Segments and Geographical Information

3 Months Ended

Mar. 31, 2022

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 Imaging Systems and CAD/CAM services (“Systems and Services”) segment.

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

	Three Months Ended March 31,
	2022		2021
Net revenues
Clear Aligner	$	809,696	$	753,269
Systems and Services	163,523		141,502
Total net revenues	$	973,219	$	894,771
Gross profit
Clear Aligner	$	605,696	$	584,534
Systems and Services	103,650		92,564
Total gross profit	$	709,346	$	677,098
Income from operations
Clear Aligner	$	312,719	$	327,465
Systems and Services	50,799		47,228
Unallocated corporate expenses	(165,436)		(149,247)
Total income from operations	$	198,082	$	225,446
Stock-based compensation
Clear Aligner	$	2,854	$	2,294
Systems and Services	214		171
Unallocated corporate expenses	28,553		24,776
Total stock-based compensation	$	31,621	$	27,241
Depreciation and amortization
Clear Aligner	$	13,767	$	11,120
Systems and Services	6,922		4,545
Unallocated corporate expenses	8,937		9,970
Total depreciation and amortization	$	29,626	$	25,635

The following table reconciles total segment income from operations in the table above to net income before provision for income taxes (in thousands):

	Three Months Ended March 31,
	2022		2021
Total segment income from operations	$	363,518	$	374,693
Unallocated corporate expenses	(165,436)		(149,247)
Total income from operations	198,082		225,446
Interest income	677		1,643
Other income (expense), net	(11,273)		34,532
Net income before provision for income taxes	$	187,486	$	261,621

Geographical Information

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

	Three Months Ended March 31,
	2022		2021
Net revenues 1:
U.S.	$	420,920	$	383,002
Switzerland	331,739		315,450
Other International	220,560		196,319
Total net revenues	$	973,219	$	894,771

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

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):

	March 31, 2022		December 31, 2021
Long-lived assets 1:
Switzerland	$	477,312	$	444,205
U.S.	209,220		210,582
China	126,623		125,346
Other International	453,019		423,050
Total long-lived assets	$	1,266,174	$	1,203,183

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