ALIGN TECHNOLOGY, INC. Forward-Looking Statements
In addition to historical information, this quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, among other things, our expectations and intentions regarding our strategic objectives and the means to achieve them, our beliefs and expectations regarding macroeconomic conditions, including inflation, fluctuations in currency exchange rates, consumer confidence and demand, weakness in general economic conditions and recessions, our expectations regarding the near and long-term implications of the COVID-19 pandemic on the global and regional economies, our expectations regarding the impact of the military conflict inUkraine generally and specifically regarding our operations and assets inRussia , including the potential ramifications of sanctions and regarding relations with other countries and impact on our workforce located inRussia , our marketing and efforts to build our brand awareness, our beliefs regarding digital dentistry and its potential to impact our business, our intentions regarding expanding our business, our expectations regarding the utilization rates for our products, including the impact of marketing on those rates and causes for periodic fluctuations of the rates, our expectation regarding customer and consumer purchasing behavior, including expectations related to consumer demand for digital solutions, our expectations for future investments in and benefits from sales and marketing activities, our preparedness and our customers' preparedness to react to changing circumstances and demand, results of operations and financial condition, our expectations for our expenses and capital obligations and expenditures in particular, our intentions to control spending and for investments, our intentions regarding the investment of our international earnings from operations, our belief regarding the sufficiency of our cash balances and borrowing capacity, our judgments regarding the estimates used in our revenue recognition and assessment of goodwill and intangible assets, our expectations regarding our tax positions and the judgments we make related to our tax obligations, our predicted level of operating expenses and gross margins and other factors beyond our control, our expectations regarding staying in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both inthe United States and internationally, as well as other statements regarding our future operations, financial condition and prospects and business strategies. These statements may contain words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or other words indicating future results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in particular, the risks discussed below in Part II, Item 1A "Risk Factors." We undertake no obligation to revise or update these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 as filed with theSecurities and Exchange Commission (the "SEC").
Executive Overview of Results
Trends and Uncertainties
Our business strategic priorities remain focused on four principal pillars of
growth: (i) international expansion; (ii) general practitioner dentists ("GPs")
adoption; (iii) patient demand and conversion; and (iv) orthodontic utilization.
Below is a discussion of the significant trends and uncertainties that could
impact to our operations:
Macroeconomic Challenges and Military Conflict in
Our revenues and costs are susceptible to fluctuations in macroeconomic conditions, in line with inflation and slowing global and regional economic activity and contractions, changes in customer and consumer sentiment and demand, seasonality, increasing prices for commodities, services and transportation and disruptions in our manufacturing, supply and distribution operations and also those of our suppliers. These factors can be further exacerbated by the anticipation of, or actual, global and regional economic recessions which compound the impacts of existing macroeconomic challenges. Moreover, many of our international operations are denominated in currencies other than theU.S. dollar and the weakening of the foreign currencies against theU.S. dollar has caused a negative impact on our financial condition and results of operations which we expect to continue into the future. Specifically, during the first half of 2022, primarily due to the military conflict betweenRussia andUkraine and the significant sanctions that followed,Russia's currency, the ruble, weakened against theU.S. dollar. The nature and extent of the impact of these factors varies by time and region and remain uncertain and unpredictable. 25
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The military conflict betweenRussia andUkraine has increased the unpredictability of the already uncertain macroeconomic conditions. We remain deeply concerned about the devastating events that have and continue to unfold inUkraine and the significant humanitarian, economic and societal tragedy unfolding there. Our top priority remains the safety and security of our employees and their families, particularly those most directly impacted by the hostilities and the resulting sanctions and retaliatory sanctions. We continue to employ a significant number of research and development personnel inRussia as well as sales, marketing and administrative personnel. We do not have employees inUkraine . We have taken extraordinary efforts to support our team members in the region, including helping them financially and working to maintain their safety and security. We furthermore accelerated programs underway before the conflict began aimed at maintaining and growing our research and development operations over the long run that includes diversifying the facilities at which our personnel are located. Our Board of Directors and its applicable committees receive regular updates from management and have and continue to provide oversight of the risks associated with the military conflict betweenRussia andUkraine and other areas of strategic importance related to the conflict. Our management continues to closely monitor the situation and evaluate additional ways in which we can support our employees. Although immaterial to our consolidated financial statements, our commercial business operations inRussia have been significantly impacted by the conflict. InFebruary 2022 , after the military conflict commenced, our primary shipping vendor,UPS , ceased deliveries intoRussia and shortly thereafter, we suspended all commercial activities. Our current focus is on providing continuity of care consistent with our values and ethical responsibility to patients, who are in treatment. In doing so, we are also focused on managing compliance with global sanctions applicable to our business, including significant restrictions imposed by countries on both sides of the conflict targeting business entities, persons and certain activities. The pace at which sanctions are being imposed and the expanding number and breadth of the sanctions enacted continue to create global and regional economic challenges that have caused and are expected to continue to cause significant uncertainty and unpredictability to our operations.
COVID-19 Pandemic Update
The COVID-19 pandemic continues to cause significant volatility and uncertainty in the global and regional economies, leading to changes in consumer and business behavior, market fluctuations, materials and product shortages and restrictions on business and individual activities, all of which are materially impacting supply and demand in broad sectors of the world markets. As new variants of the virus emerge, there has been a patchwork response to prevent its spread 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 emergence of new variants, vaccinations and public health measures are driving the pace of economic recovery unevenly in various regions. These factors and ongoing consumer concerns regarding the virus have continued to impact our results of operations, sometimes materially, and may continue to impact our results in future periods. Therefore, comparing our financial results for the reporting periods of 2022 to the same reporting periods of 2021 or earlier may not be a useful means by which to evaluate the health of our business and our results of operations. Our top priority remains the health and safety of our employees and their families, our customers and their staff, and we are taking prudent measures to safeguard them while remaining flexible in our operational efforts. Concerns regarding the spread and impact of the virus have lessened in many countries in which we operate, including theU.S. Consequently, efforts to reopen many of our offices in 2022 are continuing but remain in fluctuation as certain parts of the world at certain periods of time continue to respond to outbreaks of COVID-19 and new variants of the virus. Where our offices have reopened, we have adopted a flexible hybrid schedule that will allow many of our employees the opportunity to collaborate and connect with others in our offices three days per week while having the option to work remotely other days. We believe that this added flexibility benefits employees and Align overall. Overall, we expect the challenges and risks discussed above to persist, creating uncertainty and unpredictability for consumers, global and regional economies as well as our business and the businesses of our customers and suppliers. We strive to manage the challenges by focusing on improving our operations, building flexibility and efficiencies in our processes, and adjusting our business models to changing circumstances. Specifically, we are managing cost impacts through pricing actions, implementing cost saving measures, and averting supply chain shortages and delays. We do this by proactively communicating with our suppliers and distributors and modifying our purchase order commitments to mitigate the risks of production interruptions and maintaining inventory levels as required. We have also increased our cybersecurity measures to detect, protect against potential incidents and recover from actual incidents and events.
Further discussion of the impact of the unpredictable macroeconomic conditions,
the military conflict in
Key Financial and Operating Metrics
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We measure our performance against these strategic priorities by the achievement of key financial and operating metrics.
For the three months ended
•Revenues of$969.6 million , a decrease of 4.1% year-over-year; •Clear Aligner revenues of$798.4 million , a decrease of 5.1% year-over-year; •Americas Clear Aligner revenues of$385.2 million , a decrease of 3.8% year-over-year; •International Clear Aligner revenues of$346.2 million , a decrease of 11.2% year-over-year; •Clear Aligner case volume decrease of 10.0% year-over-year and Clear Aligner case volume decrease for teenage patients of 2.1% year-over-year; •Imaging Systems and CAD/CAM Services revenues of$171.2 million , an increase of 0.8% year-over-year; •Income from operations of$188.2 million and operating margin of 19.4%; •Effective tax rate of 35.0%; •Net income of$112.8 million with diluted net income per share of$1.44 ; •Cash, cash equivalents and marketable securities of$977.2 million as ofJune 30, 2022 ; •Operating cash flow of$127.0 million ; •Capital expenditures of$76.0 million , predominantly related to increases in our manufacturing capacity and facilities; and •Number of employees was 24,020 as ofJune 30, 2022 , an increase of 17.8% year-over-year.
Other Statistical Data and Trends
•As ofJune 30, 2022 , approximately 13.4 million people worldwide have been treated with our Invisalign system, approximately 77,000 iTero scanners have been sold and approximately 51,000 exocad software licenses have been installed. Management measures these results by comparing to the millions of people who can benefit from straighter teeth and dental practices that could use intraoral scanners and uses this data to target opportunities to expand the market for orthodontics by educating consumers about the benefits of straighter teeth using the Invisalign system, dental professionals and/or labs and service providers to use iTero intraoral scanners, and dental labs and practitioners to install exocad CAD/CAM software. •For the second quarter of 2022, total Invisalign cases submitted with a digital scanner in theAmericas increased to 91.4%, up from 86.6% in the second quarter of 2021 and international scans increased to 84.4%, up from 76.2% in the second quarter of 2021. For the second quarter of 2022, 97.1% of Invisalign cases submitted by North American orthodontists were submitted digitally.
•Total utilization rate in the second quarter of 2022 decreased to 7.3 cases per
doctor compared to 8.0 cases per doctor in the second quarter of 2021.
Utilization rates in
?North America : Utilization rate among our North American orthodontist customers decreased to 26.8 cases per doctor in the second quarter of 2022 compared to 29.4 cases per doctor in the second quarter of 2021 and the utilization rate among our North American GP customers decreased to 5.1 cases per doctor in the second quarter of 2022 compared to 5.3 cases per doctor in the second quarter of 2021. ?International: International doctor utilization rate was 6.4 cases per doctor in the second quarter of 2022 compared to 7.1 cases per doctor in the second quarter of 2021. 27
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* Invisalign utilization rates are calculated by the number of cases shipped
divided by the number of doctors to whom cases were shipped. Our International
region includes Europe , Middle East and Africa ("EMEA") and Asia Pacific
("APAC"). Latin America ("LATAM") is excluded from the International region
based on its immateriality to the quarter; however is included in the Total
utilization.
Results of Operations
Net Revenues by Reportable Segment
We group our operations into two reportable segments: Clear Aligner segment and Systems and Services segment.
•Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:
?Comprehensive Products include, but are not limited to, Invisalign Comprehensive and Invisalign First.
?Non-Comprehensive Products include, but are not limited to, Invisalign Moderate, Lite and Express packages and Invisalign Go and Invisalign Go Plus.
?Non-Case products include, but are not limited to, retention products, Invisalign training, adjusting tools used by dental professionals during the course of treatment and, more recently, Consumer Products that are complementary to our doctor-prescribed principal products such as aligner cases (clamshells), teeth whitening products, cleaning solutions (crystals, foam and other material) and other oral health products available in certain e-commerce channels in select markets. We also offer in theU.S. andCanada , a Doctor Subscription Program which is a monthly subscription program based on the doctor's monthly need for retention or limited treatment. The program allows doctors the flexibility to order both "touch-up" or retention aligners within their subscribed tier and is designed for a segment of experienced Invisalign doctors who are currently not regularly using our retainers or low-stage aligners.
•Our Systems and Services segment consists of our iTero intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options. Our services include subscription software, disposables, rentals, pay per scan services, as well as exocad's CAD/CAM software solutions that integrate workflows to dental labs and dental practices.
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Net revenues for our Clear Aligner and Systems and Services segments by region for the three and six months endedJune 30, 2022 and 2021 are as follows (in millions): Three Months Ended Six Months Ended June 30, June 30, Net Revenues 2022 2021 Change 2022 2021 Change Clear Aligner net revenues: Americas$ 385.2 $ 400.5 $ (15.3) (3.8) %$ 761.4 $ 757.9 $ 3.5 0.5 % International 346.2 389.7 (43.5) (11.2) % 717.3 743.0 (25.7) (3.5) % Non-case 67.0 50.8 16.2 31.9 % 129.4 93.3 36.1 38.7 %
Total Clear Aligner net revenues
$ (42.6) (5.1) %$ 1,608.1 $ 1,594.2 $ 13.9 0.9 % Systems and Services net revenues 171.2 169.8 1.3 0.8 % 334.7 311.4 23.3 7.5 % Total net revenues$ 969.6 $ 1,010.8 $ (41.3) (4.1) %$ 1,942.8 $ 1,905.6 $ 37.2 2.0 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Case volume data which represents Clear Aligner case shipments for the three and
six months ended
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Total case volume 599.0 665.6 (66.6) (10.0) % 1,197.8 1,261.4 (63.6) (5.0) %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
For the three months endedJune 30, 2022 , total net revenues decreased$41.3 million as compared to the same period in 2021 primarily due to a decrease in Clear Aligner case volume partially offset by increases in Clear Aligner ASP, Clear Aligner non-case revenues and service revenues.
For the six months ended
Clear Aligner -
For the three months endedJune 30, 2022 ,Americas net revenues decreased by$15.3 million as compared to the same period in 2021 primarily due to a 9.9% decrease in case volume which reduced net revenues by$39.7 million which was partially offset by an increase in ASP which increased net revenues by$24.4 million . Higher ASP was mainly due to processing fees charged on most clear aligner shipments and price increases in certain markets which increased revenues by$12.7 million along with lower net deferrals which increased net revenues by$11.4 million . For the six months endedJune 30, 2022 ,Americas net revenues increased by$3.5 million as compared to the same period in 2021 primarily due to an increase in ASP which increased net revenues by$48.5 million . Higher ASP was mainly due to processing fees charged on most clear aligner shipments and price increases in certain markets which increased revenues by$25.5 million along with lower net deferrals which increased net revenues by$20.2 million . Higher ASP was partially offset by a 5.9% decrease in case volume which reduced net revenues by$45.0 million . Clear Aligner - International For the three months endedJune 30, 2022 , International net revenues decreased by$43.5 million as compared to the same period in 2021 primarily due to a 10.1% decrease in case volume which reduced net revenues by$39.5 million . Lower ASP also decreased net revenues by$4.0 million largely due to unfavorable foreign exchange rates which decreased net revenues by$33.4 million and a product mix shift to lower priced products which decreased net revenues by$10.0 million . The decrease in ASP was partially offset by lower net deferrals which increased net revenues by$29.2 million and processing fees charged on most clear aligner shipments which increased net revenues by$12.1 million . For the six months endedJune 30, 2022 , International net revenues decreased by$25.7 million as compared to the same period in 2021 primarily due to a 3.9% decrease in case volume which resulted in lower net revenues of$29.3 million . Higher 29
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ASP increased net revenues by$3.6 million largely due to lower net deferrals which increased net revenues by$47.4 million and processing fees charged on most clear aligner shipments which increased net revenues by$36.9 million . The increase in ASP was mostly offset by unfavorable foreign exchange rates which decreased net revenues by$56.3 million , unfavorable promotional discounts which decreased net revenues$14.6 million , and a product mix shift to lower priced products which decreased net revenues by$11.5 million . Clear Aligner - Non-Case For the three and six months endedJune 30, 2022 , non-case net revenues increased by$16.2 million and$36.1 million as compared to the same periods in 2021 due to increased volume for retention products across all regions primarily driven by Vivera retainers. Systems and Services For the three months endedJune 30, 2022 , Systems and Services net revenues increased by$1.3 million as compared to the same period in 2021 primarily due to higher service and other revenues which increased$18.7 million mostly due to a larger installed base. These increases were mostly offset by a lower number of scanners sold which decreased net revenues$13.1 million in addition to a lower scanner ASP. For the six months endedJune 30, 2022 , Systems and Services net revenues increased by$23.3 million as compared to the same period in 2021 primarily due to higher service and other revenues which increased$36.4 million mostly due to a larger installed base partially offset by a lower number of scanners sold which decreased net revenues by$9.5 million and lower scanner ASP.
Cost of net revenues and gross profit (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Clear Aligner
Cost of net revenues $ 213.2 $ 194.3 $ 18.9 $ 417.2 $ 363.0 $ 54.1
% of net segment revenues 26.7 % 23.1 % 25.9 % 22.8 %
Gross profit $ 585.2 $ 646.7 $ (61.4) $ 1,190.9 $ 1,231.2 $ (40.3)
Gross margin % 73.3 % 76.9 % 74.1 % 77.2 %
Systems and Services
Cost of net revenues $ 68.8 $ 58.0 $ 10.9 $ 128.7 $ 106.9 $ 21.8
% of net segment revenues 40.2 % 34.1 % 38.5 % 34.3 %
Gross profit $ 102.3 $ 111.9 $ (9.6) $ 206.0 $ 204.4 $ 1.5
Gross margin % 59.8 % 65.9 % 61.5 % 65.7 %
Total cost of net revenues $ 282.0 $ 252.3 $ 29.7 $ 545.9 $ 469.9 $ 75.9
% of net revenues 29.1 % 25.0 % 28.1 % 24.7 %
Gross profit $ 687.6 $ 758.5 $ (71.0) $ 1,396.9 $ 1,435.6 $ (38.7)
Gross margin % 70.9 % 75.0 % 71.9 % 75.3 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Cost of net revenues includes personnel-related costs including payroll and stock-based compensation for staff involved in the production process, the cost of materials, packaging, freight and shipping related costs, depreciation on capital equipment and facilities used in the production process, amortization of acquired intangible assets and training costs.
Clear Aligner
For the three and six months endedJune 30, 2022 , our gross margin percentage decreased as compared to the same periods in 2021 primarily due to a higher mix of additional aligners along with increased costs from freight and manufacturing spend. These factors were offset in part by higher ASP.
Systems and Services
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For the three and six months endedJune 30, 2022 , our gross margin percentage decreased as compared to the same period in 2021 primarily due to lower ASP, manufacturing inefficiencies from lower production volumes and higher component costs partially offset by higher service revenues.
Selling, general and administrative (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Selling, general and administrative
$ (5.5) $ 865.9 $ 829.0 $ 36.8 % of net revenues 44.0 % 42.7 % 44.6 % 43.5 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Selling, general and administrative expense generally includes personnel-related
costs, including payroll, stock-based compensation and commissions for our sales
force, marketing and advertising expenses including media, market research,
marketing materials, clinical education, trade shows and industry events, legal
and outside service costs, equipment, software and maintenance costs,
depreciation and amortization expense and allocations of corporate overhead
expenses including facilities and Information Technology ("IT").
For the three months ended June 30, 2022 , selling, general and administrative
expense decreased compared to the same period in 2021 primarily due to lower
advertising and marketing costs, and lower incentive compensation. These
decreases were partially offset by higher salaries expense, fringe benefits and
stock-based compensation from increased headcount along with higher equipment,
software and material costs.
For the six months ended June 30, 2022 , selling, general and administrative
expense increased compared to the same period in 2021 primarily due to higher
salaries expense, fringe benefits and stock-based compensation from increased
headcount, higher expense related to advertising and marketing, equipment,
software and maintenance in addition to increased travel and expense related
costs. These increases were partially offset by lower incentive compensation.
Research and development (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Research and development $ 73.0 $ 57.7 $ 15.3 $ 144.8 $ 112.3 $ 32.5
% of net revenues 7.5 % 5.7 % 7.5 % 5.9 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Research and development expense generally includes personnel-related costs, including payroll and stock-based compensation, outside service costs associated with the research and development of new products and enhancements to existing products, software, equipment, material and maintenance costs, depreciation and amortization expense and allocations of corporate overhead expenses including facilities and IT. For the three and six months endedJune 30, 2022 , research and development expense increased compared to the same periods in 2021 primarily due to higher compensation costs from higher salaries and fringe benefits driven mainly by increased headcount as we continue to focus our investments in innovation and research. 31
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Income from operations (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Clear Aligner
Income from operations $ 307.2 $ 347.6 $ (40.4) $ 619.9 $ 675.1 $ (55.2)
Operating margin % 38.5 % 41.3 % 38.6 % 42.3 %
Systems and Services
Income from operations $ 45.6 $ 64.7 $ (19.1) $ 96.4 $ 111.9 $ (15.5)
Operating margin % 26.6 % 38.1 % 28.8 % 35.9 %
Total income from operations 1 $ 188.2 $ 268.9 $ (80.7) $ 386.3 $ 494.3 $ (108.1)
Operating margin % 19.4 % 26.6 % 19.9 % 25.9 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
1 Refer to Note 13 "Segments and Geographical Information" of the Notes to Condensed Consolidated Financial Statements for details on unallocated corporate expenses and the reconciliation to Condensed Consolidated Income from Operations.
Clear Aligner
For the three months ended
For the six months ended
Systems and Services
For the three and six months ended
Interest income (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Interest income $ 0.2 $ 0.4 $ (0.1) $ 0.9 $ 2.0 $ (1.1)
% of net revenues - % - % - % 0.1 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Interest income generally includes interest earned on cash, cash equivalents and investment balances.
For the three months ended
For the six months endedJune 30, 2022 , interest income decreased compared to the same period in 2021 mainly due to interest earned from the arbitration award related to our investment in SmileDirectClub in the first quarter of 2021. 32
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Other income (expense), net (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Other income (expense), net $ (14.8) $ (0.5) $ (14.3) $ (26.1) $ 34.0 $ (60.2)
% of net revenues (1.5) % - % (1.3) % 1.8 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Other income (expense), net, generally includes foreign exchange gains and losses, gains and losses on foreign currency forward contracts, interest expense, gains and losses on equity investments and other miscellaneous charges.
For the three months endedJune 30, 2022 , other income (expense), net decreased compared to the same period in 2021 primarily due to larger net foreign exchange losses in the three months endedJune 30, 2022 as compared to the same period in 2021. For the six months endedJune 30, 2022 , other income (expense), net decreased compared to the same period in 2021 primarily due to a$43.4 million gain related to the arbitration award related to our investment in SmileDirectClub recognized in the first quarter of 2021 as well as larger net foreign exchange losses in the six months endedJune 30, 2022 as compared to the same period in 2021.
Provision for income taxes (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Provision for income taxes $ 60.8 $ 69.1 $ (8.3) $ 114.0 $ 130.3 $ (16.3)
Effective tax rates 35.0 % 25.7 % 31.6 % 24.6 %
Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
Our effective tax rate differs from the statutory federal income tax rate of 21% for both the three and six months endedJune 30, 2022 and 2021 primarily due to the recognition of additional tax expense resulting from foreign income taxed at different rates, state income taxes, and non-deductible expenses in theU.S. partially offset by the recognition of excess tax benefits related to stock-based compensation. Additionally, a change inU.S. tax laws effectiveJanuary 1, 2022 which requires capitalization and amortization of research and development expenses incurred afterDecember 31, 2021 increased our effective tax rate for the three and six months endedJune 30, 2022 . The increase in our effective tax rate for the three and six months endedJune 30, 2022 compared to the same periods in 2021 is primarily attributable to foreign income taxed at different rates, capitalization and amortization of research and development expenses in 2022 and lower excess tax benefits from stock-based compensation.
Liquidity and Capital Resources
Liquidity and Trends
As ofJune 30, 2022 andDecember 31, 2021 , we had the following cash and cash equivalents and short-term and long-term marketable securities (in thousands): June 30, 2022 December 31, 2021 Cash and cash equivalents$ 877,501 $ 1,099,370 Marketable securities, short-term 22,138
71,972
Marketable securities, long-term 77,551 125,320 Total$ 977,190 $ 1,296,662
As of
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operations as we generate sufficient domestic operating cash flow and have access to external funding under our$300.0 million revolving line of credit. We believe that our current cash balances and the borrowing capacity under our credit facility, if necessary, will be sufficient to fund our business for at least the next 12 months. The sanctions against Russian banks or international bank messaging systems due to the military conflict betweenUkraine andRussia could impact our ability to access our cash inRussia but would not materially impact our liquidity position. As ofJune 30, 2022 , cash and cash equivalents domiciled inRussia represent approximately 7.0% of our total cash, cash equivalents and marketable securities which is required to fund their current operating requirements.
Our material cash requirements are as follows:
•For 2022, we expect our investments in capital expenditures to exceed$300.0 million . Capital expenditures primarily relate to building construction and improvements as well as additional manufacturing capacity to support our international expansion. This includes our investment in an aligner fabrication facility in Wroclaw,Poland which began serving doctors during the second quarter of 2022 as a part of our strategy to bring operational facilities closer to customers. As we continue growing, we intend to expand our investments in research and development, manufacturing, treatment planning, sales and marketing operations to meet actual and anticipated local and regional demands. •As ofJune 30, 2022 , we have$449.9 million available for repurchase under the stock repurchase program authorized by our Board of Directors inMay 2021 . Refer to Note 9 "Common Stock Repurchase Program" of the Notes to Condensed Consolidated Financial Statements for details on our stock repurchase programs. •There have been no material changes to our purchase commitments for goods and services and future operating lease payments during the periods covered by this 10-Q outside the normal course of business compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
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