algn-20240930000109714912/312024Q3falsexbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:pureiso4217:EURiso4217:GBPiso4217:CADiso4217:PLNiso4217:CNYiso4217:JPYiso4217:ILSiso4217:BRLiso4217:CHFiso4217:NZDiso4217:AUDiso4217:TWDiso4217:CZKiso4217:KRWiso4217:MXNalgn:claimalgn:segmentalgn:employee00010971492024-01-012024-09-3000010971492024-11-0100010971492024-07-012024-09-3000010971492023-07-012023-09-3000010971492023-01-012023-09-3000010971492024-09-3000010971492023-12-310001097149us-gaap:CommonStockMember2024-06-300001097149us-gaap:AdditionalPaidInCapitalMember2024-06-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001097149us-gaap:RetainedEarningsMember2024-06-3000010971492024-06-300001097149us-gaap:RetainedEarningsMember2024-07-012024-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001097149us-gaap:CommonStockMember2024-07-012024-09-300001097149us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300001097149us-gaap:CommonStockMember2024-09-300001097149us-gaap:AdditionalPaidInCapitalMember2024-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300001097149us-gaap:RetainedEarningsMember2024-09-300001097149us-gaap:CommonStockMember2023-12-310001097149us-gaap:AdditionalPaidInCapitalMember2023-12-310001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001097149us-gaap:RetainedEarningsMember2023-12-310001097149us-gaap:RetainedEarningsMember2024-01-012024-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-09-300001097149us-gaap:CommonStockMember2024-01-012024-09-300001097149us-gaap:AdditionalPaidInCapitalMember2024-01-012024-09-300001097149us-gaap:CommonStockMember2023-06-300001097149us-gaap:AdditionalPaidInCapitalMember2023-06-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001097149us-gaap:RetainedEarningsMember2023-06-3000010971492023-06-300001097149us-gaap:RetainedEarningsMember2023-07-012023-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001097149us-gaap:CommonStockMember2023-07-012023-09-300001097149us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001097149us-gaap:CommonStockMember2023-09-300001097149us-gaap:AdditionalPaidInCapitalMember2023-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001097149us-gaap:RetainedEarningsMember2023-09-3000010971492023-09-300001097149us-gaap:CommonStockMember2022-12-310001097149us-gaap:AdditionalPaidInCapitalMember2022-12-310001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001097149us-gaap:RetainedEarningsMember2022-12-3100010971492022-12-310001097149us-gaap:RetainedEarningsMember2023-01-012023-09-300001097149us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001097149us-gaap:CommonStockMember2023-01-012023-09-300001097149us-gaap:AdditionalPaidInCapitalMember2023-01-012023-09-300001097149us-gaap:CashMember2024-09-300001097149us-gaap:CashMemberus-gaap:CashAndCashEquivalentsMember2024-09-300001097149us-gaap:MoneyMarketFundsMember2024-09-300001097149us-gaap:CashAndCashEquivalentsMemberus-gaap:MoneyMarketFundsMember2024-09-300001097149us-gaap:CashAndCashEquivalentsMember2024-09-300001097149us-gaap:CashMember2023-12-310001097149us-gaap:CashMemberus-gaap:CashAndCashEquivalentsMember2023-12-310001097149us-gaap:MoneyMarketFundsMember2023-12-310001097149us-gaap:CashAndCashEquivalentsMemberus-gaap:MoneyMarketFundsMember2023-12-310001097149us-gaap:CorporateBondSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesShortTermMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesLongTermMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001097149us-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesShortTermMemberus-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesLongTermMemberus-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149us-gaap:AssetBackedSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesShortTermMemberus-gaap:AssetBackedSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesLongTermMemberus-gaap:AssetBackedSecuritiesMember2023-12-310001097149us-gaap:MunicipalBondsMember2023-12-310001097149algn:MarketableSecuritiesShortTermMemberus-gaap:MunicipalBondsMember2023-12-310001097149algn:MarketableSecuritiesLongTermMemberus-gaap:MunicipalBondsMember2023-12-310001097149us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesShortTermMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2023-12-310001097149algn:MarketableSecuritiesLongTermMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2023-12-310001097149us-gaap:CashAndCashEquivalentsMember2023-12-310001097149algn:MarketableSecuritiesShortTermMember2023-12-310001097149algn:MarketableSecuritiesLongTermMember2023-12-310001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2024-09-300001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-09-300001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-09-300001097149us-gaap:FairValueInputsLevel1Member2024-09-300001097149us-gaap:FairValueInputsLevel2Member2024-09-300001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001097149us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001097149us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001097149us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MunicipalBondsMember2023-12-310001097149us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MunicipalBondsMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MunicipalBondsMember2023-12-310001097149us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AgencySecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AgencySecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AgencySecuritiesMember2023-12-310001097149us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310001097149us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryBondSecuritiesMember2023-12-310001097149us-gaap:FairValueInputsLevel1Member2023-12-310001097149us-gaap:FairValueInputsLevel2Member2023-12-310001097149algn:HeartlandMember2024-04-220001097149algn:HeartlandMember2023-04-242024-04-220001097149us-gaap:ForeignExchangeForwardMember2024-07-012024-09-300001097149us-gaap:ForeignExchangeForwardMember2023-07-012023-09-300001097149us-gaap:ForeignExchangeForwardMember2024-01-012024-09-300001097149us-gaap:ForeignExchangeForwardMember2023-01-012023-09-300001097149us-gaap:ForeignExchangeForwardMember2024-09-300001097149us-gaap:ForeignExchangeForwardMember2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:EUR2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:GBP2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CAD2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:PLN2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CNY2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:JPY2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:ILS2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:BRL2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CHF2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:NZD2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:AUD2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:TWD2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CZK2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:KRW2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMember2024-09-300001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:EUR2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CAD2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:PLN2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:GBP2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CNY2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CHF2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:JPY2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:ILS2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:BRL2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:MXN2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:NZD2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:AUD2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:TWD2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:CZK2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMembercurrency:KRW2023-12-310001097149us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMember2023-12-3100010971492024-10-012024-09-3000010971492024-10-01srt:MinimumMember2024-09-3000010971492025-01-01srt:MaximumMember2024-09-300001097149algn:CubicureGmbHMember2024-01-020001097149algn:CubicureGmbHMember2024-01-022024-01-020001097149algn:CubicureGmbHMemberalgn:ExistingTechnologyMember2024-01-020001097149algn:CubicureGmbHMemberalgn:ExistingTechnologyMember2024-01-022024-01-020001097149algn:ClearAlignerMember2023-12-310001097149algn:ImagingSystemsAndCADCAMServicesMember2023-12-310001097149algn:ClearAlignerMember2024-01-012024-09-300001097149algn:ImagingSystemsAndCADCAMServicesMember2024-01-012024-09-300001097149algn:ClearAlignerMember2024-09-300001097149algn:ImagingSystemsAndCADCAMServicesMember2024-09-300001097149algn:ExistingTechnologyMember2024-01-012024-09-300001097149algn:ExistingTechnologyMember2024-09-300001097149us-gaap:CustomerRelationshipsMember2024-01-012024-09-300001097149us-gaap:CustomerRelationshipsMember2024-09-300001097149us-gaap:TrademarksAndTradeNamesMember2024-01-012024-09-300001097149us-gaap:TrademarksAndTradeNamesMember2024-09-300001097149us-gaap:PatentsMember2024-01-012024-09-300001097149us-gaap:PatentsMember2024-09-300001097149algn:ExistingTechnologyMember2023-01-012023-12-310001097149algn:ExistingTechnologyMember2023-12-310001097149us-gaap:CustomerRelationshipsMember2023-01-012023-12-310001097149us-gaap:CustomerRelationshipsMember2023-12-310001097149us-gaap:TrademarksAndTradeNamesMember2023-01-012023-12-310001097149us-gaap:TrademarksAndTradeNamesMember2023-12-310001097149us-gaap:PatentsMember2023-01-012023-12-310001097149us-gaap:PatentsMember2023-12-310001097149algn:CreditFacility2022Memberus-gaap:RevolvingCreditFacilityMember2024-09-300001097149algn:CreditFacility2022Memberus-gaap:LetterOfCreditMember2024-09-300001097149algn:CreditFacility2022Member2024-09-300001097149algn:ShareholderDerivativeLawsuitMember2019-01-012019-01-310001097149algn:ShareholderDerivativeLawsuitMember2024-03-310001097149algn:AntitrustClassActionsMember2024-06-012024-06-300001097149us-gaap:HerMajestysRevenueAndCustomsHMRCMember2024-03-310001097149us-gaap:SubsequentEventMemberus-gaap:HerMajestysRevenueAndCustomsHMRCMember2024-10-310001097149us-gaap:SubsequentEventMemberus-gaap:HerMajestysRevenueAndCustomsHMRCMember2024-10-312024-10-310001097149algn:StockIncentivePlan2005Member2024-09-300001097149us-gaap:CostOfSalesMember2024-07-012024-09-300001097149us-gaap:CostOfSalesMember2023-07-012023-09-300001097149us-gaap:CostOfSalesMember2024-01-012024-09-300001097149us-gaap:CostOfSalesMember2023-01-012023-09-300001097149us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-07-012024-09-300001097149us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-012023-09-300001097149us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-09-300001097149us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-300001097149us-gaap:ResearchAndDevelopmentExpenseMember2024-07-012024-09-300001097149us-gaap:ResearchAndDevelopmentExpenseMember2023-07-012023-09-300001097149us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-09-300001097149us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-09-300001097149us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300001097149us-gaap:RestrictedStockUnitsRSUMember2023-12-310001097149us-gaap:RestrictedStockUnitsRSUMember2024-09-300001097149algn:MarketPerformanceBasedRestrictedStockUnitsMember2024-01-012024-09-300001097149algn:MarketPerformanceBasedRestrictedStockUnitsMember2023-12-310001097149algn:MarketPerformanceBasedRestrictedStockUnitsMember2024-09-300001097149algn:PerformanceRestrictedStockUnitsMember2023-12-310001097149algn:PerformanceRestrictedStockUnitsMember2024-01-012024-09-300001097149algn:PerformanceRestrictedStockUnitsMember2024-09-300001097149algn:EmployeeStockPurchasePlanMember2024-09-300001097149us-gaap:EmployeeStockMember2024-01-012024-09-300001097149us-gaap:EmployeeStockMember2023-01-012023-09-300001097149us-gaap:EmployeeStockMember2024-09-300001097149algn:May2021RepurchaseProgramMember2021-05-310001097149algn:January2023RepurchaseProgramMember2023-01-310001097149algn:May2021RepurchaseProgramMemberalgn:FourthQuarter2022Member2023-01-012023-03-310001097149algn:May2021RepurchaseProgramMemberalgn:FirstQuarter2023Member2023-01-012023-03-310001097149algn:January2023RepurchaseProgramMemberalgn:FourthQuarter2023Member2024-01-012024-03-310001097149algn:January2023RepurchaseProgramMember2024-06-262024-06-260001097149algn:January2023RepurchaseProgramMember2023-01-012023-12-310001097149algn:January2023RepurchaseProgramMember2023-01-012023-09-300001097149algn:January2023RepurchaseProgramMember2024-09-300001097149us-gaap:RestrictedStockUnitsRSUMember2024-07-012024-09-300001097149us-gaap:EmployeeStockMember2024-07-012024-09-300001097149us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300001097149us-gaap:EmployeeStockMember2024-01-012024-09-300001097149algn:ClearAlignerMember2024-07-012024-09-300001097149algn:ClearAlignerMember2023-07-012023-09-300001097149algn:ClearAlignerMember2023-01-012023-09-300001097149algn:ImagingSystemsAndCADCAMServicesMember2024-07-012024-09-300001097149algn:ImagingSystemsAndCADCAMServicesMember2023-07-012023-09-300001097149algn:ImagingSystemsAndCADCAMServicesMember2023-01-012023-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ClearAlignerMember2024-07-012024-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ClearAlignerMember2023-07-012023-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ClearAlignerMember2024-01-012024-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ClearAlignerMember2023-01-012023-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ImagingSystemsAndCADCAMServicesMember2024-07-012024-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ImagingSystemsAndCADCAMServicesMember2023-07-012023-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ImagingSystemsAndCADCAMServicesMember2024-01-012024-09-300001097149us-gaap:OperatingSegmentsMemberalgn:ImagingSystemsAndCADCAMServicesMember2023-01-012023-09-300001097149us-gaap:CorporateNonSegmentMember2024-07-012024-09-300001097149us-gaap:CorporateNonSegmentMember2023-07-012023-09-300001097149us-gaap:CorporateNonSegmentMember2024-01-012024-09-300001097149us-gaap:CorporateNonSegmentMember2023-01-012023-09-300001097149us-gaap:OperatingSegmentsMember2024-07-012024-09-300001097149us-gaap:OperatingSegmentsMember2023-07-012023-09-300001097149us-gaap:OperatingSegmentsMember2024-01-012024-09-300001097149us-gaap:OperatingSegmentsMember2023-01-012023-09-300001097149country:US2024-07-012024-09-300001097149country:US2023-07-012023-09-300001097149country:US2024-01-012024-09-300001097149country:US2023-01-012023-09-300001097149country:CH2024-07-012024-09-300001097149country:CH2023-07-012023-09-300001097149country:CH2024-01-012024-09-300001097149country:CH2023-01-012023-09-300001097149algn:OtherInternationalMember2024-07-012024-09-300001097149algn:OtherInternationalMember2023-07-012023-09-300001097149algn:OtherInternationalMember2024-01-012024-09-300001097149algn:OtherInternationalMember2023-01-012023-09-300001097149country:CH2024-09-300001097149country:CH2023-12-310001097149country:US2024-09-300001097149country:US2023-12-310001097149algn:OtherInternationalMember2024-09-300001097149algn:OtherInternationalMember2023-12-3100010971492023-10-012023-12-310001097149us-gaap:SubsequentEventMember2024-10-232024-10-230001097149us-gaap:SubsequentEventMembersrt:MinimumMember2024-10-230001097149us-gaap:SubsequentEventMembersrt:MaximumMember2024-10-230001097149us-gaap:SubsequentEventMember2024-10-250001097149srt:ScenarioForecastMember2025-03-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One) | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
or | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-32259
____________________________
ALIGN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
____________________________ | | | | | |
| Delaware | 94-3267295 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer
Identification No.) |
410 North Scottsdale Road, Suite 1300
Tempe, Arizona 85288
(Address of principal executive offices, including zip code)
(602) 742-2000
(Registrant’s telephone number, including area code)
____________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.0001 par value | ALGN | The NASDAQ Stock Market LLC |
| | (NASDAQ Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 1, 2024, the number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, was 74,653,060.
ALIGN TECHNOLOGY, INC.
TABLE OF CONTENTS
| | | | | | | | |
| | |
| PART I | | |
| Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| PART II | | |
| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| Item 5. | | |
| Item 6. | | |
| |
Invisalign, Align, the Invisalign logo, ClinCheck, Invisalign Assist, Invisalign Teen, Invisalign First, Invisalign Go, the Invisalign sonic logo, Vivera, SmartForce, SmartTrack, SmartStage, SmileView, iTero, iTero Element, iTero Lumina, Orthocad, exocad, Align Digital Platform, Invisalign Smile Architect, iTero exocad Connector and exocad Dental CAD, among others, are trademarks and/or service marks of Align Technology, Inc. or one of its subsidiaries or affiliated companies and may be registered in the United States and/or other countries.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Net revenues | | $ | 977,872 | | | $ | 960,214 | | | $ | 3,003,793 | | | $ | 2,905,534 | |
| Cost of net revenues | | 296,098 | | | 297,138 | | | 901,575 | | | 868,195 | |
| Gross profit | | 681,774 | | | 663,076 | | | 2,102,218 | | | 2,037,339 | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | 434,138 | | | 407,992 | | | 1,338,222 | | | 1,300,876 | |
| Research and development | | 85,272 | | | 88,738 | | | 269,324 | | | 264,670 | |
Legal settlement loss | | 66 | | | — | | | 31,193 | | | — | |
| | | | | | | | |
| Total operating expenses | | 519,476 | | | 496,730 | | | 1,638,739 | | | 1,565,546 | |
| Income from operations | | 162,298 | | | 166,346 | | | 463,479 | | | 471,793 | |
| Interest income and other income (expense), net: | | | | | | | | |
| Interest income | | 4,003 | | | 5,522 | | | 11,696 | | | 12,280 | |
| Other income (expense), net | | (371) | | | (9,757) | | | (6,993) | | | (15,749) | |
| Total interest income and other income (expense), net | | 3,632 | | | (4,235) | | | 4,703 | | | (3,469) | |
| Net income before provision for income taxes | | 165,930 | | | 162,111 | | | 468,182 | | | 468,324 | |
| Provision for income taxes | | 49,967 | | | 40,684 | | | 150,627 | | | 147,285 | |
| Net income | | $ | 115,963 | | | $ | 121,427 | | | $ | 317,555 | | | $ | 321,039 | |
| | | | | | | | |
| Net income per share: | | | | | | | | |
Basic | | $ | 1.55 | | | $ | 1.59 | | | $ | 4.23 | | | $ | 4.19 | |
Diluted | | $ | 1.55 | | | $ | 1.58 | | | $ | 4.23 | | | $ | 4.18 | |
| Shares used in computing net income per share: | | | | | | | | |
Basic | | 74,736 | | | 76,569 | | | 75,031 | | | 76,670 | |
Diluted | | 74,757 | | | 76,826 | | | 75,149 | | | 76,849 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Net income | | $ | 115,963 | | | $ | 121,427 | | | $ | 317,555 | | | $ | 321,039 | |
| Other comprehensive income (loss): | | | | | | | | |
| Change in foreign currency translation adjustment, net of tax | | 10,713 | | | (9,822) | | | 14,140 | | | 9,810 | |
| Change in unrealized gains (losses) on investments, net of tax | | 159 | | | 526 | | | 605 | | | 2,521 | |
| | | | | | | | |
| Other comprehensive income (loss) | | 10,872 | | | (9,296) | | | 14,745 | | | 12,331 | |
| Comprehensive income | | $ | 126,835 | | | $ | 112,131 | | | $ | 332,300 | | | $ | 333,370 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | |
| | September 30,
2024 | | December 31,
2023 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 1,041,935 | | | $ | 937,438 | |
| Marketable securities, short-term | | — | | | 35,304 | |
Accounts receivable, net of allowance for doubtful accounts of $19,141 and $14,893, respectively | | 1,010,601 | | | 903,424 | |
| Inventories | | 254,119 | | | 296,902 | |
| Prepaid expenses and other current assets | | 290,732 | | | 273,550 | |
| Total current assets | | 2,597,387 | | | 2,446,618 | |
| Marketable securities, long-term | | — | | | 8,022 | |
| Property, plant and equipment, net | | 1,290,427 | | | 1,290,863 | |
| Operating lease right-of-use assets, net | | 121,079 | | | 117,999 | |
| Goodwill | | 471,512 | | | 419,530 | |
| Intangible assets, net | | 115,905 | | | 82,118 | |
| Deferred tax assets | | 1,569,950 | | | 1,590,045 | |
| Other assets | | 199,714 | | | 128,682 | |
| Total assets | | $ | 6,365,974 | | | $ | 6,083,877 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 109,035 | | | $ | 113,125 | |
| Accrued liabilities | | 574,556 | | | 525,780 | |
| Deferred revenues | | 1,380,022 | | | 1,427,706 | |
| Total current liabilities | | 2,063,613 | | | 2,066,611 | |
| Income tax payable | | 111,558 | | | 116,744 | |
| Operating lease liabilities | | 96,435 | | | 96,968 | |
| Other long-term liabilities | | 150,014 | | | 173,065 | |
| Total liabilities | | 2,421,620 | | | 2,453,388 | |
Commitments and contingencies (Note 7 and Note 8) | | | | |
| Stockholders’ equity: | | | | |
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued) | | — | | | — | |
Common stock, $0.0001 par value (200,000 shares authorized; 74,757 and 75,075 issued and outstanding, respectively) | | 7 | | | 7 | |
| Additional paid-in capital | | 1,335,909 | | | 1,162,140 | |
| Accumulated other comprehensive income (loss), net | | 35,913 | | | 21,168 | |
| Retained earnings | | 2,572,525 | | | 2,447,174 | |
| Total stockholders’ equity | | 3,944,354 | | | 3,630,489 | |
| Total liabilities and stockholders’ equity | | $ | 6,365,974 | | | $ | 6,083,877 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Retained Earnings | | Total |
Three Months Ended September 30, 2024 | | Shares | | Amount | |
Balance as of June 30, 2024 | | 74,696 | | | $ | 7 | | | $ | 1,276,298 | | | $ | 25,041 | | | $ | 2,456,562 | | | $ | 3,757,908 | |
| Net income | | — | | | — | | | — | | | — | | | 115,963 | | | 115,963 | |
| Net change in unrealized gains (losses) from investments | | — | | | — | | | — | | | 159 | | | — | | | 159 | |
| Net change in foreign currency translation adjustment | | — | | | — | | | — | | | 10,713 | | | — | | | 10,713 | |
| Issuance of common stock relating to employee equity compensation plans | | 63 | | | — | | | 10,942 | | | — | | | — | | | 10,942 | |
| Tax withholdings related to net share settlements of equity awards | | (2) | | | — | | | (370) | | | — | | | — | | | (370) | |
| Common stock repurchased and retired | | — | | | — | | | — | | | — | | | — | | | — | |
| Equity forward contract related to accelerated stock repurchase | | — | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation | | — | | | — | | | 49,039 | | | — | | | — | | | 49,039 | |
Balance as of September 30, 2024 | | 74,757 | | | $ | 7 | | | $ | 1,335,909 | | | $ | 35,913 | | | $ | 2,572,525 | | | $ | 3,944,354 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Retained Earnings | | Total |
Nine Months Ended September 30, 2024 | | Shares | | Amount | |
Balance as of December 31, 2023 | | 75,075 | | | $ | 7 | | | $ | 1,162,140 | | | $ | 21,168 | | | $ | 2,447,174 | | | $ | 3,630,489 | |
| Net income | | — | | | — | | | — | | | — | | | 317,555 | | | 317,555 | |
| Net change in unrealized gains (losses) from investments | | — | | | — | | | — | | | 605 | | | — | | | 605 | |
| Net change in foreign currency translation adjustment | | — | | | — | | | — | | | 14,140 | | | — | | | 14,140 | |
| Issuance of common stock relating to employee equity compensation plans | | 408 | | | — | | | 25,281 | | | — | | | — | | | 25,281 | |
| Tax withholdings related to net share settlements of equity awards | | (92) | | | — | | | (27,972) | | | — | | | — | | | (27,972) | |
| Common stock repurchased and retired | | (634) | | | — | | | (7,922) | | | — | | | (142,677) | | | (150,599) | |
| Equity forward contract related to accelerated stock repurchase | | — | | | — | | | 49,527 | | | — | | | (49,527) | | | — | |
| Stock-based compensation | | — | | | — | | | 134,855 | | | — | | | — | | | 134,855 | |
Balance as of September 30, 2024 | | 74,757 | | | $ | 7 | | | $ | 1,335,909 | | | $ | 35,913 | | | $ | 2,572,525 | | | $ | 3,944,354 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Retained Earnings | | Total |
Three Months Ended September 30, 2023 | | Shares | | Amount | |
Balance as of June 30, 2023 | | 76,532 | | | $ | 8 | | | $ | 1,141,623 | | | $ | 11,343 | | | $ | 2,485,327 | | | $ | 3,638,301 | |
| Net income | | — | | | — | | | — | | | — | | | 121,427 | | | 121,427 | |
| Net change in unrealized gains (losses) from investments | | — | | | — | | | — | | | 526 | | | — | | | 526 | |
| Net change in foreign currency translation adjustment | | — | | | — | | | — | | | (9,822) | | | — | | | (9,822) | |
Issuance of common stock relating to employee equity compensation plans1 | | 56 | | | — | | | 12,339 | | | — | | | — | | | 12,339 | |
| Tax withholdings related to net share settlements of equity awards | | — | | | — | | | (507) | | | — | | | — | | | (507) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Stock-based compensation | | — | | | — | | | 39,602 | | | — | | | — | | | 39,602 | |
Balance as of September 30, 2023 | | 76,588 | | | $ | 8 | | | $ | 1,193,057 | | | $ | 2,047 | | | $ | 2,606,754 | | | $ | 3,801,866 | |
1 Includes tax withholding shares related to net share settlements of equity awards. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Retained Earnings | | Total |
Nine Months Ended September 30, 2023 | | Shares | | Amount | |
Balance as of December 31, 2022 | | 77,267 | | | $ | 8 | | | $ | 1,044,946 | | | $ | (10,284) | | | $ | 2,566,688 | | | $ | 3,601,358 | |
| Net income | | — | | | — | | | — | | | — | | | 321,039 | | | 321,039 | |
| Net change in unrealized gains (losses) from investments | | — | | | — | | | — | | | 2,521 | | | — | | | 2,521 | |
| Net change in foreign currency translation adjustment | | — | | | — | | | — | | | 9,810 | | | — | | | 9,810 | |
Issuance of common stock relating to employee equity compensation plans1 | | 263 | | | — | | | 26,595 | | | — | | | — | | | 26,595 | |
| Tax withholdings related to net share settlements of equity awards | | — | | | — | | | (22,294) | | | — | | | — | | | (22,294) | |
| Common stock repurchased and retired | | (942) | | | — | | | (11,387) | | | — | | | (280,973) | | | (292,360) | |
| Equity forward contract related to accelerated stock repurchase | | — | | | — | | | 40,000 | | | — | | | — | | | 40,000 | |
| Stock-based compensation | | — | | | — | | | 115,197 | | | — | | | — | | | 115,197 | |
Balance as of September 30, 2023 | | 76,588 | | | $ | 8 | | | $ | 1,193,057 | | | $ | 2,047 | | | $ | 2,606,754 | | | $ | 3,801,866 | |
1 Includes tax withholding shares related to net share settlements of equity awards. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | | Nine Months Ended
September 30, |
| | | 2024 | | 2023 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
| Net income | | $ | 317,555 | | | $ | 321,039 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Deferred taxes | | 17,465 | | | (22,749) | |
| Depreciation and amortization | | 106,905 | | | 108,669 | |
| Stock-based compensation | | 134,855 | | | 115,197 | |
| Non-cash operating lease cost | | 28,603 | | | 24,034 | |
| Impairment of equity investment | | 115 | | | 3,329 | |
| | | | |
| Other non-cash operating activities | | 6,931 | | | 28,435 | |
| Changes in assets and liabilities, net of effects of acquisitions: | | | | |
| Accounts receivable | | (135,239) | | | (80,297) | |
| Inventories | | 32,304 | | | 31,639 | |
| Prepaid expenses and other assets | | (26,283) | | | 1,773 | |
| Accounts payable | | (13,283) | | | (23,130) | |
| Accrued and other long-term liabilities | | 47,618 | | | 156,024 | |
| Long-term income tax payable | | (5,186) | | | (7,979) | |
| Deferred revenues | | (60,207) | | | 82,894 | |
Net cash provided by operating activities | | 452,153 | | | 738,878 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
| Acquisitions, net of cash acquired | | (77,075) | | | — | |
| Purchase of property, plant and equipment | | (92,619) | | | (144,302) | |
| Purchase of marketable securities | | — | | | (2,373) | |
| Proceeds from maturities of marketable securities | | 25,660 | | | 35,754 | |
| Proceeds from sales of marketable securities | | 18,193 | | | 5,173 | |
| Purchase of equity investments | | (75,390) | | | (76,999) | |
| | | | |
| | | | |
| Other investing activities | | 235 | | | 128 | |
| Net cash used in investing activities | | (200,996) | | | (182,619) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Proceeds from issuance of common stock | | 25,281 | | | 26,595 | |
| Common stock repurchases | | (150,012) | | | (292,360) | |
| Activity for equity forward contracts related to accelerated stock repurchase agreements, net | | — | | | 40,000 | |
| Payroll taxes paid upon the vesting of equity awards | | (27,972) | | | (22,294) | |
| Net cash used in financing activities | | (152,703) | | | (248,059) | |
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | | 6,008 | | | (11,205) | |
| Net increase in cash, cash equivalents, and restricted cash | | 104,462 | | | 296,995 | |
| Cash, cash equivalents, and restricted cash at beginning of the period | | 938,519 | | | 942,355 | |
| Cash, cash equivalents, and restricted cash at end of the period | | $ | 1,042,981 | | | $ | 1,239,350 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ALIGN TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Align Technology, Inc. (“we”, “our”, the "Company", or “Align”) on a consistent basis with the audited Consolidated Financial Statements for the year ended December 31, 2023, and contain all adjustments, including normal recurring adjustments, necessary to fairly state the information set forth herein. These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other future period, and we make no representations related thereto.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, goodwill, income taxes, contingent liabilities, the fair values of financial instruments, stock-based compensation and the valuation of investments in privately held companies, among others. 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, as well as the reported amounts of revenues and expenses.
Certain Risks and Uncertainties
We are subject to risks including, but not limited to, global and regional economic market conditions, inflation, fluctuations in foreign currency exchange rates, changes in consumer confidence and demand, increased competition, dependence on key personnel, protection and litigation of proprietary technology, shifts in taxable income between tax jurisdictions and compliance with regulations of the U.S. Food and Drug Administration (“FDA”) and similar international agencies.
Our cash and investments are held primarily by five financial institutions. Financial instruments which potentially expose us to concentrations of credit risk consist primarily of cash equivalents and marketable securities. Historically, we have invested excess cash primarily in money market funds, corporate bonds, asset-backed securities, municipal and U.S. government agency bonds and treasury bonds. We periodically evaluate our investments 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.
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Effective
On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. For public business entities, the provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Companies must apply the
guidance retrospectively to all prior periods presented in the financial statements. The Company expects this pronouncement may result in changes to the nature of our reportable segment disclosures.
On December 14, 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” 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. Early adoption is permitted. The Company is evaluating the effect of this pronouncement on its annual consolidated financial statements.
Note 2. Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The following tables summarize our cash and cash equivalents, and marketable securities on our Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Reported as: |
| September 30, 2024 | | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair Value | | Cash and Cash Equivalents | | Marketable securities, short-term | | Marketable securities, long-term |
| Cash | | $ | 860,461 | | | $ | — | | | $ | — | | | $ | 860,461 | | | $ | 860,461 | | | $ | — | | | $ | — | |
| Money market funds | | 181,474 | | | — | | | — | | | 181,474 | | | 181,474 | | | — | | | — | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Total | | $ | 1,041,935 | | | $ | — | | | $ | — | | | $ | 1,041,935 | | | $ | 1,041,935 | | | $ | — | | | $ | — | |
We have no short-term or long-term marketable securities as of September 30, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Reported as: |
| December 31, 2023 | | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair Value | | Cash and Cash Equivalents | | Marketable securities, short-term | | Marketable securities, long-term |
| Cash | | $ | 887,682 | | | $ | — | | | $ | — | | | $ | 887,682 | | | $ | 887,682 | | | $ | — | | | $ | — | |
| Money market funds | | 49,756 | | | — | | | — | | | 49,756 | | | 49,756 | | | — | | | — | |
| Corporate bonds | | 31,943 | | | 5 | | | (676) | | | 31,272 | | | — | | | 28,704 | | | 2,568 | |
U.S. government treasury bonds
| | 4,855 | | | — | | | (99) | | | 4,756 | | | — | | | — | | | 4,756 | |
| Asset-backed securities | | 1,416 | | | 2 | | | (1) | | | 1,417 | | | — | | | 719 | | | 698 | |
| Municipal bonds | | 702 | | | — | | | (2) | | | 700 | | | — | | | 700 | | | — | |
| U.S. government agency bonds | | 5,215 | | | — | | | (34) | | | 5,181 | | | — | | | 5,181 | | | — | |
| | | | | | | | | | | | | | |
| Total | | $ | 981,569 | | | $ | 7 | | | $ | (812) | | | $ | 980,764 | | | $ | 937,438 | | | $ | 35,304 | | | $ | 8,022 | |
The following table summarizes the fair value of our available-for-sale marketable securities classified by contractual maturity as of December 31, 2023 (in thousands):
| | | | | | | | | | |
| | | | December 31, 2023 |
| Due in 1 year or less | | | | $ | 34,617 | |
| Due in 1 year through 5 years | | | | 8,709 | |
| Total | | | | $ | 43,326 | |
The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. Our unrealized losses as of December 31, 2023 are primarily due to changes in interest rates and credit spreads.
The following table summarizes the fair value and gross unrealized losses as of December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2023 |
| | Less than 12 months | | 12 Months of Greater | | Total |
| December 31, 2023 | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss | | | Fair Value | | Unrealized Loss |
| Corporate bonds | | $ | — | | | $ | — | | | $ | 27,939 | | | $ | (676) | | | | $ | 27,939 | | | $ | (676) | |
U.S. government treasury bonds
| | 2,044 | | | (11) | | | 2,712 | | | (88) | | | | 4,756 | | | (99) | |
| Asset-backed securities | | 1,018 | | | (1) | | | 83 | | | — | | | | 1,101 | | | (1) | |
| Municipal bonds | | — | | | — | | | 700 | | | (2) | | | | 700 | | | (2) | |
| U.S. government agency bonds | | 4,003 | | | (11) | | | 1,178 | | | (23) | | | | 5,181 | | | (34) | |
| | | | | | | | | | | | | |
| Total | | $ | 7,065 | | | $ | (23) | | | $ | 32,612 | | | $ | (789) | | | | $ | 39,677 | | | $ | (812) | |
Fair Value Measurements
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.
Level 3 — Inputs to the valuation techniques that are unobservable for the assets or liabilities.
The following tables summarize our financial assets measured at fair value as of September 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| Description | | Balance as of September 30, 2024 | | Level 1 | |
Level 2 | | |
| Cash equivalents: | | | | | | | | |
| Money market funds | | $ | 181,474 | | | $ | 181,474 | | | $ | — | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | $ | 181,474 | | | $ | 181,474 | | | $ | — | | | |
| | | | | | | | | | | | | | | | | | | | |
| Description | | Balance as of December 31, 2023 | | Level 1 | | Level 2 |
| Cash equivalents: | | | | | | |
| Money market funds | | $ | 49,756 | | | $ | 49,756 | | | $ | — | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Short-term investments: | | | | | | |
| Corporate bonds | | 28,704 | | | — | | | 28,704 | |
| Municipal bonds | | 700 | | | — | | | 700 | |
U.S. government agency bonds | | 5,181 | | | — | | | 5,181 | |
| Asset-backed securities | | 719 | | | — | | | 719 | |
| | | | | | |
| | | | | | |
| | | | | | |
| Long-term investments: | | | | | | |
U.S. government treasury bonds | | 4,756 | | | — | | | 4,756 | |
| Corporate bonds | | 2,568 | | | — | | | 2,568 | |
| | | | | | |
| | | | | | |
Asset-backed securities | | 698 | | | — | | | 698 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | $ | 93,082 | | | $ | 49,756 | | | $ | 43,326 | |
| | | | | | |
Accounts Receivable Factoring
We enter into factoring transactions on a non-recourse basis with financial institutions to sell certain of our non-U.S. accounts receivable. We account for these transactions as sales of financial assets and include the cash proceeds as a part of our cash flows from operations in the Condensed Consolidated Statements of Cash Flows. Total accounts receivable sold under factoring arrangements was $8.2 million and $24.2 million during the three months ended September 30, 2024 and 2023, respectively, and $34.2 million and $40.4 million during the nine months ended September 30, 2024 and 2023, respectively. Factoring fees on the sales of receivables were recorded in Other income (expense), net in our Condensed Consolidated Statement of Operations and were not material.
Investments in Privately Held Companies
Our investments in privately held companies in which we cannot exercise significant influence and do not own a majority equity interest or otherwise control are accounted for as 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 in equity securities at cost, minus impairment, if any. Additionally, we adjust the carrying value of our investments in equity securities to fair value for observable transactions for identical or similar investments of the same issuer.
On April 24, 2023 and April 22, 2024, we entered into Subscription Agreements (the “Subscription Agreements”) with Heartland Dental Holding Corporation (“Heartland”). Pursuant to the Subscription Agreements we acquired less than a 5% equity interest through the purchase of Class A Common Stock for $150 million in total. We are accounting for our investment in Heartland as an investment in equity securities. Based on a review of the relevant facts and circumstances, primarily observable transactions for Heartland's Class A Common Stock, we determined that no adjustment to the carrying value of our investment was necessary for the three or nine months ended September 30, 2024.
Our investments in privately held companies in which we can exercise significant influence are accounted for as equity method investments. We have elected to account for our equity method investments under the fair value option.
The carrying value of our investments in equity securities and equity method investments are reported on our Condensed Consolidated Balance Sheets as Other assets and any fair value adjustments or impairment, if any, are recorded in Other income (expense), net on our Condensed Consolidated Statement of Operations.
Derivatives Not Designated as Hedging Instruments
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 $24.5 million and a net gain of $19.8 million, respectively, during the three months ended September 30, 2024 and 2023, and a net gain of $2.7 million and $14.4 million, respectively, during the nine months ended September 30, 2024 and 2023. Recognized gains and losses from the settlement of foreign currency forward contracts are recorded to Other income (expense), net in our Condensed Consolidated Statements of Operations. As of September 30, 2024 and December 31, 2023, the fair value of foreign exchange forward contracts outstanding were not material.
The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of September 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | |
| September 30, 2024 |
| Local Currency Amount | | Notional Contract Amount (USD) |
| Euro | €176,900 | | $ | 197,946 | |
| British Pound | £105,720 | | 141,511 | |
| Canadian Dollar | $96,300 | | 71,439 | |
| Polish Zloty | PLN272,000 | | 71,001 | |
| Chinese Yuan | ¥473,500 | | 67,816 | |
| Japanese Yen | ¥5,000,000 | | 35,176 | |
| Israeli Shekel | ILS79,600 | | | 21,458 | |
| Brazilian Real | R$109,800 | | 20,044 | |
| Swiss Franc | CHF5,700 | | 6,783 | |
| New Zealand Dollar | NZ$7,700 | | 4,898 | |
| Australian Dollar | A$4,800 | | 3,330 | |
| New Taiwan Dollar | NT$98,000 | | 3,110 | |
| Czech Koruna | Kč64,400 | | 2,860 | |
| Korean Won | ₩2,500,000 | | 1,914 | |
| | | $ | 649,286 | |
| | | | | | | | | | | |
| December 31, 2023 |
| Local Currency Amount | | Notional Contract Amount (USD) |
| Euro | €337,780 | | $ | 373,705 | |
| Canadian Dollar | $108,900 | | 82,166 | |
| Polish Zloty | PLN276,900 | | 70,393 | |
| British Pound | £45,590 | | 58,005 | |
| Chinese Yuan | ¥244,500 | | 34,361 | |
| Swiss Franc | CHF28,600 | | 34,132 | |
| Japanese Yen | ¥3,577,000 | | 25,347 | |
| Israeli Shekel | ILS78,700 | | 21,800 | |
| Brazilian Real | R$80,500 | | 16,563 | |
| Mexican Peso | M$230,000 | | | 13,593 | |
| New Zealand Dollar | NZ$6,600 | | 4,161 | |
| Australian Dollar | A$4,300 | | 2,921 | |
| New Taiwan Dollar | NT$89,000 | | 2,919 | |
| Czech Koruna | Kč60,200 | | 2,687 | |
| Korean Won | ₩2,200,000 | | 1,709 | |
| | | $ | 744,462 | |
Note 3. Balance Sheet Components
Inventories consist of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30,
2024 | | December 31,
2023 |
| Raw materials | | $ | 126,959 | | | $ | 145,492 | |
| Work in process | | 77,174 | | | 91,259 | |
| Finished goods | | 49,986 | | | 60,151 | |
| Total inventories | | $ | 254,119 | | | $ | 296,902 | |
Prepaid expenses and other current assets consist of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30,
2024 | | December 31,
2023 |
| Value added tax receivables | | $ | 148,903 | | | $ | 143,728 | |
| Prepaid expenses | | 72,985 | | | 52,487 | |
| Other current assets | | 68,844 | | | 77,335 | |
| Total prepaid expenses and other current assets | | $ | 290,732 | | | $ | 273,550 | |
Accrued liabilities consist of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30,
2024 | | December 31,
2023 |
| Accrued payroll and benefits | | $ | 241,638 | | | $ | 220,862 | |
| Accrued expenses | | 74,158 | | | 71,109 | |
| Accrued sales and marketing expenses | | 38,152 | | | 34,035 | |
| Accrued income taxes | | 36,860 | | | 38,103 | |
| Current operating lease liabilities | | 31,168 | | | 29,651 | |
| Accrued property, plant and equipment | | 11,132 | | | 23,618 | |
| | | | |
| Other accrued liabilities | | 141,448 | | | 108,402 | |
| Total accrued liabilities | | $ | 574,556 | | | $ | 525,780 | |
Accrued warranty, which is included in the "Other accrued liabilities" category of the accrued liabilities table above, consists of the following activity (in thousands):
| | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, |
| | | 2024 | | 2023 |
| Balance at beginning of period | | $ | 22,426 | | | $ | 17,873 | |
| Charged to cost of net revenues | | 14,658 | | | 14,329 | |
| Actual warranty expenditures | | (9,889) | | | (10,327) | |
| Balance at end of period | | $ | 27,195 | | | $ | 21,875 | |
Deferred revenues consist of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30,
2024 | | December 31,
2023 |
| Deferred revenues - current | | $ | 1,380,022 | | | $ | 1,427,706 | |
Deferred revenues - long-term 1 | | $ | 108,676 | | | $ | 138,000 | |
1 Included in Other long-term liabilities within our Condensed Consolidated Balance Sheets.
During the three months ended September 30, 2024 and 2023, we recognized $977.9 million and $960.2 million of net revenues, respectively, of which $199.0 million and $178.8 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.
During the nine months ended September 30, 2024 and 2023, we recognized $3,003.8 million and $2,905.5 million of net revenues, respectively, of which $658.2 million and $583.5 million was included in the deferred revenues balance at December 31, 2023 and 2022, respectively.
Our unfulfilled performance obligations, including deferred revenues and backlog, as of September 30, 2024 were $1,495.6 million. These performance obligations are expected to be fulfilled over the next six months to five years.
Note 4. 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):
| | | | | | | | |
| 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 Condensed Consolidated Statement 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 the purchase price to the 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, projected future cash flows associated with the technology, the asset's life cycle and the present value factor.
Acquisition related costs are recognized separately from the business combination and are expensed as incurred. 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.
Note 5. Goodwill and Intangible Assets
Goodwill
The change in the carrying value of goodwill for the nine months ended September 30, 2024, categorized by reportable segment, is as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Clear Aligner | | Systems and Services | | Total |
Balance as of December 31, 2023 | $ | 111,086 | | | $ | 308,444 | | | $ | 419,530 | |
| Additions from acquisition | 47,576 | | | — | | | 47,576 | |
Foreign currency translation adjustments | 963 | | | 3,443 | | | 4,406 | |
Balance as of September 30, 2024 | $ | 159,625 | | | $ | 311,887 | | | $ | 471,512 | |
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 September 30, 2024 | | Accumulated
Amortization | | Accumulated
Impairment Loss | | Net Carrying Value as of September 30, 2024 |
| Existing technology | 11 | | $ | 146,651 | | | $ | (48,581) | | | $ | — | | | $ | 98,070 | |
| Customer relationships | 10 | | 21,500 | | | (9,675) | | | — | | | 11,825 | |
| Trademarks and tradenames | 10 | | 16,600 | | | (8,759) | | | (4,122) | | | 3,719 | |
| Patents | 12 | | 480 | | | (270) | | | — | | | 210 | |
| | | $ | 185,231 | | | $ | (67,285) | | | $ | (4,122) | | | 113,824 | |
| Foreign currency translation adjustments | | | | | | | | | 2,081 | |
| Total intangible assets, net | | | | | | | | | $ | 115,905 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Amortization Period
(in years) | | Gross Carrying Amount as of December 31, 2023 | | Accumulated Amortization | | Accumulated Impairment Loss | | Net Carrying Value as of December 31, 2023 |
| Existing technology | 10 | | $ | 112,051 | | | $ | (45,331) | | | $ | (4,328) | | | $ | 62,392 | |
| Customer relationships | 10 | | 21,500 | | | (8,063) | | | — | | | 13,437 | |
| Trademarks and tradenames | 10 | | 16,600 | | | (7,605) | | | (4,122) | | | 4,873 | |
| Patents | 8 | | 6,511 | | | (6,082) | | | — | | | 429 | |
| | | $ | 156,662 | | | $ | (67,081) | | | $ | (8,450) | | | 81,131 | |
| Foreign currency translation adjustments | | | | | | | | | 987 | |
| Total intangible assets, net | | | | | | | | | $ | 82,118 | |
Of the $146.7 million recorded as Existing technology intangible assets as of September 30, 2024, $47.0 million was acquired during the first quarter of 2024 as part of the Cubicure Acquisition. 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 September 30, 2024. Refer to Note 4. “Business Combination”.
The total estimated annual future amortization expense for these acquired intangible assets as of September 30, 2024, is as follows (in thousands):
| | | | | | | | |
| Fiscal Year Ending December 31, | | Amortization |
Remainder of 2024 | | $ | 4,643 | |
| 2025 | | 18,574 | |
| 2026 | | 17,969 | |
| 2027 | | 15,607 | |
| 2028 | | 14,505 | |
| 2029 | | 14,505 | |
| Thereafter | | 28,021 | |
| Total | | $ | 113,824 | |
Amortization expense for the three months ended September 30, 2024 and 2023 was $4.6 million and $4.2 million, respectively, and amortization expense for the nine months ended September 30, 2024 and 2023 was $14.2 million and $12.4 million, respectively.
Note 6. Credit Facility
We have a credit facility that provides for a $300.0 million unsecured revolving line of credit, along with a $50.0 million letter of credit. On December 23, 2022, we amended certain provisions in our credit facility which included extending the maturity date on the facility to December 23, 2027 and replacing the interest rate from the existing LIBOR with SOFR (“2022 Credit Facility”). The 2022 Credit Facility requires us to comply with specific financial conditions and performance requirements. Loans under the 2022 Credit Facility bear interest, at our option, at either a rate based on the SOFR for the applicable interest period or a base rate, in each case plus a margin. As of September 30, 2024, we had no outstanding borrowings under the 2022 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.
Note 7. Legal Proceedings
2019 Shareholder Derivative Lawsuit
In January 2019, three derivative lawsuits were filed in the U.S. District Court for the Northern District of California which were later consolidated, purportedly on our behalf, naming as defendants the then current members of our Board of
Directors along with certain of our executive officers. The complaints assert various state law causes of action, including for breaches of fiduciary duty, insider trading, and unjust enrichment. The complaints seek unspecified monetary damages on our behalf, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees. The consolidated action is currently stayed. Defendants have not yet responded to the complaints.
On April 12, 2019, a derivative lawsuit was also filed in California Superior Court for Santa Clara County, purportedly on our behalf, naming as defendants the members of our Board of Directors along with certain of our executive officers. The allegations in the complaint are similar to those in the derivative suits described above. The matter is currently stayed. Defendants have not yet responded to the complaint.
In the first quarter of 2024, the parties to these actions entered into a settlement agreement whereby, subject to court approval, plaintiffs will dismiss the lawsuits and release their claims. In the settlement agreement, Align and the defendants deny any wrongdoing and are not making any monetary payments, other than a potential award of $575,000 in attorney’s fees to plaintiffs’ counsel, covered by insurance. On August 2, 2024, the U.S. District Court for the Northern District of California granted preliminary approval of the settlement.
Antitrust Class Actions
On June 5, 2020, a dental practice named 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 Align 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 Align’s motion for summary judgment on all claims brought by the plaintiffs. The court entered judgment 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. Plaintiff-Appellants' opening brief was filed July 15, 2024. Align’s response brief was submitted October 21, 2024 and Plaintiff-Appellants' reply brief is due January 6, 2025.
On May 3, 2021, an individual named Misty Snow brought an antitrust action in the U.S. 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 filed several amended complaints adding new plaintiffs, various state law claims, and allegations based on Section 1 of the Sherman Act. 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 Align’s 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. Plaintiff-Appellants' opening brief was filed July 15, 2024. Align’s response brief was submitted October 21, 2024 and Plaintiff-Appellants' reply brief is due January 6, 2025.
We are currently unable to predict the outcome of these lawsuits and therefore we cannot determine the likelihood of loss, if any, nor estimate a range of possible loss.
In June 2024, Align and the Section 1 plaintiffs reached a settlement in principle that would resolve all remaining claims in the Section 1 lawsuit. The settlement terms included a $27.5 million cash payment and an offer of a $300 coupon for class members who elected to purchase Invisalign treatment. We agreed to settle the lawsuit to avoid the distraction and uncertainty of litigation. On September 18, 2024, the U.S. District Court for the Northern District of California denied plaintiffs’ motion for preliminary approval of the settlement without prejudice, allowing plaintiffs to file a renewed motion within 35 days. Plaintiffs and Align filed a renewed motion for preliminary approval of the settlement on October 28, 2024. We are unable to predict the timeline or outcome of the motion to approve the settlement. We continue to believe that plaintiffs’ Section 1 claims are without merit and remain ready to vigorously defend ourselves against those claims.
During the nine months ended September 30, 2024 we accrued a loss of $31.1 million for legal settlements for multiple legal matters, but primarily related to the settlement of the Section 1 claims described above.
Straumann Litigation
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. The complaint asserts claims of false advertising, unfair competition, civil conspiracy, and infringement of Align 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 June 20, 2024, Defendants filed motions to dismiss the Complaint, which are pending. On July 9, 2024, ClearCorrect Operating, LLC, ClearCorrect Holdings, Inc. and Straumann USA LLC filed counterclaims against Align for alleged antitrust violations, false advertising, unfair competition, and breach of contract. Among other things, the counterclaims seek relief enjoining Align’s accused business practices, invalidating Align’s asserted patents, and money damages. On September 13, 2024, we filed a motion to dismiss defendants’ counterclaims. Align believes these claims are without merit and intends to vigorously defend itself. Align is currently unable to predict the outcome of this lawsuit and cannot determine the likelihood of loss nor estimate a range of possible loss.
In addition to the above, in the ordinary course of our operations, we are involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. 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 8. Commitments and Contingencies
Tax Matter
Beginning in the third quarter of 2023 and continuing through the first quarter of 2024, the Company has received cumulative assessments of approximately $100 million from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of October 2019 through May 2023. We are required to pay these assessments prior to contesting or litigating in statutory appeal. The Company has historically asserted and continues to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that the Company has reasonably relied upon statements and guidance by HMRC and that the Company’s interpretation of United Kingdom legislation is appropriate.
In October 2024, the Company and HMRC reached a settlement agreement regarding the unpaid VAT related to certain aligner sales made during the period of October 2019 through mid-October 2023. As part of the settlement, HMRC agreed to vacate the judicial review (before the Administrative Court) originally scheduled for October 9th and October 10th, 2024, refund to the Company all assessments paid, approximately $100 million, for the period of October 2019 through May 2023 and withdraw any potential assessments for the period from June 2023 through mid-October 2023. Between October 21, 2024 and October 29, 2024, HMRC refunded to the Company all assessed amounts in full, approximately $100 million.
The Company has remaining exposure in the amount of approximately $7.5 million for periods up to December 2023. A statutory appeal (before the First-tier Tribunal - “Tax Tribunal”) is listed for January 27th through January 30th, 2025, at which time we anticipate the Tax Tribunal will determine whether clear aligners are exempt from VAT as a matter of law and whether the Company has any liability as a matter of principle. It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome from the Tax Tribunal statutory appeal. Accordingly, the Company has determined that a potential loss related to VAT accounted for in the periods up to December 2023 is not probable.
Indemnification Provisions
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 September 30, 2024, we did not have any material indemnification claims that were probable or reasonably possible.
Note 9. Stockholders’ Equity
As of September 30, 2024, the Align Technology, Inc. 2005 Incentive Plan, as amended, has a total reserve of 32,168,895 shares, of which 3,398,202 shares are available for issuance.
Summary of Stock-Based Compensation Expense
The stock-based compensation related to our stock-based awards and employee stock purchase plan for the three and nine months ended September 30, 2024 and 2023 is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Cost of net revenues | | $ | 3,070 | | | $ | 1,974 | | | $ | 7,716 | | | $ | 5,682 | |
| Selling, general and administrative | | 34,937 | | | 29,739 | | | 97,705 | | | 87,432 | |
| | | | | | | | |
| Research and development | | 11,032 | | | 7,889 | | | 29,434 | | | 22,083 | |
| Total stock-based compensation | | $ | 49,039 | | | $ | 39,602 | | | $ | 134,855 | | | $ | 115,197 | |
Restricted Stock Units (“RSUs”)
The fair value of RSUs is based on our closing stock price on the date of grant. RSUs granted generally vest over a period of four years. A summary for the nine months ended September 30, 2024 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2023 | 736 | | | $ | 367.63 | | | | | |
Granted | 638 | | | 309.22 | | | | | |
| Vested and released | (254) | | | 370.69 | | | | | |
| Forfeited | (56) | | | 345.74 | | | | | |
Unvested as of September 30, 2024 | 1,064 | | | $ | 333.03 | | | 1.6 | | $ | 270,565 | |
As of September 30, 2024, we expect to recognize $254.4 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.7 years.
Market-Performance Based Restricted Stock Units (“MSUs”)
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 Align’s stock price relative to the performance of a stock market index over the vesting period. MSUs vest over a period of three years and the maximum number of shares eligible to vest in the future is 250% of the MSUs initially granted.
The following table summarizes the MSU performance activity for the nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2023 | 158 | | | $ | 811.06 | | | | | |
| Granted | 83 | | | 617.79 | | | | | |
Vested and released 1 | (32) | | | 1,102.09 | | | | | |
| Forfeited | (5) | | | 1,102.09 | | | | | |
Unvested as of September 30, 2024 | 204 | | | $ | 679.52 | | | 1.6 | | $ | 51,876 | |
1 Includes MSUs vested during the period below 100% of the original grant as actual shares released is based on Align’s stock performance relative to a market index over the vesting period.
As of September 30, 2024, we expect to recognize $67.2 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.6 years.
Restricted Stock Units with Performance Conditions (“PSUs”)
Our PSUs typically include a service and performance condition. We recognize share-based compensation expense for PSUs if it is probable that the performance condition will be achieved.
The following table summarizes the PSU performance activity for the nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares
Underlying PSUs
(in thousands) | | Weighted Average Grant Date Fair Value | | Weighted Average Remaining Contractual Term (in years) | | Aggregate
Intrinsic Value
(in thousands) |
Unvested as of December 31, 2023 | $ | 5 | | | $ | 201.63 | | | | | |
| Granted | 6 | | | 206.36 | | | | | |
| Vested and released | — | | | — | | | | | |
| Forfeited | — | | | — | | | | | |
Unvested as of September 30, 2024 | $ | 11 | | | $ | 204.33 | | | 1.4 | | $ | 2,805 | |
As of September 30, 2024, we expect to recognize $1.2 million of total unamortized compensation costs, net of estimated forfeitures, related to PSUs over a weighted average period of 1.4 years.
Employee Stock Purchase Plan
As of September 30, 2024, we have 1,875,920 shares available for future issuance under the Align Technology, Inc. 2010 Employee Stock Purchase Plan (as amended and restated, the “2010 Purchase Plan”).
The fair value of the option component of the 2010 Purchase Plan shares was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | | | | | | | | | | | | | | | | |
| | | | | Nine Months Ended
September 30, |
| | | | | | | 2024 | | 2023 |
| Expected term (in years) | | | | | | 1.3 | | 1.2 |
| Expected volatility | | | | | | 49.2 | % | | 56.2 | % |
| Risk-free interest rate | | | | | | 4.6 | % | | 4.9 | % |
| Expected dividends | | | | | | — | | | — | |
| Weighted average fair value at grant date | | | | | | $ | 94.70 | | | $ | 133.53 | |
As of September 30, 2024, we expect to recognize $17.1 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.9 years.
Note 10. Common Stock Repurchase Programs
In May 2021, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock (“May 2021 Repurchase Program”), which was completed in March 2023. In January 2023, our Board of Directors authorized a new plan to repurchase up to $1.0 billion of our common stock (“January 2023 Repurchase Program”). The January 2023 Repurchase Program does not have an expiration date.
Accelerated Share Repurchase Agreements (“ASRs”)
The following table summarizes the total repurchases of our common stock pursuant to an ASR entered into or completed during the three and nine months ended September 30, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Agreement
Date | | Repurchase
Program | | Amount Paid
(in millions) | | Completion
Date | | Total Shares
Received | | Average Price per Share |
| Q4 2022 | | May 2021 | | $ | 200.0 | | | Q1 2023 | | 984,714 | | | $ | 203.10 | |
| Q1 2023 | | May 2021 | | $ | 250.0 | | | |