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Align Technology Announces First Quarter 2020 Financial Results
- Q1 total revenues of
$551.0 million , compared to$549.0 million in Q1’19 - Q1 GAAP earnings per diluted share (EPS) of
$19.21 , Q1 non-GAAP EPS of$0.73 - Q1 Invisalign volume of 359.4 thousand cases, compared to 349.2 thousand cases in Q1’19
- Q1 Invisalign cases for teenage patients of 104.0 thousand cases, 29% of total volume, compared to 97.4 thousand cases, up 1 point vs. Q1’19
- Q1 scanner and services revenues of
$69.4 million , compared to$79.8 million in Q1’19
Commenting on Align’s Q1’20 results,
Hogan added the following comments regarding Align’s first quarter results, “Through early March,
Summary Financial Comparisons
First Quarter Fiscal 2020
Q1’20 | Q4’19 | Q1’19 | Q/Q Change | Y/Y Change | ||||||
GAAP | ||||||||||
Invisalign Case Shipments 1 | 359,440 | 413,715 | 349,195 | (13.1)% | +2.9% | |||||
Net Revenues | (15.2)% | +0.4% | ||||||||
Clear Aligner 2 | (11.4)% | +2.6% | ||||||||
Scanner & Services | (34.7)% | (13.1)% | ||||||||
Net Profit | +1,152% | +2,013% | ||||||||
Diluted EPS | $19.21 | |||||||||
Non-GAAP | ||||||||||
Net Profit | (58.4)% | (42.4)% | ||||||||
Diluted EPS | $0.73 |
Note: Changes and percentages are based on actual values and may affect totals due to rounding
1 Invisalign shipments do not include SmileDirectClub (“SDC“) aligners.
2 Clear aligner revenues include Invisalign clear aligners and SDC aligners. The supply agreement with SDC terminated
As of
Align Announcement Highlights:
Corporate
- Announced the following contributions towards relief efforts in response to COVID-19:
- PledgedRMB 1 million donation to theChinese Red Cross Foundation to support its ongoing prevention and control efforts for the outbreak inChina .
-The Align Technology Foundation , Align’s donor-advised fund through Fidelity Charitable, pledged US$1 million donation to support relief efforts globally. In addition, Align will donate personal protective equipment (PPE) such as N95 masks, working with partners to source supplies for any additional PPE to help hospitals and healthcare providers treating patients with COVID-19. As the world’s largest manufacturer of custom 3D-printed materials, Align will also reach out to public and private sector organizations to offer its technology expertise and counsel on ways to reduce the scarcity of parts and materials for public health needs. Additionally, Align will explore options to convert its custom manufacturing and tooling equipment to help meet critical needs. - Announced the acquisition of privately held exocad, a global leader in the dental CAD/CAM software market that offers fully integrated workflows to dental labs and dental practices via a broad customer base of partners and resellers in over 150 countries. The acquisition of exocad broadens Align’s digital platform reach by adding technology that addresses restorative needs in an end-to-end digital platform workflow to facilitate ortho-restorative and comprehensive dentistry. The acquisition brings exocad’s expertise in restorative dentistry, implantology, guided surgery, and smile design to the Align technology portfolio.
- Announced the creation of a combined product innovation and marketing organization to further extend its lead in digital orthodontics and dentistry by enabling greater organizational speed, agility and impact across customer channels and consumers. The new Product, Innovation, and Marketing organization led by Raj Pudipeddi, Align senior vice president and chief marketing, product and business development officer, combines IT and R&D with Product Management and Global Marketing under one integrated organization responsible for the entire product lifecycle, from customer insights and ideation, to product innovation designing delightful customer and consumer experiences on the Align digital platform, to commercialization and go-to-market strategy.
Product
- Launched ClinCheck® “In-Face” visualization tool for the Invisalign Go system, Align’s innovative tooth movement system designed for general dentists. The ClinCheck In-Face Visualization tool enhances the digital treatment planning experience for doctors and their patients by incorporating a front-facing smile image of a patient’s face into their ClinCheck treatment plan.
- Received
U.S. Food and Drug Administration (FDA) 510(K) clearance for the award-winning iTero Element 5D Imaging System for commercial availability in theUnited States . The iTero Element 5D Imaging System expands the suite of existing high-precision, full-color imaging and fast scan times of the iTero Element intraoral scanner portfolio with a new clinical approach, optimized orthodontic and restorative dental workflows, and an improved doctor experience.
Business Outlook
Due to the uncertain scope and duration of the pandemic, and uncertain timing of the global recovery and economic normalization, we cannot at this time estimate the future impact on our operations and financial results. Accordingly, we are not providing guidance for the second quarter of fiscal year 2020 and are withdrawing our full year 2020 guidance.
Align Web Cast and Conference Call
Align will host a conference call today,
About Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in
We use 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 recurring core operating performance. 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 will be provided to and used by our institutional investors and the analyst community to help them analyze the performance of our business.
There are limitations to using non-GAAP financial measures, though, because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. The presentation of non-GAAP financial information is meant to be considered in addition to, not as a substitute for or in isolation from, the directly comparable financial measures prepared in accordance with GAAP. We urge investors to review the reconciliation of our GAAP financial measures to the comparable Non-GAAP financial measures included in this presentation, and not to rely on any single financial measure to evaluate our business. For more information on these non-GAAP financial measures, please see the table captioned "Unaudited GAAP to Non-GAAP Reconciliation."
About
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 Statements
This news release, including the tables below, contains forward-looking statements, including quotations from management, statements in the paragraphs under Align Announcement Highlights regarding COVID-19 relief efforts, the acquisition of exocad and its expected impact, and new product releases and clearances. 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:
- the impact of the COVID-19 pandemic on the health and safety of our employees, customers, patients, and our suppliers as well as the physical and economic impacts of the various recommendations, orders and protocols issued by local and national governmental agencies in light of the evolving situation;
- the ability to (i) realize expected benefits in connection with the acquisition of exocad within the expected timeframes or at all, (ii) timely, cost-efficiently and effectively integrate exocad’s business without adversely impacting operations of either Align or exocad, and (iii) avoid or mitigate uncertainties or liabilities in connection with the acquisition or its impacts on the value of our stock;
- difficulties predicting customer and consumer purchasing behavior and changes in consumer spending habits as a result of, among other things, prevailing economic conditions, levels of employment, salaries and wages and consumer confidence;
- expectations regarding the continued growth or declines of our domestic and/or international markets;
- increasing competition from existing and new competitors;
- rapidly evolving and groundbreaking advances that are fundamentally changing the dental industry and the way new and existing participants market and provide products and services to consumers;
- the ability to protect our intellectual property rights;
- continued compliance with regulatory requirements;
- our expectations regarding sales of our intra-oral scanners domestically and internationally and our belief that technology features and functionality of the iTero scanners and exocad technology will increase adoption of Invisalign and increase sales of our intra-oral scanners;
- 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 or enhancements to existing products do not proceed in accordance with the anticipated timeline or may themselves contain bugs or errors requiring remediation and that the market for the sale of these new or enhanced products may not develop as expected;
- a tougher consumer demand environment in
China generally, especially for manufacturers and service providers whose headquarters or primarily operations are not based inChina ; - the risks relating to our ability to sustain or increase profitability or revenue growth in future periods (or minimize declines) while controlling expenses;
- the impact of excess or constrained capacity at our manufacturing and treat operations facilities and pressure on our internal systems and personnel;
- the compromise of customer and/or patient data for any reason;
- the timing of case submissions from our doctors within a quarter as well as an increased manufacturing costs per case;
- foreign operational, political and other risks relating to our international manufacturing operations; and
- the loss of key personnel or work stoppages.
The foregoing and other risks are detailed from time to time in our periodic reports filed with the
(408) 470-1180 mhomick@aligntech.com |
(828) 551-4201 sarah.johnson@zenogroup.com |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(in thousands, except per share data) | |||||||
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Net revenues | $ | 550,963 | $ | 548,971 | |||
Cost of net revenues | 156,607 | 146,875 | |||||
Gross profit | 394,356 | 402,096 | |||||
Operating expenses: | |||||||
Selling, general and administrative | 282,906 | 247,110 | |||||
Research and development | 41,532 | 37,503 | |||||
Impairments and other charges | - | 29,782 | |||||
Total operating expenses | 324,438 | 314,395 | |||||
Income from operations | 69,918 | 87,701 | |||||
Interest income and other income (expense), net: | |||||||
Interest income | 1,986 | 2,633 | |||||
Other income (expense), net | (18,549 | ) | (5,746 | ) | |||
Total interest income and other income (expense), net | (16,563 | ) | (3,113 | ) | |||
Net income before provision for (benefit from) income taxes and equity in losses of investee | 53,355 | 84,588 | |||||
Provision for (benefit from) income taxes | (1,464,776 | ) | 8,796 | ||||
Equity in losses of investee, net of tax | - | 3,944 | |||||
Net income | $ | 1,518,131 | $ | 71,848 | |||
Net income per share: | |||||||
Basic | $ | 19.32 | $ | 0.90 | |||
Diluted | $ | 19.21 | $ | 0.89 | |||
Shares used in computing net income per share: | |||||||
Basic | 78,592 | 79,860 | |||||
Diluted | 79,028 | 80,687 | |||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
2020 |
2019 |
||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 790,696 | $ | 550,425 | |||
Marketable securities, short-term | - | 318,202 | |||||
Accounts receivable, net | 533,004 | 550,291 | |||||
Inventories | 120,977 | 112,051 | |||||
Prepaid expenses and other current assets | 131,848 | 102,450 | |||||
Total current assets | 1,576,525 | 1,633,419 | |||||
Property, plant and equipment, net | 663,491 | 631,730 | |||||
Operating lease right-of-use assets, net | 70,366 | 56,244 | |||||
73,751 | 75,692 | ||||||
Deferred tax assets | 1,551,141 | 64,007 | |||||
Other assets | 29,566 | 39,610 | |||||
Total assets | $ | 3,964,840 | $ | 2,500,702 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 72,690 | $ | 87,250 | |||
Accrued liabilities | 259,459 | 319,958 | |||||
Deferred revenues | 578,537 | 563,762 | |||||
Total current liabilities | 910,686 | 970,970 | |||||
Income tax payable | 109,128 | 102,794 | |||||
Operating lease liabilities | 53,745 | 43,463 | |||||
Other long-term liabilities | 38,292 | 37,306 | |||||
Total liabilities | 1,111,851 | 1,154,533 | |||||
Total stockholders' equity | 2,852,989 | 1,346,169 | |||||
Total liabilities and stockholders' equity | $ | 3,964,840 | $ | 2,500,702 | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(in thousands) | |||||||
Three Months Ended |
|||||||
2020 | 2019 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net cash provided by operating activities | $ | 9,784 | $ | 117,207 | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Net cash provided by (used in) investing activities | 276,211 | (74,418 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Net cash used in financing activities | (34,733 | ) | (92,762 | ) | |||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | (11,007 | ) | 1,089 | ||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 240,255 | (48,884 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of the period | 551,134 | 637,566 | |||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 791,389 | $ | 588,682 | |||
INVISALIGN BUSINESS METRICS* | |||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Fiscal | Q1 | ||||||||||||||||||
2019 | 2019 | 2019 | 2019 | 2019 | 2020 | ||||||||||||||||||
Invisalign Average Selling Price (ASP): | |||||||||||||||||||||||
Worldwide ASP | $ | 1,245 | $ | 1,230 | $ | 1,260 | $ | 1,240 | $ | 1,245 | $ | 1,255 | |||||||||||
International ASP | $ | 1,330 | $ | 1,305 | $ | 1,330 | $ | 1,300 | $ | 1,315 | $ | 1,340 | |||||||||||
Invisalign Cases Shipped by Geography: | |||||||||||||||||||||||
202,935 | 211,360 | 215,355 | 225,925 | 855,575 | 213,505 | ||||||||||||||||||
International | 146,260 | 165,785 | 170,005 | 187,790 | 669,840 | 145,935 | |||||||||||||||||
Total Cases Shipped | 349,195 | 377,145 | 385,360 | 413,715 | 1,525,415 | 359,440 | |||||||||||||||||
YoY % growth | 28.3 | % | 24.6 | % | 20.7 | % | 23.9 | % | 24.2 | % | 2.9 | % | |||||||||||
QoQ % growth | 4.6 | % | 8.0 | % | 2.2 | % | 7.4 | % | -13.1 | % | |||||||||||||
Number of Invisalign Doctors Cases Were Shipped To: | |||||||||||||||||||||||
30,200 | 31,445 | 31,975 | 33,130 | 47,130 | 32,315 | ||||||||||||||||||
International | 26,510 | 28,970 | 30,980 | 33,720 | 48,650 | 28,535 | |||||||||||||||||
Total Doctors Cases Shipped To | 56,710 | 60,415 | 62,955 | 66,850 | 95,780 | 60,850 | |||||||||||||||||
Invisalign Doctor Utilization Rates**: | |||||||||||||||||||||||
7.0 | 7.0 | 7.0 | 7.2 | 19.4 | 6.9 | ||||||||||||||||||
North American Orthodontists | 18.3 | 18.9 | 19.1 | 19.3 | 65.0 | 18.9 | |||||||||||||||||
North American GP Dentists | 3.6 | 3.6 | 3.5 | 3.8 | 9.5 | 3.6 | |||||||||||||||||
International | 5.5 | 5.7 | 5.5 | 5.6 | 13.8 | 5.1 | |||||||||||||||||
Total Utilization Rates | 6.2 | 6.2 | 6.1 | 6.2 | 15.9 | 5.9 | |||||||||||||||||
Number of Invisalign Doctors Trained: | |||||||||||||||||||||||
1,840 | 3,070 | 2,760 | 2,095 | 9,765 | 2,035 | ||||||||||||||||||
International | 2,410 | 3,520 | 3,135 | 3,445 | 12,510 | 2,600 | |||||||||||||||||
Total Doctors Trained Worldwide | 4,250 | 6,590 | 5,895 | 5,540 | 22,275 | 4,635 | |||||||||||||||||
Total to Date Worldwide | 156,205 | 162,795 | 168,690 | 174,230 | 174,230 | 178,865 | |||||||||||||||||
* 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. | |||||||||||||||||||||||
STOCK-BASED COMPENSATION | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Fiscal | Q1 | ||||||||||||||||||
2019 | 2019 | 2019 | 2019 | 2019 | 2020 | ||||||||||||||||||
Stock-based Compensation (SBC) | |||||||||||||||||||||||
SBC included in Gross Profit | $ | 1,112 | $ | 1,278 | $ | 1,354 | $ | 1,410 | $ | 5,154 | $ | 1,347 | |||||||||||
SBC included in Operating Expenses | 19,932 | 21,189 | 22,822 | 19,087 | 83,030 | 21,580 | |||||||||||||||||
Total SBC | $ | 21,044 | $ | 22,467 | $ | 24,176 | $ | 20,497 | $ | 88,184 | $ | 22,927 | |||||||||||
UNAUDITED GAAP TO NON-GAAP RECONCILIATION | |||||||
(in thousands except per share data) | |||||||
Three Months Ended |
|||||||
2020 | 2019 | ||||||
GAAP gross profit | $ | 394,356 | $ | 402,096 | |||
Stock-based compensation | 1,347 | 1,112 | |||||
Non-GAAP gross profit | $ | 395,703 | $ | 403,208 | |||
GAAP gross margin | 71.6 | % | 73.2 | % | |||
Non-GAAP gross margin | 71.8 | % | 73.4 | % | |||
GAAP income from operations | $ | 69,918 | $ | 87,701 | |||
Stock-based compensation | 22,927 | 21,044 | |||||
Acquisition related costs (1) | 1,339 | - | |||||
Impairments and other charges (2) | - | 29,782 | |||||
Non-GAAP income from operations | $ | 94,184 | $ | 138,527 | |||
GAAP operating margin | 12.7 | % | 16.0 | % | |||
Non-GAAP operating margin | 17.1 | % | 25.2 | % | |||
GAAP interest income and other income (expense), net | $ | (16,563 | ) | $ | (3,113 | ) | |
Acquisition related costs (1) | 9,175 | - | |||||
Non-GAAP interest income and other income (expense), net | $ | (7,388 | ) | $ | (3,113 | ) | |
GAAP net income before provision for (benefit from) income taxes and equity in losses of investee | $ | 53,355 | $ | 84,588 | |||
Stock-based compensation | 22,927 | 21,044 | |||||
Acquisition related costs (1) | 10,514 | - | |||||
Impairments and other charges (2) | - | 29,782 | |||||
Non-GAAP net income before provision for (benefit from) income taxes and equity in losses of investee | $ | 86,796 | $ | 135,414 | |||
GAAP provision for (benefit from) income taxes | $ | (1,464,776 | ) | $ | 8,796 | ||
Tax impact on non-GAAP adjustments | 136 | 22,134 | |||||
Tax related non-GAAP items | 1,493,494 | - | |||||
Non-GAAP provision for (benefit from) income taxes | $ | 28,854 | $ | 30,930 | |||
GAAP effective tax rate | (2,745.3 | )% | 10.4 | % | |||
Non-GAAP effective tax rate | 33.2 | % | 22.8 | % | |||
GAAP net income | $ | 1,518,131 | $ | 71,848 | |||
Stock-based compensation | 22,927 | 21,044 | |||||
Acquisition related costs (1) | 10,514 | - | |||||
Impairments and other charges (2) | - | 29,782 | |||||
Tax impact on non-GAAP adjustments | (136 | ) | (22,134 | ) | |||
Tax related non-GAAP items (3) | (1,493,494 | ) | - | ||||
Non-GAAP net income | $ | 57,942 | $ | 100,540 | |||
GAAP diluted net income per share | $ | 19.21 | $ | 0.89 | |||
Non-GAAP diluted net income per share | $ | 0.73 | $ | 1.25 | |||
Shares used in computing diluted net income per share | 79,028 | 80,687 | |||||
Notes: | |||||||
(1) Includes certain incremental expenses related to the business acquisition of exocad to close in Q2’20 including third party advisory, legal, tax, accounting, banking, valuation, and other professional or consulting fees and foreign exchange losses related to a forward contract for the purchase commitment. | |||||||
(2) Q1'19 includes |
|||||||
(3) Related to a one-time net tax benefit recorded for the deferred tax asset and certain costs associated with the intra-entity transfer of certain intellectual property rights and assets to our Swiss subsidiary. | |||||||
Refer to "About Non-GAAP Financial Measures" section of press release. | |||||||
Source: Align Technology, Inc.