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What changed in Align Technology's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Align Technology's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+370 added−346 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in Align Technology's 2024 10-K

370 paragraphs added · 346 removed · 292 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

178 edited+48 added−33 removed47 unchanged
Biggest changeAs such, we are subject to various risks when making a strategic investment or acquisition which could materially impact our business or results of operations, including that we may: • fail to perform proper due diligence and inherit unexpected material issues or assets, including intellectual property (“IP”) or other litigation or ongoing investigations, accounting irregularities or compliance liabilities; • fail to comply with regulations, governmental orders or decrees; • experience IT security and privacy compliance issues; • invest in companies that generate net losses or are slow or fail to develop; • not realize a positive return on investment or determine that our investments have declined in value, necessitating we record impairments such as future impairments of intangible assets and 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.
Biggest changeWe are subject to various risks when making a strategic investment or acquisition and integrating the operations and cultures of acquired businesses within our own, which could materially impact our business, financial condition or results of operations, including that we may: • fail to perform proper due diligence and inherit unexpected material issues or assets, including intellectual property (“IP”) or other litigation or ongoing investigations, accounting irregularities or compliance liabilities; • fail to comply with regulations, governmental orders or decrees; • experience information technology (“IT”) security and privacy compliance issues; • invest in companies that generate net losses or are slow or fail to develop; • not realize a positive return on our investment or determine that investments have declined in value, which could potentially require recording impairments; • need to pay cash, incur debt or issue equity securities to pay for an acquisition, adversely affecting our liquidity, financial condition or the trading price of our common stock; • 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; • require significant time and resources to effectuate the integration; • fail to retain key personnel or harm our existing culture or the culture of an acquired entity; • not realize material portions of the expected synergies and benefits of the investment or acquisition; or • unsuccessfully evaluate or utilize the acquired technology or acquired company’s know-how or fail to successfully integrate the technologies acquired.
Operational Risks 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.
Operational Risks Our operating results have and will continue to fluctuate in the future, which makes predicting the timing and amount of customer demand and our revenues, costs, and expenditures difficult. Our quarterly and annual operating results have and will continue to fluctuate for a variety of reasons.
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 prospects may be harmed.
In the event of technology changes, delivery delays, labor stoppages or shortages, or increases in price for these items, sales may decrease and our business and prospects may be harmed.
If alternative distributors cannot 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 key markets could be adversely affected. These distributors may also choose to sell alternative or competing products or services.
If alternative distributors cannot 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 and services in key markets could be adversely affected. These distributors may also choose to sell alternative or competing products or services.
The loss of any key personnel, particularly executive management, research and development personnel or sales personnel, could harm our business and prospects and impede the achievement of our research and development, operational or strategic objectives.
The loss of any key personnel, particularly executive management, research and development, or sales personnel, could harm our business and prospects and impede the achievement of our research and development, operational or strategic objectives.
Establishing, testing and maintaining an effective system of internal control over financial reporting requires significant 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.
Establishing, testing and maintaining an effective system of internal control over financial reporting requires significant resources and time commitments on the part of our management and our finance staff, and may require additional staffing and infrastructure investments and increases our costs of doing business.
Introduction and acceptance of any products and services may take significant time and effort, particularly if they require doctor education and training to understand their benefits or doctors choose to withhold judgment on a product until patients complete their treatments. 23 In addition, we periodically introduce new business and sales initiatives to meet customers’ needs and demands.
Introduction and acceptance of any products and services may take significant time and effort, particularly if they require doctor education and training to understand their benefits or doctors choose to withhold judgment on a product until patients complete their treatments. In addition, we periodically introduce new business and sales initiatives to meet customers’ needs and demands.
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.
Our failure or the failure of our suppliers, customers, advertisers, consultants, 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.
Our competitors also include 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 manufacture custom aligners in their offices using 3D printing technology. Large consumer product companies may also start supplying orthodontic products.
Our competitors also include DTC companies that provide clear aligners using a business model requiring little or no in-office care from trained and licensed doctors, and doctors and DSOs who manufacture custom aligners in their offices using 3D printing technology. Large consumer product companies may also start supplying orthodontic products.
Asserting or defending these proceedings can be unpredictable, protracted, time-consuming, expensive and distracting to management and technical personnel. Their outcomes may adversely affect our ability to manufacture and market our products, require us to seek licenses for infringing products or technologies or result in the assessment of significant monetary damages.
Asserting or defending these proceedings can be unpredictable, protracted, time-consuming, expensive, and distracting to management and technical personnel. Their outcomes may adversely affect our ability to manufacture and market our products and services, require us to seek licenses for infringing products or technologies, or result in the assessment of significant monetary damages.
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 (“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.
If our products and services are safe but they are promoted for use or used in unintended or unexpected ways or for which we have not obtained clearance (“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.
We use distributors for a portion of the importation, marketing and sales of our products and services, which exposes us to risks to our sales, operations and reputation, including the risk that these distributors do not comply with applicable laws or our internal procedures.
We use distributors for a portion of the importation, marketing and sales of our products and services, which exposes us to risks to our sales, operations and reputation, including the risk these distributors do not comply with applicable laws or our internal procedures.
Changes in such systems that degrade or eliminate our ability to target or measure the results of ads or increase costs to target audiences could adversely affect our campaigns. Operating systems could also include data privacy settings that limit our ability to interpret, target and measure ads effectively.
Changes in such systems that degrade or eliminate our ability to target or measure the results of ads or increase costs to target audiences could adversely affect our campaigns. Operating systems could also include data privacy settings that may limit our ability to interpret, target and measure ads effectively.
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 distribution agreements are generally non-exclusive and terminable by either party with customary notice.
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 and services. Our distribution agreements are generally non-exclusive and terminable by either party with customary notice.
Moreover, these laws may change, resulting in additional time, expense or loss of market access. If requirements to market our products or services are delayed, we may be unable to offer them in markets we deem important.
Moreover, these laws may change, resulting in additional time, expense or loss of market access. If the requirements to market our products or services are delayed, we may be unable to offer them in markets we deem important.
Although the U.S. dollar is our reporting currency, a large portion of our expenses, net revenues and net income are generated in foreign currencies.
Although the U.S. dollar is our reporting currency, a large portion of our net revenues and expenses are generated in foreign currencies.
If the operations of carriers are disrupted or we fail to mitigate any disruptions, we may be unable to timely deliver 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.
If the operations of commercial freight carriers are disrupted or we fail to mitigate any disruptions, we may be unable to timely deliver 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 as well.
We are also subject to complex, new and changing environmental, health and safety regulations. There can be no assurance we will 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.
We are also subject to complex, new and evolving environmental, health and safety regulations. There can be no assurance we will adequately address the 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.
Additionally, our clear aligners and iTero products utilize digital technology and some dental professionals have been and may continue to resist moving to a digital platform.
Additionally, our clear aligners and iTero products utilize digital technology and some dental professionals have and may continue to resist moving to a digital platform.
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.
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. The majority of our expenses, such as employee compensation and lease obligations, are relatively fixed in the short term.
If we are unable to compete effectively with existing products, existing competitors, new market entrants, or respond effectively to new technologies, our business, results of operations and financial condition could be materially impacted. Our success depends on our ability to successfully develop, introduce, achieve market acceptance of, and manage new products and services.
If we are unable to compete effectively with existing products, existing competitors, new market entrants, or respond effectively to new technologies, our business, financial condition, and results of operations could be materially adversely impacted. Our success depends on our ability to successfully develop, introduce, achieve market acceptance of, and manage new or improved products and services.
Specifically, in 2016, the Organization for Economic Cooperation and Development (“OECD”) established the Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) to among other things, allocate greater taxing rights to countries where customers are located and establish a global minimum tax rate.
Specifically, the Organization for Economic Cooperation and Development (“OECD”) established the Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) to among other things, allocate greater taxing rights to countries where customers are located and establish a global minimum tax rate.
We have employees represented by works councils in certain countries and others that may be or may become eligible to be represented by works councils, trade unions and other employee associations. Labor disputes and work stoppages involving our employees may disrupt our operations and could materially impact our results or operations.
We have personnel represented by works councils and trade unions in certain countries and others that may be or may become eligible to be represented by works councils, trade unions and other employee associations. Labor disputes and work stoppages involving our personnel may disrupt our operations and could materially impact our results or operations.
Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Because of the following factors, as well as other factors affecting our results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
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.
Moreover, our expense levels are based, in part, on 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 shortfalls.
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 taxes deemed owed or the taxes could exceed our estimates.
The positions we take regarding taxes as well as the amounts we collect or remit have and may continue to be challenged and we may be liable for failing to collect or remit all taxes deemed owed or the taxes could exceed our estimates.
Legal or regulatory action against us 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 materially limit or restrict the capabilities of our products and services.
Legal or regulatory action against us 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 materially limit or restrict our products and services.
We review finite-lived intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the asset (asset group) may not be recoverable.
We review finite-lived intangible assets and long-lived assets for impairment when events or circumstances indicate the carrying value of the asset (asset group) may not be recoverable.
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 iTero scanners. We maintain single supply relationships for many of these machines and materials.
We are highly dependent on our supply chain, particularly manufacturers of specialized and customized scanning equipment, rapid prototyping machines, resin and other advanced materials, as well as the optics, electronic and other mechanical components of our iTero intraoral scanners. We maintain single and sole supply relationships for many of these machines and materials.
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.
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.
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 not prevent third parties from producing competing products similar in design to ours if they are invalidated, held unenforceable, circumvented, or otherwise limited in scope.
We rely on our portfolio of issued and pending patent applications in the United States and other countries to protect a large part of our IP and our competitive position; however, these patents may not prevent third parties from producing competing products similar in design to ours if they are invalidated, held unenforceable, circumvented or otherwise limited in scope.
The qualitative analysis performed by management to identify indicators of impairment or the quantitative analysis used to determine fair value requires management to exercise significant judgement in determining appropriate assumptions and estimates, including revenue growth rates, gross and operating margins, discount rates and future cash flows.
The qualitative analysis performed by management to identify indicators of impairment or the quantitative analysis used to determine fair value requires management to exercise significant judgement in determining appropriate assumptions and estimates, including revenue growth rates, gross and operating margins, and discount rates.
A significant percentage of our outstanding common stock is currently owned by a small number of stockholders. These stockholders have sold in the past, and may sell in the future, large amounts of our stock over relatively short periods of time.
Future sales of significant amounts of our common stock may depress our stock price. A significant percentage of our outstanding common stock is currently owned by a small number of stockholders. These stockholders have sold in the past, and may sell in the future, large amounts of our stock over relatively short periods of time.
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 applications and models of our iTero scanners may be exposed to additional vulnerabilities, including increased security risks, errors and malfunctions that may be irreparable or difficult to repair.
Additionally, the third-party software integrated into or interoperable with our iTero intraoral scanners will routinely reach end of life, and as a consequence, certain applications and models may be exposed to additional vulnerabilities, including security risks, errors, and malfunctions that may be irreparable or difficult to repair.
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. 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.
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. It can take 12 months or more to train sales representatives to successfully market and sell our products and services and for them to establish strong customer relationships.
Sales of substantial amounts of our stock by existing stockholders may adversely affect the market price of our stock by creating the perception of difficulties or problems with our business that may depress our stock price. 34 Item 1B. Unresolved Staff Comments. None.
Sales of substantial amounts of our stock by existing stockholders may adversely affect the market price of our stock by creating the perception of difficulties or problems with our business, which may depress our stock price. Item 1B. Unresolved Staff Comments. None.
Failures of all or any portion of our 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 materially and adversely affect our ability to accept scans, manufacture clear aligners or restorative procedures or treatments and services or otherwise service our customers.
Failures of all or any portion of our or third-party software or other components or systems to interoperate with iTero or third-party intraoral scanners, termination of interoperability with third-party intraoral 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 system outages, regardless of cause, have harmed our operations previously and in the future could materially and adversely affect our ability to accept scans, manufacture clear aligners or restorative procedures or treatments and services, or otherwise service our customers.
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.
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, interrupt our supply chain and cause harm to our reputation.
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. These actions and decisions may also hinder our ability to pursue certain mergers, acquisitions, business combinations or other transactions.
Government regulatory actions and court decisions may result in fines or hinder our ability to provide certain benefits to our customers and consumers, reducing the attractiveness of our products, services and the net revenue derived from them. These actions and decisions may also hinder our ability to pursue certain mergers, acquisitions, business combinations, investments or other transactions.
We currently are and may in the future be subject to antitrust, competition or unfair competition related investigations, enforcement actions or claims by governmental agencies, competitors, consumers, customers, and others which, even if unfounded, could cause us to incur substantial costs, enter into settlements, consents, be subject to judgments, involve negative publicity, and divert management time and attention, which may materially impact our results of operations.
We currently are and may in the future be subject to antitrust, competition or unfair competition-related investigations, enforcement actions or claims by governmental agencies, competitors, consumers, customers and others which, even if unfounded, could cause us to incur substantial costs, enter into settlements, consent decrees, be subject to judgments, involve negative publicity and divert management time and attention, which may materially impact our business, financial condition and results of operations.
When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. The risks below are not the only ones we face.
When any one or more of these risks materialize from time to time, our business, reputation, results of operations, financial condition, cash flows and stock price can be materially and adversely affected. The risks below are not the only ones we face.
Consumer spending habits are affected by, among other things, inflation, fluctuations in currency exchange rates, general economic weakness, threats or actual recessions, pandemics, wars and military actions, employment levels, wages, debt obligations, discretionary income, interest rates, volatility in capital, and consumer confidence and perceptions of 20 current and future economic conditions.
Consumer spending habits are affected by, among other things, inflation, fluctuations in foreign currency exchange rates, consumer confidence, general economic weakness, actual or potential slowdowns or recessions, pandemics, wars and military actions, employment levels, wages, debt obligations, discretionary income, interest rates, volatility in capital and perceptions of current and future economic conditions.
Under GAAP, we review our goodwill at least annually, or more frequently, if we identify events or circumstances that indicate it is more likely than not that the fair value of a reporting unit has been reduced below its carrying value.
GAAP, we review our goodwill annually and more frequently if we identify events or circumstances that indicate it is more likely than not the fair value of a reporting unit has been reduced below its carrying value.
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. Additionally, seamless leadership transitions for key positions is critical to sustaining our culture and organizational success. If our succession planning is ineffective, it could adversely impact our business.
The loss of the services and knowledge of our highly-skilled personnel may significantly delay or prevent the achievement of our development, operational or strategic objectives. Additionally, seamless leadership transitions for key positions are critical to sustaining our culture and organizational success. If our succession planning is ineffective, it could adversely impact our business.
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.
While we have policies and procedures requiring compliance with applicable laws and regulations and we provide training to foster compliance, our employees, third parties acting on our behalf, and customers may not adhere to our policies and procedures or applicable laws or regulations, including the use of certain electronic communications and maintaining accurate books and records.
The factors include: • quarterly variations in our results of operations and liquidity or changes in our forecasts and guidance; • our ability to regain or sustain 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 inconsistent with macro, industry or company-specific fundamentals, including the sentiment of retail investors (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; and • general economic market conditions, including rising interest rates, inflationary pressures, recessions, consumer sentiment and demand, global political conflict and industry factors unrelated to our actual performance.
The factors include: • quarterly variations in our results of operations and liquidity, our ability to meet or exceed our forecasts and guidance or changes to or withdrawal of our previous forecasts and guidance; • our ability to regain or sustain our historical growth rates; • changes in recommendations or valuation models for our stock by the investment community, or speculation in the press or investment community regarding estimates of our net revenues, results of operations, or other key performance indicators; • announcements by us, 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 inconsistent with macroeconomic, industry, or company-specific fundamentals, including the sentiment of retail investors (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; • stockholder activism or securities class action litigation; • 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 or 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; • short selling or other hedging activity in our stock; and • general economic market conditions, including rising interest rates, tariffs, inflationary pressures, recessions, consumer sentiment and demand, global geopolitical conflict, and industry factors unrelated to our actual performance.
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.
Our internal controls may become ineffective 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, or changes to business models that may require adjustments to our financial reporting and, as a result, the degree of compliance of our internal control over financial reporting with the existing policies or procedures may become ineffective.
If our personnel or the personnel 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.
If our personnel or the personnel 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 or revenues or we may face regulatory investigations, actions and fines. In June 2024, the U.S.
To effectively manage and improve our operations, 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 cybersecurity threats, and changing customer preferences.
To effectively manage and improve our operations, 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, including privacy, security and data protection laws and regulations, increasingly sophisticated cybersecurity threats, and changing customer preferences.
Moreover, competitors do not always follow these restrictions, creating an unfair advantage and making it more difficult and costly 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.
Moreover, competitors do not always follow these restrictions, which can create an unfair advantage and make it more difficult and costly 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 comply with ABAC laws, regulators require that 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.
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, intermediaries or representatives acting on our behalf.
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, clearances or to comply with regulatory requirements may materially harm our domestic or international operations, and adversely impact our business.
Additionally, failure to comply with applicable regulatory requirements could result in enforcement actions with sanctions, including fines, civil penalties and 28 criminal prosecution. Delays or failures to obtain or maintain regulatory approvals, clearances or to comply with regulatory requirements may materially adversely affect our domestic or international operations, and adversely impact our business.
Our success depends on our ability to quickly and profitably develop, manufacture, market, obtain and maintain regulatory approval or clearance of new products and services along with improvements to existing products and services. We cannot assure successful development, sales or acceptance of our new or improved products and services.
Our success depends on our ability to quickly and profitably develop, manufacture, market, and obtain and maintain regulatory approval or clearance of new, improved or refurbished products and services. We cannot assure successful development, sales or acceptance of our products and services.
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. Our critical third-party vendors and service providers are similarly subject to various regulations.
The healthcare and technology markets are also highly regulated and subject to evolving political, economic and regulatory influences. Global regulators are expanding and changing regulations and guidance for products and services, which can limit their potential benefits and cause protracted review timelines for new products and services. Our critical third-party vendors and service providers are subject to similar regulations.
These factors include changes in the global economic environment, our legal entity structure or activities performed within our entities, our business operations, in tax laws, regulations and/or rates, to existing accounting pronouncements, interpretations of existing tax laws or regulations, in relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates, in overall levels of pretax earnings, as well as the settlement of income tax audits and non-deductible goodwill impairments.
These include changes in the global economic environment, our legal entity structure or activities performed within our entities, our business operations, tax laws, regulations and/or rates, changes to existing accounting pronouncements, changes in interpretations of existing tax laws or regulations, the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates, overall levels of pretax earnings, settlements of income tax audits, non-deductible goodwill impairments, and changes in the valuation allowance offsetting deferred tax assets.
Furthermore, before we can sell a new medical device or market a new use of, or claim for, an existing product, we frequently must 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, product materials, development, manufacturing and testing, product labeling and product storage.
Furthermore, before we can sell a new medical device or market a new use of, or claim for, an existing product, we frequently must obtain regulatory clearance or approval. For instance, in the United States, FDA regulations are wide-ranging and govern, among other things, product design, product materials, development, manufacturing and testing, product labeling and product storage.
Security breaches, data breaches, cybersecurity 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.
Security breaches, data breaches, cybersecurity attacks, other cybersecurity incidents, or the failure to comply with privacy, security and data protection laws could materially adversely impact our operations and patient care, and we could be liable for damages, and our reputation, business, financial condition and results of operations could be harmed.
We continue to assess key personnel we believe essential to our long-term success. Moreover, future organizational changes may cause employee attrition rates 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, may be harmed.
We continually assess key personnel we believe are essential to our long-term success. Moreover, future organizational changes may cause attrition rates 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 personnel, may be adversely affected.
Consequently, we may be required to record a material charge to earnings our financial statements during the period in which any impairment of goodwill, intangible or long-lived asset group is 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 GAAP.
Consequently, we may be required to record material charges to earnings on our financial statements during the period in which any impairment of goodwill, intangible assets or long-lived assets is 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.
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 operating and financial results. We are dependent on commercial freight carriers, primarily UPS, to deliver our products.
It may be difficult, expensive, and time-consuming for us to re-establish market access or regulatory compliance. 26 A disruption in the operations of a primary freight carrier, higher shipping costs or shipping delays could disrupt our supply chain and impact our operating and financial results. We depend on commercial freight carriers, primarily United Parcel Service, Inc., to deliver our products.
Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors, other companies that 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 experiencing immense and rapid digital transformation.
Competition in the markets for our products and services is increasing and we expect aggressive competition from existing competitors, other companies that introduce new technologies, products or services in the future, and customers who alone or with others create orthodontic appliances and solutions or other products or services that compete with us.
Moreover, alternative clean energy sources, coupled with reduced investments in traditional energy production and infrastructure, may not provide the predictable, reliable, and consistent energy that we, our suppliers and other businesses require.
Moreover, clean energy sources, coupled with reduced investments in traditional energy production and infrastructure, may not provide the predictable, reliable and consistent energy we, our suppliers and other business partners require.
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 marketing restrictions and be ordered to stop certain marketing activities or prevented from selling our products.
For example, some countries restrict direct to consumer advertising of medical devices. We have and may in the future be alleged to violate marketing restrictions and be ordered to stop certain marketing activities or prevented from selling our products and services.
Additionally, laws on sustainability and waste reduction are increasing and consumers may demand our products, packaging and operations be more sustainable, affect how we manufacture and package our products, increase our costs and those of our suppliers, and which may result in manufacturing, transportation and supply chain disruptions if clean energy or sustainable alternatives are not readily available in adequate amounts when required.
Additionally, as Sustainability laws are increasing, customers and consumers may demand our products, packaging and operations be more sustainable, affect how we manufacture and package our products, increase our costs and those of our suppliers, and may result in manufacturing, transportation and supply chain disruptions if sustainable clean energy is not readily available in adequate amounts when required.
Further, decreased demand for dental services can cause dentists and labs to postpone investments in capital equipment, such as intraoral scanners and CAD/CAM equipment and software. The declines in, 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.
Further, decreased demand for dental services can cause dentists and labs to postpone investments in capital equipment, such as intraoral scanners and CAD/CAM equipment and software. The declines in, or uncertain economic outlooks for, the United States, Chinese, European and certain other international economies have and could in the future materially adversely affect consumer and dental practice spending.
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 it is effective.
We are required to furnish in our Annual Report on 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 an assertion by management that our internal control over financial reporting were effective as of the end of our fiscal year.
Historically, the market price for our common stock has been volatile. The market price of our common stock is subject to rapid and large price fluctuations attributable to various factors, many of which are beyond our control.
The market price of our common stock is subject to rapid and large price fluctuations attributable to various factors, many of which are beyond our control.
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 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.
We believe a key to our success has been the culture we have created that emphasizes a shared vision and core values of Agility, Customer and Accountability. We have experienced and may continue to experience difficulties attracting and retaining personnel that meet the qualifications, experience, compliance mindset and values we expect.
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.
Failure to satisfactorily correct an adverse inspection finding or comply with applicable regulations can result in enforcement actions, or require us 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, financial condition and results of operations.
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.
It is critical that the facilities, infrastructure and IT systems on which we depend and the products and services we develop remain secure and be perceived as secure.
Increases in the cost of fuel and energy, food and other essential items as well as higher interest rates have and may continue to reduce consumers' disposable income, which could cause a decrease in discretionary spending for products like ours.
Increases in the cost of fuel and energy, food and other essential items as well as higher interest 20 rates have and could in the future reduce consumers’ disposable income, which could cause a decrease in discretionary spending for our products.
Additionally, our success depends on our healthcare providers, many of whom are individual or small operations with limited IT experience and inadequate or untested security protocols, to successfully manage data privacy and security requirements.
Additionally, our cybersecurity controls depend on our customers, many of whom are individual or small healthcare providers with limited IT experience and inadequate or untested security protocols, to successfully manage data privacy and security requirements.
Resolving these matters may require us to change our business practices in materially adverse ways. Governments and regulators are actively developing new competition laws and regulations aimed at the technology sector, AI and digital platforms and coordinating activities globally, including in large markets such as the EU, U.S., and China.
Resolving these matters may require us to change our business practices in materially adverse ways. Governments and regulators are actively developing new competition laws and regulations aimed at the technology sector, AI and digital platforms, and global activities and expansion, including in large markets such as the United States, the European Union, and China.
Even if we successfully innovate and develop new products and product improvements, we may incur substantial costs doing so and our profitability may suffer.
Even if we successfully innovate and develop new or improved products and services, we may incur substantial costs doing so and our profitability may suffer.
Increased focus on current and anticipated environmental, social and governance (“ESG”) laws and scrutiny of our ESG policies and practices may materially increase our costs, expose us to liability, adversely impact our reputation, employee retention, willingness of customers and suppliers to do business with us and willingness of investors to invest in us.
Current and anticipated sustainability and social (“Sustainability”) laws and scrutiny of our Sustainability policies and practices may materially increase our costs, expose us to liability, and adversely impact our reputation, employee retention, willingness of customers and suppliers to do business with us and willingness of investors to invest in us.
If a natural disaster occurs in a region where one of these facilities or those of our customers or suppliers are located, our employees could be impacted, research lost, and ability to create treatment plans, respond to customer inquiries or manufacture and ship our aligners or intraoral scanners could be compromised, causing significant product and services delays.
If a natural disaster occurs in a region where one of our facilities or those of our customers or suppliers are located, our or their employees or facilities could be impacted, valuable research could be lost, and our ability to create treatment plans, respond to customer inquiries or manufacture and ship our products could be compromised, causing significant delays and reputational harm.
The extent and rate at which new products or services achieve market acceptance and penetration is a function of many variables, including our ability to: • successfully predict, timely innovate and develop new technologies, applications and products preferred by customers and consumers that have features and functionality to meet the needs of patients; • successfully, and in a timely fashion, 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 ; • cost-effectively and efficiently develop, manufacture, quality test, market, dispose of, and sell new or improved products and services 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 and services offerings and technologies; • differentiate our products and services from our competitors as well as other products and services 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; • qualify for third-party reimbursement for procedures involving our products or services; • offer attractive and competitive service and subscription plans; • encourage customers to adopt new technologies and provide the needed technical, sales and marketing support to make new product and services launches successful; and • source and receive quality raw materials or parts from our suppliers.
The extent and rate at which our new, improved or refurbished products or services achieve market acceptance and penetration depends on many factors, including our ability to: • successfully predict, timely innovate, develop, and launch new or improved technologies, applications, features, products and services to meet market demand and keep pace with changes in technology, customers ’ demands and industry standards; • successfully and timely obtain regulatory approval or clearance of new or improved products or services from government agencies such as the FDA and analogous agencies in other countries ; • cost-effectively and efficiently develop, manufacture, quality test, market, dispose of and sell new or improved products and services, 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 offerings and technologies; • differentiate our products and services from those of our competitors as well as other products and services in our own portfolio and successfully articulate the benefits to potential customers; • design and manufacture products that achieve the clinical and practice outcomes we believe necessary for market acceptance; • manage the impact of nationalism or initiatives encouraging consumer purchases from domestic vendors; • qualify for third-party reimbursement for procedures involving our products or services; • offer attractive and competitive products, services and subscription plans; • encourage customers to adopt new or improved technologies and provide the needed technical, sales and marketing support to make new or improved product and services launches successful; • manage government procurement program restrictions; and • source and receive quality raw materials or parts from our suppliers.
Additionally, effective January 1, 2023, the Inflation Reduction Act imposes a 1% excise tax on our stock 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. Future sales of significant amounts of our common stock may depress our stock price.
Additionally, effective January 1, 2023, the Inflation Reduction Act imposes a 1% excise tax on our stock repurchases, net of certain stock issuances, which will increase our tax liabilities and the cost to repurchase stock and may impact if and how much stock we choose to repurchase in the future.
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 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 HIPPA, the HITECH Act, and the Privacy Standards and Security Standards, as well as those relating to privacy, data security, content regulation and consumer protection, such as the California Consumer Protection Act, as amended by the California Privacy Rights Act (as amended, the “CCPA”).
Our net revenues depend primarily on our Invisalign system and iTero scanners and declines in sales or average selling price of these products 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 an d iTero intraoral scanners.
Our net revenues depend primarily on sales of the Invisalign System and iTero intraoral scanners and declines in sales or the average selling price (“ASP”) of these products may adversely affect net revenues, gross profit, and net income. Our net revenues are primarily dependent on sales of the Invisalign System an d iTero intraoral scanners.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo more effectively address cybersecurity threats, we have a dedicated Chief Information Security Officer (“CISO”) who is responsible for leading enterprise-wide information security strategy, policy, process, and technology. Our current CISO has 20+ years of information security and risk management experience and holds a Certified Information Systems Security Professional (CISSP) certification.
Biggest changeFor a discussion of our cybersecurity-related risks, see Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.” Governance Role of Management To more effectively assess and manage cybersecurity threats, we have a dedicated Chief Information Security Officer (“CISO”) who is responsible for leading enterprise-wide information security strategy, policy, process, and technology.
The information security program’s ultimate goal is preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience to minimize the business impact should an incident occur.
Our information security program’s ultimate goal is preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience to minimize the business impact should an incident occur.
Our information security program includes, among other things, cybersecurity incident response, vulnerability management, antivirus and malware protection, technology compliance and risk management, encryption, identity and access management, application security, and security monitoring.
Our information security program includes, among other things: • cybersecurity incident response; • vulnerability management; 35 • antivirus and malware protection; • technology compliance and risk management; • encryption; • identity and access management; • application security; and • security monitoring.
The program also has an information security awareness program, which includes annual training regarding our acceptable use and information classification and handling policies, regular phishing campaigns complemented by additional employee training as appropriate, and communications and companion trainings to keep our users informed on current events.
Our information security program also includes an information security awareness program, which includes annual training regarding our acceptable use and information classification and handling policies, regular phishing campaigns complemented by additional employee training as appropriate, and communications and companion trainings to keep users informed on current events.
The Audit Committee periodically reports on its review of cybersecurity risks and our cybersecurity program to our Board of Directors. In 2023, our CISO or his team met with the Audit Committee four times to discuss cybersecurity risks and threats.
The Audit Committee periodically reports on its review of cybersecurity risks and our cybersecurity program to our Board of Directors. In 2024, our CISO or his team met with the Audit Committee four times to discuss cybersecurity risks and threats. 36
We devote significant resources to cybersecurity and risk management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and effective manner. We regularly assess the threat landscape and take a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and response.
Risk Management and Strategy Our information security program devotes significant resources to cybersecurity and risk management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and effective manner. We regularly assess the threat landscape and take a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and response.
Notwithstanding the approach we take to cybersecurity, we may not successfully prevent or mitigate cybersecurity incidents that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be covered or, if covered, fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks. 35
Notwithstanding the approach we take to cybersecurity, we may not successfully prevent or mitigate cybersecurity incidents that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be covered or, if covered, fully insured.
We have not identified any risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
As of the date of this Annual Report on Form 10-K, we have not identified any risks from known cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Item 1C. Cybersecurity. We have implemented a cross-departmental approach to managing cybersecurity risk, which includes seeking input from our employees, management, third-party vendors, the Audit Committee of the Board of Directors (the “Audit Committee”), and the Board of Directors.
Item 1C. Cybersecurity. Overview We have implemented a cross-functional information security program to assess, identify and manage material risks from cybersecurity risk, which includes seeking input from our employees, management, third-party vendors, the Audit Committee of the Board of Directors (“Audit Committee”) and the Board of Directors.
Our information security team, comprised of employees with an expertise in cybersecurity and information technology, regularly assess the threat landscape and take a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection, and response.
Our information security team, comprised of employees with an expertise in cybersecurity and information technology, regularly assesses the threat landscape and takes a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and response. Our information security team annually performs a cybersecurity enterprise risk assessment and presents the results to management and the Audit Committee.
If a third-party vendor is unable to provide a SOC 1 or SOC 2 report, our information security team takes additional steps to assess their cybersecurity preparedness and our initiation or continued engagement with them.
Our assessment of risks associated with the use of third-party vendors is part of our overall cybersecurity risk management framework. If a third-party vendor is unable to provide a SOC 1 or SOC 2 report, our information security team takes additional steps to assess its cybersecurity preparedness and our initiation or continued engagement with it.
Additionally, third-party vendors are required to include security and privacy addendums to our contracts where applicable and are reassessed periodically as necessary depending on the risk level that has been assigned to the third-party vendor. Our legal team also requires that our third-party vendors report cybersecurity incidents to us so the impact of the incident on us can be assessed.
Additionally, third-party vendors are required to include security and privacy addenda to our contracts where determined applicable and are reassessed periodically as necessary depending on the risk level that has been assigned to the third-party vendor.
Annually, an external auditor conducts a System and Organization Controls (“SOC”) type 2 audit covering the security principle for systems supporting our products. Our assessment of risks associated with the use of third-party vendors is part of our overall cybersecurity risk management framework.
Our information security team engages third-party services to conduct evaluations of our security controls, including penetration testing and independent audits. Annually, an external auditor conducts a System and Organization Controls (“SOC”) type 2 audit covering the security principle for systems supporting our products.
Our CISO regularly briefs our Audit Committee on our cybersecurity and information security program and cybersecurity incidents deemed to pose a risk of a critical business impact or reputational harm. Our cybersecurity risk management program leverages the National Institute of Standards and Technology (NIST) framework, which organizes cybersecurity risks into five categories: identify, protect, detect, respond and recover.
Our current CISO has 20+ years of information security and risk management experience and holds a Certified Information Systems Security Professional (CISSP) certification. Our CISO regularly briefs our Audit Committee on our cybersecurity and information security program and cybersecurity incidents deemed to pose a risk of a critical business impact or reputational harm.
Removed
For critical cybersecurity incidents, processes have been established for our legal team to determine the materiality of each incident. Our information security team engages third-party services to conduct evaluations of our security controls, including penetration testing and independent audits.
Added
In certain instances, incidents are escalated to certain members of our legal team who are responsible for, among other things, the accurate and timely disclosure of material cybersecurity incidents required under federal securities laws, including making the materiality determination and approving related securities disclosures.
Removed
Our Audit Committee is responsible for reviewing cybersecurity risks and our cybersecurity program. It oversees and reviews our cybersecurity and other information technology risks, controls, policies, and procedures. Our information security team annually performs a cybersecurity enterprise risk assessment and presents the results to management and the Audit Committee.
Added
Our information security program leverages the National Institute of Standards and Technology (NIST) and International Organization for Standardization (ISO) 27001 frameworks choosing to organize our cybersecurity risks into five categories: identify, protect, detect, respond and recover.
Added
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST and ISO frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. Our information security program is integrated into our overall enterprise risk management program.
Added
Our legal team also requires that our third-party vendors report cybersecurity incidents to us so the impact of the incident on us can be assessed.
Added
In addition, our internal audit team conducts periodic audits of the Company’s systems and cybersecurity processes, with findings reported to the Audit Committee and senior management.
Added
Role of the Board of Directors and the Audit Committee Our Audit Committee has responsibility for overseeing and reviewing our cybersecurity, data privacy, and other information technology risks, controls and procedures, including our plans to mitigate cybersecurity risks and to respond to data breaches.
Added
Our Audit Committee also reviews with management any specific cybersecurity issues that could affect the adequacy of our internal controls and disclosure procedures and any public disclosures about our cybersecurity controls and procedures, the Board of Directors’ cybersecurity expertise, and its oversight of cybersecurity risk.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We occupy several leased and owned facilities. As of December 31, 2023, the significant facilities occupied were as follows: Location Lease/Own Primary Use Tempe, Arizona, U.S.A. Lease Office for corporate headquarters San Jose, California, U.S.A. Own Office for research & development and administrative personnel Raleigh, North Carolina, U.S.A.
Biggest changeItem 2. Properties. We occupy several leased and owned facilities. As of December 31, 2024, the significant facilities occupied were as follows: Location Lease/Own Primary Use Tempe, Arizona, U.S.A. Lease Office for corporate headquarters San Jose, California, U.S.A. Own Office for research & development and administrative personnel Raleigh, North Carolina, U.S.A.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. For a discussion of legal proceedings, refer to Note 7 "Legal Proceedings" of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 36 PART II
Biggest changeItem 3. Legal Proceedings. For a discussion of legal proceedings, refer to Note 8 "Legal Proceedings" of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 37 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes the stock repurchase activity for the three months ended December 31, 2023: 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 Purchased Under the Programs (1) October 1, 2023 through October 31, 2023 1,049,538 $ 190.56 1,049,538 $ 750,000,000 November 1, 2023 through November 30, 2023 283,335 $ 206.89 283,335 $ 691,380,496 December 1, 2023 through December 31, 2023 182,183 $ 227.14 182,183 $ 650,000,000 Total 1,515,056 1,515,056 1 January 2023 Repurchase Program.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes the stock repurchase activity for the three months ended December 31, 2024: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2024 through October 31, 2024 83,029 $ 217.18 83,029 $ 482,000,000 November 1, 2024 through November 30, 2024 407,090 $ 221.48 407,090 $ 392,000,000 December 1, 2024 through December 31, 2024 419,848 $ 225.49 419,848 $ 297,100,000 Total 909,967 909,967 1 January 2023 Repurchase Program.
Performance Graph Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “Soliciting Material” under the Securities Exchange Act of 1934, as amended, or subject to Regulation 14A or 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting material or to the extent we specifically incorporate this information by reference.
Performance Graph Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “soliciting material” under the Exchange Act or subject to Regulation 14A or 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting material or to the extent we specifically incorporate this information by reference.
In January 2023, we announced that our Board of Directors had authorized a plan to repurchase up to $1,000,000,000 of our common stock. See Note 10 “ Common Stock Repurchase Programs” of the Notes to Consolidated Financial Statements for details on the January 2023 Repurchase Program. Item 6. [Reserved]
In January 2023, we announced that our Board of Directors had authorized a plan to repurchase up to $1,000,000,000 of our common stock (“January 2023 Repurchase Program”). See Note 11 “ Common Stock Repurchase Programs” of the Notes to Consolidated Financial Statements for details on the January 2023 Repurchase Program. 39 Item 6. [Reserved]
The graph below matches our cumulative 5-year total stockholder return on common stock with the cumulative total returns of the NASDAQ Composite index, the S&P 500 index and the S&P 1500 Composite Health Care Equipment & Supplies index.
The graph below compares the 5-year cumulative total stockholder return on Align common stock with the cumulative total returns of the NASDAQ Composite Index, the S&P 500 Index and the S&P 1500 Composite Health Care Equipment & Supplies Industry Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the NASDAQ Global Market under the symbol ALGN. As of February 22, 2024, there were approximately 52 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “ALGN.” As of February 20, 2025, there were approximately 52 holders of record of our common stock.
The graph tracks the performance of a $100 investment in our common stock and each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023. 37 Unregistered Sales of Equity Securities None.
The graph tracks the performance of a $100 investment in Align common stock and each index (assuming reinvestment of all dividends) from December 31, 2019 to December 31, 2024. Past stock price performance is not necessarily indicative of future stock price performance. 38 Recent Sales of Unregistered Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the year ended December 31, 2022, cash flows from operations of $568.7 million resulted primarily from our net income of approximately $361.6 million as well as the following: Significant adjustments to net income • Stock-based compensation of $133.4 million related to equity awards granted to employees and directors; • Depreciation and amortization of $125.8 million related to our investments in property, plant and equipment and intangible assets; and Significant changes in working capital • Inflow of $241.9 million, net from deferred revenues due to the deferral of revenue on shipments over the period as well as timing of revenue recognition; • Outflow of $130.1 million, net from inventories primarily due to lower shipment volumes over the period in addition to our efforts to manage stock at appropriate levels as required; and • Outflow of $121.9 million, net from accrued and other long-term liabilities primarily due to the payment of our 2021 corporate bonus as well as timing payment of other activities.
Biggest changeRefer to Note 8 “Legal Proceeding s ” of the Notes to Consolidated Financial Statements . • Net outflow of $80 million from deferred revenues; and • Net outflow of $153 million from accounts receivable due to timing of collections and increased revenues. 49 For the year ended December 31, 2023, cash flows from operations of $786 million resulted primarily from our net income of approximately $445 million as well as the following: Significant adjustments to net income • Stock-based compensation of $154 million related to equity awards granted to employees and directors; and • Depreciation and amortization of $142 million related to our investments in property, plant and equipment and intangible assets.
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.
Certain tables may not sum or recalculate due to rounding. Cost of net revenues includes personnel-related costs including payroll and stock-based compensation for staff involved in the production process, the cost of materials, packaging, freight and shipping, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs.
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 48 evaluate our estimates on an on-going basis and use authoritative pronouncements, historical experience and other assumptions as the basis for making the estimates.
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 and use authoritative pronouncements, historical experience and other assumptions as the basis for making the estimates.
When an impairment indicator is identified, we perform a recoverability test, in which the estimated, undiscounted future cash flows expected to result from the use and eventual disposition of the asset (asset group) are compared to the carrying value of the asset (asset group).
When an impairment indicator is identified, we perform a recoverability test, in 51 which the estimated, undiscounted future cash flows expected to result from the use and eventual disposition of the asset (asset group) are compared to the carrying value of the asset (asset group).
In addition, the teenage and younger market makes up about 70% of the approximately 22 million total annual global orthodontic case starts. We continue to emphasize the benefits of the Invisalign system for teenage and younger patient treatments through education, training and sales and marketing programs. In 2023, we had record shipments to teenage and younger patients.
In addition, the teenage and younger market makes up about 70% of the approximately 22 million total annual global orthodontic case starts. We continue to emphasize the benefits of the Invisalign System for teenage and younger patient treatments through education, training and sales and marketing programs. In 2024, we had record shipments to teenage and younger patients.
A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented under Results of Operations of this Form 10-K. Discussions regarding our financial condition and results of operations for fiscal 2022 compared to 2021 have been omitted from this Annual Report on Form 10-K, but can be found in "Item 7.
A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 is presented under Results of Operations of this Form 10-K. Discussions regarding our financial condition and results of operations for fiscal 2023 compared to 2022 have been omitted from this Annual Report on Form 10-K, but can be found in "Item 7.
We strive to deliver on each of our strategic growth drivers through a variety of interrelated enterprise-wide efforts including: • Continuing penetration and adoption of Invisalign products, intraoral scanners and CAD/CAM solutions in international markets by investing in manufacturing operations, research and development, clinical treatment planning, sales and marketing and building our quality and regulatory capabilities in existing and emerging markets globally.
We strive to deliver on each of our strategic growth drivers through a variety of interrelated enterprise-wide efforts including: • Continuing penetration and adoption of Invisalign clear aligners, intraoral scanners and CAD/CAM solutions in international markets by investing in manufacturing operations, research and development, clinical treatment planning, sales and marketing and building our quality and regulatory capabilities in existing and emerging markets globally.
Certain tables may not sum or recalculate due to rounding. 1 Refer to Note 15 “Segments and Geographical Information” of the Notes to Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to Consolidated Income from Operations.
Certain tables may not sum or recalculate due to rounding. 1 Refer to Note 16 “Segments and Geographical Information” of the Notes to Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to consolidated Income from operations.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023, which is available without charge on the SEC's website at www.sec.gov and on our investor relations website at investor.aligntech.com .
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024, which is available without charge on the SEC’s website at www.sec.gov and on our investor relations website at investor.aligntech.com .
We expect to make further investments to create additional demand for Invisalign system treatment driving more consumers to dental professionals for those treatments. • Pursuing new product lines that complement our doctor-prescribed principal products currently available in certain e-commerce and retail channels in the U.S.
We expect to make further investments to create additional demand for Invisalign System treatment driving more consumers to dental professionals for those treatments. • Pursuing new product lines that complement our doctor-prescribed principal products currently available in certain e-commerce and retail channels in the United States.
In general, we expect utilization rates to rise over time although they are likely to fluctuate from period to period. • North America: The utilization rate among our North American orthodontist customers was 94.5 cases per doctor in 2023 compared to 94.9 * cases per doctor in 2022 and 99.7 * cases per doctor in 2021 and the utilization rate among our North American GP customers was 14.0 cases per doctor in 2023 compared to 13.9 cases per doctor in 2022 and 14.3 cases per doctor in 2021. • International: International doctor utilization rate was 16.3 cases per doctor in 2023 compared to 16.2 cases per doctor in 2022 and 17.5 cases per doctor in 2021 . * Invisalign utilization rates are calculated by the number of cases shipped divided by the number of doctors to whom cases were shipped.
In general, we expect utilization rates to rise over time although they are likely to fluctuate from period to period. • North America: The utilization rate among our North American orthodontist customers was 95.0 cases per doctor in 2024 compared to 94.5 cases per doctor in 2023 and 94.9 cases per doctor in 2022 and the utilization rate among our North American GP customers was 14.3 cases per doctor in 2024 compared to 14.0 cases per doctor in 2023 and 13.9 cases per doctor in 2022. • International: International doctor utilization rate was 16.2 cases per doctor in 2024 compared to 16.3 cases per doctor in 2023 and 16.2 cases per doctor in 2022 . * Invisalign utilization rates are calculated by the number of cases shipped divided by the number of doctors to whom cases were shipped.
Similarly, in 2023, we continued our focus on our doctor subscription plan and grew our underpenetrated share of the retainer business through strategic marketing campaigns focused on driving adoption and increasing market share in the U.S., Canada, Iberia and the Nordics. • Increasing global orthodontic utilization rates as doctors’ clinical confidence in the efficacy and predictability of the Invisalign system increases with advancements in products and technology and as patients and doctors demand treatments that emphasize convenience and safety through fewer visits and less invasive and quicker treatments.
Similarly, in 2024, we continued our focus on our doctor subscription plan and grew our underpenetrated share of the retainer business through strategic marketing campaigns focused on driving adoption and increasing market share. • Increasing global orthodontic utilization rates as doctors’ clinical confidence in the efficacy and predictability of the Invisalign System increases with advancements in products and technology and as patients and doctors demand treatments that emphasize convenience and safety through fewer visits and less invasive and quicker treatments.
To increase awareness and educate young adults, parents and teens about the benefits of the Invisalign brand, in 2023 we continued to invest in and create campaigns across markets in media platforms such as TikTok, Instagram, YouTube, SnapChat, WeChat, and Douyin.
To increase awareness and educate young adults, parents and teens about the benefits of Invisalign treatment, in 2024, we continued to invest in and create campaigns across markets in media platforms such as TikTok, Instagram, YouTube, SnapChat, WeChat, and Douyin.
Realization of our deferred tax assets is dependent on our ability to generate future taxable income which is determined based on assumptions such as estimated growth rates in revenues, gross margins, future cash flows and discount rates.
Realization of our deferred tax assets is dependent on our ability to generate future taxable income which is determined based on assumptions such as estimated growth rates in revenues, gross margins, future cash flows and discount rates in the jurisdictions in which we operate.
Interest income (in millions): 45 Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Interest income $ 17.3 $ 5.4 $ 11.9 $ 5.4 $ 3.1 $ 2.3 % of net revenues 0.4 % 0.1 % 0.1 % 0.1 % Changes and percentages are based on actual values.
Interest income (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Interest income $ 20.2 $ 17.3 $ 3.0 $ 17.3 $ 5.4 $ 11.9 % of net revenues 0.5 % 0.4 % 0.4 % 0.1 % Changes and percentages are based on actual values.
During the years ended 2023 and 2022, we did not have any impairment charges related to our goodwill or finite-lived intangible assets. Accounting for Income Taxes We are subject to income taxes in the U.S. and numerous foreign jurisdictions. The evaluation of our uncertain tax positions involves significant judgment in the interpretation and application of U.S.
During the year ended 2024 and 2023, we did not have any impairment charges related to our goodwill or finite-lived intangible assets. Accounting for Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions. The evaluation of our uncertain tax positions involves significant judgment in the interpretation and application of U.S.
Financing Activities Net cash used in financing activities was $598.3 million for the year ended December 31, 2023 which consisted of payments to repurchase shares of our common stock of $602.4 million and payroll taxes paid for equity awards through share withholdings of $22.6 million, which were partially offset by $26.6 million of proceeds from the issuance of common stock.
Net cash used in financing activities was $598 million for the year ended December 31, 2023 which consisted of payments to repurchase shares of our common stock of $602 million and payroll taxes paid for equity awards through share withholdings of $23 million, which were partially offset by proceeds from the issuance of common stock for $27 million of proceeds from the issuance of common stock.
Significant changes in working capital • Inflow of $46.3 million, net from accrued and other long-term liabilities primarily due to higher incentive accruals for 2023, as well as timing of payments of other activities; • Inflow of $86.7 million, net from deferred revenues due to the deferral of revenue on shipments; • Inflow of $30.2 million, net from inventories primarily due to lower purchases of materials used in manufacturing; and • Outflow of $104.6 million, net from accounts receivable due to timing of collections and increased revenues.
Significant changes in working capital • Net inflow of $46 million from accrued and other long-term liabilities primarily due to higher incentive accruals for 2023, as well as timing of payments of other activities; • Net inflow of $87 million from deferred revenues due to the deferral of revenue on shipments; • Net inflow of $30 million from inventories primarily due to lower purchases of materials used in manufacturing; and • Net outflow of $105 million, net from accounts receivable due to timing of collections and increased revenues.
Results of Operations 41 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. • We also offer in the U.S., Canada, and EMEA, a Doctor Subscription Program which is our monthly subscription-based clear aligner program.
Results of Operations Net Revenues by Reportable Segment We group our operations into two reportable segments: Clear Aligner segment and Systems and Services segment. • Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below: • Comprehensive Products include, but are not limited to, Invisalign Comprehensive, Invisalign First and Invisalign Comprehensive 3in3. • Non-Comprehensive Products include, but are not limited to, Invisalign Moderate, Lite and Express packages, Invisalign Go and Invisalign Go Plus and Invisalign Palatal Expander. 43 • In the United States, Canada, and EMEA, we also offer a Doctor Subscription Program which is our monthly subscription-based clear aligner program.
Unfulfilled Performance Obligations for Clear Aligners and Scanners Our unfulfilled performance obligations, including deferred revenues and backlog, and the estimated revenues expected to be recognized in the future related to these performance obligations are $1,578.3 million and $1,515.4 million as of December 31, 2023 and 2022, respectively.
Unfulfilled Performance Obligations for Clear Aligners and Scanners Our unfulfilled performance obligations, including deferred revenues and backlog, and the estimated revenues expected to be recognized in the future related to these performance obligations are $1,444.9 million and $1,578.3 million as of December 31, 2024 and 2023, respectively.
Refer to Note 4 “ Leases ” of the Notes to Consolidated Financial Statements for details on the lease payments. • We have approximately $650.0 million available for repurchases of our common stock under the stock repurchase program authorized by our Board of Directors in January 2023 (“January 2023 Repurchase Program”).
Refer to Note 4 “ Leases ” of the Notes to Consolidated Financial Statements for details on the lease payments. • We have approximately $297 million, inclusive of approximately $72 million repurchased in January 2025, available for repurchases of our common stock under the stock repurchase program authorized by our Board of Directors in January 2023 (“January 2023 Repurchase Program”).
Our material cash requirements as of December 31, 2023 are as below: • Our purchase commitments consist primarily of open purchase orders for goods and services, including manufacturing inventory, supplies and services, sales and marketing, research and development services and technological services, issued in the normal course of business. Our purchase commitments totaled $1,234.5 million.
Our material cash requirements as of December 31, 2024 are as follows: • Our purchase commitments consist primarily of open purchase orders for goods and services, including manufacturing inventory, supplies and services, sales and marketing, research and development services and technological services, issued in the normal course of business. Our purchase commitments totaled $1,193 million.
Restructuring and other charges (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Restructuring and other charges $ 13.3 $ 11.5 $ 1.9 $ 11.5 $ — $ 11.5 % of net revenues 0.3 % 0.3 % 0.3 % — % Changes and percentages are based on actual values.
Restructuring and other charges (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Restructuring and other charges $ 33.2 $ 13.3 $ 19.9 $ 13.3 $ 11.5 $ 1.9 % of net revenues 0.8 % 0.3 % 0.3 % 0.3 % Changes and percentages are based on actual values.
We strive to manage the challenges from the trends and uncertainties, including the macroeconomic conditions, military conflict and the evolution of our target markets, by focusing on improving our operations, building flexibility and efficiencies in our processes, adjusting our business models to changing circumstances and offering products that meet market demand.
We strive to manage the challenges from the trends and uncertainties, including the macroeconomic conditions, tariffs and retaliatory measures, military conflicts and the evolution of our target markets, by focusing on improving our operations, further increasing flexibility and efficiencies in our processes, adjusting our business models to changing circumstances and offering products that meet market demand.
The low-stage aligners, the Touch up product, are included as a Non-Comprehensive Product. • Non-Case products include, but are not limited to, retention products including retention aligners ordered through the Doctor Subscription Program, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Invisalign Accessory Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain commerce channels in select markets. • Our Systems and Services segment consists of our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options.
The low-stage aligners, the Touch up product, are included as a Non-Comprehensive Product. • Non-Case revenues include, but are not limited to, retention products including retention aligners ordered through the Doctor Subscription Program, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Invisalign Accessory Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain commerce channels in select markets. • Our Systems and Services segment consists of sales related to our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options, upgrades and leases of scanner systems, sales of pre-owned scanner systems, subscription software, disposables, pay per scan services, as well as exocad’s CAD/CAM software solutions that integrate workflows to dental labs and dental practices.
Selling, general and administrative (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Selling, general and administrative $ 1,703.4 $ 1,674.5 $ 28.9 $ 1,674.5 $ 1,708.6 $ (34.2) % of net revenues 44.1 % 44.8 % 44.8 % 43.2 % Changes and percentages are based on actual values.
Selling, general and administrative (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Selling, general and administrative $ 1,763.2 $ 1,703.4 $ 59.8 $ 1,703.4 $ 1,674.5 $ 28.9 % of net revenues 44.1 % 44.1 % 44.1 % 44.8 % Changes and percentages are based on actual values.
Executive Overview of Results Trends and Uncertainties Our business strategic priorities focus on four principal pillars for growth: (i) international expansion; (ii) GP dentist treatment; (iii) patient demand; and (iv) orthodontic utilization.
Executive Overview of Results Trends and Uncertainties Our strategic priorities focus on four principal pillars for growth: (i) international expansion; (ii) general dental practitioners (“GP”) treatment; (iii) patient demand; and (iv) orthodontic utilization.
When our recoverability test results in undiscounted cash flows more than carrying value, no impairment is recorded.
When our recoverability test results in undiscounted cash flows that are greater than carrying value, no impairment is recorded.
Provision for (benefit from) income taxes (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Provision for (benefit from) income taxes $ 196.2 $ 237.5 $ (41.3) $ 237.5 $ 240.4 $ (2.9) Effective tax rates 30.6 % 39.6 % 39.6 % 23.7 % Changes and percentages are based on actual values.
Provision for income taxes (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Provision for (benefit from) income taxes $ 187.6 $ 196.2 $ (8.6) $ 196.2 $ 237.5 $ (41.3) Effective tax rates 30.8 % 30.6 % 30.6 % 39.6 % Changes and percentages are based on actual values.
The 3in3 product allows us to recognize more revenue up front but is offered at a lower price as compared to our traditional Invisalign comprehensive product that has a five-year treatment expiration date with unlimited additional clear aligner prior to the treatment end date.
The 3in3 product also allows us to recognize more revenue up front while doing so at a lower price as compared to our traditional Invisalign comprehensive product that has a five-year treatment expiration date with unlimited additional clear aligners prior to the treatment end date.
Income from operations (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Clear Aligner Income from operations $ 1,182.3 $ 1,134.4 $ 47.8 $ 1,134.4 $ 1,325.9 $ (191.4) Operating margin % 37.0 % 36.9 % 36.9 % 40.8 % Systems and Services Income from operations $ 191.4 $ 179.8 $ 11.6 $ 179.8 $ 259.1 $ (79.4) Operating margin % 28.9 % 27.2 % 27.2 % 36.7 % Total income from operations 1 $ 643.3 $ 642.6 $ 0.7 $ 642.6 $ 976.4 $ (333.8) Operating margin % 16.7 % 17.2 % 17.2 % 24.7 % Changes and percentages are based on actual values.
Income from operations (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Clear Aligner Income from operations $ 1,142.2 $ 1,182.3 $ (40.1) $ 1,182.3 $ 1,134.4 $ 47.8 Operating margin % 35.4 % 37.0 % 37.0 % 36.9 % Systems and Services Income from operations $ 269.2 $ 191.4 $ 77.9 $ 191.4 $ 179.8 $ 11.6 Operating margin % 35.0 % 28.9 % 28.9 % 27.2 % Total Income from operations 1 $ 607.6 $ 643.3 $ (35.7) $ 643.3 $ 642.6 $ 0.7 Operating margin % 15.2 % 16.7 % 16.7 % 17.2 % Changes and percentages are based on actual values.
We anticipate a majority, an estimated $861.5 million, will be payable within the next 12 months. These purchase commitments exclude capital expenditures. • We expect our investments in capital expenditures to be approximately $100.0 million for the next 12 months. Capital expenditures primarily relate to building construction and improvements as well as additional manufacturing capacity due to international expansion.
We anticipate a majority, an estimated $1,003 million, will be payable within the next 12 months. These purchase commitments exclude capital expenditures. • We expect our investments in capital expenditures to be between $100 million and $150 million for the next 12 months. Capital expenditures primarily relate to building construction and improvements as well as additional manufacturing capacity.
For instance, in 2022, we opened a new aligner fabrication facility in Wroclaw, Poland as a part of our strategy to bring operational facilities closer to customers to serve them more quickly and respond to their needs more effectively as well as new treatment planning operations in targeted regional geographies.
For instance, we have fabrication facilities in three key regions as a part of our strategy to bring operational facilities closer to customers to serve them more quickly and respond to their needs more effectively as well as new treatment planning operations in targeted regional geographies.
Investing Activities Net cash used in investing activities was $195.9 million for the year ended December 31, 2023 which primarily consisted of purchases of property, plant and equipment of $177.7 million which included a building acquisition for $24.5 million, an investment in the equity of a privately held company of $77.0 million and purchases of marketable securities of $2.9 million, partially offset by sales and maturities of marketable securities of $61.4 million.
Net cash used in investing activities was $196 million for the year ended December 31, 2023 which primarily consisted of purchases of property, plant and equipment of $178 million which included a building acquisition for $25 million, an investment in equity of a privately held company of $77 million and purchases of marketable securities of $3 million, partially offset by sales and maturities of marketable securities of $61 million.
Other Statistical Data and Trends 40 • As of December 31, 2023, 17 million people worldwide have been treated with our Invisalign system.
Other Statistical Data and Trends • As of December 31, 2024, over 19 million people worldwide have been treated with our Invisalign System.
Despite the challenging market conditions, 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. • We have future operating lease payments of $153.5 million, which includes $13.3 million for leases that have not yet commenced as of December 31, 2023.
Despite the challenging market conditions, we intend to expand our investments in research 48 and development, manufacturing, treatment planning, sales and marketing operations to meet actual and anticipated demand. • We have future operating lease payments of $133 million, which includes $2.6 million for leases that have not yet commenced as of December 31, 2024.
Many of these same factors also impact our costs and those of our suppliers through higher raw material prices, transportation costs, labor costs, supply and distribution operations. In 2023, we believe that sales of our products were primarily harmed by macroeconomic conditions that ultimately adversely impacted disposable income and consumer demand.
Many of these same factors also impact our costs and those of our suppliers through higher raw material prices, transportation costs, labor costs, supply and distribution operations. During 2024, we believe sales of our products were adversely impacted by macroeconomic conditions that negatively affected disposable income and consumer demand. We believe this trend will continue in 2025.
Net cash used in financing activities was $501.7 million for the year ended December 31, 2022 which consisted of payments to repurchase shares of our common stock of $475.0 million and payroll taxes paid for equity awards through share withholdings of $52.8 million, which were partially offset by $26.1 million of proceeds from the issuance of common stock.
Financing Activities Net cash used in financing activities was $356 million for the year ended December 31, 2024 which consisted of payments to repurchase shares of our common stock of $353 million and payroll taxes paid for equity awards through share withholdings of $28 million, which were partially offset by proceeds from the issuance of common stock for $25 million.
GAAP and complex domestic and international tax laws related to the allocation of international taxation rights between countries. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of both of our historical and future performance as well as other relevant factors.
GAAP and complex domestic and international tax laws related to the allocation of international taxation rights between countries. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP.
We measure and allocate revenues according to ASC 606-10, “Revenues from Contracts with Customers.” Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract to the individual performance obligations is the result of various factors, such as historical prices, changing trends and market conditions, costs, and gross margins.
Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract to the individual performance obligations is the result of various factors, such as historical prices, changing trends and market conditions, costs, and gross margins.
Sources and Use of Cash The following table summarizes our Consolidated Statements of Cash Flows for the year ended December 31, 2023, 2022 and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in): Operating activities $ 785,776 $ 568,732 $ 1,172,544 Investing activities (195,943) (213,316) (563,430) Financing activities (598,340) (501,686) (458,332) Effects of foreign exchange rate changes on cash, cash equivalents, and restricted cash 4,671 (11,514) (12,117) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (3,836) $ (157,784) $ 138,665 Operating Activities For the year ended December 31, 2023, cash flows from operations of $785.8 million resulted primarily from our net income of approximately $445.1 million as well as the following: Significant adjustments to net income • Stock-based compensation of $154.0 million related to equity awards granted to employees and directors; and 47 • Depreciation and amortization of $142.4 million related to our investments in property, plant and equipment and intangible assets.
Sources and Uses of Cash The following table summarizes our Consolidated Statements of Cash Flows for the year ended December 31, 2024, 2023 and 2022 (in thousands): Year Ended December 31, 2024 2023 2022 Net cash provided by (used in): Operating activities $ 738,231 $ 785,776 $ 568,732 Investing activities (254,912) (195,943) (213,316) Financing activities (355,722) (598,340) (501,686) Effects of foreign exchange rate changes on cash, cash equivalents, and restricted cash (21,153) 4,671 (11,514) Net (decrease) increase in cash, cash equivalents, and restricted cash $ 106,444 $ (3,836) $ (157,784) Operating Activities For the year ended December 31, 2024, cash flows from operations of $738 million resulted primarily from our net income of approximately $421 million as well as the following: Significant adjustments to net income • Stock-based compensation of $174 million related to equity awards granted to employees and directors; and • Depreciation and amortization of $145 million related to our investments in property, plant and equipment and intangible assets.
Liquidity and Capital Resources Liquidity and Trends As of December 31, 2023 and 2022, we had the following cash and cash equivalents and short-term and long-term marketable securities (in thousands): December 31, 2023 2022 Cash and cash equivalents $ 937,438 $ 942,050 Marketable securities, short-term 35,304 57,534 Marketable securities, long-term 8,022 41,978 Total $ 980,764 $ 1,041,562 As of December 31, 2023 and 2022, approximately $784.7 million and $653.7 million, respectively, of cash, cash equivalents and marketable securities were held by our foreign subsidiaries.
Liquidity and Capital Resources Liquidity and Trends As of December 31, 2024 and 2023, we had the following cash and cash equivalents and short-term and long-term marketable securities (in thousands): December 31, 2024 2023 Cash and cash equivalents $ 1,043,887 $ 937,438 Marketable securities, short-term — 35,304 Marketable securities, long-term — 8,022 Total $ 1,043,887 $ 980,764 As of December 31, 2024 and 2023, approximately $855 million and $785 million, respectively, of cash, cash equivalents and marketable securities were held by our foreign subsidiaries.
Certain tables may not sum or recalculate due to rounding. Interest income generally includes interest earned on cash, cash equivalents and investment balances. Interest income increased in 2023 compared to 2022 primarily due to higher interest rates during 2023.
Certain tables may not sum or recalculate due to rounding. Interest income generally includes interest earned on cash, cash equivalents and investment balances.
The 3in3 configuration offers doctors Invisalign Comprehensive treatment with a three-year treatment expiration date and three additional clear aligners included prior to the treatment expiration date. We anticipate adoption of the Invisalign Comprehensive 3in3 product will continue to increase in 2024.
The 3in3 configuration offers doctors Invisalign Comprehensive treatment with a three-year treatment expiration date and three additional clear aligners included prior to the treatment expiration date.
Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, taking into account prevailing market conditions. Refer to Note 10 “ Common Stock Repurchase Programs ” of the Notes to Consolidated Financial Statements for details on our stock repurchase programs.
Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, taking into account prevailing market conditions.
Other income (expense), net (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Other income (expense), net $ (19.4) $ (48.9) $ 29.5 $ (48.9) $ 32.9 $ (81.8) % of net revenues (0.5) % (1.3) % (1.3) % 0.8 % Changes and percentages are based on actual values.
Interest income increased in 2024 compared to 2023 primarily due to primarily due to higher cash and cash equivalents. 47 Other income (expense), net (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Other income (expense), net $ (18.9) $ (19.4) $ 0.5 $ (19.4) $ (48.9) $ 29.5 % of net revenues (0.5) % (0.5) % (0.5) % (1.3) % Changes and percentages are based on actual values.
Actual results could differ from those estimates. We believe the following critical accounting estimates affect our more significant judgments used in the preparation of our consolidated financial statements. For further information on all of our significant accounting policies, see Note 1 “ Summary of Significant Accounting Policies ” of the Notes to Consolidated Financial Statements .
Actual results could differ from those estimates. We believe the following critical accounting estimates affect our more significant judgments used in the preparation of our consolidated financial statements.
We generally determine the fair value of a reporting unit via a discounted cash flow analysis and allocate the net assets of the Company to each reporting unit to determine carrying value. We will record an impairment charge when our quantitative impairment analysis indicates that the carrying value of a reporting unit exceeds its fair value.
We generally determine the fair value of a reporting unit via a discounted cash flow (“DCF”) analysis and allocate our net assets to each reporting unit to determine carrying value.
We intend to reinvest our foreign subsidiary earnings indefinitely outside of the U.S. and do not expect to incur significant additional costs upon repatriation of these foreign earnings. We generate sufficient domestic operating cash flow and have access to $300.0 million under our revolving line of 46 credit.
We continue to evaluate opportunities to repatriate our foreign earnings if or when needed. We do not expect to incur significant additional costs upon repatriation of these foreign earnings. We generate sufficient domestic operating cash flow and have access to $300 million under our revolving line of credit.
We continue to monitor the potential for violence and military actions that may directly or indirectly impact our personnel, manufacturing, supply chain, and sales. Changing Product Preferences As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we anticipate customer and patient expectations and demands will evolve.
Changing Product Preferences As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we continue to anticipate customer and patient expectations and demands will continue to evolve.
Accounting for Legal Proceedings and Litigation Estimates of probable losses resulting from litigation are inherently difficult to make, particularly when the matters are in early procedural stages with incomplete facts and information.
We may, in the future, be required to increase the valuation allowance to take into account additional deferred tax assets that we may be unable to realize. Accounting for Legal Proceedings Estimates of probable losses resulting from litigation are inherently difficult to make, particularly when the matters are in early procedural stages with incomplete facts and information.
Clear Aligner Operating margin percentage remained relatively flat in 2023 compared to 2022 primarily due to a decrease in gross margin which was offset by operating leverage. Systems and Services Operating margin percentage increased in 2023 compared to 2022 primarily due to higher gross margin.
Clear Aligner Operating margin percentage decreased in 2024 compared to 2023 primarily due to a decrease in gross margin and an increase in employee costs. Systems and Services Operating margin percentage increased in 2024 compared to 2023 primarily due to higher gross margin, partially offset by an increase in employee costs .
Clear Aligner The gross margin percentage decreased in 2023 as compared to 2022 primarily due to a increased manufacturing spend offset by higher ASP. Systems and Services The gross margin percentage increased in 2023 as compared to 2022 primarily due to lower purchase price variance and higher service revenue mix, partially offset by lower ASP.
Clear Aligner The gross margin percentage decreased in 2024 as compared to 2023 primarily due to lower ASPs and higher restructuring expense. 45 Systems and Services The gross margin percentage increased in 2024 as compared to 2023 primarily due to higher ASPs and lower cost of net revenues leverage, partially offset by lower service revenue mix.
Net revenues for our Clear Aligner and Systems and Services segments by region for the year ended December 31, 2023, 2022 and 2021 are as follows (in millions): Year Ended December 31, Year Ended December 31, Net Revenues 2023 2022 Change 2022 2021 Change Clear Aligner revenues: Americas $ 1,463.0 $ 1,471.9 $ (9.0) (0.6) % $ 1,471.9 $ 1,548.8 $ (76.9) (5.0) % International 1,449.5 1,349.0 100.5 7.4 % 1,349.0 1,498.7 (149.7) (10.0) % Non-case 286.9 251.7 35.2 14.0 % 251.7 199.6 52.1 26.1 % Total Clear Aligner net revenues $ 3,199.3 $ 3,072.6 $ 126.7 4.1 % $ 3,072.6 $ 3,247.1 $ (174.5) (5.4) % Systems and Services net revenues 662.9 662.1 0.9 0.1 % 662.1 705.5 (43.5) (6.2) % Total net revenues $ 3,862.3 $ 3,734.6 $ 127.6 3.4 % $ 3,734.6 $ 3,952.6 $ (217.9) (5.5) % During 2023, we began including Touch Up case revenues in Americas and/or International net revenues.
Net revenues for our Clear Aligner and Systems and Services segments by region for the year ended December 31, 2024, 2023 and 2022 are as follows (in millions): Year Ended December 31, Year Ended December 31, Net Revenues 2024 2023 Change 2023 2022 Change Clear Aligner revenues: Americas $ 1,426.3 $ 1,463.0 $ (36.6) (2.5) % $ 1,463.0 $ 1,471.9 $ (9.0) (0.6) % International 1,500.5 1,449.5 51.1 3.5 % 1,449.5 1,349.0 100.5 7.4 % Non-case 303.3 286.9 16.4 5.7 % 286.9 251.7 35.2 14.0 % Total Clear Aligner net revenues $ 3,230.1 $ 3,199.3 $ 30.8 1.0 % $ 3,199.3 $ 3,072.6 $ 126.7 4.1 % Systems and Services net revenues 768.9 662.9 106.0 16.0 % 662.9 662.1 0.9 0.1 % Total net revenues $ 3,999.0 $ 3,862.3 $ 136.8 3.5 % $ 3,862.3 $ 3,734.6 $ 127.6 3.4 % Changes and percentages are based on actual values.
Our utilization rates have declined in 2023 due to the macroeconomic conditions and other factors as described in the Trends and Uncertainties section above.
Our utilization rates have been impacted by the macroeconomic conditions and other factors as described in the “Trends and Uncertainties” section above.
Clear Aligner - Non-Case Non-case net revenues increased by $35.2 million in 2023 compared to 2022 mainly due to increased volume of Vivera retainers across all regions which includes retention aligners ordered through our Doctor Subscription Program.
The decreases in ASP were partially offset by lower net deferrals and price changes which increased net revenues by $99 million and $72 million, respectively. Clear Aligner - Non-Case Non-case net revenues increased by $16 million in 2024 compared to 2023 mainly due to increased volume of Vivera retainers which includes retention aligners ordered through our Doctor Subscription Program.
Other income (expense), net decreased in 2023 compared to 2022 primarily due to the favorable impact of foreign exchange rates offset slightly by losses in investments in private companies.
Other income (expense), net increased in 2024 compared to 2023 primarily due to gains recorded on our equity investments, offset by the unfavorable impact of foreign exchange rates.
Similarly, the recent conflict in the Middle East may further exacerbate general and regional macroeconomic instability, particularly if fighting is prolonged, it spreads to other locations, creates shipping and logistical challenges or cost increases, or leads to sanctions or boycotts. Our iTero business is headquartered in Israel and the timing and cost of shipping our products has been impacted.
For instance, ongoing conflicts in the Middle East may further exacerbate general and regional macroeconomic instability, particularly if fighting intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise may materially impact our operations.
Clear Aligner - Americas Americas net revenues decreased by $9.0 million in 2023 as compared to 2022, primarily due to a 2.1% decrease in case volumes, resulting in a reduction of net revenues of $31.4 million, partially offset by a $22.4 million increase due to higher ASP.
Clear Aligner net revenues increased primarily from an increase in volume, partially offset by lower Clear Aligner ASP. Clear Aligner - Americas Americas net revenues decreased by $37 million in 2024 as compared to 2023, primarily due to a 3.0% decrease in ASP, resulting in a decrease of net revenues of $44 million.
The increases in ASP were partially offset by a product mix shift to lower priced products reducing net revenues by $68.2 million, higher promotional discounts which reduced net revenues by $52.5 million, and unfavorable foreign exchange rates which decreased net revenues by $27.2 million.
The decrease in ASP was primarily driven by a mix shift to lower priced products and countries which reduced net revenues by $88 million and higher promotional discounts which decreased net 44 revenues by $66 million and unfavorable foreign exchange rates that decreased net revenues by $9 million.
Macroeconomic Challenges and Military Conflict in Ukraine and the Middle East Our revenues are susceptible to fluctuations caused by macroeconomic conditions, inflation, changes to currency exchange rates, rising interest rates, actual and threatened wars and military actions, threats of or actual recessions, supply chain challenges, market volatility, and other factors, each of which impacts customer confidence, consumer sentiment and demand.
Below is a discussion of the significant trends and uncertainties that could impact our operations: Macroeconomic Challenges and Military Conflicts in Ukraine and the Middle East Our revenues are susceptible to fluctuations resulting from events and circumstances, including macroeconomic conditions, fluctuations in foreign currency exchange rates, inflation, higher interest rates, actual and threatened wars and military actions, threats or actual imposition of tariffs, customs duties and fees by nations and retaliatory actions, threats of or actual slowdowns or recessions, supply chain challenges, market volatility, employment levels, wages, debt obligations, discretionary income and other factors, each of which impacts customer confidence, consumer sentiment and demand.
The final outcome of legal proceedings is dependent on many variables difficult to predict and, therefore, the ultimate cost to entirely resolve such matters may be materially different than the amount of current estimates.
The final outcome of legal proceedings is dependent on many variables that are difficult to predict and, therefore, the ultimate cost to resolve such matters may be materially different than our current estimates. Consequently, new information or changes in judgments and estimates could have a material adverse effect on our business, financial condition, and results of operations or cash flows.
Both the determination of fair value and carrying value of a reporting unit require management to exercise significant judgement related to operating assumptions and estimates and allocation methodologies. 49 Finite-Lived Intangible Assets Finite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset (asset group) may not be recoverable.
We will record an impairment charge when our quantitative impairment analysis indicates that the carrying value of a reporting unit exceeds its fair value. Finite-Lived Intangible Assets Finite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset (asset group) may not be recoverable.
The decrease in scanner net revenues was mostly offset by higher service revenues of $31.8 million and other revenues which increased $19.1 million primarily due to revenue from sales of certified pre-owned scanners, CAD/CAM software, and scanner rentals. 43 Cost of net revenues and gross profit (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Clear Aligner Cost of net revenues $ 911.3 $ 844.4 $ 66.9 $ 844.4 $ 772.7 $ 71.7 % of net segment revenues 28.5 % 27.5 % 27.5 % 23.8 % Gross profit $ 2,288.0 $ 2,228.2 $ 59.9 $ 2,228.2 $ 2,474.4 $ (246.2) Gross margin % 71.5 % 72.5 % 72.5 % 76.2 % Systems and Services Cost of net revenues $ 244.1 $ 256.4 $ (12.3) $ 256.4 $ 244.5 $ 11.9 % of net segment revenues 36.8 % 38.7 % 38.7 % 34.7 % Gross profit $ 418.8 $ 405.6 $ 13.2 $ 405.6 $ 461.0 $ (55.4) Gross margin % 63.2 % 61.3 % 61.3 % 65.3 % Total cost of net revenues $ 1,155.4 $ 1,100.9 $ 54.5 $ 1,100.9 $ 1,017.2 $ 83.6 % of net revenues 29.9 % 29.5 % 29.5 % 25.7 % Gross profit $ 2,706.9 $ 2,633.8 $ 73.1 $ 2,633.8 $ 2,935.4 $ (301.6) Gross margin % 70.1 % 70.5 % 70.5 % 74.3 % Changes and percentages are based on actual values.
Cost of net revenues and gross profit (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Clear Aligner Cost of net revenues $ 952.1 $ 911.3 $ 40.8 $ 911.3 $ 844.4 $ 66.9 % of net segment revenues 29.5 % 28.5 % 28.5 % 27.5 % Gross profit $ 2,278.0 $ 2,288.0 $ (10.1) $ 2,288.0 $ 2,228.2 $ 59.9 Gross margin % 70.5 % 71.5 % 71.5 % 72.5 % Systems and Services Cost of net revenues $ 247.7 $ 244.1 $ 3.6 $ 244.1 $ 256.4 $ (12.3) % of net segment revenues 32.2 % 36.8 % 36.8 % 38.7 % Gross profit $ 521.2 $ 418.8 $ 102.3 $ 418.8 $ 405.6 $ 13.2 Gross margin % 67.8 % 63.2 % 63.2 % 61.3 % Total cost of net revenues $ 1,199.9 $ 1,155.4 $ 44.5 $ 1,155.4 $ 1,100.9 $ 54.5 % of net revenues 30.0 % 29.9 % 29.9 % 29.5 % Gross profit $ 2,799.2 $ 2,706.9 $ 92.3 $ 2,706.9 $ 2,633.8 $ 73.1 Gross margin % 70.0 % 70.1 % 70.1 % 70.5 % Changes and percentages are based on actual values.
Management measures these results by comparing to the millions of people who can benefit from straighter teeth 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. • For the fourth quarter of 2023, total Invisalign cases submitted with a digital scanner in the Americas increased to 95.1%, up from 92.7% * in the fourth quarter of 2022 and international scans increased to 88.1%, up from 86.8% in the fourth quarter of 2022.
Management measures these results by comparing to the millions of people who can benefit from straighter teeth 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. 42 • The total number of Invisalign trained doctors cases were shipped to (doctor submitters) in 2024 was 130.4 thousand compared to 125.8 thousand in 2023, a 3.6% increase.
We are in over 100 markets and have 13 fabrication and treatment locations throughout the world. 38 • Targeting growth opportunities with international orthodontists and GP customers, particularly with adopters of digital dentistry platforms by tailoring our sales and marketing strategies, manufacturing operations and resources around the unique needs of each customer channel.
We have also diversified our research and development activities, which has created a longer term, more stable environment for consistent hiring, retention and innovation in a variety of high technology locations. • Targeting growth opportunities with international orthodontists and GP customers, particularly with adopters of digital dentistry platforms by tailoring our sales and marketing strategies, manufacturing operations and resources around the unique needs of each customer channel.
We furthermore demonstrate to GPs and orthodontists how the iTero portfolio of intraoral scanners and CAD/CAM restorative services and workflows can increase revenues and profitability for their dental practices by enhancing patient experiences and creating operational practice efficiencies. • Investing in research and development that allows us to innovate, develop and bring to market products and solutions that deliver the ever-increasing clinical precision and predictability that doctors expect with the speed and convenience their patients require. • Creating demand and enabling patient conversion through targeted investments in advertising and public relations through social media, influencers and other forms of digital communications to encourage treatment by Invisalign trained doctors.
We have and may continue to financially invest in or explore collaborations with key ecosystem partners, including DSOs, whose missions and visions align with our own vision, strategy, business model and goals. 40 • Investing in research and development that allows us to innovate, develop and bring to market products and solutions that deliver the ever-increasing clinical precision and predictability that doctors expect with the speed and convenience their patients require. • Creating demand and enabling patient conversion with targeted investments in advertising and public relations through social media, influencers and other forms of digital communications to encourage treatment by Invisalign trained doctors.
For the year ended December 31, 2023, our business operations reflect the following: ◦ Revenues of $3,862.3 million, an increase of 3.4% year-over-year; ◦ Clear Aligner revenues of $3,199.3 million, an increase of 4.1% year-over-year; ▪ Americas Clear Aligner case revenues of $1,463.0 million, a decrease of 0.6% year-over-year; ▪ International Clear Aligner case revenues of $1,449.5 million, an increase of 7.4% year-over-year; ▪ Clear Aligner volume increase of 0.4% year-over-year and Clear Aligner volume increase for teenage patients of 7.8% year-over-year; ◦ Imaging Systems and CAD/CAM Services revenues of $662.9 million, an increase of 0.1% year-over-year; ◦ Income from operations of $643.3 million and operating margin of 16.7%; ◦ Effective tax rate of 30.6%; ◦ Net income of $445.1 million with diluted net income per share of $5.81; ◦ Cash, cash equivalents and marketable securities of $980.8 million as of December 31, 2023; ◦ Operating cash flow of $785.8 million; ◦ Capital expenditures of $177.7 million, predominantly related to purchases of property, plant and equipment; and ◦ Number of employees was 21,610 as of December 31, 2023, a decrease of 6.7% year-over-year.
For the year ended December 31, 2024, our business operations reflect the following: ◦ Revenues of $3,999.0 million, an increase of 3.5% year-over-year; ◦ Clear Aligner revenues of $3,230.1 million, an increase of 1.0% year-over-year; ▪ Americas Clear Aligner case revenues of $1,426.3 million, a decrease of 2.5% year-over-year; ▪ International Clear Aligner case revenues of $1,500.5 million, an increase of 3.5% year-over-year; ▪ Clear Aligner volume increase of 3.5% year-over-year and Clear Aligner volume increase for kids and teens of 7.7% year-over-year; ◦ Imaging Systems and computer-aided design and computer-aided manufacturing (“CAD/CAM”) Services revenues of $768.9 million, an increase of 16.0% year-over-year; ◦ Income from operations of $607.6 million and operating margin of 15.2%; ◦ Effective tax rate of 30.8%; ◦ Net income of $421.4 million with diluted net income per share of $5.62; ◦ Cash and cash equivalents of $1,043.9 million as of December 31, 2024; ◦ Cash provided by operating activities of $738.2 million; ◦ Capital expenditures of $115.6 million, primarily related to investments in our manufacturing capacity and facilities; and ◦ Number of employees of 20,945 as of December 31, 2024, a decrease of 3.1% year-over-year.
Research and development expense increased in 2023 compared to 2022 primarily due to higher employee costs, including higher salaries expense, fringe benefits, stock-based compensation and bonus as we continue to focus our investments in innovation and research.
Selling, general and administrative expense increased in 2024 compared to 2023 primarily due to higher employee costs, including salaries, fringe benefits, stock-based compensation and bonus partially offset by lower outside services expense.
We paid approximately $79 million in cash, which represents the total purchase consideration less credit for our previously owned interest. • As of December 31, 2023, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material impact on our liquidity or capital resources.
Refer to Note 8 “ Legal Proceedings ” of the Notes to Consolidated Financial Statements for more information. • As of December 31, 2024, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material impact on our liquidity or capital resources.
Certain tables may not sum or recalculate due to rounding. Restructuring and other charges incurred during 2023 was primarily related to post employment benefits, including employee severance.
Certain tables may not sum or recalculate due to rounding. Restructuring and other charges increased in 2024 compared to 2023 due to higher severance and other one-time post-employment benefits, driven by a more significant restructuring plan initiated in 2024.
Net cash used in investing activities was $213.3 million for the year ended December 31, 2022 which primarily consisted of purchases of property, plant and equipment of $291.9 million, purchases of marketable securities of $28.0 million and $12.3 million cash paid relating to a business acquisition.
Investing Activities Net cash used in investing activities was $255 million for the year ended December 31, 2024 which primarily consisted of $116 million for purchases of property, plant and equipment, $77 million for the Cubicure acquisition and $106 million for investments in privately held companies, partially offset by sales and maturities of marketable securities of $44 million.
Certain tables may not sum or recalculate due to rounding. 42 Clear Aligner Case Volume Case volume data which represents Clear Aligner case shipments for the year ended December 31, 2023, 2022 and 2021 is as follows (in thousands): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Total case volume 2,408.5 2,398.4 10.2 0.4 % 2,398.4 2,559.6 (161.3) (6.3) % During 2023, we began including Touch Up case revenues in Americas and/or International net revenues.
Clear Aligner Case Volume Case volume data which represents Clear Aligner case shipments for the year ended December 31, 2024, 2023 and 2022 is as follows (in thousands): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Total case volume 2,493.7 2,408.5 85.2 3.5 % 2,408.5 2,398.4 10.2 0.4 % Changes and percentages are based on actual values.
Selling, general and administrative expense increased in 2023 compared to 2022 primarily due to higher employee costs, including higher salaries expense, fringe benefits, stock-based compensation and bonus, offset by lower advertising and marketing and outside service provider costs. 44 Research and development (in millions): Year Ended December 31, Year Ended December 31, 2023 2022 Change 2022 2021 Change Research and development $ 346.8 $ 305.3 $ 41.6 $ 305.3 $ 250.3 $ 54.9 % of net revenues 9.0 % 8.2 % 8.2 % 6.3 % Changes and percentages are based on actual values.
Research and development (in millions): Year Ended December 31, Year Ended December 31, 2024 2023 Change 2023 2022 Change Research and development $ 364.2 $ 346.8 $ 17.4 $ 346.8 $ 305.3 $ 41.6 % of net revenues 9.1 % 9.0 % 9.0 % 8.2 % Changes and percentages are based on actual values.
Foreign exchange 39 volatility and the subsequent strengthening or weakening of the U.S dollar against other currencies remains uncertain and unpredictable. Moreover, military conflicts increase the unpredictability of the volatile macroeconomic conditions.
In 2024, the U.S. dollar remained strong against major currencies, which negatively impacted our financial condition and results of operations for the year. Foreign exchange volatility and the subsequent strengthening or weakening of the U.S dollar against other currencies remains uncertain and unpredictable.
Certain tables may not sum or recalculate due to rounding. The decrease in our effective tax rate for the year ended December 31, 2023 compared to the same period in 2022 is primarily attributable to the application of newly issued tax guidance, including IRS Notice 2023-55 and a change in our jurisdictional mix of income.
The increase in our effective tax rate for the year ended December 31, 2024 compared to the same period in 2023 is primarily attributable to an increase in U.S. taxes on foreign earnings, partially offset by a change in our jurisdictional mix of income and release of unrecognized tax benefits due to a lapse of the statute of limitation.
Clear Aligner - International International net revenues increased by $100.5 million in 2023 as compared to 2022 due to a 3.5% increase in case volumes, resulting in an increase of net revenues by $46.9 million, and higher ASP increasing net revenues by $53.6 million.
Clear Aligner - International International net revenues increased by $51 million in 2024 as compared to 2023 due to a 7.0% increase in volume, resulting in increased net revenues of $101 million. This increase was partially offset by a decrease of 3.3% in ASP which decreased net revenues by $50 million.
While the military conflict between Russia and Ukraine did not materially impact our 2023 financial condition and results of operations, we expect the conflict will continue to create market uncertainties and dampen consumer sentiment and demand, particularly in Europe.
We also expect the military conflict between Russia and Ukraine to continue to create market uncertainties and dampen consumer sentiment and demand, particularly in Europe. Additionally, government actions in various countries relating to implemented or proposed tariffs, particularly the United States, China, Mexico, and Europe are expected to adversely impact our revenue and cost of goods sold if implemented.
Total net revenues increased by $127.6 million in 2023 as compared to 2022, primarily due to an increase in Clear Aligner average selling price (“ASP”), an increase in Clear Aligner non-case revenue and higher Systems and Services services mix, partially offset by a decrease in both scanner volumes and ASP’s.
Certain tables may not sum or recalculate due to rounding. Total net revenues increased by $137 million in 2024 as compared to 2023, primarily due to an increase in Systems and Services net revenues from higher scanner ASP, increase in non-system sales and services revenue.
The increases in ASP were partially offset by higher promotional discounts which decreased net revenues by $44.3 million, a product mix shift to lower priced products which reduced net revenues by $37.6 million and higher sales credits which lowered net revenues $11.5 million.
Lower ASP was due to unfavorable foreign exchange rates that decreased net revenues by $21 million and a price reduction for sales in the United Kingdom (“UK”) to offset VAT we began charging in 2024, which decreased net revenues by $32 million, a mix shift to lower priced products and countries which reduced net revenues by $60 million and higher promotional discounts which reduced net revenues by $114 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−4 removed2 unchanged
Biggest changeAn immediate 10% change in interest rates would not have a material adverse impact on our future operating results and cash flows. 50 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.
Biggest changeAs of December 31, 2024, we are not exposed to interest rate risk on our unsecured revolving line of credit. An immediate 10% change in interest rates would not have a material adverse impact on our future operating results and cash flows. We have not historically used derivative financial instruments to manage our exposure to changes in interest rates.
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.
Although we will continue to monitor our exposure to currency fluctuations, and, where appropriate, 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.
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.
We generally sell our products in the local 52 currency of the respective countries. This provides some natural hedging because most of the subsidiaries’ operating expenses are also generally denominated in their local currencies.
We enter into foreign currency forward contracts for currencies where we have exposures, primarily the Euro, British Pound, Chinese Yuan, Polish Zloty and Canadian Dollar, to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and intercompany receivables and payables.
We enter into foreign currency forward contracts for currencies where we have exposures, primarily the Euro, British Pound, Chinese Yuan, Polish Zloty and Canadian Dollar, to minimize the short-term impact of foreign currency exchange rate fluctuations on certain assets and liabilities.
Currency Rate Risk As a result of our international business activities, our financial results have been affected by factors such as changes in foreign currency exchange rates as well as economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations will not harm our business in the future.
Foreign Currency Exchange Rate Risk As a result of our international business activities, our financial results have been affected by changes in foreign currency exchange rates as well as economic conditions in foreign markets. There is no assurance that exchange rate fluctuations will not adversely impact our results of operations or financial condition in the future.
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.
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.
In addition, we are subject to the broad market risk that is created by the global market disruptions and uncertainties resulting from macroeconomic challenges, various military conflicts and consumer confidence. Further discussion on these risks may be found in Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors” .
In addition, we are subject to the broad market risk that is created by the global market disruptions and uncertainties resulting from macroeconomic challenges, various military conflicts and consumer confidence.
Inflation Risk 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.
Inflation Risk 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. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
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. 51
There is no assurance that our results of operations and financial condition will not be adversely impacted by inflation in the future. 53
Removed
Interest Rate Risk Changes in interest rates could impact our anticipated interest income on our cash and cash equivalents and investments in marketable securities. Our investments are fixed-rate short-term and long-term securities.
Added
Further discussion on these risks may be found in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors .” Interest Rate Risk Changes in interest rates could impact our anticipated interest income earned on our cash and cash equivalents balance.
Removed
Fixed-rate securities may have their fair market value adversely impacted due to a rise in interest rates, and, as a result, our future investment income may fall short of expectations or we may suffer losses in principal if forced to sell securities which have declined in market value due.
Removed
As of December 31, 2023, we had approximately $43.3 million invested in available-for-sale marketable securities.
Removed
As of December 31, 2023, we are not subject to risks from immediate interest rate increases on our unsecured revolving line of credit facility.

Other ALGN 10-K year-over-year comparisons