ALIGN TECHNOLOGY INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, among other things, our expectations and intentions regarding our strategic objectives, business strategy and growth drivers, and the means to achieve them; our beliefs and expectations regarding macroeconomic conditions, including fluctuations in currency exchange rates, higher interest rates, elevated gasoline and other energy costs, market volatility, uncertainty surrounding future United States trade policies, tariffs, customs duties and fees, and retaliatory actions by other nations, inflation, threats of or actual economic slowdowns or recessions and geopolitical tensions; our expectations and beliefs regarding customer and consumer confidence, purchasing behavior and demand for dental services and changes in consumer spending habits; our expectations regarding product mix, product launches, product pilots and product adoption; our expectations regarding competition and our ability to compete in our target markets; our expectations regarding the sales growth of our clear aligners, intraoral scanners and other products; our expectations regarding the impact of the military conflicts in the Middle East, Ukraine and China, on our employees, operations and assets; our marketing and efforts to build our brand awareness; our estimates regarding the size and opportunities of our target markets along with our expectations for growth in those markets; our beliefs regarding the general impact of technological innovation and on our particular solutions and products; our beliefs regarding digital dentistry and its potential to impact our business and transform dentistry; our intentions regarding expansion of our business and any impacts on our operational flexibility and responsiveness to customer demand; our expectations regarding the timing and amount of future stock repurchases; our expectations regarding our tax positions and the judgments we make related to our tax obligations, including value-added tax positions and related contingent liabilities; our beliefs regarding the importance of our manufacturing operations on our success and our plans to open a manufacturing facility in Hyderabad, India in 2027; our beliefs regarding the need for and benefits of our technological development on Invisalign treatment, the areas of development in which we focus our efforts, and the advantages of our intellectual property portfolio; our expectations regarding the utilization rates for our products, including the impact of marketing on those rates and causes for periodic fluctuations of the rates; our expectations regarding the existence and impact of seasonality; our expectations regarding the continued expansion of our international markets and their growth; our expectations regarding impacts or staying in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States and internationally; our expectations regarding the outcomes and timing of ongoing litigation matters and regulatory developments; our expectations for future investments in and benefits from sales and marketing activities; our preparedness and our customers’ preparedness to react to changing circumstances and demand; our expectations for our expenses and capital obligations and expenditures in particular; our expectations regarding restructuring plans, workforce reductions, and related charges and savings; our expectations regarding acquisitions, dispositions, divestitures, held-for-sale classifications, and related fair-value estimates and measurement-period adjustments; our intentions to control spending and for investments, our intentions regarding the investment of and ability to repatriate foreign earnings; our belief regarding the sufficiency of our cash and investment balances and borrowing capacity; our judgments regarding the estimates used in our revenue recognition and assessment of goodwill and intangible assets; our predicted level of operating expenses and gross margins and other factors beyond our control, as well as other statements regarding our future operations, financial condition and prospects and business strategies. These statements may contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or other words indicating future results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in particular, the risks discussed below in Part II, Item 1A “Risk Factors.” We undertake no obligation to revise or update these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2026. Executive Overview of Results Our Strategic Growth Drivers We strive to help our doctor customers move their practices forward by connecting them with new patients, providing digital solutions to help increase practice efficiency and helping them deliver the best possible treatment outcomes and 29 Table of Contents experiences to millions of people around the world. We strive to achieve this through our continued focus on, and execution of, our strategic growth drivers: (i) International Expansion; (ii) General Practitioner dentists (“GP”) treatment; (iii) Patient Demand; and (iv) Orthodontic Utilization. Our growth strategy depends on our ability to facilitate the digital transformation of dentistry, our continuous focus on innovation, and expansion to meet and exceed evolving customer expectations as the array of products and services available to them increases. Recent Developments New Manufacturing Facility : During the second quarter, we announced plans to expand our global manufacturing network with a new facility in Hyderabad, India, which is expected to commence operations in 2027 and will represent our first manufacturing facility in India. We expect to invest approximately $200 million over the next several years in connection with the project, including both capital expenditures and operating costs. The planned expansion is intended to support growth in high-demand markets, enhance supply chain resiliency, increase manufacturing capacity, improve operational efficiency, and further diversify our global manufacturing footprint. UK VAT Update : On July 7, 2026, the Upper Tribunal (Tax and Chancery Chamber) of the United Kingdom issued a decision reversing the April 24, 2025 decision of the First-tier Tribunal and holding that clear aligners are not “dental prostheses” and are therefore subject to value added tax in the United Kingdom at the standard rate. We have recorded an estimated liability of approximately $37.5 million as of June 30, 2026, which reflects management’s best estimate of the obligation as of the reporting date. We intend to exhaust all available appeals and vigorously defend our position, but the ultimate resolution of this matter remains subject to significant uncertainty. For more information, see Note 7 “ Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements. Trends and Uncertainties Below is a discussion of the significant trends and uncertainties that could impact our operations: Macroeconomic Challenges, Trade Impediments and Geopolitical Tensions Our revenues may fluctuate as a result of various events and circumstances impacting customer confidence, consumer sentiment, discretionary spending and ultimately demand for dental services and our products. These events and circumstances include, but are not limited to, macroeconomic conditions, fluctuations in foreign currency exchange rates, uncertainty surrounding the durability, scope, and enforceability of existing and future tariff measures, retaliatory tariffs or protectionist trade measures taken in response to such tariffs, inflation, elevated interest rates, actual or potential slowdowns or recessions, wages, employment levels and health insurance coverage, debt obligations, discretionary income, supply chain challenges, market volatility, geopolitical conditions, military actions, and other factors. For more information on events and circumstances that could impact our revenues, refer to Part II, Item 1A “Risk Factors—Macroeconomic and External Risks.” Many of these factors may contribute to, among other things, higher raw material prices, increased transportation and labor costs, and interruptions in supply and distribution operations, each of which can also impact the availability of certain raw materials, parts and components used in our products as well as our costs and those of our suppliers. For example, we believe that in the beginning of the second quarter of 2025, sales of our products were adversely impacted compared to the same period in prior years by certain macroeconomic conditions, including global tariff volatility, inflation, and higher interest rates, which we believe may continue to impede dental patient demand. Patient traffic growth has been uneven for many doctors, with orthodontic starts down for four consecutive years. We believe uncertainty not only impacts consumer purchasing decisions but also the decisions and recommendations that doctors make, especially doctors who offer both clear aligners and wires and brackets in their practices and have the additional time to treat patients with wires and brackets when orthodontic starts are slowing or diminishing. We believe this has resulted in an increase in orthodontic starts using wires and brackets in lieu of clear aligners that was more pronounced in the second quarter of 2025. We believe these trends are continuing and will impede future sales for so long as consumer economic uncertainty persists, particularly to the extent it impairs discretionary spending. Additionally, we believe that the ongoing military conflicts in the Middle East, including the hostilities involving Israel, Iran, and the United States that began or escalated in 2025 and 2026, together with elevated gasoline and energy costs and related market volatility, have and may continue to contribute to declines in widely reported measures of consumer confidence, and we anticipate these conditions will continue to add to market uncertainties and dampen consumer sentiment and demand. More directly, we believe government actions relating to actual or proposed tariffs and retaliatory actions in key strategic countries or regions, particularly in the United States, China, Europe, Brazil, Canada, Israel and Mexico may adversely impact our revenue and cost of goods sold. Additionally, the trade war and geopolitical tensions between the United States and China may result in the limitation or prohibition of the availability of certain raw materials, components and parts necessary for our products or the products of our suppliers. The degree of our exposure depends on, among other things, the type of goods subject 30 Table of Contents to any tariffs or trade restrictions enacted, the tariff rates or limits imposed, the timing of the tariffs or restrictions and any other retaliatory measures enacted. The impact may vary by time and region, making operational results uncertain and difficult to predict. These events may also cause a shift in public opinion about companies based in the United States and this may have an adverse impact on our reputation and business. We continue to closely monitor the foregoing issues, assess their potential impact on our operations and financial results, and implement plans to seek to mitigate the impact of any adverse events. Additionally, a material amount of our revenues are derived internationally and many of our international operations are denominated in currencies other than the U.S. dollar. In the second quarter of 2026, foreign currency movements favorably impacted our revenues compared to the prior-year period. Foreign exchange volatility and the subsequent strengthening or weakening of the U.S. dollar against other currencies remains uncertain and unpredictable. We continue to monitor the potential for violence and military actions that may directly or indirectly impact our personnel, manufacturing, supply chain, and sales. For instance, the ongoing conflict in Ukraine and unstable environment in the Middle East, as well as increased geopolitical tensions involving Taiwan and the South China Sea may further exacerbate general and regional macroeconomic instability. This is particularly true if fighting erupts, intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise materially impacts our operations or consumer spending. Our iTero business is headquartered in Israel and, although the sales, delivery times and cost of shipping have not been materially impacted to date, the situation remains fluid. We have implemented contingency planning and business continuity measures to mitigate these risks, but it is uncertain whether further escalation could disrupt our operations. While there have been export and import restrictions imposed against products originating from and businesses operating in Israel, they have not materially impacted our sales or operations to date although we continue to monitor the risk. 2025 Restructuring In the third quarter of 2025, we initiated a plan to realign certain business groups and reduce our global workforce as part of our continued effort to right size our labor force in response to the current macroeconomic environment. As of June 30, 2026, we incurred a total of approximately $40.2 million in restructuring charges under this plan, of which $2.5 million remained unpaid. These charges were primarily related to involuntary termination benefits, including employee severance and other post-employment benefits in connection with the 2025 restructuring plan, which has been completed. We do not expect to incur additional restructuring expenses in connection with the 2025 restructuring plan. For more information, see Note 14. “ Restructuring and Other Charges ” of the Notes to Condensed Consolidated Financial Statements. Changing Product Preferences As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we anticipate customer and patient expectations and demands will continue to evolve. We expect to meet customer demands with innovative treatment options that include more choices to address a wider scope of treatment goals and budgets based on our existing and new products, such as streamlined Clear Aligner configurations with limited or no additional aligners. This may result in larger and unpredictable variations in geographic and product mix and selling prices with uncertain implications on our financial statements and business operations. For example, we have and may continue to experience a shift from certain products with higher average selling prices (“ASP”) to those with lower ASPs. We strive to manage the challenges presented by the foregoing trends and uncertainties, including the macroeconomic conditions, tariffs and retaliatory measures, military conflicts and the evolution of our target markets, by focusing on improving our operations, further increasing flexibility and efficiencies in our processes, adjusting our business models to changing circumstances and offering products that meet market demand. Specifically, we are managing financial impacts by implementing strategic product innovations, introductions and pricing actions, implementing cost saving measures, and evaluating hiring needs. Further discussion of the impact of these challenges on our business may be found in Part II, Item 1A “Risk Factors.” Key Financial and Operating Metrics We measure our performance against the foregoing strategic priorities by the achievement of key financial and operating metrics. For the three months ended June 30, 2026, our business operations reflect the following: • Revenues of $1,056 million, an increase of 4.3% year-over-year; 31 Table of Contents • Clear Aligner revenues of $871 million, an increase of 8.2% year-over-year; • Clear Aligner case volume increased 7.4% year-over-year and Clear Aligner case volume for teens and growing patients increased from 223.2 thousand shipments to 239.2 thousand or 7.2% year-over-year; • Imaging Systems and CAD/CAM services revenues of $185 million, a decrease of 10.8% year-over-year; • Income from operations of $154 million and operating margin of 14.6%; • Effective tax rate of 27.2%; • Net income of $108 million with diluted net income per share of $1.51; • Cash and cash equivalents of $1,103 million as of June 30, 2026; • Cash provided by operating activities of $193 million; • Capital expenditures of $36 million, primarily related to investments in our manufacturing capacity and facilities; and • Number of employees was 20,435 as of June 30, 2026, a decrease of 4.9% year-over-year primarily due to workforce reduction associated with the 2025 restructuring plan. Other Statistical Data and Trends • As of June 30, 2026, approximately 23 million people worldwide have been treated with our Invisalign system. • For the second quarter of 2026, the total number of Invisalign-trained doctors that submitted cases and received shipments (doctor submitters) was 89.2 thousand compared to 86.3 thousand in the second quarter of 2025, a 3.4% increase. • The total utilization rate (case shipments divided by the number of doctor submitters) in the second quarter of 2026 increased to 7.8 cases per doctor compared to 7.5 cases per doctor in the second quarter of 2025. • Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) increased from $1,250 in the second quarter of 2025 to $1,260 in the second quarter of 2026, a 0.8% increase. Results of Operations Net Revenues by Reportable Segment We group our operations into two reportable segments: Clear Aligner segment and Systems and Services segment. • Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below: ▪ Comprehensive Products include, but are not limited to, Invisalign Comprehensive, Invisalign First and Invisalign Comprehensive 3in3. ▪ Non-Comprehensive Products include, but are not limited to, Invisalign Moderate, Lite and Express packages, Invisalign Go and Invisalign Go Plus and Invisalign Palatal Expander. ▪ In the United States, Canada and EMEA, we also offer a Doctor Subscription Program which is our monthly subscription-based clear aligner program. The program allows doctors the flexibility to order retainers and low-stage “touch-up” clear aligners within their subscribed tier and is designed for a segment of experienced Invisalign trained doctors who are currently not regularly using our retainers or low-stage aligners. The low-stage aligners, the Touch up product, are included as a Non-Comprehensive Product. ▪ Non-Case revenues include, but are not limited to, retention products including retention aligners ordered through the Doctor Subscription Program, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Invisalign Accessory Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain commerce channels in select markets. ▪ Our Systems and Services segment consists of sales related to our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options, scanner wand upgrades, and non-system revenues from leases of scanner systems, sales of pre-owned scanner systems, subscription software, disposables, pay per scan services, as well as exocad ’ s CAD/CAM software solutions that integrate workflows to dental labs and dental practices. 32 Table of Contents Net revenues for our Clear Aligner and Systems and Services segments for the three and six months ended June 30, 2026 and 2025 are as follows (in millions): Three Months Ended June 30, Six Months Ended June 30, Net Revenues 2026 2025 Change 2026 2025 Change Clear Aligner net revenues $ 870.9 $ 804.6 $ 66.3 8.2 % $ 1,726.9 $ 1,601.5 $ 125.4 7.8 % Systems and Services net revenues 185.3 207.8 (22.5) (10.8) % 369.4 390.3 (20.9) (5.3) % Total net revenues $ 1,056.2 $ 1,012.4 $ 43.7 4.3 % $ 2,096.3 $ 1,991.7 $ 104.6 5.3 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Clear Aligner Case Volume Case volume data which represents Clear Aligner case shipments for the three and six months ended June 30, 2026 and 2025 is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Total case volume 691.8 644.4 47.4 7.4 % 1,377.4 1,286.7 90.8 7.1 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. For the three and six months ended June 30, 2026, total net revenues increased by $44 million and $105 million compared to the same period in 2025, primarily due to an increase in Clear Aligner volume and increased ASPs. Clear Aligner For the three months ended June 30, 2026, Clear Aligner net revenues increased by $66 million compared to the same period in 2025, primarily due to an increase in volume, which increased net revenues by $53 million and an increase of $13 million from favorable foreign exchange rates and price increases. For the six months ended June 30, 2026, Clear Aligner net revenues increased by $125 million compared to the same period in 2025, primarily due to an increase in volume and favorable foreign exchange rates, which increased net revenues by $102 million and $49 million, respectively. These increases were partially offset by higher discounts and product mix shift to lower-priced countries and products resulting in a decrease in net revenues of $26 million. Systems and Services For the three months ended June 30, 2026, Systems and Services net revenues decreased by $23 million compared to the same period in 2025, primarily due to decrease of $27 million from mix shift to lower-priced products and $15 million from lower scanner wand sales. These decreases were partially offset by higher system volume of $11 million and an increase of $8 million from higher non-system sales and favorable foreign exchange. For the six months ended June 30, 2026, Systems and Services net revenues decreased by $21 million compared to the same period in 2025, primarily due to decrease of $46 million from mix shift to lower-priced products, and $28 million from lower scanner wand sales. These decreases were partially offset by higher system volume of $35 million and an increase of $18 million from higher non-systems sales and favorable foreign exchange. 33 Table of Contents Cost of net revenues and gross profit (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Clear Aligner Cost of net revenues $ 249.4 $ 240.8 $ 8.6 $ 492.5 $ 475.6 $ 17.0 % of net segment revenues 28.6 % 29.9 % 28.5 % 29.7 % Gross profit $ 621.5 $ 563.8 $ 57.7 $ 1,234.4 $ 1,125.9 $ 108.5 Gross margin % 71.4 % 70.1 % 71.5 % 70.3 % Systems and Services Cost of net revenues $ 49.4 $ 63.5 $ (14.1) $ 109.7 $ 127.9 $ (18.2) % of net segment revenues 26.7 % 30.6 % 29.7 % 32.8 % Gross profit $ 135.9 $ 144.3 $ (8.4) $ 259.6 $ 262.3 $ (2.7) Gross margin % 73.3 % 69.4 % 70.3 % 67.2 % Total cost of net revenues $ 298.8 $ 304.3 $ (5.6) $ 602.3 $ 603.5 $ (1.2) % of net revenues 28.3 % 30.1 % 28.7 % 30.3 % Gross profit $ 757.4 $ 708.1 $ 49.3 $ 1,494.0 $ 1,388.2 $ 105.8 Gross margin % 71.7 % 69.9 % 71.3 % 69.7 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Cost of net revenues includes personnel-related costs including payroll and stock-based compensation for staff involved in the production process, the cost of materials, packaging, freight and shipping, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs. For the three and six months ended June 30, 2026, our gross margin percentage increased as compared to the same periods in 2025 primarily due to tariff refunds, roll-off of accelerated depreciation and higher clear aligner ASPs. Clear Aligner For the three and six months ended June 30, 2026, our gross margin increased compared to the same period in 2025, primarily due to higher ASPs, roll-off accelerated depreciation and operational efficiencies, partially offset by higher freight costs. Systems and Services For the three and six months ended June 30, 2026, our gross margin increased compared to the same period in 2025, primarily due to lower Cost of net revenues from tariff refunds and operational efficiencies, partially offset by lower ASPs. Selling, general and administrative (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Selling, general and administrative $ 462.7 $ 448.7 $ 14.0 $ 928.0 $ 896.3 $ 31.7 % of net revenues 43.8 % 44.3 % 44.3 % 45.0 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Selling, general and administrative expense generally includes personnel-related costs, including payroll, stock-based compensation and commissions for our sales force, marketing and advertising expenses, including media, market research, marketing materials, clinical education, trade shows and industry events, legal and outside service costs, equipment, software and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT. 34 Table of Contents For the three months ended June 30, 2026, selling, general and administrative expense increased compared to the same period in 2025, primarily due to higher spend on outside services, higher employee costs, including salaries, fringe benefits and bonus, and higher equipment and maintenance costs, partially offset by lower advertising and marketing expense, and stock-based compensation. For the six months ended June 30, 2026, selling, general and administrative expense increased compared to the same period in 2025, primarily due to higher spend on outside services, litigation, higher employee costs, including salaries, fringe benefits and bonus, and higher equipment and software costs, partially offset by lower advertising and marketing expense, commissions, and stock-based compensation. Research and development (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Research and development $ 102.0 $ 96.4 $ 5.6 $ 200.7 $ 193.6 $ 7.1 % of net revenues 9.7 % 9.5 % 9.6 % 9.7 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Research and development expense generally includes personnel-related costs, including payroll and stock-based compensation, outside service costs associated with the research and development of new products and enhancements to existing products, software, equipment, material and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT. For the three months ended June 30, 2026, research and development expense increased compared to the same period in 2025 , primarily due to higher employee costs, including salaries, fringe benefits and bonus costs, outside services, and depreciation on capitalized labor costs related to internal-use software, partially offset by lower stock-based compensation. For the six months ended June 30, 2026, research and development expense increased compared to the same period in 2025 , primarily due to higher employee costs, including salaries, fringe benefits and bonus costs, depreciation on capitalized labor costs related to internal-use software, and cloud tool spending, partially offset by lower stock-based compensation, and reduced outside service provider spend. Legal settlements and contingencies (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Legal settlements and contingencies $ 38.7 $ — $ 38.7 $ 69.3 $ 4.2 $ 65.2 % of net revenues 3.7 % — % 3.3 % 0.2 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. For the three months ended June 30, 2026, we recorded $1.2 million and $37.5 million related to legal settlements and UK VAT contingency loss, respectively. Refer to Note 6 “ Legal Proceedings ” and Note 7 “Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements for more information. For the six months ended June 30, 2026, we recorded $31.8 million and $37.5 million related to legal settlements and UK VAT contingency loss, respectively. Refer to Note 6 “ Legal Proceedings ” and Note 7 “Commitments and Contingencies ” of the Notes to Condensed Consolidated Financial Statements for more information. 35 Table of Contents Income from operations (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Clear Aligner Income from operations $ 325.5 $ 267.0 $ 58.5 $ 633.3 $ 527.2 $ 106.0 Operating margin % 37.4 % 33.2 % 36.7 % 32.9 % Systems and Services Income from operations $ 77.7 $ 85.7 $ (8.1) $ 143.7 $ 144.2 $ (0.5) Operating margin % 41.9 % 41.3 % 38.9 % 37.0 % Total income from operations 1 $ 154.0 $ 163.0 $ (9.0) $ 296.0 $ 294.1 $ 1.8 Operating margin % 14.6 % 16.1 % 14.1 % 14.8 % 1 Refer to Note 13 “Segments and Geographical Information” of the Notes to Condensed Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to Income from operations. Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Clear Aligner For the three months ended June 30, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and lower advertising and marketing expense, partially offset by an increase in employee costs and credit card transaction fees. For the six months ended June 30, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and lower advertising and marketing expense, partially offset by an increase in employee costs and equipment. Systems and Services For the three months ended June 30, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and a decrease in operating expenses related to lower advertising and marketing costs. For the six months ended June 30, 2026, our operating margin increased compared to the same period in 2025, primarily due to higher gross margin and a decrease in operating expenses related to lower employee costs, advertising and outside services partially offset by an increase in credit card transaction fees and equipment. Interest income (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Interest income $ 4.6 $ 2.9 $ 1.8 $ 8.5 $ 8.2 $ 0.4 % of net revenues 0.4 % 0.3 % 0.4 % 0.4 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Interest income generally includes interest earned on cash, cash equivalents and investment balances. For the three and six months ended June 30, 2026, interest income increased compared to the same period in 2025, primarily due to interest earned on cash and cash equivalent balances. 36 Table of Contents Other income (expense), net (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Other income (expense), net $ (10.0) $ 7.6 $ (17.6) $ (6.9) $ 11.7 $ (18.6) % of net revenues (0.9) % 0.8 % (0.3) % 0.6 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Other income (expense), net, generally includes foreign exchange gains and losses, gains and losses on foreign currency forward contracts, interest expense, gains and losses on equity investments and other miscellaneous charges. For the three months ended June 30, 2026, other income (expense), net decreased compared to the same period in 2025, primarily due to an unfavorable impact from foreign exchange rates. For the six months ended June 30, 2026, other income (expense), net decreased compared to the same period in 2025, primarily due to an unfavorable impact from foreign exchange rates, partially offset by a gain recorded on our equity investment. Provision for income taxes (in millions): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change Provision for income taxes $ 40.4 $ 48.9 $ (8.5) $ 76.5 $ 96.1 $ (19.6) Effective tax rates 27.2 % 28.2 % 25.7 % 30.6 % Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding. Our effective tax rate differed from the U.S. statutory federal income tax rate of 21% for the three and six months period ended June 30, 2026 and 2025, primarily due to the recognition of additional tax expense resulting from U.S. taxes on foreign earnings, state income taxes, and non-deductible expense in the U.S., partially offset by the foreign income taxed at different rates. The decrease in our effective tax rate for the three months ended June 30, 2026 compared to the same period in 2025 is primarily attributable to the change in our jurisdictional mix of income. The decrease in our effective tax rate for the six months ended June 30, 2026 compared to the same period in 2025 is primarily attributable to the change in our jurisdictional mix of income, a decrease in the state income taxes and higher tax deduction from stock-based compensation. Liquidity and Capital Resources Liquidity and Trends As of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $1,103 million and $1,095 million, respectively, of which approximately $861 million and $929 million, respectively, were held by our foreign subsidiaries. We continue to evaluate opportunities to repatriate our foreign earnings if or when needed. We do not expect to incur significant additional costs upon repatriation of these foreign earnings. We generate sufficient operating cash flow from our domestic operations and have access to $300 million under our revolving line of credit. We believe that our current cash balances and the borrowing capacity under our credit facility, if necessary, will be sufficient to fund our business for at least the next 12 months. Our material cash requirements as of June 30, 2026 are as follows: • Our purchase commitments consist primarily of open purchase orders for goods and services, including manufacturing inventory, supplies and services, sales and marketing, research and development services and technological services, issued in the normal course of business. There have been no material changes to our purchase commitments for goods and services during the six months ended June 30, 2026 as compared to the year ended December 31, 2025. 37 Table of Contents • There have been no material changes to our future operating lease payments, including leases that have not yet commenced, during the six months ended June 30, 2026 as compared to the year ended December 31, 2025. • We expect our investments in capital expenditures for fiscal year 2026 to be $125 million to $150 million. Capital expenditures primarily relate to technology upgrades, additional manufacturing capacity as well as ongoing maintenance. • 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 is expected to be completed over a period of up to three years. We continually evaluate opportunities to repurchase shares of our common stock depending on various factors including our share price and current liquidity requirements. We repurchased approximately $98 million during the first half of 2026, leaving $733 million available for future repurchase under the April 2025 Repurchase Program. We expect to repurchase up to $200 million of our common stock over a six-month period beginning on May 1, 2026. Refer to Note 9 “Common Stock Repurchase Programs” of the Notes to Condensed Consolidated Financial Statements for details on our stock repurchase programs. • As of June 30, 2026, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material impact on our liquidity or capital resources. Sources and Uses of Cash The following table summarizes our Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (in thousands): Six Months Ended June 30, 2026 2025 Net cash provided by (used in): Operating activities $ 343,799 $ 181,326 Investing activities (213,738) (56,768) Financing activities (115,575) (303,055) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (6,689) 35,876 Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,797 $ (142,621) During the quarter ended June 30, 2026, we announced plans to construct a new manufacturing facility in Hyderabad, India, expected to commence operations in 2027. The project represents a multi‑year investment of approximately $200 million, including both capital expenditures and operating costs. We do not currently expect this investment to have a material impact on our short-term liquidity position. Operating Activities For the six months ended June 30, 2026, cash flows from operations of $344 million resulted primarily from our net income of approximately $221 million as well as the following: Significant adjustments to reconcile net income to net cash provided by operating activities • Deferred taxes of $31 million related to a decrease in our long term deferred tax position; • Depreciation and amortization of $97 million related to our investments in property, plant and equipment and intangible assets; • Stock-based compensation of $86 million related to equity awards granted to employees and directors; • Non-cash operating lease costs of $21 million; • Gain on assets held for sale of $12 million resulting from an increase in fair value less costs to sell; • Fair value adjustment gain of $7 million related to our investment in Heartland; and • Other non-cash operating activities of $11 million primarily related to an increase in our bad debt allowance. Significant changes in working capital 38 Table of Contents • Net outflow of $72 million in accounts receivable due to timing of collections; • Net outflow of $26 million in prepaid expenses and other assets primarily due to the renewal of enterprise technology service agreements; • Net inflow of $61 million in accrued and other long-term liabilities; and • Net outflow of $64 million in deferred revenue. Investing Activities Net cash used in investing activities was $214 million for the six months ended June 30, 2026, primarily driven by $66 million of purchases of property, plant and equipment, a $100 million additional investment in Heartland, $70 million for our investment in convertible notes, and $19 million related to an immaterial acquisition, offset by $42 million of proceeds from the sale of property, plant and equipment. Financing Activities Net cash used in financing activities was $116 million for the six months ended June 30, 2026, primarily driven by outflows of $98 million for share repurchases and $29 million for payroll taxes paid for vested equity awards, offset by $12 million of proceeds from the issuance of common stock under our employee stock purchase plan. Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures at the date of the financial statements. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, goodwill and finite-lived intangible assets, income taxes and legal proceedings and litigation. We use authoritative pronouncements, historical experience and other assumptions as the basis for making estimates. Actual results could differ from those estimates. Revenue Recognition Our revenues are derived primarily from the sale of aligners, scanners and services from our Clear Aligner and Systems and Services segments. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenues according to ASC 606-10, “Revenues from Contracts with Customers.” Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract 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 results of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation. We allocate consideration for each clear aligner treatment plan based on each unit’s SSP. 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 options, we also consider usage rates, which is the number of times a customer is expected to order more aligners after the initial shipment. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We estimate the SSP of each element in a scanner system and services sale taking into consideration same or similar product historical prices as well as our discounting strategies. For CAD/CAM services, we estimate the SSP of each element, including the initial software license and maintenance and support, using data such as historical prices. 39 Table of Contents Recent Accounting Pronouncements See Note 1 “ Summary of Significant Accounting Policies ” of the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.