Segments and Geographical Information

9 Months Ended

Sep. 30, 2016

Notes To Financial Statements [Abstract]

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 and 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 the 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 Scanner 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 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.

These reportable operating segments are based on how our CODM views and evaluates our operations as well as allocation of resources. The following information relates to these segments (in thousands):

	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

Geographical Information

On July 1, 2016, we implemented a new international corporate structure. This changed the structure of our international procurement and sales operations.

Net revenues are presented below by geographic area (in thousands):

	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

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

As a result of the new international corporate structure changes approximately $92.0 million in long-lived assets were transfered into our Netherlands entity as of July 1, 2016. Tangible long-lived assets are presented below by geographic area (in thousands):

	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

⁽²⁾ Long-lived assets are attributed to countries based on the entity that owns the asset.