Align
Invisalign Itero

Press Release

Jan 29, 2019

Align Technology Announces Record 2018 Financial Results

  • 2018 revenues up 33.5% to a record $2.0 billion
  • 2018 Invisalign volume of 1.2 million cases up 31.9% and iTero scanner volume up 77.2%
  • 2018 operating margin of 23.7% and diluted EPS of $4.92
  • 2018 Invisalign volume in Americas and International regions up 24.2% and 45.0%, respectively
  • Q4 total revenues up 26.7% year-over-year to a record $534.0 million, and diluted EPS of $1.20
  • Q4 Invisalign volume up 30.9% year-over-year to 333.8 thousand cases
  • Q4 scanner and services revenues up 54.8% year-over-year to $88.4 million
  • Q4 operating income up 9.9% year-over-year to $120.5 million or operating margin of 22.6%

SAN JOSE, Calif., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the fourth quarter (Q4’18) and year ended December 31, 2018 (FY 2018). Q4’18 Invisalign volume was 333.8 thousand cases, up 30.9% year-over-year. For the Americas and International regions, Q4’18 Invisalign volume was up 21.7% and 45.3% year-over-year, respectively. Q4’18 Invisalign volume for teenage patients was 87.1 thousand cases, up 37.3% year-over-year. Q4’18 total revenues were $534.0 million, up 26.7% year-over-year, and Q4’18 scanner and services revenues were $88.4 million, up 54.8% year-over-year. Q4’18 operating income of $120.5 million was up 9.9% year-over-year resulting in an operating margin of 22.6%. Q4’18 net profit was $97.4 million, or $1.20 per diluted share.

For 2018, record Invisalign revenues were $1.7 billion, up 29.4% year-over-year with Invisalign case shipments of 1.2 million, up 31.9% year-over-year. 2018 iTero revenues were $275.0 million, up 67.5% year-over-year with record volume, up 77.2% year-over-year. 2018 Invisalign cases for teenage patients were 333.1 thousand, up 40.3% year-over-year. For 2018, total revenues were $2.0 billion, up 33.5% year-over-year, and net profit was $400.2 million, or $4.92 per diluted share.

Commenting on Align’s Q4 and 2018 results, Align Technology President and CEO Joe Hogan said, “Our fourth quarter was a strong finish to a great year. Q4 revenues were better than expected reflecting higher Invisalign ASPs and volume growth of 31% year-over-year, as well as another record quarter for our iTero scanners with revenue up 55% year-over-year.  Q4 sequential growth was driven by a strong quarter for EMEA with record growth from teens, as well as continued traction with Invisalign Lite and Invisalign Go. Q4 operating margin of 22.6% reflects higher doctor training and manufacturing costs, as well as higher legal fees than anticipated, partially offset by a sequential improvement in Invisalign ASPs.”

Hogan continued, “We achieved record revenues of nearly $2.0 billion for the year and had over 1.2 million people start treatment with Invisalign clear aligners the first time, resulting in our 6th millionth Invisalign patient – a teenager from China. These results reflect record revenues and volumes for both Invisalign and iTero across customer channels and country markets, and continued strength from teens, which grew 40.3%. The total number of teenagers treated with Invisalign this year was over 333 thousand representing 27.1% of our volume.  Finally, in 2018, we trained a record number of new Invisalign doctors – nearly 20 thousand worldwide – and more than half of them were international doctors.”


GAAP Summary Financial Comparisons
Fourth Quarter Fiscal 2018

  Q4’18 Q3’18 Q4’17  Q/Q Change  Y/Y Change
Invisalign Case Shipments1   333,800   319,345   255,030   +4.5%     +30.9%  
Net Revenues $534.0M $505.3M $421.3M   +5.7%     +26.7%  
Clear Aligner2 $445.6M $427.1M $364.2M   +4.3%     +22.4%  
Scanner & Services $88.4M $78.2M $57.1M   +13.0%     +54.8%  
Net Profit $97.4M $100.9M $10.3M   (3.4)%     +848.9%  
Diluted EPS3 $1.20 $1.24 $0.13 $(0.04)   $1.07  

Fiscal 2018

        2018   2017  Y/Y Change
Invisalign Case Shipments1       1,228,065   931,045   +31.9%  
Net Revenues     $1,966.5M $1,473.4M   +33.5%  
Clear Aligner2     $1,691.5M $1,309.3M   +29.2%  
Scanner & Services     $275.0M $164.2M   +67.5%  
Net Profit     $400.2M $231.4M   +72.9%  
Diluted EPS3     $4.92 $2.83   +$2.09  

Note: Changes and percentages are based on actual values and may affect 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 includes deemed repatriation tax impact of $1.06

As of December 31, 2018, Align had $744.5 million in cash, cash equivalents and marketable securities compared to $761.5 million as of December 31, 2017.  During Q4’18, we repurchased $50.0 million of our stock against our stock buy-back authorizations and have $500.0 million still available for repurchase under the May 2018 Repurchase Program.  

2018 Business Highlights

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

Invisalign and iTero Intraoral Scanner

  • Launched Invisalign treatment with mandibular advancement in the U.S. for teen Class II treatment following FDA approval.
  • Introduced Invisalign First clear aligners worldwide for treatment of growing children.
  • Expanded the Invisalign product portfolio with new options and greater flexibility for a broader range of patients.  
  • Launched the new Invisalign Go product with a more user-friendly iTero chair side experience. 
  • Announced multiple industry awards for iTero Element 2 and iTero Element Flex scanners, including 2018 DrBicuspid.com Dental Excellence Award and 2018 GOOD DESIGN® Award.
  • Entered into multi-year agreements with both Aspen Dental and Heartland Dental for iTero Element scanners in their U.S. locations.
  • Expanded the iTero Element portfolio with the launch of the iTero Element 2 and the iTero Element Flex scanners, along with new functionality connectivity to exocad and Dentrix. 
  • Began marketing the iTero Element intraoral scanner in China.
  • Announced the commercial availability of Vivera Retainers with Precision Bite Ramps, the first retainers in the market that can be customized to provide additional support after deep bite correction.

Invisalign Experience Program

  • Expanded the interactive brand experience program that was piloted in late 2017, and added eight new stores in major U.S. cities in the fourth quarter of 2018 to end the year with twelve stores in the U.S.
  • Announced the Invisalign Experience Branded Practice Pilot (doctor owned pilot). In late 2018, Align partnered with a few Invisalign doctors in select U.S. cities to pilot Invisalign Experience branded practices to test new ways to reach consumers and connect them directly with doctors to start Invisalign treatment.

Patient Milestones

  • Reached 6th millionth Invisalign patient milestone with a teenage patient from China. 
  • Announced the one millionth Invisalign case for the Europe, Middle East and Africa (EMEA) region.  

International Expansion

  • Opened the first Invisalign treatment planning facility in Europe, located in Cologne, Germany.
  • Launched a new digital treatment planning facility and education center in Madrid, Spain.

Research and Awards

  • Announced eleven recipients of research grants under Align’s 2018 Research Award Program, and opened the 2019 Research Award Program to support clinical and scientific dental research in universities across the globe. 
  • Launched the Orthodontic Aligner Fellowship Certificate Program, in collaboration with DentalXP, a global dental education provider on August 6, 2018.

Corporate

  • Announced entering into an accelerated stock repurchase agreement to repurchase $50.0 million of Align's common stock as part of Align's $600.0 million stock repurchase program announced on May 23, 2018. 
  • Announced that on August 22, 2018, the United States Court of Appeals for the Federal Circuit vacated the Patent Trial and Appeal Board’s decision invalidating certain claims of Align’s patent no. 6,699,037, entitled “Method and System for Incrementally Moving Teeth.”

Q1 2019 Business Outlook
For the first quarter of 2019 (Q1’19), Align provides the following guidance:

  • Net revenues in the range of $525.0 million to $535.0 million, up approximately 20% to 22% over the same period a year ago.
  • Invisalign case shipments in the range of 340 thousand to 345 thousand, up approximately 25% to 27% over the same period a year ago.
  • Operating margin in the range of 15.1% to 16.1%.
  • Diluted EPS in the range of $0.78 to $0.84.

Align Web Cast and Conference Call

Align will host a conference call today, January 29, 2019 at 4:30 p.m. ET, 1:30 p.m. PT, to review its fourth quarter and year ended 2018 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 13685779 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 12, 2019.

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 doctor 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 2019, 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 excess or constrained capacity at our manufacturing and treat operations facilities 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 as well as an increased manufacturing costs per case, 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, 2017, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2018, and its latest Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, which was filed with the SEC on November 1, 2018. 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,
 
    2018
  2017
  2018
  2017  
                   
Net revenues   $ 534,020     $ 421,323     $ 1,966,492     $ 1,473,413  
                   
Cost of net revenues     150,924       103,406       518,625       356,466  
                   
Gross profit     383,096       317,917       1,447,867       1,116,947  
                   
Operating expenses:                  
Selling, general and administrative     226,819       182,141       852,404       665,777  
Research and development     35,804       26,170       128,899       97,559  
Total operating expenses     262,623       208,311       981,303       763,336  
                   
Income from operations     120,473       109,606       466,564       353,611  
Interest income     2,249       2,486       8,576       6,948  
Other income (expense), net     (730 )     95       (8,489 )     4,240  
                   
Net income before provision for income taxes and equity in losses of investee     121,992       112,187       466,651       364,799  
                   
Provision for income taxes**     22,517       103,654       57,723       130,162  
Equity in losses (gains) of investee, net of tax     2,083       (1,731 )     8,693       3,219  
                   
Net income   $ 97,392     $ 10,264     $ 400,235     $ 231,418  
                   
Net income per share:                  
Basic   $ 1.22     $ 0.13     $ 5.00     $ 2.89  
Diluted   $ 1.20     $ 0.13     $ 4.92     $ 2.83  
                   
Shares used in computing net income per share:                  
Basic     79,891       80,080       80,064       80,085  
Diluted     80,943       81,863       81,357       81,832  
           
                   
* During Q1'18, we adopted the ASC 606, "Revenues from Contracts with Customers" using the full retrospective method. The adoption of ASC 606 did not have a material impact on our Condensed Consolidated Statements of Operations presented herein.
 
** During Q4'17, the U.S. Tax Cuts and Jobs Act was enacted into law and we recorded the tax impacts in our provision for income taxes.  
                   

 

           
ALIGN TECHNOLOGY, INC.          
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS*      
(in thousands)          
           
    December 31,
2018
  December 31,
2017
 
ASSETS          
           
Current assets:          
Cash and cash equivalents   $ 636,899   $ 449,511  
Marketable securities, short-term     98,460     272,031  
Accounts receivable, net     439,009     324,189  
Inventories     55,641     31,688  
Prepaid expenses and other current assets     72,470     80,948  
Total current assets     1,302,479     1,158,367  
           
Marketable securities, long-term     9,112     39,948  
Property, plant and equipment, net     521,329     348,793  
Equity method investments     45,913     54,606  
Goodwill and intangible assets, net     81,949     89,068  
Deferred tax assets     64,689     49,334  
Other assets     26,987     43,893  
           
Total assets   $ 2,052,458   $ 1,784,009  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current liabilities:          
Accounts payable   $ 64,256   $ 36,776  
Accrued liabilities     234,679     195,562  
Deferred revenues     393,138     267,713  
Total current liabilities     692,073     500,051  
           
Income tax payable     78,008     114,091  
Other long-term liabilities     29,486     15,579  
Total liabilities     799,567     629,721  
           
Total stockholders' equity     1,252,891     1,154,288  
           
Total liabilities and stockholders' equity   $ 2,052,458   $ 1,784,009  
           
           
* During Q1'18, we adopted the ASC 606, "Revenues from Contracts with Customers" using the full retrospective method. Condensed Consolidated Balance Sheet as of December 31, 2017 has been recasted to comply with the adoption.
 
           

 

           
ALIGN TECHNOLOGY, INC.          
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS*          
(in thousands)          
           
    Year Ended
December 31,
 
    2018
  2017
 
           
CASH FLOWS FROM OPERATING ACTIVITIES          
Net cash provided by operating activities   $ 554,681     $ 438,539    
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Net cash provided by (used in) investing activities     6,927       (251,477 )  
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Net cash used in financing activities     (369,434 )     (135,500 )  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash     (4,733 )     5,544    
Net decrease in cash, cash equivalents, and restricted cash     187,441       57,106    
Cash, cash equivalents, and restricted cash at beginning of the period     450,125       393,019    
Cash, cash equivalents, and restricted cash at end of the period   $ 637,566     $ 450,125    
           
           
*During Q1'18, we adopted ASU 2016-18, "Statement of Cash Flows - Restricted Cash" on a retrospective basis. Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2017 has been recasted to comply with the adoption.  
   

 

ALIGN TECHNOLOGY, INC.                                  
INVISALIGN BUSINESS METRICS*                                  
                                 
                                 
          Q4   Fiscal   Q1   Q2   Q3   Q4   Fiscal  
            2017       2017       2018       2018       2018       2018       2018    
Invisalign Average Selling Price (ASP):                                  
  Worldwide ASP        $   1,305     $   1,295     $   1,310     $   1,315     $   1,230     $   1,235     $   1,270    
  International ASP       $   1,400     $   1,375     $   1,435     $   1,425     $   1,340     $   1,295     $   1,370    
                                     
Invisalign Cases Shipped by Geography:                                  
  Americas         155,625       586,205       166,665       181,425       190,615       189,410       728,115    
  International         99,405       344,840       105,570       121,260       128,730       144,390       499,950    
    Total Cases Shipped         255,030       931,045       272,235       302,685       319,345       333,800       1,228,065    
   YoY % growth         34.2 %     31.4 %     30.8 %     30.5 %     35.3 %     30.9 %     31.9 %  
   QoQ % growth         8.0 %         6.7 %     11.2 %     5.5 %     4.5 %      
                                     
Number of Invisalign Doctors Cases Were Shipped To:                                
  Americas         26,480       38,230       27,105       28,280       28,890       29,215       42,000    
  International         18,505       26,175       19,700       21,805       23,270       25,475       36,040    
    Total Doctors Cases Shipped To         44,985       64,405       46,805       50,085       52,160       54,690       78,040    
                                     
Invisalign Doctor Utilization Rates**:                                  
  North America          6.0       15.8       6.3       6.6       6.9       6.7       18.2    
    North American Orthodontists          14.0       46.6       15.3       16.4       17.4       16.5       56.7    
    North American GP Dentists          3.3       8.2       3.4       3.6       3.5       3.6       9.1    
  International         5.4       13.2       5.4       5.6       5.5       5.7       13.9    
    Total Utilization Rates         5.7         14.5       5.8       6.0       6.1       6.1         15.7    
                                     
Number of Invisalign Doctors Trained***:                                  
  Americas           1,760       6,615       1,630       1,880         2,085         2,290       7,885    
  International           2,400       10,215         2,645         3,300         2,845         2,980       11,770    
    Total Doctors Trained Worldwide         4,160       16,830       4,275       5,180       4,930       5,270       19,655    
    Total to Date Worldwide         132,300       132,300       136,575       141,755       146,685       151,955       151,955    
                                     
                                     
Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals. Effective Q1'18, Americas region includes North America and LATAM. International region includes EMEA and APAC. We have recasted historical data to reflect the change.
   
* Invisalign business metrics exclude SmileDirectClub aligners.                                 
** # of cases shipped / # of doctors to whom cases were shipped. LATAM utilization rate is not separately disclosed, but included in the total utilization rates.       
***2018 and 2017 adjusted to reflect Americas doctors trained for Invisalign iGo                           
                                     
                                     
                                     
ALIGN TECHNOLOGY, INC.                                  
STOCK-BASED COMPENSATION                                   
(in thousands)                                  
                                     
          Q4   Fiscal   Q1   Q2   Q3   Q4   Fiscal  
            2017       2017       2018       2018       2018       2018       2018    
Stock-based Compensation (SBC)                                  
  SBC included in Gross Profit       $   804     $   3,330     $   881     $   900     $   966     $   948     $   3,695    
  SBC included in Operating Expenses         14,026       55,524       14,949       15,990       18,232       17,897       67,068    
    Total SBC Expense       $   14,830     $   58,854     $   15,830     $   16,890     $   19,198     $   18,845     $   70,763    
                                     
                                     
                                 


         
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)        
         
    Q1'19 Guidance    
         
    GAAP     
         
Net Revenues   $525.0 - $535.0    
         
Gross Margin   70.3% - 71.0%    
         
Operating Expenses   $289.8 - $293.8    
         
Operating Margin   15.1% - 16.1%    
         
Net Income per Diluted Share   $0.78 - $0.84    
         
         
Business Metrics:   Q1'19    
         
Case Shipments   340.0K - 345.0K    
Capital Expenditure   $60M - $65M    
Depreciation & Amortization   $19M - $20M    
Diluted Shares Outstanding   80.9M (2)  
Stock Based Compensation Expense   $19.9M    
Effective Tax Rate   ~16% (1)  
         
(1) Includes excess tax benefits related to share-based compensation expense pursuant to ASU 2016-09  
(2) Excludes any stock repurchases during the quarter
 
         

Align Technology
Madelyn Homick
(408) 470-1180
mhomick@aligntech.com

Zeno Group
Sarah Johnson
(828) 551-4201
sarah.johnson@zenogroup.com

Align_Digital_Primary.jpg

Source: Align Technology, Inc.

 

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