October 26, 2017

Align Technology Announces Record Third Quarter 2017 Results


SAN JOSE, CA -- (Marketwired) -- 10/26/17 --

  • Q3 revenues up 38.3% year-over-year, up 8.1% sequentially to a record $385.3 million
  • Q3 total Invisalign case shipments up 32.8% year-over-year to 236.1 thousand
  • Q3 Invisalign case shipments to teenage patients up 46.3% year-over-year, up 26.5% sequentially
  • Q3 scanner and services revenues up 25.0% year-over-year, up 23.2% sequentially to $43.7 million
  • Q3 diluted EPS $1.01, up 60.3% year-over-year

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the third quarter ended September 30, 2017. Invisalign case shipments in the third quarter of 2017 (Q3'17) were 236.1 thousand, a 32.8% increase year-over-year. North America and International case shipments were up year-over-year 25.0% and 47.4%, respectively. Q3'17 Invisalign case shipments to teenage patients were 69.8 thousand, a 46.3% increase year-over-year. For Q3'17, revenues were $385.3 million, a 38.3% increase year-over-year, and net profit was $82.6 million, or $1.01 per diluted share, up 60.3% per diluted share compared to the same period in the prior year.

Commenting on Align's Q3 2017 results, Align Technology President and CEO Joe Hogan said, "I'm pleased to report another strong quarter and results that exceeded our expectations across our key financial metrics including revenue, volume, margins, and EPS. Third quarter revenues increased 38.3% year-over-year driven by increased Invisalign volumes across all our geographies, as well as strong growth from iTero scanners. Our strong third quarter results also reflect accelerated growth from teenager patients in both North America and the Asia Pacific region, with total Invisalign shipments up 46.3% year-over-year and up 26.5% from the second quarter. On a sequential basis, revenues increased 8.1% driven by continued strength across Asia Pacific, which offset expected seasonality in Europe, as well as higher than expected revenues from shipments to SmileDirectClub."

GAAP Summary Financial Comparisons
Third Quarter Fiscal 2017

    Q3'17   Q2'17   Q3'16   Q/Q Change   Y/Y Change
Invisalign Case Shipments*   236,065   231,890   177,755   +1.8%   +32.8%
Net Revenues   $385.3M   $356.5M   $278.6M   +8.1%   +38.3%
  Clear Aligner**   $341.6M   $321.0M   $243.7M   +6.4%   +40.2%
  Scanner & Services   $43.7M   $35.4M   $34.9M   +23.2%   +25.0%
Net Profit   $82.6M   $69.2M   $51.4M   +19.3%   +60.7%
Diluted EPS   $1.01   $0.85   $0.63   +$0.16   +$0.38

Note: Changes and percentages are based on actual values and may affect totals due to rounding
* Invisalign Shipment figures do not include SmileDirectClub aligners
** Clear aligner revenue includes revenues from Invisalign clear aligners and SmileDirectClub aligners

As of September 30, 2017, Align had $737.9 million in cash, cash equivalents and marketable securities compared to $676.6 million as of June 30, 2017. During Q3'17, Align concluded its previously announced $50.0 million accelerated stock repurchase program (ASR) receiving a total of 0.4 million shares at a weighted average share price of $146.48 under the ASR. We have $250.0 million remaining available for repurchases under the existing stock repurchase authorization.

Q3 2017 Business Highlights

  • Align Technology Introduces a New Brand Identity for iTero® Scanning System and Tools: Align announced a new global brand identity for the company's leading iTero® scanning system and innovative tools at the recent bi-annual Invisalign GP Summit customer event. The introduction of a new, vibrant brand identity for the iTero scanner reflects its critical and central role in digital treatment and the practice of the future.
  • Patterson Dental and Align Technology Announce Distribution Agreement for iTero® Element Intraoral Scanning System: Align announced a distribution agreement for Align's iTero Element intraoral scanning system. This agreement provides access to Patterson's sales force and general dentist customers who are looking to grow their business through practice digitization. The iTero scanner enables dentists to scan in as little as 60 seconds, visualize changes in dentition, and perform restorative and orthodontic workflows that enhance their patient care and help them grow their practice.
  • Align Technology Moves Corporate Headquarters to New Buildings in San Jose, California: In August, Align relocated its corporate headquarters to a new location at 2820 Orchard Parkway, San Jose, CA. The Company had purchased the new buildings in January 2017 in anticipation of the lease expiration for its prior location.
  • Align Technology Expands Its Presence in Raleigh, North Carolina with Larger Office to Support Continued Headcount Growth: Align has opened a larger office in Raleigh, North Carolina to accommodate headcount growth and leverage the area's diverse and broad-based talent resources. Align intends to hire more than 200 employees over the next several years in Raleigh in various areas illustrating its commitment to driving continued innovation and supporting its expanding customer base globally.
  • Align Technology Opens First Office in Canada to Support Continued Growth: In August, Align opened its' first office in Canada to support continued growth across the region. Canada is Align's second largest country market and has a large opportunity for expansion and accelerated growth. Sian Roberts, who joined Align earlier this year as VP and General Manager, will lead the strategy and execution for Canada.

Q4 2017 Business Outlook
For the fourth quarter of 2017 (Q4'17), Align provides the following guidance:

  • Invisalign case shipments in the range of 245 thousand to 250 thousand, up approximately 29% to 32% over the same period a year ago.
  • Net revenues in the range of $391 million to $398 million, up approximately 33% to 36% over the same period a year ago.
  • Diluted EPS in the range of $0.92 to $0.95.

Align Web Cast and Conference Call
Align will host a conference call today, October 26, 2017 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter 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 13671493 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 9, 2017.

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 fourth quarter of 2017, 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 June 30, 2017, which was filed with the SEC on August 3, 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   Nine Months Ended
    September 30,
2017
  September 30,
2016
  September 30,
2017
  September 30,
2016
                 
Net revenues   $ 385,267   $ 278,589   $ 1,052,090   $ 786,671
                         
Cost of net revenues     92,779     69,387     253,060     191,626
                         
Gross profit     292,488     209,202     799,030     595,045
                         
Operating expenses:                        
  Selling, general and adminstrative     169,524     126,708     483,636     360,385
  Research and development     24,201     20,415     71,389     54,111
    Total operating expenses     193,725     147,123     555,025     414,496
                         
Income from operations     98,763     62,079     244,005     180,549
                         
Interest and other income (expense), net     3,750     1,463     8,607     1,161
                         
Net income before provision for income taxes and equity in losses of investee     102,513     63,542     252,612     181,710
                         
Provision for income taxes     18,344     11,698     26,508     39,172
Equity in losses of investee, net of tax     1,614     477     4,950     477
                         
Net income   $ 82,555   $ 51,367   $ 221,154   $ 142,061
                         
Net income per share:                        
  Basic   $ 1.03   $ 0.64   $ 2.76   $ 1.78
  Diluted   $ 1.01   $ 0.63   $ 2.71   $ 1.74
                         
Shares used in computing net income per share:                        
  Basic     80,163     79,977     80,086     79,920
  Diluted     81,789     81,466     81,757     81,523
                           
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
         
    September 30,
2017
  December 31,
2016
ASSETS        
         
Current assets:        
  Cash and cash equivalents   $ 362,613   $ 389,275
  Marketable securities, short-term     316,454     250,981
  Accounts receivable, net     321,328     247,415
  Inventories     36,941     27,131
  Prepaid expenses and other current assets     63,667     38,176
    Total current assets     1,101,003     952,978
             
Marketable securities, long-term     58,842     59,783
Property, plant and equipment, net     295,901     175,167
Equity method investments     52,875     45,061
Goodwill and intangible assets, net     90,070     81,998
Deferred tax assets     73,532     67,844
Other assets     25,400     13,320
             
    Total assets   $ 1,697,623   $ 1,396,151
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 45,942   $ 28,596
  Accrued liabilities     173,851     134,332
  Deferred revenues     241,576     191,407
    Total current liabilities     461,369     354,335
             
Income tax payable     45,375     45,133
Other long-term liabilities     8,921     1,294
    Total liabilities     515,665     400,762
             
Total stockholders' equity     1,181,958     995,389
             
    Total liabilities and stockholders' equity   $ 1,697,623   $ 1,396,151
                 
ALIGN TECHNOLOGY, INC.
INVISALIGN BUSINESS METRICS*
 
    Q1   Q2   Q3   Q4   Fiscal   Q1   Q2   Q3
    2016   2016   2016   2016   2016   2017   2017   2017
Invisalign Average Selling Price (ASP):                                
  Worldwide ASP   $ 1,255   $ 1,285   $ 1,285   $ 1,230   $ 1,265   $ 1,270   $ 1,285   $ 1,310
  International ASP   $ 1,315   $ 1,345   $ 1,365   $ 1,315   $ 1,335   $ 1,325   $ 1,335   $ 1,390
                                                 
Invisalign Cases Shipped by Geography:                                                
  North America     110,500     114,855     115,900     122,555     463,810     132,885     146,510     144,870
  International     53,195     62,140     61,855     67,500     244,690     75,175     85,380     91,195
    Total Cases Shipped     163,695     176,995     177,755     190,055     708,500     208,060     231,890     236,065
      YoY % growth     25.2%     22.4%     20.5%     18.5%     21.5%     27.1%     31.0%     32.8%
      QoQ % growth     2.1%     8.1%     0.4%     6.9%           9.5%     11.5%     1.8%
                                                 
Number of Invisalign Doctors Cases Were Shipped To:                                                
  North America     22,355     22,575     22,570     23,265     34,065     23,910     24,695     24,845
  International     11,280     12,485     12,720     13,635     20,415     14,955     16,570     17,760
    Total Doctors Cases Shipped To     33,635     35,060     35,290     36,900     54,480     38,865     41,265     42,605
                                                 
Invisalign Doctor Utilization Rates*:                                                
  North America     4.9     5.1     5.1     5.3     13.6     5.6     5.9     5.8
    North American Orthodontists     10.4     10.7     11.1     11.3     36.6     12.6     13.6     13.8
    North American GP Dentists     3.0     3.1     3.0     3.2     7.6     3.1     3.3     3.1
  International     4.7     5.0     4.9     5.0     12.0     5.0     5.2     5.1
    Total Utilization Rates     4.9     5.1     5.0     5.2     13.0     5.4     5.6     5.5
* # of cases shipped/# of doctors to whom cases were shipped                                                
                                                 
Number of Invisalign Doctors Trained:                                                
  North America     875     1,125     1,300     1,420     4,720     980     1,620     1,460
  International     1,605     1,760     1,315     2,280     6,960     2,280     3,255     2,820
    Total Doctors Trained Worldwide     2,480     2,885     2,615     3,700     11,680     3,260     4,875     4,280
    Total to Date Worldwide     106,270     109,155     111,770     115,470     115,470     118,730     123,605     127,885
                                                 
Note: Historical public data may differ due to rounding. Additionally, rounding may affect totals.
*Invisalign business metrics exclude SmileDirectClub aligners.
 
ALIGN TECHNOLOGY, INC.
STOCK-BASED COMPENSATION
(in thousands)
                 
    Q1   Q2   Q3   Q4   Fiscal   Q1   Q2   Q3
    2016   2016   2016   2016   2016   2017   2017   2017
Stock-based Compensation (SBC)                                
  SBC included in Gross Profit   $ 961   $ 932   $ 995   $ 1,078   $ 3,966   $ 925   $ 768   $ 833
  SBC included in Operating Expenses     11,563     12,767     12,716     13,136     50,182     13,887     13,477     14,134
    Total SBC Expense   $ 12,524   $ 13,699   $ 13,711   $ 14,214   $ 54,148   $ 14,812   $ 14,245   $ 14,967
                                                 
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)    
         
    Q4'17 Guidance    
         
    GAAP    
         
Net Revenues   $391 - $398    
         
Gross Margin   75.0% - 75.5%    
         
Operating Expenses   $198 - $202    
         
Operating Margin   24.3% - 24.8%    
         
Net Income per Diluted Share   $0.92 - $0.95   (1)
         
         
Business Metrics:   Q4'17    
         
Case Shipments   245K - 250K    
Capital Expenditure   $55M - $60M    
Depreciation & Amortization   $10.5M - $11M    
Diluted Shares Outstanding   81.9M   (2)
Stock Based Compensation Expense   $15.3M    
Effective Tax Rate   22%   (1)
         
(1) Includes the benefit from the adoption of the new accounting standard update for share-based compensation
(2) Excludes any stock repurchases during the quarter
     

Investor Relations Contact
Yin Cantor
Align Technology, Inc.
(408) 470-1044
ycantor@aligntec.com

Press Contact
Shannon Mangum Henderson
Ethos Communication, Inc.
(678) 261-7803
align@ethoscommunication.com

Source: Align Technology

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