Item 1. Financial Statements.

ALIGN TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Net revenues						$	960,214					$	890,348					$	2,905,534					$	2,833,120
Cost of net revenues						297,138						271,179						868,195						817,046
Gross profit						663,076						619,169						2,037,339						2,016,074
Operating expenses:
Selling, general and administrative						407,992						398,547						1,300,876						1,264,402
Research and development						88,738						76,966						264,670						221,738
Total operating expenses						496,730						475,513						1,565,546						1,486,140
Income from operations						166,346						143,656						471,793						529,934
Interest income and other income (expense), net:
Interest income						5,522						1,685						12,280						2,607
Other income (expense), net						(9,757)						(22,700)						(15,749)						(48,805)
Total interest income and other income (expense), net						(4,235)						(21,015)						(3,469)						(46,198)
Net income before provision for income taxes						162,111						122,641						468,324						483,736
Provision for income taxes						40,684						49,941						147,285						163,938
Net income						$	121,427					$	72,700					$	321,039					$	319,798
Net income per share:
Basic						$	1.59					$	0.93					$	4.19					$	4.08
Diluted						$	1.58					$	0.93					$	4.18					$	4.07
Shares used in computing net income per share:
Basic						76,569						78,093						76,670						78,408
Diluted						76,826						78,237						76,849						78,652

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 September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Net income						$	121,427					$	72,700					$	321,039					$	319,798
Other comprehensive income (loss):
Change in foreign currency translation adjustment, net of tax						(9,822)						(20,246)						9,810						(41,313)
Change in unrealized gains (losses) on investments, net of tax						526						(729)						2,521						(3,758)
Other comprehensive income (loss)						(9,296)						(20,975)						12,331						(45,071)
Comprehensive income						$	112,131					$	51,725					$	333,370					$	274,727

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)

						September 30, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents						$	1,239,013					$	942,050
Marketable securities, short-term						44,792						57,534
Accounts receivable, net of allowance for doubtful accounts of $13,155 and $10,343, respectively						904,178						859,685
Inventories						296,189						338,752
Prepaid expenses and other current assets						217,632						226,370
Total current assets						2,701,804						2,424,391
Marketable securities, long-term						18,137						41,978
Property, plant and equipment, net						1,268,388						1,231,855
Operating lease right-of-use assets, net						118,966						118,880
Goodwill						404,295						407,551
Intangible assets, net						82,741						95,720
Deferred tax assets						1,591,791						1,571,746
Other assets						132,429						55,826
Total assets						$	6,318,551					$	5,947,947
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	99,693					$	127,870
Accrued liabilities						614,462						454,374
Deferred revenues						1,408,831						1,343,643
Total current liabilities						2,122,986						1,925,887
Income tax payable						116,443						124,393
Operating lease liabilities						98,523						100,334
Other long-term liabilities						178,733						195,975
Total liabilities						2,516,685						2,346,589
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; 76,588 and 77,267 issued and outstanding, respectively)						8						8
Additional paid-in capital						1,193,057						1,044,946
Accumulated other comprehensive income (loss), net						2,047						(10,284)
Retained earnings						2,606,754						2,566,688
Total stockholders’ equity						3,801,866						3,601,358
Total liabilities and stockholders’ equity						$	6,318,551					$	5,947,947

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 September 30, 2023						Shares						Amount
Balance as of June 30, 2023						76,532						$	8					$	1,141,623					$	11,343					$	2,485,327					$	3,638,301
Net income						—						—						—						—						121,427						121,427
Net change in unrealized gains (losses) from investments						—						—						—						526						—						526
Net change in foreign currency translation adjustment						—						—						—						(9,822)						—						(9,822)
Issuance of common stock relating to employee equity compensation plans						56						—						12,339						—						—						12,339
Tax withholdings related to net share settlements of equity awards						—						—						(507)						—						—						(507)
Stock-based compensation						—						—						39,602												—						39,602
Balance as of September 30, 2023						76,588						$	8					$	1,193,057					$	2,047					$	2,606,754					$	3,801,866

						Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss), Net						Retained Earnings						Total
Nine Months Ended September 30, 2023						Shares						Amount
Balance as of December 31, 2022						77,267						$	8					$	1,044,946					$	(10,284)					$	2,566,688					$	3,601,358
Net income						—						—						—						—						321,039						321,039
Net change in unrealized gains (losses) from investments						—						—						—						2,521						—						2,521
Net change in foreign currency translation adjustment						—						—						—						9,810						—						9,810
Issuance of common stock relating to employee equity compensation plans						263						—						26,595						—						—						26,595
Tax withholdings related to net share settlements of equity awards						—						—						(22,294)						—						—						(22,294)
Common stock repurchased and retired						(942)						—						(11,387)						—						(280,973)						(292,360)
Equity forward contract related to accelerated stock repurchase						—						—						40,000						—						—						40,000
Stock-based compensation						—						—						115,197						—						—						115,197
Balance as of September 30, 2023						76,588						$	8					$	1,193,057					$	2,047					$	2,606,754					$	3,801,866

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 September 30, 2022						Shares						Amount
Balance as of June 30, 2022						78,059						$	8					$	1,016,882					$	(19,770)					$	2,601,961					$	3,599,081
Net income						—						—						—						—						72,700						72,700
Net change in unrealized gains (losses) from investments						—						—						—						(729)						—						(729)
Net change in foreign currency translation adjustment						—						—						—						(20,246)						—						(20,246)
Issuance of common stock relating to employee equity compensation plans						52						—						11,322						—						—						11,322
Tax withholdings related to net share settlements of equity awards						—						—						(424)						—						—						(424)
Stock-based compensation						—						—						32,918												—						32,918
Balance as of September 30, 2022						78,111						$	8					$	1,060,698					$	(40,745)					$	2,674,661					$	3,694,622

						Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss), Net						Retained Earnings						Total
Nine Months Ended September 30, 2022						Shares						Amount
Balance as of December 31, 2021						78,710						$	8					$	999,006					$	4,326					$	2,619,374					$	3,622,714
Net income						—						—						—						—						319,798						319,798
Net change in unrealized gains (losses) from investments						—						—						—						(3,758)						—						(3,758)
Net change in foreign currency translation adjustment						—						—						—						(41,313)						—						(41,313)
Issuance of common stock relating to employee equity compensation plans						302						—						26,149						—						—						26,149
Tax withholdings related to net share settlements of equity awards						—						—						(52,611)						—						—						(52,611)
Common stock repurchased and retired						(901)						—						(10,525)						—						(264,511)						(275,036)
Stock-based compensation						—						—						98,679						—						—						98,679
Balance as of September 30, 2022						78,111						$	8					$	1,060,698					$	(40,745)					$	2,674,661					$	3,694,622

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)

						Nine Months Ended September 30,
						2023						2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income						$	321,039					$	319,798
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes						(22,749)						6,765
Depreciation and amortization						108,669						92,096
Stock-based compensation						115,197						98,679
Non-cash operating lease cost						24,034						22,756
Impairment of equity investment						3,329						—
Other non-cash operating activities						28,435						26,216
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable						(80,297)						32,284
Inventories						31,639						(108,524)
Prepaid expenses and other assets						1,773						(32,440)
Accounts payable						(23,130)						(27,100)
Accrued and other long-term liabilities						156,024						(213,378)
Long-term income tax payable						(7,979)						9,019
Deferred revenues						82,894						197,854
Net cash provided by operating activities						738,878						424,025
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired						—						(12,304)
Purchase of property, plant and equipment						(144,302)						(238,696)
Purchase of marketable securities						(2,373)						(20,466)
Proceeds from maturities of marketable securities						35,754						22,456
Proceeds from sales of marketable securities						5,173						93,647
Purchase of equity investments						(76,999)						—
Other investing activities						128						(2,143)
Net cash used in investing activities						(182,619)						(157,506)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock						26,595						26,149
Common stock repurchases						(292,360)						(275,036)
Payments for equity forward contracts related to accelerated share repurchase agreements						40,000						—
Payroll taxes paid upon the vesting of equity awards						(22,294)						(52,611)
Net cash used in financing activities						(248,059)						(301,498)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash						(11,205)						(20,422)
Net increase (decrease) in cash, cash equivalents, and restricted cash						296,995						(55,401)
Cash, cash equivalents, and restricted cash at beginning of the period						942,355						1,100,139
Cash, cash equivalents, and restricted cash at end of the period						$	1,239,350					$	1,044,738

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, 2022, and contain all adjustments, including normal recurring adjustments, necessary to 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, 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other future period, and we make no representations related thereto.

Use of Estimates

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

During the third quarter of 2023, we completed an assessment of the useful lives of certain manufacturing equipment used in cutting, forming, assembling and scanning. We adjusted the estimated useful life from ten (10) years to thirteen (13) years. This change in accounting estimate was effective and applied to assets in service beginning in the third quarter of 2023. The updated useful life will be applied prospectively on the assets scheduled to be placed in service in the future. The effect of this change in estimate was a reduction in depreciation expense of approximately $4.0 million and an increase in net income of $3.0 million, or $0.04 per share basic and diluted, for both the three and nine months ended September 30, 2023.

Certain Risks and Uncertainties

Our business has been materially impacted by fluctuations in macroeconomic conditions, which have been exacerbated by ongoing geopolitical issues. While the situation is highly uncertain and evolving, we have been and continue to be impacted by factors such as inflation, supply chain challenges, rising interest rates, volatilities in the financial markets, foreign currency exchange rate fluctuations, impacts on consumer confidence and purchasing power, and global recession concerns which could further subject our business to materially adverse consequences should any portion of its impacts become prolonged or escalate beyond its current scope. Additionally, we could also be materially adversely affected by uncertain or reduced demand, labor shortages, delays in collection of outstanding receivables and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.

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

Military Conflict in Middle East

The recent conflict in the Middle East may further exacerbate general and regional macroeconomic instability, particularly if fighting is prolonged or spreads to other locations. Our iTero business is headquartered in Petach Tikva, Israel. We continue

to monitor the potential for violence and military actions that may directly or indirectly impact our personnel, manufacturing, supply chain, and sales in unpredictable ways.

Recent Accounting Pronouncements

(i) Recent Accounting Pronouncements Not Yet Effective

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

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 September 30, 2023 and December 31, 2022 (in thousands):

																														Reported as:
September 30, 2023						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable securities, short-term						Marketable securities, long-term
Cash						$	988,029					$	—					$	—					$	988,029					$	988,029					$	—					$	—
Money market funds						250,984						—						—						250,984						250,984						—						—
Corporate bonds						44,572						—						(1,160)						43,412						—						31,828						11,584
U.S. government treasury bonds						11,394						—						(235)						11,159						—						6,503						4,656
Asset-backed securities						2,477						—						(7)						2,470						—						1,582						888
Municipal bonds						701						—						(10)						691						—						691						—
U.S. government agency bonds						5,263						—						(66)						5,197						—						4,188						1,009
Total						$	1,303,420					$	—					$	(1,478)					$	1,301,942					$	1,239,013					$	44,792					$	18,137

																														Reported as:
December 31, 2022						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable securities, short-term						Marketable securities, long-term
Cash						$	712,921					$	—					$	—					$	712,921					$	712,921					$	—					$	—
Money market funds						229,129						—						—						229,129						229,129						—						—
Corporate bonds						69,390						—						(2,915)						66,475						—						36,510						29,965
U.S. government treasury bonds						20,559						—						(549)						20,010						—						15,404						4,606
Asset-backed securities						4,514						1						(37)						4,478						—						2,909						1,569
Municipal bonds						3,447						—						(61)						3,386						—						2,711						675
U.S. government agency bonds						5,231						1						(69)						5,163						—						—						5,163
Total						$	1,045,191					$	2					$	(3,631)					$	1,041,562					$	942,050					$	57,534					$	41,978

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

						September 30, 2023						December 31, 2022
Due in 1 year or less						$	42,847					$	51,037
Due in 1 year through 5 years						20,082						48,475
Total						$	62,929					$	99,512

The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. Our unrealized losses as of September 30, 2023 and December 31, 2022 are primarily due to changes in interest rates and credit spreads.

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

						As of September 30, 2023
						Less than 12 months												12 Months of Greater												Total
September 30, 2023						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss									Fair Value						Unrealized Loss
Corporate bonds						$	2,509					$	(11)					$	40,608					$	(1,149)								$	43,117					$	(1,160)
U.S. government treasury bonds						1,995						(43)						9,163						(192)									11,158						(235)
Asset-backed securities						1,975						(4)						495						(3)									2,470						(7)
Municipal bonds						—						—						691						(10)									691						(10)
U.S. government agency bonds						4,030						(28)						1,166						(38)									5,196						(66)
Total						$	10,509					$	(86)					$	52,123					$	(1,392)								$	62,632					$	(1,478)

						As of December 31, 2022
						Less than 12 months												12 Months of Greater												Total
December 31, 2022						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss									Fair Value						Unrealized Loss
Corporate bonds						$	10,639					$	(440)					$	54,634					$	(2,475)								$	65,273					$	(2,915)
U.S. government treasury bonds						5,262						(177)						14,748						(372)									20,010						(549)
Asset-backed securities						2,636						(17)						1,275						(20)									3,911						(37)
Municipal bonds						—						—						2,412						(61)									2,412						(61)
U.S. government agency bonds						3,017						(5)						1,136						(64)									4,153						(69)
Total						$	21,554					$	(639)					$	74,205					$	(2,992)								$	95,759					$	(3,631)

Accounts Receivable Factoring

We enter into factoring transactions on a non-recourse basis with financial institutions to sell certain of our non-U.S. accounts receivable. We account for these transactions as sales of accounts receivables and include the cash proceeds as a part of our cash flows from operations in the Condensed Consolidated Statements of Cash Flows. Total accounts receivable sold under the factoring arrangements was $24.2 million during the three months and $40.4 million for the nine months ended September 30, 2023. Factoring fees on the sales of receivables were recorded in other income (expense), net in our Condensed Consolidated Statement of Operations and were not material.

Fair Value Measurements

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

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

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 September 30, 2023 and December 31, 2022 (in thousands):

Description						Balance as of September 30, 2023						Level 1						Level 2
Cash equivalents:
Money market funds						$	250,984					$	250,984					$	—
Short-term investments:
U.S. government agency bonds						4,188						—						4,188
U.S. government treasury bonds						6,503						6,503						—
Corporate bonds						31,828						—						31,828
Municipal bonds						691						—						691
Asset-backed securities						1,582						—						1,582
Long-term investments:
U.S. government treasury bonds						4,656						4,656						—
Corporate bonds						11,584						—						11,584
U.S. government agency bonds						1,009						—						1,009
Asset-backed securities						888						—						888
						$	313,913					$	262,143					$	51,770

Description						Balance as of December 31, 2022						Level 1						Level 2
Cash equivalents:
Money market funds						$	229,129					$	229,129					$	—
Short-term investments:
U.S. government treasury bonds						15,404						15,404						—
Corporate bonds						36,510						—						36,510
Municipal bonds						2,711						—						2,711
Asset-backed securities						2,909						—						2,909
Long-term investments:
U.S. government treasury bonds						4,606						4,606						—
Corporate bonds						29,965						—						29,965
Municipal bonds						675						—						675
U.S. government agency bonds						5,163						—						5,163
Asset-backed securities						1,569						—						1,569
						$	328,641					$	249,139					$	79,502

Investments in Privately Held Companies

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

On April 24, 2023, we entered into a Subscription Agreement (the "Subscription Agreement") with Heartland Dental Holding Corporation (“Heartland”) who is an affiliate of KKR Core Holding Company LLC, which is an investment vehicle managed or advised by, or otherwise affiliated with, Kohlberg Kravis Roberts & Co. L.P. Heartland is a dental support organization (“DSO”) that provides nonclinical administrative and support services to supported dental professional corporations (“PCs”). Pursuant to the Subscription Agreement we acquired less than a 5% equity interest and have no significant influence in Heartland through the purchase of Class A Common Stock for $75 million. In connection with the Subscription Agreement, we entered into a Stockholders’ Agreement, by and among us, Heartland Dental Topco, LLC (“Topco”) and funds and accounts managed by affiliates of KKR & Co. Inc. (“KKR”), and a Side Letter, by and among us, Heartland, Topco and KKR (the "Side Letter"). Subject to certain restrictions set forth in the Side Letter, we agreed to provisions applicable to Heartland’s stockholders, including certain drag-along and voting obligations.

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

On September 6, 2023, we entered into a definitive agreement to acquire privately held Cubicure GmbH. The purchase price for the transaction will be approximately €79 million subject to customary closing adjustments and adjustments for Align’s existing ownership of capital stock of Cubicure. The acquisition is expected to close in the fourth quarter of 2023 or early 2024.

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables. These forward contracts are classified within Level 2 of the fair value hierarchy. As a result of the settlement of foreign currency forward contracts, during the three months ended September 30, 2023 and 2022, we recognized net gains of $19.8 million and of $34.6 million, respectively, and during the nine months ended September 30, 2023 and 2022, we recognized net gains of $14.4 million and of $43.8 million, respectively. As of September 30, 2023 and December 31, 2022, the fair value of foreign exchange forward contracts outstanding was not material.

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

			September 30, 2023
			Local Currency Amount						Notional Contract Amount (USD)
Euro			€271,600						$	287,705
Canadian Dollar			C$103,200						76,384
Polish Zloty			PLN293,200						67,110
British Pound			£46,398						56,620
Chinese Yuan			¥399,000						54,764
Swiss Franc			CHF27,900						30,615
Japanese Yen			¥4,400,000						29,612
Brazilian Real			R$90,000						17,861
Mexican Peso			M$230,000						13,214
Israeli Shekel			ILS50,300						13,208
New Zealand Dollar			NZ$8,700						5,227
Czech Koruna			Kč86,800						3,762
Australian Dollar			A$3,970						2,567
New Taiwan Dollar			NT$77,600						2,405
Korean Won			₩1,400,000						1,036
									$	662,090

			December 31, 2022
			Local Currency Amount						Notional Contract Amount (USD)
Euro			€186,900						$	200,010
Polish Zloty			PLN365,988						83,307
Canadian Dollar			C$109,000						80,514
Chinese Yuan			¥471,000						68,223
British Pound			£41,200						49,677
Japanese Yen			¥6,200,000						47,196
Israeli Shekel			ILS110,030						31,383
Swiss Franc			CHF25,000						27,165
Brazilian Real			R$141,200						26,839
Mexican Peso			M$230,000						11,746
New Zealand Dollar			NZ$6,000						3,806
Australian Dollar			A$4,000						2,721
Czech Koruna			Kč56,000						2,469
New Taiwan Dollar			NT$60,000						1,959
									$	637,015

Note 3. Balance Sheet Components

Inventories consist of the following (in thousands):

						September 30, 2023						December 31, 2022
Raw materials						$	139,681					$	172,758
Work in process						98,633						96,558
Finished goods						57,875						69,436
Total inventories						$	296,189					$	338,752

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

						September 30, 2023						December 31, 2022
Value added tax receivables						$	123,980					$	140,484
Prepaid expenses						59,496						69,124
Other current assets						34,156						16,762
Total prepaid expenses and other current assets						$	217,632					$	226,370

Accrued liabilities consist of the following (in thousands):

						September 30, 2023						December 31, 2022
Accrued payroll and benefits						$	203,712					$	149,508
Accrued income taxes						157,175						74,323
Accrued expenses						73,087						64,341
Accrued sales and marketing expenses						35,405						36,407
Current operating lease liabilities						28,277						26,574
Accrued property, plant and equipment						14,437						19,922
Other accrued liabilities						102,369						83,299
Total accrued liabilities						$	614,462					$	454,374

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

						Nine Months Ended September 30,
						2023						2022
Balance at beginning of period						$	17,873					$	16,169
Charged to cost of net revenues						14,329						11,359
Actual warranty expenditures						(10,327)						(11,109)
Balance at end of period						$	21,875					$	16,419

Deferred revenues consist of the following (in thousands):

						September 30, 2023						December 31, 2022
Deferred revenues - current						$	1,408,831					$	1,343,643
Deferred revenues - long-term 1						$	146,271					$	160,662

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

During the three months ended September 30, 2023 and 2022, we recognized $960.2 million and $890.3 million of net revenues, respectively, of which $178.8 million and $156.5 million was included in the deferred revenues balance at December 31, 2022 and 2021, respectively.

During the nine months ended September 30, 2023 and 2022, we recognized $2,905.5 million and $2,833.1 million of net revenues, respectively, of which $583.5 million and $519.8 million was included in the deferred revenues balance at December 31, 2022 and 2021, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of September 30, 2023 were $1,560.7 million. These performance obligations are expected to be fulfilled over the next six months to five years.

Note 4. Goodwill and Intangible Assets

Goodwill

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

			Clear Aligner						Systems and Services						Total
Balance as of December 31, 2022			$	109,480					$	298,071					$	407,551
Foreign currency translation adjustments			(479)						(2,777)						(3,256)
Balance as of September 30, 2023			$	109,001					$	295,294					$	404,295

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 September 30, 2023						Accumulated Amortization						Accumulated Impairment Loss						Net Carrying Value as of September 30, 2023
Existing technology			10						$	112,051					$	(42,383)					$	(4,328)					$	65,340
Customer relationships			10						21,500						(7,525)						—						13,975
Trademarks and tradenames			10						17,200						(7,820)						(4,122)						5,258
Patents			8						6,511						(5,884)						—						627
									$	157,262					$	(63,612)					$	(8,450)					85,200
Foreign currency translation adjustments																											(2,459)
Total intangible assets, net 1																											$	82,741

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

			Weighted Average Amortization Period (in years)						Gross Carrying Amount as of December 31, 2022						Accumulated Amortization						Accumulated Impairment Loss						Net Carrying Value as of December 31, 2022
Existing technology			10						$	112,051					$	(33,537)					$	(4,328)					$	74,186
Customer relationships			10						21,500						(5,913)						—						15,587
Trademarks and tradenames			10						17,200						(6,442)						(4,122)						6,636
Patents			8						6,511						(5,288)						—						1,223
									$	157,262					$	(51,180)					$	(8,450)					97,632
Foreign currency translation adjustments																											(1,912)
Total intangible assets, net 1																											$	95,720

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

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

Fiscal Year Ending December 31,						Amortization
Remainder of 2023						$	4,069
2024						15,335
2025						14,959
2026						14,353
2027						11,992
Thereafter						24,492
Total						$	85,200

Amortization expense for the three months ended September 30, 2023 and 2022 was $4.2 million and $3.9 million, respectively, and amortization expense for the nine months ended September 30, 2023 and 2022 was $12.4 million and $12.1 million, respectively.

Note 5. Credit Facility

We have a credit facility that provides for a $300.0 million unsecured revolving line of credit, along with a $50.0 million letter of credit. On December 23, 2022, we amended certain provisions in our credit facility which included extending the maturity date on the facility to December 23, 2027 and replacing the interest rate from the existing LIBOR with SOFR (“2022 Credit Facility”). The 2022 Credit Facility requires us to comply with specific financial conditions and performance requirements. Loans under the 2022 Credit Facility bear interest, at our option, at either a rate based on the SOFR for the applicable interest period or a base rate, in each case plus a margin. As of September 30, 2023, we had no outstanding borrowings under the 2022 Credit Facility and were in compliance with the conditions and performance requirements in all material respects.

Note 6. Legal Proceedings

2019 Shareholder Derivative Lawsuit

In January 2019, three derivative lawsuits were filed in the U.S. District Court for the Northern District of California which were later consolidated, purportedly on our behalf, naming as defendants the then current members of our Board of Directors along with certain of our executive officers. The complaints assert various state law causes of action, including for breaches of fiduciary duty, insider trading, and unjust enrichment. The complaints seek unspecified monetary damages on our behalf, 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 is currently stayed. Defendants have not yet responded to the complaints.

On April 12, 2019, a derivative lawsuit was also filed in California Superior Court for Santa Clara County, purportedly on our behalf, 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 is currently stayed. Defendants have not yet responded to the complaint.

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

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 our alleged market activities in alleged clear aligner and intraoral scanner markets. Plaintiff filed an amended complaint and added VIP Dental Spas as a plaintiff on August 14, 2020. A jury trial is scheduled to begin in this matter on May 13, 2024. We believe the plaintiffs’ claims are without merit and we intend to vigorously defend ourselves.

On May 3, 2021, an individual named Misty Snow brought an antitrust action in the U.S. District Court for the Northern District of California on behalf of herself and a putative class of similarly situated individuals seeking monetary damages and injunctive relief relating to our alleged market activities in alleged clear aligner and intraoral scanner markets based on Section

2 of the Sherman Act. Plaintiff filed an amended complaint on July 30, 2021 adding new plaintiffs and various state law claims. Plaintiffs filed a second amended complaint on October 21, 2021. On March 2, 2022, Plaintiffs filed a third amended complaint. On October 3, 2022, Plaintiffs filed a fourth amended complaint. On May 18, 2023, the court granted plaintiffs leave to file a fifth amended complaint. The amended complaints added allegations based on Section 1 of the Sherman Act. A jury trial is scheduled to begin in this matter on May 13, 2024 for issues related to Section 2 allegations. A jury trial is scheduled to begin in this matter on January 21, 2025 for issues related to Section 1 allegations. We believe the plaintiffs’ claims are without merit and we intend to vigorously defend ourselves.

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

SDC Dispute

On August 27, 2020, we initiated a confidential arbitration proceeding against SmileDirectClub LLC (“SDC”) before the American Arbitration Association in San Jose, California. This arbitration relates to the Strategic Supply Agreement (“Supply Agreement”) entered into between the parties in 2016. The complaint alleges that SDC breached the Supply Agreement’s terms, causing damages to us in an amount to be determined. On January 19, 2021, SDC filed a counterclaim alleging that we breached the Supply Agreement. On May 3, 2022, SDC filed an additional counterclaim alleging that we breached the Supply Agreement. We deny SDC's allegations in the counterclaims.

On October 27, 2022, the arbitrator issued an interim award on our claims and SDC’s first counterclaim finding that SDC breached the Supply Agreement, we did not breach the Supply Agreement, and SDC caused harm to us. Based on these findings, the arbitrator awarded us an interim award of $63 million in damages.

On May 18, 2023, the arbitrator issued a final award on SDC’s second counterclaim, finding that Align did not breach the Supply Agreement. The final award subsumed the interim award on our claims and SDC’s first counterclaim and concluded the Supply Agreement arbitration proceedings.

On March 6, 2023, Align filed a petition to confirm the arbitrator’s interim award in the Superior Court for Santa Clara County.

On May 30, 2023, Align filed a petition to confirm the final award in the Superior Court of Santa Clara County. On August 21, 2023, the Superior Court issued an order confirming the Interim and Final Awards. On September 8, 2023, the Superior Court entered judgment in Align’s favor for $63 million in damages.

On September 29, 2023, SDC and certain affiliates filed bankruptcy petitions under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas. The extent to which Align will be able to collect any or all of its $63 million judgment through SDC’s bankruptcy proceedings is unknown.

In addition to the above, in the ordinary course of our operations, we are involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. Regardless of the 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 our view of these matters may change in the future as litigation and events related thereto unfold; we currently do not believe that these matters, individually or in the aggregate, will materially affect our financial position, results of operations or cash flows.

Note 7. Commitments and Contingencies

Tax Matter

During the three months ended September 30, 2023, the Company received a notice and initial assessment, in the amount of approximately $27 million, from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of June 2022 through May 2023. We are required to pay this initial assessment prior to contesting or litigating the assessment in administrative and judicial proceedings. The Company has historically asserted and continues to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that the Company has reasonably relied upon statements and guidance by HMRC and that the Company’s interpretation of United Kingdom legislation is appropriate. However, it is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome of any legal challenges brought by the Company against HMRC disputing this initial assessment and any assessments for other past periods, if any. Accordingly, the Company has determined

that a potential loss related to unpaid VAT is not probable. As such, we have not recorded a contingent loss for the initial assessment in our Condensed Consolidated Statements of Operations for the three or nine months ended September 30, 2023. The Company acknowledges that this matter poses risks of litigation and the ultimate resolution of this matter could result in an unfavorable ruling, which consequently could lead to a significant loss to the Company. As of September 30, 2023, if an unfavorable ruling is issued, we estimate a potential exposure up to approximately $100 million, excluding interest and penalties.

Off-Balance Sheet Arrangements

As of September 30, 2023, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources other than certain items disclosed in Note 8 “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, 2022.

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

Note 8. Stockholders’ Equity

As of September 30, 2023, the 2005 Incentive Plan, as amended, has a total reserve of 32,168,895 shares of which 4,754,771 shares are available for issuance.

Summary of Stock-Based Compensation Expense

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

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Cost of net revenues						$	1,974					$	1,651					$	5,682					$	4,779
Selling, general and administrative						29,739						25,293						87,432						76,509
Research and development						7,889						5,974						22,083						17,391
Total stock-based compensation						$	39,602					$	32,918					$	115,197					$	98,679

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 nine months ended September 30, 2023 is as follows:

			Number of Shares Underlying RSUs (in thousands)						Weighted Average Grant Date Fair Value						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2022			489						$	427.24
Granted			508						316.52
Vested and released			(196)						378.93
Forfeited			(37)						388.56
Unvested as of September 30, 2023			764						$	367.93					1.6						$	233,165

As of September 30, 2023, we expect to recognize $202.1 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 our common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Align’s stock price relative to the performance of a stock market index over the vesting period. MSUs vest over a period of three years and the maximum number eligible to vest in the future is 250% of the MSUs initially granted.

The following table summarizes the MSU performance activity for the nine months ended September 30, 2023:

			Number of Shares Underlying MSUs (in thousands)						Weighted Average Grant Date Fair Value						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2022			144						$	725.73
Granted			82						629.53
Vested and released 1			(25)						392.67
Forfeited			(43)						423.87
Unvested as of September 30, 2023			158						$	811.06					1.7						$	48,135

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

As of September 30, 2023, we expect to recognize $56.8 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.7 years.

Restricted Stock Units with Performance Conditions (“PSUs”)

During the nine months ended September 30, 2023, we did not grant any PSUs to any employees. As of September 30, 2023, we expect to recognize $0.5 million of total unamortized compensation costs, net of estimated forfeitures, related to PSUs over a weighted average term of 1.3 years. Total PSUs granted were 4,728 and the weighted average grant date fair value for the PSUs was $201.63.

Employee Stock Purchase Plan

As of September 30, 2023, we have 1,995,520 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:

												Nine Months Ended September 30,
																		2023						2022
Expected term (in years)																		1.2						1.5
Expected volatility																		56.2		%				50.2		%
Risk-free interest rate																		4.9		%				1.8		%
Expected dividends																		—						—
Weighted average fair value at grant date																		$	133.53					$	159.44

As of September 30, 2023, we expect to recognize $11.6 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 0.7 years.

Note 9. Common Stock Repurchase Programs

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”), which was completed in March 2023. In January 2023, our Board of Directors authorized a new plan to repurchase up to $1.0 billion of our common stock (“January 2023 Repurchase Program”), none of which had been utilized as of September 30, 2023. The January 2023 Repurchase Program does not have an expiration date.

Accelerated Share Repurchase Agreements (“ASRs”)

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

Agreement Date						Repurchase Program						Amount Paid (in millions)						Completion Date						Total Shares Received						Average Price per Share
Q4 2022						May 2021						N/A1						Q1 2023						136,448						$	293.15
Q1 2023						May 2021						$	250.0					Q1 2023						805,905						$	310.21

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

As of September 30, 2023, $1.0 billion remains available for repurchases under the January 2023 Stock Repurchase Program.

Subsequent to the third quarter, on October 26, 2023, we entered into an ASR to repurchase $250.0 million of our common stock. We made an initial payment of $250.0 million and received an initial delivery of approximately one million shares. The exact 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 $40.7 million and $49.9 million for the three months ended September 30, 2023 and 2022, respectively, representing effective tax rates of 25.1% and 40.7%, respectively. Our provision for income taxes was $147.3 million and $163.9 million for the nine months ended September 30, 2023 and 2022, respectively, representing effective tax rates of 31.4% and 33.9%, respectively. Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three and nine months ended September 30, 2023 and 2022 primarily due to the recognition of additional tax expense resulting from U.S. taxes on foreign earnings, foreign income taxed at different rates, application of newly issued tax guidance, state income taxes, and non-deductible expenses in the U.S.

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.

Our total gross unrecognized tax benefits, excluding interest and penalties, were $150.0 million and $141.6 million as of September 30, 2023 and December 31, 2022, respectively, a material amount of which would impact our effective tax rate if recognized. The increase in our unrecognized tax benefits relates primarily to positions taken on income tax return calculations finalized during the three and nine months ended September 30, 2023.

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 September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Numerator:
Net income						$	121,427					$	72,700					$	321,039					$	319,798
Denominator:
Weighted average common shares outstanding, basic						76,569						78,093						76,670						78,408
Dilutive effect of potential common stock						257						144						179						244
Total shares, diluted						76,826						78,237						76,849						78,652
Net income per share, basic						$	1.59					$	0.93					$	4.19					$	4.08
Net income per share, diluted						$	1.58					$	0.93					$	4.18					$	4.07
Anti-dilutive potential common shares 1						245						345						263						317

1 Represents RSU and MSU shares excluded from 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):

						Nine Months Ended September 30,
						2023						2022
Non-cash investing and financing activities:
Acquisition of property, plant and equipment in accounts payable and accrued liabilities						$	25,979					$	41,255
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	25,559					$	23,310
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	25,048					$	26,532

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 and restructuring costs. We group our operations into two reportable segments (i) Clear Aligner segment and (ii) Imaging Systems and CAD/CAM services (“Systems and Services”) segment.

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

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Net revenues
Clear Aligner						$	794,939					$	732,837					$	2,417,417					$	2,340,931
Systems and Services						165,275						157,511						488,117						492,189
Total net revenues						$	960,214					$	890,348					$	2,905,534					$	2,833,120
Gross profit
Clear Aligner						$	562,331					$	519,387					$	1,731,721					$	1,710,328
Systems and Services						100,745						99,782						305,618						305,746
Total gross profit						$	663,076					$	619,169					$	2,037,339					$	2,016,074
Income from operations
Clear Aligner						$	296,319					$	259,434					$	879,933					$	879,362
Systems and Services						44,975						44,436						132,600						140,834
Unallocated corporate expenses						(174,948)						(160,214)						(540,740)						(490,262)
Total income from operations						$	166,346					$	143,656					$	471,793					$	529,934
Stock-based compensation
Clear Aligner						$	5,772					$	4,377					$	14,917					$	10,232
Systems and Services						366						240						950						690
Unallocated corporate expenses						33,464						28,301						99,330						87,757
Total stock-based compensation						$	39,602					$	32,918					$	115,197					$	98,679
Depreciation and amortization
Clear Aligner						$	17,737					$	14,678					$	50,725					$	42,474
Systems and Services						7,827						7,181						23,716						20,879
Unallocated corporate expenses						11,466						10,330						34,228						28,743
Total depreciation and amortization						$	37,030					$	32,189					$	108,669					$	92,096

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 September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Total segment income from operations						$	341,294					$	303,870					$	1,012,533					$	1,020,196
Unallocated corporate expenses						(174,948)						(160,214)						(540,740)						(490,262)
Total income from operations						166,346						143,656						471,793						529,934
Interest income						5,522						1,685						12,280						2,607
Other income (expense), net						(9,757)						(22,700)						(15,749)						(48,805)
Net income before provision for income taxes						$	162,111					$	122,641					$	468,324					$	483,736

Geographical Information

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

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
Net revenues 1:
U.S.						$	421,272					$	400,045					$	1,262,008					$	1,251,018
Switzerland						259,587						257,845						913,724						919,935
Other International						279,355						232,458						729,802						662,167
Total net revenues						$	960,214					$	890,348					$	2,905,534					$	2,833,120

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):

						September 30, 2023						December 31, 2022
Long-lived assets 1:
Switzerland						$	567,230					$	532,921
U.S.						206,348						214,804
Other International2						613,776						603,010
Total long-lived assets						$	1,387,354					$	1,350,735

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

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

Note 14. Restructuring and Other Charges

During the fourth quarter of 2022, we initiated a restructuring plan to increase efficiencies across the organization which was completed during the first half of 2023. During fiscal 2022, we incurred approximately $10.2 million in restructuring expenses, of which $3.9 million remained unpaid and was included in Accrued liabilities as of December 31, 2022. During the first quarter of 2023, we paid $3.7 million, and recorded incremental restructuring expenses of approximately $0.1 million. The remaining $0.3 million balance as of March 31, 2023 was paid during the three months ended June 30, 2023. During the three months ended September 30, 2023 there was no additional restructuring activity.