Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Align Technology Inc., balance sheet: goodwill and intangible assets

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Goodwill	407,551)	418,547)	444,817)	63,924)	64,029)
Existing technology	112,051)	104,531)	99,400)	12,600)	12,600)
Customer relationships	21,500)	55,000)	55,000)	33,500)	33,500)
Trademarks and tradenames	17,200)	17,200)	16,600)	7,100)	7,100)
Reacquired rights	—)	—)	—)	7,500)	7,500)
Patents	6,511)	6,511)	6,610)	7,414)	7,414)
Acquired intangible long-lived assets, gross carrying amount	157,262)	183,242)	177,610)	68,114)	68,114)
Accumulated amortization	(51,180)	(57,428)	(41,317)	(37,088)	(30,936)
Accumulated impairment loss	(8,450)	(19,258)	(19,258)	(19,258)	(19,258)
Foreign currency translation adjustments	(1,912)	3,153)	13,037)	—)	—)
Intangible assets, net	95,720)	109,709)	130,072)	11,768)	17,920)
Goodwill and intangible assets	503,271)	528,256)	574,889)	75,692)	81,949)

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
Goodwill	Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.	Align Technology Inc. goodwill decreased from 2020 to 2021 and from 2021 to 2022.
Intangible assets, net	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Align Technology Inc. intangible assets, net decreased from 2020 to 2021 and from 2021 to 2022.
Goodwill and intangible assets	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Align Technology Inc. goodwill and intangible assets decreased from 2020 to 2021 and from 2021 to 2022.

Align Technology Inc., adjustments to financial statements

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Adjustment to Total Assets
Total assets (as reported)	5,947,947)	5,942,110)	4,829,683)	2,500,702)	2,052,458)
Less: Goodwill	407,551)	418,547)	444,817)	63,924)	64,029)
Total assets (adjusted)	5,540,396)	5,523,563)	4,384,866)	2,436,778)	1,988,429)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	3,601,358)	3,622,714)	3,233,865)	1,346,169)	1,252,891)
Less: Goodwill	407,551)	418,547)	444,817)	63,924)	64,029)
Stockholders’ equity (adjusted)	3,193,807)	3,204,167)	2,789,048)	1,282,245)	1,188,862)

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).

Align Technology Inc., Financial Data: Reported vs. Adjusted

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Align Technology Inc., adjusted financial ratios

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Total Asset Turnover
Reported total asset turnover	0.63	0.67	0.51	0.96	0.96
Adjusted total asset turnover	0.67	0.72	0.56	0.99	0.99
Financial Leverage
Reported financial leverage	1.65	1.64	1.49	1.86	1.64
Adjusted financial leverage	1.73	1.72	1.57	1.90	1.67
Return on Equity (ROE)
Reported ROE	10.04%	21.31%	54.92%	32.89%	31.94%
Adjusted ROE	11.32%	24.09%	63.67%	34.53%	33.67%
Return on Assets (ROA)
Reported ROA	6.08%	12.99%	36.77%	17.71%	19.50%
Adjusted ROA	6.53%	13.98%	40.50%	18.17%	20.13%

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).

Financial ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Align Technology Inc. adjusted total asset turnover ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Align Technology Inc. adjusted financial leverage ratio increased from 2020 to 2021 and from 2021 to 2022.
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.	Align Technology Inc. adjusted ROE deteriorated from 2020 to 2021 and from 2021 to 2022.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Align Technology Inc. adjusted ROA deteriorated from 2020 to 2021 and from 2021 to 2022.

Align Technology Inc., Financial Ratios: Reported vs. Adjusted

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net revenues	3,734,635)	3,952,584)	2,471,941)	2,406,796)	1,966,492)
Total assets	5,947,947)	5,942,110)	4,829,683)	2,500,702)	2,052,458)
Activity Ratio
Total asset turnover¹	0.63	0.67	0.51	0.96	0.96
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net revenues	3,734,635)	3,952,584)	2,471,941)	2,406,796)	1,966,492)
Adjusted total assets	5,540,396)	5,523,563)	4,384,866)	2,436,778)	1,988,429)
Activity Ratio
Adjusted total asset turnover²	0.67	0.72	0.56	0.99	0.99

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).

2022 Calculations

¹ Total asset turnover = Net revenues ÷ Total assets
= 3,734,635 ÷ 5,947,947 = 0.63

² Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= 3,734,635 ÷ 5,540,396 = 0.67

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Align Technology Inc. adjusted total asset turnover ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Total assets	5,947,947)	5,942,110)	4,829,683)	2,500,702)	2,052,458)
Stockholders’ equity	3,601,358)	3,622,714)	3,233,865)	1,346,169)	1,252,891)
Solvency Ratio
Financial leverage¹	1.65	1.64	1.49	1.86	1.64
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Adjusted total assets	5,540,396)	5,523,563)	4,384,866)	2,436,778)	1,988,429)
Adjusted stockholders’ equity	3,193,807)	3,204,167)	2,789,048)	1,282,245)	1,188,862)
Solvency Ratio
Adjusted financial leverage²	1.73	1.72	1.57	1.90	1.67

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).

2022 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 5,947,947 ÷ 3,601,358 = 1.65

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 5,540,396 ÷ 3,193,807 = 1.73

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Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Align Technology Inc. adjusted financial leverage ratio increased from 2020 to 2021 and from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income	361,573)	772,020)	1,775,888)	442,776)	400,235)
Stockholders’ equity	3,601,358)	3,622,714)	3,233,865)	1,346,169)	1,252,891)
Profitability Ratio
ROE¹	10.04%	21.31%	54.92%	32.89%	31.94%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net income	361,573)	772,020)	1,775,888)	442,776)	400,235)
Adjusted stockholders’ equity	3,193,807)	3,204,167)	2,789,048)	1,282,245)	1,188,862)
Profitability Ratio
Adjusted ROE²	11.32%	24.09%	63.67%	34.53%	33.67%

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).

2022 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 361,573 ÷ 3,601,358 = 10.04%

² Adjusted ROE = 100 × Net income ÷ Adjusted stockholders’ equity
= 100 × 361,573 ÷ 3,193,807 = 11.32%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.	Align Technology Inc. adjusted ROE deteriorated from 2020 to 2021 and from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income	361,573)	772,020)	1,775,888)	442,776)	400,235)
Total assets	5,947,947)	5,942,110)	4,829,683)	2,500,702)	2,052,458)
Profitability Ratio
ROA¹	6.08%	12.99%	36.77%	17.71%	19.50%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net income	361,573)	772,020)	1,775,888)	442,776)	400,235)
Adjusted total assets	5,540,396)	5,523,563)	4,384,866)	2,436,778)	1,988,429)
Profitability Ratio
Adjusted ROA²	6.53%	13.98%	40.50%	18.17%	20.13%

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).

2022 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 361,573 ÷ 5,947,947 = 6.08%

² Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 361,573 ÷ 5,540,396 = 6.53%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Align Technology Inc. adjusted ROA deteriorated from 2020 to 2021 and from 2021 to 2022.

Align Technology Inc. (NASDAQ:ALGN)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Align Technology Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Align Technology Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)