Achieves 7 Millionth Invisalign Patient Milestone

• Q2 revenues up 22.5% year-over-year to a record $600.7 million
• Q2 Invisalign volume up 24.6% year-over-year to 377.1 thousand cases
• Q2 scanner and services revenues up 82.4% year-over-year to $104.0 million
• Q2 Invisalign cases for teenage patients up 32.2% year-over-year to 103.7 thousand
• Q2 operating income of $176.5 million includes $51.0 million benefit from Straumann settlement
• Q2 net profit of $147.1 million and $1.83 diluted EPS

SAN JOSE, Calif., July 24, 2019 (GLOBE NEWSWIRE) -- Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the second quarter ended June 30, 2019. Q2’19 Invisalign volume was 377.1 thousand cases, up 24.6% year-over-year. For the Americas and International regions, Q2’19 Invisalign volume was up 16.5% and 36.7% year-over-year, respectively. Q2’19 Invisalign volume for teenage patients was 103.7 thousand cases, up 32.2% year-over-year. Q2’19 total revenues were $600.7 million, up 22.5% year-over-year, and Q2’19 scanner and services revenues were $104.0 million, up 82.4% year-over-year.

Q2’19 operating income of $176.5 million was up 43.8% year-over-year resulting in an operating margin of 29.4%. Q2’19 net profit was $147.1 million, or $1.83 per diluted EPS. Q2’19 operating expense included a $51.0 million benefit from the ClearCorrect settlement with Straumann, which increased Q2 operating margin by approximately 8 points and benefited EPS by $0.57, respectively.

Commenting on Align’s second quarter results and outlook for the third quarter, Align Technology President and CEO Joe Hogan said, “Our second quarter revenues were at the high-end of our guidance, reflecting Invisalign volume growth primarily from international doctors, as well as very strong sales from iTero scanner and services. Q2 Invisalign volumes were up 24.6% year-over-year reflecting continued adoption from teenage and younger patients, as well as increased utilization among orthodontists and expansion of our customer base which totaled 60,000 active doctors worldwide. In Q2, total Invisalign case shipments were lower than expected, primarily due to a softness in China related to a tougher consumer environment and slower growth in young adult case in North America. Given the uncertainty in China, our outlook for the third quarter reflects a more cautious view for growth in the Asia Pacific region.”

GAAP Summary Financial Comparisons
Second Quarter Fiscal 2019

	Q2’19		Q1’19		Q2’18		Q/Q Change			Y/Y Change
Invisalign Case Shipments1	377,145		349,195		302,685		+8.0%			+24.6%
Net Revenues	$600.7M		$549.0M		$490.3M		+9.4%			+22.5%
Clear Aligner2	$496.7M		$469.2M		$433.3M		+5.9%			+14.6%
Scanner & Services	$104.0M		$79.8M		$57.0M		+30.4%			+82.4%
Net Profit3, 4	$147.1M		$71.8M		$106.1M		+104.8%			+38.7%
Diluted EPS3, 4	$1.83		$0.89		$1.30		+$0.94			+$0.53

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 of $29.8 million related to closing Invisalign Stores as a result of the arbitrator’s decision regarding SmileDirectClub announced March 5, 2019.
⁴Q2’19 results include a $51.0 million gain from Straumann litigation settlement.

As of June 30, 2019, Align had $765.9 million in cash, cash equivalents and marketable securities compared to $732.5 million as of March 31, 2019. In May 2019, we purchased on the open market approximately 0.2 million shares of our common stock at an average price of $307.48 per share, including commission, for an aggregate purchase price of $49.5 million. We have $400.5 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:
Corporate

• During the quarter, Align shipped its 7 millionth Invisalign patient who is a young child in the U.S. being treated with Invisalign First.
• Announced that Align and Straumann Group terminated discussions concerning a possible development and distribution agreement that was disclosed as part of the patent settlement agreement announced by the two companies in March of this year.  
• Announced that Simon Beard was appointed as senior vice president of the Americas region and Markus Sebastian was promoted to senior vice president of the EMEA region. 
• Align awarded ten research grants totaling $250,000 as part of its ongoing annual research awards program to universities worldwide. 
• Announced that Roger E. George, Align senior vice president, chief legal and regulatory officer has retired and that Julie Coletti was appointed to senior vice president and Chief Legal and Regulatory Officer.  
• Announced that on April 26, 2019, an Administrative Law Judge with the United States International Trade Commission issued an Initial Determination regarding her investigation of 3Shape’s infringement on Align’s patents.
• Align completed the purchase of the Raleigh office building located in Morrisville, NC. This office serves as the Americas headquarters.

Invisalign and iTero Intraoral Scanner

• Launched the new iTero Element Foundation intraoral scanner with restorative software. The iTero Element Foundation extends Align’s portfolio of intraoral scanners with powerful 3D visualization to better meet the needs of doctors, labs and patients.

Q3 2019 Business Outlook

For the third quarter of 2019 (Q3’19), Align provides the following guidance:

• Net revenues in the range of $585 million to $600 million, up approximately 16% to 19% over the same period a year ago
• Invisalign case shipments in the range of 370 thousand to 380 thousand, up approximately 16% to 19% over the same period a year ago
• Operating margin in the range of 19.8% to 20.5%
• Diluted EPS in the range of $1.09 to $1.16
• In addition, we expect to repurchase at least $100 million of our stock in the open market in Q3
• As we continue our operational expansion efforts, we expect CapEx for Q3 to be approximately $50 million to $55 million, and we expect depreciation and amortization to be $24 million to 26 million

Align Web Cast and Conference Call
Align will host a conference call today, July 24, 2019 at 4:30 p.m. ET, 1:30 p.m. PT, to review its second 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 13691835 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 7, 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 third quarter of 2019, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, capital expenditures, depreciation and amortization, diluted earnings per share, tax rate, case shipments, and our expectations regarding stock repurchases during the quarter. 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, including Align’s predictions related to a tougher consumer demand environment in China, especially for U.S. based products and services, Align’s expectations regarding the continued growth of our international markets, Align's ability to protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing and new competitors, Align’s expectations regarding the sales growth of its intra-oral scanner sales in international markets, its belief that technology features and functionality of the iTero scanners will increase adoption of Invisalign and increase sales of Align’s intra-oral scanners, Align’s expectations regarding the financial and strategic benefits of establishing regional order acquisition, treatment planning and manufacturing facilities, 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, Align’s expectation to incur additional costs related to the planned corporate structure reorganization, the risks relating to Align's ability to sustain or increase profitability or revenue growth in future periods while controlling expenses, the expected impact additional sales representatives will have on our sales in 2019, 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, system integration and implementation issues, 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 and its latest Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which was filed with the SEC on May 2, 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 June 30,								Six Month Ended June 30,
	2019				2018				2019				2018
Net revenues	$	600,697			$	490,259			$	1,149,668			$	927,183
Cost of net revenues		168,408				124,677				315,283				234,193
Gross profit		432,289				365,582				834,385				692,990
Operating expenses:
Selling, general and administrative		267,948				212,087				515,058				411,712
Research and development		38,851				30,804				76,354				60,395
Impairments and other charges		-				-				29,782				-
Litigation settlement gain		(51,000	)			-				(51,000	)			-
Total operating expenses		255,799				242,891				570,194				472,107
Income from operations		176,490				122,691				264,191				220,883
Interest income		3,465				1,917				6,098				4,093
Other income (expense), net		13,892				(7,099	)			8,146				(6,922	)
Net income before provision for income taxes and equity in losses of investee		193,847				117,509				278,435				218,054
Provision for income taxes		43,121				7,703				51,917				10,605
Equity in losses of investee, net of tax		3,584				3,701				7,528				5,478
Net income	$	147,142			$	106,105			$	218,990			$	201,971
Net income per share:
Basic	$	1.84			$	1.32			$	2.74			$	2.52
Diluted	$	1.83			$	1.30			$	2.71			$	2.48
Shares used in computing net income per share:
Basic		79,943				80,216				79,901				80,127
Diluted		80,590				81,471				80,665				81,575

 

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	423,500		$	636,899
Marketable securities, short-term		297,422			98,460
Accounts receivable, net		520,094			439,009
Inventories		81,124			55,641
Prepaid expenses and other current assets		135,234			72,470
Total current assets		1,457,374			1,302,479
Marketable securities, long-term		44,969			9,112
Property, plant and equipment, net		599,611			521,329
Operating lease right-of-use assets		57,269			-
Equity method investments		-			45,913
Goodwill and intangible assets, net		78,852			81,949
Deferred tax assets		59,050			64,689
Other assets		48,892			26,987
Total assets	$	2,346,017		$	2,052,458
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	61,950		$	64,256
Accrued liabilities		245,634			234,679
Deferred revenues		481,462			393,138
Total current liabilities		789,046			692,073
Income tax payable		98,182			78,008
Operating lease liabilities		59,140			-
Other long-term liabilities		25,967			29,486
Total liabilities		972,335			799,567
Total stockholders' equity		1,373,682			1,252,891
Total liabilities and stockholders' equity	$	2,346,017		$	2,052,458

 

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	Six Months Ended June 30,
	2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities	$	294,561			$	217,121
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash (used in) provided by investing activities		(321,020	)			54,003
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities		(188,381	)			(170,745	)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash		1,467				(1,923	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(213,373	)			98,456
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	$	424,193			$	548,581

 

ALIGN TECHNOLOGY, INC.
INVISALIGN BUSINESS METRICS*
	Q1  2018			Q2  2018			Q3 2018			Q4 2018			Fiscal 2018			Q1 2019			Q2 2019
Invisalign Average Selling Price (ASP):
Worldwide ASP	$	1,310		$	1,315		$	1,230		$	1,235		$	1,270		$	1,245		$	1,230
International ASP	$	1,435		$	1,425		$	1,340		$	1,295		$	1,370		$	1,330		$	1,305
Invisalign Cases Shipped by Geography:
Americas		166,665			181,425			190,615			189,410			728,115			202,935			211,360
International		105,570			121,260			128,730			144,390			499,950			146,260			165,785
Total Cases Shipped		272,235			302,685			319,345			333,800			1,228,065			349,195			377,145
YoY % growth		30.8%			30.5%			35.3%			30.9%			31.9%			28.3%			24.6%
QoQ % growth		6.7%			11.2%			5.5%			4.5%						4.6%			8.0%
Number of Invisalign Doctors Cases Were Shipped To:
Americas		27,105			28,280			28,890			29,215			42,000			30,200			31,445
International		19,700			21,805			23,270			25,475			36,040			26,510			28,970
Total Doctors Cases Shipped To		46,805			50,085			52,160			54,690			78,040			56,710			60,415
Invisalign Doctor Utilization Rates**:
North America		6.3			6.6			6.9			6.7			18.2			7.0			7.0
North American Orthodontists		15.3			16.4			17.4			16.5			56.7			18.3			18.9
North American GP Dentists		3.4			3.6			3.5			3.6			9.1			3.6			3.6
International		5.4			5.6			5.5			5.7			13.9			5.5			5.7
Total Utilization Rates		5.8			6.0			6.1			6.1			15.7			6.2			6.2
Number of Invisalign Doctors Trained***:
Americas		1,630			1,880			2,085			2,290			7,885			1,725			2,890
International		2,645			3,300			2,845			2,980			11,770			2,410			3,520
Total Doctors Trained Worldwide		4,275			5,180			4,930			5,270			19,655			4,135			6,410
Total to Date Worldwide		136,575			141,755			146,685			151,955			151,955			156,090			162,500
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  2018			Q2 2018			Q3 2018			Q4 2018			Fiscal 2018			Q1 2019			Q2 2019
Stock-based Compensation (SBC)
SBC included in Gross Profit	$	881		$	900		$	966		$	948		$	3,695		$	1,112		$	1,278
SBC included in Operating Expenses		14,949			15,990			18,232			17,897			67,068			19,932			21,189
Total SBC Expense	$	15,830		$	16,890		$	19,198		$	18,845		$	70,763		$	21,044		$	22,467

 

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)
		Q3'19 Guidance
		GAAP
Net Revenues		$585M - $600M
Gross Margin		71.9% - 72.5%
Operating Expenses		$305M - $312M
Operating Margin		19.8% - 20.5%
Net Income per Diluted Share		$1.09 - $1.16
Business Metrics:		Q3'19
Case Shipments		370K - 380K
Capital Expenditure		$50M-$55M
Depreciation & Amortization		$24M-$26M
Diluted Shares Outstanding		80.6M	(1)
Stock Based Compensation Expense		$25.0M
Effective Tax Rate		~24%	(2)
(1) Excludes any stock repurchases during the quarter
(2) Includes excess tax benefits related to share-based compensation expense pursuant to ASU 2016-09

 

Align Technology:			Zeno Group:
Madelyn Homick			Sarah Johnson
(408) 470-1180			(828) 551-4201
mhomick@aligntech.com			sarah.johnson@zenogroup.com

 

Source: Align Technology, Inc.