April 22, 2010

Align Technology Announces First Quarter Fiscal 2010 Results


SANTA CLARA, Calif., Apr 22, 2010 (GlobeNewswire via COMTEX News Network) --

  --  Q1 revenues of $90.1 million increase 4.0% sequentially and 28.5%
      year-over-year
  --  Q1 Invisalign case shipments of 63.6 thousand increase 4.2% sequentially
      and 27.1% year-over-year


Align Technology, Inc. (Nasdaq:ALGN) today reported financial results for the first quarter of fiscal 2010, ended March 31, 2010.

Total net revenues for the first quarter of fiscal 2010 (Q1 10) were $90.1 million compared to $86.6 million reported in the fourth quarter of 2009 (Q4 09) and compared to $70.1 million reported in the first quarter of 2009 (Q1 09). Invisalign case shipments for Q1 10 were a record 63.6 thousand, compared to 61.1 thousand in Q4 09 and compared to 50.1 thousand in Q1 09.

Gross margin for Q1 10 was a record 77.4%, compared to 73.7% in Q4 09 and 75.2% in Q1 09. The increase in Q1 gross margin primarily reflects the manufacturing efficiencies associated with higher case volumes. These efficiencies were somewhat offset by $630 thousand of continuing education (CE) training costs that have been re-classified from sales and marketing expense. Historically, with the exception of initial training classes (CE1), continuing education fees and costs for educational programs were charged to sales and marketing expense. As a result of the Proficiency Program annual CE requirement, all training and education fees and costs, in which CE credit is provided, will now be charged to revenue and costs of sales, respectively.

Net profit for Q1 10 was $14.9 million, or $0.19 per diluted share. This is compared to net profit of $11.5 million, or $0.15 per diluted share in Q4 09 and net profit of $2.6 million, or $0.04 per diluted share in Q1 09. Stock-based compensation expense included in Q1 10 was $3.5 million compared to $3.1 million in Q4 09 and $3.7 million in Q1 09.

"I'm pleased to report strong results for our first quarter," said Thomas M. Prescott, president and CEO. "Record revenues and case shipments combined with lower spending resulted in better than anticipated earnings."

To supplement our consolidated financial statements, we use the following non-GAAP financial measures: 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 net profit for Q1 10 was $15.5 million, or $0.20 per diluted share. This is compared to non-GAAP net profit of $12.1 million, or $0.16 per diluted share in Q4 09 and non-GAAP net profit of $3.2 million, or $0.05 per diluted share in Q1 09.

Q1 10 Operating Results



  ------------------------------  ------  ------  ------

  Key GAAP Operating Results       Q1 10   Q4 09   Q1 09
                                  ------  ------  ------
  Gross Margin                     77.4%   73.7%   75.2%
  Operating Expense               $49.0M  $49.2M  $47.4M
  Operating Margin                 23.0%   16.9%    7.5%
  Net Profit                      $14.9M  $11.5M   $2.6M
  Earnings Per Diluted Share
   (EPS)                           $0.19   $0.15   $0.04


  Key Non-GAAP Operating Results   Q1 10   Q4 09   Q1 09
                                  ------  ------  ------
  Non-GAAP Gross Margin            78.3%   78.6%   75.2%
  Non-GAAP Operating Expense      $49.0M  $49.2M  $46.5M
  Non-GAAP Operating Margin        23.9%   21.8%    8.8%
  Non-GAAP Net Profit             $15.5M  $12.1M   $3.2M
  Non-GAAP Earnings Per Diluted
   Share (EPS)                     $0.20   $0.16   $0.05

Liquidity and Capital Resources

As of March 31, 2010, Align had $205.4 million in cash, cash equivalents, and short-term marketable securities compared to $186.5 million as of December 31, 2009.

Key Business Metrics

The following table highlights business metrics for Align's first quarter of 2010. Additional historical information is available on the Company's website at http://investor.aligntech.com.



  -------------------------------  ------  ----------  --------

                                           % of Total  Q1 10/Q4
                                                          09
  Revenue by Channel ($M):          Q1 10   Revenue    % Change
                                   ------  ----------  --------
  North American Orthodontists      $28.2       31.3%     12.6%
  North American GP Dentists        $37.2       41.3%      2.8%
  International                     $20.0       22.2%    (5.8%)

  Non-case Revenue*                  $4.7        5.2%     12.5%
                                   ------  ----------  --------

  Total Revenue                     $90.1        100%      4.0%
                                   ======  ==========  ========


                                           % of Total  Q1 10/Q4
                                                          09
  Revenue by Product ($M):          Q1 10   Revenue    % Change
                                   ------  ----------  --------
  Invisalign Full                   $65.7       72.9%      3.9%
  Invisalign Express                 $8.6        9.6%     13.7%
  Invisalign Teen                    $8.2        9.1%   (12.6%)
  Invisalign Assist                  $2.9        3.2%     30.2%

  Non-case Revenue*                  $4.7        5.2%     11.7%
                                   ------  ----------  --------

  Total Revenue                     $90.1        100%      4.0%
                                   ======  ==========  ========
  *includes training, ancillary
   products, and retainers


                                           % of Total  Q1 10/Q4
                                                          09
  Cases Shipped by  Channel:        Q1 10     Cases    % Change
                                   ------  ----------  --------
  North American Orthodontists     22,150       34.8%     12.0%
  North American GP Dentists       28,490       44.8%      2.8%

  International                    12,970       20.4%    (4.3%)
                                   ------  ----------  --------

  Total Cases Shipped              63,610        100%      4.2%
                                   ======  ==========  ========



                                           % of Total  Q1 10/Q4
                                                          09
  Cases Shipped by Product:         Q1 10     Cases    % Change
                                   ------  ----------  --------
  Invisalign Full                  43,715       68.7%      5.2%
  Invisalign Express                9,225       14.5%      8.1%
  Invisalign Teen                   7,370       11.6%    (9.9%)

  Invisalign Assist                 3,300        5.2%     19.0%
                                   ------  ----------  --------

  Total Cases Shipped              63,610        100%      4.2%
                                   ======  ==========  ========

  Average Selling Price (ASP), as
   billed:                          Q1 10
                                   ------
  Total Worldwide Blended ASP      $1,395
  International ASP                $1,590

  Number of Doctors Cases were
   Shipped to:                      Q1 10
                                   ------
  North American Orthodontists      4,015
  North American GP Dentists       10,850

  International                     3,535
                                   ------
  Total Doctors Cases were
   Shipped to Worldwide            18,400
                                   ======

  Number of Doctors Trained
   Worldwide:                       Q1 10  Cumulative  Active**
                                   ------  ----------  --------
  North American Orthodontists         75       9,010     5,615
  North American GP Dentists          315      35,530    17,895

  International                       525      16,265    16,265
                                   ------  ----------  --------

  Total Doctors Trained Worldwide     915      60,805    39,775
                                   ======  ==========  ========
  **Active -- represents North American Invisalign-trained
   doctors that submitted at least 1 case and completed 1 CE
   hour in 2009 or reactivated their status in Q1 2010.


  Doctor Utilization Rates*:        Q1 10     Q4 09     Q1 09
                                   ------  ----------  --------
  North American Orthodontists        5.5         5.0       4.6
  North American GP Dentists          2.6         2.5       2.2

  International                       3.7         3.8       3.2
                                   ------  ----------  --------

  Total Utilization Rate              3.5         3.3       2.9
                                   ======  ==========  ========
  * Utilization = # of cases
   shipped/# of doctors to whom
   cases were shipped

  Total Invisalign Patients
   (cases shipped):                 Q1 10  Cumulative
                                   ------  ----------
  Number of Patients Treated or
   in Treatment (cases)            63,610   1,228,305
                                   ======  ==========

Q2 Fiscal 2010 Business Outlook

For the second quarter of fiscal 2010 (Q2 10), Align Technology expects net revenues to be in a range of $88.0 million to $91.0 million. GAAP earnings per diluted share for Q2 10 is expected to be in a range of $0.12 to $0.14. Stock-based compensation expense for Q2 10 is expected to be approximately $4.4 million. A more comprehensive business outlook is available following the financial tables of this release.

Commenting on Align's business outlook for the second quarter of 2010, Kenneth Arola, vice president and CFO made the following statement:

There are several factors that contribute to our outlook:

  --  With the change we have made to the Proficiency Program, it is uncertain
      how doctors, particularly lower volume doctors, will respond. It is
      likely that some practices that have been working hard to accelerate
      adoption will want to take a breather, while others who started to get
      that acceleration and enjoying the progress they made may want to
      continue at their new pace.

  --  In Q2, we will introduce a consumer rebate program that will run through
      the end of the quarter, as well as an additional volume rebate for the
      Elite and Premier providers. This is expected to have some negative
      impact on ASPs and gross margin during the quarter.

  --  For our International business, Q2 is historically a seasonally stronger
      sequential quarter and we expect it to be the same again this year. We
      do business in Euros and therefore major changes quarter-to-quarter in
      foreign exchange rates can impact top-line revenues and gross margin.

  --  June marks the beginning of the summer and we are looking forward to
      participating in another full season of teen orthodontic case starts and
      continue gaining share of chair -- both at the tail end of Q2 and into
      Q3.


Other Announcements

In a separate announcement today Align also announced a significant change to the Invisalign proficiency program launched in June 2009 by eliminating the annual case start requirement in order for doctors to maintain their active Invisalign provider status. Doctors are still required to complete a minimum of ten Invisalign continuing education (CE) hours per year. For more information, please see Align's press release titled, "Align Technology Eliminates Annual Case Requirement for Invisalign Providers."

Align Web Cast and Conference Call

Align Technology will host a conference call today, April 22, 2010 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first quarter fiscal 2010 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 348442 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 May 5, 2010.

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. Today, the Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express, and Vivera Retainers.

To learn more about Invisalign or to find an Invisalign trained doctor in your area, please visit www.invisalign.com or call 1-800-INVISIBLE.

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, royalties associated with the settlement with Ormco, the effect of charges associated with restructurings, 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. 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 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.

Forward-Looking Statement

This news release, including the tables below, contains forward-looking statements, including statements regarding, certain business metrics for the second quarter of 2010, including anticipated revenue, gross margin, operating expense, operating income, earnings per share, case shipments and cash and statements made by Mr. Arola commenting on our business outlook, including expectations on average selling prices and gross margin in the second quarter and our ability to continue to gain share of the teenage orthodontic market during the summer months. 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, continued customer demand for Invisalign 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 Invisalign 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, 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, 2009, which was filed with the Securities and Exchange Commission on February 26, 2010. 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
                               --------------------

                               March 31,  March 31,

                                  2010       2009
                               ---------  ---------

  Net revenues                  $ 90,090   $ 70,132


  Cost of revenues                20,380     17,425
                               ---------  ---------


  Gross profit                    69,710     52,707
                               ---------  ---------

  Operating expenses:
   Sales and marketing            27,946     27,854
   General and administrative     14,951     13,468
   Research and development        6,116      5,191

   Restructuring                      --        910
                               ---------  ---------

  Total operating expenses        49,013     47,423
                               ---------  ---------

  Profit from operations          20,697      5,284

  Interest and other income
   (expense), net                  (553)        148
                               ---------  ---------

  Profit before income taxes      20,144      5,432


  Provision for income taxes       5,214      2,796
                               ---------  ---------


  Net profit                    $ 14,930    $ 2,636
                               =========  =========

  Net profit per share

   - basic                        $ 0.20     $ 0.04
                               =========  =========

   - diluted                      $ 0.19     $ 0.04
                               =========  =========

  Shares used in computing
   net profit per share

   - basic                        75,166     65,983
                               =========  =========

   - diluted                      77,597     66,447
                               =========  =========



  ALIGN TECHNOLOGY, INC.
  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
  (in thousands)

                                            December
                                March 31,     31,
                                  2010        2009


                               ----------  ----------
             ASSETS

  Current assets:
   Cash and cash equivalents    $ 190,407   $ 166,487
   Marketable securities,
    short-term                     14,991      19,978
   Accounts receivable, net        58,801      54,537
   Inventories, net                 2,356       2,046

   Other current assets            18,055      18,251
                               ----------  ----------
     Total current assets         284,610     261,299

  Property and equipment, net      25,418      24,971
  Goodwill and intangible
   assets, net                      4,766       5,466
  Deferred tax asset               56,560      61,535

  Other long-term assets            2,198       1,969
                               ----------  ----------


     Total assets               $ 373,552   $ 355,240
                               ==========  ==========


        LIABILITIES AND
      STOCKHOLDERS' EQUITY

  Current liabilities:
   Accounts payable               $ 4,513     $ 6,122
   Accrued liabilities             34,690      42,822

   Deferred revenue                37,047      32,299
                               ----------  ----------
     Total current
      liabilities                  76,250      81,243


  Other long term liabilities         946         961
                               ----------  ----------

     Total liabilities             77,196      82,204


  Total stockholders' equity      296,356     273,036
                               ----------  ----------

   Total liabilities and
    stockholders' equity        $ 373,552   $ 355,240
                               ==========  ==========



  ALIGN TECHNOLOGY, INC.
  RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS

  Reconciliation of GAAP to
   Non-GAAP Gross Profit
  (in thousands)

                                      Three Months Ended
                               -------------------------------

                               March 31,   December  March 31,
                                             31,
                                  2010       2009       2009
                               ---------  ---------  ---------

  GAAP Gross profit             $ 69,710   $ 63,806   $ 52,707

  Ormco royalties                    827      4,259         --
                               ---------  ---------  ---------

  Non-GAAP Gross profit         $ 70,537   $ 68,065   $ 52,707
                               =========  =========  =========


  Reconciliation of GAAP to
   Non-GAAP Operating
   Expenses
  (in thousands)

                                      Three Months Ended
                               -------------------------------

                               March 31,   December  March 31,
                                             31,
                                  2010       2009       2009
                               ---------  ---------  ---------

  GAAP Operating expenses       $ 49,013   $ 49,161   $ 47,423

   Restructuring                      --         --      (910)
                               ---------  ---------  ---------

  Non-GAAP Operating expenses   $ 49,013   $ 49,161   $ 46,513
                               =========  =========  =========


  Reconciliation of GAAP to
   Non-GAAP Profit from
   Operations
  (in thousands)

                                      Three Months Ended
                               -------------------------------

                               March 31,   December  March 31,
                                             31,
                                  2010       2009       2009
                               ---------  ---------  ---------

  GAAP Profit from Operations   $ 20,697   $ 14,645    $ 5,284
   Ormco royalties                   827      4,259         --

   Restructuring                      --         --        910
                               ---------  ---------  ---------
  Non-GAAP Profit from
   Operations                   $ 21,524   $ 18,904    $ 6,194
                               =========  =========  =========


  Reconciliation of GAAP to
   Non-GAAP Net Profit
  (in thousands, except per
   share amounts)

                                      Three Months Ended
                               -------------------------------

                               March 31,   December  March 31,
                                             31,
                                  2010       2009       2009
                               ---------  ---------  ---------

  GAAP Net profit               $ 14,930   $ 11,492    $ 2,636
   Ormco royalties                   827      4,259         --
   Restructuring                      --         --        910
   Tax effect on non-GAAP
    adjustments                    (216)    (3,605)      (355)
                               ---------  ---------  ---------

  Non-GAAP Net profit           $ 15,541   $ 12,146    $ 3,191
                               =========  =========  =========

  Diluted Net profit per
   share:

   GAAP                           $ 0.19     $ 0.15     $ 0.04
                               =========  =========  =========

   Non-GAAP                       $ 0.20     $ 0.16     $ 0.05
                               =========  =========  =========

  Shares used in computing
   diluted non-GAAP net
   profit per share               77,597     76,831     66,447
                               =========  =========  =========



  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.

  Financials
  (in millions, except per share amounts and
   percentages)


                                Q2 2010
                           ------------------

  Net Revenue                $88.0 -- $91.0

  Gross Profit               $66.5 -- $69.5

  Gross Margin                75.6% - 76.4%

  Operating Expenses         $52.5 -- $53.5

  Operating Margin            16.0% - 17.6%

  Net Income per Diluted
   Share                     $0.12 -- $0.14

  Stock Based
   Compensation Expense:
  Cost of Revenues                $0.4

  Operating Expenses              $4.0
                           ------------------
  Total Stock Based
   Compensation Expense           $4.4

  Business Metrics:

                                Q2 2010
                           ------------------
  Case Shipments              63.5K - 65.5K
  Cash                       $225M -- $230M
  Capex                      $3.0M -- $5.0M
  Depreciation &
   Amortization              $2.0M -- $3.0M
  Diluted Shares
   Outstanding                    78M


  Full Year 2010:               FY 2010
                           ------------------

  Stock Based
   compensation                  $17.0M
  Diluted Shares
   Outstanding                    78M

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Align Technology

CONTACT:  Align Technology, Inc.
Investor Relations Contact
Shirley Stacy
(408) 470-1150
sstacy@aligntech.com
Ethos Communication, Inc.
Press Contact
Shannon Mangum Henderson
(678) 261-7803
align@ethoscommunication.com

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