Marketable Securities and Fair Value Measurements

As of September 30, 2017 and December 31, 2016, the estimated fair value of our short-term and long-term marketable securities, classified as available for sale, are as follows (in thousands):

Short-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	62,348	$	—	$	—		$	62,348
Corporate bonds	164,661		31		(61		)	164,631
U.S. government agency bonds	7,769		—		(8		)	7,761
U.S. government treasury bonds	78,370		2		(33		)	78,339
Certificates of deposit	3,375		—		—			3,375
Total marketable securities, short-term	$	316,523	$	33	$	(102	)	$	316,454

Long-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	7,990	$	3	$	—		$	7,993
Corporate bonds	45,815		40		(18		)	45,837
U.S. government treasury bonds	5,025		—		(13		)	5,012
Total marketable securities, long-term	$	58,830	$	43	$	(31	)	$	58,842

Short-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	42,397	$	—	$	(6	)	$	42,391
Corporate bonds	122,788		22		(121		)	122,689
Municipal securities	5,852		—		(5		)	5,847
U.S. government agency bonds	28,903		9		(4		)	28,908
U.S. government treasury bonds	45,146		7		(7		)	45,146
Certificates of deposit	6,000		—		—			6,000
Total marketable securities, short-term	$	251,086	$	38	$	(143	)	$	250,981

Long-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	6,805	$	—	$	(16	)	$	6,789
Corporate bonds	40,889		8		(85		)	40,812
U.S. government treasury bonds	12,016		5		(16		)	12,005
Asset-backed securities	177		—		—			177
Total marketable securities, long-term	$	59,887	$	13	$	(117	)	$	59,783

Cash equivalents are not included in the table above as the gross unrealized gains and losses are not material. We have no short-term or long-term investments that have been in a continuous material unrealized loss position for greater than twelve months as of September 30, 2017 and December 31, 2016. Amounts reclassified to earnings from accumulated other comprehensive income (loss), net related to unrealized gains or losses were not material for the three and nine months ended September 30, 2017 and 2016. For the three and nine months ended September 30, 2017 and 2016, realized gains or losses were not material.

Our fixed-income securities investment portfolio consists of investments that have a maximum effective maturity of 27 months. The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. The unrealized losses are due primarily to changes in credit spreads and interest rates. We expect to realize the full value of all these investments upon maturity or sale. The weighted average remaining duration of these securities was approximately 7 months for both September 30, 2017 and December 31, 2016.

As the carrying value approximates the fair value for our short-term and long-term marketable securities shown in the tables above, the following table summarizes the fair value of our short-term and long-term marketable securities classified by maturity as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017		December 31, 2016
One year or less	$	316,454	$	250,981
Due in greater than one year	58,842		59,783
Total available for sale short-term and long-term marketable securities	$	375,296	$	310,764

Fair Value Measurements

We measure the fair value of financial assets as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Our Level 1 assets consist of money market funds and U.S. government treasury bonds. We did not hold any Level 1 liabilities as of September 30, 2017 and December 31, 2016.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Our Level 2 assets consist of commercial paper, corporate bonds, certificates of deposit, U.S. government agency bonds and our Israeli funds that are mainly invested in insurance policies. We obtain fair values for our Level 2 investments. Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates. We did not hold any Level 2 liabilities as of September 30, 2017 and December 31, 2016.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. Certain investments in private companies contain embedded derivatives, which do not require bifurcation as we elected to measure these investments at fair value. Our Level 3 assets consist of long-term notes receivable. We did not hold any Level 3 liabilities as of September 30, 2017 and December 31, 2016.

The following table summarizes the reconciliation of assets measured and recorded at fair value on a recurring basis using significant unobservable inputs Level 3 (in thousands):



	Long-term Notes Receivable
Balance as of December 31, 2016	$	2,047
Additional notes receivable issued	2,000
Accrued interest receivable	54
Change in fair value recognized in earnings	56
Balance as of September 30, 2017	$	4,157

Refer to Note 9 "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for more information on our investment with a privately held company.

The following tables summarize our financial assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):



Description	Balance as of September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	177,486	$	177,486	$	—	$	—
Commercial paper	13,295		—		13,295		—
Short-term investments:
Commercial paper	62,348		—		62,348		—
Corporate bonds	164,631		—		164,631		—
U.S. government agency bonds	7,761		—		7,761		—
U.S. government treasury bonds	78,339		78,339		—		—
Certificates of deposit	3,375		—		3,375		—
Long-term investments:
U.S. government agency bonds	7,993		—		7,993		—
Corporate bonds	45,837		—		45,837		—
U.S. government treasury bonds	5,012		5,012		—		—
Prepaid expenses and other current assets:
Israeli funds	3,310		—		3,310		—
Other assets:
Long-term notes receivable	4,157		—		—		4,157
	$	573,544	$	260,837	$	308,550	$	4,157



Description	Balance as of December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	87,179	$	87,179	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate bonds	750		—		750		—
Short-term investments:
Commercial paper	42,391		—		42,391		—
Corporate bonds	122,689		—		122,689		—
Municipal securities	5,847		—		5,847		—
U.S. government agency bonds	28,908		—		28,908		—
U.S. government treasury bonds	45,146		45,146		—		—
Certificates of deposit	6,000		—		6,000		—
Long-term investments:
U.S. government agency bonds	6,789		—		6,789		—
Corporate bonds	40,812		—		40,812		—
U.S. government treasury bonds	12,005		12,005		—		—
Asset-backed securities	177		—		177		—
Prepaid expenses and other current assets:
Israeli funds	2,956		—		2,956		—
Other assets:
Long-term notes receivable	2,047		—		—		2,047
	$	406,195	$	144,330	$	259,818	$	2,047

Derivative Financial Instruments

We have in the past and may in the future enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations associated with certain assets and liabilities. We had no foreign exchange forward contracts outstanding as of September 30, 2017 and no net gain or loss from the settlement of foreign currency forward contracts during the three and nine months ended September 30, 2017. The net gain or loss on forward contracts was not material during the three and nine months ended September 30, 2016.

Balance Sheet Components

9 Months Ended

Sep. 30, 2017

Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Raw materials	$	15,666	$	9,793
Work in process	12,819		10,773
Finished goods	8,456		6,565
Total inventories	$	36,941	$	27,131

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Accrued payroll and benefits	$	84,418	$	79,214
Accrued expenses	38,983		21,811
Accrued income taxes	10,486		4,210
Accrued sales rebate	9,293		10,342
Accrued sales tax and value added tax	8,693		5,032
Accrued professional fees	8,181		3,604
Accrued warranty	5,055		3,841
Other accrued liabilities	8,742		6,278
Total accrued liabilities	$	173,851	$	134,332

Warranty

We regularly review the accrued balances and update these balances based on historical warranty trends. Actual warranty costs incurred have not materially differed from those accrued; however, future actual warranty costs could differ from the estimated amounts.

Warranty accrual as of September 30, 2017 and 2016 consists of the following activity (in thousands):



	Nine Months Ended September 30,
	2017			2016
Balance at beginning of period	$	3,841		$	2,638
Charged to cost of revenues	5,201			3,440
Actual warranty expenditures	(3,987		)	(2,681		)
Balance at end of period	$	5,055		$	3,397

Equity Method Investments	9 Months Ended
Equity Method Investments	Sep. 30, 2017
Equity Method Investments and Joint Ventures [Abstract]
Equity Method Investments	Equity Method Investments On July 25, 2016, we acquired a 17% equity interest, on a fully diluted basis, in SmileDirectClub, LLC (“SDC”) for $46.7 million. The investment is accounted for under an equity method investment and the investee, SDC, is considered a related party. The investment is reported in our Condensed Consolidated Balance Sheet under equity method investments, and we record our proportional share of SDC's losses within equity in losses of investee, net of tax, in our Condensed Consolidated Statement of Operations. On July 24, 2017, we purchased an additional 2% equity interest in SDC for $12.8 million. As a result of this purchase, we hold a 19% equity interest in SDC on a fully diluted basis. As of September 30, 2017, the balance of our equity method investments was $52.9 million. Concurrently with the investment on July 25, 2016, we also entered into a supply agreement with SDC to manufacture clear aligners for SDC's doctor-led, at-home program for simple teeth straightening. The term of the supply agreement expires on December 31, 2019. We commenced supplying aligners to SDC in October 2016. The sale of aligners to SDC and the income from the supply agreement are reported in our Clear Aligner business segment after eliminating outstanding intercompany transactions. As of September 30, 2017, the balance of accounts receivable due from SDC is $12.7 million. On July 25, 2016, we entered into a Loan and Security Agreement with SDC where we agreed to provide a loan of up to $30.0 million in one or more advances to SDC. As of September 30, 2017, $17.0 million of advances under the Loan Facility were outstanding (Refer to Note 9 "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for information on the Loan and Security Agreement with SDC).

Business Combinations	9 Months Ended
Business Combinations	Sep. 30, 2017
Business Combinations [Abstract]
Business Combinations	Business Combinations During the first quarter of 2017, we completed the acquisitions of certain of our distributors for the total estimated cash consideration of approximately $9.5 million including cash acquired. We preliminarily recorded $1.8 million of net tangible liabilities, $8.2 million of identifiable intangible assets and $3.1 million of goodwill. The preliminary fair values of net tangible liabilities and identifiable intangible assets acquired are based on preliminary valuations, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The goodwill is primarily related to the benefit we expect to obtain from direct sales as we believe that the transition from our distributor arrangements to a direct sales model will increase our net revenues in the region as we will experience higher average sales prices (“ASP”) compared to our discounted ASP under the distribution agreements. The goodwill is not deductible for tax purposes. Pro forma results of operations for these acquisitions have not been presented as they are not material to our results of operations, either individually or in aggregate, for the three and nine months ended September 30, 2017.

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 805
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463

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-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479

Reference 10: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472

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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472

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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472

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-Name Accounting Standards Codification
-Topic 805
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-URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472

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-Topic 805
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-URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463

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-Topic 805
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-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479

+ Details

Goodwill and Long-lived Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets

Goodwill

The change in the carrying value of goodwill for the nine months ended September 30, 2017, all attributable to our Clear Aligner reporting unit, is as follows (in thousands):



	Total
Balance as of December 31, 2016	$	61,044
Goodwill from distributor acquisitions	3,247
Adjustments¹	324
Balance as of September 30, 2017	$	64,615

¹The adjustments to goodwill during the period were related to foreign currency translation and purchase accounting adjustments within the measurement period.

During the fourth quarter of fiscal 2016, we performed the annual goodwill impairment testing and found no impairment as the fair value of our Clear Aligner reporting unit was significantly in excess of the carrying value.

Intangible Long-Lived Assets

Acquired intangible long-lived assets are being amortized as follows (in thousands):



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of September 30, 2017		Accumulated Amortization			Accumulated Impairment Loss			Net Carrying Value as of September 30, 2017
Trademarks	15	$	7,100	$	(1,734	)	$	(4,179	)	$	1,187
Existing technology	13	12,600		(4,563		)	(4,328		)	3,709
Customer relationships	11	33,500		(14,216		)	(10,751		)	8,533
Reacquired rights¹	3	7,500		(749		)	—			6,751
Patents	8	6,316		(1,307		)	—			5,009
Other	2	618		(352		)	—			266
Total intangible assets		$	67,634	$	(22,921	)	$	(19,258	)	$	25,455



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2016		Accumulated Amortization			Accumulated Impairment Loss			Net Carrying Value as of December 31, 2016
Trademarks	15	$	7,100	$	(1,631	)	$	(4,179	)	$	1,290
Existing technology	13	12,600		(4,141		)	(4,328		)	4,131
Customer relationships	11	33,500		(12,819		)	(10,751		)	9,930
Patents	8	6,316		(713		)	—			5,603
Total intangible assets		$	59,516	$	(19,304	)	$	(19,258	)	$	20,954

¹ The fair value of reacquired rights obtained from distributor acquisitions during the the first quarter of fiscal year 2017 is valued using the income approach. In addition, we effectively settled the pre-existing relationship with the distributors by assessing whether the distributor agreements include favorable or unfavorable terms compared to current market rates. Based on the assessment, we determined that the distributor agreements had terms that are consistent with market rates and, therefore, no settlement gains or losses are recorded associated with the acquisitions during the first quarter of fiscal year 2017.

The total estimated annual future amortization expense for these acquired intangible assets as of September 30, 2017 is as follows (in thousands):




Remainder of 2017	$	2,215
2018	6,002
2019	5,887
2020	3,772
2021	3,349
Thereafter	4,230
Total	$	25,455

Amortization for the nine months ended September 30, 2017 was $4.7 million.

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

Credit Facilities	9 Months Ended
Credit Facilities	Sep. 30, 2017
Notes To Financial Statements [Abstract]
Credit Facilities	Credit Facilities The credit facility provides for a $50.0 million revolving line of credit with a $10.0 million letter of credit sublimit. The credit facility requires us to comply with specific financial conditions and performance requirements. On February 10, 2017, we amended the credit facility and extended the maturity date to March 22, 2018. The loan bears interest, at our option, at a fluctuating rate per annum equal to the daily one-month adjusted LIBOR rate plus a spread of 1.75% or an adjusted LIBOR rate (based on one, three, six or twelve-month interest periods) plus a spread of 1.75%. As of September 30, 2017, we had no outstanding borrowings under this credit facility and were in compliance with the conditions and performance requirements. On July 24, 2017, we amended the credit facility's negative covenants to allow for a Costa Rica building purchase, an additional equity interest in SDC and an increase in SDC's loan limit (Refer to Note 9 "Equity Method Investments" of the Notes to Condensed Consolidated Financial Statements for information on the additional equity interest in SDC and Refer to Note 9 "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for information on the Costa Rica building purchase and SDC loan amendment).

Legal Proceedings (Notes)	9 Months Ended
Legal Proceedings (Notes)	Sep. 30, 2017
Legal Proceedings [Abstract]
Legal Proceedings	Legal Proceedings Securities Class Action Lawsuit On November 28, 2012, plaintiff City of Dearborn Heights Act 345 Police & Fire Retirement System filed a lawsuit against Align, Thomas M. Prescott (“Mr. Prescott”), Align’s former President and Chief Executive Officer, and Kenneth B. Arola (“Mr. Arola”), Align’s former Vice President, Finance and Chief Financial Officer, in the United States District Court for the Northern District of California on behalf of a purported class of purchasers of our common stock (the “Securities Action”). On July 11, 2013, an amended complaint was filed, which named the same defendants, on behalf of a purported class of purchasers of our common stock between January 31, 2012 and October 17, 2012. The amended complaint alleged that Align, Mr. Prescott and Mr. Arola violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and that Mr. Prescott and Mr. Arola violated Section 20(a) of the Securities Exchange Act of 1934. Specifically, the amended complaint alleged that during the purported class period defendants failed to take an appropriate goodwill impairment charge related to the April 29, 2011 acquisition of Cadent Holdings, Inc. in the fourth quarter of 2011, the first quarter of 2012 and the second quarter of 2012, which rendered our financial statements and projections of future earnings materially false and misleading and in violation of U.S. GAAP. The amended complaint sought monetary damages in an unspecified amount, costs and attorneys’ fees. On December 9, 2013, the court granted defendants’ motion to dismiss with leave for plaintiff to file a second amended complaint. Plaintiff filed a second amended complaint on January 8, 2014 on behalf of the same purported class. The second amended complaint states the same claims as the amended complaint. On August 22, 2014, the court granted our motion to dismiss without leave to amend. On September 22, 2014, Plaintiff filed a notice of appeal to the Ninth Circuit Court of Appeals. Briefing for the appeal was completed in May 2015 and the Ninth Circuit held oral arguments in October 2016. On May 5, 2017, the Ninth Circuit affirmed the district court's dismissal of the complaint. Plaintiff filed a request for rehearing that was denied by the Ninth Circuit on June 14, 2017. Plaintiff had 90 days following the June 14 Order to file a petition for a writ of certiorari with the United States Supreme Court which has passed and this case has been dismissed without leave to amend. Shareholder Derivative Lawsuit On February 1, 2013, plaintiff Gary Udis filed a shareholder derivative lawsuit against several of Align’s current and former officers and directors in the Superior Court of California, County of Santa Clara. The complaint alleges that our reported income and earnings were materially overstated because of a failure to timely write down goodwill related to the April 29, 2011 acquisition of Cadent Holdings, Inc., and that defendants made allegedly false statements concerning our forecasts. The complaint asserts various state law causes of action, including claims of breach of fiduciary duty, unjust enrichment, and insider trading, among others. The complaint seeks unspecified damages on behalf of Align, which is named solely as nominal defendant against whom no recovery is sought. The complaint also seeks an order directing Align to reform and improve its corporate governance and internal procedures, and seeks restitution in an unspecified amount, costs, and attorneys’ fees. On July 8, 2013, an Order was entered staying this derivative lawsuit until an initial ruling on our first motion to dismiss the Securities Action. On January 15, 2014, an Order was entered staying this derivative lawsuit until an initial ruling on our second motion to dismiss the Securities Action. On October 14, 2014, an Order was entered staying this derivative lawsuit until a ruling by the Ninth Circuit in the Securities Action discussed above. On June 28, 2017, the Court entered an Order dismissing this action with prejudice pursuant to a joint stipulation between the parties. In addition, in the course of Align's operations, Align is involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. Regardless of the outcome, these proceedings can have an adverse impact on us because of defense costs, diversion of management resources, and other factors. Although the results of complex legal proceedings are difficult to predict and Align's view of these matters may change in the future as litigation and events related thereto unfold; Align currently does not believe that these matters, individually or in the aggregate, will materially affect Align's financial position, results of operations or cash flows.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies

Operating Leases

As of September 30, 2017, minimum future lease payments for non-cancelable operating leases are as follows (in thousands):



Fiscal Year Ending December 31,	Operating Leases
Remainder of 2017	$	3,072
2018	12,785
2019	11,164
2020	8,503
2021	7,435
Thereafter	13,558
Total minimum future lease payments	$	56,517

Other Commitments

On July 25, 2016, we entered into a Loan and Security Agreement (the "Loan Agreement") with SmileDirectClub, LLC ("SDC") where we agreed to provide a loan of up to $15.0 million in one or more advances to SDC (the "Loan Facility"). On July 24, 2017, we amended the Loan Agreement with SDC to increase the line of credit up to $30.0 million. Available advances under the Loan Facility are subject to a borrowing base of 80% of SDC's eligible accounts receivable, determined in accordance with the terms of the Loan Agreement, and the satisfaction of other customary conditions. The advances bear interest, paid quarterly, at the rate of 7% per annum. Advances that are repaid or prepaid may be reborrowed. All outstanding principal and accrued and unpaid interest on the advances are due and payable on July 25, 2021. SDC's obligations in respect of the Loan Agreement are collateralized by a security interest in substantially all of SDC's assets. As of September 30, 2017, $17.0 million of advances under the Loan Facility were outstanding (Refer to Note 4 "Equity Method Investments" of the Notes to Condensed Consolidated Financial Statements for more information on our investments in SDC).

We have entered into certain investments with a privately held company where we have committed to purchase up to $5.0 million in convertible promissory notes. The first convertible promissory note was issued on July 14, 2016 for $2.0 million and a second convertible promissory note was issued on June 5, 2017 for $2.0 million. Both notes are outstanding as of September 30, 2017. The remaining $1.0 million available is conditioned upon achievement of certain business milestones. The notes all mature on December 30, 2018 and accrue interest annually at 2.5%.

On June 30, 2017, we entered into a non-cancelable Addendum to the Master Subscription Agreement with a software company to renew our software license subscription for the total price of $50.0 million over the next three years starting on January 1, 2018.

On July 24, 2017, we entered into a Purchase and Sale Agreement with Belen Business Center CR, S.A. to purchase a building located in the Republic of Costa Rica for a purchase price of $26.1 million. On July 28, 2017, we made the first payment of $5.2 million for the purchase.

Off-Balance Sheet Arrangements

As of September 30, 2017, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Indemnification Provisions

In the normal course of business to facilitate transactions in our services and products, we indemnify certain parties: customers, vendors, lessors and other parties with respect to certain matters, including, but not limited to, services to be provided by us and intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of September 30, 2017, we did not have any material indemnification claims that were probable or reasonably possible.

Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Stockholders' Equity

Summary of Stock-Based Compensation Expense

As of September 30, 2017, the 2005 Incentive Plan (as amended) has a total reserve of 27,783,379 shares of which 6,920,114 shares are available for issuance.

Stock-based compensation is based on the estimated fair value of awards, net of estimated forfeitures, and recognized over the requisite service period. Estimated forfeitures are based on historical experience at the time of grant and may be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation related to all of our stock-based awards and employee stock purchases for the three and nine months ended September 30, 2017 and 2016 is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Cost of net revenues	$	833	$	995	$	2,526	$	2,888
Selling, general and administrative	11,880		10,797		34,814		31,474
Research and development	2,254		1,919		6,684		5,572
Total stock-based compensation	$	14,967	$	13,711	$	44,024	$	39,934

Stock Options

We have not granted options since 2011 and all outstanding options were fully vested and associated stock-based compensation expenses were recognized as of December 31, 2015. Activity for the nine months ended September 30, 2017 under the stock option plans is set forth below (in thousands, except years and per share amounts):



	Number of Shares Underlying Stock Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	222		$	14.90
Exercised	(110	)	16.19
Cancelled or expired	(4	)	18.16
Outstanding as of September 30, 2017	108		$	13.47	0.90	$	18,711
Vested and expected to vest at September 30, 2017	108		$	13.47	0.90	$	18,711
Exercisable at September 30, 2017	108		$	13.47	0.90	$	18,711

Restricted Stock Units (“RSUs”)

The fair value of nonvested RSUs is based on our closing stock price on the date of grant. A summary for the nine months ended September 30, 2017 is as follows (in thousands, except years and per share amounts):



	Shares Underlying RSUs		Weighted Average Grant Date Fair Value		Weighted Remaining Vesting Period (in years)	Aggregate Intrinsic Value
Nonvested as of December 31, 2016	1,789		$	58.39
Granted	456		110.40
Vested and released	(785	)	53.61
Forfeited	(71	)	67.22
Nonvested as of September 30, 2017	1,389		77.72		1.34	$	258,838

As of September 30, 2017, we expect to recognize $76.6 million of total unamortized compensation cost, net of estimated forfeitures, related to RSUs over a weighted average period of 2.3 years.

Market-performance Based Restricted Stock Units (“MSUs”)

On an annual basis, we grant market-performance based restricted stock units (“MSUs”) to our executive officers. Each MSU represents the right to one share of Align’s common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Align’s stock price relative to the performance of the NASDAQ Composite Index over the vesting period, generally two to three years, up to 200% of the MSUs initially granted.

The following table summarizes the MSU performance for the nine months ended September 30, 2017 (in thousands, except years):



	Number of Shares Underlying MSUs		Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Period (in years)	Aggregate Intrinsic Value
Nonvested as of December 31, 2016	520		$	60.49
Granted	201		88.80
Vested and released	(283	)	53.11
Forfeited	(10	)	64.50
Nonvested as of September 30, 2017	428		78.53		1.22	$	79,742

As of September 30, 2017, we expect to recognize $14.7 million of total unamortized compensation cost, net of estimated forfeitures, related to MSUs over a weighted average period of 1.2 years.

Employee Stock Purchase Plan ("ESPP")

In May 2010, our shareholders approved the 2010 Employee Stock Purchase Plan ("2010 Purchase Plan") which will continue until terminated by either the Board of Directors or its administrator. The maximum number of shares available for purchase under the 2010 Purchase Plan is 2,400,000 shares. As of September 30, 2017, we have 735,301 shares available for future issuance.

The fair value of the option component of the 2010 Purchase Plan shares was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Expected term (in years)	1.2			1.2			1.2			1.2
Expected volatility	28.8		%	27.4		%	26.8		%	30.5		%
Risk-free interest rate	1.2		%	0.5		%	1.0		%	0.7		%
Expected dividends	—			—			—			—
Weighted average fair value at grant date	$	47.02		$	24.44		$	31.36		$	22.23

As of September 30, 2017, there was $4.0 million of total unamortized compensation costs related to employee stock purchases which we expect to be recognized over a weighted average period of 0.9 year.

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

Accounting for Income Taxes

Common Stock Repurchase	9 Months Ended
Common Stock Repurchase	Sep. 30, 2017
Notes To Financial Statements [Abstract]
Common Stock Repurchase	Common Stock Repurchase April 2014 Repurchase Program In April 2014, we announced that our Board of Directors had authorized a stock repurchase program ("April 2014 Repurchase Plan") pursuant to which we may purchase up to $300.0 million of our common stock over the next three years. During the first quarter of 2017, we repurchased on the open market approximately 0.04 million shares of our common stock at an average price of $96.37 per share, including commission for an aggregate purchase price of approximately $3.8 million, completing the April 2014 Repurchase Program. All repurchased shares were retired. April 2016 Repurchase Program In April 2016, we announced that our Board of Directors had authorized an additional plan to repurchase up to $300.0 million of the Company's stock ("April 2016 Repurchase Program"). On May 2, 2017, we entered into an accelerated share repurchase ("ASR") to repurchase $50.0 million of our common stock ("2017 ASR"). The 2017 ASR was completed on August 3, 2017. The final number of shares repurchased was based on our volume-weighted average stock price during the term of the transaction, less an agreed upon discount. We received a total of approximately 0.4 million shares at a weighted average share price of $146.48 under the 2017 ASR. All repurchased shares were retired. As of September 30, 2017, we have $250.0 million remaining under the April 2016 Repurchase Plan.

Accounting for Income Taxes

9 Months Ended

Sep. 30, 2017

Our provision for income taxes was $18.3 million and $11.7 million for the three months ended September 30, 2017 and 2016, respectively, representing effective tax rates of 17.9% and 18.4%, respectively. Our effective tax rate differs from the statutory federal income tax rate of 35% mainly as a result of certain foreign earnings, primarily from the Netherlands and Costa Rica, being taxed at lower tax rates. The decrease in effective tax rate for the three months ended September 30, 2017 compared to the same period in 2016 is primarily attributable to the adoption of ASU 2016-09 in 2017 which requires excess tax benefits related to stock-based compensation to be recognized as a reduction of income tax expense, and certain one-time tax charges recognized as a result of the implementation of the international corporate restructure on July 1, 2016 that is no longer pertinent to the current period.

Our provision for income taxes was $26.5 million and $39.2 million for the nine months ended September 30, 2017 and 2016, respectively, representing effective tax rates of 10.5% and 21.6%, respectively. For the nine months ended September 30, 2017, our effective tax rate differs from the statutory federal income tax rate of 35% mainly as a result of certain foreign earnings, primarily from the Netherlands and Costa Rica, being taxed at lower tax rates and the recognition of excess tax benefits related to stock-based compensation in accordance with the adoption of ASU 2016-09. For the nine months ended September 30, 2016, our effective tax rate differs from the statutory federal income tax rate of 35% due to certain foreign earnings, most significantly in Costa Rica and the Netherlands, which is subject to lower tax rates, and the impact from our international corporate restructuring that occurred on July 1, 2016, partially offset by the impact of certain stock-based compensation charges and unrecognized tax benefits. The decrease in the effective tax rate for the nine months ended September 30, 2017 compared to the same period in 2016 is primarily attributable to the adoption of ASU 2016-09 in the first quarter of fiscal year 2017 which requires excess tax benefits related to stock-based compensation to be recognized as a reduction of income tax expense. In addition, the effective tax rate for the prior period was higher due to certain one-time tax charges recognized as a result of the implementation of the international corporate restructure during the third quarter of fiscal year 2016.

For the three and nine months ended September 30, 2017, we recognized excess tax benefits of $1.7 million and $24.1 million, respectively, in our provision for income taxes.

We exercise significant judgment in regards to estimates of future market growth, forecasted earnings and projected taxable income in determining the provision for income taxes and for purposes of assessing our ability to utilize any future benefit from deferred tax assets.

Our total gross unrecognized tax benefits, excluding interest and penalties, was $46.1 million and $46.4 million as of September 30, 2017 and December 31, 2016, respectively, all of which would impact our effective tax rate if recognized. Our total interest and penalties accrued as of September 30, 2017 was $2.6 million. We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months.

We file U.S. federal, U.S. state, and non-U.S. income tax returns. Our major tax jurisdictions include U.S. federal, the State of California and the Netherlands. For U.S. federal and state tax returns, we are no longer subject to tax examinations for years before 2000. With few exceptions, we are no longer subject to examination by foreign tax authorities for years before 2007. Our subsidiary in Israel is under audit by the local tax authorities for calendar years 2006 through 2013.

On July 1, 2016, we implemented a new international corporate structure. This changed the structure of our international procurement and sales operations, as well as realigned the ownership and use of intellectual property among our wholly-owned subsidiaries. We continue to anticipate that an increasing percentage of our consolidated pre-tax income will be derived from and reinvested in our foreign operations. We believe that income taxed in certain foreign jurisdictions at a lower rate relative to the U.S. federal statutory rate will have a beneficial impact on our worldwide effective tax rate over time.

In June 2017, the Costa Rica Ministry of Foreign Trade, an agency of the Government of Costa Rica, granted an extension of certain income tax incentives for an additional twelve year period, which was originally granted in 2002 and was set to expire in June 2017. Under these incentives, all of the income in Costa Rica is subject to a reduced tax rate. In order to receive the benefit of these incentives, we must hire specified numbers of employees and maintain certain minimum levels of fixed asset investment in Costa Rica. If we do not fulfill these conditions for any reason, our incentive could lapse and our income in Costa Rica would be subject to taxation at higher rates which could have a negative impact on our operating results. The Costa Rica corporate income tax rate that would apply, absent the incentives, is 30% for 2017 and 2016. For the three and nine months ended September 30, 2017, the reduction in income taxes was minimal primarily due to the new international corporate structure implemented on July 1, 2016. For the three and nine months ended September 30, 2016, income taxes were reduced by $0.3 million with minimal impact to diluted net income per share and $17.5 million representing a benefit to diluted net income per share of $0.21, respectively.

We maintain sufficient cash reserves in the U.S. and do not intend to repatriate our foreign earnings which have not already been subject to U.S. income tax. As a result, income taxes have not been provided on these foreign earnings. If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we would be subject to additional U.S. income taxes subject to an adjustment for foreign tax credits and foreign withholding taxes. We intend to use the undistributed earnings for local operating expansions and to meet local operating working capital needs. In addition, a significant amount of the cash earned by foreign subsidiaries is deployed to effect this international restructure.

Net Income Per Share

9 Months Ended

Sep. 30, 2017

Net Income Per Share

Net Income per Share

Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock. Potential common stock, computed using the treasury stock method, includes RSU, MSU, stock options and our ESPP.

The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands, except per share amounts):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Numerator:
Net income	$	82,555	$	51,367	$	221,154	$	142,061
Denominator:
Weighted-average common shares outstanding, basic	80,163		79,977		80,086		79,920
Dilutive effect of potential common stock	1,626		1,489		1,671		1,603
Total shares, diluted	81,789		81,466		81,757		81,523

Net income per share, basic	$	1.03	$	0.64	$	2.76	$	1.78
Net income per share, diluted	$	1.01	$	0.63	$	2.71	$	1.74

For the three and nine months ended September 30, 2017 and 2016, potentially dilutive shares excluded from diluted net income per share related to RSUs, MSUs, and ESPP were not material.

Segments and Geographical Information

9 Months Ended

Sep. 30, 2017

Segments and Geographical Information

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. We report segment information based on the management approach. The management approach designates the internal reporting used by CODM for decision making and performance assessment as the basis for determining our reportable segments. The performance measures of our reportable segments include net revenues and gross profit. In the fourth quarter of 2016, management decided to change the way it internally assesses the performance of our reportable segments by including income from operations measure in the performance metrics. 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 and accounting and finance, legal and regulatory, and other separately managed general and administrative costs outside the operating segments. We have included the new performance measure in the prior period presentation to conform to the current year's presentation.

We group our operations into two reportable segments: Clear Aligner segment and Scanner segment.


•	Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:


◦	Comprehensive Products include our Invisalign Full, Teen and Assist products.


◦	Non-Comprehensive Products include our Express/Lite products in addition to revenues from the sale of aligners to SmileDirectClub (“SDC”) under our supply agreement, which commenced in the fourth quarter of 2016. Revenue from SDC is recorded after eliminating outstanding intercompany transactions.


◦	Non-Case includes our Vivera retainers along with our training and ancillary products for treating malocclusion.


•	Our Scanner segment consists of intraoral scanning systems and additional services available with the intraoral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.

These reportable operating segments are based on how our CODM views and evaluates our operations as well as allocation of resources. The following information relates to these segments (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
Net revenues	2017			2016			2017			2016
Clear Aligner	$	341,611		$	243,668		$	945,046		$	706,802
Scanner	43,656			34,921			107,044			79,869
Total net revenues	$	385,267		$	278,589		$	1,052,090		$	786,671
Gross profit
Clear Aligner	$	266,285		$	189,270		$	737,046		$	552,663
Scanner	26,203			19,932			61,984			42,382
Total gross profit	$	292,488		$	209,202		$	799,030		$	595,045
Income from operations
Clear Aligner	$	154,614		$	102,431		$	403,264		$	306,789
Scanner	13,525			11,977			28,324			20,333
Unallocated corporate expenses	(69,376		)	(52,329		)	(187,583		)	(146,573		)
Total income from operations	$	98,763		$	62,079		$	244,005		$	180,549
Depreciation and amortization
Clear Aligner	$	5,643		$	3,541		$	15,607		$	10,163
Scanner	1,130			761			3,248			2,853
Unallocated corporate expenses	3,199			2,599			7,860			3,770
Total depreciation and amortization	$	9,972		$	6,901		$	26,715		$	16,786

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total segment income from operations	$	168,139		$	114,408		$	431,588		$	327,122
Unallocated corporate expenses	(69,376		)	(52,329		)	(187,583		)	(146,573		)
Total income from operations	98,763			62,079			244,005			180,549
Interest and other income (expense), net	3,750			1,463			8,607			1,161
Net income before provision for income taxes and equity in losses of investee	$	102,513		$	63,542		$	252,612		$	181,710

Geographical Information

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Net revenues⁽¹⁾:
United States ⁽²⁾	$	217,758	$	168,501	$	608,052	$	516,924
The Netherlands ⁽²⁾	127,307		87,051		357,278		191,049
Other International	40,202		23,037		86,760		78,698
Total net revenues	$	385,267	$	278,589	$	1,052,090	$	786,671

⁽¹⁾Net revenues are attributed to countries based on location of where revenue is recognized.

⁽²⁾ Effective July 2016, we implemented a new international corporate structure. This changed the structure of our international procurement and sales operations.

Tangible long-lived assets are presented below by geographic area (in thousands):



	September 30, 2017		December 31, 2016
Long-lived assets⁽¹⁾:
The Netherlands	$	142,591	$	111,515
United States	125,172		43,278
Mexico	21,537		17,918
Other International	6,601		2,456
Total long-lived assets	$	295,901	$	175,167

⁽¹⁾Long-lived assets are attributed to countries based on entity that owns the assets.

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599

+ Details

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2017
Notes To Financial Statements [Abstract]
Basis of presentation	Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Align Technology, Inc. (“we”, “our”, or “Align”) in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and contain all adjustments, including normal recurring adjustments, necessary to state fairly our results of operations for the three and nine months ended September 30, 2017 and 2016, our comprehensive income for the three and nine months ended September 30, 2017 and 2016, our financial position as of September 30, 2017 and our cash flows for the nine months ended September 30, 2017 and 2016. The Condensed Consolidated Balance Sheet as of December 31, 2016 was derived from the December 31, 2016 audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any other future period, and we make no representations related thereto. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and the Consolidated Financial Statements and notes thereto included in Items 7, 7A and 8, respectively, in our Annual Report on Form 10-K for the year ended December 31, 2016.
Out of period adjustment	Out of Period Adjustment During the second quarter of 2017, we recorded an out of period adjustment of $1.9 million that resulted in a decrease in interest and other income (expense), net and an increase in accrued liabilities. We do not believe the out of period adjustment is material to the Consolidated Financial Statements for the three and nine months ended September 30, 2017 or to prior period's Consolidated Financial Statements.
Use of estimates	Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America (“U.S.”) requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates, including those related to the fair values of financial instruments, long-lived assets and goodwill, equity method investments, useful lives of intangible assets and property and equipment, revenue recognition, stock-based compensation, equity losses of investee, income taxes and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Recent Accounting Pronouncements	Recent Accounting Pronouncements (i) New Accounting Updates Recently Adopted In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting" (Topic 718). We adopted the standard in the first quarter of fiscal year 2017. With this adoption, excess tax benefits related to stock-based compensation expense are reflected in our condensed consolidated statement of operations as a component of the provision for income taxes instead of additional paid-in capital in our condensed consolidated balance sheet. We elected to apply the standard on a prospective basis. In addition, we elected to continue to estimate expected forfeitures rather than as they occur to determine the amount of compensation cost to be recognized in each period. During the nine months ended September 30, 2017, we recognized excess tax benefits of $24.1 million in our provision for income taxes. Excess tax benefits from share-based payment arrangements are classified as an operating activity in our condensed consolidated statement of cash flows in the same manner as other cash flows related to income taxes. In October 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory," (Topic 740) which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We early adopted the standard in the first quarter of fiscal year 2017 by applying the modified retrospective approach. During the first quarter of fiscal year 2017, we recognized a $1.3 million decrease to retained earnings as a cumulative-effect adjustment. (ii) Recent Accounting Updates Not Yet Effective In May 2014, the FASB released ASU 2014-9, "Revenue from Contracts with Customers," (Topic 606) to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of the standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for the goods or services. The new standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In addition, the new standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We plan to adopt the standard in the first quarter of fiscal year 2018 by applying the full retrospective method. Our ability to adopt using the full retrospective method is dependent on the completion of our analysis of information necessary to recast prior period financial statements. We are continuing to evaluate the accounting, transition and disclosure requirements of the standard and are in process of assessing the financial statement impact of adoption including, but not limited to, volume-based discount programs, sales commissions and the identification of performance obligations. The adoption of the standard may have a material impact on our consolidated financial statements and related disclosures. In April 2016, the FASB released ASU 2016-10, "Revenue from Contracts with Customers," to clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the principles for those areas of the ASU 2014-9 issued in May 2014. The effective date and the transition requirement of the amendments in this update are the same as the effective date and transition requirements of Topic 606. In May 2016, the FASB released ASU 2016-12, "Revenue from Contracts with Customers," to address certain issues in the Topic 606 guidance on assessing the collectability, presentation of sales taxes, non-cash consideration, and completed contracts and contract modifications at transition. The ASU provides narrow-scope improvements and practical expedients to the ASU 2014-9 issued in May 2014. The effective date and the transition requirement of the amendments in this update are the same as the effective date and transition requirements of Topic 606. In December 2016, the FASB released ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," to clarify certain aspects of guidance in the Topic 606 including its scope, disclosure requirements and contract cost accounting, while retaining the principles for those areas of the ASU 2014-9 issued in May 2014. The effective date and the transition requirement of the amendments in this update are the same as the effective date and transition requirements of Topic 606. In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the standard is permitted. We plan to adopt the standard in the first quarter of fiscal year 2019 by electing practical expedients available in the standard. While we are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements, we expect the adoption will have a material increase to the assets and liabilities of our consolidated balance sheet. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses” (Topic 326). The FASB issued this update to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this update replace the existing guidance of incurred loss impairment methodology with an approach that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments" (Topic 230). This FASB clarifies the presentation and classification of certain cash receipts and cash payments in the statements of cash flows. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2017. Early adoption is permitted. We do not expect the guidance will have a material impact on our consolidated statements of cash flows. In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows - Restricted Cash," which provides guidance to address the classification and presentation of changes in restricted cash in the statements of cash flows. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2017 on a retrospective basis, and early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” to clarify the definition of a business when evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2017 on a prospective basis, and early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," to simplify the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. Under the amendments, an entity will recognize an impairment charge for the amount by which the carrying value exceeds the fair value. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2019 on a prospective basis, and early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, "Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting," to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2017 on a prospective basis, and early adoption is permitted. While we are currently evaluating the impact of this guidance, we do not expect the guidance will have a material impact on our consolidated financial statements and related disclosures.

Marketable Securities and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Short-Term And Long-Term Marketable Securities

As of September 30, 2017 and December 31, 2016, the estimated fair value of our short-term and long-term marketable securities, classified as available for sale, are as follows (in thousands):

Short-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	62,348	$	—	$	—		$	62,348
Corporate bonds	164,661		31		(61		)	164,631
U.S. government agency bonds	7,769		—		(8		)	7,761
U.S. government treasury bonds	78,370		2		(33		)	78,339
Certificates of deposit	3,375		—		—			3,375
Total marketable securities, short-term	$	316,523	$	33	$	(102	)	$	316,454

Long-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	7,990	$	3	$	—		$	7,993
Corporate bonds	45,815		40		(18		)	45,837
U.S. government treasury bonds	5,025		—		(13		)	5,012
Total marketable securities, long-term	$	58,830	$	43	$	(31	)	$	58,842

Short-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	42,397	$	—	$	(6	)	$	42,391
Corporate bonds	122,788		22		(121		)	122,689
Municipal securities	5,852		—		(5		)	5,847
U.S. government agency bonds	28,903		9		(4		)	28,908
U.S. government treasury bonds	45,146		7		(7		)	45,146
Certificates of deposit	6,000		—		—			6,000
Total marketable securities, short-term	$	251,086	$	38	$	(143	)	$	250,981

Long-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	6,805	$	—	$	(16	)	$	6,789
Corporate bonds	40,889		8		(85		)	40,812
U.S. government treasury bonds	12,016		5		(16		)	12,005
Asset-backed securities	177		—		—			177
Total marketable securities, long-term	$	59,887	$	13	$	(117	)	$	59,783

Investments Classified by Contractual Maturity Date



	September 30, 2017		December 31, 2016
One year or less	$	316,454	$	250,981
Due in greater than one year	58,842		59,783
Total available for sale short-term and long-term marketable securities	$	375,296	$	310,764

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table summarizes the reconciliation of assets measured and recorded at fair value on a recurring basis using significant unobservable inputs Level 3 (in thousands):



	Long-term Notes Receivable
Balance as of December 31, 2016	$	2,047
Additional notes receivable issued	2,000
Accrued interest receivable	54
Change in fair value recognized in earnings	56
Balance as of September 30, 2017	$	4,157

Financial Assets Measured At Fair Value On Recurring Basis

The following tables summarize our financial assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):



Description	Balance as of September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	177,486	$	177,486	$	—	$	—
Commercial paper	13,295		—		13,295		—
Short-term investments:
Commercial paper	62,348		—		62,348		—
Corporate bonds	164,631		—		164,631		—
U.S. government agency bonds	7,761		—		7,761		—
U.S. government treasury bonds	78,339		78,339		—		—
Certificates of deposit	3,375		—		3,375		—
Long-term investments:
U.S. government agency bonds	7,993		—		7,993		—
Corporate bonds	45,837		—		45,837		—
U.S. government treasury bonds	5,012		5,012		—		—
Prepaid expenses and other current assets:
Israeli funds	3,310		—		3,310		—
Other assets:
Long-term notes receivable	4,157		—		—		4,157
	$	573,544	$	260,837	$	308,550	$	4,157



Description	Balance as of December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	87,179	$	87,179	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate bonds	750		—		750		—
Short-term investments:
Commercial paper	42,391		—		42,391		—
Corporate bonds	122,689		—		122,689		—
Municipal securities	5,847		—		5,847		—
U.S. government agency bonds	28,908		—		28,908		—
U.S. government treasury bonds	45,146		45,146		—		—
Certificates of deposit	6,000		—		6,000		—
Long-term investments:
U.S. government agency bonds	6,789		—		6,789		—
Corporate bonds	40,812		—		40,812		—
U.S. government treasury bonds	12,005		12,005		—		—
Asset-backed securities	177		—		177		—
Prepaid expenses and other current assets:
Israeli funds	2,956		—		2,956		—
Other assets:
Long-term notes receivable	2,047		—		—		2,047
	$	406,195	$	144,330	$	259,818	$	2,047

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Accrued Liabilities

Schedule of Inventories

Inventories consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Raw materials	$	15,666	$	9,793
Work in process	12,819		10,773
Finished goods	8,456		6,565
Total inventories	$	36,941	$	27,131

Accrued liabilities consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Accrued payroll and benefits	$	84,418	$	79,214
Accrued expenses	38,983		21,811
Accrued income taxes	10,486		4,210
Accrued sales rebate	9,293		10,342
Accrued sales tax and value added tax	8,693		5,032
Accrued professional fees	8,181		3,604
Accrued warranty	5,055		3,841
Other accrued liabilities	8,742		6,278
Total accrued liabilities	$	173,851	$	134,332

Warranty Accrual

Warranty accrual as of September 30, 2017 and 2016 consists of the following activity (in thousands):



	Nine Months Ended September 30,
	2017			2016
Balance at beginning of period	$	3,841		$	2,638
Charged to cost of revenues	5,201			3,440
Actual warranty expenditures	(3,987		)	(2,681		)
Balance at end of period	$	5,055		$	3,397

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Summary of Goodwill by Reportable Segment

The change in the carrying value of goodwill for the nine months ended September 30, 2017, all attributable to our Clear Aligner reporting unit, is as follows (in thousands):



	Total
Balance as of December 31, 2016	$	61,044
Goodwill from distributor acquisitions	3,247
Adjustments¹	324
Balance as of September 30, 2017	$	64,615

¹The adjustments to goodwill during the period were related to foreign currency translation and purchase accounting adjustments within the measurement period.

Schedule of Amortized Intangible Assets

Acquired intangible long-lived assets are being amortized as follows (in thousands):



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of September 30, 2017		Accumulated Amortization			Accumulated Impairment Loss			Net Carrying Value as of September 30, 2017
Trademarks	15	$	7,100	$	(1,734	)	$	(4,179	)	$	1,187
Existing technology	13	12,600		(4,563		)	(4,328		)	3,709
Customer relationships	11	33,500		(14,216		)	(10,751		)	8,533
Reacquired rights¹	3	7,500		(749		)	—			6,751
Patents	8	6,316		(1,307		)	—			5,009
Other	2	618		(352		)	—			266
Total intangible assets		$	67,634	$	(22,921	)	$	(19,258	)	$	25,455



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2016		Accumulated Amortization			Accumulated Impairment Loss			Net Carrying Value as of December 31, 2016
Trademarks	15	$	7,100	$	(1,631	)	$	(4,179	)	$	1,290
Existing technology	13	12,600		(4,141		)	(4,328		)	4,131
Customer relationships	11	33,500		(12,819		)	(10,751		)	9,930
Patents	8	6,316		(713		)	—			5,603
Total intangible assets		$	59,516	$	(19,304	)	$	(19,258	)	$	20,954

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The total estimated annual future amortization expense for these acquired intangible assets as of September 30, 2017 is as follows (in thousands):




Remainder of 2017	$	2,215
2018	6,002
2019	5,887
2020	3,772
2021	3,349
Thereafter	4,230
Total	$	25,455

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Future Lease Payments

As of September 30, 2017, minimum future lease payments for non-cancelable operating leases are as follows (in thousands):



Fiscal Year Ending December 31,	Operating Leases
Remainder of 2017	$	3,072
2018	12,785
2019	11,164
2020	8,503
2021	7,435
Thereafter	13,558
Total minimum future lease payments	$	56,517

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Stock-based Compensation Expense

The stock-based compensation related to all of our stock-based awards and employee stock purchases for the three and nine months ended September 30, 2017 and 2016 is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Cost of net revenues	$	833	$	995	$	2,526	$	2,888
Selling, general and administrative	11,880		10,797		34,814		31,474
Research and development	2,254		1,919		6,684		5,572
Total stock-based compensation	$	14,967	$	13,711	$	44,024	$	39,934

Stock Option Activity

Activity for the nine months ended September 30, 2017 under the stock option plans is set forth below (in thousands, except years and per share amounts):



	Number of Shares Underlying Stock Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	222		$	14.90
Exercised	(110	)	16.19
Cancelled or expired	(4	)	18.16
Outstanding as of September 30, 2017	108		$	13.47	0.90	$	18,711
Vested and expected to vest at September 30, 2017	108		$	13.47	0.90	$	18,711
Exercisable at September 30, 2017	108		$	13.47	0.90	$	18,711

Summary Of Restricted Stock Units

A summary for the nine months ended September 30, 2017 is as follows (in thousands, except years and per share amounts):



	Shares Underlying RSUs		Weighted Average Grant Date Fair Value		Weighted Remaining Vesting Period (in years)	Aggregate Intrinsic Value
Nonvested as of December 31, 2016	1,789		$	58.39
Granted	456		110.40
Vested and released	(785	)	53.61
Forfeited	(71	)	67.22
Nonvested as of September 30, 2017	1,389		77.72		1.34	$	258,838

Summary Of Market-performance Based Restricted Stock Units

The following table summarizes the MSU performance for the nine months ended September 30, 2017 (in thousands, except years):



	Number of Shares Underlying MSUs		Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Period (in years)	Aggregate Intrinsic Value
Nonvested as of December 31, 2016	520		$	60.49
Granted	201		88.80
Vested and released	(283	)	53.11
Forfeited	(10	)	64.50
Nonvested as of September 30, 2017	428		78.53		1.22	$	79,742

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

The fair value of the option component of the 2010 Purchase Plan shares was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Expected term (in years)	1.2			1.2			1.2			1.2
Expected volatility	28.8		%	27.4		%	26.8		%	30.5		%
Risk-free interest rate	1.2		%	0.5		%	1.0		%	0.7		%
Expected dividends	—			—			—			—
Weighted average fair value at grant date	$	47.02		$	24.44		$	31.36		$	22.23

Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Schedule Of Earnings Per Share Basic And Diluted

The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands, except per share amounts):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Numerator:
Net income	$	82,555	$	51,367	$	221,154	$	142,061
Denominator:
Weighted-average common shares outstanding, basic	80,163		79,977		80,086		79,920
Dilutive effect of potential common stock	1,626		1,489		1,671		1,603
Total shares, diluted	81,789		81,466		81,757		81,523

Net income per share, basic	$	1.03	$	0.64	$	2.76	$	1.78
Net income per share, diluted	$	1.01	$	0.63	$	2.71	$	1.74

Segments and Geographical Information (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas



	Three Months Ended September 30,						Nine Months Ended September 30,
Net revenues	2017			2016			2017			2016
Clear Aligner	$	341,611		$	243,668		$	945,046		$	706,802
Scanner	43,656			34,921			107,044			79,869
Total net revenues	$	385,267		$	278,589		$	1,052,090		$	786,671
Gross profit
Clear Aligner	$	266,285		$	189,270		$	737,046		$	552,663
Scanner	26,203			19,932			61,984			42,382
Total gross profit	$	292,488		$	209,202		$	799,030		$	595,045
Income from operations
Clear Aligner	$	154,614		$	102,431		$	403,264		$	306,789
Scanner	13,525			11,977			28,324			20,333
Unallocated corporate expenses	(69,376		)	(52,329		)	(187,583		)	(146,573		)
Total income from operations	$	98,763		$	62,079		$	244,005		$	180,549
Depreciation and amortization
Clear Aligner	$	5,643		$	3,541		$	15,607		$	10,163
Scanner	1,130			761			3,248			2,853
Unallocated corporate expenses	3,199			2,599			7,860			3,770
Total depreciation and amortization	$	9,972		$	6,901		$	26,715		$	16,786

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total segment income from operations	$	168,139		$	114,408		$	431,588		$	327,122
Unallocated corporate expenses	(69,376		)	(52,329		)	(187,583		)	(146,573		)
Total income from operations	98,763			62,079			244,005			180,549
Interest and other income (expense), net	3,750			1,463			8,607			1,161
Net income before provision for income taxes and equity in losses of investee	$	102,513		$	63,542		$	252,612		$	181,710

Geographical Information

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Net revenues⁽¹⁾:
United States ⁽²⁾	$	217,758	$	168,501	$	608,052	$	516,924
The Netherlands ⁽²⁾	127,307		87,051		357,278		191,049
Other International	40,202		23,037		86,760		78,698
Total net revenues	$	385,267	$	278,589	$	1,052,090	$	786,671

⁽¹⁾Net revenues are attributed to countries based on location of where revenue is recognized.

⁽²⁾ Effective July 2016, we implemented a new international corporate structure. This changed the structure of our international procurement and sales operations.

Tangible long-lived assets are presented below by geographic area (in thousands):



	September 30, 2017		December 31, 2016
Long-lived assets⁽¹⁾:
The Netherlands	$	142,591	$	111,515
United States	125,172		43,278
Mexico	21,537		17,918
Other International	6,601		2,456
Total long-lived assets	$	295,901	$	175,167

⁽¹⁾Long-lived assets are attributed to countries based on entity that owns the assets.

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Interest and other income (expense), net	$ 3,750			$ 1,463	$ 8,607	$ 1,161
Accrued liabilities	173,851				173,851		$ 134,332
Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Tax benefit	$ 1,700				$ 24,100
Retained Earnings \| Accounting Standards Update 2016-16
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Decrease to retained earnings			$ 1,300
Out of period adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Interest and other income (expense), net		$ (1,900)
Accrued liabilities		$ 1,900

Short-Term and Long-Term Marketable Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Total available for sale short-term and long-term marketable securities	$ 375,296	$ 310,764
Fair Value, Measurements, Recurring [Member] \| Short-term Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	316,523	251,086
Gross Unrealized Gains	33	38
Gross Unrealized Losses	(102)	(143)
Total available for sale short-term and long-term marketable securities	316,454	250,981
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	62,348	42,397
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	(6)
Total available for sale short-term and long-term marketable securities	62,348	42,391
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	164,661	122,788
Gross Unrealized Gains	31	22
Gross Unrealized Losses	(61)	(121)
Total available for sale short-term and long-term marketable securities	164,631	122,689
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| U.S. government agency bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	7,769	28,903
Gross Unrealized Gains	0	9
Gross Unrealized Losses	(8)	(4)
Total available for sale short-term and long-term marketable securities	7,761	28,908
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| Municipal securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		5,852
Gross Unrealized Gains		0
Gross Unrealized Losses		(5)
Total available for sale short-term and long-term marketable securities		5,847
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| U.S. government treasury bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	78,370	45,146
Gross Unrealized Gains	2	7
Gross Unrealized Losses	(33)	(7)
Total available for sale short-term and long-term marketable securities	78,339	45,146
Fair Value, Measurements, Recurring [Member] \| Short-term Investments \| Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,375	6,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Total available for sale short-term and long-term marketable securities	3,375	6,000
Fair Value, Measurements, Recurring [Member] \| Long-term Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	58,830	59,887
Gross Unrealized Gains	43	13
Gross Unrealized Losses	(31)	(117)
Total available for sale short-term and long-term marketable securities	58,842	59,783
Fair Value, Measurements, Recurring [Member] \| Long-term Investments \| Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	45,815	40,889
Gross Unrealized Gains	40	8
Gross Unrealized Losses	(18)	(85)
Total available for sale short-term and long-term marketable securities	45,837	40,812
Fair Value, Measurements, Recurring [Member] \| Long-term Investments \| U.S. government agency bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	7,990	6,805
Gross Unrealized Gains	3	0
Gross Unrealized Losses	0	(16)
Total available for sale short-term and long-term marketable securities	7,993	6,789
Fair Value, Measurements, Recurring [Member] \| Long-term Investments \| U.S. government treasury bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,025	12,016
Gross Unrealized Gains	0	5
Gross Unrealized Losses	(13)	(16)
Total available for sale short-term and long-term marketable securities	$ 5,012	12,005
Fair Value, Measurements, Recurring [Member] \| Long-term Investments \| Asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		177
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Total available for sale short-term and long-term marketable securities		$ 177

Marketable Securities and Fair Value Measurements Additional Information (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Maturity Period Used To Classify Investments	7 months	7 months
Maximum
Schedule of Available-for-sale Securities [Line Items]
Maturity Period Used To Classify Investments	27 months

Marketable Securities and Fair Value Measurements Available For Sale Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
One year or less	$ 316,454	$ 250,981
Due in greater than one year	58,842	59,783
Total available for sale short-term and long-term marketable securities	$ 375,296	$ 310,764

Investments in debt and equity securities which are categorized neither as held-to-maturity nor trading and which are intended to be sold or mature more than one year from the balance sheet date or operating cycle, if longer. Such securities are reported at fair value; unrealized gains (losses) related to Available-for-sale Securities are excluded from earnings and reported in a separate component of shareholders' equity (other comprehensive income), unless the Available-for-sale security is designated as a hedge or is determined to have had an other than temporary decline in fair value below its amortized cost basis. All or a portion of the unrealized holding gain (loss) of an Available-for-sale security that is designated as being hedged in a fair value hedge is recognized in earnings during the period of the hedge, as are other than temporary declines in fair value below the cost basis for investments in equity securities and debt securities that an entity intends to sell or it is more likely than not that it will be required to sell before the recovery of its amortized cost basis. Other than temporary declines in fair value below the cost basis for debt securities categorized as Available-for-sale that an entity does not intend to sell and for which it is not more likely than not that the entity will be required to sell before the recovery of its amortized cost basis are bifurcated into credit losses and losses related to all other factors. Other than temporary declines in fair value below cost basis related to credit losses are recognized in earnings, and losses related to all other factors are recognized in other comprehensive income.

Marketable Securities and Fair Value Measurements - Reconciliation (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance as of December 31, 2016	$ 2,047
Additional notes receivable issued	2,000
Accrued interest receivable	54
Change in fair value recognized in earnings	56
Balance as of September 30, 2017	$ 4,157

Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Disclosure Inventories [Abstract]
Raw materials	$ 15,666	$ 9,793
Work in process	12,819	10,773
Finished goods	8,456	6,565
Total inventories	$ 36,941	$ 27,131

Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Disclosure Accrued Liabilities [Abstract]
Accrued payroll and benefits	$ 84,418	$ 79,214
Accrued expenses	38,983	21,811
Accrued income taxes	10,486	4,210
Accrued sales rebate	9,293	10,342
Accrued sales tax and value added tax	8,693	5,032
Accrued professional fees	8,181	3,604
Accrued warranty	5,055	3,841
Other accrued liabilities	8,742	6,278
Total accrued liabilities	$ 173,851	$ 134,332

Warranty Accrual Activity (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 3,841	$ 2,638
Charged to cost of revenues	5,201	3,440
Actual warranty expenditures	(3,987)	(2,681)
Balance at end of period	$ 5,055	$ 3,397

Equity Method Investments (Details) - USD ($) $ in Thousands			9 Months Ended
	Jul. 24, 2017	Jul. 25, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Schedule of Equity Method Investments [Line Items]
Payments to acquire			$ 12,764	$ 46,745
Equity method investments			52,875		$ 45,061
SDC
Schedule of Equity Method Investments [Line Items]
Ownership	19.00%	17.00%
Payments to acquire	$ 12,800	$ 46,700
Additional ownership acquired	2.00%
Due from related parties			12,700
Loan receivable		$ 30,000	$ 17,000

Business Combinations (Details) - USD ($) $ in Thousands	3 Months Ended
Business Combinations (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Goodwill and intangible assets, net		$ 90,070	$ 81,998
Certain Distributors
Business Acquisition [Line Items]
Cash consideration	$ 9,500
Net tangible liabilities	1,800
Intangibles acquired	8,200
Goodwill and intangible assets, net	$ 3,100

Goodwill and Intangible Assets - Change in Carrying Value of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Goodwill [Roll Forward]
Balance as of December 31, 2016	$ 81,998
Balance as of September 30, 2017	90,070
Clear Aligner
Goodwill [Roll Forward]
Balance as of December 31, 2016	61,044
Goodwill from distributor acquisitions	3,247
Adjustments	324
Balance as of September 30, 2017	$ 64,615

Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount, beginning balance	$ 67,634	$ 59,516
Accumulated Amortization	(22,921)	(19,304)
Accumulated Impairment Loss	(19,258)	(19,258)
Net Carrying Value, ending balance	$ 25,455	$ 20,954
Trademarks
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	15 years	15 years
Gross Carrying Amount, beginning balance	$ 7,100	$ 7,100
Accumulated Amortization	(1,734)	(1,631)
Accumulated Impairment Loss	(4,179)	(4,179)
Net Carrying Value, ending balance	$ 1,187	$ 1,290
Existing technology
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	13 years	13 years
Gross Carrying Amount, beginning balance	$ 12,600	$ 12,600
Accumulated Amortization	(4,563)	(4,141)
Accumulated Impairment Loss	(4,328)	(4,328)
Net Carrying Value, ending balance	$ 3,709	$ 4,131
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	11 years	11 years
Gross Carrying Amount, beginning balance	$ 33,500	$ 33,500
Accumulated Amortization	(14,216)	(12,819)
Accumulated Impairment Loss	(10,751)	(10,751)
Net Carrying Value, ending balance	$ 8,533	$ 9,930
Reacquired rights
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	3 years
Gross Carrying Amount, beginning balance	$ 7,500
Accumulated Amortization	(749)
Accumulated Impairment Loss	0
Net Carrying Value, ending balance	$ 6,751
Patents
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	8 years	8 years
Gross Carrying Amount, beginning balance	$ 6,316	$ 6,316
Accumulated Amortization	(1,307)	(713)
Accumulated Impairment Loss	0	0
Net Carrying Value, ending balance	$ 5,009	$ 5,603
Other
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	2 years
Gross Carrying Amount, beginning balance	$ 618
Accumulated Amortization	(352)
Accumulated Impairment Loss	0
Net Carrying Value, ending balance	$ 266

Goodwill and Intangible Assets - Total Estimated Annual Future Amortization Expense for Acquired Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Disclosure Total Estimated Annual Future Amortization Expense For Acquired Intangible Assets [Abstract]
Remainder of 2017	$ 2,215
2018	6,002
2019	5,887
2020	3,772
2021	3,349
Thereafter	4,230
Net Carrying Value, ending balance	$ 25,455	$ 20,954

Goodwill and Intangible Assets - Narrative (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill impairment		$ 0
Amortization	$ 4,700,000

Credit Facilities - Additional Information (Details) - USD ($) $ in Millions	Mar. 22, 2013	Sep. 30, 2017
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.75%
Revolving Credit Facility [Member] \| Wells Fargo [Member]
Line of Credit Facility [Line Items]
Line of credit, available borrowings	$ 50.0
Letter of Credit [Member] \| Wells Fargo [Member]
Line of Credit Facility [Line Items]
Line of credit, available borrowings	$ 10.0
Outstanding		$ 0.0

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.