• Record Q3 net revenues of $125.9 million increased 4.8% sequentially and 31.2% year-over-year
• Record Q3 Invisalign revenue was $114.3 million with record case shipments of 79.4 thousand
• Q3 Invisalign Teen volume increased 36.2% sequentially and 54.5% year-over-year
• Q3 GAAP diluted EPS was $0.24 and Q3 Non-GAAP diluted EPS was $0.27

SAN JOSE, Calif., Oct. 27, 2011 (GLOBE NEWSWIRE) -- Align Technology, Inc. (Nasdaq:ALGN) today reported financial results for the third quarter of fiscal 2011 ended September 30, 2011.

Total net revenues for the third quarter of fiscal 2011 (Q3 11) were a record $125.9 million. This is compared to $120.1 million reported in the second quarter of 2011 (Q2 11) and compared to $95.9 million reported in the third quarter of 2010 (Q3 10). Q3 11 Invisalign revenue of $114.3 million increased 0.6% sequentially and 19.1% year over year. Invisalign case shipments of 79.4 thousand increased 4.4% sequentially and 19.8% year over year. Q3 11 scanner and CAD/CAM services revenue was $11.6 million, compared to $6.4 million for two months of sales included in Q2 11 following the acquisition of Cadent, Inc.

Commenting on Align's Q3 11 results, Align President and CEO Thomas M. Prescott said, "I'm very pleased to report another good quarter for Align with revenue and EPS higher than our outlook. Better than expected results were driven by increased Invisalign case volume from North American Orthodontists and International doctors, as well as higher earnings that benefited from lower than projected operating expenses. Strong growth of Invisalign Teen reflects our continued penetration in the very important teenage orthodontic market where we believe we gained significant share this quarter. Q3 results also reflect a full quarter of sales from our intra-oral scanner and CAD/CAM services products, which continued to benefit from our sales and marketing resources as we do our best to leverage Invisalign and industry events to introduce iTero and iOC scanners to our customers."

Gross margin for Q3 11 was 73.4%, compared to 75.9% in Q2 11 and 78.1% in Q3 10. Q3 11 gross margin includes amortization of acquired intangible assets related to cost of revenues of $0.3 million, acquisition and integration related costs of $0.2 million, and severance and benefits costs of $0.2 million. Q2 11 gross margin includes amortization of acquired intangible assets related to cost of revenues of $0.2 million and acquisition and integration related costs of $0.1 million. The sequential decrease in Q3 11 gross margin primarily reflects a full quarter of cost of sales from scanner and CAD/CAM services, including costs for Israeli scanner operations that were previously included in operating expense.

Operating expenses for Q3 11 were $66.1 million, compared to $74.5 million in Q2 11 and $53.0 million in Q3 10. Q3 11 operating expenses include acquisition and integration related transaction costs of $1.3 million, amortization of acquired intangible assets of $0.9 million and severance and benefit costs of $0.1 million. Q2 11 operating expenses include acquisition and integration related transaction costs of $5.8 million, and amortization of acquired intangible assets of $0.6 million. Q3 10 operating expenses includes litigation settlement costs of $3.3 million related to a class action settlement.

Net profit for Q3 11 was $19.3 million, or $0.24 per diluted share. This is compared to net profit of $11.2 million, or $0.14 per diluted share in Q2 11 and net profit of $16.8 million, or $0.22 per diluted share in Q3 10. Net profit for Q3 11 includes pre-tax acquisition and integration related costs of $1.3 million, pre-tax amortization of acquired intangible assets of $1.1 million, pre-tax severance and benefit costs of $0.2 million with a total tax effect of $0.2 million. Net profit for Q2 11 includes pre-tax acquisition and integration related costs of $5.9 million, pre-tax amortization of acquired intangible assets of $0.8 million, with a total tax effect of $1.6 million. Q3 10 net profit includes pre-tax litigation settlement costs of $3.3 million related to a class action settlement with a total tax effect of $0.8 million.

To supplement our consolidated financial statements, we use the following non-GAAP financial measures: non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expense, non-GAAP operating margin, non-GAAP net profit and non-GAAP earnings per share. Detailed reconciliations between GAAP and non-GAAP information are contained in the tables following the financial tables of this release.

Non-GAAP gross margin for Q3 11 was 73.9%. This is compared to non-GAAP gross margin of 76.1% in Q2 11 and compared to non-GAAP gross margin of 78.1% in Q3 10. Non-GAAP net profit for Q3 11 was $21.9 million, or $0.27 per diluted share. This is compared to non-GAAP net profit of $16.3 million, or $0.20 per diluted share in Q2 11 and non-GAAP net profit of $19.3 million, or $0.25 per diluted share in Q3 10.

Total stock-based compensation expense included in Q3 11 and Q2 11 was $5.0 million compared to $4.4 million in Q3 10. Stock based compensation expense included in GAAP gross margin in Q3 11 and Q2 11 was $0.5 million compared to $0.4 million in Q3 10. Stock-based compensation expense included in GAAP operating expense in Q3 11 and Q2 11 was $4.5 million compared to $4.0 million in Q3 10. 

Liquidity and Capital Resources

As of September 30, 2011, Align Technology had $211.1 million in cash, cash equivalents, and marketable securities compared to $312.4 million as of December 31, 2010.

Key Business Metrics

The following table highlights business metrics for Align Technology's third quarter of 2011. Additional historical information is available on the Company's website at http://investor.aligntech.com.

Q4 Fiscal 2011 Business Outlook

For the fourth quarter of fiscal 2011 (Q4 11), Align Technology expects net revenues to be in a range of $124.0 million to $128.5 million. GAAP earnings per diluted share for Q4 11 is expected to be in a range of $0.17 to $0.19. A more comprehensive business outlook is available following the financial tables of this release.

Stock Repurchase Program

In a separate announcement today Align also announced that its board of directors has authorized a stock repurchase program of up to $150 million, effective immediately. For more information, please see Align's press release titled, "Align Technology Announces $150 Million Stock Repurchase Program."

Align Web Cast and Conference Call

Align Technology will host a conference call today, October 27, 2011 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter fiscal 2011 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 201-689-8261 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 380473 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 5:30 p.m. ET on November 10, 2011.

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 teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998.The Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express 10, and Vivera Retainers. To learn more about Invisalign or to find an Invisalign trained doctor in your area, please visit www.invisalign.com.

Cadent Holdings, Inc. is a subsidiary of Align Technology and is a leading provider of 3D digital scanning solutions for orthodontics and dentistry. The Cadent family of products includes iTero and iOC scanning systems, OrthoCAD iCast, OrthoCAD iQ and OrthoCAD iRecord. For additional information, please visit www.cadentinc.com.

About non-GAAP Financial Measures

To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating expenses, non-GAAP profit from operations, non-GAAP net profit, and non-GAAP earnings per share, which exclude, as applicable, acquisition and integration related costs, amortization of acquired intangible assets, severance and benefit costs, litigation settlement and any related tax effects. 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, ongoing and customary course of its operations. Accordingly, management excludes from "core operating performance" certain expenditures, revenues 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 quarter 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" and "Business Outlook Summary" 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 2011, including anticipated revenue, gross margin, operating expense, operating income, earnings per share, case shipments and cash.  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 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 acquisition of Cadent, 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, 2010, which was filed with the Securities and Exchange Commission on February 26, 2011. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

CONTACT: Investor Relations Contact

         Shirley Stacy

         Align Technology, Inc.

         (408) 470-1150

         sstacy@aligntech.com

         

         Press Contact

         Shannon Mangum Henderson

         Ethos Communication, Inc.

         (678) 261-7803

         align@ethoscommunication.com