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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________ 
FORM 10-Q
____________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to
Commission file number: 000-32259
____________________________
ALIGN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
____________________________ 
Delaware94-3267295
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
410 North Scottsdale Road, Suite 1300
Tempe, Arizona 85281
(Address of principal executive offices)
(602) 742-2000
(Registrant’s telephone number, including area code)
 ____________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueALGNThe NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No 
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of April 29, 2022 was 78,805,547.

1

Table of Contents


ALIGN TECHNOLOGY, INC.
TABLE OF CONTENTS
 
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Invisalign, Align, the Invisalign logo, ClinCheck, Made to Move, Invisalign Assist, Invisalign Teen, Invisalign Go, Vivera, SmartForce, SmartTrack, SmartStage, SmileView, iTero, iTero Element, Orthocad, iCast, iRecord and exocad, among others, are trademarks and/or service marks of Align Technology, Inc. or one of its subsidiaries or affiliated companies and may be registered in the United States and/or other countries.
2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three Months Ended
March 31,
 20222021
Net revenues$973,219 $894,771 
Cost of net revenues263,873 217,673 
Gross profit709,346 677,098 
Operating expenses:
Selling, general and administrative439,457 397,115 
Research and development71,807 54,537 
Total operating expenses511,264 451,652 
Income from operations198,082 225,446 
Interest income and other income (expense), net:
Interest income677 1,643 
Other income (expense), net(11,273)34,532 
      Total interest income and other income (expense), net(10,596)36,175 
Net income before provision for income taxes187,486 261,621 
Provision for income taxes53,188 61,245 
Net income$134,298 $200,376 
Net income per share:
Basic
$1.71 $2.54 
Diluted
$1.70 $2.51 
Shares used in computing net income per share:
Basic
78,742 79,000 
Diluted
79,193 79,798 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
 20222021
Net income$134,298 $200,376 
Other comprehensive loss:
Change in foreign currency translation adjustment, net of tax(7,311)(14,451)
Change in unrealized gains (losses) on investments, net of tax(2,728)(20)
Other comprehensive loss(10,039)(14,471)
Comprehensive income$124,259 $185,905 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
March 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$926,119 $1,099,370 
Marketable securities, short-term86,749 71,972 
Accounts receivable, net of allowance for doubtful accounts of $9,764 and $9,245, respectively
950,892 897,198 
Inventories275,669 230,230 
Prepaid expenses and other current assets241,339 195,305 
Total current assets2,480,768 2,494,075 
Marketable securities, long-term107,695 125,320 
Property, plant and equipment, net1,140,922 1,081,926 
Operating lease right-of-use assets, net125,252 121,257 
Goodwill411,965 418,547 
Intangible assets, net103,499 109,709 
Deferred tax assets1,515,620 1,533,767 
Other assets57,693 57,509 
Total assets$5,943,414 $5,942,110 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$186,509 $163,886 
Accrued liabilities465,071 607,315 
Deferred revenues1,212,067 1,152,870 
Total current liabilities1,863,647 1,924,071 
Income tax payable123,476 118,072 
Operating lease liabilities104,983 102,656 
Other long-term liabilities184,456 174,597 
Total liabilities2,276,562 2,319,396 
Commitments and contingencies (Notes 6 and 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)
  
Common stock, $0.0001 par value (200,000 shares authorized; 78,805 and 78,710 issued and outstanding, respectively)
8 8 
Additional paid-in capital992,287 999,006 
Accumulated other comprehensive income (loss), net(5,713)4,326 
Retained earnings2,680,270 2,619,374 
Total stockholders’ equity3,666,852 3,622,714 
Total liabilities and stockholders’ equity$5,943,414 $5,942,110 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss), NetRetained EarningsTotal
Three Months Ended March 31, 2022SharesAmount
Balance as of December 31, 202178,710 $8 $999,006 $4,326 $2,619,374 $3,622,714 
Net income— — — — 134,298 134,298 
Net change in unrealized gains (losses) from investments— — — (2,728)— (2,728)
Net change in foreign currency translation adjustment— — — (7,311)— (7,311)
Issuance of common stock relating to employee equity compensation plans239 — 14,827 — — 14,827 
Tax withholdings related to net share settlements of equity awards— — (51,533)— — (51,533)
Common stock repurchased and retired(144)— (1,634)— (73,402)(75,036)
Stock-based compensation— — 31,621 — — 31,621 
Balance as of March 31, 202278,805 $8 $992,287 $(5,713)$2,680,270 $3,666,852 


Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss), NetRetained EarningsTotal
Three Months Ended March 31, 2021SharesAmount
Balance as of December 31, 202078,860 $8 $974,556 $43,501 $2,215,800 $3,233,865 
Net income— — — — 200,376 200,376 
Net change in unrealized gains (losses) from investments— — — (20)— (20)
Net change in foreign currency translation adjustment— — — (14,451)— (14,451)
Issuance of common stock relating to employee equity compensation plans276 — 13,133 — — 13,133 
Tax withholdings related to net share settlements of equity awards— — (66,568)— — (66,568)
Stock-based compensation— — 27,241 — — 27,241 
Balance as of March 31, 202179,136 $8 $948,362 $29,030 $2,416,176 $3,393,576 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.








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ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended
March 31,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $134,298 $200,376 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes17,464 28,979 
Depreciation and amortization29,626 25,635 
Stock-based compensation31,621 27,241 
Non-cash operating lease cost7,526 5,911 
Arbitration award gain (43,403)
Other non-cash operating activities8,612 5,795 
Changes in assets and liabilities:
Accounts receivable(55,543)(67,423)
Inventories(49,455)(15,582)
Prepaid expenses and other assets(48,665)(34,858)
Accounts payable7,025 (14,936)
Accrued and other long-term liabilities(126,400)(475)
Long-term income tax payable5,405 3,920 
Deferred revenues68,984 106,007 
Net cash provided by operating activities
30,498 227,187 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment(87,328)(43,431)
Purchase of marketable securities(15,041) 
Proceeds from maturities of marketable securities6,095  
Proceeds from sales of marketable securities8,528  
Repayment on unsecured promissory note 4,594 
Proceeds from arbitration award 43,403 
Other investing activities(2,452) 
Net cash (used in) provided by investing activities(90,198)4,566 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock14,827 13,133 
Common stock repurchases(75,036) 
Payroll taxes paid upon the vesting of equity awards(51,533)(66,568)
Net cash used in financing activities(111,742)(53,435)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash(1,826)(7,487)
Net (decrease) increase in cash, cash equivalents, and restricted cash(173,268)170,831 
Cash, cash equivalents, and restricted cash at beginning of the period1,100,139 961,474 
Cash, cash equivalents, and restricted cash at end of the period$926,871 $1,132,305 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ALIGN TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Align Technology, Inc. (“we”, “our”, "Company", or “Align”) on a consistent basis with the audited Consolidated Financial Statements for the year ended December 31, 2021, and contains all adjustments, including normal recurring adjustments, necessary to state fairly state the information set forth herein. The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S.”).

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other future period, and we make no representations related thereto. 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the 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 revenue recognition, useful lives of intangible assets and property and equipment, long-lived assets and goodwill, income taxes and contingent liabilities, the fair values of financial instruments, stock-based compensation and the valuation of investments in privately held companies 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.

Certain Risks and Uncertainties

As the pandemic continues and new variants of the virus emerge, we are seeing a resurgence of severe preventative measures to prevent its spread in China and, consequently, continuing fluctuations in the numbers of patients seeking treatment for dental services and the number of doctors providing services and treatments in other markets. The full extent to which the pandemic, including as a result of any new variants, business restrictions or lockdowns, and the impact of vaccinations, will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately determined. Further, we could also be materially adversely affected by supply chain disruptions, including shortages and inflationary pressures, uncertain or reduced demand, labor shortages, delays in collection of outstanding receivables and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.

The military conflict between Russia and Ukraine and its related impacts on the economy has caused significant worldwide challenges. While the situation is highly uncertain and evolving, its impact on the economy such as inflation, supply chain challenges, impacts on consumer confidence, purchasing power, sanctions and retaliatory sanctions among others, have impacted and could potentially subject our business to materially adverse consequences should any portion of its impacts become prolonged or escalate beyond its current scope.

Revenue Recognition

Our revenues are derived primarily from the sale of aligners, scanners, and services from our Clear Aligner and Systems and Services segments. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenues according to ASC 606-10, “Revenues from Contracts with Customers.”

We identify a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) in order to allocate consideration from the contract to the individual
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performance obligations is the result of various factors, such as changing trends and market conditions, historical prices, costs, and gross margins. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.

Clear Aligner

We enter into contracts (“treatment plan(s)”) that involve multiple future performance obligations. Invisalign Comprehensive, Invisalign First, Invisalign Moderate, and Lite and Express Packages include optional additional aligners at no charge for a certain period of time ranging from six months to five years after initial shipment, and Invisalign Go and Invisalign Go Plus includes optional additional aligners at no charge for a period of up to two years after initial shipment.

Our treatment plans comprise the following performance obligations that also represent distinct deliverables: initial aligners, the option of additional aligners, case refinement, and replacement aligners. We take the practical expedient to consider shipping and handling costs as activities to fulfill the performance obligation. We allocate revenues for each treatment plan based on each unit’s SSP. Management considers a variety of factors such as same or similar product historical sales, costs, and gross margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. In addition to historical data, we take into consideration changing trends and market conditions. For treatment plans with multiple future performance obligations, we also consider usage rates, which is the number of times a customer is expected to order additional aligners. Our process for estimating usage rates requires significant judgment and evaluation of inputs, including historical usage data by region, country and channel. We recognize the revenues upon shipment, as the customers obtain physical possession, and we have enforceable rights to payment. As we collect most consideration upfront, we consider whether a significant financing component exists; however, as the delivery of the performance obligations are at the customer’s discretion, we conclude that no significant financing component exists.

Systems and Services

We sell intraoral scanners and CAD/CAM services through both our direct sales force and distribution partners. The intraoral scanner sales price includes one year of warranty and unlimited scanning services. The customer may also select, for additional fees, extended warranty and unlimited scanning services for periods beyond the initial year. When intraoral scanners are sold with an unlimited scanning service agreement and/or extended warranty, we allocate revenues based on the respective SSP of the scanner and the subscription service. We estimate the SSP of each element, taking into account factors such as same or similar historical prices and discounting strategies. Revenues are then recognized over time as the monthly services are rendered and upon shipment of the scanner, as that is when we deem the customer to have obtained control. CAD/CAM services, where sold separately, include the initial software license and maintenance and support. We allocate revenues based upon the respective SSPs of the software license and the maintenance and support. We estimate the SSP of each element using data such as historical prices. Revenues related to the software license are recognized upfront and revenues related to the maintenance and support are recognized over time. For both scanner and service sales, most consideration is collected upfront and in cases where there are payment plans, consideration is collected within one year and, therefore, there are no significant financing components.

Recent Accounting Pronouncements Not Yet Effective

We continue to monitor new accounting pronouncements issued by the Financial Accounting Standards Board and do not believe any of the recently issued accounting pronouncements will have an impact on our consolidated financial statements or related disclosures.

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Note 2. Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The following tables summarize our cash and cash equivalents, and marketable securities on our Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (in thousands):
Reported as:
March 31, 2022Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair ValueCash and Cash EquivalentsMarketable securities, short-termMarketable securities, long-term
Cash$689,175 $— $— $689,175 $689,175 $— $— 
Money market funds236,960 — (16)236,944 236,944 — — 
Corporate bonds116,307 3 (2,389)113,921 — 41,164 72,757 
U.S. government treasury bonds
46,638  (511)46,127 — 31,055 15,072 
Asset-backed securities27,453  (197)27,256 — 10,984 16,272 
Municipal bonds6,049  (77)5,972 — 3,546 2,426 
U.S. government agency bonds1,204  (36)1,168 — — 1,168 
Total$1,123,786 $3 $(3,226)$1,120,563 $926,119 $86,749 $107,695 

Reported as:
December 31, 2021Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair ValueCash and Cash EquivalentsMarketable securities, short-termMarketable securities, long-term
Cash$754,802 $— $— $754,802 $754,802 $— $— 
Money market funds343,012 — (2)343,010 343,010 — — 
Corporate bonds115,507 9 (398)115,118 1,042 35,065 79,011 
U.S. government treasury bonds
42,976  (48)42,928 — 22,251 20,677 
Asset-backed securities32,031  (40)31,991 — 10,999 20,992 
Municipal bonds7,628  (15)7,613 516 3,657 3,440 
U.S. government agency bonds1,201  (1)1,200 — — 1,200 
Total$1,297,157 $9 $(504)$1,296,662 $1,099,370 $71,972 $125,320 

The following table summarizes the fair value of our available-for-sale marketable securities classified by contractual maturity as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022December 31, 2021
Due in 1 year or less $67,225 $59,737 
Due in 1 year through 5 years$127,219 139,113 
Total$194,444 $198,850 

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. Our unrealized losses as of March 31, 2022 and December 31, 2021 are primarily due to changes in interest rates and credit spreads.

Fair Value Measurements

Fair value is an exit price, representing the amount 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.

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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. 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.

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.

The following tables summarize our financial assets measured at fair value as of March 31, 2022 and December 31, 2021 (in thousands):
DescriptionBalance as of
March 31, 2022
Level 1

Level 2
Level 3
Cash equivalents:
Money market funds$236,944 $236,944 $ $ 
Short-term investments:
U.S. government treasury bonds31,055 31,055   
Corporate bonds41,164  41,164  
Municipal bonds3,546  3,546  
Asset-backed securities10,984  10,984  
Long-term investments:
U.S. government treasury bonds15,072 15,072   
Corporate bonds72,757  72,757  
Municipal bonds2,426  2,426  
U.S. government agency bonds1,168  1,168  
Asset-backed securities16,272  16,272  
Other assets:
Investments in privately held companies11,225   11,225 
$442,613 $283,071 $148,317 $11,225 

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DescriptionBalance as of December 31, 2021Level 1Level 2Level 3
Cash equivalents:
Money market funds$343,010 $343,010 $ $ 
Corporate bonds1,042  1,042  
Municipal bonds516  516  
Short-term investments:
U.S. government treasury bonds22,251 22,251   
Corporate bonds35,065  35,065  
Municipal bonds3,657  3,657  
Asset-backed securities10,999  10,999  
Long-term investments:
U.S. government treasury bonds
20,677 20,677   
Corporate bonds79,011  79,011  
Municipal bonds
3,440  3,440  
U.S. government agency bonds
1,200  1,200  
Asset-backed securities
20,992  20,992  
Prepaid expenses and other current assets:
Israeli funds3,841  3,841  
Other assets:
Investments in privately held companies8,621   8,621 
$554,322 $385,938 $159,763 $8,621 

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables. These forward contracts are classified within Level 2 of the fair value hierarchy. As a result of the settlement of foreign currency forward contracts, the net losses we recognized during the three months ended March 31, 2022 were not material and we recognized net gains of $12.4 million during the three months ended March 31, 2021. The fair value of foreign exchange forward contracts outstanding was $8.4 million as of March 31, 2022 and was not material as of December 31, 2021.

The following tables present the gross notional value of all our foreign exchange forward contracts outstanding as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Local Currency AmountNotional Contract Amount (USD)
Euro189,795$210,031 
Chinese Yuan¥520,50081,862 
Polish ZlotyPLN324,50077,086 
Canadian DollarC$96,00076,733 
Brazilian RealR$323,70067,665 
Japanese Yen¥5,666,20046,621 
British Pound£32,27542,394 
Russian Ruble3,700,00035,885 
Swiss FrancCHF17,27018,692 
Israeli ShekelILS54,21017,085 
Mexican PesoM$281,56014,127 
Australian DollarA$5,0003,748 
$691,929 
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December 31, 2021
Local Currency AmountNotional Contract Amount (USD)
Euro165,110$186,358 
Canadian DollarC$99,80078,018 
Chinese Yuan¥494,50077,358 
Polish ZlotyPLN219,80054,014 
Brazilian RealR$286,50050,894 
Japanese Yen¥5,548,70048,206 
British Pound£34,74046,881 
Israeli ShekelILS54,11017,416 
Mexican PesoM$311,50015,133 
Swiss FrancCHF9,95010,883 
Australian DollarA$6,9005,009 
$590,170 

Note 3. Balance Sheet Components

Inventories consist of the following (in thousands):
March 31,
2022
December 31,
2021
Raw materials$133,808 $123,234 
Work in process79,495 51,706 
Finished goods62,366 55,290 
Total inventories$275,669 $230,230 

Prepaid expenses and other current assets consist of the following (in thousands):
March 31,
2022
December 31,
2021
Value added tax receivables$134,941 $93,610 
Prepaid expenses74,069 70,218 
Other current assets32,329 31,477 
Total prepaid expenses and other current assets$241,339 $195,305 

Accrued liabilities consist of the following (in thousands): 
March 31,
2022
December 31,
2021
Accrued payroll and benefits$156,272 $288,355 
Accrued expenses66,211 67,169 
Accrued income taxes45,646 33,838 
Accrued sales and marketing expenses41,221 41,387 
Accrued professional fees36,340 31,457 
Accrued property, plant and equipment25,296 46,561 
Current operating lease liabilities25,243 22,719 
Other accrued liabilities68,842 75,829 
Total accrued liabilities$465,071 $607,315 

Accrued warranty, which is included in the "Other accrued liabilities" category of the accrued liabilities table above, consists of the following activity (in thousands):
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Three Months Ended
March 31,
 20222021
Balance at beginning of period$16,169 $12,615 
Charged to cost of net revenues3,536 4,280 
Actual warranty expenditures(3,612)(3,160)
Balance at end of period$16,093 $13,735 

Deferred revenues consist of the following (in thousands):
March 31,
2022
December 31,
2021
Deferred revenues - current$1,212,067 $1,152,870 
Deferred revenues - long-term 1
$146,998 $136,684 

1 Included in Other long-term liabilities within our Condensed Consolidated Balance Sheet

During the three months ended March 31, 2022 and 2021, we recognized $973.2 million and $894.8 million of net revenues, respectively, of which $184.9 million and $125.8 million was included in the deferred revenues balance at December 31, 2021 and 2020, respectively.

Our unfulfilled performance obligations, including deferred revenues and backlog, as of March 31, 2022 were $1,385.4 million. These performance obligations are expected to be fulfilled over six months to five years.

Note 4. Goodwill and Intangible Assets

Goodwill

The change in the carrying value of goodwill for the three months ended March 31, 2022, categorized by reportable segments, is as follows (in thousands):
Clear AlignerSystems and ServicesTotal
Balance as of December 31, 2021$112,208 $306,339 $