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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Tax Matter Beginning in the third quarter of 2023 and continuing through the first quarter of 2024, the Company has received cumulative assessments of approximately $100 million from His Majesty’s Revenue and Customs (“HMRC”) for unpaid value added tax (“VAT”) related to certain clear aligner sales made during the period of October 2019 through May 2023. We are required to pay these assessments prior to contesting or litigating in statutory appeal. The Company has historically asserted and continues to assert that doctor prescribed clear aligners sold by dentists for the orthodontic treatment of patient malocclusions are exempt from VAT, that the Company has reasonably relied upon statements and guidance by HMRC and that the Company’s interpretation of United Kingdom legislation is appropriate. In October 2024, the Company and HMRC reached a settlement agreement regarding the unpaid VAT related to certain aligner sales made during the period of October 2019 through mid-October 2023. As part of the settlement, HMRC agreed to vacate the judicial review (before the Administrative Court) originally scheduled for October 9th and October 10th, 2024, refund to the Company all assessments paid, approximately $100 million, for the period of October 2019 through May 2023 and withdraw any potential assessments for the period from June 2023 through mid-October 2023. Between October 21, 2024 and October 29, 2024, HMRC refunded to the Company all assessed amounts in full, approximately $100 million. The Company has remaining exposure in the amount of approximately $7.5 million for periods up to December 2023. A statutory appeal (before the First-tier Tribunal - “Tax Tribunal”) is listed for January 27th through January 30th, 2025, at which time we anticipate the Tax Tribunal will determine whether clear aligners are exempt from VAT as a matter of law and whether the Company has any liability as a matter of principle. It is not possible at this stage to accurately evaluate the likelihood of an unfavorable outcome from the Tax Tribunal statutory appeal. Accordingly, the Company has determined that a potential loss related to VAT accounted for in the periods up to December 2023 is not probable. 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 of future payments, if any, 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, 2024, we did not have any material indemnification claims that were probable or reasonably possible.

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