WEST PHARMACEUTICAL SERVICES INC

Note 3: Revenue

Revenue Recognition

We recognize the majority of our revenue, primarily relating to Proprietary Products product sales, at a point in time, following the transfer of control of our products to our customers, which typically occurs upon shipment or delivery, depending on the terms of the related agreements.

We recognize revenue relating to our Contract-Manufactured Products product sales and certain Proprietary Products product sales over time, as our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date.

We recognize revenue relating to our development and tooling agreements over time, as our performance creates or enhances an asset that the customer controls as the asset is created or enhanced.

For revenue recognized over time, revenue is recognized by applying a method of measuring progress toward complete satisfaction of the related performance obligation. When selecting the method for measuring progress, we select the method that best depicts the transfer of control of goods or services promised to our customers.

Revenue for our Contract-Manufactured Products product sales, certain Proprietary Products product sales, and our development and tooling agreements is recorded under an input method, which recognizes revenue on the basis of our efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time elapsed, or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. The input method that we use is based on costs incurred.

The majority of the performance obligations within our contracts are satisfied within one year or less. Performance obligations satisfied beyond one year are not material as of December 31, 2025.

Our revenue can be generated from contracts with multiple performance obligations. When a sales agreement involves multiple performance obligations, each obligation is separately identified and the transaction price is allocated based on the amount of consideration we expect to be entitled in exchange for transferring the promised good or service to the customer.

Some customers receive pricing rebates upon attaining established sales volumes. We record rebate costs when sales occur based on our assessment of the likelihood that the required volumes will be attained. We also maintain an allowance for product returns, as we believe that we are able to reasonably estimate the amount of returns based on our substantial historical experience and specific identification of customer claims.

The following table presents the approximate percentage of our net sales by market group:

The following table presents the approximate percentage of our net sales by product category:

Due to the Company's reassessment of product categories, beginning in the second quarter of 2023, certain product types have been moved from High-Value Product Components to High-Value Product Delivery Devices. No adjustments were made to the product categorization prior to and since the second quarter of 2023.

The following table presents the approximate percentage of our net sales by geographic location:

Contract Assets and Liabilities

Contract assets and liabilities result from transactions with revenue primarily recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, we record a contract asset. Contract assets are recorded on the consolidated balance sheet in accounts receivable, net, and other assets (current and noncurrent portions, respectively). Contract assets included in accounts receivable, net, relate to the unbilled amounts of our product sales for which we have recognized revenue over time. Contract assets included in other assets represent the remaining performance obligations of our development and tooling agreements. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, we record a contract liability. Contract liabilities are recorded on the consolidated balance sheet within other liabilities (current and noncurrent portions, respectively) and represent cash payments received in advance of our performance.

The following table summarizes our contract assets and liabilities, excluding amounts included in accounts receivable, net:

Contract assets are included within other current assets and deferred income is included within other current liabilities and other long-term liabilities. The decrease in deferred income during 2025 was primarily due to the recognition of current year revenue of $62.0 million and the recognition of $44.0 million of revenue that was included in deferred income at the beginning of the year, offset by additional cash payments of $103.7 million received in advance of satisfying future performance obligations.

As of December 31, 2025, performance obligations expected to be satisfied beyond one year were $1.8 million. The remaining $51.9 million of performance obligations are expected to be satisfied withinone year or less.

Note 4: Net Income Per Share

The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:

During 2025, 2024 and 2023, there were 0.4 million,0.3 million and 0.2 million shares, respectively, from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive.

In February 2023, the Company's Board of Directors approved a share repurchase program under which we may repurchase up to $1.0 billion in shares of common stock. This program was completed during January 2025. In December 2024, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of up to 550,000 shares of our common stock on the open market or in privately-negotiated transactions. This program was completed during April 2025.

The below table summarizes share repurchases under this program during the years ended December 31:

On February 17, 2026, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $1.0 billion of the Company’s common stock in open-market transactions, block transactions, through derivative transactions, privately negotiated transactions, or otherwise, including pursuant to any trading plan entered into by the Company under Rule 10b5-1 of the Exchange Act. The number of shares to be repurchased and the timing of any repurchases will depend on factors such as the stock price, economic and market conditions, and corporate and regulatory requirements. The share repurchase program will commence as soon as reasonably practical but does not obligate the Company to acquire any particular amount of common stock, has no expiration date and it may be suspended or terminated at any time.

Note 5: Property, Plant and Equipment

A summary of gross property, plant and equipment at December 31 is presented in the following table:

Depreciation expense for the years ended December 31, 2025, 2024 and 2023 was $168.6 million, $151.8 million and $133.7 million, respectively.

We capitalize interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. Capitalized interest for the years ended December 31, 2025, 2024 and 2023 was $14.6 million, $13.2 million and $5.8 million, respectively.