What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 192 added, 158 removed, 596 unchanged (37% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net revenues $ 1,028,490 $ 1,002,173 $ 2,025,921 $ 1,945,320

4 unchanged sentences

Research and development 92,193 88,485 184,052 175,932

Legal settlement loss

31,127 — 31,127 —

Total operating expenses 575,582 541,678 1,119,263 1,068,816

18 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 96,564 $ 111,814 $ 201,592 $ 199,612

Other comprehensive income (loss):

Other comprehensive income:

Change in foreign currency translation adjustment, net of tax 6,359 9,158 3,427 19,632

Change in unrealized gains (losses) on investments, net of tax 243 350 446 1,995

Other comprehensive income (loss) ( 2,729 ) 12,119

Other comprehensive income

6,602 9,508 3,873 21,627

Comprehensive income $ 103,166 $ 121,322 $ 205,465 $ 221,239

45 unchanged sentences

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss), Net Retained Earnings Total

Three Months Ended March 31, 2024 Shares Amount

Three Months Ended June 30, 2024

Shares Amount

Balance as of March 31, 2024

75,281 $ 7 $ 1,238,739 $ 18,439 $ 2,502,675 $ 3,759,860

Net income — — — — 96,564 96,564

Net change in unrealized gains (losses) from investments — — — 243 — 243

Net change in foreign currency translation adjustment — — — 6,359 — 6,359

Issuance of common stock relating to employee equity compensation plans 17 — — — — —

Tax withholdings related to net share settlements of equity awards ( 4 ) — ( 1,547 ) — — ( 1,547 )

Common stock repurchased and retired ( 598 ) — ( 7,922 ) — ( 142,677 ) ( 150,599 )

Equity forward contract related to accelerated stock repurchase — — — — —

Stock-based compensation — — 47,028 — 47,028

Balance as of June 30, 2024

74,696 $ 7 $ 1,276,298 $ 25,041 $ 2,456,562 $ 3,757,908

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss), Net Retained Earnings Total

Six Months Ended June 30, 2024

Shares Amount

Balance as of December 31, 2023

8 unchanged sentences

Stock-based compensation — — 85,816 — — 85,816

Balance as of June 30, 2024

74,696 $ 7 $ 1,276,298 $ 25,041 $ 2,456,562 $ 3,757,908

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss), Net Retained Earnings Total

Three Months Ended June 30, 2023

Shares Amount

Balance as of March 31, 2023

76,516 $ 8 $ 1,104,693 $ 1,835 $ 2,373,513 $ 3,480,049

Net income — — — — 111,814 111,814

Net change in unrealized gains (losses) from investments — — — 350 — 350

Net change in foreign currency translation adjustment — — — 9,158 — 9,158

Issuance of common stock relating to employee equity compensation plans 1

Tax withholdings related to net share settlements of equity awards — — ( 930 ) — — ( 930 )

Stock-based compensation — — 37,860 — 37,860

Balance as of June 30, 2023

76,532 $ 8 $ 1,141,623 $ 11,343 $ 2,485,327 $ 3,638,301

1 Includes tax withholding shares related to net share settlements of equity awards.

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss), Net Retained Earnings Total

Three Months Ended March 31, 2023 Shares Amount

Six Months Ended June 30, 2023

Shares Amount

Balance as of December 31, 2022

77,267 $ 8 $ 1,044,946 $ ( 10,284 ) $ 2,566,688 $ 3,601,358

Net income — — — — 199,612 199,612

7 unchanged sentences

Stock-based compensation — — 75,595 — — 75,595

Balance as of March 31, 2023 76,516 $ 8 $ 1,104,693 $ 1,835 $ 2,373,513 $ 3,480,049

Balance as of June 30, 2023

76,532 $ 8 $ 1,141,623 $ 11,343 $ 2,485,327 $ 3,638,301

1 Includes tax withholding shares related to net share settlements of equity awards.

3 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

22 unchanged sentences

Proceeds from sales of marketable securities 7,518 4,048

Purchase of equity investments ( 75,390 ) ( 75,000 )

Other investing activities 129 74

7 unchanged sentences

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash ( 9,196 ) ( 3,523 )

Net decrease in cash, cash equivalents, and restricted cash ( 71,640 ) ( 109,674 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 176,057 ) 9,943

Cash, cash equivalents, and restricted cash at beginning of the period 938,519 942,355

8 unchanged sentences

These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S.”).

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other future period, and we make no representations related thereto.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other future period, and we make no representations related thereto.

Use of Estimates

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We invest excess cash primarily in money market funds, corporate bonds, asset-backed securities, municipal and U.S.

government agency bonds and treasury bonds and periodically evaluate them for credit losses.

government agency bonds and treasury bonds.

We periodically evaluate our investments for credit losses.

Such credit losses have not been material to our financial statements.

4 unchanged sentences

Recent Accounting Pronouncements Not Yet Effective

On November 27, 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures.

On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, “Improvements to Reportable Segment Disclosures.

” The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

1 unchanged sentence

Early adoption is permitted.

Companies must apply the guidance retrospectively to all prior periods presented in the financial statements.

Company expects this pronouncement to result in changes to the nature of our reportable segment disclosures;

however, we do not expect this new guidance to impact our financial results.

Companies must apply the

guidance retrospectively to all prior periods presented in the financial statements.

The Company expects this pronouncement may result in changes to the nature of our reportable segment disclosures.

On December 14, 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.

6 unchanged sentences

Cash, Cash Equivalents and Marketable Securities

The following tables summarize our cash and cash equivalents, and marketable securities on our Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 Amortized

The following tables summarize our cash and cash equivalents, and marketable securities on our Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 Amortized

Losses Fair Value Cash and Cash Equivalents Marketable securities, short-term Marketable securities, long-term

2 unchanged sentences

Corporate bonds 19,560 — ( 208 ) 19,352 — 19,352 —

government treasury bonds

4,871 — ( 101 ) 4,770 — 2,721 2,049

Asset-backed securities 324 — — 324 — 324

12 unchanged sentences

Total $ 981,569 $ 7 $ ( 812 ) $ 980,764 $ 937,438 $ 35,304 $ 8,022

The following table summarizes the fair value of our available-for-sale marketable securities classified by contractual maturity as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

The following table summarizes the fair value of our available-for-sale marketable securities classified by contractual maturity as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

Due in 1 year or less $ 20,358 $ 34,617

4 unchanged sentences

As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss.

Our unrealized losses as of March 31, 2024 and December 31, 2023 are primarily due to changes in interest rates and credit spreads.

The following tables summarize the fair value and gross unrealized losses as of March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

As of March 31, 2024

Our unrealized losses as of June 30, 2024 and December 31, 2023 are primarily due to changes in interest rates and credit spreads.

The following tables summarize the fair value and gross unrealized losses as of June 30, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

As of June 30, 2024

Less than 12 months 12 Months of Greater Total

March 31, 2024 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

June 30, 2024 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

Corporate bonds $ 2,013 $ — $ 17,339 $ ( 208 ) $ 19,352 $ ( 208 )

government treasury bonds

2,049 ( 26 ) 2,721 ( 75 ) 4,770 ( 101 )

Asset-backed securities — — 324 — 324 —

Municipal bonds — — — — — —

government agency bonds — — 1,006 ( 3 ) 1,006 ( 3 )

10 unchanged sentences

Total $ 7,065 $ ( 23 ) $ 32,612 $ ( 789 ) $ 39,677 $ ( 812 )

Accounts Receivable Factoring

We enter into factoring transactions on a non-recourse basis with financial institutions to sell certain of our non-U.S.

accounts receivable.

We account for these transactions as sales of accounts receivables and include the cash proceeds as a part of our cash flows from operations in the Condensed Consolidated Statements of Cash Flows.

Total accounts receivable sold under the factoring arrangements was $ 14.6 million during the three months ended March 31, 2024 and $ 8.0 million during the three months ended March 31, 2023.

Factoring fees on the sales of receivables were recorded in other income (expense), net in our Condensed Consolidated Statement of Operations and were not material.

Fair Value Measurements

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We obtain fair values for our Level 2 investments.

Our custody bank and asset managers independently use

professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates.

Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The following tables summarize our financial assets measured at fair value as of March 31, 2024 and December 31, 2023 (in thousands):

The following tables summarize our financial assets measured at fair value as of June 30, 2024 and December 31, 2023 (in thousands):

Description Balance as of

March 31, 2024 Level 1

June 30, 2024

Cash equivalents:

2 unchanged sentences

government agency bonds 1,006 — 1,006

government treasury bonds 2,721 — 2,721

Corporate bonds 19,352 — 19,352

Asset-backed securities 324 — 324

Long-term investments:

government treasury bonds 2,049 — 2,049

Corporate bonds 1,570 — 1,570

$ 22,308 $ 1,626 $ 20,682

Description Balance as of December 31, 2023 Level 1 Level 2

Description Balance as of December 31, 2023

Level 1 Level 2

Cash equivalents:

12 unchanged sentences

$ 93,082 $ 49,756 $ 43,326

Accounts Receivable Factoring

We enter into factoring transactions on a non-recourse basis with financial institutions to sell certain of our non-U.S.

accounts receivable.

We account for these transactions as sales of financial assets and include the cash proceeds as a part of our cash flows from operations in the Condensed Consolidated Statements of Cash Flows.

Total accounts receivable sold under the factoring arrangements was $ 11.3 million and $ 8.2 million during the three months ended June 30, 2024 and 2023, respectively, and $ 25.9 million and $ 16.2 million during the six months ended June 30, 2024 and 2023, respectively.

Factoring fees on the sales of receivables were recorded in other income (expense), net in our Condensed Consolidated Statement of Operations and were not material.

Investments in Privately Held Companies

3 unchanged sentences

Additionally, we adjust the carrying value of our investments in equity securities to fair value for observable transactions for identical or similar investments of the same issuer.

On April 24, 2023, we entered into a Subscription Agreement (the "April 2023 Subscription Agreement") with Heartland Dental Holding Corporation (“Heartland”).

Pursuant to the Subscription Agreement we acquired less than a 5 % equity interest through the purchase of Class A Common Stock for $ 75 million.

We are not the primary beneficiary of nor are we able to

exercise significant influence over Heartland.

As such, we are accounting for our investment in Heartland as an investment in equity securities.

Similar to our other investments in equity securities, Heartland is accounted for under the measurement alternative.

Based on review of our investment in Heartland, we determined that no adjustments to the carrying value were necessary;

therefore, it is properly reflected on our Condensed Consolidated Balance Sheet in Other assets at $ 75 million.

Investments in equity securities are reported on our Condensed Consolidated Balance Sheet as Other assets.

We record upward and downward adjustments in carrying value or impairment, if any, in our investments in equity securities, in other income (expense), net in our Condensed Consolidated Statement of Operations.

The carrying value of our investments in equity securities, exclusive of Heartland, were not material as of March 31, 2024 and the associated adjustments to the carrying values, if any, of the investments were not material during the three month periods ended March 31, 2024 and 2023.

On April 24, 2023 and April 22, 2024, we entered into Subscription Agreements (the “Subscription Agreements”) with Heartland Dental Holding Corporation (“Heartland”).

Pursuant to the Subscription Agreements we acquired less than a 5 % equity interest through the purchase of Class A Common Stock for $ 150 million in total.

We are accounting for our investment in Heartland as an investment in equity securities.

Based on a review of the relevant facts and circumstances, primarily observable transactions for Heartland's Class A Common Stock, we determined that no adjustment to the carrying value of our investment was necessary for the three or six months ended June 30, 2024.

Our investments in privately held companies in which we can exercise significant influence are accounted for as equity method investments.

We have elected to account for our equity method investments under the fair value option.

The carrying value of our equity method investments are reported on our Condensed Consolidated Balance Sheet as other assets and are not material as of March 31, 2024 and December 31, 2023.

The carrying value of our investments in equity securities and equity method investments are reported on our Condensed Consolidated Balance Sheets as Other assets and any fair value adjustments or impairment, if any, are recorded in other income (expense), net on our Condensed Consolidated Statement of Operations.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These forward contracts are classified within Level 2 of the fair value hierarchy.

As a result of the settlement of foreign currency forward contracts, we recognized a net gain of $ 19.7 million during the three months ended March 31, 2024 and a net loss of $ 6.4 million during the three months ended March 31, 2023.

As a result of the settlement of foreign currency forward contracts, we recognized a net gain of $ 7.5 million and $ 1.1 million, respectively, during the three months ended June 30, 2024 and 2023, and a net gain of $ 27.2 million and a net loss of $ 5.3 million, respectively, during the six months ended June 30, 2024 and 2023.

Recognized gains and losses from the settlement of foreign currency forward contracts are recorded to Other income (expense), net in our Condensed Consolidated Statements of Operations.

As of March 31, 2024 and December 31, 2023, the fair value of foreign exchange forward contracts outstanding were no t material.

The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

As of June 30, 2024 and December 31, 2023, the fair value of foreign exchange forward contracts outstanding were no t material.

The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024

Local Currency Amount Notional Contract Amount (USD)

1 unchanged sentence

British Pound £ 114,500 144,867

Canadian Dollar C$ 96,500 71,174

Canadian Dollar $ 102,400 74,790

Polish Zloty PLN 291,700 72,401

1 unchanged sentence

Japanese Yen ¥ 4,700,000 29,419

Israeli Shekel ILS 69,600 18,554

Brazilian Real R$ 91,600 16,390

Mexican Peso M$ 288,500 15,750

Israeli Shekel ILS 48,200 13,137

Swiss Franc CHF 4,700 5,246

New Zealand Dollar NZ$ 9,900 5,912

New Taiwan Dollar NT$ 98,000 3,064

Australian Dollar A$ 6,200 4,137

Czech Koruna Kč 44,600 1,905

New Taiwan Dollar NT$ 111,000 3,418

New Zealand Dollar NZ$ 5,200 3,168

Korean Won ₩ 3,100,000 2,244

Czech Koruna Kč 28,000 1,197

December 31, 2023

1 unchanged sentence

Euro € 337,780 $ 373,705

Canadian Dollar C$ 108,900 82,166

Canadian Dollar $ 108,900 82,166

Polish Zloty PLN 276,900 70,393

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Accrued warranty, which is included in the "Other accrued liabilities" category of the accrued liabilities table above, consists of the following activity (in thousands):

Three Months Ended

Six Months Ended

Balance at beginning of period $ 22,426 $ 17,873

7 unchanged sentences

$ 117,582 $ 138,000

1 Included in Other long-term liabilities within our Condensed Consolidated Balance Sheet.

During the three months ended March 31, 2024 and 2023, we recognized $ 997.4 million and $ 943.1 million of net revenues, respectively, of which $ 236.8 million and $ 205.7 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of March 31, 2024 were $ 1,533.1 million.

1 Included in Other long-term liabilities within our Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2024 and 2023, we recognized $ 1,028.5 million and $ 1,002.2 million of net revenues, respectively, of which $ 222.4 million and $ 199.0 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.

During the six months ended June 30, 2024 and 2023, we recognized $ 2,025.9 million and $ 1,945.3 million of net revenues, respectively, of which $ 459.2 million and $ 404.7 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of June 30, 2024 were $ 1,505.0 million.

These performance obligations are expected to be fulfilled over the next six months to five years .

Business Combination

On January 2, 2024 (the “Acquisition Date”), we completed the acquisition of privately-held Cubicure GmbH (“Cubicure”) (the "Acquisition") .

On January 2, 2024 (the “Cubicure Acquisition Date”), we completed the acquisition of privately-held Cubicure GmbH (“Cubicure”) (the "Cubicure Acquisition") .

Cubicure is an Austrian company and specializes in direct 3D printing solutions for polymer additive manufacturing that develops, produces, and distributes innovative materials, equipment, and processes for 3D printing solutions.

The acquisition of Cubicure is intended to support and scale our strategic innovation roadmap and strengthen the Align Digital Platform.

The Cubicure Acquisition is intended to support and scale our strategic innovation roadmap and strengthen the Align Digital Platform.

In fiscal year 2021, we acquired an 9.04 % equity interest in Cubicure.

Subsequently, on the Acquisition Date, we acquired the remaining equity of Cubicure.

Subsequently, on the Cubicure Acquisition Date, we acquired the remaining equity of Cubicure.

Prior to the acquisition, we also had technology license and joint development agreements with Cubicure.

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Total purchase consideration paid $ 85,794

The Acquisition was accounted for as a business combination under ASC Topic 805, Business Combinations ( “ASC 805”) that was achieved in stages.

As a result of the acquisition, we remeasured our pre-existing equity interest in Cubicure at fair value prior to the acquisition.

The Cubicure Acquisition was accounted for as a business combination under ASC Topic 805, Business Combinations ( “ASC 805”) that was achieved in stages.

As a result of the Cubicure Acquisition, we remeasured our pre-existing equity interest in Cubicure at fair value prior to the Cubicure Acquisition.

Based on the fair value of this equity interest, derived from the purchase price, we estimated the fair value of our 9.04 % pre-existing investment in Cubicure to be approximately $ 8.0 million.

1 unchanged sentence

In 2021, we initiated Joint development (“JDA”) and Technology license agreements (“TLA”) to provide us with access to Cubicure's technology.

The settlement of the JDA and TLA were concluded to be at market terms on the Acquisition Date;

The settlement of the JDA and TLA were concluded to be at market terms on the Cubicure Acquisition Date;

therefore, no gain or loss was recorded related to the settlement of these contracts.

We also had accounts payable from the pre-existing arrangements with Cubicure of $ 2.3 million, which were effectively settled and reduced from the purchase consideration of the Acquisition.

We also had accounts payable from the pre-existing arrangements with Cubicure of $ 2.3 million, which were effectively settled and reduced from the purchase consideration of the Cubicure Acquisition.

The preliminary allocation of purchase price to assets acquired and liabilities assumed which is subject to change within the measurement period is as follows (in thousands):

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We allocated all goodwill to our Clear Aligner reporting unit.

The following table presents details of the identified intangible assets acquired (in thousands, except years):

Weighted Average Amortization

Period (in years)

Developed technology 13 $ 47,000

As part of the Cubicure Acquisition we acquired a developed technology intangible asset.

The acquired developed technology had an estimated fair value of $ 47.0 million as of the Cubicure Acquisition Date and will be amortized over a useful life of thirteen years .

The fair value of developed technology was estimated under the Multi-Period Excess Earnings Method and the fair value estimates for developed technology include significant assumptions in the prospective financial information which include, but are not limited, to the projected future cash flows associated with the technology, asset's life cycle and the present value factor.

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Acquisition related costs were not material.

Our consolidated financial statements include the operating results of Cubicure from the Acquisition Date.

Our consolidated financial statements include the operating results of Cubicure from the Cubicure Acquisition Date.

Separate post-acquisition operating results and pro forma results of operations for this acquisition have not been presented as the effect is not material to our consolidated financial results.

Goodwill and Intangible Assets

The change in the carrying value of goodwill for the three months ended March 31, 2024, categorized by reportable segments, is as follows (in thousands):

The change in the carrying value of goodwill for the six months ended June 30, 2024, categorized by reportable segments, is as follows (in thousands):

Clear Aligner Systems and Services Total

Balance as of December 31, 2023

$ 111,086 $ 308,444 $ 419,530

Additions from acquisition 47,673 — 47,673

1 unchanged sentence

( 3,091 ) ( 9,619 ) ( 12,710 )

Balance as of March 31, 2024 $ 156,579 $ 301,656 $ 458,235

Balance as of June 30, 2024

$ 155,668 $ 298,825 $ 454,493

Finite-Lived Intangible Assets

2 unchanged sentences

(in years) Gross Carrying Amount as of

March 31, 2024

June 30, 2024

Amortization Accumulated

Impairment Loss Net Carrying

March 31, 2024

June 30, 2024

Existing technology 11 $ 146,651 $ ( 44,869 ) $ — $ 101,782

5 unchanged sentences

Total intangible assets, net 1

1 Includes $ 34.3 million of fully amortized intangible assets related to customer relationships and trademarks.

1 Includes $ 46.7 million of fully amortized intangible assets.

Weighted Average Amortization Period

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Total intangible assets, net 1

1 Includes $ 34.3 million of fully amortized intangible assets related to customer relationships and trademarks.

Of the $ 159.1 million recorded as existing technology intangible assets as of March 31, 2024, $ 47.0 million was acquired during the first quarter of 2024 as part of our acquisition of Cubicure.

The existing technology acquired in the Cubicure acquisition had an estimated useful life of 13 years, which had the effect of increasing the weighted average amortization period from approximately 10 years as of December 31, 2023 to approximately 11 years as of March 31, 2024.

1 Includes $ 34.3 million of fully amortized intangible assets.

Of the $ 146.7 million recorded as existing technology intangible assets as of June 30, 2024, $ 47.0 million was acquired during the first quarter of 2024 as part of the Cubicure Acquisition.

The existing technology acquired in the Cubicure Acquisition had an estimated useful life of 13 years, which had the effect of increasing the weighted average amortization period from approximately 10 years as of December 31, 2023 to approximately 11 years as of June 30, 2024.

Refer to Note 4.

Business Combination .

The total estimated annual future amortization expense for these acquired intangible assets as of March 31, 2024, is as follows (in thousands):

The total estimated annual future amortization expense for these acquired intangible assets as of June 30, 2024, is as follows (in thousands):

Fiscal Year Ending December 31, Amortization

2 unchanged sentences

Total $ 118,468

Amortization expense for the three months ended March 31, 2024 and 2023 was $ 5.0 million and $ 4.1 million, respectively.

Amortization expense for the three months ended June 30, 2024 and 2023 was $ 4.7 million and $ 4.1 million, respectively, and amortization expense for the six months ended June 30, 2024 and 2023 was $ 9.6 million and $ 8.2 million, respectively.

Credit Facility

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Loans under the 2022 Credit Facility bear interest, at our option, at either a rate based on the SOFR for the applicable interest period or a base rate, in each case plus a margin.

As of March 31, 2024, we had no outstanding borrowings under the 2022 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.

As of June 30, 2024, we had no outstanding borrowings under the 2022 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.

Legal Proceedings

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The complaints assert various state law causes of action, including for breaches of fiduciary duty, insider trading, and unjust enrichment.

The complaints seek unspecified monetary damages on our behalf, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees.

The complaints seek unspecified monetary damages on our

behalf, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees.

The consolidated action is currently stayed.

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In the settlement agreement, Align and the defendants deny any wrongdoing and are not making any monetary payments, other than a potential award of $ 575,000 in attorney ’ s fees to plaintiffs ’ counsel, covered by insurance.

On March 1, 2024, the plaintiffs filed a motion for preliminary approval of the

settlement with the U.S.

District Court for the Northern District of California.

The hearing on the motion for preliminary approval is currently set for May 21, 2024.

On July 3, 2024, the U.S.

District Court for the Northern District of California denied preliminary approval of the settlement without prejudice.

The court held a case management conference on August 1, 2024 and indicated a revised order would issue in the near future.

Antitrust Class Actions

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The court entered judgment on March 22, 2024.

Plaintiffs have noticed appeal of the district court’s summary judgment ruling.

Plaintiffs have appealed the district court’s summary judgment ruling to the United States Court of Appeals for the Ninth Circuit.

Plaintiff-Appellants' opening brief was filed July 15, 2024.

Align’s response brief is due September 27, 2024 and Plaintiff-Appellants' reply brief is due October 18, 2024.

On May 3, 2021, an individual named Misty Snow brought an antitrust action in the U.S.

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The court entered judgment for the Section 2 and related state law claims on March 22, 2024.

Plaintiffs have noticed appeal of the district court’s summary judgment ruling.

A jury trial is scheduled to begin in this matter on January 21, 2025 for issues related to Section 1 allegations.

We believe the plaintiffs’ claims are without merit and we intend to vigorously defend ourselves.

Plaintiffs have appealed the district court’s summary judgment ruling to the United States Court of Appeals for the Ninth Circuit.

Plaintiff-Appellants' opening brief was filed July 15, 2024.

Align’s response brief is due September 27, 2024 and Plaintiff-Appellants' reply brief is due October 18, 2024.

We are currently unable to predict the outcome of these lawsuits and therefore we cannot determine the likelihood of loss, if any, nor estimate a range of possible loss.

On August 27, 2020, we initiated a confidential arbitration proceeding against SmileDirectClub LLC (“SDC”) before the American Arbitration Association in San Jose, California.

This arbitration relates to the Strategic Supply Agreement (“Supply Agreement”) entered into between the parties in 2016.

The complaint alleges that SDC breached the Supply Agreement ’ s terms, causing damages to us in an amount to be determined.

On January 19, 2021, SDC filed a counterclaim alleging that we breached the Supply Agreement.

On May 3, 2022, SDC filed an additional counterclaim alleging that we breached the Supply Agreement.

We denied SDC's allegations in the counterclaims.

On October 27, 2022, the arbitrator issued an interim award on our claims and SDC’s first counterclaim finding that SDC breached the Supply Agreement, we did not breach the Supply Agreement, and SDC caused harm to us.

Based on these findings, the arbitrator awarded us an interim award of $ 63 million in damages.

On May 18, 2023, the arbitrator issued a final award on SDC ’ s second counterclaim, finding that Align did not breach the Supply Agreement.

The final award subsumed the interim award on our claims and SDC ’ s first counterclaim and concluded the Supply Agreement arbitration proceedings.

On March 6, 2023, Align filed a petition to confirm the arbitrator ’ s interim award in the Superior Court for Santa Clara County.

On May 30, 2023, Align filed a petition to confirm the final award in the Superior Court of Santa Clara County.

On August 21, 2023, the Superior Court issued an order confirming the Interim and Final Awards.

On September 8, 2023, the Superior Court entered judgment in Align ’s favor for $ 63 million in damages .

On September 29, 2023, SDC and certain affiliates filed bankruptcy petitions under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas.

On January 26, 2024, SDC’s bankruptcy cases were converted from cases under chapter 11 of the Bankruptcy Code to cases under chapter 7 of the Bankruptcy Code.

In conjunction therewith, Allison D.

Byman was appointed as the chapter 7 trustee in SDC’s bankruptcy cases.

The extent to which Align will be able to collect any or all of its $ 63 million judgment through SDC ’s bankruptcy proceedings is unknown.

In June 2024, Align and the Section 1 plaintiffs reached a settlement in principle that would resolve all remaining claims in the Section 1 lawsuit.

The settlement terms remain confidential and subject to court approval.

While we continue to believe that plaintiffs’ Section 1 claims are without merit and despite vigorously defending ourselves against those claims, we decided to settle the lawsuit to avoid the distraction and uncertainty of litigation.

During the three months ended June 30, 2024 we accrued a loss of $ 31.1 million for legal settlements for multiple legal matters , but primarily related to the settlement of the Section 1 claims described above.

Straumann Litigation

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Among other things, the complaint seeks relief enjoining the defendants’ infringement of multiple Align multilayer material patents through defendants’ manufacture, sale and offer for sale of aligners made with Zendura FLX/ClearQuartz materials.

Defendants have not yet filed a response to the complaint.

On June 20, 2024, Defendants filed motions to dismiss the Complaint, which are pending.

On July 9, 2024, ClearCorrect Operating, LLC, ClearCorrect Holdings, Inc.

and Straumann USA LLC filed counterclaims

against Align for alleged antitrust violations, false advertising, unfair competition, and breach of contract.

Among other things, the counterclaims seek relief enjoining Align’s accused business practices, invalidating Align’s asserted patents, and money damages.

Align believes these claims are without merit and intends to vigorously defend itself.

Align is currently unable to predict the outcome of this lawsuit and cannot determine the likelihood of loss nor estimate a range of possible loss.

In addition to the above, in the ordinary course of our operations, we are involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters.

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The Company has historically asserted and continues to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that the Company has reasonably relied upon statements and guidance by HMRC and that the Company’s interpretation of United Kingdom legislation is appropriate.

However, it is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome of any legal challenges brought by the Company against HMRC disputing this initial assessment and any assessments for other past periods.

A hearing has been scheduled for October 9 through October 10, 2024 regarding the unpaid VAT related to certain aligner sales made during the period of October 2019 through May 2023.

It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome of any legal challenges brought by the Company against HMRC disputing this initial assessment and any assessments for other past periods.

Accordingly, the Company has determined that a potential loss related to unpaid VAT is not probable.

As such, we have not recorded a contingent loss for these assessments in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2024.

As such, we have not recorded a contingent loss for these assessments in our Condensed Consolidated Statements of Operations for the six months ended June 30, 2024.

The Company acknowledges that this matter poses risks of litigation and the ultimate resolution of this matter could result in an unfavorable ruling, which consequently could lead to a significant loss to the Company.

As of March 31, 2024, if an unfavorable ruling is issued, we estimate a potential exposure of approximately $ 115 million, depending on fluctuations of foreign currency exchange rates, excluding interest and penalties.

As of June 30, 2024, if an unfavorable ruling is issued, we estimate a potential exposure of approximately $ 115 million, depending on fluctuations of foreign currency exchange rates, excluding interest and penalties.

Indemnification Provisions

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However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period.

As of March 31, 2024, we did not have any material indemnification claims that were probable or reasonably possible.

As of June 30, 2024, we did not have any material indemnification claims that were probable or reasonably possible.

Stockholders’ Equity

As of March 31, 2024, the 2005 Incentive Plan, as amended, has a total reserve of 32,168,895 shares of which 3,393,482 shares are available for issuance.

As of June 30, 2024, the Align Technology, Inc.

2005 Incentive Plan, as amended, has a total reserve of 32,168,895 shares, of which 3,381,447 shares are available for issuance.

Summary of Stock-Based Compensation Expense

The stock-based compensation related to our stock-based awards and employee stock purchase plan for the three months ended March 31, 2024 and 2023 is as follows (in thousands):

The stock-based compensation related to our stock-based awards and employee stock purchase plan for the three and six months ended June 30, 2024 and 2023 is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Cost of net revenues $ 2,582 $ 1,901 $ 4,646 $ 3,708

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RSUs granted generally vest over a period of four years .

A summary for the three months ended March 31, 2024 is as follows:

A summary for the six months ended June 30, 2024 is as follows:

Number of Shares

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Forfeited ( 34 ) 360.58

Unvested as of March 31, 2024

Unvested as of June 30, 2024

1,084 $ 333.79 1.8 $ 261,797

As of March 31, 2024, we expect to recognize $ 311.9 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 3.2 years.

As of June 30, 2024, we expect to recognize $ 285.6 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.9 years.

Market-Performance Based Restricted Stock Units (“MSUs”)

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The actual number of MSUs which will be eligible to vest will be based on the performance of Align’s stock price relative to the performance of a stock market index over the vesting period.

MSUs vest over a period of three years and the maximum number eligible to vest in the future is 250 % of the MSUs initially granted.

The following table summarizes the MSU performance activity for the three months ended March 31, 2024:

MSUs vest over a period of three years and the maximum number of shares eligible to vest in the future is 250 % of the MSUs initially granted.

The following table summarizes the MSU performance activity for the six months ended June 30, 2024:

Number of Shares

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Forfeited ( 5 ) 1,102.09

Unvested as of March 31, 2024

Unvested as of June 30, 2024

204 $ 679.52 1.9 $ 49,247

1 Includes MSUs vested during the period below 100% of the original grant as actual shares released is based on Align ’ s stock performance over the vesting period.

As of March 31, 2024, we expect to recognize $ 82.2 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 2.1 years.

As of June 30, 2024, we expect to recognize $ 73.3 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.9 years.

Restricted Stock Units with Performance Conditions (“PSUs”)

During the three months ended March 31, 2024, we did not grant any PSUs to any employees.

During the six months ended June 30, 2024, we did not grant any PSUs to any employees.

In the fourth quarter of 2022, we granted PSUs to certain employees which are eligible to vest based on the achievement of project-based milestones over a term of 2.2 years.

Total PSUs granted were 4,728 and the weighted average grant date fair value for the PSUs was $ 201.63 .

Compensation costs related to PSUs is not material to our operating results.

Compensation costs related to PSUs are not material to our operating results.

Employee Stock Purchase Plan

As of March 31, 2024, we have 1,931,910 shares available for future issuance under our Amended and Restated 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”).

As of June 30, 2024, we have 1,931,910 shares available for future issuance under the Align Technology, Inc.

2010 Employee Stock Purchase Plan (as amended and restated, the “2010 Purchase Plan”).

The fair value of the option component of the 2010 Purchase Plan shares was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:

Three Months Ended

Six Months Ended

Expected term (in years) 0.9 1.0

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Weighted average fair value at grant date $ 100.10 $ 105.75

As of March 31, 2024, we expect to recognize $ 14.1 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.8 years.

As of June 30, 2024, we expect to recognize $ 10.4 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.5 years.

Common Stock Repurchase Programs

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Accelerated Share Repurchase Agreements (“ASRs”)

During the three months ended March 31, 2023, we entered into or completed ASRs providing for the repurchase of our common stock based on the volume-weighted average price during the term of the agreement, less an agreed upon discount.

We did not enter into any new ASRs during the three months ended March 31, 2024;

During the six months ended June 30, 2023, we entered into or completed ASRs providing for the repurchase of our common stock based on the volume-weighted average price during the term of the agreement, less an agreed upon discount.

We did not enter into any new ASRs during the three or six months ended June 30, 2024;

however, we did settle and obtain final delivery of shares for the ASR contract entered in the fourth quarter of 2023.

The following table summarizes the information regarding repurchases of our common stock under the ASRs for the three months ended March 31, 2024 and 2023:

The following table summarizes the information regarding repurchases of our common stock under the ASRs for the three and six months ended June 30, 2024 and 2023:

Date Repurchase

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Open Market Common Stock Repurchases

During the three months ended March 31, 2024 and 2023 we did not repurchase any shares in the open market.

During the three months ended December 31, 2023, we repurchased $ 100.0 million of our common stock through open market repurchases under the January 2023 Repurchase Program.

As of March 31, 2024, $ 650.0 million remains available for repurchases under the January 2023 Repurchase Program.

Subsequent to the first quarter, on April 26, 2024, we announced a plan to repurchase $ 150.0 million of our common stock through open market repurchases under the January 2023 Repurchase Program.

On June 3, 2024, we initiated a plan to repurchase $ 150.0 million of our common stock through open market repurchases under the January 2023 Repurchase Program.

This plan was completed on June 26, 2024.

In total, we repurchased approximately 0.6 million shares of our common stock at an average price of $ 250.73 per share, including commissions and fees.

During the twelve months ended December 31, 2023, we repurchased $ 100.0 million of our common stock through open market repurchases under the January 2023 Repurchase Program, none of which occurred during the six months ended June 30, 2023.

As of June 30, 2024, $ 500.0 million remains available for repurchases under the January 2023 Repurchase Program.

Accounting for Income Taxes

Our provision for income taxes was $ 53.4 million and $ 46.8 million for the three months ended March 31, 2024 and 2023, respectively, representing effective tax rates of 33.7 % and 34.8 %, respectively.

Our effective tax rate differs from the statutory federal income tax rate of 21% for the three months ended March 31, 2024 and 2023 primarily due to the recognition of additional tax expense resulting from U.S.

Our provision for income taxes was $ 47.3 million and $ 59.8 million for the three months ended June 30, 2024 and 2023, respectively, representing effective tax rates of 32.9 % and 34.8 %, respectively.

Our provision for incomes taxes was $ 100.7 million and $ 106.6 million for the six months ended June 30, 2024 and 2023, respectively, representing effective tax rates of 33.3 % and 34.8 %.

Our effective tax rate differs from the statutory federal income tax rate of 21% for the three and six months ended June 30, 2024 and 2023 primarily due to the recognition of additional tax expense resulting from U.S.

taxes on foreign earnings, foreign income taxed at different rates, state income taxes, and non-deductible expenses in the U.S.

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We continue to assess the realizability of the deferred tax assets as we take into account new information.

Our total gross unrecognized tax benefits, excluding interest and penalties, were $ 150.8 million and $ 149.2 million as of March 31, 2024 and December 31, 2023, respectively, a material amount of which would impact our effective tax rate if recognized.

The increase in our unrecognized tax benefits relates primarily to positions taken on income tax return calculations finalized during the three months ended March 31, 2024 .

Our total gross unrecognized tax benefits, excluding interest and penalties, were $ 150.3 million and $ 149.2 million as of June 30, 2024 and December 31, 2023, respectively, a material amount of which would impact our effective tax rate if recognized.

The increase in our unrecognized tax benefits relates primarily to positions taken on income tax return calculations finalized during the three and six months ended June 30, 2024 .

Net Income per Share

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 96,564 $ 111,814 $ 201,592 $ 199,612

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Anti-dilutive potential common shares 1

1 Represents approximately 569 thousand RSU and 2 thousand ESPP weighted-average outstanding common stock equivalent shares that are excluded from the calculation of diluted net income per share as the effect would have been anti-dilutive.

1,149 329 648 367

1 Represents approximately 1,148.7 thousand RSU and 0.3 thousand ESPP weighted-average outstanding common stock equivalent shares for the three months ended June 30, 2024 and approximately 647.8 thousand RSU and 0.1 thousand ESPP weighted-average outstanding common stock equivalent shares for the six months ended June 30, 2024 that are excluded from the calculation of diluted net income per share as the effect would have been anti-dilutive.

Supplemental Cash Flow Information

The supplemental cash flow information consists of the following (in thousands):

Three Months Ended

Six Months Ended

Non-cash investing and financing activities:

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We report segment information based on the management approach.

The management approach designates the internal reporting used by our Chief Operating Decision Maker for decision making and performance assessment as the basis for determining our reportable segments.

The management approach designates the internal reporting used by our Chief Operating Decision Maker, our Chief Executive Officer, for decision making and performance assessment as the basis for determining our reportable segments.

The performance measures of our reportable segments include net revenues, gross profit and income from operations.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Clear Aligner $ 831,738 $ 832,674 $ 1,648,989 $ 1,622,478

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Systems and Services

8,070 7,743 14,908 15,889

Unallocated corporate expenses

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Total segment income from operations $ 370,416 $ 358,142 $ 706,347 $ 671,239

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net revenues 1 :

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During the fourth quarter of 2023, we initiated a restructuring plan to increase efficiencies across the organization and incurred approximately $ 14.0 million in restructuring expenses, of which $ 5.3 million remained unpaid and were included in Accrued liabilities as of December 31, 2023.

During the first quarter of 2024 , we reduced our December 31, 2023 restructuring liability by approximately $ 3.9 million, primarily due to cash payments.

As of March 31, 2024, we had a remaining balance of $ 1.4 million recorded in Accrued liabilities.

Subsequent Event

Subsequent to our quarter end, on April 22, 2024, we entered into a new Subscription Agreement (the "April 2024 Subscription Agreement") with Heartland.

The April 2024 Subscription Agreement provided for us, among other items, to acquire an additional equity interest in Heartland through the purchase of Class A Common Stock for $ 75 million.

In total, we have invested $ 150.0 million and acquired less than a 5 % equity interest in Heartland.

During the first half of 2024 , we reduced our December 31, 2023 restructuring liability by approximately $ 5.1 million, primarily due to cash payments.

As of June 30, 2024, we had a remaining balance of $ 0.2 million recorded in Accrued liabilities.

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 1. Financial Statements