Align Technology Inc 10-Q for FY2023 Q2

Align Technology Inc (ALGN)

10-Q 2023-08-04 For: 2023-06-30

Added on April 11, 2026

About this 10-Q

Align Technology Inc filed this 10-Q on August 4, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1B; up 3.4% from $969.55M a year earlier
Net income: $111.81M; down 0.9% from net income of $112.8M a year earlier
Diluted EPS: $1.46; up 1.4% from $1.44 a year earlier

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Delaware			94-3267295
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)


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)


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



PART I	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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II	O THER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues	$	1,002,173	$	969,553	$	1,945,320	$	1,942,772
Cost of net revenues	288,564		281,994		571,057		545,867
Gross profit	713,609		687,559		1,374,263		1,396,905
Operating expenses:
Selling, general and administrative	453,193		426,398		892,884		865,855
Research and development	88,485		72,965		175,932		144,772

Total operating expenses	541,678		499,363		1,068,816		1,010,627
Income from operations	171,931		188,196		305,447		386,278
Interest income and other income (expense), net:
Interest income	4,421		245		6,758		922
Other income (expense), net	(4,763)		(14,832)		(5,992)		(26,105)
Total interest income and other income (expense), net	(342)		(14,587)		766		(25,183)
Net income before provision for income taxes	171,589		173,609		306,213		361,095
Provision for income taxes	59,775		60,809		106,601		113,997
Net income	$	111,814	$	112,800	$	199,612	$	247,098

Net income per share:
Basic	$	1.46	$	1.44	$	2.60	$	3.15
Diluted	$	1.46	$	1.44	$	2.60	$	3.13
Shares used in computing net income per share:
Basic	76,524		78,395		76,722		78,568
Diluted	76,689		78,545		76,897		78,840


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


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


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	951,956	$	942,050
Marketable securities, short-term	55,805		57,534
Accounts receivable, net of allowance for doubtful accounts of $13,244 and $10,343, respectively	908,395		859,685
Inventories	312,736		338,752
Prepaid expenses and other current assets	236,564		226,370
Total current assets	2,465,456		2,424,391
Marketable securities, long-term	26,023		41,978
Property, plant and equipment, net	1,279,042		1,231,855
Operating lease right-of-use assets, net	125,881		118,880
Goodwill	414,765		407,551
Intangible assets, net	89,296		95,720
Deferred tax assets	1,605,926		1,571,746
Other assets	138,161		55,826
Total assets	$	6,144,550	$	5,947,947

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	110,155	$	127,870
Accrued liabilities	600,163		454,374
Deferred revenues	1,396,747		1,343,643
Total current liabilities	2,107,065		1,925,887
Income tax payable	113,309		124,393
Operating lease liabilities	104,650		100,334
Other long-term liabilities	181,225		195,975
Total liabilities	2,506,249		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; 76,532 and 77,267 issued and outstanding, respectively)	8		8
Additional paid-in capital	1,141,623		1,044,946
Accumulated other comprehensive income (loss), net	11,343		(10,284)
Retained earnings	2,485,327		2,566,688
Total stockholders’ equity	3,638,301		3,601,358
Total liabilities and stockholders’ equity	$	6,144,550	$	5,947,947


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss), Net		Retained Earnings		Total
Three Months Ended June 30, 2023	Shares	Amount
Balance as of March 31, 2023	76,516	$	8	$	1,104,693	$	1,835	$	2,373,513	$	3,480,049
Net income	—	—		—		—		111,814		111,814
Net change in unrealized gains (losses) from investments	—	—		—		350		—		350
Net change in foreign currency translation adjustment	—	—		—		9,158		—		9,158
Issuance of common stock relating to employee equity compensation plans	16	—		—		—		—		—
Tax withholdings related to net share settlements of equity awards	—	—		(930)		—		—		(930)


Stock-based compensation	—	—		37,860				—		37,860
Balance as of June 30, 2023	76,532	$	8	$	1,141,623	$	11,343	$	2,485,327	$	3,638,301


									Reported as:
June 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	$	759,407	$	—	$	—	$	759,407	$	759,407	$	—	$	—
Money market funds	192,549		—		—		192,549		192,549		—		—
Corporate bonds	59,703		—		(1,740)		57,963		—		39,145		18,818
U.S. government treasury bonds	14,054		—		(325)		13,729		—		9,096		4,633
Asset-backed securities	3,600		—		(13)		3,587		—		2,012		1,575
Municipal bonds	1,437		—		(18)		1,419		—		1,419		—
U.S. government agency bonds	5,214		—		(84)		5,130		—		4,133		997

Total	$	1,035,964	$	—	$	(2,180)	$	1,033,784	$	951,956	$	55,805	$	26,023


									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


	June 30, 2023		December 31, 2022
Due in 1 year or less	$	50,644	$	51,037
Due in 1 year through 5 years	31,184		48,475
Total	$	81,828	$	99,512


	As of June 30, 2023
	Less than 12 months				12 Months of Greater				Total
June 30, 2023	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate bonds	$	1,514	$	(15)	$	56,155	$	(1,725)		$	57,669	$	(1,740)
U.S. government treasury bonds	1,986		(32)		11,743		(293)			13,729		(325)
Asset-backed securities	2,565		(5)		1,022		(8)			3,587		(13)
Municipal bonds	—		—		685		(18)			685		(18)
U.S. government agency bonds	3,980		(33)		1,150		(51)			5,130		(84)

Total	$	10,045	$	(85)	$	70,755	$	(2,095)		$	80,800	$	(2,180)


	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)


Description	Balance as of June 30, 2023		Level 1		Level 2
Cash equivalents:
Money market funds	$	192,549	$	192,549	$	—





Short-term investments:

U.S. government agency bonds	4,133		—		4,133
U.S. government treasury bonds	9,096		9,096		—
Corporate bonds	39,145		—		39,145
Municipal bonds	1,419		—		1,419
Asset-backed securities	2,012		—		2,012
Long-term investments:
U.S. government treasury bonds	4,633		4,633		—
Corporate bonds	18,818		—		18,818


U.S. government agency bonds	997		—		997
Asset-backed securities	1,575		—		1,575



	$	274,377	$	206,278	$	68,099


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	199,612	$	247,098
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	(36,688)		14,747
Depreciation and amortization	71,639		59,907
Stock-based compensation	75,595		65,761
Non-cash operating lease cost	15,531		15,075


Other non-cash operating activities	21,860		16,172
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	(73,680)		(53,462)
Inventories	19,064		(91,060)
Prepaid expenses and other assets	(16,799)		(14,219)
Accounts payable	(10,351)		(23,944)
Accrued and other long-term liabilities	140,284		(212,896)
Long-term income tax payable	(11,113)		(1,657)
Deferred revenues	56,718		136,021
Net cash provided by operating activities	451,672		157,543
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment	(122,664)		(163,348)
Purchase of marketable securities	(2,373)		(20,466)
Proceeds from maturities of marketable securities	17,601		21,690
Proceeds from sales of marketable securities	4,048		92,235
Purchase of equity investments	(75,000)		—


Other investing activities	74		(2,189)
Net cash used in investing activities	(178,314)		(72,078)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	14,256		14,827
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	(21,788)		(52,187)
Net cash used in financing activities	(259,892)		(312,396)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	(3,523)		4,978


	June 30, 2023
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€218,700	$	238,786
Canadian Dollar	C$106,000	79,959
Polish Zloty	PLN279,700	68,452
Chinese Yuan	¥408,000	56,266
British Pound	£43,900	55,704
Japanese Yen	¥5,340,000	37,136
Swiss Franc	CHF30,000	33,526
Brazilian Real	R$143,300	29,532
Mexican Peso	M$230,000	13,491
Israeli Shekel	ILS49,380	13,300
New Zealand Dollar	NZ$9,900	6,046
Czech Koruna	Kč60,000	2,750
New Taiwan Dollar	NT$82,000	2,629
Australian Dollar	A$3,460	$	2,302
Korean Won	₩1,800,000	1,365
		$	641,244


	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


	June 30, 2023		December 31, 2022
Raw materials	$	148,793	$	172,758
Work in process	100,468		96,558
Finished goods	63,475		69,436
Total inventories	$	312,736	$	338,752


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


	June 30, 2023		December 31, 2022
Value added tax receivables	$	137,248	$	140,484
Prepaid expenses	76,608		69,124
Other current assets	22,708		16,762
Total prepaid expenses and other current assets	$	236,564	$	226,370


	June 30, 2023		December 31, 2022
Accrued payroll and benefits	$	211,889	$	149,508
Accrued income taxes	147,618		74,323
Accrued expenses	63,004		64,341
Accrued sales and marketing expenses	43,628		36,407
Current operating lease liabilities	28,770		26,574
Accrued property, plant and equipment	11,992		19,922

Other accrued liabilities	93,262		83,299
Total accrued liabilities	$	600,163	$	454,374


	June 30, 2023		December 31, 2022
Deferred revenues - current	$	1,396,747	$	1,343,643
Deferred revenues - long-term 1	$	148,277	$	160,662


	Clear Aligner		Systems and Services		Total
Balance as of December 31, 2022	$	109,480	$	298,071	$	407,551

Foreign currency translation adjustments	959		6,255		7,214
Balance as of June 30, 2023	$	110,439	$	304,326	$	414,765


	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of June 30, 2023		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of June 30, 2023
Existing technology	10	$	112,051	$	(39,434)	$	(4,328)	$	68,289
Customer relationships	10	21,500		(6,988)		—		14,512
Trademarks and tradenames	10	17,200		(7,361)		(4,122)		5,717
Patents	8	6,511		(5,685)		—		826
		$	157,262	$	(59,468)	$	(8,450)	89,344
Foreign currency translation adjustments								(48)
Total intangible assets, net 1								$	89,296


	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


Fiscal Year Ending December 31,	Amortization
Remainder of 2023	$	8,213
2024	15,335
2025	14,959
2026	14,353
2027	11,992
Thereafter	24,492
Total	$	89,344


	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	$	427.23
Granted	502	316.03
Vested and released	(191)	380.55
Forfeited	(27)	394.18
Unvested as of June 30, 2023	773	$	367.66	1.8	$	273,404


	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 1	82	629.53
Vested and released	(25)	392.67
Forfeited	(41)	392.67
Unvested as of June 30, 2023	160	$	812.75	1.9	$	56,670


	June 30, 2023		December 31, 2022
Long-lived assets 1:
Switzerland	$	566,755	$	532,921
U.S.	208,822		214,804


Other International2	629,346		603,010
Total long-lived assets	$	1,404,923	$	1,350,735



		ALIGN TECHNOLOGY, INC.

August 4, 2023	By:	/s/ JOSEPH M. HOGAN
		Joseph M. Hogan President and Chief Executive Officer

August 4, 2023	By:	/s/ JOHN F. MORICI
		John F. Morici Chief Financial Officer and Executive Vice President, Global Finance


/s/ JOSEPH M. HOGAN
Joseph M. Hogan
President and Chief Executive Officer


/s/ JOHN F. MORICI
John F. Morici
Chief Financial Officer and Executive Vice President, Global Finance



By:			/s/ JOSEPH M. HOGAN
Name:			Joseph M. Hogan
Title:			President and Chief Executive Officer