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 June 30, ~~2022~~2023


☐			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 Number)

410 North Scottsdale Road, Suite 1300

Tempe, Arizona ~~85281~~85288

(Address of principal executive ~~offices)~~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 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~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of July ~~29, 2022~~28, 2023 was ~~78,108,185.~~76,533,704.

Table of Contents

ALIGN TECHNOLOGY, INC.

TABLE OF CONTENTS



PART I	F INANCIAL INFORMATION	3
Item 1.	F inancial S tatements (U naudited ):	3
	Condensed Consolidated Statements of Operations	3
	C ondensed C onsolidated S tatements of C omprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
Item 4.	Controls and Procedures	3736
PART II	O THER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6054
Item 3.	Defaults Upon Senior Securities	6054
Item 4.	Mine Safety Disclosures	6054
Item 5.	Other Information	6054
Item 6.	Exhibits	6155
Signatures		6256

Invisalign, Align, the Invisalign logo, ClinCheck, ~~Made to Move,~~ Invisalign Assist, Invisalign Teen, Invisalign Go, Vivera, SmartForce, SmartTrack, SmartStage, SmileView, iTero, iTero Element, Orthocad, iCast, iRecord and exocad, 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.

Table of Contents

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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net revenues	Net revenues	$	969,553	$	1,010,808	$	1,942,772	$	1,905,579	Net revenues	$	1,002,173	$	969,553	$	1,945,320	$	1,942,772
Cost of net revenues	Cost of net revenues	281,994		252,270		545,867		469,943		Cost of net revenues	288,564		281,994		571,057		545,867
Gross profit	Gross profit	687,559		758,538		1,396,905		1,435,636		Gross profit	713,609		687,559		1,374,263		1,396,905
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	426,398		431,921		865,855		829,036		Selling, general and administrative	453,193		426,398		892,884		865,855
Research and development	Research and development	72,965		57,715		144,772		112,252		Research and development	88,485		72,965		175,932		144,772

Total operating expenses	Total operating expenses	499,363		489,636		1,010,627		941,288		Total operating expenses	541,678		499,363		1,068,816		1,010,627
Income from operations	Income from operations	188,196		268,902		386,278		494,348		Income from operations	171,931		188,196		305,447		386,278
Interest income and other income (expense), net:	Interest income and other income (expense), net:									Interest income and other income (expense), net:
Interest income	Interest income	245		383		922		2,026		Interest income	4,421		245		6,758		922
Other income (expense), net	Other income (expense), net	(14,832)		(483)		(26,105)		34,049		Other income (expense), net	(4,763)		(14,832)		(5,992)		(26,105)
Total interest income and other income (expense), net	Total interest income and other income (expense), net	(14,587)		(100)		(25,183)		36,075		Total interest income and other income (expense), net	(342)		(14,587)		766		(25,183)
Net income before provision for income taxes	Net income before provision for income taxes	173,609		268,802		361,095		530,423		Net income before provision for income taxes	171,589		173,609		306,213		361,095
Provision for income taxes	Provision for income taxes	60,809		69,088		113,997		130,333		Provision for income taxes	59,775		60,809		106,601		113,997
Net income	Net income	$	112,800	$	199,714	$	247,098	$	400,090	Net income	$	111,814	$	112,800	$	199,612	$	247,098

Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	1.44	$	2.53	$	3.15	$	5.06	Basic	$	1.46	$	1.44	$	2.60	$	3.15
Diluted	Diluted	$	1.44	$	2.51	$	3.13	$	5.02	Diluted	$	1.46	$	1.44	$	2.60	$	3.13
Shares used in computing net income per share:	Shares used in computing net income per share:									Shares used in computing net income per share:
Basic	Basic	78,395		79,008		78,568		79,004		Basic	76,524		78,395		76,722		78,568
Diluted	Diluted	78,545		79,638		78,840		79,737		Diluted	76,689		78,545		76,897		78,840

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

Table of Contents

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	112,800	$	199,714	$	247,098	$	400,090	Net income	$	111,814	$	112,800	$	199,612	$	247,098
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Change in foreign currency translation adjustment, net of tax	Change in foreign currency translation adjustment, net of tax	(13,756)		586		(21,067)		(13,865)		Change in foreign currency translation adjustment, net of tax	9,158		(13,756)		19,632		(21,067)
Change in unrealized gains (losses) on investments, net of tax	Change in unrealized gains (losses) on investments, net of tax	(301)		—		(3,029)		(20)		Change in unrealized gains (losses) on investments, net of tax	350		(301)		1,995		(3,029)

Other comprehensive income (loss)	Other comprehensive income (loss)	(14,057)		586		(24,096)		(13,885)		Other comprehensive income (loss)	9,508		(14,057)		21,627		(24,096)
Comprehensive income	Comprehensive income	$	98,743	$	200,300	$	223,002	$	386,205	Comprehensive income	$	121,322	$	98,743	$	221,239	$	223,002

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

Table of Contents

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	877,501	$	1,099,370	Cash and cash equivalents	$	951,956	$	942,050
Marketable securities, short-term	Marketable securities, short-term	22,138		71,972		Marketable securities, short-term	55,805		57,534
Accounts receivable, net of allowance for doubtful accounts of $9,520 and $9,245, respectively		931,854		897,198
Accounts receivable, net of allowance for doubtful accounts of $13,244 and $10,343, respectively						Accounts receivable, net of allowance for doubtful accounts of $13,244 and $10,343, respectively	908,395		859,685
Inventories	Inventories	310,046		230,230		Inventories	312,736		338,752
Prepaid expenses and other current assets	Prepaid expenses and other current assets	235,265		195,305		Prepaid expenses and other current assets	236,564		226,370
Total current assets	Total current assets	2,376,804		2,494,075		Total current assets	2,465,456		2,424,391
Marketable securities, long-term	Marketable securities, long-term	77,551		125,320		Marketable securities, long-term	26,023		41,978
Property, plant and equipment, net	Property, plant and equipment, net	1,182,444		1,081,926		Property, plant and equipment, net	1,279,042		1,231,855
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	117,912		121,257		Operating lease right-of-use assets, net	125,881		118,880
Goodwill	Goodwill	390,100		418,547		Goodwill	414,765		407,551
Intangible assets, net	Intangible assets, net	93,817		109,709		Intangible assets, net	89,296		95,720
Deferred tax assets	Deferred tax assets	1,518,648		1,533,767		Deferred tax assets	1,605,926		1,571,746
Other assets	Other assets	52,843		57,509		Other assets	138,161		55,826
Total assets	Total assets	$	5,810,119	$	5,942,110	Total assets	$	6,144,550	$	5,947,947

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	145,607	$	163,886	Accounts payable	$	110,155	$	127,870
Accrued liabilities	Accrued liabilities	416,459		607,315		Accrued liabilities	600,163		454,374
Deferred revenues	Deferred revenues	1,242,348		1,152,870		Deferred revenues	1,396,747		1,343,643
Total current liabilities	Total current liabilities	1,804,414		1,924,071		Total current liabilities	2,107,065		1,925,887
Income tax payable	Income tax payable	116,414		118,072		Income tax payable	113,309		124,393
Operating lease liabilities	Operating lease liabilities	98,332		102,656		Operating lease liabilities	104,650		100,334
Other long-term liabilities	Other long-term liabilities	191,878		174,597		Other long-term liabilities	181,225		195,975
Total liabilities	Total liabilities	2,211,038		2,319,396		Total liabilities	2,506,249		2,346,589
Commitments and contingencies (Notes 6 and 7)	Commitments and contingencies (Notes 6 and 7)	0		0		Commitments and contingencies (Notes 6 and 7)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	—		—		Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	—		—
Common stock, $0.0001 par value (200,000 shares authorized; 78,059 and 78,710 issued and outstanding, respectively)		8		8
Common stock, $0.0001 par value (200,000 shares authorized; 76,532 and 77,267 issued and outstanding, respectively)						Common stock, $0.0001 par value (200,000 shares authorized; 76,532 and 77,267 issued and outstanding, respectively)	8		8
Additional paid-in capital	Additional paid-in capital	1,016,882		999,006		Additional paid-in capital	1,141,623		1,044,946
Accumulated other comprehensive income (loss), net	Accumulated other comprehensive income (loss), net	(19,770)		4,326		Accumulated other comprehensive income (loss), net	11,343		(10,284)
Retained earnings	Retained earnings	2,601,961		2,619,374		Retained earnings	2,485,327		2,566,688
Total stockholders’ equity	Total stockholders’ equity	3,599,081		3,622,714		Total stockholders’ equity	3,638,301		3,601,358
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,810,119	$	5,942,110	Total liabilities and stockholders’ equity	$	6,144,550	$	5,947,947

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

Table of Contents

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			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Three Months Ended June 30, 2022		Shares	Amount
Balance as of March 31, 2022		78,805	$	8	$	992,287	$	(5,713)	$	2,680,270	$	3,666,852
Three Months Ended June 30, 2023													Three Months Ended June 30, 2023	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Balance as of March 31, 2023													Balance as of March 31, 2023	76,516	$	8
Net income	Net income	—	—		—		—		112,800		112,800		Net income	—	—		—		—		111,814		111,814
Net change in unrealized gains (losses) from investments	Net change in unrealized gains (losses) from investments	—	—		—		(301)		—		(301)		Net change in unrealized gains (losses) from investments	—	—		—		350		—		350
Net change in foreign currency translation adjustment	Net change in foreign currency translation adjustment	—	—		—		(13,756)		—		(13,756)		Net change in foreign currency translation adjustment	—	—		—		9,158		—		9,158
Issuance of common stock relating to employee equity compensation plans	Issuance of common stock relating to employee equity compensation plans	11	—		—		—		—		—		Issuance of common stock relating to employee equity compensation plans	16	—		—		—		—		—
Tax withholdings related to net share settlements of equity awards	Tax withholdings related to net share settlements of equity awards	—	—		(654)		—		—		(654)		Tax withholdings related to net share settlements of equity awards	—	—		(930)		—		—		(930)
Common stock repurchased and retired		(757)	—		(8,891)		—		(191,109)		(200,000)

Stock-based compensation	Stock-based compensation	—	—		34,140		—		—		34,140		Stock-based compensation	—	—		37,860				—		37,860
Balance as of June 30, 2022		78,059	$	8	$	1,016,882	$	(19,770)	$	2,601,961	$	3,599,081
Balance as of June 30, 2023													Balance as of June 30, 2023	76,532	$	8	$	1,141,623	$	11,343	$	2,485,327	$	3,638,301


		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Six Months Ended June 30, 2022		Shares	Amount
Balance as of December 31, 2021		78,710	$	8	$	999,006	$	4,326	$	2,619,374	$	3,622,714
Six Months Ended June 30, 2023													Six Months Ended June 30, 2023	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Balance as of December 31, 2022													Balance as of December 31, 2022	77,267	$	8
Net income	Net income	—	—		—		—		247,098		247,098		Net income	—	—		—		—		199,612		199,612
Net change in unrealized gains (losses) from investments	Net change in unrealized gains (losses) from investments	—	—		—		(3,029)		—		(3,029)		Net change in unrealized gains (losses) from investments	—	—		—		1,995		—		1,995
Net change in foreign currency translation adjustment	Net change in foreign currency translation adjustment	—	—		—		(21,067)		—		(21,067)		Net change in foreign currency translation adjustment	—	—		—		19,632		—		19,632
Issuance of common stock relating to employee equity compensation plans	Issuance of common stock relating to employee equity compensation plans	250	—		14,827		—		—		14,827		Issuance of common stock relating to employee equity compensation plans	207	—		14,256		—		—		14,256
Tax withholdings related to net share settlements of equity awards	Tax withholdings related to net share settlements of equity awards	—	—		(52,187)		—		—		(52,187)		Tax withholdings related to net share settlements of equity awards	—	—		(21,787)		—		—		(21,787)
Common stock repurchased and retired	Common stock repurchased and retired	(901)	—		(10,525)		—		(264,511)		(275,036)		Common stock repurchased and retired	(942)	—		(11,387)		—		(280,973)		(292,360)

Equity forward contract related to accelerated stock repurchase													Equity forward contract related to accelerated stock repurchase	—	—		40,000		—		—		40,000
Stock-based compensation	Stock-based compensation	—	—		65,761		—		—		65,761		Stock-based compensation	—	—		75,595		—		—		75,595
Balance as of June 30, 2022		78,059	$	8	$	1,016,882	$	(19,770)	$	2,601,961	$	3,599,081
Balance as of June 30, 2023													Balance as of June 30, 2023	76,532	$	8	$	1,141,623	$	11,343	$	2,485,327	$	3,638,301

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)

Table of Contents

~~ALIGN TECHNOLOGY, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)~~

~~(in thousands)~~

~~(unaudited)~~


		Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings				Total					Common Stock					Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Three Months Ended June 30, 2021		Shares	Amount
Balance as of March 31, 2021		79,136	$	8			$	948,362					$	29,030				$	2,416,176		$	3,393,576
Three Months Ended June 30, 2022																	Three Months Ended June 30, 2022			Shares			Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Balance as of March 31, 2022																	Balance as of March 31, 2022			78,805			$	8
Net income	Net income	—	—		—				—		199,714				199,714		Net income			—			—		—		—		112,800		112,800
Net change in unrealized gains (losses) from investments																	Net change in unrealized gains (losses) from investments			—			—		—		(301)		—		(301)
Net change in foreign currency translation adjustment	Net change in foreign currency translation adjustment	—	—		—				586		—				586		Net change in foreign currency translation adjustment			—			—		—		(13,756)		—		(13,756)
Issuance of common stock relating to employee equity compensation plans	Issuance of common stock relating to employee equity compensation plans	89	—		—				—		—				—		Issuance of common stock relating to employee equity compensation plans			11			—		—		—		—		—
Tax withholdings related to net share settlements of equity awards	Tax withholdings related to net share settlements of equity awards	—	—		(38,321)				—		—				(38,321)		Tax withholdings related to net share settlements of equity awards			—			—		(654)		—		—		(654)
Common stock repurchased and retired	Common stock repurchased and retired	(277)	—		(3,065)				—		(156,935)				(160,000)		Common stock repurchased and retired			(757)			—		(8,891)		—		(191,109)		(200,000)
Equity forward contract related to accelerated stock repurchase		—	—		(40,000)				—		—				(40,000)

Stock-based compensation	Stock-based compensation	—	—		28,855				—		—				28,855		Stock-based compensation			—			—		34,140				—		34,140
Balance as of June 30, 2021		78,948	$	8	$	895,831			$	29,616	$	2,458,955			$	3,384,410
Balance as of June 30, 2022																	Balance as of June 30, 2022			78,059			$	8	$	1,016,882	$	(19,770)	$	2,601,961	$	3,599,081


		Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings				Total					Common Stock					Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Six Months Ended June 30, 2021		Shares	Amount
Balance as of December 31, 2020		78,860	$	8			$	974,556					$	43,501				$	2,215,800		$	3,233,865
Six Months Ended June 30, 2022																	Six Months Ended June 30, 2022			Shares			Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Balance as of December 31, 2021																	Balance as of December 31, 2021			78,710			$	8
Net income	Net income	—	—		—				—		400,090				400,090		Net income			—			—		—		—		247,098		247,098
Net change in unrealized gains (losses) from investments	Net change in unrealized gains (losses) from investments	—	—						(20)		—				(20)		Net change in unrealized gains (losses) from investments			—			—		—		(3,029)		—		(3,029)
Net change in foreign currency translation adjustment	Net change in foreign currency translation adjustment	—	—		—				(13,865)		—				(13,865)		Net change in foreign currency translation adjustment			—			—		—		(21,067)		—		(21,067)
Issuance of common stock relating to employee equity compensation plans	Issuance of common stock relating to employee equity compensation plans	365	—		13,133				—		—				13,133		Issuance of common stock relating to employee equity compensation plans			250			—		14,827		—		—		14,827
Tax withholdings related to net share settlements of equity awards	Tax withholdings related to net share settlements of equity awards	—	—		(104,889)				—		—				(104,889)		Tax withholdings related to net share settlements of equity awards			—			—		(52,187)		—		—		(52,187)
Common stock repurchased and retired	Common stock repurchased and retired	(277)	—		(3,065)				—		(156,935)				(160,000)		Common stock repurchased and retired			(901)			—		(10,525)		—		(264,511)		(275,036)
Equity forward contract related to accelerated stock repurchase		—	—		(40,000)				—		—				(40,000)

Stock-based compensation	Stock-based compensation	—	—		56,096				—		—				56,096		Stock-based compensation			—			—		65,761		—		—		65,761
Balance as of June 30, 2021		78,948	$	8	$	895,831			$	29,616	$	2,458,955			$	3,384,410
Balance as of June 30, 2022																	Balance as of June 30, 2022			78,059			$	8	$	1,016,882	$	(19,770)	$	2,601,961	$	3,599,081

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

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ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	247,098	$	400,090	Net income	$	199,612	$	247,098
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	Deferred taxes	14,747		39,961		Deferred taxes	(36,688)		14,747
Depreciation and amortization	Depreciation and amortization	59,907		51,527		Depreciation and amortization	71,639		59,907
Stock-based compensation	Stock-based compensation	65,761		56,096		Stock-based compensation	75,595		65,761
Non-cash operating lease cost	Non-cash operating lease cost	15,075		12,413		Non-cash operating lease cost	15,531		15,075

Arbitration award gain		—		(43,403)

Other non-cash operating activities	Other non-cash operating activities	16,172		13,174		Other non-cash operating activities	21,860		16,172
Changes in assets and liabilities:
Changes in assets and liabilities, net of effects of acquisitions:						Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	Accounts receivable	(53,462)		(164,822)		Accounts receivable	(73,680)		(53,462)
Inventories	Inventories	(91,060)		(49,070)		Inventories	19,064		(91,060)
Prepaid expenses and other assets	Prepaid expenses and other assets	(14,219)		(70,132)		Prepaid expenses and other assets	(16,799)		(14,219)
Accounts payable	Accounts payable	(23,944)		(5,736)		Accounts payable	(10,351)		(23,944)
Accrued and other long-term liabilities	Accrued and other long-term liabilities	(212,896)		65,650		Accrued and other long-term liabilities	140,284		(212,896)
Long-term income tax payable	Long-term income tax payable	(1,657)		7,535		Long-term income tax payable	(11,113)		(1,657)
Deferred revenues	Deferred revenues	136,021		231,408		Deferred revenues	56,718		136,021
Net cash provided by operating activities	Net cash provided by operating activities	157,543		544,691		Net cash provided by operating activities	451,672		157,543
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment	Purchase of property, plant and equipment	(163,348)		(167,668)		Purchase of property, plant and equipment	(122,664)		(163,348)
Purchase of marketable securities	Purchase of marketable securities	(20,466)		—		Purchase of marketable securities	(2,373)		(20,466)
Proceeds from maturities of marketable securities	Proceeds from maturities of marketable securities	21,690		—		Proceeds from maturities of marketable securities	17,601		21,690
Proceeds from sales of marketable securities	Proceeds from sales of marketable securities	92,235		—		Proceeds from sales of marketable securities	4,048		92,235
Repayment on unsecured promissory note		—		4,594
Proceeds from arbitration award		—		43,403
Purchase of equity investments						Purchase of equity investments	(75,000)		—

Other investing activities	Other investing activities	(2,189)		(4,249)		Other investing activities	74		(2,189)
Net cash used in investing activities	Net cash used in investing activities	(72,078)		(123,920)		Net cash used in investing activities	(178,314)		(72,078)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	Proceeds from issuance of common stock	14,827		13,133		Proceeds from issuance of common stock	14,256		14,827
Common stock repurchases	Common stock repurchases	(275,036)		(160,000)		Common stock repurchases	(292,360)		(275,036)
Payments for equity forward contracts related to accelerated share repurchase agreements	Payments for equity forward contracts related to accelerated share repurchase agreements	—		(40,000)		Payments for equity forward contracts related to accelerated share repurchase agreements	40,000		—
Payroll taxes paid upon the vesting of equity awards	Payroll taxes paid upon the vesting of equity awards	(52,187)		(104,889)		Payroll taxes paid upon the vesting of equity awards	(21,788)		(52,187)
Net cash used in financing activities	Net cash used in financing activities	(312,396)		(291,756)		Net cash used in financing activities	(259,892)		(312,396)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	4,978		(3,511)		Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	(3,523)		4,978
Net (decrease) increase in cash, cash equivalents, and restricted cash		(221,953)		125,504
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	9,943		(221,953)
Cash, cash equivalents, and restricted cash at beginning of the period	Cash, cash equivalents, and restricted cash at beginning of the period	1,100,139		961,474		Cash, cash equivalents, and restricted cash at beginning of the period	942,355		1,100,139
Cash, cash equivalents, and restricted cash at end of the period	Cash, cash equivalents, and restricted cash at end of the period	$	878,186	$	1,086,978	Cash, cash equivalents, and restricted cash at end of the period	$	952,298	$	878,186

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

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ALIGN TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Align Technology, Inc. (“we”, “our”, "Company", or “Align”) on a consistent basis with the audited Consolidated Financial Statements for the year ended December 31, ~~2021,~~2022, and ~~contains~~contain all adjustments, including normal recurring adjustments, necessary to ~~state~~ fairly state the information set forth herein. The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S.”).

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The results of operations for the three and six months ended June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022~~2023 or any other future period, and we make no representations related thereto.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S. requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, useful lives of intangible assets and property and equipment, long-lived assets and goodwill, income taxes, contingent liabilities, the fair values of financial instruments, stock-based compensation and the valuation of investments in privately held companies, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Certain Risks and Uncertainties

~~The military conflict between Russia and Ukraine and its impact on the economy~~Our business has ~~caused significant worldwide challenges.~~been materially impacted by fluctuations in macroeconomic conditions, which have been exacerbated by ongoing geopolitical issues. While the situation is highly uncertain and evolving, ~~its impact on the economy, including~~we have been and continue to be impacted by factors such as inflation, supply chain challenges, rising interest rates, volatilities in the financial ~~market, supply chain challenges,~~markets, foreign currency exchange rate fluctuations, impacts on consumer confidence and purchasing power, ~~sanctions~~ and ~~retaliatory sanctions among others, have impacted and~~global recession concerns which could ~~potentially~~further subject our business to materially adverse consequences should any portion of its impacts become prolonged or escalate beyond its current scope.

Further, as the COVID-19 pandemic continues and new variants of the virus emerge, we are continuing to see fluctuations in the numbers of patients seeking treatment for dental services and the number of doctors providing services and treatments globally. The full extent to which the pandemic, including as a result of any new variants, business restrictions or lockdowns, and the impact of vaccinations, will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately determined. Additionally, we could also be materially adversely affected by uncertain or reduced demand, labor shortages, delays in collection of outstanding receivables and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.

~~Revenue Recognition~~While the overall impact of the COVID-19 pandemic is gradually declining, we continue to be exposed to risks and uncertainties posed by it which varies by geographic region at different levels. The extent to which our business could be impacted in the future by the pandemic is highly uncertain and difficult to predict.

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.”Recent Accounting Pronouncements

We identify a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

~~Table of Contents~~

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 changing trends and market conditions, historical prices, costs, and gross margins. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.

~~Clear Aligner~~

We enter into contracts (“treatment plan(s)”) that involve multiple future performance obligations. Invisalign Comprehensive, Invisalign First, Invisalign Moderate, and Lite and Express Packages include optional additional aligners at no charge for a certain period of time ranging from six months to five years after initial shipment, and Invisalign Go and Invisalign Go Plus includes optional additional aligners at no charge for a period of up to two years after initial shipment.

Our treatment plans comprise the following performance obligations that also represent distinct deliverables: initial aligners, the option of additional aligners, case refinement, and replacement aligners. We take the practical expedient to consider shipping and handling costs as activities to fulfill the performance obligation. We allocate revenues for each 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 future performance obligations, we also consider usage rates, which is the number of times a customer is expected to order additional aligners. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We recognize the revenues upon shipment, as the customers obtain physical possession, and we have enforceable rights to payment. As we collect most consideration upfront, we consider whether a significant financing component exists; however, as the delivery of the performance obligations are at the customer’s discretion, we conclude that no significant financing component exists.

~~Systems and Services~~

We sell intraoral scanners and CAD/CAM services through both our direct sales force and distribution partners. The intraoral scanner sales price includes one year of warranty and unlimited scanning services. The customer may also select, for additional fees, extended warranty and unlimited scanning services for periods beyond the initial year. When intraoral scanners are sold with an unlimited scanning service agreement and/or extended warranty, we allocate revenues based on the respective SSP of the scanner and the subscription service. We estimate the SSP of each element, taking into account factors such as same or similar historical prices and discounting strategies. Revenues are then recognized over time as the monthly services are rendered and upon shipment of the scanner, as that is when we deem the customer to have obtained control. CAD/CAM services, where sold separately, include the initial software license and maintenance and support. We allocate revenues based upon the respective SSPs of the software license and the maintenance and support. We estimate the SSP of each element using data such as historical prices. Revenues related to the software license are recognized upfront and revenues related to the maintenance and support are recognized over time. For both scanner and service sales, most consideration is collected upfront and in cases where there are payment plans, consideration is collected within one year and, therefore, there are no significant financing components.

(i) Recent Accounting Pronouncements Not Yet Effective

We continue to monitor new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) and do not believe any of the recently issued accounting pronouncements will have a material impact on our consolidated financial statements or related disclosures.

109

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Note 2. Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The following tables summarize our cash and cash equivalents, and marketable securities on our Consolidated Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


										Reported as:															Reported as:
June 30, 2022		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
June 30, 2023																June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
Cash	Cash	$	758,365	$	—	$	—	$	758,365	$	758,365	$	—	$	—	Cash	$	759,407	$	—	$	—	$	759,407	$	759,407	$	—	$	—
Money market funds	Money market funds	119,148		—		(12)		119,136		119,136		—		—		Money market funds	192,549		—		—		192,549		192,549		—		—
Corporate bonds	Corporate bonds	70,808		—		(2,812)		67,996		—		8,488		59,508		Corporate bonds	59,703		—		(1,740)		57,963		—		39,145		18,818
U.S. government treasury bonds	U.S. government treasury bonds	18,609		—		(495)		18,114		—		6,490		11,624		U.S. government treasury bonds	14,054		—		(325)		13,729		—		9,096		4,633
Asset-backed securities	Asset-backed securities	7,042		—		(59)		6,983		—		3,113		3,870		Asset-backed securities	3,600		—		(13)		3,587		—		2,012		1,575
Municipal bonds	Municipal bonds	5,541		—		(100)		5,441		—		4,047		1,394		Municipal bonds	1,437		—		(18)		1,419		—		1,419		—
U.S. government agency bonds	U.S. government agency bonds	1,201		—		(46)		1,155		—		—		1,155		U.S. government agency bonds	5,214		—		(84)		5,130		—		4,133		997

Total	Total	$	980,714	$	—	$	(3,524)	$	977,190	$	877,501	$	22,138	$	77,551	Total	$	1,035,964	$	—	$	(2,180)	$	1,033,784	$	951,956	$	55,805	$	26,023


										Reported as:															Reported as:
December 31, 2021		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
December 31, 2022																December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
Cash	Cash	$	754,802	$	—	$	—	$	754,802	$	754,802	$	—	$	—	Cash	$	712,921	$	—	$	—	$	712,921	$	712,921	$	—	$	—
Money market funds	Money market funds	343,012		—		(2)		343,010		343,010		—		—		Money market funds	229,129		—		—		229,129		229,129		—		—
Corporate bonds	Corporate bonds	115,507		9		(398)		115,118		1,042		35,065		79,011		Corporate bonds	69,390		—		(2,915)		66,475		—		36,510		29,965
U.S. government treasury bonds	U.S. government treasury bonds	42,976		—		(48)		42,928		—		22,251		20,677		U.S. government treasury bonds	20,559		—		(549)		20,010		—		15,404		4,606
Asset-backed securities	Asset-backed securities	32,031		—		(40)		31,991		—		10,999		20,992		Asset-backed securities	4,514		1		(37)		4,478		—		2,909		1,569
Municipal bonds	Municipal bonds	7,628		—		(15)		7,613		516		3,657		3,440		Municipal bonds	3,447		—		(61)		3,386		—		2,711		675
U.S. government agency bonds	U.S. government agency bonds	1,201		—		(1)		1,200		—		—		1,200		U.S. government agency bonds	5,231		1		(69)		5,163		—		—		5,163

Total	Total	$	1,297,157	$	9	$	(504)	$	1,296,662	$	1,099,370	$	71,972	$	125,320	Total	$	1,045,191	$	2	$	(3,631)	$	1,041,562	$	942,050	$	57,534	$	41,978

The following table summarizes the fair value of our available-for-sale marketable securities classified by contractual maturity as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Due in 1 year or less	Due in 1 year or less	$	17,185	$	59,737	Due in 1 year or less	$	50,644	$	51,037
Due in 1 year through 5 years	Due in 1 year through 5 years	82,504		139,113		Due in 1 year through 5 years	31,184		48,475
Total	Total	$	99,689	$	198,850	Total	$	81,828	$	99,512

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 June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are primarily due to changes in interest rates and credit spreads.

The following tables summarize the gross unrealized losses as of June 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous loss position (in thousands):

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	As of June 30, 2023
	Less than 12 months				12 Months of Greater				Total
June 30, 2023	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate bonds	$	1,514	$	(15)	$	56,155	$	(1,725)		$	57,669	$	(1,740)
U.S. government treasury bonds	1,986		(32)		11,743		(293)			13,729		(325)
Asset-backed securities	2,565		(5)		1,022		(8)			3,587		(13)
Municipal bonds	—		—		685		(18)			685		(18)
U.S. government agency bonds	3,980		(33)		1,150		(51)			5,130		(84)

Total	$	10,045	$	(85)	$	70,755	$	(2,095)		$	80,800	$	(2,180)


	As of December 31, 2022
	Less than 12 months				12 Months of Greater				Total
December 31, 2022	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate bonds	$	10,639	$	(440)	$	54,634	$	(2,475)		$	65,273	$	(2,915)
U.S. government treasury bonds	5,262		(177)		14,748		(372)			20,010		(549)
Asset-backed securities	2,636		(17)		1,275		(20)			3,911		(37)
Municipal bonds	—		—		2,412		(61)			2,412		(61)
U.S. government agency bonds	3,017		(5)		1,136		(64)			4,153		(69)

Total	$	21,554	$	(639)	$	74,205	$	(2,992)		$	95,759	$	(3,631)

Accounts Receivable Factoring

We enter into factoring transactions on a non-recourse basis with financial institutions to sell certain of our non-U.S. accounts receivable. We account for these transactions as sales of accounts receivables and include the cash proceeds as a part of our cash flows from operations in the Condensed Consolidated Statements of Cash Flows. Total accounts receivable sold under the factoring arrangements was $8.2 million during the three months and $16.2 million for the six months ended June 30, 2023. Factoring fees on the sales of receivables were recorded in other income (expense), net in our Condensed Consolidated Statement of Operations and were not material.

Fair Value Measurements

Fair value is an exit price, representing the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

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

~~Table of Contents~~

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. We obtain fair values for our Level 2 investments. Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Table of Contents

The following tables summarize our financial assets measured at fair value as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


Description	Description	Balance as of June 30, 2022		Level 1		Level 2		Level 3		Description	Balance as of June 30, 2023		Level 1		Level 2
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	119,136	$	119,136	$	—	$	—	Money market funds	$	192,549	$	192,549	$	—

Short-term investments:	Short-term investments:									Short-term investments:

U.S. government agency bonds										U.S. government agency bonds	4,133		—		4,133
U.S. government treasury bonds	U.S. government treasury bonds	6,490		6,490		—		—		U.S. government treasury bonds	9,096		9,096		—
Corporate bonds	Corporate bonds	8,488		—		8,488		—		Corporate bonds	39,145		—		39,145
Municipal bonds	Municipal bonds	4,047		—		4,047		—		Municipal bonds	1,419		—		1,419
Asset-backed securities	Asset-backed securities	3,113		—		3,113		—		Asset-backed securities	2,012		—		2,012
Long-term investments:	Long-term investments:									Long-term investments:
U.S. government treasury bonds	U.S. government treasury bonds	11,624		11,624		—		—		U.S. government treasury bonds	4,633		4,633		—
Corporate bonds	Corporate bonds	59,508		—		59,508		—		Corporate bonds	18,818		—		18,818
Municipal bonds		1,394		—		1,394		—

U.S. government agency bonds	U.S. government agency bonds	1,155		—		1,155		—		U.S. government agency bonds	997		—		997
Asset-backed securities	Asset-backed securities	3,870		—		3,870		—		Asset-backed securities	1,575		—		1,575

Other assets:
Investments in privately held companies		11,793		—		—		11,793
		$	230,618	$	137,250	$	81,575	$	11,793

											$	274,377	$	206,278	$	68,099


Description	Balance as of December 31, 2022		Level 1		Level 2
Cash equivalents:
Money market funds	$	229,129	$	229,129	$	—




Short-term investments:
U.S. government treasury bonds	15,404		15,404		—
Corporate bonds	36,510		—		36,510
Municipal bonds	2,711		—		2,711
Asset-backed securities	2,909		—		2,909



Long-term investments:
U.S. government treasury bonds	4,606		4,606		—
Corporate bonds	29,965		—		29,965
Municipal bonds	675		—		675
U.S. government agency bonds	5,163		—		5,163
Asset-backed securities	1,569		—		1,569






	$	328,641	$	249,139	$	79,502

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 under the measurement alternative. Under the measurement alternative, the carrying value of our equity investment is adjusted to fair value for observable transactions for identical or similar investments of the same issuer. Investments in equity securities are reported on our Consolidated Balance Sheet as other assets, and we periodically evaluate them for impairment. We record any change in carrying value of our equity securities, in other income (expense), net in our Consolidated Statement of Operations. The carrying value of our equity investments in privately held companies without readily determinable fair values were not material, excluding Heartland, as of June 30, 2023 or 2022 and the associated adjustments to the carrying values of the investments were not material during the quarters ended June 30, 2023 and 2022.

On April 24, 2023, we entered into a Subscription Agreement (the "Subscription Agreement") with Heartland Dental Holding Corporation (“Heartland”) who is an affiliate of KKR Core Holding Company LLC, which is an investment vehicle

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Description Balance as of December 31, 2021 Level 1 Level 2 Level 3
Cash equivalents:
Money market funds $ 343,010 $ 343,010 $ — $ —
Corporate bonds 1,042 — 1,042 —
Municipal bonds 516 — 516 —
Short-term investments:
U.S. government treasury bonds 22,251 22,251 — —
Corporate bonds 35,065 — 35,065 —
Municipal bonds 3,657 — 3,657 —
Asset-backed securities 10,999 — 10,999 —
Long-term investments:
U.S. government treasury bonds 20,677 20,677 — —
Corporate bonds 79,011 — 79,011 —
Municipal bonds 3,440 — 3,440 —
U.S. government agency bonds 1,200 — 1,200 —
Asset-backed securities 20,992 — 20,992 —
Prepaid expenses and other current assets:
Israeli funds 3,841 — 3,841 —
Other assets:
Investments in privately held companies 8,621 — — 8,621
$ 554,322 $ 385,938 $ 159,763 $ 8,621
managed or advised by, or otherwise affiliated with, Kohlberg Kravis Roberts & Co. L.P. (“KKR”). Heartland is a dental support organization (“DSO”) that provides nonclinical administrative and support services to supported dental professional corporations (“PCs”). Pursuant to the Subscription Agreement we acquired less than a 5% equity interest and have no significant influence in Heartland through the purchase of Class A Common Stock for $75 million. In connection with the Subscription Agreement, we entered into a Stockholders’ Agreement, by and among us, Heartland Dental Topco, LLC (“Topco”) and funds and accounts managed by affiliates of KKR & Co. Inc. (“KKR”), and a Side Letter, by and among us, Heartland, Topco and KKR (the "Side Letter"). Subject to certain restrictions set forth in the Side Letter, we agreed to provisions applicable to Heartland’s stockholders, including certain drag-along and voting obligations.

Similar to our other private equity investments Heartland is accounted for under the measurement alternative. Based on review of our equity investment, we determined there were no adjustments to the carrying value and it is properly reflected on our Consolidated Balance Sheet in other assets at $75 million as of June 30, 2023.

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 trade and intercompany receivables and payables. These forward contracts are classified within Level 2 of the fair value hierarchy. As a result of the settlement of foreign currency forward contracts, during the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we recognized a net ~~gain~~gains of $1.1 million and of $10.8 ~~million and a net loss of $13.0~~ million, respectively, and during the six months ended June 30, 2023 and 2022, we recognized a net loss of $5.3 million and a net gain of $9.2 ~~million. The net loss recognized during the six months ended June 30, 2021 was not material.~~million, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value of foreign exchange forward contracts outstanding was not material.

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The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


	June 30, ~~2022~~2023
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€~~147,830~~218,700	$	~~154,164~~238,786
Canadian Dollar	C$106,000	79,959
Polish Zloty	PLN279,700	68,452
Chinese Yuan	¥~~719,300~~408,000	~~107,297~~56,266
~~Polish Zloty~~British Pound	~~PLN351,500~~£43,900	~~77,556~~55,704
~~Canadian Dollar~~Japanese Yen	~~C$95,200~~¥5,340,000	~~73,748~~37,136
Swiss Franc	CHF30,000	33,526
Brazilian Real	R$~~317,000~~143,300	~~59,913~~
~~Japanese Yen~~	~~¥6,081,000~~	~~44,744~~
~~British Pound~~	~~£34,097~~	~~41,333~~
~~Swiss Franc~~	~~CHF22,500~~	~~23,536~~29,532
Mexican Peso	M$~~282,700~~230,000	~~13,988~~13,491
Israeli Shekel	~~ILS43,160~~ILS49,380	~~12,380~~13,300
New Zealand Dollar	NZ$9,900	6,046
Czech Koruna	Kč60,000	2,750
New Taiwan Dollar	NT$82,000	2,629
Australian Dollar	A$~~4,600~~3,460	~~3,170~~$	2,302
Korean Won	₩1,800,000	1,365
		$	~~611,829~~641,244

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	December 31, ~~2021~~2022
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€~~165,110~~186,900	$	~~186,358~~200,010
Polish Zloty	PLN365,988	83,307
Canadian Dollar	C$~~99,800~~109,000	~~78,018~~80,514
Chinese Yuan	¥~~494,500~~471,000	~~77,358~~68,223
~~Polish Zloty~~British Pound	~~PLN219,800~~£41,200	~~54,014~~49,677
Japanese Yen	¥6,200,000	47,196
Israeli Shekel	ILS110,030	31,383
Swiss Franc	CHF25,000	27,165
Brazilian Real	R$~~286,500~~141,200	~~50,894~~
~~Japanese Yen~~	~~¥5,548,700~~	~~48,206~~
~~British Pound~~	~~£34,740~~	~~46,881~~
~~Israeli Shekel~~	~~ILS54,110~~	~~17,416~~26,839
Mexican Peso	M$~~311,500~~230,000	~~15,133~~11,746
~~Swiss Franc~~New Zealand Dollar	~~CHF9,950~~NZ$6,000	~~10,883~~3,806
Australian Dollar	A$~~6,900~~4,000	~~5,009~~2,721
Czech Koruna	Kč56,000	2,469
New Taiwan Dollar	NT$60,000	1,959
		$	~~590,170~~637,015

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Note 3. Balance Sheet Components

Inventories consist of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Raw materials	Raw materials	$	159,037	$	123,234	Raw materials	$	148,793	$	172,758
Work in process	Work in process	82,292		51,706		Work in process	100,468		96,558
Finished goods	Finished goods	68,717		55,290		Finished goods	63,475		69,436
Total inventories	Total inventories	$	310,046	$	230,230	Total inventories	$	312,736	$	338,752

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


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Value added tax receivables	Value added tax receivables	$	110,988	$	93,610	Value added tax receivables	$	137,248	$	140,484
Prepaid expenses	Prepaid expenses	61,628		70,218		Prepaid expenses	76,608		69,124
Other current assets	Other current assets	62,649		31,477		Other current assets	22,708		16,762
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	235,265	$	195,305	Total prepaid expenses and other current assets	$	236,564	$	226,370

Accrued liabilities consist of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Accrued payroll and benefits	Accrued payroll and benefits	$	152,849	$	288,355	Accrued payroll and benefits	$	211,889	$	149,508
Accrued income taxes						Accrued income taxes	147,618		74,323
Accrued expenses	Accrued expenses	74,281		67,169		Accrued expenses	63,004		64,341
Accrued sales and marketing expenses	Accrued sales and marketing expenses	37,250		41,387		Accrued sales and marketing expenses	43,628		36,407
Current operating lease liabilities						Current operating lease liabilities	28,770		26,574
Accrued property, plant and equipment	Accrued property, plant and equipment	35,563		46,561		Accrued property, plant and equipment	11,992		19,922
Current operating lease liabilities		24,613		22,719
Accrued professional fees		18,433		31,457

Other accrued liabilities	Other accrued liabilities	73,470		109,667		Other accrued liabilities	93,262		83,299
Total accrued liabilities	Total accrued liabilities	$	416,459	$	607,315	Total accrued liabilities	$	600,163	$	454,374

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

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		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Balance at beginning of period	Balance at beginning of period	$	16,169	$	12,615	Balance at beginning of period	$	17,873	$	16,169
Charged to cost of net revenues	Charged to cost of net revenues	7,660		8,936		Charged to cost of net revenues	9,421		7,660
Actual warranty expenditures	Actual warranty expenditures	(7,334)		(7,105)		Actual warranty expenditures	(6,797)		(7,334)
Balance at end of period	Balance at end of period	$	16,495	$	14,446	Balance at end of period	$	20,497	$	16,495

Deferred revenues consist of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Deferred revenues - current	Deferred revenues - current	$	1,242,348	$	1,152,870	Deferred revenues - current	$	1,396,747	$	1,343,643
Deferred revenues - long-term 1	Deferred revenues - long-term 1	$	155,510	$	136,684	Deferred revenues - long-term 1	$	148,277	$	160,662

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

During the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we recognized ~~$969.6~~$1,002.2 million and ~~$1,010.8~~$969.6 million of net revenues, respectively, of which ~~$178.4~~$199.0 million and ~~$134.4~~$178.4 million was included in the deferred revenues balance at December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

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During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we recognized ~~$1,942.8~~$1,945.3 million and ~~$1,905.6~~$1,942.8 million of net revenues, respectively, of which ~~$363.3~~$404.7 million and ~~$260.2~~$363.3 million was included in the deferred revenues balance at December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of June 30, ~~2022~~2023 were ~~$1,409.4~~$1,552.6 million. These performance obligations are expected to be fulfilled over the next six months to five years.

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Note 4. Goodwill and Intangible Assets

Goodwill

The change in the carrying value of goodwill for the six months ended June 30, ~~2022,~~2023, categorized by reportable segments, is as follows (in thousands):

Clear Aligner Systems and Services Total
Balance as of December 31, 2021 $ 112,208 $ 306,339 $ 418,547
Foreign currency translation adjustments
(3,804) (24,643) (28,447)
Balance as of June 30, 2022 $ 108,404 $ 281,696 $ 390,100


	Clear Aligner		Systems and Services		Total
Balance as of December 31, 2022	$	109,480	$	298,071	$	407,551

Foreign currency translation adjustments	959		6,255		7,214
Balance as of June 30, 2023	$	110,439	$	304,326	$	414,765

Intangible Long-Lived Assets

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


		Weighted Average Amortization Period (in years)	Gross Carrying Amount as of June 30, 2022		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of June 30, 2022			Weighted Average Amortization Period (in years)	Gross Carrying Amount as of June 30, 2023		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of June 30, 2023
Existing technology	Existing technology	10	$	104,531	$	(27,640)	$	(4,328)	$	72,563	Existing technology	10	$	112,051	$	(39,434)	$	(4,328)	$	68,289
Customer relationships	Customer relationships	10	21,500		(4,838)		—		16,662		Customer relationships	10	21,500		(6,988)		—		14,512
Trademarks and tradenames	Trademarks and tradenames	10	17,200		(5,466)		(4,179)		7,555		Trademarks and tradenames	10	17,200		(7,361)		(4,122)		5,717
Patents	Patents	8	6,511		(4,891)		—		1,620		Patents	8	6,511		(5,685)		—		826
			$	149,742	$	(42,835)	$	(8,507)	98,400				$	157,262	$	(59,468)	$	(8,450)	89,344
Foreign currency translation adjustments	Foreign currency translation adjustments								(4,583)		Foreign currency translation adjustments								(48)
Total intangible assets, net 1	Total intangible assets, net 1								$	93,817	Total intangible assets, net 1								$	89,296

1 Also includes $33.5 million of fully amortized intangible assets related to customer relationships.


		Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2021		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of December 31, 2021			Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2022		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of December 31, 2022
Existing technology	Existing technology	10	$	104,531	$	(22,495)	$	(4,328)	$	77,708	Existing technology	10	$	112,051	$	(33,537)	$	(4,328)	$	74,186
Customer relationships	Customer relationships	11	55,000		(25,891)		(10,751)		18,358		Customer relationships	10	21,500		(5,913)		—		15,587
Trademarks and tradenames	Trademarks and tradenames	10	17,200		(4,547)		(4,179)		8,474		Trademarks and tradenames	10	17,200		(6,442)		(4,122)		6,636
Patents	Patents	8	6,511		(4,495)		—		2,016		Patents	8	6,511		(5,288)		—		1,223
			$	183,242	$	(57,428)	$	(19,258)	106,556				$	157,262	$	(51,180)	$	(8,450)	97,632
Foreign currency translation adjustments	Foreign currency translation adjustments								3,153		Foreign currency translation adjustments								(1,912)
Total intangible assets, net									$	109,709
Total intangible assets, net 1											Total intangible assets, net 1								$	95,720

1 Also includes $33.5 million of fully amortized intangible assets related to customer relationships.

The total estimated annual future amortization expense for these acquired intangible assets as of June 30, ~~2022~~2023 is as follows (in thousands):

Fiscal Year Ending December 31, Amortization
Remainder of 2022 $ 7,536
2023 14,997
2024 13,831
2025 13,455
2026 12,849
Thereafter 35,732
Total $ 98,400

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Fiscal Year Ending December 31,	Amortization
Remainder of 2023	$	8,213
2024	15,335
2025	14,959
2026	14,353
2027	11,992
Thereafter	24,492
Total	$	89,344

Amortization expense for ~~both~~ the three months ended June 30, 2023 and 2022 was $4.1 million and ~~2021 was~~ $3.9 million, respectively, and amortization expense for both the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 was $8.2 ~~million and $7.8 million, respectively.~~million.

Note 5. Credit Facility

~~On July 21, 2020, we entered into~~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 ~~sublimit and a~~facility which included extending the maturity date ~~of July 21, 2023~~on the facility to December 23, 2027 and replacing the interest rate from the existing LIBOR with SOFR (“~~2020~~2022 Credit Facility”). The ~~2020~~2022 Credit Facility requires us to comply with specific financial conditions and performance requirements. Loans under the ~~2020~~2022 Credit Facility bear interest, at our option, at either a rate based on the ~~reserve adjusted LIBOR~~SOFR for the applicable interest period or a base rate, in each case plus a margin. The base rate is the highest of the credit facility's publicly announced prime rate, the federal funds rate plus 0.50% and one-month LIBOR plus 1.0%. The margin ranges from 1.50% to 2.25% for LIBOR loans and 0.50% to 1.25% for base rate loans. The 2020 Credit Facility allows for an alternative rate to be identified if LIBOR is no longer available. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period (and at three month intervals if the interest period exceeds three months) in the case of LIBOR loans. The outstanding principal, together with accrued and unpaid interest, is due on the maturity date. As of June 30, ~~2022,~~2023, we had no outstanding borrowings under the ~~2020~~2022 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.

Note 6. Legal Proceedings

2019 Shareholder Derivative Lawsuit

In January 2019, 3three derivative lawsuits were filed in the U.S. District Court for the Northern District of California which were later consolidated, purportedly on our behalf, ~~of Align,~~ 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, ~~of Align,~~ 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 ~~was stayed until April 28, 2022.~~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, ~~of Align,~~ 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 ~~was similarly stayed until April 28, 2022.~~is currently stayed. Defendants have not yet responded to the complaint.

~~Align believes~~We believe these claims are without merit. ~~Align is~~We are currently unable to predict the outcome of these lawsuits and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

~~2020 Securities Class Action Lawsuit~~

On March 2, 2020, a class action lawsuit against Align and two of our executive officers was filed in the U.S. District Court for the Southern District of New York (later transferred to the U.S. District Court for the Northern District of California) on behalf of a purported class of purchasers of our common stock. The complaint alleged claims under the federal securities laws and sought monetary damages in an unspecified amount and costs and expenses incurred in the litigation. The lead plaintiff filed an amended complaint on August 4, 2020 against Align and three of our executive officers alleging similar claims as in the initial complaint on behalf of a purported class of purchasers of our common stock from April 25, 2019 to July 24, 2019. On March 29, 2021, defendants’ motion to dismiss the amended complaint was granted with leave for the lead plaintiff to file a further amended complaint. On April 22, 2021, lead plaintiff filed a notice stating it would not file a further amended complaint. On April 23, 2021, the Court dismissed the action with prejudice and judgment was entered. Lead plaintiff filed a notice of appeal on April 28, 2021 ~~and filed its opening appeal brief with the United States Court of Appeals for the Ninth Circuit on September 1, 2021.~~ The defendants-appellees filed their answering brief on November 22, 2021. The lead plaintiff-appellant’s reply brief was filed on January 12, 2022. Oral argument was held on March 10, 2022. On July 8, 2022, a panel of the Ninth Circuit affirmed the district court order dismissing the compla~~int. On July 21, 2022, plaintiff-appellant filed a petition for rehearing or hearing en banc, which is pending. Align believes th~~ese claims are without merit and intends to vigorously defend itself. Align is currently unable to predict the outcome of this lawsuit and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

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~~2020 Shareholder Derivative Lawsuit~~

On May 4, 2020, a derivative lawsuit was filed in the U.S. District Court for the Northern District of California, purportedly on behalf of Align, 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 presented in the 2020 Securities Class Action Lawsuit, but this complaint asserts state law claims for breach of fiduciary duty and insider trading. The complaint seeks unspecified monetary damages on behalf of Align, 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. This action is stayed pending resolution of the appeal in the 2020 Securities Class Action Lawsuit. ~~Align believes these claims are without merit.~~ ~~Align is currently unable to predict the outcome of this lawsuit and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.~~

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 monetary damages and injunctive relief relating to ~~Align’s~~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. A jury trial is scheduled to begin in this matter on June 29, 2024. ~~Align believes~~We believe the plaintiffs’ claims are without merit and ~~intends~~we intend to vigorously defend ~~itself.~~ourselves.

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 monetary damages and injunctive relief relating to ~~Align’s~~our alleged market activities in alleged clear aligner and intraoral scanner ~~markets.~~markets based on Section 2 of the Sherman Act. Plaintiff filed an amended complaint on July 30, 2021 adding new plaintiffs and various state law claims.

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Plaintiffs filed a second amended complaint on October 21, 2021. On March 2, 2022, Plaintiffs filed a third amended complaint. On October 3, 2022, Plaintiffs filed a fourth amended complaint. On May 18, 2023, the court granted plaintiffs leave to file a fifth amended complaint. The amended complaints added allegations based on Section 1 of the Sherman Act. A jury trial is scheduled to begin in this matter on June 29, ~~2024. Align believes~~2024 for issues related to Section 2 allegations. A jury trial is scheduled to begin in this matter on January 21, 2025 for issues related to Section 1 allegations. We believe the plaintiffs’ claims are without merit and ~~intends~~we intend to vigorously defend ~~itself.~~ourselves.

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

SDC Dispute

In April 2018, SDC Financial LLC, SmileDirectClub LLC, and the Members of SDC Financial LLC other than the Company (collectively, the “SDC Entities”) initiated confidential arbitration proceedings against Align. In an award dated March 4, 2019, (“Award”) an arbitrator found that Align breached a restrictive covenant and that Align misused the SDC Entities’ confidential information and violated fiduciary duties to SDC Financial LLC. As part of the Award, Align was enjoined from opening new Invisalign stores or providing certain services in physical retail establishments in connection with the marketing and sale of clear aligners in the U.S., and enjoined from using the SDC Entities’ confidential information. The arbitrator extended the expiration date of specified aspects of the restrictive covenant to August 18, 2022. The arbitrator also ordered Align to tender its SDC Financial LLC membership interests to the SDC Entities for a purchase price equal to the “capital account” balance as of October 31, 2017, to be determined in accordance with the applicable provisions of the SDC Operating Agreements. No financial damages were awarded to the SDC Entities. The Circuit Court for Cook County, Illinois confirmed the Award on April 29, 2019.

On August 27, 2020, ~~Align~~we initiated a confidential arbitration proceeding against SmileDirectClub LLC (“SDC”) before the American Arbitration Association in San Jose, California. This arbitration relates to the Strategic Supply Agreement (“Supply Agreement”) entered into between the parties in 2016. The complaint alleges that SDC breached the Supply Agreement’s terms, causing damages to ~~Align~~us in an amount to be determined. On January 19, 2021, SDC filed a counterclaim alleging that ~~Align~~we breached the Supply Agreement. On May 3, 2022, SDC filed an additional counterclaim alleging that ~~Align~~we breached the Supply Agreement. ~~Align denies~~We deny SDC's allegations in the counterclaims and ~~will~~we intend to vigorously defend ~~itself~~ourselves against them. The arbitration hearing on ~~Align’s~~our claims and SDC’s first counterclaim was held on July 18-27, 2022 in Chicago, Illinois.

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

On December 2, 2022, SDC filed a motion to re-open the arbitrator’s interim award in Align’s favor. On March 3, 2023, the arbitrator denied SDC’s motion to re-open. On March 6, 2023, Align filed a petition to confirm the arbitrator’s interim award in the Superior Court for Santa Clara County.

The arbitration hearing on SDC’s second counterclaim ~~is set for~~was held on February ~~20-24, 2023.~~21-23, 2023 in Chicago, Illinois. On May 18, 2023, the arbitrator issued a final award on SDC’s second counterclaim, finding that Align did not breach the Supply Agreement. The final award subsumed the interim award on our claims and SDC’s first counterclaim and concluded the Supply Agreement arbitration proceedings.

On May 30, 2023, Align ~~is currently unable~~filed a petition to ~~predict~~confirm the ~~outcome~~final award in the Superior Court of ~~these disputes~~Santa Clara County. Confirmation of the final award may be material to our results in the quarter reported. On June 16, 2023, SDC filed a petition to vacate the final award before the same court. On August 3, 2023, the Superior Court held arguments on Align's petition to confirm and ~~therefore cannot determine~~SDC’s petition to vacate the ~~likelihood~~final award in Align’s favor. Depending on how the Superior Court rules on those petitions, we anticipate recognizing the amount ultimately realizable following confirmation of ~~loss or success nor estimate a range of possible loss or success, if any.~~the final award.

In addition to the above, in the ordinary course of ~~Align’s~~our operations, ~~Align is~~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

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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 ~~Align’s~~our view of these matters may change in the future as litigation and events related thereto unfold; ~~Align~~we currently ~~does~~do not believe that these matters, individually or in the aggregate, will materially affect ~~Align’s~~our financial position, results of operations or cash flows.

Note 7. Commitments and Contingencies

Off-Balance Sheet Arrangements

As of June 30, ~~2022,~~2023, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources other than certain items disclosed in Note 118 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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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 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 June 30, ~~2022,~~2023, we did not have any material indemnification claims that were probable or reasonably possible.

Note 8. Stockholders’ Equity

As of June 30, ~~2022,~~2023, the 2005 Incentive Plan, as amended, has a total reserve of 27,783,379 shares of which ~~3,744,033~~2,734,533 shares are available for issuance.

Summary of Stock-Based Compensation Expense

The stock-based compensation related to our stock-based awards and employee stock purchase plan for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Cost of net revenues $ 1,614 $ 1,418 $ 3,128 $ 2,724
Selling, general and administrative 26,491 23,058 51,216 44,902
Research and development 6,035 4,379 11,417 8,470
Total stock-based compensation $ 34,140 $ 28,855 $ 65,761 $ 56,096

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	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of net revenues	$	1,901	$	1,614	$	3,708	$	3,128
Selling, general and administrative	29,002		26,491		57,693		51,216

Research and development	6,957		6,035		14,194		11,417
Total stock-based compensation	$	37,860	$	34,140	$	75,595	$	65,761

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 six months ended June 30, ~~2022~~2023 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)			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, 2021		492	$	369.17
Unvested as of December 31, 2022								Unvested as of December 31, 2022	489	$	427.23
Granted	Granted	232	485.01					Granted	502	316.03
Vested and released	Vested and released	(189)	333.28					Vested and released	(191)	380.55
Forfeited	Forfeited	(22)	429.13					Forfeited	(27)	394.18
Unvested as of June 30, 2022		513	$	432.28	1.6	$	121,475
Unvested as of June 30, 2023								Unvested as of June 30, 2023	773	$	367.66	1.8	$	273,404

As of June 30, ~~2022,~~2023, we expect to recognize ~~$174.7~~$224.7 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of ~~2.6~~3.0 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 ~~Align’s~~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

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

The following table summarizes the MSU performance activity for the six months ended June 30, ~~2022:~~2023:


		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)			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, 2021		174	$	551.57
Unvested as of December 31, 2022								Unvested as of December 31, 2022	144	$	725.73
Granted 1	Granted 1	101	607.96					Granted 1	82	629.53
Vested and released	Vested and released	(128)	396.10					Vested and released	(25)	392.67
Forfeited	Forfeited	(3)	744.39					Forfeited	(41)	392.67
Unvested as of June 30, 2022		144	$	725.73	1.5	$	34,097
Unvested as of June 30, 2023								Unvested as of June 30, 2023	160	$	812.75	1.9	$	56,670

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

As of June 30, ~~2022,~~2023, we expect to recognize ~~$55.2~~$67.2 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.9 years.

Restricted Stock Units with Performance Conditions (“PSUs”)

During the six months ended June 30, 2023, we did not grant any PSUs to any employees. As of June 30, 2023, we expect to recognize $0.6 million of total unamortized compensation costs, net of estimated forfeitures, related to PSUs over a weighted average term of 1.5 years. Total PSUs granted were 4,728 and the weighted average grant date fair value for the PSUs was $201.63.

Employee Stock Purchase Plan

As of June 30, ~~2022,~~2023, we have ~~2,156,295~~2,046,725 shares available for future issuance under our Amended and Restated 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”).

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


		Six Months Ended June 30,						Six Months Ended June 30,
		2022			2021					2023			2022
Expected term (in years)	Expected term (in years)	1.5			1.0				Expected term (in years)	1.0			1.5
Expected volatility	Expected volatility	48.6		%	58.8		%		Expected volatility	56.7		%	48.6		%
Risk-free interest rate	Risk-free interest rate	1.0		%	0.1		%		Risk-free interest rate	4.6		%	1.0		%
Expected dividends	Expected dividends	—			—				Expected dividends	—			—
Weighted average fair value at grant date	Weighted average fair value at grant date	$	196.97		$	202.74			Weighted average fair value at grant date	$	105.75		$	196.97

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As of June 30, ~~2022,~~2023, we expect to recognize ~~$14.3~~$14.5 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of ~~0.8 year.~~0.6 years.

Note 9. Common Stock Repurchase ~~Program~~Programs

In May 2018, our Board of Directors authorized a plan to repurchase up to $600.0 million of our common stock (“May 2018 Repurchase Program”). As of December 31, 2021, the authorization under the May 2018 Repurchase Program was completed. 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”)~~. As~~, 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”), none of which had been utilized as of June 30, ~~2022, we~~2023. The January 2023 Repurchase Program does not have ~~$449.9 million available for repurchases under the May 2021 Repurchase Program.~~an expiration date.

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Accelerated Share Repurchase Agreements (“ASRs”)

During the ~~six~~three months ended ~~June 30, 2022 and 2021,~~March 31, 2023, we entered into or completed ASRs providing for the repurchase of our common stock based on the volume-weighted average price during the term of the agreement, less an agreed upon discount. We did not enter into any ASRs during the three months ended June 30, 2023. The following table summarizes the information regarding repurchases of our common stock under the ASRs:

Agreement
Date Repurchase
Program Amount Paid
(in millions) Completion
Date Total Shares
Received Average Price per Share
Q2 2021 May 2018 $ 100.0 Q3 2021 171,322 $ 583.70
Q2 2021 May 2021 $ 100.0 Q3 2021 161,707 $ 618.40
Q2 2022 May 2021 $ 200.0 Q2 2022 756,502 $ 264.37

Agreement
Date

Repurchase
Program

Amount Paid
(in millions)

Completion
Date

Total Shares
Received

Average Price per Share

Q4 2022

May 2021

N/A1

Q1 2023

136,448

293.15

Q1 2023

May 2021

250.0

Q1 2023

805,905

310.21

1 During the fourth quarter of 2022, we entered into a $200.0 million ASR which was not completed as of December 31, 2022. During the first quarter of 2023, we paid a final $40.0 million related to the $200.0 million ASR, closing this ASR with the final delivery of shares.

~~Open Market Common Stock Repurchases~~

~~During the six months ended~~As of June 30, ~~2022, we repurchased on~~2023, $1.0 billion remains available for repurchases under the ~~open market approximately 0.1 million shares of our common stock at an average price of $522.61 per share, including commissions and fees, for an aggregate purchase price of $75.0 million.~~January 2023 Stock Repurchase Program.

Note 10. Accounting for Income Taxes

Our provision for income taxes was ~~$60.8~~$59.8 million and ~~$69.1~~$60.8 million for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, representing effective tax rates of ~~35.0%~~34.8% and ~~25.7%~~35.0%, respectively. Our provision for income taxes was ~~$114.0~~$106.6 million and ~~$130.3~~$114.0 million for the six months ~~ended~~ June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, representing effective tax rates of ~~31.6%~~34.8% and ~~24.6%, respectively.~~31.6%. Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 primarily due to the recognition of additional tax expense resulting from U.S. taxes on foreign earnings, foreign income taxed at different rates, state income taxes, and non-deductible expenses in the U.S., partially offset by the recognition of excess tax benefits related to stock-based compensation. Additionally, a change in U.S. tax laws effective January 1, 2022 which requires capitalization and amortization of research and development expenses incurred after December 31, 2021 has increased our effective tax rate for the three and six months ended June 30, 2022.

We exercise significant judgment in regards to estimates of future market growth, forecasted earnings and projected taxable income in determining the provision for income taxes and for purposes of assessing our ability to utilize any future benefit from deferred tax assets. We continue to assess the realizability of the deferred tax assets as we take into account new information.

We file U.S. federal, U.S. state, and non-U.S. income tax returns. Our major tax jurisdictions include U.S. federal, the State of California and Switzerland. For U.S. federal and state tax returns, we are no longer subject to tax examinations for years before 2018 and 2017, respectively. Our Israeli subsidiary is under tax audit for years 2016 through 2019. During the fourth quarter of 2021, the Israel Tax Authority issued a tax assessment in connection with a 2016 transaction to which our Israeli subsidiary was a party. We filed an administrative appeal challenging the assessment during the first quarter of 2022 and, by doing so, proceeded to the next administrative stage of the audit. We will continue to vigorously defend our Israeli subsidiary’s tax return position. Based on our assessment of the information currently available, we have not derecognized or remeasured our tax positions with respect to this matter during the six months ended June 30, 2022. With few exceptions, we are no longer subject to examination by foreign tax authorities for years before 2015.

Our total gross unrecognized tax benefits, excluding interest and penalties, were ~~$73.2~~$148.2 million and ~~$63.3~~$141.6 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, a material amount of which would impact our effective tax rate if recognized. ~~We have elected to recognize interest and penalties related to~~The increase in our unrecognized tax benefits ~~as a component of~~relates primarily to positions taken on income tax return calculations finalized during the three and six months ended June 30, 2023.

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taxes. Total interest and penalties accrued as of June 30, 2022 was not material. While we defend income tax audits in various jurisdictions and the results of such audits may differ materially from the amounts accrued for each year, we cannot currently ascertain the bases on which any given audit will be ultimately resolved. Accordingly, we are unable to estimate the range of possible adjustments to our balance of gross unrecognized tax benefits in the next 12 months.

Note 11. Net Income per Share

The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands, except per share amounts):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Numerator:	Numerator:									Numerator:
Net income	Net income	$	112,800	$	199,714	$	247,098	$	400,090	Net income	$	111,814	$	112,800	$	199,612	$	247,098
Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding, basic	Weighted average common shares outstanding, basic	78,395		79,008		78,568		79,004		Weighted average common shares outstanding, basic	76,524		78,395		76,722		78,568
Dilutive effect of potential common stock	Dilutive effect of potential common stock	150		630		272		733		Dilutive effect of potential common stock	165		150		175		272
Total shares, diluted	Total shares, diluted	78,545		79,638		78,840		79,737		Total shares, diluted	76,689		78,545		76,897		78,840

Net income per share, basic	Net income per share, basic	$	1.44	$	2.53	$	3.15	$	5.06	Net income per share, basic	$	1.46	$	1.44	$	2.60	$	3.15
Net income per share, diluted	Net income per share, diluted	$	1.44	$	2.51	$	3.13	$	5.02	Net income per share, diluted	$	1.46	$	1.44	$	2.60	$	3.13

Anti-dilutive potential common shares 1	Anti-dilutive potential common shares 1	361		49		314		38		Anti-dilutive potential common shares 1	329		361		367		314

1 Represents RSUs and MSUs not included in the calculation of diluted net income per share as the effect would have been anti-dilutive.

Note 12. Supplemental Cash Flow Information

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


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Acquisition of property, plant and equipment in accounts payable and accrued liabilities	Acquisition of property, plant and equipment in accounts payable and accrued liabilities	$	60,115	$	133,530	Acquisition of property, plant and equipment in accounts payable and accrued liabilities	$	20,648	$	60,115
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	15,048	$	14,030	Operating cash flows from operating leases	$	16,152	$	15,048
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	16,351	$	24,338	Operating leases	$	21,346	$	16,351

Note 13. Segments and Geographical Information

Segment Information

We report segment information based on the management approach. The management approach designates the internal reporting used by our Chief Operating Decision Maker for decision making and performance assessment as the basis for determining our reportable segments. The performance measures of our reportable segments include net revenues, gross profit and income from operations. Income from operations for each segment includes all geographic revenues, related cost of net revenues and operating expenses directly attributable to the segment. Certain operating expenses are attributable to operating segments and each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. Costs not specifically allocated to segment income from operations include various corporate expenses such as stock-based compensation and costs related to IT, facilities, human resources, accounting and finance, legal and regulatory, and other separately managed general and administrative costs outside the operating ~~segments.~~segments and restructuring costs. We group our operations into 2two reportable ~~segments:~~segments (i) Clear Aligner segment and (ii) Imaging Systems and CAD/CAM services (“Systems and Services”) segment.

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Summarized financial information by segment is as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net revenues	Net revenues									Net revenues
Clear Aligner	Clear Aligner	$	798,398	$	840,959	$	1,608,094	$	1,594,228	Clear Aligner	$	832,674	$	798,398	$	1,622,478	$	1,608,094
Systems and Services	Systems and Services	171,155		169,849		334,678		311,351		Systems and Services	169,499		171,155		322,842		334,678
Total net revenues	Total net revenues	$	969,553	$	1,010,808	$	1,942,772	$	1,905,579	Total net revenues	$	1,002,173	$	969,553	$	1,945,320	$	1,942,772
Gross profit	Gross profit									Gross profit
Clear Aligner	Clear Aligner	$	585,245	$	646,665	$	1,190,941	$	1,231,199	Clear Aligner	$	603,251	$	585,245	$	1,169,390	$	1,190,941
Systems and Services	Systems and Services	102,314		111,873		205,964		204,437		Systems and Services	110,358		102,314		204,873		205,964
Total gross profit	Total gross profit	$	687,559	$	758,538	$	1,396,905	$	1,435,636	Total gross profit	$	713,609	$	687,559	$	1,374,263	$	1,396,905
Income from operations	Income from operations									Income from operations
Clear Aligner	Clear Aligner	$	307,209	$	347,626	$	619,928	$	675,091	Clear Aligner	$	306,093	$	307,209	$	583,614	$	619,928
Systems and Services	Systems and Services	45,599		64,675		96,398		111,903		Systems and Services	52,049		45,599		87,625		96,398
Unallocated corporate expenses	Unallocated corporate expenses	(164,612)		(143,399)		(330,048)		(292,646)		Unallocated corporate expenses	(186,211)		(164,612)		(365,792)		(330,048)
Total income from operations	Total income from operations	$	188,196	$	268,902	$	386,278	$	494,348	Total income from operations	$	171,931	$	188,196	$	305,447	$	386,278
Stock-based compensation	Stock-based compensation									Stock-based compensation
Clear Aligner	Clear Aligner	$	3,001	$	2,632	$	5,855	$	4,926	Clear Aligner	$	4,491	$	3,001	$	9,145	$	5,855
Systems and Services	Systems and Services	236		174		450		345		Systems and Services	263		236		584		450
Unallocated corporate expenses	Unallocated corporate expenses	30,903		26,049		59,456		50,825		Unallocated corporate expenses	33,106		30,903		65,866		59,456
Total stock-based compensation	Total stock-based compensation	$	34,140	$	28,855	$	65,761	$	56,096	Total stock-based compensation	$	37,860	$	34,140	$	75,595	$	65,761
Depreciation and amortization	Depreciation and amortization									Depreciation and amortization
Clear Aligner	Clear Aligner	$	14,029	$	12,170	$	27,796	$	23,290	Clear Aligner	$	16,590	$	14,029	$	32,988	$	27,796
Systems and Services	Systems and Services	6,776		4,622		13,698		9,167		Systems and Services	7,743		6,776		15,889		13,698
Unallocated corporate expenses	Unallocated corporate expenses	9,476		9,100		18,413		19,070		Unallocated corporate expenses	11,486		9,476		22,762		18,413
Total depreciation and amortization	Total depreciation and amortization	$	30,281	$	25,892	$	59,907	$	51,527	Total depreciation and amortization	$	35,819	$	30,281	$	71,639	$	59,907

The following table reconciles total segment income from operations in the table above to net income before provision for income taxes (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Total segment income from operations	Total segment income from operations	$	352,808	$	412,301	$	716,326	$	786,994	Total segment income from operations	$	358,142	$	352,808	$	671,239	$	716,326
Unallocated corporate expenses	Unallocated corporate expenses	(164,612)		(143,399)		(330,048)		(292,646)		Unallocated corporate expenses	(186,211)		(164,612)		(365,792)		(330,048)

Total income from operations	Total income from operations	188,196		268,902		386,278		494,348		Total income from operations	171,931		188,196		305,447		386,278
Interest income	Interest income	245		383		922		2,026		Interest income	4,421		245		6,758		922
Other income (expense), net	Other income (expense), net	(14,832)		(483)		(26,105)		34,049		Other income (expense), net	(4,763)		(14,832)		(5,992)		(26,105)

Net income before provision for income taxes	Net income before provision for income taxes	$	173,609	$	268,802	$	361,095	$	530,423	Net income before provision for income taxes	$	171,589	$	173,609	$	306,213	$	361,095

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Geographical Information

Net revenues are presented below by geographic area (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net revenues 1:	Net revenues 1:									Net revenues 1:
U.S.	U.S.	$	430,053	$	434,398	$	850,973	$	817,400	U.S.	$	429,598	$	430,053	$	840,736	$	850,973
Switzerland	Switzerland	330,351		366,334		662,090		681,784		Switzerland	341,006		330,351		654,137		662,090

Other International	Other International	209,149		210,076		429,709		406,395		Other International	231,569		209,149		450,447		429,709
Total net revenues	Total net revenues	$	969,553	$	1,010,808	$	1,942,772	$	1,905,579	Total net revenues	$	1,002,173	$	969,553	$	1,945,320	$	1,942,772

1 Net revenues are attributed to countries based on the location of where revenues are recognized by our legal entities.

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


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Long-lived assets 1:	Long-lived assets 1:					Long-lived assets 1:
Switzerland	Switzerland	$	499,626	$	444,205	Switzerland	$	566,755	$	532,921
U.S.	U.S.	212,071		210,582		U.S.	208,822		214,804
China		123,180		125,346

Other International		465,479		423,050

Other International2						Other International2	629,346		603,010
Total long-lived assets	Total long-lived assets	$	1,300,356	$	1,203,183	Total long-lived assets	$	1,404,923	$	1,350,735

1 Long-lived assets are attributed to countries based on the location of our entity that owns or leases the assets.

2 Certain prior period immaterial amounts have been reclassified to conform to current presentation.

Note 14. Restructuring and Other Charges

During the fourth quarter of 2022, we initiated a restructuring plan to increase efficiencies across the organization which was completed during the first half of 2023. During fiscal 2022, we incurred approximately $10.2 million in restructuring expenses, of which $3.9 million remained unpaid and was included in Accrued liabilities as of December 31, 2022. During the first quarter of 2023, we paid $3.7 million, and recorded incremental restructuring expenses of approximately $0.1 million. The remaining $0.3 million balance as of March 31, 2023 was paid during the three months ended June 30, 2023.

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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, as amended (the ~~"Securities Act"~~“Securities Act”), 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 and the means to achieve them, our beliefs and expectations regarding macroeconomic conditions, including inflation, fluctuations in currency exchange rates, ~~consumer confidence and demand,~~rising interest rates, market volatility, weakness in general economic conditions and recessions and the impact of efforts by central banks and federal, state and local governments to combat inflation and recession, our expectations and beliefs regarding customer and consumer purchasing behavior and changes in consumer spending habits, our expectations regarding the impact of the military conflict in Ukraine and our operations and assets in Russia, our expectations regarding product mix and product adoption, our expectations regarding competition and our ability to compete in our target markets, our expectations regarding the near and long-term implications of the COVID-19 pandemic on the global and regional economies, our expectations regarding the impact of the military conflict in Ukraine generally and specifically regarding our operations and assets in Russia, including the potential ramifications of sanctions and regarding relations with other countries and impact on our workforce located in Russia, our marketing and efforts to build our brand awareness, our estimates regarding the size and opportunities of the markets we are targeting along with our expectations for growth in those markets, our beliefs regarding the impact of technological innovation in general, and in our solutions and products in particular, on target markets and patient care, our beliefs regarding digital dentistry and its potential to impact our business, our intentions regarding expanding our business, including its impact on our operational flexibility and responsiveness to customer demand, our beliefs regarding the importance of our manufacturing operations on our success, 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 beliefs regarding our business strategy and growth drivers, 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 ~~expectation~~expectations regarding ~~customer~~the existence and ~~consumer purchasing behavior, including~~impact of seasonality, our expectations ~~related~~regarding the sales growth of our intraoral scanner sales, our expectations regarding the productivity impact additional sales representatives will have on our sales and the impact of specialization of those representatives in sales channels, our expectations regarding the continued expansion of our international markets and their growth, our expectations regarding staying in compliance with laws and regulations currently applicable to, ~~consumer demand for digital solutions,~~or which may become applicable to, our business both in the United States and internationally, our beliefs regarding our culture and commitment and its impact on our financial and operational performance and its importance to our future success, our expectations for future investments in and benefits from consumer demand sales and marketing activities, our preparedness and our ~~customers'~~customers’ preparedness to react to changing circumstances and demand, ~~results of operations and financial condition,~~ our expectations for our expenses and capital obligations and expenditures in particular, our intentions to control spending and for investments, our intentions regarding the investment of our international earnings from operations, 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 expectations regarding our tax positions and the ~~judgments~~judgements we make related to our tax obligations, our predicted level of operating expenses and gross margins and other factors beyond our control, ~~our expectations regarding 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,~~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, ~~2021~~2022 as filed with the Securities and Exchange Commission (the “SEC”).

Executive Overview of Results

Trends and Uncertainties

Our business strategic priorities remain focused on four principal pillars offor growth: (i) international expansion; (ii) general practitioner dentists (“GPs”) adoption; (iii) patient demand and conversion; and (iv) orthodontic utilization. Our growth strategy depends on our ability to facilitate the digital transformation of dentistry happening around the world, 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. Below is a discussion of the significant trends and uncertainties that could impact to our operations:

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Macroeconomic Challenges and Military Conflict in Ukraine

Our revenues ~~and costs~~ are susceptible to fluctuations in macroeconomic conditions, in line with inflation, rising interest rates, threats of or actual recessions, fluctuations in currency exchange rates, supply chain challenges, market volatility, actual and ~~slowing global~~threatened wars and ~~regional economic activity~~military actions, and ~~contractions, changes in~~other factors, each of which impact customer ~~and~~confidence, consumer sentiment and ~~demand, seasonality, increasing~~demand. Many of these same factors also impact our costs and those of our suppliers through higher raw material prices, ~~for commodities, services and~~ transportation ~~and disruptions in our manufacturing,~~costs, labor costs, supply and distribution operations and also those of our suppliers. These factors can be further exacerbated by the anticipation of, or actual, global and regional economic recessions which compound the impacts of existing macroeconomic challenges. Moreover,operations. Additionally, many of our international operations are denominated in currencies other than the U.S. dollar ~~and the~~which were impacted in 2022 by macroeconomic slowing or contraction causing weakening ~~of the foreign currencies~~ against the U.S. dollar, ~~has caused a negative impact on~~which negatively impacted our financial condition and results of ~~operations which we expect to continue into the future. Specifically, during~~operations. In the first half of ~~2022, primarily due to~~2023, the ~~military conflict between Russia and Ukraine and the significant sanctions that followed, Russia’s currency, the ruble,~~U.S. dollar weakened against a number of these other currencies, favorably impacting our financial condition and results of operations. We expect this moderation of the ~~U.S. dollar.~~strength of the dollar to continue, although we also expect the dollar to remain historically strong compared to many of these currencies. The nature and extent of the impact of these factors varies by time and region and ~~remain~~remains uncertain and unpredictable.

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The military conflict between Russia and Ukraine ~~has~~ increased the unpredictability of the ~~already uncertain~~volatile macroeconomic ~~conditions. We remain deeply concerned about the devastating events that have~~conditions in 2022 and is likely to continue doing so in 2023. While we continue to unfold in Ukraine and the significant humanitarian, economic and societal tragedy unfolding there. Our top priority remains the safety and security of our employees and their families, particularly those most directly impacted by the hostilities and the resulting sanctions and retaliatory sanctions. We continue to employ ~~a significant number of~~ research and development personnel in Russia as well as ~~sales, marketing~~limited post-sales support and administrative ~~personnel.~~personnel, our total number of employees in Russia was materially reduced in 2022 following actions and initiatives designed to align the size of our operations with our ongoing resource needs. We do not have employees in Ukraine. We have taken extraordinary efforts to support our team members in the region, including helping them financially and working to maintain their safety and security. We furthermore accelerated programs underway before the conflict began aimed at maintaining and growing our research and development operations over the long run that includes diversifying the facilities at which our personnel are located. Our Board of Directors and its applicable committees receive regular updates from management and have and continue to provide oversight of the risks associated withanticipate the military conflict between Russia and Ukraine to materially impact our 2023 financial condition and ~~other areas~~results of ~~strategic importance related~~operations although we expect the conflict will continue to ~~the conflict. Our management continues to closely monitor the situation~~create market uncertainties and ~~evaluate additional ways~~dampen consumer sentiment and demand, particularly in ~~which we can support our employees.~~Europe.

~~Although immaterial~~Evolving Product Offerings

As the markets for clear aligners and digital processes and workflows used to ~~our consolidated financial statements, our commercial business operations in Russia have been significantly impacted by~~transform the conflict. In February 2022, after the military conflict commenced, our primary shipping vendor, UPS, ceased deliveries into Russia and shortly thereafter, we suspended all commercial activities. Our current focus is on providing continuitypractice of care consistent with our values and ethical responsibility to patients, who are in treatment. In doing so, we are also focused on managing compliance with global sanctions applicable to our business, including significant restrictions imposed by countries on both sides of the conflict targeting business entities, persons and certain activities. The pace at which sanctions are being imposed and the expanding number and breadth of the sanctions enacteddentistry continue to ~~create global~~mature, we anticipate customer and ~~regional economic challenges that have caused~~patient expectations and ~~are expected~~demands will evolve and competition to supplant traditional bracket and wires to continue to ~~cause significant~~increase. We expect to succeed in these evolving markets by continuing 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. Our efforts to succeed with these innovative treatment options may result in larger and unpredictable variations in geographic and product mix and selling prices, causing uncertainty, including variations in products sold, changes in the amount and ~~unpredictability to~~timing of deferred revenues and other potential impacts on our financial statements and business operations.

COVID-19 Pandemic Update

~~The~~Although there remains significant uncertainty surrounding the COVID-19 pandemic for regional economies, its global impact continues to ~~cause significant volatility and uncertainty~~decline. During 2022, we experienced the impacts of the COVID-19 pandemic primarily in the ~~global and regional economies, leading to changes~~Asia Pacific region, particularly in consumer and business behavior, market fluctuations, materials and product shortages and restrictions on business and individual activities, all of which are materially impacting supply and demand in broad sectorsChina, where lockdowns decreased economic activity throughout most of the ~~world markets. As new variants~~year. With the easing of the ~~virus emerge, there has been a patchwork response to prevent its spread~~COVID-19 restrictions in China in late 2022 and ~~consequently, continuing fluctuations~~2023, rates of infection in China initially increased early in the ~~numbers~~first quarter of ~~patients seeking treatment for dental services~~2023 and has then decreased as 2023 has progressed. We expect the ~~number~~impacts of ~~doctors providing services and treatments~~the COVID-19 pandemic to remain unpredictable in other markets. The emergence of new variants, vaccinations and public health measures are driving the pace of economic recovery unevenly in various regions. These factors and ongoing consumer concerns regarding the virus have continued2023, although we expect them to ~~impact our results of operations, sometimes materially, and may continue~~decrease compared to ~~impact our results in future periods. Therefore,~~2022. Nevertheless, comparing our financial results for the reporting periods of ~~2022~~2023 to the same reporting periods of ~~2021~~2022 or earlier may not be a useful means by which to evaluate ~~the health of~~ our business and ~~our~~ results of ~~operations.~~operations due to volatility in regional business environments caused by the pandemic.

Our top priority remains the health and safety of our employees and their families, our customers and their staff, and we are taking prudent measures to safeguard them while remaining flexible in our operational efforts. Concerns regarding the spread and impact of the virus have lessened in many countries in which we operate, including the U.S. Consequently, efforts to r~~eopen many of our offices~~ ~~in 2022 are continuing but remain in fluctuation as certain parts of the world at certain periods of time continue to respond to outbreaks of COVID-19 and new variants of the virus~~. Where our offices have reopened, we have adopted a flexible hybrid schedule that will allow many of our employees the opportunity to collaborate and connect with others in our offices three days per week while having the option to work remotely other days. We believe that this added flexibility benefits employees and Align overall.

Overall, we expect the challenges and risks discussed above to persist, creating uncertainty and unpredictability for consumers, global and regional economies as well as our business and the businesses of our customers and suppliers. We strive to manage the challenges from the macroeconomic conditions, the conflict in Ukraine, the evolution of our target markets and COVID-19 by focusing on improving our operations, building flexibility and efficiencies in our processes, ~~and~~ adjusting our business models to changing ~~circumstances.~~circumstances and offering products that meet market demand. Specifically, we are managing cost impacts through pricing actions, ~~implementing~~ cost saving measures and averting supply chain shortages and delays. We do this by proactively communicating with our suppliers and distributors and modifying our purchase order commitments to mitigate the risks of production interruptionsthat drive value and maintaining ~~inventory levels as required.~~control of our employee headcount. We ~~have~~ also ~~increased~~continue to innovate, introducing new and enhanced products that augment our ~~cybersecurity measures to detect, protect against potential incidents~~doctor customer and ~~recover from actual incidents and events.~~patient experiences.

Further discussion of the impact of ~~the unpredictable macroeconomic conditions, the military conflict in Ukraine, and the ramifications from the impacts of COVID-19~~these challenges on our business may be found in Part II, Item 1A of this Quarterly Report on Form 10-Q under the heading “~~Risk Factors~~.“Risk Factors.”

Key Financial and Operating Metrics

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We measure our performance against these strategic priorities by the achievement of key financial and operating metrics.

For the three months ended June 30, ~~2022,~~2023, our business operations reflect the following:

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•Revenues of ~~$969.6~~$1,002.2 million, ~~a decrease~~an increase of ~~4.1%~~3.4% year-over-year;

•Clear Aligner revenues of ~~$798.4~~$832.7 million, ~~a decrease~~an increase of ~~5.1%~~4.3% year-over-year;

◦Americas Clear Aligner revenues of ~~$385.2~~$375.3 million, a decrease of ~~3.8%~~2.6% year-over-year;

◦International Clear Aligner revenues of ~~$346.2~~$378.4 million, ~~a decrease~~an increase of ~~11.2%~~9.3% year-over-year;

◦Clear Aligner case volume ~~decrease~~increase of ~~10.0%~~0.9% year-over-year and Clear Aligner case volume ~~decrease~~increase for teenage patients of ~~2.1%~~9.7% year-over-year;

•Imaging Systems and CAD/CAM Services revenues of ~~$171.2~~$169.5 million, ~~an increase~~a decrease of ~~0.8%~~1.0% year-over-year;

•Income from operations of ~~$188.2~~$171.9 million and operating margin of ~~19.4%~~17.2%;

•Effective tax rate of ~~35.0%~~34.8%;

•Net income of ~~$112.8~~$111.8 million with diluted net income per share of ~~$1.44;~~$1.46;

•Cash, cash equivalents and marketable securities of ~~$977.2~~$1,033.8 million as of June 30, ~~2022;~~2023;

•Operating cash flow of ~~$127.0~~$251.8 million;

•Capital expenditures of ~~$76.0~~$58.5 million, predominantly related to increases in our manufacturing capacity and facilities; and

•Number of employees was ~~24,020~~22,910 as of June 30, ~~2022, an increase~~2023, a decrease of ~~17.8%~~4.6% year-over-year.

Other Statistical Data and Trends

•As of June 30, ~~2022,~~2023, approximately ~~13.4~~15.7 million people worldwide have been treated with our Invisalign ~~system, approximately 77,000 iTero scanners have been sold and approximately 51,000 exocad software licenses have been installed.~~system. Management measures these results by comparing to the millions of people who can benefit from straighter teeth ~~and dental practices that could use intraoral scanners~~ and uses this data to target opportunities to expand the market for orthodontics by educating consumers about the benefits of straighter teeth using the Invisalign ~~system, dental professionals and/or labs and service providers to use iTero intraoral scanners, and dental labs and practitioners to install exocad CAD/CAM software.~~system.

•For the second quarter of ~~2022,~~2023, total Invisalign cases submitted with a digital scanner in the Americas increased to ~~91.4%~~94.0%, up from ~~86.6%~~91.4% in the second quarter of ~~2021~~2022 and international scans increased to ~~84.4%~~88.0%, up from ~~76.2%~~83.7% in the second quarter of ~~2021.~~2022. For the second quarter of ~~2022, 97.1%~~2023, 97.9% of Invisalign cases submitted by North American orthodontists were submitted digitally.

•~~Total~~The total utilization rate in the second quarter of ~~2022~~2023 decreased to ~~7.3~~7.2 cases per doctor compared to ~~8.0~~7.3 cases per doctor in the second quarter of ~~2021.~~2022. Utilization rates in North America and our International locations were as follows:

▪North America: ~~Utilization~~Theutilization rate among our North American orthodontist customers decreased to 26.4 cases per doctor in the second quarter of 2023 compared to 26.8 cases per doctor in the second quarter of 2022 ~~compared to 29.4 cases per doctor in the second quarter of 2021~~ and the utilization rate among our North American GP customers ~~decreased~~increased to 5.2 cases per doctor in the second quarter of 2023 compared to 5.1 cases per doctor in the second quarter of ~~2022 compared to 5.3 cases per doctor in the second quarter of 2021.~~2022.

▪International: International doctor utilization rate was 6.6 cases per doctor in the second quarter of 2023 compared to 6.4 cases per doctor in the second quarter of ~~2022 compared to 7.1 cases per doctor in the second quarter of 2021.~~2022.

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* Invisalign utilization rates are calculated by the number of cases shipped divided by the number of doctors to whom cases were shipped. Our International region includes Europe, Middle East and Africa (“EMEA”) and Asia Pacific (“APAC”). Latin America (“LATAM”) is excluded from the International region based on its immateriality to the quarter; however is included in the Total utilization.

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 and Invisalign First.

▪Non-Comprehensive Products include, but are not limited to, Invisalign Moderate, Lite and Express packages and Invisalign Go and Invisalign Go Plus.

▪Non-Case products include, but are not limited to, retention products, Invisalign training, adjusting tools used by dental professionals during the course of treatment and ~~more recently, Consumer~~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 ~~e-commerce~~commerce channels in select markets. We also offer in the U.S., Canada, and ~~Canada,~~EMEA, a Doctor Subscription Program which is a monthly subscription program based on the doctor’s monthly need for retention or limited treatment. The program allows doctors the flexibility to order both “touch-up” or retention 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.

•Our Systems and Services segment consists of our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options. Our services include subscription software, disposables, rentals, leases, pay per scan services, as well as exocad’s CAD/CAM software solutions that integrate workflows to dental labs and dental practices.

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Net revenues for our Clear Aligner and Systems and Services segments by region for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 are as follows (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
Net Revenues	Net Revenues	2022		2021		Change				2022		2021		Change				Net Revenues	2023		2022		Change				2023		2022		Change
Clear Aligner net revenues:	Clear Aligner net revenues:																	Clear Aligner net revenues:
Americas	Americas	$	385.2	$	400.5	$	(15.3)	(3.8)	%	$	761.4	$	757.9	$	3.5	0.5	%	Americas	$	375.3	$	385.2	$	(9.9)	(2.6)	%	$	736.6	$	761.4	$	(24.9)	(3.3)	%
International	International	346.2		389.7		(43.5)		(11.2)	%	717.3		743.0		(25.7)		(3.5)	%	International	378.4		346.2		32.2		9.3	%	732.6		717.3		15.3		2.1	%
Non-case	Non-case	67.0		50.8		16.2		31.9	%	129.4		93.3		36.1		38.7	%	Non-case	79.0		67.0		12.0		17.9	%	153.3		129.4		23.9		18.5	%
Total Clear Aligner net revenues	Total Clear Aligner net revenues	$	798.4	$	841.0	$	(42.6)	(5.1)	%	$	1,608.1	$	1,594.2	$	13.9	0.9	%	Total Clear Aligner net revenues	$	832.7	$	798.4	$	34.3	4.3	%	$	1,622.5	$	1,608.1	$	14.4	0.9	%
Systems and Services net revenues	Systems and Services net revenues	171.2		169.8		1.3		0.8	%	334.7		311.4		23.3		7.5	%	Systems and Services net revenues	169.5		171.2		(1.7)		(1.0)	%	322.8		334.7		(11.8)		(3.5)	%
Total net revenues	Total net revenues	$	969.6	$	1,010.8	$	(41.3)	(4.1)	%	$	1,942.8	$	1,905.6	$	37.2	2.0	%	Total net revenues	$	1,002.2	$	969.6	$	32.6	3.4	%	$	1,945.3	$	1,942.8	$	2.5	0.1	%

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Case volume data which represents Clear Aligner case shipments for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 Change 2022 2021 Change
Total case volume 599.0 665.6 (66.6) (10.0) % 1,197.8 1,261.4 (63.6) (5.0) %


	Three Months Ended June 30,					Six Months Ended June 30,
	2023	2022	Change			2023	2022	Change


Total case volume	604.4	599.0	5.5	0.9	%	1,179.8	1,197.8	(18.0)	(1.5)	%

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, ~~2022,~~2023, total net revenues ~~decreased $41.3~~increased by $32.6 million as compared to the same period in ~~2021~~2022, primarily due to an increase in Clear Aligner ASPs and non-case revenues, partially offset by unfavorable foreign exchange rates and a decrease in ~~Clear Aligner case volume partially offset by increases in Clear Aligner ASP, Clear Aligner non-case revenues and service revenues.~~scanner volumes.

For the six months ended June 30, ~~2022,~~2023, total net revenues increased ~~$37.2~~by $2.5 million as compared to the same period in ~~2021~~2022, primarily due to ~~increases~~an increase in Clear Aligner ~~ASP, Clear Aligner~~ non-case ~~revenues~~revenue and ~~service revenues partially~~ASPs mostly offset by a decrease in both Clear Aligner case ~~volume.~~volumes and scanner volumes and unfavorable foreign exchange rates.

Clear Aligner - Americas

For the three months ended June 30, ~~2022,~~2023, Americas net revenues decreased by ~~$15.3~~$9.9 million as compared to the same period in ~~2021 primarily~~2022 due to a ~~9.9%~~4.0% decrease in case ~~volume which reduced~~volumes, resulting in a reduction of net revenues by ~~$39.7~~$15.4 million, ~~which was~~ partially offset by ana $5.5 million increase indue to higher ASP. Higher ASP reflects a full quarter impact of price increases driving increased net revenues by $18.8 million along with higher additional aligners which increased net revenues by ~~$24.4~~$5.9 million. ~~Higher ASP was mainly due to processing fees charged on most clear aligner shipments and price~~The increases in ~~certain markets which increased revenues~~ASP were partially offset by ~~$12.7 million along with lower net deferrals which increased~~unfavorable promotional discounts reducing net revenues by ~~$11.4~~$13.2 million and unfavorable foreign exchange rates which decreased net revenues by $4.3 million.

For the six months ended June 30, ~~2022,~~2023, Americas net revenues ~~increased~~decreased by ~~$3.5~~$24.9 million as compared to the same period in ~~2021 primarily~~2022 due to ana 4.7% decrease in case volumes, resulting in a reduction of net revenues by $35.5 million, partially offset by a $10.6 million increase indue to higher ASP. Higher ASP includes the full impact of price increases driving increased net revenues by $38.1 million along with higher additional aligners which increased net revenues by ~~$48.5~~$11.3 million. ~~Higher ASP was mainly due to processing fees charged on most clear aligner shipments and price~~The increases in ~~certain markets which increased revenues~~ASP were partially offset by ~~$25.5 million along with lower net deferrals which increased~~unfavorable promotional discounts reducing net revenues by ~~$20.2 million. Higher ASP was partially offset by~~$28.9 million, a ~~5.9% decrease in case volume which reduced~~product mix shift to lower priced products reducing net revenues by ~~$45.0~~$5.7 million, and unfavorable foreign exchange rates which decreased net revenues by $5.2 million.

Clear Aligner - International

For the three months ended June 30, ~~2022,~~2023, International net revenues ~~decreased~~increased by ~~$43.5~~$32.2 million as compared to the same period in ~~2021 primarily~~2022, due to a ~~10.1% decrease~~6.9% increase in case ~~volume which reduced~~volumes, resulting in an increase of net revenues by ~~$39.5 million. Lower~~$23.8 million, in addition to a $8.4 million increase due to higher ASP. Higher ASP ~~also decreased~~reflects a full quarter impact of price increases driving increased net revenues by ~~$4.0~~$27.8 million ~~largely due to unfavorable foreign exchange rates which decreased~~and higher additional aligners reducing net revenues by ~~$33.4 million and~~$24.0 million. The increases in ASP were partially offset by a product mix shift to lower priced products ~~which decreased~~reducing net revenues by ~~$10.0 million. The decrease in ASP was partially offset by lower net deferrals which increased net revenues by $29.2~~$26.3 million, ~~and processing fees charged on most clear aligner shipments which increased net revenues by $12.1 million.~~

For the six months ended June 30, 2022, International net revenues decreased by $25.7 million as compared to the same period in 2021 primarily due to a 3.9% decrease in case volume which resulted in lower net revenues of $29.3 million. Higherunfavorable foreign

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~~ASP increased~~exchange rates which decreased net revenues by ~~$3.6~~$11.1 million, and unfavorable promotional discounts reducing net revenues by $7.7 million.

For the six months ended June 30, 2023, International net revenues increased by $15.3 million as compared to the same period in 2022, due to a 2.3% increase in case volumes, resulting in an increase of net revenues by $16.3 million, and lower ASP decreasing net revenues by $1.0 million. Lower ASP was largely due to a product mix shift to lower ~~net deferrals which increased~~priced products reducing net revenues by ~~$47.4~~$63.7 million, ~~and processing fees charged on most clear aligner shipments which increased net revenues by $36.9 million. The increase in ASP was mostly offset by~~ unfavorable foreign exchange rates which decreased net revenues by ~~$56.3~~$37.5 million, and unfavorable promotional discounts ~~which decreased net revenues $14.6 million, and a product mix shift to lower priced products which decreased~~reducing net revenues by ~~$11.5~~$15.5 million. The decrease in ASP was primarily offset by higher additional aligners increasing net revenues by $56.5 million and price increases on most products which increased net revenues by $56.1 million.

Clear Aligner - Non-Case

For the three and six months ended June 30, ~~2022,~~2023, non-case net revenues increased by ~~$16.2~~$12.0 million and ~~$36.1~~$23.9 million, respectively, as compared to the same periods in ~~2021~~2022 mainly due to ~~increased volume for~~ retention products across all regions primarily driven by Vivera ~~retainers.~~retainers and increased volumes from the Doctor Subscription program.

Systems and Services

For the three months ended June 30, ~~2022,~~2023, Systems and Services net revenues ~~increased~~decreased by ~~$1.3~~$1.7 million as compared to the same period in ~~2021~~2022 primarily due to ~~higher service and other revenues which increased $18.7 million mostly due to a larger installed base. These increases were mostly offset by~~ a lower number of scanners sold ~~which decreased~~reducing net revenues ~~$13.1~~by $14.4 million ~~in addition to a~~and lower scanner ~~ASP.~~ASP reducing net revenues by $1.9 million. The decreases in net revenues were primarily offset by higher service revenues of $7.5 million and other revenues which increased net revenues by $7.1 million primarily due to revenue from sales of certified pre-owned scanners.

For the six months ended June 30, ~~2022,~~2023, Systems and Services net revenues ~~increased~~decreased by ~~$23.3~~$11.8 million as compared to the same period in ~~2021~~2022 primarily due to ~~higher service and other revenues which increased $36.4 million mostly due to a larger installed base partially offset by~~ a lower number of scanners sold ~~which decreased~~reducing net revenues by ~~$9.5~~$41.8 million. This decrease in net revenues was partially offset by higher service revenues of $16.4 million and ~~lower~~other revenues increased by $13.6 million primarily due to revenue from sales of certified pre-owned scanners and scanner ~~ASP.~~rentals.

Cost of net revenues and gross profit (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Clear Aligner	Clear Aligner																	Clear Aligner
Cost of net revenues	Cost of net revenues	$	213.2		$	194.3		$	18.9	$	417.2		$	363.0		$	54.1	Cost of net revenues	$	229.4		$	213.2		$	16.3	$	453.1		$	417.2		$	35.9
% of net segment revenues	% of net segment revenues	26.7		%	23.1		%			25.9		%	22.8		%			% of net segment revenues	27.6		%	26.7		%			27.9		%	25.9		%
Gross profit	Gross profit	$	585.2		$	646.7		$	(61.4)	$	1,190.9		$	1,231.2		$	(40.3)	Gross profit	$	603.3		$	585.2		$	18.0	$	1,169.4		$	1,190.9		$	(21.6)
Gross margin %	Gross margin %	73.3		%	76.9		%			74.1		%	77.2		%			Gross margin %	72.4		%	73.3		%			72.1		%	74.1		%
Systems and Services	Systems and Services																	Systems and Services
Cost of net revenues	Cost of net revenues	$	68.8		$	58.0		$	10.9	$	128.7		$	106.9		$	21.8	Cost of net revenues	$	59.1		$	68.8		$	(9.7)	$	118.0		$	128.7		$	(10.7)
% of net segment revenues	% of net segment revenues	40.2		%	34.1		%			38.5		%	34.3		%			% of net segment revenues	34.9		%	40.2		%			36.5		%	38.5		%
Gross profit	Gross profit	$	102.3		$	111.9		$	(9.6)	$	206.0		$	204.4		$	1.5	Gross profit	$	110.4		$	102.3		$	8.0	$	204.9		$	206.0		$	(1.1)
Gross margin %	Gross margin %	59.8		%	65.9		%			61.5		%	65.7		%			Gross margin %	65.1		%	59.8		%			63.5		%	61.5		%
Total cost of net revenues	Total cost of net revenues	$	282.0		$	252.3		$	29.7	$	545.9		$	469.9		$	75.9	Total cost of net revenues	$	288.6		$	282.0		$	6.6	$	571.1		$	545.9		$	25.2
% of net revenues	% of net revenues	29.1		%	25.0		%			28.1		%	24.7		%			% of net revenues	28.8		%	29.1		%			29.4		%	28.1		%
Gross profit	Gross profit	$	687.6		$	758.5		$	(71.0)	$	1,396.9		$	1,435.6		$	(38.7)	Gross profit	$	713.6		$	687.6		$	26.1	$	1,374.3		$	1,396.9		$	(22.6)
Gross margin %	Gross margin %	70.9		%	75.0		%			71.9		%	75.3		%			Gross margin %	71.2		%	70.9		%			70.6		%	71.9		%

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 related costs, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs.

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Clear Aligner

For the three and six months ended June 30, ~~2022,~~2023, our gross margin percentage decreased as compared to the same periods in ~~2021~~2022 primarily due to ~~a higher mix of additional aligners along with~~ increased ~~costs from freight and~~ manufacturing ~~spend. These factors were~~spend offset ~~in part~~ by higher ~~ASP.~~ASP and lower freight costs.

Systems and Services

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For the three and six months ended June 30, ~~2022,~~2023, our gross margin percentage ~~decreased~~increased as compared to the same ~~period~~periods in ~~2021~~2022 primarily due to lower ~~ASP, manufacturing inefficiencies from lower production volumes~~purchase price variance, service and freight costs, higher ~~component costs~~service revenue mix and partially offset by ~~higher service revenues.~~lower ASP.

Selling, general and administrative (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Selling, general and administrative	Selling, general and administrative	$	426.4		$	431.9		$	(5.5)	$	865.9		$	829.0		$	36.8	Selling, general and administrative	$	453.2		$	426.4		$	26.8	$	892.9		$	865.9		$	27.0
% of net revenues	% of net revenues	44.0		%	42.7		%			44.6		%	43.5		%			% of net revenues	45.2		%	44.0		%			45.9		%	44.6		%

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,~~clinical education, 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 Information Technology (“IT”).

For the three ~~months ended June 30, 2022, selling, general~~ and administrative expense decreased compared to the same period in 2021 primarily due to lower advertising and marketing costs, and lower incentive compensation. These decreases were partially offset by higher salaries expense, fringe benefits and stock-based compensation from increased headcount along with higher equipment, software and material costs.

~~For the~~ six months ended June 30, ~~2022,~~2023, selling, general and administrative expense increased compared to the same period in ~~2021~~2022 primarily due to higher salaries expense, fringe benefits and stock-based and incentive compensation, ~~from increased headcount, higher expense related to~~offset by lower advertising and marketing ~~equipment, software~~costs and ~~maintenance~~reductions in ~~addition to increased travel and expense related costs. These increases were partially offset by lower incentive compensation.~~litigation expense.

Research and development (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Research and development	Research and development	$	73.0		$	57.7		$	15.3	$	144.8		$	112.3		$	32.5	Research and development	$	88.5		$	73.0		$	15.5	$	175.9		$	144.8		$	31.2
% of net revenues	% of net revenues	7.5		%	5.7		%			7.5		%	5.9		%			% of net revenues	8.8		%	7.5		%			9.0		%	7.5		%

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 and six months ended June 30, ~~2022,~~2023, research and development expense increased compared to the same periods in ~~2021~~2022 primarily due to higher ~~compensation costs from higher~~ salaries ~~and~~expense, fringe benefits ~~driven mainly by increased headcount~~and stock-based and incentive compensation as we continue to focus on our investments in innovation and research.

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Income from operations (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Clear Aligner	Clear Aligner																	Clear Aligner
Income from operations	Income from operations	$	307.2		$	347.6		$	(40.4)	$	619.9		$	675.1		$	(55.2)	Income from operations	$	306.1		$	307.2		$	(1.1)	$	583.6		$	619.9		$	(36.3)
Operating margin %	Operating margin %	38.5		%	41.3		%			38.6		%	42.3		%			Operating margin %	36.8		%	38.5		%			36.0		%	38.6		%
Systems and Services	Systems and Services																	Systems and Services
Income from operations	Income from operations	$	45.6		$	64.7		$	(19.1)	$	96.4		$	111.9		$	(15.5)	Income from operations	$	52.0		$	45.6		$	6.5	$	87.6		$	96.4		$	(8.8)
Operating margin %	Operating margin %	26.6		%	38.1		%			28.8		%	35.9		%			Operating margin %	30.7		%	26.6		%			27.1		%	28.8		%
Total income from operations 1	Total income from operations 1	$	188.2		$	268.9		$	(80.7)	$	386.3		$	494.3		$	(108.1)	Total income from operations 1	$	171.9		$	188.2		$	(16.3)	$	305.4		$	386.3		$	(80.8)
Operating margin %	Operating margin %	19.4		%	26.6		%			19.9		%	25.9		%			Operating margin %	17.2		%	19.4		%			15.7		%	19.9		%

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

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 Condensed Consolidated Income from Operations.

Clear Aligner

For the three and six months ended June 30, ~~2022,~~2023, our operating margin percentage decreased compared to the same ~~period~~periods in ~~2021~~2022 primarily due to ~~lower gross margin which was partially offset by lower operating expenses as a percentage of net revenues.~~

~~For the six months ended June 30, 2022, our operating margin percentage decreased compared to the same period in 2021 primarily due to lower gross margin as well as~~ higher operating expenses as a percentage of net ~~revenues.~~revenues and lower gross margin.

Systems and Services

For the three months ended June 30, 2023, our operating margin percentage increased compared to the same periods in 2022 primarily due to lower operating expenses as a percentage of net revenues and higher gross margins.

For the six months ended June 30, ~~2022,~~2023, our operating margin percentage decreased compared to the same ~~periods~~period in ~~2021~~2022 primarily due to ~~lower gross margin as well as~~ higher operating expenses as a percentage of ~~net revenues.~~revenue partially offset by increased gross margin.

Interest income (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Interest income	Interest income	$	0.2		$	0.4		$	(0.1)	$	0.9		$	2.0		$	(1.1)	Interest income	$	4.4		$	0.2		$	4.2	$	6.8		$	0.9		$	5.8
% of net revenues	% of net revenues	—		%	—		%			—		%	0.1		%			% of net revenues	0.4		%	—		%			0.3		%	—		%

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 ~~months ended June 30, 2022, there was no significant change to interest income compared to the same period in 2021.~~

~~For the~~and six months ended June 30, ~~2022,~~2023, interest income ~~decreased~~increased compared to the same ~~period~~periods in ~~2021 mainly~~2022 primarily due to higher interest ~~earned from the arbitration award related to our investment in SmileDirectClub~~rates in the first and second quarter of ~~2021.~~2023.

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Other income (expense), net (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Other income (expense), net	Other income (expense), net	$	(14.8)		$	(0.5)		$	(14.3)	$	(26.1)		$	34.0		$	(60.2)	Other income (expense), net	$	(4.8)		$	(14.8)		$	10.1	$	(6.0)		$	(26.1)		$	20.1
% of net revenues	% of net revenues	(1.5)		%	—		%			(1.3)		%	1.8		%			% of net revenues	(0.5)		%	(1.5)		%			(0.3)		%	(1.3)		%

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.

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For the three and six months ended June 30, ~~2022,~~2023, other income (expense), net ~~decreased~~increased compared to the same ~~period~~periods in ~~2021~~2022 primarily due to ~~larger net~~the favorable impact of foreign exchange ~~losses in the three months ended June 30, 2022 as compared to the same period in 2021.~~rates and miscellaneous charges.

For the six months ended June 30, 2022, other income (expense), net decreased compared to the same period in 2021 primarily due to a $43.4 million gain related to the arbitration award related to our investment in SmileDirectClub recognized in the first quarter of 2021 as well as larger net foreign exchange losses in the six months ended June 30, 2022 as compared to the same period in 2021.

Provision for income taxes (in millions):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022			2021			Change		2022			2021			Change			2023			2022			Change		2023			2022			Change
Provision for income taxes	Provision for income taxes	$	60.8		$	69.1		$	(8.3)	$	114.0		$	130.3		$	(16.3)	Provision for income taxes	$	59.8		$	60.8		$	(1.0)	$	106.6		$	114.0		$	(7.4)
Effective tax rates	Effective tax rates	35.0		%	25.7		%			31.6		%	24.6		%			Effective tax rates	34.8		%	35.0		%			34.8		%	31.6		%

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three and six ~~months~~month periods ended June 30, ~~2022~~2023 and ~~2021~~2022 primarily due to the recognition of additional tax expense resulting from U.S. taxes on foreign earnings, foreign income taxed at different rates, state income taxes, and non-deductible expenses in the U.S. ~~partially offset by the recognition of excess tax benefits related to stock-based compensation. Additionally, a change~~

The decrease in ~~U.S. tax laws effective January 1, 2022 which requires capitalization and amortization of research and development expenses incurred after December 31, 2021 increased~~ our effective tax rate for the three ~~and six~~ months ended June 30, ~~2022.~~2023 compared to the same period in 2022 is primarily attributable to the change in our jurisdictional mix of income, foreign income taxed at different rates, partially offset by higher excess tax benefits from stock-based compensation and remeasurement of Switzerland deferred tax asset due to Swiss tax rate change.

The increase in our effective tax rate for the ~~three and~~ six months ended June 30, ~~2022~~2023 compared to the same ~~periods~~period in ~~2021~~2022 is primarily attributable to the change in our jurisdictional mix of income, foreign income taxed at different rates, ~~capitalization and amortization of research and development expenses in 2022~~ and lower excess tax benefits from stock-based compensation.

Liquidity and Capital Resources

Liquidity and Trends

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had the following cash and cash equivalents and short-term and long-term marketable securities (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	877,501	$	1,099,370	Cash and cash equivalents	$	951,956	$	942,050
Marketable securities, short-term	Marketable securities, short-term	22,138		71,972		Marketable securities, short-term	55,805		57,534
Marketable securities, long-term	Marketable securities, long-term	77,551		125,320		Marketable securities, long-term	26,023		41,978
Total	Total	$	977,190	$	1,296,662	Total	$	1,033,784	$	1,041,562

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, approximately ~~$725.8~~$719.5 million and ~~$713.8~~$653.7 million, respectively, of cash, cash equivalents and marketable securities were held by our foreign subsidiaries. ~~Our intent is~~We intend to ~~permanently reinvest~~continue reinvesting our foreign subsidiary earnings ~~from our international operations going forward,~~indefinitely and ~~our current plans do~~expect the additional costs upon repatriation of these foreign earnings not ~~require us~~ to ~~repatriate them to fund our U.S.~~

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~~operations as we~~be significant. We generate sufficient domestic operating cash flow and have access to external funding under our $300.0 million 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.

The sanctions against Russian banks or international bank messaging systems due to the military conflict between Ukraine and Russia could impact our ability to access our cash in Russia but would not materially impact our liquidity position. As of June 30, ~~2022,~~2023, cash and cash equivalents domiciled in Russia, which is required to fund their current operating requirements, represent approximately ~~7.0%~~1.4% of our total cash, cash equivalents and marketable ~~securities which is required to fund their current operating requirements.~~securities.

Our material cash requirements are as follows:

•For ~~2022,~~2023, we expect our investments in capital expenditures to exceed ~~$300.0~~$200.0 million. Capital expenditures primarily relate to building purchases, construction and improvements as well as additional manufacturing capacity to support our international expansion. This includes our investment in an aligner fabrication facility in Wroclaw, Poland which

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began serving doctors during the second quarter of 2022 as a part of our strategy to bring operational facilities closer to customers. As we continue growing, we intend to expand our investments in research and development, manufacturing, treatment planning, sales and marketing operations to meet actual and anticipated local and regional demands.

•~~As of~~During the six months ended June 30, ~~2022,~~2023, we ~~have $449.9 million available~~entered into or completed ASRs providing for the repurchase ~~under~~of our common stock based on the ~~stock repurchase program authorized by~~volume-weighted average price during the term of the agreement, less an agreed upon discount. The May 2021 Repurchase Program was completed as of March 31, 2023. In January 2023, our Board of Directors ~~in May 2021.~~authorized a plan to repurchase up to $1.0 billion of our common stock (“January 2023 Repurchase Program”), none of which had been utilized as of June 30, 2023. Refer to Note 9 “Common Stock Repurchase Program” of the Notes to Condensed Consolidated Financial Statements for details on our stock repurchase programs.

•There have been no material changes to our purchase commitments for goods and services and future operating lease payments during the periods covered by this 10-Q outside the normal course of business compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Sources and Uses of Cash

The following table summarizes our condensed consolidated cash flows for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Net cash flow provided by (used in):	Net cash flow provided by (used in):					Net cash flow provided by (used in):
Operating activities	Operating activities	$	157,543	$	544,691	Operating activities	$	451,672	$	157,543
Investing activities	Investing activities	(72,078)		(123,920)		Investing activities	(178,314)		(72,078)
Financing activities	Financing activities	(312,396)		(291,756)		Financing activities	(259,892)		(312,396)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	4,978		(3,511)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(3,523)		4,978
Net (decrease) increase in cash, cash equivalents, and restricted cash	Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(221,953)	$	125,504	Net (decrease) increase in cash, cash equivalents, and restricted cash	$	9,943	$	(221,953)

Operating Activities

For the six months ended June 30, ~~2022,~~2023, cash flows from operations of ~~$157.5~~$451.7 million resulted primarily from our net income of approximately ~~$247.1~~$199.6 million as well as the following:

Significant adjustments to net income

•Stock-based compensation of ~~$65.8~~$75.6 million related to equity awards granted to employees and directors;

•Depreciation and amortization of ~~$59.9~~$71.6 million related to our investments in property, plant and equipment and intangible assets;

•Deferred taxes of $36.7 million related to increase in long term deferred tax position;

•Non-cash operating lease costs of ~~$15.1 million;~~$15.5 million related to lease amortization; and

•~~Changes in deferred taxes~~Other non-cash operating of ~~$14.7~~$21.9 million ~~primarily~~majority related to amortization ~~and adjustments to our~~of deferred ~~tax assets of our Swiss entity.~~commissions.

Significant changes in working capital

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•~~Decrease~~Increase of ~~$212.9~~$140.3 million in accrued and other long-term liabilities primarily due to ~~payment of our 2021 corporate bonus and the~~higher incentive accruals for 2023, as well as timing of payment of other activities;

•Decrease of $73.7 million in accounts receivable due to timing of collections and partially offset by increased revenues;

•Increase of ~~$136.0~~$56.7 million in deferred revenues due to the deferral of revenue on ~~shipments over the period as well as timing of revenue recognition;~~shipments; and

•Increase of ~~$91.1~~$19.1 million in inventories primarily due to ~~lower shipment volumes over the period in addition to higher safety stock requirements to secure materials with~~our purchase of long lead ~~times~~components to ~~support our demand; and~~

•~~Increase of $53.5 million in accounts receivable primarily related to timing of shipments and collections.~~meet expected demand.

Investing Activities

Net cash used in investing activities was ~~$72.1~~$178.3 million for the six months ended June 30, ~~2022 which~~2023 and primarily consisted of purchases of property, plant and equipment of ~~$163.3~~$122.7 million which included a building acquisition for $24.5 million, an equity

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method investment of $75.0 million and purchases of marketable securities of ~~$20.5 million. These outflows were~~$2.4 million, partially offset by sales and maturities of our marketable securities of ~~$113.9~~$21.6 million.

Financing Activities

Net cash used in financing activities was ~~$312.4~~$259.9 million for the six months ended June 30, ~~2022 which~~2023 and consisted of common stock repurchases net of ~~$275.0~~$252.4 million and payroll taxes paid for equity awards through share withholdings of ~~$52.2~~$21.8 million which were partially offset by ~~$14.8~~$14.3 million of proceeds from the issuance of common stock under our employee stock purchase plan.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon 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 on-going basis, including those related to revenue recognition, goodwill and finite-lived acquired intangible assets, income taxes, legal proceedings and litigations. We use authoritative pronouncements, historical experience and other assumptions as the basis for making the estimates. Actual results could differ from those estimates.

Revenue Recognition

We allocate revenues 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 ~~future performance obligations,~~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.

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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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, we are exposed to interest rate, foreign currency exchange and inflation risks that could impact our financial position and results of operations. In addition, we are subject to the broad market risk that is created by the global market disruptions and uncertainties resulting from macroeconomic challenges, the military conflict between Russia and Ukraine and the COVID-19 pandemic. Further discussion on these risks may be found in Item 1A of this is Quarterly Report on Form 10-Q under the heading “Risk Factors.”

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Interest Rate Risk

Changes in interest rates could impact our anticipated interest income on our cash equivalents and investments in marketable securities. Our investments are fixed-rate short-term and long-term securities. ~~Fixed-rate~~Fair market value of fixed-rate securities may ~~have their fair market value~~be adversely impacted due to a rise in interest ~~rates, and, as~~rates. As a result, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates. As of June 30, ~~2022,~~2023, we had approximately ~~$99.7~~$81.8 million invested in available-for-sale marketable securities. An immediate 10% change in interest rates would not have a material adverse impact on our future operating results and cash flows.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. As of June 30, ~~2022,~~2023, we are not subject to risks from immediate interest rate increases on our unsecured revolving line of credit facility.

Currency Rate Risk

As a result of our international business activities, our financial results ~~could be~~have been affected by factors such as changes in foreign currency exchange rates oras well as economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations will not harm our business in the future. We generally sell our products in the local currency of the respective countries. This provides some natural hedging because most of the subsidiaries’ operating expenses are generally denominated in their local currencies. Regardless of this natural hedging, our results of operations may be adversely impacted by exchange rate fluctuations.

We ~~primarily~~ enter into foreign currency forward contracts for currencies where we have exposures, primarily the Euro, Chinese Yuan, Polish Zloty, Canadian Dollar, to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and intercompany receivables and payables.These forward contracts are not designated as hedging instruments and do not subject us to material balance sheet risk due to fluctuations in foreign currency exchange rates. The gains and losses on these forward contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being economically hedged. These instruments are generally one month in original maturity and are marked to market through earnings every ~~period and generally are one month in original maturity.~~period. We do not enter into foreign currency forward contracts for trading or speculative purposes. As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in currency rates. It is difficult to predict the impact forward contracts could have on our results of operations.

Although we will continue to monitor our exposure to currency fluctuations, and, where appropriate, may use forward contracts to minimize the effect of these fluctuations, the impact of an aggregate change of 10% in foreign currency exchange rates relative to the U.S. dollar on our results of operations and financial position could be material.

Military Conflict in Ukraine

~~The U.S.~~After beginning in 2022, the military conflict between Russia and ~~other nations have imposed sanctions on various sectors of the Russian economy~~Ukraine has continued to escalate and ~~on transactions with certain Russian nationals and entities. Russia has also announced economic sanctions against the U.S. and other nations that include a ban on imports of certain products.~~create challenges to already uncertain macroeconomic conditions. As of June 30, ~~2022,~~2023, we do not expect these events to have any material impact on our operations. Our Russia net revenues as a percentage of our consolidated net revenues and our assets domiciled in Russia, including cash and cash equivalents, as a percentage of our total assets, are immaterial.

Inflation Risk

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The economy has been impacted by certain macroeconomic challenges which have contributed to a rising inflationary trend that have impacted both our revenues and costs globally, and which we expect will continue into the foreseeable future. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. There can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report

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on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of June 30, ~~2022,~~2023, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, refer to Note 6 “Legal Proceedings” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

The following ~~discussion is divided into two sections. The first, entitled~~ “~~Risks Relating to our Business Operations and Strategy,~~” discusses some of the risks that may affect our business, results of operations, financial condition and ~~financial condition. The second, captioned~~ “~~General Risk Factors,~~” ~~discusses some~~the price of ~~the risks that apply generally to companies and to owning~~ our ~~common stock, in particular.~~stock. You should carefully review ~~both sections,~~this section, as well as our condensed consolidated financial statements and notes thereto and other information appearing in this Quarterly Report on Form 10-Q, for important information regarding these and other risks that may affect us. The order we have chosen to list the risks below or the sections in which we have identified them should not be interpreted to mean we deem any risks to be more or less important or likely to occur or, if any do occur, that their impact may be any less significant than others. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this report because they could cause our actual results and conditions to differ materially from those statements. Before you invest in Align, you should know that investing involves risks, including those described below. The risks below are not the only ones we face. If any of the risks actually occur, our business, financial condition and results of operations could be negatively affected, the trading price of our common stock could decline, and you may lose all or part of your investment.

Summary of Risk Factors

~~The following~~Our business is subject to a ~~summary~~number of ~~the~~risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully ~~described~~ below ~~in this “Risk Factors” section:~~and include, but are not limited to:

~~Risks Relating to our Business Operations~~Macroeconomic and ~~Strategy~~External Risks

•Global and regional economic conditions

•Inflation, fluctuations in currency exchange rates, consumer confidence and demand, weakness in general economic conditions and recessions could negatively affect our financial condition and results of operations.Major health crises

•~~Our results~~Political events, international disputes, war and terrorism

•Natural disasters

Business and Industry Risks

•Changes in demand for our products

•Increased competition

•Failure of ~~operations have been materially adversely affected by global~~our new products, or changes to our existing products, to attract or retain consumers or generate revenue

•Successful integration of our acquisitions

Operational Risks

•Business disruptions

•Predicting demand

•Availability of supplies

•Shipping delays

•Personnel development and ~~regional efforts~~retention

•Effectiveness of marketing and our ability to ~~mitigate the spread of COVID-19~~attract consumers

Legal, Regulatory and ~~we expect this will continue in as yet unknown ways~~Compliance Risks

•Government investigations, enforcement actions, and ~~to varying degrees as the virus evolves~~settlements

•Compliance with laws and ~~circumstances dictate.~~regulatory and legislative mandates or guidance

•Privacy, cybersecurity and data protection

•Litigation, including class action lawsuits

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Intellectual Property Risks

•~~The outbreak~~Obtain, maintain, protect, and enforcement of ~~military conflict between Russia~~our intellectual property rights

Financial, Tax and ~~Ukraine has created a humanitarian crisis, materially impacted economic activities and may in the future materially impact~~Accounting Risks

•Impairment of our ~~global and regional operations.~~goodwill

•~~Our net revenues are dependent primarily on our Invisalign system~~Compliance with accounting, financial reporting, and ~~iTero scanners and any decline in sales or average selling price of these products, for any reason, may adversely affect net revenues, gross margin and net income.~~tax laws

•~~Competition in the markets for~~Management of our products is increasing and we expect aggressive competition from existing competitors, other companies that may introduce new technologies in the future and customers who alone or with others create orthodontic appliances and solutions or other products or services that compete with us.stock plans

•~~An increasingly larger portion~~Volatility of our total revenues are derived from international sales and we are dependent on our international operations, which exposes us to foreign operational, political, military and other risks that may harm our business.

•~~Our success depends on our ability to develop, successfully introduce, achieve market acceptance of, and manage new products and services.~~

•~~As we continue to grow, we are subject to growth related risks, including risks related to excess or constrained capacity and operational inefficiencies at our manufacturing and treat facilities.~~

•Our products and information technology systems are critical to our business. Issues with product development or enhancements, IT system integration, implementation, updates and upgrades along with security and data protection risks have previously and could again in the future disrupt our operations, which could have a material adverse impact on our business and operating results.

•If we are unable or fail to protect our customer or patient information or if we are unable to comply with applicable privacy, security and data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our business, operations and reputation could be harmed.

•Demand for our products may not increase as rapidly as we anticipate or may decrease due to resistance to non-traditional treatment methods, which could have a material adverse impact on our business and operating results.

•~~Our operating results have and will continue to fluctuate in the future, which makes predicting the timing and amount of our revenues, costs and expenditures difficult.~~

•A disruption in the operations of a primary freight carrier, higher shipping costs or shipping delays could disrupt our supply chain and cause a decline in our net revenues or a reduction in our earnings.

•If we fail to accurately predict our volume growth, hire too many or too few technicians, or manufacture too many or too few products, the delivery time for our products could be delayed or our costs may exceed our revenues, each of which could adversely affect our results of operations.

•We are dependent on our marketing activities to deepen our market penetration and raise awareness of our brand and products, which may not prove successful or may become less effective or more costly to maintain in the long term.

•Our success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our intellectual property (“IP”) rights, our competitive position may be harmed. Litigating claims of this type is costly and could distract our management and cause a decline in our results of operations and adversely impact our reputation.

•If we or any vendors on whose products or services we rely for our products and services infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

•Obtaining approvals and complying with governmental regulations, particularly those related to personal healthcare information, financial information, quality systems, competition, anti-trust, data governance and data privacy, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

•We are highly dependent on third-party suppliers, some of whom are sole source suppliers, for certain key machines, components and materials, and our business and operating results could be harmed if supply is restricted or ends or the price of raw materials used in our manufacturing process increases.

•~~We rely on highly skilled personnel and, if we fail to attract, motivate, train or retain highly skilled personnel, it may be more difficult to grow effectively and pursue our strategic priorities.~~

•We use distributors for a portion of the importation, marketing and sales efforts related to our products and services, which exposes us to risks that may be harmful to our sales and operations, including the risk that these distributors do not comply with applicable laws or our internal procedures.

•Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.

•Increased focus on compliance with current or future ESG laws and increased scrutiny of our ESG policies and practices may materially increase our costs, expose us to potential liability, may adversely impact our reputation, employee retention, willingness of customers and suppliers to do business with us and willingness of investors to invest in us, and otherwise materially impact our business.stock

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~~General Risk Factors~~

•~~We rely on our personnel~~Macroeconomic and ~~if we fail to attract, motivate, train or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.~~

•~~Business disruptions could seriously harm our financial condition.~~

•~~Changes in, or interpretations of, accounting rules and regulations, could result in unfavorable accounting charges.~~

•We are required to annually assess our internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

•~~If we fail to manage our exposure to global financial and securities market risks successfully, our operating results and financial statements could be materially impacted.~~

•~~If our goodwill or long-lived assets become impaired, we may be required to record a significant charge to earnings.~~

•~~Our effective tax rate may vary significantly from period to period.~~

•New tax laws and practice, changes to existing tax laws and practice, or disputes regarding the positions we take regarding tax laws, could negatively affect our provision for income taxes as well as our ongoing operations.

•We have in the past and may again in the future invest in or acquire other businesses, products or technologies which may require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.

•~~Historically, the market price for our common stock has been volatile.~~

•~~We cannot guarantee that we will continue to repurchase our common stock in the future, and any repurchases that we may make may not achieve our desired objectives.~~

•~~Future sales of significant amounts of our common stock may depress our stock price.~~

External Risks ~~Relating to our Business Operations and Strategy~~

Inflation, fluctuations in currency exchange rates, consumer confidence and demand, weakness in general economic conditions and recessions could negatively affect our financial condition and results of operations.

Our operations and financial performance ~~are affected by~~depend on global and regional economic conditions. Inflation, fluctuations in currency exchange rates, changes in consumer confidence and demand, and general ~~macroeconomic~~economic weakness and threats, or actual recessions, have and could in the future materially affect our business, results of operations, and financial condition.

Macroeconomic conditions impact consumer confidence and discretionary ~~spending.~~spending, which can adversely affect demand for our products. Consumer spending habits are affected by, among other things, inflation, ~~weakness~~fluctuations in currency exchange rates, general economic ~~conditions,~~weakness, threats or actual recessions, pandemics, wars and military actions, employment levels, ~~of employment, salaries and wage rates,~~wages, debt obligations, discretionary income, interest rates, volatility in capital, ~~markets,~~and consumer confidence and ~~consumer perception~~perceptions of current and future economic conditions. ~~Declines in, or uncertain economic outlooks for, the U.S. or certain international economies could adversely affect consumer spending habits which may,~~Changes and uncertainty can, among other things, ~~result in a~~reduce or shift spending away from elective procedures, drive patients to purchase orthodontic treatments that cost less than our Invisalign treatment options, decrease in the number of ~~overall~~ orthodontic and dental case starts, reduce patient traffic in dentists’ offices ~~reduce or shift spending away from elective, non-urgent, or higher value procedures~~ or reduce demand for dental services generally, any of which could materially adversely affect our revenues and operating results. Conversely, to the extent social distancing, travel, work and other restrictions have limited options for consumer spending, demand for our products may decline once any or all of these restrictions ease. Inflation, weakness in the global or regional economies and recessions can decreasegenerally. Further, decreased demand for dental ~~technologies, causing~~services can cause dentists and labs to postpone investments in capital equipment, such as intraoral scanners and CAD/CAM equipment and software. ~~We observed increased inflation~~The recent declines in, ~~2021 that has continued~~or uncertain economic outlooks for, the U.S., Chinese, European and certain other international economies have and may continue to adversely affect consumer and dental practice spending. The increase in ~~2022~~the cost of fuel and energy, food and other essential items along with higher interest rates could reduce consumers' disposable income, resulting in decreased discretionary spending for products like ours. Further, we ~~are unable to~~cannot predict the ~~impacts~~impact of efforts by central banks and federal, state and local governments to combat higher inflation. If their efforts are too aggressive, they may lead to a recession. Alternatively, if they are insufficient or are not sustained long enough to lower inflation to acceptable levels, consumer spending may be adversely impacted for a prolonged period of time. Decreases in disposable income and discretionary spending or changes in consumer confidence and spending habits has and may continue to adversely affect our revenues and operating results.

Inflation continues to adversely impact spending and trade activities, causing unpredictable impacts on global and regional economies. Higher inflation ~~may~~has also ~~increase~~increased domestic and international shipping costs, raw material prices, and labor ~~rates.~~rates, which has adversely impacted the costs of producing, procuring and shipping our products. Our ability to recover these cost increases through price increases may continue to lag, resulting in downward pressure on our operating results. ~~Any attempts~~Attempts to offset cost increases with price increases may ~~result in greater reductions in~~reduce sales, increase customer dissatisfaction or otherwise harm our reputation. ~~The continued increase in fuel prices~~Any of these events could also have an effect on consumer spending and on our costs of producing, procuring and shipping our products. We are also unable to predict the impact of efforts by central banks to combat elevated levels of inflation. Increases in lending rates may reduce economic activity. If downward pressures continue due to these economic factors, this may lead to a recession. If a recession occurs, economies weaken, fuel prices continue to increase or inflationary trends continue,materially affect our business and operating ~~results could be materially adversely affected.~~results.

We have international operations and sales outside the U.S. We earn a large portion of our total revenues from international sales generated through our foreign direct and indirect operations and we expect to increase our sales and presence outside the U.S., particularly in markets we believe have high-growth potential. Moreover, we perform most of our key production steps in locations outside of the U.S. For instance, we perform our digital treatment planning and aligner fabrication in multiple international locations, including large-scale operations in Mexico, Costa Rica, Poland, Japan and China. Additionally, we maintain significant global sales and marketing operations in Switzerland, Singapore and China, along with research and development operations globally, including in the U.S., Spain, Israel, Armenia and Germany. Our reliance on international operations and sales exposes us to fluctuations in foreign currencies that may adversely impact our business or results of operations. Although the U.S. dollar is our reporting currency, a growing portion of our net revenues and net income are generated in foreign currencies. ~~In our foreign subsidiaries where~~While we utilize forward contracts to reduce the ~~local currency is~~adverse earnings impact from the ~~functional currency, our net revenues and net income are translated into U.S. dollars using the average period~~effect of exchange rate ~~which~~fluctuations on certain assets and liabilities, our hedging strategies may ~~fluctuate significantly. As a result, negative movements in~~not be successful, and currency exchange ~~rates against the U.S. dollar~~rate fluctuations have and ~~may increasingly adversely affect our net revenues and net income in our consolidated financial statements. For example, the recent substantial decline in the value of the Euro compared~~could continue to the U.S. dollar has adversely impacted our operating results in Europe. We enter into currency forward contract transactions in an effort to cover some of our exposure to currency fluctuations, but there is no assurance these transactions will fully or effectively hedge our exposure to currency fluctuations, and, under certain circumstances, these transactions could have a material adverse effect on our operating results and cash flows. In addition, our foreign currency exposure on assets, liabilities and cash flows that we do not hedge have and could continue to have a material impact on our financial ~~condition.~~results in periods when the U.S. dollar significantly fluctuates in relation to foreign currencies.

Our business could be impacted by political events, trade and other international disputes, war, and terrorism, including the military conflictbetween Russia and Ukraine.

Political events, trade and other international disputes, war, and terrorism could harm or disrupt international commerce and the global economy and could have a material effect on our business as well as our customers, suppliers, contract manufacturers, distributors, and other business partners. Such risks include inflation, supply chain and trade disruptions, trade sanctions, reduced consumer spending, disruptions to our IT systems, including through network failures, malicious or

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disruptive software, or cyberattacks, energy shortages or rationing that adversely impacts our manufacturing facilities, rising fuel or rising costs of producing, procuring and shipping our products, fluctuations to foreign currency exchange rates, and constraints, volatility or disruption in the financial markets.

Political events, trade and other international disputes, wars, and terrorism can lead to unexpected tariffs or trade restrictions, which may adversely impact our business. Tariffs, such as the tariffs on Chinese goods, and responses to the tariffs increase the cost of our products and the components and raw materials used to make them. Increased costs could adversely impact our gross margin and reduce demand for our products. Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, that adversely impact our operations and supply chain, limit our ability to offer products and services or inhibit our ability to comply due to contradictions with other laws. These measures could require us to take various actions, including changing suppliers or restructuring business relationships. Complying with new or changed trade restrictions is expensive, time-consuming and disruptive to our operations. Such restrictions can be announced with little or no advance notice and we may be unable to effectively mitigate their adverse impacts. If disputes and conflicts escalate in the future, the responses by governments may be significantly more restrictive and could materially affect our business.

Political unrest, threats, tensions, actions and responses to any social, economic, business, geopolitical, military, terrorism, or acts of war involving key commercial, development or manufacturing markets such as China, Mexico, Israel, Europe, or other countries could materially impact our international operation. For example, our employees in Israel could be obligated to perform reserve duty in the Israeli military and be called for additional active duty under emergency circumstances. If this or any other events or conditions occur, the impact to us, our employees and customers would be uncertain, particularly if emergency circumstances, armed conflicts or an escalation in political instability or violence disrupts our product development, data or information exchange, payroll or banking operations, product or materials shipping by us or our suppliers and other unanticipated business disruptions, interruptions and limitations in telecommunication services or critical systems or applications reliant on a stable and uninterrupted communications infrastructure.

The military conflictbetween Russia and Ukraine has materially adversely impacted global economies.Our ~~results of~~commercial operations have been impacted by the conflict and if we fail to support existing customers, we may harm our reputation, and be subject to legal and regulatory actions in Russia. Additionally, although the majority of our research and development personnel formerly headquartered in Russia have relocated, some personnel remain. Whether those that are in Russia or those in their new locations remain with us over the long-term is unknown. If we are unable to retain key skilled personnel, or we are unable to quickly replace such personnel with individuals of equivalent technical expertise and qualifications, our business and financial condition could be materially ~~adversely~~effected. Moreover, production could be impaired as a result of the military conflict in other countries such as Poland and Israel, where our fabrication facilities are located. We have no way to predict the progress or outcome of the conflict in Ukraine or the reactions by governments, businesses or consumers but it could have a material effect on our business and operating results.

Our business could be impacted by major public health issues, including pandemics, and our business has been materially affected by the global and regional ~~efforts to mitigate the~~ spread of ~~COVID-19 and we expect this will continue in as yet unknown ways and to varying degrees as the virus evolves and circumstances dictate.~~COVID-19.

~~The broad~~Major public health issues, including pandemics such as COVID-19, have adversely affected, and ~~extensive~~could in the future materially affect, our business due to their impact on the global and regional economies, demand for consumer products, and the imposition or removal of public safety measures. Public health concerns may also limit the movement of goods between regions, disrupt or delay supply chains and sales and distribution channels, resulting in interruptions of the ~~COVID-19 pandemic on virtually~~supply of products. Insurance coverage, if available, may be insufficient to cover all aspects of our business and society has exacerbated many pre-existing risks to our business by making them more likely to occur or more impactful when they do occur. Accordingly, you should consider the risks described in this risk factor in addition to, and not in lieu of, the risks described elsewhere throughout these risk factors.losses that may arise.

COVID-19 ~~has~~ created significant, widespread and unprecedented volatility, uncertainty, and economic instability, disrupting broad aspects of ~~the~~ global ~~economy,~~and regional economies, our operations and the businesses of our customers and suppliers. Many of these effects continue to varying degrees and further mutated variants and outbreaks globally or regionally continue to harm recovering consumer confidence and have led to renewed implementation of harsh preventative measures by local and regional governments and businesses. Therefore, comparing our financial results for the reporting periods of ~~2022~~2023 to the same reporting periods of ~~2021~~2022 or earlier may not be a useful means by which to evaluate the health of our business and our results of operations.

As a result of outbreaks of COVID-19 and new variants of the virus such as Delta and Omicron, customer demand and doctor availability has been inconsistent and difficult to predict. Although the practices of the doctors, dental service organizations and labs that are our principal customers have largely reopened following the initial outbreak of COVID-19 in 2020, many continue to operate at less than pre-pandemic capacities. For example, in China the impact of widespread population lockdowns under the country’s zero tolerance policies has been more pronounced in the first half of 2022 than in prior periods, leading to the complete closure of dental offices in major metropolitan and other areas for extended periods of time. While the pandemic increased demand for digital solutions such as the products and solutions we offer for the dental field, it is unclear if this will continue. For instance, if the use of video conferencing declines when employees return to office environments or travel, dining, entertainment and other consumer spending categories rebound, demand or growth rates for our products may decline. These fluctuations are currently and have previously adversely impacted our results of operations from time to time and are expected to continue to impact our results, particularly in the near term.

In response to the pandemic, we implemented measures aimed at limiting its spread for the health and safety of our employees, customers, patients and the communities in which we live and work as well as in accordance with orders and decrees of governmental agencies. These measures included diagnostic screenings at our facilities, increased social distancing mandates, closures of physical offices, manufacturing and treatment planning facilities, including our U.S. corporate headquarters and regional facilities worldwide, implementing remote working where feasible, and prohibiting non-essential travel. Many of these actions remain in effect to varying degrees and we may implement new or revise existing measures as circumstances require. The actions and reactions to voluntary and involuntary protective measures have been highly disruptive to our business and may continue to be disruptive.

The rules and regulations for reopening and operating our offices will likely increase in complexity, making compliance more difficult. Beginning and continuing in 2022, we are gradually reopening many of our offices. Where our offices have reopened, we have adopted a flexible hybrid schedule that will allow many of our employees the opportunity to collaborate and connect with others in our offices three days per week while having the option to work remotely other days. If employees perceive our approach to reopening our offices to be inadequate, overly burdensome, or prefer the safety or convenience of working from home, employees may choose to terminate their employment with us, productivity may decline or we may experience employee unrest, slowdowns, stoppages or other demands. Additionally, we may fail to timely meet customer demand or fulfill orders, the costs to maintain or implement protective measures or deliver our products may increase, and we may be subject to increased litigation, including product liability and occupational safety and condition claims. For further discussion or the risks related to our hybrid schedule approach to reopening our offices, employee satisfaction, retention and engagement see the risk factor “We ~~rely on our personnel and, if we fail to attract, motivate or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.”~~

As the economic and societal impact of the pandemic continues, we are continually evaluating macroeconomic as well as industry-specific factors, including the extent our business and financial results and the business and financial results of our customers’ and suppliers’ have been and in the future may be impacted. The financial health and stability of businesses and consumers overall depends on numerous evolving factors, many of which we cannot control nor accurately predict. Examples include:

•~~the duration, scope, and severity of governmental, business and societal actions in response to the pandemic;~~

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•the impact on worldwide economic activity, employment rates as well as actions taken by central banks and governments, including in response to the growing impact of inflation, or the occurrence of regional or global recessions as a result of fiscal tightening or other factors;

•~~customer and consumer purchasing behavior changes as pandemic-related restrictions are curtailed, lifted or reinstated, and travel and discretionary spending patterns shift;~~

•the response of employees, customers and suppliers to the reimplementation or easing of social distancing mandates and returning to in-office or facility working, including anxieties regarding the continuing risks of the spread of the virus or any of its variants, vaccination requirements, and other mandates that may impact employee productivity and engagement, retention or require additional costly protective measures;

•the liquidity of funds and financial stability of consumers, customers, and patients, including their willingness to purchase our products and services, delays paying for products or services, requests for extended payment terms, or payment defaults;

•disruptions and shortages impacting the cost, availability and timing of the procurement, delivery, manufacturing and overall supply chain for raw materials, components, parts and products, including semiconductor chips;

•~~delays and cancellations as a result of port congestion and intermittent supplier shutdowns;~~

•travel and gathering restrictions, including those that adversely impair or prohibit our sales personnel from interacting with customers or that limit patients from visiting their doctors or capacity limits on the number of patients doctors can see in their offices;

•actions taken by competitors as a result of consumer demand or consumer spending pressures related to COVID-19, such as price reductions, aggressive product promotions, changes in or the launch or termination of products or product lines, and mergers, consolidations and liquidations;

•data privacy and cybersecurity risks from new or expanded use of remote working and/or teledentistry by our suppliers, customers, and us, including new or expanded use of online service platforms, products and solutions such as video conferencing applications, doctor, consumer and patient apps, inadequately secured computing networks, servers, software or software applications, overheard telephone conversations, viewable computer screens, stolen passwords or access information, increased phishing and other cyber threats; and

•~~diversion of management’s attention as they focus on the short- and long-term ramifications of the pandemic.~~

~~The effects of the pandemic continue to linger and evolve and we~~ cannot predict future direct and ancillary impacts on our business or results of operations from the COVID-19 pandemic, although they may ~~have a~~be material ~~adverse effect on~~to our business ~~financial condition, results of operations, cash flows and stock price~~ as well as the businesses of our customers, suppliers and economic activity generally.

~~The outbreak~~Our operations may be impacted by natural disasters, which may become more frequent or severe as a result of ~~military conflictbetween Russia and Ukraine has created a humanitarian crisis, materially impacted economic activities,~~climate change, and may ~~in the future materially~~adversely impact our ~~global~~business and ~~regional operations.~~operating results as well as those of our customers and suppliers.

~~The global economy has been negatively impacted by the military conflict between Russia and Ukraine.Governments including the U.S., United Kingdom, and~~Natural disasters can impact our operations as well as those of our customers and critical suppliers. Natural disasters include earthquakes, tsunamis, floods, droughts, hurricanes, wildfires, and other extreme weather conditions that can cause deaths, injuries, and critical health crises, power outages, restrictions and shortages of food, water, shelter, and medical supplies, telecommunications failures, materials scarcity, price volatility and other ramifications. Climate change is likely to increase both the ~~European Union have imposed export controls on certain products~~frequency and ~~financial~~severity of natural disasters and, economic sanctions on certain industry sectors and parties in Russia which has triggered retaliatory sanctions by the Russian government and its allies that have materially impacted business inside Russia. Although immaterialconsequently, risks to our consolidated financial statements, our commercial business operations in Russia have been materially impacted by the conflict. Additionally, if due to the conflict, we are unable to retain key skilled personnel workforce located in Russia, particularly research and development personnel, or quickly replace such personnel with individuals of equivalent technical expertise and qualifications, our business and ~~financial condition could be materially adversely effected. The outcome~~operations. Our digital dental modeling and ~~future impacts~~certain of ~~the conflict remain highly uncertain, continue to evolve and~~our customer facing operations are likely to grow more severe the longer the military action and sanctions remain in effect. Moreover, this conflict and existing and future sanctions may have broad and pervasive impacts to the global economy and our operations, heightening and affecting many of the other risks listed in this Quarterly Report on Form 10-Q, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on general economic and political conditions, including inflation, supply chain disruptions and consumer spending; disruptions to our information systems, including through network failures, malicious or disruptive software, or cyberattacks; trade disruptions; rising fuel and/or rising costs of producing, procuring and shipping our products; our exposure to foreign currency exchange rate fluctuations; and constraints, volatility or disruption in the financial markets. We may not be successfulprimarily processed in our ~~efforts to mitigate all or any of the negative impacts of the conflict, particularly the longer sanctions~~facilities located in Costa Rica. Our aligner molds and ~~retaliatory sanctions remain~~finished aligners are fabricated in ~~effect. How we respond to these impacts will also subject us to risk. The suspension or resumption of our commercial operations~~China, Mexico and Poland. Our locations in ~~Russia or our decision to continue supporting our personnel~~Costa Rica and Mexico as well as others are in ~~Russia may result in reputational harm or boycotts of our products that could impact our sales~~earthquake and ~~operations inside~~hurricane zones and ~~outside of Russia or subject us to litigation for which we~~ may be ~~found liable in courts or other tribunals in Russia or elsewhere. Moreover, production could be impaired should hostilities spread~~subject to other ~~countries such as Poland, where we have built our new aligner fabrication facility.~~

natural disasters. Moreover, a significant

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~~We have no way~~portion of our research and development activities are located in California, which suffers from earthquakes, periodic droughts, heat waves, flooding, power shortages and wildfires. If a natural disaster occurs in a region where one of these facilities is located, our employees could be impacted, our research lost, and our ability to ~~predict~~create treatment plans, respond to customer inquiries or manufacture and ship our aligners or intraoral scanners could be compromised which could result in our customers experiencing significant product and services delays.

The effects of climate change on regional and global economies could change the ~~progress~~supply, demand or ~~outcome~~availability of sources of energy or other resources material to our products and operations and affect the ~~situation in Ukraine, as the conflict~~availability or cost of natural resources and ~~governmental reactions are rapidly developing~~goods and ~~beyond~~services on which we and our ~~control. A prolonged conflict, intensified military activities~~suppliers rely.

Business and Industry Risks

Demand for our products may not increase or ~~more extensive sanctions impacting the region and the resulting economic impact~~may decrease due to resistance to non-traditional treatment methods, which could have a material ~~adverse effect~~impact on our ~~operations,~~business and operating results.

Our products require our customers to change from traditional treatment methods. For example, Invisalign treatment is a significant change from traditional metal wires and brackets orthodontic treatment, and customers and consumers may not find it cost-effective or preferable to traditional treatment. A number of dental professionals continue to believe Invisalign treatment is only appropriate for a limited percentage of patients or are reluctant to move from analog to digital. Additionally, our iTero products provide a digital alternative and some dental professionals have been and may continue to be resistant to move to a digital platform. Increased market acceptance of our products depends in part on the recommendations of dental professionals, as well as other factors including efficacy, safety, ease of use, reliability, aesthetics, and price compared to competing products and treatment methods. If demand for our products fails to increase, our business and operating results ~~of operations, financial condition, liquidity, growth prospects and business outlook.~~may be harmed.

Our net revenues ~~are dependent~~depend primarily on our Invisalign system and iTero scanners and any decline in sales or average selling price of these products ~~for any reason,~~ may adversely affect net revenues, gross margin and net income.

Our net revenues remain largely dependent on sales of our Invisalign system of clear aligners and iTero intraoral scanners. Of the two, we expect net revenues from the sale of the Invisalign system, primarily our comprehensive products, will continue to account for the majority of our net revenues, making the continued and widespread acceptance of the Invisalign system by orthodontists, GPs and consumers critical to our ~~future~~ success. Our iTero business also contributes a material percentage of our overall ~~revenues.~~ ~~Although exocad and its CAD/CAM software solutions are important to the continuing evolution of the Align Digital Platform, the contributions to our total~~ net ~~revenues from the exocad solutions remain immaterial.~~revenues. Our operating results could be harmed if:

•orthodontists and GPs experience a reduction in consumer demand for orthodontic services;

•consumers ~~prove~~are unwilling to adopt Invisalign system treatment as rapidly or in the volumes we anticipate and at the prices offered;

•orthodontists or GPs choose to continue using wires and brackets or competitive products rather than the Invisalign system or the rates at which they utilize the Invisalign system fail to increase or increase as rapidly as anticipated;

•sales of our iTero scanners decline or fail to grow sufficiently or as anticipated;

•the growth of CAD/CAM solutions does not produce the results anticipated; or

•if the average selling price of our products declines.

The average selling prices of our products, particularly our Invisalign system, are influenced by numerous factors, including the type and timing of products sold (particularly the timing of orders for additional clear aligners for certain Invisalign products) and foreign exchange rates. In addition, we sell a number of products at different list prices which may differ based on country. Our average selling prices for our Invisalign system and iTero scanners have been impacted in the past and may be adversely affected again in the future if:

•we introduce new or change existing promotions, general or volume-based discount programs, product or services bundles or consumer rebate programs;

•participation in any promotions or programs unexpectedly increases, or decreases or drives demand in unexpected and material ways;

•our geographic, channel or product mix shifts to lower priced products or to products ~~that have~~with a higher percentage of deferred revenue;

•we decrease prices on one or more products or services in response to increasing competitive pricing pressures;

•we introduce new or change existing products or services, or modify how we market or sell any of our new or existing products or services;

•governments impose pricing regulations such as volume-based procurement regulations in China; or

•~~our critical accounting~~ estimates ~~materially~~used in the calculation of deferred revenue differ from actual ~~behavior or results.~~average selling prices.

If our average selling prices decline, our net revenues, gross ~~profit, gross~~ margin and net income may be adversely affected.

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Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors, other companies that may introduce new technologies or products in the future and customers who alone or with others create orthodontic appliances and solutions or other products or services that compete with us.

The dental industry is in a period of immense and rapid digital transformation involving products, technologies, distribution channels and business models. While solutions such as our Invisalign system, iTero scanners and CAD/CAM software facilitate this transition, whether our technologies will achieve market acceptance and, if adopted, whether and when they may become obsolete, remains unclear. In addition, we face competition from companies that introduce new technologies and products and we may be unable to compete with these competitors or they may render our technology or products obsolete or economically unattractive. If we are unable to compete effectively with existing products or respond effectively to any new technologies, our business could be harmed.

Currently, the Invisalign system competes ~~directly~~primarily against traditional metal wires and brackets and increasingly against clear aligners manufactured and distributed by new and existing market entrants and manufacturers of traditional wires and brackets, ~~both within and outside the U.S.,~~ and from traditional medical device companies, laboratories, startups and, in some cases, doctors and ~~DSOs~~Dental Support Organizations (“DSOs”) themselves. ~~Due in part to market opportunities and the expiration of certain of our key patents beginning in 2017, competition from providers of clear aligners is increasing.~~ The number and types of competitors are diverse and growing rapidly. They vary by segment, geography, and size, and include new and well-established regional competitors in dental markets, as well as

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larger companies or divisions of larger companies with substantial sales, marketing, research and financial ~~capabilities, and existing dental market channels.~~capabilities. Our competitors also include direct-to-consumer (“DTC”) companies that provide clear aligners using a remote business model requiring little or no in-office care from trained and licensed doctors, and doctors and DSOs who ~~can~~ manufacture custom aligners in their offices using 3D printing technology. Large consumer product companies may also start supplying orthodontic products.

The manipulation and movement of teeth and bone is a complex and delicate process with potentially painful and debilitating results if improperly performed or monitored. Accordingly, we ~~are committed to delivering~~deliver our Invisalign system solutions primarily through trained and skilled ~~doctors.~~doctors and are reliant on their recommendations and support of our products. The Invisalign system requires a doctor's prescription and an ~~in person~~in-person physical examination of the patient’s dentition before beginning treatment; however, with the advent of DTC providers, there has been a shift away from traditional dental practices that may impact our primary selling channels. Doctors and DSOs are sampling alternative products and taking advantage of competitive promotions and sale opportunities. ~~In addition, we face competition from companies~~

Our iTero intraoral scanner can be used to start clear aligner therapy, as well as other dental procedures, including restorative, implant planning and dentures, and also functions as a diagnostic tool. The iTero intraoral scanner competes with polyvinyl siloxane (“PVS”) impressions and new scanners in the market that ~~introduce new technologies and we may be unable to compete~~doctors use for clear aligner therapy or other dental procedures. It also competes with ~~these competitors or they may render our technology obsolete or economically unattractive.~~traditional bite wing 2D dental x-rays for detecting interproximal caries. If we are unable to compete effectively with these existing products, existing competitors, new market entrants, or respond effectively to ~~any~~ new technologies, our ~~business~~Systems and Services segment could be harmed.

To stimulate product and services demand, we have a history of offering volume discounts, price reductions and other promotions to targeted customers and ~~consumers.~~consumers and releasing lower priced products. Whether or not successful, these promotional campaigns and lower priced products have had and may in the future have unexpected and unintended consequences, including reduced gross margins, profitability and average selling prices, net revenues, volume growth, and net income.

We cannot ~~assure~~be sure that we will be able to compete successfully against our current or future competitors or that competitive pressures will not have a material ~~adverse~~ effect on our business, results of operations and financial condition.

An increasingly larger portion of our total revenues are derived from international sales and we are dependent on our international operations, which exposes us to foreign operational, political, military and other risks that may harm our business.

We earn an increasingly larger portion of our total revenues from international sales generated through our foreign direct and indirect operations and we expect to increase our sales and presence outside the U.S., particularly in markets we believe have high-growth potential. Moreover, we perform most of our key production steps in locations outside of the U.S. For instance, our digital treatment planning and aligner fabrication are performed in multiple international locations, including large-scale operations in Mexico, Costa Rica and China and we continue to establish additional sites closer to our international customers, such as our recently constructed manufacturing facility in Poland. Also, we maintain significant global sales and marketing operations in Switzerland, Singapore and China along with research and development operations globally, including in the U.S., Russia, Israel and Germany. Our reliance on international operations exposes us to risks and uncertainties that may affect our business or results of operations, including:

•~~difficulties managing international operations, including any travel restrictions on us or our contractors, consultants or customers;~~

•~~fluctuations in currency exchange rates;~~

•~~import and export risks, including shipping delays, cost increases, penalties, controls, license requirements and restrictions;~~

•~~controlling production volume and quality of the manufacturing process;~~

•the engagement in activities by our employees, contractors, partners and agents prohibited by our policies and procedures as well as international and local trade, labor and other laws such as those prohibiting bribery and corrupt payments to government officials, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and export control laws;

•delays, disruptions and increasing costs to us and our suppliers for raw materials or components, manufacturing, and transportation, including as a result of customs clearance, port congestion, workforce unrest or labor shortages, slowdowns or stoppages, unionization efforts, or disasters, whether natural forces or human caused;

•~~increased expense of developing, testing, manufacturing and marketing localized versions of our products;~~

•threats, tensions, actions and responses to any social, economic, business, geopolitical, military, terrorism, or acts of war, including the possibility, threat of, imposition of, or changes in sanctions, trade restrictions and tariffs, as well as retaliatory military actions, sanctions, trade restrictions and tariffs particularly involving key customers, development or manufacturing markets such as China, Mexico, Russia, the Middle East, Eastern Europe or other countries;

•~~Some of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and may be called for additional active duty under emergency circumstances~~ which may materially impair all or a portion of our business critical to our iTero operations. If any of these events or conditions occur, the impact to us, our employees and customers is uncertain, particularly if emergency circumstances, armed conflicts or an escalation in political instability

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or violence disrupts our product development, data or information exchange, payroll or banking operations, product or materials shipping by us or our suppliers and other unanticipated business disruptions, ~~interruptions and limitations in telecommunication services or critical systems or applications reliant on a stable and uninterrupted communications infrastructure;~~

•~~burdens of complying with a wide variety of regional and foreign laws, including anti-trust, fair competition and environmental laws;~~

•the impact of nationalism or initiatives to encourage the purchase or support of domestic vendors, which can influence customers to purchase products from, or collaborate to promote interoperability of products with, companies whose headquarters or primary operations are not domestic;

•~~reduced IP rights protections as compared to the protections afforded under the laws of the U.S.;~~

•~~longer customer payment cycles and greater difficulty in accounts receivable collection; and~~

•~~potential adverse direct and indirect tax consequences.~~

~~Should any of these factors, either individually or in combination, occur they could materially impact our international operations and adversely affect our business as a whole.~~

Our success depends on our ability to successfully develop, ~~successfully~~ introduce, achieve market acceptance of, and manage new products and services.

Our success depends on our ability to profitably and quickly develop, manufacture, market, obtain and ~~obtain~~maintain regulatory approval or clearance of new products and services along with improvements to existing products and services. There is no assurance we can successfully develop, sell and achieve market acceptance of our new or improved products and services. The extent ~~of,~~ and rate at which new products or ~~offerings~~services may achieve market acceptance and penetration is a function of many variables, including our ability to:

•successfully predict and timely innovate and develop new technologies, applications and ~~applications with the~~products preferred by customers and consumers and that have features and functionality ~~customers desire or expect;~~to meet the needs of patients;

•successfully and timely obtain regulatory approval or clearance of new and improved products or services from government agencies such as the FDA and analogous agencies in other countries;

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•~~cost effectively~~cost-effectively and efficiently develop, manufacture, quality test, market, dispose of, ~~bring to market, market, and/or~~and sell new or improved products and services ~~offerings;~~offerings, including localized versions for international markets;

•properly forecast the amount and timing of new or improved product and services demand;

•allocate our research and development funding to products and services with higher growth prospects;

•ensure the compatibility of our technology, services and systems with those of our customers;

•anticipate and rapidly innovate in response to new competitive products ~~product~~and services offerings and technologies;

•differentiate our products and product offerings from our competitors as well as other products in our own portfolio and successfully articulate the benefits to our customers;

•manage the impact of nationalism or initiatives encouraging consumer purchases from domestic vendors, or dissuade interoperability of products and technologies between companies;

•qualify for third-party reimbursement for procedures involving our ~~products;~~products or services;

•offer attractive and competitive service and subscription plans; and

•encourage customers to adopt new technologies and provide the needed technical, sales and marketing support to make new product and services launches successful.

If we fail to accurately predict ~~customer~~the needs and preferences of customers and their patients, or fail to produce viable technologies or products, we may invest heavily in research and development ~~of products~~ that dodoes not lead to significant revenues. Even if we successfully innovate and develop new products and product ~~enhancements,~~improvements, we may incur substantial costs doing so and our profitability may suffer. It may be difficult to gain market share and acceptance for new or ~~enhanced~~improved products. Introduction and acceptance of ~~new~~any products and services may take significant time and effort, particularly if ~~the products or services~~they require doctor education and training to understand ~~the~~their benefits ~~of the new products~~ or ~~they measure the success of~~doctors choose to withhold judgment on a product ~~only after using it to treat patients.~~until patients complete their treatments. For instance, it can take up to 24 months or longer to ~~treat patients~~complete treatment using our Invisalign system. ~~Consequently, doctors may be unwilling to adopt our products until they successfully complete one or more cases or until more historical clinical results are available.~~

In addition, ~~as part of our effort to accommodate our customers’ needs and demands,~~ we periodically introduce new business and sales initiatives to meet ~~these~~customers’ needs and ~~demands, such as our commercial teeth whitening products announced in 2021.~~demands. In general, our internal resources support these ~~new businesses or sales~~ initiatives ~~and we frequently provide such support~~ without clear indications itthey will prove successful or be without short-term execution challenges. Should these ~~new business or sale~~ initiatives be unsuccessful, our business, results of operations and financial condition could be materially impacted.

We may invest in or acquire other businesses, products or technologies which may require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.

Periodically, we have and may in the future acquire, or make investments in, companies, products or technologies. Alternatively, we may be unable to find suitable investment or acquisition targets or be unable to complete investments or acquisitions on favorable terms, if at all. If we make investments or complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals or desired synergies, and investments or acquisitions we complete could be viewed negatively by our customers, securities analysts and investors. Moreover, to the extent we make strategic investments, the companies in which we invest may fail or we may ultimately own less than a majority of the outstanding shares of the company and be outvoted on critical issues that could harm us or the value of our investment.

Additionally, as an organization we do not have a history of significant acquisitions or integrating their operations and cultures with our own. As ~~we continue to grow,~~such, we are subject to ~~growth related~~various risks when making a strategic investment or acquisition which could materially impact our business or results of operations, including ~~risks related~~that we may:

•fail to ~~excess~~perform proper due diligence and inherit unexpected material issues or ~~constrained capacity~~assets, including intellectual property (“IP”) or other litigation or ongoing investigations, accounting irregularities or improprieties, bribery, corruption or other compliance liabilities;

•fail to comply with regulations, governmental orders or decrees;

•experience IT security and ~~operational inefficiencies at~~privacy compliance issues;

•invest in companies that generate net losses or the markets for their products, services or technologies may be slow or fail to develop;

•not realize a positive return on investment or determine that our ~~manufacturing~~investments have declined in value, such that it may be necessary to record impairments such as future impairments of intangible assets and ~~treat facilities.~~goodwill;

•have to pay cash, incur debt or issue equity securities to pay for an acquisition, adversely affecting our liquidity, financial condition or the value of our common stock. The sale of equity or issuance of debt to finance any acquisition could result in dilution to our stockholders. The occurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that impede our ability to manage our operations;

•find it difficult to implement and harmonize company-wide financial reporting, forecasting and budgeting, accounting, billing, IT and other systems due to inconsistencies in standards, internal controls, procedures and policies;

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•require significant time and resources to effectuate the integration;

~~We are subject~~•fail to ~~growth related risks, including excess~~retain key personnel or ~~constrained capacity~~harm our existing culture or the culture of an acquired entity;

•not realize any or all or material portions of the expected synergies and ~~pressure on our internal systems, personnel and suppliers. In order~~benefits of the acquisition; or

•unsuccessfully evaluate or utilize the acquired technology or acquired company’s know-how or fail to manage current operations and future growth effectively, we must continually implement and improve our operational, financial and management information systems, hire, train, motivate, manage and retain employees, and ensure our suppliers remain diverse and capable of meeting growing demand forsuccessfully integrate the systems, raw materials, parts and components essential to the manufacture and delivery of our products. We may be unable to manage such growth effectively while balancing near-term efforts to meet existing demand, including adding personnel, creating scalable, secure and robust systems and operations, and automating processes needed for long term efficiencies. Any such failure could have a material adverse impact on our business, operations and prospects.technologies acquired.

~~We continue~~Moreover, opposition to ~~establish treatment planning and manufacturing facilities closer~~one or more acquisitions may lead to ~~our international customers~~negative ratings by analysts or investors, give rise to ~~provide them with better experiences, improve their confidence using the Invisalign system and iTero intraoral scanners to treat patients, and provide redundancy should other facilities be temporarily~~stockholder objections or permanently unavailable. Our ability to obtain regulatory clearance and certifications for, move into, plan, construct and equip additional facilities is subject to significant risk and uncertainty, including risks related to establishing facilities, hiring and retaining employees and delays and cost overruns,result in stockholder activism, any of which could disrupt our operations or harm our stock price.

Operational Risks

Business disruptions could seriously harm our financial condition.

Our global operations have been disrupted in the past and will likely be disrupted and harmed again in the future. The occurrence of any material or prolonged business disruptions, whether internal or at key suppliers, could harm our business and results of operations, result in material losses, seriously harm our revenues, profitability and financial condition, adversely affect our competitive position, increase our costs and expenses, and require substantial expenditures and recovery time in order to fully resume operations.

When business disruptions occur, they may, ~~be all~~individually or ~~partially out of our control and can negatively impact our gross margin. In addition, operating facilities located~~ in ~~higher cost regions compared to Mexico, China and Costa Rica negatively impact our gross margin. If~~ the ~~construction or transition into additional facilities is significantly delayed, if a facility temporarily or permanently, partially or fully shuts down, or demand for our products outpaces~~aggregate, affect our ability to ~~hire qualified personnel~~provide products, services and ~~effectively implement systems~~solutions to our customers, and ~~infrastructure,~~could cause production delays or limitations, create adverse effects on distributors, disrupt supply chains, result in shipping and distribution disruptions and reduce the availability of or access to one or more facilities. We have policies and procedures which are intended to mitigate the impact of the business disruptions and crises that we believe could be most significant, and we train employees and work with suppliers to prepare for potential disruptions. However, the design or implementation of these policies and practices may ~~be unable~~fail to ~~fulfill orders timely, or at all,~~adequately address particular disruptions, which ~~may negatively impact~~could materially and adversely affect our business, financial condition and results ~~reputation and overall business.~~of operations.

Our operating results have and will continue to fluctuate in the future, which makes predicting the timing and amount of customer demand, our revenues, costs and expenditures difficult.

Our quarterly and annual operating results have and will continue to fluctuate for a variety of reasons, including as a result of changing doctor and consumer product demand. In addition ~~because adapting production capacity~~to the factors otherwise described herein, some of the other factors that have historically, and ~~related cost structures~~could in the future, cause our operating results to ~~changing market conditions takes time, our facilities’ capacity may at times exceed or fall short~~fluctuate include:

•higher manufacturing, delivery and inventory costs;

•the creditworthiness, liquidity and solvency of our ~~production requirements. For instance,~~customers and their ability to timely make payments when due;

•changes in the timing of revenue recognition and our average selling prices, including as a result of the ~~COVID-19 pandemic, sales~~timing of receipt of product orders and shipments, product and services mix, geographic mix, product and services deferrals, the introduction of new products and software releases, product pricing, bundling and promotions, pricing for fees or expenses, modifications to our terms and conditions such as payment terms, or as a result of new accounting pronouncements or changes to critical accounting estimates including, without limitation, estimates based on matters such as our predicted usage of additional aligners;

•seasonal fluctuations, including those related to patient demographics or seasonality as well as the availability of doctors to take appointments;

•longer customer payment cycles and greater difficulty in accounts receivable collection for our international sales;

•costs and expenditures, including in connection with new treatment planning and fabrication facilities, the ~~final weeks~~hiring and deployment of ~~the first quarter~~personnel, and litigation; and

•timing and fluctuation of ~~2020 declined substantially~~spending around marketing and ~~operations at~~brand awareness campaigns and industry trade shows.

If we underestimate product demand, demand may exceed our manufacturing ~~facilities declined shortly thereafter. Then, as dental practices reopened~~capacity or that of one or more of our suppliers, we ~~experienced~~may be understaffed and we may not have sufficient materials needed for production. Specifically, our manufacturing process relies on sophisticated computer software and requires new technicians to undergo a ~~rapid increase in demand. These fluctuations in~~relatively long training process, often 120 days or longer. As a result, if we are unable to accurately predict demand, we may have an insufficient number of trained technicians to ensure products are timely manufactured and delivered to meet customers’ expectations, which could damage our relationships with our existing customers or harm our ability to attract new customers. Specifically, production levels for our intraoral scanner are generally forecasted based on forecasts and historic product demand and ~~sales~~we often place orders with suppliers for materials, components and sub-assemblies (“materials and components”) as well as finished products weeks or more in advance of projected customer orders.

Conversely, if we overestimate customer demand, we may lose opportunities to increase revenues and profits, we may have ~~recurred several times since the first quarter~~excessive staffing, materials, components and finished products, or capacity. If we hire and train too many technicians in anticipation of ~~2020 corresponding~~demand that does not materialize or materializes slower than anticipated, our costs and expenditures may

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outpace our revenues or revenue growth, harming our gross margin and financial results. Additionally, to secure supplies for production of products, we periodically enter into non-cancelable minimum purchase commitments with ~~increases in the number of people infected with COVID-19 and its variants, and may continue~~vendors, which could impact our ability to ~~arise in the future.~~adjust inventory for declining demand. If product demand decreases or increases more than forecast, ~~we could be required to write off inventory or record excess capacity charges,~~ we may be required to purchase or lease additional or larger facilities and additional equipment, or we may be unable to fulfill customer demand in the time frames and with the quantities ~~required, any of which~~required. Responding to unanticipated changes in demand may take time to accomplish, lower our gross margin, inhibit sales or harm our reputation. Production of our Invisalign clear aligners and iTero intraoral scanners are also limited by capacity constraints due to a variety of factors, including labor shortages, shipping delays, our dependency on third-party vendors for key materials, parts, components and equipment, and limited production yields. Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance and otherwise harm our business and financial results and those of our business partners.

Improvements to or changes in our products may affect the demand, making it less predictable. We routinely review inventory for usage potential, including fulfillment of customer warranty obligations and spare part requirements, and write down to the lower of cost or net realized value the excess and obsolete inventory, which may materially affect our results of operations. For instance, periodically we announce new products, capabilities, or technologies that replace or shorten the life cycles of legacy products or cause customers to defer or stop purchasing legacy products until new products become available. These risks increase the difficulty of accurately forecasting demand for discontinued and new products as well as the likelihood of inventory obsolescence, loss of revenue and associated gross profit.

We may make business decisions that adversely affect our operating results such as modifications to our pricing policies and payment terms, promotions, development efforts, product releases, business structure or operations. Most of our expenses, such as employee compensation and lease obligations, are relatively fixed in the short term. Moreover, our expense levels are based, in part, on our expectations for future revenues. As a result, if our net revenues for a particular period are below expectations, we may be unable to timely or effectively reduce spending to offset any net revenues shortfall.

We are subject to operating risks, including excess or constrained capacity and operational inefficiencies, which could adversely affect our results of operations.

We are subject to operating risks, including excess or constrained capacity and pressure on our internal systems, personnel and suppliers. To manage current and anticipated future operations effectively, we must continually implement and improve our operational, financial and management information systems, hire, train, motivate, manage and retain employees, and ensure our suppliers remain diverse and capable of meeting demand for the systems, raw materials, parts and components essential to the manufacture and delivery of our products. We may be unable to balance near-term efforts to meet existing demand with future demand, including adding personnel, creating scalable, secure and robust systems and operations, and automating processes needed for long term efficiencies. Any such failure could have a material impact on our business, operations and prospects.

Additionally, we have established treatment planning and manufacturing facilities closer to our international customers to provide them with better experiences, improve their confidence using our products to treat patients, create efficiencies, and provide redundancy should other facilities be temporarily or permanently unavailable. Our ability to equip facilities is subject to significant risk and uncertainty. If a facility is temporarily or permanently, partially or fully shut down, or if demand for our products outpaces our ability to hire qualified personnel and effectively implement systems and infrastructure, we may be unable to fulfill orders timely, or at all, which may negatively impact our financial results, reputation and overall business.

Our products and ~~information technology~~IT systems are critical to our business. Issues with product development or enhancements, IT system and software integration, implementation, updates and upgrades ~~along with security and data protection risks~~ have previously and could again in the future disrupt our operations ~~which could~~and have a material ~~adverse~~ impact on our business, our reputation and operating results.

We rely on the efficient, uninterrupted and secure operation of our own complex ~~information technology~~IT systems ~~(“IT systems”)~~ and are dependent on key ~~software of~~ third ~~parties~~party software embedded in our products and IT systems as well as third-party hosted IT systems to support our operations. All software and IT systems are vulnerable to damage, ~~attack~~cyber-attacks or interruption from a variety of sources. As our business has grown in size and complexity, including through the integration of acquired businesses, which to date have been smaller organizations with less-mature or less sophisticated systems, securities practices or training, the growth has placed, and will continue to place, significant demands on our operations and such systems and have increased the risk of security incidents. To effectively manage and improve our ~~existing~~ operations, ~~and continue to grow,~~ our IT systems and applications require an ongoing commitment of significant expenditures and resources to maintain, protect, upgrade, enhance and restore existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, increasingly sophisticated cyber threats, and changing customer preferences. Expanded remote working and increased usage of online and hosted technology platforms by us, our customers and suppliers, including teledentistry and new or expanded use of online service platforms, products and solutions such as video conferencing applications, doctor, consumer and patient apps have increased the demands on and risks to our IT systems and personnel. Moreover, we continue to transform certain business processes, extend established processes to new subsidiaries and/or implement additional functionality in our enterprise resource planning, ~~(“ERP”),~~ product development, manufacturing, and other software and IT systems which entails certain risks, including disruption of our operations, such as our ability to develop and update products that are safe and secure, track orders and timely ship products, manage our supply chain and aggregate financial and operational data. Failure to adequately protect and maintain the integrity of our products and IT systems may materially impact our financial position, results of operations and cash flows.

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System upgrades, development of new releases and enhancements require significant expenditures and allocation of valuable employee resources. Delays in integration or disruptions to our business from implementation of these new or upgraded systems could have a material adverse impact on our financial condition and operating results. We have a complex, global iTero intraoral scanner installed base of older and newer models. These models are continually updated to add, expand or improve ~~on existing or new~~ features with new hardware ~~improvements, improvements~~from us or third parties, or to ~~third party components, or part~~provide repair or ~~replacement.~~replacement parts. We have experienced hardware issues in the past and may in the future, including issues relating to manufacturing, design, quality, or safety, of which we become aware only after products or changes have been introduced into the market. We also have not been and may ~~not~~ be ~~able~~unable to ensure that third party components or ~~any~~ changes to ~~the foregoing~~them will ~~not~~ be ~~incompatible~~compatible with, or not have a negative impact on the functionality of, our iTero intraoral scanners. As a result, there have been and may be widespread failures of our iTero intraoral scanners or we may experience epidemic failures of our iTero intraoral scanner to perform as anticipated. Previously, we have not been and in the future may not be prepared for, or have the infrastructure to, timely and adequately remediate or implement corrective measures for such failures, including due to our dependency on third party providers or suppliers. As a consequence, remediation has been and may be in the future time-consuming and difficult to achieve, which may ~~significantly~~materially impact our customers and our business partners, damage our reputation and result in lost business and revenue opportunities, and ~~prove costly, possibly materially.~~could be materially costly.

Additionally, we continuously upgrade and issue new releases of ~~our products and~~ customer facing ~~software applications, such as our iTero intraoral scanners, exocad CAD/CAM solutions, my iTero, our ClinCheck software, MyAligntech and the Invisalign Doctor Site as well as our internal~~ software applications, upon which customer facing, manufacturing and treatment planning operations ~~are dependent.~~depend. Software applications and products containing software frequently contain errors or defects, especially when first introduced or when new versions are released. Additionally, the third-party software integrated into or interoperable with our products and services will routinely reach end of life, and as a consequence, certain models of our iTero intraoral scanners may be exposed to additional vulnerabilities, including increased security risks, errors and malfunctions that may be irreparable or difficult to repair. The discovery of a defect, error or security vulnerability in our products, software applications or IT systems, incompatibility with customers’ computer operating systems and hardware configurations with a new release or upgraded version or the failure of our products or primary IT systems may cause adverse consequences, including: delay or loss of revenues, significant remediation costs, delay in market acceptance, loss of data, disclosure of financial, health or other personal information of our customers or their patients, product recalls, damage to our reputation, loss of market share or increased service costs, any of which could have a material ~~adverse~~ effect on our business, financial condition or results of our operations and the operations of our customers or our business partners.

A significant portion of our clear aligner production is dependent on digital scans from our globally dispersed and decentralized installed base of iTero and third-party intraoral scanners.Failures of all or any portion of ours or third-party software or other components or systems to interoperate with iTero or third-party scanners, termination of interoperability with third-party scanners, malware or ransomware attacks, product or system vulnerabilities or defects, interference or disruptions for us, our customers, labs or other business partners in the use of our products or the transmission or processing of data needed for the use or ordering of our products, or a system outage for any reason have harmed our operations previously and in the future could affect materially and adversely our ability to accept scans, manufacture clear aligners or restorative procedures or treatments and services or otherwise service our customers which may, amongst other things, harm our sales, damage our reputation, adversely impact our strategic partners or result in litigation.

Additionally, our globally-dispersed installed base of iTero intraoral scanners at customer, strategic business partner or other locations may be independently or collectively the target of a cybersecurity incident or attack or subject to the intrusion of a virus, bug, or other similar negative intruder. Due to the large and growing number of these decentralized locations, we may not be able to, or not have the capacity, knowledge, or infrastructure to, respond to or remedy a cybersecurity issue in a timely manner or sufficiently, either of which may cause loss or damage to us or our customers or strategic business partners or may cause further malfunctions in, or damage to, our servers, databases, systems or products and services, loss or damage of our data, interruption or temporary cessation of our operations, or an overall negative impact to our business or reputation.

If the information we rely on to run our businesses is inaccurate or unreliable, if the data governance controls in place fail or change, if compliance with such controls fails, if we fail to properly maintain, secure or restore our IT systems, if the integrity of our products or IT systems is compromised or questioned or data is lost, or if we fail to develop new capabilities to meet our business needs in a timely manner, we could suffer operational disruptions, have customer disputes, and fail to produce timely, accurate or complete reports. We may also be required to respond to regulatory inquiries or actions, forced to defend against litigation or pay damages, penalties or fines, experience increases in operating and administrative expenses, find it necessary to recall or repair products, rebuild networks or systems, lose existing customers or strategic business partners, experience difficulties attracting new customers or implementing our growth strategies, or suffer other adverse consequences. In addition, experienced computer programmers and hackers, some of whom may be employed by state actors, organized groups, or be part of loosely aligned associations, may be able to penetrate the security features of our products, IT systems or our cloud-based software servers hosted by third parties and misappropriate, destroy or damage our confidential information or that

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of third parties, expose health, financial data, or other personal information of our customers and their patients, create system disruptions or cause shutdowns. Furthermore, sophisticated hardware and operating system software and applications that we either internally develop or procure from third parties may contain defects or present risks in design, development, manufacture or distribution, including “bugs,” security vulnerabilities, and other problems that can unexpectedly interfere with the operation of the system or compromise or exploit the safety and security of our products, networks or data. The costs to eliminate, mitigate or recover from security problems, viruses and bugs could be significant and depending on the nature and extent of the problem and the networks or products impacted, may result in network or systems interruptions, decreased product sales, or data loss that may have a material adverse impact on our operations, net revenues and operating results.

There can be no assurance that our process of improving existing or developing new products or IT systems, integrating new IT systems, protecting confidential patient health information, and improving service levels will not be delayed or that additional product or IT systems issues will not arise in the future. Failure to adequately protect and maintain the integrity of our products and IT systems and data may result in a material adverse effect on our financial position, results of operations and cash flows.

If we are unable or fail to protect our customer or patient information or if we are unable to comply with applicable privacy, security and data protection laws, our operations may be severely adversely impacted, patient care could suffer, we could be liable for related damages, and our business, operations and reputation could be harmed.

We retain confidential customer financial as well as patient health information in addition to our own proprietary information and data essential to our business operations. Therefore, it is critical that the facilities and infrastructure on which we depend to run our business and the products we develop remain secure and are also perceived by the marketplace and our customers to be secure. Despite the implementation of security features in our products and security measures in our IT systems, our products as well as the infrastructure and IT systems on which we depend are vulnerable to physical break-ins, computer viruses, programming errors or other technical malfunctions, hacking or phishing attacks, malware and ransomware, employee error or malfeasance or similar disruptive problems by third parties, including organized groups or state actors. For example, we have experienced cybersecurity incidents and may again in the future. Further, the frequency of third-party cyber attacks has increased since the onset of the COVID-19 pandemic and more recently the military conflict in Ukraine. The military conflict in Ukraine may cause nation-state actors to carry out cyber attacks to achieve their goals, which may include espionage, information operations, monetary gain, ransomware, disruption, and destruction. In response to potential increases in cyber attacks anticipated in response to the military conflict in Ukraine, we increased efforts to identify and respond to any attacks, including placing our cybersecurity operations team on high alert. Significant service disruptions, breaches in our infrastructure and IT systems or other cybersecurity incidents could expose us to litigation or regulatory investigations, impair our reputation and competitive position, be distracting to our management, and require significant time and resources to address. Affected parties or regulatory agencies could initiate legal or regulatory action against us, which could prevent us from resolving the issues quickly or in unanticipated ways, cause us to incur significant expense and liability, or result in judicial or governmental orders forcing us to cease operations or modify our business practices in ways that could materially limit or restrict the products and services we provide. Concerns over our privacy practices could adversely affect others’ perception of us and deter customers, patients and partners from using our products. In addition, patient care could suffer, and we could be liable if our products or IT systems fail to deliver accurate and complete information in a timely manner. We have cybersecurity and other forms of insurance coverage related to a breach event covering expenses for notification, credit monitoring, investigation, crisis management, public relations and legal advice. The policy also provides coverage for regulatory action defense including oversight, investigations and disclosure obligations as well as fines and penalties, potential payment card industry fines and penalties and costs related to cyber extortion; however, damages and claims arising from such incidents may not be covered or may exceed the amount of any coverage and do not cover the time and effort we incur investigating and responding to any incidents, which may be significant.

We are also subject to federal, state and foreign laws and regulations, including ones relating to privacy, data security and protection, content regulation, and consumer protection among others. We are subject to various national and regional data localization or data residency laws which generally require that certain types of data collected within a country be stored and processed only within that country or approved countries and other countries are considering enacting similar data localization or data residency laws. We have and likely will again in the future be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with such laws, any of which could be costly. We are also subject to data export restrictions and international transfer laws which prohibit or impose conditions upon the transfer of such data from one country to another. These laws and regulations are constantly evolving and may be interpreted, applied, created or amended in a manner that could adversely affect our business.

In addition, we must comply with numerous data privacy and data security requirements that span from individual state and national laws in the U.S. and China to multinational requirements in the EU. For instance, China has enacted complex and highly restrictive cybersecurity, data localization, and cross border data transfer laws. In the EU, we must comply with the

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General Data Protection Regulation which serves as a harmonization of EU data-privacy laws, and in the U.S., we must comply with data privacy and data security provisions of the U.S. Health Insurance Portability and Accountability Act regulations. Moreover, the number of local and national governments enacting data privacy laws continues to increase and we expect this trend to continue. Maintaining compliance with these laws and regulations is costly and could require complex changes in the way we do business or provide services to our customers and their patients. Additionally, our success may be dependent on the success of healthcare providers, many of whom are comprised of individual or small operations with limited IT experience and inadequate or untested security protocols, in managing data privacy and data security requirements.

Demand for our products may not increase as rapidly as we anticipate or may decrease due to resistance to non-traditional treatment methods, which could have a material adverse impact on our business and operating results.

Invisalign treatment represents a significant change from traditional metal wires and brackets orthodontic treatment, and customers and consumers may not find it cost-effective or preferable to traditional treatment. For instance, a number of dental professionals continue to believe the Invisalign treatment is appropriate for only a limited percentage of patients. Increased market acceptance of our products depends in part upon the recommendations of dental professionals, as well as other factors including efficacy, safety, ease of use, reliability, aesthetics, and price compared to competing products and treatment methods. If demand for our products remains flat or decreases due to resistance to nontraditional treatment methods, this could materially adversely affect our business and operating results.

~~Our operating results have and will continue to fluctuate in the future, which makes predicting the timing and amount of our revenues, costs and expenditures difficult.~~

Our quarterly and annual operating results have and will continue to fluctuate for a variety of reasons, including as a result of changing doctor and consumer product demand. In addition to the factors otherwise described herein, some of the other factors that have historically and in the future could cause our operating results to fluctuate include:

•~~higher manufacturing, delivery and inventory costs;~~

•~~the creditworthiness, liquidity and solvency of our customers and their ability to timely make payments when due;~~

•changes in the timing of revenue recognition and changes in our average selling prices, including as a result of the timing of receipt of product orders and shipments, product and services mix, geographic mix, product and services deferrals, the introduction of new products and software releases, product pricing, bundling and promotions, pricing for fees or expenses, modifications to our terms and conditions such as payment terms, or as a result of new accounting pronouncements or changes to critical accounting estimates including, without limitation, those estimates based on such matters as our predicted usage of additional aligners;

•seasonal fluctuations, including those related to patient demographics such as the seasonality of teen treatments in the U.S., China and Europe as well as the number of doctors in their offices and their availability to take appointments;

•costs and expenditures in connection with such things as the establishment of new treatment planning and fabrication facilities, the hiring and deployment of personnel, and litigation, and the success of or changes to our marketing programs from quarter to quarter; and

•~~timing and fluctuation of spending around marketing and brand awareness campaigns and industry trade shows.~~

To respond to these and other factors, we may make business decisions that adversely affect our operating results such as modifications to our pricing policy and payment terms, promotions, development efforts, product releases, business structure or operations. Most of our expenses, such as employee compensation and lease obligations, are relatively fixed in the short term. Moreover, our expense levels are based, in part, on our expectations for future revenues. As a result, if our net revenues for a particular period fall below expectations, we may be unable to timely or effectively reduce spending to offset any shortfall in net revenues.

A disruption in the operations of a primary freight carrier, higher shipping costs or shipping delays could disrupt our supply chain and cause a decline in our net revenues or a reduction in our earnings.

We are dependent on commercial freight carriers, primarily UPS, to deliver our products. If the operations of these carriers are disrupted for any reason, we may be unable to timely deliver our products to our customers who may choose alternative products which could cause our net revenues and gross margin to materially decline. For example, after Russia's military attacks began in Ukraine, UPS ceased shipments to Russia and we suspended our commercial operations there as well. Moreover, when fuel costs increase, our freight costs generally do so as well. Due to the recent increase in fuel costs, we have experienced a material increase in our freight costs. In addition, we earn an increasingly larger portion of our total revenues from international sales. International sales carry higher shipping costs which could negatively impact our gross margin and results of operations. If freight costs materially increase and we are unable to successfully pass all or significant portions of the

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~~increase along to our customers, or we cannot otherwise offset such increases in our cost of net revenues, our gross margin and financial results could be materially adversely affected.~~

If we fail to accurately predict our volume growth, hire too many or too few technicians, or manufacture too many or too few products, the delivery time for our products could be delayed or our costs may exceed our revenues, each of which could adversely affect our results of operations.

~~If we fail to accurately predict our volume growth, we may inaccurately estimate the staffing, materials or storage required to manufacture our products.~~

If we underestimate volume growth, our growth may exceed our manufacturing capacity of one or more of our suppliers or manufacturing facilities, we may be understaffed and we may not have sufficient materials. Specifically, our manufacturing process relies on sophisticated computer software and requires new technicians to undergo a relatively long training process, often 120 days or longer. As a result, if we are unable to accurately predict our volume growth, we may have an insufficient number of trained technicians to ensure products are manufactured and delivered within the time frames our customers expect. Without sufficient capacity, trained personnel or materials, we may be unable to provide our products to customers in a timely manner, which could damage our relationships with our existing customers or harm our ability to attract new customers. Specifically, production levels for our intraoral scanner are generally forecasted based on forecasts and historic product demand and we often place orders with suppliers for materials, components and sub-assemblies (“materials and components”) as well as finished products weeks or more in advance of projected customer orders. Actual customer demand depends on many factors and may vary significantly from forecasts. We will lose opportunities to increase revenues and profits and may incur increased costs if we underestimate customer demand. The effects of underestimating our demand could cause a decline in our net revenues and net income and could adversely affect our results of operations.

Conversely, if we over estimate our growth, we may have excess expenses caused by excess staffing, materials, components and finished products, and capacity. If we hire and train too many technicians in anticipation of volume growth that does not materialize, materializes at a rate slower than anticipated, or if volumes decline, our costs and expenditures may outpace our revenues or revenue growth, harming our gross margin and financial results. Additionally, in order to secure supplies for production of products, we sometimes enter into non-cancelable minimum purchase commitments with vendors, which could impact our ability to adjust our inventory to reflect declining market demands. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer.

Improvements to or changes in our products may affect the demand and make demand less predictable. We routinely review inventory for usage potential, including fulfillment of customer warranty obligations and spare part requirements, and we write down to the lower of cost or net realized value the excess and obsolete inventory, which may materially adversely affect our results of operations. For instance, periodically we announce new products, capabilities, or technologies that replace or shorten the life cycles of legacy products or cause customers to defer or stop purchasing legacy products until new products become available. These risks increase the difficulty of accurately forecasting demand for discontinued and new products as well as the likelihood of inventory obsolescence, loss of revenue and associated gross profit.

We are dependent on our marketing activities to deepen our market penetration and raise awareness of our brand and products, which may not prove successful or may become less effective or more costly to maintain in the long term.

Our marketing efforts and costs are significant and include national and regional campaigns in multiple countries involving television, print media, social media and, more recently, alliances with professional sports teams, social media influencers and other strategic partners. We attempt to structure our advertising campaigns to increase brand awareness, adoption and goodwill; however, there is no assurance our campaigns will achieve the returns on advertising spend desired, increase brand or product awareness sufficiently to sustain or increase our growth goals or generate goodwill and positive reputational goals. Moreover, should any entity or individual endorsing us or our products take actions, make or publish statements in support of, or lend support to events or causes which may be perceived by all or any portion of society negatively, our sponsorships or support of these entities or individuals may be called into question, boycotts of our products announced, and our reputation may be harmed, any of which could have a material adverse effect on our gross margin and business overall.

In addition, various countries prohibit certain types of marketing activities. For example, some countries restrict direct to consumer advertising of medical devices. We could run afoul of restrictions and be ordered to stop certain marketing activities. Moreover, competitors do not always follow these restrictions, creating an unfair advantage and making it more difficult and costly for us to compete.

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Additionally, we rely heavily on data generated from our campaigns to target specific audiences and evaluate their effectiveness, particularly data generated from internet activities on mobile devices. To obtain this data, we are dependent on third parties and popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android and iOS operating systems and mobile browsers. Any changes in such systems that degrade, reduce or eliminate our ability to target or measure the results of ads or increase costs to target audiences could adversely affect the effectiveness of our campaigns. For example, Apple has released mobile operating systems that include significant data privacy changes that may limit our ability to interpret, target and measure ads effectively.

Our success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our intellectual property (“IP”) rights, our competitive position may be harmed. Litigating claims of this type is costly and could distract our management and cause a decline in our results of operations and adversely impact our reputation.

~~Our success depends in part on our ability to maintain existing IP rights and to obtain and maintain further IP protection for our products. Our inability to do so could harm our competitive position.~~

We rely on our portfolio of issued and pending patent applications in the U.S. and other countries to protect a large part of our IP and our competitive position; however, these patents may be insufficient to protect our IP rights because our patents may be challenged, invalidated, held unenforceable, circumvented, or may not be sufficiently broad to prevent third parties from producing competing products similar in design to our products and foreign patents protections may be more limited than those provided under U.S. patents and IP laws.

We may not be afforded the protection of a patent if our currently pending or future patent filings do not result in the issuance of patents or we fail to apply for patent protection. We may fail to apply for a patent if our personnel fail to disclose or recognize new patentable ideas or innovations. Remote working can decrease the opportunities for our personnel to collaborate, thereby reducing the opportunities for effective invention disclosures and patent application filings. We may choose not to file a foreign patent application if the limited protections provided by a foreign patent do not outweigh the costs to obtain it. Our foreign patent portfolio is less extensive than our U.S. portfolio.

We also rely on protection of our copyrights, trademarks, trade secrets, know-how and proprietary information. We generally enter into confidentiality agreements with our employees, consultants and collaborative partners upon commencement of a relationship with us. However, despite the existence of these agreements, we have experienced incidents in which our proprietary information has been misappropriated in the past and believe that it could be misappropriated again in the future. If these agreements do not provide meaningful protection against the unauthorized use or disclosure of our trade secrets or other confidential information, adequate remedies may not exist when unauthorized uses or disclosures occur.

Our inability to maintain the proprietary nature of our technology through patents, copyrights or trade secrets would impair our competitive advantages and could have a material adverse effect on our operating results, financial condition and future growth prospects. In particular, a failure to protect our IP rights might allow competitors to copy our technology or create counterfeit or pirated versions of our products, which could adversely affect our reputation, pricing and market share.

~~Litigation, interferences, oppositions, re-exams,~~ ~~inter partes~~ reviews, post grant reviews or other proceedings have been necessary and will likely be needed in the future to determine the validity and scope of certain of our IP rights and the IP rights claimed by third parties to determine the validity, scope or non-infringement of certain patent rights pertinent to the manufacture, use or sale of our products and the products of competitors. Asserting or defending these types of proceedings can be unpredictable, protracted, time consuming, expensive and distracting to management and technical personnel. The outcome of such proceedings could adversely affect the validity and scope of our patent or other IP rights, hinder our ability to manufacture and market our products, require us to seek a license for infringing products or technologies or result in the assessment of significant monetary damages. An unfavorable ruling could include monetary damages, an injunction prohibiting us from selling our products, or an exclusion order preventing us from importing our products in one or more countries. Moreover, independent actions by competitors, customers or others have been brought alleging that our efforts to assert or attempt to enforce our patent or other IP rights constitute unfair competition or violations of antitrust laws in the U.S. and other jurisdictions and investigations and additional litigation based on the same or similar claims may be brought in the future. The potential effects on our business operations resulting from litigation, whether or not ultimately determined in our favor or settled by us, are costly and could materially adversely affect our results of operations and reputation.

If we or any vendors on whose products or services we rely for our products and services infringe the patents or IP rights of other parties or are subject to a patent infringement claim, our ability to grow our business may be severely limited.

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Extensive litigation over patents and other IP rights is common in the medical device, optical scanner, 3D printing and other technologies and industries on which our products and services are based. We have been sued for infringement of third parties’ patents in the past and we are currently defending patent infringement lawsuits and other legal claims. In addition, we periodically receive letters from third parties drawing our attention to their patent rights. While we do not believe we infringe upon any valid and enforceable rights that have been brought to our attention, there may be other more pertinent rights of which we are presently unaware. The defense and prosecution of IP lawsuits, interference proceedings and related legal and administrative proceedings could result in substantial expense to us and significant diversion of effort by our technical and management personnel. An adverse determination in any legal proceeding to which we may become a party could subject us to significant liabilities, exclusion orders or injunctions that may prevent or limit our rights to sell or import our products in one or more countries. An adverse determination of this nature could require us to seek licenses from third parties. Licenses may not be available on commercially reasonable terms or at all, in which event, our business would be materially adversely affected.

Obtaining approvals and complying with governmental regulations, particularly those related to personal healthcare information, financial information, quality systems, competition, anti-trust, data governance and data privacy, is expensive and time-consuming, and any failure to obtain or maintain approvals or comply with regulations regarding our products or services or the products and services of our suppliers or customers could materially harm our sales, result in substantial penalties and cause harm to our reputation.

As a technology company and supplier of medical devices and solutions, we and many of our healthcare provider customers, suppliers and distributors are subject to extensive and frequently changing regulations under numerous federal, state, local and foreign laws, including those regulating:

•~~the storage, transmission and disclosure of medical information and healthcare records;~~

•prohibitions against the offer, payment or receipt of remuneration to induce referrals to entities providing healthcare services or goods or to induce the order, purchase or recommendation of our products; and

•~~the design, marketing and advertising of our products.~~

The healthcare and technology markets are also highly regulated and subject to changing political, economic and regulatory influences. For instance, regulations affecting the security and privacy of patient healthcare information applicable to healthcare providers and their business associates, such as HIPAA, may require us to make significant and unplanned enhancements of software applications or services, result in delays or cancellations of orders, or result in the revocation of endorsement of our products and services by healthcare participants. Additionally, we are expanding our product portfolio into the areas of software as a medical device and the use of artificial intelligence. Global regulators are rapidly expanding and changing the regulations and guidance regarding the market access pathways for these innovative products, which could result in market withdrawal of existing products or protracted review timelines for new product introductions. Our critical vendors and service providers are similarly subject to various regulations. Our failure or the failure of our suppliers, customers, advertisers and influencers to strictly adhere to clearances or approvals in the labeling, marketing and sales of our products and services could subject us to claims or litigation, including actions alleging false or misleading advertising, unfair or anti-competitive business practices or other violations of laws or regulations, which may result in costly investigations, fines, penalties, as well as material judgments, settlements or decrees. There can be no assurance that we will adequately address the business risks associated with the implementation and compliance with such laws or that we will be able to take advantage of any resulting business opportunities.

We are and may be in the future subject to antitrust or competition related investigations, enforcement actions, and settlements, by governmental agencies, competitors, consumers, customers, and others which could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business. Governments, enforcement authorities and other legislative bodies are actively developing new competition laws and regulations aimed at the technology sector, artificial intelligence and digital platforms, coordinating globally, and enforcing competition laws and regulations, and this includes scrutiny in potentially large markets such as the EU, U.S., and China. Government regulatory actions and court decisions may result in fines or hinder our ability to provide certain benefits to our consumers, reducing the attractiveness of our products and the revenue that comes from them.

Furthermore, in general before we can sell a new medical device or market a new use of or claim for an existing product, we must obtain clearance or approval to gain market access unless an exemption applies. For instance, in the U.S., FDA regulations are wide ranging and govern, among other things:

•~~product design, development, manufacturing and testing;~~

•~~product labeling;~~

•~~product storage;~~

•~~pre-market clearance or approval;~~

•~~complaint handling and corrective actions;~~

•~~advertising and promotion; and~~

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•~~product sales and distribution.~~

It takes significant time, effort and expense to obtain and maintain FDA clearances or approvals of products and services and there is no guarantee we will successfully or timely obtain or maintain approvals in all or any of the countries in which we do business now or in the future. In other countries, the requirements to obtain and maintain similar approvals may differ materially from those of the FDA and may require additional time and expense. Moreover, these laws may change resulting in additional time and expense or loss of approvals. Additionally, the impact of the COVID-19 pandemic on normal governmental operations may delay our efforts to obtain and maintain approvals, possibly significantly. If approvals to market our products or services are delayed, whether in the U.S. or other countries, we may be unable to offer them in markets we deem important to our business. Failure or delays to obtain or maintain regulatory approvals may materially harm our domestic or international operations, and our business as a whole adversely impacted.

Any failure to comply with applicable regulatory requirements could result in enforcement actions in the U.S. and other countries. For example, enforcement actions by the FDA may include one or more of the following sanctions:

•~~warning letters, fines, injunctions, consent decrees and civil penalties;~~

•~~repair, replacement, refunds, recall or seizure of our products;~~

•~~operating restrictions or partial suspension or total shutdown of production;~~

•~~refusing our requests for 510(k) clearance or pre-market approval of new products, new intended uses, or modifications to existing products;~~

•~~withdrawing clearance or pre-market approvals previously granted; and~~

•~~criminal prosecution.~~

We and certain of our vendors must also comply with facility registration and product listing requirements of the FDA and adhere to applicable Quality System regulations. The FDA enforces its Quality System regulations through periodic unannounced inspections. Our failure to satisfactorily correct an adverse inspection finding or to comply with applicable manufacturing regulations could result in enforcement actions, and we may be required to find alternative manufacturers, which could be a long and costly process. Any enforcement action by the FDA or foreign governments could have a material adverse effect on us.

In addition, while we provide significant training to our personnel, they may not properly adhere to our policies or applicable laws or regulations. If our employees fail to comply with any or all laws or regulations or our policies or procedures, it could result in violations of laws or regulations and subject us to harm to our reputation, loss of customers, loss or revenues, or regulatory investigations and actions.

Consequently, if we cannot successfully obtain approval for our products or services or timely and cost-effectively maintain compliance with laws regulating our products and services, our results of operations and financial condition could be harmed.

We are highly dependent on third-party suppliers, some of whom are sole source suppliers, for certain key machines, components and materials, and our business and operating results could be harmed if supply is restricted or ends, or if the price of raw materials used in our manufacturing process increases.

We are highly dependent on our supply chain, particularly manufacturers of specialized scanning equipment, rapid prototyping machines, resin and other advanced materials, as well as the optics, electronic and other mechanical components of our intraoral scanners.

We maintain single supply relationships for many of these machines and ~~materials. In particular,~~materials such as our CT scanning and stereolithography equipment ~~used in our aligner manufacturing~~ and many of the critical components for the optics of our scanners are provided by single suppliers. We rely on a single third-party manufacturer to supply key sub-assemblies for our iTero Element scanner. We purchase the vast majority of our resin and polymer ~~the primary raw materials~~ used in ~~our manufacturing process for~~ clear ~~aligners, from a single source.~~aligner manufacturing. By using single suppliers in limited locations for materials and manufacturing, ~~in a limited number of locations,~~ we ~~risk~~are exposed to multiple supply chain vulnerabilities. For example, damage to or destruction of a facility can materially disrupt ~~our ability to timely deliver~~the delivery of key parts, components and materials or products or a supplier could encounter financial, operating or other difficulties, be unable to hire or maintain personnel, fail to timely obtain supplies, or fail to maintain manufacturing standards or ~~controls, or fail to timely deliver materials, parts or components. To the extent~~controls. The occurrence of any of ~~our suppliers or others' suppliers in our supply chain are dependent on raw materials, components or other parts from Russia or Ukraine, the foregoing risks~~these may ~~be more likely to occur as a result of the military conflict in Ukraine. Any one of these occurrences would~~adversely impact our supply chain.

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Restrictions in response to the COVID-19 pandemic and other macroeconomic factors have affected and are expected to continue to affect our supply chain. The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including China. A significant portion of our finished goods product distribution occurs through China and EMEA. Each of these areas has been affected by the COVID-19 pandemic and has implemented measures to try to contain its spread, including restrictions on manufacturing facilities, commerce, travel, our support operations and workforce, and our customers, strategic partners, vendors and suppliers. There is considerable uncertainty regarding the current and future impact of such measures, including reduced availability or increased cost of air transport, port closures and increased border controls and closures. Any or all restrictions can limit our manufacturers’ capacity to produce our parts or products and have a material adverse effect on our supply chain.

Due to the military conflict between Russia and Ukraine, some countries have placed export controls on certain products and financial and economic sanctions on various industry sectors and parties in Russia. The outcome and future impacts of the conflict remain highly uncertain and are continuing to evolve but they have impacted and could materially affect our supply chain in the future.

The effects of climate change on regional and global economies could change the supply, demand or availability of sources of energy or other resources material to our products and operations and affect the availability or cost of natural resources and goods and services on which we and our suppliers rely.

Because of our dependence on our suppliers, changes in ~~one or more of our~~key relationships ~~with them or changes in their circumstances can result in disruptions to the supply chain, which~~ can materially ~~impact~~disrupt our ~~business.~~supply chain. For instance, we may be unable to quickly establish or qualify replacement suppliers creating production interruptions, delays and inefficiencies. Finding substitute manufacturers may be expensive, time-consuming or impossible and could result in a significant interruption in the supply of one or more products causing us to lose revenues and suffer damage to our customer relationships. Technology changes by our service providers, vendors, and other third parties could disrupt access to required manufacturing capacity or require expensive, ~~time consuming~~time-consuming development efforts to adapt and integrate new equipment or processes. In the event of technology changes, delivery delays, labor stoppages or shortages, or shortages of, or increases in price for these items, sales may decrease and our business and ~~growth~~ prospects may be harmed.

~~We rely on highly skilled personnel and, if we fail to attract, motivate, train or retain highly skilled personnel, it may be more difficult to grow effectively and pursue our strategic priorities.~~

We are highly dependent on the talent and effort of highly skilled employees, including orthodontists and production technicians in our treatment planning facilities, and employees on our clinical engineering, technology development and sales teams. To be successful, we must effectively manage our growth through our ability to identify, hire, develop, motivate, train and retain these skilled employees as well as personnel throughout our organization.

We provide significant training to our personnel and our business will be impacted if our training fails to properly prepare our personnel to perform the work required, we are unable to successfully instill technical expertise in new and existing personnel or if our techniques prove unsuccessful or not cost-effective.

Moreover, for certain roles, this training and experience can make key personnel, such as our sales personnel, highly desirable by competitors and lead to increased attrition. The loss of the services and knowledge from our highly skilled employees may significantly delay or prevent the achievement of our development and business objectives and could harm our business. For example, it can take up to twelve months or more to train sales representatives to successfully market and sell our products and for them to establish strong customer relationships.

If we are unable to retain our workforce, including key sales and other skilled personnel, or quickly replace personnel with individuals of equivalent technical expertise and qualifications, our results of operations and our ability to maintain market share could be materially adversely effected.

~~For more discussion related to our personnel and corporate culture see the risk factor, “We rely on our personnel and, if we fail to attract, motivate, train or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.”~~

We use distributors for a portion of the importation, marketing and sales efforts related to our products and services, which exposes us to risks ~~that may be harmful~~ to our sales and operations and reputation, including the risk that these distributors do not comply with applicable laws or our internal procedures.

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In addition to our direct sales force, we have and expect to continue to use distributors to import, market, sell, service and support our products. Our agreements with these distributors are generally non-exclusive and terminable by either party with little notice. If ~~any of these relationships are terminated and if~~ alternative distributors must be quickly found and trained in the use, marketing, sales and support of our products and services, our revenues and ability to sell or service our products in markets key to our ~~growth and expansion~~business could be adversely affected. These distributors may also choose to sell alternative or competing products or services.In addition, we may be held responsible for the actions of these distributors and their employees and agents for compliance with laws and regulations, including fair competition, bribery and corruption, trade compliance, safety, data privacy and marketing and sales activities. The conduct of these distributors also reflects on us and our brand. If our distributors fail to satisfy customers, our reputation and brand loyalty could be harmed. A distributor may also affect our ability to effectively market our products in certain foreign countries or regulatory jurisdictions if it holds the regulatory authorization in such countries or within such regions and causes, by action or inaction, the suspension of such marketing authorization or sanctions for non-compliance or prevents us from taking control of any such authorization. It may be difficult, expensive, and time-consuming for us to re-establish market access or regulatory compliance.

A disruption in the operations of a primary freight carrier, higher shipping costs or shipping delays could disrupt our supply chain and impact our revenues or gross margin.

We are dependent on commercial freight carriers, primarily UPS, to deliver our products. If the operations of carriers are disrupted or if we fail to mitigate the impacts from freight carrier disruptions, we may be unable to timely deliver our products to our customers who may choose alternative products, causing our net revenues and gross margin to decline, possibly materially. Moreover, when fuel costs increase, our freight costs generally do so as well. In addition, we earn an increasingly larger portion of our total revenues from international sales, which carry higher shipping costs that could negatively impact our gross margin and results of operations. If freight costs materially increase and we are unable to successfully pass all or significant portions of the increases along to our customers, or we cannot otherwise offset such increases in our cost of net revenues, our gross margin and financial results could be materially affected.

Our success depends on our personnel. If we cannot attract, motivate, train or retain our personnel, it may be difficult to grow effectively and pursue our strategic priorities, materially effecting our results of operations.

We are highly dependent on the talent and efforts of our personnel, including highly skilled personnel like orthodontists and production technicians in our treatment planning facilities, and employees on our clinical engineering, technology development and sales teams. We strive to retain our personnel by providing competitive compensation and benefits, development opportunities and training, flexible work options, and an inclusive corporate culture. However, there is substantial competition in our industry for highly-skilled personnel, in particular significantly higher demand for technical and digital talent, and our competitors have in the past and will likely continue in the future to recruit our personnel. Our compensation and benefit arrangements, such as our equity award programs, may not successfully attract new employees and retain and motivate existing employees. In addition, other internal and external factors can impact our ability to hire and retain talent, including insufficient advancement or career opportunities and restrictive immigration policies. The loss of any of our key personnel, particularly executive management, key research and development personnel or key sales team personnel, could harm our business and prospects and could impede the achievement of our research and development, operational or strategic objectives.

We provide significant training to our personnel and our business will be harmed if our training fails to properly prepare them to perform the work required, we are unable to successfully instill technical expertise in new and existing personnel or if our techniques prove unsuccessful or are not cost-effective. Moreover, for certain roles, this training and experience can make key personnel, such as our sales personnel, highly desirable to competitors and lead to increased attrition. The loss of the services and knowledge of our highly-skilled employees may significantly delay or prevent the achievement of our development and business objectives that may harm our business. For example, it can take up to twelve months or more to train sales representatives to successfully market and sell our products and for them to establish strong customer relationships.

Additionally, facilitating seamless leadership transitions for key positions is critical to sustaining the culture and maintaining our organizational success. If our succession planning efforts are ineffective, it could adversely impact our business. We continue to assess the key personnel we believe essential to our long-term success. Moreover, future organizational changes could cause our employee attrition rate to increase. If we fail to effectively manage any organizational or strategic changes, our financial condition, results of operations, and reputation, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.

We have adopted a hybrid work schedule in many of our offices, allowing employees the opportunity to collaborate and connect with others for several days each week while providing the option to work remotely other days. This hybrid work approach may materially increase our costs or create unforeseen challenges or complications, including:

•difficulties maintaining our corporate culture, disruption of morale or decreased loyalty;

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•difficulties with hiring and retention, particularly if we must compete against other companies that offer generous or broad remote working policies or employees who prefer to work in offices or geographies different from where they were hired or are expected to work;

•negative impacts to collaboration, performance and productivity;

•increased stress, fatigue or “burn out” by employees unable to disengage their work life from home life;

•increased operational, governance, compliance, and tax risks;

•problems managing office space requirements;

•concerns regarding favoritism or discrimination;

•strains to our business continuity plans and difficulties achieving our strategic objectives; and

•increased labor and employment claims and litigation.

Also, we believe a key to our success has been the culture we have created that emphasizes a shared vision and values focusing on agility, customer success and accountability. We believe this culture fosters an environment of integrity, innovation, creativity, and teamwork. We have experienced and may continue to experience in the future, difficulties attracting and retaining employees that meet the qualifications, experience, compliance mindset and values we expect. If we cannot attract and retain personnel that meet our selection criteria or relax our standards our corporate culture, ability to achieve our strategic objectives, and our compliance with obligations under our internal controls and other requirements may be harmed. This could have a material adverse effect on our results of operations and our ability to maintain market share.

We depend on our marketing activities to deepen our market penetration and raise awareness of our brands and products, which may not prove successful or may become less effective or more costly to maintain in the long term.

Our marketing efforts and costs are significant and include national and regional campaigns in multiple countries involving television, print and social media and alliances with professional sports teams, social media influencers and other strategic partners. We design our advertising campaigns to increase brand awareness, adoption and goodwill; however, there is no assurance they will achieve the returns on advertising spend desired, increase brand or product awareness sufficiently or generate goodwill and positive reputational goals. Moreover, should any entity or individual endorsing us or our products take actions, make or publish statements in support of, or lend support to events or causes which may be perceived by a portion of society negatively, our sponsorships or support of these entities or individuals may be questioned, our products boycotted, and our reputation harmed, any of which could have a material effect on our financial results and business overall.

In addition, various countries prohibit certain types of marketing activities. For example, some countries restrict direct to consumer advertising of medical devices. We have in the past and may again in the future be alleged to violate certain marketing restrictions and be ordered to stop certain marketing activities or prevented from selling our products. Moreover, competitors do not always follow these restrictions, creating an unfair advantage and making it more difficult and costly for us to compete.

Additionally, we rely heavily on data generated from our campaigns to target specific audiences and evaluate their effectiveness, particularly data generated from internet activities on mobile devices. To obtain this data, we are dependent on third parties and popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android and iOS operating systems and mobile browsers. Changes in such ~~cases.~~systems that degrade or eliminate our ability to target or measure the results of ads or increase costs to target audiences could adversely affect the effectiveness of our campaigns. For example, Apple has released mobile operating systems that include significant data privacy changes that may limit our ability to interpret, target and measure ads effectively.

Legal, Regulatory and Compliance Risks

We are subject to antitrust and competition regulations, litigation and enforcement that may result in fines, penalties, restrictions on our business practices, and product or operational changes which could materially impact our business.

We are and may in the future be subject to antitrust or competition related investigations, enforcement actions by governmental agencies, competitors, consumers, customers, and others which could cause us to incur substantial costs, enter into settlements, consents or be subject to judgments. Resolving these matters may require us to change our business practices in a manner materially adverse to our business. Governments and regulators are actively developing new competition laws and regulations aimed at the technology sector, artificial intelligence and digital platforms and coordinating their activities globally, including in large markets such as the EU, U.S., and China. Government regulatory actions and court decisions may result in fines or hinder our ability to provide certain benefits to our consumers, reducing the attractiveness of our products and the revenue derived from them or our ability to pursue certain mergers, acquisitions, business combinations or other transactions. Other companies and government agencies have in the past and may in the future allege that our actions violate antitrust or competition laws or otherwise constitute unfair competition. Such claims and investigations, even if unfounded, may be

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expensive to defend, involve negative publicity, and divert management time and attention, any of which may materially impact our results of operations.

Obtaining approvals and complying with governmental regulations, particularly those related to personal healthcare and financial information, quality systems, anti-corruption and anti-bribery are expensive and time-consuming. Any failure to obtain or maintain approvals or comply with regulations regarding our products or services or those of our suppliers could materially harm our sales, result in substantial penalties and fines and cause harm to our reputation.

We and many of our healthcare provider customers, suppliers and distributors are subject to extensive and frequently changing regulations under numerous federal, state, local and foreign laws, including those regulating:

•the storage, transmission and disclosure of personal and medical information as well as healthcare records;

•the design, manufacture marketing and advertising of our products.

The healthcare and technology markets are also highly regulated and subject to changing political, economic and regulatory influences. Global regulators are expanding and changing regulations and guidance for products, which can limit the potential benefits of products and cause protracted review timelines for new products. As we continue to incorporate artificial intelligence, including machine learning and independent algorithms, into our software to make it more effective for us, our customers, suppliers and consumers, it subjects us to risks of compliance with the expanding and changing regulations regarding the use and scope of artificial intelligence. Our critical vendors and service providers are similarly subject to various regulations. Our failure or the failure of our suppliers, customers, advertisers and influencers to strictly adhere to clearances or approvals in the labeling, marketing and sales of our products and services could subject us to claims or litigation, including allegations of false or misleading advertising or violations of laws or regulations, which may result in costly investigations, fines, penalties, as well as material judgments, settlements or decrees. We are also subject to complex and changing environmental and health and safety regulations. Additionally, a large portion of our revenues are derived from international sales and we are dependent on our international operations, which exposes us to additional foreign regulations not otherwise described in these risk factors. There can be no assurance we can adequately address the business risks associated with the implementation and compliance with such laws and our internal processes and procedures to comply with such laws or that we will be able to take advantage of any resulting business opportunities.

Furthermore, before we can sell a new medical device or market a new use of or claim for an existing product, we must frequently obtain clearance or approval to do so. For instance, in the U.S., FDA regulations are wide ranging and govern, among other things, product design, development, manufacturing and testing; product labeling and product storage. It takes significant time, effort and expense to obtain and maintain clearances and approvals of products and services, and there is no guarantee we will timely succeed, if at all, in the countries in which we do business. In other countries, the requirements, time, effort and expense to obtain and maintain clearances may differ materially from those of the FDA. Moreover, these laws may change, resulting in additional time and expense or loss of market access. If approvals to market our products or services are delayed, we may be unable to offer them in markets we deem important to our business. Additionally, failure to comply with applicable regulatory requirements could result in enforcement actions with sanctions including, among other things, fines, civil penalties and criminal prosecution. Delays or failures to obtain or maintain regulatory approvals or to comply with regulatory requirements may materially harm our domestic or international operations, and adversely impact our business.

We and certain of our vendors must also comply with and adhere to facility registration and product listing requirements for Quality System regulations. The FDA enforces its Quality System regulations through periodic unannounced inspections. Failure to satisfactorily correct an adverse inspection finding or to comply with applicable manufacturing regulations can result in enforcement actions, or we may be required to find alternative manufacturers, which could be a long and costly process and may cause reputational harm. Enforcement actions by regulators could have a material effect on our business.

We are also subject to anti-corruption and anti-bribery (“ABAC”) laws such as the Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act of 2010, which generally prohibit corrupt payments to foreign officials for the purpose of obtaining or maintaining business, securing an advantage and directing business to another. To comply with ABAC laws, regulators require we maintain accurate books and records and a system of internal accounting controls. Under the FCPA, we may be held liable for corruption by directors, officers, employees, agents, or other strategic or local partners or representatives.

In addition, while we have policies requiring compliance with applicable laws and regulations and we provide significant training to foster compliance, our employees, third parties acting on our behalf and customers may not properly adhere to our policies or applicable laws or regulations, including the use of certain electronic communications and maintaining accurate books and records. If our personnel or those of our agents or suppliers fail to comply with any laws, regulations, policies or procedures, or we fail to audit and enforce compliance, our reputation may be harmed, we may lose customers, revenues, or face regulatory investigations, actions and fines.

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Security breaches, data breaches, cyber attacks, other cybersecurity incidents or the failure to comply with privacy, security and data protection laws could materially impact our operations, patient care could suffer, we could be liable for damages, and our business, operations and reputation could be harmed.

We retain confidential customer personal and financial, patient health and our own proprietary information and data essential to our business operations. We rely on the effectiveness of our IT systems, our policies and contracts and policies of our vendors and the IT systems of our service providers and other third parties to safeguard the information and data. Additionally, our success is dependent on the success of healthcare providers, many of whom are individual or small operations with limited IT experience and inadequate or untested security protocols, to manage data privacy and security requirements. It is critical that the facilities, infrastructure and IT systems on which we depend and the products we develop remain secure and be perceived by the marketplace and our customers as secure. Despite the implementation of security features in our products and security measures in our IT systems, we and our service providers, vendors, and other third parties are targeted by or subject to physical break-ins, computer viruses and other malicious code, unauthorized or fraudulent access, programming errors or other technical malfunctions, hacking or phishing attacks, malware, ransomware, employee error or malfeasance, cyber attacks, and other breaches of IT systems or similar disruptive actions, including by organized groups and nation-state actors. For example, we have experienced, and may again experience in the future, cybersecurity incidents and unauthorized internal employee ex filtration of company information.

Further, the frequency and sophistication of third-party cyber-attacks is increasing. In 2022, to respond to potential increases in cyber-attacks due to the military conflict in Ukraine, we increased efforts to identify and respond to attacks, including placing our cybersecurity operations team on high alert. Significant service disruptions, breaches in our infrastructure and IT systems or other cybersecurity incidents could expose us to litigation or regulatory investigations, impair our reputation and competitive position, be distracting to management, and require significant time and resources to address. Affected parties or regulatory agencies could initiate legal or regulatory action against us, which could prevent us from resolving issues quickly or force us to resolve them in unanticipated ways, cause us to incur significant expense and damages, or result in orders forcing us to cease operations or modify our business practices in ways that could materially limit or restrict the capabilities of our products and services. Concerns over our privacy practices could adversely affect others’ perception of us and deter customers and patients from using our products. In addition, patient care could suffer, and we could be liable if our products or IT systems fail to timely deliver accurate and complete information. We have internal monitoring and detection systems as well as cybersecurity and other forms of insurance coverage related to a breach event. However, damages and claims arising from such incidents may not be covered or may exceed the amount of any coverage and do not cover the time and effort we incur investigating and responding to any incidents, which may be material.The costs to eliminate, mitigate or recover from security problems and cyber attacks and incidents could be material and depending on the nature and extent of the problem and the networks or products impacted, may result in network or systems interruptions, decreased product sales, or data loss that may have a material impact on our operations, net revenues and operating results.

Additionally, our globally-dispersed installed base of iTero intraoral scanners at customer, strategic business partner or other locations may be independently or collectively the target of cybersecurity incidents or attacks or subject to viruses, bugs, or other similar negative intruders. Due to the large and growing number of these decentralized devices, we may be unable to, or not have the capacity, knowledge, or infrastructure to, respond to or remedy a cybersecurity issue in a timely manner, which may cause loss or damage to us or our customers or strategic business partners or may cause further malfunctions in, or damage to, our servers, databases, systems or products and services, loss or damage of our data, interruption or temporary cessation of our operations, or an overall negative impact to our business or reputation.

We are also subject to federal, state and foreign laws and regulations respecting the security and privacy of patient healthcare information applicable to healthcare providers and their business associates, such as HIPAA, as well as those relating to privacy, data security, content regulation, and consumer protection. We are subject to various national and regional data localization or data residency laws such as the EU General Data Protection Regulation and analogous laws in China which generally require certain types of data collected within a country be stored and processed only within that country or approved countries. Other countries are considering similar data localization or data residency laws. We have and likely will again in the future be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with such laws, any of which could be costly. We are also subject to data export restrictions and international transfer laws which prohibit or impose conditions upon the transfer of such data. These laws and regulations are constantly evolving and may be created, interpreted, applied, or amended in ways that adversely affect our business.

Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.

Our products and services involve an inherent risk of claims concerning their design, materials, manufacture, safety and performance, how they are marketed and advertised in a complex framework of highly regulated domestic and international

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laws and regulations, how we package, bundle or sell them to individual customers ~~who may be private individuals~~ or companies, ~~or public entities such as~~including hospitals and clinics, and how we train and support doctors, their staffs and patients who ~~administer or~~ use our products. Moreover, consumer products and services are routinely subject to claims of false, deceptive or misleading advertising, consumer fraud and unfair business practices. Additionally, we may be held liable if ~~any product~~products we ~~develop or manufacture~~market and sell or services we offer or perform ~~causes~~cause injury or isare otherwise found unhealthy. If our products are safe but they are promoted for use or used in unintended or unexpected ways or for which we have not obtained clearance ~~or approvals~~ (“off-label” usage), we may be investigated, fined or have our products or services enjoined or approvals rescinded or we may be required to defend ourselves in litigation. Although we maintain insurance for product liability, business practices and other types of activities we make or offer, coverage may not be available on acceptable terms, if at all, and may be insufficient for actual liabilities. Any claim for product liability, sales, advertising and business practices, regardless of its merit or eventual outcome, could result in ~~significant~~material legal defense costs and damage our reputation, increase our expenses and divert management’s attention.

Increased focus on ~~compliance with~~ current ~~or future ESG~~and anticipated environmental, social and governance (“ESG”) laws and ~~increased~~ scrutiny of our ESG policies and practices may materially increase our costs, expose us to ~~potential~~ liability, ~~may~~ adversely impact our reputation, employee retention, willingness of customers and suppliers to do business with us and willingness of investors to invest in ~~us, and otherwise materially impact our business.~~us.

Our operations are subject to a variety of existing local, regional and global ESG laws and regulations, and we will likely be required to comply with new, broader, more complex and more costly laws and regulations that focus on ESG ~~matters in the future.~~matters. Our compliance obligations will likely span all aspects of our business and operations, including product design and development, materials sourcing and other procurement activities, product packaging, product safety, energy and natural resources usage, facilities design and utilization, recycling and collection, transportation, disposal activities and workers’ rights.

~~The environmental~~Environmental regulations related to greenhouse gases, ~~may~~sustainability and reduction of waste are expected to have an increasingly larger impact on ~~our~~us or our ~~suppliers’ energy sources.~~suppliers. Many U.S. and foreign regulators have ~~enacted~~ or are considering enacting new or additional disclosure requirements or limits on the emissions of greenhouse gases, including ~~but not limited to,~~ carbon dioxide and methane, from power generation units using fossil ~~fuels like coal and natural gas.~~fuels. The effects of greenhouse gas emission limits on power generation ~~that have been enacted already or that may be enacted in the future~~ are subject to significant uncertainties, including the timing of any new requirements, levels of emissions reductions and the scope and types of emissions regulated. ~~Initiatives~~Additionally, laws on sustainability and ~~legislation designed to reduce, restrict or eliminate greenhouse gas emissions from power generation~~waste reduction are emerging and consumers may ~~have the effect of increasing~~demand more sustainability in our products. Such regulations and consumer demands may affect how we manufacture and package our products, which may increase our costs and those of our suppliers and could result in manufacturing, transportation and supply chain disruptions ~~and delays~~ if clean energy or sustainable alternatives are not readily available in adequate ~~supply~~amounts when required. Moreover, alternative energy sources, ~~that supply the power to meet our current and future demands as well as those of our suppliers and the global and regional economies in general,~~ coupled with reduced investments in traditional energy ~~sources~~production and infrastructure, may ~~fail to~~not provide ~~the~~ predictable, reliable, and consistent energy that we, our suppliers and other businesses ~~need for operations.~~require.

Regulations related to the sourcing of certain metals may have an impact on our business. For instance, the sourcing and availability of metals ~~that may be~~ used in the manufacture of, or contained in, our products may be affected by laws and regulations ~~in the U.S. or internationally~~ regarding the use of minerals obtained from certain regions of the world like the Democratic Republic of Congo and adjoining countries. Although we do not believe ~~that~~ we ~~or our suppliers~~ source minerals

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from this region, our expanding geographic operations may increase the risk of purchasing conflict minerals. Further, these laws and regulations may decrease the number of suppliers capable of supplying our needs for certain metals, thereby negatively affecting our ability to manufacture products in sufficient quantities or at competitive prices, leading customers to potentially choose competitive goods and services.

Meeting our obligations under existing ESG laws, rules, or regulations is ~~already~~ costly to us and our suppliers, and we expect those costs to increase, ~~in the future,~~ possibly materially. Additionally, we expect regulators to perform investigations, inspections and periodically ~~audit~~audits of our compliance with these laws and regulations, and we cannot provide assurance that our efforts or operations will be compliant. If we fail to comply with any requirements, we could be subject to significant penalties or liabilities and we may be required to implement new and ~~significantly~~materially more costly processes and procedures to come into compliance. Further these laws are subject to unpredictable changes. Even if we successfully comply with these laws and regulations, our suppliers may ~~fail to comply.~~not. We may also suffer financial and reputational harm if customers require, and we are unable to deliver, certification that our products are conflict free. In all of these situations, customers may stop purchasing products from us, and may take legal action against us, which could harm our reputation, revenues and results of operations.

Investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders, and customers are also increasingly focused on corporate ESG ~~practices of companies.~~practices. Additionally, public interest and legislative pressure related to ~~public~~ companies’ ESG practices continues to grow. If our ESG practices fail to meet investor or other industry ~~stakeholders'~~stakeholders’ frequently evolving expectations and standards, ~~for ESG~~ including environmental stewardship, support for local communities, board of director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency and employing ESG strategies in our operations, our brand, reputation and employee retention may be ~~negatively impacted,~~harmed, customers and suppliers may be unwilling to do business with us and investors may be unwilling to invest in us. ~~In addition, as we work to align our ESG practices with industry standards, we have expanded and, in the future, will likely continue to expand our disclosures in these areas.~~ We also expect to incur additional costs and require additional resources to monitor, report, and comply with our various ESG practices. If we fail to adopt ESG standards or practices as quickly as stakeholders

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desire, report on our ESG efforts or practices accurately, or satisfy the disclosure and other expectations of stakeholders, our reputation, business, financial performance, growth, and stock price may be adversely impacted.

~~General Risk Factors~~

~~We rely on our personnel and, i~~Intellectual Property Risks~~f we fail to attract, motivate, train or retain personnel, or if our growth harms our corporate culture, it may be more difficult to grow effectively and pursue our strategic priorities.~~

~~We believe a key factor~~Our success depends in part on our ~~success has been the culture~~proprietary technology, and if we have created that emphasizes a shared vision and values focusing on agility, customer success and accountability. We believe this culture fosters an environment of integrity, innovation, creativity, and teamwork. We have also experienced in the past and expectfail to experience in the future, difficulties attracting and retaining employees that meet the qualifications, experience, compliance mindset and values we expect. If we are unable to attract and retain personnel that meetsuccessfully obtain or enforce our ~~selection criteria or relax~~IP rights, our standards in order to meet the demands of our growth or if our growth is not managed effectively, our corporate culture, ability to achieve our strategic objectives, and our compliance with obligations under our internal controls and other requirementscompetitive position may be harmed.

~~Beginning~~Our success depends in part on our ability to maintain existing IP rights and ~~continuing~~obtain, maintain and enforce further IP protection for our products. Our inability to do so could harm our competitive position.

We rely on our portfolio of issued and pending patent applications in ~~2022, we are gradually reopening many~~the U.S. and other countries to protect a large part of our ~~offices that have been substantially closed~~IP and our competitive position; however, these patents may be insufficient because our patents may be challenged, invalidated, held unenforceable, circumvented, or may not be broad enough to prevent third parties from producing competing products similar in design to ours and foreign patents protections may be more limited than those under U.S. patent and IP laws.

Additionally, any of our patent applications may not result in an issued patent or the scope of the patent ultimately issued may be narrower than initially sought. We may not be afforded the protection of a patent if our currently pending or future patent filings do not result in the issuance of patents or we fail to timely apply for patent protection. We may fail to apply for a patent if our personnel fail to disclose or recognize new patentable ideas or innovations. Remote working can decrease the opportunities for our personnel to collaborate, thereby reducing the opportunities for effective invention disclosures and patent application filings. We may choose not to file a foreign patent application if the limited protections provided by a foreign patent do not outweigh the costs to obtain it.

We also protect our IP through copyrights, trademarks, trade secrets, and confidentiality obligations. We generally enter into confidentiality agreements with our employees, ~~during~~consultants and collaborative partners upon commencement of a relationship with us. However, despite the ~~COVID-19 pandemic. Where our offices have reopened,~~existence of these protections, we have ~~adopted a flexible hybrid schedule that~~experienced incidents in which our proprietary information has been misappropriated and believe it will ~~allow many~~be misappropriated again in the future. If these agreements do not provide meaningful protection against the unauthorized use or disclosure of our ~~employees~~trade secrets or other confidential information, adequate remedies may not exist to prevent unauthorized uses or disclosures.

Enforcement of our IP rights is time-consuming and costly, and could ultimately prove to be unsuccessful. In certain jurisdictions, enforcement of IP rights is more difficult due to legislation and geopolitical circumstances. As we launch our products in different regions at different times, our products may be acquired and reverse engineered by potential competitors in regions where infringement is more difficult to pursue.

Our inability to maintain the ~~opportunity~~proprietary nature of our technology through patents, copyrights or trade secrets would impair our competitive advantages and could have a material effect on our operating results, financial condition and future growth prospects. In particular, a failure to ~~collaborate and connect with others in~~protect our ~~offices three days per week while having the option~~IP rights might allow competitors to ~~work remotely other days. This hybrid approach that we have adopted may materially increase~~copy our ~~costs~~technology or create ~~unforeseen challenges~~counterfeit or ~~complications, including:~~pirated versions of our products, which could adversely affect our reputation, pricing and market share.

Litigation regarding our IP rights, rights claimed by third parties, or IP litigation by any vendors on whose products or services we rely for our products and services may impact our ability to grow our business, adversely impact our results of operations and adversely impact our reputation.

•Extensive litigation over IP rights is common in medical device, optical scanner, 3D printing and other technologies and industries on which our products and services are based. Litigation, interferences, oppositions, re-exams, ~~difficulties maintaining~~inter partes reviews, post grant reviews or other proceedings have been necessary and will likely be needed in the future to determine the validity and scope of certain of our ~~corporate culture, disruption~~IP rights and those claimed by third parties. These proceedings are used to determine the validity, scope or non-infringement of ~~morale~~certain patent rights pertinent to the manufacture, use or ~~decreased loyalty;~~

•~~difficulties with hiring~~sale of our products and ~~retention, particularly considering tight labor markets~~the products of competitors. We have been sued for infringement of third parties’ patents in the past and ~~generous~~are currently defending patent infringement lawsuits and other legal claims. In addition, we periodically receive letters from third parties drawing our attention to their IP rights and there may be other third-party IP rights of which we are presently unaware. As dentistry becomes more digital, competitors may make defense of our IP more challenging. Asserting or ~~broad remote working policies being adopted by companies against whom we compete for talent;~~

•~~negative impacts~~defending these proceedings can be unpredictable, protracted, time-consuming, expensive and distracting to ~~collaboration, performance~~management and ~~productivity;~~

•~~increased employee stress, fatigue or “burn out” by employees unable to disengage their work life from~~technical personnel. Their outcomes may adversely affect the ~~home life;~~

•~~increased operational, governance, compliance,~~validity and ~~tax risks;~~

•~~increased attrition or limits to~~scope of our IP rights, hinder our ability to ~~attract employees who prefer~~manufacture and market our products, require us to seek licenses for ~~convenience~~infringing products or ~~for safety reasons~~technologies or result in the assessment of significant monetary damages. Unfavorable rulings could include monetary damages, injunctions prohibiting us from selling our products, or exclusion orders preventing us from importing our products in one or more countries. Moreover, independent actions by competitors, customers or others have alleged that our efforts to ~~continue working remotely full time,~~enforce our IP rights constitute unfair competition or violations of antitrust laws and investigations and additional litigation based on the same or similar claims may be brought in ~~offices or geographies different from where they were hired to work or are expected to work;~~

•~~problems managing office space requirements;~~

•~~concerns regarding favoritism or discrimination;~~

•~~strains to~~the future. The potential effects on our business ~~continuity plans~~operations resulting from litigation, whether or not ultimately determined in our favor or settled by us, are costly and ~~difficulties achieving~~could materially affect our ~~strategic objectives;~~results of operations and reputation.

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•
~~increased labor~~

Financial, Tax and ~~employment claims and litigation.~~Accounting Risks

~~Furthermore,~~If our ~~compensation and benefit arrangements, such as our equity award programs,~~goodwill or long-lived assets become impaired, we may ~~not always~~ be ~~successful in attracting new employees and retaining and motivating existing employees. In addition, other internal and external factors can impact our ability~~required to ~~hire and retain talent, including insufficient advancement or career opportunities, restrictive immigration policy and regulatory changes, an increase in employees choosing~~record a material charge to ~~retire or quit with no immediate intentions to continue working and significantly higher demand for technical and digital talent.~~earnings.

IfUnder GAAP, we review our goodwill and long-lived asset group for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Additionally, goodwill must be tested for impairment at least annually. The qualitative and quantitative analysis used to test goodwill are ~~unable to attract~~dependent upon various assumptions and ~~retain personnel~~reflect management’s best estimates. Changes in certain assumptions, including revenue growth rates, discount rates, earnings multiples and future cash flows may cause a change in circumstances indicating that ~~meet our selection criteria~~the carrying value of goodwill or ~~relax our standards in order to meet~~ the demands of our growth or if our growth is not managed effectively, our corporate culture, ability to achieve our strategic objectives, and our compliance with obligations under our internal controls and other requirementsasset group may be ~~harmed. This could~~impaired and assessing these assumptions and predicting and forecasting future events can be difficult. Goodwill and purchased assets require periodic fair value assessments to determine if they have become impaired. Consequently, we may be required to record a material ~~adverse effect on our results of operations~~ ~~and our ability~~charge to ~~maintain market share.~~

~~Business disruptions could seriously harm our financial condition.~~

~~Our global operations have been disrupted~~earnings in the ~~past and will likely be disrupted and harmed again~~financial statements during the period in ~~the future. The occurrence~~which any impairment of ~~any material~~goodwill or prolonged business disruptions could harm our growth and expansion, result in significant losses, seriously harm our revenues, profitability and financial condition, adversely affect our competitive position, increase our costs and expenses, and require substantial expenditures and recovery time in order to fully resume operations.

Human error can have a significant effect on our business. While we train our employees and perform our due diligence when contracting with third parties, mistakes and accidents still occur. For instance, in March 2021, a container ship carrying some of our products was stuck in the Suez Canal for six days. Although this did not have a material adverse effect on our business, therelong-lived asset group is ~~no assurance that such incidents may not impact us in a material way in the future.~~

Natural disasters can impact our business and third-party vendors that may be critical to our business, including as a result of earthquakes, tsunamis, floods, droughts, hurricanes, wildfires, extreme weather conditions, power outages, restrictions and shortages, telecommunications failures, materials scarcity and price volatility, and medical epidemics or health pandemics. Climate change is likely to increase both the frequency and severity of natural disasters and, consequently, risks to our operations and growth. Our digital dental modeling and certain of our customer facing operations are primarily processed in our facilities located in Costa Rica. Our aligner molds and finished aligners are fabricated in China, Mexico and Poland. Our locations in Costa Rica and Mexico as well as others are in earthquake zones and may be subject to other natural disasters. Moreover, a significant portion of our research and development activities are located in California, which suffers from earthquakes, periodic droughts, power shortages and wildfires. If there is a major earthquake or any other natural disaster in a region where one of these facilities is located, our employees could be impacted, our research could be lost, and our ability to create ClinCheck treatment plans, respond to customer inquiries or manufacture and ship our aligners could be compromised which could result in our customers experiencing significant delays receiving their aligners and a decrease in service levels.

When human induced or natural disasters occur, they may, individually or in the aggregate, affect our ability to provide products, services and solutions to our customers, and could cause production delays or limitations, create adverse effects on distributors, disrupt supply chains, result in shipping and distribution disruptions and reduce the availability of or access to one or more facilities, any of which could materially and adversely affect our business, financial condition and results of operations.determined.

Changes in, or interpretations of, accounting rules and regulations, could result in unfavorable accounting charges.

We prepare our consolidated financial statements in conformity with ~~U.S.~~ GAAP. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in these policies or in the way these policies are interpreted by us or regulators could ~~have a significant~~materially effect on our reported results and may even retroactively affect previously reported financial statements.

We are required to annually assess our internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in our financial reports and ~~have an adverse effect on~~adversely affect our stock price.

We are required to furnish in our Form 10-K a report by our management regarding the effectiveness of our internal control over financial reporting that includes, among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether ~~our internal control over financial reporting~~it is effective. Our internal controls may become inadequate because of changes in personnel, updates and upgrades to or migration away from existing software, failure to maintain accurate books and records, changes in accounting standards or interpretations of existing standards, and, as a result, the degree of compliance of our internal control over financial reporting with the existing policies or procedures may become ineffective. Establishing, testing and maintaining an effective system of internal control over financial reporting requires significant

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resources and time commitments on the part of our management and our finance staff, may require additional staffing and infrastructure investments and increases our costs of doing business. If we are unable to assert that our internal control over financial reporting is effective in any future period (or if our auditors are unable to express an opinion on the effectiveness of our internal controls or conclude that our internal controls are ineffective), the timely filing of our financial reports could be delayed or we could be required to restate past reports, and cause us to lose investor confidence in the accuracy and completeness of our financial reports in the future, which could have an adverse effect on our stock price.

If we fail to manage our exposure to global financial and securities market risks successfully, our operating results and financial statements could be materially impacted.

~~The primary objective of our investment activities is to preserve principal. To achieve this objective, a~~A majority of our marketable investments are investment grade, liquid, fixed-income securities and money market instruments denominated in U.S. dollars. If the carrying value of an investment exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, we are required to write down the value of the investment, which could materially harm our results of operations and financial condition. Moreover, the performance of certain securities in our investment portfolio correlates with the credit condition of the U.S. financial sector. In an unstable credit or economic environment, it is necessary to assess the value of our investments more frequently and we might incur ~~significant~~material realized, unrealized or impairment losses associated with these investments.

Additionally, in July 2017, the United Kingdom Financial Conduct Authority announced that it would stop compelling banks to submit interest rates for the calculation of the London Interbank Offered Rate (“LIBOR”) after 2021. Although we do not have any outstanding debt under our 2020 Credit Facility, were we to draw on it, the outstanding amounts would bear interest at fluctuating interest rates on an approved replacement benchmark. We also have other contracts indexed to LIBOR. Any indebtedness that we incur may be indexed to a replacement benchmark, such as the Secured Overnight Financing Rate (“SOFR”). Any such changebank failures could cause or continue to cause volatility in the ~~effective interest rate under an agreement, including~~credit or capital markets, market-wide liquidity issues, bank-runs and general concern across the global financial industry. These conditions could limit our ~~2020 Credit Facility, and our overall interest expense~~access to ~~increase, adversely affecting our cash flows and results of operations.~~

~~If our goodwill~~capital or ~~long-lived assets become impaired, we may be required to record a significant charge to earnings.~~

~~Under GAAP, we review our goodwill and long-lived asset group for impairment when events or changes in circumstances indicate~~impair the carrying value may not be recoverable. Additionally, goodwill is required to be tested for impairment at least annually. The qualitative and quantitative analysis used to test goodwill are dependent upon various assumptions and reflect management’s best estimates. Changes in certain assumptions including revenue growth rates, discount rates, earnings multiples and future cash flows may cause a change in circumstances indicating that the carrying value of ~~goodwill or the asset group may be impaired and assessing these assumptions and predicting and forecasting future events can be difficult. Goodwill and purchased~~ assets ~~require periodic fair value assessments to determine if they have become impaired. Consequently,~~ we ~~may be required to record a significant charge to earnings in the financial statements during the period in which any impairment of goodwill or long-lived asset group is determined.~~hold.

Our effective tax rate may vary significantly from period to period.

Align operates globally and is subject to taxes in the U.S. and foreign countries. Various internal and external factors may ~~have favorable or unfavorable effects on~~affect our future effective tax rate. These factors include ~~but are not limited to,~~ changes in the global economic environment, changes in our legal entity structure or activities performed within our entities, changes in our business operations, changes in tax laws, regulations and/or rates, new or changes to existing accounting pronouncements, changing interpretations of existing tax laws or regulations, changes in ~~the~~ relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates, changes in overall levels of pretax earnings, the future levels of tax benefits of stock-based compensation, settlement of income tax audits and non-deductible goodwill impairments. ~~For example, our effective tax rate varied significantly in the first quarter of fiscal 2020 due to the relocation of our EMEA regional headquarters from the Netherlands to Switzerland.~~

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Our effective tax rate is also dependent in part on forecasts of full year results which can vary materially. Furthermore, we may continue to experience significant variation in our effective tax rate related to excess tax benefits on stock-based compensation, particularly in the first quarter of each year when the majority of our equity awards vest.

New tax laws and ~~practice,~~practices, changes to existing tax laws and ~~practice,~~practices, or disputes regarding the positions we take regarding tax laws, could negatively affect our provision for income taxes as well as our ongoing operations.

~~As a U.S. multinational corporation, we are subject to~~Compliance with tax laws ~~both within and outside of the U.S. and~~requires significant judgment ~~is required in determining~~concerning our worldwide provision for income taxes. Changes in tax laws or changes to how those laws are applied to our business in practice, could affect the amount of tax to which we are subject and the manner in which we

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operate. Additionally, the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project ~~has resulted~~proposes changes to long-standing tax principles, including allocating greater taxing rights to countries where customers are located and establishing a global minimum tax rate of at least 15%. Numerous countries are evaluating their existing tax laws due in ~~considerable new reporting obligations worldwide as OECD member countries have implemented its guidance.~~part to recommendations made by the OECD’s BEPS project. The ~~OECD continues to publish guidance pursuant to~~changes proposed by the BEPS ~~and other projects which,~~project, if adopted by ~~member~~specific countries, may increase tax uncertainty and adversely affect our ~~tax positions in many of the countries in which we do business.~~provision for income taxes.

Moreover, the application of indirect taxes (such as sales and use tax (“SUT”), value-added tax (“VAT”), goods and services tax (“GST”), and other indirect taxes) to our operations is complex and evolving. U.S. states, local and foreign taxing jurisdictions have differing rules and regulations governing differing types of taxes, and these rules and regulations are subject to varying interpretations and exemptions that may change over time. We collect and remit SUT, VAT, GST and other taxes in many jurisdictions and we are routinely subject to audits. We are also routinely audited regarding our tax reporting and remissions by local and national governments, and may also be subject to audits in jurisdictions for which we have not accrued tax liabilities. The positions we take regarding taxes as well as the amounts we collect or remit may be challenged and we may be liable for failing to collect or remit all or any portion of taxes deemed owed or the taxes could exceed our estimates. One or more U.S. states or countries may seek to impose incremental or new sales, use, or other tax collection obligations on us or may determine that such taxes should have but have not been paid by us.

We are routinely subject to audits regarding our tax reporting and remissions by local and national governments. We may also be subject to audits in U.S. states, local and foreign jurisdictions for which we have not accrued tax liabilities. The positions we take and assumptions we make regarding taxes as well as the amounts we collect or remit may be challenged and we may be liable for failing to collect or remit all or any portion of taxes deemed owed or the taxes could exceed our estimates. If we dispute rulings or positions taken by tax authorities, we may incur expenses and expend significant time and effort to defend our positions, which may be costly.

The application of existing and new ~~or future~~ tax laws, and the results of audits ~~whether in the U.S. or internationally,~~ could harm our business. Furthermore, there have been and will continue to be substantial ongoing costs associated with complying with the various tax requirements and defending our positions in the numerous markets in which we conduct or will conduct business.

We have in the past and may again in the future invest in or acquire other businesses, products or technologies which may require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.

Periodically, we may acquire, or make investments in, complementary companies, products or technologies like our acquisition of exocad in 2020. Alternatively, we may be unable to find suitable investment or acquisition targets in the future, and we may not be able to complete investments or acquisitions on favorable terms, if at all. If we do make investments or complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals or desired synergies, and any investments that we make or acquisitions we complete could be viewed negatively by our customers, securities analysts and investors. Moreover, to the extent we make strategic investments, the companies in which we invest may fail or we may ultimately own less than a majority of the outstanding shares of the company and be outvoted on critical matters or issues that could harm us or the value of our investment.

Additionally, as an organization we do not have a history of significant acquisitions or integrating their operations and cultures with our own. As such we are subject to multiple vulnerabilities and risks when making a strategic investment or acquisition, including we may:

•fail to perform proper due diligence and inherit or fail to uncover material issues of the acquired company or assets, including IP or other litigation or ongoing investigations, accounting irregularities or improprieties, bribery, corruption or other compliance liabilities;

•~~fail to comply with regulations, governmental orders or decrees;~~

•~~create IT security and privacy compliance issues;~~

•~~invest in companies that generate net losses and the market for their products, services or technologies may be slow to develop;~~

•not realize a positive return on investment or determine that our investments have declined in value, such that we may be required to record impairments such as future impairments of intangible assets and goodwill or the recording of stock-based compensation, which could have a material adverse impact on our financial results;

•find it difficult to implement and harmonize company-wide financial reporting, forecasting and budgeting, accounting, billing, information technology and other systems due to inconsistencies in standards, internal controls, procedures and policies;

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•~~require significant time and resources to effectuate the transition;~~

•~~fail to retain key personnel;~~

•~~inaccurately forecast the financial impact of an acquired business;~~

•~~not realize any or all or material portions of the expected synergies and benefits of the acquisition; or~~

•~~unsuccessfully evaluate or utilize the acquired technology or acquired company’s know-how or fail to successfully integrate any acquisitions or the technologies acquired.~~

Moreover, opposition to one or more acquisitions could lead to negative ratings by analysts or investors, give rise to objections by one or more stockholders or result in stockholder activism, any of which could harm our stock price.

Historically, the market price for our common stock has been volatile.

The market price of our common stock is subject to rapid and ~~wide~~large price fluctuations ~~in response~~attributable to various factors, many of which are beyond our control. The factors include:

•~~the impact on global and regional economies as a result of the COVID-19 pandemic;~~

•quarterly variations in our results of operations and liquidity or changes in our forecasts and guidance;

•our ability ito~~n the future to~~ regain or sustain ~~or regain~~ our historical growth rates;

•changes in recommendations by the investment community or speculation in the press or investment community regarding estimates of our net revenues, operating results or other performance indicators;

•announcements by us or our competitors or new market entrants, including strategic actions, management changes, and material transactions or acquisitions;

•technical factors in the public trading markets for our stock that may produce price movements ~~that may or may not comport~~inconsistent with macro, industry or company-specific fundamentals, including ~~without limitation,~~ the sentiment of retail investors ~~(including as~~(as it may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock, fractional share trading, and other technical trading factors or strategies;

•announcements regarding stock repurchases, sales or purchases of our common stock by us, our officers or directors, credit agreements and debt issuances;

•announcements of technological innovations, new, additional or revised programs, business models, products or product offerings by us, our customers or competitors;

•key decisions in pending litigation, new litigation, settlements, judgments or decrees;

•~~sales of stock by us, our officers or directors;~~ and

•general economic market conditions, including rising interest rates, inflationary pressures, recessions, consumer sentiment and demand, global political ~~conflict.~~conflict and industry factors unrelated to our actual performance.

In addition, the stock market in general, and the market for technology and medical device companies, in particular, have experienced extreme price and volume fluctuations ~~that are~~ often unrelated to or disproportionate to ~~the~~corporate operating ~~performance of those companies.~~performance. These broad market and industry factors may include market expectations of, or actual changes in, monetary policies that have the goal of easing or tightening interest rates such as the U.S. federal funds rate ~~in the U.S.~~ and austerity measures of governments intended to control budget deficits. Historically, our stock has fluctuated materially based on broad general economic market and industry factors unrelated to our actual performance and future changes in monetary policies, austerity, and other market factors may seriously harm the market price of our common stock, regardless of our actual operating performance. Historically, securities litigation, including securities class action lawsuits and securities derivative lawsuits, is often brought against an ~~issuing company~~issuer following periods of volatility in the market price of its securities and we have not been ~~excepted~~exempt from such litigation.

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We cannot guarantee that we will continue to repurchase our common stock in the future, and any repurchases that we may make may not achieve our desired objectives.

We have a history of recurring stock repurchase programs intended to return capital to our investors. Future stock repurchase programs are contingent on a variety of factors, including our financial condition, results of operations, business requirements, and our Board of Directors' continuing determination that stock repurchases are in the best interests of our stockholders and in compliance with all applicable laws and agreements. There is no assurance that we will continue repurchasing our common stock in the future ~~consistent with~~at historical levels or at all, or that our stock repurchase programs will ~~have~~beneficially impact our stock price. Additionally, effective January 1, 2023, the Inflation Reduction Act imposes a ~~beneficial impact~~1% excise tax on our stock ~~price.~~repurchases, which will increase our tax liabilities and the cost to retire stock and may impact if and how much stock we choose to repurchase in the future.

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Future sales of significant amounts of our common stock may depress our stock price.

A ~~large~~significant percentage of our outstanding common stock is currently owned by a small number of ~~significant~~ stockholders. These stockholders have sold in the past, and may sell in the future, large amounts of ~~common~~our stock over relatively short periods of time. Sales of substantial amounts of our ~~common~~ stock ~~in the public market~~ by existing stockholders may adversely affect the market price of our ~~common~~ stock by creating the perception of difficulties or problems with our business that may depress our stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Unregistered Sales of Equity Securities~~

~~None.~~

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~

~~The following table summarizes the~~There were no stock ~~repurchase activity for~~repurchases during the three months ended June 30, ~~2022:~~

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs
Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Programs(1)
April 1, 2022 through April 30, 2022
— $ — — $ 649,926,094
May 1, 2022 through May 31, 2022 551,895 $ 289.91 551,895 $ 449,926,094
June 1, 2022 through June 30, 2022 204,607 $ 195.50 204,607 $ 449,926,094
Total 756,502 756,502

12023. As of June 30, 2023, we have $1.0 billion remaining available for repurchases under the ~~May 2021~~January 2023 Repurchase ~~Program.~~ Program~~On May 13, 2021, we announced that~~ authorized by our Board of Directors ~~had authorized a plan~~in January 2023 (Refer to ~~repurchase up to $1.0 billion of our common stock. See~~ Note 9 ~~“Common~~“Common Stock Repurchase Programs” of the Notes to ~~Condensed~~ Consolidated Financial Statements for details on the ~~May 2021~~January 2023 Repurchase ~~Program.~~Program).

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None~~

During the fiscal quarter ended June 30, 2023, no director or officer, as defined in Rule 16a-1(f) of the Exchange Act, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

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Item 6. Exhibits.

(a) Exhibits:

~~Exhibit~~

~~Number~~

~~Description~~

~~Filing~~

~~Date~~

~~Exhibit~~

~~Number~~

Filed
herewith

~~10.1~~

~~Fixed Dollar Accelerated Share Repurchase~~ ~~Transaction~~ ~~between Citibank, N.A. and Align Technology, Inc. dated April 29, 2022~~

~~31.1~~

~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~

~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~†

~~Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~

~~Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~

~~Inline XBRL Taxonomy Extension Presentation Linkbase Document~~

~~104~~

~~Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)~~

Exhibit

Number

Description

Filing

Date

Exhibit

Number

Filed
herewith

3.1

Amended Certificate of Incorporation of Align Technology, Inc.

S-1, as amended (File No. 333-49932)

12/28/2000

3.1

3.1A

Certificate of Amendment to the Amended Certificate of Incorporation

8-K

5/20/2016

3.01

3.1B

Certificate of Amendment to the Amended Certificate of Incorporation

3.2

Amended and Restated Bylaws of registrant

8-K

3/01/2023

3.1

10.1

Subscription Agreement, dated as of April 24, 2023 between Align Technology, Inc. and Heartland Dental Holding Corporation

10.2

Stockholders' Agreement, dated as of April 24, 2023 by and among Heartland Dental Holding Corporation, Heartland Dental Topco, LLC, KKR Core Holding Company LLC, KKR Partners IV L.P., any Sponsor Group Permitted Transferee as defined in the Agreement and Align Technology, Inc.

10.3

Side Letter, dated as of April 24, 2023 by and among Heartland Dental Holding Corporation, Heartland Dental Topco, LLC, KKR Core Holding Company LLC, KKR Partners IV L.P., any Sponsor Group Permitted Transferee as defined in the Stockholders' Agreement and Align Technology, Inc.

31.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 †

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

† The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the Registrant under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ALIGN TECHNOLOGY, INC.

August 4, ~~2022~~2023	By:	/s/ JOSEPH M. HOGAN
		Joseph M. Hogan President and Chief Executive Officer

August 4, ~~2022~~2023	By:	/s/ JOHN F. MORICI
		John F. Morici Chief Financial Officer and Executive Vice President, Global Finance

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Fiscal Year Ending December 31,	Amortization
Remainder of 2022	$	7,536
2023	14,997
2024	13,831
2025	13,455
2026	12,849
Thereafter	35,732
Total	$	98,400


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Programs(1)
April 1, 2022 through April 30, 2022	—	$	—	—	$	649,926,094
May 1, 2022 through May 31, 2022	551,895	$	289.91	551,895	$	449,926,094
June 1, 2022 through June 30, 2022	204,607	$	195.50	204,607	$	449,926,094
Total	756,502			756,502