UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

 

Date of report (Date of earliest event reported) January 30, 2018

 

ALIGN TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

0-32259	94-3267295
(Commission File Number)	(IRS Employer Identification No.)

 

2820 Orchard Parkway, San Jose, California	95134
(Address of Principal Executive Offices)	(Zip Code)

 

2820 Orchard Parkway, San Jose, California95134

(Address of Principal Executive Offices)(Zip Code)

 

(408) 470-1000

(Registrant’s Telephone Number, Including Area Code)

 

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS

 

On January 30, 2018, Align Technology, Inc. ("Align") is issuing a press release and holding a conference call regarding its financial results for its fourth quarter and year ended December 31, 2017. The full text of the press release is furnished as Exhibit 99.1 to this Form 8-K. 

This information shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. 

ITEM 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.	Description
99.1	Press Release of Align Technology, Inc. announcing fourth quarter and year ended 2017 financial results dated January 30, 2018

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: January 30, 2018	Align Technology, INC.
	By:	/s/Roger E. George
		Roger E. George
		Vice President, Legal and Corporate Affairs and General Counsel

 

INDEX TO EXHIBITS

 

Exhibit No.	Description
99.1	Press Release of Align Technology, Inc. announcing fourth quarter and year ended 2017 financial results dated January 30, 2018

 

 

Exhibit 99.1

 

 

 

 

 

Align Technology		Ethos Communication:
Yin Cantor		Shannon Mangum Henderson
(408) 470-1044		(678) 261-7803
ycantor@aligntech.com		align@ethoscommunication.com

 

 

 

ALIGN TECHNOLOGY ANNOUNCES FOURTH QUARTER AND 2017 FINANCIAL RESULTS

 

•

Q4 revenues up 43.7% year-over-year to a record $421.3 million, and diluted EPS of $0.13, includes $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act

•

Q4 operating income up 60.3% year-over-year to a record $109.6 million or operating margin of 26.0%

•

Q4 total Invisalign case shipments up 34.2% year-over-year to 255.0 thousand

•

Q4 Invisalign cases for teenage patients up 44.1% year-over-year to 63.5 thousand

•

Q4 scanner and services revenues up 37.0% year-over-year to $57.1 million

•

Record 2017 Invisalign revenues up 34.1% year-over-year to $1.3 billion with Invisalign case shipments up 31.4% year-over-year to 931.0 thousand

•

Record 2017 iTero scanner volume up 37.5%

 

SAN JOSE, Calif., January 30, 2018 -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the fourth quarter and year ended December 31, 2017. Invisalign case shipments in the fourth quarter of 2017 (Q4’17) were 255.0 thousand, up 34.2% year-over-year. North America and International case shipments were up year-over-year 24.2% and 52.3%, respectively. Q4’17 Invisalign cases for teenage patients were 63.5 thousand, up 44.1% year-over-year. Q4’17 revenues were $421.3 million, up 43.7% year-over-year with Q4’17 operating income a record $109.6 million, up 60.3% year-over-year resulting in an operating margin of 26.0%. Q4’17 net profit was $10.3 million, or $0.13 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

 

For 2017, record Invisalign revenues were $1.3 billion, up 34.1% year-over-year with Invisalign case shipments of 931.0 thousand, up 31.4% year-over-year. 2017 iTero revenues were $164.2 million, up 35.1% with record volumes, up 37.5% year-over-year. 2017 Invisalign cases for teenage patients were 237.5 thousand, up 40.4% year-over-year. For 2017, revenues were $1.5 billion, up 36.4% year-over-year and net profit was $231.4 million, or $2.83 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

 

Commenting on Align’s Q4 and 2017 results, Align Technology President and CEO Joe Hogan said, “Overall, the fourth quarter was a strong finish to another outstanding year for Align, with better than expected revenues, volumes and operating income. Record Q4 revenues were up 43.7% year-over-year driven by increased Invisalign volumes across all geographies and customer channels, as well as by record iTero scanner revenue. Q4 Invisalign volume was up 34.2% year-over-year reflecting strong international growth from increased utilization and expansion of our customer base which included over 4,000 new customers for the third consecutive quarter. Notwithstanding this strong performance, our Q4 results were impacted by the new U.S. Tax Cut and Jobs Act which reduced our reported net income and EPS. However, Q4 operating income was a record $109.6M or 26.0%.”

 

Hogan continued, “For the full year, revenues of $1.5 billion increased 36.4% year-over-year driven by both record Invisalign revenue which surpassed the $1 billion mark for the first time ever and record iTero scanner revenues. These results reflect continued progress and execution of our four strategic growth drivers which focus on: driving international expansion; increasing Orthodontists utilization of Invisalign, especially with teenagers; enabling GP dentists to treat or refer more Invisalign cases; and generating consumer demand from millions of people worldwide and connecting them with an Invisalign doctor.”

 

 

GAAP Summary Financial Comparisons

Fourth Quarter Fiscal 2017

		Q4’17				Q3’17				Q4’16				Q/Q Change				Y/Y Change
Invisalign Case Shipments1			255.0	K			236.1	K			190.1	K			+8.0	%			+34.2	%
Net Revenues		$	421.3	M		$	385.3	M		$	293.2	M			+9.4	%			+43.7	%
Clear Aligner2		$	364.2	M		$	341.6	M		$	251.5	M			+6.6	%			+44.8	%
Scanner & Services		$	57.1	M		$	43.7	M		$	41.7	M			+30.8	%			+37.0	%
Net Profit3		$	10.3	M		$	82.6	M		$	47.6	M			(87.6	)%			(78.4	)%
Diluted EPS3		$	0.13			$	1.01			$	0.59			$	(0.88	)		$	(0.46	)

 

Fiscal 2017

										2017				2016				Y/Y Change
Invisalign Case Shipments1											931,045				708,500				+31.4	%
Net Revenues										$	1,473.4	M		$	1,079.9	M			+36.4	%
Clear Aligner2										$	1,309.3	M		$	958.3	M			+36.6	%
Scanner & Services										$	164.2	M		$	121.5	M			+35.1	%
Net Profit3										$	231.4	M		$	189.7	M			+22.0	%
Diluted EPS3										$	2.83			$	2.33				+$0.50

Note: Changes and percentages are based on actual values and may effect 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 and 2017 net profit and diluted EPS includes $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act

 

 

As of December 31, 2017, Align had $761.5 million in cash, cash equivalents and marketable securities compared to $700.0 million as of December 31, 2016. We repurchased approximately 0.2 million shares of stock for $50.0 million in Q4’17 under the April 2016 Repurchase Program. We have $200.0 million remaining available for repurchases under the existing stock repurchase authorization.

 

2017 Business Highlights

 

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

 

•

Expanded restorative digital workflow solutions for iTero Element® scanner to include iTero Chairside CAD, a chairside prosthetics design software application that will support same-day dentistry as part of collaboration with Exocad GmbH.

•

Celebrated the 5 millionth Invisalign® patient, a 12-year old Canadian teenager starting Invisalign treatment with mandibular advancement.

•

Signed distribution agreement with Glidewell Dental for the iTero Element® intraoral scanning system in North America with glidewell.io™ In-Office Solution, a chairside restorative ecosystem designed to simplify the process of prescribing and delivering laboratory-quality dental restorations.

•

Opened the first Invisalign® store pilot in San Francisco to help consumers connect with an Invisalign® provider to improve their smile with Invisalign® treatment.

•

Awarded nearly $300,000 to researchers at universities in North America, Europe and Asia Pacific as part of the Company’s Research Award Program to support clinical and scientific dental research.

•

Signed distribution agreement Patterson Dental for iTero Element® intraoral scanning system in U.S. and Canada.

•

Opened first Invisalign® Treatment Planning Facility in Chengdu, China.

•

Launched TimeLapse technology for digital scan comparisons and ability to complete a scan in as little as 1 minute as part of a software upgrade for its iTero Element® intraoral scanners.

•

Received U.S. Patents for SmartTrack material, an innovative multi-layer polymer that delivers more gentle, constant force to improve control of tooth movements with Invisalign® clear aligners.

•

Celebrated the 1 millionth Invisalign® Teen patient, an 11 year-old boy from the U.S. starting Invisalign treatment.

•

Launched first global, multi-million dollar Invisalign brand platform and marketing campaign.

•

Achieved over 1 million scans submitted with iTero Element® scanner since its introduction in 2015.

•

Introduced of Invisalign® Teen with mandibular advancement feature, the first clear aligner solution for Class II correction in growing tween and teen patients. (Not yet available in the U.S., pending FDA approval.)

•

Expanded digital implant workflow options for the iTero® intraoral scanner with Nobel Biocare implants and ELOS Medtech scan bodies.

 

Q1 2018 Business Outlook

For the first quarter of 2018 (Q1’18), Align provides the following guidance:

•

Net revenues in the range of $400 million to $410 million, up approximately 29% to 32% over the same period a year ago.

•

Invisalign case shipments in the range of 264 thousand to 269 thousand, up approximately 27% to 29% over the same period a year ago.

•

Operating margin in the range of 18.5% to 19.5%

•

Diluted EPS in the range of $0.94 to $0.98.

 

Align Web Cast and Conference Call

Align will host a conference call today, January 30, 2018 at 4:30 p.m. ET, 1:30 p.m. PT, to review its fourth quarter and year ended 2017 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 13674959 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 13, 2018.

 

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 provider 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 2018 year end, 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 capacity constraints 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, 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, 2016, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2017, and its latest Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which was filed with the SEC on November 2, 2017. 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,
		2017				2016				2017				2016
Net revenues		$	421,323			$	293,203			$	1,473,413			$	1,079,874
Cost of net revenues			103,406				72,954				356,466				264,580
Gross profit			317,917				220,249				1,116,947				815,294
Operating expenses:
Selling, general and administrative			182,141				130,268				665,777				490,653
Research and development			26,170				21,609				97,559				75,720
Total operating expenses			208,311				151,877				763,336				566,373
Income from operations			109,606				68,372				353,611				248,921
Interest and other income (expense), net			2,581				(7,516	)			11,188				(6,355	)
Net income before provision for income taxes and equity in losses (gains) of investee			112,187				60,856				364,799				242,566
Provision for income taxes			103,654				12,028				130,162				51,200
Equity in losses (gains) of investee, net of tax			(1,731	)			1,207				3,219				1,684
Net income		$	10,264			$	47,621			$	231,418			$	189,682
Net income per share:
Basic		$	0.13			$	0.60			$	2.89			$	2.38
Diluted		$	0.13			$	0.59			$	2.83			$	2.33
Shares used in computing net income per share:
Basic			80,080				79,667				80,085				79,856
Diluted			81,863				81,248				81,832				81,484

 

 

 

 

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
		December 31, 2017				December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents		$	449,511			$	389,275
Marketable securities, short-term			272,031				250,981
Accounts receivable, net			322,825				247,415
Inventories			31,688				27,131
Prepaid expenses and other current assets			80,948				38,176
Total current assets			1,157,003				952,978
Marketable securities, long-term			39,948				59,783
Property, plant and equipment, net			348,793				175,167
Equity method investments			54,606				45,061
Goodwill and intangible assets, net			89,068				81,998
Deferred tax assets			50,059				67,844
Other assets			38,379				13,320
Total assets		$	1,777,856			$	1,396,151
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	36,776			$	28,596
Accrued liabilities			194,198				134,332
Deferred revenues			266,842				191,407
Total current liabilities			497,816				354,335
Income tax payable			114,091				45,133
Other long-term liabilities			15,579				1,294
Total liabilities			627,486				400,762
Total stockholders' equity			1,150,370				995,389
Total liabilities and stockholders' equity		$	1,777,856			$	1,396,151

 

 

 

ALIGN TECHNOLOGY, INC.
INVISALIGN BUSINESS METRICS*
		Q4				Fiscal				Q1				Q2				Q3				Q4				Fiscal
		2016				2016				2017				2017				2017				2017				2017
Invisalign Average Selling Price (ASP):
Worldwide ASP		$	1,230			$	1,265			$	1,270			$	1,285			$	1,310			$	1,305			$	1,295
International ASP		$	1,315			$	1,335			$	1,325			$	1,335			$	1,390			$	1,390			$	1,360
Invisalign Cases Shipped by Geography:
North America			122,555				463,810				132,885				146,510				144,870				152,245				576,510
International			67,500				244,690				75,175				85,380				91,195				102,785				354,535
Total Cases Shipped			190,055				708,500				208,060				231,890				236,065				255,030				931,045
YoY % growth			18.5	%			21.5	%			27.1	%			31.0	%			32.8	%			34.2	%			31.4	%
QoQ % growth			6.9	%							9.5	%			11.5	%			1.8	%			8.0	%
Number of Invisalign Doctors Cases Were Shipped To:
North America			23,265				34,065				23,910				24,695				24,845				25,365				36,415
International			13,635				20,415				14,955				16,570				17,760				19,620				27,990
Total Doctors Cases Shipped To			36,900				54,480				38,865				41,265				42,605				44,985				64,405
Invisalign Doctor Utilization Rates*:
North America			5.3				13.6				5.6				5.9				5.8				6.0				15.8
North American Orthodontists			11.3				36.6				12.6				13.6				13.8				14.0				46.6
North American GP Dentists			3.2				7.6				3.1				3.3				3.1				3.3				8.2
International			5.0				12.0				5.0				5.2				5.1				5.2				12.7
Total Utilization Rates			5.2				13.0				5.4				5.6				5.5				5.7				14.5
*# of cases shipped/# of doctors to whom cases were shipped
Number of Invisalign Doctors Trained:
North America			1,420				4,720				980				1,620				1,460				1,340				5,400
International			2,280				6,960				2,280				3,255				2,820				2,745				11,100
Total Doctors Trained Worldwide			3,700				11,680				3,260				4,875				4,280				4,085				16,500
Total to Date Worldwide			115,470				115,470				118,730				123,605				127,885				131,970				131,970

 

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

*Invisalign business metrics exclude SmileDirectClub aligners.  

 

ALIGN TECHNOLOGY, INC.
STOCK-BASED COMPENSATION
(in thousands)
		Q4				Fiscal				Q1				Q2				Q3				Q4				Fiscal
		2016				2016				2017				2017				2017				2017				2017
Stock-based Compensation (SBC)
SBC included in Gross Profit		$	1,078			$	3,966			$	925			$	768			$	833			$	804			$	3,330
SBC included in Operating Expenses			13,136				50,182				13,887				13,477				14,134				14,026				55,524
Total SBC Expense		$	14,214			$	54,148			$	14,812			$	14,245			$	14,967			$	14,830			$	58,854

 

 

 

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)

             

		Q1'18 Guidance
		GAAP
Net Revenues			$400.0 - $410.0
Gross Margin			74.3% - 75.0%
Operating Expenses			$223.5 - $227.5
Operating Margin			18.5% - 19.5%
Net Income per Diluted Share			$0.94 - $0.98	(1)
Business Metrics:			Q1'18
Case Shipments			264.0K - 269.0K
Capital Expenditure			$65M - $70M
Depreciation & Amortization			$10.5M - $11M
Diluted Shares Outstanding			82.0M	(2)
Stock Based Compensation Expense			$16.2M
Effective Tax Rate			2.0%	(1)

 

(1) Includes the benefit from the adoption of the accounting standard update 2016-09 related to share-based compensation expense

(2) Excludes any stock repurchases during the quarter

 

 

- 9 -