What changed in this filing

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Item 1. Financial Statements

2024-11-05 compared with 2024-08-02 · 165 added, 141 removed, 647 unchanged (32% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

27 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 115,963 $ 121,427 $ 317,555 $ 321,039

Other comprehensive income:

Other comprehensive income (loss):

Change in foreign currency translation adjustment, net of tax 10,713 ( 9,822 ) 14,140 9,810

Change in unrealized gains (losses) on investments, net of tax 159 526 605 2,521

Other comprehensive income

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

Other comprehensive income (loss) 10,872 ( 9,296 ) 14,745 12,331

Comprehensive income $ 126,835 $ 112,131 $ 332,300 $ 333,370

3 unchanged sentences

(in thousands, except per share data)

September 30,

2024 December 31,

40 unchanged sentences

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

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Shares Amount

Balance as of March 31, 2024

Balance as of June 30, 2024

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

7 unchanged sentences

Stock-based compensation — — 49,039 — — 49,039

Balance as of June 30, 2024

Balance as of September 30, 2024

74,757 $ 7 $ 1,335,909 $ 35,913 $ 2,572,525 $ 3,944,354

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

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Shares Amount

9 unchanged sentences

Stock-based compensation — — 134,855 — — 134,855

Balance as of June 30, 2024

Balance as of September 30, 2024

74,757 $ 7 $ 1,335,909 $ 35,913 $ 2,572,525 $ 3,944,354

1 unchanged sentence

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Shares Amount

Balance as of March 31, 2023

Balance as of June 30, 2023

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

3 unchanged sentences

Issuance of common stock relating to employee equity compensation plans 1

56 — 12,339 — — 12,339

Tax withholdings related to net share settlements of equity awards — — ( 507 ) — — ( 507 )

Stock-based compensation — — 39,602 — — 39,602

Balance as of June 30, 2023

Balance as of September 30, 2023

76,588 $ 8 $ 1,193,057 $ 2,047 $ 2,606,754 $ 3,801,866

1 unchanged sentence

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Shares Amount

10 unchanged sentences

Stock-based compensation — — 115,197 — — 115,197

Balance as of June 30, 2023

Balance as of September 30, 2023

76,588 $ 8 $ 1,193,057 $ 2,047 $ 2,606,754 $ 3,801,866

4 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Non-cash operating lease cost 28,603 24,034

Impairment of equity investment 115 3,329

Other non-cash operating activities 6,931 28,435

25 unchanged sentences

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 6,008 ( 11,205 )

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

Net increase in cash, cash equivalents, and restricted cash 104,462 296,995

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

9 unchanged sentences

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 as filed with the SEC.

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.

The results of operations for the three and nine months ended September 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

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S.

requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ materially from those estimates.

On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, useful lives of intangible assets and property and equipment, long-lived assets and goodwill, income taxes, contingent liabilities, the fair values of financial instruments, stock-based compensation and the valuation of investments in privately held companies, among others.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

On an ongoing basis, we evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, goodwill, income taxes, contingent liabilities, the fair values of financial instruments, stock-based compensation and the valuation of investments in privately held companies, among others.

Certain Risks and Uncertainties

3 unchanged sentences

Financial instruments which potentially expose us to concentrations of credit risk consist primarily of cash equivalents and marketable securities.

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

Historically, we have invested excess cash primarily in money market funds, corporate bonds, asset-backed securities, municipal and U.S.

government agency bonds and treasury bonds.

21 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 June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 Amortized

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

September 30, 2024 Amortized

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

1 unchanged sentence

Money market funds 181,474 — — 181,474 181,474 — —

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

Asset-backed securities 324 — — 324 — 324

government agency bonds 1,009 — ( 3 ) 1,006 — 1,006 —

Total $ 1,041,935 $ — $ — $ 1,041,935 $ 1,041,935 $ — $ —

We have no short-term or long-term marketable securities as of September 30, 2024.

December 31, 2023 Amortized

9 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 June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

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

December 31, 2023

Due in 1 year or less $ 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 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

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 )

Asset-backed securities — — 324 — 324 —

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

Total $ 2,013 $ — $ 18,669 $ ( 211 ) $ 20,682 $ ( 211 )

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

The following table summarizes the fair value and gross unrealized losses as of 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 December 31, 2023

10 unchanged sentences

Fair value is an exit price, representing the amount that would be received from selling an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

We use the U.S.

GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The three levels of inputs that may be used to measure fair value:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

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.

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 June 30, 2024 and December 31, 2023 (in thousands):

Level 1 — Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly.

Level 3 — Inputs to the valuation techniques that are unobservable for the assets or liabilities.

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

Description Balance as of

June 30, 2024

September 30, 2024

Cash equivalents:

Money market funds $ 181,474 $ 181,474 $ —

Short-term investments:

government agency bonds 1,006 — 1,006

Corporate bonds 19,352 — 19,352

Asset-backed securities 324 — 324

$ 181,474 $ 181,474 $ —

19 unchanged sentences

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.

Total accounts receivable sold under factoring arrangements was $ 8.2 million and $ 24.2 million during the three months ended September 30, 2024 and 2023, respectively, and $ 34.2 million and $ 40.4 million during the nine months ended September 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

Our investments in privately held companies in which we cannot exercise significant influence and do not own a majority equity interest or otherwise control are accounted for as an investment in equity securities.

We have elected to account for all investments in equity securities in accordance with the measurement alternative.

4 unchanged sentences

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.

4 unchanged sentences

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 $ 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.

As a result of the settlement of foreign currency forward contracts, we recognized a net loss of $ 24.5 million and a net gain of $ 19.8 million, respectively, during the three months ended September 30, 2024 and 2023, and a net gain of $ 2.7 million and $ 14.4 million, respectively, during the nine months ended September 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 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

As of September 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 September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024

Local Currency Amount Notional Contract Amount (USD)

7 unchanged sentences

Brazilian Real R$ 109,800 20,044

Mexican Peso M$ 288,500 15,750

Swiss Franc CHF 5,700 6,783

New Zealand Dollar NZ$ 7,700 4,898

Australian Dollar A$ 4,800 3,330

New Taiwan Dollar NT$ 98,000 3,110

New Zealand Dollar NZ$ 5,200 3,168

Korean Won ₩ 3,100,000 2,244

Czech Koruna Kč 64,400 2,860

Korean Won ₩ 2,500,000 1,914

December 31, 2023

17 unchanged sentences

Inventories consist of the following (in thousands):

September 30,

2024 December 31,

4 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

September 30,

2024 December 31,

4 unchanged sentences

Accrued liabilities consist of the following (in thousands):

September 30,

2024 December 31,

8 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

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

3 unchanged sentences

Deferred revenues consist of the following (in thousands):

September 30,

2024 December 31,

3 unchanged sentences

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.

During the three months ended September 30, 2024 and 2023, we recognized $ 977.9 million and $ 960.2 million of net revenues, respectively, of which $ 199.0 million and $ 178.8 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.

During the nine months ended September 30, 2024 and 2023, we recognized $ 3,003.8 million and $ 2,905.5 million of net revenues, respectively, of which $ 658.2 million and $ 583.5 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 September 30, 2024 were $ 1,495.6 million.

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

3 unchanged sentences

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.

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

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

13 unchanged sentences

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):

The allocation of the purchase price to the assets acquired and liabilities assumed is as follows (in thousands):

Working capital $ 1,039

5 unchanged sentences

Total $ 85,794

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets, and represents the value associated future technology, future customer relationships, and the knowledge and experience of the workforce in place.

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets, and represents the value associated with future technology, future customer relationships, and the knowledge and experience of the workforce in place.

None of this goodwill is deductible for tax purposes.

2 unchanged sentences

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.

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, projected future cash flows associated with the technology, the asset's life cycle and the present value factor.

Acquisition related costs are recognized separately from the business combination and are expensed as incurred.

3 unchanged sentences

Goodwill and Intangible Assets

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):

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

Clear Aligner Systems and Services Total

4 unchanged sentences

963 3,443 4,406

Balance as of June 30, 2024

Balance as of September 30, 2024

$ 159,625 $ 311,887 $ 471,512

Finite-Lived Intangible Assets

Acquired finite-lived intangible assets were as follows, excluding intangibles that were fully amortized, is as follows (in thousands):

Acquired finite-lived intangible assets, excluding intangibles that were fully amortized, are as follows (in thousands):

Weighted Average Amortization Period

(in years) Gross Carrying Amount as of

June 30, 2024

September 30, 2024

Amortization Accumulated

Impairment Loss Net Carrying

June 30, 2024

September 30, 2024

Existing technology 11 $ 146,651 $ ( 48,581 ) $ — $ 98,070

5 unchanged sentences

Total intangible assets, net $ 115,905

1 Includes $ 46.7 million of fully amortized intangible assets.

Weighted Average Amortization Period

10 unchanged sentences

Total intangible assets, net $ 82,118

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.

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

Refer to Note 4.

“ Business Combination ”.

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

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

Fiscal Year Ending December 31, Amortization

2 unchanged sentences

Total $ 113,824

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.

Amortization expense for the three months ended September 30, 2024 and 2023 was $ 4.6 million and $ 4.2 million, respectively, and amortization expense for the nine months ended September 30, 2024 and 2023 was $ 14.2 million and $ 12.4 million, respectively.

Credit Facility

3 unchanged sentences

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 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.

As of September 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

1 unchanged sentence

In January 2019, three derivative lawsuits were filed in the U.S.

District Court for the Northern District of California which were later consolidated, purportedly on our behalf, naming as defendants the then current members of our Board of Directors along with certain of our executive officers.

District Court for the Northern District of California which were later consolidated, purportedly on our behalf, naming as defendants the then current members of our Board of

Directors along with certain of our executive officers.

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.

6 unchanged sentences

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 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.

On August 2, 2024, the U.S.

District Court for the Northern District of California granted preliminary approval of the settlement.

Antitrust Class Actions

8 unchanged sentences

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.

Align’s response brief was submitted October 21, 2024 and Plaintiff-Appellants' reply brief is due January 6, 2025.

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

6 unchanged sentences

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.

Align’s response brief was submitted October 21, 2024 and Plaintiff-Appellants' reply brief is due January 6, 2025.

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.

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.

The settlement terms included a $ 27.5 million cash payment and an offer of a $ 300 coupon for class members who elected to purchase Invisalign treatment.

We agreed to settle the lawsuit to avoid the distraction and uncertainty of litigation.

On September 18, 2024, the U.S.

District Court for the Northern District of California denied plaintiffs’ motion for preliminary approval of the settlement without prejudice, allowing plaintiffs to file a renewed motion within 35 days.

Plaintiffs and Align filed a renewed motion for preliminary approval of the settlement on October 28, 2024.

We are unable to predict the timeline or outcome of the motion to approve the settlement.

We continue to believe that plaintiffs’ Section 1 claims are without merit and remain ready to vigorously defend ourselves against those claims.

During the nine months ended September 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

5 unchanged sentences

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.

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.

On September 13, 2024, we filed a motion to dismiss defendants’ counterclaims.

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

5 unchanged sentences

Commitments and Contingencies

B eginning in the third quarter of 2023 and continuing through the first quarter of 2024, the Company has received cumulative assessments of approximately $ 95 million from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of October 2019 through May 2023.

Beginning in the third quarter of 2023 and continuing through the first quarter of 2024, the Company has received cumulative assessments of approximately $ 100 million from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of October 2019 through May 2023.

We are required to pay these assessments prior to contesting or litigating in statutory appeal.

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.

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 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 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.

In October 2024, the Company and HMRC reached a settlement agreement regarding the unpaid VAT related to certain aligner sales made during the period of October 2019 through mid-October 2023.

As part of the settlement, HMRC agreed to vacate the judicial review (before the Administrative Court) originally scheduled for October 9th and October 10th, 2024, refund to the Company all assessments paid, approximately $ 100 million, for the period of October 2019 through May 2023 and withdraw any potential assessments for the period from June 2023 through mid-October 2023.

Between October 21, 2024 and October 29, 2024, HMRC refunded to the Company all assessed amounts in full, approximately $ 100 million.

The Company has remaining exposure in the amount of approximately $ 7.5 million for periods up to December 2023.

A statutory appeal (before the First-tier Tribunal - “Tax Tribunal”) is listed for January 27th through January 30th, 2025, at which time we anticipate the Tax Tribunal will determine whether clear aligners are exempt from VAT as a matter of law and whether the Company has any liability as a matter of principle.

It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome from the Tax Tribunal statutory appeal.

Accordingly, the Company has determined that a potential loss related to VAT accounted for in the periods up to December 2023 is not probable.

Indemnification Provisions

6 unchanged sentences

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

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

Stockholders’ Equity

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

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

2005 Incentive Plan, as amended, has a total reserve of 32,168,895 shares, of which 3,398,202 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 and six months ended June 30, 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 nine months ended September 30, 2024 and 2023 is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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RSUs granted generally vest over a period of four years .

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

A summary for the nine months ended September 30, 2024 is as follows:

Number of Shares

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Forfeited ( 56 ) 345.74

Unvested as of June 30, 2024

Unvested as of September 30, 2024

1,064 $ 333.03 1.6 $ 270,565

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.

As of September 30, 2024, we expect to recognize $ 254.4 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.7 years.

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

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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:

The following table summarizes the MSU performance activity for the nine months ended September 30, 2024:

Number of Shares

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Forfeited ( 5 ) 1,102.09

Unvested as of June 30, 2024

Unvested as of September 30, 2024

204 $ 679.52 1.6 $ 51,876

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 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.

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

As of September 30, 2024, we expect to recognize $ 67.2 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.6 years.

Restricted Stock Units with Performance Conditions (“PSUs”)

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 are not material to our operating results.

Our PSUs typically include a service and performance condition.

We recognize share-based compensation expense for PSUs if it is probable that the performance condition will be achieved.

The following table summarizes the PSU performance activity for the nine months ended September 30, 2024:

Number of Shares

Underlying PSUs

(in thousands) Weighted Average Grant Date Fair Value Weighted Average

Contractual Term (in years)

Intrinsic Value

(in thousands)

Unvested as of December 31, 2023

Granted 6 206.36

Vested and released — —

Forfeited — —

Unvested as of September 30, 2024

$ 11 $ 204.33 1.4 $ 2,805

As of September 30, 2024, we expect to recognize $ 1.2 million of total unamortized compensation costs, net of estimated forfeitures, related to PSUs over a weighted average period of 1.4 years.

Employee Stock Purchase Plan

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

As of September 30, 2024, we have 1,875,920 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:

Six Months Ended

Nine Months Ended

September 30,

Expected term (in years) 1.3 1.2

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Weighted average fair value at grant date $ 94.70 $ 133.53

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.

As of September 30, 2024, we expect to recognize $ 17.1 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.9 years.

Common Stock Repurchase Programs

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Accelerated Share Repurchase Agreements (“ASRs”)

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 and six months ended June 30, 2024 and 2023:

The following table summarizes the total repurchases of our common stock pursuant to an ASR entered into or completed during the three and nine months ended September 30, 2024 and 2023:

Date Repurchase

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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.

As of September 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 $ 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.

Our provision for income taxes was $ 50.0 million and $ 40.7 million for the three months ended September 30, 2024 and 2023, respectively, representing effective tax rates of 30.1 % and 25.1 %, respectively.

Our provision for incomes taxes was $ 150.6 million and $ 147.3 million for the nine months ended September 30, 2024 and 2023, respectively, representing effective tax rates of 32.2 % and 31.4 %.

Our effective tax rate differs from the statutory federal income tax rate of 21% for the three and nine months ended September 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 $ 150.3 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 .

We may be required to adjust the valuation allowance for deferred tax assets if we determine, based on available evidence at the time of the determination, that it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Changes to the valuation allowance could have a material adverse effect on our results of operations.

Our total gross unrecognized tax benefits, excluding interest and penalties, were $ 156.2 million and $ 149.2 million as of September 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 nine months ended September 30, 2024.

Net Income per Share

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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1,173 245 689 263

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.

1 Represents approximately 1,169.7 thousand RSU and 3.1 thousand ESPP weighted-average outstanding common stock equivalent shares for the three months ended September 30, 2024 and approximately 687.7 thousand RSU and 0.8 thousand ESPP weighted-average outstanding common stock equivalent shares for the nine months ended September 30, 2024 that are excluded from the calculation of diluted net income per share as the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2023 all anti-dilutive shares were RSUs.

Supplemental Cash Flow Information

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

Six Months Ended

Nine Months Ended

September 30,

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, our Chief Executive Officer, 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 ("CODM"), 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

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Net income before provision for income taxes $ 165,930 $ 162,111 $ 468,182 $ 468,324

Our Chief Operating Decision Maker does not regularly review total assets at the reportable segment level;

Our CODM does not regularly review total assets at the reportable segment level;

however, we have provided geographical information related to our long-lived assets below.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Tangible long-lived assets, which includes Property, plant and equipment, net, and Operating lease right-of-use assets, net, are presented below by geographic area (in thousands):

September 30,

2024 December 31,

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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 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.

As of September 30, 2024 , substantially all restructuring activities initiated in the fourth quarter of 2023 were complete.

Subsequent Event

Subsequent to our quarter end, on October 23, 2024, we announced a restructuring plan to reduce costs by adjusting headcount for the existing business environment.

The plan includes a reduction of our total headcount by approximately 700 employees.

The costs associated with this action primarily include severance and other one-time post-employment benefits and are currently estimated to be between approximately $ 25.0 million and $ 30.0 million.

We expect these activities to be substantially completed by the end of fiscal year 2024.

Additionally, on October 25, 2024, we announced a plan to repurchase $ 275.0 million of our common stock through open market repurchases beginning in the fourth quarter of 2024 and continuing through the first quarter of 2025.

The number of shares to be repurchased and the average price per share are not determinable as of the filing of this Quarterly Report on Form 10-Q.

Upon completion of these open market repurchases the Company will have $ 225.0 million remaining available for repurchases under the January 2023 Repurchase Program.

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