Align Technology Inc 10-Q for FY2022 Q3

Align Technology Inc (ALGN)

10-Q 2022-11-04 For: 2022-09-30

Added on April 11, 2026

About this 10-Q

Align Technology Inc filed this 10-Q on November 4, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $890.35M; down 12.4% from $1.02B a year earlier
Net income: $72.7M; down 59.8% from net income of $180.97M a year earlier
Diluted EPS: $0.93; down 59.2% from $2.28 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	36
Item 4.	Controls and Procedures	37
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	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
Signatures		62


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net revenues	$	890,348	$	1,015,906	$	2,833,120	$	2,921,485
Cost of net revenues	271,179		260,750		817,046		730,693
Gross profit	619,169		755,156		2,016,074		2,190,792
Operating expenses:
Selling, general and administrative	398,547		428,409		1,264,402		1,257,445
Research and development	76,966		65,587		221,738		177,839
Total operating expenses	475,513		493,996		1,486,140		1,435,284
Income from operations	143,656		261,160		529,934		755,508
Interest income and other income (expense), net:
Interest income	1,685		401		2,607		2,427
Other income (expense), net	(22,700)		427		(48,805)		34,476
Total interest income and other income (expense), net	(21,015)		828		(46,198)		36,903
Net income before provision for income taxes	122,641		261,988		483,736		792,411
Provision for income taxes	49,941		81,019		163,938		211,352
Net income	$	72,700	$	180,969	$	319,798	$	581,059

Net income per share:
Basic	$	0.93	$	2.29	$	4.08	$	7.36
Diluted	$	0.93	$	2.28	$	4.07	$	7.29
Shares used in computing net income per share:
Basic	78,093		78,904		78,408		78,971
Diluted	78,237		79,516		78,652		79,677


☒			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


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,044,523	$	1,099,370
Marketable securities, short-term	46,242		71,972
Accounts receivable, net of allowance for doubtful accounts of $9,617 and $9,245, respectively	859,629		897,198
Inventories	320,903		230,230
Prepaid expenses and other current assets	229,283		195,305
Total current assets	2,500,580		2,494,075
Marketable securities, long-term	50,256		125,320
Property, plant and equipment, net	1,199,880		1,081,926
Operating lease right-of-use assets, net	116,031		121,257
Goodwill	377,616		418,547
Intangible assets, net	91,711		109,709
Deferred tax assets	1,524,584		1,533,767
Other assets	52,144		57,509
Total assets	$	5,912,802	$	5,942,110

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	138,918	$	163,886
Accrued liabilities	383,618		607,315
Deferred revenues	1,286,867		1,152,870
Total current liabilities	1,809,403		1,924,071
Income tax payable	127,059		118,072
Operating lease liabilities	96,694		102,656
Other long-term liabilities	185,024		174,597
Total liabilities	2,218,180		2,319,396
Commitments and contingencies (Notes 6 and 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	—		—
Common stock, $0.0001 par value (200,000 shares authorized; 78,111 and 78,710 issued and outstanding, respectively)	8		8
Additional paid-in capital	1,060,698		999,006
Accumulated other comprehensive income (loss), net	(40,745)		4,326
Retained earnings	2,674,661		2,619,374
Total stockholders’ equity	3,694,622		3,622,714
Total liabilities and stockholders’ equity	$	5,912,802	$	5,942,110


	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


									Reported as:
September 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable securities, short-term		Marketable securities, long-term
Cash	$	709,497	$	—	$	—	$	709,497	$	709,497	$	—	$	—
Money market funds	335,026		—		—		335,026		335,026		—		—
Corporate bonds	70,560		—		(3,405)		67,155		—		29,454		37,701
U.S. government treasury bonds	18,587		—		(641)		17,946		—		9,078		8,868
Asset-backed securities	5,624		—		(53)		5,571		—		3,695		1,876
Municipal bonds	4,780		—		(93)		4,687		—		4,015		672
U.S. government agency bonds	1,204		—		(65)		1,139		—		—		1,139

Total	$	1,145,278	$	—	$	(4,257)	$	1,141,021	$	1,044,523	$	46,242	$	50,256


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

Total	$	1,297,157	$	9	$	(504)	$	1,296,662	$	1,099,370	$	71,972	$	125,320


	September 30, 2022		December 31, 2021
Due in 1 year or less	$	35,157	$	59,737
Due in 1 year through 5 years	61,341		139,113
Total	$	96,498	$	198,850


Description	Balance as of September 30, 2022		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	335,026	$	335,026	$	—	$	—





Short-term investments:


U.S. government treasury bonds	9,078		9,078		—		—
Corporate bonds	29,454		—		29,454		—
Municipal bonds	4,015		—		4,015		—
Asset-backed securities	3,695		—		3,695		—
Long-term investments:
U.S. government treasury bonds	8,868		8,868		—		—
Corporate bonds	37,701		—		37,701		—
Municipal bonds	672		—		672		—

U.S. government agency bonds	1,139		—		1,139		—
Asset-backed securities	1,876		—		1,876		—

Other assets:
Investments in privately held companies	12,180		—		—		12,180
	$	443,704	$	352,972	$	78,552	$	12,180


Description	Balance as of December 31, 2021		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	343,010	$	343,010	$	—	$	—

Corporate bonds	1,042		—		1,042		—
Municipal bonds	516		—		516		—

Short-term investments:
U.S. government treasury bonds	22,251		22,251		—		—
Corporate bonds	35,065		—		35,065		—
Municipal bonds	3,657		—		3,657		—
Asset-backed securities	10,999		—		10,999		—



Long-term investments:
U.S. government treasury bonds	20,677		20,677		—		—
Corporate bonds	79,011		—		79,011		—
Municipal bonds	3,440		—		3,440		—
U.S. government agency bonds	1,200		—		1,200		—
Asset-backed securities	20,992		—		20,992		—
Prepaid expenses and other current assets:
Israeli funds	3,841		—		3,841		—


Other assets:
Investments in privately held companies	8,621		—		—		8,621
	$	554,322	$	385,938	$	159,763	$	8,621


	September 30, 2022
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€181,300	$	177,102
Chinese Yuan	¥569,000	79,875
Canadian Dollar	C$92,800	67,607
Polish Zloty	PLN315,800	63,306
British Pound	£44,200	48,974
Japanese Yen	¥6,224,000	43,194
Brazilian Real	R$200,000	36,666
Swiss Franc	CHF24,800	25,391
Israeli Shekel	ILS78,390	22,021
Mexican Peso	M$283,900	14,088
Korean Won	₩8,200,000	5,710
Australian Dollar	A$4,090	2,653
New Taiwan Dollar	NT$70,000	2,200
Czech Koruna	Kč40,000	1,585
New Zealand Dollar	NZ$2,500	1,419
		$	591,791


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	319,798	$	581,059
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	6,765		48,104
Depreciation and amortization	92,096		79,141
Stock-based compensation	98,679		84,498
Non-cash operating lease cost	22,756		19,364

Arbitration award gain	—		(43,403)
Other non-cash operating activities	26,216		15,651
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	32,284		(216,081)
Inventories	(108,524)		(83,249)
Prepaid expenses and other assets	(32,440)		(74,736)
Accounts payable	(27,100)		13,495
Accrued and other long-term liabilities	(213,378)		107,159
Long-term income tax payable	9,019		20,263
Deferred revenues	197,854		348,430
Net cash provided by operating activities	424,025		899,695
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired	(12,304)		(8,002)
Purchase of property, plant and equipment	(238,696)		(292,002)
Purchase of marketable securities	(20,466)		—
Proceeds from maturities of marketable securities	22,456		—
Proceeds from sales of marketable securities	93,647		—
Repayment on unsecured promissory note	—		4,594
Proceeds from arbitration award	—		43,403
Other investing activities	(2,143)		(3,712)
Net cash used in investing activities	(157,506)		(255,719)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	26,149		25,623
Common stock repurchases	(275,036)		(275,038)

Payroll taxes paid upon the vesting of equity awards	(52,611)		(107,344)
Net cash used in financing activities	(301,498)		(356,759)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	(20,422)		(10,241)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(55,401)		276,976


	September 30, 2022		December 31, 2021
Raw materials	$	147,629	$	123,234
Work in process	101,179		51,706
Finished goods	72,095		55,290
Total inventories	$	320,903	$	230,230


	Nine Months Ended September 30,
	2022		2021
Balance at beginning of period	$	16,169	$	12,615
Charged to cost of net revenues	11,359		13,400
Actual warranty expenditures	(11,109)		(11,040)
Balance at end of period	$	16,419	$	14,975


	Clear Aligner		Systems and Services		Total
Balance as of December 31, 2021	$	112,208	$	306,339	$	418,547
Additions from acquisition	—		8,729		8,729
Foreign currency translation adjustments	(6,694)		(42,966)		(49,660)
Balance as of September 30, 2022	$	105,514	$	272,102	$	377,616


	September 30, 2022		December 31, 2021
Value added tax receivables	$	132,070	$	93,610
Prepaid expenses	50,567		70,218
Other current assets	46,646		31,477
Total prepaid expenses and other current assets	$	229,283	$	195,305


	September 30, 2022		December 31, 2021
Accrued payroll and benefits	$	137,754	$	288,355
Accrued expenses	66,859		67,169
Accrued sales and marketing expenses	35,661		41,387
Current operating lease liabilities	24,173		22,719
Accrued property, plant and equipment	22,648		46,561
Accrued professional fees	21,260		31,457

Other accrued liabilities	75,263		109,667
Total accrued liabilities	$	383,618	$	607,315


	September 30, 2022		December 31, 2021
Deferred revenues - current	$	1,286,867	$	1,152,870
Deferred revenues - long-term 1	$	152,070	$	136,684


	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of September 30, 2022		Accumulated Amortization		Accumulated Impairment Loss		Net Carrying Value as of September 30, 2022
Existing technology	10	$	112,051	$	(30,589)	$	(4,328)	$	77,134
Customer relationships	10	21,500		(5,375)		—		16,125
Trademarks and tradenames	10	17,200		(5,925)		(4,179)		7,096
Patents	8	6,511		(5,090)		—		1,421
		$	157,262	$	(46,979)	$	(8,507)	101,776
Foreign currency translation adjustments								(10,065)
Total intangible assets, net 1								$	91,711


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


Fiscal Year Ending December 31,	Amortization
Remainder of 2022	$	4,144
2023	16,501
2024	15,335
2025	14,959
2026	14,353
Thereafter	36,484
Total	$	101,776


	Number of Shares Underlying RSUs (in thousands)	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2021	492	$	369.17
Granted	239	478.94
Vested and released	(196)	334.10
Forfeited	(35)	433.42
Unvested as of September 30, 2022	500	$	430.73	1.4	$	103,619


	Number of Shares Underlying MSUs (in thousands)	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Unvested as of December 31, 2021	174	$	551.57
Granted 1	101	607.96
Vested and released	(128)	396.10
Forfeited	(3)	744.39
Unvested as of September 30, 2022	144	$	725.73	1.2	$	29,838


Agreement Date	Repurchase Program	Amount Paid (in millions)		Completion Date	Total Shares Received	Average Price per Share
Q2 2021	May 2018	$	100.0	Q3 2021	171,322	$	583.70
Q2 2021	May 2021	$	100.0	Q3 2021	161,707	$	618.40
Q3 2021	May 2021	$	75.0	Q3 2021	109,239	$	686.91
Q2 2022	May 2021	$	200.0	Q2 2022	756,502	$	264.37


	September 30, 2022		December 31, 2021
Long-lived assets 1:
Switzerland	$	519,202	$	444,205
U.S.	214,975		210,582
China	112,715		125,346

Other International	469,019		423,050
Total long-lived assets	$	1,315,911	$	1,203,183



		ALIGN TECHNOLOGY, INC.

November 4, 2022	By:	/s/ JOSEPH M. HOGAN
		Joseph M. Hogan President and Chief Executive Officer

November 4, 2022	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