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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Align Technology Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	536,671)	1,236,388)	531,854)	629,227)	520,148)
Cost of capital²	18.62%	18.66%	18.68%	18.65%	18.61%
Invested capital³	3,344,477)	2,990,610)	2,459,204)	1,524,413)	1,516,250)

Economic profit⁴	(86,117)	678,414)	72,521)	344,855)	237,947)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 536,671 – 18.62% × 3,344,477 = -86,117

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Align Technology Inc. economic profit increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.

Align Technology Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	361,573)	772,020)	1,775,888)	442,776)	400,235)
Deferred income tax expense (benefit)¹	(41,724)	11,974)	(1,490,491)	(1,714)	(10,386)
Increase (decrease) in allowance for doubtful accounts²	1,098)	(994)	3,483)	4,378)	(3,436)
Increase (decrease) in deferred revenues³	214,751)	449,116)	241,173)	189,076)	137,888)
Increase (decrease) in accrued warranty⁴	1,704)	3,554)	1,410)	2,654)	2,622)
Increase (decrease) in equity equivalents⁵	175,829)	463,650)	(1,244,425)	194,394)	126,688)
Interest expense	—)	—)	—)	—)	—)
Interest expense, operating lease liability⁶	4,442)	4,012)	3,620)	2,427)	—)
Adjusted interest expense	4,442)	4,012)	3,620)	2,427)	—)
Tax benefit of interest expense⁷	(933)	(843)	(760)	(510)	—)
Adjusted interest expense, after taxes⁸	3,509)	3,169)	2,859)	1,917)	—)
Interest income	(5,367)	(3,103)	(3,125)	(12,482)	(8,576)
Investment income, before taxes	(5,367)	(3,103)	(3,125)	(12,482)	(8,576)
Tax expense (benefit) of investment income⁹	1,127)	652)	656)	2,621)	1,801)
Investment income, after taxes¹⁰	(4,240)	(2,451)	(2,469)	(9,861)	(6,775)
Net operating profit after taxes (NOPAT)	536,671)	1,236,388)	531,854)	629,227)	520,148)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenues.

⁴ Addition of increase (decrease) in accrued warranty.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 126,908 × 3.50% = 4,442

⁷ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 4,442 × 21.00% = 933

⁸ Addition of after taxes interest expense to net income.

⁹ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 5,367 × 21.00% = 1,127

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Align Technology Inc. NOPAT increased from 2020 to 2021 but then slightly decreased from 2021 to 2022 not reaching 2020 level.

Align Technology Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for (benefit from) income taxes	237,484)	240,403)	(1,396,939)	112,347)	57,723)
Less: Deferred income tax expense (benefit)	(41,724)	11,974)	(1,490,491)	(1,714)	(10,386)
Add: Tax savings from interest expense	933)	843)	760)	510)	—)
Less: Tax imposed on investment income	1,127)	652)	656)	2,621)	1,801)
Cash operating taxes	279,014)	228,620)	93,656)	111,949)	66,308)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Align Technology Inc. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

Align Technology Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Operating lease liability¹	126,908)	125,375)	86,180)	59,200)	106,676)
Total reported debt & leases	126,908)	125,375)	86,180)	59,200)	106,676)
Stockholders’ equity	3,601,358)	3,622,714)	3,233,865)	1,346,169)	1,252,891)
Net deferred tax (assets) liabilities²	(1,541,880)	(1,503,143)	(1,517,140)	(63,917)	(64,223)
Allowance for doubtful accounts³	10,343)	9,245)	10,239)	6,756)	2,378)
Deferred revenues⁴	1,504,305)	1,289,554)	840,438)	599,265)	410,189)
Accrued warranty⁵	17,873)	16,169)	12,615)	11,205)	8,551)
Equity equivalents⁶	(9,359)	(188,175)	(653,848)	553,309)	356,895)
Accumulated other comprehensive (income) loss, net of tax⁷	10,284)	(4,326)	(43,501)	688)	2,774)
Adjusted stockholders’ equity	3,602,283)	3,430,213)	2,536,516)	1,900,166)	1,612,560)
Construction in progress⁸	(285,202)	(367,686)	(163,492)	(116,751)	(95,414)
Marketable securities⁹	(99,512)	(197,292)	—)	(318,202)	(107,572)
Invested capital	3,344,477)	2,990,610)	2,459,204)	1,524,413)	1,516,250)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenues.

⁵ Addition of accrued warranty.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Align Technology Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

Align Technology Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	23,338,568)	23,338,568)	÷	23,465,476)	=	0.99	0.99	×	18.71%	=	18.61%
Operating lease liability³	126,908)	126,908)	÷	23,465,476)	=	0.01	0.01	×	3.50% × (1 – 21.00%)	=	0.01%
Total:	23,465,476)					1.00					18.62%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,387,418)	40,387,418)	÷	40,512,793)	=	1.00	1.00	×	18.71%	=	18.65%
Operating lease liability³	125,375)	125,375)	÷	40,512,793)	=	0.00	0.00	×	3.20% × (1 – 21.00%)	=	0.01%
Total:	40,512,793)					1.00					18.66%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,876,959)	44,876,959)	÷	44,963,139)	=	1.00	1.00	×	18.71%	=	18.67%
Operating lease liability³	86,180)	86,180)	÷	44,963,139)	=	0.00	0.00	×	4.20% × (1 – 21.00%)	=	0.01%
Total:	44,963,139)					1.00					18.68%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	17,195,753)	17,195,753)	÷	17,254,953)	=	1.00	1.00	×	18.71%	=	18.64%
Operating lease liability³	59,200)	59,200)	÷	17,254,953)	=	0.00	0.00	×	4.10% × (1 – 21.00%)	=	0.01%
Total:	17,254,953)					1.00					18.65%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,714,841)	20,714,841)	÷	20,821,517)	=	0.99	0.99	×	18.71%	=	18.61%
Operating lease liability³	106,676)	106,676)	÷	20,821,517)	=	0.01	0.01	×	0.00% × (1 – 21.00%)	=	0.00%
Total:	20,821,517)					1.00					18.61%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Operating lease liability. See details »

Align Technology Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(86,117)	678,414)	72,521)	344,855)	237,947)
Invested capital²	3,344,477)	2,990,610)	2,459,204)	1,524,413)	1,516,250)
Performance Ratio
Economic spread ratio³	-2.57%	22.68%	2.95%	22.62%	15.69%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	0.27%	0.72%	-2.55%	-3.87%	—
Cigna Group	0.80%	-0.19%	2.70%	-0.51%	—
CVS Health Corp.	-3.98%	-0.01%	0.44%	-0.34%	—
Elevance Health Inc.	-0.15%	1.13%	-0.85%	-0.02%	—
Humana Inc.	2.37%	2.71%	9.58%	7.71%	—
Intuitive Surgical Inc.	5.13%	20.75%	8.73%	25.41%	—
Medtronic PLC	-2.52%	-4.11%	-3.25%	-2.15%	-5.74%
UnitedHealth Group Inc.	4.74%	4.60%	5.18%	5.20%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -86,117 ÷ 3,344,477 = -2.57%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Align Technology Inc. economic spread ratio improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.

Align Technology Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(86,117)	678,414)	72,521)	344,855)	237,947)

Net revenues	3,734,635)	3,952,584)	2,471,941)	2,406,796)	1,966,492)
Add: Increase (decrease) in deferred revenues	214,751)	449,116)	241,173)	189,076)	137,888)
Adjusted net revenues	3,949,386)	4,401,700)	2,713,114)	2,595,872)	2,104,380)
Performance Ratio
Economic profit margin²	-2.18%	15.41%	2.67%	13.28%	11.31%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	0.38%	1.03%	-4.45%	-7.05%	—
Cigna Group	0.38%	-0.10%	1.59%	-0.31%	—
CVS Health Corp.	-1.53%	0.00%	0.22%	-0.19%	—
Elevance Health Inc.	-0.06%	0.53%	-0.40%	-0.01%	—
Humana Inc.	0.75%	1.00%	2.75%	2.26%	—
Intuitive Surgical Inc.	4.43%	16.32%	8.95%	18.83%	—
Medtronic PLC	-5.54%	-9.87%	-7.99%	-5.12%	-13.59%
UnitedHealth Group Inc.	2.43%	2.26%	2.64%	2.54%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × -86,117 ÷ 3,949,386 = -2.18%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Align Technology Inc. economic profit margin improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.

Align Technology Inc. (NASDAQ:ALGN)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin