Align Technology Announces Second Quarter Fiscal 2008 Results
SANTA CLARA, Calif., July 29, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the second quarter of fiscal 2008, ended June 30, 2008.
Total net revenues for the second quarter of fiscal 2008 (Q2 08) were a record $79.9 million. This reflects a year-over-year increase of 4.3 percent compared to $76.6 million in the second quarter of 2007 (Q2 07). On a sequential basis, net revenues increased 6.9 percent from $74.8 million in the first quarter of 2008 (Q1 08). Q2 07 shipments included approximately four thousand cases and revenue of $5.2 million from the reduction in backlog and cycle times caused by the allocation of capacity to the Patients First Program during the fourth quarter of 2006 and the first quarter of 2007.
"I'm pleased with our solid performance in the second quarter despite an ever more challenging economic environment for our doctors and their patients," said Thomas M. Prescott, president and CEO of Align Technology. "During the second quarter, we continued to execute on our strategic initiatives including today's launch of Invisalign Teen following the successful pilot of the product."
Net profit for Q2 08 was $4.0 million, or $0.06 per diluted share. This is compared to net profit of $13.6 million, or $0.19 per diluted share in Q2 07, and net profit of $5.3 million, or $0.07 per diluted share in Q1 08. Stock-based compensation expense included in Q2 08 net profit was $4.8 million, compared to $2.9 million in Q2 07, and $4.0 million in Q1 08.
The Company also announced measures to reduce operating expenses.
Prescott said, "As consumer spending has continued to soften, so has our outlook for revenue growth. As a result, we're reducing overall company spending and slowing headcount growth while preserving the important investments in strategic priorities. Unfortunately, valued employees will be affected, and those are decisions that the management team and I do not take lightly. These actions are only the first steps in actively reducing our cost structure and moving towards a financial model with greater operating leverage."
The cost-saving measures include: a reduction in full time headcount of 38, slowing headcount growth for the remainder of 2008, and cuts in discretionary spending. These actions will reduce expenses in the second half of 2008 by approximately $5 million to $6 million. In addition, the company is implementing a phased consolidation of its order acquisition operations in Santa Clara, California into its existing operations in Juarez, Mexico by the end of 2008. Upon completion, 29 positions in Santa Clara will be eliminated, resulting in annualized cost savings of approximately $1.0 to $1.5 million in 2009. As part of these actions, Align will record a restructuring charge estimated to be approximately $2.6 million in the second half of fiscal 2008, of which approximately $2.2 million will be realized in Q3 08. At the end of Q2 08, Align had a regular employee base of approximately 1,400 worldwide.
Q2 08 Operating Results Key GAAP Operating Results Q2 08 Q1 08 Q2 07 Gross Margin 74.7% 73.8% 73.6% Operating Expense $55.8M $50.5M $42.9M Operating Margin 4.8% 6.2% 17.6% Net Profit $4.0M $5.3M $13.6M Earnings Per Diluted Share (EPS) $0.06 $0.07 $0.19
Liquidity and Capital Resources
As of June 30, 2008, Align had $110.1 million in cash, cash equivalents, and short term marketable securities compared to $127.9 million as of December 31, 2007. During Q2 08, Align purchased 2.2 million shares at an average price of $12.65 per share for a total of $27.7 million. There remains $22.3 million under the Company's existing stock repurchase authorization.
Key Business Metrics
The following table highlights business metrics for Align's second quarter of 2008. Additional historical information is available on the Company's website at http://investor.aligntech.com.
Revenue by Channel: Q2 08 Q2'08/Q1'08 Q2'08/Q2'07 % Change % Change (a) U.S. Orthodontists $23.3M 2.1% (6.7%) U.S. GP Dentists $36.6M 5.2% 0.6% International $16.4M 15.8% 41.3% Training and Other $3.6M 20.2% (1.1%) Total Revenue $79.9M 6.9% 4.3% Average Selling Price (ASP): Q2 08 Q2'08/Q1'08 Q2'08/Q2'07 % Change % Change Total Worldwide Blended ASP $1,390 0.7% 4.5% Total Worldwide ASP excluding Invisalign Express $1,500 (0.7%) 4.9% U.S. Orthodontists Blended ASP $1,290 (0.8%) 4.9% U.S. GP Dentists Blended ASP $1,340 0.0% 2.3% International $1,700 0.0% 4.3% Number of Cases Shipped: Q2 08 Q2'08/Q1'08 Q2'08/Q2'07 % Change % Change (a) U.S. Orthodontists -- Full Invisalign 14,830 2.3% (11.9%) U.S. Orthodontists -- Invisalign Express 3,250 5.2% (3.6%) U.S. GP Dentists -- Full Invisalign 22,140 5.9% (2.7%) U.S. GP Dentists -- Invisalign Express 4,970 0.4% 1.2% International -- Full Invisalign 9,520 16.1% 35.4% International -- Invisalign Express 160 23.1% 45.5% Total Cases Shipped 54,870 6.0% (0.3%) Number of Doctors Cases were Shipped to: Q2 08 U.S. Orthodontists 3,730 U.S. GP Dentists 11,030 International 2,910 Total Doctors Cases were Shipped to Worldwide 17,670 Number of Doctors Trained Worldwide: Q2 08 Cumulative U.S. Orthodontists 100 8,510 U.S. GP Dentists 1,630 30,260 International 600 13,340 Total Doctors Trained Worldwide 2,330 52,110 Multiple Case Doctors (Cumulative as of): Q2 08 U.S. Orthodontists 90.5% U.S. GP Dentists 86.6% International 77.2% Doctors Starting Invisalign Treatment (Cumulative as of): Q2 08 U.S. Orthodontists 6,920 U.S. GP Dentists 23,820 International 7,390 Total Doctors Starting Invisalign Treatment 38,130 Doctor Utilization Rates*: Q2 08 Q1 08 Q2 07(a) U.S. Orthodontists 4.9 4.8 5.3 U.S. GP Dentists 2.5 2.4 2.7 International 3.3 3.2 3.1 Total Utilization Rate 3.1 3.1 3.4 * Utilization = # of cases/# of doctors to whom cases were shipped (a) Q2 07 shipments included approximately four thousand cases and revenue of $5.2 million from the reduction in backlog and cycle times caused by the allocation of capacity to the Patients First Program during the fourth quarter of 2006 and the first quarter of 2007
For the third quarter of fiscal 2008 (Q3 08), Align Technology expects net revenues to be in a range of $74 million to $76 million. GAAP earnings per diluted share for Q3 08 is expected to be in a range of $0.01 to $0.03. Non-GAAP earnings per diluted share for Q3 08 is expected to be in a range of $0.04 to $0.06. Stock-based stock compensation expense for Q3 08 is expected to be approximately $4.7 million.
For fiscal 2008, Align Technology expects net revenues to be in a range of $309 million to $314 million. The increase in deferred revenue for fiscal 2008 is expected to be in the range of $5 million to $8 million primarily associated with new products, which will be recognized in future periods, bringing the Company's total deferred revenue balance at the end of 2008 to a range of $17 million to $20 million. GAAP earnings per diluted share for fiscal 2008 is expected to be in a range of $0.26 to $0.30. Non-GAAP earnings per diluted share for fiscal 2008 is expected to be in a range of $0.29 to $0.33. Stock-based compensation expense for fiscal 2008 is expected to be approximately $17.9 million.
A more comprehensive business outlook is available following the financial tables of this release.
In a separate announcement today Align also announced a new addition to its Invisalign product family: Invisalign Teen for non-adult, comprehensive orthodontic treatment. For more information, please see Align's press release titled, " Align Technology Targets Mainstream Orthodontics Market with Invisalign Teen."
Align Web Cast and Conference Call
Align Technology will host a conference call today, July 29, 2008 at 4:30 p.m. ET, 1:30 p.m. PT, to review its second quarter fiscal 2008 results, discuss future operating trends and business outlook. The conference call will also be web cast live via the Internet. To access the web cast, go to the "Events & Presentations" section under Company Information on Align Technology's Investor Relations web site at http://investor.aligntech.com. To access the conference call, please dial 201-689-8341 approximately fifteen minutes prior to the start of the call. If you are unable to listen to the call, an archived 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 account number 292 followed by # and conference number 289687 followed by #. The replay must be accessed from international locations by dialing 201-612-7415 and using the same account and conference numbers referenced above. The telephonic replay will be available through 4:30 p.m. ET on August 12, 2008.
About Align Technology, Inc.
Align Technology designs, manufactures and markets Invisalign, 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. Invisalign is appropriate for treating adults and older teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998.
To learn more about Invisalign or to find a certified Invisalign doctor in your area, please visit http://www.invisalign.com or call 1-800-INVISIBLE.
About non-GAAP Financial Measures
To supplement our business outlook, we use the following non-GAAP financial measures: non-GAAP operating expenses, net profit (loss), earnings (loss) per share, which excludes the restructuring charge. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Business Outlook Summary" included at the end of this release.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our "core operating performance". Management believes that "core operating performance" represents Align's performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from "core operating performance" certain expenses and expenditures that may not be indicative of our operating performance including discrete cash charges that are infrequent or one-time in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal evaluation of period-to-period comparisons. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are provided to and used by our institutional investors and the analyst community to facilitate comparisons with prior and subsequent reporting periods.
This news release, including the tables below, contains forward-looking statements, including statements regarding Align's anticipated amount of cost savings due to the cost-saving measures, the expected amount of and timing of the charges to be incurred in connection with these measures and Align's anticipated financial results and certain business metrics for the third quarter and full year of 2008, including anticipated revenue and deferred revenue, gross profit, gross margin, operating expense, net profit, earnings per share, percentage of revenue by channel, case shipments and average selling prices. 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, failure to achieve the expected cost savings, including a delay in the implementation of the relocation of order acquisition to Mexico and greater than anticipated costs resulting from the relocation, changes in the size of the expected restructuring charge, 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, the risks relating to Align's ability to sustain or increase profitability or revenue growth in future periods while controlling expenses, continued customer demand for Invisalign and new products, changes in consumer spending habits as a result of, among other tings, 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 Invisalign by consumers and dental professionals, Align's third party manufacturing processes and personnel, foreign operational, political and other risks relating to Align's international manufacturing operations, Align's ability to protect its intellectual property rights, competition from manufacturers of traditional braces and new competitors, 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 fiscal year ended December 31, 2007, which was filed with the Securities and Exchange Commission on February 26, 2008. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
Investor Relations Contact Press Contact Shirley Stacy Shannon Mangum Henderson Align Technology, Inc. Ethos Communication, Inc. (408) 470-1150 (678) 540-9222 email@example.com firstname.lastname@example.org ALIGN TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2008 2007 2008 2007 Net revenues $79,902 $76,603 $154,678 $140,364 Cost of revenues 20,243 20,247 39,851 37,776 Gross profit 59,659 56,356 114,827 102,588 Operating expenses: Sales and marketing 32,464 24,353 60,523 47,503 General and administrative 16,322 11,880 31,510 24,065 Research and development 7,001 6,675 14,296 12,368 Patients First Program - - - (1,796) Total operating expenses 55,787 42,908 106,329 82,140 Profit from operations 3,872 13,448 8,498 20,448 Interest and other income, net 443 680 1,409 1,135 Profit before income taxes 4,315 14,128 9,907 21,583 Provision for income taxes (285) (510) (573) (987) Net profit $4,030 $13,618 $9,334 $20,596 Net profit per share - basic $0.06 $0.20 $0.14 $0.31 - diluted $0.06 $0.19 $0.13 $0.29 Shares used in computing net profit per share - basic 68,581 66,696 68,817 66,068 - diluted 69,916 71,207 70,478 70,346 ALIGN TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, 2008 December 31, 2007 ASSETS Current assets: Cash and cash equivalents $64,339 $89,140 Marketable securities, short-term 45,723 38,771 Accounts receivable, net 51,173 44,850 Inventories, net 3,017 2,910 Other current assets 10,132 8,846 Total current assets 174,384 184,517 Property and equipment, net 29,525 25,320 Goodwill and intangible assets, net 9,675 11,093 Other long-term assets 3,585 1,831 Total assets $217,169 $222,761 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $8,965 $9,222 Accrued liabilities 34,708 39,875 Deferred revenues 14,144 12,362 Total current liabilities 57,817 61,459 Other long term liabilities 133 148 Total liabilities 57,950 61,607 Total stockholders' equity 159,219 161,154 Total liabilities and stockholders' equity $217,169 $222,761 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. This outlook excludes the effects of any stock repurchases.
Financials (including reconciliation of GAAP to non-GAAP financial measures): (in millions, except per share amounts and percentages) Q3 2008 GAAP Adjustment(a) Non-GAAP Net Revenue $74.0 - $76.0 $74.0 - $76.0 Gross Margin 73.6% - 74.4% 73.6% - 74.4% Operating Expenses $53.7 - $55.2 $2.2(a) $51.5 - $53.0 Net Profit % 1% - 2% 3% 4% - 5% Net Profit per Diluted Share $0.01 - $0.03 $0.03 $0.04 - $0.06 Stock Based Compensation Expense: Cost of Revenues $0.4 $0.4 Operating Expenses $4.3 $4.3 Total Stock Based Compensation Expense $4.7 $4.7 (a) Restructuring charges Business Metrics: Q3 2008 Case Shipments 51.0K - 53.0K Cash $116M - $120M DSO ~57 days Capex $3.0M - $5.0M Depreciation & Amortization $2.0M - $3.0M Diluted Shares Outstanding 70.0M FY 2008 FY 2008 Adjustment(a) Non-GAAP Net Revenue $309.0 - $314.0 $309.0 - $314.0 Gross Margin 73.7% - 74.2% 73.7% - 74.2% Operating Expenses $210.8 - $213.8 $2.6(a) $208.2 - $211.2 Net Profit % 6% - 7% 1% 7% - 8% Net Profit per Diluted Share $0.26 - $0.30 $0.03 $0.29 - $0.33 Stock Based Compensation Expense: Cost of Revenues $1.7 $1.7 Operating Expenses $16.2 $16.2 Total Stock Based Compensation Expense $17.9 $17.9 Increase in Deferred Revenue $5.0 - $8.0 $5.0 - $8.0 Total Deferred Revenue Balance $17.0 - $20.0 $17.0 - $20.0 (a) Restructuring charges Business Metrics: FY 2008 Case Shipments 213.0K - 216.5K Cash $130M - $135M DSO ~57 days Capex $14.0M - $18.0M Depreciation & Amortization $13.0M - $14.0M Diluted Shares Outstanding 70.0M
SOURCE Align Technology, Inc.
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