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Align Technology Announces Second Quarter Fiscal 2010 Results
SAN JOSE, Calif., Jul 22, 2010 (GlobeNewswire via COMTEX News Network) -- Align Technology, Inc. (Nasdaq:ALGN) today reported financial results for the second quarter of fiscal 2010, ended June 30, 2010.
Total net revenues for the second quarter of fiscal 2010 (Q2 10) were $108.2 million compared to $90.1 million reported in the first quarter of 2010 (Q1 10) and compared to $76.3 million reported in the second quarter of 2009 (Q2 09). Q2 10 net revenues include the release of $14.3 million of previously deferred revenue for Invisalign Teen replacement aligners. Invisalign case shipments for Q2 10 were 67.5 thousand, compared to 63.6 thousand in Q1 10 and compared to 53.0 thousand in Q2 09.
Net profit for Q2 10 was $32.6 million, or $0.42 per diluted share and includes a pre-tax benefit of $14.3 million to net revenues from the release of previously deferred revenue related to Invisalign Teen replacement aligners, and a pre-tax credit of $8.7 million to operating expenses for an insurance settlement related to the OrthoClear litigation. This is compared to net profit of $14.9 million, or $0.19 per diluted share in Q1 10 and net profit of $4.5 million, or $0.07 per diluted share in Q2 09. Stock-based compensation expense included in Q2 10 was $4.3 million compared to $3.5 million in Q1 10 and compared to $4.3 million in Q2 09.
"Q2 was an outstanding quarter for Align," said Thomas M. Prescott, Align president and CEO. "Our Invisalign business continues to outperform our expectations, resulting in our third consecutive quarter for record revenues and case shipments -- even without the positive effects from the release of $14.3 million of previously deferred revenue for Invisalign Teen, and a credit of $8.7 million from an insurance settlement related to the OrthoClear litigation."
In Q2 10, Align released $14.3 million of previously deferred revenue for Invisalign Teen replacement aligners. Invisalign Teen, which was launched July 29, 2008, includes up to six replacement aligners, which may be ordered at any time throughout treatment. Revenue for these replacement aligners was deferred based on 100 percent of the fair value of the aligners, or approximately $350 per case, until the case completed, or the replacement aligners were used. Over the past two years, the Company has evaluated the usage experience of the Invisalign Teen replacement aligners and now believes that it has sufficient historical experience to support a deferral for estimated usage of approximately $20 per case.
To supplement our consolidated financial statements, we use the following non-GAAP financial measures: non-GAAP revenue, non-GAAP gross profit, non-GAAP operating expense, non-GAAP operating margin, non-GAAP net profit and non-GAAP earnings per share. Detailed reconciliations between GAAP and non-GAAP information are contained in the tables following the financial tables of this release.
Non-GAAP net revenues for Q2 10 were $93.9 million. Non-GAAP net profit for Q2 10 was $16.5 million, or $0.21 per diluted share. This is compared to non-GAAP net profit of $15.5 million, or $0.20 per diluted share in Q1 10 and non-GAAP net profit of $4.8 million, or $0.07 per diluted share in Q2 09.
Q2 10 Operating Results
Key GAAP Operating Results Q2 10 Q1 10 Q2 09
------ ------ ------
Gross Margin 80.4% 77.4% 76.0%
Operating Expense $41.7M $49.0M $51.7M
Operating Margin 41.9% 23.0% 8.2%
Net Profit $32.6M $14.9M $4.5M
Earnings Per Diluted Share
(EPS) $0.42 $0.19 $0.07
Key Non-GAAP Operating Results Q2 10 Q1 10 Q2 09
------ ------ ------
Non-GAAP Gross Margin 77.4% 78.3% 76.0%
Non-GAAP Operating Expense $50.3M $49.0M $51.3M
Non-GAAP Operating Margin 23.8% 23.9% 8.7%
Non-GAAP Net Profit $16.5M $15.5M $4.8M
Non-GAAP Earnings Per Diluted
Share (EPS) $0.21 $0.20 $0.07
Liquidity and Capital Resources
As of June 30, 2010, Align had $244.8 million in cash, cash equivalents, and short-term marketable securities compared to $186.5 million as of December 31, 2009.
Key Business Metrics
The following table highlights business metrics for Align's second quarter of 2010. Additional historical information is available on the Company's website at http://investor.aligntech.com.
Q2
10/Q1
10
Non-GAAP Revenue by Channel % of Total %
($M): Q2 10 Revenue Change
------ ---------- ------
North American Orthodontists $29.1 31.1% 3.4%
North American GP Dentists $37.4 39.8% 0.5%
International $22.0 23.4% 9.9%
Non-case Revenue* $5.4 5.7% 15.1%
------ ---------- ------
Total Non-GAAP Revenue** $93.9 100% 4.2%
====== ========== ======
Q2
10/Q1
10
Non-GAAP Revenue by Product % of Total %
($M): Q2 10 Revenue Change
------ ---------- ------
Invisalign Full $67.5 71.9% 2.8%
Invisalign Express/Lite $8.8 9.3% 1.4%
Invisalign Teen $8.4 9.0% 2.9%
Invisalign Assist $3.8 4.1% 30.3%
Non-case Revenue* $5.4 5.7% 15.1%
------ ---------- ------
Total Non-GAAP Revenue** $93.9 100% 4.2%
====== ========== ======
*includes training, ancillary products, and retainers
**excludes the release of $14.3M of previously deferred
revenue for Invisalign Teen replacement aligners
Q2
10/Q1
10
% of Total %
Cases Shipped by Channel: Q2 10 Cases Change
------ ---------- ------
North American Orthodontists 23,085 34.2% 4.2%
North American GP Dentists 28,460 42.2% (0.1%)
International 15,940 23.6% 22.9%
------ ---------- ------
Total Cases Shipped 67,485 100% 6.1%
====== ========== ======
Q2
10/Q1
10
% of Total %
Cases Shipped by Product: Q2 10 Cases Change
------ ---------- ------
Invisalign Full 47,075 69.8% 7.7%
Invisalign Express/Lite 9,580 14.2% 3.8%
Invisalign Teen 6,810 10.0% (7.6%)
Invisalign Assist 4,020 6.0% 21.9%
------ ---------- ------
Total Cases Shipped 67,485 100% 6.1%
====== ========== ======
Average Selling Price (ASP), as
billed*: Q2 10
------
Total Worldwide Blended ASP $1,355
International ASP $1,415
* based on non-GAAP revenues
Number of Doctors Cases were
Shipped to: Q2 10
------
North American Orthodontists 3,990
North American GP Dentists 10,235
International 4,165
------
Total Doctors Cases were
Shipped to Worldwide 18,390
======
Doctor Utilization Rates*: Q2 10 Q1 10 Q2 09
North American Orthodontists 5.8 5.5 4.7
North American GP Dentists 2.8 2.6 2.2
International 3.8 3.7 3.6
------ ---------- ------
Total Utilization Rate 3.7 3.5 3.0
====== ========== ======
* Utilization = # of cases shipped/# of doctors to whom
cases were shipped
Number of Doctors Trained
Worldwide: Q2 10 Cumulative
------ ----------
North American Orthodontists 85 9,090
North American GP Dentists 480 36,005
International 395 16,675
------ ----------
Total Doctors Trained Worldwide 960 61,770
====== ==========
Total Invisalign Patients
(cases shipped): Q2 10 Cumulative
------ ----------
Number of Patients Treated or
in Treatment (cases) 67,485 1,295,790
====== ==========
Q3 Fiscal 2010 Business Outlook
For the third quarter of fiscal 2010 (Q3 10), Align Technology expects net revenues to be in a range of $92 million to $95 million. GAAP earnings per diluted share for Q3 10 is expected to be in a range of $0.16 to $0.18. Stock-based compensation expense for Q3 10 is expected to be approximately $4.6 million. A more comprehensive business outlook is available following the financial tables of this release.
Align Web Cast and Conference Call
Align Technology will host a conference call today, July 22, 2010 at 4:30 p.m. ET, 1:30 p.m. PT, to review its second quarter fiscal 2010 results, discuss future operating trends and 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 Technology's Investor Relations web site at http://investor.aligntech.com. To access the conference call, please dial 201-689-8341 approximately fifteen minutes prior to the start of the call. If you are unable to listen to the call, an archived 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 account number 292 followed by # and conference number 353357 followed by #. The replay must be accessed from international locations by dialing 201-612-7415 and using the same account and conference numbers referenced above. The telephonic replay will be available through 5:30 p.m. ET on August 4, 2010.
About Align Technology, Inc.
Align Technology designs, manufactures and markets Invisalign, a proprietary method for treating malocclusion, or the misalignment of teeth. Invisalign corrects malocclusion using a series of clear, nearly invisible, removable appliances that gently move teeth to a desired final position. Because it does not rely on the use of metal or ceramic brackets and wires, Invisalign significantly reduces the aesthetic and other limitations associated with braces. Invisalign is appropriate for treating adults and teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998. Today, the Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express, and Vivera Retainers.
To learn more about Invisalign or to find an Invisalign trained doctor in your area, please visit www.invisalign.com or call 1-800-INVISIBLE.
About non-GAAP Financial Measures
To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: non-GAAP revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP profit from operations, non-GAAP net profit, and non-GAAP earnings per share, which exclude, as applicable, royalties associated with the settlement with Ormco, the effect of charges associated with restructurings, the impact of an insurance settlement and the release of previously deferred revenue of Invisalign Teen, and any related tax effects. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Business Outlook Summary" included at the end of this release.
We use these 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 "core operating performance". Management believes that "core operating performance" represents Align's performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from "core operating performance" certain expenditures, revenues and other items that may not be indicative of our operating performance including discrete cash and non-cash charges that are infrequent or one-time in nature. 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 are provided to and used by our institutional investors and the analyst community to facilitate comparisons with prior and subsequent reporting periods.
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 2010, including anticipated revenue, gross margin, operating expense, operating income, earnings per share, case shipments and cash. 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 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, the risks relating to Align's ability to sustain or increase profitability or revenue growth in future periods while controlling expenses, continued customer demand for Invisalign 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 Invisalign 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, competition from manufacturers of traditional braces 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 fiscal year ended December 31, 2009, which was filed with the Securities and Exchange Commission on February 26, 2010. 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, June 30, June 30,
2010 2009 2010 2009
---------- --------- ---------- ----------
Net revenues $ 108,196 $ 76,316 $ 198,286 $ 146,448
Cost of revenues 21,178 18,338 41,558 35,763
---------- --------- ---------- ----------
Gross profit 87,018 57,978 156,728 110,685
---------- --------- ---------- ----------
Operating expenses:
Sales and marketing 28,939 29,108 56,885 56,962
General and
administrative 15,005 16,539 29,956 30,007
Research and development 6,396 5,669 12,512 10,860
Restructuring -- 409 -- 1,319
Insurance settlement (8,666) -- (8,666) --
---------- --------- ---------- ----------
Total operating expenses 41,674 51,725 90,687 99,148
---------- --------- ---------- ----------
Profit from operations 45,344 6,253 66,041 11,537
Interest and other income
(expense), net 156 557 (397) 705
---------- --------- ---------- ----------
Profit before income
taxes 45,500 6,810 65,644 12,242
Provision for income
taxes 12,897 2,265 18,111 5,061
---------- --------- ---------- ----------
Net profit $ 32,603 $ 4,545 $ 47,533 $ 7,181
========== ========= ========== ==========
Net profit per share
- basic $ 0.43 $ 0.07 $ 0.63 $ 0.11
========== ========= ========== ==========
- diluted $ 0.42 $ 0.07 $ 0.61 $ 0.11
========== ========= ========== ==========
Shares used in computing
net profit per share
- basic 75,703 66,285 75,436 66,135
========== ========= ========== ==========
- diluted 77,607 67,373 77,644 66,941
========== ========= ========== ==========
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December
June 30, 31,
2010 2009
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 235,801 $ 166,487
Marketable securities,
short-term 8,998 19,978
Accounts receivable, net 62,930 54,537
Inventories 2,487 2,046
Other current assets 20,881 18,251
---------- ----------
Total current assets 331,097 261,299
Property and equipment, net 27,249 24,971
Goodwill and intangible
assets, net 4,066 5,466
Deferred tax asset 44,171 61,535
Other long-term assets 2,109 1,969
---------- ----------
Total assets $ 408,692 $ 355,240
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,316 $ 6,122
Accrued liabilities 41,455 42,822
Deferred revenue 27,036 32,299
---------- ----------
Total current
liabilities 73,807 81,243
Other long term liabilities 932 961
---------- ----------
Total liabilities 74,739 82,204
Total stockholders' equity 333,953 273,036
---------- ----------
Total liabilities and
stockholders' equity $ 408,692 $ 355,240
========== ==========
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS
Reconciliation of GAAP to
Non-GAAP Net Revenues
(in thousands)
Three Months Ended
--------------------------------
June 30, March 31, June 30,
2010 2010 2009
---------- --------- ---------
Net revenues $ 108,196 $ 90,090 $ 76,316
Teen deferred revenue
release (14,298) -- --
---------- --------- ---------
Non-GAAP net revenues $ 93,898 $ 90,090 $ 76,316
========== ========= =========
Reconciliation of GAAP to
Non-GAAP Gross Profit
(in thousands)
Three Months Ended
--------------------------------
June 30, March 31, June 30,
2010 2010 2009
---------- --------- ---------
GAAP Gross profit $ 87,018 $ 69,710 $ 57,978
Teen deferred revenue
release (14,298) -- --
Ormco royalties -- 827 --
---------- --------- ---------
Non-GAAP Gross profit $ 72,720 $ 70,537 $ 57,978
========== ========= =========
Reconciliation of GAAP to
Non-GAAP Operating
Expenses
(in thousands)
Three Months Ended
--------------------------------
June 30, March 31, June 30,
2010 2010 2009
---------- --------- ---------
GAAP Operating expenses $ 41,674 $ 49,013 $ 51,725
Restructuring -- -- (409)
Insurance settlement 8,666 -- --
---------- --------- ---------
Non-GAAP Operating
expenses $ 50,340 $ 49,013 $ 51,316
========== ========= =========
Reconciliation of GAAP to
Non-GAAP Profit from
Operations
(in thousands)
Three Months Ended
--------------------------------
June 30, March 31, June 30,
2010 2010 2009
---------- --------- ---------
GAAP Profit from
Operations $ 45,344 $ 20,697 $ 6,253
Teen deferred revenue
release (14,298) -- --
Ormco royalties -- 827 --
Restructuring -- -- 409
Insurance settlement (8,666) -- --
---------- --------- ---------
Non-GAAP Profit from
Operations $ 22,380 $ 21,524 $ 6,662
========== ========= =========
Reconciliation of GAAP to
Non-GAAP Net Profit
(in thousands, except per
share amounts)
Three Months Ended
--------------------------------
June 30, March 31, June 30,
2010 2010 2009
---------- --------- ---------
GAAP Net profit $ 32,603 $ 14,930 $ 4,545
Teen deferred revenue
release (14,298) -- --
Ormco royalties -- 827 --
Restructuring -- -- 409
Insurance settlement (8,666) -- --
Tax effect on non-GAAP
adjustments 6,816 (216) (127)
---------- --------- ---------
Non-GAAP Net profit $ 16,455 $ 15,541 $ 4,827
========== ========= =========
Diluted Net profit per
share:
GAAP $ 0.42 $ 0.19 $ 0.07
========== ========= =========
Non-GAAP $ 0.21 $ 0.20 $ 0.07
========== ========= =========
Shares used in computing
diluted non-GAAP net
profit per share 77,607 77,597 67,373
========== ========= =========
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.
Financials
(in millions, except per share amounts and
percentages)
Q3 2010
------------------
Net Revenue $92.0 - $95.0
Gross Profit $71.1 - $73.9
Gross Margin 77.3% - 77.8%
Operating Expenses $52.5 - $53.5
Operating Margin 20.2% - 21.4%
Net Income per Diluted
Share $0.16 - $0.18
Stock Based
Compensation Expense:
Cost of Revenues $0.4
Operating Expenses $4.2
------------------
Total Stock Based
Compensation Expense $4.6
Business Metrics:
Q3 2010
------------------
Case Shipments 66K - 68K
Cash $255M - $260M
Capex $3.0M - $5.0M
Depreciation &
Amortization $2.0M - $3.0M
Diluted Shares
Outstanding 78M
Full Year 2010: FY 2010
------------------
Stock Based
compensation $17.0M
Diluted Shares
Outstanding 78M
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Align Technology
CONTACT: Align Technology, Inc. Investor Relations Contact Shirley Stacy (408) 470-1150 sstacy@aligntech.com Ethos Communication, Inc. Press Contact Shannon Mangum Henderson (678) 261-7803 align@ethoscommunication.com
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