SAN JOSE, CA -- (Marketwired) -- 10/23/14 -- Align Technology, Inc. (NASDAQ: ALGN)

• Revenues of $189.9 million, up 15.4% year-over-year
• Clear Aligner revenues up 16.0% and Scanner and Services revenues up 7.1% year-over-year
• Operating margin of 27.1%, compared to 25.2% in Q3 a year-ago
• Earnings per diluted share (EPS) of $0.47, compared to $0.42 in Q3 a year-ago

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the third quarter ended September 30, 2014.

Total revenues for the third quarter of 2014 (Q3'14) were $189.9 million, a 15.4% increase year-over-year from $164.5 million for the third quarter of 2013 (Q3'13). Clear aligner case shipments in Q3'14 were 119.6 thousand, an 11.9% increase year-over-year from 106.9 thousand for Q3'13. Net profit for Q3'14 was $38.2 million, or $0.47 per diluted share, versus $34.5 million, or $0.42 per diluted share for Q3'13.

"I am pleased to report solid third quarter results with year-over-year growth driven by higher Invisalign volume across all customer channels and geographies, especially from International doctors. Third quarter results also reflect continued growth in the number of teenagers starting orthodontic treatment with Invisalign during the summer season," said Thomas M. Prescott, Align president and CEO. "As a result of solid revenue growth, better than expected gross margin and management of operating expenses, EPS was $0.03 above the high-end range of our outlook."

Summary Financial Comparisons
(In millions except for shipments and per share amounts)
			Q3'14			Q2'14			Q3'13			Q/Q			Y/Y
GAAP
Clear Aligner Shipments				119,615			119,300			106,900		+0.3	%		+11.9	%
Net Revenues			$	189.9		$	192.5		$	164.5		(1.4	)%		+15.4	%
	Clear Aligner		$	178.1		$	179.7		$	153.6		(0.9	)%		+16.0	%
	Scanner and Services		$	11.7		$	12.8		$	11.0		(8.3	)%		+7.1	%
Net Profit			$	38.2		$	35.6		$	34.5		+7.4	%		+10.7	%
Earnings Per Share			$	0.47		$	0.43		$	0.42		+$0.04			+$0.05
Note: Changes and percentages are based on actual values and may effect totals due to rounding

As of September 30, 2014, Align had $561.5 million in cash, cash equivalents and short-term and long-term marketable securities compared to $472.0 million as of December 31, 2013. During Q3'14, the Company repurchased 500,000 shares of stock, including 364,000 shares related to the completion of the Company's previously announced $70 million accelerated stock repurchase (ASR) and 136,000 shares amounting to $7.4 million in open market repurchases. The repurchases are part of Align's three-year, $300 million stock repurchase program announced on April 23, 2014, with $100 million of that amount authorized to be purchased through April 2015. Year-to-date, the Company repurchased 1.5 million shares for $77.4 million. The Company anticipates repurchasing the remaining $22.6 million of the first $100 million of the authorization over the next six months.

Q4 Fiscal 2014 Business Outlook
For the fourth quarter of 2014 (Q4'14), Align provides the following guidance:

• Clear aligner case shipments in a range of 125.1 thousand to 127.6 thousand, which reflects a year-over-year increase of 12.6% to 14.8%.
• Net revenues in a range of $194.9 million to $199.1 million, which reflects a year-over-year increase of 9.3% to 11.7%.
• Diluted EPS in a range of $0.47 to $0.50.

Align Web Cast and Conference Call
Align Technology will host a conference call today, October 23, 2014 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter 2014 results, discuss future operating trends and the 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's Investor Relations web site at http://investor.aligntech.com. To access the conference call, please dial 201-689-8261 approximately fifteen minutes prior to the start of the call. 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 13591983 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 October 30, 2014.

About Align Technology, Inc.
Align Technology is the leader in modern clear aligner orthodontics that designs, manufactures and markets the Invisalign® system, which provides dental professionals with a range of treatment options for adults and teenagers. Align also offers the iTero 3D digital scanning system and services for orthodontic and restorative dentistry. Align was founded in March 1997 and received FDA clearance to market the Invisalign system in 1998. 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 the iTero 3D digital scanning system, please visit www.itero.com.

About Non-GAAP Financial Measures
While there are no non-GAAP adjustments to the three months ended September 30, 2014, we may use from time to time the following non-GAAP financial measures to supplement our consolidated financial statements: non-GAAP net profit and non-GAAP earnings per share, which exclude, as applicable, impairment of goodwill, impairment of long-lived assets, and any related income tax adjustments. 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.

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, on-going and customary course of its operations. Accordingly, management excludes from "core operating performance" certain expenditures and other items that may not be indicative of our operating performance including discrete cash and non-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. A reconciliation of the GAAP and non-GAAP financial measures for the nine months ended September 30, 2013 and a more detailed explanation of each non-GAAP financial measure and its uses are provided in the footnotes to the table captioned "Reconciliation of GAAP to non-GAAP Key Financial Metrics" included at the end of this release.

Forward-Looking Statement
This news release, including the tables below, contains forward-looking statements, including statements regarding certain business metrics for the fourth quarter of 2014, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, diluted earnings per share, case shipments, additional common stock repurchases and cash, cash equivalents and short-term and long-term investments. 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, 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, 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, our ability to successfully achieve the anticipated benefits from the scanner and services business, 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 protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing 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, 2013, which was filed with the Securities and Exchange Commission on February 28, 2014. 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							Nine Months Ended
			September 30, 2014				September 30, 2013			September 30, 2014				September 30, 2013
Net revenues			$	189,876			$	164,506		$	563,053			$	481,914
Cost of revenues				44,822				39,416			135,272				120,284
Gross profit				145,054				125,090			427,781				361,630
Operating expenses:
	Sales and marketing			52,368				45,224			161,642				135,352
	General and administrative			28,285				27,487			84,533				84,862
	Research and development			12,854				10,915			39,523				33,113
	Impairment of goodwill			-				-			-				40,693
	Impairment of long-lived assets			-				-			-				26,320
Total operating expenses				93,507				83,626			285,698				320,340
Operating profit				51,547				41,464			142,083				41,290
Interest and other income (expense), net				(1,999	)			449			(1,491	)			(874	)
Profit before income taxes				49,548				41,913			140,592				40,416
Provision for income taxes				11,301				7,376			34,301				18,542
Net profit			$	38,247			$	34,537		$	106,291			$	21,874
Net profit per share
	- basic		$	0.47			$	0.43		$	1.31			$	0.27
	- diluted		$	0.47			$	0.42		$	1.29			$	0.26
Shares used in computing net profit per share
	- basic			80,629				79,967			80,924				80,592
	- diluted			82,014				81,848			82,443				82,549

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
				September 30, 2014			December 31, 2013
ASSETS
Current assets:
	Cash and cash equivalents			$	180,676		$	242,953
	Marketable securities, short-term				244,820			127,040
	Accounts receivable, net				130,047			113,250
	Inventories				15,983			13,968
	Prepaid expenses and other current assets				44,146			47,465
		Total current assets			615,672			544,676
Marketable securities, long-term					136,017			101,978
Property, plant and equipment, net					86,447			75,743
Goodwill and intangible assets, net					82,926			85,362
Deferred tax assets					19,714			15,766
Other assets					7,513			8,622
		Total assets		$	948,289		$	832,147
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	24,517		$	17,718
	Accrued liabilities				86,600			80,345
	Deferred revenues				87,443			77,275
		Total current liabilities			198,560			175,338
Other long term liabilities					27,273			22,839
		Total liabilities			225,833			198,177
Total stockholders' equity					722,456			633,970
	Total liabilities and stockholders' equity			$	948,289		$	832,147

ALIGN TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS
Reconciliation of GAAP to Non-GAAP Operating Expenses
(in thousands)
				Nine Months Ended
				September 30, 2014			September 30, 2013
GAAP Operating expenses				$	285,698		$	320,340
	Impairment of goodwill (1)				-			(40,693	)
	Impairment of long-lived assets (2)				-			(26,320	)
Non-GAAP Operating expenses				$	285,698		$	253,327
Reconciliation of GAAP to Non-GAAP Operating Profit
(in thousands)
					Nine Months Ended
					September 30, 2014			September 30, 2013
GAAP Operating profit				$	142,083		$	41,290
	Impairment of goodwill (1)				-			40,693
	Impairment of long-lived assets (2)				-			26,320
Non-GAAP Operating profit				$	142,083		$	108,303
Reconciliation of GAAP to Non-GAAP Net Profit
(in thousands, except per share amounts)
					Nine Months Ended
					September 30, 2014			September 30, 2013
GAAP Net profit				$	106,291		$	21,874
	Impairment of goodwill (1)				-			40,693
	Impairment of long-lived assets (2)				-			26,320
	Income tax-related adjustments (3)				-			(3,788	)
Non-GAAP Net profit				$	106,291		$	85,099
Diluted Net profit per share:
		GAAP		$	1.29		$	0.26
		Non-GAAP		$	1.29		$	1.03
Shares used in computing diluted GAAP Net profit (loss) per share					82,443			82,549
Shares used in computing diluted Non-GAAP Net profit per share					82,443			82,549

Notes:

There were no Non-GAAP adjustments for the three months ended September 30, 2014 or 2013.

(1) Impairment of goodwill. These costs represent non-cash write-downs of our goodwill generally related to negative trends in market and economic conditions, termination of relationships with distributors, or the increase in competitive environment related to our Scanner and Services reporting unit. We remove the impact of these charges to our operating performance to assist in assessing our ability to generate cash from operations. We believe this may be useful information to users of our financial statements; therefore, we have excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of our current operating performance, particularly in terms of liquidity.

(2) Impairment of long-lived assets. These costs represent non-cash write-downs of our long-lived assets generally related to the increase in competitive environment related to our Scanner and Services reporting unit. As a result of these conditions, we have assessed that our asset group within the reporting unit was not recoverable and, therefore, recorded an impairment charge. We remove the impact of these charges to our operating performance to assist in assessing our ability to generate cash from operations. We believe this may be useful information to users of our financial statements; therefore, we have excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of our current operating performance, particularly in terms of liquidity.

(3) Income tax-related adjustments. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for discrete tax items and items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be re-calculated during the year to take into account events or trends that we believe materially impact the estimated annual rate.

ALIGN TECHNOLOGY, INC.

Q3 2014 FINANCIAL AND BUSINESS METRICS

(in thousands except utilization and doctors trained)

					Q1				Q2				Q3				Q4				FISCAL				Q1				Q2					Q3
					2013				2013				2013				2013				2013				2014				2014					2014
Invisalign Clear Aligner Net Revenues by Geography:
	North America				$	97,045			$	102,217			$	103,888			$	105,059			$	408,209			$	107,910			$	111,648				$	113,349
	International					31,818				40,320				38,983				50,595				161,716				49,848				55,988					53,439
	Non-case*					12,709				10,766				10,679				10,570				44,724				10,481				12,099					11,350
		Total Clear Aligner Net Revenues			$	141,572			$	153,303			$	153,550			$	166,224			$	614,649			$	168,239			$	179,735				$	178,138
			YoY % growth			14.8	%			14.7	%			21.2	%			25.1	%			19.0	%			18.8	%			17.2	%				16.0	%
			QoQ % growth			6.6	%			8.3	%			0.2	%			8.3	%							1.2	%			6.8	%				-0.9	%
	*includes Invisalign training, ancillary products, and retainers
Invisalign Clear Aligner Net Revenues by Product:
	Invisalign Full Products				$	112,780			$	123,379			$	125,169			$	136,179			$	497,507			$	138,133			$	147,158				$	147,583
	Invisalign Express Products					16,083				19,158				17,702				19,475				72,418				19,625				20,478				$	19,205
	Non-case*					12,709				10,766				10,679				10,570				44,724				10,481				12,099					11,350
		Total Clear Aligner Net Revenues			$	141,572			$	153,303			$	153,550			$	166,224			$	614,649			$	168,239			$	179,735				$	178,138
Average Invisalign Selling Price (ASP):
	Worldwide ASP (1)				$	1,315			$	1,345			$	1,335			$	1,400			$	1,350			$	1,405			$	1,405				$	1,395
	Worldwide ASP, adjusted (2)				$	1,340			$	1,355			$	1,335			$	1,400			$	1,360			$	1,405			$	1,405				$	1,395
	International ASP				$	1,355			$	1,480			$	1,455			$	1,630			$	1,490			$	1,620			$	1,625				$	1,560
	(1) Invisalign case net revenues / Invisalign case shipments
	(2) Adjusted for one-time adjustments (eg. Q1'13 and Q2'13 grandfathered mid-course correction deferrals)
Invisalign Clear Aligner Cases Shipped by Geography:
	North America					74,730				78,865				80,130				80,120				313,845				81,420				84,850					85,405
	International					23,445				27,270				26,770				31,010				108,495				30,760				34,450					34,210
		Total Cases Shipped				98,175				106,135				106,900				111,130				422,340				112,180				119,300					119,615
Invisalign Clear Aligner Cases Shipped by Product:
	Invisalign Full Products					79,235				84,850				87,670				91,605				343,360				92,335				98,565					99,385
	Invisalign Express Products					18,940				21,285				19,230				19,525				78,980				19,845				20,735					20,230
		Total Cases Shipped				98,175				106,135				106,900				111,130				422,340				112,180				119,300					119,615
Number of Invisalign Doctors Cases Shipped To:
	North America					17,280				18,070				18,140				18,495				27,330				19,015				19,505					19,550
	International					5,840				6,355				6,510				6,925				10,800				7,185				7,685					7,950
		Total Doctors Cases Shipped To				23,120				24,425				24,650				25,420				38,130				26,200				27,190					27,500
Invisalign Doctor Utilization Rates*:
	North America					4.3				4.4				4.4				4.3				11.5				4.3				4.4					4.4
	North American Orthodontists					8.0				8.0				8.4				8.0				26.4				8.1				8.4					8.8
	North American GP Dentists					2.9				3.0				2.9				3.0				7.3				2.9				2.9					2.8
	International					4.0				4.3				4.1				4.5				10.0				4.3				4.5					4.3
		Total Utilization Rates				4.3				4.4				4.3				4.4				11.1				4.3				4.4					4.4
	* # of cases shipped/# of doctors to whom cases were shipped
Number of Invisalign Doctors Trained:
	North America					755				1,130				795				1,460				4,140				700				1,150			#		1,125
	International					970				1,020				875				1,060				3,925				1255				1,380					1,400
			Total Doctors Trained Worldwide			1,725				2,150				1,670				2,520				8,065				1,955				2,530					2,525
			Total to Date Worldwide			78,220				80,370				82,040				84,560				84,560				86,515				89,045					91,570
Scanner and Services Net Revenues:
	North America Scanner and Services				$	11,952			$	10,454			$	10,875			$	11,980			$	45,261			$	12,313			$	12,698				$	11,579
	International Scanner and Services					56				71				81				88				296				94				98					159
		Total Scanner and Net Revenues			$	12,008			$	10,525			$	10,956			$	12,068			$	45,557			$	12,407			$	12,796				$	11,738
Total Net Revenues by Geography:
	Total North America Net Revenues				$	108,997			$	112,671			$	114,763			$	117,039			$	453,470			$	120,223			$	124,346				$	124,928
	Total International Net Revenues					31,874				40,391				39,064				50,683				162,012				49,942				56,086					53,598
	Total Non-case Net Revenues					12,709				10,766				10,679				10,570				44,724				10,481				12,099					11,350
		Total Worldwide Net Revenues			$	153,580			$	163,828			$	164,506			$	178,292			$	660,206			$	180,646			$	192,531				$	189,876
			YoY % growth			13.7	%			12.5	%			20.5	%			24.8	%			17.9	%			17.6	%			17.5	%				15.4	%
			QoQ % growth			7.5	%			6.7	%			0.4	%			8.4	%							1.3	%			6.6	%				-1.4	%
Stock-based Compensation (SBC)
	SBC included in Gross Profit				$	600			$	600			$	700			$	700			$	2,600			$	800			$	940				$	865
	SBC included in Operating Expenses					5,800				6,700				6,900				4,500				23,900				8,300				9,370					9,045
		Total SBC Expense			$	6,400			$	7,300			$	7,600			$	5,200			$	26,500			$	9,100			$	10,310				$	9,910

Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals.

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)
		Q4'14 Guidance
		GAAP
Net Revenues		$194.9 - $199.1
Gross Margin		74.2% - 74.6%
Operating Expenses		$94.7 - $95.5
Operating Margin		25.6% - 26.6%
Net Income per Diluted Share		$0.47 - $0.50
Business Metrics:		Q4'14
Case Shipments		125.1K - 127.6K
Cash, Cash Equivalents, and Marketable Securities		$580M - $590M
Capital Expenditure		$20.0M - $25.0M
Depreciation & Amortization		$4.5M - $5.0M
Diluted Shares Outstanding		81.9M
Stock Based Compensation Expense		$11.1M
Tax Rate		23.0%

Source: Align Technology

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