ALIGN TECHNOLOGY INC 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management's Annual Report on Internal Control over Financial Reporting 57 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 58 Consolidated Statements of Operations for the year ended December 31, 2025 , 202 4 and 20 23 60 Consolidated Statements of Comprehensive Income for the year ended December 31, 202 5 , 202 4 and 20 23 61 Consolidated Balance Sheets as of December 31, 202 5 and 20 24 62 Consolidated Statements of Stockholders’ Equity for the year ended December 31, 202 5 , 202 4 and 20 23 63 Consolidated Statements of Cash Flows for the year ended December 31, 202 5 , 202 4 and 20 23 64 Notes to Consolidated Financial Statements 65 56 MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Align is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed by, or under supervision of, our CEO and CFO, and effected by the board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Align; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Align are being made only in accordance with authorizations of management and directors of Align; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Align’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management has concluded that, as of December 31, 2025, our internal control over financial reporting was effective based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO. The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein. / S / JOSEPH M. HOGAN Joseph M. Hogan President and Chief Executive Officer February 27, 2026 / S / JOHN F. MORICI John F. Morici Chief Financial Officer and Executive Vice President, Global Finance February 27, 2026 57 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Align Technology, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Align Technology, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedule of Valuation and Qualifying Accounts and Reserves for each of the three years listed in the period ended in December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 58 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Determination of Standalone Selling Price of Distinct Performance Obligations in Clear Aligner Contracts As described in Notes 1 and 16 to the consolidated financial statements, the Company recognized net revenues of $3.2 billion from its Clear Aligner segment for the year ended December 31, 2025. The Company enters into contracts (“treatment plans”) that involve multiple future performance obligations. Management identifies a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Management allocates revenues for each treatment plan based on each unit’s standalone selling price. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, they take into consideration changing trends and market conditions. Management also considers usage rates, which is the number of times a customer is expected to order additional aligners. Management’s process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. The principal considerations for our determination that performing procedures relating to revenue recognition and the determination of standalone selling price of distinct performance obligations in Clear Aligner contracts is a critical audit matter are the significant judgment by management in determining the estimate of standalone selling price, which includes significant assumptions related to usage rates for each distinct performance obligation. This in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s determination of the estimates of standalone selling price and usage rates for each distinct performance obligation. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the determination of standalone selling price for each distinct performance obligation in the Company’s Clear Aligner contracts. These procedures also included, among others, (i) testing management’s process for determining the estimate of standalone selling price, which included testing the completeness and accuracy of inputs used and evaluating the reasonableness of factors considered by management related to same or similar product historical sales and usage rates, and (ii) testing management’s process for estimating usage rates, which included evaluating the reasonableness of inputs evaluated by management related to historical usage data by region, country and channel. /s/ PricewaterhouseCoopers LLP San Jose, California February 27, 2026 We have served as the Company’s auditor since 1997. 59 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2025 2024 2023 Net revenues $ 4,034,964 $ 3,999,012 $ 3,862,260 Cost of net revenues 1,323,951 1,199,853 1,155,397 Gross profit 2,711,013 2,799,159 2,706,863 Operating expenses: Selling, general and administrative 1,755,791 1,763,193 1,703,379 Research and development 369,911 364,202 346,830 Restructuring and other charges 35,378 33,168 13,316 Legal settlement loss 4,178 30,968 — Total operating expenses 2,165,258 2,191,531 2,063,525 Income from operations 545,755 607,628 643,338 Interest income and other income (expense), net: Interest income 16,045 20,218 17,258 Other income (expense), net 23,487 ( 18,887 ) ( 19,392 ) Total interest income and other income (expense), net 39,532 1,331 ( 2,134 ) Net income before provision for income taxes 585,287 608,959 641,204 Provision for income taxes 174,936 187,597 196,151 Net income $ 410,351 $ 421,362 $ 445,053 Net income per share: Basic $ 5.66 $ 5.63 $ 5.82 Diluted $ 5.65 $ 5.62 $ 5.81 Shares used in computing net income per share: Basic 72,542 74,877 76,426 Diluted 72,588 74,993 76,568 The accompanying notes are an integral part of these consolidated financial statements. 60 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2025 2024 2023 Net income $ 410,351 $ 421,362 $ 445,053 Other comprehensive income (loss): Change in foreign currency translation adjustment, net of tax 69,410 ( 15,786 ) 28,419 Change in unrealized gains on investments, net of tax — 596 3,033 Other comprehensive income (loss) 69,410 ( 15,190 ) 31,452 Comprehensive income $ 479,761 $ 406,172 $ 476,505 The accompanying notes are an integral part of these consolidated financial statements. 61 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 1,094,908 $ 1,043,887 Accounts receivable, net of allowance for doubtful accounts of $ 34,213 and $ 19,131 , respectively 1,101,757 995,685 Inventories 226,343 254,287 Prepaid expenses and other current assets 165,571 198,582 Assets held for sale 27,983 — Total current assets 2,616,562 2,492,441 Property, plant and equipment, net 1,131,453 1,271,134 Operating lease right-of-use assets, net 108,322 113,376 Goodwill 491,833 442,630 Intangible assets, net 93,933 103,488 Deferred tax assets 1,513,542 1,557,372 Other assets 278,048 234,159 Total assets $ 6,233,693 $ 6,214,600 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 121,450 $ 108,693 Accrued liabilities 536,749 598,188 Deferred revenues 1,261,816 1,331,146 Total current liabilities 1,920,015 2,038,027 Income tax payable 68,200 96,466 Operating lease liabilities 82,507 88,214 Other long-term liabilities 113,824 139,908 Total liabilities 2,184,546 2,362,615 Commitments and contingencies (Notes 8 and 9) Stockholders’ equity: Preferred stock, $ 0.0001 par value ( 5,000 shares authorized; none issued) — — Common stock, $ 0.0001 par value ( 200,000 shares authorized; 71,364 and 73,849 issued and outstanding, respectively) 7 7 Additional paid-in capital 1,509,595 1,362,234 Accumulated other comprehensive income (loss), net 75,388 5,978 Retained earnings 2,464,157 2,483,766 Total stockholders’ equity 4,049,147 3,851,985 Total liabilities and stockholders’ equity $ 6,233,693 $ 6,214,600 The accompanying notes are an integral part of these consolidated financial statements. 62 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss), Net Retained Earnings Total Shares Amount Balance as of December 31, 2022 77,267 $ 8 $ 1,044,946 $ ( 10,284 ) $ 2,566,688 $ 3,601,358 Net income — — — — 445,053 445,053 Net change in unrealized gains (losses) from investments — — — 3,033 — 3,033 Net change in foreign currency translation adjustment — — — 28,419 — 28,419 Issuance of common stock relating to employee equity compensation plans 335 — 26,595 — — 26,595 Tax withholdings related to net share settlements of equity awards ( 70 ) — ( 22,575 ) — — ( 22,575 ) Common stock repurchased and retired ( 2,457 ) ( 1 ) ( 30,852 ) — ( 564,567 ) ( 595,420 ) Equity forward contract related to accelerated stock repurchase — — ( 10,000 ) — — ( 10,000 ) Stock-based compensation — — 154,026 — — 154,026 Balance as of December 31, 2023 75,075 7 1,162,140 21,168 2,447,174 3,630,489 Net income — — — — 421,362 421,362 Net change in unrealized gains (losses) from investments — — — 596 — 596 Net change in foreign currency translation adjustment — — — ( 15,786 ) — ( 15,786 ) Issuance of common stock relating to employee equity compensation plans 411 — 25,281 — — 25,281 Tax withholdings related to net share settlements of equity awards ( 92 ) — ( 28,125 ) — — ( 28,125 ) Common stock repurchased and retired ( 1,545 ) — ( 20,292 ) — ( 335,243 ) ( 355,535 ) Equity forward contract related to accelerated stock repurchase — — 49,527 — ( 49,527 ) — Stock-based compensation — — 173,703 — — 173,703 Balance as of December 31, 2024 73,849 7 1,362,234 5,978 2,483,766 3,851,985 Net income — — — — 410,351 410,351 Net change in foreign currency translation adjustment — — — 69,410 — 69,410 Issuance of common stock relating to employee equity compensation plans 494 — 21,749 — — 21,749 Tax withholdings related to net share settlements of equity awards ( 104 ) — ( 20,390 ) — — ( 20,390 ) Common stock repurchased and retired ( 2,875 ) — ( 39,868 ) — ( 429,960 ) ( 469,828 ) Stock-based compensation — — 185,870 — — 185,870 Balance as of December 31, 2025 71,364 $ 7 $ 1,509,595 $ 75,388 $ 2,464,157 $ 4,049,147 The accompanying notes are an integral part of these consolidated financial statements. 63 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 410,351 $ 421,362 $ 445,053 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes 33,085 25,756 ( 18,642 ) Depreciation and amortization 237,436 145,034 142,401 Stock-based compensation 185,870 173,703 154,026 Non-cash operating lease cost 39,742 38,438 33,107 Impairment loss on Assets held for sale 23,142 — — Impairment and fair value adjustments for equity investments ( 18,074 ) ( 5,885 ) 4,990 Other non-cash operating activities 37,686 12,256 32,733 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable ( 139,909 ) ( 153,487 ) ( 104,614 ) Inventories 808 25,053 30,169 Prepaid expenses and other assets 13,431 67,527 ( 51,013 ) Accounts payable 5,330 ( 843 ) ( 7,703 ) Accrued and other long-term liabilities ( 95,654 ) 89,705 46,327 Long-term income tax payable ( 28,265 ) ( 20,279 ) ( 7,772 ) Deferred revenues ( 111,756 ) ( 80,109 ) 86,714 Net cash provided by operating activities 593,223 738,231 785,776 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired — ( 77,075 ) — Purchase of property, plant and equipment ( 102,445 ) ( 115,580 ) ( 177,716 ) Purchase of marketable securities — — ( 2,910 ) Proceeds from maturities of marketable securities — 25,660 55,170 Proceeds from sales of marketable securities — 18,193 6,234 Purchase of equity investments ( 10,000 ) ( 106,345 ) ( 76,999 ) Other investing activities — 235 278 Net cash used in investing activities ( 112,445 ) ( 254,912 ) ( 195,943 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 21,749 25,281 26,595 Common stock repurchases, net of excise tax ( 465,939 ) ( 352,878 ) ( 592,360 ) Activity for equity forward contracts related to accelerated stock repurchase agreements, net — — ( 10,000 ) Payroll taxes paid upon the vesting of equity awards ( 20,390 ) ( 28,125 ) ( 22,575 ) Net cash used in financing activities ( 464,580 ) ( 355,722 ) ( 598,340 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 35,025 ( 21,153 ) 4,671 Net (decrease) increase in cash, cash equivalents, and restricted cash 51,223 106,444 ( 3,836 ) Cash, cash equivalents, and restricted cash at beginning of year 1,044,963 938,519 942,355 Cash, cash equivalents, and restricted cash at end of year $ 1,096,186 $ 1,044,963 $ 938,519 The accompanying notes are an integral part of these consolidated financial statements. 64 ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Business Description Align Technology, Inc. (“we,” “us,” “our,” “Align” or the “Company”) is a global medical device company primarily engaged in the design, manufacture and marketing of Invisalign ® clear aligners for the treatment of malocclusions, or the misalignment of teeth, by orthodontists and general dental practitioners (“GPs”), Vivera TM retainers for retention, iTero TM intraoral scanners and services for dentistry, and exocad TM computer-aided design and computer-aided manufacturing (“CAD/CAM”) software for dental laboratories and dental practitioners. Our vision and strategy is to revolutionize orthodontic and restorative dentistry through digital treatment planning and implementation using the Align TM Digital Platform, an integrated suite of proprietary technologies and services designed to deliver a seamless, end-to-end solution for patients, consumers, orthodontists, GPs and lab partners. We strive to achieve our vision and strategy through key objectives made possible with the proprietary technologies and services of the Align TM Digital Platform to establish: clear aligners as the principal solution for the treatment of malocclusions with the Invisalign System as the treatment solution of choice by orthodontists, GPs and patients globally, our iTero intraoral scanners as the preferred scanning technology for digital dental scans and our exocad CAD/CAM software as the dental restorative solution of choice for dental labs. Our corporate headquarters is located in Tempe, Arizona and we have offices worldwide. Our Americas regional headquarters is located in Raleigh, North Carolina; our European, Middle East and Africa (“EMEA”) regional headquarters is located in Rotkreuz, Switzerland; and our Asia Pacific (“APAC”) regional headquarters is located in Singapore. We have two operating segments: (1) Clear Aligner and (2) Imaging Systems and CAD/CAM services (“Systems and Services”). Basis of Presentation and Preparation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Align and our wholly-owned subsidiaries after elimination of intercompany transactions and balances. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our 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 and deferred revenues, useful lives of intangible assets and property, plant and equipment, 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. Fair Value of Financial Instruments 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 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 - 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, 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. We are ultimately responsible for these underlying estimates. 65 Level 3 - Unobservable inputs to the valuation techniques that are supported by little or no market activity and 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. Cash and Cash Equivalents We consider cash on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the U.S. and internationally. Restricted Cash Restricted cash primarily consists of funds reserved for legal requirements. Restricted cash balances are primarily included in Other assets within our Consolidated Balance Sheets. Marketable Securities Marketable securities consist of marketable debt securities which are classified as available-for-sale and are carried at fair value. Our fixed-income securities investment portfolio allows for investments with a maximum effective maturity of up to 40 months on any individual security. Marketable securities classified as current assets have maturities within one year from the balance sheet date. Unrealized gains or losses on such securities are included in Accumulated other comprehensive income (loss), net (“AOCI”) in stockholders’ equity. Realized gains and losses from sales and maturities of marketable securities are reported in earnings and computed using the specific identification cost method. Marketable securities are subject to a periodic impairment review. We evaluate if an allowance for credit loss is necessary by considering available information relevant to the collectability of the security and information about credit rating changes, past events, current conditions, and reasonable and supportable forecasts. Any allowance for credit loss is recorded as a charge to Other income (expense), net, in our Consolidated Statements of Operations. If we have an intent to sell, or if it is more likely than not that we will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of Other income (expense), net in our Consolidated Statements of Operations. As of December 31, 2025 and 2024, we had no marketable securities. Variable Interest Entities We evaluate whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine we are the primary beneficiary of a VIE, we would consolidate the assets, liabilities, income and expense of the VIE into our consolidated financial statements. In determining if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE ’ s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of activities that are significant to the VIE and an assessment of our ability to direct those activities. Our assessment of whether we are the primary beneficiary of a VIE requires management to exercise significant judgment and utilize assumptions. We have concluded that we are not the primary beneficiary of our VIE investments; therefore, we do not consolidate their results into our consolidated financial statements. 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 investments in equity securities. We have elected to account for all investments in equity securities in accordance with the measurement alternative. Under the measurement alternative, we record the value of our investments at cost, minus impairment, if any. Additionally, we adjust the carrying value of our investments for observable transactions for identical or similar investments of the same issuer. On April 24, 2023 and April 22, 2024, we entered into Subscription Agreements (the “Heartland Subscription Agreements”) with Heartland Dental Holding Corporation (“Heartland”). Pursuant to the Heartland Subscription Agreements we acquired less than a 5 % equity interest in total, through the purchase of Class A Common Stock for $ 150 million ($ 75 million in each April 2023 and April 2024). 66 On December 19, 2024 and June 5, 2025, we entered into Subscription Agreements (the “Smile Doctors Subscription Agreements”) with New SD Holding Company, L.P. (“SD Holding Company”). Pursuant to the Smile Doctors Subscription Agreements, we acquired less than a 3 % equity interest through the purchase of Class A Common Units for $ 40 million. SD Holding Company owns a controlling interest, through intermediary entities, in Smile Doctors, LLC. We account for our investments in Heartland and SD Holding Company as investments in equity securities, utilizing the measurement alternative. Based on a review of the relevant facts and circumstances, primarily observable transactions for identical investments, we recorded a $ 18.0 million and 6.0 million increase to the carrying value of our Heartland investment in 2025 and 2024, respectively. This increased the total carrying value of our investment in Heartland to $ 174.0 million for the year ended December 31, 2025. 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. For the years ended December 31, 2025 and 2024, we did not hold any material investments in which we exercised significant influence. The carrying value of our investments in equity securities and equity method investments are reported in our Consolidated Balance Sheets as Other assets and any price adjustments or impairment, if any, are recorded in Other income (expense), net in our Consolidated Statements of Operations. Derivatives Not Designated as Hedging Instruments We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain assets and liabilities. These forward contracts are classified within Level 2 of the fair value hierarchy. The gains and losses on these forward contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being economically hedged. We do not enter into foreign currency forward contracts for trading or speculative purposes. The net gain or loss from the settlement of these foreign currency forward contracts is recorded in Other income (expense), net in the Consolidated Statements of Operations. As of December 31, 2025 and 2024, the fair value of outstanding foreign exchange forward contracts was not material. Foreign Currency For our international subsidiaries, we analyze on an annual basis or more often, if necessary, if a significant change in facts and circumstances indicate that the functional currency of the subsidiary has changed. For international subsidiaries where the local currency is the functional currency, adjustments from translating financial statements from the local currency to the U.S. dollar reporting currency are recorded to change in foreign currency translation adjustment, net of tax in our Consolidated Statements of Comprehensive Income. This foreign currency translation adjustment reflects the translation of the balance sheet at period end exchange rates, and the income statement at the transaction date or average exchange rate in effect during the period. Foreign currency remeasurement gains and losses that are derived from monetary assets and liabilities stated in a currency other than the international subsidiaries functional currency are included in Other income (expense), net. For the years ended December 31, 2025, 2024 and 2023, we had foreign currency transaction gains of $ 11.3 million and losses of $ 21.0 million and $ 7.0 million, respectively. Certain Risks and Uncertainties Our cash and investments are held primarily by five financial institutions. Financial instruments which potentially expose the Company to concentration of credit risk consist principally of cash and cash equivalents. These instruments have minimal credit risk exposures. Management regularly monitors their compositions and maturities. The Company maintains its cash and cash equivalents in bank accounts that exceed federally insured FDIC limits. Through December 31, 2025, the Company has not experienced any material credit losses on such deposits. We invest excess cash primarily in money market funds and certificates of deposit and periodically evaluate them for credit losses. Such credit losses have not been material to our financial statements. We purchase certain inventory from sole suppliers. Additionally, we rely on a limited number of hardware manufacturers. The inability of any supplier or manufacturer to fulfill our supply requirements could materially and adversely impact our future operating results. 67 Accounts Receivable, net Trade accounts receivable are recorded at the invoiced amount. Accounts receivable, net includes allowances for doubtful accounts for any potentially uncollectible amounts. We periodically assess the adequacy of the allowance for doubtful accounts by reviewing the accounts receivable on a collective basis and giving consideration to various factors including the aging of the receivables and a customer’s expected ability to pay. For specific customer accounts receivable balances, we consider known disputes and collection history. In determining the amount of the allowance for doubtful accounts, we also evaluate the creditworthiness of customers, current market conditions and forecasts of future economic conditions to make any adjustments. Actual write-offs have not materially differed from the estimated allowances. No individual customer accounted for 10% or more of our accounts receivable, net balance at December 31, 2025 or 2024 nor net revenues for the years ended December 31, 2025, 2024 or 2023. 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 Consolidated Statements of Cash Flows. Total accounts receivable sold under factoring arrangements was $ 47.9 million and $ 52.1 million during the years ended December 31, 2025, and 2024, respectively. Factoring fees incurred on the sales of accounts receivable were recorded in Other income (expense), net in our Consolidated Statements of Operations and were not material. Inventories Inventories are valued at the lower of cost or net realizable value, with cost computed using standard cost which approximates actual cost on a first-in-first-out basis. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of Cost of net revenues. Property, Plant and Equipment, net Property, plant and equipment, net are stated at historical cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Construction in progress is related to the construction or development of property (including land) and equipment that are not ready for their intended use and have not yet been placed in service. Upon sale or retirement, the asset’s cost and related accumulated depreciation are removed from the balance sheet and any related gains or losses are reflected in Income from operations. Maintenance and repairs are expensed as incurred. Refer to Note 3 “Balance Sheet Components" of the Notes of Consolidated Financial Statements for details on estimated useful lives . Leases - Lessee We determine if an arrangement is or contains a lease at inception. Leases with a term of 12 months or less are not recorded on the balance sheet. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. A ROU asset and lease liability is recognized on the lease commencement date. The lease liability is determined based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments as the rate implicit in our leases is not readily determinable. The ROU asset consists of the initial lease liability adjusted for lease incentives received and any initial direct costs incurred. The lease term represents the noncancellable period of the lease and may include options to extend the lease when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components which are accounted for as a single lease component. Payments under our lease arrangements are primarily fixed; however, certain lease agreements contain variable payments which are expensed as incurred and not included in the lease liability balance. The short-term portion of our lease liabilities is recorded in Accrued liabilities on our Consolidated Balance Sheets. Leases - Lessor We determine if an arrangement is or contains a lease at inception. All of our leases in which we are the lessor are classified as operating leases, exclusive of leases with a term of 12 months or less. The underlying asset in an operating lease arrangement is carried at depreciated cost within Property, plant, and equipment, net on our Consolidated Balance Sheets. 68 Business Combinations We allocate the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. When determining the fair value of assets acquired and liabilities assumed, management is required to make certain estimates and assumptions, particularly with respect to determining the fair value of intangible assets. The estimates and assumptions used in fair valuing intangible assets include, but are not limited to, the amount and timing of projected future cash flows which are dependent on forecasted revenues and expenses, a discount rate, and the assets’ life cycle, among others. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of tangible and identifiable intangible net assets acquired in a business combination and is allocated to the respective reporting units based on relative synergies generated. Finite-Lived Intangible Assets Our intangible assets primarily consist of intangible assets acquired as part of a business combination. These assets are amortized using the straight-line method over their estimated useful lives. The average amortization period by intangible asset class ranges from seven to twelve years . This amortization period reflects the period in which the economic benefits of the assets are expected to be realized. Impairment of Goodwill and Long-Lived Assets and Finite-Lived Intangible Assets Goodwill We evaluate goodwill for impairment at least annually on November 30th or more frequently if indicators of impairment are identified between annual testing dates. We perform an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit has been reduced below its carrying amount. In performing this qualitative assessment, we identify and consider the significance of relevant key factors, events, and circumstances that affect the fair value of our reporting units. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give consideration to the difference between the reporting unit fair value and carrying value as of the most recent date a fair value measurement was performed. If, after assessing the totality of relevant events and circumstances, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further testing is performed; however, if we conclude otherwise, then we will perform a quantitative impairment test which compares the estimated fair value of the reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recorded in our Consolidated Statements of Operations for the amount of the excess. Management is required to exercise significant judgment when identifying the relevant assumptions and estimates used in determining the fair value and carrying value of our reporting units. Long-Lived Assets and Finite-Lived Intangible Assets We evaluate long-lived assets (including ROU assets) and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. Factors we consider important which could trigger a quantitative impairment test include, but are not limited to, significant negative industry or economic trends, significant adverse changes in our competitive environment and a significant loss of customers. If an impairment indicator is identified, we perform a quantitative impairment analysis in which we compare the carrying value of an asset (asset group) to the future undiscounted cash flows the asset (asset group) is expected to generate. An asset (asset group) is considered impaired if its carrying amount exceeds the undiscounted cash flows. If an asset (asset group) is deemed to be impaired, the impairment to be recognized is calculated as the amount by which the carrying amount of the asset (asset group) exceeds its fair value. Our estimates of future cash flows attributable to our assets (asset groups) require significant judgment based on our historical and anticipated results and are subject to many assumptions. In the third quarter of 2025, we committed to a plan to dispose of, other than by sale, specifically identified manufacturing assets prior to the end of their estimated useful lives. We have materially completed the disposition of these assets as of 69 December 31, 2025. Accordingly, we have revised the estimated useful lives of these assets to reflect our use through the disposal date. In the year ended December 31, 2025, we recorded $ 76.9 million of accelerated depreciation expense related to these assets. The increase in depreciation expense negatively impacted Net income, net of tax, by $ 53.9 million or $ 0.74 per basic and diluted share. Development Costs for Internal Use Software Internally developed software includes enterprise-level business software that we customize to meet our specific operational needs. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with the development of the applications. For the years ended December 31, 2025 and 2024, capitalized internally developed software costs were $ 38.5 million and $ 23.1 million, respectively. Development Costs for Software to be Marketed The costs to develop software that is marketed externally have not been capitalized as we believe our current software development process is essentially completed concurrent with the establishment of technological feasibility. As such, all related software development costs are expensed as incurred and included in Research and development expense in our Consolidated Statements of Operations. Product Warranty We offer assurance warranties on our products which provide the customer assurance that the product will function as intended because it complies with agreed-upon specifications; therefore, our warranties are not treated as a separate revenue performance obligation in accordance with the revenue standard but rather are accounted for as guarantees. Clear Aligner We warrant our Invisalign products against material defects until the treatment plan is complete except in the case of retainers, which are warranted up to three months from expected first use. We accrue for warranty costs, which are primarily based on historical product failure rates as well as current information on replacement cost. Systems and Services We warrant our intraoral scanners for a period of one year , which includes materials and labor. We accrue for these warranty costs based on average historical repair costs. An extended warranty may be purchased for an additional fee. Sales of extended warranties are accounted for as a separate performance obligation and recorded as revenue. We warrant our CAD/CAM software for a one year period to perform in accordance with agreed product specifications. As we have not historically incurred any material warranty costs, we do not accrue for these software warranties. Warranty costs are recorded in cost of net revenues upon shipment of products. We regularly review our warranty liability and update these balances based on historical warranty cost trends. Actual warranty costs incurred have not materially differed from those accrued; however future actual warranty costs could differ from the estimated amounts. Revenue Recognition Our revenues are derived primarily from the sale of aligners, scanners, and services from our Clear Aligner and Systems and Services reportable segments. We identify separate performance obligations, determine the transaction price, allocate the transaction price and record revenue in accordance with ASC 606 “ Revenues from Contracts with Customers. ” We identify a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) in order to allocate the transaction price to the individual performance obligations is the result of various factors, such as historical prices, changing trends and market conditions, costs, and gross margins. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is 70 allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation. Clear Aligner We enter into contracts (“treatment plan(s)”) that involve multiple future performance obligations. Invisalign Comprehensive, Invisalign First Phase 1, Invisalign First Comprehensive Phase 2, Invisalign Adult, Invisalign Standard, Invisalign Moderate, Invisalign Go, Invisalign Go Plus, and Lite and Express Packages include optional additional aligners at no charge for a certain period of time ranging from six months to five years after initial shipment. Our treatment plans comprise the following performance obligations that also represent distinct deliverables: initial aligners and the option of additional aligners. We allocate the transaction price for each treatment plan based on each unit’s standalone selling price. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, we take into consideration changing trends and market conditions. For treatment plans with multiple future options, we also consider usage rates, which is the number of times a customer is expected to order additional aligners. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We recognize revenue upon shipment, as the customers obtain physical possession and we have enforceable rights to payment. We have made an accounting policy election to account for shipping and handling costs as activities to fulfill the performance obligation. Where processing fees are charged, the consideration received from the fees are included in the transaction price. As we collect most consideration upfront, we consider whether a significant financing component exists; however, as the delivery of the performance obligations are at the customer’s discretion, we conclude that no significant financing component exists. Systems and Services We sell intraoral scanners and CAD/CAM services through both our direct sales force and distribution partners. The intraoral scanner sales price includes one year of warranty and unlimited scanning services. The customer may also select, for additional fees, an extended warranty and unlimited scanning services for periods beyond the initial year. When intraoral scanners are sold with an unlimited scanning service agreement and/or extended warranty, we allocate revenues based on the respective SSP of the scanner and the subscription services. We estimate the SSP of each element, taking into account factors such as same or similar historical prices and discounting strategies. Revenues are then recognized over time as the monthly services are rendered and upon shipment of the scanner, as that is when we deem the customer to have obtained control. We also have a rental program, where scanners are leased to customers. The contracts for the program are treated as operating leases, and the revenue is recognized ratably over the lease term. CAD/CAM services, where sold separately, include the initial software license and maintenance and support. We allocate revenues based upon the respective SSPs of the software license and the maintenance and support. We estimate the SSP of each element using data such as historical prices. Revenues related to the software license are recognized upfront and revenues related to the maintenance and support are recognized over time. For both scanner and service sales, most consideration is collected upfront and in cases where there are payment plans, consideration is collected within one year and, therefore, there are no significant financing components. Volume Discounts In certain situations, we offer promotions in which the discount will increase depending upon the volume purchased over time. We concluded that in these situations, the promotions can represent either variable consideration or options, depending upon the specifics of the promotion. In the event the promotion contains an option, the option is considered a material right and, therefore, included in the accounting for the initial arrangement. We estimate the average anticipated discount over the lifetime of the promotion or contract, and apply that discount to each unit as it is sold. On a quarterly basis, we review our estimates and, if needed, updates are made and changes are applied prospectively. Accrued Sales Return Reserve We provide a reserve for sales returns based on historical sales returns as a percentage of revenues. Costs to Obtain a Contract 71 We offer a variety of commission plans to our sales force; each plan has multiple components. To match the costs to obtain a contract to the associated revenues, we evaluate the individual components and capitalize the eligible components, recognizing the costs over the treatment period. The capitalized costs to obtain contracts were $ 29.2 million and $ 25.8 million as of December 31, 2025 and 2024, respectively, and are included in Other assets in our Consolidated Balance Sheets. We recognized amortization on our costs to obtain a contract of $ 15.6 million, $ 18.7 million, and $ 12.5 million during the years ended December 31, 2025, 2024, and 2023, respectively, which is included in Selling, general and administrative expenses in our Consolidated Statements of Operations. Unfulfilled Performance Obligations for Clear Aligners and Scanners Our unfulfilled performance obligations, including deferred revenues and backlog, and the estimated revenues expected to be recognized in the future related to these performance obligations are $ 1,352.7 million and $ 1,444.9 million as of December 31, 2025 and 2024, respectively. This includes performance obligations from the Clear Aligner reportable segment, primarily the shipment of additional aligners, which are fulfilled over six months to five years . This also includes performance obligations from our Systems and Services reportable segment, primarily services and support, which are fulfilled over one to five years , and contracted deliveries of additional scanners. The estimate includes both product and service unfulfilled performance obligations and the time range reflects our best estimate of when we will transfer control to the customer and may change based on customer usage patterns, timing of shipments, readiness of customers' facilities for installation, and manufacturing availability. Contract Balances The timing of revenue recognition results in deferred revenues being recognized on our Consolidated Balance Sheet. For both aligners and scanners, we usually collect the total consideration owed prior to all performance obligations being satisfied with payment terms generally varying from net 30 to net 180 days. Contract liabilities are recorded as deferred revenue, which is generated based upon the timing of invoices and recognition patterns, not payments. If revenue recognition exceeds the billing, the excess amount is considered an unbilled receivable or a contract asset. Conversely, if the billing occurs prior to the revenue recognition, the amount is considered deferred revenue and a contract liability. Shipping and Handling Costs Shipping and handling charges to customers as well as processing fees are included in net revenues, and the associated costs incurred are recorded in cost of net revenues. Legal Proceedings We are involved in legal proceedings on an ongoing basis. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated loss in our consolidated financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. Research and Development Research and development costs are expensed as incurred and include costs associated with the research and development of new products and enhancements to existing products. These costs primarily include employee related costs, including payroll, benefits and stock-based compensation, equipment, material and maintenance costs, outside consulting expenses, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT. Advertising Costs The cost of advertising and media is expensed as incurred. For the years ended December 31, 2025, 2024 and 2023, we incurred advertising costs of $ 188.7 million, $ 185.0 million and $ 201.2 million, respectively. Stock-Based Compensation We recognize stock-based compensation cost for shares expected to vest on a straight-line basis over the requisite service period of the award, net of estimated forfeitures. We use the Black-Scholes option pricing model to determine the fair value of employee stock purchase plan shares. We use a Monte Carlo simulation model to estimate the fair value of awards with a market based condition which requires the input of assumptions, including expected term, stock price volatility and the risk-free 72 rate of return. For restricted stock units that include a performance condition, we use the stock price on the grant date to estimate the fair value and stock-based compensation cost is recorded based on expected attainment of performance targets. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Income Taxes We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenues and expenses for tax and financial statement purposes. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the applicable tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included in our Consolidated Balance Sheets. We account for uncertainty in income taxes pursuant to authoritative guidance based on a two-step approach to recognize and measure uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit based on its technical merits, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit or refinement of estimates due to new information. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will impact our tax provision in our Consolidated Statements of Operations in the period in which such determination is made. We assess the likelihood that we will be able to realize our deferred tax assets, including those related to our Switzerland deferred tax assets, which have a finite utilization period. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is more likely than not that we will not realize our deferred tax assets, we will record a valuation allowance against the deferred tax assets that we estimate will not ultimately be realizable. The determination of whether a valuation allowance is required involves significant judgment and reflects our evaluation of changes in our operational performance, taxable income forecasts, and other relevant factors, Common Stock Repurchase We repurchase our own common stock from time to time under stock repurchase programs approved by our Board of Directors. We account for these repurchases under the accounting guidance for equity where we allocate the total repurchase value that is in excess of par value between additional paid-in capital and retained earnings. All shares repurchased are retired. Recent Accounting Pronouncements (i) New Accounting Updates Recently Adopted On December 14, 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures. ” The amendments in this ASU require a public entity to disclose in tabular format, using both percentages and reporting currency amounts, specific categories in the rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. The amendments in this ASU also require taxes paid (net of refunds received) to be disaggregated by federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. For public business entities, the provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. We adopted this standard on a prospective basis for our annual report on Form 10-K effective for the year ended December 31, 2025. ASU 2023-09 impacts our accounting for income tax financial statement disclosures, but did not impact our Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows. On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 (“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 and other segment expenses. For public business entities, the provisions of ASU 2023-07 were effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We adopted this standard for the fiscal year ended December 31, 2024 and for interim periods within the fiscal year ended December 31, 2025 . See Note 14 “ Segments and Geographical Information.” 73 (ii) Recent Accounting Pronouncements Not Yet Effective On September 18, 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software.” The amendments in this ASU simplify the accounting for internal-use software by eliminating the existing project development stages and introducing new guidance for evaluating the probable-to-complete threshold for capitalization. The amendments in this ASU also require the application of ASC 360-10 disclosure requirements for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. The provisions of ASU 2025-06 are effective for all entities for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect of this pronouncement on its annual consolidated financial statements. On November 4, 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures. ” The amendments in this ASU require a public entity to disclose, in the notes to the financial statements, specified information about certain costs and expenses, including the amounts of inventory purchases, employee compensation, depreciation and intangible asset amortization. For public business entities, the provisions of ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. There will be no impact to our consolidated balance sheets or statements of operations; however, the Company is evaluating the effect of this pronouncement on our consolidated financial statement disclosures. Note 2. Financial Instruments Cash, Cash Equivalents and Marketable Securities The following tables summarize our cash and cash equivalents, and marketable securities balances recorded in our Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands): Reported as: December 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and cash equivalents Cash $ 770,051 $ — $ — $ 770,051 $ 770,051 Money market funds 308,940 — — 308,940 308,940 Certificates of deposit 15,917 — — 15,917 15,917 Total $ 1,094,908 $ — $ — $ 1,094,908 $ 1,094,908 Reported as: December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and cash equivalents Cash $ 752,423 $ — $ — $ 752,423 $ 752,423 Money market funds 291,464 — — 291,464 291,464 Total $ 1,043,887 $ — $ — $ 1,043,887 $ 1,043,887 We had no short-term or long-term marketable securities as of December 31, 2025 or 2024. 74 Fair Value Measurements The following tables summarize our financial assets measured at fair value as of December 31, 2025 and 2024 (in thousands): Description Balance as of December 31, 2025 Level 1 Cash equivalents: Money market funds $ 308,940 $ 308,940 Certificate of deposits 15,917 15,917 $ 324,857 $ 324,857 Description Balance as of December 31, 2024 Level 1 Cash equivalents: Money market funds $ 291,464 $ 291,464 $ 291,464 $ 291,464 We had no financial assets that were categorized as level 2 or level 3 in the fair value hierarchy for the years ended December 31, 2025 or 2024. Derivatives Not Designated as Hedging Instruments Recurring foreign currency forward contracts We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain assets and liabilities. 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 loss of $ 34.2 million during the year ended December 31, 2025, a net gain of $ 35.2 million during the year ended December 31, 2024 and a net loss of $ 15.9 million during the year ended December 31, 2023. Recognized gains and losses from the settlement of foreign currency forward contracts are recorded in Other income (expense), net in our Consolidated Statements of Operations. As of December 31, 2025 and 2024, the fair value of foreign exchange forward contracts outstanding was not material. 75 The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of December 31, 2025 and 2024 (in thousands): December 31, 2025 Local Currency Amount Notional Contract Amount (USD) Euro € 183,700 $ 215,895 Canadian Dollar C$ 90,000 65,802 British Pound £ 38,500 51,782 Polish Zloty PLN 174,800 48,605 Israeli Shekel ILS 80,500 25,283 Japanese Yen ¥ 3,200,000 20,447 Brazilian Real R$ 63,500 11,440 Chinese Yuan ¥ 52,000 7,461 Swiss Franc CHF 4,200 5,316 New Taiwan Dollar NT$ 121,500 3,851 New Zealand Dollar NZ$ 6,020 3,474 Korean Won ₩ 4,600,000 3,207 Australian Dollar A$ 3,500 2,337 Czech Koruna Kč 26,000 1,262 Total notional contract amount $ 466,162 December 31, 2024 Local Currency Amount Notional Contract Amount (USD) Euro € 176,080 $ 183,172 Polish Zloty PLN 283,000 68,633 Canadian Dollar C$ 97,000 67,446 British Pound £ 37,600 47,090 Israeli Shekel ILS 90,055 24,740 Chinese Yuan ¥ 164,500 22,417 Brazilian Real R$ 83,100 13,327 Japanese Yen ¥ 2,000,000 12,778 Swiss Franc CHF 5,700 6,314 New Zealand Dollar NZ$ 7,000 3,924 Czech Koruna Kč 72,800 3,004 Australian Dollar A$ 3,800 2,355 New Taiwan Dollar NT$ 58,700 1,786 Korean Won ₩ 2,000,000 1,361 Total notional contract amount $ 458,347 Note 3. Balance Sheet Components Inventories consist of the following (in thousands): December 31, 2025 2024 Raw materials $ 107,296 $ 124,377 Work in process 65,679 73,660 Finished goods 53,368 56,250 Total inventories $ 226,343 $ 254,287 76 During the year ended December 31, 2025, we recognized an impairment loss on inventory of $ 14.9 million to adjust our inventory balance to its net realizable value. This loss was recorded in Cost of net revenues in our Consolidated Statements of Operations. Prepaid expenses and other current assets consist of the following (in thousands): December 31, 2025 2024 Value added tax receivables 1 $ 55,819 $ 34,028 Prepaid expenses 62,478 82,978 Other current assets 47,274 81,576 Total prepaid expenses and other current assets $ 165,571 $ 198,582 1 Refer to Note 9 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements for discussion of tax matter. Property, plant and equipment, net consist of the following (in thousands): December 31, Generally Used Estimated Useful Life 2025 2024 Clinical and manufacturing equipment Up to 13 years $ 848,473 $ 871,827 Building 20 years 524,608 529,716 Leasehold improvements Lease term 1 67,402 62,172 Computer software and hardware 3 years 120,608 135,756 Land — 57,868 63,875 Furniture, fixtures and other 2 - 5 years 151,874 135,816 Construction in progress — 127,944 133,684 Total 1,898,777 1,932,846 Less: Accumulated depreciation and impairment charges ( 767,324 ) ( 661,712 ) Total property, plant and equipment, net $ 1,131,453 $ 1,271,134 1 Shorter of the remaining lease term or the estimated useful lives of the assets. Depreciation was $ 218.6 million, $ 126.2 million and $ 126.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. Depreciation expense in 2025 includes $ 76.9 million of accelerated depreciation, as discussed in Note 1 “Summary of Significant Accounting Policies." Accrued liabilities consist of the following (in thousands): December 31, 2025 2024 Accrued payroll and benefits $ 226,149 $ 248,003 Accrued expenses 61,049 66,391 Accrued income taxes 44,049 48,808 Current operating lease liabilities 31,939 31,063 Accrued sales and marketing expenses 29,941 37,617 Accrued property, plant and equipment 10,469 13,462 Other accrued liabilities 133,153 152,844 Total accrued liabilities $ 536,749 $ 598,188 77 Accrued warranty, which is included in the “Other accrued liabilities” category of the Total accrued liabilities table above, consists of the following activity (in thousands): Balance as of December 31, 2023 $ 22,426 Charged to cost of net revenues 21,962 Actual warranty expenditures ( 13,177 ) Balance as of December 31, 2024 31,211 Charged to cost of net revenues 5,333 Actual warranty expenditures ( 12,133 ) Balance as of December 31, 2025 $ 24,411 Deferred revenues consist of the following (in thousands): December 31, 2025 2024 Deferred revenues - current $ 1,261,816 $ 1,331,146 Deferred revenues - long-term 1 85,543 102,164 1 Included in Other long-term liabilities within our Consolidated Balance Sheets. During the years ended December 31, 2025 and 2024, we recognized $ 4,035.0 million and $ 3,999.0 million of net revenues, respectively, of which $ 840.5 million and $ 819.0 million was included in the deferred revenues balance at December 31, 2024 and 2023, respectively. Note 4. Leases Lessee Information We have operating leases for our digital treatment planning and office facilities, retail spaces, vehicles and office equipment. The components of lease expense consist of following (in thousands): Year Ended December 31, Lease Cost 2025 2024 2023 Operating lease cost 1 $ 43,401 $ 42,299 $ 44,614 Variable lease cost 2 4,054 3,630 16,013 Total lease cost $ 47,455 $ 45,929 $ 60,627 1 Includes expense associated with short term leases, lease terms of 12 months or less, which is not material. 2 Includes payments related to agreements with embedded leases that are not otherwise reflected on the balance sheet. The following table provides a summary of our operating lease terms and discount rates: December 31, Remaining Lease Term and Discount Rate 2025 2024 Weighted average remaining lease term (in years) 5.1 5.4 Weighted average discount rate 4.1 % 3.8 % 78 As of December 31, 2025, the future payments related to our operating lease liabilities are as follows (in thousands): Fiscal Year Ending December 31, Operating Leases 2026 $ 35,694 2027 29,595 2028 23,986 2029 15,564 2030 7,212 Thereafter 13,060 Total lease payments 125,111 Less: Imputed interest ( 10,665 ) Total lease liabilities $ 114,446 As of December 31, 2025, we had additional leases that had not commenced with future lease payments of $ 58.4 million. These leases will commence during 2026 with non-cancelable lease terms of two to fourteen years . Lessor Information We lease iTero intraoral scanners to customers which are classified as operating leases. Our portfolio of leased iTero scanners included in Property, plant and equipment, net are as follows: December 31, 2025 2024 Scanners under operating leases, gross $ 55,576 $ 33,770 Less: accumulated depreciation ( 26,222 ) ( 12,038 ) Scanners under operating leases, net $ 29,354 $ 21,732 As of December 31, 2025, the future lease payments due to us are as follows (in thousands): Fiscal Year Ending December 31, Operating Leases 2026 $ 33,898 2027 28,587 2028 8,736 2029 1,080 Thereafter — Total lease payments $ 72,301 For the years ended December 31, 2025, 2024 and 2023, operating lease income was $ 28.8 million, $ 21.7 million and $ 16.6 million, respectively. Operating lease income is recorded in Net revenues in our Consolidated Statements of Operations. Note 5. Business Combination 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 Cubicure Acquisition is intended to support and scale our strategic innovation roadmap and strengthen the Align Digital Platform. 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. Prior to the acquisition, we also had technology license and joint development agreements with Cubicure. The fair value of consideration transferred in the acquisition is shown in the table below (in thousands): 79 Cash paid to Cubicure stockholders $ 80,142 Fair value of pre-existing equity interest ownership 7,968 Settlement of pre-existing relationship - accounts payable ( 2,316 ) Total purchase consideration paid $ 85,794 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. The remeasurement resulted in the recognition of a pre-tax gain of $ 4.1 million, which was reflected as a component of Other income (expense), net within our Consolidated Statements of Operations. 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 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 Cubicure Acquisition. The allocation of purchase price to assets acquired and liabilities assumed is as follows (in thousands): Working capital $ 1,039 Property & equipment 975 Developed technology 47,000 Other non-current asset 1,483 Other liabilities ( 12,279 ) Goodwill 47,576 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 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. We allocated all goodwill to our Clear Aligner reporting unit. 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, the asset's life cycle and a present value factor. Acquisition related costs are recognized separately from the business combination and are expensed as incurred. Acquisition related costs were not material. 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. 80 Note 6. Goodwill and Intangible Assets Goodwill The change in the carrying value of goodwill for the years ended December 31, 2025 and 2024, categorized by reportable segment, 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 47,576 — 47,576 Foreign currency translation adjustments ( 6,017 ) ( 18,459 ) ( 24,476 ) Balance as of December 31, 2024 152,645 289,985 442,630 Foreign currency translation adjustments 11,610 37,593 49,203 Balance as of December 31, 2025 $ 164,255 $ 327,578 $ 491,833 We completed our annual goodwill impairment assessment in 2025 and 2024 and determined there were no impairments. Finite-Lived Intangible Assets 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 December 31, 2025 Accumulated Amortization Accumulated Impairment Loss Net Carrying Value as of December 31, 2025 Existing technology 11 $ 146,651 $ ( 67,138 ) $ — $ 79,513 Customer relationships 10 21,500 ( 12,363 ) — 9,137 Trademarks and tradenames 1 7 9,800 ( 8,050 ) — 1,750 Patents 12 480 ( 320 ) — 160 $ 178,431 $ ( 87,871 ) $ — $ 90,560 Foreign currency translation adjustments 3,373 Total intangible assets, net $ 93,933 1 The Weighted Average Amortization Period decreased from 10 years to 7 years due to an intangible asset with a useful life of 15 years becoming fully amortized in 2025. Weighted Average Amortization Period (in years) Gross Carrying Amount as of December 31, 2024 Accumulated Amortization Accumulated Impairment Loss Net Carrying Value as of December 31, 2024 Existing technology 11 $ 146,651 $ ( 52,238 ) $ — $ 94,413 Customer relationships 10 21,500 ( 10,079 ) — 11,421 Trademarks and tradenames 10 16,600 ( 9,255 ) ( 4,122 ) 3,223 Patents 12 480 ( 280 ) — 200 $ 185,231 $ ( 71,852 ) $ ( 4,122 ) $ 109,257 Foreign currency translation adjustments ( 5,769 ) Total intangible assets, net $ 103,488 Of the $ 146.7 million recorded as Existing technology intangible assets as of December 31, 2025, $ 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 December 31, 2024. Refer to Note 5 “Business Combination” . For the years ended December 31, 2025 and 2024, we did not identify any impairment triggering events that would indicate that the carrying value of our finite-lived intangible assets was not recoverable. 81 The total estimated future amortization expense for these acquired finite-lived intangible assets as of December 31, 2025 is as follows (in thousands): Fiscal Year Amortization 2026 $ 17,922 2027 15,607 2028 14,505 2029 14,505 2030 6,328 Thereafter 21,693 Total $ 90,560 Amortization expense was $ 18.8 million, $ 18.9 million and $ 16.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. Note 7. Credit Facility We maintain a credit facility, as amended in December 2022, that includes a $ 300.0 million unsecured revolving line of credit and a $ 50.0 million letter of credit sub-limit. The facility matures on December 23, 2027 and loans under the facility accrue interest, at our election, based on either the Secured Overnight Financing Rate (“SOFR”) for the applicable period or a base rate, in each case plus an applicable margin. The facility includes financial covenants and performance requirements. As of December 31, 2025, we had no outstanding borrowings under the facility and were in compliance with the terms and conditions of the facility in all material respects. Note 8. Legal Proceedings Antitrust Class Actions On June 5, 2020, a dental practice, Simon and Simon, PC (doing business as City Smiles), brought an antitrust action in the U.S. District Court for the Northern District of California on behalf of itself and a putative class of similarly situated practices seeking treble monetary damages, interest, costs, attorneys’ fees, and injunctive relief relating to our alleged market activities in alleged clear aligner and intraoral scanner markets. Plaintiff filed an amended complaint and added VIP Dental Spas as a plaintiff on August 14, 2020. On December 18, 2023, the court certified a class of persons or entities that purchased Invisalign directly from us between January 1, 2019 and March 31, 2022. The court denied Plaintiffs’ motion to certify a class of purchasers of scanners. On February 21, 2024, the court granted our motion for summary judgment on all claims brought by the plaintiffs. Plaintiffs have appealed the district court’s summary judgment ruling to the United States Court of Appeals for the Ninth Circuit. Oral argument was held on April 10, 2025. On May 3, 2021, an individual named Misty Snow brought an antitrust action in the U.S. District Court for the Northern District of California on behalf of herself and a putative class of similarly situated individuals seeking treble monetary damages, interest, costs, attorneys’ fees, and injunctive relief relating to our alleged market activities in alleged clear aligner and intraoral scanner markets based on Section 2 of the Sherman Act. Plaintiffs have since filed several amended complaints adding new plaintiffs and various state law claims. On November 29, 2023, the court certified a class of indirect purchasers of Invisalign between July 1, 2018 and December 31, 2023 and a class of indirect purchasers of Invisalign seeking injunctive relief. On February 21, 2024, the court granted our motion for summary judgment on the claims related to Section 2 allegations. The court entered judgment for the Section 2 and related state law claims on March 22, 2024. Plaintiffs have appealed the district court’s summary judgment ruling to the United States Court of Appeals for the Ninth Circuit. Oral argument was held on April 10, 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. During the course of the Misty Snow lawsuit, some additional plaintiffs joined and filed allegations based on Section 1 of the Sherman Act. In June 2024, we reached a settlement in principle with the Section 1 plaintiffs to resolve all remaining claims in the Section 1 lawsuit. In March 2025, Align and plaintiffs agreed to a revised settlement to resolve all Section 1 claims for a 82 $ 31.75 million cash payment. On November 21, 2025, the court granted final approval of the settlement and dismissed the case with prejudice. In 2025, Align issued a payment for the full settlement amount, $ 31.75 million, consisting of $ 27.5 million accrued as of December 31, 2024 and an additional loss accrual of $ 4.25 million in the first quarter of 2025, to an escrow agency in accordance with the court's approval. Straumann Litigation On April 11, 2024, we filed a lawsuit in the U.S. District Court for the Western District of Texas against ClearCorrect Operating, LLC, ClearCorrect Holdings, Inc. and Institut Straumann AG, (collectively the “Defendants”). The complaint asserted infringement of our patents related to aligner material, treatment planning, and intraoral scanner technologies. 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. On September 12, 2025, Defendants filed a motion to dismiss the amended complaint. That motion to dismiss remains pending. Defendants are also seeking to invalidate all of our asserted patents at the district court. On July 9, 2024, Defendants filed counterclaims against us alleging antitrust violations and unfair competition. Among other things, the counterclaims seek injunctive relief and money damages. On August 29, 2025, Defendants filed amended counterclaims, which additionally allege that Align procured certain materials patents by fraud. On September 26, 2025, Align filed a motion to dismiss the amended counterclaims. That motion is still pending. A trial in the case is set for June 22, 2026. On April 10, 12 and 14, 2025, Defendants filed eight inter partes review (“IPR”) petitions with the United States Patent Trial and Appeal Board (“PTAB”), alleging that eight of the patents asserted by Align against the Defendants are unpatentable. On October 23, 2025, the PTAB issued decisions denying institution of two of Defendants eight IPRs. On October 23, October 27, October 30, and November 6, 2025, the PTAB issued decisions instituting proceedings on the remaining six IPRs. We believe the petitions are without merit and intend to defend ourselves vigorously. We believe Defendants’ counterclaims are without merit and intend to vigorously defend ourselves. We are currently unable to predict the outcome of this lawsuit and cannot determine the likelihood of loss, if any, nor estimate a range of possible loss. Angelalign Litigation On August 15, 2025, we initiated two actions in the European Unified Patent Court against Angelalign Technology, Inc.; Angelalign France Technology SASU; Europe Angelalign Technology B.V.; Angelalign Technology (Germany) GmbH; Italy Angelalign Technology S.R.L. and Shanghai EA Medical Instruments Co., Ltd. These actions allege infringement of patents related to user interfaces for treatment planning and to the “power ridge” feature of clear aligners. Subsequently, on November 27, 2025, we initiated a third action in the Unified Patent Court against the same entities for infringement of a patent related to treatments in complex cases. The accused entities have challenged the validity of the asserted patent in each of these actions. On January 13, 2026, Angelalign Technology (Germany) GMBH filed an action in the European Patent Office challenging the validity of the treatment-planning patent referenced above. These actions are currently pending. On February 12, 2026, the Unified Patent Court issued a preliminary injunction in Align’s favor and against Angel, enjoining Angel from using its “Live Now” feature, a user interface for treatment planning. Angel must pay € 20,000 EUR per day or cease offering its infringing software feature. On August 18, 2025, we initiated an action in the U.S. District Court for the Eastern District of Texas against Angelalign Technology Inc; Wuxi EA Medical Instruments Technologies Ltd.; Wuxi EA Bio-Tech Co., Ltd.; and Shanghai EA Medical Instruments Co., Ltd. This action alleges infringement of patents related to multilayer materials for clear aligners and “bite ramp” and “power ridge” features of clear aligners. On January 2, 2026, following institution of an investigation by the U.S. International Trade Commission, referenced below, this action was stayed pending further order of the court. On August 18, 2025, we initiated two actions in China’s Zhengzhou Intermediate People’s Court against Shanghai Angelalign Medical Devices Co., Ltd.; Wuxi Angelalign Medical Device Technology Co., Ltd.; and Wuxi Angelalign Biotechnology Co., Ltd. These actions allege infringement of patents related to tooth attachments and treatment planning. Separately, on September 10, 2025, we filed an action against the same entities in the Jinan Intermediate People’s Court alleging infringement of a patent related to extraction site closure. And on January 12, 2026, we filed an action against these entities in the Fuzhou Intermediate People’s Court alleging infringement of a patent related to extraction site closure. These actions are currently pending. 83 On January 16, 2026, Shanghai Angelalign Medical Devices Co., Ltd. filed a petition with the China National Intellectual Property Administration (“CNIPA”) challenging the validity of our patent related to extraction site closure, which patent is the subject of an infringement action referenced above. On January 22, 2026, Shanghai Angelalign Medical Devices Co., Ltd. filed a petition with the CNIPA challenging the validity of our patent related to tooth attachments, which patent likewise is the subject of an infringement action referenced above. And on January 19, 2026, we filed a petition with the CNIPA challenging the validity of a patent held by Wuxi Angelalign Medical Device Technology Co., Ltd. regarding undercut detection and filling. These invalidity actions are currently pending. On September 23, 2025, we filed a complaint at the U.S. International Trade Commission (“ITC”) against Angelalign Technology Inc., Wuxi EA Medical Instruments Technologies Ltd.; Wuxi EA Bio-Tech Co., Ltd.; Shanghai EA Medical Instruments Co., Ltd.; and USA Angelalign Technology Corp. (collectively, “the ITC Respondents”). This complaint alleges unlawful importation and sale of clear aligners that infringe patents related to multilayer materials for clear aligners, in violation of 19 U.S.C.§ 1337. Further, the complaint requests that the ITC institute an investigation and issue an exclusion order blocking the ITC Respondents’ importation of infringing products into the United States, and a cease-and-desist order prohibiting the ITC Respondents from selling, marketing, or transferring infringing products within the United States. On December 19, 2025, the ITC instituted the requested investigation, which is currently pending. On August 22, 2025, Shanghai Angelalign Medical Devices Co., Ltd. and Wuxi Angelalign Medical Devices Technology Co., Ltd. initiated an action against us in China’s the Beijing Intellectual Property Court. The complaint alleges that we infringe a patent relating to undercut detection for mold manufacturing. We believe that these allegations are without merit and intend to defend ourselves vigorously. We are currently unable to predict the outcome of these lawsuits or any future litigation, and therefore we cannot determine the likelihood of loss, if any, 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. Regardless of the outcome, these proceedings can have an adverse impact on us because of defense costs, diversion of management resources, and other factors. Although the results of complex legal proceedings are difficult to predict and our view of these matters may change in the future as litigation and events related thereto unfold; we currently do not believe that these matters, individually or in the aggregate, will materially affect our financial position, results of operations or cash flows. Note 9. Commitments and Contingencies Tax Matter Beginning in the third quarter of 2023 and continuing through the first quarter of 2024, we 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 were required to pay these assessments prior to contesting or litigating the matter in statutory appeal. We have historically asserted and continue to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that we have reasonably relied upon statements and guidance by HMRC and that our interpretation of United Kingdom legislation is appropriate. 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 for the period of October 2019 through May 2023 and withdraw any potential assessments for the period from June 2023 through mid-October 2023. HMRC has refunded to the Company the assessed amounts, approximately $ 100 million. A statutory appeal (before the First-tier Tribunal - “Tax Tribunal”) was held on January 27th through January 30th, 2025. On April 24, 2025, the Tax Tribunal issued a ruling in our favor indicating that clear aligners are “dental prostheses for the purposes of VAT”, which is a key condition for the VAT exemption. On June 13, 2025, HMRC applied for permission to appeal the Tax Tribunal decision, which was granted on July 15, 2025. On August 1, 2025, HMRC lodged their grounds for appeal to the Upper Tribunal. A hearing in front of the Upper Tribunal has been scheduled for May 2026. 84 In August 2025, we stopped charging VAT to our United Kingdom customers. It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome from the Upper Tribunal statutory appeal, nor estimate a range of possible loss. Indemnification Provisions In the normal course of business to facilitate transactions in our services and products, we indemnify certain parties: customers, vendors, lessors, and other parties with respect to certain matters, including, but not limited to, services to be provided by us and intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to make a reasonable estimate of the maximum potential amount of future payments, if any, under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows or financial position. 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 December 31, 2025, we did not have any material indemnification claims that were probable or reasonably possible. Note 10. Stockholders’ Equity Common Stock The holders of common stock are entitled to receive dividends whenever funds are legally available and when and if declared by the Company’s Board of Directors. We have not historically declared or paid dividends on our common stock. Stock-Based Compensation Plans Our Align Technology, Inc. 2005 Incentive Plan, as amended (the “2005 Incentive Plan”), provides for the granting of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, performance units and performance shares to employees, non-employee directors and consultants. Shares granted on or after May 16, 2013 as an award of restricted stock, restricted stock units, performance shares or performance units (“full value awards”) are counted against the authorized share reserve as one and nine-tenths (1 9/10 ) shares for every one (1) share subject to the award, and any shares canceled that were counted as one and nine-tenths shares against the plan reserve will be returned at the same ratio. As of December 31, 2025, the 2005 Incentive Plan has a total reserve of 34,668,895 shares of which 4,608,476 shares are available for issuance. We issue new shares from our pool of authorized but unissued shares to satisfy the exercise and vesting obligations of our stock-based compensation plans. Summary of Stock-Based Compensation Expense Stock-based compensation related to our stock-based awards and employee stock purchase plan for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Cost of net revenues $ 6,177 $ 6,995 $ 7,462 Selling, general and administrative 132,362 123,979 115,992 Research and development 47,331 42,729 30,572 Total stock-based compensation $ 185,870 $ 173,703 $ 154,026 The income tax benefit related to stock-based compensation was $ 20.0 million, $ 19.0 million and $ 17.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. 85 Restricted Stock Units (“RSUs”) The fair value of RSUs is based on the closing price of our stock on the date of grant. Generally, RSUs vest over a period of four years . The following table summarizes RSU activity for the year ended December 31, 2025: Number of Shares Underlying RSUs (in thousands) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Unvested as of December 31, 2024 1,019 $ 331.10 Granted 692 195.43 Vested and released ( 313 ) 354.77 Forfeited ( 148 ) 274.34 Unvested as of December 31, 2025 1,250 $ 256.80 1.3 $ 195,141 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (calculated by multiplying our closing stock price on the last trading day of fiscal year 2025 by the number of unvested RSUs) that would have been received by the unit holders had all RSUs vested and been released on the last trading day of fiscal year 2025. This amount will fluctuate based on the fair market value of our stock. During 2025, of the 312,735 shares vested and released, 90,466 shares were withheld for employee statutory tax obligations, resulting in a net issuance of 222,269 shares. The total fair value of RSUs vested as of their respective vesting dates during 2025, 2024 and 2023 was $ 61.1 million, $ 78.8 million and $ 63.0 million, respectively. The weighted average grant date fair value of RSUs granted during 2025, 2024 and 2023 was $ 195.43 , $ 307.12 and $ 316.16 , respectively. As of December 31, 2025, we expect to recognize $ 191.9 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.3 years. Market-Performance Based Restricted Stock Units (“MSUs”) We grant MSUs to members of senior management. Each MSU represents the right to one share of our common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of our 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 of shares eligible to vest is 250 % of the MSUs initially granted. The following table summarizes MSU activity for the year ended December 31, 2025: Number of Shares Underlying MSUs (in thousands) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Unvested as of December 31, 2024 193 $ 679.14 Granted 127 362.98 Vested and released ( 30 ) 878.35 Forfeited ( 27 ) 638.92 Unvested as of December 31, 2025 263 $ 507.88 1.3 $ 41,148 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (calculated by multiplying our closing stock price on the last trading day of 2025 by the number of unvested MSUs) that would have been received by the unit holders had all MSUs been vested and released as of the last trading day of 2025. This amount will fluctuate based on the fair market value of our stock. During 2025, of the 29,995 shares that vested and released, 11,091 shares were withheld for employee statutory tax obligations, resulting in a net issuance of 18,904 shares. The total fair value of MSUs vested as of their respective vesting dates during 2025, 2024 and 2023 was $ 5.7 million, $ 10.1 million and $ 7.8 million, respectively. As of December 31, 2025, we expect to recognize $ 44.9 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.3 years. 86 The fair value of MSUs is estimated at the grant date using a Monte Carlo simulation that includes factors for market conditions. The weighted average assumptions used in the Monte Carlo simulation were as follows: Year Ended December 31, 2025 2024 2023 Expected term (in years) 3.0 3.0 3.0 Expected volatility 51.5 % 52.0 % 59.1 % Risk-free interest rate 4.2 % 4.3 % 4.3 % Expected dividends — — — Weighted average fair value per share at grant date $ 362.98 $ 617.79 $ 629.53 Restricted Stock Units with Performance Conditions (“PSUs”) 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 PSU activity for the year ended December 31, 2025: Number of Shares Underlying PSUs (in thousands) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Unvested as of December 31, 2024 11 $ 204.33 Granted — — Vested and released ( 5 ) 201.63 Forfeited — — Unvested as of December 31, 2025 6 $ 206.36 1.0 $ 984 During 2025, of the 4,728 shares vested and released, 1,923 shares were withheld for employee statutory tax obligations, resulting in a net issuance of 2,805 shares. As of December 31, 2025, we expect to recognize $ 0.5 million of total unamortized compensation costs, net of estimated forfeitures, related to PSUs over a weighted average period of 1.0 year. Employee Stock Purchase Plan ( “ ESPP ” ) In May 2010, our stockholders approved the 2010 Employee Stock Purchase Plan (as amended and restated, the “2010 Purchase Plan”) which consists of consecutive overlapping twenty-four month offering periods with four six-month purchase periods in each offering period. Employees purchase shares at 85 % of the lower of the fair market value of the common stock at either the beginning of the offering period (grant date) or the end of the purchase period. The 2010 Purchase Plan will continue until terminated by either the Board of Directors or its administrator. The 2010 Purchase Plan also allows for purchase rights to employees outside the U.S. and Canada with six-month offering periods and purchase periods. In May 2021, the 2010 Purchase Plan was amended and restated to increase the maximum number of shares available for purchase to 4,400,000 shares. The following table summarizes the ESPP shares issued: Year Ended December 31, 2025 2024 2023 Number of shares issued (in thousands) 147 120 114 Weighted average price $ 148.77 $ 213.11 $ 234.19 As of December 31, 2025, 1,728,664 shares remain available for future issuance. 87 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: Year Ended December 31, 2025 2024 2023 Expected term (in years) 1.2 1.3 1.2 Expected volatility 56.2 % 49.2 % 56.4 % Risk-free interest rate 4.0 % 4.6 % 4.9 % Expected dividends — — — Weighted average fair value at grant date $ 64.94 $ 94.75 $ 132.94 We recognized stock-based compensation related to our employee stock purchase plan of $ 15.1 million, $ 14.0 million and $ 20.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we expect to recognize $ 10.6 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.6 years. Note 11. Common Stock Repurchase Programs We enter into Accelerated Share Repurchase (“ASR”) agreements and Open Market Repurchase (“OMR”) programs 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. Under the terms of each ASR, the financial institution may be required to deliver additional shares of common stock at final settlement or, under certain circumstances, we may be required at our election, to either deliver shares or make a cash payment to the financial institution. The ASRs limit the number of shares we would be required to deliver. In January 2023, our Board of Directors authorized a plan to repurchase up to $ 1.0 billion of our common stock (“January 2023 Repurchase Program”). The January 2023 Repurchase Program was completed in its entirety in the second quarter of 2025. In April 2025, our Board of Directors authorized a plan to repurchase up to $ 1.0 billion of our common stock (the “April 2025 Repurchase Program”). The April 2025 Repurchase Program is expected to be completed over a period of up to three years . As of December 31, 2025, we have $ 831.2 million remaining available for repurchase under the April 2025 Repurchase Program. The following tables summarize the total repurchases of our common stock pursuant to ASR agreements and OMR programs under the January 2023 and April 2025 Repurchase Programs for the years ended December 31, 2025 and 2024: Accelerated Share Repurchases Agreement Date Repurchase Program Amount Paid (in millions) Completion Date Total Shares Received Average Price per Share Q4 2023 January 2023 $ 250.0 Q1 2024 1,086,334 $ 230.13 Open Market Repurchases Agreement Date Repurchase Program Amount Paid (in millions) Completion Date Total Shares Received Average Price per Share Q4 2023 January 2023 $ 100.0 Q4 2023 465,518 $ 214.81 Q2 2024 January 2023 $ 150.0 Q2 2024 598,302 $ 250.73 Q4 2024 January 2023 $ 275.0 Q1 2025 1,241,509 $ 221.50 Q1 2025 January 2023 $ 225.0 Q2 2025 1,339,124 $ 168.02 Q3 2025 April 2025 $ 168.8 N/A 1 1,203,883 $ 140.22 1 On August 5, 2025, we initiated a $ 200 million open market repurchase program, which was completed in January 2026. The amount paid, total shares received and average price per share per the table above are determined as of December 31, 2025. As of December 31, 2025, we had $ 831.2 million available for repurchases under the April 2025 Repurchase Program. In January 2026, we repurchased $ 31.2 million of our common stock initiated in the Q3 2025 open market repurchase program. 88 Note 12. Employee Benefit Plans We have a defined contribution retirement plan as defined in Section 401(k) of the Internal Revenue Code for our U.S. employees which covers substantially all U.S. employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. We match 50 % of our employee’s salary deferral contributions up to 6 % of the employee’s eligible compensation. We contributed approximately $ 9.7 million, $ 10.0 million and $ 9.5 million to the 401(k) plan during the years ended December 31, 2025, 2024 and 2023, respectively. We also have defined contribution retirement plans outside of the U.S. to which we contributed $ 59.9 million, $ 57.4 million and $ 55.1 million during the years ended December 31, 2025, 2024 and 2023, respectively. Note 13. Income Taxes Net income before provision for income taxes consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Domestic $ 280,926 $ 334,485 $ 315,643 Foreign 304,361 274,474 325,561 Net income before provision for income taxes $ 585,287 $ 608,959 $ 641,204 The provision for (benefit from) income taxes consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Federal Current $ 52,962 $ 95,027 $ 134,332 Deferred 14,385 1,578 ( 16,805 ) 67,347 96,605 117,527 State Current 13,977 13,702 28,535 Deferred 13,766 3,384 ( 3,157 ) 27,743 17,086 25,378 Foreign Current 74,689 56,653 51,306 Deferred 5,157 17,253 1,940 79,846 73,906 53,246 Provision for (benefit from) income taxes $ 174,936 $ 187,597 $ 196,151 The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09: 89 Year Ended December 31, 2025 Amount Percent US federal statutory income tax rate $ 122,911 21.0 % State income taxes, net of federal tax benefit * 25,901 4.4 Foreign tax effects Switzerland Statutory tax rate difference between Switzerland and U.S. ( 11,536 ) ( 2.0 ) Canton tax 3,233 0.6 Swiss tax rate change - Remeasurement of deferred tax assets 15,136 2.6 Other 4,102 0.7 Mexico Impairment Loss 7,111 1.2 Other 1,303 0.2 Other Foreign Jurisdictions 14,135 2.4 Effect of cross-border tax laws: Subpart F 21,622 3.7 Foreign-derived intangible income ( 13,611 ) ( 2.3 ) Other 825 0.2 Tax Credits Research and development tax credits ( 7,840 ) ( 1.3 ) Nontaxable or Nondeductible Items Share-based payment awards 17,335 3.0 Other 3,219 0.5 Changes in Unrecognized Tax Benefits ( 29,673 ) ( 5.1 ) Other Adjustments 763 0.1 Income Tax expense $ 174,936 29.9 % *State and local taxes in California, New York, Minnesota and New York City made up the majority (greater than 50%) of the tax effect in this category. The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09: Year Ended December 31 2024 2023 U.S. federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 2.2 2.9 U.S. tax on foreign earnings 5.4 3.7 Impact of differences in foreign tax rates ( 2.0 ) 1.4 Stock-based compensation 3.4 3.0 Settlement on audits — 0.1 Change in valuation allowance 0.9 ( 1.3 ) Other items not individually material ( 0.1 ) ( 0.2 ) Effective tax rate 30.8 % 30.6 % 90 As of December 31, 2025 and 2024, the significant components of our deferred tax assets and liabilities are (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating loss and capital loss carryforwards $ 1,683 $ 2,741 Reserves and accruals 61,496 67,221 Stock-based compensation 30,975 29,255 Deferred revenue 140,486 146,509 Capitalized research & development 23,021 32,027 Amortizable tax basis in intangibles 1,283,968 1,301,338 Other 649 12,282 Deferred tax assets before valuation allowance 1,542,278 1,591,373 Valuation allowance ( 11,498 ) ( 19,390 ) Total deferred tax assets 1,530,780 1,571,983 Deferred tax liabilities: Depreciation and amortization $ 11,610 $ 16,485 Acquisition-related intangibles 16,357 28,868 Other 14,426 4,511 Total deferred tax liabilities 42,393 49,864 Net deferred tax assets $ 1,488,387 $ 1,522,119 As of December 31, 2025, it was considered more likely than not that our deferred tax assets would be realized with the exception of certain interest expense carryovers, capital loss carryovers and unrealized translation losses as we are unable to forecast sufficient future profits to realize these deferred tax assets. The total valuation allowance as of December 31, 2025 was $ 11.5 million. During the year ended December 31, 2025, the valuation allowance decreased by $ 7.9 million primarily due to the change in deferred tax assets on certain interest expense and unrealized translation losses from our German subsidiaries. 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. This assessment includes deferred tax assets associated with our Switzerland tax deductible basis created from our 2020 intra-entity transfer of intellectual property, which have a finite utilization period and depend on our ability to generate sufficient taxable income in that jurisdiction. Any changes to the valuation allowance, particularly those related to our Switzerland deferred tax assets, could have a material adverse effect on our results of operations. As of December 31, 2025, we have foreign net operating loss carryforwards of approximately $ 4.7 million, attributed mainly to losses in Russia and Germany. The losses in Germany can be carried forward indefinitely. The operating loss carryforwards in Russia, if not utilized, will expire beginning 2033. The changes in the balance of gross unrecognized tax benefits, which exclude interest and penalties, for the years ended December 31, 2025, 2024 and 2023, are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Gross unrecognized tax benefits at January 1, $ 145,534 $ 149,172 $ 141,560 Increases related to tax positions taken during the current year 8,879 12,264 8,616 Increases related to tax positions taken during a prior year 1,288 2,031 5,647 Decreases related to tax positions taken during a prior year ( 4,286 ) ( 3,924 ) ( 533 ) Decreases related to expiration of statute of limitations ( 33,988 ) ( 14,009 ) ( 3,654 ) Decreases related to settlement with tax authorities — — ( 2,464 ) Gross unrecognized tax benefits at December 31, $ 117,427 $ 145,534 $ 149,172 The total amount of gross unrecognized tax benefits as of December 31, 2025 was $ 117.4 million, of which $ 111.9 million would impact our effective tax rate if recognized. 91 We file U.S. federal, U.S. state, and non-U.S. income tax returns. Our major tax jurisdictions include U.S. federal, the State of California and Switzerland. We are under IRS audit for U.S. federal tax returns from 2018 to 2020. For U.S state tax returns, we are no longer subject to tax examinations for years before 2020. With few exceptions, we are no longer subject to examination by other foreign tax authorities for years before 2017. We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes. Interest and penalties included in tax expense for the years ended December 31, 2025, 2024 and 2023 as well as accrued as of December 31, 2025 and 2024 were not material. Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirement of ASU 2023-09 for the year ended December 31, 2025: Year Ended December 31, 2025 United States - Federal $ 72,872 United States - State and local 13,792 Israel 7,291 Other foreign jurisdictions 40,798 Total income taxes paid $ 134,753 Note 14. Net Income per Share Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock. Potential common stock, computed using the treasury stock method, includes RSUs, MSUs, PSUs and our ESPP. The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands, except per share amounts): Year Ended December 31, 2025 2024 2023 Numerator: Net income $ 410,351 $ 421,362 $ 445,053 Denominator: Weighted average common shares outstanding, basic 72,542 74,877 76,426 Dilutive effect of potential common stock 46 116 142 Total shares, diluted 72,588 74,993 76,568 Net income per share, basic $ 5.66 $ 5.63 $ 5.82 Net income per share, diluted $ 5.65 $ 5.62 $ 5.81 Anti-dilutive potential common shares 1 1,239 685 293 1 Represents approximately 1,238 thousand RSU and 1 thousand ESPP weighted-average outstanding common stock equivalent shares for the year ended December 31, 2025, approximately 685 thousand RSU shares for the year ended December 31, 2024, and approximately 263 thousand RSU and 30 thousand ESPP weighted-average outstanding common stock equivalent shares for the year ended December 31, 2023 that are excluded from the calculation of diluted net income per share as the effect would have been anti-dilutive. 92 Note 15. Supplemental Cash Flow Information The supplemental cash flow information consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Taxes paid $ 134,753 $ 177,082 $ 294,569 Non-cash investing and financing activities: Acquisition of property, plant and equipment in accounts payable and accrued liabilities $ 16,592 $ 18,974 $ 32,280 Final settlement of prior year stock repurchase forward contract $ — $ 50,000 $ 40,000 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 39,856 $ 39,526 $ 33,714 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 22,291 $ 32,671 $ 27,901 Note 16. Segments and Geographical Information Segment Information We report segment information based on the management approach. 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. We group our operations into two reportable segments: Clear Aligner segment and Imaging Systems and CAD/CAM services (“Systems and Services”) segment, which are based on our predominant product lines. Our CODM uses gross profit and income from operations to assess each reportable segment’s performance, by reviewing each measure against internal forecasts and historical performance. Our CODM may also benchmark each segment’s performance against our competitors and external expectations. 93 Summarized financial information by reportable segment is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Net revenues Clear Aligner $ 3,245,404 $ 3,230,122 $ 3,199,329 Systems and Services 789,560 768,890 662,931 Total net revenues $ 4,034,964 $ 3,999,012 $ 3,862,260 Cost of net revenues 1 Clear Aligner $ 1,058,893 $ 952,136 $ 911,291 Systems and Services 265,058 247,717 244,106 Total cost of goods sold $ 1,323,951 $ 1,199,853 $ 1,155,397 Gross profit Clear Aligner $ 2,186,511 $ 2,277,986 $ 2,288,038 Systems and Services 524,502 521,173 418,825 Total gross profit $ 2,711,013 $ 2,799,159 $ 2,706,863 Other Segment expenses Clear Aligner $ 1,151,720 $ 1,135,782 $ 1,105,781 Systems and Services 218,412 251,951 227,470 Unallocated corporate expenses 795,126 803,798 730,274 Total operating expenses $ 2,165,258 $ 2,191,531 $ 2,063,525 Segment income from operations Clear Aligner $ 1,034,791 $ 1,142,204 $ 1,182,257 Systems and Services 306,090 269,222 191,355 Total segment income from operations $ 1,340,881 $ 1,411,426 $ 1,373,612 1 Management has identified Cost of net revenues as a significant expense for our Clear Aligner and Systems and Services reportable segments. Other segment expenses typically include employee related costs, marketing and advertising costs, and depreciation and amortization expense incurred by various functions including selling, marketing, general and administrative and research and development. Our CODM does not regularly receive these operating expenses at the reportable segment level. Income from operations for each segment includes all geographic revenues, related cost of net revenues and operating expenses directly attributable to the reportable segment. Certain operating expenses are not directly attributable to a reportable segment and must be allocated. Each allocation is measured differently based on the nature of the cost being allocated. Certain other operating expense are not specifically allocated to segment income from operations and generally include various corporate expenses such as stock-based compensation and costs related to IT, facilities, human resources, accounting and finance, legal and regulatory, other separately managed general and administrative costs outside the reportable segments and restructuring costs. The following table reconciles total segment income from operations in the table above to net income before provision for (benefit from) income taxes (in thousands): Year Ended December 31, 2025 2024 2023 Total segment income from operations $ 1,340,881 $ 1,411,426 $ 1,373,612 Unallocated corporate expenses ( 795,126 ) ( 803,798 ) ( 730,274 ) Total income from operations 545,755 607,628 643,338 Interest income 16,045 20,218 17,258 Other income (expense), net 23,487 ( 18,887 ) ( 19,392 ) Net income before provision for income taxes $ 585,287 $ 608,959 $ 641,204 The following table includes certain non-cash expenses for each reportable segment (in thousands): 94 Year Ended December 31, 2025 2024 2023 Stock-based compensation Clear Aligner $ 23,883 $ 22,888 $ 13,963 Systems and Services 1,525 1,595 1,293 Unallocated corporate expenses 160,462 149,220 138,770 Total stock-based compensation $ 185,870 $ 173,703 $ 154,026 Depreciation and amortization Clear Aligner $ 151,565 $ 67,450 $ 64,781 Systems and Services 39,513 30,998 31,518 Unallocated corporate expenses 46,358 46,586 46,102 Total depreciation and amortization $ 237,436 $ 145,034 $ 142,401 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. Geographical Information Net revenues are presented below by geographic area (in thousands): Year Ended December 31, 2025 2024 2023 Net revenues 1 : U.S. $ 1,661,185 $ 1,695,696 $ 1,665,925 Switzerland 920,588 983,629 1,168,320 Other International 1,453,191 1,319,687 1,028,015 Total net revenues $ 4,034,964 $ 3,999,012 $ 3,862,260 1 Net revenues are attributed to countries based on the location of where revenues are recognized by our legal entities. 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): December 31, 2025 2024 Long-lived assets 1 : Switzerland $ 493,584 $ 571,628 U.S. 200,343 207,689 Other International 545,848 605,193 Total long-lived assets $ 1,239,775 $ 1,384,510 1 Long-lived assets are attributed to countries based on the location of our entity that owns or leases the assets. Note 17. Restructuring and Other Charges 2023 Restructuring During 2023, we 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. As of December 31, 2024, we had no remaining restructuring liability related to the 2023 Restructuring. 2024 Restructuring During 2024, we incurred approximately $ 37.0 million in restructuring expenses, of which $ 13.0 million remained unpaid and were included in Accrued liabilities as of December 31, 2024. For the year ended December 31, 2025, we reduced our 95 December 31, 2024 restructuring liability by approximately $ 14.6 million primarily due to cash payments, offset by approximately $ 2.1 million of additional restructuring expense recorded in Cost of net revenues. The 2023 and 2024 restructuring charges were primarily related to involuntary termination benefits, including employee severance and other post-employment benefits. 2025 Restructuring During the third quarter of 2025, we initiated a plan to realign certain business groups and reduce our global workforce. This plan represents our continued effort to right size our labor force with the current macroeconomic environment. We incurred $ 40.9 million in total restructuring expenses, primarily related to involuntary termination benefits, including employee severance and other post-employment benefits. We have recorded $ 5.5 million in Cost of net revenues and $ 35.4 million in Restructuring and other charges in our Consolidated Statements of Operations as of December 31, 2025. All charges recorded to Cost of net revenues were allocated to our Clear Aligner reportable segment and all charges recorded to Restructuring and other charges were unallocated corporate expenses. As of December 31, 2025, $ 17.1 million remained unpaid and was included in Accrued liabilities in our Consolidated Balance Sheets. Activity related to the restructuring liabilities associated with our restructuring initiatives consist of the following (in thousands): For the twelve months ended December 31, 2024 2023 Restructuring 2024 Restructuring Total Balance at beginning of period 1 $ 5,299 $ — $ 5,299 Restructuring and other charges ( 598 ) 36,991 36,393 Cash payments and adjustments ( 4,701 ) ( 23,990 ) ( 28,691 ) Balance at end of period 1 $ — $ 13,001 $ 13,001 For the twelve months ended December 31, 2025 2024 Restructuring 2025 Restructuring 2 Total Balance at beginning of period 1 $ 13,001 $ — $ 13,001 Restructuring and other charges 2,056 40,888 42,944 Cash payments and adjustments ( 14,569 ) ( 23,776 ) ( 38,345 ) Balance at end of period 1 $ 488 $ 17,112 $ 17,600 1 Included in “Accrued liabilities” within our Consolidated Balance Sheets. 2 2025 restructuring activities include an immaterial amount of charges for non post-employment benefit related restructuring expense. Note 18. Assets Held for Sale In connection with the 2025 Restructuring activities, refer to Note 17 “Restructuring and Other Charges” , we have undertaken additional actions to optimize our manufacturing footprint. These actions include disposing, either by sale or other than by sale, of certain capital assets, including various manufacturing assets and facilities. For discussion of assets disposed of other than by sale refer to Note 1 “Summary of Significant Accounting Policies." ASC Topic 360-10, Property, Plant and Equipment - Overall, requires a long-lived asset to be classified as “held for sale” in the period in which certain criteria are met. The Company classifies real estate assets as held for sale after the following conditions have been satisfied: (1) management, having the appropriate authority, commits to a plan to sell the asset, (2) the asset is available for immediate sale in its present condition, (3) the Company has initiated an active program to sell the asset, (4) it is probable the sale of the asset will be completed within one year, (5) the asset is being actively marketed for a reasonable price, and (6) it is unlikely the plan to sell the asset will significantly change. At the time the Company classifies a property as held for sale, the Company ceases recording depreciation. An asset classified as held for sale is measured and reported at the lower of its carrying amount or its estimated fair value less cost to sell. Upon classification as held for sale, the Company assesses fair value less costs to sell at each reporting period until the asset is no longer classified as held for sale. During the third quarter of 2025, the Company committed to a plan to sell a manufacturing facility, including land, building and building improvements (collectively the “disposal group”), located in Juarez, Mexico and determined the disposal group met the criteria for classification as held for sale. The Company classified the disposal group as held for sale for $ 27.9 million, which represents the disposal group’s fair value less estimated costs to sell. Fair value of the disposal group was 96 determined utilizing two equally weighted valuation techniques, the Direct Capitalization and Direct Comparison methods. The Direct Capitalization method utilizes various inputs, including estimated market rents, vacancy rates and operating expenses, to determine an estimated net operating income, and a capitalization rate. The Direct Comparison method utilizes sales of comparable properties, adjusted for property differences such as location, physical characteristics and market conditions. For the year ended December 31, 2025, we recognized an impairment loss of $ 23.1 million on assets held for sale, which was recorded within Cost of net revenues in our Consolidated Statements of Operations. The entire impairment loss was attributable to our Clear Aligner reportable segment. As of December 31, 2025, we had adjusted assets held for sale of $ 28.0 million, which are presented separately as Assets held for sale in our Consolidated Balance Sheets. We had no assets held for sale as of December 31, 2024. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable.