Segments and Geographical Information

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segments and Geographical Information

Segments and Geographical Information

Segment Information

We report segment information based on the management approach. The management approach designates the internal reporting used by our Chief Operating Decision Maker for decision making and performance assessment as the basis for determining our reportable segments. The performance measures of our reportable segments include net revenues, gross profit and income from operations. Income from operations for each segment includes all geographic revenues, related cost of net revenues and operating expenses directly attributable to the segment. Certain operating expenses are attributable to operating segments and each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. Costs not specifically allocated to segment income from operations include various corporate expenses such as stock-based compensation and costs related to IT, facilities, human resources, accounting and finance, legal and regulatory, and other separately managed general and administrative costs outside the operating segments.

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 and Invisalign First.

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

•Non-Case products include, but are not limited to, retention products, Invisalign training, adjusting tools used by dental professionals during the course of treatment and Consumer 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 e-commerce channels in the U.S.

•Our Systems and Services segment consists of our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options. Our services include subscription software, disposables, rentals, pay per scan services, as well as exocad’s CAD/CAM software solutions that integrate workflows to dental labs and dental practices.

Summarized financial information by segment is as follows (in thousands):

	Year Ended December 31,
	2021		2020		2019
Net revenues
Clear Aligner	$	3,247,080	$	2,101,459	$	2,025,750
Systems and Services	705,504		370,482		381,046
Total net revenues	$	3,952,584	$	2,471,941	$	2,406,796
Gross profit
Clear Aligner	$	2,474,373	$	1,532,130	$	1,499,713
Systems and Services	460,982		231,105		244,184
Total gross profit	$	2,935,355	$	1,763,235	$	1,743,897
Income from operations
Clear Aligner	$	1,325,866	$	768,045	$	835,957
Systems and Services	259,127		96,052		137,720
Unallocated corporate expenses	(608,593)		(476,926)		(431,184)
Total income from operations	$	976,400	$	387,171	$	542,493
Stock-based compensation
Clear Aligner	$	10,648	$	8,975	$	9,220
Systems and Services	705		734		255
Unallocated corporate expenses	102,983		88,718		78,709
Total stock-based compensation	$	114,336	$	98,427	$	88,184
Depreciation and amortization
Clear Aligner	$	50,723	$	41,371	$	38,979
Systems and Services	21,581		16,798		7,441
Unallocated corporate expenses	36,425		35,369		32,570
Total depreciation and amortization	$	108,729	$	93,538	$	78,990
Impairments and other charges (gains), net
Clear Aligner	$	—	$	—	$	22,990
Total impairments and other charges (gains), net	$	—	$	—	$	22,990
Litigation settlement gain
Clear Aligner	$	—	$	—	$	(51,000)
Total litigation settlement gain	$	—	$	—	$	(51,000)

The following table reconciles total segment income from operations in the table above to net income before provision for (benefit from) income taxes and equity in losses of investee (in thousands):

	Year Ended December 31,
	2021		2020		2019
Total segment income from operations	$	1,584,993	$	864,097	$	973,677
Unallocated corporate expenses	(608,593)		(476,926)		(431,184)
Total income from operations	976,400		387,171		542,493
Interest income	3,103		3,125		12,482
Other income (expense), net	32,920		(11,347)		7,676
Net income before provision for (benefit from) income taxes and equity in losses of investee	$	1,012,423	$	378,949	$	562,651

Geographical Information

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

	Year Ended December 31,
	2021		2020		2019
Net revenues 1:
U.S.	$	1,724,296	$	1,099,564	$	1,161,959
Switzerland 2	1,353,229		809,080		—
China	275,503		199,851		196,733
The Netherlands 2	—		—		760,444
Other International	599,556		363,446		287,660
Total net revenues	$	3,952,584	$	2,471,941	$	2,406,796

1    Net revenues are attributed to countries based on the location of where revenues are recognized by our legal entities.

2     In 2020, we implemented a new international corporate structure. This changed the structure of international procurement and sales operations from the Netherlands to Switzerland.

Tangible long-lived assets, which includes Property, plant and equipment, net, and Operating lease right-of-use assets, net, are presented below by geographic area (in thousands):

	As of December 31,
	2021		2020
Long-lived assets 1:
Switzerland	$	444,205	$	257,337
U.S.	210,582		180,539
China	125,346		113,918
Costa Rica	92,204		97,804
Other International	330,846		167,676
Total long-lived assets	$	1,203,183	$	817,274

1    Long-lived assets are attributed to countries based on the location of our entity that owns or leases the assets.