July 28, 2016

Align Technology Announces Second Quarter 2016 Results


SAN JOSE, CA -- (Marketwired) -- 07/28/16 -- Align Technology, Inc. (NASDAQ: ALGN) -

  • Q2 revenues up 28.6% year-over-year to $269.4 million
  • Q2 results driven by Clear aligner revenues up 21.2% year-over-year and Scanner revenues up almost 200% year-over-year
  • Q2 Clear Aligner shipments up 22.4% year-over-year to 177 thousand cases, international shipments up 38.3% year-over-year
  • Diluted EPS $0.62, up $0.23 year-over-year

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the second quarter ended June 30, 2016. Clear Aligner case shipments in the second quarter of 2016 (Q2'16) were 177 thousand, a 22.4% increase year-over-year. For Q2'16, revenues were $269.4 million, a 28.6% increase year-over-year, and net profit was $50.1 million, or $0.62 per diluted share, up $0.23 per diluted share compared to the same period in the prior year.

"Q2 was driven by better than expected revenue due to continued strong year-over-year Invisalign volume across our customer base and record utilization, with international case volume up 38.3%, and North America up 15.3%," said Joe Hogan, Align Technology President and CEO. "We also had continued strong demand for our iTero Element with record shipments this quarter resulting in revenue growth of almost 200% year-over-year."

GAAP Summary Financial Comparisons

Second Quarter Fiscal 2016

    Q2'16   Q1'16   Q2'15   Q/Q Change     Y/Y Change  
  Clear Aligner Shipments     176,995     163,695     144,570     +8.1 %   +22.4 %
  Net Revenues   $ 269.4M   $ 238.7M   $ 209.5M     +12.8 %   +28.6 %
    Clear Aligner   $ 243.4M   $ 219.7M   $ 200.8M     +10.8 %   +21.2 %
    Scanner & Services   $ 26.0M   $ 19.0M   $ 8.7M     +36.3 %   +199.0 %
  Net Profit   $ 50.1M   $ 40.5M   $ 31.4M     +23.7 %   +60.0 %
  Diluted EPS   $ 0.62   $ 0.50   $ 0.39   $ 0.12     +$0.23  

Note: Changes and percentages are based on actual values and may effect totals due to rounding

As of June 30, 2016, Align had $685.0 million in cash, cash equivalents and marketable securities compared to $678.7 million as of December 31, 2015. On May 3, 2016, as part of our $300.0 million April 2014 stock repurchase program, we entered into an Accelerated Stock Repurchase agreement and funded the repurchase of $50.0 million of our common stock. On that date we received an initial delivery of approximately 0.5 million shares based on current market prices. The final number of shares to be repurchased will be based on our volume-weighted average stock price during the term of the agreement, less an agreed upon discount. Upon completion of this agreement, we will commence repurchasing an additional $50.0 million of our common stock on the open market. These two actions will complete the April 2014 stock repurchase program. During the quarter the Company also announced a new plan to repurchase up to an additional $300.0 million of the Company's stock, all of which remains available for repurchase as of June 30, 2016.

Additional Aligners at No Charge Effective July 18, 2015

Align implemented its new Additional Aligners policy on July 18, 2015 in which the Company no longer distinguishes between mid-course corrections and case refinements providing doctors the ability to order additional aligners to address either treatment need at no charge, subject to certain requirements. These changes were effective for all new Invisalign Full, Teen, and Assist treatments shipped worldwide after July 18, 2015, as well as any cases that were open as of this date. While this policy change was largely immaterial to the Company's cash flows, it did impact the timing at which the Company recognizes revenue. The Company estimates Q2'16 revenues and pre-tax income were lower by approximately $8.3 million due to this change.

Q3 2016 Business Outlook

For the third quarter of 2016 (Q3'16), Align provides the following guidance:

  • Clear Aligner case shipments in the range of 174.2 thousand to 176.9 thousand, up approximately 18.1% to 19.9% over the same period a year ago.
  • Net revenues in the range of $267.2 million to $273.5 million.
  • Diluted EPS in the range of $0.49 to $0.52.

Align Technology to Supply Non-Invisalign Clear Aligners to SmileDirect Club in North America

In a separate press release today, Align announced a supply agreement with SmileDirectClub to manufacture non-Invisalign clear aligners for SmileDirectClub's doctor-directed, at-home program for affordable, cosmetic teeth straightening.

Align Web Cast and Conference Call

Align will host a conference call today, July 28, 2016 at 4:30 p.m. ET, 1:30 p.m. PT, to review its second quarter 2016 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. 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 13640324 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 August 11, 2016.

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.

Forward-Looking Statement

This news release, including the tables below, contains forward-looking statements, including statements regarding certain business metrics for the third quarter of 2016, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, diluted earnings per share, 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, 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, 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 year ended December 31, 2015, which was filed with the Securities and Exchange Commission (SEC) on February 25, 2016, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which was filed with the SEC on May 5, 2016. 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   Six Months Ended
    June 30,
  June 30,
   
2016
  2015  
2016
  2015
                         
Net revenues   $ 269,362   $ 209,488   $ 508,082   $ 407,574
                         
Cost of net revenues     64,146     50,854     122,239     97,850
                         
Gross profit     205,216     158,634     385,843     309,724
                         
Operating expenses:                        
  Selling, general and adminstrative     121,467     100,625     233,677     188,906
  Research and development     18,613     15,684     33,696     29,569
Total operating expenses     140,080     116,309     267,373     218,475
                         
Income fom operations     65,136     42,325     118,470     91,249
                         
Interest and other income (expense), net     125     174     (302)     (1,278)
                         
Net income before provision for income taxes     65,261     42,499     118,168     89,971
                         
Provision for income taxes     15,113     11,149     27,474     22,444
                         
Net income   $ 50,148   $ 31,350   $ 90,694   $ 67,527
                         
Net income per share                        
  Basic   $ 0.63   $ 0.39   $ 1.14   $ 0.84
  Diluted   $ 0.62   $ 0.39   $ 1.11   $ 0.83
                         
Shares used in computing net income per share                        
  Basic     79,951     80,257     79,891     80,358
  Diluted     81,281     81,394     81,440     81,729
                         
     
ALIGN TECHNOLOGY, INC.    
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands)    
         
    June 30,
2016
  December 31,
2015
ASSETS            
             
Current assets:            
  Cash and cash equivalents   $ 167,706   $ 167,714
  Marketable securities, short-term     404,107     359,581
  Accounts receivable, net     192,660     158,550
  Inventories     22,992     19,465
  Prepaid expenses and other current assets     37,942     26,700
    Total current assets     825,407     732,010
             
  Marketable securities, long-term     113,158     151,370
  Property, plant and equipment, net     161,685     136,473
  Goodwill and intangible assets, net     83,749     79,162
  Deferred tax assets     60,051     51,416
  Other assets     7,223     8,202
             
    Total assets   $ 1,251,273   $ 1,158,633
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
 Current liabilities:            
  Accounts payable   $ 30,927   $ 34,354
  Accrued liabilities     107,505     107,765
  Deferred revenues     160,557     129,553
    Total current liabilities     298,989     271,672
             
 Income tax payable     41,244     37,512
 Other long term liabilities     1,182     1,523
    Total liabilities     341,415     310,707
             
 Total stockholders' equity     909,858     847,926
             
    Total liabilities and stockholders' equity   $ 1,251,273   $ 1,158,633
             
 
 
                             
ALIGN TECHNOLOGY, INC.              
Q2 2016 FINANCIAL AND BUSINESS METRICS              
(in thousands except average selling price, utilization and doctors trained)

               
    Q1   Q2   Q3   Q4   Fiscal   Q1   Q2
    2015   2015   2015   2015   2015   2016   2016
Invisalign Clear Aligner Net Revenues by Geography:                                          
  North America   $ 118,844   $ 126,137   $ 124,085   $ 129,663   $ 498,729   $ 135,699   $ 143,909
  International     55,920     61,896     61,265     70,980     250,061     69,850     83,703
  Non-case*     12,265     12,784     12,942     13,405     51,396     14,149     15,824
    Total Clear Aligner Net Revenues   $ 187,029   $ 200,817   $ 198,292   $ 214,048   $ 800,186   $ 219,698   $ 243,436
      YoY % growth     11.2%     11.7%     11.3%     14.8%     12.3%     17.5%     21.2%
      QoQ % growth     0.3%     7.4%     -1.3%     7.9%           2.6%     10.8%
   *includes Invisalign training, ancillary products, and retainers                                          
                                           
Average Invisalign Selling Price (ASP):                                          
  Worldwide ASP   $ 1,335   $ 1,300   $ 1,255   $ 1,250   $ 1,285   $ 1,255   $ 1,285
  International ASP   $ 1,410   $ 1,380   $ 1,325   $ 1,315   $ 1,355   $ 1,315   $ 1,345
                                           
                                           
Invisalign Clear Aligner Cases Shipped by Geography:                                          
  North America     91,110     99,630     101,260     106,390     398,390     110,500     114,855
  International     39,670     44,940     46,225     54,010     184,845     53,195     62,140
    Total Cases Shipped     130,780     144,570     147,485     160,400     583,235     163,695     176,995
      YoY % growth     16.6%     28.9%     23.6%     26.4%     22.0%     25.2%     22.4%
      QoQ % growth     3.1%     10.5%     2.0%     8.8%           2.1%     8.1%
                                           
Number of Invisalign Doctors Cases Shipped To:                                          
  North America     20,165     21,335     21,160     21,835     31,710     22,355     22,575
  International     9,050     9,790     10,150     10,865     16,460     11,280     12,485
    Total Doctors Cases Shipped To     29,215     31,125     31,310     32,700     48,170     33,635     35,060
                                           
Invisalign Doctor Utilization Rates*:                                          
  North America     4.5     4.7     4.8     4.9     12.6     4.9     5.1
    North American Orthodontists     9.0     9.5     9.9     9.9     31.8     10.4     10.7
    North American GP Dentists     2.9     3.0     2.9     3.1     7.4     3.0     3.1
  International     4.4     4.6     4.6     5.0     11.2     4.7     5.0
    Total Utilization Rates     4.5     4.6     4.7     4.9     12.1     4.9     5.1
   * # of cases shipped/# of doctors to whom cases were shipped                                          
                                           
Number of Invisalign Doctors Trained:                                          
  North America     870     1,120     1,060     1,270     4,320     875     1,125
  International     1,540     1,335     1,200     1,400     5,475     1,605     1,760
    Total Doctors Trained Worldwide     2,410     2,455     2,260     2,670     9,795     2,480     2,885
    Total to Date Worldwide     96,405     98,860     101,120     103,790     103,790     106,270     109,155
                                           
Total Net Revenues:                                          
  Clear Aligner Net Revenues   $ 187,029   $ 200,817   $ 198,292   $ 214,048   $ 800,186   $ 219,698   $ 243,436
  Scanner & Services Net Revenues     11,057     8,671     9,344     16,228     45,300     19,022     25,926
    Total Worldwide Net Revenues   $ 198,086   $ 209,488   $ 207,636   $ 230,276   $ 845,486   $ 238,720   $ 269,362
      YoY % growth     9.7%     8.8%     9.4%     15.9%     11.0%     20.5%     28.6%
      QoQ % growth     -0.3%     5.8%     -0.9%     10.9%           3.7%     12.8%
                                           
Stock-based Compensation (SBC)                                          
  SBC included in Gross Profit   $ 980   $ 970   $ 984   $ 1,008   $ 3,942   $ 961   $ 932
  SBC included in Operating Expenses     10,670     11,860     13,677     12,799     49,006     11,563     12,767
    Total SBC Expense   $ 11,650   $ 12,830   $ 14,661   $ 13,807   $ 52,948   $ 12,524   $ 13,699
                                           
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 appropriate 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 the press release.
     
     
     
Financial Outlook
(in millions, except per share amounts and percentages)
     
    Q3'16 Guidance
     
    GAAP
     
Net Revenues   $267.2 - $273.5
     
Gross Margin   74.4% - 74.8%
     
Operating Expenses   $147.1 - $148.1
     
Operating Margin   19.3% - 20.6%
     
Net Income per Diluted Share   $0.49 - $0.52
     
     
Business Metrics:   Q3'16
     
Case Shipments   174.2K - 176.9K
Capital Expenditure   $20M - $25M
Depreciation & Amortization   $7.0M - $7.5M
Diluted Shares Outstanding   81.4M*
Stock Based Compensation Expense   $14.4M
Tax Rate   24.5%
     
* Excludes any stock repurchases during the quarter  
   

Source: Align Technology

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