role of our function is to establish a normative framework and to ensure that our activities are robust and comply strictly with regulations,while optimising the effectiveness of our setup.This requires the implementation of a true compliance by design within the Group,taking into account risks at all levels of the organisation.”Stphanie Maarek,Head of Compliance at BNP ParibasSUS$3.1 trillionin illicit funds(3)flowed through the global financial system in 2023.Source:NASDAQ Verafin 2023 study.Meeting challenges(1)Anti-Money Laundering and Countering the Financing of Terrorism.(2)Anti-Money Laundering and Countering the Financing of Terrorism Authority.(3)Including the financing of terrorism,money laundering,the proceeds of trafficking in human beings and in drugs.OVER VISIONBNP PARIBAS 2024 INTEGRATED REPORT2425Listening to ourSTAKEHOLDERSMAJORCRUCIALImportance for external stakeholdersImportance for BNP Paribas employeesPolitical andsocietal riskBiodiversityOperationalenvironmentalimpactResponsible procurementLocalcommunity supportAccessibility for all to products and servicesData privacy and securityEthics&complianceFair andinclusiveworkplaceGovernanceTransparentpracticesEmploymentpracticesDigitaltransformation&innovationCorporate economic valueCustomerexpectationsTalentmanagementResponsibleinvesting andfinancingClimate change&energy transitionBusinesscontinuityHuman rightsFair competitivepracticesOUR EXTRA-FINANCIAL CHALLENGESIMPORTANTMAPPING AND PRIORITISING OUR CHALLENGESTo help analyse stakeholder interests and viewpoints,the Group has developed a chart to map and prioritise 21 extra-financial challenges,cross-referencing their importance as expressed by employees(1)and external stakeholders(2).This chart distinguishes between three categories of challenges:crucial,major and important.According to our stakeholders,our Group is facing six crucial challenges,namely data privacy and security;climate change and energy transition;ethics and compliance;human rights;responsible investing and financing;and business continuity.The eight major challenges are:corporate economic value;customer expectations;digital transformation and innovation;employment practices;fair and inclusive workplace;governance;talent management;and transparent practices.The six crucial and eight major challenges represent 14 key and cross-cutting priorities at the heart of our strategic plan.They are also found in its three main pillars:profitable growth(Growth),the optimisation of the client and employee experience(Technology)and the scaling up of sustainable finance(Sustainability).n line with our Company purpose “we are at the service of our clients and the world we live in”we have made the decisive choice to engage in an open and constructive dialogue with our stakeholders.At the heart of our strategic orientations,this dynamic of interaction allows us to better understand their expectations and,at the same time,how society is changing.It is therefore an integral part of our social and environmental responsibility.Our stakeholder-oriented approach comes down to understanding their interests,points of view and expectations regarding our activities.It enables us to broaden our thinking,anticipate our clients needs and develop our product and service offerings accordingly.It also informs our focus on designing and implementing innovative solutions with a positive impact on society.This regular dialogue with our stakeholders,which allows us to explain our decisions and actions,helps to increase the transparency and clarity of our publications.ORGANISING A STRUCTURED DIALOGUEThe Group has identified different types of stakeholders:its clients(individuals,professionals,corporate clients and institutions),its employees and their representatives,its shareholders(individual and institutional investors),its suppliers,financial and extra-financial rating agencies,regulatory bodies and public authorities,as well as civil society and its organisations.We have established personalised levels of communication with each of these stakeholders.Each one has dedicated contacts within the Group who deploy several complementary modes of interaction to enhance dialogue,including surveys,networks and events.I(1)These perceptions were collected from more than 1,200 Group employees.(2)These perceptions were assessed through an analysis of the publications of our main peers,over 2,500 regulations applicable to our activities and regions,over 20,000 trade press articles and over 450 million messages posted on X.VISIONBNP PARIBAS 2024 INTEGRATED REPORT262730 OUR STRATEGIC PLANENTERS ITS FINAL STAGE34A DIVERSIFIED AND INTEGRATED MODEL CREATING VALUE 36THREE OPERATING DIVISIONS SERVING OUR CLIENTS 42OUR GOVERNANCE BODIES 43OUR SHAREHOLDERS AND INVESTORS44OUR BOARD OF DIRECTORS 46OUR EXECUTIVE COMMITTEEindful of the world around it,BNP Paribas is maintaining and intensifying its support to those who act for a better future.Fuelled by our diversified and integrated business model,this momentum is steered by our stable,measured and long-term corporate governance.We are capitalising on the diversity and complementarity of the business lines in our three operating divisions,to provide each client with solutions tailored to their expectations,in a coordinated manner,while continuing to create value for our stakeholders,year after year.MIMPETUSVISIONACCELERATIONOurenters its final stageOur strategic plan is entering its final stage and the trajectory for 2025 and 2026 is fully under way.This is in line with the ambition to consolidate our European leadership with the aim to help our clients accelerate theirtransition to a sustainable economy.The power of its diversified,integrated and at-scale model allowed BNP Paribas to make significant progress for the benefit of its clients and society.We are progressing at a steady pace in all our regions.Our strategy,developed on three key pillars Growth,Technology and Sustainability is based on a common foundation:human capital.In their daily commitment to our clients,our nearly 178,000 employees are the main artisans of the strategic plans deployment.The Group posted a very strong performance in 2024,exceeding its initial targets,and thus confirming its trajectory through to 2026.GrowthContinued profitablegrowth by leveragingthe Groups leadingpositions in EuropeTechnologyTechnology for optimisedclient/employeeexperience andoperational performanceSustainability Accelerated mobilisationof the Groups businesslines on sustainablefinance issuesTechnology andindustrialisationat the heart of ourmodelDeploymentof sustainablefinance and ESGat scaleDevelopmentof employeespotential andengagementFUELLED BY A POWERFUL MODELBUILT ON THREE STRENGTHSFosterorganicgrowthGainmarketsharesDevelopnewopportunitiesGenerate economies of scaleIN ORDER TOSTRONG AMBITIONS strategicallyaligned to bestserve clients andpartners with the fullbenefit of ourintegrated anddiversifiedoperating modelLeadingEuropeanplatformsSTRATEGIC PLAN(1)The notion of revenues is equivalent to that of net banking income.(2)Increase in Group revenues between 2024 and 2026 minus the increase in Group operating expenses between 2024 and 2026.(3)Calculated based on net income,Group share,adjusted for the remuneration of undated super-subordinated notes and the average end-of-period number of shares.(4)Return on Tangible Equity. 5%COMPOUNDED ANNUAL GROWTH RATE FOR THE 2024-2026 PERIODREVENUES(1)JAWS EFFECT(2) 1.5ptON AVERAGE PER YEAR FOR THE 2024-2026 PERIOD 8%COMPOUNDED ANNUAL GROWTH RATE FOR THE 2024-2026 PERIODOUR 2025-2026 TRAJECTORYIN 2025 AND 2026NET INCOME,GROUP SHARE 7%COMPOUNDED ANNUAL GROWTH RATE FOR THE 2024-2026 PERIODROTE(4)11.5%IN 202512%IN 2026IMPETUS3031BNP PARIBAS 2024 INTEGRATED REPORTOur development is sustained by capitalising on the strengths of our diversified,integrated and at-scale model.Our three operating divisions Corporate&Institutional Banking(CIB);Commercial,Personal Banking&Services(CPBS);Investment&Protection Services(IPS)made full contributions to the Groups value creation in 2024 through their performance and the complementary nature of their expertise.Our results exceeded the targets announced,with significant increases compared to 2023:revenues and net income were up 4.1%.ACCELERATION DRIVEN BY EXTERNAL GROWTH TRANSACTIONS In addition to dynamic organic growth,BNP Paribas initiated ambitious external development transactions that translate into additional streams of growth,such as the planned acquisition of AXA Investment Managers,and investments in wealth management and life insurance with the planned acquisition of HSBCs private banking business in Germany and the acquisitions of Neuflize Vie in France and BCC Vita in Italy.BNP Paribas is therefore well positioned to continue its momentum in 2025 and 2026.Since 2022,we have devoted 179 billion to supporting our clients in their projects to transition towards a low-carbon economy.A true acceleration was marked in 2024 with 75billion of finance and support.For BNP Paribas,advising clients in their transition also means helping them leverage all solutions,including low-carbon energy projects,circular concepts in real estate or IT,and regenerative agriculture.As such,together alongside its clients,the Group contributes to a solid and more sustainable economy.This economy must also,and above all,leave no one behind.At BNP Paribas nominated“Worlds Best Bank for Financial Inclusion”by Euromoney magazine our teams apply their expertise with this conviction every day.A LEADING PLAYER As the worlds leader in sustainable bonds and loans issuance(1)for the second year running,BNP Paribas reasserted its role in financing a more sustainable economy.We are also pioneers in financial engineering and in 2024 launched the first public blue bond(2)in France as well as the first fund dedicated to forestry.(1)Dealogic 2024:total GSS bonds(green,social,sustainable,and sustainability-linked bonds)and GSS loans(green,social,ESG-linked and sustainability-linked loans).(2)A blue bond aims to raise capital from investors to finance marine and ocean projects with positive impacts for the environment,the economy and the climate.“In 2024,we posted a very strong performance,better than forecasted.We are specifying our 2025-2026 trajectory and already have medium-term growth drivers.”Lars Machenil,Chief Financial OfficerIn a context marked by rapid technological changes and increasing regulatory requirements,we are continuing to roll out our People Strategy by focusing on three dimensions.MEETING RECRUITMENT CHALLENGESFaced with recruitment tensions and rapid changes in our businesses,it is both essential and a challenge to have the right person in the right place at the right time.In response to these needs,we are rolling out our internal work-study programme.It involves offering internal mobility opportunities for our employees while providing training to bolster the skills related to their new position.Launched in several countries in job positions with a strong technical dimension,such as business analysts and cybersecurity experts,this initiative was extended to commercial professions in 2024 and will be deployed further.ALIGNING SKILLS NEEDED BY OUR TEAMS WITH THE COMPANYS STRATEGYTo support our strategic plan,we work with our teams daily to develop their skills.This is achieved by reinforcing our training system and launching a new tool to establish the skills that the Group will need in the future.Developed in partnership with managers to facilitate the implementation of concrete actions,this Strategic Workforce Planning(SWP)identifies candidates and training needs.Moreover,we enhanced our training offering in terms of data and AI,and our Sustainability Academy provides all our teams with high value-added training.ENSURING THE WELL-BEING OF OUR EMPLOYEESIn 2024,we renewed the agreement on fundamental rights and the Groups global social baseline,with UNI Global Union,the international trade union federation.Developing skills and ensuring the well-being of our teams to meet our strategic challengesWe are strengthening the industrialisation of our technological platforms,with a focus on both our clients,for whom we provide innovative and secure services,and our employees,with whom we work as they adopt new tools and evolving working methods.KEEPING OUR IT INFRASTRUCTURES AT THE CUTTING EDGE AND INTEGRATING AIProviding our clients with innovative solutions while protecting them from cyber risks and securing the use of their data are our main priorities.With these objectives in mind,we continuously modernise our applications,interfaces and infrastructures.In this last field,which is essential to our robustness,we continue to reinforce collaboration with market leaders to consolidate our position.We have also widely adopted artificial intelligence(AI),with a target of 1,000 use cases in production by 2025,and made a major shift towards generative AI.The partnership established in 2024 with Mistral AI to roll out its models across most of our business lines allows us to gain leverage in this context.“We are accelerating the integration of generative AI into our systems by combining three priorities:security to preserve the trust of our clients and regulators,partnerships to access cutting-edge technologies,and training to engage our teams.”Philippe Maillard,Chief Operating Officer“Attentive to the needs of our employees and in partnership with managers,Human Resources is continuously adapting to the changing needs of the business lines in order to meet our goals.”Sofia Merlo,Head of Human Resources“Through the expertise and commitment of our teams,we support our clients in their projects every day,so they can seize the opportunities provided by the transition and,together,build a truly sustainable economy.”Anne Pointet,Head of Company EngagementGROWTH Leveraging our position as a European leader to build growth drivers TECHNOLOGY Placing technology at the core of our efforts to enhance our client and employee experienceSUSTAINABILITY Supporting our clients in their transition to a sustainable economyin growth in net income,Group share,in 2024 compared to 2023,on a distributable basis. 4.1%on sustainable bonds and loans(1)for the second consecutive year.#1 IN THE WORLDApplicable to all our employees as of 1December 2024,it has incorporated the changes in our working methods since its initial signing in 2018 and makes it possible to strengthen,in relation to local regulations,the fundamental rights of our teams on subjects such as teleworking and parenting support.Furthermore,the Group is committed to the protection and support of employees,with the development of the global“We Care”programme for health and well-being around two major risks:sedentary lifestyles and mental health.AI use cases in production at the end of 2024.800OVERIMPETUS3233BNP PARIBAS 2024 INTEGRATED REPORTThanks to the solidity of our Group and the strength of our diversified and integrated model,we support our clients and partners globally to help them develop and carry out their projects.Our commitment to them extends over the long term and in all phases of the economic cycle.By leveraging our leading business platforms and our position as a European leader in many markets,we support the development of a sustainable economy and create value for all our stakeholders.A diversified and integrated MODEL creating valueADVISORYEVERYDAY BANKINGFINANCINGPAYMENTSSAVINGSPROTECTIONINVESTMENTSCommercial,Personal Banking&Services(CPBS)95,405employees(1)Revenues(2)26.8bn40,886 employees(1)Revenues17.9bnCorporate&Institutional Banking(CIB)18,204employees(1)Revenues 5.8bnInvestment&Protection Services(IPS)Comprehensive and long-term client-centric approachSolid financial structureIntegrated platforms and approachesSector diversification and prudent risk management GrowthPursuing profitable growth by leveraging our leading positions in EuropeSustainabilityMobilising all our business lines on sustainable finance issuesTechnologyPlacing technology at the heart of our clients and employees experience and of our operational performanceOUR STRATEGIC PLAN“We are at the service of our clients and the world we live in”OUR COMPANY PURPOSEHumanNearly 178,000(1)employees,including more than 144,000 in Europe99%employees completed at least four training courses during the yearNearly 133,000 employees have completed at least one training course in sustainable finance through our Sustainability Academy,since its creation TechnologicalOver 800 artificial intelligence use cases under productionOur Digital,Data&Agile Academy contributes to the reinforcement of skills(upskilling)and the acquisition of new ones(reskilling)A growing pool of 1,200 APIs(3)handling over 1,390 million transactions per month Financial11.7bn in net income,Group share134.1bn in equity480bn in immediately available liquidity reserve(4)A 12.9%Common Equity Tier 1 ratio(1)Figure as at 31 December 2024.The number of employees is reported in Full-Time Equivalents(headcount in proportion to their working time)on permanent or temporary contracts,excluding employees on unpaid leave.This figure has been rounded.(2)For CPBS,revenues include 100%of Private Banking in commercial&personal banking(excluding PEL/CEL effects).(3)Application Programming Interfaces.(4)Liquid market assets or eligible assets in central banks(counterbalancing capacity),taking into account prudential standards,notably US standards,minus intra-day payment system needs.(5)Subject to approval by the Annual General Meeting of 13 May 2025.(6)The European Sustainable Finance Disclosure Regulation(SFDR)identifies funds according to their sustainability potential.The Article 8 classification concerns funds declaring that social and/or environmental criteria are taken into account.The Article 9 classification concerns funds with a sustainable investment objective.OUR 2024 RESOURCESOUR 2024 VALUE CREATIONFor our clientsDaily and long-term support for our clients(individuals,corporate clients and institutional clients),in 64 countries and territories,on all continents900bn in outstanding customer loans1,035bn in customer deposits1,377bn in assets under management For our employees14bn in fixed and variable remuneration,incentive bonuses and profit-sharing paid39%women in the SMP(Senior Management Position)populationMore than 20,000 Group internal recruitments4.5%of the Groups shares held by employees For our shareholders and investors A 4.79 net dividend per share(5)A 67bn market capitalisationFor society and the environment 6.4bn in taxes paid A budget of over 76m for the Groups philanthropy5 million beneficiaries,since 2022,of products and services supporting financial inclusion1,338,394 hours spent on solidarity initiatives by the Groups employees in 2023 and 2024Nearly 17,000 external hires on permanent contracts at the Group179bn dedicated to supporting our clients in the transition to a low-carbon economy since 2022285bn in assets under management in BNP Paribas Asset Management open-ended funds distributed in Europe,classified as Article 8 or 9 according to the SFDR(6)76%of our stock of energy production financing dedicated to low-carbon energies,as at the end of September 20245.4bn dedicated,since 2022,to financing companies contributing to protect terrestrial and marine biodiversityIMPETUS3435BNP PARIBAS 2024 INTEGRATED REPORTserving our clientsTHREEOPERATING divisionsBNP Paribas is organised around three operating divisions:Corporate&Institutional Banking(CIB),Commercial,Personal Banking&Services(CPBS)and Investment&Protection Services(IPS).Focused on our clients needs,they represent the three pillars of our diversified and integrated business model.Designed to foster collaboration between all our business lines and to meet the expectations of our stakeholders,these divisions implement a comprehensive,shared approach in order to enhance each others expertise and provide our clients with bespoke,long-term support for all their projects.OUR STRATEGYThe CIB division aims to be the long-term preferred European partner for its corporate and institutional clients.It is particularly committed to supporting them in their transition to a more sustainable model.The development of this strategy is based on three priorities:capitalise on the Groups diversified,integrated and at-scale model;leverage its ability to connect its corporate and institutional franchises;gain new market share in a consolidating industry.OUR PROGRESS IN 2024 In 2024,against a backdrop of continued market disruption,CIB drew on its three strong and integrated business lines to pursue its long-term strategy to serve its clients.All three demonstrated their growth potential and heightened resilience in the face of economic cycles.Through increasing market shares,the division bolstered its position as the leading European CIB in EMEA.Thus,in 2024,CIB:intensified cross-selling and inter-regional dynamics,fully exploiting the potential of the integrated model to serve clients and finance the economy;accelerated its development as a result of the investments made to strengthen its franchises;consolidated its position as a key partner in the transition to a low-carbon economy by mobilising its teams and reinforcing its expertise,notably through the Low-Carbon Transition Group(LCTG).CIB is the leader in sustainable financing worldwide and in the EMEA region(2).Corporate&Institutional Banking(1)Environmental,social and governance.(2)Dealogic,All ESG Bonds&Loans,EMEA and Global rankings,in volume by bookrunner,2024.Yann Grardin,Chief Operating Officer,Corporate&InstitutionalBanking“Our clients long-term trust is rooted in the remarkable commitment of our teams.More than ever,we are working alongside corporate and institutional clients to help them navigate a rapidly changing world and seize all the opportunities that arise.We strive to make our ties even stronger tomorrow.”SECURITIES SERVICESRanked among the worlds leading players in securities custody,the business line securely stores and manages the assets of banks,fund managers,insurance companies,pension funds and sovereign wealth funds,while ensuring the smooth running of their financial transactions.It helps to increase their global investment opportunities,manage their risks and improve their operational efficiency.With a view to helping institutional investors along their transition path,Securities Services is incorporating new,customisable and flexible ESG(1)criteria,thus enabling more responsible monitoring of their portfolios.“Worlds Best Bank for Securities Services”(Euromoney Awards for Excellence 2024).GLOBAL BANKINGBy combining a global platform with a local presence,Global Banking provides corporate clients with a wide range of products and services,including financing solutions and securitisation in collaboration with Global Markets,as well as primary activities in the bond and equity markets,advice on mergers and acquisitions,and transaction banking expertise.Global Banking supports its clients in their transition to a low-carbon economy by mobilising a comprehensive range of products and services,supported by a network of experts in sustainable transition.“Bond House&Europe Investment-Grade Corporate Bond House EMEA Leveraged Finance House”(IFR Awards 2024).GLOBAL MARKETSAs a specialist in capital markets investment and financing,Global Markets offers a broad range of investment,hedging,financing,research and market analysis products and services across all asset classes.It is aimed at a wide range of institutional and corporate clients operating internationally.Global Markets is contributing to the emergence of a carbon-neutral economy and a more socially responsible world,by helping its clients to integrate ESG(1)criteria into their market activities and by developing sustainable solutions.“Loan sustainability coordinator of the year;Lead manager of the year,sustainability bonds sovereign;Lead manager of the year,sustainability bonds supranational,sub-sovereign and agency(SSA)”(Environmental Finance Sustainable Debt Awards 2024).orporate&Institutional Banking(CIB)acts as a bridge between two types of clients:corporate clients and institutional clients banks,insurance companies and asset managers.CIB teams connect the financing needs of the former with the investment opportunities sought by the latter,by offering them tailor-made solutions in the areas of capital markets,securities services,financing,risk management,cash management and financial advice.CAs part of our strategic plan,CIB is implementing its goal of becoming the leading European player among the major global corporate and institutional banks,as well as the preferred partner of its clients in their transition to sustainable development.Operating in three major regions Europe,Middle East and Africa(EMEA);Americas;Asia-Pacific(APAC)its teams work to meet client expectations as fully as possible through three dedicated business lines.IMPETUS3637BNP PARIBAS 2024 INTEGRATED REPORTOUR SPECIALISED BUSINESSESARVALArval is a major player in the vehicle leasing market and offers a range of mobility solutions:car-sharing,long-term bicycle leasing,bicycle-sharing and mobility pass.It offers its clients(large international groups,mid-caps or SMEs,professionals and private individuals)flexible solutions to make their journeys smooth and responsible.With the goal of leasing 400,000 full-electric vehicles by 2026 and offering mobility solutions across all its regions,Arval has positioned itself as a key player in the energy transition and in sustainable mobility.Arval is the second largest player in the European multi-brand vehicle long-term leasing sector,ranked#1 in Poland,#2 in France,Spain,Italy and Belgium,and#3 in the Netherlands(2).BNP PARIBAS LEASING SOLUTIONSBNP Paribas Leasing Solutions offers equipment leasing and financing solutions to corporate clients and professionals through various commercial channels(partnerships with manufacturers,distributors and resellers of professional equipment,directly via companies or from our commercial&personal banking network).BNP Paribas Leasing Solutions is committed to the ecological transition of its partners and (1)Excluding Fintro clients.(2)Source:Frost&Sullivan at the end of December 2023.(3)On 27 November 2024,100%of BNP Paribas Personal Investors Indian activities were sold to the Mirae group.(4)Figure as at 31 December 2024.BNP Paribas Personal Investors is present in Germany through three brands:Consorsbank,DAB BNP Paribas and BNP Paribas Wealth Management Private Banking(3).2 million clients.HELLO BANK!BNP Paribas 100%digital offering provides its individual customers with real-time daily banking services,with credit,savings,investment and insurance solutions adapted to their new uses and ways of working.In France,it also provides a range of services and support to entrepreneurs.Hello bank!operates in France,Belgium,Germany and Italy.3.7 million clients.NICKELNickel,launched in France in 2014,offers a current account available in five minutes from its partners at tobacconists or Nickel Points (over 11,500 in Europe at the end of 2024).Its customers can pay and be paid via a simple and inclusive offer based on four values:universality,simplicity,usefulness and kindness.On the strength of its digital model and a local distribution network in France,Spain,Belgium,Portugal and Germany,Nickel maintained a sustained rate of customer acquisition throughout the year.Over 4.3 million individual customer accounts have been opened since Nickels launch in 2014(4).OUR STRATEGY Drawing on its market-leading positions in two-thirds of its business lines and the ongoing transformation of its operating model,the CPBS division boasts significant growth potential.Its vision fuels the action plans of its business lines to provide support for the growth of revenues and make them more attractive.To achieve its goals,CPBS aims to:accelerate the significant and profitable growth of its specialised business lines;strengthen its leadership in Europe for corporate clients and the private banking segment;develop its retail banking activities to better respond to changes in the uses of its customers and become even more attractive,while adapting its operating model;pursue the continuous improvement of its operational efficiency.OUR PROGRESS IN 2024In an economic environment that remains uncertain,our commercial&personal banking entities and specialised businesses continued to provide agility and performance to serve their clients,consolidating the divisions development strategy and confirming the goals of the Groups strategic plan.Thus,CPBS continued to:develop its sustainable financing services and solutions and the know-how of its teams to provide personalised support to its clients in their transition,notably in the field of sustainable mobility and the energy renovation of homes;transform its relationship model to offer its clients the best available people and digital technologies by reinforcing the know-how of its teams and developing self-care,for example through the launch of virtual assistants;industrialise its operational model and its technological transformation,benefiting in particular from the full potential of artificial intelligence to optimise its processes,the efficiency of its sales pathways and commercial actions,as well as the refinement of its pricing;foster cooperation among its business lines and extend the cross-functional nature of its approach,differentiating BNP Paribas in the market and generating an increase in its cross-selling revenues.Commercial,Personal Banking&ServicesOUR COMMERCIAL&PERSONAL BANKING ENTITIESWith four commercial&personal banking entities in the eurozone(France,Belgium,Italy,Luxembourg)and commercial&personal banking networks outside the eurozone (in Ukraine,Poland,Trkiye,Kosovo,Morocco,Algeria and China through its minority stake in Bank of Nanjing),BNP Paribas offers its clients a wide range of products and services.From savings to investments,and from financing to payment solutions or mobility,CPBS teams are at their side to implement all their projects.Commercial&Personal Banking in France(CPBF)More than 8 million clients BNP Paribas Fortis in Belgium More than 3.8 million clients(1)BNL in Italy 2.6 million clients BGL BNP Paribas in Luxembourg Nearly 184,000 clients Europe-Mediterranean in Ukraine,Poland,Trkiye,Kosovo,Morocco,Algeria and in China through a minority stake More than 16 million clientsommercial,Personal Banking&Services(CPBS),which brings together all our commercial&personal banking entities and a number of specialised businesses,positions itself as a long-term and trusted companion for its clients.Efficient and agile,the division meets their financial needs and much more,serving their best interests and those of society as a whole.As part of our strategic plan,CPBS is working to keep improving on the recommendations made by its clients and employees,with an increasingly personalised,enhanced and responsible product and service offering.By relying on an ecosystem of partners,CPBS teams combine the best of digital technologies and human support to offer clients an innovative and high-quality relationship.CFLOAAs one of the key players in fintech,Floa develops payment facilities and innovative financial services(such as“Buy Now Pay Later”split payments)for consumers,retailers and fintechs.Its technological expertise enables it to guarantee simplified and secure payments,both online and in-store.Leader in France,Floa is also present in Spain,Belgium,Italy and Portugal.Over 4 million clients and more than 15,000 e-commerce partners and points of sale.Based on the One Bank for Corporates approach,Cash Management(#1 in Europe for large corporate clients),Trade Finance(#1 in Europe)and Factoring(#1 in Europe),operating in synergy with the Global Banking business line of the Corporate&Institutional Banking division,complete the offering provided to commercial&personal banking corporate clients.For its part,the Wealth Management activity is developing its private banking model in our commercial&personal banking entities.Thierry Laborde,Chief Operating Officer,Commercial,PersonalBanking&Services“Our strong performance,driven by the commitment of our teams,demonstrates the significant momentum that has gathered pace throughout the year.By continuing to innovate with determination,we are enhancing the quality of our clients experience to remain their trusted companion over the long term.”clients,by financing more sustainable equipment and providing services to promote the circular economy.More than 317,000 projects financed in 2024,amounting to 16.3 billion.The total amount of assets under management at the end of December 2024 was 40.4 billion.BNP PARIBAS PERSONAL FINANCEBNP Paribas Personal Finance is a major player in consumer credit in Europe.Under its various commercial brands,it offers a full range of consumer loans through a variety of distribution channels.BNP Paribas Personal Finance is developing an active partnership strategy with large retailers,car manufacturers and distributors,e-merchants and other financial institutions.Moreover,the financing of clean mobility and home improvement are two major pillars of its development strategy.BNP Paribas Personal Finance provides support for households in the financing of the energy transition and had 10 billion in sustainable assets at the end of December 2024.BNP PARIBAS PERSONAL INVESTORSIn addition to its traditional online brokerage business,BNP Paribas Personal Investors offers its individual customers a wide range of banking,credit and savings services,as well as short-and long-term investment solutions.This business line also provides innovative digital services to independent financial advisers,asset managers and fintechs.IMPETUS3839BNP PARIBAS 2024 INTEGRATED REPORTThe insurer has committed to aligning its portfolios with a carbon neutrality trajectory by 2050.#1 worldwide in creditor protection insurance(1);287 billion in assets under management at the end of 2024.BNP PARIBAS WEALTH MANAGEMENTBNP Paribas Wealth Management supports entrepreneurs,family offices and high-net-worth individuals in their wealth management and financing projects.In Europe,BNP Paribas Wealth Management is developing its private banking activity alongside BNP Paribas commercial&personal banking entities.In all regions,notably in Asia,it also relies on the Corporate&Institutional Banking business lines to meet the most sophisticated needs of its entrepreneur clients.As part of OUR SPECIALISED BUSINESSESBNP PARIBAS CARDIFBNP Paribas Cardif is a global leader in bancassurance partnerships.In collaboration with over 500 distribution partners,it designs,develops and markets savings and protection solutions to insure people and their property.It helps its policyholders to carry out their projects while protecting them against the vagaries of life.Committed to society,to its partners and to their customers,BNP Paribas Cardif has set itself the mission to make insurance more accessible.As an investor,it helps give meaning to the investments of its policyholders and has set itself a target of allocating an average of 1 billion per year by 2025 to positive impact investments.(1)Finaccord,2024.(2)Investor communications,in amount of assets under management as published by the main banks in the eurozone on 31 December 2024.(3)Environmental,social and governance.(4)BNP Paribas Asset Management figures as at 31 December 2024.According to the European Sustainable Finance Disclosure Regulation(SFDR),which identifies funds according to their sustainability potential,funds classified as Article 8 declare the consideration of social and/or environmental criteria,while those classified as Article 9 present a sustainable investment objective.Investment&Protection ServicesOUR STRATEGYAs part of our strategic plan,IPS aims to become a leading European player in responsible protection,savings and investments.To this end,the division is ramping up the development of its service offering and strengthening its distribution networks.IPS has thus set itself three priorities:accelerate financial savings development;capture growth in private assets;strengthen leadership in responsible investments.OUR PROGRESS IN 2024In a changing context,IPS has been able to adjust its modus operandi and its offering to better meet the needs of its clients by:strengthening franchises through the expansion of its Entrepreneurs&Families client base and the acquisition of Neuflize Vie(high-net-worth customers in France);consolidating distribution through a solid partnership dynamic for BNP Paribas Cardif and the successful start of the insurance partnership with BCC Iccrea in Italy;expanding its product offering with a strong pace of ESG and private assets fund launches by BNP Paribas Asset Management;confirming its positions on sustainability,as illustrated by the leadership of BNP Paribas Asset Management on SFDR Article 8 and 9 funds;accelerating its technological transformation,through the integration of artificial intelligence and the deployment of new tools for the savings customer journey.In 2024,IPS also signed the planned acquisition of AXA Investment Managers,which represents a major strategic transformation.ur Investment&Protection Services division(IPS)brings together our activities dedicated to protection,savings,investment and real estate services.The division designs and rolls out innovative and responsible products to support individuals,professionals,corporate clients and institutional investors in their projects and their transition to a sustainable economy.As part of our strategic plan,IPS aims to become a European benchmark in responsible protection,savings and investment.To this end,the division is enhancing its range of services and solutions,expanding its distribution network,and consolidating its leadership in social and environmental responsibility.IPS is also continuing to optimise the digitisation of its business lines to make them ever more agile,efficient and at the cutting edge of technology.Oits ongoing drive for innovation,BNP Paribas Wealth Management continues to enhance its range of digital solutions to provide a customised client experience.It also strives to complement its responsible offering to align with the convictions of each of its clients in terms of sustainability.With 462 billion in assets under management in 2024,BNP Paribas Wealth Management is a world-leading private bank and the leading private bank in the eurozone(2).BNP PARIBAS ASSET MANAGEMENTBNP Paribas Asset Management provides investment solutions integrating a sustainability approach to individual savers,corporate clients and institutional investors.It focuses its expertise on five core capabilities high-conviction active strategies;emerging markets;private assets;systematic,quantitative&index;and liquidity solutions with investment processes incorporating quantitative,fundamental and ESG research.In 2024,BNP Paribas Asset Management published its Equality Roadmap and launched two funds illustrating its commitment to sustainability:one dedicated to the net-zero transition and another,in partnership with International Woodland Company,to invest in sustainable forestry.90%of the assets under management of its European open-ended funds are classified as Article 8 or 9 within the meaning of the European SFDR regulation,equivalent to 285 billion(4).BNP PARIBAS REAL ESTATEBNP Paribas Real Estate provides support for its clients institutional investors,property owners,corporate clients,local authorities,individuals,etc.at all stages of the real estate asset life cycle:property development,transactions,consulting,valuation,investment management and property management.It operates in all asset classes,from offices to housing,including industrial premises,logistics,hotels and retail spaces.Committed to a sustainable and long-term approach,BNP Paribas Real Estate is recognised as a leading player in terms of social and environmental responsibility.Active in 23 countries with offices in 11 European countries,platforms in Hong Kong(SAR China),Dubai and Singapore,and a network of commercial alliances with local partners in Europe and the United States.Renaud Dumora,Deputy Chief Executive Officer,Investment&Protection Services“In 2024,Investment&Protection Services accelerated its platformisation and its use of artificial intelligence,delivered solid organic growth and launched transformative external growth projects.These dynamics will enable the division to change dimension and better meet the expectations of its clients.”IMPETUS4041BNP PARIBAS 2024 INTEGRATED REPORTur main governance bodies are the Board of Directors and the Executive Officers(Chief Executive Officer and Chief Operating Officers).Acting in the interest of the Group and its stakeholders,notably its shareholders and investors,they steer the strategy in line with a long-term vision and a sustainable growth objective.The Board of Directors determines the strategic orientations of BNP Paribas based on proposals made by the General Management,which,assisted by its Executive Committee,implements them and manages day-to-day business.OUR SHAREHOLDERS AND OUR INVESTORSThey have three main responsibilities:electing Directors(excluding Directors representing employees);voting on resolutions;conducting dialogue,exchanging ideas and contributing to discussions:-the Investor Relations team informs them about the Groups strategy,significant developments and results;-the Shareholder Relations team answers questions from the Banks 416,300 individual shareholders;-the“Cercle des actionnaires”(Shareholders Club)brings together some 46,500 individual shareholders who own at least 200 BNP Paribas shares;-in 2024,the Shareholder Liaison Committee held two meetings,primarily to discuss the capital structure and changes therein,the quarterly results and the economic outlook in a complex and uncertain environment.At the heart of our governance is the principle of shareholder equality.None of the Banks shares entitles their holders to an increased dividend or double voting rights or limits the exercise of voting rights.OUR BOARD OF DIRECTORSAssisted by four specialised committees,the Board brings together the expertise of 14 Directors(see pages 44-45).It performs several missions:representing all shareholders and ensuring the quality of shareholder relationships;determining the Groups strategic orientations on the recommendation of the General Management,with an objective of creating long-term value,whilst taking into account the social and environmental challenges of BNP Paribas activities;overseeing the quality of the information provided to shareholders and the markets;reviewing and approving the financial statements,ensuring their fairness;preventing and managing risks;ensuring compliance with internal control obligations;establishing the compensation policy for the Companys Directors,Corporate Officers and regulated employees;appointing the Chairman,the Chief Executive Officer and,upon proposal of the Chief Executive Officer,the Chief Operating Officers;conducting the periodic review of the selection,appointment and succession process of Directors and Corporate Officers.OUR GENERAL MANAGEMENTAssisted by its Executive Committee,it comprises a Director and Chief Executive Officer,two Chief Operating Officers and a Deputy Chief Operating Officer.It meets at least once a week.Its main missions are:recommending and implementing the strategy,overseeing the Groups development and managing its day-to-day activities;informing and reporting to the Board of Directors.The Executive Committee comprises General Management and the Heads of BNP Paribas main business lines and functions(see pages 46-47).INFORMING OUR SHAREHOLDERS AND OUR INVESTORSBNP Paribas provides all its shareholders with rigorous,regular,consistent and high-quality information,in accordance with the recommendations of the stock market authorities and best market practices.Our Investor Relations team informs institutional investors and financial analysts about the Companys strategy,significant developments and financial results,published each quarter.COMMUNICATING WITH OUR INDIVIDUAL SHAREHOLDERS:THE SHAREHOLDER LIAISON COMMITTEEThis Committee is made up of 10 shareholders,chosen for their geographical and socio-professional representativeness,as well as two current or former employees.They are appointed for a term of three years.It meets several times a year.LEADING THE SHAREHOLDER COMMUNITY:THE“CERCLE DES ACTIONNAIRES”The“Cercle des actionnaires”(Shareholders Club)brings together some 46,500 shareholders owning at least 200 BNP Paribas shares.Its members benefit from a wide range of events throughout France,in line with the Groups commitments.Nearly 300 events were organised for them in 2024.For the first time and in line with the Groups Climate strategy,the“Cercles”teams provided individual shareholders with the opportunity to participate in exchange and training workshops on the Climate Fresk,which were a great success.(1)Sustainable Finance Disclosure Regulation.(2)Corporate Sustainability Due Diligence Directive.(1)Based on the average number of shares outstanding during the year.Calculated in 2023 on the basis of the distributable 2023 earnings and the number of shares outstanding at year-end.(2)Before distribution.Revalued net book value based on the number of shares outstanding at year-end.(3)1.11 distributed following the approval of the Shareholders Combined General Meeting of 18 May 2021,plus 1.55 distributed following the approval of the Ordinary Annual General Meeting of 24 September 2021;taking into account only the distribution of the 2020 dividend.(4)Taking into account only the distribution of the 2020 dividend.(5)Taking into account only the distribution of the 2021 dividend and not taking into account the 900 million share buyback programme,executed between 1 November 2021 and 6 December 2021.(6)Taking into account only the distribution of the 2022 dividend and not taking into account the 962 million share buyback programme in respect of the so-called“ordinary”distribution.(7)Taking into account only the distribution of the 2023 dividend and not taking into account the 1.05 billion share buyback programme in respect of the so-called“ordinary”distribution.(8)Subject to approval by the Annual General Meeting of 13 May 2025 and not taking into account the 1.08 billion share buyback programme planned for 2025.(9)Cash dividend distribution recommended at the Annual General Meeting expressed as a percentage of distributable net income attributable to shareholders.(10)Recorded intra-day during trading session.IN EUROS20202021202220232024Net income attributable to the shareholders per share(1)5.317.267.809.219.57Net book value per share(2)82.388.089.096.0102.5Net dividend per share2.66(3)3.67(5)3.90(6)4.60(7)4.79(8)Cash payout ratio(%)(9)50.00(4)50.00(5)50.00(6)50.00(7)50.00(8)SHARE PRICEHighest(10)54.2262.5568.0767.0273.08Lowest(10)24.5139.7140.6747.0253.08Year-end43.10560.7753.2562.5959.22CAC 40 index on 31 December5,551.417,153.036,473.767,543.187,380.74A SHAREHOLDER BASE THAT STANDS OUT FOR ITS STABILITY AND LOYALTY Shareholding structure as at 31 December 2024(in%of voting rights)(1)Based on analyses from the SRD 2 surveys Institutional investors excluding BlackRock(in 2022,2023 and 2024)and Amundi(in 2023 and 2024).(2)“Socit Fdrale de Participations et dInvestissement”:a public-interest limited company(socit anonyme)acting on behalf of the Belgian State.(3)The voting rights of the FCPE(profit-sharing scheme)are exercised,after the decision is taken by the Supervisory Board,by its Chairman.SUSTAINABLE FINANCE AT THE HEART OF OUR GOVERNANCEOur governance system in terms of sustainable finance has been strengthened since 2021.Since then,three committees,including members of the General Management,have been working to support the integration of these issues into the Groups strategy and within each entity.THE STRATEGIC COMMITTEEUnder the leadership of the Director and Chief Executive Officer,it met five times in 2024.It notably ruled on our loan portfolios alignment commitments for new sectors,updating the Risk Appetite Statement and the Pillar 3 ESG disclosures.THE INFRASTRUCTURE COMMITTEEUnder the direction of the Groups Deputy Chief Operating Officer,this committee met nine times in 2024 to monitor the deployment at the methodological,normative and operational levels of processes and reports related to sustainable finance,such as the ESG Assessment.THE REGULATORY COMMITTEEChaired by the Group General Counsel and the Head of Company Engagement,it met twice in 2024 to inform its members about the main regulatory texts.Among the topics discussed were the notion of sustainable investment in the context of the SFDR
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11Fiscal Year Ended March 31,2025Financial ResultsMay 13,20252 22Financial Results for FYE March 31,2025Financial Forecast for FYE March 31,2026Shareholder ReturnsSummaryOperating Profit 500.0 bil.yen Profit for the year 250.0 bil.yenTariff Impact:Uncertain outlook,but measures to offset additional tariffs on completed vehicles and parts have been reflected.Motorcycles:Sales plan targets more than 21.3 million unit sales,surpassing sales of FYE March 31,2025.Automobiles:Despite challenging sales environment,especially in China,strengthen HEV sales,particularly in North America.Change of the Dividend PolicyTo improve capital efficiency and ensure stable dividends even during periods of uncertainty,DOE will be adopted.Dividend Outlook FYE March 31,2026:Expected to be 70 yen per share(an increase of 2 yen vs.previous FY)Operating Profit 1,213.4 bil.yen(excl.the impact of the change in the estimation model for automobile product warranties:1,341.0 bil.yen）Motorcycles:Achieved record-high sales volume,operating profit,and operating margin.Automobiles:Despite decreased sales,mainly in China and ASEAN,and higher EV incentives in North America,HEV sales expanded.Operating cash flows after R&D adjustment 2,806.6 bil.yen3 33FYE Mar.31,2021Operating Profit（Operating Margin）224.6 bil.yen(12.6%)663.4 bil.yen(18.3%)Unit Sales488.7 bil.yen(16.8%)15.13 mil.18.76 mil.20.57mil.Stable Revenue from Motorcycle and Automobile BusinessMotorcycle BusinessAutomobile Business(HEV)By consolidating dominant unit sales volume,realize a low-cost structure that surpasses other companiesEvolutionStandardizationto 2 Motor HEVHigh-Efficiency e:HEV Dedicated EngineHigh-Efficiency,High-Power HEV SystemSupplier Collaboration ActivitiesCross-Model Standardization MeasuresPrevious Systeme:HEV 2020（Current System）SystemSystem costcost reducedreduced byby 25%hievesAchieves bothboth fuelfuel efficiency efficiency and performanceand performanceFITACCORDLEGEND1 Motor HEV2 Motor HEV3 Motor HEVPrevious modelCurrent model1.5 timesFYE Mar.31,2025898K units FYE Mar.31,2019North America47North America396Japan252Japan195303K units3 timesEurope 72Asia 80China 90SCLMCCUBShared across many Shared across many models globally,spanning models globally,spanning countries and regionscountries and regionsFYE Mar.31,2023FYE Mar.31,2025CompactMid-sizeLuxuryProfitability improvement due to cost reduction Profitability improvement due to cost reduction and product enhancementand product enhancement.Sales expanding globally,Sales expanding globally,especially in North Americaespecially in North America4 44Optimization of Capital through Proactive Shareholder ReturnsTowards Increasing Corporate Value Considering the impact of tariffs,the outlook for FYE Mar.31,2026 is the bottomAcquisition of theCompanys Own SharesFYE Mar.31,2024:250.0 bil.yenFYE Mar.31,2025:1,400.0 bil.yenEstablishment and Continuation of Earnings BaseEnhancement of Resolution of Electrification StrategyOptimization of cash on hand in sightCompletion expected by Dec.of this year（as of end of April:589.5 bil.yen acquired）Long-term direction unchanged,but electrification strategy being revisedOptimization of resourcesOptimization of resources,including a review of large-scale investments in CanadaStable management through a resilient business portfolio even in an uncertain business environmentMaximizeHEV competitiveness using next-generation platformsA detailed explanation is planned as part of“2025 Honda Business Briefing”on May 20thEV Market Growth Slowdown/Intensified Competition in China and Asia/Changes in U.S.Tariff Policies Changes in EnvironmentPastPresentFuturesecuresecure stable profits from thestable profits from thesolid foundation solid foundation formed formed byby motorcycle motorcycle and financial services businessand financial services businessIn addition to the increase in HEV units,centered in North America,*Status of acquisition of the Companys own shares up to 1.1 tri.yen(resolved on Dec.23,2024)Direction of ApproachIssueCurrentSituation*Resolution-based amount Fiscal Year Ended March 31,2025Financial Results6 66FYE March 31,2025:Honda Unit SalesMotorcyclesMotorcyclesAutomobilesAutomobilesPower ProductsPower ProductsHonda Group Unit SalesFYE Mar.31,2024FYE Mar.31,2025ChangeFYE Mar.31,2024FYE Mar.31,2025ChangeFYE Mar.31,2024FYE Mar.31,2025ChangeJapan241224224-17595630630 35302278278-24NorthAmerica498548548 501,6281,6541,654 261,0831,0201,020-63Europe440475475 351039393-10794651651-143Asia16,01617,47817,478 1,4621,6511,1821,182-4691,2941,4131,413 119OtherRegions1,6241,8471,847 223132157157 25339338338-1Total18,81920,57220,572 1,7534,1093,7163,716-3933,8123,7003,700-112Change(%) 9.3%-9.6%-2.9%*-399 in China are included.Consolidated Unit Sales12,21913,68513,685 1,4662,8562,8402,840-163,8123,7003,700-112*Unit(thousand)7 77FYE March 31,2025:Consolidated Financial ResultsYen(billion)FYE March 31（Ref.Ref.）Excluding effects of the change in the estimation Excluding effects of the change in the estimation model for automobile product warrantiesmodel for automobile product warranties*1*1 20242025AmountChange2025AmountChangeSales revenue20,428.821,688.721,688.7 1,259.9 6.2!,688.7 1,259.9 6.2%Operating profit1,381.91,213.41,213.4-168.4-12.2%1,341.0-40.8-3.0%Operating margin6.8%5.6%5.6%-1.2 pt6.2%-0.6 ptShare of profit(loss)of investments accounted for using the equity method 110.80.90.9-109.8-99.1%0.9-109.8-99.1%Profit before income taxes1,642.31,317.61,317.6-324.7-19.8%1,445.2-197.1-12.0%Profit for the year attributable to owners of the parent1,107.1835.8835.8-271.3-24.51.0-176.1-15.9rnings per share attributable to owners of the parent(Yen)*2225.88178.93178.93-46.95199.31-26.57Market average rate(Yen)U.S.Dollar145153153 8*3*1 For the year ended March 31,2025,Honda changed the estimation model of provisions for specific warranty programs of automobile products manufactured at major production bases,from estimating the provisions individually for each specific warranty program to estimating the provisions comprehensively at the time of vehicle sales.*2 Each share of common stock was split into 3 shares per share on the record date of September 30,2023,with an effective date of October 1,2023.Earnings per share were calculated that the stock split was carried out at the beginning of the fiscal year ended March 31,2024.Please refer to the footnotes on the last page for weighted average number of shares outstanding.*3 weak yen/-strong yen8 88FYE March 31,2025:Change in Operating ProfitImpact of the change in the estimation modelfor automobile product warranties1,381.91,381.9-233.6233.6 525.0 525.0-85.085.0-153.5153.5-93.693.6-127.6127.61,213.41,213.4Results for FYE March 31,2024(Twelve Months)Operating Operating MarginMargin6.8%6.8%Operating Operating MarginMargin5.6%5.6%Operating Operating MarginMargin6.2%6.2%Operating profit excl.impact of the change in the estimation model for automobile product warranties1,341.01,341.0Operating ProfitOperating Profit ()-168.4168.4-1212.2.2*1 Sales impacts*2 Price/Cost impacts*3 Expenses*4 Currency effectsSales volume,model mixIncentiveFinanceOther 29.7-270.1 19.0-12.2 Price revisionCost reduction,etc. 512.4 12.6WarrantyFinanceOther 99.5-32.2-152.3JPY/USD USD/Others(BRL,CAD,MXN)JPY/Asian currencies(INR,THB,VND,CNY,IDR)Other 92.0-53.5 1.0-133.1Yen(billion)-40.840.8(-3.0 3.0 )Excluding impact of the changeExcluding impact of the changein the estimation modelin the estimation modelfor automobile product warrantiesfor automobile product warrantiesSales impacts*1R&DExpenses*3Currencyeffects*4Price/Costimpacts*2Results for FYE March 31,2025(Twelve Months)9 99FYE March 31,2025:Sales Revenue/Operating Profit(Margin)by Business Segment(Twelve Months)upper:FYE March 31,2025MotorcycleMotorcycleBusinessBusinessAutomobileAutomobileBusinessBusinessFinancial ServicesFinancial ServicesBusinessBusinessPower Products andPower Products andOther BusinessesOther Businesseslower:FYE March 31,2024 Unit(thousand)Honda Group Unit Sales(Consolidated Unit Sales)20,57220,5723,7163,716-3,7003,700(13,685)(13,685)(2,840)(2,840)-(3,700)(3,700)18,8194,109-3,812(12,219)(2,856)-(3,812)Yen(billion)Sales Revenue3,626.63,626.614,467.814,467.83,512.23,512.2414.6414.63,220.113,791.53,251.7422.3Operating Profit663.4663.4243.8243.8315.6315.6-9.49.4556.2560.6273.9-8.8Operating Margin18.3.3%1.7%1.7%9.0%9.0%-2.3%2.3.3%4.1%8.4%-2.1%In the financial services business,Honda provides retail lending and leasing to customers and wholesale financing to dealers to support the sale of its products.Operating profit from aircraft andaircraft engines included in above Yen(billion)-38.8-32.9101010FYE March 31,2025:Change in Operating Profit for Motorcycle Business556.2556.248.148.1 175.3 175.3-20.120.1-21.521.5-74.674.6663.4663.4Operating Operating MarginMargin17.3.3%Operating Operating MarginMargin18.3.3%*1 Sales impacts*2 Price/Cost impacts*3 ExpensesSales volume,model mixIncentiveOther 79.0-14.1-16.8 Price revisionCost reduction,etc. 174.2 1.1WarrantyOther 35.1-55.2Operating ProfitOperating Profit () 107.2 107.2 19.3 19.3 DespiteDespite Currency effects and other factors,Currency effects and other factors,the increase in operating profit was mainly due to Price/Cost impacts and Sales impacts.the increase in operating profit was mainly due to Price/Cost impacts and Sales impacts.Results for FYE March 31,2024(Twelve Months)Results for FYE March 31,2025(Twelve Months)Sales impacts*1R&DExpenses*3CurrencyeffectsPrice/Costimpacts*2Yen(billion)111111FYE March 31,2025:Change in Operating Profit for Automobile Business560.6560.6-333.7333.7 336.5 336.5-38.238.2-127.0127.0-26.726.7-127.6127.6243.8243.8371.4371.4Operating Operating MarginMargin4.1%4.1%Operating Operating MarginMargin2.6%2.6%Operating Operating MarginMargin1.7%1.7%*1 Sales impacts*2 Price/Cost impacts*3 ExpensesSales volume,model mixIncentiveOther-45.6-253.1-35.0 Price revisionCost reduction,etc. 326.3 10.2WarrantyOther 57.4-95.6Operating ProfitOperating Profit ()-316.7316.7-56.5 56.5 Although higher profits from Price/Cost impacts offset higher Expenses and R&D,Although higher profits from Price/Cost impacts offset higher Expenses and R&D,lower sales volume and higher incentives resulted in lower profits.lower sales volume and higher incentives resulted in lower profits.Sales impacts*1R&DExpenses*3CurrencyeffectsPrice/Costimpacts*2Impact of the change in the estimation model forautomobile product warrantiesResults for FYE March 31,2024(Twelve Months)Results for FYE March 31,2025(Twelve Months)Yen(billion)-189.1189.1(-33.7 33.7 )Excluding impact of the changeExcluding impact of the changein the estimation modelin the estimation modelfor automobile product warrantiesfor automobile product warrantiesOperating profit excl.impact of the change in the estimation model for automobile product warranties121212Cash Flows of Non-Financial Services Businesses*Cash Flows from operating activities(CFO)excluding R&D expenses (CFO of non-financial services businesses R&D expenditures amount transferred to development assets)*Yen(billion)FYE March 31,2024FYE March 31,2025FYE March 31,2025Cash flows from operating activities 2,288.1 1,883.1 Cash flows from investing activities-827.1-1,217.2 Free cash flow 1,460.9 1,460.9 665.8 665.8 Cash flows from financing activities-712.5-1,390.3 Effects of exchange rate changes 322.6-38.4 Net change of cash and cash equivalents 1,071.0-762.9 Cash&cash equivalents at end of yearCash&cash equivalents at end of year4,624.6 4,624.6 3,861.7 3,861.7 Net cash at end of yearNet cash at end of year3,761.6 3,761.6 3,215.7 3,215.7 Operating cash flows after R&D adjustment* 3,056.9 2,806.6 Fiscal Year Ending March 31,2026Financial Forecast141414Forecast for FYE March 31,2026:Honda Unit SalesMotorcyclesMotorcyclesAutomobilesAutomobilesPower ProductsPower ProductsHonda Group Unit SalesFYE March 31,2025 ResultsFYE FYE March 31,2026March 31,2026ForecastForecastChangeFYE March 31,2025 ResultsFYE FYE March 31,2026March 31,2026ForecastForecastChangeFYE March 31,2025 ResultsFYE FYE March 31,2026March 31,2026ForecastForecastChangeJapan224210210-14630600600-30278250250-28NorthAmerica548545545-31,6541,6801,680 261,020970970-50Europe475430430-45939090-3651700700 49Asia17,47818,06518,065 5871,1821,0901,090-921,4131,4101,410-3OtherRegions1,8472,0502,050 203157160160 3338340340 2Total20,57221,30021,300 7283,7163,6203,620-963,7003,6703,670-30*-87 in China are included.Consolidated Unit Sales13,68514,25014,250 5652,8402,8302,830-103,7003,6703,670-30Unit(thousand)*151515Consolidated Financial Forecast for FYE March 31,2026Yen(billion)FYE March 31,2025 ResultsFYE March 31,2026FYE March 31,2026ForecastForecastAmountChangeSales revenue21,688.720,300.020,300.0-1,388.7-6.4%Operating profit1,213.4500.0500.0-713.4-58.8%Operating margin5.6%2.5%2.5%-3.1 ptShare of profit(loss)of investments accounted for using the equity method 0.90.0 0.0-0.9-100.0%Profit before income taxes1,317.6490.0490.0-827.6-62.8%Profit for the year attributable to owners of the parent835.8250.0250.0-585.8-70.1rnings per share attributable to owners of the parent(Yen)178.9362.8462.84-116.09Market average rate(Yen)U.S.Dollar153135135-18161616Forecast for FYE March 31,2026:Change in Operating ProfitSales impacts*1Tariff impacts1,213.41,213.4 1 127.627.6 250.0 250.0-219.1219.1-126.0126.0-452.0452.0-650.0650.05 500.000.0Results for FYE March 31,2025Operating Operating MarginMargin2 2.5%.5%Forecast for FYE March 31,2026Same currency rate conditions as the previous FY(before tariff impacts)1,402.01,402.0Operating Profit()-713.4713.4-58.58.8 8*1 Sales impacts*2 Price/Cost impacts*3 Expenses*4 Currency effectsSales volume,model mixIncentiveFinanceOther 95.5- 34.0 26.6Price revisionCost reduction,etc. 247.0 3.0WarrantyFinanceOther-8.6-22.0-188.5JPY/USD USD/Others(BRL,CAD,MXN)JPY/Asian currencies(INR,THB,VND,CNY,IDR)Other-236.5-29.0-73.5-113.0Yen(billion）Impact of the change in the estimation model forautomobile product warranties(Returned)Results for FYE March 31,2025(excl.the impact of the change in the estimation model for automobile product warranties(Returned)1,341.01,341.0 156.1 156.1 200.0200.0Recovery efforts for tariff impactStructure equivalent Structure equivalent to the previous FYto the previous FYOperating Operating MarginMargin6.2%6.2%Operating Operating MarginMargin6.6.2 2%Completed automobile vehiclesAutomobile parts and raw materialsOther-300.0-220.0-130.0 Operating Operating MarginMargin5.6%5.6%R&DExpenses*3Currencyeffects*4Price/Costimpacts*2Forecast for FYE March 31,2026171717Forecast for FYE March 31,2026:Capital Expenditures/Depreciation/R&D*1 Capital expenditures as well as Depreciation in Results and Forecast shown above exclude investment in operating leases,right-of-use assets,and intangible assets.*2 Research and development expenditures are research and development activities related costs incurred during the reporting period.In accordance with IFRS,a portion of research and development expenditures is recognized as an intangible asset and amortized over its estimated useful life.As such,this amount is not in conformity with“Research and development”on Consolidated Statements of Income.Yen(billion)FYE March 31,2025 FYE March 31,2026ChangeResultsForecastForecastCapital expenditures*1537.4620.0620.0 82.5Depreciation and amortization*1456.1388.0388.0-68.1Research and development expenditures*21,210.61,190.01,190.0-20.6181818Shareholder Returns 589.5 billion yen/411.75 million shares have been acquired(rate of progress:53.6%),for the acquisition of up to 1 trillion 100 billion yen/1.1 billion shares(resolved on December 23,2024)Dividend per Share(Yen)FYE March 31,2025(Previous)FYE March 31,2025FYE March 31,2025FYE March 31,2026(Forecast)Interim Dividend343434(35)Year-end Dividend343434(35)Fiscal Year686868(70)DOE(dividend on equity attributable to owners of the parent after adjustment)*1will be introduced as a return indicator from FYE March 31,2026 onward.Aim to pay a dividend with a target of 3.0%to provide a more stable and continuous return.*1 Equity attributable to owners of the parent”,which serves as the basis for DOE(adjusted dividend on equity attributable to owners of the parent),is based on adjusted figures that exclude other components of equity,which are highly volatile due to the effects of currency rates and market conditions.*2（):Forecast*2-Total number of shares to be acquired(maximum):1.1 billion shares(common shares)-Total amount of shares to be acquired(maximum):1 trillion 100 billion yen-Period of acquisition:From January 6,2025 to December 23,2025Caution with Respect to Forward-Looking Statements:Accounting standards:Notice on the Factors for Increases and Decreases in Income:Unit sales:Caution with Respect to Forward-Looking Statements:Accounting standards:Notice on the Factors for Increases and Decreases in Income:Unit sales:*Earnings per share attributable to owners of the parent is calculated based on weighted average number of shares outstanding as shown below:-Twelve MonthsEnded March 31,20244,901,560,000(approx.),Ended March 31,20254,671,383,000(approx.)ForecastEnding March 31,20263,978,277,000(approx.)This presentation contains forward-looking statements about the performance and shareholders return of Honda,which are based on managements assumptions and beliefs taking into account information currently available to it.Therefore,please be advised that Hondas actual results could differ materially from those described in these forward-looking statements as a result of numerous factors,including general economic conditions in Hondas principal markets andfluctuation of foreign exchange rates,as well as other factors detailed from time to time.Our consolidated financial statements are prepared in conformity with International Financial Reporting Standards(IFRS),as issued by the International Accounting Standards Board(IASB).With respect to the discussion in this presentation of the changes,identified factors and used what it believes to be a reasonable method to analyze the respective changes in such factors.Analyzed changes in these factors at the levels of theCompany and its material consolidated subsidiaries.(1)“Foreign currency effects”consist of“translation adjustments”,which come from the translation of the currency of foreign subsidiaries financial statements into Japanese yen,and“foreign currency adjustments”,which result fromforeign-currency-denominated transaction.With respect to“foreign currency adjustments”,analyzed foreign currency adjustments primarily related to the following currencies:U.S.dollar,Japanese yen and others at the level of theCompany and its material consolidated subsidiaries.(2)With respect to“Price and Cost impacts”,analyzed effects of changes in sales price,cost reductions,effects of raw material cost fluctuations and others,excluding foreign currency effects.(3)With respect to“Sales impacts”,analyzed changes in sales volume and in the mix of product models sold that resulted in increases/decreases in profit,changes in sales revenue of Financial services business that resulted inincreases/decreases in profit,as well as certain other reasons for increases/decreases in sales revenue and cost of sales,excluding foreign currency effects.(4)With respect to“Expenses”,analyzed reasons for an increase/decrease in selling,general and administrative expenses from the previous fiscal year excluding foreign currency translation effects.(5)With respect to“Research and Development expenses”,analyzed reasons for an increase/decrease in research and development expenses from the previous fiscal year excluding foreign currency translation effects.Motorcycle BusinessHonda Group Unit Sales is the total unit sales of completed products,including motorcycles,ATVs,and Side-by-Sides of Honda,its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method.ConsolidatedUnit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers,which consists of unit sales of completed products of Honda and its consolidated subsidiaries.Automobile BusinessHonda Group Unit Sales is the total unit sales of completed products of Honda,its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method.Consolidated Unit Sales is the total unit sales of completedproducts corresponding to consolidated sales revenue to external customers,which consists of unit sales of completed products of Honda and its consolidated subsidiaries.Certain sales of automobiles that are financed with residual value typeauto loans and other by our Japanese finance subsidiaries and provided through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to the externalcustomers in our Automobile business.Accordingly,they are not included in Consolidated Unit Sales,but are included in Honda Group Unit Sales of our Automobile business.Power Products BusinessHonda Group Unit Sales is the total unit sales of completed power products of Honda,its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method.Consolidated Unit Sales is the total unit sales ofcompleted power products corresponding to consolidated sales revenue to external customers,which consists of unit sales of completed power products of Honda and its consolidated subsidiaries.In Power Products business,there is nodiscrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method was involved in the sale of Honda power products.*Each share of common stock was split into 3 shares per share on the record date of September 30,2023,with an effective date of October 1,2023.Weighted average number of shares outstanding is calculated that the stock split was carried out at the beginning of the fiscal year ended March 31,2024.*Appendix222222Forecast for FYE March 31,2026 Summary of Tariff Impact Estimation AssumptionsReflect all currently estimated amounts of the impact from announced additional tariffs.Continue to scrutinize the impact amounts as we move towards Fiscal First Quarter Ended June 30,2025.This estimation contains forward-looking statements about the performance of Honda,which is based on managements assumptions and beliefs taking into account information currently available to it.Estimation AssumptionsCalculation PeriodAdditional TariffUnits(K)Impact AmountCompleted automobile vehiclesImports from Canada and Mexico:Apply additional tariffs after deducting the amount equivalent to US-origin parts.Imports from other countries:Apply additional tariffs to all.25/426/325S020-300Automobile parts and raw materials【Automobile Parts】Imports from Canada and Mexico:All parts are estimated to be the subject of the additional tariff,due to the fact that the total volume&value of the USMCA compliant parts,which are not the subject of the additional tariffs,are still being thoroughly evaluated for greater accuracy.Imports from other countries:Apply additional tariffs.Reflect offset measures for additional tariffs on automotive parts:Estimate the refund amount as 3.75%of the total MSRP based on US production and sales plans.【Raw Materials】Apply additional tariffs on steel and aluminum.25%-220Motorcycles,Power Products,OtherImports from countries other than Canada and Mexico:Apply baseline tariffs and reciprocal tariffs.Other(including impacts due to economic downturns in exporting countries).25/425/625/726/310% by country-130Tariff Impact TotalTariff Impact Total-65025/426/3Yen(billion）25/426/325/526/325/426/3232323305.5305.5-129.3129.3 148.9 148.9-30.630.6-55.955.9-37.337.3-127.6127.673.573.5201.1201.1Operating Operating MarginMargin5.6%5.6%Operating Operating MarginMargin 1.4%1.4%Operating Operating MarginMargin3.8%3.8%Operating Profit Operating Profit ()-232.0232.0-75.9 75.9*1 Sales impacts*2 Price/Cost impacts*3 Expenses*4 Currency effectsSales volume,model mixIncentiveFinanceOther-64.3-26.9-1.6-36.5 Price revisionCost reduction,etc. 133.2 15.7WarrantyFinanceOther 27.1-7.8-49.9JPY/USD USD/Others(BRL,CAD,MXN)JPY/Asian currencies(INR,THB,VND,CNY,IDR)Other 10.5-22.0-1.5-24.3Three Months Ended March 31,2025:Change in Operating ProfitThree Months Ended Three Months Ended March 31,2024March 31,2024Three Months Ended Three Months Ended March 31,2025March 31,2025Yen(billion）Sales impacts*1R&DExpenses*3Currencyeffects*4Price/Costimpacts*2Impact of the change in the estimation model forautomobile product warranties-104.4104.4(-34.2 34.2 )Excluding impact of the changeExcluding impact of the changein the estimation modelin the estimation modelfor automobile product warrantiesfor automobile product warrantiesOperating profit excl.impact of the change in the estimation model for automobile product warranties242424Three Months Ended March 31,2025:Sales Revenue/Operating Profit(Margin)by Business Segmentupper:FYE March 31,2025MotorcycleMotorcycleBusinessBusinessAutomobileAutomobileBusinessBusinessFinancial ServicesFinancial ServicesBusinessBusinessPower Products andPower Products andOther BusinessesOther Businesseslower:FYE March 31,2024 Unit(thousand)Honda Group Unit Sales(Consolidated Unit Sales)5,0645,064899899-1,1841,184(3,287)(3,287)(707)(707)-(1,184)(1,184)4,858995-1,264(3,116)(757)-(1,264)Yen(billion)Sales Revenue 919.6919.63,569.23,569.2849.0849.0113.2113.2862.13,670.9863.6115.7Operating Profit161.7161.7-158.7158.770.670.60.00.0144.7100.169.1-8.3Operating Margin17.6.6%-4.4%4.4%8.3%8.3%-0.1%0.1.8%2.7%8.0%-7.2%In the financial services business,Honda provides retail lending and leasing to customers and wholesale financing to dealers to support the sale of its products.Operating profit from aircraft andaircraft engines included in above Yen(billion)-10.5-8.3252525Compared with Three Months Ended March 31,2024:Compared with Three Months Ended March 31,2024:-69.2 69.2 billion yen /billion yen /-1 1.3%.3%(Excluding currency translation effects:(Excluding currency translation effects:-118118.6 billion yen/.6 billion yen/-2 2.2%).2%)Three MonthsThree MonthsSales RevenueFYE March 31,2024 FYE March 31,2025FYE March 31,2025ChangeChangeexcluding currency translation effects(%)Motorcycle Business862.1919.6919.6 57.4 77.3 9.0%Automobile Business3,595.13,484.73,484.7-110.4-164.1-4.6%Financial Services Business862.6848.0848.0-14.5-29.4-3.4%Power Products and Other Businesses109.3107.6107.6-1.7-2.4-2.2%Total5,429.35,360.05,360.0-69.2-118.6-2.2%Market average rate(Yen)U.S.Dollar 148153153Sales RevenueFYE March 31,2024 FYE March 31,2025FYE March 31,2025ChangeChangeexcluding currency translation effects(%)Motorcycle Business3,220.13,626.63,626.6 406.4 440.7 13.7%Automobile Business13,567.514,169.214,169.2 601.6 82.0 0.6%Financial Services Business3,248.83,507.73,507.7 258.9 109.8 3.4%Power Products and Other Businesses392.2385.1385.1-7.1-15.2-3.9%Total20,428.821,688.721,688.7 1,259.9 617.2 3.0%Market average rate(Yen)U.S.Dollar 145153153Change in Sales Revenue(sales revenue from external customers）Compared with Compared with FYE March 31,2024FYE March 31,2024: 1 1,259.9,259.9 billion yen /billion yen / 6.2%6.2%(Excluding currency translation effects: (Excluding currency translation effects: 617617.2 billion yen/.2 billion yen/ 3.0%)3.0%)TwelveTwelve MonthsMonthsYen(billion)Yen(billion)262626Yen(billion)ThreeMonthsJapanNorth AmericaEuropeAsiaOther Regions202420252025202420252025202420252025202420252025202420252025SalesRevenue1,289.11,432.41,432.43,171.73,106.43,106.4307.7280.9280.91,307.01,268.01,268.0304.1319.7319.7OperatingProfit-165.5-45.445.4288.1-38.238.233.6-8.58.5108.374.074.041.745.445.4Change 120.0 billion yen-326.3 billion yen-42.2 billion yen-31.7% 9.1%Twelve MonthsJapanNorth AmericaEuropeAsiaOther Regions202420252025202420252025202420252025202420252025202420252025SalesRevenue5,392.75,584.55,584.512,073.713,108.213,108.2966.3946.2946.25,009.94,896.34,896.31,081.91,226.21,226.2OperatingProfit151.0191.1191.1694.9435.2435.260.35.35.3397.8408.2408.2153.9177.8177.8Change 26.5%-37.4%-91.2% 2.6% 15.5%Fiscal Fourth Quarter Ended March 31,2025:Sales Revenue/Operating Profit by Geographical Segment272727Yen(billion)Three Months Ended March 31Fiscal Year Ended March 312024Results2025ResultsChange2024Results2025ResultsChangeCapital expenditures167.6216.5216.5 48.9387.9537.4537.4 149.4Depreciation and amortization121.1115.3115.3-5.7486.0456.1456.1-29.8Research and development expenditures325.1404.7404.7 79.6976.31,210.61,210.6 234.2Fiscal Fourth Quarter Ended March 31,2025:Capital Expenditures/Depreciation/R&D282828Yen(billion)AssetsFYE March 31,2024FYE March 31,2025Liabilities and EquityFYE March 31,2024FYE March 31,2025Cash and cash equivalents 4,624.63,861.7Trade payables 1,541.01,591.0Trade receivables 1,247.01,180.1Financing liabilities 862.9645.8Inventories2,433.62,464.7Other liabilities 3,634.83,751.2Investments accounted for using the equity method1,206.91,242.6NonNon-financial Services financial Services BusinessesBusinesses6,039.06,039.05,988.35,988.3Property,plant and equipment3,219.53,196.0Financing liabilities 9,308.411,085.5Other assets 3,524.04,046.9Other liabilities1,658.81,649.8NonNon-financial Services financial Services Businesses Businesses 16,256.116,256.115,992.215,992.2Finance SubsidiariesFinance Subsidiaries10,967.310,967.312,735.412,735.4Cash and cash equivalents329.8667.0Reconciling items-238.1-575.7Receivables from financial services8,176.58,930.6Total liabilitiesTotal liabilities16,768.216,768.218,148.018,148.0Equipment on operating leases5,202.75,748.1Non-financial Services Businesses equity10,217.110,003.9Other assets409.0367.4Finance Subsidiaries equity3,151.02,977.8Finance SubsidiariesFinance Subsidiaries14,118.314,118.315,713.315,713.3Reconciling items-362.2-353.9Reconciling items-600.3-929.7Total equityTotal equity13,005.813,005.812,627.812,627.8Total assets Total assets 29,774.129,774.130,775.830,775.8Total liabilities and equityTotal liabilities and equity29,774.129,774.130,775.830,775.8FYE March 31,2025:Consolidated Statements of Financial PositionDivided into Non-financial Services Businesses and Finance Subsidiaries292929Yen(billion)QTDYTD(FYE March 31)FYE March 31,2024FYE March 31,2025ChangeChange(%)Segment Information1Q2Q3Q4Q1Q2Q3Q4Q20242025ChangeChange(%)ResultsResultsSales RevenueMotorcycle Business756.9815.6785.4862.1937.6873.0896.2919.6 57.4 6.7%3,220.13,626.6 406.4 12.6%Automobile Business3,031.3 3,315.7 3,773.4 3,670.9 3,504.5 3,625.9 3,768.0 3,569.2-101.7-2.8,791.514,467.8 676.3 4.9%Financial ServicesBusiness773.6804.2810.2863.6939.3875.1848.6849.0-14.6-1.7%3,251.73,512.2 260.4 8.0%PP&Other Businesses109.1105.192.2115.7104.898.398.0113.2-2.5-2.2B2.3414.6-7.7-1.8%Reconciling items-46.1-56.2-71.2-83.3-81.6-79.8-79.9-91.1-7.8-256.9-332.5-75.5-Total4,624.9 4,984.3 5,390.1 5,429.3 5,404.8 5,392.7 5,531.1 5,360.0-69.2-1.3 ,428.821,688.7 1,259.9 6.2%Operating ProfitMotorcycle Business143.5109.8158.1144.7177.6148.2175.8161.7 17.0 11.8U6.2663.4 107.2 19.3%Automobile Business176.9124.3159.1100.1222.835.1144.5-158.7-258.8-560.6243.8-316.7-56.5%Financial ServicesBusiness69.567.467.869.184.977.782.270.6 1.5 2.23.9315.6 41.6 15.2%PP&Other Businesses4.40.3-5.2-8.3-0.7-3.2-5.3-0.0 8.3-8.8-9.4-0.5-Total394.4302.1379.8305.5484.7257.9397.373.5-232.0-75.9%1,381.91,213.4-168.4-12.2%Operating profit from aircraft and aircraft engines-5.6-8.8-10.0-8.3-9.7-9.3-9.3-10.5-2.1-32.9-38.8-5.9-Sales Revenue/Operating Profit by Business Segment303030Unit(thousand)Honda Group Unit Sales/Consolidated Unit Sales1Q2Q3Q4Q1Q2Q3Q4Q2024Results2025ResultsChange2024Results2025ForecastChangeMotorcycles4,4734,7934,6954,8585,0625,3205,1265,064 20618,81920,572 1,75320,57221,300 728Japan5864596050505866 6241224-17224210-14North America120135119124132137144135 11498548 50548545-3Europe1191109511613812796114-2440475 35475430-45Asia3,7814,0934,0104,1324,2754,5864,3554,262 13016,01617,478 1,46217,47818,065 587Other Regions395391412426467420473487 611,6241,847 2231,8472,050 203Automobiles9011,0331,1809958699101,038899-964,1093,716-3933,7163,620-96Japan115144169167141161159169 2595630 35630600-30North America393385433417406430435383-341,6281,654 261,6541,680 26Europe2023253523251728-710393-109390-3Asia343446518344264257383278-661,6511,182-4691,1821,090-92Other Regions3035353235374441 9132157 25157160 3Power Products9838437221,2648228318631,184-803,8123,700-1123,7003,670-30Japan6072729846786589-9302278-24278250-28North America35723790399270212219319-801,0831,020-631,020970-50Europe218138125313134118115284-29794651-143651700 49Asia288314340352301351364397 451,2941,413 1191,4131,410-3Other Regions608295102717210095-7339338-1338340 2Consolidated Unit SalesMotorcycles2,8703,1363,0973,1163,4503,5103,4383,287 17112,21913,685 1,46613,68514,250 565Japan5864596050505866 6241224-17224210-14North America120135119124132137144135 11498548 50548545-3Europe1191109511613812796114-2440475 35475430-45Asia2,1782,4362,4122,3902,6632,7762,6672,485 959,41610,591 1,17510,59111,015 424Other Regions395391412426467420473487 611,6241,847 2231,8472,050 203Automobiles633699767757672724737707-502,8562,840-162,8402,830-10Japan102129149145120139138142-3525539 14539505-34North America393385433417406430435383-341,6281,654 261,6541,680 26Europe2023253523251728-710393-109390-3Asia881271251288893103113-15468397-71397395-2Other Regions3035353235374441 9132157 25157160 3Power Products9838437221,2648228318631,184-803,8123,700-1123,7003,670-30Japan6072729846786589-9302278-24278250-28North America35723790399270212219319-801,0831,020-631,020970-50Europe218138125313134118115284-29794651-143651700 49Asia288314340352301351364397 451,2941,413 1191,4131,410-3Other Regions608295102717210095-7339338-1338340 2ForecastHonda GroupUnit Saless2024FYE March 31FYE March 312025Change3131311Q2Q3Q4Q1Q2Q3Q4Q2024Results2025ResultsChangeGlobalHEV216205227217204217231246 29865898 33PHEV38854553-22317-6EV43766223019 132177 56FCEV-000 0-0 0Excluding ChinaHEV154171191196178195205230 34712808 96PHEV01111101 023 1EV01134182717 14567 62FCEV-000 0-0 0ElectrifiedAutomobile RetailSales2024FYE March 31FYE March 312025ChangeAutomobile Retail Sales per Power TrainsUnit(thousand)
2025-09-30
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