Segments and Geographical Information

3 Months Ended

Mar. 31, 2023

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 and restructuring costs. 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,
	2023		2022
Net revenues
Clear Aligner	$	789,804	$	809,696
Systems and Services	153,343		163,523
Total net revenues	$	943,147	$	973,219
Gross profit
Clear Aligner	$	566,139	$	605,696
Systems and Services	94,515		103,650
Total gross profit	$	660,654	$	709,346
Income from operations
Clear Aligner	$	277,521	$	312,719
Systems and Services	35,576		50,799
Unallocated corporate expenses	(179,581)		(165,436)
Total income from operations	$	133,516	$	198,082
Stock-based compensation
Clear Aligner	$	4,654	$	2,854
Systems and Services	321		214
Unallocated corporate expenses	32,760		28,553
Total stock-based compensation	$	37,735	$	31,621
Depreciation and amortization
Clear Aligner	$	16,398	$	13,767
Systems and Services	8,146		6,922
Unallocated corporate expenses	11,276		8,937
Total depreciation and amortization	$	35,820	$	29,626

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,
	2023		2022
Total segment income from operations	$	313,097	$	363,518
Unallocated corporate expenses	(179,581)		(165,436)
Total income from operations	133,516		198,082
Interest income	2,337		677
Other income (expense), net	(1,229)		(11,273)
Net income before provision for income taxes	$	134,624	$	187,486

Geographical Information

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

	Three Months Ended March 31,
	2023		2022
Net revenues 1:
U.S.	$	411,138	$	420,920
Switzerland	313,131		331,739
Other International	218,878		220,560
Total net revenues	$	943,147	$	973,219

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, 2023		December 31, 2022
Long-lived assets 1:
Switzerland	$	563,557	$	532,921
U.S.	212,323		214,804
Other International2	604,824		603,010
Total long-lived assets	$	1,380,704	$	1,350,735

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

2 Certain prior period immaterial amounts have been reclassified to conform to current presentation.