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Invisalign Itero

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Jan 30, 2018

Align Technology Announces Fourth Quarter and 2017 Financial Results

SAN JOSE, CA -- (Marketwired) -- 01/30/18 --

  • Q4 revenues up 43.7% year-over-year to a record $421.3 million, and diluted EPS of $0.13, includes $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act
  • Q4 operating income up 60.3% year-over-year to a record $109.6 million or operating margin of 26.0%
  • Q4 total Invisalign case shipments up 34.2% year-over-year to 255.0 thousand
  • Q4 Invisalign cases for teenage patients up 44.1% year-over-year to 63.5 thousand
  • Q4 scanner and services revenues up 37.0% year-over-year to $57.1 million
  • Record 2017 Invisalign revenues up 34.1% year-over-year to $1.3 billion with Invisalign case shipments up 31.4% year-over-year to 931.0 thousand
  • Record 2017 iTero scanner volume up 37.5%

Align Technology, Inc.(NASDAQ: ALGN) today reported financial results for the fourth quarter and year ended December 31, 2017. Invisalign case shipments in the fourth quarter of 2017 (Q4'17) were 255.0 thousand, up 34.2% year-over-year. North America and International case shipments were up year-over-year 24.2% and 52.3%, respectively. Q4'17 Invisalign cases for teenage patients were 63.5 thousand, up 44.1% year-over-year. Q4'17 revenues were $421.3 million, up 43.7% year-over-year with Q4'17 operating income a record $109.6 million, up 60.3% year-over-year resulting in an operating margin of 26.0%. Q4'17 net profit was $10.3 million, or $0.13 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

For 2017, record Invisalign revenues were $1.3 billion, up 34.1% year-over-year with Invisalign case shipments of 931.0 thousand, up 31.4% year-over-year. 2017 iTero revenues were $164.2 million, up 35.1% with record volumes, up 37.5% year-over-year. 2017 Invisalign cases for teenage patients were 237.5 thousand, up 40.4% year-over-year. For 2017, revenues were $1.5 billion, up 36.4% year-over-year and net profit was $231.4 million, or $2.83 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

Commenting on Align's Q4 and 2017 results, Align Technology President and CEO Joe Hogan said, "Overall, the fourth quarter was a strong finish to another outstanding year for Align, with better than expected revenues, volumes and operating income. Record Q4 revenues were up 43.7% year-over-year driven by increased Invisalign volumes across all geographies and customer channels, as well as by record iTero scanner revenue. Q4 Invisalign volume was up 34.2% year-over-year reflecting strong international growth from increased utilization and expansion of our customer base which included over 4,000 new customers for the third consecutive quarter. Notwithstanding this strong performance, our Q4 results were impacted by the new U.S. Tax Cut and Jobs Act which reduced our reported net income and EPS. However, Q4 operating income was a record $109.6M or 26.0%."

Hogan continued, "For the full year, revenues of $1.5 billion increased 36.4% year-over-year driven by both record Invisalign revenue which surpassed the $1 billion mark for the first time ever and record iTero scanner revenues. These results reflect continued progress and execution of our four strategic growth drivers which focus on: driving international expansion; increasing Orthodontists utilization of Invisalign, especially with teenagers; enabling GP dentists to treat or refer more Invisalign cases; and generating consumer demand from millions of people worldwide and connecting them with an Invisalign doctor."

 
GAAP Summary Financial Comparisons
Fourth Quarter Fiscal 2017
    Q4'17   Q3'17   Q4'16   Q/Q Change   Y/Y Change
Invisalign Case Shipments1   255.0K   236.1K   190.1K   +8.0%   +34.2%
Net Revenues   $421.3M   $385.3M   $293.2M   +9.4%   +43.7%
  Clear Aligner2   $364.2M   $341.6M   $251.5M   +6.6%   +44.8%
  Scanner & Services   $57.1M   $43.7M   $41.7M   +30.8%   +37.0%
Net Profit3   $10.3M   $82.6M   $47.6M   (87.6)%   (78.4)%
Diluted EPS3   $0.13   $1.01   $0.59   $(0.88)   $(0.46)
                     
Fiscal 2017
    2017   2016   Y/Y Change
Invisalign Case Shipments1   931,045   708,500   +31.4%
Net Revenues   $1,473.4M   $1,079.9M   +36.4%
  Clear Aligner2   $1,309.3M   $958.3M   +36.6%
  Scanner & Services   $164.2M   $121.5M   +35.1%
Net Profit3   $231.4M   $189.7M   +22.0%
Diluted EPS3   $2.83   $2.33   +$0.50
Note: Changes and percentages are based on actual values and may effect totals due to rounding
1 Invisalign Shipment figures do not include SmileDirectClub aligners
2 Clear aligner revenue includes revenues from Invisalign clear aligners and SmileDirectClub aligners
3 Q4'17 and 2017 net profit and diluted EPS includes $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act
 

As of December 31, 2017, Align had $761.5 million in cash, cash equivalents and marketable securities compared to $700.0 million as of December 31, 2016. We repurchased approximately 0.2 million shares of stock for $50.0 million in Q4'17 under the April 2016 Repurchase Program. We have $200.0 million remaining available for repurchases under the existing stock repurchase authorization.

2017 Business Highlights

The following list highlights Align's key announcements over the past year:

  • Expanded restorative digital workflow solutions for iTero Element® scanner to include iTero Chairside CAD, a chairside prosthetics design software application that will support same-day dentistry as part of collaboration with Exocad GmbH.
  • Celebrated the 5 millionth Invisalign® patient, a 12-year old Canadian teenager starting Invisalign treatment with mandibular advancement.
  • Signed distribution agreement with Glidewell Dental for the iTero Element® intraoral scanning system in North America with glidewell.io™ In-Office Solution, a chairside restorative ecosystem designed to simplify the process of prescribing and delivering laboratory-quality dental restorations.
  • Opened the first Invisalign® store pilot in San Francisco to help consumers connect with an Invisalign® provider to improve their smile with Invisalign® treatment.
  • Awarded nearly $300,000 to researchers at universities in North America, Europe and Asia Pacific as part of the Company's Research Award Program to support clinical and scientific dental research.
  • Signed distribution agreement Patterson Dental for iTero Element® intraoral scanning system in U.S. and Canada.
  • Opened first Invisalign® Treatment Planning Facility in Chengdu, China.
  • Launched TimeLapse technology for digital scan comparisons and ability to complete a scan in as little as 1 minute as part of a software upgrade for its iTero Element® intraoral scanners.
  • Received U.S. Patents for SmartTrack material, an innovative multi-layer polymer that delivers more gentle, constant force to improve control of tooth movements with Invisalign® clear aligners.
  • Celebrated the 1 millionth Invisalign® Teen patient, an 11 year-old boy from the U.S. starting Invisalign treatment.
  • Launched first global, multi-million dollar Invisalign brand platform and marketing campaign.
  • Achieved over 1 million scans submitted with iTero Element® scanner since its introduction in 2015.
  • Introduced of Invisalign® Teen with mandibular advancement feature, the first clear aligner solution for Class II correction in growing tween and teen patients. (Not yet available in the U.S., pending FDA approval).
  • Expanded digital implant workflow options for the iTero® intraoral scanner with Nobel Biocare implants and ELOS Medtech scan bodies.

Q1 2018 Business Outlook

For the first quarter of 2018 (Q1'18), Align provides the following guidance:

  • Net revenues in the range of $400 million to $410 million, up approximately 29% to 32% over the same period a year ago.
  • Invisalign case shipments in the range of 264 thousand to 269 thousand, up approximately 27% to 29% over the same period a year ago.
  • Operating margin in the range of 18.5% to 19.5%
  • Diluted EPS in the range of $0.94 to $0.98.

Align Web Cast and Conference Call
 Align will host a conference call today, January 30, 2018 at 4:30 p.m. ET, 1:30 p.m. PT, to review its fourth quarter and year ended 2017 results, discuss future operating trends and the business outlook. The conference call will also be web cast live via the Internet. To access the webcast, go to the "Events & Presentations" section under Company Information on Align's Investor Relations web site at http://investor.aligntech.com. To access the conference call, please dial 201-689-8261. An archived audio web cast will be available beginning approximately one hour after the call's conclusion and will remain available for approximately 12 months. Additionally, a telephonic replay of the call can be accessed by dialing 877-660-6853 with conference number 13674959 followed by #. For international callers, please dial 201-612-7415 and use the same conference number referenced above. The telephonic replay will be available through 5:30 p.m. ET on February 13, 2018.

About Align Technology, Inc.
 Align Technology designs and manufactures the Invisalign® system, the most advanced clear aligner system in the world, and iTero® intraoral scanners and services. Align's products help dental professionals achieve the clinical results they expect and deliver effective, cutting-edge dental options to their patients. Visit www.aligntech.com for more information.

For additional information about the Invisalign system or to find an Invisalign provider in your area, please visit www.invisalign.com. For additional information about iTero digital scanning system, please visit www.itero.com.

Forward-Looking Statement
 This news release, including the tables below, contains forward-looking statements, including statements regarding certain business metrics for the first quarter of 2018 year end, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, diluted earnings per share, tax rate and case shipments. Forward-looking statements contained in this news release and the tables below relating to expectations about future events or results are based upon information available to Align as of the date hereof. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. As a result, actual results may differ materially and adversely from those expressed in any forward-looking statement. Factors that might cause such a difference include, but are not limited to, difficulties predicting customer and consumer purchasing behavior, Align's ability to protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing and new competitors, the willingness and ability of our customers to maintain and/or increase product utilization in sufficient numbers, the possibility that the development and release of new products does not proceed in accordance with the anticipated timeline, the possibility that the market for the sale of these new products may not develop as expected, or that the expected benefits of new or existing business relationships will not be achieved as anticipated, the risks relating to Align's ability to sustain or increase profitability or revenue growth in future periods while controlling expenses, growth related risks, including capacity constraints and pressure on our internal systems and personnel, the security of customer and/or patient data is compromised for any reason, continued customer demand for our existing and new products, changes in consumer spending habits as a result of, among other things, prevailing economic conditions, levels of employment, salaries and wages and consumer confidence, the timing of case submissions from our doctors within a quarter, acceptance of our products by consumers and dental professionals, foreign operational, political and other risks relating to Align's international manufacturing operations, Align's ability to develop and successfully introduce new products and product enhancements and the loss of key personnel. These and other risks are detailed from time to time in Align's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2017, and its latest Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which was filed with the SEC on November 2, 2017. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

                       
ALIGN TECHNOLOGY, INC.                      
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS            
(in thousands, except per share data)                      
                       
    Three Months Ended
December 31, 		    Year Ended
December 31, 		 
    2017     2016     2017   2016  
                               
Net revenues   $ 421,323     $ 293,203     $ 1,473,413   $ 1,079,874  
                               
Cost of net revenues     103,406       72,954       356,466     264,580  
                               
Gross profit     317,917       220,249       1,116,947     815,294  
                               
Operating expenses:                              
  Selling, general and adminstrative     182,141       130,268       665,777     490,653  
  Research and development     26,170       21,609       97,559     75,720  
    Total operating expenses     208,311       151,877       763,336     566,373  
                               
Income from operations     109,606       68,372       353,611     248,921  
                               
Interest and other income (expense), net     2,581       (7,516 )     11,188     (6,355 )
                               
Net income before provision for income taxes and equity in losses (gains) of investee     112,187       60,856       364,799     242,566  
                               
Provision for income taxes     103,654       12,028       130,162     51,200  
Equity in losses (gains) of investee, net of tax     (1,731 )     1,207       3,219     1,684  
                               
Net income   $ 10,264     $ 47,621     $ 231,418   $ 189,682  
                               
Net income per share:                              
  Basic   $ 0.13     $ 0.60     $ 2.89   $ 2.38  
  Diluted   $ 0.13     $ 0.59     $ 2.83   $ 2.33  
                               
Shares used in computing net income per share:                              
  Basic     80,080       79,667       80,085     79,856  
  Diluted     81,863       81,248       81,832     81,484  
                                 
         
ALIGN TECHNOLOGY, INC.        
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS    
(in thousands)        
         
    December 31,
 2017 		  December 31,
2016
ASSETS            
             
Current assets:            
  Cash and cash equivalents   $ 449,511   $ 389,275
  Marketable securities, short-term     272,031     250,981
  Accounts receivable, net     322,825     247,415
  Inventories     31,688     27,131
  Prepaid expenses and other current assets     80,948     38,176
    Total current assets     1,157,003     952,978
             
Marketable securities, long-term     39,948     59,783
Property, plant and equipment, net     348,793     175,167
Equity method investments     54,606     45,061
Goodwill and intangible assets, net     89,068     81,998
Deferred tax assets     50,059     67,844
Other assets     38,379     13,320
             
    Total assets   $ 1,777,856   $ 1,396,151
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 36,776   $ 28,596
  Accrued liabilities     194,198     134,332
  Deferred revenues     266,842     191,407
    Total current liabilities     497,816     354,335
             
Income tax payable     114,091     45,133
Other long-term liabilities     15,579     1,294
     Total liabilities     627,486     400,762
             
Total stockholders' equity     1,150,370     995,389
             
    Total liabilities and stockholders' equity   $ 1,777,856   $ 1,396,151
                 
 
ALIGN TECHNOLOGY, INC.
INVISALIGN BUSINESS METRICS*
    Q4     Fiscal     Q1     Q2     Q3     Q4     Fiscal  
    2016     2016     2017     2017     2017     2017     2017  
Invisalign Average Selling Price (ASP):                                                        
  Worldwide ASP   $ 1,230     $ 1,265     $ 1,270     $ 1,285     $ 1,310     $ 1,305     $ 1,295  
  International ASP   $ 1,315     $ 1,335     $ 1,325     $ 1,335     $ 1,390     $ 1,390     $ 1,360  
                                                         
Invisalign Cases Shipped by Geography:                                                        
  North America     122,555       463,810       132,885       146,510       144,870       152,245       576,510  
  International     67,500       244,690       75,175       85,380       91,195       102,785       354,535  
    Total Cases Shipped     190,055       708,500       208,060       231,890       236,065       255,030       931,045  
      YoY % growth     18.5 %     21.5 %     27.1 %     31.0 %     32.8 %     34.2 %     31.4 %
      QoQ % growth     6.9 %             9.5 %     11.5 %     1.8 %     8.0 %        
                                                         
Number of Invisalign Doctors Cases Were Shipped To:                                                        
  North America     23,265       34,065       23,910       24,695       24,845       25,365       36,415  
  International     13,635       20,415       14,955       16,570       17,760       19,620       27,990  
    Total Doctors Cases Shipped To     36,900       54,480       38,865       41,265       42,605       44,985       64,405  
                                                         
Invisalign Doctor Utilization Rates*:                                                        
  North America     5.3       13.6       5.6       5.9       5.8       6.0       15.8  
    North American Orthodontists     11.3       36.6       12.6       13.6       13.8       14.0       46.6  
    North American GP Dentists     3.2       7.6       3.1       3.3       3.1       3.3       8.2  
  International     5.0       12.0       5.0       5.2       5.1       5.2       12.7  
    Total Utilization Rates     5.2       13.0       5.4       5.6       5.5       5.7       14.5  
  * # of cases shipped/# of doctors to whom cases were shipped                                                        
                                                         
Number of Invisalign Doctors Trained:                                                        
  North America     1,420       4,720       980       1,620       1,460       1,340       5,400  
  International     2,280       6,960       2,280       3,255       2,820       2,745       11,100  
    Total Doctors Trained Worldwide     3,700       11,680       3,260       4,875       4,280       4,085       16,500  
    Total to Date Worldwide     115,470       115,470       118,730       123,605       127,885       131,970       131,970  
                                                         
Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals.
*Invisalign business metrics exclude SmileDirectClub aligners.
 
                             
ALIGN TECHNOLOGY, INC.       
STOCK-BASED COMPENSATION       
(in thousands)       
                             
    Q4   Fiscal   Q1   Q2   Q3   Q4   Fiscal
    2016   2016   2017   2017   2017   2017   2017
Stock-based Compensation (SBC)                                          
  SBC included in Gross Profit   $ 1,078   $ 3,966   $ 925   $ 768   $ 833   $ 804   $ 3,330
  SBC included in Operating Expenses     13,136     50,182     13,887     13,477     14,134     14,026     55,524
    Total SBC Expense   $ 14,214   $ 54,148   $ 14,812   $ 14,245   $ 14,967   $ 14,830   $ 58,854
                                           
   
ALIGN TECHNOLOGY, INC.  
BUSINESS OUTLOOK SUMMARY  
(unaudited)  
   
The outlook figures provided below and elsewhere in this press release are approximate in nature since Align's business outlook is difficult to predict. Align's future performance involves numerous risks and uncertainties and the company's results could differ materially from the outlook provided. Some of the factors that could affect Align's future financial performance and business outlook are set forth under "Forward Looking Information" above in this press release.
     
Financial Outlook    
(in millions, except per share amounts and percentages)  
     
  Q1'18 Guidance  
     
  GAAP  
     
Net Revenues $400.0 - $410.0  
     
Gross Margin 74.3% - 75.0%  
     
Operating Expenses $223.5 - $227.5  
     
Operating Margin 18.5% - 19.5%  
     
Net Income per Diluted Share $0.94 - $0.98 (1)
     
     
Business Metrics: Q1'18  
     
Case Shipments 264.0K - 269.0K  
Capital Expenditure $65M - $70M  
Depreciation & Amortization $10.5M - $11M  
Diluted Shares Outstanding 82.0M (2)
Stock Based Compensation Expense $16.2M  
Effective Tax Rate 2.0% (1)
     
(1) Includes the benefit from the adoption of the accounting standard update 2016-09 related to share-based compensation expense
(2) Excludes any stock repurchases during the quarter 
 

Align Technology
Yin Cantor
(408) 470-1044
ycantor@aligntech.com

Ethos Communication:
Shannon Mangum Henderson
(678) 261-7803
align@ethoscommunication.com

Source: Align Technology

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