|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
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94-3267295
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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Large accelerated filer
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x
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Accelerated filer
|
¨
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Non-accelerated filer
|
o
(Do not check if a smaller reporting company)
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Smaller reporting company
|
¨
|
|
|
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PART I
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||
ITEM 1.
|
||
|
||
|
||
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||
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||
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||
ITEM 2.
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||
ITEM 3.
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||
ITEM 4.
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||
PART II
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||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
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||
ITEM 3.
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||
ITEM 4.
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||
ITEM 5.
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||
ITEM 6.
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||
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Three Months Ended
|
|
Nine Months Ended
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||||||||||||
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September 30,
|
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September 30,
|
||||||||||||
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2016
|
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2015
|
|
2016
|
|
2015
|
||||||||
Net revenues
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$
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278,589
|
|
|
$
|
207,636
|
|
|
$
|
786,671
|
|
|
$
|
615,210
|
|
Cost of net revenues
|
69,387
|
|
|
50,060
|
|
|
191,626
|
|
|
147,910
|
|
||||
Gross profit
|
209,202
|
|
|
157,576
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|
|
595,045
|
|
|
467,300
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|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
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126,708
|
|
|
101,751
|
|
|
360,385
|
|
|
290,657
|
|
||||
Research and development
|
20,415
|
|
|
17,779
|
|
|
54,111
|
|
|
47,348
|
|
||||
Total operating expenses
|
147,123
|
|
|
119,530
|
|
|
414,496
|
|
|
338,005
|
|
||||
Income from operations
|
62,079
|
|
|
38,046
|
|
|
180,549
|
|
|
129,295
|
|
||||
Interest and other income (expenses), net
|
1,463
|
|
|
(1,568
|
)
|
|
1,161
|
|
|
(2,846
|
)
|
||||
Net income before provision for income taxes and equity in losses of investee
|
63,542
|
|
|
36,478
|
|
|
181,710
|
|
|
126,449
|
|
||||
Provision for income taxes
|
11,698
|
|
|
8,862
|
|
|
39,172
|
|
|
31,306
|
|
||||
Equity in losses of investee, net of tax
|
477
|
|
|
—
|
|
|
477
|
|
|
—
|
|
||||
Net income
|
$
|
51,367
|
|
|
$
|
27,616
|
|
|
$
|
142,061
|
|
|
$
|
95,143
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
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$
|
0.64
|
|
|
$
|
0.35
|
|
|
$
|
1.78
|
|
|
$
|
1.19
|
|
Diluted
|
$
|
0.63
|
|
|
$
|
0.34
|
|
|
$
|
1.74
|
|
|
$
|
1.17
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
79,977
|
|
|
79,808
|
|
|
79,920
|
|
|
80,173
|
|
||||
Diluted
|
81,466
|
|
|
81,092
|
|
|
81,523
|
|
|
81,576
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
$
|
51,367
|
|
|
$
|
27,616
|
|
|
$
|
142,061
|
|
|
$
|
95,143
|
|
Net change in currency translation adjustment
|
(76
|
)
|
|
114
|
|
|
(143
|
)
|
|
(95
|
)
|
||||
Change in unrealized gains (losses) on available-for-sale securities, net of tax
|
(437
|
)
|
|
98
|
|
|
1,038
|
|
|
260
|
|
||||
Other comprehensive income (loss)
|
(513
|
)
|
|
212
|
|
|
895
|
|
|
165
|
|
||||
Comprehensive income
|
$
|
50,854
|
|
|
$
|
27,828
|
|
|
$
|
142,956
|
|
|
$
|
95,308
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
419,948
|
|
|
$
|
167,714
|
|
Marketable securities, short-term
|
193,018
|
|
|
359,581
|
|
||
Accounts receivable, net of allowances for doubtful accounts and returns of $3,925 and $2,472, respectively
|
244,992
|
|
|
158,550
|
|
||
Inventories
|
26,341
|
|
|
19,465
|
|
||
Prepaid expenses and other current assets
|
27,469
|
|
|
26,700
|
|
||
Total current assets
|
911,768
|
|
|
732,010
|
|
||
Marketable securities, long-term
|
62,820
|
|
|
151,370
|
|
||
Property, plant and equipment, net
|
172,658
|
|
|
136,473
|
|
||
Equity method investments
|
46,268
|
|
|
—
|
|
||
Goodwill and intangible assets, net
|
82,987
|
|
|
79,162
|
|
||
Deferred tax assets
|
68,918
|
|
|
51,416
|
|
||
Other assets
|
13,474
|
|
|
8,202
|
|
||
Total assets
|
$
|
1,358,893
|
|
|
$
|
1,158,633
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
33,104
|
|
|
$
|
34,354
|
|
Accrued liabilities
|
132,538
|
|
|
107,765
|
|
||
Deferred revenues
|
177,409
|
|
|
129,553
|
|
||
Total current liabilities
|
343,051
|
|
|
271,672
|
|
||
Income tax payable
|
42,539
|
|
|
37,512
|
|
||
Other long-term liabilities
|
993
|
|
|
1,523
|
|
||
Total liabilities
|
386,583
|
|
|
310,707
|
|
||
Commitments and contingencies (Note 7 and 8)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value (200,000 shares authorized; 79,867 and 79,500 issued and outstanding, respectively)
|
8
|
|
|
8
|
|
||
Additional paid-in capital
|
854,422
|
|
|
821,507
|
|
||
Accumulated other comprehensive income (loss), net
|
(85
|
)
|
|
(980
|
)
|
||
Retained earnings
|
117,965
|
|
|
27,391
|
|
||
Total stockholders’ equity
|
972,310
|
|
|
847,926
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,358,893
|
|
|
$
|
1,158,633
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
142,061
|
|
|
$
|
95,143
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Deferred taxes
|
(17,476
|
)
|
|
(4,646
|
)
|
||
Depreciation and amortization
|
16,786
|
|
|
13,141
|
|
||
Stock-based compensation
|
39,934
|
|
|
39,135
|
|
||
Net tax benefits from stock-based awards
|
13,057
|
|
|
8,663
|
|
||
Excess tax benefit from share-based payment arrangements
|
(13,943
|
)
|
|
(8,663
|
)
|
||
Equity in losses of investee, net of tax
|
477
|
|
|
—
|
|
||
Other non-cash operating activities
|
9,525
|
|
|
9,252
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(93,122
|
)
|
|
(27,123
|
)
|
||
Inventories
|
(6,873
|
)
|
|
(3,033
|
)
|
||
Prepaid expenses and other assets
|
(5,069
|
)
|
|
(2,529
|
)
|
||
Accounts payable
|
(4,134
|
)
|
|
4,408
|
|
||
Accrued and other long-term liabilities
|
38,969
|
|
|
6,712
|
|
||
Deferred revenues
|
46,482
|
|
|
28,182
|
|
||
Net cash provided by operating activities
|
166,674
|
|
|
158,642
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchase of property, plant and equipment
|
(56,368
|
)
|
|
(36,663
|
)
|
||
Purchase of marketable securities
|
(283,797
|
)
|
|
(306,938
|
)
|
||
Proceeds from maturities of marketable securities
|
328,498
|
|
|
238,412
|
|
||
Purchase of equity method investments
|
(46,745
|
)
|
|
—
|
|
||
Proceeds from sales of marketable securities
|
209,302
|
|
|
12,518
|
|
||
Other investing activities
|
(8,031
|
)
|
|
46
|
|
||
Net cash provided by (used in) investing activities
|
142,859
|
|
|
(92,625
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from issuance of common stock
|
12,877
|
|
|
10,559
|
|
||
Common stock repurchases
|
(58,174
|
)
|
|
(90,603
|
)
|
||
Excess tax benefit from share-based payment arrangements
|
13,943
|
|
|
8,663
|
|
||
Employees’ taxes paid upon the vesting of restricted stock units
|
(26,265
|
)
|
|
(17,574
|
)
|
||
Net cash used in financing activities
|
(57,619
|
)
|
|
(88,955
|
)
|
||
Effect of foreign exchange rate changes on cash and cash equivalents
|
320
|
|
|
(2,893
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
252,234
|
|
|
(25,831
|
)
|
||
Cash and cash equivalents, beginning of the period
|
167,714
|
|
|
199,871
|
|
||
Cash and cash equivalents, end of the period
|
$
|
419,948
|
|
|
$
|
174,040
|
|
September 30, 2016
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
$
|
19,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,029
|
|
Corporate bonds
|
81,955
|
|
|
18
|
|
|
(29
|
)
|
|
81,944
|
|
||||
Municipal securities
|
9,205
|
|
|
—
|
|
|
(4
|
)
|
|
9,201
|
|
||||
U.S. government agency bonds
|
30,587
|
|
|
24
|
|
|
—
|
|
|
30,611
|
|
||||
U.S. government treasury bonds
|
47,702
|
|
|
31
|
|
|
—
|
|
|
47,733
|
|
||||
Certificates of deposits
|
4,500
|
|
|
—
|
|
|
—
|
|
|
4,500
|
|
||||
Total Marketable Securities, Short-Term
|
$
|
192,978
|
|
|
$
|
73
|
|
|
$
|
(33
|
)
|
|
$
|
193,018
|
|
September 30, 2016
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
|||||||
U.S. government agency bonds
|
$
|
9,249
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
9,260
|
|
Corporate bonds
|
43,101
|
|
|
118
|
|
|
(7
|
)
|
|
43,212
|
|
||||
U.S. government treasury bonds
|
10,027
|
|
|
21
|
|
|
—
|
|
|
10,048
|
|
||||
Asset-backed securities
|
300
|
|
|
—
|
|
|
—
|
|
|
300
|
|
||||
Total Marketable Securities, Long-Term
|
$
|
62,677
|
|
|
$
|
150
|
|
|
$
|
(7
|
)
|
|
$
|
62,820
|
|
December 31, 2015
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
$
|
38,537
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,537
|
|
Corporate bonds
|
179,765
|
|
|
6
|
|
|
(251
|
)
|
|
179,520
|
|
||||
U.S. dollar denominated foreign corporate bonds
|
510
|
|
|
—
|
|
|
(2
|
)
|
|
508
|
|
||||
Municipal securities
|
14,209
|
|
|
7
|
|
|
(2
|
)
|
|
14,214
|
|
||||
U.S. government agency bonds
|
75,172
|
|
|
—
|
|
|
(53
|
)
|
|
75,119
|
|
||||
U.S. government treasury bonds
|
51,763
|
|
|
1
|
|
|
(81
|
)
|
|
51,683
|
|
||||
Total Marketable Securities, Short-Term
|
$
|
359,956
|
|
|
$
|
14
|
|
|
$
|
(389
|
)
|
|
$
|
359,581
|
|
December 31, 2015
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
U.S. government agency bonds
|
$
|
43,853
|
|
|
$
|
—
|
|
|
$
|
(178
|
)
|
|
$
|
43,675
|
|
Corporate bonds
|
64,012
|
|
|
9
|
|
|
(218
|
)
|
|
63,803
|
|
||||
U.S. government treasury bonds
|
37,673
|
|
|
—
|
|
|
(107
|
)
|
|
37,566
|
|
||||
Municipal securities
|
3,993
|
|
|
—
|
|
|
(2
|
)
|
|
3,991
|
|
||||
Asset-backed securities
|
2,338
|
|
|
—
|
|
|
(3
|
)
|
|
2,335
|
|
||||
Total Marketable Securities, Long-Term
|
$
|
151,869
|
|
|
$
|
9
|
|
|
$
|
(508
|
)
|
|
$
|
151,370
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Due in one year or less
|
$
|
193,018
|
|
|
$
|
359,581
|
|
Due in greater than one year
|
62,820
|
|
|
151,370
|
|
||
Total available for sale short-term and long-term marketable securities
|
$
|
255,838
|
|
|
$
|
510,951
|
|
Description
|
Balance as of
September 30, 2016
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Other
Observable Inputs (Level 3) |
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
92,931
|
|
|
$
|
92,931
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
19,029
|
|
|
—
|
|
|
19,029
|
|
|
—
|
|
||||
Corporate bonds
|
81,944
|
|
|
—
|
|
|
81,944
|
|
|
—
|
|
||||
Municipal securities
|
9,201
|
|
|
—
|
|
|
9,201
|
|
|
—
|
|
||||
U.S. government agency bonds
|
30,611
|
|
|
—
|
|
|
30,611
|
|
|
—
|
|
||||
U.S. government treasury bonds
|
47,733
|
|
|
47,733
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposits
|
4,500
|
|
|
—
|
|
|
4,500
|
|
|
—
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. government agency bonds
|
9,260
|
|
|
—
|
|
|
9,260
|
|
|
—
|
|
||||
Corporate bonds
|
43,212
|
|
|
—
|
|
|
43,212
|
|
|
—
|
|
||||
U.S. government treasury bonds
|
10,048
|
|
|
10,048
|
|
|
—
|
|
|
—
|
|
||||
Asset-backed securities
|
300
|
|
|
—
|
|
|
300
|
|
|
—
|
|
||||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
||||||||
Israeli funds
|
2,527
|
|
|
—
|
|
|
2,527
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Long-term notes receivable
|
2,000
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
||||
|
$
|
353,296
|
|
|
$
|
150,712
|
|
|
$
|
200,584
|
|
|
$
|
2,000
|
|
Description
|
Balance as of
December 31, 2015
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
70,148
|
|
|
$
|
70,148
|
|
|
$
|
—
|
|
Commercial paper
|
36,887
|
|
|
—
|
|
|
36,887
|
|
|||
U.S. government agency bonds
|
3,599
|
|
|
—
|
|
|
3,599
|
|
|||
Corporate bonds
|
625
|
|
|
—
|
|
|
625
|
|
|||
Short-term investments:
|
|
|
|
|
|
||||||
Commercial paper
|
38,537
|
|
|
—
|
|
|
38,537
|
|
|||
Corporate bonds
|
179,520
|
|
|
—
|
|
|
179,520
|
|
|||
U.S. dollar denominated foreign corporate bonds
|
508
|
|
|
—
|
|
|
508
|
|
|||
Municipal securities
|
14,214
|
|
|
—
|
|
|
14,214
|
|
|||
U.S. government agency bonds
|
75,119
|
|
|
—
|
|
|
75,119
|
|
|||
U.S. government treasury bonds
|
51,683
|
|
|
51,683
|
|
|
—
|
|
|||
Long-term investments:
|
|
|
|
|
|
||||||
U.S. government agency bonds
|
43,675
|
|
|
—
|
|
|
43,675
|
|
|||
Corporate bonds
|
63,803
|
|
|
—
|
|
|
63,803
|
|
|||
U.S. government treasury bonds
|
37,566
|
|
|
37,566
|
|
|
—
|
|
|||
Municipal securities
|
3,991
|
|
|
—
|
|
|
3,991
|
|
|||
Asset-backed securities
|
2,335
|
|
|
—
|
|
|
2,335
|
|
|||
Prepaid expenses and other current assets:
|
|
|
|
|
|
||||||
Israeli funds
|
2,436
|
|
|
—
|
|
|
2,436
|
|
|||
|
$
|
624,646
|
|
|
$
|
159,397
|
|
|
$
|
465,249
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Raw materials
|
$
|
12,018
|
|
|
$
|
9,950
|
|
Work in process
|
1,488
|
|
|
7,067
|
|
||
Finished goods
|
12,835
|
|
|
2,448
|
|
||
Total Inventories
|
$
|
26,341
|
|
|
$
|
19,465
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Accrued payroll and benefits
|
$
|
65,848
|
|
|
$
|
55,430
|
|
Accrued sales and marketing expenses
|
14,303
|
|
|
7,071
|
|
||
Accrued sales rebates
|
9,258
|
|
|
8,486
|
|
||
Accrued sales tax and value added tax
|
6,087
|
|
|
4,801
|
|
||
Accrued income taxes
|
5,043
|
|
|
2,646
|
|
||
Accrued professional fees
|
4,947
|
|
|
2,775
|
|
||
Accrued warranty
|
3,397
|
|
|
2,638
|
|
||
Other accrued liabilities
|
23,655
|
|
|
23,918
|
|
||
Total Accrued Liabilities
|
$
|
132,538
|
|
|
$
|
107,765
|
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Balance at beginning of period
|
$
|
2,638
|
|
|
$
|
3,148
|
|
Charged to cost of net revenues
|
3,440
|
|
|
1,308
|
|
||
Actual warranty expenditures
|
(2,681
|
)
|
|
(1,745
|
)
|
||
Balance at end of period
|
$
|
3,397
|
|
|
$
|
2,711
|
|
|
Clear Aligner
|
||
Balance as of December 31, 2015
|
$
|
61,074
|
|
Adjustments
1
|
121
|
|
|
Balance as of September 30, 2016
|
$
|
61,195
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying Amount as of
September 30, 2016
|
|
Accumulated
Amortization
|
|
Accumulated
Impairment Loss
|
|
Net Carrying
Value as of September 30, 2016 |
||||||||
Trademarks
|
14
|
|
$
|
7,100
|
|
|
$
|
(1,597
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
1,324
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(4,000
|
)
|
|
(4,328
|
)
|
|
4,272
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(12,353
|
)
|
|
(10,751
|
)
|
|
10,396
|
|
||||
Patents
|
8
|
|
6,316
|
|
|
(516
|
)
|
|
—
|
|
|
5,800
|
|
||||
Total Intangible Assets
|
|
|
$
|
59,516
|
|
|
$
|
(18,466
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
21,792
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying
Amount as of
December 31, 2015
|
|
Accumulated
Amortization
|
|
Accumulated Impairment Loss
|
|
Net Carrying
Value as of
December 31, 2015
|
||||||||
Trademarks
|
15
|
|
$
|
7,100
|
|
|
$
|
(1,492
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
1,429
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(3,577
|
)
|
|
(4,328
|
)
|
|
4,695
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(10,957
|
)
|
|
(10,751
|
)
|
|
11,792
|
|
||||
Patents
|
8
|
|
285
|
|
|
(113
|
)
|
|
—
|
|
|
172
|
|
||||
Total Intangible Assets
|
|
|
$
|
53,485
|
|
|
$
|
(16,139
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
18,088
|
|
|
|
||
Remainder of 2016
|
$
|
840
|
|
2017
|
3,353
|
|
|
2018
|
3,353
|
|
|
2019
|
3,346
|
|
|
2020
|
3,336
|
|
|
Thereafter
|
7,564
|
|
|
Total
|
$
|
21,792
|
|
Fiscal Year Ending December 31,
|
|
Operating leases
|
||
Remainder of 2016
|
|
$
|
3,354
|
|
2017
|
|
10,258
|
|
|
2018
|
|
6,441
|
|
|
2019
|
|
4,161
|
|
|
2020
|
|
3,671
|
|
|
Thereafter
|
|
4,732
|
|
|
Total minimum future lease payments
|
|
$
|
32,617
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of net revenues
|
$
|
995
|
|
|
$
|
984
|
|
|
$
|
2,888
|
|
|
$
|
2,929
|
|
Selling, general and administrative
|
10,797
|
|
|
11,564
|
|
|
31,474
|
|
|
30,106
|
|
||||
Research and development
|
1,919
|
|
|
2,113
|
|
|
5,572
|
|
|
6,100
|
|
||||
Total stock-based compensation
|
$
|
13,711
|
|
|
$
|
14,661
|
|
|
$
|
39,934
|
|
|
$
|
39,135
|
|
|
Stock Options
Number of Shares
Underlying
Stock Options
|
|
Weighted
Average
Exercise
Price per Share
|
|
Weighted Average
Remaining
Contractual Term (In Years)
|
|
Aggregate
Intrinsic
Value
|
|||||
|
|
|
|
|
|
|
|
|||||
Outstanding as of December 31, 2015
|
496
|
|
|
$
|
15.14
|
|
|
|
|
|
||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(224
|
)
|
|
14.69
|
|
|
|
|
|
|||
Cancelled or expired
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding as of September 30, 2016
|
272
|
|
|
$
|
15.52
|
|
|
1.25
|
|
$
|
21,248
|
|
Vested and expected to vest at September 30, 2016
|
272
|
|
|
$
|
15.52
|
|
|
1.25
|
|
$
|
21,248
|
|
Exercisable at September 30, 2016
|
272
|
|
|
$
|
15.52
|
|
|
1.25
|
|
$
|
21,248
|
|
|
Number of Shares
Underlying RSU
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted
Remaining
Contractual
Period
|
|
Aggregate
Intrinsic
Value
|
|||||
|
|
|
|
|
(in years)
|
|
|
|||||
Nonvested as of December 31, 2015
|
2,079
|
|
|
$
|
49.45
|
|
|
|
|
|
||
Granted
|
683
|
|
|
66.64
|
|
|
|
|
|
|||
Vested and released
|
(774
|
)
|
|
44.89
|
|
|
|
|
|
|||
Forfeited
|
(120
|
)
|
|
52.86
|
|
|
|
|
|
|||
Nonvested as of September 30, 2016
|
1,868
|
|
|
$
|
57.42
|
|
|
1.29
|
|
$
|
175,091
|
|
|
Number of Shares
Underlying MSU
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average
Remaining
Contractual Period
|
|
Aggregate
Intrinsic
Value
|
|||||
|
|
|
|
|
(in years )
|
|
|
|||||
Nonvested as of December 31, 2015
|
611
|
|
|
$
|
51.41
|
|
|
|
|
|
||
Granted
|
219
|
|
|
55.77
|
|
|
|
|
|
|||
Vested and released
|
(271
|
)
|
|
36.73
|
|
|
|
|
|
|||
Forfeited
|
(39
|
)
|
|
56.41
|
|
|
|
|
|
|||
Nonvested as of September 30, 2016
|
520
|
|
|
$
|
60.49
|
|
|
1.35
|
|
$
|
48,783
|
|
|
Three Months Ended,
September 30,
|
|
Nine Months Ended,
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
51,367
|
|
|
$
|
27,616
|
|
|
$
|
142,061
|
|
|
$
|
95,143
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding, basic
|
79,977
|
|
|
79,808
|
|
|
79,920
|
|
|
80,173
|
|
||||
Dilutive effect of potential common stock
|
1,489
|
|
|
1,284
|
|
|
1,603
|
|
|
1,403
|
|
||||
Total shares, diluted
|
81,466
|
|
|
81,092
|
|
|
81,523
|
|
|
81,576
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share, basic
|
$
|
0.64
|
|
|
$
|
0.35
|
|
|
$
|
1.78
|
|
|
$
|
1.19
|
|
Net income per share, diluted
|
$
|
0.63
|
|
|
$
|
0.34
|
|
|
$
|
1.74
|
|
|
$
|
1.17
|
|
•
|
Our Clear Aligner segment consists of our Invisalign system which includes Invisalign Full, Express/Lite, Teen, Assist, Vivera retainers, along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intra-oral scanning systems and additional services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
Net Revenues
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Clear Aligner
|
$
|
243,668
|
|
|
$
|
198,292
|
|
|
$
|
706,802
|
|
|
$
|
586,138
|
|
Scanner
|
34,921
|
|
|
9,344
|
|
|
79,869
|
|
|
29,072
|
|
||||
Total net revenues
|
$
|
278,589
|
|
|
$
|
207,636
|
|
|
$
|
786,671
|
|
|
$
|
615,210
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit
|
|
|
|
|
|
|
|
||||||||
Clear Aligner
|
$
|
189,270
|
|
|
$
|
156,205
|
|
|
$
|
552,663
|
|
|
$
|
461,502
|
|
Scanner
|
19,932
|
|
|
1,371
|
|
|
42,382
|
|
|
5,798
|
|
||||
Total gross profit
|
$
|
209,202
|
|
|
$
|
157,576
|
|
|
$
|
595,045
|
|
|
$
|
467,300
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net revenues:
(1)
|
|
|
|
|
|
|
|
||||||||
U.S.
|
$
|
168,501
|
|
|
$
|
143,933
|
|
|
$
|
516,924
|
|
|
$
|
429,005
|
|
the Netherlands
|
87,051
|
|
|
37,427
|
|
|
191,049
|
|
|
118,295
|
|
||||
Other international
|
23,037
|
|
|
26,276
|
|
|
78,698
|
|
|
67,910
|
|
||||
Total net revenues
|
$
|
278,589
|
|
|
$
|
207,636
|
|
|
$
|
786,671
|
|
|
$
|
615,210
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Long-lived assets:
(2)
|
|
|
|
||||
United States
|
$
|
43,652
|
|
|
$
|
112,632
|
|
Netherlands
|
109,156
|
|
|
486
|
|
||
Mexico
|
17,055
|
|
|
15,422
|
|
||
Other International
|
2,795
|
|
|
7,933
|
|
||
Total long-lived assets
|
$
|
172,658
|
|
|
$
|
136,473
|
|
•
|
Departure of our CFO and appointment of new CFO.
On November 7, 2016, David L. White, our Chief Financial Officer ("CFO"), announced his retirement as our Chief Financial Officer effective November 10, 2016. Mr. White will remain employed in a non-executive role until March 1, 2017 in order to, among other things, oversee planning and ERP implementation projects and assist in the transition of his duties. Also effective November 10, 2016, John F. Morici joined us as our new CFO. While we expect to engage in an orderly transition with Mr. Morici as our new CFO, our ability to execute our business strategies and retain key personnel may be adversely affected by the uncertainty associated with this transition.
|
•
|
New Products, Feature Enhancements and Technology Innovation
. Product innovation drives greater treatment predictability and clinical applicability, and ease of use for our customers, which supports adoption of Invisalign in their practices. Increasing applicability and treating more complex cases requires that we move away from individual features to more comprehensive solutions so that Invisalign providers can more predictably treat the whole case, such as with our Invisalign "G-Series" of product innovations, including our most recent October 2016 release, Invisalign G7. Invisalign G7 delivers better upper lateral control, improved root control, and features to address prevention of posterior open bites. We also announced ClinCheck Pro 5.0, which has new features designed to deliver an improved and user friendly experience and increased control to Invisalign providers. Since the iTero Element began shipping in September 2015, the use of iTero scanners for Invisalign case submissions in place of Polyvinyl-siloxane ("PVS") impressions has gradually increased to a record 48.4% of cases from North America and 39.6% of cases from doctors worldwide. We believe that over the long-term, clinical solutions and treatment tools will increase adoption of Invisalign and increase sales of our Intra-oral scanners; however, it is difficult to predict the rate of adoption which may vary by region and channel.
|
•
|
Invisalign Adoption.
Our goal is to establish Invisalign as the treatment of choice for treating malocclusion ultimately driving increased product adoption and frequency of use by dental professionals, also known as "utilization rates." Our quarterly utilization rates for the previous 9 quarters are as follows:
|
•
|
Number of new Invisalign doctors trained.
We continue to expand our Invisalign customer base through the training of new doctors. During fiscal year 2015, Invisalign growth was driven primarily by increased utilization across all regions as well as by the continued expansion of our customer base as we trained a total of 9,795 new Invisalign doctors, of which 56% were trained internationally. During the third quarter of 2016, we trained 2,615 new Invisalign doctors, up from 2,260 trained in third quarter of 2015.
|
•
|
International Clear Aligner Growth.
We will continue to focus our efforts towards increasing adoption of our products by dental professionals in our direct international markets. On a year over year basis, international volume increased 33.8 % driven primarily by strong performance in our Asia Pacific and in Europe regions. In 2016, we are continuing to expand in our existing markets through targeted investments in sales coverage and professional marketing and education programs, along with consumer marketing in selected country markets. We expect international Clear Aligner revenues to continue to grow at a faster rate than North America for the foreseeable future due to our continued investment in international market expansion, the size of the market opportunity, and our relatively low market penetration in this region. As our international Clear Aligner revenues have increased from $61.3 million in the third quarter of 2015 to $84.3 million in the third quarter of 2016, we are increasingly subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Although we have historically accepted the exposure to exchange rate movements without using derivative financial instruments to manage risk, we have in the past and may in the future initiate foreign currency economic hedging program to mitigate the foreign currency risk in countries where we have significant monetary assets and liabilities denominated in currencies other than the functional currency. The impact from forward contracts was not material to our financial statements for the nine months ended
September 30, 2016
.
|
•
|
Establish Regional Order Acquisition and Treatment Planning facilities:
We intend to establish additional Order Acquisition and Treatment Planning facilities closer to our International customers in order to improve our operational efficiency and provide doctors with a great experience to further improve their confidence in using Invisalign to treat more patients, more often. If demand for our product exceeds our current expectations, or if the timing of receipt of case product orders during a given quarter is different from our expectations, we may not be able to fulfill orders in a timely manner, which may negatively impact our financial results and overall business. Conversely, if demand decreases or if we fail to forecast demand accurately, we could be required to record excess capacity charges, which would lower our gross margin.
|
•
|
Operating Expenses.
We expect operating expenses to increase in 2016 due in part to:
|
◦
|
investments in international expansion in new country markets such as India and Korea;
|
◦
|
the increase in sales and customer support resources; and
|
◦
|
product and technology innovation to address such things as treatment times, indications unique to teens, and predictability.
|
•
|
Stock Repurchases:
|
◦
|
Stock Repurchase Authorization.
On April 28, 2016, we announced that our Board of Directors had authorized a plan to repurchase up to $300.0 million of the Company's stock. Any purchases under this stock repurchase program may be made, from time-to-time, pursuant to open market purchases (including pursuant to Rule 10b5-1 plans), privately-negotiated transactions, accelerated stock repurchases, block trades or derivative contracts or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934.
|
◦
|
Accelerated Stock Repurchase
. On May 3, 2016, as part of our
$300.0 million
April 2014 stock repurchase program, we entered into an Accelerated Stock Repurchase agreement to repurchase
$50.0 million
of our common stock (the "2016 ASR"). Under the terms of the 2016 ASR, we paid
$50.0 million
on May 4, 2016 and received an initial delivery of approximately
0.5 million
shares based on current market prices. The 2016 ASR was completed on September 6, 2016 with a final delivery of approximately
0.1 million
shares. All repurchased shares were retired. (
Refer to Note 9 "Common Stock Repurchase", of the Notes to condensed consolidated financial statements
for details on common stock repurchase).
|
◦
|
10b5-1 Stock Repurchase Plan
. On May 3, 2016, we also entered into a stock repurchase plan under which we will repurchase up to $50 million of our common stock. During 2016, we repurchased on the open market approximately
0.1 million
shares of our common stock at an average of
$93.21
per share, including commissions, for an aggregate purchase price of approximately
$8.2 million
. This stock repurchase plan will operate in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934. Accordingly, transactions, if any, will be carried out in accordance with the terms of the share repurchase plan, including specified price, volume, and timing conditions.
|
◦
|
Remaining Available Repurchases
. As of September 30, 2016, we have
$41.8 million
remaining under the April 2014 Repurchase Program and $300.0 million under the April 2016 Repurchase Plan. (
Refer to Note 9 "Common Stock Repurchase", of the Notes to condensed consolidated financial statements
for details on common stock repurchase).
|
•
|
SmileDirectClub.
On July 25, 2016, we entered into a supply agreement with SmileDirectClub, LLC to manufacture clear aligners for SmileDirectClub's doctor-led, at-home program for simple teeth straightening. SmileDirectClub aligners will use our single-layer EX30 material for cases without attachments or interproximal reduction and will be manufactured by Align according to SmileDirectClub's specifications for minor tooth movement. The Invisalign brand and system of clear aligners will continue to be available exclusively through Invisalign-trained orthodontists and general dentists for in-office treatment. In October 2016, we became SmileDirectClub's exclusive third-party supplier and commercial supplying aligners for its minor tooth movement aligner program. We also provided a revolving line of credit to SmileDirectClub of up to $15 million to fund their working capital and general corporate needs. As part of the transaction, we acquired a 17% equity interest in SmileDirectClub for $46.7 million. As a result of our equity holdings in SmileDirectClub, we are required to account for SmileDirectClub's operations in our financial statements based on the equity method of accounting. Our financial results, therefore will reflect two components as follows:
|
◦
|
The investment is reported on our balance sheet as a single amount under Equity Method Investments and we record our share of their operating results after eliminating outstanding intercompany transactions within Equity in losses of investee in our consolidated statement of operation. As of September 30, 2016 the balance of our equity method investments was $46.3 million. Align is performing a fair value assessment in order to determine if we need to value components of the SDC agreements including any identifiable intangible assets. We expect to complete our valuation in the fourth quarter of 2016.
|
◦
|
Commencing in October 2016, when we began supplying aligners, the sale of aligners to SDC and the income from under the supply agreement will be reported in our Clear Aligner business segment.
|
•
|
Our Clear Aligner segment consists of our Invisalign system which includes Invisalign Full, Teen and Assist ("Full Products"), Express/Lite ("Express Products"),Vivera retainers, along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intra-oral scanning systems and additional services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
For the Three Months Ended,
September 30, |
|
For the Nine Months Ended,
September 30, |
||||||||||||||||||||||||||
Net Revenues
|
2016
|
|
2015
|
|
Net
Change
|
|
%
Change
|
|
2016
|
|
2015
|
|
Net
Change
|
|
%
Change
|
||||||||||||||
Clear Aligner Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
North America
|
$
|
143.8
|
|
|
$
|
124.1
|
|
|
$
|
19.7
|
|
|
15.9
|
%
|
|
$
|
423.4
|
|
|
$
|
369.1
|
|
|
$
|
54.3
|
|
|
14.7
|
%
|
International
|
84.3
|
|
|
61.3
|
|
|
23.0
|
|
|
37.5
|
%
|
|
237.9
|
|
|
179.1
|
|
|
58.8
|
|
|
32.8
|
%
|
||||||
Invisalign non-case
|
15.6
|
|
|
12.9
|
|
|
2.7
|
|
|
20.9
|
%
|
|
45.5
|
|
|
38.0
|
|
|
7.5
|
|
|
19.7
|
%
|
||||||
Total Clear Aligner net revenues
|
$
|
243.7
|
|
|
$
|
198.3
|
|
|
$
|
45.4
|
|
|
22.9
|
%
|
|
$
|
706.8
|
|
|
$
|
586.1
|
|
|
$
|
120.7
|
|
|
20.6
|
%
|
Scanner net revenues
|
34.9
|
|
|
9.3
|
|
|
25.6
|
|
|
273.7
|
%
|
|
79.9
|
|
|
29.1
|
|
|
50.8
|
|
|
174.6
|
%
|
||||||
Total net revenues
|
$
|
278.6
|
|
|
$
|
207.6
|
|
|
$
|
71.0
|
|
|
34.2
|
%
|
|
$
|
786.7
|
|
|
$
|
615.2
|
|
|
$
|
171.5
|
|
|
27.9
|
%
|
|
For the Three Months Ended,
September 30, |
|
For the Nine Months Ended,
September 30, |
||||||||||||||||||||
Region
|
2016
|
|
2015
|
|
Net
Change
|
|
%
Change
|
|
2016
|
|
2015
|
|
Net
Change
|
|
%
Change
|
||||||||
North America Invisalign
|
115.9
|
|
|
101.3
|
|
|
14.6
|
|
|
14.4
|
%
|
|
341.3
|
|
|
292.0
|
|
|
49.3
|
|
|
16.9
|
%
|
International Invisalign
|
61.9
|
|
|
46.2
|
|
|
15.7
|
|
|
34.0
|
%
|
|
177.2
|
|
|
130.8
|
|
|
46.4
|
|
|
35.5
|
%
|
Total Invisalign case volume
|
177.8
|
|
|
147.5
|
|
|
30.3
|
|
|
20.5
|
%
|
|
518.5
|
|
|
422.8
|
|
|
95.7
|
|
|
22.6
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||
Clear Aligner
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
$
|
54.4
|
|
|
$
|
42.1
|
|
|
$
|
12.3
|
|
|
$
|
154.1
|
|
|
$
|
124.6
|
|
|
$
|
29.5
|
|
% of net segment revenues
|
22.3
|
%
|
|
21.2
|
%
|
|
|
|
21.8
|
%
|
|
21.3
|
%
|
|
|
||||||||
Gross profit
|
$
|
189.3
|
|
|
$
|
156.2
|
|
|
$
|
33.1
|
|
|
$
|
552.6
|
|
|
$
|
461.5
|
|
|
$
|
91.1
|
|
Gross margin %
|
77.7
|
%
|
|
78.8
|
%
|
|
|
|
78.2
|
%
|
|
78.7
|
%
|
|
|
||||||||
Scanner and Services
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
$
|
15.0
|
|
|
$
|
8.0
|
|
|
$
|
7.0
|
|
|
$
|
37.5
|
|
|
$
|
23.3
|
|
|
$
|
14.2
|
|
% of net segment revenues
|
42.9
|
%
|
|
85.3
|
%
|
|
|
|
46.9
|
%
|
|
80.1
|
%
|
|
|
||||||||
Gross profit
|
$
|
20.0
|
|
|
$
|
1.4
|
|
|
$
|
18.6
|
|
|
$
|
42.4
|
|
|
$
|
5.8
|
|
|
$
|
36.6
|
|
Gross margin %
|
57.1
|
%
|
|
14.7
|
%
|
|
|
|
53.1
|
%
|
|
19.9
|
%
|
|
|
||||||||
Total cost of net revenues
|
$
|
69.4
|
|
|
$
|
50.1
|
|
|
$
|
19.3
|
|
|
$
|
191.6
|
|
|
$
|
147.9
|
|
|
$
|
43.7
|
|
% of net revenues
|
24.9
|
%
|
|
24.1
|
%
|
|
|
|
24.4
|
%
|
|
24.0
|
%
|
|
|
||||||||
Gross profit
|
$
|
209.2
|
|
|
$
|
157.6
|
|
|
$
|
51.6
|
|
|
$
|
595.0
|
|
|
$
|
467.3
|
|
|
$
|
127.7
|
|
Gross margin %
|
75.1
|
%
|
|
75.9
|
%
|
|
|
|
75.6
|
%
|
|
76.0
|
%
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||
Selling, general and administrative
|
$
|
126.7
|
|
|
$
|
101.8
|
|
|
$
|
24.9
|
|
|
$
|
360.4
|
|
|
$
|
290.7
|
|
|
$
|
69.7
|
|
% of net revenues
|
45.5
|
%
|
|
49.0
|
%
|
|
|
|
45.8
|
%
|
|
47.2
|
%
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||
Research and development
|
$
|
20.4
|
|
|
$
|
17.8
|
|
|
$
|
2.6
|
|
|
$
|
54.1
|
|
|
$
|
47.3
|
|
|
$
|
6.8
|
|
% of net revenues
|
7.3
|
%
|
|
8.6
|
%
|
|
|
|
6.9
|
%
|
|
7.7
|
%
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||
Interest and other income (expenses), net
|
$
|
1.5
|
|
|
$
|
(1.6
|
)
|
|
$
|
3.1
|
|
|
$
|
1.2
|
|
|
$
|
(2.8
|
)
|
|
$
|
4.0
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||
Provision for income taxes
|
$
|
11.7
|
|
|
$
|
8.9
|
|
|
$
|
2.8
|
|
|
$
|
39.2
|
|
|
$
|
31.3
|
|
|
$
|
7.9
|
|
Effective tax rates
|
18.4
|
%
|
|
24.3
|
%
|
|
|
|
21.6
|
%
|
|
24.8
|
%
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Cash and cash equivalents
|
$
|
419,948
|
|
|
$
|
167,714
|
|
Short-term investments
|
193,018
|
|
|
359,581
|
|
||
Long-term investments
|
62,820
|
|
|
151,370
|
|
||
Total
|
$
|
675,786
|
|
|
$
|
678,665
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Net cash flow provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
166,674
|
|
|
$
|
158,642
|
|
Investing activities
|
|
142,859
|
|
|
(92,625
|
)
|
||
Financing activities
|
|
(57,619
|
)
|
|
(88,955
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
320
|
|
|
(2,893
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
252,234
|
|
|
$
|
(25,831
|
)
|
•
|
a net change in deferred tax assets of $17.5 million,
|
•
|
depreciation and amortization of
$16.8 million
related to our fixed assets and acquired intangible assets,
|
•
|
stock-based compensation of
$39.9 million
related to equity incentive compensation awards granted to our employees,
|
•
|
net tax benefits from stock based compensation of $13.1 million and
|
•
|
excess tax benefits from our share-based payment arrangements of
$13.9 million
.
|
•
|
an increase of
$93.1 million
in accounts receivable which is a result of the increase in net revenues,
|
•
|
an increase of
$46.5 million
in deferred revenues corresponding to the increases in case shipments, and
|
•
|
an increase of
$39.0 million
in accrued and other long-term liabilities due to timing of payments and activities.
|
•
|
Revenue recognition;
|
•
|
Stock-based compensation expense;
|
•
|
Goodwill and finite-lived acquired intangible assets,
|
•
|
Impairment of goodwill, finite-lived acquired intangible assets and long-lived assets, and
|
•
|
Accounting for income taxes.
|
•
|
limited visibility into and difficulty predicting the level of activity in our customers’ practices from quarter to quarter;
|
•
|
weakness in consumer spending as a result of the slowdown in the U.S. economy and global economies;
|
•
|
changes in relationships with our distributors;
|
•
|
changes in the timing of receipt of Invisalign case product orders during a given quarter which, given our cycle time and the delay between case receipts and case shipments, could have an impact on which quarter revenue can be recognized;
|
•
|
fluctuations in currency exchange rates against the U.S. dollar;
|
•
|
changes in product mix;
|
•
|
our inability to scale production of our iTero Element scanner to meet customer demand;
|
•
|
if participation in our customer rebate or discount programs increases our average selling price will be adversely affected;
|
•
|
seasonal fluctuations in the number of doctors in their offices and their availability to take appointments;
|
•
|
success of or changes to our marketing programs from quarter to quarter;
|
•
|
our reliance on our contract manufacturers for the production of sub-assemblies for our intra-oral scanners;
|
•
|
timing of industry tradeshows;
|
•
|
changes in the timing of when revenue is recognized, including as a result of the introduction of new products or promotions, modifications to our terms and conditions or as a result of changes to critical accounting estimates or new accounting pronouncements;
|
•
|
changes to our effective tax rate;
|
•
|
unanticipated delays in production caused by insufficient capacity or availability of raw materials;
|
•
|
any disruptions in the manufacturing process, including unexpected turnover in the labor force or the introduction of new production processes, power outages or natural or other disasters beyond our control;
|
•
|
the development and marketing of directly competitive products by existing and new competitors;
|
•
|
disruptions to our business as a result our agreement to manufacture clear aligners for SmileDirectClub, including, market acceptance of the SmileDirectClub business model and product, possible adverse customer reaction, and negative publicity about us and our products,
|
•
|
major changes in available technology or the preferences of customers may cause our current product offerings to become less competitive or obsolete;
|
•
|
aggressive price competition from competitors;
|
•
|
costs and expenditures in connection with litigation;
|
•
|
the timing of new product introductions by us and our competitors, as well as customer order deferrals in anticipation of enhancements or new products;
|
•
|
unanticipated delays in our receipt of patient records made through an intraoral scanner for any reason;
|
•
|
disruptions to our business due to political, economic or other social instability, including the impact of an epidemic any of which results in changes in consumer spending habits, consumers unable or unwilling to visit the orthodontist or general practitioners office, as well as any impact on workforce absenteeism;
|
•
|
inaccurate forecasting of net revenues, production and other operating costs,
|
•
|
investments in research and development to develop new products and enhancements; and
|
•
|
our ability to successfully hedge against a portion of our foreign currency-denominated assets and liabilities.
|
•
|
correctly identify customer needs and preferences and predict future needs and preferences;
|
•
|
include functionality and features that address customer requirements;
|
•
|
ensure compatibility of our computer operating systems and hardware configurations with those of our customers;
|
•
|
allocate our research and development funding to products with higher growth prospects;
|
•
|
anticipate and respond to our competitors’ development of new products and technological innovations;
|
•
|
differentiate our offerings from our competitors’ offerings;
|
•
|
innovate and develop new technologies and applications;
|
•
|
the availability of third-party reimbursement of procedures using our products;
|
•
|
obtain adequate intellectual property rights; and
|
•
|
encourage customers to adopt new technologies.
|
•
|
difficulties in hiring and retaining employees generally, as well as difficulties in hiring and retaining employees with the necessary skills to perform the more technical aspects of our operations;
|
•
|
difficulties in managing international operations, including any travel restrictions to or from our facilities located in Russia and Israel;
|
•
|
fluctuations in currency exchange rates;
|
•
|
increased income taxes, and other restrictions and limitations, if we were to decide to repatriate any of our foreign cash balances back to the U.S.;
|
•
|
import and export license requirements and restrictions;
|
•
|
controlling production volume and quality of the manufacturing process;
|
•
|
political, social and economic instability, including as a result of increased levels of violence in Juarez, Mexico or the Middle East. We cannot predict the effect on us of any future armed conflict, political instability or violence in these regions. In addition, some of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are subject to being called for additional active duty under emergency circumstances. We cannot predict the full impact of these conditions on us in the future, particularly if emergency circumstances or an escalation in the political situation occurs. If many of our employees are called for active duty, our operations in Israel and our business may not be able to function at full capacity;
|
•
|
acts of terrorism and acts of war;
|
•
|
general geopolitical instability and the responses to it, such as the possibility of additional sanctions against Russia which continue to bring uncertainty to this region;
|
•
|
interruptions and limitations in telecommunication services;
|
•
|
product or material transportation delays or disruption, including as a result of increased levels of violence, acts of terrorism, acts of war or health epidemics restricting travel to and from our international locations or as a result of natural disasters, such as earthquakes or volcanic eruptions;
|
•
|
burdens of complying with a wide variety of local country and regional laws, including the risks associated with the Foreign Corrupt Practices Act and local anti-bribery compliance;
|
•
|
trade restrictions and changes in tariffs; and
|
•
|
potential adverse tax consequences.
|
•
|
local political and economic instability;
|
•
|
the engagement of activities by our employees, contractors, partners and agents, especially in countries with developing economies, that are prohibited by international and local trade and labor laws and other laws prohibiting corrupt payments to government officials, including the Foreign Corrupt Practices Act, the UK Bribery Act of 2010 and export control laws, in spite of our policies and procedures designed to ensure compliance with these laws;
|
•
|
although it is our intention to indefinitely reinvest earnings outside the U.S., restrictions on the transfer of funds held by our foreign subsidiaries, including with respect to restrictions on our ability to repatriate foreign cash to the U.S at favorable tax rates;
|
•
|
fluctuations in currency exchange rates; and
|
•
|
increased expense of developing, testing and making localized versions of our products.
|
•
|
agreements with distributors may terminate prematurely due to disagreements or may result in litigation between the partners;
|
•
|
we may not be able to renew existing distributor agreements on acceptable terms;
|
•
|
our distributors may not devote sufficient resources to the sale of products;
|
•
|
our distributors may be unsuccessful in marketing our products;
|
•
|
our existing relationships with distributors may preclude us from entering into additional future arrangements with other distributors; and
|
•
|
we may not be able to negotiate future distributor agreements on acceptable terms.
|
•
|
product design, development, manufacturing and testing;
|
•
|
product labeling;
|
•
|
product storage;
|
•
|
pre-market clearance or approval;
|
•
|
complaint handling and corrective actions;
|
•
|
advertising and promotion; and
|
•
|
product sales and distribution.
|
•
|
warning letters, fines, injunctions, consent decrees and civil penalties;
|
•
|
repair, replacement, refunds, recall or seizure of our products;
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
•
|
refusing our requests for 510(k) clearance or pre-market approval of new products, new intended uses, or modifications to existing products;
|
•
|
withdrawing clearance or pre-market approvals that have already been granted; and
|
•
|
criminal prosecution.
|
•
|
storage, transmission and disclosure of medical information and healthcare records;
|
•
|
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
|
•
|
the marketing and advertising of our products.
|
•
|
quarterly variations in our results of operations and liquidity;
|
•
|
changes in recommendations by the investment community or in their estimates of our net revenues or operating results;
|
•
|
speculation in the press or investment community concerning our business and results of operations;
|
•
|
strategic actions by our competitors, such as product announcements or acquisitions;
|
•
|
announcements of technological innovations or new products by us, our customers or competitors; and
|
•
|
general economic market conditions.
|
Period
|
|
Total Number of Shares Repurchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Repurchased as Part of Publicly Announced Program
|
|
Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Programs
(1)
|
||||||
July 1, 2016 through July 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
364,978,175
|
|
August 1, 2016 through August 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
364,978,175
|
|
September 1, 2016 through September 30, 2016
|
|
231,009
|
|
|
$
|
100.32
|
|
|
231,009
|
|
|
$
|
341,803,668
|
|
Exhibit
Number
|
|
Description
|
|
Filing
|
|
Date
|
|
Exhibit
Number
|
|
Filed here with
|
10.1
|
|
Class C Non-Incentive Unit Purchase Agreement, July 25, 2016
|
|
Form 8-K
|
|
07/28/16
|
|
10.1
|
|
|
10.2
|
|
Employment Agreement between the Align Technology, Inc. and John Morici
|
|
|
|
|
|
|
|
*
|
31.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
31.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
*
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
*
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
*
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
*
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
*
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
*
|
|
|
|
|
ALIGN TECHNOLOGY, INC.
|
|
|
|
|
November 8, 2016
|
By:
|
/S/ JOSEPH M. HOGAN
|
|
|
Joseph M. Hogan
President and Chief Executive Officer
|
|
|
|
|
By:
|
/S/ DAVID L. WHITE
|
|
|
David L. White
Chief Financial Officer
|
Exhibit
Number
|
|
Description
|
|
Filing
|
|
Date
|
|
Exhibit
Number
|
|
Filed here with
|
|
10.1
|
|
Class C Non-Incentive Unit Purchase Agreement, July 25, 2016
|
|
Form 8-K
|
|
7/28/2016
|
|
10.1
|
|
|
|
10.2
|
|
Employment Agreement between the Align Technology, Inc. and John Morici
|
|
|
|
|
|
|
|
*
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
*
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
*
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
*
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
*
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
*
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
/S/ JOHN MORICI
|
|
JOHN MORICI
|
|
|
|
ALIGN TECHNOLOGY, INC.
|
|
|
|
/S/ JOSEPH M. HOGAN
|
By:
|
JOSEPH M. HOGAN
|
Title:
|
President and CEO
|
|
Vice President & Above
|
Household Goods Shipment
|
- Packing, loading, transporting, and insurance
- Two vehicles, if over 500 miles
- Renter: 30 days of storage
- Homeowner: 60 days of storage
|
En Route Trip
|
- One-way economy airfare
OR
- Mileage for two cars at current rate, (based on 400 miles/day)
- Reasonable meals and lodging
|
Home Finding Trip
|
- 1 trip (7 days/6 nights)
- Employee and spouse/domestic partner
- RT economy airfare or mileage for one car at IRS rate
- Meals, lodging, and rental car
|
Temporary Living
|
- Furnished apartment or extended-stay hotel
- Up to 60 days
- No meals or incidentals
|
Destination Home Purchase Assistance
|
- Home Finding Assistance
- Must have been homeowners previously
- Normal and customary closing costs (no points/pre-paids)
- Up to 2% of the purchase price
- Must use Plus Agent
|
Rental Assistance
|
- One day professional rental tour
- Lease termination up to 2 month’s rent
- Application fee, credit report fee, and finder’s fee
|
Miscellaneous Allowance
|
- One month’s base salary capped at $30,000
- Payroll taxes deducted
- Not grossed-up for taxes
|
Gross-Up
|
- Equalization
|
Dated:
|
|
|
/S/ JOHN MORICI
|
|
(Signature)
|
|
|
|
JOHN MORICI
|
|
(Printed Name)
|
|
|
|
ACCEPTED AND AGREED TO:
|
|
ALIGN TECHNOLOGY, INC.
|
|
|
|
/S/ JOSEPH M. HOGAN
|
|
(Signature)
|
|
|
By:
|
Joseph M. Hogan
|
Title:
|
President and Chief the Executive Officer
|
Dated:
|
11/3/2016
|
By:
|
JOHN MORICI
|
|
(PRINTED NAME OF EMPLOYEE)
|
|
|
Date
|
November 3, 2016
|
WITNESSED BY:
|
|
(PRINTED NAME OF REPRESENTATIVE)
|
TO:
|
ALIGN TECHNOLOGY, INC.
|
FROM:
|
JOHN MORICI
|
DATE:
|
November 3, 2016
|
SUBJECT
|
Previous Inventions
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Align Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ JOSEPH M. HOGAN
|
Joseph M. Hogan
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Align Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ DAVID L. WHITE
|
David L. White
|
Chief Financial Officer
|
|
|
By:
|
/S/ JOSEPH M. HOGAN
|
Name:
|
Joseph M. Hogan
|
Title:
|
President and Chief Executive Officer
|
|
|
By:
|
/S/ DAVID L. WHITE
|
Name:
|
David L. White
|
Title:
|
Chief Financial Officer
|