Align Technology (ALGN) 10-K risk factor changes: FY2019 vs FY2018

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.

We expect that net revenues from the sale of the Invisalign System, primarily our comprehensive products, will continue to account for the vast majority of our total net revenues for the foreseeable future.

Continued and widespread market acceptance of Invisalign by orthodontists, GPs and consumers is critical to our future success.

If orthodontists and GPs experience a reduction in consumer demand for orthodontic services, if consumers prove unwilling to adopt Invisalign as rapidly as we anticipate or in the volume that we anticipate, if orthodontists or GPs choose to use a competitive product rather than Invisalign or if the average selling price of our product declines for any reason, including as a result of a shift in product mix towards lower priced products, our operating results would be harmed.

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.

Currently, our products compete directly against products manufactured and distributed by various companies, both within and outside the U.S. Although the number of competitors varies by segment, geography and customer, we encounter a wide variety of competitors, including well-established regional competitors in certain foreign markets, as well as larger companies or divisions of larger companies with substantial sales, marketing, research and financial capabilities.

Due in part to the expiration of certain key patents owned by us beginning in 2017, we are facing increased competition in the clear aligner market as a result of the entry of new, large companies into certain markets who have the ability to leverage their existing channels in the dental market to compete directly with us.

In addition, corresponding foreign patents started to expire in 2018 and will likely result in increased competition in some of the markets outside the U.S. Large consumer product companies may also enter the orthodontic supply market.

Furthermore, we also face competition from companies that now offer clear aligners directly to the consumer and do not require the consumer to see a doctor before or during orthodontic treatment.

Unlike these direct to consumer competitors, we are committed to a doctor in the core of everything we do, and Invisalign Treatment requires a doctor's prescription and an in person physical examination of the patients dentition before treatment can begin.

In addition, we may also face competition in the future from new companies that may introduce new technologies.

We may be unable to compete with these competitors and one or more of these competitors may render our technology obsolete or economically unattractive.

If 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.

Increased competition has resulted in the past and may in the future result in volume discounting and price reductions, reduced gross margins, reduced profitability and loss of market share, and reduce dental professionals’ efforts and commitment to expand their use of our products, any of which could have a material adverse effect on our net revenues, volume growth, net income and stock price.

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

We are dependent on our international operations, which exposes us to foreign operational, political and other risks that may harm our business.

Our key production steps are performed in operations located outside of the U.S. Technicians use a sophisticated, internally developed computer-modeling program to prepare digital treatment plans, which are then transmitted electronically to our aligner fabrication facilities.

These digital files form the basis of the ClinCheck treatment plan and are used to manufacture aligner molds and aligners.

Our digital treatment planning and aligner fabrication are performed in multiple international locations.

We will continue to establish treatment planning and aligner fabrication facilities closer to our international customers in order to improve our operational efficiency.

In addition to the research and development efforts conducted in our North America facilities, we also carry out research and development in Moscow, Russia.

We also have operations in Israel where we design and assemble wands,

and our intraoral scanner is manufactured.

Our reliance on international operations exposes us to risks and uncertainties that may affect our business or results of operation, including:

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| • | 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; |

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| • | difficulties in managing international operations, including any travel restrictions to or from our facilities; |

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| • | fluctuations in currency exchange rates; |

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| • | import and export controls, license requirements and restrictions; |

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

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[removed: Overview][added: Overview]

Our [removed: goal is] [added: goals are] to establish Invisalign clear aligners as the standard method for treating malocclusion [added: which, to date, over 8 million people worldwide have been treated with our Invisalign System,] and to establish the iTero intraoral scanner as the preferred scanning device for 3D digital scans, ultimately driving increased [added: clear aligner and other] product adoption by dental professionals.

We intend to achieve [removed: this] [added: these goals] by continued focus and execution of our strategic growth drivers set forth in the [removed: Business Strategy] [added: *Business Strategy*] section [removed: in] [added: of] this Annual Report on Form 10-K.

The successful execution of our business strategy in [removed: 2019] [added: 2020] and beyond may be affected by a number of [removed: other] factors including:

| • | [removed: New] [added: *New] Invisalign Products and Feature [removed: Enhancements. Product] [added: Enhancements*. We believe product] innovation drives greater treatment predictability, clinical applicability and ease of use for [removed: our] [added: the dental professionals we serve] 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. |

| [removed: ◦] [added: •] | [removed: In March 2017, we announced] [added: We rolled out] Invisalign treatment with Mandibular Advancement, the first clear aligner solution for Class II correction in growing tween and teen [removed: patients.] [added: patients in multiple regions and countries throughout 2018.] This offering combines the benefits of our clear aligner system with features for moving the lower jaw forward while simultaneously aligning the [removed: teeth. Invisalign treatment with Mandibular Advancement is available in Canada, select Europe, Middle East and Africa (“EMEA”), Asia Pacific (“APAC”) and Latin America (“LATAM”) countries and, in the U.S. starting November 2018 as we received 510(k) clearance from] [added: teeth without] the [removed: United States (“U.S.”) Food and Drug Administration in October 2018.] [added: need for elastics typically used to treat teen Class II patients.] |

| [removed: ◦] [added: •] | [removed: Beginning] [added: In] July 2018, [added: we announced] Invisalign First clear [removed: aligners,] [added: aligners which are] a treatment option designed with features specifically for younger patients with early mixed [removed: dentition, are available to Invisalign-trained doctors in the U.S., Canada, Australia, New Zealand, Japan, and the EMEA region. Invisalign First clear aligners are designed specifically to address] [added: dentition with] a [removed: broad range of younger patients’ malocclusions, including shorter clinical crowns, management] [added: mixture] of [removed: erupting dentition] [added: primary/baby] and [removed: predictable dental arch expansion.] [added: permanent teeth.] 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. [added: 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.] |

| [removed: ◦] [added: •] | In April 2018, we announced [removed: 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 [removed: 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.] [added: cases.] 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 [added: (“GP”)] dentists to tailor their treatment plans to the individual needs of each patient. |

| • | [removed: New] [added: *New] iTero Products and Technology [removed: Innovation.] [added: 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. |

| [removed: ◦] [added: •] | 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 [added: 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.] |

We believe that over the [removed: long-term,] [added: longterm,] clinical solutions and treatment tools will increase adoption of Invisalign and increase sales of our intraoral scanners; however, it is difficult to predict the rate of adoption which may vary by region and channel.

For the fourth quarter of [removed: 2018,] [added: 2019,] total Invisalign cases submitted with a digital scanner in the Americas increased to [removed: 72.6%,] [added: 79.5%,] up [added: slightly] from [removed: 71.0%] [added: 78.8%] in the third quarter of [removed: 2018.][added: 2019.]

International scans increased to [removed: 57.5%,] [added: 64.7%,] up from [removed: 53.9%] [added: 62.6%] in the third quarter of [removed: 2018.][added: 2019.]

We believe that over the [removed: long-term,] [added: longterm,] technology innovation and added features and functionality of our iTero scanners will increase adoption of Invisalign and increase sales of our intraoral scanners; however, it is difficult to predict the rate of adoption which may vary by region and channel.

| • | [removed: Invisalign Adoption.] [added: *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 [removed: "utilization rates."] [added: “utilization rates.”] Our annual utilization rates for the last three fiscal years are as follows: |

[removed: ][added: ]

[removed: *] [added: *] Invisalign utilization rates [removed: =] [added: are calculated by the] # of cases shipped divided by [added: the] # of doctors [added: to whom] cases were [removed: shipped to.][added: shipped.]

LATAM is excluded from [added: the] above chart as it is [removed: not material.][added: immaterial.]

| ◦ | Total utilization in [removed: 2018] [added: 2019] increased to [removed: 15.7] [added: 15.9] cases per doctor compared to [removed: 14.5] [added: 15.7] cases in [removed: 2017.] [added: 2018.] |

| ▪ | [removed: North America:] [added: *North America:*] Utilization [removed: among] [added: for both] our North American orthodontist [added: and GP] customers increased in [removed: 2018] [added: 2019] to [removed: 56.7] [added: 65.0 and 9.5] cases per doctor compared to [removed: 46.6] [added: 56.7] cases [added: and 9.1 cases] per doctor in [removed: 2017.] [added: 2018, respectively.] The increase in [removed: North American] [added: utilization in 2019 reflects improvements in product and technology which continues to strengthen] |

[removed: orthodontist utilization in 2018 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.

We expect [removed: that over the long-term,] our utilization rates [removed: will] [added: to] gradually improve as a result of advancements in product and technology, which continue to strengthen our doctors’ clinical confidence in the use of [removed: Invisalign.][added: Invisalign clear aligners.]

In addition, since the teenage and younger market makes up 75% of the approximately 12 million total orthodontic case starts each year, and as we continue to drive adoption of teenage and younger patients through sales and marketing programs, we expect our utilization [removed: rate] [added: rates] to improve.

| • | [removed: Number] [added: *Number] of New Invisalign Doctors [removed: Trained.] [added: Trained.*] We continue to expand our Invisalign customer base through the training of new doctors. In [removed: 2018,] [added: 2019,] we trained [removed: approximately 19,655] [added: 22,270] new Invisalign doctors of which [removed: 7,885] [added: 9,765] were trained in the Americas region and [removed: 11,770] [added: 12,505] in the International region. |

| • | [removed: International] [added: *International] Invisalign [removed: Growth.] [added: 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 [removed: international] [added: International] Invisalign volume increased [removed: 45.3%] [added: 34.0%] driven primarily by increased adoption as well as expansion of our customer base in both the EMEA and APAC regions. [added: However, beginning in the second quarter of 2019, we experienced slower growth rates than prior periods in China primarily due to the US-China trade war and resulting economic uncertainty which caused headwind for consumer demand especially for consumption of luxury goods and considered purchases.] We [added: also believe there has been increased competitive activity from wires and bracket manufacturers and clear aligner suppliers. In addition, in the first quarter of 2020, the outbreak of the Novel Coronavirus (2019 NCov) in China has caused increased uncertainty and disruption to our employees, doctors’ practices, their patients and consumers. We expect the impact of the Novel Coronavirus and related efforts by the Chinese government to contain its spread, including travel restrictions, extension of the Lunar New Year and discouraging non-essential medical and dental procedures to adversely impact sales and operations in China for a currently indeterminate period of time. Notwithstanding these current issues in China, we] continue to see growth from our international orthodontists and [removed: general practitioner (“GP”)] [added: GP] customers and are seeing more positive traction in the GP channel [removed: from segmenting] [added: as we continue to segment] our sales and marketing resources and programs specifically around each customer channel. In [removed: addition, 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 [removed: are continuing] [added: continued] 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 [removed: opportunities,] [added: 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 [removed: penetration (Refer to Item 1A Risk Factors - “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).] [added: penetration.] |

| • | [removed: Establish] [added: *Establish] Regional Order Acquisition, Treatment Planning and Manufacturing [removed: Operations.] [added: Operations.*] We [removed: will continue] [added: expect] to [removed: establish] [added: continue establishing] and [removed: expand] [added: expanding] additional order acquisition, treatment planning and manufacturing operations closer to our international customers in order to improve our operational efficiency and [removed: to provide doctors] [added: increase doctors'] confidence in [removed: using] Invisalign clear [removed: aligners to treat more patients and more often.] [added: aligners.] In the fourth quarter of 2018, we began fabricating our aligners in our [removed: new] manufacturing facility in Ziyang, China, our first aligner fabrication facility outside of Juarez, Mexico. [removed: We expect that it will take several quarters to ramp this facility up to full capacity and as a result manufacturing labor] [added: In the third quarter of 2019, we opened our new order acquisition] and [removed: overhead] [added: treatment facility] in [removed: this] [added: Wroclaw, Poland and new treatment] facility [removed: 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 at our existing facilities.” for information on related risk factors).] [added: in Yokohama, Japan.] |

| • | [removed: Expenses.] [added: *Expenses.*] We expect expenses to increase in [removed: 2019] [added: 2020] due in part to: |

| [removed: ◦] [added: ▪] | Investments in manufacturing capacity and facilities to enhance our regional capabilities; |

| [removed: ◦] [added: ▪] | Investments in international [removed: expansion in new country markets;] [added: expansion;] |

| [removed: ◦] [added: ▪] | Investments in expansion of number of direct sales force personnel; |

| [removed: ◦] [added: ▪] | [removed: Increases] [added: Increase] in sales, marketing and customer support [removed: resources;] [added: resources including our new advertising campaign; and] |

| [removed: ◦] [added: ▪] | Product and technology innovation to enhance product efficiency and operational [removed: productivity;] [added: productivity.] |

[removed: | • |] [added: Common] Stock [removed: Repurchases: |][added: Repurchases]

| [removed: ◦] [added: •] | [removed: April] [added: *April] 2016 Repurchase [removed: Program.] [added: Program.*] In 2018, we repurchased approximately $200.0 million of our common stock on the open market, completing the April 2016 Repurchase Program. |

| [removed: ◦] [added: •] | [removed: May 2018 Repurchase Program. In May 2018, we announced that our Board of Directors had authorized a plan to repurchase up to $600.0 million of our common stock. In August 2018,] [added: *Stock Repurchases.* During the year ended December 31, 2019,] we repurchased [removed: $50.0] [added: $200.0] million of our common stock on the open [removed: market. In November 2018, we] [added: market at an average price of $264.93 per share. We also] entered into an accelerated [removed: share] [added: stock] repurchase [removed: ("2018 ASR")] [added: agreement] to repurchase [removed: $50.0] [added: $200.0] million of our common stock [removed: which was completed in December 2018.] [added: and received a total of 1.1 million shares for an average share price of $176.61.] As of December 31, [removed: 2018,] [added: 2019,] we have [removed: $500.0] [added: $100.0] million [removed: remaining] [added: available for repurchase] under the [removed: May 2018 Repurchase Program. In February 2019, we repurchased $50.0] [added: $600.0] million [removed: of] [added: repurchase program authorized by] our [removed: common stock on the open market] [added: Board of Directors in May 2018] (Refer to [removed: Note 11 "Common] [added: *Note 12 “Common] Stock Repurchase [removed: Programs"] [added: Programs”] of the Notes to Consolidated Financial [removed: Statements] [added: Statements*] for details on [removed: common] [added: our] stock repurchase programs). |

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

We group our operations into two reportable segments: Clear Aligner segment and Scanner [removed: segment][added: segment.]

| [removed: ◦] [added: •] | Comprehensive Products [removed: include, but not limited to,] [added: include] Invisalign Comprehensive [removed: (formerly known as Invisalign Full] and Invisalign [removed: Teen), Invisalign Assist and Invisalign] First. |

| [removed: ◦] [added: •] | Non-Comprehensive Products include, but [added: are] not limited to, Invisalign [removed: Express 10, Invisalign Express 5, Express Package,] [added: Moderate,] Lite [removed: Package] and [added: Express packages and] Invisalign [removed: Go] [added: Go,] in addition to revenues from the sale of aligners to SmileDirectClub (“SDC”) under our supply [removed: agreement.] [added: agreement that expired on December 31, 2019.] |

| [removed: ◦] [added: •] | Non-Case includes, but [added: is] not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion. |

A discussion regarding our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 is presented under Results of Operations of this Form 10-K.

Discussions regarding our financial condition and results of operations for fiscal 2018 compared to 2017 have been omitted from this Annual Report on Form 10-K, but can be found in "Item 7.

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, 2018, filed with the SEC on February 28, 2019, which is available without charge on the SEC's website at www.sec.gov and on our investor relations website at investor.aligntech.com.

| • | In October 2019, we launched the Invisalign Moderate Package for the treatment of mild to moderate malocclusion. The Invisalign Moderate treatment includes all the features of Invisalign treatment, plus additional features that address the orthodontic needs of teenage patients such as compliance indicators and compensation for tooth eruption. |

As we continue to expand our global presence, we expect to seek regulatory approvals to offer our iTero portfolio products in more countries, thereby tapping potential growth opportunities in underserved markets

| • | 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 pending regulatory approval and is not yet available in the U.S. or LATAM countries. |

| • | 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 will also be available in other select countries in 2020. |

| *▪* | *International:* International doctor utilization remained relatively flat at 13.8 cases per doctor in 2019 compared to 13.9 cases in 2018. |

| • | *Increasing Competition.* Starting in the second quarter of 2019, we began experiencing 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 companies, 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 low prices. In the third quarter of 2019, we increased 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 launched new sales tools and professional marketing materials and we also expect to see increased productivity from the approximate 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*.* |

| • | *Corporate Structure Reorganization.* In January 2020, we reorganized our corporate structure and intercompany relationships to more closely align with the international nature of our business activities with the goal of achieving financial and operational efficiencies. As part of this corporate structure reorganization, our EMEA regional headquarters |

was moved from Amsterdam, the Netherlands to Rotkreuz, Switzerland.

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 has been disruptive to our business, and may not ultimately be more efficient or effective.

Moreover, our reorganization activities, including any related expenses and the impact from affected employees, could have a material adverse effect on our business, operating results, financial condition and effective tax rates.

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*Changes and percentages are based on actual values.

Certain tables may not sum or recalculate due to rounding.*

Higher ASP was mainly the result of price increases across most products which increased net revenues by $35.1 million and $23.4 million increase in net revenues driven by a product mix shift towards Comprehensive products and less SDC revenues, which carry a lower ASP.

We no longer manufacture aligners for SDC as our supply agreement with SDC expired by its terms on December 31, 2019.

These ASP increases were partially offset by a reduction in net revenues of $23.1 million from higher promotional discounts and $17.6 million reduction in net revenues as a result of higher net revenue deferrals and unfavorable foreign exchange rates.

These ASP decreases were partially offset by a $47.8 million improvement in net revenues related to price increases across most products along with a benefit from going direct in several additional countries, and lower net revenue deferrals and sales credits that increased net revenues by $18.1 million.

This increase is primarily a result of scanner volume growth which increased net revenues by $58.4 million, and higher CAD/CAM services that increased net revenues by $37.7 million primarily due to a larger install base and increased scanner subscription services.

Additionally, net revenues increased by $10.0 million due to an improvement in the scanner ASP mainly attributable to price increases in several regions.

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*Changes and percentages are based on actual values.

Certain tables may not sum or recalculate due to rounding.*

*Scanner*

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*Changes and percentages are based on actual values.

Certain tables may not sum or recalculate due to rounding.*

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| • | 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. |

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 scanners are available in the U.S., Canada, the majority of European countries as well as in select APAC markets.

The existing iTero Element scanner continues 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 China, Invisalign cases submitted using a digital scanner increased to 45.9% from close to 0% in only one year.

Beginning in the first quarter of 2018, we report International region to include EMEA and APAC.

Our historical utilization numbers have been recast to reflect this new classification.

| ▪ | International: International doctor utilization was 13.9 cases per doctor in 2018 compared to 13.2 cases in 2017. The increase in International utilization reflects increased utilization and continued expansion of our customer base in both EMEA and APAC regions due to increasing adoption of the product due in part to its ability to treat more complex cases. |

| • | Invisalign Experience Program. In 2018, we expanded the interactive brand experience that was piloted in 2017 and finished the year with a total of twelve Invisalign locations in major U.S. cities. The program expansion is designed to address the rapidly-evolving consumer market for clear aligners and connects consumers interested in Invisalign treatment with Invisalign doctors in their communities (Refer to Item 3 "Legal Proceedings" for details on SDC dispute which may impact the Invisalign locations). |

| • | Increased Sales Force. In order to provide more comprehensive sales and service coverage, in the fourth quarter of 2018, we increased our sales force in the Americas by adding approximately 100 sales team members. In the first quarter of 2019, we plan to add 50 new sales representatives in EMEA to cover GP dentist channel. (Refer to Item 1A Risk Factors - “We primarily rely on our direct sales force to sell our products, and any failure to maintain our direct sales force could harm our business" for information on related risk factors). |

| ◦ | 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. |

| • | SmileDirectClub. In February 2018, we received a communication on behalf of SDC Financial LLC, SmileDirectClub LLC, and the Members of SDC Financial LLC other than the Company (collectively, the SDC Entities) alleging that the launch and operation of the Invisalign locations pilot program constitutes a breach of non-compete provisions applicable to the members of SDC Financial LLC, including Align. As a result of this alleged breach, SDC Financial LLC notified us that its members (other than Align) seek to exercise a right to repurchase all of Align's SDC Financial LLC membership interests for a purchase price equal to the current capital account balance. The SDC Entities’ communication also alleged that we breached confidentiality provisions applicable to the SDC Financial LLC members and demanded that we cease all activities related to the Invisalign pilot project, close existing Invisalign locations and cease using SDC’s confidential information. In April 2018, the SDC Entities served a Demand for Arbitration alleging that we breached the non-compete clause and confidentiality clause, misused the SDC Entities’ alleged trade secrets, and violated fiduciary duties to SDC Financial LLC. The SDC Entities seek through the arbitration the rights to repurchase all of Align’s SDC Financial LLC membership interests for a purchase price equal to the current capital account balance as defined by the Internal Revenue Service which likely is significantly below the current fair market value of such investment, an injunction requiring us to close our Invisalign locations and to cease using the SDC Entities’ confidential information, and financial damages in an unspecified amount. We filed a response in which we denied the SDC Entities’ allegations and denied that the SDC Entities are entitled to any relief. In April 2018 the SDC Entities also filed a motion for preliminary injunction in the Tennessee Court of Chancery seeking to enjoin Align from opening additional Invisalign locations until the arbitration is completed. In June 2018, the Tennessee court denied the SDC Entities’ motion for a preliminary injunction. In December 2018, the parties participated in binding arbitration proceedings and presented closing arguments on January 23, 2019. The arbitrator’s decision is due on or before March 4, 2019. This dispute does not impact Align’s existing supply agreement with SDC which remains in place through 2019. We do not intend to renew this agreement. We are currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss, if any, nor estimate a range of possible loss. (Refer to Note 8 "Legal Proceedings" of the Notes to Consolidated Financial Statements for details on SDC dispute). |

Effective in the first quarter of 2018, Americas region includes North America and LATAM.

Historical data has been recasted to reflect the change.

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Fiscal Year 2018 compared to Fiscal Year 2017

This increase was offset in part by lower average selling prices ("ASP"), which was mainly the result of higher promotional discounts, which reduced net revenues by $44.7 million, and increased net revenue deferrals by $3.0 million.

This decline was partially offset by higher prices from the new products introduced in July 2018, which increased net revenues by $19.2 million.

The ASP decline was mainly the result of increased net revenue deferrals mostly for additional aligners, which reduced net revenues by $20.1 million, and higher promotions discounts, which reduced net revenues by $17.4 million.

These were partially offset by the favorable foreign exchange rates of $20.8 million and the higher prices of $18.3 million related to our new products effective July 2018.

This was primarily due to increased Vivera volume across all regions, which increased revenue by $14.4 million, and training revenues across all regions, which increased revenue by $6.5 million.

This increase is primarily due to an increase in the number of scanners recognized, which increased revenues $87.8 million.

Additionally, a larger scanner install base resulted in higher computer-aided design/computer-aided manufacturing ("CAD/CAM") services which increased net revenues by $21.3 million and higher disposable sleeve volume which increased net revenue by $6.9 million.

These factors were offset in part by a decrease in scanner ASP mostly due to increased promotional discounts, which reduced net revenues by $5.5 million.

Fiscal Year 2017 compared to Fiscal Year 2016

Total net revenues increased by $393.6 million in 2017 as compared to 2016 primarily as a result of Clear Aligner case volume growth across all regions and products as well as increased non-case revenue.

Americas net revenues increased by $182.5 million in 2017 compared to 2016 primarily due to case volume growth across all channels and most products which increased net revenues by $195.5 million.

This increase was offset in part by lower ASP which decreased net revenues by $13.1 million.

These factors contributing to the decline in ASP were partially offset in part by price increases on our Comprehensive Products effective on April 1, 2017 which contributed $28.4 million to net revenues as well as an increase in additional aligner revenue which contributed $10.8 million to net revenues, among other factors.

International net revenues increased by $149.8 million in 2017 compared to 2016 primarily driven by case volume growth across all channels and products which increased net revenues by $142.9 million and, to a lesser extent, higher ASP which contributed approximately $6.8 million to the increase in net revenues.

The increase in ASP was primarily due to price increases in our Comprehensive Products effective on July 1, 2017, as well as the impact from acquiring certain distributors as we now recognize direct sales at full ASP rather than the discounted ASP, which collectively contributed $24.4 million to net revenues.

The factors contributing to an increase in ASP were partially offset in part by higher promotional discounts which decreased net revenues by $13.7 million as well as an increase in net revenue deferrals of $3.0 million, among other factors.

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

Our investments [removed: include] [added: are] fixed-rate short-term and long-term securities.

As of December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: $107.6] [added: $318.2] million invested in available-for-sale marketable securities.

[removed: We do not have material] [added: Based on] interest bearing liabilities [added: we have] as of December 31, [removed: 2018, and, therefore,] [added: 2019,] we are not subject to risks from immediate interest rate increases.

[removed: Currency] [added: Currency] Rate [removed: Risk][added: Risk]

As a result of our international business activities, our financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations will [added: not harm our business in the future.]

[removed: In March 2018, we started entering] [added: We enter] into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and intercompany receivables and payables.

The fair value of foreign exchange forward contracts outstanding as of December 31, [removed: 2018] [added: 2019] was not material.

not harm our business in the future.

[removed: Our Company][added: Our Company]

Align Technology, [removed: Inc] [added: Inc.] (“We”, “Our”, “Align”) is a global medical device company engaged in the design, manufacture and marketing of Invisalign® clear aligners and iTero® intraoral scanners and services for orthodontics, and restorative and aesthetic dentistry.

Our Americas regional headquarters is located in Raleigh, North [removed: Carolina;] [added: Carolina, U.S.A.;] our [removed: European] [added: European, Middle East and Africa (“EMEA”)] regional headquarters is located in [added: Rotkreuz, Switzerland, which moved from] Amsterdam, the [removed: Netherlands;] [added: Netherlands in January 2020;] and our Asia Pacific [added: ("APAC")] regional headquarters is located in Singapore.

For the year ended December 31, [removed: 2018,] [added: 2019,] Clear Aligner net revenues [removed: represent] [added: represented] approximately [removed: 86%] [added: 84%] of worldwide net revenues, while Scanner net revenues [removed: represent] [added: represented] the remaining [removed: 14%] [added: 16%] of worldwide net revenues.

We sell the [removed: vast] majority of our products directly to our customers: orthodontists and general practitioner dentists ("GPs"), as well as to restorative and aesthetic dentists, including prosthodontists, periodontists, and oral surgeons.

In addition, we sell directly to Dental Support Organizations [removed: (DSOs)] [added: ("DSOs")] who contract with dental practices to provide critical business management and support including non-clinical operations, and we sell directly to dental laboratories who manufacture or customize a variety of products [added: used by licensed dentists] to [removed: assist in the provision of] [added: provide] oral health [removed: care by a licensed dentist.][added: care.]

The Invisalign System is sold primarily through a direct sales force in North America, [removed: Asia Pacific ("APAC"),] [added: APAC,] Europe, [removed: Middle East and Africa (EMEA)] [added: EMEA] and Latin [removed: America.][added: America ("LATAM").]

To date, over [removed: 6.1] [added: 8] million people worldwide have been treated with our Invisalign System.

[removed: Clear] [added: Clear] Aligner [removed: Segment][added: Segment]

[removed: Malocclusion] [added: *Malocclusion] and Traditional Orthodontic [removed: Treatment][added: Treatment*]

Malocclusion, or the misalignment of teeth, is one of the most prevalent clinical dental conditions, affecting billions of people, or approximately 60% to 75% of the [added: global] population.

Of the 12 million annual orthodontic cases started, [added: we estimate that] approximately 75% or 8.4 million [removed: are applicable to Invisalign treatment] [added: could be treated using] our [removed: served market.][added: Invisalign clear aligners.]

In addition, approximately 300 million people with malocclusion could benefit from straightening their [removed: teeth but are unlikely to seek treatment through a doctor’s office.][added: teeth.]

This represents an incremental opportunity for us as we expand the market for orthodontics by educating more consumers about the benefits of straighter teeth using Invisalign clear aligners and [removed: connect] [added: connecting] them with an Invisalign doctor of their choice.

[removed: The] [added: *The] Invisalign [removed: System][added: System*]

The Invisalign System is a proprietary method for treating malocclusion based on a proprietary computer-simulated virtual treatment plan and a series of doctor-prescribed, custom manufactured, clear [removed: plastic,] [added: plastic] removable aligners.

The Invisalign System offers a range of treatment options, specialized services, and [added: access to] proprietary software for treatment visualization and is comprised of the following phases:

[removed: Orthodontic] [added: *Orthodontic] diagnosis and transmission of treatment data to [removed: us.][added: us*.]

The Invisalign-trained dental professional prepares [added: an online prescription form on our Invisalign Doctor Site] and [removed: sends us a patient’s treatment data package] [added: submits the patient's records,] which [removed: consists of a prescription form,] [added: include] a digital [added: intraoral] scan or a polyvinyl-siloxane [removed: (or "PVS")] [added: ("PVS")] impression of the relevant dental arches, photographs of the patient and, at the dental professional’s election, x-rays of the patient’s dentition.

Intraoral digital scans may be submitted through either Align's iTero scanner or [removed: a few qualified] [added: certain] third-party [removed: scanners.][added: scanners capable of accurately interfacing with our systems and processes.]

See "Third Party Scanners and Digital scans for Invisalign treatment submission." More than [removed: 63%] [added: 73%] of Invisalign case submissions are [added: now] submitted via digital [removed: scan instead] [added: scan, increasing the accuracy] of [removed: a] [added: treatments, reducing the time from prescription submission to patient receipt, and decreasing the carbon footprint resulting from the shipment of the materials used to form the] physical PVS [removed: impression.][added: impressions and shipping those PVS impressions to us.]

[removed: Preparation] [added: *Preparation] of computer-simulated treatment [removed: plan.][added: plan*.]

Using [removed: propriety software which we do not sell,] [added: the information and digital data provided,] we generate a proposed custom, three-dimensional treatment plan, called a ClinCheck treatment [removed: plan.][added: plan using our proprietary software, which is not for sale or license.]

[removed: The] [added: A patient’s] ClinCheck treatment plan simulates [removed: appropriate] [added: expected] tooth movement in stages and details [added: the] timing and placement of any features or attachments [removed: that will] [added: to] be used during treatment.

[added: *Review and approval of the treatment plan by an Invisalign-trained doctor.*] The patient’s ClinCheck treatment plan is then made available to the prescribing dental professional via the Invisalign Doctor Site which enables the dental professional to project tooth movement [removed: with a level of accuracy not previously possible with metal arch wires] [added: from initial position to final position] and [removed: brackets.][added: compare multiple treatment plan options.]

By reviewing, modifying as needed and approving the treatment plan, the dental professional retains control [removed: over] [added: of] the [removed: treatment plan.][added: patient's treatment.]

[added: *Manufacture of custom aligners.*] Upon the dental professional’s approval of the ClinCheck treatment plan, we use the data underlying the simulation, in conjunction with stereolithography technology (a form of 3D printing technology), to construct a series of molds depicting the future position of the patient’s teeth.

Aligners are thin, clear plastic, removable dental appliances that are custom manufactured in a series to correspond to each stage of the [added: patient's] ClinCheck treatment plan.

[removed: All] [added: *Shipment to] the [added: dental professional and patient aligner wear.* In most countries, all the] aligners for a [removed: patient] [added: patient's treatment plan] are shipped directly to the dental professional, who then dispenses them to the patient at regular check-up intervals throughout the treatment.

Aligners are generally worn for a period of time [removed: which correspond] [added: typically one] to [added: two weeks, corresponding to] the stages of the [added: patient’s] approved ClinCheck treatment plan.

The patient replaces the aligners with the next pair in the series when prescribed, advancing tooth movement [removed: with] [added: through] each [removed: aligner] stage.

[removed: Throughout] [added: At various points in each patient’s] treatment, [removed: the] [added: their] doctor may place attachments or use other auxiliaries to achieve desired tooth movements, per the doctor’s original prescription and [removed: resulting] [added: the approved] ClinCheck treatment plan.

At the treating doctor’s discretion, weekly aligner changes are recommended for all Invisalign treatments [added: except] for Invisalign [removed: Comprehensive, Invisalign First Comprehensive, Invisalign Lite, Invisalign Assist] [added: Lite] and [removed: Invisalign Go packages, thereby reducing treatment time by] [added: Express packages and may provide] up to 50% [added: shorter treatment time] compared [removed: to two week] [added: with two-week] aligner wear.

[removed: Clear] [added: *Clear] Aligner [removed: Products][added: Products*]

[removed: Comprehensive] [added: *Comprehensive] Products - Invisalign Treatment [removed: Options:][added: Options:*]

[removed: The Invisalign Comprehensive treatment includes all the features of Invisalign treatment, plus additional features that address] [added: It also addresses] the orthodontic needs of teenage [removed: patients] [added: patients,] such as [added: Mandibular Advancement,] compliance [removed: indicators,] [added: indicators and] compensation for tooth eruption.

[removed: Invisalign] [added: *Invisalign] First Phase 1 and Invisalign First Comprehensive Phase 2 [removed: Package.][added: Package*.]

[removed: Designed] [added: For example, in 2018, we extended the Invisalign product family] with [added: Invisalign First clear aligners, designed with] features specifically for younger patients with early mixed dentition [removed: with] [added: (with] a mixture of primary/baby and permanent [removed: teeth.][added: teeth).]

[added: Invisalign First] Phase 1 treatment [removed: is] [added: provides] early interceptive orthodontic [removed: treatment for young patients,] [added: treatment,] traditionally done through arch expanders, or partial metal braces, before all permanent teeth have [removed: erupted - typically at ages 7 through 10 years.][added: erupted.]

[removed: Non-Comprehensive] [added: *Non-Comprehensive] Products - Invisalign Treatment [removed: Options:][added: Options:*]

We also sell through sales agents and distributors in certain countries.

Scanners and computer-aided design/computer-aided manufacturing ("CAD/CAM") services are primarily

sold through our direct sales force and through sales agents and distributors in certain countries.

In addition, we sell iTero scanners and CAD/CAM services directly to DSOs.

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| Malocclusion | Very Mild |  | Moderate |  | Severe |

| Product | Invisalign Express Package | Invisalign Lite Package | Invisalign Go Limited Movement (GP) | Invisalign Moderate Package | Invisalign Comprehensive Package |

| Stages | 7 | 14 | 20 | 20-26 | As many as required |

| Clinical Scope | Relapse and minor movement, anterior esthetic alignment | Class I, mild crowding/spacing, non-extraction, pre-restorative | Class I, no anterior / posterior correction, mild to moderate crowding, spacing, non-extraction, pre-restorative Tooth movement from 2nd premolar to 2nd premolar (5x5) | Class I, mild Class II, mild to moderate crowding/spacing, mild anterior / posterior and vertical discrepancies, pre-restorative | Class I, II, III, moderate to severe crowding/spacing, anterior / posterior and vertical discrepancies, extractions, complex pre-restorative |

Most of our Invisalign Treatment Plans described above provide dental professionals with the option to order additional aligners if the patient's treatment is not tracking against the original treatment plan.

The number of additional aligner orders and timing are subject to certain requirements noted in our terms and conditions.

*Invisalign Comprehensive*.

The Invisalign Comprehensive Package is used to treat adults and teens for a full spectrum of mild to severe malocclusion and contains a wide variety of Invisalign features to address the doctor's treatment goals.

Invisalign First Phase 1 is designed specifically for younger patients generally between the ages of seven and ten years, which is a mixture of primary/baby and permanent teeth.

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.

Our Invisalign First Comprehensive Phase 2 Package is a continuation of the First Phase 1 and is generally consistent with our Invisalign Comprehensive Package.

After a patient completes Invisalign First Phase I, doctors have the option to purchase a discounted Comprehensive Phase 2 Package for that same patient.

These packages may be offered in select countries and/or may differ from region to region.

*Retention*.

Digital models also reduce the carbon footprint associated with the shipping of the materials used to create PVS impressions, the shipping of those impressions, and their disposal.

*iTero Scanner*.

We also continue to offer the existing iTero Element scanner in existing markets.

The iTero Element 5D Imaging System is available in the majority of EMEA and select APAC countries; however, it is pending regulatory approval in the U.S. and LATAM countries.

In June 2019, we announced the launch of iTero Element Foundation intraoral scanner with restorative software.

The iTero Element Foundation extends our 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 be available in other select APAC and EMEA countries in 2020.

*Ancillary Products*.

We accept case submissions for our clear aligner products in two ways: (1) physical impressions of the patient’s teeth or (2) intraoral scan of the patient’s teeth.

With respect to intraoral scans, we accept scans from iTero scanners and certain third-party scanners that have interoperability relationship with our systems and processes.

This is achieved through a dual view layout that shows a prospective patient an image of his/her own current dentition next to his/her simulated final position after Invisalign treatment.

This allows doctors to visually assess and communicate Invisalign treatment progress with an easy to read, color-coded tooth movement report.

some time, in the near term we will leverage our existing infrastructure in adjacent country markets as we build local sales and support organizations to drive long-term market penetration.

In addition, we are scaling and expanding our operations and facilities to better support our customers across the globe.

In 2019, we opened a new order acquisition and treatment facility in Wroclaw, Poland and a new treatment planning facility in Yokohama, Japan to support customers within these regions.

| *3.* | *Patient Demand & Conversion.* Our goal is to make Invisalign a highly recognized name brand worldwide by creating awareness for Invisalign treatment among consumers and motivating potential patients to seek Invisalign treatment. We accomplish this objective through an integrated consumer marketing strategy that includes television, media, social networking and event marketing and strategic alliances with professional sports teams as well as educating patients on treatment options and directing them to high volume Invisalign doctors. In January 2019, we expanded our Smile Concierge program which educates consumers on the benefits of Invisalign treatment, answers their questions and helps them schedule an appointment with an Invisalign doctor. The program simultaneously helps doctors better engage with prospective customers through more detailed customer insights. Additionally, in August 2019, we significantly increased our investment in consumer marketing in the U.S. The U.S. campaign was launched across all key media channels to over 140 million consumers, combining a robust paid media strategy across prime broadcast, cable and connected TV channels with paid search and social media. |

In the fourth quarter of 2018, we also began fabricating our aligners in Ziyang, China, our first aligner fabrication facility outside of Juarez, Mexico.

In addition, we produce our handheld intraoral scanner wand, perform final scanner assembly and repair our scanners at our facilities in Or Yehuda, Israel and Ziyang, China.

For a discussion of the risks of our supply and manufacturing operations, see *Item 1A* Risk Factors*.*

Our Clear Aligner operating segment includes revenues from non-Invisalign aligners supplied to SmileDirectClub, LLC ("SDC").

Refer to "Supply Agreement with SmileDirectClub, LLC" section.

Scanners and computer-aided design/computer-aided manufacturing ("CAD/CAM") services are primarily sold through our direct sales force and a few distributors in North America, Europe and certain Asia Pacific countries, and through distribution partners in smaller non-core international country markets.

Review and approval of the treatment plan by an Invisalign-trained doctor.

Manufacture of custom aligners.

Shipment to the dental professional and patient aligner wear.

In October 2016, we introduced one-week aligner wear.

Additional aligners.

Should the dental professional determine that the treatment is not tracking for various reasons, such as patient compliance, certain teeth movement not tracking to plan, or they need to extend the treatment a few stages further to

achieve their treatment goals, the dental professional can request additional aligners at any point during the treatment, subject to certain requirements in our terms and conditions.

Invisalign Comprehensive.

Invisalign Comprehensive Package replaces both Invisalign Full and Invisalign Teen treatments and includes the Mandibular Advancement feature launched in March 2017.

Used for a wide range of malocclusion, the Invisalign Comprehensive treatment plans each consist of the number of aligners necessary to achieve the doctor's treatment goals.

Aligners for Invisalign Comprehensive treatments are manufactured and then delivered to the dental professionals in a single shipment.

Invisalign Comprehensive Package is sold in the U.S., Canada and select international countries.

Invisalign Assist.

Used for anterior alignment and aesthetically-oriented cases, the Invisalign Assist treatment offers added support to our dental practitioners throughout the treatment process, including progress tracking that allows the dental professional to submit new impressions every nine stages.

When the progress tracking feature is selected, aligners are shipped to the dental professional after every nine stages thereby helping to achieve successful treatment outcomes.

Predominantly marketed to GPs, Invisalign Assist is intended to make it easier to select appropriate cases for their experience level or treatment approach, submit cases more efficiently and manage appointments with suggested tasks.

Invisalign Assist is sold in the U.S. and Canada.

Invisalign First clear aligners became commercially available to Invisalign-trained doctors in the U.S., Canada, Australia, New Zealand, Japan, and certain countries in the EMEA region as of July 1, 2018, and became available in Brazil in January 2019.

Invisalign Express 10, Invisalign Express 5, Express Package and Lite Package.

Invisalign Express 10, Invisalign Express 5 and Express Package use up to 10 sets, 5 sets and 7 sets of aligners, respectively.

Invisalign Lite use up to 14 sets of aligners.

Non-comprehensive products are available in select country markets and delivered to the dental professionals in a single shipment.

Invisalign Go.

Invisalign Go is available in select country markets.

Retention.

Invisalign Comprehensive with Mandibular Advancement (launched in March 2017) is the first clear aligner solution for Class II correction in growing tween and teen patients.

This new offering combines the benefits of our clear aligner system with

features for moving the lower jaw forward while simultaneously aligning the teeth without the need for elastics typically used to treat teen Class II patients.

In 2017, it was available in Canada, core country markets in EMEA and certain country markets in APAC and Latin America.

In October 2018, Invisalign Treatment with mandibular advancement was approved by the FDA and became commercially available in the U.S. in November 2018.

Non-Invisalign Aligners Supplied to SmileDirectClub, LLC:

SmileDirectClub Aligners.

On July 25, 2016, we entered into a supply agreement with SmileDirectClub, LLC ("SDC") to manufacture non-Invisalign clear aligners for SDC's doctor-led, at-home program for simple teeth straightening.

In October 2016, we became SDC's exclusive third-party supplier and began supplying aligners directly to SDC.

SDC aligners include up to 20 stages without attachments or interproximal reduction ("IPR").

Align manufactures the aligners per SDC’s specifications for minor tooth movement using EX-30, a non-proprietary aligner material used prior to the introduction of SmartTrack aligner material.

Align does not market or sell SDC products and ships supply of aligners directly to SDC when requested.

*For a discussion of legal proceedings, refer to Note 9 "Legal Proceedings" of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.*

Securities Class Action Lawsuit

On November 5, 2018, a class action lawsuit against Align, and three of our executive officers, was filed in the U.S. District Court for the Northern District of California on behalf of a purported class of purchasers of our common stock between July 25, 2018 and October 24, 2018.

The complaint generally alleges claims under the federal securities laws and seeks monetary damages in an unspecified amount and costs and expenses incurred in the litigation.

On December 12, 2018, a similar lawsuit was filed in the same court on behalf of a purported class of purchasers of our common stock between April 25, 2018 and October 24, 2018 (together with the first lawsuit, the “Securities Actions”).

Motions for appointment as lead plaintiff were filed on January 4, 2019.

Align believes the plaintiffs’ claims are without merit and intends to vigorously defend itself.

Align is currently unable to predict the outcome of these lawsuits and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

Shareholder Derivative Lawsuit

In January 2019, three derivative lawsuits were also filed in the U.S. District Court for the Northern District of California, purportedly on behalf of Align, naming as defendants the members of our Board of Directors along with certain of our executive officers.

The allegations in the complaints are similar to those presented in the Securities Action, but the complaints assert various state law causes of action, including for breaches of fiduciary duty, insider trading, and unjust enrichment, among others.

The complaints seek unspecified monetary damages on behalf of Align, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees.

Patent Infringement and Related Lawsuits

On November 14, 2017, Align filed six patent infringement lawsuits asserting 26 patents against 3Shape, a Danish corporation, and a related U.S. corporate entity, asserting that 3Shape’s Trios intraoral scanning system and Dental System software infringe Align patents.

Align filed two Section 337 complaints with the U.S. International Trade Commission (“ITC”) alleging that 3Shape violates U.S. trade laws by selling for importation and importing its infringing Trios intraoral scanning system and Dental System software.

Align’s ITC complaints seek cease and desist orders and exclusion orders prohibiting the importation of 3Shape’s Trios scanning system and Dental System software products into the U.S. Align also filed four separate complaints in the U.S. District Court for the District of Delaware alleging patent infringement by 3Shape’s Trios intraoral scanning system and Dental System software.

On May 9, 2018, 3Shape filed a complaint in the U.S. District Court for the District of Delaware alleging patent infringement by Align’s iTero Element scanner of a single 3Shape patent.

On June 14, 2018, 3Shape filed another complaint in the U.S. District Court for the District of Delaware alleging patent infringement by Align’s iTero Element scanner of a single 3Shape patent.

On August 28, 2018, 3Shape filed a complaint against Align in the U.S. District Court for the District of Delaware alleging antitrust violations and seeking monetary damages and injunctive relief relating to Align’s market activities, including Align’s assertion of its patent portfolio, in the clear aligner and intraoral scanning markets.

On December 10, 2018, Align filed three additional patent infringement lawsuits asserting 10 additional patents against 3Shape.

Align filed one Section 337 complaint with the ITC alleging that 3Shape violates U.S. trade laws through unfair competition by selling for importation and importing the infringing TRIOS intraoral scanning system, Trios Lab Scanners and TRIOS software, TRIOS Module software, Dental System software, and Ortho System Software.

On December 11, 2018, Align filed two separate complaints in the U.S. District Court for the District of Delaware alleging patent infringement by 3Shape's Trios intraoral scanning system, Lab Scanners and Dental and Ortho System Software.

Except for 3Shape’s antitrust complaint, each of the District Court complaints seek monetary damages and injunctive relief against further infringement.

We are currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss, if any, nor estimate a range of possible loss.

SDC Dispute

In February 2018, we received a communication on behalf of SDC Financial LLC, SmileDirectClub LLC, and the Members of SDC Financial LLC other than the Company (collectively, the SDC Entities) alleging that the launch and operation of the

Invisalign locations pilot program constitutes a breach of non-compete provisions applicable to the members of SDC Financial LLC, including Align.

As a result of this alleged breach, SDC Financial LLC notified us that its members (other than Align) seek to exercise a right to repurchase all of Align's SDC Financial LLC membership interests for a purchase price equal to the current capital account balance.

The SDC Entities’ communication also alleged that we breached confidentiality provisions applicable to the SDC Financial LLC members and demanded that we cease all activities related to the Invisalign pilot project, close existing Invisalign locations and cease using SDC’s confidential information.

In April 2018, the SDC Entities served a Demand for Arbitration alleging that we breached the non-compete clause and confidentiality clause, misused the SDC Entities’ alleged trade secrets, and violated fiduciary duties to SDC Financial LLC.

The SDC Entities seek through the arbitration the rights to repurchase all of Align’s SDC Financial LLC membership interests for a purchase price equal to the current capital account balance as defined by the Internal Revenue Service which likely is significantly below the current fair market value of such investment, an injunction requiring us to close our Invisalign locations and to cease using the SDC Entities’ confidential information, and financial damages in an unspecified amount.

We filed a response in which we denied the SDC Entities’ allegations and denied that the SDC Entities are entitled to any relief.

In April 2018 the SDC Entities also filed a motion for preliminary injunction in the Tennessee Court of Chancery seeking to enjoin Align from opening additional Invisalign locations until the arbitration is completed.

In June 2018, the Tennessee court denied the SDC Entities’ motion for a preliminary injunction.

In December 2018, the parties participated in binding arbitration proceedings and presented closing arguments on January 23, 2019.

The arbitrator’s decision is due on or before March 4, 2019.

This dispute does not impact Align’s existing supply agreement with SDC which remains in place through 2019.

We do not intend to renew this agreement.

In addition, in the course of Align’s operations, Align is involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters.

Regardless of the outcome, these proceedings can have an adverse impact on us because of defense costs, diversion of management resources, and other factors.

Although the results of complex legal proceedings are difficult to predict and Align’s view of these matters may change in the future as litigation and events related thereto unfold; Align currently does not believe that these matters, individually or in the aggregate, will materially affect Align’s financial position, results of operations or cash flows (Refer to Note 8 “Legal Proceedings” of the Notes to the Consolidated Financial Statements for details on legal proceedings).

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] file [removed: number: 0-32259][added: number: 000-32259]

[removed: ALIGN] [added: ALIGN] TECHNOLOGY, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware |] [added: Delaware] | [removed: 94-3267295] [added: 94-3267295] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization) |] [added: organization)] | [removed: (I.R.S. Employer Identification Number)] [added: (I.R.S. Employer Identification Number)] |

[removed: 2820] [added: 2820] Orchard [removed: Parkway][added: Parkway]

[removed: San Jose, California 95134][added: San Jose, California 95134]

[removed: (Address] [added: (Address] of principal executive [removed: offices)][added: offices)]

[removed: (408) 470-1000][added: (408) 470-1000]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Trading Symbol] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: Common] [added: Common] Stock, $0.0001 par [removed: value] [added: value] | [added: ALGN] | [removed: The] [added: The] NASDAQ Stock Market LLC (NASDAQ Global [removed: Market)] [added: Market)] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: None][added: None]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

| Large accelerated filer [removed: x] | [added: ☒] | Accelerated filer [removed: o] | [added: ☐ |]

| Non-accelerated filer [removed: o] | [added: ☐] | Smaller reporting company [removed: o] | [added: ☐ |]

| [removed: | |] Emerging growth company [removed: o] | [added: ☐ | | |]

| 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 7(a)(2)(B) of the Securities Act. | | | [added: |]

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was [removed: $22,262,043,858] [added: approximately $15.9 billion] as of June [removed: 29, 2018] [added: 28, 2019] based on the closing sale price of the registrant’s common stock on the NASDAQ Global Market on such date.

On February [removed: 22, 2019, 79,989,347] [added: 21, 2020, 78,753,161] shares of the registrant’s common stock were outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive Proxy Statement relating to its [removed: 2019] [added: 2020] Annual Stockholders’ Meeting to be filed pursuant to Regulation 14A within 120 days after the registrant’s fiscal year end of December 31, [removed: 2018] [added: 2019] are incorporated by reference into Part III of this Annual Report on Form 10-K.

[removed: For] [added: For] the Year [removed: Ended December] [added: Ended December] 31, [removed: 2018][added: 2019]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | [removed: Page] [added: Page] |

[removed: | [PART I](#s05866C7C9FDF58D4A8B347740830126B) | | [3](#s05866C7C9FDF58D4A8B347740830126B) |][added: PART I]

| Item 1. | Business | [removed: [3](#s4B36E70590B85430B96FA4ED342EF06B)] [added: [3](#s4DD015EE7579569E987F82CA3A435E70)] |

| | Executive Officers of the Registrant | [removed: [13](#sCB595ADAFC2E5905BB8A56B56019696F)] [added: [12](#s1A0668F0CF0B53ED9178E2F04E262510)] |

OR

| | |

| --- | --- |

| | |

Yes ☒ No ☐

Yes ☒ No ☐

| | | | |

| --- | --- | --- | --- |

| | | | |

Yes ☐ No ☒

ALIGN TECHNOLOGY, INC.

FORM 10-K

| [PART II](#s12ECE38888BB5687B38D8FC5DF573B2B) | | [28](#s12ECE38888BB5687B38D8FC5DF573B2B) |

| [PART IV](#s947EAB1FA789594085F040AA9CC72BE1) | | [89](#s947EAB1FA789594085F040AA9CC72BE1) |

| Signatures | | [92](#s86DEB2CB8A345F0D942D58EB8582C3A2) |

10-K 1 algn-20181231x10k.htm 10-K

OR

| | | |

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| [PART II](#s9677B3A3144D5C37BBC87BBCF916E678) | | [31](#s9677B3A3144D5C37BBC87BBCF916E678) |

| [PART IV](#s8FB323719DE6548FB41A9E253EA2100F) | | [97](#s8FB323719DE6548FB41A9E253EA2100F) |

| Signatures | | [100](#sBF64ECB5EB005C9689F3E092CD18E69B) |

At December 31, [removed: 2018,] [added: 2019,] the significant facilities occupied were as follows:

| [removed: Location] [added: Location] | [removed: Lease/Own] [added: Lease/Own] | [removed: Primary Use] [added: Primary Use] | [removed: Expiration] [added: Expiration] of [removed: Lease] [added: Lease] |

| San Jose, [removed: California] [added: California, U.S.A.] | Own | Office for corporate headquarters, research & development and administrative personnel | N/A |

| San Jose, Costa Rica | [added: Lease and] Own | Office for administrative personnel, treatment personnel, and customer care | [removed: N/A] [added: July 2023] |

| Or Yehuda, Israel | Lease [added: and Own] | Manufacturing and office for research & development and administrative personnel | February 2022 |

| [removed: Amsterdam, The Netherlands] [added: Rotkreuz, Switzerland] | Lease | Office for [removed: European] [added: EMEA regional] headquarters, sales and marketing and administrative personnel | [removed: March 2020] [added: July 2024] |

| Ziyang, China | Lease [added: and Own] | Manufacturing and office for administrative personnel | May 2021 |

| Raleigh, North Carolina, U.S.A | Own | Office for Americas regional headquarters | N/A |

| Raleigh, North Carolina | Lease | Office for research & development and administrative personnel | March 2026 |

[removed: PART II][added: PART II]

[removed: Market Information][added: Market Information]

As of February [removed: 22, 2019,] [added: 21, 2020,] there were approximately [removed: 73] [added: 70] holders of record of our common stock.

[removed: Performance Graph][added: Performance Graph]

[removed: Notwithstanding] [added: *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 [removed: reference.][added: reference.*]

The graph below matches our cumulative 5-year total [removed: shareholder] [added: stockholder] return on common stock with the cumulative total returns of the NASDAQ Composite index, the S&P 500 and the S&P 1500 Composite Health Care Equipment & Supplies index.

The graph tracks the performance of a $100 investment in our common stock, in the peer group, and the index (with the reinvestment of all dividends) from December 31, [removed: 2013] [added: 2014] to December 31, [removed: 2018.][added: 2019.]

[removed: ][added: ]

[removed: UNREGISTERED] [added: UNREGISTERED] SALES OF EQUITY SECURITIES AND USE OF [removed: PROCEEDS][added: PROCEEDS]

Following is a summary of stock repurchases for the three months ended December 31, [removed: 2018:][added: 2019:]

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of Shares [removed: Repurchased] [added: Repurchased] | | | [removed: Average] [added: Average] Price Paid per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Repurchased as Part of Publicly Announced [removed: Program] [added: Program] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that May Yet Be Repurchased Under the [removed: Program (1)] [added: Program 1] | | |

| [removed: ◦] [added: 1] | [removed: May 2018 Repurchase Program.] In [removed: May 2018, we announced that our Board of Directors had authorized a plan to repurchase up to $600.0 million of our common stock. In August 2018,] [added: November 2019,] we repurchased [removed: $50.0] [added: $100.5] million of our common stock on the open market. [removed: In November 2018, we entered into an accelerated share repurchase ("2018 ASR") to repurchase $50.0 million of our common stock which was completed in December 2018.] As of December 31, [removed: 2018,] [added: 2019,] we have [removed: $500.0] [added: $100.0] million [removed: remaining] [added: available for repurchase] under the [added: $600.0 million repurchase program authorized by our Board of Directors in] May 2018 [removed: Repurchase Program] (Refer to [removed: Note 11 "Common] [added: *Note 12 “Common] Stock Repurchase [removed: Programs"] [added: Programs”] of the Notes to Consolidated Financial [removed: Statements for details on common stock repurchase programs).] [added: Statements*).] |

| October 1, 2019 through October 31, 2019 | | — | | | $ | — | | | — | | | $ | 200,500,000 | |

| November 1, 2019 through November 30, 2019 | | 388,510 | | | $ | 258.67 | | | 388,510 | | | $ | 100,000,000 | |

| December 1, 2019 through December 31, 2019 | | — | | | $ | — | | | — | | | $ | 100,000,000 | |

Our common stock trades on the NASDAQ Global Market under the symbol "ALGN".

| October 1, 2018 through October 31, 2018 | | — | | | $ | — | | | — | | | $ | 550,000,000 | |

| November 1, 2018 through November 30, 2018 | | 142,677 | | | $ | 245.31 | | | 142,677 | | | $ | 500,000,000 | |

| December 1, 2018 through December 31, 2018 | | 91,865 | | | $ | 163.28 | | | 91,865 | | | $ | 500,000,000 | |

(1) Stock Repurchase Program

The [added: following] selected consolidated financial data should be read in conjunction with the consolidated financial statements and accompanying notes and [removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations.][added: Operations*.]

[removed: SELECTED CONSOLIDATED FINANCIAL DATA][added: | Financial Position Data: | | | | | | | | | | | | | | | | | | | |]

[removed: (in] [added: | | (in] thousands, except per share [removed: data)][added: data) | | | | | | | | | | | | | | | | | | |]

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017 2] | | | | [removed: 2015] [added: 2016 2] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Consolidated Statements] [added: Statement] of Operations [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | |

| Net revenues | $ | [removed: 1,966,492] [added: 2,406,796] | | | $ | [removed: 1,473,413] [added: 1,966,492] | | | $ | [removed: 1,079,874] [added: 1,473,413] | | | $ | [removed: 845,486] [added: 1,079,874] | | | $ | [removed: 761,653] [added: 845,486] | |

| Gross profit | [removed: $] [added: 1,743,897] | [added: | | |] 1,447,867 | | | [removed: $] | 1,116,947 | | | [removed: $] | 815,294 | | | [removed: $] | 640,110 | | | [removed: $ | 578,443 | |]

| Income from operations | [removed: 466,564] [added: 542,493] | | | | [removed: 353,611] [added: 466,564] | | | | [removed: 248,921] [added: 353,611] | | | | [removed: 188,634] [added: 248,921] | | | | [removed: 193,576] [added: 188,634] | | |

| Interest income | [removed: 8,576] [added: 12,482] | | | | [removed: 6,948] [added: 8,576] | | | | [removed: 4,213] [added: 6,948] | | | | [removed: 2,938] [added: 4,213] | | | | [removed: 1,818] [added: 2,938] | | |

| Other income (expense), net | [added: 7,676 | | | |] (8,489 | | ) | | 4,240 | | | | (10,568 | | ) | | (5,471 | | ) | [removed: | (5,025 | | ) |]

| Net income before provision for income taxes and equity in losses of investee | [removed: 466,651] [added: 562,651] | | | | [removed: 364,799] [added: 466,651] | | | | [removed: 242,566] [added: 364,799] | | | | [removed: 186,101] [added: 242,566] | | | | [removed: 190,369] [added: 186,101] | | |

| Provision for income taxes | [removed: 57,723] [added: 112,347] | | | | [removed: 130,162] [added: 57,723] | | | | [removed: 51,200] [added: 130,162] | | | | [removed: 42,081] [added: 51,200] | | | | [removed: 44,537] [added: 42,081] | | |

| Equity in losses of investee, net of tax | [removed: 8,693] [added: 7,528] | | | | [removed: 3,219] [added: 8,693] | | | | [removed: 1,684] [added: 3,219] | | | | [removed: —] [added: 1,684] | | | | — | | |

| Net income | $ | [removed: 400,235] [added: 442,776] | | | $ | [removed: 231,418] [added: 400,235] | | | $ | [removed: 189,682] [added: 231,418] | | | $ | [removed: 144,020] [added: 189,682] | | | $ | [removed: 145,832] [added: 144,020] | |

| Basic | $ | [removed: 5.00] [added: 5.57] | | | $ | [removed: 2.89] [added: 5.00] | | | $ | [removed: 2.38] [added: 2.89] | | | $ | [removed: 1.80] [added: 2.38] | | | $ | [removed: 1.81] [added: 1.80] | |

| Diluted | $ | [removed: 4.92] [added: 5.53] | | | $ | [removed: 2.83] [added: 4.92] | | | $ | [removed: 2.33] [added: 2.83] | | | $ | [removed: 1.77] [added: 2.33] | | | $ | 1.77 | |

| Basic | [removed: 80,064] [added: 79,424] | | | | [removed: 80,085] [added: 80,064] | | | | [removed: 79,856] [added: 80,085] | | | | [removed: 79,998] [added: 79,856] | | | | [removed: 80,754] [added: 79,998] | | |

| Diluted | [removed: 81,357] [added: 80,100] | | | | [removed: 81,832] [added: 81,357] | | | | [removed: 81,484] [added: 81,832] | | | | [removed: 81,521] [added: 81,484] | | | | [removed: 82,283] [added: 81,521] | | |

| Working capital [removed: (1)] [added: 1] | $ | [removed: 610,406] [added: 662,449] | | | $ | [removed: 658,316] [added: 610,406] | | | $ | [removed: 597,772] [added: 658,316] | | | $ | [removed: 460,338] [added: 597,772] | | | $ | [removed: 455,349] [added: 460,338] | |

| Total assets | [removed: 2,052,458] [added: 2,500,702] | | | | [removed: 1,784,009] [added: 2,052,458] | | | | [removed: 1,402,305] [added: 1,784,009] | | | | [removed: 1,158,633] [added: 1,402,305] | | | | [removed: 987,997] [added: 1,158,633] | | |

| Total long-term liabilities | [removed: 107,494] [added: 183,563] | | | | [removed: 129,670] [added: 107,494] | | | | [removed: 46,427] [added: 129,670] | | | | [removed: 39,035] [added: 46,427] | | | | [removed: 33,415] [added: 39,035] | | |

| Stockholders’ equity | $ | [removed: 1,252,891] [added: 1,346,169] | | | $ | [removed: 1,154,288] [added: 1,252,891] | | | $ | [removed: 999,307] [added: 1,154,288] | | | $ | [removed: 847,926] [added: 999,307] | | | $ | [removed: 752,771] [added: 847,926] | |

| [removed: (1)] [added: 1] | Working capital is calculated as the difference between total current assets and total current liabilities. |

| [removed: (2)] [added: 2] | Balances have been recast to reflect the adoption of [removed: new revenue accounting standard (Refer] [added: ASC 606. We recognized a $3.9 million cumulative effect upon adoption as an adjustment] to [removed: Note] [added: our opening balance of retained earnings as of January 1, 2016 in our Consolidated Statements of Stockholders’ Equity. Refer to *Note] 1 "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial [removed: Statements] [added: Statements*] for details). |

| | Fiscal Year | | | | | | | | | | | | | | | | | | |

The following tables set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 2018.

| | | | | | | | | | | | | | | | | | | | |

| | Year Ended December 31, | | | | | | | | | | | | | | | | | | |

| | December 31, | | | | | | | | | | | | | | | | | | |

| | 2018 | | | | 2017 (2) | | | | 2016 (2) | | | | 2015 | | | | 2014 | | |

| Consolidated Balance Sheet Data: | | | | | | | | | | | | | | | | | | | |

[removed: Quarterly] [added: Quarterly] Results of [removed: Operations][added: Operations]

| | [removed: Three] [added: Three] Months [removed: Ended] [added: Ended] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2018 | | | | | | | | | | | | | | | | 2017 | | | |] [added: 2019] | | | | [added: 2018] | | | | [added: 2017] | | |

| | [removed: December] [added: December] 31, [removed: 2018] [added: 2019] | | | | [removed: September] [added: September] 30, [removed: 2018] [added: 2019] | | | | [removed: June] [added: June] 30, [removed: 2018] [added: 2019] | | | | [removed: March] [added: March] 31, [removed: 2018] [added: 2019] | | | | [removed: December] [added: December] 31, [removed: 2017] [added: 2018] | | | | [removed: September] [added: September] 30, [removed: 2017] [added: 2018] | | | | [removed: June] [added: June] 30, [removed: 2017] [added: 2018] | | | | [removed: March] [added: March] 31, [removed: 2017] [added: 2018] | | |

| | [removed: (in] [added: (in] thousands, except per share [removed: data) (unaudited )] [added: data) (unaudited )] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net revenues | $ | [removed: 534,020] [added: 649,787] | | | $ | [removed: 505,289] [added: 607,341] | | | $ | [removed: 490,259] [added: 600,697] | | | $ | [removed: 436,924] [added: 548,971] | | | $ | [removed: 421,323] [added: 534,020] | | | $ | [removed: 385,267] [added: 505,289] | | | $ | [removed: 356,482] [added: 490,259] | | | $ | [removed: 310,341] [added: 436,924] | |

| Gross profit | [removed: 383,096] [added: 471,958] | | | | [removed: 371,781] [added: 437,554] | | | | [removed: 365,582] [added: 432,289] | | | | [removed: 327,408] [added: 402,096] | | | | [removed: 317,917] [added: 383,096] | | | | [removed: 292,488] [added: 371,781] | | | | [removed: 270,917] [added: 365,582] | | | | [removed: 235,625] [added: 327,408] | | |

| Income from operations | [removed: 120,473] [added: 151,150] | | | | [removed: 125,208] [added: 127,152] | | | | [removed: 122,691] [added: 176,490] | | | | [removed: 98,192] [added: 87,701] | | | | [removed: 109,606] [added: 120,473] | | | | [removed: 98,763] [added: 125,208] | | | | [removed: 83,569] [added: 122,691] | | | | [removed: 61,673] [added: 98,192] | | |

| Net income | [removed: 97,392] [added: 121,262] | | | | [removed: 100,872] [added: 102,524] | | | | [removed: 106,105] [added: 147,142] | | | | [removed: 95,866] [added: 71,848] | | | | [removed: 10,264] [added: 97,392] | | | | [removed: 82,555] [added: 100,872] | | | | [removed: 69,179] [added: 106,105] | | | | [removed: 69,420] [added: 95,866] | | |

| Diluted | $ | [removed: 1.20] [added: 1.53] | | | $ | [removed: 1.24] [added: 1.28] | | | $ | [removed: 1.30] [added: 1.83] | | | $ | [removed: 1.17] [added: 0.89] | | | $ | [removed: 0.13] [added: 1.20] | | | $ | [removed: 1.01] [added: 1.24] | | | $ | [removed: 0.85] [added: 1.30] | | | $ | [removed: 0.85] [added: 1.17] | |

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

| | [removed: Page] [added: Page] |

[removed: | Report of Management on Internal Control over Financial Reporting | [54](#s0088DD25709155B48F1F812AE6CC5529) |][added: REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING]

[removed: | Report of Independent Registered Public Accounting Firm | [55](#s470B593D46AF5323A305AB4C2D429EF6) |][added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]

| Consolidated Statements of Operations for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [57](#sD26BA1804B73528DB422EEE74B9ED3FF)] [added: [50](#sDFAB7D29993258FFB48031ACD41FE96E)] |

| Consolidated Statements of Comprehensive Income for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [58](#s5A9014C579FA58E38D7349B3805569B7)] [added: [51](#s44E9FFE3DA3D58DE80D7B405E291B658)] |

| Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] | [removed: [59](#s905CDA10DFD15CF38C217E8A6AB7A9C7)] [added: [52](#s2574B6FB8E105915877D73795C8A679A)] |

| Consolidated Statements of Stockholders’ Equity for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [60](#s58B32FFE8F77520294BF6FAD56ABAB60)] [added: [53](#s0BD901995D5559179456FF673A6DA098)] |

| Consolidated Statements of Cash Flows for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [61](#s3820ED1E9F6559F9A05E342479422E16)] [added: [54](#s079DD1C1F99154399B1EA2AF69BC561B)] |

[removed: | Notes to Consolidated Financial Statements | [62](#sFF0F20B7AA565E9D8953CCA59DED0FCE) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING][added: | Report of Management on Internal Control over Financial Reporting | [47](#sBAF16E41BD50523CBA2DF2CDB168A1BC) |]

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

In making this assessment, management used the criteria set forth in [removed: Internal] [added: *Internal] Control-Integrated [removed: Framework (2013)] [added: Framework* *(2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO).][added: ("COSO").]

Based on our assessment, management has concluded that, as of December 31, [removed: 2018,] [added: 2019,] our internal control over financial reporting was effective based on criteria in [removed: Internal] [added: *Internal] Control - Integrated Framework (2013) issued by the [removed: COSO.][added: COSO*.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

| [removed: Joseph] [added: Joseph] M. [removed: Hogan] [added: Hogan] |

| [removed: President] [added: President] and Chief Executive [removed: Officer] [added: Officer] |

| [removed: John] [added: John] F. [removed: Morici] [added: Morici] |

| [removed: Chief] [added: Chief] Financial Officer and Senior Vice President, Global [removed: Finance] [added: Finance] |

[added: |] Report of Independent Registered Public Accounting Firm [added: | [48](#sAE5974153B6A593EA99503AA3F90FBBA) |]

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance sheets of Align Technology, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of operations, comprehensive income, stockholders’ [removed: equity,] [added: equity] and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] including the related notes and financial statement schedule listed in the index appearing under [removed: Item 15(a)(2)] [added: item 15 (a)(2)] (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018] [added: 2019] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the COSO.

[removed: Change] [added: Change] in Accounting [removed: Principle][added: Principle]

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for [removed: certain elements of its employee share-based payments] [added: leases] in [removed: 2017.][added: 2019.]

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the [added: company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide]

| | 2019 | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | |

| Basic | $ | 1.54 | | | $ | 1.29 | | | $ | 1.84 | | | $ | 0.90 | | | $ | 1.22 | | | $ | 1.26 | | | $ | 1.32 | | | $ | 1.20 | |

| Basic | 78,578 | | | | 79,332 | | | | 79,943 | | | | 79,860 | | | | 79,891 | | | | 80,111 | | | | 80,216 | | | | 80,036 | | |

| Diluted | 79,137 | | | | 79,825 | | | | 80,590 | | | | 80,687 | | | | 80,943 | | | | 81,359 | | | | 81,471 | | | | 81,628 | | |

| February 28, 2020 |

| February 28, 2020 |

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Revenue Recognition - Determination of Standalone Selling Price of Distinct Performance Obligations in Clear Aligner Contracts*

As described in Notes 1 and 17 to the consolidated financial statements, the Company recognized net revenues of $2 billion from its Clear Aligner segment for the year ended December 31, 2019.

The Company enters into contracts (“treatment plans”) that involve multiple future performance obligations.

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

Determining the standalone selling price, allocation of consideration from the contract to the individual performance obligations and the appropriate timing of revenue recognition is the result of significant qualitative and quantitative judgments.

Management also considers usage rates, which is the number of times a customer is expected to order additional aligners.

Management’s process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel.

The principal considerations for our determination that performing procedures related to revenue recognition and the determination of standalone selling price of distinct performance obligations in Clear Aligner contracts is a critical audit matter are there was significant judgment by management in determining the standalone selling price, which includes significant assumptions related to usage rates for each distinct performance obligation.

This in turn led to significant judgment, subjectivity, and effort in applying audit procedures to evaluate the judgments made by management in determining the estimates of standalone selling price and usage rates for each distinct performance obligation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the determination of standalone selling price for each distinct performance obligation in the Company’s Clear Aligner contracts.

These procedures also included, among others, (i) testing management’s process for determining the estimate of standalone selling price, which included testing the completeness and accuracy of inputs used and evaluating the reasonableness of factors considered by management, such as historical sales, usage rates, costs, and gross margin, and (ii) testing management’s process for estimating usage rates, which included evaluating the reasonableness of inputs evaluated by management, including historical usage data by region, country and channel.

February 28, 2020

| Impairments and other (gains) charges | 22,990 | | | | — | | | | — | | |

| Litigation settlement gain | (51,000 | | ) | | — | | | | — | | |

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES

| Net income | $ | 442,776 | | | $ | 400,235 | | | $ | 231,418 | |

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES

(in thousands, except per share data)

| | 2019 | | | | 2018 | | |

| Prepaid expenses and other current assets | 102,450 | | | | 72,470 | | |

| Operating lease right-of-use assets, net | 56,244 | | | | — | | |

| Operating lease liabilities | 43,463 | | | | — | | |

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

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES

(in thousands)

| Net income | — | | | — | | | | — | | | | — | | | | 442,776 | | | | 442,776 | | |

| Common stock repurchased and retired | (1,887 | ) | | — | | | | (18,992 | | ) | | — | | | | (381,007 | | ) | | (399,999 | | ) |

| Stock-based compensation | — | | | — | | | | 88,184 | | | | — | | | | — | | | | 88,184 | | |

| Balances at December 31, 2019 | 78,433 | | | $ | 8 | | | $ | 906,937 | | | $ | (688 | ) | | $ | 439,912 | | | $ | 1,346,169 | |

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

| Basic | $ | 1.22 | | | $ | 1.26 | | | $ | 1.32 | | | $ | 1.20 | | | $ | 0.13 | | | $ | 1.03 | | | $ | 0.86 | | | $ | 0.87 | |

| Basic | 79,891 | | | | 80,111 | | | | 80,216 | | | | 80,036 | | | | 80,080 | | | | 80,163 | | | | 80,188 | | | | 79,904 | | |

| Diluted | 80,943 | | | | 81,359 | | | | 81,471 | | | | 81,628 | | | | 81,863 | | | | 81,789 | | | | 81,631 | | | | 81,534 | | |

| February 28, 2019 |

February 28, 2019

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balances at December 31, 2015 | 79,500 | | | $ | 8 | | | $ | 821,507 | | | $ | (980 | ) | | $ | 27,391 | | | $ | 847,926 | |

| Cumulative effect adjustment from adoption of ASU 2014-09 | — | | | — | | | | — | | | | — | | | | 3,918 | | | | 3,918 | | |

| Net income | — | | | — | | | | — | | | | — | | | | 189,682 | | | | 189,682 | | |

| Common stock repurchased and retired | (1,110 | ) | | — | | | | (10,593 | | ) | | — | | | | (85,625 | | ) | | (96,218 | | ) |

| Net tax benefits from stock-based awards | — | | | — | | | | 15,888 | | | | — | | | | — | | | | 15,888 | | |

| Net tax benefits from stock-based awards | — | | | | — | | | | 15,888 | | |

| Excess tax benefit from share-based payment arrangements | — | | | | — | | | | (16,773 | | ) |

| Excess tax benefit from share-based payment arrangements | — | | | | — | | | | 16,773 | | |

We measure the fair value of financial assets as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Equity securities under ASC 321 are reported on our Consolidated Balance Sheet as other assets, and we record a change in carrying value of our equity securities, if any, in other income (expense), net in our Consolidated Statement of Operations.

and liabilities being economically hedged.

We determine the fair value of our reporting units based on the present value of estimated future cash flows under the income approach of the reporting units as well as various price or market multiples applied to the reporting unit's operating results along with the appropriate control premium under the marketing approach, both of which are classified as level 3 within the fair value hierarchy as described in Note 2 "Marketable Securities and Fair Value

During the year ended December 31, 2018, we capitalized approximately $2.7 million of internally developed software costs.

Internally developed software costs capitalized during the year ended December 31, 2017 was not material.

We warrant clear aligners manufactured for SmileDirectClub, LLC (“SDC”) against material defects for one year.

We accrue for warranty costs in cost of net revenues upon shipment of products.

Warranties

Certain of these leases have free or escalating rent payment provisions and lease incentives provided by the landlord.

We recognize rent expense under such leases on a straight-line basis over the term of the lease.

GILTI imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

FASB guidance issued in January 2018 allows companies to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which the tax is incurred (the “period cost method”), or (ii) account for GILTI in the measurement of deferred taxes (the “deferred method”).

We have made the election to record GILTI tax using the period cost method.

In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting" (Topic 718).

We adopted the standard in the first quarter of fiscal year 2017.

With this adoption, excess tax benefits related to stock-based compensation expense are reflected in our consolidated statement of operations as a component of the provision for income taxes instead of additional paid-in capital in our consolidated balance sheet.

In addition, we elected to continue to estimate expected forfeitures rather than as they occur to determine the amount of compensation cost to be recognized in each period.

During the fiscal year ended December 31, 2017, we recognized excess tax benefits of $30.0 million in our provision for income taxes.

Excess tax benefits from share-based payment arrangements are classified as an operating activity in our consolidated statement of cash flows.

Prior periods have been retrospectively adjusted, and we recognized a $3.9 million cumulative effect of adopting the guidance as an adjustment to our opening balance of retained earnings as of January 1, 2016 in our Consolidated Statements of Stockholders’ Equity.

Consolidated Balance Sheet line items, which reflect the adoption of the ASU 2014-09 are as follows (in thousands):

| | | | | | | | | | | | | |

[removed: Evaluation] [added: Evaluation] of disclosure controls and [removed: procedures.][added: procedures.]

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of December 31, [removed: 2018] [added: 2019] to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

[removed: Management's] [added: Management's] annual report on internal control over financial [removed: reporting.][added: reporting.]

[removed: Changes] [added: Changes] in internal control over financial [removed: reporting.][added: reporting.]

There have been no changes in our internal control over financial reporting during the quarter ended December 31, [removed: 2018] [added: 2019] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[removed: PART III][added: PART III]

Certain information required by Part III is omitted from this Form 10-K because we intend to file a definitive Proxy Statement for our [removed: 2018] [added: 2020] Annual Meeting of Stockholders (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information to be included therein is incorporated herein by reference.

The information required by Item 401 of Regulation S-K concerning our directors is incorporated by reference to the Proxy Statement under the section captioned “Election of Directors.” The information required by Item 401 of Regulation S-K concerning our executive officers is set forth in [removed: Item] [added: *Item] 1— “Business” of this Annual Report on Form [removed: 10-K.][added: 10-K*.]

[removed: Code] [added: Code] of [removed: Ethics][added: Ethics]

The Internet address for our website is [removed: www.aligntech.com,] [added: *www.aligntech.com*,] and the code of ethics may be found on the “Corporate Governance” section of our “Investor Relations” webpage.

The information required by Item 402 of Regulation S-K is incorporated by reference to the Proxy Statement under the section captioned “Executive Compensation.” The information required by Items 407(e)(4) and (e)(5) is incorporated by reference to the Proxy Statement under the section captioned “Corporate Governance—Compensation Committee [removed: Interlocks”] [added: Interlocks] and [added: Insider Participation” and] “Compensation Committee [added: of the Board] Report,” respectively.

The information required by Item 403 of Regulation S-K is incorporated by reference to the Proxy Statement under the section captioned [removed: “Security Ownership of Certain Beneficial Owners and Management.”][added: “Principal Stockholders”.]

[removed: Equity] [added: Equity] Compensation Plan [removed: Information][added: Information]

The following table provides information as of December 31, [removed: 2018] [added: 2019] about our common stock that may be issued upon the exercise of options and awards granted to employees, consultants or members of our Board of Directors under all existing equity compensation plans, including the 2005 Incentive Plan and the Employee Stock Purchase Plan ("ESPP"), each as amended, and certain individual arrangements (Refer to [removed: Note 10“Stockholders’] [added: *Note 11 "Stockholders’] Equity” of the Notes to Consolidated Financial [removed: Statements] [added: Statements*] for a description of our equity compensation plans).

| [removed: Plan Category] [added: Plan Category] | | [removed: Number] [added: Number] of securities to be issued [removed: upon exercise] [added: upon exercise] of outstanding options and restricted stock [removed: units(a)] [added: units (a)] | | | [removed: Weighted average exercise] [added: Weighted average exercise] price [removed: of outstanding options(b)] [added: of outstanding options (b)] | | | | [removed: Number] [added: Number] of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in [removed: column(a))] [added: column(a))] | | |

| Equity compensation plans approved by security holders | | [removed: 1,263,246] [added: 939,539] | | 1 | $ | [removed: 8.07] [added: —] | | | [removed: 6,632,043] [added: 5,450,153] | | 2, 3 |

| 1 | Includes [removed: 930,859] [added: 695,650] restricted stock units and [removed: 324,200] [added: 243,889] market-performance based restricted stock units at target, which have an exercise price of zero. |

| 2 | Includes [removed: 571,778] [added: 441,293] shares available for issuance under our ESPP. We are unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights or the weighted average exercise price of outstanding rights under the ESPP. |

| 3 | Includes [removed: 648,185] [added: 653,854] of potentially issuable MSUs if performance targets are achieved at maximum payout. |

| Total | | 939,539 | | | $ | — | | | 5,450,153 | | |

| Total | | 1,263,246 | | | $ | 8.07 | | | 6,632,043 | | |

[removed: PART IV][added: PART IV]

| Report of Independent Registered Public Accounting Firm | [removed: [55](#s470B593D46AF5323A305AB4C2D429EF6)] [added: [48](#sAE5974153B6A593EA99503AA3F90FBBA)] |

| Consolidated Statements of Operations for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [57](#sD26BA1804B73528DB422EEE74B9ED3FF)] [added: [50](#sDFAB7D29993258FFB48031ACD41FE96E)] |

| Consolidated Statements of Comprehensive Income for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [58](#s5A9014C579FA58E38D7349B3805569B7)] [added: [51](#s44E9FFE3DA3D58DE80D7B405E291B658)] |

| Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] | [removed: [59](#s905CDA10DFD15CF38C217E8A6AB7A9C7)] [added: [52](#s2574B6FB8E105915877D73795C8A679A)] |

| Consolidated Statements of Stockholders’ Equity for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [60](#s58B32FFE8F77520294BF6FAD56ABAB60)] [added: [53](#s0BD901995D5559179456FF673A6DA098)] |

| Consolidated Statements of Cash Flows for the year ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [61](#s3820ED1E9F6559F9A05E342479422E16)] [added: [54](#s079DD1C1F99154399B1EA2AF69BC561B)] |

| Notes to Consolidated Financial Statements | [removed: [62](#sFF0F20B7AA565E9D8953CCA59DED0FCE)] [added: [55](#sF245520E109152DFAACDDC565AD63338)] |