10-K – 2026-02-27 – algn-20251231.htm

Failure to obtain or maintain approvals or comply with regulations and government actions regarding our products or services or those of our suppliers could materially harm our sales, result in substantial penalties and fines, interrupt our supply chain and cause harm to our reputation.

We and many of our healthcare provider customers, suppliers and commercial intermediaries are subject to extensive and evolving regulations and government actions under numerous federal, state, local, and foreign laws, including those regulating:

• the access, storage, transmission, disclosure, and other processing of, and security measures with respect to, personal, financial and medical information as well as healthcare records, including children’s personal and health data;
• websites and application advertising, including those involving the use of cookies or involving the collection, use, disclosure, or other processing of data relating to individuals for marketing purposes and other business purposes;
• prohibitions against the offer, payment or receipt of remuneration to induce referrals to entities providing healthcare services or goods or to induce the order, purchase or recommendation of our products and services; and
• the design, manufacture, marketing and advertising of our products and services.

The healthcare and technology markets are also highly regulated and subject to evolving political, economic and regulatory influences and government actions. Global regulators are expanding and changing regulations and guidance for products and services, which can limit their potential benefits and cause protracted review timelines for new products and services. Our critical third-party vendors and service providers are subject to similar regulations. Our failure or the failure of our suppliers, customers, advertisers, consultants, and influencers to strictly adhere to clearances or approvals in the labeling, marketing and sales of our products and services could subject us to claims or litigation, including allegations of false or misleading advertising or violations of laws or regulations, which may result in costly investigations, fines, penalties, as well as material judgments, settlements or decrees. We are also subject to complex, new and evolving environmental, health and safety regulations. There can be no assurance we will adequately address the risks associated with the implementation and compliance with such laws and our internal processes and procedures to comply with such laws or that we will be able to take advantage of any resulting business opportunities.

Furthermore, we frequently must obtain regulatory clearance or approval before we can sell a new medical device or market a new use of, or claim for, an existing product. For instance, in the United States, FDA regulations are wide-ranging and govern, among other things, product design, product materials, development, manufacturing and testing, product labeling and product storage. It takes significant time, effort, and expense to obtain and maintain clearances and approvals of products and
30

services, and there is no guarantee we will timely succeed, if at all, in the countries in which we do business. In other countries, the requirements, time, effort and expense to obtain and maintain clearances may differ materially. Moreover, these laws may change, resulting in additional time, expense or loss of market access. If the requirements to market our products or services are delayed, we may be unable to offer them in markets we deem important. Additionally, failure to comply with applicable regulatory requirements could result in enforcement actions with sanctions, including fines, civil penalties and criminal prosecution. Delays or failures to obtain or maintain regulatory approvals or clearances, or to comply with regulatory requirements, may materially adversely affect our domestic or international operations, and adversely impact our business. We and certain of our third-party vendors must also comply with and adhere to facility registration and product listing requirements for Quality System regulations. The FDA enforces its Quality System regulations through periodic unannounced inspections. Failure to satisfactorily correct an adverse inspection finding or comply with applicable regulations can result in enforcement actions, or require us to find alternative manufacturers, which could be a long and costly process and may cause reputational harm. Enforcement actions by regulators could have a material effect on our business, financial condition and results of operations.

We are also subject to anti-corruption and anti-bribery (“ABAC”) laws such as the Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act of 2010, which generally prohibit payments to foreign officials for the purpose of obtaining or maintaining business, securing an advantage and directing business to another. ABAC laws require us to maintain accurate books and records and a system of internal accounting controls. Under the FCPA, we may be held liable for corruption by directors, officers, employees, agents, or other strategic or local partners, intermediaries or representatives acting on our behalf.

While we have policies and procedures requiring compliance with applicable laws and regulations and we provide training to foster compliance, our employees, third parties acting on our behalf, and customers may not adhere to our policies and procedures or applicable laws or regulations, including the use of certain electronic communications and maintaining accurate books and records. If our personnel or the personnel of our agents or suppliers fail to comply with any laws, regulations, policies or procedures, or we fail to audit and enforce compliance, our reputation may be harmed, we may lose customers or revenues or we may face regulatory investigations, actions and fines.

We are subject to various laws relating to privacy, data protection, data governance and cybersecurity, and face risks related to the data we collect, process, and share.

We are or may become, or alleged to be or become, subject to stringent federal, state, and foreign laws and regulations, such as HIPAA, which regulates the security and privacy of patient healthcare information applicable to healthcare providers and their business associates, and the California Consumer Protection Act, as amended by the California Privacy Rights Act, which regulates privacy, data security, content regulation and consumer protection. Numerous other states have enacted, or plan to enact, laws relating to privacy, data protection, data governance and cybersecurity, with such enacted laws either in operation or slated to go into operation over the next several years. Outside of the United States, relevant legal requirements continue to evolve. For example, the collection and use of health data and other personal information is governed in the EU by the EU GDPR, which imposes significant obligations upon companies and rights for individuals, with substantial penalties for noncompliance. Numerous other jurisdictions maintain similar legislation or other laws or regulations addressing privacy, data protection, data governance, or cybersecurity. Several jurisdictions, including the EU, United States, China, Australia, and Japan, have enacted data export restrictions and international transfer laws and regulations that established legal requirements for cross-border transfers of all or certain personal information and certain jurisdictions have also established legal requirements for data localization, which may require us to maintain separate servers located in those countries so that all or certain personal information are maintained locally.

These laws, regulations and other obligations relating to privacy, data protection, data governance and cybersecurity are constantly evolving and may be created, interpreted or enforced in ways that could impose new, substantially uncertain, and relatively burdensome obligations on our global operations, restrict our activities and our ability to provide our products and services in certain jurisdictions, require us to cease operations or modify our policies and business practices in a materially limiting manner, prevent us from resolving issues quickly or force us to resolve them in unanticipated ways, require us to engage in additional contractual negotiations, increase our costs and obligations and limit our ability to efficiently transfer personal data across borders, cause us to incur significant costs, expenses and damages, and present challenges in adapting our policies and practices to address their requirements. Any failure or perceived failure by us or our vendors, customers, or service providers to comply with applicable privacy and data protection laws or to adequately safeguard personal data or patient healthcare information, even if unfounded, may result in regulatory investigations, enforcement actions, litigation (including class actions), and financial penalties, any of which could materially affect our operations and financial performance. Additionally, concerns over our practices with respect to privacy, data protection, data governance, and cybersecurity could adversely affect our reputation and deter customers and consumers from using our products and services.

We have cybersecurity and other forms of insurance coverage related to cyberattacks, breaches, and other incidents or security problems, but we cannot guarantee applicable insurance will be available to us in the future on economically reasonable terms or at all. Damages and claims arising from incidents may not be covered, may exceed coverage limits, and may not cover the time and effort we incur investigating and responding to any incidents, or other costs or liabilities, which may be material. The costs to eliminate, mitigate, or recover from security problems and cybersecurity attacks and incidents could be material and require us to implement additional or different security controls or other measures and, depending on the nature and extent of the problem and the products, services or IT systems impacted, such security problems and cybersecurity attacks and incidents may result in network, IT system interruptions or other disruptions, decreased product sales, data loss, damage, unavailability, or other liabilities, any of which may have a material impact on our operations, net revenues and operating results. The costs associated with cybersecurity tools and infrastructure and competition for scarce cybersecurity and IT resources could limit our ability to identify, eliminate or remediate cybersecurity or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network.
31

Our business exposes us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services, and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.

Our products and services involve an inherent risk of claims concerning their design, materials, manufacture, safety, and performance, how we package, bundle, or sell them to individual customers or companies, including hospitals and clinics, and how we train and support doctors, their staffs and patients who use our products and services. Moreover, consumer products and services are routinely subject to claims of false, deceptive or misleading advertising, labeling, consumer fraud and unfair business practices. Additionally, we may be held liable if our products or services cause injury or are otherwise found unhealthy. If our products and services are safe but they are promoted for use or used in unintended or unexpected ways or for which we have not obtained clearance (“off-label” usage), we may be investigated, fined or have our products or services enjoined or approvals rescinded or we may be required to defend ourselves in litigation. Although we maintain insurance for product liability, business practices, and other types of activities we make or offer, coverage may not be available on acceptable terms, if at all, and may be insufficient for actual liabilities. Any claim for product liability, sales, advertising and business practices, regardless of its merit or eventual outcome, could result in material legal defense costs and damage our reputation, increase our expenses, and divert management’s attention.

Current and anticipated sustainability and social (“Sustainability”) laws and scrutiny of our Sustainability policies and practices may materially increase our costs, expose us to liability, and adversely impact our reputation, employee retention, willingness of customers and suppliers to do business with us and willingness of investors to invest in us.

Our operations are subject to rapidly changing and varied expectations and requirements regarding Sustainability issues from a wide range of stakeholders, such as governmental and self-regulatory organizations, including U.S. federal and state governments, and the EU, as well as investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders and customers. We are also required to comply with disclosure obligations under the SEC’s long-standing climate change disclosure guidance and other SEC regulations, as well as the European Union’s Corporate Sustainability Reporting Directive (“CSRD”). If we fail to adopt Sustainability standards or practices as quickly as stakeholders desire, comply with or timely report on our Sustainability efforts or practices accurately, or satisfy the disclosure and other expectations of stakeholders, our brand, reputation, employee retention, business, financial performance, growth, and stock price may be adversely impacted.

Our compliance obligations span all aspects of our business and operations, including product design and development, materials sourcing and other procurement activities, product packaging, product safety, energy and natural resources usage, facilities design and utilization, recycling and collection, transportation, disposal activities, workers’ and human rights. U.S. and foreign regulators have or are considering enacting new or additional disclosure requirements or limits on the emissions of greenhouse gases from power generated by fossil fuels. Additionally, customers and consumers may demand our products, packaging and operations be more sustainable, which could affect how we manufacture and package our products, increase our costs and those of our suppliers, and result in manufacturing, transportation and supply chain disruptions if clean energy sources are unavailable in adequate amounts when required. Moreover, clean energy sources, coupled with reduced investments in traditional energy production and infrastructure, may not provide the predictable and reliable energy we, our suppliers and other business partners require.

Other restrictions apply to the substances incorporated into our products, including the chemical compounds in our clear aligners, electronics in our scanners and the packaging in which they are shipped. These laws are proliferating and new substances subject to restrictions are added regularly and may require additional reporting or phasing out of certain chemicals and compounds such as per- and polyfluoroalkyl substances (PFAS) and microplastics. We may be required to re-design our products or identify new suppliers to maintain compliance with these laws. Further, these laws and regulations may decrease the number of suppliers capable of supplying our needs, thereby negatively affecting our ability to manufacture products in sufficient quantities at competitive prices, leading customers to potentially choose competitive goods and services.

Meeting our obligations under existing Sustainability laws and regulations is costly for us and our suppliers, and we expect these regulations and costs to increase as the regulatory frameworks in each jurisdiction in which we operate become more complex and distinct. Additionally, regulators may perform investigations, inspections and periodically audit our compliance with these laws and regulations, and our efforts or operations may not be compliant. If we fail to comply with any requirements, we could be subject to significant penalties or liabilities and we may be required to implement new and materially more costly processes and procedures. Even if we successfully comply with these laws and regulations, our suppliers may not. We may also suffer financial and reputational harm if customers require, and we cannot deliver, certification that our products are compliant. In all of these situations, customers may stop purchasing products from us, and may take legal action against us, which could harm our reputation, business, financial condition and results of operations.

AI and machine learning technologies in our products, services and IT systems may result in legal and regulatory risks, reputational harm or have other adverse consequences to our business.

We have and are continuing to incorporate AI and machine learning technologies into certain of our products, services and IT systems, while continuing to explore the opportunities that AI could bring to our company. However, there can be no assurance that we or our customers will realize the expected benefits from these investments. AI innovation presents risks and challenges that could impact our business. Our or our vendors’ AI technologies may be developed using inaccurate, incomplete, flawed or biased algorithms, training methodologies or data, which could lead to the dissemination of false information and result in competitive harm, regulatory penalties, legal liability, or brand or reputational harm.
32

AI is subject to a dynamic and rapidly evolving legal and regulatory environment, which, without appropriate review, governance and risk management, could expose us to unforeseen legal or regulatory scrutiny and liabilities. For example, the U.S. AI regulatory framework remains in development and has been introduced at the federal level through executive orders and legislation has been introduced and enacted at the state level. In Europe, the EU AI Act entered into force on August 1, 2024 which will become fully effective on August 2, 2026, with some provisions effective in February 2025. Other jurisdictions are considering similar legislation. Although we do not engage in developing or providing AI systems for which their placement on the market, putting into service, or use would qualify as “prohibited AI practices,” restrictions and obligations under this regulation, to the extent applicable to us, could have a negative impact on our business, global systems, financial condition and results of operations. Additionally, other jurisdictions have proposed, and in certain cases enacted, laws and regulations addressing aspects of the use and development of AI. The evolving AI regulatory environment may, among other impacts, result in inconsistencies among AI regulations and frameworks across jurisdictions; onerous compliance, governance, and research and development obligations that may require us to rework or reevaluate products or services to be compliant or result in the development of products that are unacceptable under new or revised regulatory frameworks; increased risk of exposure to investigations, proceedings and claims related to our AI models; increased liability related to the use of AI by our customers, consumers or suppliers beyond our control; delays in the deployment of new products and services; competitive and reputational harm; and increased cybersecurity risks.

Additionally, as we offer more third-party AI models in our solutions, we face risks inherent in how third-party AI models used in our solutions have been developed and deployed, including situations in which the third party may lack a proper license or consent for the training data used for their model. The use and availability of third-party AI models in our solutions could result in scrutiny and legal liability, including intellectual property infringement claims. Such claims or scrutiny could cause reputational harm and loss of customers, and adversely impact our business and financial results. In addition, new competition regulations on AI development and deployment could impose new requirements on our markets that could impact our business and financial results.

The input of confidential information or trade secrets into AI systems may result in the loss of intellectual property, proprietary rights or attorney-client privilege in such information or trade secrets. The use of AI technologies for developing products or services may adversely affect or preclude our intellectual property rights in such products or services, or may expose us to liability related to the infringement, misappropriation or other violation of third-party intellectual property. Further, particularly given the nascent stage of the technology, the use of AI can lead to unintended consequences, including the generation of outputs that appear correct but are factually inaccurate, misleading, or that result in unintended biases and discriminatory outcomes, or are otherwise flawed, which could harm our reputation and business and expose us to risks related to such inaccuracies or errors in these outputs.

Intellectual Property Risks

Our success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our IP rights, our competitive position may be harmed.

Our success depends in part on our ability to maintain existing IP rights and obtain, maintain and enforce further IP protections for our products. Our inability to do so could harm our competitive position.

We rely on our portfolio of issued and pending patent applications in the United States and other countries to protect a large part of our IP and competitive position; however, these patents may not prevent third parties from producing competing products similar in design to ours if they are invalidated, held unenforceable, circumvented or otherwise limited in scope. Furthermore, our foreign patent protections may be more limited in scope than those under U.S. patent and IP laws.

Additionally, any of our patent applications may not result in an issued patent or the scope of the patent ultimately issued may be narrower than initially sought. We may not be afforded the protection of a patent if our currently pending or future patent filings do not result in the issuance of patents or if we fail to timely apply for patent protection. We may not apply for a patent if our personnel fail to timely disclose or recognize new patentable ideas or innovations. We may choose not to file a foreign patent application if the limited protections provided by a foreign patent do not outweigh the costs to obtain it. Further, third parties may file patents or develop IP strategies that prevent or limit the effectiveness of our patents.

We also protect our IP through copyrights, trademarks, trade secrets and confidentiality obligations. We generally enter into confidentiality agreements with our employees, consultants and collaborative partners upon commencement of a relationship with us. However, despite the existence of these protections, our proprietary information has been misappropriated in the past and could be misappropriated again in the future. If these agreements do not provide meaningful protection against the unauthorized use or disclosure of our trade secrets or other confidential information, adequate remedies may not exist to prevent unauthorized uses or disclosures. Furthermore, if these agreements are breached through the unauthorized use or disclosure of our trade secrets or other confidential information, available remedies may be insufficient to adequately compensate for damages caused by the unauthorized use or disclosure, even with successful enforcement of a breach of contract or trade secret claim.

Enforcement of our IP rights is time-consuming and costly, and could ultimately prove to be unsuccessful. In certain jurisdictions, enforcement of IP rights is more difficult due to legislation and geopolitical circumstances. As we launch our products in different regions at different times, our products may be acquired and reverse engineered by potential competitors in regions where infringement is more difficult to pursue.

Our inability to maintain the proprietary nature of our technology through patents, copyrights, or trade secrets could impair our competitive advantages and could have a material effect on our operating results, financial condition, and future growth
33

prospects. In particular, failure in protecting and enforcing our IP rights might allow competitors to copy our technology or create counterfeit or pirated versions of our products, which could adversely affect our reputation, pricing, and market share.

Litigation regarding our IP rights, rights claimed by third parties or IP litigation by any vendors on whose products or services we rely for our products and services may impact our ability to grow our business and adversely impact our reputation and results of operations.

Extensive litigation over IP rights is common in technologies and industries on which our products and services are based. Litigation, interferences, oppositions, reexaminations, inter partes reviews, post-grant reviews or other proceedings have been necessary and will likely be needed in the future to determine the validity and scope of certain of our IP rights and those claimed by third parties. These proceedings are used to determine the validity, scope or non-infringement of certain IP rights pertinent to the manufacture, use or sale of our products and the products of competitors. We have been, and may in the future be, sued and need to defend against lawsuits alleging infringement of third parties’ IP rights or other legal claims challenging our IP rights. In addition, we periodically receive letters from third parties drawing our attention to their IP rights and there may be other third-party IP rights of which we are presently unaware. As dentistry continues to become more digital, competitors may make defense of our IP more challenging. Asserting or defending these proceedings can be unpredictable (e.g., due to differences in forums, judges, and jurisdictions; case law that continues to evolve with time; changes in administrative policies, etc.), protracted, time-consuming, expensive, and distracting to management and technical personnel. Their outcomes may adversely affect our ability to manufacture and market our products and services, require us to seek licenses for infringing products or technologies, or result in the assessment of significant monetary damages. Unfavorable rulings could also include monetary damages, injunctions prohibiting us from selling our products, or exclusion orders preventing us from importing our products in one or more countries. Moreover, independent actions by competitors, customers, or others have alleged that our efforts to enforce our IP rights constitute unfair competition or violations of antitrust laws. Investigations and additional litigation based on the same or similar claims may be brought in the future. The potential effects on our business operations resulting from litigation, whether or not ultimately determined in our favor or settled by us, are costly and could materially affect our reputation, business, financial condition and results of operations.

Financial, Tax and Accounting Risks

If our goodwill, finite-lived intangible or long-lived assets become impaired, we may be required to record material charges to income.

Under U.S. GAAP, we review our goodwill annually or more frequently if we identify events or circumstances that indicate it is more likely than not the fair value of a reporting unit has been reduced below its carrying value. We review finite-lived intangible assets and long-lived assets for impairment when events or circumstances indicate the carrying value of the asset (asset group) may not be recoverable. The qualitative analysis performed by management to identify indicators of impairment or the quantitative analysis used to determine fair value requires management to exercise significant judgment in determining appropriate assumptions and estimates, including revenue growth rates, gross and operating margins, and discount rates. Consequently, we may be required to record material charges to income during the period in which any impairment of goodwill, finite-lived intangible assets or long-lived assets is determined.

Changes in, or interpretations of, accounting rules and regulations, could result in unfavorable accounting charges.

We prepare our consolidated financial statements in conformity with U.S. GAAP. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles or in the way these principles are interpreted by us or by our regulators could materially affect our current or previously issued financial statements.

We are required to annually assess our internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in our financial reports and adversely affect our stock price.

Establishing, testing and maintaining an effective system of internal control over financial reporting requires significant resources and time commitments by management and our finance staff, and may require additional staffing and infrastructure investments and increases our costs of doing business. If we are unable to assert that our internal control over financial reporting is effective, if our auditors are unable to express an opinion on the effectiveness of our internal controls, or conclude that our internal controls are ineffective, the timely filing of our financial reports could be delayed or we could be required to restate past reports. This could cause our investors to lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

Our effective tax rate may vary significantly from period to period, which could result in volatility of our operating results and adversely affect our financial results.

Our future effective tax rate may be impacted by various internal and external factors, such as changes in the global economic environment, our legal entity structure or activities performed within our entities, our business operations, tax laws, regulations and/or rates, changes to existing accounting pronouncements, changes in interpretations of existing tax laws or regulations, the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates, overall levels of pretax earnings, settlements of income tax audits, non-deductible goodwill impairments, and changes in the valuation allowance offsetting deferred tax assets. Furthermore, we may continue to experience variation in our effective tax rate related to excess tax benefits or tax expense on stock-based compensation, particularly in the first quarter of each year when the majority of our equity awards vest.

34

New tax laws and practices, changes to existing tax laws and practices, or disputes regarding the positions we take regarding tax laws, could negatively affect our provision for income taxes as well as our ongoing operations.

Compliance with tax laws requires significant judgment concerning our worldwide provision for income taxes. Changes in tax laws, such as the Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) established by Organization for Economic Cooperation and Development (“OECD”), the OECD/G20 Framework’s Pillar Two 15% global minimum tax, and the One Big Beautiful Bill Act, or changes to how those laws are applied to our business could affect the amount of tax which we are subject to and the manner in which we operate. We continue to monitor the enactment of legislation to evaluate the impact of changing global tax laws, which could adversely affect our provision for income taxes or operations.

The application of indirect taxes (such as sales and use tax (“SUT”), value-added tax (“VAT”), goods and services tax (“GST”), and other indirect taxes) to our operations is complex and evolving. U.S. states, local and foreign taxing jurisdictions have differing rules and regulations governing differing types of taxes, and these rules and regulations are subject to varying interpretations and exemptions that may change over time. We collect and remit SUT, VAT, GST and other taxes in many jurisdictions and we are routinely subject to audits. The positions we take regarding taxes as well as the amounts we collect or remit have and may continue to be challenged and we may be liable for failing to collect or remit all taxes deemed owed or the taxes could exceed our estimates. Certain jurisdictions have applied novel or aggressive interpretations of their laws in new ways in an effort to raise additional tax revenue from U.S. based companies such as us, and we may experience similar developments in the future. In addition, ongoing volatility due to international trade may prompt foreign governments to expand regulatory authority or adopt new measures, increasing compliance risks, taxes, and operational complexities. We have and may continue to dispute rulings or positions taken by tax authorities, which have and may continue to incur significant expenses, time, and effort to defend our positions.

The application of existing and new tax laws, and the results of audits could harm our business. Furthermore, there have been and will continue to be substantial ongoing costs associated with complying with the various tax requirements and defending our positions in the numerous markets in which we conduct or will conduct business.

Risks Related to Ownership of our Common Stock

Historically, the market price for our common stock has been volatile.

The market price of our common stock is subject to rapid and large price fluctuations attributable to various factors, many of which are beyond our control. The factors include:

• quarterly variations in our results of operations and liquidity, our ability to meet or exceed our forecasts and guidance or changes to or withdrawal of our previous forecasts and guidance;
• our ability to regain or sustain our historical growth rates;
• changes in recommendations or valuation models for our stock by the investment community, or speculation in the press or investment community regarding estimates of our net revenues, results of operations, or other key performance indicators;
• negative publicity or unfavorable consumer perceptions, whether accurate or inaccurate, concerning our products or the company;
• announcements by us, our competitors, or new market entrants, including strategic actions, management changes, and material transactions, investments or acquisitions;
• technical factors in the public trading markets for our stock that may produce price movements inconsistent with macroeconomic, industry, or company-specific fundamentals, including the sentiment of retail investors (as it may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock, fractional share trading, and other technical trading factors or strategies;
• stockholder activism or securities class action litigation;
• announcements regarding stock repurchases, sales or purchases of our common stock by us, our officers or directors, credit agreements, and debt issuances;
• announcements of technological innovations or new, additional or revised programs, business models, products, or product offerings by us, our customers, or competitors;
• key decisions in pending litigation, new litigation, settlements, judgments, or decrees;
• short selling or other hedging activity in our stock; and
• general economic market conditions, including elevated interest rates, new, proposed or retaliatory tariffs, uncertainty regarding changes in trade policies, including trade wars, inflationary pressures, recessions, consumer sentiment and demand, global geopolitical conflict, and industry factors unrelated to our actual performance.

In addition, the stock market in general, and the market for technology and medical device companies, in particular, often experience extreme price and volume fluctuations unrelated or disproportionate to corporate operating performance. Volatility in our stock price has increased, and may continue to increase, our susceptibility to securities class action litigation, which could result in substantial costs and divert management’s attention and resources, which may adversely affect our business.

We may not continue repurchasing our common stock and any repurchases may not achieve our desired objectives.

Future stock repurchase programs are contingent on a variety of factors, including our financial condition, market conditions, results of operations, business requirements, and our continuing determination that stock repurchases are in the best interests of our stockholders and in compliance with all applicable laws and agreements. There is no assurance we will continue repurchasing our common stock in the future at historical levels or at all, or that our stock repurchase programs will beneficially impact our stock price. Additionally, the Inflation Reduction Act imposes a 1% excise tax on our stock repurchases, net of
35

certain stock issuances, which increases our tax liabilities and the cost to repurchase stock and may impact if and how much stock we choose to repurchase in the future.

Future sales of significant amounts of our common stock may depress our stock price.

A significant percentage of our outstanding common stock is currently owned by a small number of stockholders. These stockholders have sold in the past, and may sell in the future, large amounts of our stock over relatively short periods of time. Sales of substantial amounts of our stock by existing stockholders may adversely affect the market price of our stock by creating the perception of difficulties or problems with our business, which may depress our stock price.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Overview

We have implemented a cross-functional information security program to assess, identify and manage material risks from cybersecurity risk, which includes seeking input from our employees, management, third-party vendors, the Audit Committee of the Board of Directors (“Audit Committee”) and the Board of Directors.

Our information security program’s ultimate goal is preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience to minimize the business impact should an incident occur. In the event of an identified cybersecurity incident, we have developed a cybersecurity incident response process, which outlines steps to be followed from incident detection, analysis, containment, eradication, recovery and notification, including notifying functional areas (e.g. information technology, legal, finance, operations, privacy), as well as senior leadership and the Audit Committee, as appropriate. In certain instances, incidents are escalated to certain members of our legal team who are responsible for, among other things, the accurate and timely disclosure of material cybersecurity incidents as required under federal securities laws, including making the materiality determination and approving related securities disclosures.

Risk Management and Strategy

Our information security program devotes significant resources to cybersecurity and risk management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and effective manner. We regularly assess the threat landscape and take a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and response. Our information security program leverages the National Institute of Standards and Technology (NIST) and International Organization for Standardization (ISO) 27001 frameworks choosing to organize our cybersecurity risks into five categories: identify, protect, detect, respond and recover. This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST and ISO frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our information security program is integrated into our overall enterprise risk management program. Our information security program includes, among other things:

• cybersecurity incident response;
• vulnerability management;
• antivirus and malware protection;
• technology compliance and risk management;
• encryption;
• identity and access management;
• application security; and
• security monitoring.

Our information security program also includes an information security awareness program, which includes annual training regarding our acceptable use and information classification and handling policies, regular phishing campaigns complemented by additional employee training as appropriate, and communications and companion trainings to keep users informed on current events.

36

Our information security team engages third-party services to conduct evaluations of our security controls, including penetration testing and independent audits. Annually, an external auditor conducts a System and Organization Controls (“SOC”) type 2 audit covering the security principle for systems supporting our products.

Our assessment of risks associated with the use of third-party vendors is part of our overall cybersecurity risk management framework. If a third-party vendor is unable to provide a SOC 1 or SOC 2 report, our information security team takes additional steps to assess its cybersecurity preparedness and our initiation or continued engagement with it. Additionally, third-party vendors are required to include security and privacy addenda to our contracts where determined applicable and are reassessed periodically as necessary depending on the risk level that has been assigned to the third-party vendor. Our legal team also requires that our third-party vendors report cybersecurity incidents to us so the impact of the incident on us can be assessed.

As of the date of this Annual Report on Form 10-K, we have not identified any risks from known cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. Notwithstanding the approach we take to cybersecurity, we may not successfully prevent or mitigate cybersecurity incidents that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be covered or, if covered, fully insured.

For a discussion of our cybersecurity-related risks, see Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.”

Governance

Role of Management

To more effectively assess and manage cybersecurity threats, we have a dedicated Chief Information Security Officer (“CISO”) who is responsible for leading enterprise-wide information security strategy, policy, process, and technology. Our current CISO has 20+ years of information security and risk management experience and holds a Certified Information Systems Security Professional (CISSP) certification. Our CISO regularly briefs our Audit Committee on our cybersecurity and information security program and cybersecurity incidents deemed to pose a risk of a critical business impact or reputational harm.

Our information security team, comprised of employees with an expertise in cybersecurity and information technology, regularly assesses the threat landscape and takes a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and response. Our information security team annually performs a cybersecurity enterprise risk assessment and presents the results to management and the Audit Committee. In addition, our internal audit team conducts periodic audits of the Company’s systems and cybersecurity processes, with findings reported to the Audit Committee and senior management.

Role of the Board of Directors and the Audit Committee

Our Audit Committee has responsibility for overseeing and reviewing our cybersecurity, data privacy, and other information technology risks, controls and procedures, including our plans to mitigate cybersecurity risks and to respond to data breaches. Our Audit Committee also reviews with management any specific cybersecurity issues that could affect the adequacy of our internal controls and disclosure procedures and any public disclosures about our cybersecurity controls and procedures, the Board of Directors’ cybersecurity expertise, and its oversight of cybersecurity risk. The Audit Committee periodically reports on its review of cybersecurity risks and our cybersecurity program to our Board of Directors . In 2025, our CISO or his team met with the Audit Committee two times to discuss cybersecurity risks and threats.

37

Item 2. Properties.

We occupy several leased and owned facilities. As of December 31, 2025, the significant facilities occupied were as follows:

Location Lease/Own Primary Use
Tempe, Arizona, U.S.A. Lease Office for corporate headquarters
San Jose, California, U.S.A. Own Office for research & development and administrative personnel
Raleigh, North Carolina, U.S.A. Own Office for Americas regional headquarters
Belen, Heredia, Costa Rica Own Office for administrative personnel, treatment personnel, and customer care
La Lima, Cartago, Costa Rica Own Office for administrative personnel, treatment personnel, and customer care
Wroclaw, Poland Lease and Own Manufacturing and office for treatment and administrative personnel
Petah Tikva, Israel Lease and Own Manufacturing and office for research & development and administrative personnel
Rotkreuz, Switzerland Lease Office for EMEA regional headquarters
Juarez, Mexico Own Manufacturing and office for administrative personnel
Guoco Midtown, Singapore
Lease
Office for APAC regional headquarters

Ziyang, China Own Manufacturing and office for administrative personnel

We believe our existing facilities are in good operating condition and are suitable for the conduct of our business. The facilities noted above are used mostly by all our reportable segments.

Item 3. Legal Proceedings.

The information set forth in Note 8 “ Legal Proceedings” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K is incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable.
38

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded on the Nasdaq Global Select Market under the symbol “ALGN.” As of February 20, 2026, there were approximately 50 holders of record of our common stock. Because the majority of our shares of outstanding common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividends

We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings for use in the operations and expansion of our business. In additional, we may use a portion of our retained earnings to repurchase shares of our common stock, if appropriate.

Securities Authorized for Issuance Under Equity Compensation Plans

Please see Part III, Item 12 of this Annual Report on Form 10-K under the heading “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .”

Performance Graph

Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “soliciting material” under the Exchange Act or subject to Regulation 14A or 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting material or to the extent we specifically incorporate this information by reference.

The graph below compares the 5-year cumulative total stockholder return on Align common stock with the cumulative total returns of the NASDAQ Composite Index, the S&P 500 Index and the S&P 1500 Composite Health Care Equipment & Supplies Industry Index. The graph tracks the performance of a $100 investment in Align common stock and each index (assuming reinvestment of all dividends) from December 31, 2020 to December 31, 2025. Past stock price performance is not necessarily indicative of future stock price performance.

39

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

The following table summarizes the stock repurchase activity for the three months ended December 31, 2025:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)

October 1, 2025 through October 31, 2025 319,732  $ 131.99  319,732  $ 886,241,000 
November 1, 2025 through November 30, 2025 105,371  $ 139.31  105,371  $ 871,563,000 
December 1, 2025 through December 31, 2025 255,577  $ 157.95  255,577  $ 831,195,000 
Total 680,680  680,680 

1 April 2025 Repurchase Program. In April 2025, our Board of Directors authorized a plan to repurchase up to $1,000,000,000 of our common stock (“April 2025 Repurchase Program”). See Note 11 “ Common Stock Repurchase Programs” of the Notes to Consolidated Financial Statements for details on the April 2025 Repurchase Program.

40

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 is presented under Results of Operations of this Annual Report on Form 10-K. Discussions regarding our financial condition and results of operations for fiscal 2024 compared to 2023 have been omitted from this Annual Report on Form 10-K, but can be found in “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025, which is available without charge on the SEC’s website at www.sec.gov and on our investor relations website at investor.aligntech.com .

Executive Overview of Results

Our Strategic Growth Drivers

We strive to help our doctor customers move their practices forward by connecting them with new patients, providing digital solutions to help increase practice efficiency and helping them deliver the best possible treatment outcomes and experiences to millions of people around the world. We strive to achieve this through our continued focus on, and execution of, our strategic growth drivers:

International Expansion : Continually increasing the presence of our operations and commercial organization globally, expanding our products and service offerings and training and educating more doctors in more markets.

General Practitioner dentists (“GP”) treatment : Making teeth straightening more relevant for GPs by enabling them to effectively scan, identify, treat, and monitor malocclusion.

Patient Demand : Making the Invisalign ® system the most recognized brand name in orthodontics by creating awareness and preference among consumers and motivating potential patients to start treatment.

Orthodontist Utilization : Continually innovating in digital orthodontics to increase product applicability and predictability to address a range of malocclusion, especially for teens and growing patients, enabling doctors to confidently diagnose and treat more patients.

Our growth strategy depends on our ability to facilitate the digital transformation of dentistry, our continuous focus on innovation, and expansion to meet and exceed evolving customer expectations as the array of products and services available to them increases.

We strive to deliver on each of our strategic growth drivers through a variety of interrelated enterprise-wide efforts including:

• Continuing penetration and adoption of Invisalign ® clear aligners, iTero Element™ and Lumina™ intraoral scanners and exocad™ CAD/CAM solutions in international markets by investing in manufacturing operations, research and development, clinical treatment planning, sales and marketing and building our quality and regulatory capabilities in existing and emerging markets globally. Our fabrication facilities in our three key regions and treatment planning operations in targeted regional geographies brings our operations closer to our customers and enables us to serve them more quickly and respond to their needs more effectively. We have also diversified our research and development activities, which has created a longer term, more stable environment for consistent hiring, retention and innovation in a variety of high technology locations.

• Targeting growth opportunities with international orthodontists and GP customers, particularly with adopters of digital dentistry platforms by tailoring our sales and marketing strategies, manufacturing operations and resources around the unique needs of each customer channel. As we continue growing, we intend to opportunistically expand our research, development, manufacturing, treatment planning, and sales and marketing operations to meet local and regional demand thoughtfully and deliberately. Over the longer-term, we expect international revenues to grow faster than Americas’ revenues as a result of growing international demand, our continued investment in international market expansion, the size of the market opportunities and our relatively low market penetration in these regions.
41

• Building confidence within the GP and orthodontic communities through training and education efforts to increase their adoption and utilization of digital dental practice transformation and clear aligner treatment. We continue to expand our clear aligner customer base by educating new doctors on the benefits of digital dentistry through the Invisalign System. We furthermore demonstrate to GPs and orthodontists how the iTero portfolio of intraoral scanners, products like Invisalign Go™ treatment, and exocad™ CAD/CAM restorative services and workflows can increase revenues and profitability for their dental practices by enhancing patient experiences and creating operational practice efficiencies. DSOs represent a large and growing opportunity to help drive adoption of digital technology across the dental industry. We have well established relationships with many DSOs globally that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the Align TM Digital Platform, including increased practice efficiency and profitability, as well as delivering a better patient experience from shorter cycle times to customer proximity. We have and may continue to financially invest in or explore collaborations with key ecosystem partners, including DSOs, whose missions and visions align with our vision, strategy, business model and goals.

• Investing in research and development that allows us to innovate, develop and bring to market products and solutions that deliver the ever-increasing clinical precision and predictability that doctors expect with the speed and convenience their patients require. For instance, in 2025, we announced several new enhancements to the Align TM Digital Platform, including (i) restorative capabilities to our iTero Lumina™ intraoral scanner (without iTero NIRI technology) and the new iTero Lumina™ Pro dental imaging system (with iTero NIRI technology), and (ii) iTero Digital Solutions, a comprehensive ecosystem that includes intraoral scanners and integrated software tools, including enhancements to the Align™ Oral Health Suite, Invisalign ® Outcome Simulator Pro with ClinCheck ® Smile Video, and the iTero™ Design Suite. Additionally, we continue to invest in AI infrastructure, specialized talent, and strategic partnerships to further enhance the capabilities of the Align™ Digital Platform and differentiate our product portfolio from traditional and emerging competitors. We believe our commitment to AI can unlock new and adjacent market opportunities, and sharpen our operational focus and capital efficiency by driving automation, scalability, and productivity across our operations, while enabling doctors and their patients to benefit from more efficient and predictable treatment experiences. We maintain governance frameworks, internal controls, and oversight mechanisms designed to promote responsible AI development and deployment, mitigate associated risks, and ensure alignment with applicable laws.

• Creating demand and enabling patient conversion with targeted investments in advertising and public relations through television, film, print, social media and alliances with professional sports teams, athletes, social media influencers and other strategic partners, to encourage treatment by Invisalign trained doctors. We believe that well-designed, targeted sales and marketing promotions that build on our strong brand awareness allow us to differentiate our products and solutions from traditional and emerging competitors. To increase awareness and educate young adults, parents and teens about the benefits of Invisalign treatment, in 2025, we continued to invest in and create campaigns across markets in media platforms such as TikTok, Instagram, YouTube, SnapChat, WeChat, and Douyin. We expect to make further investments to stimulate additional demand for Invisalign System treatment and drive more consumers to dental professionals for those treatments.

• Pursuing new product lines that complement our doctor-prescribed principal products currently available in certain e-commerce and retail channels in the United States. Similarly, in 2025, we continued our focus on our doctor subscription plan and grew our underpenetrated share of the retainer business through strategic marketing campaigns focused on driving adoption and increasing market share.

• Increasing global orthodontic utilization rates as doctors’ clinical confidence in the efficacy and predictability of the Invisalign System increases with advancements in products and technology and as patients and doctors demand treatments that emphasize convenience and safety through fewer visits and less invasive and quicker treatments. In addition, the teenage and younger market makes up approximately 70% of the estimated 22 million total annual global orthodontic case starts. We offer early interceptive treatment to this patient population with products designed to acclimate them to wearing removable devices. Included in these treatments are the Invisalign First Phase 1 Package, designed specifically for younger patients generally between the ages of six and ten. Also included are Invisalign Palatal Expanders, a series of removable devices that treat the most common skeletal and dental malocclusions in growing children, and the Invisalign System with mandibular advancement featuring occlusal blocks, which addresses Class II skeletal and dental correction for growing patients in the late mixed or early permanent dentition stages (ages 10-16). We furthermore continue to emphasize the benefits of the Invisalign System for teenage and younger patient treatments through education, training and sales and marketing programs. In 2025, a record number of teens and kids started treatment with Invisalign clear aligners. We expect utilization rates to continue to rise. However, our utilization rates will fluctuate from period to period due to a variety of factors, which may include seasonal trends in our business, consumer demand due to macroeconomic factors, and adoption rates for new products and features.
42

Trends and Uncertainties

Below is a discussion of the significant trends and uncertainties that could impact our operations:

Macroeconomic Challenges, Trade Impediments and Geopolitical Tensions

Our revenues may fluctuate as a result of events and circumstances impacting customer confidence, consumer sentiment, discretionary spending and ultimately demand for dental services and our products. These events and circumstances include, but are not limited to, macroeconomic conditions, fluctuations in foreign currency exchange rates, tariffs or proposed tariffs, customs duties or fees, and any retaliatory tariffs or protectionist trade measures taken in response to such tariffs or as a result of trade and international disputes, inflation, elevated interest rates, actual or potential slowdowns or recessions, wages, employment levels and health insurance coverage, debt obligations, discretionary income, supply chain challenges, market volatility, and other factors. For more information on events and circumstances that could impact our revenues, refer to Part II, Item 1A “Risk Factors—Macroeconomic and External Risks.”

Many of these factors may contribute to, among other things, higher raw material prices, increased transportation and labor costs, and interruptions in supply and distribution operations, each of which can also impact the availability of certain raw materials, parts and components used in our products as well as our costs and those of our suppliers. For example, we believe that in the beginning of the second quarter of 2025, sales of our products were adversely impacted compared to the same period in prior years by certain macroeconomic conditions, including global tariff volatility, inflation, and higher interest rates, which we believe may continue to impede dental patient demand. For example, patient traffic growth has been uneven for many doctors, with orthodontic starts down for four consecutive years. We believe uncertainty not only impacts consumer purchasing decisions but also the decisions and recommendations that doctors make, especially doctors who offer both clear aligners and wires and brackets in their practices and have the additional time to treat patients with wires and brackets when orthodontic starts are slowing or diminishing. We believe this has resulted in an increase in orthodontic starts using wires and brackets in lieu of clear aligners that was more pronounced in the second quarter of 2025. However, we believe these trends are continuing and will impede future sales for so long as consumer economic uncertainty persists, particularly to the extent it impairs discretionary spending. We also anticipate the geopolitical conflicts involving Ukraine, the Middle East, China and other regions will continue to add to market uncertainties and dampen consumer sentiment and demand.

More directly, we believe government actions relating to actual or proposed tariffs and retaliatory actions in key strategic countries or regions, particularly in the United States, China, Europe, Brazil, Canada, Israel and Mexico may adversely impact our revenue and cost of goods sold. Additionally, the trade war and geopolitical tensions between the United States and China may result in the limitation or prohibition of the availability of certain raw materials, components and parts necessary for our products or the products of our suppliers. The degree of our exposure depends on, among other things, the type of goods subject to any tariffs or trade restrictions enacted, the tariff rates or limits imposed, the timing of the tariffs or restrictions and any other retaliatory measures enacted. The impact may vary by time and region, making operational results uncertain and difficult to predict. These events may also cause a shift in public opinion about companies based in the United States and this may have an adverse impact on our reputation and business. We continue to closely monitor the foregoing issues, assess their potential impact on our operations and financial results, and implement plans to seek to mitigate the impact of any adverse events.

Additionally, a material amount of our revenues are derived internationally and many of our international operations are denominated in currencies other than the U.S. dollar. In 2025, the U.S. dollar remained weakened against major currencies, which positively impacted our financial condition and results of operations for the year. Foreign exchange volatility and the subsequent strengthening or weakening of the U.S. dollar against other currencies remains uncertain and unpredictable.

We continue to monitor the potential for violence and military actions that may directly or indirectly impact our personnel, manufacturing, supply chain, and sales. For instance, the ongoing conflict in Ukraine and unstable environment in the Middle East, as well as increased geopolitical tensions involving Taiwan and the South China Sea may further exacerbate general and regional macroeconomic instability. This is particularly true if fighting erupts, intensifies, spreads to other locations, creates shipping and logistical challenges or cost increases, leads to sanctions or boycotts, or otherwise materially impacts our operations or consumer spending. Our iTero business is headquartered in Israel and, although the sales, delivery times and cost of shipping have not been materially impacted to date, the situation remains fluid. We have implemented contingency planning and business continuity measures to mitigate these risks, but it is uncertain whether further escalation could disrupt our operations. While there have been export and import restrictions imposed against products originating from and businesses operating in Israel, they have not materially impacted our sales or operations to date although we continue to monitor the risk.

2025 Restructuring
43

Beginning in the third quarter of 2025 and continuing into the fourth quarter, we initiated a series of restructuring actions to streamline our operations, realign parts of our organization, and optimize our global manufacturing footprint in response to the current macro environment. These actions included realigning certain business groups and reducing our global workforce, disposing of certain manufacturing assets prior to the end of their useful lives, and committing to the sale of a manufacturing facility and related assets.

As part of these restructuring efforts, we incurred $41 million of expenses through December 31, 2025, primarily related to involuntary termination benefits, including employee severance and other post‑employment costs. We also recorded $76.9 million of accelerated depreciation associated with certain manufacturing assets we planned to dispose of other than by sale.

In addition, we undertook actions to optimize our manufacturing footprint, including the planned sale of our manufacturing facility in Juarez, Mexico, consisting of land, building, and building improvements (the “disposal group”). During the third quarter of 2025, we determined that the disposal group met the criteria for classification as held for sale under ASC 360‑10. Accordingly, the disposal group was measured at its fair value less estimated costs to sell, resulting in an impairment charge of $23.1 million. As of December 31, 2025, we had $28.0 million of assets classified as held for sale.

We may incur additional costs not currently contemplated due to events related to or resulting from these restructuring actions. Refer to Note 1 “Summary of Significant Accounting Policies,” Note 17 “Restructuring and Other Charges,” and Note 18 “Assets Held for Sale,” in the Notes to Consolidated Financial Statements for further discussion.

Changing Product Preferences

As the markets for clear aligners and digital processes and workflows used to transform the practice of dentistry continue to mature, we anticipate customer and patient expectations and demands will continue to evolve. We expect to meet customer demands with innovative treatment options that include more choices to address a wider scope of treatment goals and budgets based on our existing and new products. This may result in larger and unpredictable variations in geographic and product mix and selling prices, which could result in uncertain impacts on our financial statements and business operations. For example, we have and may continue to experience a shift from certain products with higher ASPs to those with lower ASPs.

We strive to manage the challenges presented by the foregoing trends and uncertainties, including the macroeconomic conditions, tariffs and retaliatory measures, military conflicts and the evolution of our target markets, by focusing on improving our operations, further increasing flexibility and efficiencies in our processes, adjusting our business models to changing circumstances and offering products that meet market demand. Specifically, we are managing financial impacts by implementing strategic product innovations, introductions and pricing actions, implementing cost saving measures and evaluating hiring needs.

Further discussion of the impact of these challenges on our business may be found in Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.”

Key Financial and Operating Metrics

We measure our performance against the foregoing strategic priorities by the achievement of key financial and operating metrics. For the year ended December 31, 2025, our business operations reflect the following:

◦ Revenues of $4,035.0 million, an increase of 0.9% year-over-year;
◦ Clear Aligner revenues of $3,245.4 million, an increase of 0.5% year-over-year;
◦ Clear Aligner case volume increase of 4.7% year-over-year and Clear Aligner volume increase for teens and growing patients from 868.1 thousand shipments to 935.8 thousand or 7.8% year-over-year;
◦ Imaging Systems and computer-aided design and computer-aided manufacturing (“CAD/CAM”) services revenues of $789.6 million, an increase of 2.7% year-over-year;
◦ Income from operations of $545.8 million and operating margin of 13.5%;
◦ Effective tax rate of 29.9%;     
◦ Net income of $410.4 million with diluted net income per share of $5.65;
◦ Cash and cash equivalents of $1,094.9 million as of December 31, 2025;
◦ Cash provided by operating activities of $593.2 million;
◦ Capital expenditures of $102.4 million, primarily related to investments in our manufacturing capacity and facilities; and
◦ Number of employees was 20,290 as of December 31, 2025, a decrease of 3.1% year-over-year.

44

Other Statistical Data and Trends

• As of December 31, 2025, over 22 million people worldwide have been treated with our Invisalign system.

• For the year ended 2025, the total number of Invisalign-trained doctors cases were shipped to (doctor submitters) was 130.0 thousand compared to 130.4 thousand in 2024, a 0.3% decrease. GP and orthodontist doctor submitters decreased by approximately 2% and increased by approximately 2%, respectively, in 2025 compared to 2024.

• The total utilization rate in 2025 was 20.1 cases per doctor compared to 19.1 in both 2024 and 2023. Our utilization rates have been impacted by the macroeconomic conditions and other factors as described in the “Trends and Uncertainties” section above. In general, we expect utilization rates to rise over time although they are likely to fluctuate from period to period.

• Clear aligner revenue per case shipment (clear aligner revenues divided by case shipments) decreased by 3.9% from $1,295 in 2024 to $1,245 in 2025.

Results of Operations

Net Revenues by Reportable Segment

We group our operations into two reportable segments: Clear Aligner segment and Systems and Services segment.

• Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:

• Comprehensive Products include, but are not limited to, Invisalign Comprehensive, Invisalign First and Invisalign Comprehensive 3in3.

• Non-Comprehensive Products include, but are not limited to, Invisalign Moderate, Lite and Express packages, Invisalign Go and Invisalign Go Plus and Invisalign Palatal Expander.

• In the United States, Canada, and EMEA, we also offer a Doctor Subscription Program which is our monthly subscription-based clear aligner program. The program allows doctors the flexibility to order retainers and low-stage “touch-up” clear aligners within their subscribed tier and is designed for a segment of experienced Invisalign trained doctors who are currently not regularly using our retainers or low-stage aligners. The low-stage aligners, the Touch up product, are included as a Non-Comprehensive Product.

• Non-Case revenues include, but are not limited to, retention products including retention aligners ordered through the Doctor Subscription Program, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Invisalign Accessory Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain commerce channels in select markets.

• Our Systems and Services segment consists of sales related to our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options, scanner wand upgrades and non-system revenues from leases of scanner systems, sales of pre-owned scanner systems, subscription software, disposables, pay per scan services, as well as exocad’s CAD/CAM software solutions that integrate workflows to dental labs and dental practices.
45

Net revenues for our Clear Aligner and Systems and Services segments for the years ended December 31, 2025, 2024 and 2023 are as follows (in millions) 1 :

  Year Ended December 31, Year Ended December 31,
Net Revenues 2025 2024 Change 2024 2023 Change

Clear Aligner net revenues
$ 3,245.4  $ 3,230.1  $ 15.3  0.5  % $ 3,230.1  $ 3,199.3  $ 30.8  1.0  %
Systems and Services net revenues 789.6  768.9  20.7  2.7  % 768.9  662.9  106.0  16.0  %
Total net revenues $ 4,035.0  $ 3,999.0  $ 36.0  0.9  % $ 3,999.0  $ 3,862.3  $ 136.8  3.5  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
1 Beginning with our quarterly report on Form 10-Q for the quarter ended March 31, 2025, we are no longer disclosing Clear Aligner net revenues for Americas, International and Non-case. Rather our disclosure will align with our Clear Aligner reportable segment in total.

Clear Aligner Case Volume

Case volume data which represents Clear Aligner case shipments for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):

  Year Ended December 31, Year Ended December 31,
2025 2024 Change 2024 2023 Change
Total case volume 2,611.3  2,493.7  117.5  4.7  % 2,493.7  2,408.5  85.2  3.5  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Total net revenues increased by $36 million in 2025 as compared to the same period in 2024, primarily due to an increase in Clear Aligner volume, partially offset by a decrease in ASP and an increase in Systems and Services net revenues driven by strong scanner wand sales.

Clear Aligner

Clear Aligner net revenues increased by $15 million in 2025 as compared to the same period in 2024, primarily due to higher Clear Aligner volume, resulting in an increase of net revenues of $138 million. Clear Aligner net revenues were further positively impacted by $4 million due to favorable foreign exchange rates. These increases were partially offset by a decrease in ASP, driven by product mix shift to lower priced products and higher discounts, resulting in a decrease of net revenue of $127 million.

Systems and Services

Systems and Services net revenues increased by $21 million in 2025 as compared to the same period in 2024 primarily due to an increase of $26 million in sales of scanner wands, driven by strong volume partially offset by lower scanner wand ASP, a $19 million increase from non-system sales and a $1 million positive impact from favorable foreign exchange rates. These increases were partially offset by lower scanner system sales of $25 million, driven by lower system volume and ASP.

46

Cost of net revenues and gross profit (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Clear Aligner
Cost of net revenues $ 1,058.9  $ 952.1  $ 106.8  $ 952.1  $ 911.3  $ 40.8 
% of net segment revenues 32.6  % 29.5  % 29.5  % 28.5  %
Gross profit $ 2,186.5  $ 2,278.0  $ (91.5) $ 2,278.0  $ 2,288.0  $ (10.1)
Gross margin % 67.4  % 70.5  % 70.5  % 71.5  %
Systems and Services
Cost of net revenues $ 265.1  $ 247.7  $ 17.3  $ 247.7  $ 244.1  $ 3.6 
% of net segment revenues 33.6  % 32.2  % 32.2  % 36.8  %
Gross profit $ 524.5  $ 521.2  $ 3.3  $ 521.2  $ 418.8  $ 102.3 
Gross margin % 66.4  % 67.8  % 67.8  % 63.2  %
Total cost of net revenues $ 1,324.0  $ 1,199.9  $ 124.1  $ 1,199.9  $ 1,155.4  $ 44.5 
% of net revenues 32.8  % 30.0  % 30.0  % 29.9  %
Gross profit $ 2,711.0  $ 2,799.2  $ (88.1) $ 2,799.2  $ 2,706.9  $ 92.3 
Gross margin % 67.2  % 70.0  % 70.0  % 70.1  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Cost of net revenues includes personnel-related costs including payroll and stock-based compensation for staff involved in the production process, the cost of materials, packaging, freight and shipping, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs.

For the year ended 2025, our gross margin decreased as compared to the same period in 2024 primarily due to an increase in Clear Aligner Cost of net revenues driven by restructuring charges, impairment losses on Assets held for sale and depreciation on assets disposed of other than by sale. Our gross margin was further impacted negatively by an impairment loss on inventory recorded in our Systems and Services segment. We also experienced a decline in ASPs in both reportable segments. These decreases were partially offset by lower Cost of net revenues, excluding the items noted previously, from operational efficiencies.

Clear Aligner

The gross margin percentage decreased in 2025 as compared to the same period in 2024 primarily due to accelerated depreciation on assets disposed of other than by sale of $77 million and lower ASPs. These decreases were partially offset by operational efficiencies.

Systems and Services

The gross margin percentage decreased in 2025 as compared to the same period in 2024 primarily due to lower ASPs and an impairment loss on inventory of $15 million. These decreases were partially offset by lower Cost of net revenues, excluding the impairment loss, from operational efficiencies.

Selling, general and administrative (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Selling, general and administrative $ 1,755.8  $ 1,763.2  $ (7.4) $ 1,763.2  $ 1,703.4  $ 59.8 
% of net revenues 43.5  % 44.1  % 44.1  % 44.1  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Selling, general and administrative expense generally includes personnel-related costs, including payroll, stock-based compensation and commissions for our sales force, marketing and advertising expenses including media, market research, marketing materials, clinical education, trade shows and industry events, legal and outside service costs, equipment, software and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT.
47

Selling, general and administrative expense decreased in 2025 compared to the same period in 2024 primarily due to lower employee costs, including salaries, fringe benefits, and bonus, and lower marketing and outside services expense. The decrease was partially offset by higher clinical education expense.

Research and development (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Research and development $ 369.9  $ 364.2  $ 5.7  $ 364.2  $ 346.8  $ 17.4 
% of net revenues 9.2  % 9.1  % 9.1  % 9.0  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Research and development expense generally includes personnel-related costs, including payroll and stock-based compensation, outside service costs associated with the research and development of new products and enhancements to existing products, software, equipment, material and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT.

Research and development expense increased in 2025 compared to the same period in 2024 primarily due to higher employee costs, including salaries, fringe benefits, stock-based compensation, offset by lower capitalized labor costs related to internal use software and lower bonus cost.

Restructuring and other charges (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Restructuring and other charges $ 35.4  $ 33.2  $ 2.2  $ 33.2  $ 13.3  $ 19.9 
% of net revenues 0.9  % 0.8  % 0.8  % 0.3  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Restructuring and other charges increased in 2025 compared to the same period in 2024 due to higher severance and other one-time post-employment benefits, driven by a more significant restructuring plan initiated in 2025. Refer to Note 17 “ Restructuring and Other Charges” of the Notes to Consolidated Financial Statements for more information.

Legal settlement loss (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Legal settlement loss $ 4.2  $ 31.0  $ (26.8) $ 31.0  $ —  $ 31.0 
% of net revenues 0.1  % 0.8  % 0.8  % —  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Legal settlement losses were incurred in 2025 and 2024 due to litigation and other settlements. For the year ended 2025, we recorded losses of $4 million due to such legal settlements. Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements for more information.

48

Income from operations (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Clear Aligner
Income from operations $ 1,034.8  $ 1,142.2  $ (107.4) $ 1,142.2  $ 1,182.3  $ (40.1)
Operating margin % 31.9  % 35.4  % 35.4  % 37.0  %
Systems and Services
Income from operations $ 306.1  $ 269.2  $ 36.9  $ 269.2  $ 191.4  $ 77.9 
Operating margin % 38.8  % 35.0  % 35.0  % 28.9  %
Total Income from operations 1
$ 545.8  $ 607.6  $ (61.9) $ 607.6  $ 643.3  $ (35.7)
Operating margin % 13.5  % 15.2  % 15.2  % 16.7  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

1      Refer to Note 16 “Segments and Geographical Information” of the Notes to Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to consolidated Income from operations.

Total operating margin percentage decreased in 2025 compared to the same period in 2024 primarily due to lower gross margin and higher restructuring and other charges, offset by lower legal settlement loss. Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements for more information.

Clear Aligner

Operating margin percentage decreased in 2025 compared to the same period in 2024 primarily due to a decrease in gross margin and an increase in marketing and media expense and credit card transaction fees.

Systems and Services

Operating margin percentage increased in 2025 compared to the same period in 2024 primarily due to higher operating income driven by higher revenue and lower operating expenses related to a decrease in employee costs .

Interest income (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Interest income $ 16.0  $ 20.2  $ (4.2) $ 20.2  $ 17.3  $ 3.0 
% of net revenues 0.4  % 0.5  % 0.5  % 0.4  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Interest income generally includes interest earned on cash, cash equivalents and investment balances.

Interest income decreased in 2025 compared to the same period in 2024 primarily due to lower interest rates earned on cash and cash equivalent balances.

Other income (expense), net (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Other income (expense), net $ 23.5  $ (18.9) $ 42.4  $ (18.9) $ (19.4) $ 0.5 
% of net revenues 0.6  % (0.5) % (0.5) % (0.5) %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

Other income (expense), net, generally includes foreign exchange gains and losses, gains and losses on foreign currency forward contracts, interest expense, gains and losses on equity investments and other miscellaneous charges.

Other income (expense), net increased in 2025 compared to the same period in 2024 primarily due to gains recorded on our equity investments and changes in foreign exchange rates.

49

Provision for income taxes (in millions):

  Year Ended December 31, Year Ended December 31,
  2025 2024 Change 2024 2023 Change
Provision for (benefit from) income taxes $ 174.9  $ 187.6  $ (12.7) $ 187.6  $ 196.2  $ (8.6)
Effective tax rates 29.9  % 30.8  % 30.8  % 30.6  %

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.

The decrease in our effective tax rate for the year ended December 31, 2025 compared to the same period in 2024 is primarily attributable to a decrease in U.S. taxes on foreign earnings, release of unrecognized tax benefits due to statute of limitation lapse, partially offset by the remeasurement of the deferred tax asset due to tax rate change and change in our jurisdictional mix of income.

Liquidity and Capital Resources

Liquidity and Trends

As of December 31, 2025 and 2024, we had the following cash and cash equivalents (in thousands):

December 31,
  2025 2024

Cash and cash equivalents $ 1,094,908  $ 1,043,887 

Our principal source of liquidity is cash provided by our operations. As of December 31, 2025 and 2024, we had cash and cash equivalents of $1,095 million and $1,044 million, respectively, of which approximately $929 million and $855 million, respectively, were held by our foreign subsidiaries. We continue to evaluate opportunities to repatriate our foreign earnings if or when needed. We do not expect to incur significant additional costs upon repatriation of these foreign earnings. We generate sufficient operating cash flow from our domestic operations and have access to $300 million under our revolving line of credit. We believe that our current cash balances and the borrowing capacity under our credit facility, if necessary, will be sufficient to fund our business for at least the next 12 months.

Our material cash requirements as of December 31, 2025 and material trends and uncertainties for the fiscal year 2026 are as follows:

• Our purchase commitments consist primarily of open purchase orders for goods and services, including manufacturing inventory, supplies and services, sales and marketing, research and development services and technological services, issued in the normal course of business. Our purchase commitments totaled $1,020 million. We anticipate a majority, an estimated $935 million, will be payable within the next 12 months. These purchase commitments exclude capital expenditures.

• We expect our investments in capital expenditures to be between $125 million and $150 million for the next 12 months. Capital expenditures primarily relate to technology upgrades, additional manufacturing capacity as well as ongoing maintenance.

• We committed to a plan to dispose of, other than by sale, specifically identified manufacturing assets prior to the end of their estimated useful lives during the third quarter of 2025. We have materially completed the disposition of these assets as of December 31, 2025. Accordingly, we have revised the estimated useful lives of these assets to reflect our use through the disposal date. For the year ended December 31, 2025, we recorded $77 million of accelerated depreciation expense related to these assets. The increase in depreciation expense negatively impacted Net income, net of tax, by $54 million or $0.74 per basic and diluted share.

• We have future operating lease payments of $184 million, which includes $58 million for leases that have not yet commenced as of December 31, 2025. Refer to Note 4 “ Leases ” of the Notes to Consolidated Financial Statements  for details on the lease payments.

• We continually evaluate opportunities to repurchase shares of our common stock depending on various factors including our share price and current liquidity requirements. Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, taking into account
50

prevailing market conditions. In April 2025, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock, (the “April 2025 Repurchase Program”). The April 2025 Repurchase Program is expected to be completed over a period of up to three years. We repurchased $466 million during the year ended 2025, under both the April 2025 Repurchase Program and the January 2023 Repurchase Program (“January 2023 Repurchase Program”). The January 2023 Repurchase Program was completed in its entirely in the second quarter of 2025. We had approximately $831 million available as of year end, of which approximately $31 million was repurchased in January 2026, leaving $800 million available for future repurchase under the April 2025 Repurchase Program. Refer to Note 11 “Common Stock Repurchase Program” of the Notes to Consolidated Financial Statements for details on our stock repurchase programs.

• In 2025, we settled certain legal matters and issued a payment for the full settlement amount of $32 million, Settlement payments were made in accordance with the terms and conditions as set forth in the settlement agreement. Refer to Note 8 “ Legal Proceedings ” of the Notes to Consolidated Financial Statements for more information.

• In the third quarter of 2025, we initiated a restructuring plan to realign certain business groups and reduce our global workforce. This plan represents our continued effort to right size our labor force with the current macroeconomic environment. We incurred $41 million in total restructuring expenses, primarily related to involuntary termination benefits, including employee severance and other post-employment benefits. We may also incur additional costs not currently contemplated due to events related to or resulting from any such action. Refer to Note 17 “ Restructuring and Other Charges ” of the Notes to Consolidated Financial Statements for more information.

• We may be required to adjust the valuation allowance for deferred tax assets if we determine, based on available evidence at the time of the determination, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment includes deferred tax assets associated with our Switzerland tax deductible basis created from our 2020 intra-entity transfer of intellectual property, which have a finite utilization period and depend on our ability to generate sufficient taxable income in that jurisdiction. Any changes to the valuation allowance, particularly those related to our Switzerland deferred tax assets, could have a material adverse effect on our results of operations. Refer to Note 13 “Income Taxes” of the Notes to Consolidated Financial Statements for more information.

• As of December 31, 2025, we had no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material impact on our liquidity or capital resources.

Sources and Uses of Cash

The following table summarizes our Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 (in thousands):

  Year Ended December 31,
  2025 2024 2023
Net cash provided by (used in):
Operating activities $ 593,223  $ 738,231  $ 785,776 
Investing activities (112,445) (254,912) (195,943)
Financing activities (464,580) (355,722) (598,340)
Effects of foreign exchange rate changes on cash, cash equivalents, and restricted cash 35,025  (21,153) 4,671 
Net (decrease) increase in cash, cash equivalents, and restricted cash
$ 51,223  $ 106,444  $ (3,836)

Operating Activities

For the year ended December 31, 2025, cash flows from operations of $593 million resulted primarily from our net income of approximately $410 million as well as the following:

Significant adjustments to net income

• Stock-based compensation of $186 million related to equity awards granted to employees and directors; and
• Depreciation and amortization of $237 million related to our investments in property, plant and equipment and intangible assets.

51

Significant changes in working capital

• Net outflow of $96 million from accrued and other long-term liabilities primarily due to timing of payments related to the payment of fiscal year 2024 bonuses in the first quarter of 2025;
• Net outflow of $112 million from deferred revenues; and
• Net outflow of $140 million from accounts receivable due to timing of collections and increased revenues.

For the year ended December 31, 2024, cash flows from operations of $738 million resulted primarily from our net income of approximately $421 million as well as the following:

Significant adjustments to net income

• Stock-based compensation of $174 million related to equity awards granted to employees and directors; and
• Depreciation and amortization of $145 million related to our investments in property, plant and equipment and intangible assets.

Significant changes in working capital

• Net inflow of $90 million from accrued and other long-term liabilities primarily due to timing of payments;
• Net inflow of $68 million from prepaid expenses and other assets primarily due to settlement of tax matter. Refer to Note 8 “Legal Proceedings” of the Notes to Consolidated Financial Statements .
• Net outflow of $80 million from deferred revenues; and
• Net outflow of $153 million from accounts receivable due to timing of collections and increased revenues.

Investing Activities

Net cash used in investing activities was $112 million for the year ended December 31, 2025 which was primarily related to an outflow of $102 million for purchases of property, plant and equipment and a $10 million additional investment in SD Holding Company.

Net cash used in investing activities was $255 million for the year ended December 31, 2024 which primarily consisted of $116 million for purchases of property, plant and equipment, $77 million for the Cubicure acquisition and $106 million for investments in privately held companies, partially offset by sales and maturities of marketable securities of $44 million.

Financing Activities

Net cash used in financing activities was $465 million for the year ended December 31, 2025 which consisted of payments to repurchase shares of our common stock of $466 million and payroll taxes paid for equity awards through share withholdings of $20 million, which were partially offset by proceeds from the issuance of common stock for $22 million.

Net cash used in financing activities was $356 million for the year ended December 31, 2024 which consisted of payments to repurchase shares of our common stock of $353 million and payroll taxes paid for equity awards through share withholdings of $28 million, which were partially offset by proceeds from the issuance of common stock for $25 million.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures at the date of the financial statements. We evaluate our estimates on an on-going basis and use authoritative pronouncements, historical experience and other assumptions as the basis for making the estimates. Actual results could differ from those estimates.

We believe the following critical accounting estimates affect our more significant judgments used in the preparation of our consolidated financial statements. For further information on all of our significant accounting policies, see Note 1 “ Summary of Significant Accounting Policies ” of the Notes to Consolidated Financial Statements .

52

Revenue Recognition

Our revenues are derived primarily from the sale of aligners, scanners, and services from our Clear Aligner and Systems and Services segments. We enter into sales contracts that may consist of multiple distinct performance obligations. Sales contracts with multiple performance obligations require management to exercise judgment in allocating the transaction price, based on standalone selling prices, to each performance obligation and determining the timing of revenue recognition which directly impacts our unfulfilled performance obligations at period end.

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

We allocate consideration for each clear aligner treatment plan based on each unit’s SSP. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, we take into consideration changing trends and market conditions. For treatment plans with multiple options, we also consider usage rates, which is the number of times a customer is expected to order more aligners after the initial shipment. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel.

We estimate the SSP of each element in a scanner system and services sale taking into consideration same or similar product historical prices as well as our discounting strategies. For CAD/CAM services, we estimate the SSP of each element, including the initial software license and maintenance and support, using data such as historical prices.

Unfulfilled Performance Obligations for Clear Aligners and Scanners

Our unfulfilled performance obligations, including deferred revenues and backlog, and the estimated revenues expected to be recognized in the future related to these performance obligations are $1,353 million and $1,445 million as of December 31, 2025 and 2024, respectively. This includes performance obligations from the Clear Aligner reportable segment, primarily the shipment of additional aligners, which are fulfilled over six months to five years. This also includes performance obligations from our Systems and Services reportable segment, primarily services and support, which are fulfilled over one to five years, and contracted deliveries of additional scanners. The estimate includes both product and service unfulfilled performance obligations and the time range reflects our best estimate of when we will transfer control to the customer and may change based on customer usage patterns, timing of shipments, readiness of customers' facilities for installation, and manufacturing availability.

Impairment of Goodwill and Finite-Lived Intangible Assets

Goodwill

We evaluate goodwill for impairment at least annually on November 30th or more frequently if indicators of impairment are identified between annual testing dates. Goodwill is tested for impairment between annual testing dates when events or circumstances indicate that the fair value of a reporting unit has been reduced below its carrying value. When an indicator of impairment is identified we perform a quantitative impairment assessment in which we determine the fair value of a reporting unit and compare it to the carrying value of the respective reporting unit. We generally determine the fair value of a reporting unit via a discounted cash flow (“DCF”) analysis and allocate our net assets to each reporting unit to determine carrying value. The use of a DCF model requires management to exercise significant judgment related to operating assumptions and estimates including, revenue growth rates, terminal growth rates, operating margins and discount rates, among others. Additionally, management exercises judgment when determining the methodology used to allocate net assets to each reporting unit. We will record an impairment charge when our quantitative impairment analysis indicates that the carrying value of a reporting unit exceeds its fair value.

Finite-Lived Intangible Assets

Finite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset (asset group) may not be recoverable. When an impairment indicator is identified, we perform a recoverability test, in
53

which the estimated, undiscounted future cash flows expected to result from the use and eventual disposition of the asset (asset group) are compared to the carrying value of the asset (asset group). When our recoverability test results in undiscounted cash flows that are greater than carrying value, no impairment is recorded. However, when our recoverability test results in undiscounted cash flows that are less than carrying value, we determine the fair value of the asset (asset group) and reduce the carrying amount of the asset (asset group), through an impairment charge, to its fair value. The process of identifying impairment indicators, preparing an undiscounted cash flow and determining the fair value of the asset (asset group) require management to exercise significant judgment related to various assumptions and estimates.

If we were to have impairments to goodwill or finite-lived intangible assets, it could adversely affect our operating results. During the years ended 2025 and 2024, we did not have any impairment charges related to our goodwill or finite-lived intangible assets.

Accounting for Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. The evaluation of our uncertain tax positions involves significant judgment in the interpretation and application of U.S. GAAP and complex domestic and international tax laws related to the allocation of international taxation rights between countries. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP. Realization of our deferred tax assets is dependent on our ability to generate future taxable income which is determined based on assumptions such as estimated growth rates in revenues, gross margins, future cash flows and discount rates in the jurisdictions in which we operate. The accuracy of these estimates could be affected by unforeseen events or actual results, and the sustainability of our future tax benefits is dependent upon the acceptance of these valuation estimates and assumptions by the taxing authorities, particularly with respect to our Switzerland operation, where our deferred tax assets have a finite utilization period. While we currently believe that it is more likely than not that these deferred tax assets will be realized and that a valuation allowance is not required, this conclusion remains sensitive to changes in our operational performance, taxable income forecasts, and other relevant factors. We may, in the future, be required to increase the valuation allowance to take into account deferred tax assets that we may be unable to realize, which would result in a material increase to our income tax provision in the period the determination is made.

Accounting for Legal Proceedings

Estimates of probable losses resulting from litigation are inherently difficult to make, particularly when the matters are in early procedural stages with incomplete facts and information. The final outcome of legal proceedings is dependent on many variables that are difficult to predict and, therefore, the ultimate cost to resolve such matters may be materially different than our current estimates. Consequently, new information or changes in judgments and estimates could have a material adverse effect on our business, financial condition, and results of operations or cash flows.

Recent Accounting Pronouncements

See Note 1 “ Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on results of operations and financial condition, which is incorporated herein.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, we are exposed to interest rate, foreign currency exchange and inflation risks that could impact our financial position and results of operations. In addition, we are subject to the broad market risk that is created by the global market disruptions and uncertainties resulting from macroeconomic challenges, various military conflicts and consumer confidence. Further discussion on these risks may be found in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors .”

Interest Rate Risk

Changes in interest rates could impact our anticipated interest income earned on our cash and cash equivalents balance. As of December 31, 2025, we are not exposed to interest rate risk on our unsecured revolving line of credit. An immediate 10% change in interest rates would not have a material adverse impact on our future operating results and cash flows.

We have not historically used derivative financial instruments to manage our exposure to changes in interest rates.

Foreign Currency Exchange Rate Risk
54

As a result of our international business activities, our financial results have been affected by changes in foreign currency exchange rates as well as economic conditions in foreign markets. There is no assurance that exchange rate fluctuations will not adversely impact our results of operations or financial condition in the future. We generally sell our products in the local currency of the respective countries. This provides some natural hedging because most of the subsidiaries’ operating expenses are also generally denominated in their local currencies.

We enter into foreign currency forward contracts for currencies where we have exposures, primarily the Euro, British Pound, Chinese Yuan, Polish Zloty and Canadian Dollar, to minimize the short-term impact of foreign currency exchange rate fluctuations on certain assets and liabilities. These forward contracts are not designated as hedging instruments and are generally one month in original maturity and are marked to market through earnings every period. The gains and losses on these forward contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being economically hedged. We do not enter into foreign currency forward contracts for trading or speculative purposes. As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in currency rates.

Although we will continue to monitor our exposure to currency fluctuations, and, where appropriate, use forward contracts to minimize the effect of these fluctuations, the impact of an aggregate change of 10% in foreign currency exchange rates relative to the U.S. dollar on our results of operations and financial position could be material.

Inflation Risk

The economy has been impacted by certain macroeconomic challenges which have contributed to a rising inflationary trend that have impacted both our revenues and costs globally. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. There is no assurance that our results of operations and financial condition will not be adversely impacted by inflation in the future.

55

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
  Page
Management's Annual Report on Internal Control over Financial Reporting
57

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
58

Consolidated Statements of Operations for the year ended December 31, 2025 , 202 4 and 20 23
60

Consolidated Statements of Comprehensive Income for the year ended December 31, 202 5 , 202 4 and 20 23
61

Consolidated Balance Sheets as of December 31, 202 5 and 20 24
62

Consolidated Statements of Stockholders’ Equity for the year ended December 31, 202 5 , 202 4 and 20 23
63

Consolidated Statements of Cash Flows for the year ended December 31, 202 5 , 202 4 and 20 23
64

Notes to Consolidated Financial Statements
65

56

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Align is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed by, or under supervision of, our CEO and CFO, and effected by the board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Align;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Align are being made only in accordance with authorizations of management and directors of Align; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Align’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment, management has concluded that, as of December 31, 2025, our internal control over financial reporting was effective based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO.

The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

 

/ S /    JOSEPH M. HOGAN         

Joseph M. Hogan
President and Chief Executive Officer
February 27, 2026

/ S /    JOHN F. MORICI 

John F. Morici
Chief Financial Officer and Executive Vice President, Global Finance
February 27, 2026

57

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Align Technology, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Align Technology, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedule of Valuation and Qualifying Accounts and Reserves for each of the three years listed in the period ended in December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

58

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Determination of Standalone Selling Price of Distinct Performance Obligations in Clear Aligner Contracts

As described in Notes 1 and 16 to the consolidated financial statements, the Company recognized net revenues of $3.2 billion from its Clear Aligner segment for the year ended December 31, 2025. The Company enters into contracts (“treatment plans”) that involve multiple future performance obligations. Management identifies a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Management allocates revenues for each treatment plan based on each unit’s standalone selling price. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, they take into consideration changing trends and market conditions. Management also considers usage rates, which is the number of times a customer is expected to order additional aligners. Management’s process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel.

The principal considerations for our determination that performing procedures relating to revenue recognition and the determination of standalone selling price of distinct performance obligations in Clear Aligner contracts is a critical audit matter are the significant judgment by management in determining the estimate of standalone selling price, which includes significant assumptions related to usage rates for each distinct performance obligation. This in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s determination of the estimates of standalone selling price and usage rates for each distinct performance obligation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the determination of standalone selling price for each distinct performance obligation in the Company’s Clear Aligner contracts. These procedures also included, among others, (i) testing management’s process for determining the estimate of standalone selling price, which included testing the completeness and accuracy of inputs used and evaluating the reasonableness of factors considered by management related to same or similar product historical sales and usage rates, and (ii) testing management’s process for estimating usage rates, which included evaluating the reasonableness of inputs evaluated by management related to historical usage data by region, country and channel.

/s/ PricewaterhouseCoopers LLP
San Jose, California
February 27, 2026

We have served as the Company’s auditor since 1997.
59

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 

  Year Ended December 31,
  2025 2024 2023
Net revenues $ 4,034,964   $ 3,999,012   $ 3,862,260  
Cost of net revenues 1,323,951   1,199,853   1,155,397  
Gross profit 2,711,013   2,799,159   2,706,863  
Operating expenses:
Selling, general and administrative 1,755,791   1,763,193   1,703,379  
Research and development 369,911   364,202   346,830  
Restructuring and other charges 35,378   33,168   13,316  
Legal settlement loss
4,178   30,968   —  
Total operating expenses 2,165,258   2,191,531   2,063,525  
Income from operations 545,755   607,628   643,338  
Interest income and other income (expense), net:
Interest income 16,045   20,218   17,258  
Other income (expense), net 23,487   ( 18,887 ) ( 19,392 )
Total interest income and other income (expense), net 39,532   1,331   ( 2,134 )
Net income before provision for income taxes 585,287   608,959   641,204  
Provision for income taxes 174,936   187,597   196,151  
Net income $ 410,351   $ 421,362   $ 445,053  

Net income per share:
Basic $ 5.66   $ 5.63   $ 5.82  
Diluted $ 5.65   $ 5.62   $ 5.81  
Shares used in computing net income per share:
Basic 72,542   74,877   76,426  
Diluted 72,588   74,993   76,568  

The accompanying notes are an integral part of these consolidated financial statements.
60

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

  Year Ended December 31,
  2025 2024 2023
Net income $ 410,351   $ 421,362   $ 445,053  
Other comprehensive income (loss):
Change in foreign currency translation adjustment, net of tax 69,410   ( 15,786 ) 28,419  
Change in unrealized gains on investments, net of tax
—   596   3,033  
Other comprehensive income (loss) 69,410   ( 15,190 ) 31,452  
Comprehensive income $ 479,761   $ 406,172   $ 476,505  

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

61

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

December 31,
2025 2024
ASSETS
Current assets:
Cash and cash equivalents $ 1,094,908   $ 1,043,887  

Accounts receivable, net of allowance for doubtful accounts of $ 34,213 and $ 19,131 , respectively
1,101,757   995,685  
Inventories 226,343   254,287  
Prepaid expenses and other current assets 165,571   198,582  
Assets held for sale
27,983   —  

Total current assets 2,616,562   2,492,441  

Property, plant and equipment, net 1,131,453   1,271,134  
Operating lease right-of-use assets, net 108,322   113,376  
Goodwill 491,833   442,630  
Intangible assets, net 93,933   103,488  
Deferred tax assets 1,513,542   1,557,372  
Other assets 278,048   234,159  
Total assets $ 6,233,693   $ 6,214,600  

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 121,450   $ 108,693  
Accrued liabilities 536,749   598,188  
Deferred revenues 1,261,816   1,331,146  
Total current liabilities 1,920,015   2,038,027  
Income tax payable 68,200   96,466  
Operating lease liabilities 82,507   88,214  
Other long-term liabilities 113,824   139,908  
Total liabilities 2,184,546   2,362,615  
Commitments and contingencies (Notes 8 and 9)

Stockholders’ equity:
Preferred stock, $ 0.0001 par value ( 5,000 shares authorized; none issued)
—   —  
Common stock, $ 0.0001 par value ( 200,000 shares authorized; 71,364 and 73,849 issued and outstanding, respectively)
7   7  
Additional paid-in capital 1,509,595   1,362,234  
Accumulated other comprehensive income (loss), net 75,388   5,978  
Retained earnings 2,464,157   2,483,766  
Total stockholders’ equity 4,049,147   3,851,985  
Total liabilities and stockholders’ equity $ 6,233,693   $ 6,214,600  

The accompanying notes are an integral part of these consolidated financial statements.
62

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Income (Loss), Net Retained Earnings Total
Shares Amount
Balance as of December 31, 2022
77,267   $ 8   $ 1,044,946   $ ( 10,284 ) $ 2,566,688   $ 3,601,358  
Net income —  —  —  —  445,053   445,053  
Net change in unrealized gains (losses) from investments —  —  —  3,033   —  3,033  
Net change in foreign currency translation adjustment —  —  —  28,419   —  28,419  
Issuance of common stock relating to employee equity compensation plans
335   —  26,595   —  —  26,595  
Tax withholdings related to net share settlements of equity awards ( 70 ) —  ( 22,575 ) —  —  ( 22,575 )
Common stock repurchased and retired ( 2,457 ) ( 1 ) ( 30,852 ) —  ( 564,567 ) ( 595,420 )
Equity forward contract related to accelerated stock repurchase —  —  ( 10,000 ) —  —  ( 10,000 )
Stock-based compensation —  —  154,026   —  —  154,026  
Balance as of December 31, 2023
75,075   7   1,162,140   21,168   2,447,174   3,630,489  
Net income —  —  —  —  421,362   421,362  
Net change in unrealized gains (losses) from investments —  —  —  596   —  596  
Net change in foreign currency translation adjustment —  —  —  ( 15,786 ) —  ( 15,786 )
Issuance of common stock relating to employee equity compensation plans 411   —  25,281   —  —  25,281  
Tax withholdings related to net share settlements of equity awards ( 92 ) —  ( 28,125 ) —  —  ( 28,125 )
Common stock repurchased and retired ( 1,545 ) —   ( 20,292 ) —  ( 335,243 ) ( 355,535 )
Equity forward contract related to accelerated stock repurchase —  —  49,527   —  ( 49,527 ) —  
Stock-based compensation —  —  173,703   —  —  173,703  
Balance as of December 31, 2024
73,849   7   1,362,234   5,978   2,483,766   3,851,985  
Net income —  —  —  —  410,351   410,351  

Net change in foreign currency translation adjustment —  —  —  69,410   —  69,410  
Issuance of common stock relating to employee equity compensation plans 494   —  21,749   —  —  21,749  
Tax withholdings related to net share settlements of equity awards ( 104 ) —  ( 20,390 ) —  —  ( 20,390 )
Common stock repurchased and retired ( 2,875 ) —  ( 39,868 ) —  ( 429,960 ) ( 469,828 )

Stock-based compensation —  —  185,870   —  —  185,870  
Balance as of December 31, 2025
71,364   $ 7   $ 1,509,595   $ 75,388   $ 2,464,157   $ 4,049,147  

The accompanying notes are an integral part of these consolidated financial statements.
63

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
  Year Ended December 31,
  2025 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 410,351   $ 421,362   $ 445,053  
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes 33,085   25,756   ( 18,642 )
Depreciation and amortization 237,436   145,034   142,401  
Stock-based compensation
185,870   173,703   154,026  
Non-cash operating lease cost 39,742   38,438   33,107  

Impairment loss on Assets held for sale
23,142   —   —  
Impairment and fair value adjustments for equity investments
( 18,074 ) ( 5,885 ) 4,990  

Other non-cash operating activities 37,686   12,256   32,733  
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable ( 139,909 ) ( 153,487 ) ( 104,614 )
Inventories 808   25,053   30,169  
Prepaid expenses and other assets 13,431   67,527   ( 51,013 )
Accounts payable 5,330   ( 843 ) ( 7,703 )
Accrued and other long-term liabilities ( 95,654 ) 89,705   46,327  
Long-term income tax payable ( 28,265 ) ( 20,279 ) ( 7,772 )
Deferred revenues ( 111,756 ) ( 80,109 ) 86,714  
                   Net cash provided by operating activities 593,223   738,231   785,776  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired —   ( 77,075 ) —  
Purchase of property, plant and equipment ( 102,445 ) ( 115,580 ) ( 177,716 )
Purchase of marketable securities —   —   ( 2,910 )
Proceeds from maturities of marketable securities —   25,660   55,170  
Proceeds from sales of marketable securities —   18,193   6,234  

Purchase of equity investments ( 10,000 ) ( 106,345 ) ( 76,999 )
Other investing activities —   235   278  
                   Net cash used in investing activities ( 112,445 ) ( 254,912 ) ( 195,943 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 21,749   25,281   26,595  
Common stock repurchases, net of excise tax
( 465,939 ) ( 352,878 ) ( 592,360 )
Activity for equity forward contracts related to accelerated stock repurchase agreements, net —   —   ( 10,000 )
Payroll taxes paid upon the vesting of equity awards ( 20,390 ) ( 28,125 ) ( 22,575 )
                    Net cash used in financing activities ( 464,580 ) ( 355,722 ) ( 598,340 )
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 35,025   ( 21,153 ) 4,671  
            Net (decrease) increase in cash, cash equivalents, and restricted cash 51,223   106,444   ( 3,836 )
                    Cash, cash equivalents, and restricted cash at beginning of year 1,044,963   938,519   942,355  
                    Cash, cash equivalents, and restricted cash at end of year $ 1,096,186   $ 1,044,963   $ 938,519  

The accompanying notes are an integral part of these consolidated financial statements.
64

ALIGN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    
Note 1. Summary of Significant Accounting Policies

Business Description

Align Technology, Inc. (“we,” “us,” “our,” “Align” or the “Company”) is a global medical device company primarily engaged in the design, manufacture and marketing of Invisalign ® clear aligners for the treatment of malocclusions, or the misalignment of teeth, by orthodontists and general dental practitioners (“GPs”), Vivera TM retainers for retention, iTero TM intraoral scanners and services for dentistry, and exocad TM computer-aided design and computer-aided manufacturing (“CAD/CAM”) software for dental laboratories and dental practitioners. Our vision and strategy is to revolutionize orthodontic and restorative dentistry through digital treatment planning and implementation using the Align TM Digital Platform, an integrated suite of proprietary technologies and services designed to deliver a seamless, end-to-end solution for patients, consumers, orthodontists, GPs and lab partners. We strive to achieve our vision and strategy through key objectives made possible with the proprietary technologies and services of the Align TM Digital Platform to establish: clear aligners as the principal solution for the treatment of malocclusions with the Invisalign System as the treatment solution of choice by orthodontists, GPs and patients globally, our iTero intraoral scanners as the preferred scanning technology for digital dental scans and our exocad CAD/CAM software as the dental restorative solution of choice for dental labs. Our corporate headquarters is located in Tempe, Arizona and we have offices worldwide. Our Americas regional headquarters is located in Raleigh, North Carolina; our European, Middle East and Africa (“EMEA”) regional headquarters is located in Rotkreuz, Switzerland; and our Asia Pacific (“APAC”) regional headquarters is located in Singapore. We have two operating segments: (1) Clear Aligner and (2) Imaging Systems and CAD/CAM services (“Systems and Services”).

Basis of Presentation and Preparation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Align and our wholly-owned subsidiaries after elimination of intercompany transactions and balances.  

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our 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 and deferred revenues, useful lives of intangible assets and property, plant and equipment, 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.

Fair Value of Financial Instruments

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 U.S. 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 - Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly, 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. We are ultimately responsible for these underlying estimates.

65

Level 3 - Unobservable inputs to the valuation techniques that are supported by little or no market activity and 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.

Cash and Cash Equivalents

We consider cash on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the U.S. and internationally.

Restricted Cash

Restricted cash primarily consists of funds reserved for legal requirements. Restricted cash balances are primarily included in Other assets within our Consolidated Balance Sheets.

Marketable Securities

Marketable securities consist of marketable debt securities which are classified as available-for-sale and are carried at fair value. Our fixed-income securities investment portfolio allows for investments with a maximum effective maturity of up to 40 months on any individual security. Marketable securities classified as current assets have maturities within one year from the balance sheet date. Unrealized gains or losses on such securities are included in Accumulated other comprehensive income (loss), net (“AOCI”) in stockholders’ equity. Realized gains and losses from sales and maturities of marketable securities are reported in earnings and computed using the specific identification cost method. 

Marketable securities are subject to a periodic impairment review. We evaluate if an allowance for credit loss is necessary by considering available information relevant to the collectability of the security and information about credit rating changes, past events, current conditions, and reasonable and supportable forecasts. Any allowance for credit loss is recorded as a charge to Other income (expense), net, in our Consolidated Statements of Operations. If we have an intent to sell, or if it is more likely than not that we will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of Other income (expense), net in our Consolidated Statements of Operations.

As of December 31, 2025 and 2024, we had no marketable securities.

Variable Interest Entities

We evaluate whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine we are the primary beneficiary of a VIE, we would consolidate the assets, liabilities, income and expense of the VIE into our consolidated financial statements. In determining if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE ’ s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of activities that are significant to the VIE and an assessment of our ability to direct those activities. Our assessment of whether we are the primary beneficiary of a VIE requires management to exercise significant judgment and utilize assumptions. We have concluded that we are not the primary beneficiary of our VIE investments; therefore, we do not consolidate their results into our consolidated financial statements.

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 as investments in equity securities. We have elected to account for all investments in equity securities in accordance with the measurement alternative. Under the measurement alternative, we record the value of our investments at cost, minus impairment, if any. Additionally, we adjust the carrying value of our investments for observable transactions for identical or similar investments of the same issuer.

On April 24, 2023 and April 22, 2024, we entered into Subscription Agreements (the “Heartland Subscription Agreements”) with Heartland Dental Holding Corporation (“Heartland”). Pursuant to the Heartland Subscription Agreements we acquired less than a 5 % equity interest in total, through the purchase of Class A Common Stock for $ 150 million ($ 75  million in each April 2023 and April 2024).

66

On December 19, 2024 and June 5, 2025, we entered into Subscription Agreements (the “Smile Doctors Subscription Agreements”) with New SD Holding Company, L.P. (“SD Holding Company”). Pursuant to the Smile Doctors Subscription Agreements, we acquired less than a 3 % equity interest through the purchase of Class A Common Units for $ 40 million. SD Holding Company owns a controlling interest, through intermediary entities, in Smile Doctors, LLC.

We account for our investments in Heartland and SD Holding Company as investments in equity securities, utilizing the measurement alternative. Based on a review of the relevant facts and circumstances, primarily observable transactions for identical investments, we recorded a $ 18.0 million and 6.0 million increase to the carrying value of our Heartland investment in 2025 and 2024, respectively. This increased the total carrying value of our investment in Heartland to $ 174.0 million for the year ended December 31, 2025.

Our investments in privately held companies in which we can exercise significant influence are accounted for as equity method investments. We have elected to account for our equity method investments under the fair value option. For the years ended December 31, 2025 and 2024, we did not hold any material investments in which we exercised significant influence.

The carrying value of our investments in equity securities and equity method investments are reported in our Consolidated Balance Sheets as Other assets and any price adjustments or impairment, if any, are recorded in Other income (expense), net in our Consolidated Statements of Operations.

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 assets and liabilities. These forward contracts are classified within Level 2 of the fair value hierarchy. The gains and losses on these forward contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being economically hedged. We do not enter into foreign currency forward contracts for trading or speculative purposes. The net gain or loss from the settlement of these foreign currency forward contracts is recorded in Other income (expense), net in the Consolidated Statements of Operations. As of December 31, 2025 and 2024, the fair value of outstanding foreign exchange forward contracts was not material.

Foreign Currency

For our international subsidiaries, we analyze on an annual basis or more often, if necessary, if a significant change in facts and circumstances indicate that the functional currency of the subsidiary has changed. For international subsidiaries where the local currency is the functional currency, adjustments from translating financial statements from the local currency to the U.S. dollar reporting currency are recorded to change in foreign currency translation adjustment, net of tax in our Consolidated Statements of Comprehensive Income. This foreign currency translation adjustment reflects the translation of the balance sheet at period end exchange rates, and the income statement at the transaction date or average exchange rate in effect during the period. Foreign currency remeasurement gains and losses that are derived from monetary assets and liabilities stated in a currency other than the international subsidiaries functional currency are included in Other income (expense), net.  For the years ended December 31, 2025, 2024 and 2023, we had foreign currency transaction gains of $ 11.3 million and losses of $ 21.0 million and $ 7.0 million, respectively.

Certain Risks and Uncertainties

Our cash and investments are held primarily by five financial institutions. Financial instruments which potentially expose the Company to concentration of credit risk consist principally of cash and cash equivalents. These instruments have minimal credit risk exposures. Management regularly monitors their compositions and maturities. The Company maintains its cash and cash equivalents in bank accounts that exceed federally insured FDIC limits. Through December 31, 2025, the Company has not experienced any material credit losses on such deposits.

We invest excess cash primarily in money market funds and certificates of deposit and periodically evaluate them for credit losses. Such credit losses have not been material to our financial statements.

We purchase certain inventory from sole suppliers. Additionally, we rely on a limited number of hardware manufacturers. The inability of any supplier or manufacturer to fulfill our supply requirements could materially and adversely impact our future operating results.
67

Accounts Receivable, net

Trade accounts receivable are recorded at the invoiced amount. Accounts receivable, net includes allowances for doubtful accounts for any potentially uncollectible amounts. We periodically assess the adequacy of the allowance for doubtful accounts by reviewing the accounts receivable on a collective basis and giving consideration to various factors including the aging of the receivables and a customer’s expected ability to pay. For specific customer accounts receivable balances, we consider known disputes and collection history. In determining the amount of the allowance for doubtful accounts, we also evaluate the creditworthiness of customers, current market conditions and forecasts of future economic conditions to make any adjustments. Actual write-offs have not materially differed from the estimated allowances. No individual customer accounted for 10% or more of our accounts receivable, net balance at December 31, 2025 or 2024 nor net revenues for the years ended December 31, 2025, 2024 or 2023.

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 financial assets and include the cash proceeds as a part of our Cash flows from operations in the Consolidated Statements of Cash Flows. Total accounts receivable sold under factoring arrangements was $ 47.9 million and $ 52.1 million during the years ended December 31, 2025, and 2024, respectively. Factoring fees incurred on the sales of accounts receivable were recorded in Other income (expense), net in our Consolidated Statements of Operations and were not material.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost computed using standard cost which approximates actual cost on a first-in-first-out basis. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of Cost of net revenues.

Property, Plant and Equipment, net

Property, plant and equipment, net are stated at historical cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Construction in progress is related to the construction or development of property (including land) and equipment that are not ready for their intended use and have not yet been placed in service. Upon sale or retirement, the asset’s cost and related accumulated depreciation are removed from the balance sheet and any related gains or losses are reflected in Income from operations. Maintenance and repairs are expensed as incurred. Refer to Note 3 “Balance Sheet Components" of the Notes of Consolidated Financial Statements for details on estimated useful lives .

Leases - Lessee

We determine if an arrangement is or contains a lease at inception. Leases with a term of 12 months or less are not recorded on the balance sheet. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. A ROU asset and lease liability is recognized on the lease commencement date. The lease liability is determined based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments as the rate implicit in our leases is not readily determinable. The ROU asset consists of the initial lease liability adjusted for lease incentives received and any initial direct costs incurred. The lease term represents the noncancellable period of the lease and may include options to extend the lease when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components which are accounted for as a single lease component. Payments under our lease arrangements are primarily fixed; however, certain lease agreements contain variable payments which are expensed as incurred and not included in the lease liability balance. The short-term portion of our lease liabilities is recorded in Accrued liabilities on our Consolidated Balance Sheets.

Leases - Lessor

We determine if an arrangement is or contains a lease at inception. All of our leases in which we are the lessor are classified as operating leases, exclusive of leases with a term of 12 months or less. The underlying asset in an operating lease arrangement is carried at depreciated cost within Property, plant, and equipment, net on our Consolidated Balance Sheets.

68

Business Combinations

We allocate the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. When determining the fair value of assets acquired and liabilities assumed, management is required to make certain estimates and assumptions, particularly with respect to determining the fair value of intangible assets. The estimates and assumptions used in fair valuing intangible assets include, but are not limited to, the amount and timing of projected future cash flows which are dependent on forecasted revenues and expenses, a discount rate, and the assets’ life cycle, among others. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of tangible and identifiable intangible net assets acquired in a business combination and is allocated to the respective reporting units based on relative synergies generated.

Finite-Lived Intangible Assets

Our intangible assets primarily consist of intangible assets acquired as part of a business combination. These assets are amortized using the straight-line method over their estimated useful lives. The average amortization period by intangible asset class ranges from seven to twelve years . This amortization period reflects the period in which the economic benefits of the assets are expected to be realized.

Impairment of Goodwill and Long-Lived Assets and Finite-Lived Intangible Assets

Goodwill

We evaluate goodwill for impairment at least annually on November 30th or more frequently if indicators of impairment are identified between annual testing dates. 

We perform an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit has been reduced below its carrying amount. In performing this qualitative assessment, we identify and consider the significance of relevant key factors, events, and circumstances that affect the fair value of our reporting units. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give consideration to the difference between the reporting unit fair value and carrying value as of the most recent date a fair value measurement was performed. If, after assessing the totality of relevant events and circumstances, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further testing is performed; however, if we conclude otherwise, then we will perform a quantitative impairment test which compares the estimated fair value of the reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recorded in our Consolidated Statements of Operations for the amount of the excess. Management is required to exercise significant judgment when identifying the relevant assumptions and estimates used in determining the fair value and carrying value of our reporting units.

Long-Lived Assets and Finite-Lived Intangible Assets

We evaluate long-lived assets (including ROU assets) and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. Factors we consider important which could trigger a quantitative impairment test include, but are not limited to, significant negative industry or economic trends, significant adverse changes in our competitive environment and a significant loss of customers. If an impairment indicator is identified, we perform a quantitative impairment analysis in which we compare the carrying value of an asset (asset group) to the future undiscounted cash flows the asset (asset group) is expected to generate. An asset (asset group) is considered impaired if its carrying amount exceeds the undiscounted cash flows. If an asset (asset group) is deemed to be impaired, the impairment to be recognized is calculated as the amount by which the carrying amount of the asset (asset group) exceeds its fair value. Our estimates of future cash flows attributable to our assets (asset groups) require significant judgment based on our historical and anticipated results and are subject to many assumptions.

In the third quarter of 2025, we committed to a plan to dispose of, other than by sale, specifically identified manufacturing assets prior to the end of their estimated useful lives. We have materially completed the disposition of these assets as of
69

December 31, 2025. Accordingly, we have revised the estimated useful lives of these assets to reflect our use through the disposal date. In the year ended December 31, 2025, we recorded $ 76.9 million of accelerated depreciation expense related to these assets. The increase in depreciation expense negatively impacted Net income, net of tax, by $ 53.9 million or $ 0.74 per basic and diluted share.

Development Costs for Internal Use Software

Internally developed software includes enterprise-level business software that we customize to meet our specific operational needs. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with the development of the applications. For the years ended December 31, 2025 and 2024, capitalized internally developed software costs were $ 38.5 million and $ 23.1 million, respectively.

Development Costs for Software to be Marketed

The costs to develop software that is marketed externally have not been capitalized as we believe our current software development process is essentially completed concurrent with the establishment of technological feasibility. As such, all related software development costs are expensed as incurred and included in Research and development expense in our Consolidated Statements of Operations.
 
Product Warranty

We offer assurance warranties on our products which provide the customer assurance that the product will function as intended because it complies with agreed-upon specifications; therefore, our warranties are not treated as a separate revenue performance obligation in accordance with the revenue standard but rather are accounted for as guarantees.

Clear Aligner

We warrant our Invisalign products against material defects until the treatment plan is complete except in the case of retainers, which are warranted up to three months from expected first use. We accrue for warranty costs, which are primarily based on historical product failure rates as well as current information on replacement cost.

Systems and Services

We warrant our intraoral scanners for a period of one year , which includes materials and labor. We accrue for these warranty costs based on average historical repair costs. An extended warranty may be purchased for an additional fee. Sales of extended warranties are accounted for as a separate performance obligation and recorded as revenue.

We warrant our CAD/CAM software for a one year period to perform in accordance with agreed product specifications. As we have not historically incurred any material warranty costs, we do not accrue for these software warranties.
     
Warranty costs are recorded in cost of net revenues upon shipment of products. We regularly review our warranty liability and update these balances based on historical warranty cost trends. Actual warranty costs incurred have not materially differed from those accrued; however future actual warranty costs could differ from the estimated amounts.

Revenue Recognition

Our revenues are derived primarily from the sale of aligners, scanners, and services from our Clear Aligner and Systems and Services reportable segments. We identify separate performance obligations, determine the transaction price, allocate the transaction price and record revenue in accordance with ASC 606 “ Revenues from Contracts with Customers. ”

We identify a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) in order to allocate the transaction price to the individual performance obligations is the result of various factors, such as historical prices, changing trends and market conditions, costs, and gross margins. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is
70

allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.

Clear Aligner

We enter into contracts (“treatment plan(s)”) that involve multiple future performance obligations. Invisalign Comprehensive, Invisalign First Phase 1, Invisalign First Comprehensive Phase 2, Invisalign Adult, Invisalign Standard, Invisalign Moderate, Invisalign Go, Invisalign Go Plus, and Lite and Express Packages include optional additional aligners at no charge for a certain period of time ranging from six months to five years after initial shipment.

Our treatment plans comprise the following performance obligations that also represent distinct deliverables: initial aligners and the option of additional aligners. We allocate the transaction price for each treatment plan based on each unit’s standalone selling price. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, we take into consideration changing trends and market conditions. For treatment plans with multiple future options, we also consider usage rates, which is the number of times a customer is expected to order additional aligners. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We recognize revenue upon shipment, as the customers obtain physical possession and we have enforceable rights to payment. We have made an accounting policy election to account for shipping and handling costs as activities to fulfill the performance obligation. Where processing fees are charged, the consideration received from the fees are included in the transaction price.

As we collect most consideration upfront, we consider whether a significant financing component exists; however, as the delivery of the performance obligations are at the customer’s discretion, we conclude that no significant financing component exists.

Systems and Services

We sell intraoral scanners and CAD/CAM services through both our direct sales force and distribution partners. The intraoral scanner sales price includes one year of warranty and unlimited scanning services. The customer may also select, for additional fees, an extended warranty and unlimited scanning services for periods beyond the initial year. When intraoral scanners are sold with an unlimited scanning service agreement and/or extended warranty, we allocate revenues based on the respective SSP of the scanner and the subscription services. We estimate the SSP of each element, taking into account factors such as same or similar historical prices and discounting strategies. Revenues are then recognized over time as the monthly services are rendered and upon shipment of the scanner, as that is when we deem the customer to have obtained control. We also have a rental program, where scanners are leased to customers. The contracts for the program are treated as operating leases, and the revenue is recognized ratably over the lease term.

CAD/CAM services, where sold separately, include the initial software license and maintenance and support. We allocate revenues based upon the respective SSPs of the software license and the maintenance and support. We estimate the SSP of each element using data such as historical prices. Revenues related to the software license are recognized upfront and revenues related to the maintenance and support are recognized over time. For both scanner and service sales, most consideration is collected upfront and in cases where there are payment plans, consideration is collected within one year and, therefore, there are no significant financing components.

Volume Discounts

In certain situations, we offer promotions in which the discount will increase depending upon the volume purchased over time. We concluded that in these situations, the promotions can represent either variable consideration or options, depending upon the specifics of the promotion. In the event the promotion contains an option, the option is considered a material right and, therefore, included in the accounting for the initial arrangement. We estimate the average anticipated discount over the lifetime of the promotion or contract, and apply that discount to each unit as it is sold. On a quarterly basis, we review our estimates and, if needed, updates are made and changes are applied prospectively.

Accrued Sales Return Reserve

We provide a reserve for sales returns based on historical sales returns as a percentage of revenues. 

Costs to Obtain a Contract

71

We offer a variety of commission plans to our sales force; each plan has multiple components. To match the costs to obtain a contract to the associated revenues, we evaluate the individual components and capitalize the eligible components, recognizing the costs over the treatment period. The capitalized costs to obtain contracts were $ 29.2 million and $ 25.8 million as of December 31, 2025 and 2024, respectively, and are included in Other assets in our Consolidated Balance Sheets. We recognized amortization on our costs to obtain a contract of $ 15.6 million, $ 18.7 million, and $ 12.5 million during the years ended December 31, 2025, 2024, and 2023, respectively, which is included in Selling, general and administrative expenses in our Consolidated Statements of Operations.

Unfulfilled Performance Obligations for Clear Aligners and Scanners

Our unfulfilled performance obligations, including deferred revenues and backlog, and the estimated revenues expected to be recognized in the future related to these performance obligations are $ 1,352.7 million and $ 1,444.9  million as of December 31, 2025 and 2024, respectively. This includes performance obligations from the Clear Aligner reportable segment, primarily the shipment of additional aligners, which are fulfilled over six months to five years . This also includes performance obligations from our Systems and Services reportable segment, primarily services and support, which are fulfilled over one to five years , and contracted deliveries of additional scanners. The estimate includes both product and service unfulfilled performance obligations and the time range reflects our best estimate of when we will transfer control to the customer and may change based on customer usage patterns, timing of shipments, readiness of customers' facilities for installation, and manufacturing availability.

Contract Balances

The timing of revenue recognition results in deferred revenues being recognized on our Consolidated Balance Sheet. For both aligners and scanners, we usually collect the total consideration owed prior to all performance obligations being satisfied with payment terms generally varying from net 30 to net 180 days. Contract liabilities are recorded as deferred revenue, which is generated based upon the timing of invoices and recognition patterns, not payments. If revenue recognition exceeds the billing, the excess amount is considered an unbilled receivable or a contract asset. Conversely, if the billing occurs prior to the revenue recognition, the amount is considered deferred revenue and a contract liability.

Shipping and Handling Costs

Shipping and handling charges to customers as well as processing fees are included in net revenues, and the associated costs incurred are recorded in cost of net revenues.

Legal Proceedings

We are involved in legal proceedings on an ongoing basis. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated loss in our consolidated financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

Research and Development

Research and development costs are expensed as incurred and include costs associated with the research and development of new products and enhancements to existing products. These costs primarily include employee related costs, including payroll, benefits and stock-based compensation, equipment, material and maintenance costs, outside consulting expenses, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT.

Advertising Costs

The cost of advertising and media is expensed as incurred. For the years ended December 31, 2025, 2024 and 2023, we incurred advertising costs of $ 188.7 million, $ 185.0 million and $ 201.2 million, respectively.

Stock-Based Compensation

We recognize stock-based compensation cost for shares expected to vest on a straight-line basis over the requisite service period of the award, net of estimated forfeitures. We use the Black-Scholes option pricing model to determine the fair value of employee stock purchase plan shares. We use a Monte Carlo simulation model to estimate the fair value of awards with a market based condition which requires the input of assumptions, including expected term, stock price volatility and the risk-free
72

rate of return. For restricted stock units that include a performance condition, we use the stock price on the grant date to estimate the fair value and stock-based compensation cost is recorded based on expected attainment of performance targets. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Income Taxes

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenues and expenses for tax and financial statement purposes.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the applicable tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included in our Consolidated Balance Sheets.

We account for uncertainty in income taxes pursuant to authoritative guidance based on a two-step approach to recognize and measure uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit based on its technical merits, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit or refinement of estimates due to new information. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will impact our tax provision in our Consolidated Statements of Operations in the period in which such determination is made.

We assess the likelihood that we will be able to realize our deferred tax assets, including those related to our Switzerland deferred tax assets, which have a finite utilization period. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is more likely than not that we will not realize our deferred tax assets, we will record a valuation allowance against the deferred tax assets that we estimate will not ultimately be realizable. The determination of whether a valuation allowance is required involves significant judgment and reflects our evaluation of changes in our operational performance, taxable income forecasts, and other relevant factors,

Common Stock Repurchase

We repurchase our own common stock from time to time under stock repurchase programs approved by our Board of Directors. We account for these repurchases under the accounting guidance for equity where we allocate the total repurchase value that is in excess of par value between additional paid-in capital and retained earnings. All shares repurchased are retired.

Recent Accounting Pronouncements

(i) New Accounting Updates Recently Adopted

On December 14, 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures. ” The amendments in this ASU require a public entity to disclose in tabular format, using both percentages and reporting currency amounts, specific categories in the rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. The amendments in this ASU also require taxes paid (net of refunds received) to be disaggregated by federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. For public business entities, the provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. We adopted this standard on a prospective basis for our annual report on Form 10-K effective for the year ended December 31, 2025. ASU 2023-09 impacts our accounting for income tax financial statement disclosures, but did not impact our Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 (“ASU 2023-07”), “Improvements to Reportable Segment Disclosures. ” The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and other segment expenses. For public business entities, the provisions of ASU 2023-07 were effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We adopted this standard for the fiscal year ended December 31, 2024 and for interim periods within the fiscal year ended December 31, 2025 . See Note 14 “ Segments and Geographical Information.”
73

(ii) Recent Accounting Pronouncements Not Yet Effective

On September 18, 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software.” The amendments in this ASU simplify the accounting for internal-use software by eliminating the existing project development stages and introducing new guidance for evaluating the probable-to-complete threshold for capitalization. The amendments in this ASU also require the application of ASC 360-10 disclosure requirements for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. The provisions of ASU 2025-06 are effective for all entities for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect of this pronouncement on its annual consolidated financial statements.

On November 4, 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures. ” The amendments in this ASU require a public entity to disclose, in the notes to the financial statements, specified information about certain costs and expenses, including the amounts of inventory purchases, employee compensation, depreciation and intangible asset amortization. For public business entities, the provisions of ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. There will be no impact to our consolidated balance sheets or statements of operations; however, the Company is evaluating the effect of this pronouncement on our consolidated financial statement disclosures.

Note 2. Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The following tables summarize our cash and cash equivalents, and marketable securities balances recorded in our Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):

Reported as:
December 31, 2025 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Cash and cash equivalents
Cash $ 770,051   $ —   $ —   $ 770,051   $ 770,051  
Money market funds 308,940   —   —   308,940   308,940