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 and Section 21E of the Securities Exchange Act of 1934. These statements include, among other things, statements concerning our expectations regarding the release of Invisalign ClinAssist, Invisalign Teen and Vivera including the expected impact these new products and product enhancements will have on doctor utilization and our market share, and with respect to Invisalign ClinAssist the anticipated product release date and product features, our expectations regarding product mix, our expectations regarding the existence and impact of seasonality, the anticipated amount of cost-savings due to the restructuring, the expected amount and timing of the charges to be incurred in connection with these measures, our expectation that our utilization rate will improve over time, our expectations regarding our average selling prices and gross profits in 2008, our intention to continue the integration of Invisalign into the curriculums of additional universities, our expectations regarding the benefit of increased consumer marketing programs, our expectations in 2008 regarding case shipment volume, the anticipated level of our operating expenses, and the number of doctors trained, statements regarding our stock repurchase program which could be delayed indefinitely by conditions in the stock or debt markets, our need to conserve capital resources for use in our operations and other factors beyond our control, 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 Item 7 "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.

Overview

Align Technology, Inc., founded in April 1997, designs, manufactures and markets the Invisalign system, a proprietary method for treating malocclusion, or the misalignment of teeth. Invisalign corrects malocclusion using a series of clear, nearly invisible, removable appliances that gently move teeth to a desired final position. Because it does not rely on the use of metal or ceramic brackets and wires, Invisalign significantly reduces the aesthetic and other limitations associated with braces. We received the United States Food and Drug Administration ("FDA") clearance to market Invisalign in 1998. The Invisalign system is regulated by the FDA as a Class II medical device.

Each Invisalign treatment plan is unique to the individual patient. Our full Invisalign treatment consists of as many Aligners as indicated by ClinCheck in order to achieve the doctors' treatment goals. Our Invisalign Express is a dual arch orthodontic treatment for cases that meet certain predetermined clinical criteria and consist of up to ten sets of aligners. Invisalign Express treatment is intended to assist dental professionals to treat a broader range of patients by providing a lower-cost option for adult relapse cases, for minor crowding and spacing, or as a pre-cursor to restorative or cosmetic treatments such as veneers. Invisalign Teen, which was launched in July 2008, is designed to meet the specific needs of the non-adult comprehensive or teen treatment market. Upon completion of an Invisalign or non-Invisalign treatment, the patient may be prescribed our Vivera retainers, a clear aligner set designed for ongoing retention.

A number of factors, the most important of which are set forth below, may affect our results during the remainder of 2008 and beyond.

† Product innovation-New products and enhancements to existing products. We believe that product performance and innovation is a cornerstone to our future long-term growth by driving and sustaining product adoption and enhancing the user experience and thereby increasing utilization growth. Currently, the Invisalign system is a single system used by both GPs and orthodontists. We are committed to delivering new products and introducing new product features to better meet the needs of our two customers-orthodontists and GPs-each with distinct and separate needs. Orthodontists want a more robust set of tools for greater predictability, wider applicability and more flexibility in the use of the Invisalign system. On the other hand, typical GPs want greater ease of use, more efficient and simplified diagnostic tools, guidance through the case set-up process, minimal treatment intervention and self-help tools designed to simplify treatment of cases of mild to moderate malocclusion. Based on this knowledge, in July 2008 we announced the release of Invisalign Teen and the anticipated release of Invisalign ClinAssist later this year.

With the introduction of Invisalign Teen in July, our Invisalign product family now includes a product designed to meet the specific needs of the non-adult comprehensive, or teen market. Invisalign Teen includes features such as an aligner wear indicator to help gauge patient compliance and specially engineered aligner features to address the natural eruption of key teeth and root control issues common in teen patients. Predominantly marketed to orthodontists who treat the vast majority of malocclusion in teen patients, these features make it easier and more efficient for orthodontists to treat those younger patients. The launch of a teen-specific product will make the Invisalign system more applicable to an orthodontist's patient base, which we believe will increase our penetration into and our share of the teen treatment market.

Invisalign ClinAssist is the first phase of our GP-specific product platform and is intended to help newly-certified and low volume Invisalign GPs accelerate the adoption and frequency of use of Invisalign into their practice. ClinAssist is being designed with built-in monitoring tools and progress tracking.

We believe continuing to introduce new products and product features as well as enhancing the user experience will keep us at the forefront of the market and increase demand for Invisalign. The recent launch of Invisalign Teen and the planned roll out of Invisalign ClinAssist and other future products will rely on new features, tools and delivery options to meet specific clinical demands while providing a family of end-to-end solutions for our customers. We believe enhanced product performance and innovation will continue to drive the adoption and frequency of use (what we call utilization). See Part II, Item 1A-"Risk Factors" for risks related to our ability to develop and successfully introduce new products.

† Increase customer adoption and utilization. By increasing adoption through the expansion of our customer base and then increasing utilization by offering new products and feature enhancements to meet the needs of orthodontists and GPs, we believe the overall market for Invisalign and our share of that market will increase. Although we expect that over the long-term our utilization rates will gradually improve, we expect that period over period comparisons of our utilization rates will fluctuate. Our quarterly utilization rates from the first quarter of 2006 through the second quarter of 2008 are as follows:

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† Training new orthodontists and general practitioners. Expanding our customer base through training is a key part of our strategy. Through June 30, 2008, we have trained 30,260 GPs and 8,510 orthodontists in the United States and 13,340 doctors internationally. We expect to train approximately 6,600 GPs and orthodontists worldwide in 2008. In addition, by educating dental students and orthodontic residents on the benefits of the Invisalign technique, we believe they will be more likely to use this technology in their future practices and offer Invisalign as a treatment option. Currently, we have incorporated the Invisalign technique into the curriculum of 38 university programs. We expect additional dental schools to integrate the Invisalign technique into their curricula in the future.

† Focus on education and customer support. In order to build long-term relationships with our customers and increase utilization, we focus on providing ongoing training, support and services. In early 2008, we announced the introduction of the Aligntech Institute program brand (www.aligntechinstitute.com), which is a new interactive website that will provide clinical education and practice development training. These clinical education and practice development training opportunities will include instructor-led certification classes, seminars and workshops, conference calls, web-based videos, case studies, and other clinical resources. Many of these courses and resources are eligible for continuing education (CE) credits. By participating in these events, we believe that our customers will emerge with a better understanding of the product and its applicability, and with a greater aptitude for starting and finishing Invisalign cases successfully. Our VIP portal (Virtual Invisalign Practice) provides our trained doctors and their staff access to thousands of Invisalign cases and best practices as well as up-to-date support information, programs and marketing materials for continuous support and information access.

† Stimulate demand for Invisalign treatment-Increasing our patient base. Marketing to the consumer and creating demand is one of our key strategic objectives to driving long-term growth. Our market research indicates that the vast majority of people with malocclusion who desire treatment do not elect traditional treatment because of its many limitations, such as compromised aesthetics and oral discomfort. By communicating the benefits of Invisalign to both dental professionals and consumers, we intend to increase the number of patients who seek Invisalign treatment annually. In 2008, we expect to increase our overall marketing spending in the United States with expenses related to the launch of our new TV advertising campaign which occurred in the first quarter of 2008 and an increased focus on other programs, such as digital online media, designed to raise the profile of Invisalign and drive more consumers to our most experienced doctors. We will incur additional costs in the United States related to bringing new products to market, such as Invisalign Teen and Invisalign ClinAssist. We also intend to initiate similar consumer marketing efforts, but on a smaller scale, in key European countries. Despite the continuing challenges in the U.S. economy and weak consumer spending, we believe that consumer demand creation is critical to our long-term growth. As a result, we will continue to invest in efforts to increase consumer awareness of Invisalign.

† Product mix. For the six months ended June 30, 2008 and 2007, our Invisalign revenues as a percentage of total net revenues are as follows:

                                             Six Months Ended
                                                 June 30,
                                             2008        2007
Revenues By Channel
North American Invisalign:
Full revenues                                  68.2 %      72.5 %
Express revenues                                7.7 %       7.8 %
Total North American Invisalign revenues       75.9 %      80.3 %
International Invisalign revenues              19.8 %      14.8 %
Other revenues                                  4.3 %       4.9 %
Total net revenues                            100.0 %     100.0 %

We launched Vivera retainers in November 2007 and Invisalign Teen in July 2008, and we anticipate the launch of Invisalign ClinAssist in the latter half of 2008. As a result of and depending upon customer adoption of these new products, as well as the timing of the Invisalign ClinAssist launch, we expect our mix of products to begin shifting gradually in the latter part of 2008 and into 2009. Key features of these new products include staged delivery of retainers with Vivera, staged delivery of aligners with Invisalign ClinAssist, and up to six free replacement aligners with Invisalign Teen. As a result of these features, these new products will have a significantly higher amount of deferred revenue as a percentage of their average selling price compared to our current products. Included in the price of full Invisalign treatment, we offer case refinement, which is a finishing tool used to adjust a patient's teeth to the desired final position. Both Invisalign Teen and Invisalign ClinAssist include a deferral for case refinement. In addition, revenue for the six replacement aligners included in Invisalign Teen will be deferred based on their fair market value until the earlier of replacement aligners being used or until the case is completed. Invisalign ClinAssist will be invoiced upon the first staged shipment and revenue will be deferred to the balance sheet and recognized upon shipment of the final staged shipment. The Vivera retainer subscription includes four shipments per year, and revenue is deferred upon the first shipment and then recognized ratably over the one year subscription period. As these new products increase as a percentage of our total case volume in the latter part of 2008, deferred revenue on our balance sheet will increase.

† Growth of international markets. We will continue to focus our efforts towards increasing adoption of Invisalign by dental professionals in our key international markets, Europe and Japan. We expect our international revenues to continue to increase in absolute dollars and as a percentage of total net revenues in the foreseeable future. We continually evaluate cost effective ways to support our customers in smaller and less strategic markets. During 2007, we transitioned the sales of our product in part of the Asia-Pacific and Latin American regions to a distributor model. We will consider selling through distributors in other smaller or less strategic markets as well as consider expanding directly into additional countries on a case-by-case basis.

† Reliance on international manufacturing operations. Our manufacturing efficiency has been and will continue to be an important factor in our future profitability. Currently, two of our key production steps are performed in operations located outside of the U.S. At our facility in Costa Rica, dental technicians use a sophisticated, internally developed computer-modeling program to prepare electronic treatment plans. These electronic treatment plans form the basis of ClinCheck and are used to manufacture aligner molds. In addition, we use International Manufacturing Solutions Operaciones, S.R.L. ("IMS"), a third party based in Juarez, Mexico, for the fabrication and packaging of aligners. Our success will depend in part on the efforts and abilities of management to effectively manage these international operations, including our relationship with IMS. In addition, we currently are and will continue to be dependent on IMS's and our ability to hire and retain employees, as well as hire and retain employees with the necessary skills to perform the more technical aspects of our operations. If our management or IMS fail in any of these respects, we could experience production delays and lost or delayed revenue. In addition, even if we have case submissions, we may not have a sufficient number of trained dental technicians in Costa Rica to create the ClinCheck treatment forms, or if IMS is unable to ship our product to our customers on a timely basis, our revenue will be delayed or lost, which will cause our operating results to fluctuate. See Part II, Item 1A-"Risk Factors" for risks related to our international operations.

† Stock Repurchase Program. On April 29, 2008, we announced that our Board of Directors had approved a stock repurchase program of up to $50 million. During the three months ended June 30, 2008, we repurchased 2.2 million shares of our common stock at an average price of $12.65 per share for an aggregate purchase price of $27.7 million.

† Seasonal Fluctuations. Seasonal fluctuations in the number of doctors in their offices and available to take appointments have affected, and are likely to continue to affect, our business. Specifically, our customers often take vacation or are on holiday during the summer months and therefore tend to start fewer cases. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

† Foreign Exchange Rates. Although the U.S. dollar is our reporting currency, a portion of our revenues and profits are generated in foreign currencies. Revenues and profits generated by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period and as a result are affected by changes in exchange rates. We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk. Therefore, both positive and negative movements in currency exchanges rates against the U.S. dollar will continue to affect the reported amount of revenues and profits in our consolidated financial statements.

† Restructuring. In July 2008, we announced a restructuring plan to reduce our overall company spending and slow headcount growth while allowing us to continue critical investments in our new products and strategic initiatives. We announced a reduction in full time headcount and the implementation of discretionary spending cuts, which will have the effect of reducing expenses by $5 to $6 million over the second half of the year in selected areas. Additionally, we will implement a phased-consolidation of order acquisition operations from our corporate headquarters in Santa Clara, California to Juarez, Mexico. We anticipate completing the consolidation by the end of 2008, at which time, the headcount in the United States will be transitioned out. Annualized cost savings of $1.0 to $1.5 million from this action will be realized in 2009. These actions will result in a restructuring charge of approximately $2.6 million in the second half of 2008, of which approximately $2.2 million will be recognized in the third quarter of 2008.

† Stock-based compensation. We implemented Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-based Payment" ("FAS 123R") in 2006, and we expect stock-based compensation to increase until at least 2010, which corresponds to our standard 4 year vesting term. Thereafter, new grants will be expensed over the vesting period, however, this expense may be offset by fully vested grants that are no longer expensed. For the three and six months ended June 30, 2008 and 2007, stock-based compensation expense recognized in accordance with FAS 123R is as follows (in thousands):

                        Three Months Ended              Three Months Ended               Six Months Ended                Six Months Ended
                          June 30, 2008                   June 30, 2007                   June 30, 2008                   June 30, 2007
                    Stock-based        % of         Stock-based        % of        Stock-based         % of         Stock-based       % of
                   Compensation    net revenues    Compensation    net revenues    Compensation    net revenues    Compensation    net revenues
Cost of revenues   $         471            0.6 %  $         210            0.3 %  $         861            0.6 %  $         444            0.3 %
Sales and
marketing                  1,440            1.8 %            898            1.2 %          2,679            1.7 %          1,755            1.3 %
General and
administrative             2,279            2.9 %          1,429            1.8 %          4,113            2.7 %          2,532            1.8 %
Research and
development                  585            0.7 %            328            0.4 %          1,133            0.7 %            656            0.5 %
Total
stock-based
compensation
expense            $       4,775            6.0 %  $       2,865            3.7 %  $       8,786            5.7 %  $       5,387            3.9 %

Results of Operations

Net revenues:

Invisalign product revenues by channel and other revenues, which represented training and sales of ancillary products, for the three and six months ended June 30, 2008 and 2007 are as follows (in millions):

                       Three Months Ended June 30,               Six Months Ended June 30,
                                        Net        %                             Net        %
Net revenues        2008       2007    Change    Change     2008      2007      Change    Change
North America:
Ortho full        $   20.9    $ 22.4   $  (1.5 )   (7.1 )% $  41.3   $  41.8   $   (0.5 )   (1.2 )%
Ortho Express          2.4       2.5      (0.1 )   (3.6 )%     4.7       4.6        0.1      2.7 %
Total Ortho
revenues              23.3      24.9      (1.6 )   (6.7 )%    46.0      46.4       (0.4 )   (0.8 )%
GP full               33.0      32.9       0.1      0.3 %     64.1      59.9        4.2      7.1 %
GP Express             3.6       3.5       0.1      3.3 %      7.3       6.3        1.0     15.2 %
Total GP
revenues              36.6      36.4       0.2      0.6 %     71.4      66.2        5.2      7.8 %
Total North
American
Invisalign            59.9      61.3      (1.4 )   (2.4 )%   117.4     112.6        4.8      4.3 %
International
Invisalign            16.4      11.6       4.8     41.3 %     30.6      20.8        9.8     47.2 %
Total
Invisalign
revenues              76.3      72.9       3.4      4.6 %    148.0     133.4       14.6     11.0 %
Other revenues         3.6       3.7      (0.1 )   (1.1 )%     6.7       7.0       (0.3 )   (4.5 )%
Total net
revenues          $   79.9    $ 76.6   $   3.3      4.3 %  $ 154.7   $ 140.4   $   14.3     10.2 %

Case volume data which represents Invisalign case shipment by channel, for the three and six months ended June 30, 2008 and 2007 are as follows (in thousands):

                            Three Months Ended June 30,          Six Months Ended June 30,
                                            Net       %                        Net       %
Invisalign case volume   2008     2007     Change   Change    2008    2007    Change   Change
North America:
Ortho full                14.8     16.8      (2.0 )  (11.9 )%  29.3    31.0     (1.7 )   (5.5 )%
Ortho Express              3.3      3.4      (0.1 )   (3.4 )%   6.3     6.2      0.1      2.7 %
Total Ortho volume        18.1     20.2      (2.1 )  (10.5 )%  35.6    37.2     (1.6 )   (4.1 )%
GP full                   22.1     22.8      (0.7 )   (2.7 )%  43.1    41.3      1.8      4.0 %
GP Express                 5.0      4.9       0.1      1.1 %    9.9     8.8      1.1     13.3 %
Total GP volume           27.1     27.7      (0.6 )   (2.0 )%  53.0    50.1      2.9      5.7 %
Total North American
Invisalign                45.2     47.9      (2.7 )   (5.6 )%  88.6    87.3      1.3      1.5 %
International
Invisalign                 9.7      7.1       2.6     35.5 %   18.0    12.7      5.3     41.8 %
Total Invisalign case
volume                    54.9     55.0      (0.1 )   (0.3 )% 106.6   100.0      6.6      6.6 %

For the three month period ended June 30, 2008 compared to the same period in 2007, overall net revenues improved as a result of increased International Invisalign revenues partially offset by lower North American Invisalign revenues. International Invisalign revenues benefited from increased case volume, higher average selling prices, and favorable exchange rates against the U.S. dollar. Our North American Invisalign revenues were lower during the second quarter of 2008 compared to the same period in 2007 reflecting a reduction primarily in the Ortho full case volume and partially offset by increased average selling prices as a result of fewer volume rebates. In addition, our second quarter 2007 case shipments included approximately 4,000 incremental cases as we reduced the backlog created by the allocation of capacity to the Patients First Program during the fourth quarter of 2006 and the first quarter of 2007.

For the six month period ended June 30, 2008 compared to the same period in 2007, overall net revenues improved as a result of increased case volume and higher average selling prices primarily in the International channel. International Invisalign revenues benefited from increased case volume, higher average selling prices, and favorable exchange rates against the U.S. dollar. Our North American Invisalign revenues improved during the first half of 2008 compared to the same period in 2007 reflecting increased case volume and increased average selling prices as a result of fewer volume rebates.

For 2008, we expect our total net revenues to increase compared to 2007 primarily due to case volume. We expect our average selling price to be slightly higher in 2008 compared to 2007. We launched Vivera retainers in November 2007 and Invisalign Teen in July 2008 and anticipate the launch of Invisalign ClinAssist in the latter half of 2008. As a result of and depending upon customer adoption of these new products, as well as the timing of the Invisalign ClinAssist launch, we expect our mix of products to begin shifting gradually in the latter part of 2008 and into 2009. These new products will have a significantly higher amount of deferred revenue as a percentage of their average selling price, compared to our current products. As these new products increase as a percentage of our total case volume in the latter part of 2008, deferred revenue on our balance sheet will increase.

Cost of revenues and gross profit:

                         Three Months Ended             Six Months Ended
                              June 30,                      June 30,
(In millions)         2008      2007     Change     2008      2007     Change
Cost of revenues    $   20.2   $ 20.2   $      -   $  39.9   $  37.8   $   2.1
% of net revenues       25.3 %   26.4 %               25.8 %    26.9 %
. . .