SEC Form 10-Q filed by Align Technology Inc.

11/5/24 4:09:39 PM ET

Industrial Specialties

Health Care

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algn-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-32259

____________________________

ALIGN TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

____________________________


Delaware			94-3267295
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

410 North Scottsdale Road, Suite 1300

Tempe, Arizona 85288

(Address of principal executive offices, including zip code)

(602) 742-2000

(Registrant’s telephone number, including area code)

____________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	ALGN	The NASDAQ Stock Market LLC
		(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2024, the number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, was 74,653,060.



PART I	F INANCIAL INFORMATION	3
Item 1.	F inancial S tatements (U naudited ):	3
	Condensed Consolidated Statements of Operations	3
	C ondensed C onsolidated S tatements of C omprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
PART II	O THER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
Signatures		56


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net revenues	$	977,872	$	960,214	$	3,003,793	$	2,905,534
Cost of net revenues	296,098		297,138		901,575		868,195
Gross profit	681,774		663,076		2,102,218		2,037,339
Operating expenses:
Selling, general and administrative	434,138		407,992		1,338,222		1,300,876
Research and development	85,272		88,738		269,324		264,670
Legal settlement loss	66		—		31,193		—

Total operating expenses	519,476		496,730		1,638,739		1,565,546
Income from operations	162,298		166,346		463,479		471,793
Interest income and other income (expense), net:
Interest income	4,003		5,522		11,696		12,280
Other income (expense), net	(371)		(9,757)		(6,993)		(15,749)
Total interest income and other income (expense), net	3,632		(4,235)		4,703		(3,469)
Net income before provision for income taxes	165,930		162,111		468,182		468,324
Provision for income taxes	49,967		40,684		150,627		147,285
Net income	$	115,963	$	121,427	$	317,555	$	321,039

Net income per share:
Basic	$	1.55	$	1.59	$	4.23	$	4.19
Diluted	$	1.55	$	1.58	$	4.23	$	4.18
Shares used in computing net income per share:
Basic	74,736		76,569		75,031		76,670
Diluted	74,757		76,826		75,149		76,849


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,041,935	$	937,438
Marketable securities, short-term	—		35,304
Accounts receivable, net of allowance for doubtful accounts of $19,141 and $14,893, respectively	1,010,601		903,424
Inventories	254,119		296,902
Prepaid expenses and other current assets	290,732		273,550
Total current assets	2,597,387		2,446,618
Marketable securities, long-term	—		8,022
Property, plant and equipment, net	1,290,427		1,290,863
Operating lease right-of-use assets, net	121,079		117,999
Goodwill	471,512		419,530
Intangible assets, net	115,905		82,118
Deferred tax assets	1,569,950		1,590,045
Other assets	199,714		128,682
Total assets	$	6,365,974	$	6,083,877

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	109,035	$	113,125
Accrued liabilities	574,556		525,780
Deferred revenues	1,380,022		1,427,706
Total current liabilities	2,063,613		2,066,611
Income tax payable	111,558		116,744
Operating lease liabilities	96,435		96,968
Other long-term liabilities	150,014		173,065
Total liabilities	2,421,620		2,453,388
Commitments and contingencies (Note 7 and Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	—		—
Common stock, $0.0001 par value (200,000 shares authorized; 74,757 and 75,075 issued and outstanding, respectively)	7		7
Additional paid-in capital	1,335,909		1,162,140
Accumulated other comprehensive income (loss), net	35,913		21,168
Retained earnings	2,572,525		2,447,174
Total stockholders’ equity	3,944,354		3,630,489
Total liabilities and stockholders’ equity	$	6,365,974	$	6,083,877


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Three Months Ended September 30, 2024	Shares	Amount
Balance as of June 30, 2024	74,696	$	7	$	1,276,298	$	25,041	$	2,456,562	$	3,757,908
Net income	—	—		—		—		115,963		115,963
Net change in unrealized gains (losses) from investments	—	—		—		159		—		159
Net change in foreign currency translation adjustment	—	—		—		10,713		—		10,713
Issuance of common stock relating to employee equity compensation plans	63	—		10,942		—		—		10,942
Tax withholdings related to net share settlements of equity awards	(2)	—		(370)		—		—		(370)
Common stock repurchased and retired	—	—		—		—		—		—
Equity forward contract related to accelerated stock repurchase	—	—		—		—		—		—
Stock-based compensation	—	—		49,039		—		—		49,039
Balance as of September 30, 2024	74,757	$	7	$	1,335,909	$	35,913	$	2,572,525	$	3,944,354


									Reported as:
September 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
Cash	$	860,461	$	—	$	—	$	860,461	$	860,461	$	—	$	—
Money market funds	181,474		—		—		181,474		181,474		—		—






Total	$	1,041,935	$	—	$	—	$	1,041,935	$	1,041,935	$	—	$	—


									Reported as:
December 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
Cash	$	887,682	$	—	$	—	$	887,682	$	887,682	$	—	$	—
Money market funds	49,756		—		—		49,756		49,756		—		—
Corporate bonds	31,943		5		(676)		31,272		—		28,704		2,568
U.S. government treasury bonds	4,855		—		(99)		4,756		—		—		4,756
Asset-backed securities	1,416		2		(1)		1,417		—		719		698
Municipal bonds	702		—		(2)		700		—		700		—
U.S. government agency bonds	5,215		—		(34)		5,181		—		5,181		—

Total	$	981,569	$	7	$	(812)	$	980,764	$	937,438	$	35,304	$	8,022


	December 31, 2023
Due in 1 year or less	$	34,617
Due in 1 year through 5 years	8,709
Total	$	43,326


	As of December 31, 2023
	Less than 12 months				12 Months of Greater				Total
December 31, 2023	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate bonds	$	—	$	—	$	27,939	$	(676)		$	27,939	$	(676)
U.S. government treasury bonds	2,044		(11)		2,712		(88)			4,756		(99)
Asset-backed securities	1,018		(1)		83		—			1,101		(1)
Municipal bonds	—		—		700		(2)			700		(2)
U.S. government agency bonds	4,003		(11)		1,178		(23)			5,181		(34)

Total	$	7,065	$	(23)	$	32,612	$	(789)		$	39,677	$	(812)


Description	Balance as of September 30, 2024		Level 1		Level 2
Cash equivalents:
Money market funds	$	181,474	$	181,474	$	—






















	$	181,474	$	181,474	$	—


Description	Balance as of December 31, 2023		Level 1		Level 2
Cash equivalents:
Money market funds	$	49,756	$	49,756	$	—




Short-term investments:
Corporate bonds	28,704		—		28,704
Municipal bonds	700		—		700
U.S. government agency bonds	5,181		—		5,181
Asset-backed securities	719		—		719



Long-term investments:
U.S. government treasury bonds	4,756		—		4,756
Corporate bonds	2,568		—		2,568


Asset-backed securities	698		—		698






	$	93,082	$	49,756	$	43,326


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	317,555	$	321,039
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	17,465		(22,749)
Depreciation and amortization	106,905		108,669
Stock-based compensation	134,855		115,197
Non-cash operating lease cost	28,603		24,034
Impairment of equity investment	115		3,329

Other non-cash operating activities	6,931		28,435
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	(135,239)		(80,297)
Inventories	32,304		31,639
Prepaid expenses and other assets	(26,283)		1,773
Accounts payable	(13,283)		(23,130)
Accrued and other long-term liabilities	47,618		156,024
Long-term income tax payable	(5,186)		(7,979)
Deferred revenues	(60,207)		82,894
Net cash provided by operating activities	452,153		738,878
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired	(77,075)		—
Purchase of property, plant and equipment	(92,619)		(144,302)
Purchase of marketable securities	—		(2,373)
Proceeds from maturities of marketable securities	25,660		35,754
Proceeds from sales of marketable securities	18,193		5,173
Purchase of equity investments	(75,390)		(76,999)


Other investing activities	235		128
Net cash used in investing activities	(200,996)		(182,619)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	25,281		26,595
Common stock repurchases	(150,012)		(292,360)
Activity for equity forward contracts related to accelerated stock repurchase agreements, net	—		40,000
Payroll taxes paid upon the vesting of equity awards	(27,972)		(22,294)
Net cash used in financing activities	(152,703)		(248,059)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	6,008		(11,205)


	September 30, 2024
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€176,900	$	197,946
British Pound	£105,720	141,511
Canadian Dollar	$96,300	71,439
Polish Zloty	PLN272,000	71,001
Chinese Yuan	¥473,500	67,816
Japanese Yen	¥5,000,000	35,176
Israeli Shekel	ILS79,600	21,458
Brazilian Real	R$109,800	20,044
Swiss Franc	CHF5,700	6,783
New Zealand Dollar	NZ$7,700	4,898
Australian Dollar	A$4,800	3,330
New Taiwan Dollar	NT$98,000	3,110
Czech Koruna	Kč64,400	2,860
Korean Won	₩2,500,000	1,914
		$	649,286


	December 31, 2023
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€337,780	$	373,705
Canadian Dollar	$108,900	82,166
Polish Zloty	PLN276,900	70,393
British Pound	£45,590	58,005
Chinese Yuan	¥244,500	34,361
Swiss Franc	CHF28,600	34,132
Japanese Yen	¥3,577,000	25,347
Israeli Shekel	ILS78,700	21,800
Brazilian Real	R$80,500	16,563
Mexican Peso	M$230,000	13,593
New Zealand Dollar	NZ$6,600	4,161
Australian Dollar	A$4,300	2,921
New Taiwan Dollar	NT$89,000	2,919
Czech Koruna	Kč60,200	2,687
Korean Won	₩2,200,000	1,709
		$	744,462


	September 30, 2024		December 31, 2023
Raw materials	$	126,959	$	145,492
Work in process	77,174		91,259
Finished goods	49,986		60,151
Total inventories	$	254,119	$	296,902


	September 30, 2024		December 31, 2023
Value added tax receivables	$	148,903	$	143,728
Prepaid expenses	72,985		52,487
Other current assets	68,844		77,335
Total prepaid expenses and other current assets	$	290,732	$	273,550


	September 30, 2024		December 31, 2023
Accrued payroll and benefits	$	241,638	$	220,862
Accrued expenses	74,158		71,109
Accrued sales and marketing expenses	38,152		34,035
Accrued income taxes	36,860		38,103
Current operating lease liabilities	31,168		29,651
Accrued property, plant and equipment	11,132		23,618

Other accrued liabilities	141,448		108,402
Total accrued liabilities	$	574,556	$	525,780


	September 30, 2024		December 31, 2023
Deferred revenues - current	$	1,380,022	$	1,427,706
Deferred revenues - long-term 1	$	108,676	$	138,000


Cash paid to Cubicure stockholders	$	80,142
Fair value of pre-existing equity interest ownership	7,968
Settlement of pre-existing relationship - accounts payable	(2,316)
Total purchase consideration paid	$	85,794


Working capital	$	1,039
Property & equipment	975
Developed technology	47,000
Other non-current asset	1,483
Other liabilities	(12,279)
Goodwill	47,576
Total	$	85,794


	Clear Aligner		Systems and Services		Total
Balance as of December 31, 2023	$	111,086	$	308,444	$	419,530
Additions from acquisition	47,576		—		47,576
Foreign currency translation adjustments	963		3,443		4,406
Balance as of September 30, 2024	$	159,625	$	311,887	$	471,512


	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of September 30, 2024		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of September 30, 2024
Existing technology	11	$	146,651	$	(48,581)	$	—	$	98,070
Customer relationships	10	21,500		(9,675)		—		11,825
Trademarks and tradenames	10	16,600		(8,759)		(4,122)		3,719
Patents	12	480		(270)		—		210
		$	185,231	$	(67,285)	$	(4,122)	113,824
Foreign currency translation adjustments								2,081
Total intangible assets, net								$	115,905


	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2023		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of December 31, 2023
Existing technology	10	$	112,051	$	(45,331)	$	(4,328)	$	62,392
Customer relationships	10	21,500		(8,063)		—		13,437
Trademarks and tradenames	10	16,600		(7,605)		(4,122)		4,873
Patents	8	6,511		(6,082)		—		429
		$	156,662	$	(67,081)	$	(8,450)	81,131
Foreign currency translation adjustments								987
Total intangible assets, net								$	82,118


Fiscal Year Ending December 31,	Amortization
Remainder of 2024	$	4,643
2025	18,574
2026	17,969
2027	15,607
2028	14,505
2029	14,505
Thereafter	28,021
Total	$	113,824


	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, 2023	736	$	367.63
Granted	638	309.22
Vested and released	(254)	370.69
Forfeited	(56)	345.74
Unvested as of September 30, 2024	1,064	$	333.03	1.6	$	270,565

SEC Form 10-Q filed by Align Technology Inc.

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Financials


	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, 2023	158	$	811.06
Granted	83	617.79
Vested and released 1	(32)	1,102.09
Forfeited	(5)	1,102.09
Unvested as of September 30, 2024	204	$	679.52	1.6	$	51,876


	Number of Shares Underlying PSUs (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, 2023	$	5	$	201.63
Granted	6		206.36
Vested and released	—		—
Forfeited	—		—
Unvested as of September 30, 2024	$	11	$	204.33	1.4	$	2,805


Agreement Date	Repurchase Program	Amount Paid (in millions)		Completion Date	Total Shares Received	Average Price per Share
Q4 2022	May 2021	$	200.0	Q1 2023	984,714	$	203.10
Q1 2023	May 2021	$	250.0	Q1 2023	805,908	$	310.21
Q4 2023	January 2023	$	250.0	Q1 2024	1,086,334	$	230.13


	September 30, 2024		December 31, 2023
Long-lived assets 1:
Switzerland	$	580,428	$	575,432
U.S.	203,772		210,275


Other International	627,306		623,155
Total long-lived assets	$	1,411,506	$	1,408,862



		ALIGN TECHNOLOGY, INC.

November 5, 2024	By:	/s/ JOSEPH M. HOGAN
		Joseph M. Hogan President and Chief Executive Officer (Principal Executive Officer)

November 5, 2024	By:	/s/ JOHN F. MORICI
		John F. Morici Chief Financial Officer and Executive Vice President, Global Finance (Principal Financial Officer and Principal Accounting Officer)

Date	Price Target	Rating	Analyst
10/10/2024		Hold	Needham
2/26/2024	$310.00	Market Perform	Leerink Partners
12/11/2023	$197.00	Neutral → Sell	Goldman
10/27/2023	$200.00	Buy → Neutral	UBS
2/2/2023	$165.00 → $307.00	Sell → Neutral	Goldman
7/28/2022	$380.00 → $250.00	Buy → Sell	Goldman
2/3/2022	$782.00 → $722.00	Outperform	Credit Suisse
2/3/2022	$675.00 → $625.00	Buy	Stifel