• Q1 revenues up 25.6% year-over-year to a record $549.0 million
• Q1 Invisalign volume up 28.3% year-over-year to 349.2 thousand cases
• Q1 scanner and services revenues up 55.1% year-over-year to $79.8 million
• Q1 Invisalign cases for teenage patients up 41.1% year-over-year to 97.4 thousand
• Q1 operating income of $87.7 million included impairments and other charges of $29.8 million related to the U.S. Invisalign Store closures
• Q1 net profit of $71.8 million and $0.89 diluted EPS

SAN JOSE, Calif., April 24, 2019 (GLOBE NEWSWIRE) -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the first quarter ended March 31, 2019. Q1’19 Invisalign volume was 349.2 thousand cases, up 28.3% year-over-year. For the Americas and International regions, Q1’19 Invisalign volume was up 21.8% and 38.5% year-over-year, respectively. Q1’19 Invisalign volume for teenage patients was 97.4 thousand cases, up 41.1% year-over-year. Q1’19 total revenues were $549.0 million, up 25.6% year-over-year, and Q1’19 scanner and services revenues were $79.8 million, up 55.1% year-over-year.

Q1’19 operating income of $87.7 million was down 10.7% year-over-year resulting in an operating margin of 16.0%.  As a result of the arbitrator’s decision regarding SmileDirectClub (SDC) announced on March 5, 2019, Q1’19 operating income included impairments and other charges related to the U.S. Invisalign Store closures of $29.8 million which reduced operating margin by 5.4%.  Q1’19 net profit was $71.8 million, or $0.89 per diluted EPS which reflected the Invisalign Store closure charges of $22.2 million, net of tax effects of $7.5 million, or $0.28 per diluted EPS.

Commenting on Align’s Q1 2019 results, Align Technology President and CEO Joe Hogan said, “Our first quarter was a very good start to the year with revenues, volumes, gross margin, and EPS above our guidance.  Record Q1 revenues and Invisalign volumes were up 25.6% and 28.3% year-over-year, respectively, reflecting continued strong growth across all geographies and customer channels, as well as strong iTero scanner and services revenues, which were up 55.1% year-over-year.  Q1 sequential growth was driven primarily by North America and the EMEA region, reflecting strength across the Invisalign product portfolio.  We also saw a nice uptick in adoption of Invisalign treatment with record utilization overall, as well as expansion of our customer base which totaled 57,000 active doctors worldwide in Q1.”

GAAP Summary Financial Comparisons
First Quarter Fiscal 2019

Q1’19

Q4’18

Q1’18

Q/Q Change

Y/Y Change

Invisalign Case Shipments1

349,195

333,800

272,235

+4.6%

+28.3%

Net Revenues

$549.0M

$534.0M

$436.9M

+2.8%

+25.6%

Clear Aligner2

$469.2M

$445.6M

$385.5M

+5.3%

+21.7%

Scanner & Services

$79.8M

$88.4M

$51.4M

(9.8)%

+55.1%

Net Profit3

$71.8M

$97.4M

$95.9M

(26.2)%

(25.1)%

Diluted EPS3

$0.89

$1.20

$1.17

$(0.31)

$(0.28)

Note: Changes and percentages are based on actual values and may affect 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 Q1’19 results include impairments and other charges related to closing Invisalign Stores in the U.S. as a result of the arbitrator’s decision regarding SmileDirectClub (SDC) announced March 5, 2019.

As of March 31, 2019, Align had $732.5 million in cash, cash equivalents and marketable securities compared to $744.5 million as of December 31, 2018. In February 2019, we purchased on the open market approximately 0.2 million shares of our common stock at an average price of $243.42 per share, including commission for an aggregate purchase price of approximately of $50.0 million. We have $450.0 million remaining available for repurchase under the May 2018 Repurchase Program.

Announcements and Highlights

The following list highlights Align’s key announcements over the past quarter:
Invisalign and iTero Intraoral Scanner

• Launched the new iTero Element 5D Imaging System for comprehensive, preventative and restorative oral care.  The iTero Element 5D Imaging System provides a new comprehensive approach to clinical applications, workflows and user experience that expands the suite of existing high-precision, full-color imaging and fast scan times of the iTero Element portfolio.
• Launched SmileView, an online tool designed to help prospective Invisalign patients visualize a new, straighter smile before they opt for Invisalign treatment.

Corporate

• Announced that Raj Pudipeddi joined Align Technology as senior vice president and CMO, responsible for Align’s global marketing organization including product portfolio, product management, commercialization, and global branding for the Invisalign and iTero product brands.
• Announced that on February 27, 2019, the United States International Trade Commission voted to institute a third investigation based on Align’s claims of scanner related 3Shape patent infringement.
• Announced the outcome of the arbitration decision with SDC Entities requiring Align to close its U.S. Invisalign Stores by April 3, 2019.
• Announced that on March 1, 2019, an Administrative Law Judge with the United States International Trade Commission determined that 3Shape infringes four claims from three Align patents, but declined to find a violation of Section 337.
• Entered into a distribution agreement with Benco Dental, the largest privately-owned dental distributor in the United States, for Align’s family of iTero Element intraoral scanners.
• Entered into a partnership with Digital Smile Design (DSD), a leader in holistic, digital and emotional dentistry solutions, to bring dedicated tools that incorporate DSD into Align’s end-to-end digital workflow, including iTero scanning technology.
• Opened Align University Training Institute in Shanghai, China, Align’s second training facility in China.
• Announced that Align Technology and Straumann Group settled global ClearCorrect patent disputes and signed a non-binding letter of intent for Straumann to distribute iTero scanners.

Q2 2019 Business Outlook
For the second quarter of 2019 (Q2’19), Align provides the following guidance:

• Net revenues in the range of $590 million to $600 million, up approximately 20% to 22% over the same period a year ago
• Invisalign case shipments in the range of 380 thousand to 385 thousand, up approximately 26% to 27% over the same period a year ago
• Operating margin in the range of 24.5% to 25.4%
• Diluted EPS in the range of $1.47 to $1.54

Align Web Cast and Conference Call
Align will host a conference call today, April 24, 2019 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first quarter 2019 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 13689188 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 May 8, 2019.

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 doctor 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 second quarter of 2019, 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 excess or constrained capacity at our manufacturing and treat operations facilities 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 as well as an increased manufacturing costs per case, 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, 2018, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2019. 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,
			2019				2018
Net revenues		$	548,971			$	436,924
Cost of net revenues			146,875				109,516
Gross profit			402,096				327,408
Operating expenses:
Selling, general and administrative			247,110				199,625
Research and development			37,503				29,591
Impairments and other charges			29,782				-
Total operating expenses			314,395				229,216
Income from operations			87,701				98,192
Interest income			2,633				2,176
Other income (expense), net			(5,746	)			177
Net income before provision for income taxes and equity in losses of investee			84,588				100,545
Provision for income taxes			8,796				2,902
Equity in losses of investee, net of tax			3,944				1,777
Net income		$	71,848			$	95,866
Net income per share:
Basic		$	0.90			$	1.20
Diluted		$	0.89			$	1.17
Shares used in computing net income per share:
Basic			79,860				80,036
Diluted			80,687				81,628

 

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
		March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents		$	588,001		$	636,899
Marketable securities, short-term			144,540			98,460
Equity method investments			41,969			-
Accounts receivable, net			479,281			439,009
Inventories			68,489			55,641
Prepaid expenses and other current assets			116,833			72,470
Total current assets			1,439,113			1,302,479
Marketable securities, long-term			-			9,112
Property, plant and equipment, net			575,267			521,329
Operating lease right-of-use assets			56,384			-
Equity method investments			-			45,913
Goodwill and intangible assets, net			80,329			81,949
Deferred tax assets			57,151			64,689
Other assets			26,186			26,987
Total assets		$	2,234,430		$	2,052,458
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	62,512		$	64,256
Accrued liabilities			252,754			234,679
Finance lease liabilities			56,100			-
Deferred revenues			433,518			393,138
Total current liabilities			804,884			692,073
Income tax payable			93,463			78,008
Operating lease liabilities			59,307			-
Other long-term liabilities			21,072			29,486
Total liabilities			978,726			799,567
Total stockholders' equity			1,255,704			1,252,891
Total liabilities and stockholders' equity		$	2,234,430		$	2,052,458

 

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Three Months Ended March 31,
			2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities		$	117,207			$	77,332
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash (used in) provided by investing activities			(74,418	)			109,269
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities			(92,762	)			(139,822	)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash			1,089				1,715
Net (decrease) increase in cash, cash equivalents, and restricted cash			(48,884	)			48,494
Cash, cash equivalents, and restricted cash at beginning of the period			637,566				450,125
Cash, cash equivalents, and restricted cash at end of the period		$	588,682			$	498,619

 

ALIGN TECHNOLOGY, INC.
INVISALIGN BUSINESS METRICS*
					Q1				Q2				Q3				Q4				Fiscal				Q1
						2018				2018				2018				2018				2018				2019
Invisalign Average Selling Price (ASP):
	Worldwide ASP				$	1,310			$	1,315			$	1,230			$	1,235			$	1,270			$	1,245
	International ASP				$	1,435			$	1,425			$	1,340			$	1,295			$	1,370			$	1,330
Invisalign Cases Shipped by Geography:
	Americas					166,665				181,425				190,615				189,410				728,115				202,935
	International					105,570				121,260				128,730				144,390				499,950				146,260
	Total Cases Shipped					272,235				302,685				319,345				333,800				1,228,065				349,195
	YoY % growth					30.8	%			30.5	%			35.3	%			30.9	%			31.9	%			28.3	%
	QoQ % growth					6.7	%			11.2	%			5.5	%			4.5	%							4.6	%
Number of Invisalign Doctors Cases Were Shipped To:
	Americas					27,105				28,280				28,890				29,215				42,000				30,200
	International					19,700				21,805				23,270				25,475				36,040				26,510
	Total Doctors Cases Shipped To					46,805				50,085				52,160				54,690				78,040				56,710
Invisalign Doctor Utilization Rates**:
	North America					6.3				6.6				6.9				6.7				18.2				7.0
	North American Orthodontists					15.3				16.4				17.4				16.5				56.7				18.3
	North American GP Dentists					3.4				3.6				3.5				3.6				9.1				3.6
	International					5.4				5.6				5.5				5.7				13.9				5.5
	Total Utilization Rates					5.8				6.0				6.1				6.1				15.7				6.2
Number of Invisalign Doctors Trained***:
	Americas					1,630				1,880				2,085				2,290				7,885				1,725
	International					2,645				3,300				2,845				2,980				11,770				2,410
	Total Doctors Trained Worldwide					4,275				5,180				4,930				5,270				19,655				4,135
	Total to Date Worldwide					136,575				141,755				146,685				151,955				151,955				156,090
Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals. Effective Q1'18, Americas region includes North America and LATAM. International region includes EMEA and APAC. We have recasted historical data to reflect the change.
* Invisalign business metrics exclude SmileDirectClub aligners.
** # of cases shipped / # of doctors to whom cases were shipped. LATAM utilization rate is not separately disclosed, but included in the total utilization rates.
***2018 adjusted to reflect Americas doctors trained for Invisalign iGo
ALIGN TECHNOLOGY, INC.
STOCK-BASED COMPENSATION
(in thousands)
					Q1				Q2				Q3				Q4				Fiscal				Q1
						2018				2018				2018				2018				2018				2019
Stock-based Compensation (SBC)
	SBC included in Gross Profit				$	881			$	900			$	966			$	948			$	3,695			$	1,112
	SBC included in Operating Expenses					14,949				15,990				18,232				17,897				67,068				19,932
	Total SBC Expense				$	15,830			$	16,890			$	19,198			$	18,845			$	70,763			$	21,044

 

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)
		Q2'19 Guidance
		GAAP
Net Revenues		$590.0 - $600.0
Gross Margin		71.5% - 72.5%
Operating Expenses		$277.0 - $282.0
Operating Margin		24.5% - 25.4%
Net Income per Diluted Share		$1.47 - $1.54
Business Metrics:		Q2'19
Case Shipments		380.0K - 385.0K
Capital Expenditure		$85M-$90M
Depreciation & Amortization		$20M-22M
Diluted Shares Outstanding		80.6	(2	)
Stock Based Compensation Expense		$23M
Effective Tax Rate		~24%	(1	)
(1) Includes excess tax benefits related to share-based compensation expense pursuant to ASU 2016-09
(2) Excludes any stock repurchases during the quarter

Align Technology
Madelyn Homick
(408) 470-1180
mhomick@aligntech.com

Zeno Group:
Sarah Johnson
(828) 551-4201
sarah.johnson@zenogroup.com

 

Source: Align Technology, Inc.