Align
Invisalign Itero

Press Release

Oct 23, 2019

Align Technology Announces Third Quarter 2019 Financial Results

  • Q3 revenues up 20.2% year-over-year to a record $607.3 million
  • Q3 Invisalign volume up 20.7% year-over-year to 385.4 thousand cases
  • Q3 scanner and services revenues up 16.5% year-over-year to $91.1 million
  • Q3 Invisalign cases for teens and kids were up 31.5% year-over-year to 129.6 thousand cases
  • Q3 net profit of $102.5 million and $1.28 diluted EPS

SAN JOSE, Calif., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the third quarter ended September 30, 2019. Q3’19 Invisalign volume was 385.4 thousand cases, up 20.7% year-over-year. For the Americas and International regions, Q3’19 Invisalign volume was up 13.0% and 32.1% year-over-year, respectively. Q3’19 Invisalign volume for teenage patients was 129.6 thousand cases, up 31.5% year-over-year. Q3’19 total revenues were $607.3 million, up 20.2% year-over-year, and Q3’19 scanner and services revenues were $91.1 million, up 16.5% year-over-year.

Q3’19 operating income was $127.2 million or operating margin of 20.9%. Q3’19 net profit was $102.5 million, or $1.28 per diluted EPS. Q3’19 operating expenses included a $6.8 million benefit from the settlement of our Invisalign Store leases, which increased Q3’19 operating margin by approximately 1.1 points and benefited diluted EPS by $0.06. This compares to Q2’19 operating income of $176.5 million or operating margin of 29.4% and Q2’19 net profit of $147.1 million, or $1.83 per diluted EPS. Q2’19 operating expenses included a $51.0 million benefit from the ClearCorrect settlement with Straumann, which increased Q2’19 operating margin by approximately 8 points and benefited diluted EPS by $0.57.

Commenting on Align’s third quarter results, Align Technology President and CEO Joe Hogan said, “I’m pleased to report revenues, volume, and earnings above our third quarter outlook driven by better than expected volume across the Invisalign portfolio in Asia Pacific and Latin America, reflecting record highs for both regions and improving trends in the North American orthodontic channel. Notwithstanding EMEA summer seasonality, we saw continued adoption from teens and especially younger patients using Invisalign First across the board. Q3 Invisalign volumes were up 20.7% year-over-year driven by growth across the product portfolio, as well as expansion of our customer base, which increased by 6,000 new Invisalign doctors for a total of 63,000 active doctors worldwide. The iTero scanner and services business was up 16.5% year over year reflecting continue growth across each region, and down sequentially as expected coming off a record second quarter.”

 
GAAP Summary Financial Comparisons
Third Quarter Fiscal 2019  
  Q3’19 Q2’19 Q3’18  Q/Q Change  Y/Y Change
Invisalign Case Shipments1 385,360 377,145 319,345 +2.2% +20.7%
Net Revenues $607.3M $600.7M $505.3M +1.1% +20.2%
Clear Aligner2 $516.3M $496.7M $427.1M +3.9% +20.9%
Scanner & Services $91.1M $104.0M $78.2M (12.4)% +16.5%
Net Profit3 $102.5M $147.1M $100.9M (30.3)% +1.6%
Diluted EPS3 $1.28 $1.83 $1.24 $(0.55) +$0.04
 
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 Q2’19 results include a $51.0 million gain from Straumann litigation settlement
 

As of September 30, 2019, Align had $782.4 million in cash, cash equivalents and marketable securities compared to $765.9 million as of June 30, 2019. In July 2019, we entered into an accelerated stock repurchase agreement (“ASR”) to repurchase $200.0 million of our common stock which was completed in September 2019. We received a total of approximately 1.1 million shares for an average price of $176.61 per share. We have $200.5 million remaining available for repurchase under the May 2018 Repurchase Program.     

Align Announcement Highlights

The following highlights recap Align’s recent announcements:
Corporate

  • Align recently announced exciting co-marketing relationships with the San Francisco 49ers, Carolina Hurricanes, Super Bowl winning New England Patriots, and the 2019 NBA Champions the Toronto Raptors, making the Invisalign brand the official smile partner for each of these winning teams and creating new channels for Invisalign brand marketing. Working with great sports brands is a natural fit for Align. Partnering with teams who have adopted an omnichannel approach to brand marketing and engagement gives Align direct access to large, loyal fan bases and helps us reach individual consumers and whole families through a variety of existing fan platforms: in-stadium and through televised games, online, via social media, and in each team’s local community outreach programs. Align’s goal is the same for each: build awareness and demand for Invisalign treatment and connect interested and engaged consumers with Invisalign practices in their markets. It’s one more way that we can support doctors in this market of increased consumer choice.
  • Align and Covestro AG announced that the Invisalign clear aligner system for straightening teeth, made with patented SmartTrack material, will be showcased at the K 2019 Plastics Trade Fair in Düsseldorf.  The SmartTrack material solution was jointly developed by Align and Covestro.
  • Align entered into and completed an ASR with Morgan Stanley & Co. LLC, to repurchase $200 million of Align's common stock as part of Align's $600 million stock repurchase program announced on May 23, 2018.
  • Align appointed Ms. Anne Myong to the board of directors.  Ms. Myong was previously Senior Vice President and Chief Financial Officer at Walmart Global eCommerce, where she accelerated the growth and digital transformation of their retail and e-commerce operations in the United States, China and Brazil.
  • As part of Align’s $120 million annual commitment to raise consumer awareness of doctor directed Invisalign clear aligner treatment for better smiles, Align announced that it is a national sponsor for the premier healthy lifestyle brand Life Time. 

Product

  • Announced a global distribution agreement for the award-winning iTero Element family of intraoral scanners with Zimmer Biomet Dental, a global dental industry leader and provider of implant and restorative solutions and continuing education for dental professionals.
  • Announced commercial availability of the iTero Element 2 scanner in China at the 2019 International Orthodontic Conference and the 18th Annual Meeting of the Chinese Orthodontic Society in Nanjing, China. The launch exemplifies Align’s continued innovation and investment to advance digital dentistry in China.

Q4 2019 Business Outlook

For the fourth quarter of 2019 (Q4’19), Align provides the following guidance:

  • Net revenues in the range of $640 million to $650 million, up approximately 20% to 22% over the same period a year ago
  • Invisalign case shipments in the range of 400 thousand to 407 thousand, up approximately 20% to 22% over the same period a year ago
  • Operating margin in the range of 22.0% to 22.7%
  • Diluted EPS in the range of $1.35 to $1.42
  • In addition, we expect to repurchase at least $100 million of our stock in the open market in Q4'19

Align Web Cast and Conference Call
Align will host a conference call today, October 23, 2019 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter 2019 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 13694915 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 November 6, 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 fourth quarter of 2019, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, capital expenditures, depreciation and amortization, diluted earnings per share, tax rate, case shipments, and our expectations regarding stock repurchases during the quarter. 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, including Align’s predictions related to a tougher consumer demand environment in China, especially for U.S. based products and services, Align’s expectations regarding the continued growth of our international markets, Align's ability to protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing and new competitors, Align’s expectations regarding the sales growth of its intra-oral scanner sales in international markets, its belief that technology features and functionality of the iTero scanners will increase adoption of Invisalign and increase sales of Align’s intra-oral scanners, Align’s expectations regarding the financial and strategic benefits of establishing regional order acquisition, treatment planning and manufacturing facilities, 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, Align’s expectation to incur additional costs related to the planned corporate structure reorganization, the risks relating to Align's ability to sustain or increase profitability or revenue growth in future periods while controlling expenses, the expected impact additional sales representatives will have on our sales, 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, system integration and implementation issues, 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, 2018, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2019 and its latest Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which was filed with the SEC on August 1, 2019. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Align Technology Zeno Group:
Madelyn Homick Sarah Johnson
(408) 470-1180 (828) 551-4201
mhomick@aligntech.com sarah.johnson@zenogroup.com

 

               
ALIGN TECHNOLOGY, INC.              
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        
(in thousands, except per share data)              
               
  Three Months Ended
September 30,
  Nine Month Ended
September 30,
  2019   2018   2019   2018
               
Net revenues $ 607,341     $ 505,289     $ 1,757,009     $ 1,432,472  
               
Cost of net revenues   169,787       133,508       485,070       367,701  
               
Gross profit   437,554       371,781       1,271,939       1,064,771  
               
Operating expenses:              
Selling, general and administrative   277,514       213,873       792,572       625,585  
Research and development   39,680       32,700       116,034       93,095  
Impairments and other (gains) charges   (6,792 )     -       22,990       -  
Litigation settlement gain   -       -       (51,000 )     -  
Total operating expenses   310,402       246,573       880,596       718,680  
               
Income from operations   127,152       125,208       391,343       346,091  
               
Interest income   3,478       2,234       9,576       6,327  
Other income (expense), net   (2,211 )     (837 )     5,935       (7,759 )
               
Net income before provision for income taxes and equity in losses of investee   128,419       126,605       406,854       344,659  
               
Provision for income taxes   25,895       24,601       77,812       35,206  
Equity in losses of investee, net of tax   -       1,132       7,528       6,610  
               
Net income $ 102,524     $ 100,872     $ 321,514     $ 302,843  
               
Net income per share:              
Basic $ 1.29     $ 1.26     $ 4.03     $ 3.78  
Diluted $ 1.28     $ 1.24     $ 4.00     $ 3.71  
               
Shares used in computing net income per share:              
Basic   79,332       80,111       79,709       80,122  
Diluted   79,825       81,359       80,397       81,538  
               

 

       
ALIGN TECHNOLOGY, INC.      
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS    
(in thousands)      
       
  September 30,
2019
  December 31,
2018
ASSETS      
       
Current assets:      
Cash and cash equivalents $ 490,362   $ 636,899
Marketable securities, short-term   292,011     98,460
Accounts receivable, net   531,816     439,009
Inventories   94,795     55,641
Prepaid expenses and other current assets   96,595     72,470
Total current assets   1,505,579     1,302,479
       
Marketable securities, long-term   -     9,112
Property, plant and equipment, net   606,581     521,329
Operating lease right-of-use assets, net   53,923     -
Equity method investments   -     45,913
Goodwill and intangible assets, net   77,012     81,949
Deferred tax assets   63,150     64,689
Other assets   44,135     26,987
       
Total assets $ 2,350,380   $ 2,052,458
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 63,300   $ 64,256
Accrued liabilities   286,132     234,679
Deferred revenues   520,712     393,138
Total current liabilities   870,144     692,073
       
Income tax payable   101,914     78,008
Operating lease liabilities   43,365     -
Other long-term liabilities   29,408     29,486
Total liabilities   1,044,831     799,567
       
Total stockholders' equity   1,305,549     1,252,891
       
Total liabilities and stockholders' equity $ 2,350,380   $ 2,052,458
       

 

       
ALIGN TECHNOLOGY, INC.      
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      
(in thousands)      
       
  Nine Months Ended
September 30,
  2019   2018
       
CASH FLOWS FROM OPERATING ACTIVITIES      
Net cash provided by operating activities $ 529,093     $ 313,386  
       
CASH FLOWS FROM INVESTING ACTIVITIES      
Net cash used in investing activities   (290,333 )     (24,021 )
       
CASH FLOWS FROM FINANCING ACTIVITIES      
Net cash used in financing activities   (383,163 )     (315,151 )
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash   (2,098 )     (2,890 )
Net decrease in cash, cash equivalents, and restricted cash   (146,501 )     (28,676 )
Cash, cash equivalents, and restricted cash at beginning of the period   637,566       450,125  
Cash, cash equivalents, and restricted cash at end of the period $ 491,065     $ 421,449  
       

 

                               
ALIGN TECHNOLOGY, INC.                              
INVISALIGN BUSINESS METRICS*                              
                               
                               
  Q1   Q2   Q3   Q4   Fiscal   Q1   Q2   Q3
  2018   2018   2018   2018   2018   2019   2019   2019
Invisalign Average Selling Price (ASP):                              
Worldwide ASP $ 1,310     $ 1,315     $ 1,230     $ 1,235     $ 1,270     $ 1,245     $ 1,230     $ 1,260  
International ASP $ 1,435     $ 1,425     $ 1,340     $ 1,295     $ 1,370     $ 1,330     $ 1,305     $ 1,330  
                               
Invisalign Cases Shipped by Geography:                              
Americas   166,665       181,425       190,615       189,410       728,115       202,935       211,360       215,355  
International   105,570       121,260       128,730       144,390       499,950       146,260       165,785       170,005  
Total Cases Shipped   272,235       302,685       319,345       333,800       1,228,065       349,195       377,145       385,360  
 YoY % growth   30.8 %     30.5 %     35.3 %     30.9 %     31.9 %     28.3 %     24.6 %     20.7 %
 QoQ % growth   6.7 %     11.2 %     5.5 %     4.5 %         4.6 %     8.0 %     2.2 %
                               
Number of Invisalign Doctors Cases Were Shipped To:                              
Americas   27,105       28,280       28,890       29,215       42,000       30,200       31,445       31,975  
International   19,700       21,805       23,270       25,475       36,040       26,510       28,970       30,980  
Total Doctors Cases Shipped To   46,805       50,085       52,160       54,690       78,040       56,710       60,415       62,955  
                               
Invisalign Doctor Utilization Rates**:                              
North America   6.3       6.6       6.9       6.7       18.2       7.0       7.0       7.0  
North American Orthodontists   15.3       16.4       17.4       16.5       56.7       18.3       18.9       19.1  
North American GP Dentists   3.4       3.6       3.5       3.6       9.1       3.6       3.6       3.5  
International   5.4       5.6       5.5       5.7       13.9       5.5       5.7       5.5  
Total Utilization Rates   5.8       6.0       6.1       6.1       15.7       6.2       6.2       6.1  
                               
Number of Invisalign Doctors Trained:                              
Americas   1,630       1,880       2,085       2,290       7,885       1,840       3,070       2,760  
International   2,645       3,300       2,845       2,980       11,770       2,410       3,520       3,135  
Total Doctors Trained Worldwide   4,275       5,180       4,930       5,270       19,655       4,250       6,590       5,895  
Total to Date Worldwide   136,575       141,755       146,685       151,955       151,955       156,205       162,795       168,690  
                               
                               
* 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.    
                               
                               
                               
ALIGN TECHNOLOGY, INC.                              
STOCK-BASED COMPENSATION                              
(in thousands)                              
                               
  Q1   Q2   Q3   Q4   Fiscal   Q1   Q2   Q3
  2018   2018   2018   2018   2018   2019   2019   2019
Stock-based Compensation (SBC)                              
SBC included in Gross Profit $ 881     $ 900     $ 966     $ 948     $ 3,695     $ 1,112     $ 1,278     $ 1,354  
SBC included in Operating Expenses   14,949       15,990       18,232       17,897       67,068       19,932       21,189       22,822  
Total SBC $ 15,830     $ 16,890     $ 19,198     $ 18,845     $ 70,763     $ 21,044     $ 22,467     $ 24,176  
                               

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)
       
  Q4'19 Guidance   
       
  GAAP    
       
Net Revenues $640 - $650   
       
Gross Margin 71.7% - 72.4%   
       
Operating Expenses $318 - $323   
       
Operating Margin 22.0% - 22.7%   
       
Net Income per Diluted Share $1.35 - $1.42   
       
       
Business Metrics: Q4'19   
       
Case Shipments 400K - 407K   
Capital Expenditure $30M-$35M   
Depreciation & Amortization $22M-$24M   
Diluted Shares Outstanding 79.4M    (1)   
Stock Based Compensation Expense $24.0M   
Effective Tax Rate ~24%    (2)  
       

 

(1)  Excludes any stock repurchases during the quarter
(2)  Includes excess tax benefits related to share-based compensation expense pursuant to ASU 2016-09

Align_Digital_Primary.jpg

 

Source: Align Technology, Inc.

 

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