Company: ALGN
Filing Date: 2025-03-27
Form Type: PRE 14A
Source: 0001097149-25-000016
Chunk: 36

Company: ALIGN TECHNOLOGY INC
Filing Date: 2025-03-27
Form: PRE 14A
Chunk 36
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 Our 2025 cash-based Bonus Plan will only pay out to the degree 2025 revenue or operating income exceed the attainments under the 2024 Bonus Plan                                                                                                        |     |                                                                                                                                                                                                                                                                                                                                                          |     |                                                                                               |

#### Target Pay Versus Reported Value
The target value of the MSUs and RSUs granted to our CEO in 2024 was $12.5 million. However, the value reported in the Summary Compensation Table is $23.8 million, due primarily to a 190% premium placed on the value of our TSR-linked equity awards as assessed under the applicable accounting and SEC rules. This value premium is largely the result of a large run-up in our stock price immediately pre-grant which correspondingly inflated the reported value of equity granted to all NEOs.

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Notwithstanding this reported value, our MSUs, which make up the vast majority of the 2024 long-term incentive for our NEOs, vest only after positive performance over three y ears. As a result, realizable pay is dependent on generating positive stockholder outcomes over three years and is not tied to the point-in-time value assessed by applicable accounting rules. As shown in the following section, realizable TDC has averaged 48% of reported TDC over the past three years, and 3-year cumulative realizable TDC has been 49% of 3-year cumulative reported TDC.

#### Realizable Pay
Realizable pay reflects a closer approximation for the market value of equity awards to the executive as of year-end, which value increases or decreases with fluctuations in market value. We believe it is important to consider the effect of the year-end value of our stock on those awards over time in addition to the grant date fair values included in the Summary Compensation Table. Considering approximately 80% of our CEO’s and 68% of our other NEOs’ target TDC for 2024 was equity-based, we consider realizable pay an essential component of evaluating the effectiveness of our pay for performance philosophy.

As shown below, for 2024, our CEO’s cumulative 3-year realizable TDC was 77% of his cumulative 3-year target TDC and 49% of his cumulative 3-year reported TDC, which is heavily driven by the reported grant date values of our equity-based long-term incentives. Further, as shown below, in the comparisons of target pay, realizable pay, and our TSR, positive real pay delivery for our executives is