Segments and Geographical Information

9 Months Ended

Sep. 30, 2013

Segments and Geographical Information

Segments and Geographical Information

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. We report segment information based on the management approach. The management approach designates the internal reporting used by CODM for decision making and performance assessment as the basis for determining our reportable segments. The performance measures of our reportable segments include net revenues and gross profit.

We have grouped our operations into two reportable segments which are also our reporting units: Clear Aligner segment and SCCS segment.

• 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 SCCS 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.

These reportable operating segments are based on how our CODM views and evaluates our operations as well as allocation of resources (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Net Revenues	2013		2012		2013		2012
Clear Aligner
Invisalign Full	$	93,945	$	80,294	$	275,621	$	251,335
Invisalign Express/Lite	17,702		12,779		52,943		38,217
Invisalign Teen	23,779		19,144		62,289		50,672
Invisalign Assist	7,445		7,051		23,418		21,495
Invisalign non-case revenues	10,679		7,457		34,154		22,003
SCCS
Scanners	5,538		4,023		17,190		15,416
CAD/CAM Services	5,418		5,748		16,299		18,063
Total net revenues	$	164,506	$	136,496	$	481,914	$	417,201
Gross profit
Clear Aligner	$	122,663	$	98,334	$	352,114	$	301,340
Scanners and CAD/CAM Services	2,427		2,016		9,516		8,570
Total gross profit	$	125,090	$	100,350	$	361,630	$	309,910

Geographical Information

Net revenues and tangible long-lived assets are presented below by geographic area (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
Net revenues: (1)
U.S.	$	123,904	$	105,173	$	365,596	$	319,269
the Netherlands	26,494		24,193		89,952		79,273
Rest of the world	14,108		7,130		26,366		18,659
Total net revenues	$	164,506	$	136,496	$	481,914	$	417,201

⁽¹⁾ Net revenues are attributed to countries based on location of where revenue is recognized.

	As of September 30,		As of December 31,
	2013		2012
Long-lived assets:(2)
U.S.	$	62,241	$	60,098
Rest of the world	14,311		19,093
Total long-lived assets	$	76,552	$	79,191

⁽²⁾ Long-lived assets are attributed to the countries that purchased the asset.