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Segments and Geographical Information | 3 Months Ended
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Mar. 31, 2020
Notes To Financial Statements [Abstract] |
Segments and Geographical Information | 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, gross profit and income from operations. 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, accounting and finance, legal and regulatory, and other separately managed general and administrative costs outside the operating segments. 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, 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. ▪Non-Case includes, but not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion. •Our Scanner segment consists of intraoral scanning systems, which includes a single hardware platform and restorative or orthodontic software options, additional services and ancillary products. 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 March 31, |  |
|  |  |  |  |  | 2020 |  | 2019
Net revenues |  |  |  |  |  |  |  |
Clear Aligner |  |  |  |  |  | $ | 481,611 |  |  | $ | 469,205 |
Scanner |  |  |  |  |  | 69,352 |  |  | 79,766 |
Total net revenues |  |  |  |  |  | $ | 550,963 |  |  | $ | 548,971 |
Gross profit |  |  |  |  |  |  |  |
Clear Aligner |  |  |  |  |  | $ | 351,492 |  |  | $ | 351,358 |
Scanner |  |  |  |  |  | 42,864 |  |  | 50,738 |
Total gross profit |  |  |  |  |  | $ | 394,356 |  |  | $ | 402,096 |
Income from operations |  |  |  |  |  |  |  |
Clear Aligner |  |  |  |  |  | $ | 166,388 |  |  | $ | 158,641 |
Scanner |  |  |  |  |  | 14,389 |  |  | 28,259 |
Unallocated corporate expenses |  |  |  |  |  | (110,859) |  |  | (99,199) |
Total income from operations |  |  |  |  |  | $ | 69,918 |  |  | $ | 87,701 |
Depreciation and amortization |  |  |  |  |  |  |  |
Clear Aligner |  |  |  |  |  | $ | 10,121 |  |  | $ | 9,090 |
Scanner |  |  |  |  |  | 1,785 |  |  | 1,508 |
Unallocated corporate depreciation and amortization |  |  |  |  |  | 8,832 |  |  | 7,718 |
Total depreciation and amortization |  |  |  |  |  | $ | 20,738 |  |  | $ | 18,316 |
Impairments and other charges |  |  |  |  |  |  |  |
Clear Aligner |  |  |  |  |  | $ | — |  |  | $ | 29,782 |
Total impairments and other charges |  |  |  |  |  | $ | — |  |  | $ | 29,782 |
The following table reconciles total segment income from operations in the table above to net income before provision for (benefit from) income taxes and equity losses of investee (in thousands):
|  |  |  |  |  | Three Months Ended March 31, |  |
|  |  |  |  |  | 2020 |  | 2019
Total segment income from operations |  |  |  |  |  | $ | 180,777 |  |  | $ | 186,900 |
Unallocated corporate expenses |  |  |  |  |  | (110,859) |  |  | (99,199) |
Total income from operations |  |  |  |  |  | 69,918 |  |  | 87,701 |
Interest income |  |  |  |  |  | 1,986 |  |  | 2,633 |
Other income (expense), net |  |  |  |  |  | (18,549) |  |  | (5,746) |
Net income before provision for (benefit from) income taxes and equity in losses of investee |  |  |  |  |  | $ | 53,355 |  |  | $ | 84,588 |
Geographical Information Net revenues are presented below by geographic area (in thousands):
|  |  |  |  |  | Three Months Ended March 31, |  |
|  |  |  |  |  | 2020 |  | 2019
Net revenues 1: |  |  |  |  |  |  |  |
United States |  |  |  |  |  | $ | 271,705 |  |  | $ | 279,005 |
Switzerland 2 |  |  |  |  |  | 184,317 |  |  | — |
The Netherlands 2 |  |  |  |  |  | — |  |  | 174,744 |
China |  |  |  |  |  | 19,725 |  |  | 42,616 |
Other International |  |  |  |  |  | 75,216 |  |  | 52,606 |
Total net revenues |  |  |  |  |  | $ | 550,963 |  |  | $ | 548,971 |
1 Net revenues are attributed to countries based on the location of where revenues are recognized by our legal entities. 2 During the first quarter of 2020, we implemented a new international corporate structure. This changed the structure of our international procurement and sales operations from the Netherlands to Switzerland. Tangible long-lived assets, which includes Property, plant and equipment, net, and Operating lease right-of-use assets, net, are presented below by geographic area (in thousands):
|  | March 31, 2020 |  | December 31, 2019
Long-lived assets 1: |  |  |  |
Switzerland 2 |  | $ | 229,010 |  |  | $ | 7,755 |
United States |  | 182,131 |  |  | 164,451 |
Costa Rica |  | 85,573 |  |  | 82,083 |
China |  | 84,127 |  |  | 73,174 |
The Netherlands 2 |  | 1,504 |  |  | 226,286 |
Other International |  | 151,512 |  |  | 134,225 |
Total long-lived assets |  | $ | 733,857 |  |  | $ | 687,974 |
1 Long-lived assets are attributed to countries based on the location of our entity that owns or leases the assets. 2 As a result of the new international corporate structure changes, most of the long-lived assets were transferred from our Netherlands entity to our Switzerland entity during the first quarter of 2020.

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- Definition 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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