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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Align Technology Inc | NASDAQ:ALGN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.33 | 0.46% | 287.87 | 283.93 | 296.00 | 295.69 | 287.02 | 291.90 | 353,639 | 01:00:00 |
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
94-3267295
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common Stock, $0.0001 par value
|
ALGN
|
The NASDAQ Stock Market LLC
|
|
|
(NASDAQ Global Market)
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.
|
|
|
|
|
PART I
|
||
ITEM 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
PART II
|
||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
ITEM 5.
|
||
ITEM 6.
|
||
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net revenues
|
|
$
|
600,697
|
|
|
$
|
490,259
|
|
|
$
|
1,149,668
|
|
|
$
|
927,183
|
|
Cost of net revenues
|
|
168,408
|
|
|
124,677
|
|
|
315,283
|
|
|
234,193
|
|
||||
Gross profit
|
|
432,289
|
|
|
365,582
|
|
|
834,385
|
|
|
692,990
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
|
267,948
|
|
|
212,087
|
|
|
515,058
|
|
|
411,712
|
|
||||
Research and development
|
|
38,851
|
|
|
30,804
|
|
|
76,354
|
|
|
60,395
|
|
||||
Impairments and other charges
|
|
—
|
|
|
—
|
|
|
29,782
|
|
|
—
|
|
||||
Litigation settlement gain
|
|
(51,000
|
)
|
|
—
|
|
|
(51,000
|
)
|
|
—
|
|
||||
Total operating expenses
|
|
255,799
|
|
|
242,891
|
|
|
570,194
|
|
|
472,107
|
|
||||
Income from operations
|
|
176,490
|
|
|
122,691
|
|
|
264,191
|
|
|
220,883
|
|
||||
Interest income
|
|
3,465
|
|
|
1,917
|
|
|
6,098
|
|
|
4,093
|
|
||||
Other income (expense), net
|
|
13,892
|
|
|
(7,099
|
)
|
|
8,146
|
|
|
(6,922
|
)
|
||||
Net income before provision for income taxes and equity in losses of investee
|
|
193,847
|
|
|
117,509
|
|
|
278,435
|
|
|
218,054
|
|
||||
Provision for income taxes
|
|
43,121
|
|
|
7,703
|
|
|
51,917
|
|
|
10,605
|
|
||||
Equity in losses of investee, net of tax
|
|
3,584
|
|
|
3,701
|
|
|
7,528
|
|
|
5,478
|
|
||||
Net income
|
|
$
|
147,142
|
|
|
$
|
106,105
|
|
|
$
|
218,990
|
|
|
$
|
201,971
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
1.84
|
|
|
$
|
1.32
|
|
|
$
|
2.74
|
|
|
$
|
2.52
|
|
Diluted
|
|
$
|
1.83
|
|
|
$
|
1.30
|
|
|
$
|
2.71
|
|
|
$
|
2.48
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
79,943
|
|
|
80,216
|
|
|
79,901
|
|
|
80,127
|
|
||||
Diluted
|
|
80,590
|
|
|
81,471
|
|
|
80,665
|
|
|
81,575
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income
|
|
$
|
147,142
|
|
|
$
|
106,105
|
|
|
$
|
218,990
|
|
|
$
|
201,971
|
|
Net change in foreign currency translation adjustment
|
|
213
|
|
|
(759
|
)
|
|
622
|
|
|
283
|
|
||||
Change in unrealized gains (losses) on investments, net of tax
|
|
192
|
|
|
186
|
|
|
276
|
|
|
57
|
|
||||
Other comprehensive income (loss)
|
|
405
|
|
|
(573
|
)
|
|
898
|
|
|
340
|
|
||||
Comprehensive income
|
|
$
|
147,547
|
|
|
$
|
105,532
|
|
|
$
|
219,888
|
|
|
$
|
202,311
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
423,500
|
|
|
$
|
636,899
|
|
Marketable securities, short-term
|
|
297,422
|
|
|
98,460
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $4,998 and $2,378, respectively
|
|
520,094
|
|
|
439,009
|
|
||
Inventories
|
|
81,124
|
|
|
55,641
|
|
||
Prepaid expenses and other current assets
|
|
135,234
|
|
|
72,470
|
|
||
Total current assets
|
|
1,457,374
|
|
|
1,302,479
|
|
||
Marketable securities, long-term
|
|
44,969
|
|
|
9,112
|
|
||
Property, plant and equipment, net
|
|
599,611
|
|
|
521,329
|
|
||
Operating lease right-of-use assets
|
|
57,269
|
|
|
—
|
|
||
Equity method investments
|
|
—
|
|
|
45,913
|
|
||
Goodwill and intangible assets, net
|
|
78,852
|
|
|
81,949
|
|
||
Deferred tax assets
|
|
59,050
|
|
|
64,689
|
|
||
Other assets
|
|
48,892
|
|
|
26,987
|
|
||
Total assets
|
|
$
|
2,346,017
|
|
|
$
|
2,052,458
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
61,950
|
|
|
$
|
64,256
|
|
Accrued liabilities
|
|
245,634
|
|
|
234,679
|
|
||
Deferred revenues
|
|
481,462
|
|
|
393,138
|
|
||
Total current liabilities
|
|
789,046
|
|
|
692,073
|
|
||
Income tax payable
|
|
98,182
|
|
|
78,008
|
|
||
Operating lease liabilities
|
|
59,140
|
|
|
—
|
|
||
Other long-term liabilities
|
|
25,967
|
|
|
29,486
|
|
||
Total liabilities
|
|
972,335
|
|
|
799,567
|
|
||
Commitments and contingencies (Notes 9 and 10)
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
||||
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)
|
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value (200,000 shares authorized; 79,865 and 79,778 issued and outstanding, respectively)
|
|
8
|
|
|
8
|
|
||
Additional paid-in capital
|
|
874,275
|
|
|
877,514
|
|
||
Accumulated other comprehensive income (loss), net
|
|
(1,876
|
)
|
|
(2,774
|
)
|
||
Retained earnings
|
|
501,275
|
|
|
378,143
|
|
||
Total stockholders’ equity
|
|
1,373,682
|
|
|
1,252,891
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
2,346,017
|
|
|
$
|
2,052,458
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss), Net
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Three Months Ended June 30, 2019
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance as of March 31, 2019
|
|
80,000
|
|
|
$
|
8
|
|
|
$
|
855,956
|
|
|
$
|
(2,281
|
)
|
|
$
|
402,021
|
|
|
$
|
1,255,704
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147,142
|
|
|
147,142
|
|
|||||
Net change in unrealized gains (losses) from investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
192
|
|
|
—
|
|
|
192
|
|
|||||
Net change in foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
213
|
|
|
—
|
|
|
213
|
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
|
26
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
|
—
|
|
|
—
|
|
|
(2,537
|
)
|
|
—
|
|
|
—
|
|
|
(2,537
|
)
|
|||||
Common stock repurchased and retired
|
|
(161
|
)
|
|
—
|
|
|
(1,616
|
)
|
|
—
|
|
|
(47,888
|
)
|
|
(49,504
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
22,467
|
|
|
—
|
|
|
—
|
|
|
22,467
|
|
|||||
Balance as of June 30, 2019
|
|
79,865
|
|
|
$
|
8
|
|
|
$
|
874,275
|
|
|
$
|
(1,876
|
)
|
|
$
|
501,275
|
|
|
$
|
1,373,682
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss), Net
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Six Months Ended June 30, 2019
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance as of December 31, 2018
|
|
79,778
|
|
|
$
|
8
|
|
|
$
|
877,514
|
|
|
$
|
(2,774
|
)
|
|
$
|
378,143
|
|
|
$
|
1,252,891
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
218,990
|
|
|
218,990
|
|
|||||
Net change in unrealized gains (losses) from investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
276
|
|
|
—
|
|
|
276
|
|
|||||
Net change in foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
622
|
|
|
—
|
|
|
622
|
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
|
453
|
|
|
—
|
|
|
9,614
|
|
|
—
|
|
|
—
|
|
|
9,614
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
|
—
|
|
|
—
|
|
|
(52,718
|
)
|
|
—
|
|
|
—
|
|
|
(52,718
|
)
|
|||||
Common stock repurchased and retired
|
|
(366
|
)
|
|
—
|
|
|
(3,646
|
)
|
|
—
|
|
|
(95,858
|
)
|
|
(99,504
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
43,511
|
|
|
—
|
|
|
—
|
|
|
43,511
|
|
|||||
Balance as of June 30, 2019
|
|
79,865
|
|
|
$
|
8
|
|
|
$
|
874,275
|
|
|
$
|
(1,876
|
)
|
|
$
|
501,275
|
|
|
$
|
1,373,682
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss), Net
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Three Months Ended June 30, 2018
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance as of March 31, 2018
|
|
80,144
|
|
|
$
|
8
|
|
|
$
|
858,632
|
|
|
$
|
1,484
|
|
|
$
|
267,336
|
|
|
$
|
1,127,460
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106,105
|
|
|
106,105
|
|
|||||
Net change in unrealized gains (losses) from investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
186
|
|
|||||
Net change in foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(759
|
)
|
|
—
|
|
|
(759
|
)
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
|
169
|
|
|
—
|
|
|
565
|
|
|
—
|
|
|
—
|
|
|
565
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
|
—
|
|
|
—
|
|
|
(31,488
|
)
|
|
—
|
|
|
—
|
|
|
(31,488
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
16,890
|
|
|
—
|
|
|
—
|
|
|
16,890
|
|
|||||
Balance as of June 30, 2018
|
|
80,313
|
|
|
$
|
8
|
|
|
$
|
844,599
|
|
|
$
|
911
|
|
|
$
|
373,441
|
|
|
$
|
1,218,959
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss), Net
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Six Months Ended June 30, 2018
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance as of December 31, 2017
|
|
80,040
|
|
|
$
|
8
|
|
|
$
|
886,435
|
|
|
$
|
571
|
|
|
$
|
267,274
|
|
|
$
|
1,154,288
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201,971
|
|
|
201,971
|
|
|||||
Net change in unrealized gains (losses) from investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|
—
|
|
|
57
|
|
|||||
Net change in foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
283
|
|
|
—
|
|
|
283
|
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
|
669
|
|
|
—
|
|
|
8,585
|
|
|
—
|
|
|
—
|
|
|
8,585
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
|
—
|
|
|
—
|
|
|
(79,330
|
)
|
|
—
|
|
|
—
|
|
|
(79,330
|
)
|
|||||
Common stock repurchased and retired
|
|
(396
|
)
|
|
—
|
|
|
(3,811
|
)
|
|
—
|
|
|
(96,189
|
)
|
|
(100,000
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
32,720
|
|
|
—
|
|
|
—
|
|
|
32,720
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
385
|
|
|
385
|
|
|||||
Balance as of June 30, 2018
|
|
80,313
|
|
|
$
|
8
|
|
|
$
|
844,599
|
|
|
$
|
911
|
|
|
$
|
373,441
|
|
|
$
|
1,218,959
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2019
|
|
2018
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
||||
Net income
|
|
$
|
218,990
|
|
|
$
|
201,971
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Deferred taxes
|
|
5,606
|
|
|
3,667
|
|
||
Depreciation and amortization
|
|
46,169
|
|
|
24,066
|
|
||
Impairments on long-lived assets
|
|
28,498
|
|
|
—
|
|
||
Impairment on equity investment
|
|
3,975
|
|
|
—
|
|
||
Gain from sale of equity method investment
|
|
(15,769
|
)
|
|
—
|
|
||
Stock-based compensation
|
|
43,511
|
|
|
32,720
|
|
||
Equity in losses of investee
|
|
7,528
|
|
|
5,478
|
|
||
Other non-cash operating activities
|
|
12,788
|
|
|
4,543
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
(89,055
|
)
|
|
(44,266
|
)
|
||
Inventories
|
|
(26,681
|
)
|
|
(15,586
|
)
|
||
Prepaid expenses and other assets
|
|
(48,949
|
)
|
|
(9,366
|
)
|
||
Accounts payable
|
|
1,847
|
|
|
10,743
|
|
||
Accrued and other long-term liabilities
|
|
1,321
|
|
|
(53,442
|
)
|
||
Long-term income tax payable
|
|
9,608
|
|
|
1,610
|
|
||
Deferred revenues
|
|
95,174
|
|
|
54,983
|
|
||
Net cash provided by operating activities
|
|
294,561
|
|
|
217,121
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
||||
Purchase of property, plant and equipment
|
|
(80,598
|
)
|
|
(115,295
|
)
|
||
Purchase of marketable securities
|
|
(353,995
|
)
|
|
(78,405
|
)
|
||
Proceeds from maturities of marketable securities
|
|
107,021
|
|
|
207,475
|
|
||
Proceeds from sales of marketable securities
|
|
14,456
|
|
|
9,560
|
|
||
Note repayment from privately held company
|
|
6,598
|
|
|
—
|
|
||
Loan repayment from equity investee
|
|
—
|
|
|
30,000
|
|
||
Other investing activities
|
|
(14,502
|
)
|
|
668
|
|
||
Net cash (used in) provided by investing activities
|
|
(321,020
|
)
|
|
54,003
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from issuance of common stock
|
|
9,614
|
|
|
8,585
|
|
||
Common stock repurchases
|
|
(99,504
|
)
|
|
(100,000
|
)
|
||
Employees’ taxes paid upon the vesting of restricted stock units
|
|
(52,718
|
)
|
|
(79,330
|
)
|
||
Purchase of finance lease
|
|
(45,773
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
|
(188,381
|
)
|
|
(170,745
|
)
|
||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
|
|
1,467
|
|
|
(1,923
|
)
|
||
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
|
(213,373
|
)
|
|
98,456
|
|
||
Cash, cash equivalents, and restricted cash at beginning of the period
|
|
637,566
|
|
|
450,125
|
|
||
Cash, cash equivalents, and restricted cash at end of the period
|
|
$
|
424,193
|
|
|
$
|
548,581
|
|
June 30, 2019
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
|
$
|
29,556
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,556
|
|
Corporate bonds
|
|
125,299
|
|
|
74
|
|
|
(8
|
)
|
|
125,365
|
|
||||
U.S. government agency bonds
|
|
20,507
|
|
|
2
|
|
|
(13
|
)
|
|
20,496
|
|
||||
U.S. government treasury bonds
|
|
108,945
|
|
|
56
|
|
|
(6
|
)
|
|
108,995
|
|
||||
Foreign bonds
|
|
12,976
|
|
|
14
|
|
|
—
|
|
|
12,990
|
|
||||
Certificates of deposit
|
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
Total marketable securities, short-term
|
|
$
|
297,303
|
|
|
$
|
146
|
|
|
$
|
(27
|
)
|
|
$
|
297,422
|
|
June 30, 2019
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Corporate bonds
|
|
$
|
23,879
|
|
|
$
|
40
|
|
|
$
|
(1
|
)
|
|
$
|
23,918
|
|
U.S. government treasury bonds
|
|
21,038
|
|
|
16
|
|
|
(3
|
)
|
|
21,051
|
|
||||
Total marketable securities, long-term
|
|
$
|
44,917
|
|
|
$
|
56
|
|
|
$
|
(4
|
)
|
|
$
|
44,969
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
|
$
|
17,793
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,793
|
|
Corporate bonds
|
|
45,100
|
|
|
—
|
|
|
(48
|
)
|
|
45,052
|
|
||||
U.S. government agency bonds
|
|
19,981
|
|
|
—
|
|
|
(77
|
)
|
|
19,904
|
|
||||
U.S. government treasury bonds
|
|
15,292
|
|
|
—
|
|
|
(1
|
)
|
|
15,291
|
|
||||
Certificates of deposit
|
|
420
|
|
|
1
|
|
|
(1
|
)
|
|
420
|
|
||||
Total marketable securities, short-term
|
|
$
|
98,586
|
|
|
$
|
1
|
|
|
$
|
(127
|
)
|
|
$
|
98,460
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Corporate bonds
|
|
$
|
4,957
|
|
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
$
|
4,960
|
|
U.S. government agency bonds
|
|
1,399
|
|
|
8
|
|
|
—
|
|
|
1,407
|
|
||||
U.S. government treasury bonds
|
|
2,235
|
|
|
9
|
|
|
—
|
|
|
2,244
|
|
||||
Certificates of deposit
|
|
500
|
|
|
1
|
|
|
—
|
|
|
501
|
|
||||
Total marketable securities, long-term
|
|
$
|
9,091
|
|
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
9,112
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
One year or less
|
$
|
297,422
|
|
|
$
|
98,460
|
|
Due in greater than one year
|
44,969
|
|
|
9,112
|
|
||
Total available for sale short-term and long-term marketable securities
|
$
|
342,391
|
|
|
$
|
107,572
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Equity securities under the equity method investment
1
|
$
|
—
|
|
|
$
|
45,913
|
|
Equity securities without readily determinable fair values
2
|
$
|
5,887
|
|
|
$
|
9,862
|
|
1
|
Refer to Note 5 “Equity Method Investments” of the Notes to Condensed Consolidated Financial Statements
for more information.
|
2
|
The equity securities are reported as a nonrecurring investment within other assets in our Condensed Consolidated Balance Sheet. During the
six
months ended
June 30, 2019
, there was approximately
$4.0 million
of impairment resulting from an observable price change.
|
Description
|
|
Balance as of
June 30, 2019 |
|
Level 1
|
|
Level 2
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
||||||
Money market funds
|
|
$
|
193,390
|
|
|
$
|
193,390
|
|
|
$
|
—
|
|
Commercial paper
|
|
15,993
|
|
|
—
|
|
|
15,993
|
|
|||
Corporate bonds
|
|
3,716
|
|
|
—
|
|
|
3,716
|
|
|||
U.S. government treasury bonds
|
|
8,505
|
|
|
8,505
|
|
|
—
|
|
|||
Short-term investments:
|
|
|
|
|
|
|
||||||
Commercial paper
|
|
29,556
|
|
|
—
|
|
|
29,556
|
|
|||
Corporate bonds
|
|
125,365
|
|
|
—
|
|
|
125,365
|
|
|||
U.S. government agency bonds
|
|
20,496
|
|
|
—
|
|
|
20,496
|
|
|||
U.S. government treasury bonds
|
|
108,995
|
|
|
108,995
|
|
|
—
|
|
|||
Foreign bonds
|
|
12,990
|
|
|
—
|
|
|
12,990
|
|
|||
Certificates of deposit
|
|
20
|
|
|
—
|
|
|
20
|
|
|||
Long-term investments:
|
|
|
|
|
|
|
||||||
Corporate bonds
|
|
23,918
|
|
|
—
|
|
|
23,918
|
|
|||
U.S. government treasury bonds
|
|
21,051
|
|
|
21,051
|
|
|
—
|
|
|||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
||||||
Israeli funds
|
|
2,983
|
|
|
—
|
|
|
2,983
|
|
|||
|
|
$
|
566,978
|
|
|
$
|
331,941
|
|
|
$
|
235,037
|
|
Description
|
|
Balance as of December 31, 2018
|
|
Level 1
|
|
Level 2
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
||||||
Money market funds
|
|
$
|
431,081
|
|
|
$
|
431,081
|
|
|
$
|
—
|
|
Commercial paper
|
|
4,681
|
|
|
—
|
|
|
4,681
|
|
|||
Corporate bonds
|
|
3,880
|
|
|
—
|
|
|
3,880
|
|
|||
U.S. government treasury bonds
|
|
2,195
|
|
|
2,195
|
|
|
—
|
|
|||
Short-term investments:
|
|
|
|
|
|
|
||||||
Commercial paper
|
|
17,793
|
|
|
—
|
|
|
17,793
|
|
|||
Corporate bonds
|
|
45,052
|
|
|
—
|
|
|
45,052
|
|
|||
U.S. government agency bonds
|
|
19,904
|
|
|
—
|
|
|
19,904
|
|
|||
U.S. government treasury bonds
|
|
15,291
|
|
|
15,291
|
|
|
—
|
|
|||
Certificates of deposit
|
|
420
|
|
|
—
|
|
|
420
|
|
|||
Long-term investments:
|
|
|
|
|
|
|
||||||
Corporate bonds
|
|
4,960
|
|
|
—
|
|
|
4,960
|
|
|||
U.S. government agency bonds
|
|
1,407
|
|
|
—
|
|
|
1,407
|
|
|||
U.S. government treasury bonds
|
|
2,244
|
|
|
2,244
|
|
|
—
|
|
|||
Certificates of deposit
|
|
501
|
|
|
—
|
|
|
501
|
|
|||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
||||||
Israeli funds
|
|
3,047
|
|
|
—
|
|
|
3,047
|
|
|||
|
|
$
|
552,456
|
|
|
$
|
450,811
|
|
|
$
|
101,645
|
|
|
June 30, 2019
|
||||
|
Local Currency Amount
|
|
Notional Contract Amount (USD)
|
||
Euro
|
€92,000
|
|
$
|
104,871
|
|
Chinese Yuan
|
¥465,000
|
|
67,626
|
|
|
British Pound
|
£21,000
|
|
26,702
|
|
|
Canadian Dollar
|
C$31,000
|
|
23,706
|
|
|
Brazilian Real
|
R$83,000
|
|
21,581
|
|
|
Japanese Yen
|
¥1,800,000
|
|
16,716
|
|
|
Mexican Peso
|
M$140,000
|
|
7,263
|
|
|
Australian Dollar
|
A$3,000
|
|
2,104
|
|
|
Israeli Shekel
|
ILS74,500
|
|
20,928
|
|
|
|
|
|
$
|
291,497
|
|
|
December 31, 2018
|
||||
|
Local Currency Amount
|
|
Notional Contract Amount (USD)
|
||
Euro
|
€62,000
|
|
$
|
71,095
|
|
Chinese Yuan
|
¥375,000
|
|
54,515
|
|
|
Brazilian Real
|
R$81,000
|
|
20,858
|
|
|
Canadian Dollar
|
C$27,000
|
|
19,808
|
|
|
British Pound
|
£13,000
|
|
16,635
|
|
|
Japanese Yen
|
¥1,700,000
|
|
15,357
|
|
|
Australian Dollar
|
A$3,000
|
|
2,114
|
|
|
|
|
|
$
|
200,382
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Raw materials
|
|
$
|
37,094
|
|
|
$
|
26,119
|
|
Work in process
|
|
25,752
|
|
|
13,784
|
|
||
Finished goods
|
|
18,278
|
|
|
15,738
|
|
||
Total inventories
|
|
$
|
81,124
|
|
|
$
|
55,641
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Tax related receivables
|
|
$
|
54,059
|
|
|
$
|
36,794
|
|
Current promissory note receivable
1
|
|
26,699
|
|
|
—
|
|
||
Other current receivables
2
|
|
18,826
|
|
|
6,511
|
|
||
Prepaid software and maintenance
|
|
16,682
|
|
|
5,938
|
|
||
Other prepaid expenses and current assets
|
|
18,968
|
|
|
23,227
|
|
||
Total prepaid expenses and other current assets
|
|
$
|
135,234
|
|
|
$
|
72,470
|
|
1
|
Current portion of unsecured promissory note receivable (
Refer to Note 5“Equity Method Investments” of the Notes to Condensed Consolidated Financial Statements
for more information).
|
2
|
Includes
$16.0 million
receivable from litigation settlement (
Refer to Note 9“Legal Proceedings” of the Notes to Condensed Consolidated Financial Statements
for more information).
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Accrued payroll and benefits
|
|
$
|
111,831
|
|
|
$
|
127,109
|
|
Accrued expenses
|
|
52,791
|
|
|
39,323
|
|
||
Current operating lease liabilities
|
|
16,144
|
|
|
—
|
|
||
Accrued warranty
|
|
10,499
|
|
|
8,551
|
|
||
Accrued property, plant and equipment
|
|
9,969
|
|
|
8,193
|
|
||
Accrued sales return reserve
|
|
9,217
|
|
|
6,534
|
|
||
Accrued customer credits and deposits
|
|
8,796
|
|
|
12,439
|
|
||
Accrued sales tax and value added tax
|
|
6,864
|
|
|
6,276
|
|
||
Accrued professional fees
|
|
6,454
|
|
|
6,752
|
|
||
Accrued income taxes
|
|
4,407
|
|
|
5,752
|
|
||
Accrued sales rebate
|
|
4,210
|
|
|
5,668
|
|
||
Other accrued liabilities
|
|
4,452
|
|
|
8,082
|
|
||
Total accrued liabilities
|
|
$
|
245,634
|
|
|
$
|
234,679
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2019
|
|
2018
|
||||
Balance at beginning of period
|
|
$
|
8,551
|
|
|
$
|
5,929
|
|
Charged to cost of net revenues
|
|
6,000
|
|
|
5,728
|
|
||
Actual warranty expenditures
|
|
(4,052
|
)
|
|
(4,371
|
)
|
||
Balance at end of period
|
|
$
|
10,499
|
|
|
$
|
7,286
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Deferred revenues - current
|
|
$
|
481,462
|
|
|
$
|
393,138
|
|
Deferred revenues - long-term
1
|
|
$
|
23,902
|
|
|
$
|
17,051
|
|
Balance Sheet Location
|
|
June 30,
2019 |
||
Operating lease right-of-use assets
1
|
|
$
|
57,269
|
|
|
|
|
||
Accrued liabilities
|
|
$
|
16,144
|
|
Operating lease liabilities
|
|
59,140
|
|
|
Total operating lease liabilities
|
|
$
|
75,284
|
|
1
|
The balance is net of impairment charges recorded in the first quarter of 2019.
Refer to Note 8“Impairments and Other Charges” of the Notes to Condensed Consolidated Financial Statements
for more information.
|
Lease Cost
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended
June 30, 2019 |
||||
Operating lease cost
1
|
|
$
|
5,498
|
|
|
$
|
10,799
|
|
Variable lease cost
|
|
690
|
|
|
1,107
|
|
||
Total lease cost
2
|
|
$
|
6,188
|
|
|
$
|
11,906
|
|
1
|
Includes short-term lease expense which are not material for the periods.
|
2
|
Included in operating expenses on our Condensed Consolidated Statement of Operations.
|
Remaining Lease Term and Discount Rate
|
|
June 30,
2019 |
|
|
|
|
|
Weighted average remaining lease term (in years)
|
|
6.1
|
|
Weighted average discount rate
|
|
4.5
|
%
|
Fiscal Year Ending December 31,
|
|
Operating Leases
|
||
Remainder of 2019
|
|
$
|
10,334
|
|
2020
|
|
20,373
|
|
|
2021
|
|
18,381
|
|
|
2022
|
|
13,157
|
|
|
2023
|
|
9,323
|
|
|
Thereafter
|
|
13,081
|
|
|
Total lease payments
|
|
$
|
84,649
|
|
Less: Interest
|
|
(9,365
|
)
|
|
Total lease liabilities
|
|
$
|
75,284
|
|
Fiscal Year Ending December 31,
|
|
Operating Leases
|
||
2019
|
|
$
|
21,429
|
|
2020
|
|
20,483
|
|
|
2021
|
|
18,897
|
|
|
2022
|
|
15,096
|
|
|
2023
|
|
12,400
|
|
|
Thereafter
|
|
18,371
|
|
|
Total minimum lease payments
|
|
$
|
106,676
|
|
Fiscal Year Ending December 31,
|
|
Operating Lease
|
||
Remainder of 2019
|
|
$
|
423
|
|
2020
|
|
859
|
|
|
2021
|
|
1,145
|
|
|
2022
|
|
1,199
|
|
|
2023
|
|
1,229
|
|
|
Thereafter
|
|
7,441
|
|
|
Total minimum lease payments
|
|
$
|
12,296
|
|
|
Total
|
||
Balance as of December 31, 2018
|
$
|
64,029
|
|
Adjustments
1
|
(6
|
)
|
|
Balance as of June 30, 2019
|
$
|
64,023
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying Amount as of June 30, 2019
|
|
Accumulated
Amortization
|
|
Accumulated
Impairment Loss
|
|
Net Carrying
Value as of June 30, 2019 |
||||||||
Trademarks
|
15
|
|
$
|
7,100
|
|
|
$
|
(1,976
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
945
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(5,549
|
)
|
|
(4,328
|
)
|
|
2,723
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(17,473
|
)
|
|
(10,751
|
)
|
|
5,276
|
|
||||
Reacquired rights
|
3
|
|
7,500
|
|
|
(5,705
|
)
|
|
—
|
|
|
1,795
|
|
||||
Patents
|
8
|
|
6,796
|
|
|
(2,749
|
)
|
|
—
|
|
|
4,047
|
|
||||
Other
|
2
|
|
618
|
|
|
(575
|
)
|
|
—
|
|
|
43
|
|
||||
Total intangible assets
|
|
|
$
|
68,114
|
|
|
$
|
(34,027
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
14,829
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying
Amount as of
December 31, 2018
|
|
Accumulated
Amortization
|
|
Accumulated Impairment Loss
|
|
Net Carrying
Value as of
December 31, 2018
|
||||||||
Trademarks
|
15
|
|
$
|
7,100
|
|
|
$
|
(1,907
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
1,014
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(5,268
|
)
|
|
(4,328
|
)
|
|
3,004
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(16,542
|
)
|
|
(10,751
|
)
|
|
6,207
|
|
||||
Reacquired rights
|
3
|
|
7,500
|
|
|
(4,341
|
)
|
|
—
|
|
|
3,159
|
|
||||
Patents
|
8
|
|
6,796
|
|
|
(2,334
|
)
|
|
—
|
|
|
4,462
|
|
||||
Other
|
2
|
|
618
|
|
|
(544
|
)
|
|
—
|
|
|
74
|
|
||||
Total intangible assets
|
|
|
$
|
68,114
|
|
|
$
|
(30,936
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
17,920
|
|
Fiscal Year Ending December 31,
|
|
Amortization
|
||
Remainder of 2019
|
|
$
|
3,045
|
|
2020
|
|
3,844
|
|
|
2021
|
|
3,389
|
|
|
2022
|
|
2,116
|
|
|
2023
|
|
1,495
|
|
|
Thereafter
|
|
940
|
|
|
Total
|
|
$
|
14,829
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Cost of net revenues
|
|
$
|
1,278
|
|
|
$
|
900
|
|
|
$
|
2,390
|
|
|
$
|
1,781
|
|
Selling, general and administrative
|
|
18,037
|
|
|
13,216
|
|
|
34,927
|
|
|
25,794
|
|
||||
Research and development
|
|
3,152
|
|
|
2,774
|
|
|
6,194
|
|
|
5,145
|
|
||||
Total stock-based compensation
|
|
$
|
22,467
|
|
|
$
|
16,890
|
|
|
$
|
43,511
|
|
|
$
|
32,720
|
|
|
Number of Shares
Underlying RSUs
(in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted
Average Remaining
Contractual Term (in years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Nonvested as of December 31, 2018
|
931
|
|
|
$
|
129.39
|
|
|
|
|
|
||
Granted
|
269
|
|
|
256.81
|
|
|
|
|
|
|||
Vested and released
|
(391
|
)
|
|
100.51
|
|
|
|
|
|
|||
Forfeited
|
(43
|
)
|
|
171.64
|
|
|
|
|
|
|||
Nonvested as of June 30, 2019
|
766
|
|
|
$
|
186.47
|
|
|
1.5
|
|
$
|
209,599
|
|
|
Number of Shares
Underlying MSUs
(in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average
Remaining
Contractual Term (in years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Nonvested as of December 31, 2018
|
324
|
|
|
$
|
215.07
|
|
|
|
|
|
||
Granted
|
133
|
|
|
245.69
|
|
|
|
|
|
|||
Vested and released
|
(179
|
)
|
|
72.74
|
|
|
|
|
|
|||
Forfeited
|
(5
|
)
|
|
265.42
|
|
|
|
|
|
|||
Nonvested as of June 30, 2019
|
273
|
|
|
$
|
322.53
|
|
|
1.6
|
|
$
|
74,615
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2019
|
|
2018
|
||||
Expected term (in years)
|
|
1.4
|
|
|
1.3
|
|
||
Expected volatility
|
|
48.6
|
%
|
|
35.7
|
%
|
||
Risk-free interest rate
|
|
2.5
|
%
|
|
1.9
|
%
|
||
Expected dividends
|
|
—
|
|
|
—
|
|
||
Weighted average fair value at grant date
|
|
$
|
90.36
|
|
|
$
|
78.38
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
147,142
|
|
|
$
|
106,105
|
|
|
$
|
218,990
|
|
|
$
|
201,971
|
|
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding, basic
|
|
79,943
|
|
|
80,216
|
|
|
79,901
|
|
|
80,127
|
|
||||
Dilutive effect of potential common stock
|
|
647
|
|
|
1,255
|
|
|
764
|
|
|
1,448
|
|
||||
Total shares, diluted
|
|
80,590
|
|
|
81,471
|
|
|
80,665
|
|
|
81,575
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income per share, basic
|
|
$
|
1.84
|
|
|
$
|
1.32
|
|
|
$
|
2.74
|
|
|
$
|
2.52
|
|
Net income per share, diluted
|
|
$
|
1.83
|
|
|
$
|
1.30
|
|
|
$
|
2.71
|
|
|
$
|
2.48
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2019
|
|
2018
|
||||
Non-cash investing and financing activities:
|
|
|
|
|
||||
Fixed assets acquired with accounts payable or accrued liabilities
|
|
$
|
12,202
|
|
|
$
|
20,854
|
|
Conversion of convertible notes receivable into equity securities
|
|
$
|
—
|
|
|
$
|
4,862
|
|
Issuance of promissory note in exchange for sale of equity method investment
|
|
$
|
54,154
|
|
|
$
|
—
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
||||
Operating cash flows from operating leases
|
|
$
|
9,020
|
|
|
$
|
—
|
|
Investing cash flows from finance leases
1
|
|
$
|
10,896
|
|
|
$
|
—
|
|
Financing cash flows from finance leases
|
|
$
|
45,773
|
|
|
$
|
—
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
||||
Operating leases
|
|
$
|
21,066
|
|
|
$
|
—
|
|
Finance leases
|
|
$
|
51,064
|
|
|
$
|
—
|
|
1
|
A
portion of finance lease purchase payment relates to leasing a part of the building to a third party as a lessor. This amount is included in Other Investing Activities in our Condensed Consolidated Statements of Cash Flows (
Refer to Note 4 “Leases” of the Notes to Condensed Consolidated Financial Statements
for more information).
|
•
|
Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:
|
•
|
Comprehensive Products include, but not limited to, our Invisalign Comprehensive (formerly known as Invisalign Full and Invisalign Teen), Invisalign Assist and Invisalign First.
|
•
|
Non-Comprehensive Products include, Invisalign Express 10, Invisalign Express 5, Express Package, Lite Package and Invisalign Go products in addition to revenues from the sale of aligners to SDC under our supply agreement.
|
•
|
Non-Case includes, but not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intraoral scanning systems, additional services and ancillary products available with the intraoral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
Net revenues
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Clear Aligner
|
|
$
|
496,702
|
|
|
$
|
433,241
|
|
|
$
|
965,907
|
|
|
$
|
818,746
|
|
Scanner
|
|
103,995
|
|
|
57,018
|
|
|
183,761
|
|
|
108,437
|
|
||||
Total net revenues
|
|
$
|
600,697
|
|
|
$
|
490,259
|
|
|
$
|
1,149,668
|
|
|
$
|
927,183
|
|
Gross profit
|
|
|
|
|
|
|
|
|
||||||||
Clear Aligner
|
|
$
|
366,142
|
|
|
$
|
331,612
|
|
|
$
|
717,500
|
|
|
$
|
628,588
|
|
Scanner
|
|
66,147
|
|
|
33,970
|
|
|
116,885
|
|
|
64,402
|
|
||||
Total gross profit
|
|
$
|
432,289
|
|
|
$
|
365,582
|
|
|
$
|
834,385
|
|
|
$
|
692,990
|
|
Income from operations
|
|
|
|
|
|
|
|
|
||||||||
Clear Aligner
|
|
$
|
244,029
|
|
|
$
|
190,287
|
|
|
$
|
402,670
|
|
|
$
|
351,741
|
|
Scanner
|
|
39,267
|
|
|
17,670
|
|
|
67,526
|
|
|
33,752
|
|
||||
Unallocated corporate expenses
|
|
(106,806
|
)
|
|
(85,266
|
)
|
|
(206,005
|
)
|
|
(164,610
|
)
|
||||
Total income from operations
|
|
$
|
176,490
|
|
|
$
|
122,691
|
|
|
$
|
264,191
|
|
|
$
|
220,883
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
||||||||
Clear Aligner
|
|
$
|
11,277
|
|
|
$
|
6,759
|
|
|
$
|
22,412
|
|
|
$
|
13,143
|
|
Scanner
|
|
2,451
|
|
|
1,169
|
|
|
4,548
|
|
|
2,273
|
|
||||
Unallocated corporate depreciation and amortization
|
|
9,763
|
|
|
4,704
|
|
|
19,209
|
|
|
8,650
|
|
||||
Total depreciation and amortization
|
|
$
|
23,491
|
|
|
$
|
12,632
|
|
|
$
|
46,169
|
|
|
$
|
24,066
|
|
Impairments and other charges
|
|
|
|
|
|
|
|
|
||||||||
Clear Aligner
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,782
|
|
|
$
|
—
|
|
Scanner
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Unallocated corporate impairments and other charges
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total impairments and other charges
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,782
|
|
|
$
|
—
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Total segment income from operations
|
|
$
|
283,296
|
|
|
$
|
207,957
|
|
|
$
|
470,196
|
|
|
$
|
385,493
|
|
Unallocated corporate expenses
|
|
(106,806
|
)
|
|
(85,266
|
)
|
|
(206,005
|
)
|
|
(164,610
|
)
|
||||
Total income from operations
|
|
176,490
|
|
|
122,691
|
|
|
264,191
|
|
|
220,883
|
|
||||
Interest income
|
|
3,465
|
|
|
1,917
|
|
|
6,098
|
|
|
4,093
|
|
||||
Other income (expense), net
|
|
13,892
|
|
|
(7,099
|
)
|
|
8,146
|
|
|
(6,922
|
)
|
||||
Net income before provision for income taxes and equity in losses of investee
|
|
$
|
193,847
|
|
|
$
|
117,509
|
|
|
$
|
278,435
|
|
|
$
|
218,054
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net revenues
1
:
|
|
|
|
|
|
|
|
|
||||||||
United States
|
|
$
|
296,655
|
|
|
$
|
254,020
|
|
|
$
|
575,660
|
|
|
$
|
491,123
|
|
The Netherlands
|
|
192,188
|
|
|
156,428
|
|
|
366,932
|
|
|
295,959
|
|
||||
China
|
|
44,823
|
|
|
38,431
|
|
|
87,439
|
|
|
64,017
|
|
||||
Other International
|
|
67,031
|
|
|
41,380
|
|
|
119,637
|
|
|
76,084
|
|
||||
Total net revenues
|
|
$
|
600,697
|
|
|
$
|
490,259
|
|
|
$
|
1,149,668
|
|
|
$
|
927,183
|
|
|
|
June 30,
2019 |
|
December 31, 2018
|
||||
Long-lived assets
2
:
|
|
|
|
|
||||
The Netherlands
|
|
$
|
226,068
|
|
|
$
|
206,679
|
|
United States
|
|
170,191
|
|
|
139,239
|
|
||
Costa Rica
|
|
82,186
|
|
|
80,218
|
|
||
China
|
|
57,176
|
|
|
36,249
|
|
||
Mexico
|
|
38,094
|
|
|
33,240
|
|
||
Other International
|
|
83,165
|
|
|
25,704
|
|
||
Total long-lived assets
|
|
$
|
656,880
|
|
|
$
|
521,329
|
|
•
|
New Invisalign Product Portfolio and Pricing
. In July 2018, we launched a new expanded Invisalign product portfolio which includes new options and greater flexibility to treat a broader range of patients. The new Invisalign product portfolio offers doctors more choices by extending desirable features across the entire portfolio and creating new Invisalign treatment packages, as well as new options to treat young patients with early mixed dentition (with a mixture of primary/baby and permanent teeth). The new end-to-end Invisalign product portfolio includes clear aligner product offerings for almost every patient age group and case complexity to make it easier for our doctors to tailor treatment planning to the needs of each patient. Pricing and availability for the new Invisalign product offerings and the associated terms and conditions vary by region.
|
•
|
New Invisalign Products and Feature Enhancements
. Product innovation drives greater treatment predictability, clinical applicability and ease of use for our customers which supports adoption of Invisalign treatment in their practices. Our focus is to develop solutions and features to treat a wide range of cases from simple to complex.
|
◦
|
We launched Invisalign treatment with Mandibular Advancement, the first clear aligner solution for Class II correction in growing tween and teen patients. This offering combines the benefits of our clear aligner system with features for moving the lower jaw forward while simultaneously aligning the teeth. Invisalign treatment with Mandibular Advancement is available in Canada, select Europe, Middle East and Africa (“EMEA”), Asia
|
◦
|
In April 2018, we announced a new Invisalign Go product with more user-friendly iTero digital chairside experience and greater flexibility to treat a wider range of mild to moderate cases, such as crowded or gap teeth that require teeth straightening prior to restorative treatments. Invisalign Go is available to Invisalign-trained doctors in the U.S., the majority of European countries as well as in select APAC markets. Invisalign Go also incorporates new data-driven clinical protocols for predictable tooth movement and automated case assessments that leverages our Invisalign patients treated to date. These improvements make it easier for general practitioner (“GP”) dentists to tailor their treatment plans to the individual needs of each patient.
|
◦
|
Beginning July 2018, Invisalign First clear aligners, a treatment option designed with features specifically for younger patients with early mixed dentition, were available to Invisalign-trained doctors in North America and select EMEA, APAC and LATAM countries. Invisalign First clear aligners are designed specifically to address a broad range of younger patients’ malocclusions, including shorter clinical crowns, management of erupting dentition and predictable dental arch expansion. Phase 1 treatment is an early interceptive orthodontic treatment for young patients, traditionally done through arch expanders, or partial metal braces, before all permanent teeth have erupted, typically at ages seven through ten years.
|
•
|
New iTero Products and Technology Innovation.
The iTero scanner is an important component to our customer experience and is central to a digital approach as well as overall customer utilization of Invisalign.
|
◦
|
In April 2018, we expanded the iTero Element portfolio with the launch of the iTero Element 2 and the iTero Element Flex scanners, building on the existing high precision, full-color imaging and fast scan times of the iTero Element portfolio while streamlining orthodontic and restorative workflows. The next-generation iTero Element 2 is designed for greater performance with 2X faster start-up and 25% faster scan processing time compared to the iTero Element. The new iTero Element Flex wand-only configuration is a portable scanner for easy transport from office to office. iTero Element 2 and iTero Element Flex are currently available in Canada, the U.S., and a majority of EMEA and APAC countries. The existing iTero Element scanner will continue to be available in all markets.
|
◦
|
In April 2018, we announced that we received market approval for the iTero Element intra-oral scanner from the China Food and Drug Administration, and we began offering this scanner in China. The iTero Element scanner launch in China not only supports growth of our base Invisalign clear aligner business but also represents a major milestone for digital dentistry in China. As we continue to expand into markets where we sell our intra-oral scanners, we expect continued growth for the foreseeable future due to the size of the market opportunities and our relatively low market penetration in these regions.
|
◦
|
In February 2019, we announced the launch of iTero Element 5D Imaging System for comprehensive, preventative and restorative oral care. The iTero Element 5D Imaging System provides a new comprehensive approach to clinical applications, workflows and user experience that expands the suite of existing high-precision, full color imaging and fast scan times of the iTero Element portfolio. The iTero Element 5D Imaging System is available in the majority of EMEA and select APAC countries. The iTero Element 5D Imaging System is not yet available in the U.S. or Latin America.
|
◦
|
In June 2019, we announced the launch of iTero Element Foundation intraoral scanner with restorative software. The iTero Element Foundation extends Align’s portfolio of intraoral scanners with powerful 3D visualization to better meet the needs of doctors, labs and patients. The iTero Element Foundation is available in North America and Japan and will also be available in select Asia Pacific and in select EMEA countries later this year.
|
•
|
Invisalign Adoption.
Our goal is to establish Invisalign as the treatment of choice for treating malocclusion ultimately driving increased product adoption and frequency of use by dental professionals, also known as “utilization rates.” Our quarterly utilization rates for the last five quarters are as follows:
|
◦
|
Total utilization in the
second
quarter of
2019
increased to 6.2 cases per doctor compared to 6.0 cases in the
second
quarter of
2018
.
|
▪
|
North America:
Utilization among our North American orthodontist customers reached an all time high in the
second
quarter of
2019
at 18.9 cases per doctor, compared to 16.4 cases per doctor utilized in the
second
quarter of
2018
while utilization among our North American GP remained flat at 3.6 cases per doctor for both the second quarter of 2019 and 2018. The increase in North American orthodontist utilization in the
second
quarter of
2019
reflects improvements in product and technology which continues to strengthen our doctors’ clinical confidence such that they now utilize Invisalign more often and on more complex cases, including their teenage patients.
|
▪
|
International:
International doctor utilization was 5.7 cases per doctor in the
second
quarter of
2019
compared to 5.6 in the
second
quarter of 2018. The increase in International utilization reflects increased utilization and continued expansion of our customer base due to increasing adoption of the product due in part to its ability to treat more complex cases.
|
•
|
Number of New Invisalign Doctors Trained.
We continue to expand our Invisalign customer base through the training of new doctors. During the
six
months ended
June 30, 2019
, we trained 10,545 new Invisalign doctors of which 4,615 were trained in the Americas region and 5,930 in the International region. In 2018, we trained a total of 19,655 new Invisalign doctors, of which 7,885 were trained in the Americas region and 11,770 in the International region.
|
•
|
International Invisalign Growth.
We continue to focus our efforts towards increasing Invisalign clear aligner adoption by dental professionals in the EMEA and APAC markets. On a year-over-year basis, our International Invisalign volume increased 36.7% driven primarily by increased adoption as well as expansion of our customer base in both the EMEA and APAC regions. However, in the second quarter of 2019, we experienced softness in China related to a tougher consumer demand environment. Notwithstanding the current consumer sentiment in China, we continue to see growth from our international orthodontists and GP customers and are seeing more positive traction in the GP channel as we continue to segment our sales and marketing resources and programs specifically around each customer channel. We believe that continuous product introductions and feature improvements, such as Invisalign treatment with mandibular advancement, provide our customers with continued confidence in treating complex cases as well as teen-aged patients with Invisalign clear aligners. In 2019, we are continuing to expand in our existing markets through targeted investments in sales coverage and professional marketing and education programs, along with consumer marketing in select country markets. We expect International revenues to continue to grow at a faster rate than the Americas for the foreseeable future due to our continued investment in international market expansion, the size of the market opportunities and our relatively low market penetration of these regions. Our future growth is dependent upon the continued growth of Invisalign adoption and international market penetration (Refer to
Item 1A Risk Factors - “We depend on the sale of the Invisalign System for the vast majority of our net revenues, and any decline in sales of Invisalign treatment for any reason, or a decline in average selling prices would adversely affect net revenues, gross margin and net income.”
and
“We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.”
for information on related risk factors).
|
•
|
Increasing Competition.
In the second quarter of 2019, we experienced slower adult case growth from North American orthodontists, reflecting a more competitive environment especially for the young adult demographic. Given increased awareness for direct to consumer clear aligners and heavy advertising spend from direct to consumer players, case starts may be shifting away from traditional practices. We also believe that doctors are sampling alternative products and/or taking advantage of wires and brackets bundles that essentially give clear aligners away for free or at very low prices. In the third quarter of 2019, we are increasing investment in consumer demand with a new advertising campaign for North America and expanding marketing programs such as our Concierge Service, which connects potential patients with Invisalign doctors increasing conversion and loyalty. In addition, we are launching new sales tools and professional marketing materials and we also expect to see increased productivity from approximately 100 sales representatives we added in the first quarter of 2019. If, however, we are unable to compete effectively with existing products or respond effectively to any products developed by new or existing competitors, our business could be harmed (Refer to
Item 1A Risk Factors “Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors and other companies that may introduce new technologies in the future.”
for information on related risk factors
).
|
•
|
Establish Regional Order Acquisition, Treatment Planning and Manufacturing Operations.
We will continue to establish and expand additional order acquisition, treatment planning and manufacturing operations closer to our international customers in order to improve our operational efficiency and to provide doctors confidence in using Invisalign clear aligners to treat more patients and more often. In the fourth quarter of 2018, we began fabricating our aligners in our new manufacturing facility in Ziyang, China, our first aligner fabrication facility outside of Juarez, Mexico. We continue to expect that it will take several quarters to ramp this facility up to full capacity and, as a result, manufacturing labor and overhead in this facility will be underutilized during this transition period (Refer
to
Item 1A Risk Factors - “As we continue to grow, we are subject to growth related risks, including risks related to excess or constrained capacity and operational efficiencies at our manufacturing and treat facilities”
for information on related risk factors).
|
•
|
Corporate Structure Reorganization.
Given our continued growth and expansion internationally, we are reorganizing our corporate structure and intercompany relationships to more closely align with the international nature of our business activities. The new corporate structure may also allow us to obtain financial and operational efficiencies after they are implemented. As part of this corporate structure reorganization, we intend to relocate our European headquarters from the Netherlands to Switzerland. We expect the relocation to be completed in early 2020. As a result, we will continue to incur expenses in the near term and expect to realize the related benefits in subsequent years. The implementation of this reorganization plan may be disruptive to our business, and, following completion of the reorganization plan, our business may not be more efficient or effective than prior to implementation of the plan. Our reorganization activities, including any related expenses and the impact from affected employees, could have a material adverse effect on our business, operating results, and financial condition (Refer to
Item 1A Risk Factors - “We may experience unexpected issues and expenses associated with the corporate structure reorganization, including the relocation of our European headquarters to Switzerland”
for information on related risk factors).
|
•
|
Straumann Group Litigation Settlement.
In March 2019, we entered into an agreement with Straumann Group to settle all outstanding patent disputes in the U.S., the U.K., and Brazil, including those involving ClearCorrect, a subsidiary
|
•
|
SmileDirectClub.
In March 2019, we announced the outcome of the arbitration of the claims asserted against us by SDC Financial LLC, SmileDirectClub LLC, and the members of SDC Financial LLC other than the company (collectively, the SDC Entities). The arbitrator ordered us to close our Invisalign stores by April 3, 2019, enjoined us from opening new Invisalign stores or providing certain services in physical retail establishments, and enjoined us from using the SDC Entities’ confidential information. The arbitrator extended the expiration date of the non-compete provision to August 18, 2022. The arbitrator also ordered us to tender our SDC Financial LLC membership interests to the SDC Entities for a purchase price equal to the “capital account” balance of Align as of October 31, 2017. No financial damages were awarded to the SDC Entities. In the first quarter of 2019, we recorded charges related to the store closures of approximately $29.8 million, composed of impairments related to the right of use lease assets, leasehold improvements and other fixed assets along with employee severance expenses. These amounts represent estimates which are subject to change as management finalizes its assessment. Changes to these estimates may be material. On April 3, 2019, we had closed all Invisalign stores and returned all of SDC’s confidential information. We also tendered our membership interests to the SDC Entities for a purchase price that SDC claims to be the “capital account” balance of Align as of October 31, 2017. As a result, we recorded a $15.8 million gain in the second quarter of 2019 as other income in our Condensed Consolidated Statement of Operation. Although we tendered our membership interests pursuant to the arbitrator’s decision, the parties did not agree on the amount of the “capital account” balance as of October 31, 2017 or the appropriate repurchase price for the membership units. On July 3, 2019, we filed a demand for arbitration regarding SDC’s calculation of the “capital account” balance. We anticipate that there may be additional litigation with the SDC Entities regarding the “capital account” balance and other issues relating to the Award and the parties’ relationship (
Refer to Note 9 "Legal Proceedings" of the Notes to Consolidated Financial Statements
for details on SDC dispute and
Refer to Note 8 "Impairments and Other Charges" of the Notes to Consolidated Financial Statements
for details on impairments).
|
•
|
Expenses.
We expect expenses to increase in 2019 due in part to:
|
◦
|
Investments in manufacturing capacity and facilities to enhance our regional capabilities;
|
◦
|
Investments in international expansion in new country markets;
|
◦
|
Investments in expansion of number of direct sales force personnel;
|
◦
|
Increase in sales, marketing and customer support resources including our new advertising campaign;
|
◦
|
Product and technology innovation to enhance product efficiency and operational productivity;
|
◦
|
Increases in legal expenses, primarily related to the continued protection of our intellectual property rights, including our patents along with the additional costs related to the planned corporate structure reorganization.
|
•
|
Stock Repurchases.
During the
six
months ended
June 30, 2019
, we repurchased $99.5 million of our common stock on the open market. As of
June 30, 2019
, we have $400.5 million available for repurchase under the $600.0 million repurchase program authorized by our Board of Directors in May 2018. On July 30, 2019, we entered into an accelerated share repurchase agreement (“2019 ASR”) to repurchase $200.0 million of our common stock. We paid $200.0 million on July 31, 2019 and received an initial delivery of approximately 0.7 million shares based on current market prices. The final number of shares to be repurchased will be based on our volume-weighted average stock price under the term of the 2019 ASR, less an agreed upon discount (
Refer to Note 12 “Common Stock Repurchase Programs” of the Notes to Condensed Consolidated Financial Statements
for details on our stock repurchase programs).
|
•
|
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 (formerly known as Invisalign Full and Invisalign Teen), Invisalign Assist and Invisalign First.
|
•
|
Non-Comprehensive Products include, but are not limited to, Invisalign Express 10, Invisalign Express 5, Express Package, Lite Package and Invisalign Go in addition to revenues from the sale of aligners to SmileDirectClub (“SDC”) under our supply agreement.
|
•
|
Non-Case includes, but is not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intraoral scanning systems, additional services and ancillary products available with the intraoral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
Net Revenues
|
|
2019
|
|
2018
|
|
Net
Change
|
|
%
Change
|
|
2019
|
|
2018
|
|
Net
Change
|
|
%
Change
|
||||||||||||||
Clear Aligner revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Americas
|
|
$
|
248.5
|
|
|
$
|
234.0
|
|
|
$
|
14.5
|
|
|
6.2
|
%
|
|
$
|
493.9
|
|
|
$
|
443.6
|
|
|
$
|
50.3
|
|
|
11.3
|
%
|
International
|
|
216.5
|
|
|
173.0
|
|
|
43.5
|
|
|
25.1
|
%
|
|
411.3
|
|
|
324.7
|
|
|
86.6
|
|
|
26.7
|
%
|
||||||
Non-case
|
|
31.7
|
|
|
26.2
|
|
|
5.5
|
|
|
20.9
|
%
|
|
60.7
|
|
|
50.4
|
|
|
10.3
|
|
|
20.3
|
%
|
||||||
Total Clear Aligner net revenues
|
|
$
|
496.7
|
|
|
$
|
433.2
|
|
|
$
|
63.5
|
|
|
14.6
|
%
|
|
$
|
965.9
|
|
|
$
|
818.7
|
|
|
$
|
147.2
|
|
|
18.0
|
%
|
Scanner net revenues
|
|
104.0
|
|
|
57.0
|
|
|
47.0
|
|
|
82.4
|
%
|
|
183.8
|
|
|
108.4
|
|
|
75.3
|
|
|
69.5
|
%
|
||||||
Total net revenues
|
|
$
|
600.7
|
|
|
$
|
490.3
|
|
|
$
|
110.4
|
|
|
22.5
|
%
|
|
$
|
1,149.7
|
|
|
$
|
927.2
|
|
|
$
|
222.5
|
|
|
24.0
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
Region
|
|
2019
|
|
2018
|
|
Net
Change
|
|
%
Change
|
|
2019
|
|
2018
|
|
Net
Change
|
|
%
Change
|
||||||||
Americas
|
|
212.7
|
|
|
198.0
|
|
|
14.7
|
|
|
7.4
|
%
|
|
425.9
|
|
|
374.5
|
|
|
51.4
|
|
|
13.7
|
%
|
International
|
|
165.8
|
|
|
121.3
|
|
|
44.5
|
|
|
36.7
|
%
|
|
312.0
|
|
|
226.8
|
|
|
85.2
|
|
|
37.6
|
%
|
Total case volume
|
|
378.5
|
|
|
319.2
|
|
|
59.2
|
|
|
18.6
|
%
|
|
737.9
|
|
|
601.3
|
|
|
136.6
|
|
|
22.7
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Clear Aligner
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
|
$
|
130.6
|
|
|
$
|
101.6
|
|
|
$
|
28.9
|
|
|
$
|
248.4
|
|
|
$
|
190.2
|
|
|
$
|
58.2
|
|
% of net segment revenues
|
|
26.3
|
%
|
|
23.5
|
%
|
|
|
|
25.7
|
%
|
|
23.2
|
%
|
|
|
||||||||
Gross profit
|
|
$
|
366.1
|
|
|
$
|
331.6
|
|
|
$
|
34.5
|
|
|
$
|
717.5
|
|
|
$
|
628.6
|
|
|
$
|
88.9
|
|
Gross margin %
|
|
73.7
|
%
|
|
76.5
|
%
|
|
|
|
74.3
|
%
|
|
76.8
|
%
|
|
|
||||||||
Scanner
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
|
$
|
37.8
|
|
|
$
|
23.0
|
|
|
$
|
14.8
|
|
|
$
|
66.9
|
|
|
$
|
44.0
|
|
|
$
|
22.8
|
|
% of net segment revenues
|
|
36.4
|
%
|
|
40.4
|
%
|
|
|
|
36.4
|
%
|
|
40.6
|
%
|
|
|
||||||||
Gross profit
|
|
$
|
66.1
|
|
|
$
|
34.0
|
|
|
$
|
32.2
|
|
|
$
|
116.9
|
|
|
$
|
64.4
|
|
|
$
|
52.5
|
|
Gross margin %
|
|
63.6
|
%
|
|
59.6
|
%
|
|
|
|
63.6
|
%
|
|
59.4
|
%
|
|
|
||||||||
Total cost of net revenues
|
|
$
|
168.4
|
|
|
$
|
124.7
|
|
|
$
|
43.7
|
|
|
$
|
315.3
|
|
|
$
|
234.2
|
|
|
$
|
81.1
|
|
% of net revenues
|
|
28.0
|
%
|
|
25.4
|
%
|
|
|
|
27.4
|
%
|
|
25.3
|
%
|
|
|
||||||||
Gross profit
|
|
$
|
432.3
|
|
|
$
|
365.6
|
|
|
$
|
66.7
|
|
|
$
|
834.4
|
|
|
$
|
693.0
|
|
|
$
|
141.4
|
|
Gross margin %
|
|
72.0
|
%
|
|
74.6
|
%
|
|
|
|
72.6
|
%
|
|
74.7
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Selling, general and administrative
|
|
$
|
267.9
|
|
|
$
|
212.1
|
|
|
$
|
55.9
|
|
|
$
|
515.1
|
|
|
$
|
411.7
|
|
|
$
|
103.3
|
|
% of net revenues
|
|
44.6
|
%
|
|
43.3
|
%
|
|
|
|
44.8
|
%
|
|
44.4
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Research and development
|
|
$
|
38.9
|
|
|
$
|
30.8
|
|
|
$
|
8.0
|
|
|
$
|
76.4
|
|
|
$
|
60.4
|
|
|
$
|
16.0
|
|
% of net revenues
|
|
6.5
|
%
|
|
6.3
|
%
|
|
|
|
6.6
|
%
|
|
6.5
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Impairments and other charges
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29.8
|
|
|
$
|
—
|
|
|
$
|
29.8
|
|
% of net revenues
|
|
—
|
%
|
|
—
|
%
|
|
|
|
2.6
|
%
|
|
—
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Litigation settlement gain
|
|
$
|
(51.0
|
)
|
|
$
|
—
|
|
|
$
|
(51.0
|
)
|
|
$
|
(51.0
|
)
|
|
$
|
—
|
|
|
$
|
(51.0
|
)
|
% of net revenues
|
|
(8.5
|
)%
|
|
—
|
%
|
|
|
|
(4.4
|
)%
|
|
—
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Clear Aligner
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from operations
|
|
$
|
244.0
|
|
|
$
|
190.3
|
|
|
$
|
53.7
|
|
|
$
|
402.7
|
|
|
$
|
351.7
|
|
|
$
|
50.9
|
|
Operating margin %
|
|
49.1
|
%
|
|
43.9
|
%
|
|
|
|
41.7
|
%
|
|
43.0
|
%
|
|
|
||||||||
Scanner
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from operations
|
|
$
|
39.3
|
|
|
$
|
17.7
|
|
|
$
|
21.6
|
|
|
$
|
67.5
|
|
|
$
|
33.8
|
|
|
$
|
33.8
|
|
Operating margin %
|
|
37.8
|
%
|
|
31.0
|
%
|
|
|
|
36.7
|
%
|
|
31.1
|
%
|
|
|
||||||||
Total income from operations
1
|
|
$
|
176.5
|
|
|
$
|
122.7
|
|
|
$
|
53.8
|
|
|
$
|
264.2
|
|
|
$
|
220.9
|
|
|
$
|
43.3
|
|
Operating margin %
|
|
29.4
|
%
|
|
25.0
|
%
|
|
|
|
23.0
|
%
|
|
23.8
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
3.5
|
|
|
$
|
1.9
|
|
|
$
|
1.5
|
|
|
$
|
6.1
|
|
|
$
|
4.1
|
|
|
$
|
2.0
|
|
% of net revenues
|
|
0.6
|
%
|
|
0.4
|
%
|
|
|
|
0.5
|
%
|
|
0.4
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Other income (expense), net
|
|
$
|
13.9
|
|
|
$
|
(7.1
|
)
|
|
$
|
21.0
|
|
|
$
|
8.1
|
|
|
$
|
(6.9
|
)
|
|
$
|
15.1
|
|
% of net revenues
|
|
2.3
|
%
|
|
(1.4
|
)%
|
|
|
|
0.7
|
%
|
|
(0.7
|
)%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Equity in losses of investee, net of tax
|
|
$
|
3.6
|
|
|
$
|
3.7
|
|
|
$
|
(0.1
|
)
|
|
$
|
7.5
|
|
|
$
|
5.5
|
|
|
$
|
2.1
|
|
% of net revenues
|
|
0.6
|
%
|
|
0.8
|
%
|
|
|
|
0.7
|
%
|
|
0.6
|
%
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Provision for income taxes
|
|
$
|
43.1
|
|
|
$
|
7.7
|
|
|
$
|
35.4
|
|
|
$
|
51.9
|
|
|
$
|
10.6
|
|
|
$
|
41.3
|
|
Effective tax rates
|
|
22.2
|
%
|
|
6.6
|
%
|
|
|
|
18.6
|
%
|
|
4.9
|
%
|
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
423,500
|
|
|
$
|
636,899
|
|
Marketable securities, short-term
|
|
297,422
|
|
|
98,460
|
|
||
Marketable securities, long-term
|
|
44,969
|
|
|
9,112
|
|
||
Total
|
|
$
|
765,891
|
|
|
$
|
744,471
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2019
|
|
2018
|
||||
Net cash flow provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
294,561
|
|
|
$
|
217,121
|
|
Investing activities
|
|
(321,020
|
)
|
|
54,003
|
|
||
Financing activities
|
|
(188,381
|
)
|
|
(170,745
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
|
1,467
|
|
|
(1,923
|
)
|
||
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
|
$
|
(213,373
|
)
|
|
$
|
98,456
|
|
•
|
Depreciation and amortization of
$46.2 million
related to our long-lived assets;
|
•
|
Stock-based compensation of
$43.5 million
related to equity incentive compensation granted to employees and directors;
|
•
|
Impairment charges of
$28.5 million
related to decreases in the fair value of certain assets related to Invisalign stores;
|
•
|
Gain from sale of equity method investment of
$15.8 million
;
|
•
|
Equity in loss of investee of
$7.5 million
; and
|
•
|
Net change in deferred tax assets of
$5.6 million
.
|
•
|
Increase of
$95.2 million
in deferred revenues corresponding to the increase in case volume;
|
•
|
Increase of
$89.1 million
in accounts receivable which is primarily a result of the increase in net revenues; and
|
•
|
Increase of
$48.9 million
in prepaid expenses and other assets due to timing of payments and activities including a $16.0 million receivable from a litigation settlement.
|
•
|
difficulties in hiring and retaining employees generally, as well as difficulties in hiring and retaining employees with the necessary skills to perform the more technical aspects of our operations;
|
•
|
difficulties in managing international operations, including any travel restrictions to or from our facilities;
|
•
|
fluctuations in currency exchange rates;
|
•
|
import and export controls, license requirements and restrictions;
|
•
|
controlling production volume and quality of the manufacturing process;
|
•
|
political, social and economic instability, including increased levels of violence in Juarez, Mexico or the Middle East. We cannot predict the effect on us of any future armed conflict, political instability or violence in these regions. In addition, some of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are subject to being called for additional active duty under emergency circumstances. We cannot predict the full impact of these conditions on us in the future, particularly if emergency circumstances or an escalation in the political situation occurs. If many of our employees are called for active duty, our operations in Israel and our business may not be able to function at full capacity;
|
•
|
acts of terrorism and acts of war;
|
•
|
general geopolitical instability and the responses to it, such as the possibility of additional sanctions against China and Russia which continue to bring uncertainty to these regions;
|
•
|
interruptions and limitations in telecommunication services;
|
•
|
product or material transportation delays or disruption, including as a result of customs clearance, increased levels of violence, acts of terrorism, acts of war or health epidemics restricting travel to and from our international locations or as a result of natural disasters, such as earthquakes or volcanic eruptions;
|
•
|
burdens of complying with a wide variety of local country and regional laws, including the risks associated with the Foreign Corrupt Practices Act and local anti-bribery compliance;
|
•
|
trade restrictions and changes in tariffs, including the recent tariffs imposed by the U.S. and China and the possibility of additional tariffs or other trade restrictions related to trade between these two countries or between the U.S. and Mexico; and
|
•
|
potential adverse tax consequences.
|
•
|
local political and economic instability;
|
•
|
the engagement of activities by our employees, contractors, partners and agents, especially in countries with developing economies, that are prohibited by international and local trade and labor laws and other laws prohibiting corrupt payments to government officials, including the Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and export control laws, in spite of our policies and procedures designed to ensure compliance with these laws;
|
•
|
fluctuations in currency exchange rates; and
|
•
|
increased expense of developing, testing and making localized versions of our products.
|
•
|
correctly identify customer needs and preferences and predict future needs and preferences;
|
•
|
include functionality and features that address customer requirements;
|
•
|
ensure compatibility of our computer operating systems and hardware configurations with those of our customers;
|
•
|
allocate our research and development funding to products with higher growth prospects;
|
•
|
anticipate and respond to our competitors’ development of new products, product offerings and technological innovations;
|
•
|
differentiate our products and product offerings from our competitors;
|
•
|
innovate and develop new technologies and applications;
|
•
|
the availability of third-party reimbursement of procedures using our products;
|
•
|
obtain adequate intellectual property rights; and
|
•
|
encourage customers to adopt new technologies.
|
•
|
limited visibility into and difficulty predicting from quarter to quarter, the level of activity in our customers’ practices;
|
•
|
weakness in consumer spending as a result of a slowdown in the global, U.S. or other economies;
|
•
|
changes in product mix;
|
•
|
higher manufacturing costs driven by an increase in the numbers of aligners per case;
|
•
|
changes in relationships with our dental support organizations, including timing of orders;
|
•
|
changes in the timing of receipt of Invisalign case product orders during a given quarter which, given our cycle time and the delay between case receipts and case shipments, could have an impact on which quarter revenues can be recognized;
|
•
|
fluctuations in currency exchange rates against the U.S. dollar;
|
•
|
our inability to scale production of our iTero Element scanner to meet customer demand;
|
•
|
if participation in our customer rebate or discount programs increases, our average selling price will be adversely affected;
|
•
|
seasonal fluctuations in the number of doctors in their offices and their availability to take appointments;
|
•
|
success of or changes to our marketing programs from quarter to quarter;
|
•
|
our reliance on our contract manufacturers for the production of sub-assemblies for our intraoral scanners;
|
•
|
timing of industry tradeshows;
|
•
|
changes in the timing of when revenues are recognized, including as a result of the introduction of new products, product offerings or promotions, modifications to our terms and conditions or as a result of changes to critical accounting estimates or new accounting pronouncements;
|
•
|
changes to our effective tax rate;
|
•
|
unanticipated delays in production caused by insufficient capacity or availability of raw materials;
|
•
|
any disruptions in the manufacturing process, including unexpected turnover in the labor force or the introduction of new production processes, power outages or natural or other disasters beyond our control;
|
•
|
underutilization of manufacturing and treat facilities;
|
•
|
the development and marketing of directly competitive products by existing and new competitors;
|
•
|
changes in relationships with our distributors;
|
•
|
impairments in the value of our privately held companies could be material;
|
•
|
major changes in available technology or the preferences of customers may cause our current product offerings to become less competitive or obsolete;
|
•
|
aggressive price competition from competitors;
|
•
|
costs and expenditures in connection with litigation;
|
•
|
costs and expenditures in connection with establishment of treatment planning and Aligner fabrication in international locations;
|
•
|
costs and expenditures in connection with hiring and deployment of direct sales force personnel;
|
•
|
the timing of new product introductions by us and our competitors, as well as customer order deferrals in anticipation of enhancements or new products;
|
•
|
unanticipated delays in our receipt of patient records made through an intraoral scanner for any reason;
|
•
|
disruptions to our business due to political, economic or other social instability, including the impact of an epidemic any of which results in changes in consumer spending habits, consumers unable or unwilling to visit the orthodontist or general practitioners office, as well as any impact on workforce absenteeism;
|
•
|
inaccurate forecasting of net revenues, production and other operating costs,
|
•
|
investments in research and development to develop new products and enhancements;
|
•
|
changes in accounting standards, policies and estimates; and
|
•
|
our ability to successfully hedge against a portion of our foreign currency-denominated assets and liabilities.
|
•
|
quarterly variations in our results of operations and liquidity;
|
•
|
changes in recommendations by the investment community or in their estimates of our net revenues or operating results;
|
•
|
speculation in the press or investment community concerning our business and results of operations;
|
•
|
strategic actions by our competitors, such as product announcements or acquisitions;
|
•
|
announcements of technological innovations or new products or product offerings by us, our customers or competitors;
|
•
|
key decisions in pending litigation; and
|
•
|
general economic market conditions.
|
•
|
product design, development, manufacturing and testing;
|
•
|
product labeling;
|
•
|
product storage;
|
•
|
pre-market clearance or approval;
|
•
|
complaint handling and corrective actions;
|
•
|
advertising and promotion; and
|
•
|
product sales and distribution.
|
•
|
warning letters, fines, injunctions, consent decrees and civil penalties;
|
•
|
repair, replacement, refunds, recall or seizure of our products;
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
•
|
refusing our requests for 510(k) clearance or pre-market approval of new products, new intended uses, or modifications to existing products;
|
•
|
withdrawing clearance or pre-market approvals that have already been granted; and
|
•
|
criminal prosecution.
|
•
|
storage, transmission and disclosure of medical information and healthcare records;
|
•
|
prohibitions against the offer, payment or receipt of remuneration to induce referrals to entities providing healthcare services or goods or to induce the order, purchase or recommendation of our products; and
|
•
|
the marketing and advertising of our products.
|
•
|
the relocation may absorb significant management and key employee attention and resources that would otherwise be available for the ongoing business operations;
|
•
|
failure to retain key employees who possess specific knowledge or expertise and upon whom we are depending upon for the timely and successful transition to Switzerland;
|
•
|
difficulties in hiring employees in Switzerland with the necessary skills and expertise; and
|
•
|
increased costs as we transition the operations to Switzerland along with higher costs of doing business in Switzerland.
|
Period
|
|
Total Number of Shares Repurchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Repurchased as Part of Publicly Announced Program
|
|
Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Program
1
|
||||||
April 1, 2019 through April 30, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
450,000,000
|
|
May 1, 2019 through May 31, 2019
|
|
161,000
|
|
|
$
|
307.48
|
|
|
161,000
|
|
|
$
|
400,500,000
|
|
June 1, 2019 through June 30, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
400,500,000
|
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
|
Filing
|
|
Date
|
|
Exhibit
Number
|
|
Filed here with
|
|
|
|
|
|
|
|
|
*
|
||
|
|
|
|
|
|
|
|
*
|
||
|
|
|
|
|
|
|
|
*
|
||
101.INS
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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ALIGN TECHNOLOGY, INC.
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August 1, 2019
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By:
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/s/ JOSEPH M. HOGAN
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Joseph M. Hogan
President and Chief Executive Officer
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By:
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/s/ JOHN F. MORICI
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John F. Morici
Chief Financial Officer and Senior Vice President, Global Finance
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1 Year Align Technology Chart |
1 Month Align Technology Chart |
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