Align Technology ALGN · USD

Segments and Geographical Information Segment InformationWe report segment information based on the management approach. The management approach designates the internal reporting used by our Chief Operating Decision Maker (“CODM”), our Chief Executive Officer, for decision making and performance assessment as the basis for determining our reportable segments. We group our operations into two reportable segments: Clear Aligner segment and Imaging Systems and CAD/CAM services (“Systems and Services”) segment, which are based on our predominant product lines.Our CODM uses gross profit and income from operations to assess each reportable segment’s performance, by reviewing each measure against internal forecasts and historical performance. Our CODM may also benchmark each segment’s performance against our competitors and external expectations.Summarized financial information by reportable segment is as follows (in thousands): Year Ended December 31,202520242023Net revenuesClear Aligner$3,245,404 $3,230,122 $3,199,329 Systems and Services789,560 768,890 662,931 Total net revenues$4,034,964 $3,999,012 $3,862,260 Cost of net revenues1Clear Aligner$1,058,893 $952,136 $911,291 Systems and Services265,058 247,717 244,106 Total cost of goods sold $1,323,951 $1,199,853 $1,155,397 Gross profitClear Aligner$2,186,511 $2,277,986 $2,288,038 Systems and Services524,502 521,173 418,825 Total gross profit$2,711,013 $2,799,159 $2,706,863 Other Segment expensesClear Aligner$1,151,720 $1,135,782 $1,105,781 Systems and Services218,412 251,951 227,470 Unallocated corporate expenses795,126 803,798 730,274 Total operating expenses$2,165,258 $2,191,531 $2,063,525 Segment income from operationsClear Aligner$1,034,791 $1,142,204 $1,182,257 Systems and Services306,090 269,222 191,355 Total segment income from operations$1,340,881 $1,411,426 $1,373,612 1 Management has identified Cost of net revenues as a significant expense for our Clear Aligner and Systems and Services reportable segments.Other segment expenses typically include employee related costs, marketing and advertising costs, and depreciation and amortization expense incurred by various functions including selling, marketing, general and administrative and research and development. Our CODM does not regularly receive these operating expenses at the reportable segment level.

Commitments and ContingenciesTax Matter Beginning in the third quarter of 2023 and continuing through the first quarter of 2024, we received cumulative assessments of approximately $100 million from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of October 2019 through May 2023. We were required to pay these assessments prior to contesting or litigating the matter in statutory appeal. We have historically asserted and continue to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that we have reasonably relied upon statements and guidance by HMRC and that our interpretation of United Kingdom legislation is appropriate. In October 2024, the Company and HMRC reached a settlement agreement regarding the unpaid VAT related to certain aligner sales made during the period of October 2019 through mid-October 2023. As part of the settlement, HMRC agreed to vacate the judicial review (before the Administrative Court) originally scheduled for October 9th and October 10th, 2024, refund to the Company all assessments paid for the period of October 2019 through May 2023 and withdraw any potential assessments for the period from June 2023 through mid-October 2023. HMRC has refunded to the Company the assessed amounts, approximately $100 million.A statutory appeal (before the First-tier Tribunal - “Tax Tribunal”) was held on January 27th through January 30th, 2025. On April 24, 2025, the Tax Tribunal issued a ruling in our favor indicating that clear aligners are “dental prostheses for the purposes of VAT”, which is a key condition for the VAT exemption. On June 13, 2025, HMRC applied for permission to appeal the Tax Tribunal decision, which was granted on July 15, 2025. On August 1, 2025, HMRC lodged their grounds for appeal to the Upper Tribunal. A hearing in front of the Upper Tribunal has been scheduled for May 2026.In August 2025, we stopped charging VAT to our United Kingdom customers. It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome from the Upper Tribunal statutory appeal, nor estimate a range of possible loss.

Income Taxes Net income before provision for income taxes consists of the following (in thousands): Year Ended December 31, 202520242023Domestic$280,926 $334,485 $315,643 Foreign304,361 274,474 325,561 Net income before provision for income taxes$585,287 $608,959 $641,204 The provision for (benefit from) income taxes consists of the following (in thousands): Year Ended December 31, 202520242023FederalCurrent$52,962 $95,027 $134,332 Deferred14,385 1,578 (16,805)67,347 96,605 117,527 StateCurrent13,977 13,702 28,535 Deferred13,766 3,384 (3,157)27,743 17,086 25,378 ForeignCurrent74,689 56,653 51,306 Deferred5,157 17,253 1,940 79,846 73,906 53,246 Provision for (benefit from) income taxes$174,936 $187,597 $196,151 The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09: Year Ended December 31, 2025 AmountPercentUS federal statutory income tax rate$122,911 21.0 %State income taxes, net of federal tax benefit*25,901 4.4 Foreign tax effectsSwitzerlandStatutory tax rate difference between Switzerland and U.S.(11,536)(2.0)Canton tax3,233 0.6 Swiss tax rate change - Remeasurement of deferred tax assets15,136 2.6 Other4,102 0.7 MexicoImpairment Loss7,111 1.2 Other1,303 0.2 Other Foreign Jurisdictions14,135 2.4 Effect of cross-border tax laws:Subpart F21,622 3.7 Foreign-derived intangible income(13,611)(2.3)Other825 0.2 Tax CreditsResearch and development tax credits(7,840)(1.3)Nontaxable or Nondeductible ItemsShare-based payment awards17,335 3.0 Other3,219 0.5 Changes in Unrecognized Tax Benefits(29,673)(5.1)Other Adjustments763 0.1 Income Tax expense$174,936 29.9 %*State and local taxes in California, New York, Minnesota and New York City made up the majority (greater than 50%) of the tax effect in this category.The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09: Year Ended December 31 20242023U.S. federal statutory income tax rate21.0 %21.0 %State income taxes, net of federal tax benefit2.2 2.9 U.S. tax on foreign earnings5.4 3.7 Impact of differences in foreign tax rates(2.0)1.4 Stock-based compensation3.4 3.0 Settlement on audits— 0.1 Change in valuation allowance0.9 (1.3)Other items not individually material(0.1)(0.2)Effective tax rate30.

Leases Lessee InformationWe have operating leases for our digital treatment planning and office facilities, retail spaces, vehicles and office equipment. The components of lease expense consist of following (in thousands):Year Ended December 31,Lease Cost202520242023Operating lease cost 1$43,401 $42,299 $44,614 Variable lease cost 24,054 3,630 16,013 Total lease cost $47,455 $45,929 $60,627 1 Includes expense associated with short term leases, lease terms of 12 months or less, which is not material.2 Includes payments related to agreements with embedded leases that are not otherwise reflected on the balance sheet. The following table provides a summary of our operating lease terms and discount rates:December 31,Remaining Lease Term and Discount Rate20252024Weighted average remaining lease term (in years)5.15.4Weighted average discount rate 4.1 %3.8 %As of December 31, 2025, the future payments related to our operating lease liabilities are as follows (in thousands):Fiscal Year Ending December 31,Operating Leases2026$35,694 202729,595 202823,986 202915,564 20307,212 Thereafter13,060 Total lease payments125,111 Less: Imputed interest(10,665)Total lease liabilities$114,446 As of December 31, 2025, we had additional leases that had not commenced with future lease payments of $58.4 million. These leases will commence during 2026 with non-cancelable lease terms of two to fourteen years. Lessor Information We lease iTero intraoral scanners to customers which are classified as operating leases. Our portfolio of leased iTero scanners included in Property, plant and equipment, net are as follows:December 31,20252024Scanners under operating leases, gross$55,576 $33,770 Less: accumulated depreciation(26,222)(12,038)Scanners under operating leases, net$29,354 $21,732 As of December 31, 2025, the future lease payments due to us are as follows (in thousands):Fiscal Year Ending December 31,Operating Leases2026$33,898 202728,587 20288,736 20291,080 Thereafter— Total lease payments$72,301 For the years ended December 31, 2025, 2024 and 2023, operating lease income was $28.8 million, $21.7 million and $16.6 million, respectively. Operating lease income is recorded in Net revenues in our Consolidated Statements of Operations.

Business CombinationOn January 2, 2024 (the “Cubicure Acquisition Date”), we completed the acquisition of privately-held Cubicure GmbH (“Cubicure”) (the “Cubicure Acquisition”). Cubicure is an Austrian company and specializes in direct 3D printing solutions for polymer additive manufacturing that develops, produces, and distributes innovative materials, equipment, and processes for 3D printing solutions. The Cubicure Acquisition is intended to support and scale our strategic innovation roadmap and strengthen the Align Digital Platform. In fiscal year 2021, we acquired a 9.04% equity interest in Cubicure. Subsequently, on the Cubicure Acquisition Date, we acquired the remaining equity of Cubicure. Prior to the acquisition, we also had technology license and joint development agreements with Cubicure.The fair value of consideration transferred in the acquisition is shown in the table below (in thousands):Cash paid to Cubicure stockholders$80,142 Fair value of pre-existing equity interest ownership7,968 Settlement of pre-existing relationship - accounts payable(2,316)Total purchase consideration paid$85,794 The Cubicure Acquisition was accounted for as a business combination under ASC Topic 805, Business Combinations (“ASC 805”) that was achieved in stages. As a result of the Cubicure Acquisition, we remeasured our pre-existing equity interest in Cubicure at fair value prior to the Cubicure Acquisition. Based on the fair value of this equity interest, derived from the purchase price, we estimated the fair value of our 9.04% pre-existing investment in Cubicure to be approximately $8.0 million. The remeasurement resulted in the recognition of a pre-tax gain of $4.1 million, which was reflected as a component of Other income (expense), net within our Consolidated Statements of Operations.In 2021, we initiated Joint development (“JDA”) and Technology license agreements (“TLA”) to provide us with access to Cubicure’s technology. The settlement of the JDA and TLA were concluded to be at market terms on the Cubicure Acquisition Date; therefore, no gain or loss was recorded related to the settlement of these contracts. We also had accounts payable from the pre-existing arrangements with Cubicure of $2.3 million, which were effectively settled and reduced from the purchase consideration of the Cubicure Acquisition.

OverviewWe 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 StrategyOur 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.

Portions of the registrant’s definitive Proxy Statement relating to its 2026 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The registrant’s definitive proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

Credit FacilityWe maintain a credit facility, as amended in December 2022, that includes a $300.0 million unsecured revolving line of credit and a $50.0 million letter of credit sub-limit. The facility matures on December 23, 2027 and loans under the facility accrue interest, at our election, based on either the Secured Overnight Financing Rate (“SOFR”) for the applicable period or a base rate, in each case plus an applicable margin.The facility includes financial covenants and performance requirements. As of December 31, 2025, we had no outstanding borrowings under the facility and were in compliance with the terms and conditions of the facility in all material respects.