What changed in this filing

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Item 1A. Risk Factors

2021-08-04 compared with 2021-05-05 · 184 added, 152 removed, 406 unchanged (45% of the section changed)

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• Our net revenues are dependent primarily on our Invisalign System and iTero Scanners and any decline in sales or average selling price of these products for any reason, may adversely affect net revenues, gross margin and net income.

• Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors, other companies that may introduce new technologies in the future and customers who create aligners or retainers in house.

• An increasingly larger portion of our total revenues are derived from international sales and we are dependent on our international operations, which exposes us to foreign operational, political and other risks that may harm our business.

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• Our success depends on our ability to develop, successfully introduce and achieve market acceptance of new products and services.

• We may not achieve the anticipated benefits from our recent acquisition of exocad in the timeframe expected, or at all, which may have an adverse effect on our business and our financial results.

• We may not achieve the anticipated benefits from our acquisition of exocad in the timeframe expected, or at all, which may have an adverse effect on our business and our financial results.

• As we continue to grow, we are subject to growth related risks, including risks related to excess or constrained capacity and operational inefficiencies at our manufacturing and treat facilities.

• Our products and information technology systems are critical to our business.

Issues with product development or enhancements, IT system integration, implementation, updates and upgrades along with security and data protection risks have previously and could again in the future disrupt our operations, which could have a material adverse impact on our business and operating results.

• If we are unable to protect our customer or patient information or if we are unable to comply with applicable privacy, security and data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our business, operations and reputation could be harmed.

• If we fail to sustain or increase revenue growth while controlling expenses, our profitability may decline.

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• If we fail to accurately predict our volume growth and hire too many or too few technicians, the delivery time of our products could be delayed or our costs may exceed our revenues, each of which could adversely affect our results of operations.

• Our information technology systems are critical to our business.

System integration and implementation issues and system security risks could disrupt our operations, which could have a material adverse impact on our business and operating results.

• If the security of our customer and patient information is compromised or we are unable to comply with data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our reputation could be impaired.

• We are dependent on our marketing activities to deepen our market penetration and raise awareness of our brand and products, which may not prove successful or may become less effective or more costly to maintain in the long term.

• Our success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our intellectual property rights, our competitive position may be harmed.

Litigating claims of this type are costly and could distract our management and cause a decline in our results of operations and stock price.

• Obtaining approvals and complying with governmental regulations, particularly healthcare and data privacy compliance, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

• If we or any vendors on whose products or services we rely for our products and service infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

Litigating claims of this type is costly and could distract our management and cause a decline in our results of operations and stock price.

• Obtaining approvals and complying with governmental regulations, particularly those related to personal healthcare information, financial information and data privacy, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

• If we or any vendors on whose products or services we rely for our products and services infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

• We maintain single supply relationships for certain key machines and materials, and our business and operating results could be harmed if supply is restricted or ends or the price of raw materials used in our manufacturing process increases.

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• We use distributors for a portion of the importation, marketing and sales efforts related to our products and services, which exposes us to risks that may be harmful to our sales and operations.

• Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be liable for substantial damages or penalties if we are subject to claims or litigation.

• Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.

• We are subject to risks associated with our strategic investments.

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General Risk Factors

• If we lose our key personnel or are unable to attract and retain key personnel, we may be unable to pursue business opportunities or develop our products.

• We rely on highly skilled personnel and, i f we fail to attract, motivate or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.

• Business disruptions could seriously harm our financial condition.

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• Changes in tax laws or tax rulings could negatively impact our income tax provision and net income.

• We may acquire other businesses, products or technologies in the future which could require significant management attention, disrupt our business, dilute shareholder value and adversely affect our results of operations.

• We have in the past and may again in the future acquire other businesses, products or technologies which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.

• Historically, the market price for our common stock has been volatile.

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• Future sales of significant amounts of our common stock may depress our stock price.

• Increased scrutiny of our environmental, social or governance responsibilities have and will likely continue to result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.

Risks Relating to our Business Operations and Strategy

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The broad and extensive impact of the COVID-19 pandemic on virtually all aspects of our business and society generally has exacerbated many of the pre-existing risks to our business by making them more likely to occur or more impactful when they do occur.

Accordingly, you should consider the risks in this risk factor in addition to, and not in lieu of, the risks identified elsewhere in these risk factors.

Moreover, any comparisons of our financial results in the first and second quarters of 2021 to the same periods in 2020 may not prove a useful means by which to evaluate the health of our business and our results of operations because of the broad and significantly adverse impact to our business and the businesses of our customers from the pandemic and recovery that followed.

COVID-19 created significant, widespread and unprecedented volatility, uncertainty, and economic instability, disrupting broad aspects of the global economy, our operations and the businesses of our customers and suppliers.

Accordingly, you should consider the risks set forth in this risk factor in addition to, and not in lieu of, the risks identified elsewhere in these risk factors.

Moreover, any comparisons of our financial results for the reporting periods of 2021 to the same reporting periods of 2020 may not be a useful means by which to evaluate the health of our business and our results of operations because of the broad and significant global impact to our business and the businesses of our customers from the pandemic followed by variances and inconsistencies in regional and local economies as they recover.

COVID-19 has created significant, widespread and unprecedented volatility, uncertainty, and economic instability, disrupting broad aspects of the global economy, our operations and the businesses of our customers and suppliers.

Many of these effects continue to varying degrees and further outbreaks of COVID-19 globally or regionally may harm recovering consumer confidence or renew implementation of harsh preventative measures.

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In particular, these preventative measures in the first and second quarters of 2020 materially adversely impacted our business and financial results.

While practices across all regions have largely reopened, many continue to operate at less than pre-pandemic capacities.

The pandemic has concurrently increased demand for digital solutions such as the products and solutions we offer in the dental field.

As restrictions are eased or removed entirely over the longer term, employees return to office work environments, and the availability of travel, dining, entertainment and other similar purchases and activities rebound, it is uncertain whether the increased demand for our products will continue or continue at the pace seen in recent quarters.

In the quarters that have followed, practices across all regions have largely reopened, although many continue to operate at less than pre-pandemic capacities.

The pandemic also increased demand for digital solutions such as the products and solutions we offer in the dental field.

As restrictions continue to ease or are removed entirely, employees return to office work environments, and the availability of travel, dining, entertainment and other similar purchases and activities rebound, it is uncertain whether increased demand for our products will continue or continue at the pace seen in recent quarters.

In response to the COVID-19 pandemic, in 2020 we implemented measures aimed at limiting its spread for the health and safety of our employees, customers, patients and the communities in which we live and work as well as in accordance with orders and decrees of governmental agencies.

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Many of these actions remain in effect to varying degrees although we may implement new or revise existing requirements as circumstances require.

The actions and reactions to voluntary and involuntary requirements can be highly disruptive to our business and may ultimately prove wholly or partially ineffective.

Even if effective, if employees perceive them to be inadequate or overly burdensome, or they prove difficult to maintain over extended periods of time, productivity may decline or we may experience employee unrest, slowdowns, stoppages or other demands, we may fail to timely meet customer demand or fulfill orders, the costs to maintain or implement protective measures or deliver our products may increase, and we may be subject to increased litigation, including product liability and occupational safety and condition claims.

The actions and reactions to voluntary and involuntary requirements have been highly disruptive to our business and may continue to be disruptive.

As physical offices are allowed to reopen, the rules and regulations for reopening will likely increase in complexity, making compliance more difficult.

Furthermore, if employees perceive the protocols and requirements we implement to create a safe and effective work environment to be inadequate, overly burdensome or no longer necessary, employees may choose to leave, productivity may decline or we may experience employee unrest, slowdowns, stoppages or other demands, we may fail to timely meet customer demand or fulfill orders, the costs to maintain or implement protective measures or deliver our products may increase, and we may be subject to increased litigation, including product liability and occupational safety and condition claims.

As the economic and societal impact of the pandemic continues to unfold, we are continually evaluating macroeconomic as well as industry-specific factors, including the extent our business and financial results are or may be impacted as well as those of our customers and suppliers, and the financial health and stability of businesses and consumers overall depends on numerous evolving factors, many of which we cannot control nor accurately predict.

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• customer and consumer purchasing behavior changes as pandemic-related restrictions are curtailed or lifted, remote working declines and travel and discretionary spending patterns shift and our ability to timely and effectively respond to any resulting decreases or increases in demand;

• the response of employees, customers and suppliers to the easing of social distancing mandates and returning to in office or facility working, including anxieties regarding the continuing risks of the spread of the virus, vaccination requirements, and other mandates that may impact employee productivity and engagement, retention or require additional costly protective measures;

• the response of employees, customers and suppliers to the easing of social distancing mandates and returning to in office or facility working, including anxieties regarding the continuing risks of the spread of the virus or any of its variants, vaccination requirements, and other mandates that may impact employee productivity and engagement, retention or require additional costly protective measures;

• the liquidity and financial stability of consumers, customers, and patients, including their willingness to purchase our products and services, delays paying for products or services, requests for extended payment terms, or payment defaults;

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• the confidence of our customers and patients that our products and solutions are sanitary and safe to use;

• data privacy and cybersecurity risks from new or expanded use of remote working and/or teledentistry by our suppliers, customers, and us, including new or expanded use of online service platforms, products and solutions such as video conferencing applications, doctor, consumer and patient apps, inadequately secured computing networks or servers, overheard telephone conversations, viewable computer screens, stolen passwords or access information, increased phishing and other cyber threats;

• data privacy and cybersecurity risks from new or expanded use of remote working and/or teledentistry by our suppliers, customers, and us, including new or expanded use of online service platforms, products and solutions such as video conferencing applications, doctor, consumer and patient apps, inadequately secured computing networks, servers, software or software applications, overheard telephone conversations, viewable computer screens, stolen passwords or access information, increased phishing and other cyber threats;

• the impact of remote working arrangements on our financial reporting systems and internal control over financial reporting, including our ability to ensure information required to be disclosed is timely and accurately recorded, processed, summarized, reported, and communicated to management, including our Chief Executive and Chief Financial Officers, as appropriate, to allow for timely decisions regarding required disclosure;

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if we implement new or expand existing discount programs or participation in these programs increases;

if we introduce new or change existing products or services, or modify how we market or sell any of our new or existing products or services;

if our critical accounting estimates materially differ from actual behavior or results;

or if our geographic, channel, or product mix shifts to lower priced products or to products that have a higher percentage of deferred revenue, our average selling prices would be adversely affected.

Moreover, some programs may be unsuccessful or may drive demand in unexpected ways.

Moreover, some programs, products and services may be unsuccessful or may drive demand in unexpected ways.

If any of the foregoing to occur, our net revenues, gross profit, gross margin and net income may decline.

Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors, other companies that may introduce new technologies in the future and customers who create aligners or retainers in house.

The dental industry is in a period of immense and rapid digital transformation involving products, technologies, distribution channels and business models.

While solutions such as our clear aligner and iTero scanners facilitate this transition, whether our technologies will achieve market acceptance and, if adopted, whether and when they may become obsolete as new offerings become available remains unclear.

Currently, our clear aligner system competes directly against traditional metal wires and brackets and increasingly against clear aligners manufactured and distributed by new market entrants and traditional manufacturers of wires and brackets, both within and outside the U.S., and from traditional medical device companies, laboratories, startups and, in some cases, doctors themselves.

Due in part to market opportunities and the expiration of certain of our key patents beginning in 2017, competition in the clear aligner market is increasing.

The number and types of competitors are diverse and vary by segment, geography and customers, including new and well-established regional competitors, as well as larger companies or divisions of larger companies with substantial sales, marketing, research and financial capabilities, including the ability to leverage existing dental market channels to compete directly with us.

Our competitors also include direct-to-consumer (“DTC”) companies that provide clear aligners using a remote teledentistry model requiring little or no in-office care from trained and licensed doctors and doctors themselves who can manufacture custom aligners in their offices using modern 3D printing technology.

Our competitors also include direct-to-consumer (“DTC”) companies that provide clear aligners using a remote teledentistry model requiring little or no in-office care from trained and licensed doctors, doctors and DSOs who can manufacture custom aligners in their offices using modern 3D printing technology.

Large consumer product companies may also enter the orthodontic supply market.

The manipulation and movement of teeth and bone is a delicate process with potentially painful and debilitating results if not appropriately performed and monitored.

The manipulation and movement of teeth and bone is a delicate process with potentially painful and debilitating results if improperly performed or monitored.

Accordingly, we are committed to delivering our Invisalign System solutions primarily through trained and skilled doctors.

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however, with the advent of DTC providers accompanied by significant advertising campaigns, there has been a shift away from traditional practices that may impact our primary selling channels.

We also believe doctors are sampling alternative products and/or taking advantage of competitive promotions and sale opportunities.

We also believe doctors and DSOs are sampling alternative products and/or taking advantage of competitive promotions and sale opportunities.

In addition, we may face competition from companies that introduce new technologies and we may be unable to compete with these competitors or they may render our technology obsolete or economically unattractive.

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These digital files form the basis of the ClinCheck treatment plan and are used to manufacture our aligners.

Our digital treatment planning and aligner fabrication are performed in multiple international locations, including large-scale operations in Mexico, Costa Rica and China and we continue to establish additional sites closer to our international customers.

Also, we maintain significant regional sales and marketing operations in Switzerland, Singapore and China along with research and development operations globally, including in the U.S., Russia, Israel, and Germany.

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Bribery Act of 2010 and export control laws, in spite of our policies and procedures designed to ensure compliance with these laws;

• increased expense of developing, testing, making and marketing localized versions of our products;

• political, military, social, economic, or business instability, acts of terrorism and acts of war, including increased levels of violence and military hostilities and protests in various regions of the world, including regions in which we operate such as the United States, Mexico, Hong Kong, the Middle East, Eastern Europe and Africa.

• increased expense of developing, testing, manufacturing and marketing localized versions of our products;

• political, military, social, economic, or business instability, acts of terrorism and acts of war, including increased levels of violence and military hostilities and protests in various regions of the world, including regions in which we operate such as the U.S., Mexico, Hong Kong, the Middle East, Eastern Europe and Africa.

In addition, some of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and may be called for additional active duty under emergency circumstances which may materially impair all or a portion of our business operations critical to our iTero operations.

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Consumer spending habits are affected by, among other things, pandemics, prevailing economic conditions, levels of employment, salaries and wage rates, debt obligations, discretionary income, consumer confidence and consumer perception of current and future economic conditions.

A decrease in U.S.

or certain international economies or an uncertain economic outlook, both of which have or are occurring as a result of the COVID-19 pandemic, would adversely affect consumer spending habits which may, among other things, result in a decrease in the number of overall orthodontic case starts, reduced patient traffic in dentists’ offices, reduction in or shift away from consumer spending on elective, non-urgent, or higher value procedures or a reduction in the demand for dental services generally, any of which would materially adversely affect our sales and operating results.

Conversely, the pandemic may have temporarily limited options for consumer discretionary spending and demand for our products may be harmed once travel and other restrictions are eased.

Weakness in the global economy results in a challenging environment for selling dental technologies and dentists may postpone investments in capital equipment, such as intraoral scanners and CAD/CAM software.

Declines in, or uncertain economic outlooks for, the U.S.

or certain international economies could adversely affect consumer spending habits which may, among other things, result in a decrease in the number of overall orthodontic and dental case starts, reduce patient traffic in dentists’ offices, reduce or shift spending away from elective, non-urgent, or higher value procedures or reduce demand for dental services generally, any of which could materially adversely affect our sales and operating results.

Conversely, the pandemic may have temporarily limited options for consumer spending and demand for our products may decline once travel and other restrictions are eased.

Weakness in the global economy can result in a challenging environment for selling dental technologies and dentists may postpone investments in capital equipment, such as intraoral scanners and CAD/CAM software.

In addition, Invisalign treatment, which accounts for the vast majority of our net revenues, represents a significant change from traditional metal brackets and wires orthodontic treatment, and customers and consumers may not find it cost-effective or preferable to traditional treatment.

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There is no assurance we can successfully develop, sell and achieve market acceptance of our products and services.

The extent of, and rate at which,

market acceptance and penetration are achieved by any products or offerings is a function of many variables, including our ability to:

The extent of, and rate at which, market acceptance and penetration are achieved by any products or offerings is a function of many variables, including our ability to:

• correctly predict, timely develop and cost effectively manufacture or bring to market solutions that meet future customer needs and preferences with the features and functionality they desire or expect;

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• qualify for third-party reimbursement for procedures using our products;

• successfully identify, timely develop and market products and services to new and evolving target markets;

• encourage customers to adopt new technologies and provide the needed support to make new product launches successful .

• successfully identify, timely develop and/or market new and existing products and services offerings to effectively meet customer demand and compete in evolving target markets;

• encourage customers to adopt new technologies and provide the needed technical, sales and marketing support to make new product and services launches successful .

If we fail to accurately predict customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products that do not lead to significant revenues.

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Consequently, doctors may be unwilling to adopt our new products until they successfully complete one or more cases or until more historical clinical results are available.

Any failure to successfully develop and introduce or achieve market acceptance of new products or enhancements to existing products could materially adversely affect our operating results and cause our net revenues to decline.

We may not achieve the anticipated benefits from our recent acquisition of exocad in the timeframe expected, or at all, which may have an adverse effect on our business and our financial results.

Any failure to successfully develop and introduce or achieve market acceptance of new products or enhancements to existing products could materially adversely affect net revenues and cause our operating results to decline.

We may not achieve the anticipated benefits from our acquisition of exocad in the timeframe expected, or at all, which may have an adverse effect on our business and our financial results.

We closed our acquisition of exocad on April 1, 2020.

There is no guarantee that the acquisition will achieve the desired benefits and synergies or that the exocad CAD/CAM software will continue to succeed in the marketplace.

In addition, we do not have a history of significant acquisitions and integrating exocad during the COVID-19 pandemic poses challenges which may make it difficult to achieve the expected financial, technical or strategic benefits of the acquisition in the time frames anticipated if at all.

In addition, we do not have a history of significant acquisitions and integrating exocad during the COVID-19 pandemic has presented and continues to pose challenges which may make it difficult to achieve the expected financial, technical or strategic benefits of the acquisition in the time frames anticipated if at all.

Potential risks we may experience include:

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We are subject to growth related risks, including excess or constrained capacity and pressure on our internal systems, personnel and suppliers.

In order to manage current operations and future growth effectively, we will need to continue to implement and improve our operational, financial and management information systems, to hire, train, motivate, manage and retain employees, and ensure our suppliers remain diverse and capable enough to meet growing demand for the systems, raw materials, parts and components essential to the manufacture and delivery of our products.

In order to manage current operations and future growth effectively, we must continue implementing and improving our operational, financial and management information systems, hire, train, motivate, manage and retain employees, and ensure our suppliers remain diverse and capable of meeting growing demand for the systems, raw materials, parts and components essential to the manufacture and delivery of our products.

We may be unable to manage such growth effectively;

balancing near-term efforts to meet existing demand while adding personnel, creating scalable and robust systems and operations, and automating processes needed for long term efficiencies.

balancing near-term efforts to meet existing demand while adding personnel, creating scalable, secure and robust systems and operations, and automating processes needed for long term efficiencies.

Any such failure could have a material adverse impact on our business, operations and prospects.

We continue to establish additional order acquisition, treatment planning and manufacturing facilities closer to our international customers in order to provide doctors with better experiences, improve their confidence in using the Invisalign System and iTero intraoral scanners to treat more patients and provide redundancy should other facilities be temporarily or permanently unavailable.

Our ability to obtain regulatory clearance and certifications for, move into, plan, construct and equip additional order acquisition, treatment planning and manufacturing facilities is subject to significant risk and uncertainty, including risks related to establishing facilities, such as hiring and retaining employees and delays and cost overruns, any of which may be out of our control and may negatively impact our gross margin.

In addition, these facilities may be located in higher cost regions compared to Mexico, China and Costa Rica, which may negatively impact our gross margin.

Our ability to obtain regulatory clearance and certifications for, move into, plan, construct and equip additional order acquisition, treatment planning and manufacturing facilities is subject to significant risk and uncertainty, including risks related to establishing facilities, hiring and retaining employees and delays and cost overruns, any of which may be out of our control and may negatively impact our gross margin.

In addition, any facilities located in higher cost regions compared to Mexico, China and Costa Rica may negatively impact our gross margin.

If the transition into additional facilities is significantly delayed, if a facility is required to temporarily or permanently, partially or fully shut down, or demand for our products outpaces our ability to hire qualified personnel and effectively implement systems and infrastructure, we may be unable to fulfill orders timely, or at all, which may negatively impact our financial results, reputation and overall business.

In addition, because adapting production capacity and related cost structures to changing market conditions takes time, our facility capacity may at times exceed or fall short of our production requirements.

In addition, because adapting production capacity and related cost structures to changing market conditions takes time, our facilities capacity may at times exceed or fall short of our production requirements.

For instance, as a result of the COVID-19 pandemic sales in the final weeks of the first quarter of 2020 declined substantially and operations at our manufacturing facilities declined shortly thereafter.

Thereafter, as dental practices reopened we experienced a rapid increase in demand.

If product demand decreases or increases more than forecast, we could be required to write off inventory or record excess capacity charges, we may be required to purchase or lease additional or larger facilities and additional equipment, or we may be unable to fulfill customer demand in the time frames and with the quantities they require, any of which may take time to accomplish, lower our gross margin, inhibit sales or harm our reputation, or if we are required to implement additional protective measures to safeguard our employees, productivity could decline.

Production of our clear aligners and intraoral scanners may also be limited by capacity constraints due to a variety of factors, including our dependency on third party vendors for key components in addition to limited production yields.

If product demand decreases or increases more than forecast, we could be required to write off inventory or record excess capacity charges, we may be required to purchase or lease additional or larger facilities and additional equipment, or we may be unable to fulfill customer demand in the time frames and with the quantities required, any of which may take time to accomplish, lower our gross margin, inhibit sales or harm our reputation.

Additionally, if we are required to implement new or modify existing health and safety protocols to safeguard our employees, customers or their patients, productivity could decline.

Production of our clear aligners and intraoral scanners may also be limited by capacity constraints due to a variety of factors, including our dependency on third party vendors for key materials and components in addition to limited production yields.

Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance and otherwise harm our business and financial results.

Our products and information technology systems are critical to our business.

We rely on the efficient, uninterrupted and secure operation of our own complex information technology systems ("IT systems") and are dependent on key software of third parties embedded in our products and IT systems as well as third party hosted IT systems to support our operations.

All software and IT systems are vulnerable to damage, attack or interruption from a variety of sources.

As our business has grown in size and complexity, including through the integration of acquired businesses, which to date have been smaller organizations with less-mature or less sophisticated systems, securities practices or training, the growth has placed, and will continue to place, significant demands on our operations and such systems and have increased the risk of security incidents.

To effectively manage our existing operations and continue to grow, our IT systems and applications require an ongoing commitment of significant resources to maintain, protect, enhance and restore existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, increasingly sophisticated cyber threats, and changing customer preferences.

Expanded remote working and increased usage of online and hosted technology platforms by us, our customers and suppliers as a means to mitigate the spread of COVID-19 have increased the demands on and risks to our IT systems and personnel.

Moreover, we continue to transform certain business processes, extend established processes to new subsidiaries and/or implement additional functionality in our enterprise resource planning (“ERP”), product development, manufacturing, and other software and IT systems which entails certain risks, including disruption of our operations, such as our ability to develop and update products that are safe and secure, track orders and timely ship products, manage our supply chain and aggregate financial and operational data.

System upgrades, development of new releases and enhancements require significant expenditures and allocation of valuable employee resources.

Delays in integration or disruptions to our business from implementation of these new or upgraded systems could have a material adverse impact on our financial condition and operating results.

Additionally, we continuously upgrade and issue new releases of our products and customer facing software applications, such as our iTero intraoral scanners, exocad CAD/CAM solutions, my iTero, our ClinCheck software, MyAligntech and the Invisalign Doctor Site as well as our internal software applications upon which customer facing, manufacturing and treatment planning operations are dependent.

Software applications and products containing software frequently contain errors or defects, especially when first introduced or when new versions are released.

The discovery of a defect, error or security vulnerability in our products, software applications or IT systems, incompatibility with customers’ computer operating systems and hardware configurations with a new release or upgraded version or the failure of our products or primary IT systems may cause adverse consequences, including:

delay or loss of revenues, delay in market acceptance, loss of data, disclosure of financial, health or other personal information of our customers or their patients, product recalls, damage to our reputation, loss of market share or increased service costs, any of which could have a material adverse effect on our business, financial condition or results of operations.

A significant portion of our clear aligner production is dependent on digital scans from our iTero and third party intraoral scanners.

Failures of all or any portion of ours or third party software or other components or systems to interoperate with iTero or third party scanners, termination of interoperability with third party scanners, malware or ransomware attacks, product or system vulnerabilities or defects, or a system outage for any reason have harmed our operations previously and in the future could materially adversely effect our ability to accept scans, manufacture clear aligners or otherwise service our customers which may, amongst other things, harm our sales, damage our reputation, or result in litigation.

If the information we rely on to run our businesses is inaccurate or unreliable, if we fail to properly maintain, secure or restore our IT systems, if the integrity of our products or IT systems is compromised or questioned or data is lost, or if we fail to develop new capabilities to meet our business needs in a timely manner, we could suffer operational disruptions, have customer disputes, and fail to produce timely, accurate or complete reports.

We may also be required to respond to regulatory inquiries or actions, forced to defend against litigation or pay damages, penalties or fines, experience increases in operating and administrative expenses, find it necessary to recall or repair products, rebuild networks or systems, lose existing customers, experience difficulties attracting new customers or implementing our growth strategies, or suffer other adverse consequences.

In addition, experienced computer programmers and hackers may be able to penetrate the security features of our products, IT systems or our cloud-based software servers hosted by third parties and misappropriate, destroy or damage our confidential information or that of third parties, expose health, financial data, or other personal information of our customers and their patients, create system disruptions or cause shutdowns.

Furthermore, sophisticated hardware and operating system software and applications that we either internally develop or procure from third parties may contain defects or present risks in design, development, manufacture or distribution, including “bugs,” security vulnerabilities, and other problems that can unexpectedly interfere with the operation of the system or compromise or exploit the safety and security of our products, networks or data.

The costs to eliminate, mitigate or recover from security problems, viruses and bugs could be significant and depending on the nature and extent of the problem and the networks or products impacted, may result in network or systems interruptions, decreased product sales, or data loss that may have a material adverse impact on our operations, net revenues and operating results.

There can be no assurance that our process of improving existing or developing new products or IT systems, integrating new IT systems, protecting confidential patient health information, and improving service levels will not be delayed or that additional product or IT systems issues will not arise in the future.

Failure to adequately protect and maintain the integrity of our products and IT systems and data may result in a material adverse effect on our financial position, results of operations and cash flows.

If we are unable to protect our customer or patient information or if we are unable to comply with applicable privacy, security and data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our business, operations and reputation could be harmed.

We retain confidential customer financial as well as patient health information in addition to our own proprietary information and data essential to our business operations.

Therefore, it is critical that the facilities and infrastructure on which we depend to run our business and the products we develop remain secure and are also perceived by the marketplace and our customers to be secure.

Despite the implementation of security features in our products and security measures in our IT systems, our products as well as the infrastructure and IT systems on which we depend are vulnerable to physical break-ins, computer viruses, programming errors or other technical malfunctions, hacking or phishing attacks by third parties, malware and ransomware, employee error or malfeasance or similar disruptive problems.

For example, we have experienced cybersecurity incidents and may again in the future.

Further, the frequency of third party cyber attacks has increased since the onset of the COVID-19 pandemic.

Significant service disruptions, breaches in our infrastructure and IT systems or other cybersecurity incidents could expose us to litigation or regulatory investigations and could impair our reputation and competitive position.

Affected parties could initiate legal or regulatory action against us, which could cause us to incur significant expense and liability or result in judicial or governmental orders forcing us to cease operations or modify our business practices in ways that could materially limit or restrict the products and services we provide.

Concerns over our privacy practices could adversely affect others’ perception of us and deter customers, consumers and partners from using our products.

In addition, patient care could suffer, and we could be liable if our products or IT systems fail to deliver accurate and complete information in a timely manner.

We have cybersecurity and other forms of insurance coverage related to a breach event covering expenses for notification, credit monitoring, investigation, crisis management, public relations and legal advice.

The policy also provides coverage for regulatory action defense including fines and penalties, potential payment card industry fines and penalties and costs related to cyber extortion;

however, damage and claims arising from such incidents may not be covered or may exceed the amount of any coverage.

We are also subject to federal, state and foreign laws and regulations, including ones relating to privacy, data security and protection, content regulation, and consumer protection among others.

We are subject to various national and regional data localization or data residency laws which generally require that certain types of data collected within a country be stored and processed only within that country or approved countries and other countries are considering enacting similar data localization or data residency laws.

We have and likely will again in the future be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with the requirements of such laws, any of which could have significant cost implications.

We are also subject to data export restrictions and international transfer laws which prohibit or impose conditions upon the transfer of such data from one country to another.

These laws and regulations are constantly evolving and may be interpreted, applied, created or amended in a manner that could adversely affect our business.

In addition, we must comply with numerous data privacy and data security requirements that span from individual state and national laws in the U.S.

and China to multinational requirements in the EU.

For instance, China has enacted new, complex and highly restrictive cybersecurity, data localization, and cross border data transfer laws.

In the EU, we must comply with the General Data Protection Regulation which serves as a harmonization of EU data-privacy laws, and in the U.S.

we must comply with data privacy and data security provisions of the U.S.

Health Insurance Portability and Accountability Act (“HIPAA”) regulations.

Moreover, the number of local and national governments enacting data privacy laws continues to increase and we expect this trend to continue.

Maintaining compliance with these laws and regulations is costly and could require complex changes in the way we do business or provide services to our customers and their patients.

Additionally, our success may be dependent on the success of healthcare providers in managing data privacy and data security requirements.

If we fail to sustain or increase revenue growth while controlling expenses, our profitability may decline.

If we are to sustain or increase profitability in future periods, we need to continue increasing our net revenues, while controlling expenses.

Because our business and the markets we target are evolving, it is difficult to predict our future operating results or levels of growth or declines, and we have not in the past and may be unable in the future to sustain or regain our historical growth rates which may cause our profitability to decline.

Because our business and the markets we target are evolving, it is difficult to predict our future operating

results or levels of growth or declines, and we have not in the past and may be unable in the future to sustain or regain our historical growth rates which may cause our profitability to decline.

Our operating results have and will continue to fluctuate in the future, which makes predicting the timing and amount of our revenues, costs and expenditures difficult.

Our quarterly and annual operating results have and will continue to fluctuate for a variety of reasons, including as a result of changing doctor and consumer product demand.

Some of the factors that could cause our operating results to fluctuate include:

Some of the factors that have historically and in the future could cause our operating results to fluctuate include:

• limited visibility into and difficulty predicting from quarter to quarter, the level of activity in our customers’ practices;

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• competition in general and competitive developments in our target markets;

• changes in relationships with our dental support organizations and distributors, including timing of orders;

• new programs or business models, new product or services introductions or changes or modifications to existing products and services offerings, including any impacts related to the timing of orders, product mix or market cannibalization;

• changes in relationships with our dental service organizations and distributors, including timing of orders;

• changes in the timing of revenue recognition and changes in our average selling prices, including as a result of the timing of receipt of product orders and shipments, product and services mix, geographic mix, product and services deferrals, the introduction of new products and software releases, product pricing, bundling and promotions, modifications to our terms and conditions such as payment terms, or as a result of new accounting pronouncements or changes to critical accounting estimates including, without limitation, those estimates based on such matters as our predicted usage of additional aligners;

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International sales carry higher shipping costs which could negatively impact our gross margin and results of operations.

If freight costs materially increase and we are unable to pass that increase along to our

customers or otherwise offset such increases in our cost of net revenues, our gross margin and financial results could be adversely affected.

If freight costs materially increase and we are unable to pass that increase along to our customers or otherwise offset such increases in our cost of net revenues, our gross margin and financial results could be adversely affected.

If we fail to accurately predict our volume growth and hire too many or too few technicians, the delivery time of our products could be delayed or our costs may exceed our revenues, each of which could adversely affect our results of operations.

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This requires new technicians to undergo a relatively long training process, often 120 days or longer.

As a result, if we are unable to accurately predict our volume growth, we may have an insufficient number of trained technicians to ensure products are manufactured and delivered within the time frame our customers expect.

Such a delay could cause us to lose existing customers or fail to attract new customers.

Such delays could cause us to lose existing customers or fail to attract new customers.

This could cause a decline in our net revenues and net income and could adversely affect our results of operations.

Conversely, if we hire and train too many technicians in anticipation of volume growth that does not materialize, materializes at a rate slower than anticipated, or if volumes decline, our costs and expenditures may outpace our revenue growth, harming our gross margins, operating expenses and financial results.

Our information technology systems are critical to our business.

System integration and implementation issues and system security risks could disrupt our operations, which could have a material adverse impact on our business and operating results.

We rely on the efficient and uninterrupted operation of complex information technology systems ("IT systems").

All IT systems are vulnerable to damage, attack or interruption from a variety of sources.

As our business has grown in size and complexity, the growth has placed, and will continue to place, significant demands on such systems.

To effectively manage this growth, our IT systems and applications require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, increasingly sophisticated cyber threats, and changing customer preferences.

Expanded remote working and increased customer usage of online technology platforms by us, our customers and suppliers as a means to mitigate the spread of COVID-19 have increased the demands on and risks to our IT systems and personnel.

Moreover, we continue to transform certain business processes, extend established processes to new subsidiaries and/or implement additional functionality in our enterprise resource planning (“ERP”) software system which entails certain risks, including disruption of our operations, such as our ability to track orders and timely ship products, manage our supply chain and aggregate financial and operational data.

System upgrades, new releases and enhancements require significant expenditures and allocation of valuable employee resources.

Delays in integration or disruptions to our business from implementation of these new or upgraded systems could have a material adverse impact on our financial condition and operating results.

Additionally, we continuously upgrade and issue new releases of our customer facing software applications, such as my iTero, our ClinCheck software, MyAligntech and the Invisalign Doctor Site as well as our internal software applications upon which customer facing, manufacturing and treatment planning operations are dependent.

Software applications frequently contain errors or defects, especially when first introduced or when new versions are released.

The discovery of a defect, error or security vulnerability in our software applications or IT systems, incompatibility with customers’ computer operating systems and hardware configurations with a new release or upgraded version or the failure of our primary IT systems may cause adverse consequences, including:

delay or loss of revenues, delay in market acceptance, damage to our reputation, loss of market share or increased service costs, any of which could have a material adverse effect on our business, financial condition or results of operations.

A significant portion of our clear aligner production is dependent on digital scans from our iTero and third party intraoral scanners.

A failure of all or any portion of ours or third party software or other components or systems to interoperate with iTero or third party scanners, termination of interoperability with third party scanners, or a system outage for any reason could have a material adverse effect on our ability to accept scans, manufacture clear aligners or otherwise service our customers which may amongst other things, harm our sales, damage our reputation, or result in litigation.

If the information we rely on to run our businesses is inaccurate or unreliable, if we fail to properly maintain our IT systems and data integrity, or if we fail to develop new capabilities to meet our business needs in a timely manner, we could suffer operational disruptions, have customer disputes, and fail to produce timely and accurate reports.

We may also be required to respond to regulatory inquiries or actions, forced to defend against litigation or pay damages, penalties or fines, experience increases in operating and administrative expenses, find it necessary to rebuild networks or systems, lose existing customers, experience difficulties attracting new customers or implementing our growth strategies, or suffer other adverse consequences.

In addition, experienced computer programmers and hackers may be able to penetrate our network security or our cloud-based

software servers hosted by third parties and misappropriate our confidential information or that of third parties, expose personal and financial data of our customers and their patients, create system disruptions or cause shutdowns.

The costs to eliminate or mitigate security problems, viruses and bugs could be significant and depending on the nature and extent of the problem and the networks or products impacted, may result in network or systems interruptions that may have a material adverse impact on our operations, net revenues and operating results.

There can be no assurance that our process of improving existing or developing new IT systems, integrating new IT systems, protecting confidential patient health information, and improving service levels will not be delayed or that additional IT systems issues will not arise in the future.

Failure to adequately protect and maintain the integrity of our IT systems and data may result in a material adverse effect on our financial position, results of operations and cash flows.

If the security of our customer and patient information is compromised or we are unable to comply with data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our reputation could be impaired.

We retain confidential customer financial as well as patient health information.

Therefore, it is critical that the facilities and infrastructure on which we depend to run our business remain secure and are also perceived by the marketplace and our customers to be secure.

Despite the implementation of security measures, we have experienced breaches in the past and the infrastructure and systems on which we depend may be vulnerable to physical break-ins, computer viruses, programming errors or other technical malfunctions, hacking or phishing attacks by third parties, ransomware, employee error or malfeasance or similar disruptive problems.

For example, some companies have experienced an increase in phishing and social engineering attacks from third parties in connection with the COVID-19 pandemic.

If we fail to meet our customer and patients’ expectations regarding the security of their information, we could be liable for damages and our reputation and competitive position could be impaired.

Concerns over our privacy practices could adversely affect others’ perception of us and deter customers, advertisers and partners from using our products.

In addition, patient care could suffer, and we could be liable if our IT systems fail to deliver correct information in a timely manner.

The policy also provides coverage for regulatory action defense including fines and penalties, potential payment card industry fines and penalties and costs related to cyber extortion;

however, damage and claims arising from such incidents may not be covered or may exceed the amount of any coverage.

We are also subject to federal, state and foreign laws and regulations, including ones relating to privacy, data protection, content regulation, and consumer protection.

We may be or become subject to data localization or data residency laws which generally require that certain types of data collected within a country be stored and processed only within that country or approved countries.

Some countries, including Brazil, Russia and China, have enacted, and others are considering enacting, data localization or data residency laws and we could be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with the requirements of such laws, any of which could have significant cost implications.

We may also be subject to data export restrictions, or international transfer laws which prohibit or impose conditions upon the transfer of such data from one country to another.

These laws and regulations are constantly evolving and may be interpreted, applied, created or amended in a manner that could adversely affect our business.

In addition, we must comply with numerous data protection requirements that span from individual state and national laws in the U.S.

and China to multinational requirements in the EU.

For instance, China has enacted new, complex and highly restrictive cybersecurity, data localization, and cross border data transfer laws.

In the EU, we must comply with the General Data Protection Regulation which serves as a harmonization of EU data-privacy laws.

Maintaining compliance with these laws and regulations is costly and could require complex changes in the way we do business or provide services to our customers and their patients.

Additionally, our success may be dependent on the success of healthcare providers in managing data protection requirements.

We are dependent on our marketing activities to deepen our market penetration and raise awareness of our brand and products, which may not prove successful or may become less effective or more costly to maintain in the long term.

Our marketing efforts and costs are significant and include national and regional campaigns involving television, print media, social media and, more recently, alliances with professional sports teams, social media influencers and other strategic

We attempt to structure our advertising campaigns to increase brand awareness, adoption and goodwill;

however, there is no assurance our campaigns will achieve the returns on advertising spend desired, successfully increase brand or product awareness sufficiently to sustain or increase our growth goals, or generate the goodwill and positive reputational goals we intend.

Moreover, should any of these entities or individuals do, say, publish or lend support to events or causes which may be perceived by all or any portion of society negatively, our sponsorships or support of these entities may be called into question, boycotts of our products announced, and our reputation may be harmed, any of which could have an adverse effect on our gross margin and business overall.

Moreover, should any of these entities or individuals do, say, publish or lend support to events or causes which may be perceived by all or any portion of society negatively, our sponsorships or support of these entities or individuals may be called into question, boycotts of our products announced, and our reputation may be harmed, any of which could have an adverse effect on our gross margin and business overall.

In addition, various countries restrict direct to consumer advertising of our products and we could run afoul of restrictions and be ordered to stop certain marketing activities.

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patents and IP laws.

Moreover, our foreign patent portfolio is less extensive than our U.S.

Moreover, our

foreign patent portfolio is less extensive than our U.S.

We also rely on protection of our copyrights, trademarks, trade secrets, know-how and proprietary information.

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Litigation, interferences, oppositions, re-exams, inter partes reviews, post grant reviews or other proceedings have been necessary and likely will be needed in the future to determine the validity and scope of certain of our IP rights and the IP rights claimed by third parties to determine the validity, scope or non-infringement of certain patent rights pertinent to the manufacture, use or sale of our products.

Any of these proceedings are unpredictable and may be protracted, expensive and distracting to management.

Asserting or defending these types of proceedings can be unpredictable, protracted, time consuming, expensive and distracting to management.

The outcome of such proceedings could adversely affect the validity and scope of our patent or other proprietary rights, hinder our ability to manufacture and market our products, require us to seek a license for the infringed product or technology or result in the assessment of significant monetary damages.

An unfavorable ruling could include monetary damages or, in cases where injunctive relief is sought, an injunction prohibiting us from selling our products.

Moreover, independent actions by competitors, customers or others may be brought alleging that our efforts to assert or attempt to enforce our patent or other intellectual property rights constitute unfair competition or violations of antitrust laws in the United States and other jurisdictions.

Any of these litigation results could adversely affect our results of operations and stock price.

Obtaining approvals and complying with governmental regulations, particularly healthcare and data privacy compliance, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

As a supplier of medical devices and solutions, we and many of customers and suppliers are subject to extensive and frequently changing regulations under numerous federal, state, local and foreign laws.

An unfavorable ruling could include monetary damages, an injunction prohibiting us from selling our products, or an exclusion order preventing us from importing our products in one or more countries.

Moreover, independent actions by competitors, customers or others have been brought alleging that our efforts to assert or attempt to enforce our patent or other intellectual property rights constitute unfair competition or violations of antitrust laws in the U.S.

and other jurisdictions and investigations and additional litigation based on the same or similar claims may be brought in the future.

Any of these litigation efforts or adverse litigation results could adversely affect our results of operations and stock price.

Obtaining approvals and complying with governmental regulations, particularly those related to personal healthcare information, financial information and data privacy, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

As a supplier of medical devices and solutions, we and many of our customers and suppliers are subject to extensive and frequently changing regulations under numerous federal, state, local and foreign laws.

Our healthcare provider customers and distributors are also subject to a wide variety of laws and regulations that affect the nature and scope of their relationships with us.

The healthcare market itself is highly regulated and subject to changing political, economic and regulatory influences.

For instance, regulations affecting the security and privacy of patient healthcare information held by healthcare providers and their business associates such as the U.S.

Health Insurance Portability and Accountability Act (“HIPAA”) may require us to make significant and unplanned enhancements of software applications or services, result in delays or cancellations of orders, or result in the revocation of endorsement of our products and services by healthcare participants.

For instance, regulations affecting the security and privacy of patient healthcare information held by healthcare providers and their business associates such as HIPAA may require us to make significant and unplanned enhancements of software applications or services, result in delays or cancellations of orders, or result in the revocation of endorsement of our products and services by healthcare participants.

Our critical vendors and service providers are similarly subject to various regulations.

Our failure, or the failure of our suppliers or customers to strictly adhere to clearances or approvals in the labeling, marketing and sales of our products and services could subject us to claims or litigation, including actions alleging false or misleading advertising, unfair or anti-competitive business practices or other violations of laws or regulations, which may result in costly investigations, fines, penalties, as well as material judgments, settlements or decrees.

Our failure, or the failure of our suppliers, customers, advertisers and influencers to strictly adhere to clearances or approvals in the labeling, marketing and sales of our products and services could subject us to claims or litigation, including actions alleging false or misleading advertising, unfair or anti-competitive business practices or other violations of laws or regulations, which may result in costly investigations, fines, penalties, as well as material judgments, settlements or decrees.

There can be no assurance that we will adequately address the business risks associated with the implementation and compliance with such laws or that we will be able to take advantage of any resulting business opportunities.

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Regardless, compliance with these laws and regulations will require time and effort by our personnel and others and we will incur additional costs.

If we or any vendors on whose products or services we rely for our products and service infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

Extensive litigation over patents and other IP rights is common in the medical device, software 3D printing and other technologies and industries on which our products and services and based.

We have been sued for infringement of third party’s patents in the past and we may be the subject of patent or other litigation in the future.

We periodically receive letters from third parties drawing our attention to their patent rights.

If we or any vendors on whose products or services we rely for our products and services infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

Extensive litigation over patents and other IP rights is common in the medical device, optical scanner, 3D printing and other technologies and industries on which our products and services are based.

We have been sued for infringement of third party’s patents in the past and we are currently defending patent infringement suits and other legal claims.

In addition, we periodically receive letters from third parties drawing our attention to their patent rights.

While we do not believe we infringe upon any valid and enforceable rights that have been brought to our attention, there may be other more pertinent rights of which we are presently unaware.

The defense and prosecution of IP suits, interference proceedings and related legal and administrative proceedings could result in substantial expense to us and significant diversion of effort by our technical and management personnel.

An adverse determination of any litigation or interference proceeding to which we may become a party could subject us to significant liabilities, exclusion orders or injunctions that may prevent or limit our rights to sell or import our products in one or more countries.

An adverse determination of this nature could also put our patents at risk of being invalidated or interpreted narrowly or require us to seek licenses from third parties.

An adverse determination in any legal proceeding to which we may become a party could subject us to significant liabilities, exclusion orders or injunctions that may prevent or limit our rights to sell or import our products in one or more countries.

An adverse determination of this nature could require us to seek licenses from third parties.

Licenses may not be available on commercially reasonable terms or at all, in which event, our business would be materially adversely affected.

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We do not have any long-term employment contracts with our direct sales force and the loss of the services of key personnel or groups of employees may harm our business.

In order to provide more comprehensive sales and service coverage and pursue growth opportunities, we continue to increase the size of our sales force

domestically and internationally.

Moreover, as we focus on market penetration, we have begun to segregate sales personnel to focus on specific markets such as orthodontists and GPs.

In order to provide more comprehensive sales and service coverage and pursue growth opportunities, we continue to increase the size of our sales force domestically and internationally.

Moreover, as we focus on market penetration, we have segregated sales personnel to focus on specific markets such as orthodontists and GPs.

It can take up to twelve months or more to train sales representatives to successfully market and sell our products and for them to establish strong customer relationships.

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We use distributors for a portion of the importation, marketing and sales efforts related to our products and services, which exposes us to risks that may be harmful to our sales and operations.

In addition to our direct sales force, we have and expect to continue to use distributors to import, market, sell, service and/or support our products.

Our agreements with these distributors may be non-exclusive and terminable by either party with little notice.

In addition to our direct sales force, we have and expect to continue to use distributors to import, market, sell, service and support our products.

Our agreements with these distributors are generally non-exclusive and terminable by either party with little notice.

If any of these relationships are terminated and alternative distributors are not quickly found and trained in the use, marketing, sales and support of our products and services, our revenues and ability to sell or service our products in markets key to our growth and expansion could be adversely affected.

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It may be difficult, expensive, and time-consuming for us to re-establish market access or regulatory compliance in such cases.

Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be liable for substantial damages or penalties if we are subject to claims or litigation.

Our products and services involve an inherent risk of claims concerning their design, manufacture, safety and performance, how they are marketed and advertised in a complex framework of highly regulated domestic and international laws and regulations, and how we package, bundle or and sell them to customers who may be private individuals or companies or public entities such as hospitals and clinics.

Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.

laws and regulations, how we package, bundle or sell them to customers who may be private individuals or companies or public entities such as hospitals and clinics and how we train and support doctors, their staffs and patients who administer or use our products.

Moreover, consumer products and services are routinely subject to claims of false, deceptive or misleading advertising, consumer fraud and unfair business practices.

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Impairments in the value of our investments could negatively impact our financial results.

We have and expect to continue to make investments in promising research and technology, primarily through privately held companies, for strategic reasons and to support key business initiatives, and we may not realize a return on our strategic investments.

We have and expect to continue to make investments in research and technology that we deem promising, primarily through privately held companies, for strategic reasons and to support key business initiatives, and we may not realize a return on our strategic investments.

Of the companies in which we invest, they may generate net losses and the market for their products, services or technologies may be slow to develop, if at all.

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General Risk Factors

If we lose our key personnel or are unable to attract and retain key personnel, we may be unable to pursue business opportunities or develop our products.

We are highly dependent on the key employees in our clinical engineering, technology development, manufacturing, sales, training and marketing personnel and management teams.

The loss of the services provided by those individuals may

significantly delay or prevent the achievement of our product development and other business objectives and could harm our business.

Our future success also depends on our ability to identify, recruit, train and retain additional qualified personnel, including orthodontists and production technicians in our treatment planning facilities.

Few orthodontists are accustomed to working in a manufacturing environment since they are generally trained to work in private practices, universities and other research institutions.

Thus, we may be unable to attract and retain personnel with the advanced qualifications necessary for the further development of our business.

Furthermore, we may not be successful in retaining our key personnel or their services.

If we are unable to attract and retain key personnel, our business could be materially harmed.

We rely on highly skilled personnel and, i f we fail to attract, motivate or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.

To be successful, we must effectively manage our growth which depends on our ability to identify, hire, develop, motivate, and retain personnel throughout our organization.

We are highly dependent on the talent and effort of highly skilled employees, including orthodontists and production technicians in our treatment planning facilities and employees in our clinical engineering, technology development, manufacturing, sales, and management teams.

The loss of the services provided by these employees may significantly delay or prevent the achievement of our development and business objectives and could harm our business.

Moreover, competition for qualified employees in our industry is intense, and our employees are targeted by other employers.

Our compensation and benefit arrangements, such as our equity award programs and telecommuting policies, may not always be successful in attracting new employees and retaining and motivating our existing employees.

Furthermore, other internal and external factors can impact our ability to hire and retain talent, including insufficient advancement or career opportunities and restrictive immigration policy and regulatory changes.

Additionally, are committed to a corporate culture that focuses on values emphasizing agility, customer and accountability.

We believe this culture fosters an environment of integrity, innovation, creativity, and teamwork but we have also experienced in the past and expect to experience in the future, difficulties attracting and retaining employees that meet the qualifications, experience, compliance mindset and values we expect.

If we are unable to attract and retain personnel that meet our selection criteria or we relax our standards in order to meet the demands of our growth or if our growth is not managed effectively, our corporate culture, ability to achieve our strategic objectives, and our compliance with obligations under our internal controls and other requirements may be harmed.

Business disruptions could seriously harm our financial condition.

Our global operations may be disrupted by natural or human induced disasters including, earthquakes, tsunamis, floods, drought, hurricanes, typhoons, wildfires, extreme weather conditions, power shortages, telecommunications failures, materials scarcity and price volatility, and medical epidemics or health pandemics.

For instance, the COVID-19 pandemic and subsequent recovery materially adversely impacted our sales and business operations in 2020, the operations of our customers and the global economy overall.

For instance, the COVID-19 pandemic and subsequent recovery materially impacted our sales and business operations in 2020, the operations of our customers and the global economy overall.

Climate change may increase both the frequency and severity of natural disasters and, consequently, risks to our operations and growth.

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Our digital dental modeling is primarily processed in our facility located in San Jose, Costa Rica.

The operations teams in Costa Rica and other global locations create ClinCheck treatment plans using sophisticated computer software.

The operations teams in Costa Rica and

other global locations create ClinCheck treatment plans using sophisticated computer software.

In addition, certain of our customer facing operations are located in Costa Rica.

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financial sector.

In an unstable credit or economic environment, it is necessary to assess the value of our investments more frequently and we might incur significant realized, unrealized or impairment losses associated with these investments.

In an unstable credit or economic environment, it is necessary to assess the

value of our investments more frequently and we might incur significant realized, unrealized or impairment losses associated with these investments.

If our goodwill or long-lived assets become impaired, we may be required to record a significant charge to earnings.

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Furthermore, we may continue to experience significant variation in our effective tax rate related to excess tax benefits on stock-based compensation, particularly in the first quarter of each year when the majority of our equity awards vest.

Changes in tax laws or tax rulings could negatively impact our income tax provision and net income.

New tax laws, or changes in existing tax laws or tax rulings or the way they are applied to our business could negatively impact our income tax provision and net income or subject us to new or greater tax burdens that may harm our sales or results of operations.

multinational corporation, we are subject to changing tax laws both within and outside of the U.S.

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The OECD has issued and is expected to continue to issue, guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.

We may acquire other businesses, products or technologies in the future which could require significant management attention, disrupt our business, dilute shareholder value and adversely affect our results of operations.

Moreover, the application of indirect taxes (such as sales and use tax (“SUT”), value-added tax (“VAT”), goods and services tax (“GST”), and other indirect taxes) to our operations is complex and evolving.

states, local and foreign taxing jurisdictions have differing rules and regulations governing differing types of taxes, and these rules and regulations are subject to varying interpretations that may change over time.

We collect and remit SUT, VAT, GST and other taxes in many jurisdictions and we are routinely subject to audits.

The positions we take regarding taxes as well as the amounts we collect or remit may be challenged and we may be liable for failing to collect or remit all or any portion of taxes deemed owed or the taxes could exceed our estimates.

We may also be subject to audits in U.S.

states, local and foreign jurisdictions for which we have not accrued tax liabilities.

One or more U.S.

states or countries may seek to impose incremental or new sales, use, or other tax collection obligations on us or may determine that such taxes should have but have not been paid by us.

The application of existing, new, or future tax laws, and results of audits, whether in the U.S.

or internationally, could harm our business.

Furthermore there have been and will continue to be substantial ongoing costs associated with complying with the various tax requirements in the numerous markets in which we conduct or will conduct business.

We have in the past and may again in the future acquire other businesses, products or technologies which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.

Periodically, we may acquire, or make investments in, complementary companies, products or technologies like our acquisition of exocad in 2020.

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Any integration process may require significant time and resources and we may not successfully evaluate or utilize the acquired technology, or we may fail to retain key personnel, or accurately forecast the financial impact of an acquired business.

We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, any of which could adversely affect our liquidity, financial condition or the value of our common stock.

The sale of equity or issuance of debt to finance any acquisition could result in dilution to our shareholders.

We may have to pay cash, incur debt or issue equity securities to pay for an acquisition, which could adversely affect our liquidity, financial condition or the value of our common stock.

The sale of equity or issuance of debt to finance any acquisition could result in dilution to our stockholders.

The occurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

Moreover, opposition to one of more acquisitions could lead to negative ratings by analysts or investors, give rise objections by one or more stockholders or result in shareholder activism, any of which could harm our stock price.

Moreover, opposition to one of more acquisitions could lead to negative ratings by analysts or investors, give rise to objections by one or more stockholders or result in stockholder activism, any of which could harm our stock price.

Acquisitions can also lead to large non-cash charges that can have an adverse effect on our results of operations as a result of write-offs for items such as future impairments of intangible assets and goodwill or the recording of stock-based compensation.

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• announcements regarding stock repurchases, sales of our common stock, credit agreements and debt issuances;

• announcements of technological innovations or new products or product offerings by us, our customers or competitors;

• announcements of technological innovations, new, additional or revised programs, business models, products or product offerings by us, our customers or competitors;

• key decisions in pending litigation;

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• general economic market conditions.

In addition, the stock market in general, and the market for technology and medical device companies, in particular, have experienced extreme price and volume fluctuations that have often been unrelated to or disproportionate to the operating performance of those companies.

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

In addition, the stock market in general, and the market for technology and medical device companies, in particular, have experienced extreme price and volume fluctuations that are often unrelated to or disproportionate to the operating performance of those companies.

These broad market and industry factors may include market expectations of, or actual changes in, monetary policies that have the goal of easing or tightening interest rates such as the federal funds rate in the U.S.

and austerity measures of governments intended to control budget deficits.

Historically, our stock has fluctuated materially based on broad economic and industry factors unrelated to our actual performance and future changes in monetary policies, austerity, and other market factors may seriously harm the market price of our common stock, regardless of our operating performance.

Historically, class action litigation is often brought against an issuing company following periods of volatility in the market price of its securities and we have not been excepted from such litigation.

We cannot guarantee we will repurchase our common stock again in the future, and any repurchases may not achieve our objectives.

We have a history of recurring stock repurchase programs intended to return capital to our investors although they were suspended in 2020 primarily as a result of uncertainties regarding the pandemic.

Any authorization or continuance of our share

repurchase programs is contingent on a variety of factors, including our financial condition, results of operations, business requirements, and our board of directors' continuing determination that share repurchases are in the best interests of our stockholders and in compliance with all applicable laws and agreements.

There is no assurance that we will resume repurchases of our common stock, or continue repurchasing our common stock if we do resume, consistent with historical levels or at all, or that our stock repurchase programs will have a beneficial impact on our stock price.

We have a history of recurring stock repurchase programs intended to return capital to our investors.

Although repurchases were suspended in 2020 primarily as a result of uncertainties regarding the pandemic, we ended the suspension in the second quarter of 2021 with two accelerated stock repurchase programs in the aggregate amount of $200 million which also

included the announcement of a $1 billion stock repurchase authorization by our Board of Directors.

Any further authorizations or continuance of existing stock repurchase programs is contingent on a variety of factors, including our financial condition, results of operations, business requirements, and our Board of Directors' continuing determination that stock repurchases are in the best interests of our stockholders and in compliance with all applicable laws and agreements.

There is no assurance that we will continue repurchasing our common stock in the future, consistent with historical levels or at all, or that our stock repurchase programs will have a beneficial impact on our stock price.

Future sales of significant amounts of our common stock may depress our stock price.

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Sales of substantial amounts of our common stock in the public market by existing stockholders may adversely affect the market price of our common stock by creating the perception of difficulties or problems with our business that may depress our stock price.

Increased scrutiny of our environmental, social or governance responsibilities have and will likely continue to result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.

Investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders, and customers are increasingly focused on environmental, social and governance ("ESG") practices of companies.

Additionally, public interest and legislative pressure related to public companies’ ESG practices continues to grow.

If our ESG practices fail to meet regulatory requirements or investor or other industry stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency and employing ESG strategies in our operations, our brand, reputation and employee retention may be negatively impacted and customers and suppliers may be unwilling to do business with us.

In addition, as we work to align our ESG practices with industry standards, we have expanded and, in the future, will likely continue to expand our disclosures in these areas.

We also expect to incur additional costs and require additional resources to monitor, report, and comply with our various ESG practices.

If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the expectations of stakeholders, our reputation, business, financial performance and growth may be adversely impacted.

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

What changed 10-Q

Item 1A. Risk Factors