Item 1. Financial Statements.

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

						Three Months Ended March 31,
						2022						2021
Net revenues						$	973,219					$	894,771
Cost of net revenues						263,873						217,673
Gross profit						709,346						677,098
Operating expenses:
Selling, general and administrative						439,457						397,115
Research and development						71,807						54,537
Total operating expenses						511,264						451,652
Income from operations						198,082						225,446
Interest income and other income (expense), net:
Interest income						677						1,643
Other income (expense), net						(11,273)						34,532
Total interest income and other income (expense), net						(10,596)						36,175
Net income before provision for income taxes						187,486						261,621
Provision for income taxes						53,188						61,245
Net income						$	134,298					$	200,376
Net income per share:
Basic						$	1.71					$	2.54
Diluted						$	1.70					$	2.51
Shares used in computing net income per share:
Basic						78,742						79,000
Diluted						79,193						79,798

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

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

						Three Months Ended March 31,
						2022						2021
Net income						$	134,298					$	200,376
Other comprehensive loss:
Change in foreign currency translation adjustment, net of tax						(7,311)						(14,451)
Change in unrealized gains (losses) on investments, net of tax						(2,728)						(20)
Other comprehensive loss						(10,039)						(14,471)
Comprehensive income						$	124,259					$	185,905

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

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

						March 31, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents						$	926,119					$	1,099,370
Marketable securities, short-term						86,749						71,972
Accounts receivable, net of allowance for doubtful accounts of $9,764 and $9,245, respectively						950,892						897,198
Inventories						275,669						230,230
Prepaid expenses and other current assets						241,339						195,305
Total current assets						2,480,768						2,494,075
Marketable securities, long-term						107,695						125,320
Property, plant and equipment, net						1,140,922						1,081,926
Operating lease right-of-use assets, net						125,252						121,257
Goodwill						411,965						418,547
Intangible assets, net						103,499						109,709
Deferred tax assets						1,515,620						1,533,767
Other assets						57,693						57,509
Total assets						$	5,943,414					$	5,942,110
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	186,509					$	163,886
Accrued liabilities						465,071						607,315
Deferred revenues						1,212,067						1,152,870
Total current liabilities						1,863,647						1,924,071
Income tax payable						123,476						118,072
Operating lease liabilities						104,983						102,656
Other long-term liabilities						184,456						174,597
Total liabilities						2,276,562						2,319,396
Commitments and contingencies (Notes 6 and 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)						—						—
Common stock, $0.0001 par value (200,000 shares authorized; 78,805 and 78,710 issued and outstanding, respectively)						8						8
Additional paid-in capital						992,287						999,006
Accumulated other comprehensive income (loss), net						(5,713)						4,326
Retained earnings						2,680,270						2,619,374
Total stockholders’ equity						3,666,852						3,622,714
Total liabilities and stockholders’ equity						$	5,943,414					$	5,942,110

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

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

						Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss), Net						Retained Earnings						Total
Three Months Ended March 31, 2022						Shares						Amount
Balance as of December 31, 2021						78,710						$	8					$	999,006					$	4,326					$	2,619,374					$	3,622,714
Net income						—						—						—						—						134,298						134,298
Net change in unrealized gains (losses) from investments						—						—						—						(2,728)						—						(2,728)
Net change in foreign currency translation adjustment						—						—						—						(7,311)						—						(7,311)
Issuance of common stock relating to employee equity compensation plans						239						—						14,827						—						—						14,827
Tax withholdings related to net share settlements of equity awards						—						—						(51,533)						—						—						(51,533)
Common stock repurchased and retired						(144)						—						(1,634)						—						(73,402)						(75,036)
Stock-based compensation						—						—						31,621						—						—						31,621
Balance as of March 31, 2022						78,805						$	8					$	992,287					$	(5,713)					$	2,680,270					$	3,666,852

						Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss), Net						Retained Earnings						Total
Three Months Ended March 31, 2021						Shares						Amount
Balance as of December 31, 2020						78,860						$	8					$	974,556					$	43,501					$	2,215,800					$	3,233,865
Net income						—						—						—						—						200,376						200,376
Net change in unrealized gains (losses) from investments						—						—						—						(20)						—						(20)
Net change in foreign currency translation adjustment						—						—						—						(14,451)						—						(14,451)
Issuance of common stock relating to employee equity compensation plans						276						—						13,133						—						—						13,133
Tax withholdings related to net share settlements of equity awards						—						—						(66,568)						—						—						(66,568)
Stock-based compensation						—						—						27,241						—						—						27,241
Balance as of March 31, 2021						79,136						$	8					$	948,362					$	29,030					$	2,416,176					$	3,393,576

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

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

						Three Months Ended March 31,
						2022						2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income						$	134,298					$	200,376
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes						17,464						28,979
Depreciation and amortization						29,626						25,635
Stock-based compensation						31,621						27,241
Non-cash operating lease cost						7,526						5,911
Arbitration award gain						—						(43,403)
Other non-cash operating activities						8,612						5,795
Changes in assets and liabilities:
Accounts receivable						(55,543)						(67,423)
Inventories						(49,455)						(15,582)
Prepaid expenses and other assets						(48,665)						(34,858)
Accounts payable						7,025						(14,936)
Accrued and other long-term liabilities						(126,400)						(475)
Long-term income tax payable						5,405						3,920
Deferred revenues						68,984						106,007
Net cash provided by operating activities						30,498						227,187
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment						(87,328)						(43,431)
Purchase of marketable securities						(15,041)						—
Proceeds from maturities of marketable securities						6,095						—
Proceeds from sales of marketable securities						8,528						—
Repayment on unsecured promissory note						—						4,594
Proceeds from arbitration award						—						43,403
Other investing activities						(2,452)						—
Net cash (used in) provided by investing activities						(90,198)						4,566
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock						14,827						13,133
Common stock repurchases						(75,036)						—
Payroll taxes paid upon the vesting of equity awards						(51,533)						(66,568)
Net cash used in financing activities						(111,742)						(53,435)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash						(1,826)						(7,487)
Net (decrease) increase in cash, cash equivalents, and restricted cash						(173,268)						170,831
Cash, cash equivalents, and restricted cash at beginning of the period						1,100,139						961,474
Cash, cash equivalents, and restricted cash at end of the period						$	926,871					$	1,132,305

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

ALIGN TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

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

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

Use of Estimates

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

Certain Risks and Uncertainties

As the pandemic continues and new variants of the virus emerge, we are seeing a resurgence of severe preventative measures to prevent its spread in China and, consequently, continuing fluctuations in the numbers of patients seeking treatment for dental services and the number of doctors providing services and treatments in other markets. The full extent to which the pandemic, including as a result of any new variants, business restrictions or lockdowns, and the impact of vaccinations, will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately determined. Further, we could also be materially adversely affected by supply chain disruptions, including shortages and inflationary pressures, uncertain or reduced demand, labor shortages, delays in collection of outstanding receivables and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.

The military conflict between Russia and Ukraine and its related impacts on the economy has caused significant worldwide challenges. While the situation is highly uncertain and evolving, its impact on the economy such as inflation, supply chain challenges, impacts on consumer confidence, purchasing power, sanctions and retaliatory sanctions among others, have impacted and could potentially subject our business to materially adverse consequences should any portion of its impacts become prolonged or escalate beyond its current scope.

Revenue Recognition

Our revenues are derived primarily from the sale of aligners, scanners, and services from our Clear Aligner and Systems and Services segments. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenues according to ASC 606-10, “Revenues from Contracts with Customers.”

We identify a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract to the individual

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

Clear Aligner

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

Our treatment plans comprise the following performance obligations that also represent distinct deliverables: initial aligners, the option of additional aligners, case refinement, and replacement aligners. We take the practical expedient to consider shipping and handling costs as activities to fulfill the performance obligation. We allocate revenues for each treatment plan based on each unit’s SSP. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, we take into consideration changing trends and market conditions. For treatment plans with multiple future performance obligations, we also consider usage rates, which is the number of times a customer is expected to order additional aligners. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We recognize the revenues upon shipment, as the customers obtain physical possession, and we have enforceable rights to payment. As we collect most consideration upfront, we consider whether a significant financing component exists; however, as the delivery of the performance obligations are at the customer’s discretion, we conclude that no significant financing component exists.

Systems and Services

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

Recent Accounting Pronouncements Not Yet Effective

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

Note 2. Financial Instruments

Cash, Cash Equivalents and Marketable Securities

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

																														Reported as:
March 31, 2022						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable securities, short-term						Marketable securities, long-term
Cash						$	689,175					$	—					$	—					$	689,175					$	689,175					$	—					$	—
Money market funds						236,960						—						(16)						236,944						236,944						—						—
Corporate bonds						116,307						3						(2,389)						113,921						—						41,164						72,757
U.S. government treasury bonds						46,638						—						(511)						46,127						—						31,055						15,072
Asset-backed securities						27,453						—						(197)						27,256						—						10,984						16,272
Municipal bonds						6,049						—						(77)						5,972						—						3,546						2,426
U.S. government agency bonds						1,204						—						(36)						1,168						—						—						1,168
Total						$	1,123,786					$	3					$	(3,226)					$	1,120,563					$	926,119					$	86,749					$	107,695

																														Reported as:
December 31, 2021						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable securities, short-term						Marketable securities, long-term
Cash						$	754,802					$	—					$	—					$	754,802					$	754,802					$	—					$	—
Money market funds						343,012						—						(2)						343,010						343,010						—						—
Corporate bonds						115,507						9						(398)						115,118						1,042						35,065						79,011
U.S. government treasury bonds						42,976						—						(48)						42,928						—						22,251						20,677
Asset-backed securities						32,031						—						(40)						31,991						—						10,999						20,992
Municipal bonds						7,628						—						(15)						7,613						516						3,657						3,440
U.S. government agency bonds						1,201						—						(1)						1,200						—						—						1,200
Total						$	1,297,157					$	9					$	(504)					$	1,296,662					$	1,099,370					$	71,972					$	125,320

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

						March 31, 2022						December 31, 2021
Due in 1 year or less						$	67,225					$	59,737
Due in 1 year through 5 years						$	127,219					139,113
Total						$	194,444					$	198,850

The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. Our unrealized losses as of March 31, 2022 and December 31, 2021 are primarily due to changes in interest rates and credit spreads.

Fair Value Measurements

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

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

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

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

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

Description						Balance as of March 31, 2022						Level 1						Level 2						Level 3
Cash equivalents:
Money market funds						$	236,944					$	236,944					$	—					$	—
Short-term investments:
U.S. government treasury bonds						31,055						31,055						—						—
Corporate bonds						41,164						—						41,164						—
Municipal bonds						3,546						—						3,546						—
Asset-backed securities						10,984						—						10,984						—
Long-term investments:
U.S. government treasury bonds						15,072						15,072						—						—
Corporate bonds						72,757						—						72,757						—
Municipal bonds						2,426						—						2,426						—
U.S. government agency bonds						1,168						—						1,168						—
Asset-backed securities						16,272						—						16,272						—
Other assets:
Investments in privately held companies						11,225						—						—						11,225
						$	442,613					$	283,071					$	148,317					$	11,225

Description						Balance as of December 31, 2021						Level 1						Level 2						Level 3
Cash equivalents:
Money market funds						$	343,010					$	343,010					$	—					$	—
Corporate bonds						1,042						—						1,042						—
Municipal bonds						516						—						516						—
Short-term investments:
U.S. government treasury bonds						22,251						22,251						—						—
Corporate bonds						35,065						—						35,065						—
Municipal bonds						3,657						—						3,657						—
Asset-backed securities						10,999						—						10,999						—
Long-term investments:
U.S. government treasury bonds						20,677						20,677						—						—
Corporate bonds						79,011						—						79,011						—
Municipal bonds						3,440						—						3,440						—
U.S. government agency bonds						1,200						—						1,200						—
Asset-backed securities						20,992						—						20,992						—
Prepaid expenses and other current assets:
Israeli funds						3,841						—						3,841						—
Other assets:
Investments in privately held companies						8,621						—						—						8,621
						$	554,322					$	385,938					$	159,763					$	8,621

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables. These forward contracts are classified within Level 2 of the fair value hierarchy. As a result of the settlement of foreign currency forward contracts, the net losses we recognized during the three months ended March 31, 2022 were not material and we recognized net gains of $12.4 million during the three months ended March 31, 2021. The fair value of foreign exchange forward contracts outstanding was $8.4 million as of March 31, 2022 and was not material as of December 31, 2021.

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

			March 31, 2022
			Local Currency Amount						Notional Contract Amount (USD)
Euro			€189,795						$	210,031
Chinese Yuan			¥520,500						81,862
Polish Zloty			PLN324,500						77,086
Canadian Dollar			C$96,000						76,733
Brazilian Real			R$323,700						67,665
Japanese Yen			¥5,666,200						46,621
British Pound			£32,275						42,394
Russian Ruble			₽3,700,000						35,885
Swiss Franc			CHF17,270						18,692
Israeli Shekel			ILS54,210						17,085
Mexican Peso			M$281,560						14,127
Australian Dollar			A$5,000						3,748
									$	691,929

			December 31, 2021
			Local Currency Amount						Notional Contract Amount (USD)
Euro			€165,110						$	186,358
Canadian Dollar			C$99,800						78,018
Chinese Yuan			¥494,500						77,358
Polish Zloty			PLN219,800						54,014
Brazilian Real			R$286,500						50,894
Japanese Yen			¥5,548,700						48,206
British Pound			£34,740						46,881
Israeli Shekel			ILS54,110						17,416
Mexican Peso			M$311,500						15,133
Swiss Franc			CHF9,950						10,883
Australian Dollar			A$6,900						5,009
									$	590,170

Note 3. Balance Sheet Components

Inventories consist of the following (in thousands):

						March 31, 2022						December 31, 2021
Raw materials						$	133,808					$	123,234
Work in process						79,495						51,706
Finished goods						62,366						55,290
Total inventories						$	275,669					$	230,230

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

						March 31, 2022						December 31, 2021
Value added tax receivables						$	134,941					$	93,610
Prepaid expenses						74,069						70,218
Other current assets						32,329						31,477
Total prepaid expenses and other current assets						$	241,339					$	195,305

Accrued liabilities consist of the following (in thousands):

						March 31, 2022						December 31, 2021
Accrued payroll and benefits						$	156,272					$	288,355
Accrued expenses						66,211						67,169
Accrued income taxes						45,646						33,838
Accrued sales and marketing expenses						41,221						41,387
Accrued professional fees						36,340						31,457
Accrued property, plant and equipment						25,296						46,561
Current operating lease liabilities						25,243						22,719
Other accrued liabilities						68,842						75,829
Total accrued liabilities						$	465,071					$	607,315

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

						Three Months Ended March 31,
						2022						2021
Balance at beginning of period						$	16,169					$	12,615
Charged to cost of net revenues						3,536						4,280
Actual warranty expenditures						(3,612)						(3,160)
Balance at end of period						$	16,093					$	13,735

Deferred revenues consist of the following (in thousands):

						March 31, 2022						December 31, 2021
Deferred revenues - current						$	1,212,067					$	1,152,870
Deferred revenues - long-term 1						$	146,998					$	136,684

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

During the three months ended March 31, 2022 and 2021, we recognized $973.2 million and $894.8 million of net revenues, respectively, of which $184.9 million and $125.8 million was included in the deferred revenues balance at December 31, 2021 and 2020, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of March 31, 2022 were $1,385.4 million. These performance obligations are expected to be fulfilled over six months to five years.

Note 4. Goodwill and Intangible Assets

Goodwill

The change in the carrying value of goodwill for the three months ended March 31, 2022, categorized by reportable segments, is as follows (in thousands):

			Clear Aligner						Systems and Services						Total
Balance as of December 31, 2021			$	112,208					$	306,339					$	418,547
Foreign currency translation adjustments			(642)						(5,940)						(6,582)
Balance as of March 31, 2022			$	111,566					$	300,399					$	411,965

Intangible Long-Lived Assets

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

			Weighted Average Amortization Period (in years)						Gross Carrying Amount as of March 31, 2022						Accumulated Amortization						Accumulated Impairment Loss						Net Carrying Value as of March 31, 2022
Existing technology			10						$	104,531					$	(25,068)					$	(4,328)					$	75,135
Customer relationships			11						55,000						(26,894)						(10,751)						17,355
Trademarks and tradenames			10						17,200						(5,006)						(4,179)						8,015
Patents			8						6,511						(4,693)						—						1,818
									$	183,242					$	(61,661)					$	(19,258)					102,323
Foreign currency translation adjustments																											1,176
Total intangible assets, net																											$	103,499

			Weighted Average Amortization Period (in years)						Gross Carrying Amount as of December 31, 2021						Accumulated Amortization						Accumulated Impairment Loss						Net Carrying Value as of December 31, 2021
Existing technology			10						$	104,531					$	(22,495)					$	(4,328)					$	77,708
Customer relationships			11						55,000						(25,891)						(10,751)						18,358
Trademarks and tradenames			10						17,200						(4,547)						(4,179)						8,474
Patents			8						6,511						(4,495)						—						2,016
									$	183,242					$	(57,428)					$	(19,258)					106,556
Foreign currency translation adjustments																											3,153
Total intangible assets, net																											$	109,709

The total estimated annual future amortization expense for these acquired intangible assets as of March 31, 2022 is as follows (in thousands):

Fiscal Year Ending December 31,						Amortization
Remainder of 2022						$	11,459
2023						14,997
2024						13,831
2025						13,455
2026						12,849
Thereafter						35,732
Total						$	102,323

Amortization expense for the three months ended March 31, 2022 and 2021 was $4.3 million and $3.9 million, respectively.

Note 5. Credit Facility

On July 21, 2020, we entered into a credit facility for a $300.0 million unsecured revolving line of credit, with a $50.0 million letter of credit sublimit, and a maturity date of July 21, 2023 (“2020 Credit Facility”). The 2020 Credit Facility requires us to comply with specific financial conditions and performance requirements. Loans under the 2020 Credit Facility bear interest, at our option, at either a rate based on the reserve adjusted LIBOR for the applicable interest period or a base rate, in each case plus a margin. The base rate is the highest of the credit facility's publicly announced prime rate, the federal funds rate plus 0.50% and one-month LIBOR plus 1.0%. The margin ranges from 1.50% to 2.25% for LIBOR loans and 0.50% to 1.25% for base rate loans. The 2020 Credit Facility allows for an alternative rate to be identified if LIBOR is no longer available. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period (and at three month intervals if the interest period exceeds three months) in the case of LIBOR loans. The outstanding principal, together with accrued and unpaid interest, is due on the maturity date. As of March 31, 2022, we had no outstanding borrowings under the 2020 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.

Note 6. Legal Proceedings

2018 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. The complaint generally alleged claims under the federal securities laws and sought 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. On November 29, 2019, the lead plaintiff filed an amended consolidated complaint against Align and two of our executive officers alleging similar claims as the initial complaints on behalf of a purported class of purchasers of our common stock from May 23, 2018 and October 24, 2018. On September 9, 2020, Defendants’ motion to dismiss the amended consolidated complaint was granted in part and denied in part. On June 30, 2021, counsel for the parties signed a Stipulation and Agreement of Settlement to resolve all claims for $16 million. The

settlement amount will be funded by insurance proceeds and consequently, we recorded a short term liability and a receivable for this amount in our consolidated financial statements. The Court granted final approval of the settlement on April 28, 2022 and dismissed the case with prejudice.

2019 Shareholder Derivative Lawsuit

In January 2019, three derivative lawsuits were filed in the U.S. District Court for the Northern District of California which were later consolidated, purportedly on behalf of Align, naming as defendants the then current members of our Board of Directors along with certain of our executive officers. The allegations in the complaints are similar to those asserted in the 2018 Securities Class Action Lawsuit, but the complaints assert various state law causes of action, including for breaches of fiduciary duty, insider trading, and unjust enrichment. The complaints seek unspecified monetary damages on behalf of Align, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees. The consolidated action was stayed until the final disposition of the 2018 Securities Class Action Lawsuit on April 28, 2022. Defendants have not yet responded to the complaints.

On April 12, 2019, a derivative lawsuit was also filed in California Superior Court for Santa Clara County, purportedly on behalf of Align, naming as defendants the members of our Board of Directors along with certain of our executive officers. The allegations in the complaint are similar to those in the derivative suits described above. The matter was similarly stayed until the final disposition of the 2018 Securities Class Action Lawsuit on April 28, 2022. Defendants have not yet responded to the complaint.

Align believes these claims are without merit. 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*.*

2020 Securities Class Action Lawsuit

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

2020 Shareholder Derivative Lawsuit

On May 4, 2020, a derivative lawsuit was filed in the U.S. District Court for the Northern District of California, purportedly on behalf of Align, naming as defendants the members of our Board of Directors along with certain of our executive officers. The allegations in the complaint are similar to those presented in the 2020 Securities Class Action Lawsuit, but this complaint asserts state law claims for breach of fiduciary duty and insider trading. The complaint seeks unspecified monetary damages on behalf of Align, which is named solely as a nominal defendant against whom no recovery is sought, as well as disgorgement and the costs and expenses associated with the litigation, including attorneys’ fees. This action is stayed pending resolution of the appeal in the 2020 Securities Class Action Lawsuit. Align believes these claims are without merit. Align is currently unable to predict the outcome of this lawsuit and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

3Shape Litigation

On February 7, 2022, Align and 3Shape, a Danish corporation, settled their outstanding patent infringement and antitrust litigation, which began in November 2017. The terms of the settlement are confidential, and the settlement has not had a material effect on Align’s ongoing operations and financial results. The outstanding cases have all been dismissed with prejudice.

Antitrust Class Actions

On June 5, 2020, a dental practice named Simon and Simon, PC doing business as City Smiles brought an antitrust action in the U.S. District Court for the Northern District of California on behalf of itself and a putative class of similarly situated practices seeking monetary damages and injunctive relief relating to Align’s alleged market activities in alleged clear aligner and intraoral scanner markets. Plaintiff filed an amended complaint and added VIP Dental Spas as a plaintiff on August 14, 2020. A jury trial is scheduled to begin in this matter on January 29, 2024. Align believes the plaintiffs’ claims are without merit and intends to vigorously defend itself.

On May 3, 2021, an individual named Misty Snow brought an antitrust action in the U.S. District Court for the Northern District of California on behalf of herself and a putative class of similarly situated individuals seeking monetary damages and injunctive relief relating to Align’s alleged market activities in alleged clear aligner and intraoral scanner markets. Plaintiff filed an amended complaint on July 30, 2021 adding new plaintiffs and various state law claims. Plaintiffs filed a second amended complaint on October 21, 2021. On March 2, 2022, Plaintiffs filed a third amended complaint. Align filed a motion to dismiss the third amended complaint, which the Court denied. Align has not yet responded to the third amended complaint. A jury trial is scheduled to begin in this matter on January 29, 2024. 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, if any, nor estimate a range of possible loss.

SDC Dispute

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

As required by the Award, Align tendered its membership interests for a purchase price that SDC claimed to be Align’s “capital account” balance. Align disputed that the SDC Entities properly determined the value of Align’s “capital account” balance as of October 31, 2017. Consequently, on July 3, 2019, Align filed a confidential demand for arbitration challenging the propriety of the SDC Entities’ determination. On March 12, 2021 the Arbitrator issued a final award in favor of Align and against SDC finding that the SDC entities owed Align an additional $43.4 million plus interest. SDC paid the amount due to Align on March 17, 2021.

On August 27, 2020, Align initiated a confidential arbitration proceeding against the SDC entities before the American Arbitration Association in San Jose, California. This arbitration relates to the Strategic Supply Agreement (“Supply Agreement”) entered into between the parties in 2016. The complaint alleges that the SDC Entities breached the Supply Agreement’s terms, causing damages to Align in an amount to be determined. On January 19, 2021, SDC filed a counterclaim alleging that Align breached the Supply Agreement. Align denies the SDC Entities’ allegations in the counterclaim and will vigorously defend itself against them. This arbitration hearing is set for July 18-29, 2022.

Align is currently unable to predict the outcome of these disputes and therefore cannot determine the likelihood of loss or success nor estimate a range of possible loss or success, if any.

In addition to the above, in the ordinary 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.

Note 7. Commitments and Contingencies

Off-Balance Sheet Arrangements

As of March 31, 2022, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources other than certain items disclosed in Note 11 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Indemnification Provisions

In the normal course of business to facilitate transactions in our services and products, we indemnify certain parties: customers, vendors, lessors, and other parties with respect to certain matters, including, but not limited to, services to be provided by us and intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of March 31, 2022, we did not have any material indemnification claims that were probable or reasonably possible.

Note 8. Stockholders’ Equity

As of March 31, 2022, the 2005 Incentive Plan, as amended, has a total reserve of 27,783,379 shares of which 3,752,174 shares are available for issuance.

Summary of Stock-Based Compensation Expense

The stock-based compensation related to our stock-based awards and employee stock purchase plan for the three months ended March 31, 2022 and 2021 is as follows (in thousands):

						Three Months Ended March 31,
						2022						2021
Cost of net revenues						$	1,514					$	1,306
Selling, general and administrative						24,725						21,844
Research and development						5,382						4,091
Total stock-based compensation						$	31,621					$	27,241

Restricted Stock Units (“RSUs”)

The fair value of RSUs is based on our closing stock price on the date of grant. RSUs granted generally vest over a period of four years. A summary for the three months ended March 31, 2022 is as follows:

			Number of Shares Underlying RSUs (in thousands)						Weighted Average Grant Date Fair Value						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2021			492						$	369.17
Granted			217						499.14
Vested and released			(176)						330.33
Forfeited			(11)						423.61
Unvested as of March 31, 2022			522						$	435.22					1.8						$	227,614

As of March 31, 2022, we expect to recognize $192.2 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.8 years.

Market-Performance Based Restricted Stock Units (“MSUs”)

We grant MSUs to members of senior management. Each MSU represents the right to one share of Align’s common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Align’s stock price relative to the performance of a stock market index over the vesting period. MSUs vest over a period of three years and the maximum number of eligible to vest in the future is 250% of the MSUs initially granted.

The following table summarizes the MSU performance for the three months ended March 31, 2022:

			Number of Shares Underlying MSUs (in thousands)						Weighted Average Grant Date Fair Value						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2021			174						$	551.57
Granted 1			101						607.96
Vested and released			(128)						396.10
Forfeited			(3)						744.39
Unvested as of March 31, 2022			144						$	725.73					1.7						$	62,814

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

As of March 31, 2022, we expect to recognize $62.3 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.7 years.

Employee Stock Purchase Plan

As of March 31, 2022, we have 2,156,295 shares available for future issuance under our Amended and Restated 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”).

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

						Three Months Ended March 31,
						2022						2021
Expected term (in years)						1.5						1.0
Expected volatility						48.6		%				58.8		%
Risk-free interest rate						1.0		%				0.1		%
Expected dividends						—						—
Weighted average fair value at grant date						$	196.97					$	202.74

As of March 31, 2022, we expect to recognize $20.0 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 1.0 year.

Note 9. Common Stock Repurchase Program

In May 2021, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock (“May 2021 Repurchase Program”). As of March 31, 2022, we have $649.9 million available for repurchase under the May 2021 Repurchase Program.

During February 2022, we repurchased on the open market approximately 0.1 million shares of our common stock at an average price of $522.61 per share, including commissions and fees, for an aggregate purchase price of $75.0 million.

Subsequent to the first quarter, on April 29, 2022, we entered into an ASR to repurchase $200.0 million of our common stock. We paid $200.0 million and received an initial delivery of approximately 0.6 million shares based on current market prices. The final number of shares to be repurchased will be based on our volume-weighted average stock price under the terms of the ASR, less an agreed upon discount.

Note 10. Accounting for Income Taxes

Our provision for income taxes was $53.2 million and $61.2 million for the three months ended March 31, 2022 and 2021, respectively representing effective tax rates of 28.4% and 23.4%, respectively. Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three months ended March 31, 2022 and 2021 primarily due to the recognition of additional tax expense resulting from foreign income taxed at different rates, state income taxes, and non-deductible expenses in the U.S., partially offset by the recognition of excess tax benefits related to stock-based compensation. Additionally, a change in U.S. tax laws effective January 1, 2022 which requires capitalization and amortization of research and development expenses incurred after December 31, 2021 has increased our effective tax rate for the three months ended March 31, 2022.

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

We file U.S. federal, U.S. state, and non-U.S. income tax returns. Our major tax jurisdictions include U.S. federal, the State of California and Switzerland. For U.S. federal and state tax returns, we are no longer subject to tax examinations for years before 2018 and 2016, respectively. Our Israeli subsidiary is under tax audit for years 2016 through 2019. During the fourth quarter of 2021, the Israel Tax Authority issued a tax assessment in connection with a 2016 transaction to which our Israeli subsidiary was a party. We filed an administrative appeal challenging the assessment during the first quarter of 2022 and, by doing so, proceeded to the next administrative stage of the audit. We will continue to vigorously defend our Israeli subsidiary’s tax return position. Based on our assessment of the information currently available, we have not derecognized or remeasured our tax positions with respect to this matter during the three months ended March 31, 2022. With few exceptions, we are no longer subject to examination by foreign tax authorities for years before 2015.

Our total gross unrecognized tax benefits, excluding interest and penalties, were $68.3 million and $63.3 million as of March 31, 2022 and December 31, 2021, respectively, a material amount of which would impact our effective tax rate if recognized. We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes. Total interest and penalties accrued as of March 31, 2022 was not material. While we defend income tax audits in various jurisdictions and the results of such audits may differ materially from the amounts accrued for each year, we cannot currently ascertain the bases on which any given audit will be ultimately resolved. Accordingly, we are unable to estimate the range of possible adjustments to our balance of gross unrecognized tax benefits in the next 12 months.

Note 11. Net Income per Share

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

						Three Months Ended March 31,
						2022						2021
Numerator:
Net income						$	134,298					$	200,376
Denominator:
Weighted average common shares outstanding, basic						78,742						79,000
Dilutive effect of potential common stock						451						798
Total shares, diluted						79,193						79,798
Net income per share, basic						$	1.71					$	2.54
Net income per share, diluted						$	1.70					$	2.51
Anti-dilutive potential common shares 1						151						76

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

Note 12. Supplemental Cash Flow Information

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

						Three Months Ended March 31,
						2022						2021
Non-cash investing and financing activities:
Acquisition of property, plant and equipment in accounts payable and accrued liabilities						$	58,876					$	45,354
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	7,292					$	6,923
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	12,262					$	7,369

Note 13. Segments and Geographical Information

Segment Information

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

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

						Three Months Ended March 31,
						2022						2021
Net revenues
Clear Aligner						$	809,696					$	753,269
Systems and Services						163,523						141,502
Total net revenues						$	973,219					$	894,771
Gross profit
Clear Aligner						$	605,696					$	584,534
Systems and Services						103,650						92,564
Total gross profit						$	709,346					$	677,098
Income from operations
Clear Aligner						$	312,719					$	327,465
Systems and Services						50,799						47,228
Unallocated corporate expenses						(165,436)						(149,247)
Total income from operations						$	198,082					$	225,446
Stock-based compensation
Clear Aligner						$	2,854					$	2,294
Systems and Services						214						171
Unallocated corporate expenses						28,553						24,776
Total stock-based compensation						$	31,621					$	27,241
Depreciation and amortization
Clear Aligner						$	13,767					$	11,120
Systems and Services						6,922						4,545
Unallocated corporate expenses						8,937						9,970
Total depreciation and amortization						$	29,626					$	25,635

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

						Three Months Ended March 31,
						2022						2021
Total segment income from operations						$	363,518					$	374,693
Unallocated corporate expenses						(165,436)						(149,247)
Total income from operations						198,082						225,446
Interest income						677						1,643
Other income (expense), net						(11,273)						34,532
Net income before provision for income taxes						$	187,486					$	261,621

Geographical Information

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

						Three Months Ended March 31,
						2022						2021
Net revenues 1:
U.S.						$	420,920					$	383,002
Switzerland						331,739						315,450
Other International						220,560						196,319
Total net revenues						$	973,219					$	894,771

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

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

						March 31, 2022						December 31, 2021
Long-lived assets 1:
Switzerland						$	477,312					$	444,205
U.S.						209,220						210,582
China						126,623						125,346
Other International						453,019						423,050
Total long-lived assets						$	1,266,174					$	1,203,183

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