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Align Technology, Inc. Announces Q1 2007 Results
SANTA CLARA, Calif., April 26, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Align Technology, Inc. (Nasdaq: ALGN), the inventor of Invisalign(R), a proprietary method of straightening teeth without wires and brackets, today reported financial results for the first quarter of 2007. Total revenues for the first quarter of 2007 were $63.8 million, compared to $48.9 million in the first quarter of 2006, an increase of 30.4 percent.
"We are pleased that we are off to a strong start in 2007," stated Thomas M. Prescott, President and CEO of Align Technology. "Improved operating performance yielded a welcome return to profitability, and our solid growth in volume and revenue on an increasing base of customers is very gratifying. We are committed to evolving our products to meet the specific needs of our Orthodontists and GP Dentists, which is key to generating and sustaining our top line growth."
First Quarter 2007 Revenue Analysis
Revenue was $63.8 million for the first quarter, an increase of 30.4% from the first quarter of 2006. In the first quarter, revenue per channel was:
* $21.5 million for U.S. Ortho, including $2.1 million for Invisalign
Express;
* $29.8 million for U.S. GP, including $2.8 million for Invisalign
Express;
* $9.2 million for International; and
* $3.3 million for Training and Other.
Key metrics include:
* 3,800 U.S. Orthos, 9,700 U.S. GPs and 2,100 International doctors
submitted cases in the first quarter. Also in the first quarter, cases
were shipped to 3,600 U.S. Orthos, 8,700 U.S. GPs and 2,000
International doctors.
* Utilization in the first quarter of 2007 was 4.8 for U.S. Orthos,
2.6 for U.S. GPs and 2.8 for International. Sequentially, utilization
rates increased for U.S. Orthos and U.S. GPs on a growing base of
participating doctors. Utilization rates have remained consistent for
International.
* In the first quarter, worldwide average selling price (ASP) for
Invisalign was $1,340. Excluding Invisalign Express, worldwide ASP was
$1,450.
* Total number of cases shipped increased 23 percent year over year to
45,000. Included in this were 6,700 Invisalign Express cases.
* Doctors trained worldwide in the first quarter increased by 1,800,
including 1,300 U.S. GP dentists, to a cumulative total of 42,600.
* Since product inception, 30,100 doctors worldwide have used Invisalign:
6,400 U.S. Orthos; 18,200 U.S. GPs; and 5,500 International doctors. 84
percent of these doctors have started more than one case.
A full list of quarterly metrics is available in the Fact Sheet following the financial tables of this release. Additionally, quarterly metric information for the last 9 quarters is available on Align's website at investor.aligntech.com.
Operating results reflect stock-based compensation expense of $2.5 million for Q1. It also reflects a reversal of $1.8 million of the $8.3 million expense we recorded in the fourth quarter of 2006 for the Patients First Program. The expense reversal results from a reduction in the number of cases and associated costs we will incur to fulfill our obligations under the Patients First Program. These items have been excluded in the non-GAAP financials. A reconciliation of GAAP (U.S. generally accepted accounting principles) to non-GAAP results and outlook is contained in the tables below.
First Quarter 2007 Operating Results
Key GAAP operating results for the first quarter of 2007 include:
* Gross margin was 72.5 percent, compared to 70.8 percent in the first
quarter 2006.
* Operating expenses were $39.2 million, compared to $39.8 million in the
first quarter 2006. First quarter 2007 operating expense includes the
$1.8 million reduction in the cost of completing the Patients First
Program cases.
* Net profit was $7.0 million, compared to a net loss of $4.8 million in
the first quarter 2006.
* Earnings per share was $0.10, compared to a loss per share of $0.08 in
the first quarter 2006.
Key non-GAAP operating results for the first quarter of 2007 include:
* Gross margin was 72.9 percent, compared to 71.1 percent in the first
quarter 2006.
* Operating expenses were $38.7 million, compared to $37.8 million in the
first quarter 2006.
* Net profit was $7.6 million, compared to a net loss of $2.6 million in
the first quarter 2006.
* Earnings per share was $0.11, compared to a loss per share of $0.04 in
the first quarter 2006.
Liquidity and Capital Resources
As of March 31, 2007, Align had $65.7 million in cash, cash equivalents, marketable securities and restricted cash, compared to $64.1 million as of December 31, 2006. During the first quarter Align reduced the borrowings against its credit facility by $3.5 million. $8.0 million remains outstanding.
Patients First Program Update
The fourth quarter of 2006 included an $8.3 million operating expense for the anticipated cost of completing the 30,500 registered Patients First Program cases. As of March 31, 2007, Align had received 24,700 of the 30,500 registered cases. In accordance with the Patients First Program terms and conditions, the program was closed to receipt of additional cases as of March 30, 2007. As a result, the first quarter includes a $1.8 million reversal of operating expense to reflect the reduction in the number of cases and associated costs we will incur to fulfill our obligation under the program. 16,300 cases have been shipped as of March 31, 2007 with the remaining 8,400 in process cases expected to ship in the second quarter of 2007.
Business Outlook for the Second Quarter 2007 and Full Year 2007
For the second quarter 2007, Align Technology expects revenues between $72.0 and $74.0 million and GAAP earnings per share between $0.10 and $0.12. Non-GAAP EPS is expected to be between $0.15 and $0.17.
For the fiscal year 2007, Align Technology expects revenues between $268.4 and $278.0 million and GAAP earnings per share between $0.30 and $0.38. Non-GAAP EPS for fiscal year 2007 is expected to be between $0.46 and $0.55.
A more comprehensive business outlook, including a reconciliation of GAAP to Non-GAAP financial measures, is available following the financial tables of this release.
Align Webcast and Conference Call
Align Technology will host a webcast and conference call today, April 26, 2007 at 10:00 a.m. EDT, 7:00 a.m. PDT, to review the first quarter 2007 results and discuss future operating trends and a business outlook. To access the webcast, click on "Webcasts & Presentations" 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 through 5:30 p.m. EDT on April 25, 2008. Additionally, a telephonic replay of the call can be accessed by dialing (877) 660-6853 with account number 292 followed by # and conference number 227477 followed by #. The replay may 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. EDT on May 10, 2007.
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 older teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998.
To learn more about Invisalign or to find a certified Invisalign 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, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP gross profit, profit (loss) from operations, net profit (loss) and certain expenses (including sales and marketing, general and administrative and research and development), which exclude stock-based compensation and the Patients First Program reversal. 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 "Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations" and "Business Outlook" 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 expenses and expenditures that may not be indicative of our operating performance including not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent or one-time in nature, such as the Patients First Program. 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 help them analyze the health of our business.
Forward-Looking Statement
This news release, including the tables below, contain forward-looking statements, including statements regarding Align's anticipated financial results and certain business metrics for the second quarter and full year of 2007, including anticipated revenue, operating expense, earnings per share, percentage of revenue by channel, case shipments and average selling prices, and statements regarding the anticipated timing of the completion of the remaining Patients First Program cases. 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, 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, including during the summer vacation periods in the United States and Europe in the third quarter, acceptance of Invisalign by consumers and dental professionals, Align's third party manufacturing processes and personnel, 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, including members of its direct sales force. 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, 2006, which was filed with the Securities and Exchange Commission on March 12, 2007, and its Quarterly Reports on Form 10-Q. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
Investor Relations Contacts: Press Contact:
Eldon Bullington Shannon Mangum Henderson
Align Technology, Inc. Ethos Communication, Inc.
(408) 470-1000 (678) 540-9222
investorinfo@aligntech.com align@ethoscommunication.com
Matt Clawson
Allen & Caron, Inc.
(949) 474-4300
matt@allencaron.com
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31, 2007 March 31, 2006
(in thousands, except per share data)
Revenues $63,761 $48,908
Cost of revenues 17,529 14,297
Gross profit 46,232 34,611
Operating expenses:
Sales and marketing 23,150 20,066
General and administrative 12,185 15,064
Research and development 5,693 4,694
Patients First Program (1,796) -
Total operating expenses 39,232 39,824
Profit (loss) from operations 7,000 (5,213)
Interest and other income, net 455 698
Provision for income taxes (477) (249)
Net profit (loss) $6,978 $(4,764)
Net profit (loss) per share
- basic $0.11 $(0.08)
- diluted $0.10 $(0.08)
Shares used in computing net profit
(loss) per share
- basic 65,433 62,518
- diluted 69,331 62,518
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2007 December 31, 2006
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $56,209 $55,113
Restricted cash 95 93
Marketable securities, short-term 9,384 8,931
Accounts receivable, net 38,203 33,635
Inventories, net 3,725 3,090
Other current assets 7,624 7,227
Total current assets 115,240 108,089
Property and equipment, net 26,208 26,904
Goodwill and intangible assets, net 13,457 14,303
Other long-term assets 2,134 2,262
Total assets $157,039 $151,558
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $8,000 $11,500
Accounts payable 6,761 5,034
Accrued liabilities 31,831 40,307
Deferred revenue 11,226 10,942
Total current liabilities 57,818 67,783
Other long term liabilities 233 219
Total liabilities 58,051 68,002
Total stockholders' equity 98,988 83,556
Total liabilities and
stockholders' equity $157,039 $151,558
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended March 31, 2007
Reported Adjustments Non GAAP
Revenues $63,761 $- $63,761
Cost of revenues 17,529 (234)(a) 17,295
Gross profit 46,232 234 46,466
Operating expenses:
Sales and marketing 23,150 (857)(a) 22,293
General and administrative 12,185 (1,103)(a) 11,082
Research and development 5,693 (328)(a) 5,365
Patients First Program (1,796) 1,796 -
Total operating expenses 39,232 (492) 38,740
Profit (loss) from operations 7,000 726 7,726
Interest and other income, net 455 - 455
Provision for income taxes (477) (80)(b) (557)
Net profit (loss) $6,978 $646 $7,624
Net profit (loss) per share
- basic $0.11 $0.12
- diluted $0.10 $0.11
Shares used in computing net profit
(loss) per share
- basic 65,433 65,433
- diluted 69,331 69,331
(a) Non cash stock-based compensation included in cost of sales and
operating expenses.
(b) Tax impact on non-GAAP adjustments.
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended March 31, 2006
Reported Adjustments Non GAAP
Revenues $48,908 $- $48,908
Cost of revenues 14,297 (148)(a) 14,149
Gross profit 34,611 148 34,759
Operating expenses:
Sales and marketing 20,066 (679)(a) 19,387
General and administrative 15,064 (1,088)(a) 13,976
Research and development 4,694 (290)(a) 4,404
Patients First Program - - -
Total operating expenses 39,824 (2,057) 37,767
Profit (loss) from operations (5,213) 2,205 (3,008)
Interest and other income, net 698 - 698
Provision for income taxes (249) - (249)
Net profit (loss) $(4,764) $2,205 $(2,559)
Net profit (loss) per share
- basic $(0.08) $(0.04)
- diluted $(0.08) $(0.04)
Shares used in computing net profit
(loss) per share
- basic 62,518 62,518
- diluted 62,518 62,518
(a) Non cash stock-based compensation included in cost of sales and
operating expenses.
(b) Tax impact on non-GAAP adjustments.
ALIGN TECHNOLOGY, INC.
FACT SHEET
The following information highlights business metrics for Align's first quarter of 2007. For prior quarter information, please refer to the Investor Relations website at http://investor.aligntech.com.
(rounded to the nearest hundred, except in utilization, ASPs and
percentage amounts)
Cases Delivered Patients First Program Information
1Q 2007 1Q 2007
U.S. Orthodontists - Full 14,200 Cases registered 30,500
U.S. Orthodontists Final number of
- Invisalign Express 2,800 OC Cases Received 24,700
U.S. GP dentists - Full 18,600 Cases shipped 16,300
U.S. GP dentists In process cases
- Invisalign Express 3,800 to be shipped 8,400
International - Full 5,500
International
- Invisalign Express 100
Total Cases Delivered 45,000
Doctors Trained 1Q 2007 Cumulative Total
U.S. Orthodontists 100 8,100
U.S. GP dentists 1,300 23,300
International 400 11,200
Total Doctors Trained 1,800 42,600
Submitting Doctors Doctors Cases Are Shipped To
1Q 2007 1Q 2007
U.S. Orthodontists 3,800 U.S. Orthodontists 3,600
U.S. GP dentists 9,700 U.S. GP dentists 8,700
International 2,100 International 2,000
Total Submitting Doctors 15,600 Total Shipped to Doctors 14,300
Doctors Starting Invisalign Treatment % of Multiple-Case Doctors
Since Inception Since Inception
U.S. Orthodontists 6,400 U.S. Orthodontists 88%
U.S. GP dentists 18,200 U.S. GP dentists 87%
International 5,500 International 74%
Total Doctors Starting
Invisalign Treatment 30,100 Total Worldwide 84%
Doctor Utilization* Blended ASP incl. Invisalign Express
1Q 2007 1Q 2007
U.S. Orthodontists 4.8 U.S. Orthodontists $1,260
U.S. GP dentists 2.6 U.S. GP dentists $1,330
International 2.8 International $1,650
Total Worldwide ASP $1,340
* Doctor Utilization = # of cases / # of doctors cases are shipped to
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 (including reconciliation of GAAP to non-GAAP financial
measures)
(in millions, except per share amounts and percentages)
2Q 2007
GAAP Adjustment Non-GAAP
Revenue $72.0 - $74.0 -- $72.0 - $74.0
Gross Margin 71.4% - 73.0% 0.4% (a) 71.8% - 73.4%
Sales and Marketing $24.2 - $24.5 $1.0 (a) $23.2 - $23.5
R&D $6.4 - $6.9 $0.4 (a) $6.0 - $6.5
G&A $13.8 - $14.1 $1.6 (a) $12.2 - $12.5
Patient's First Costs -- -- --
Operating Expenses $44.4 - $45.5 $3.0 $41.4 - $42.5
Net Profit $7.1 - $8.5 $3.2 $10.3 - $11.8
Net Profit per Share $0.10 - $0.12 $0.05 $0.15 - $0.17
FY 2007
GAAP Adjustment Non-GAAP
Revenue $268.4 - $278.0 -- $268.4 - $278.0
Gross Margin 71.5% - 72.6% 0.4% (a) 71.9% - 73.0%
Sales and Marketing $94.6 - $96.2 $4.0 - $4.3(a) $90.6 - $91.9
R&D $25.3 - $26.7 $1.5 - $1.7(a) $23.8 - $25.0
G&A $52.7 - $54.6 $6.1 - $6.6(a) $46.6 - $48.0
Patient's First Costs ($1.8) ($1.8) --
Operating Expenses $170.8 - $175.6 $9.7 - $10.6 $161.1 - $165.0
Net Profit $21.1 - $26.3 $10.9 - $12.0 $32.1 - $38.3
Net Profit per Share $0.30 - $0.38 $0.16 - $0.17 $0.46 - $0.55
(a) Non cash stock-based compensation included in cost of sales and
operating expenses
Business Metrics
2Q 2007 FY 2007
Channel as a % of Revenue
U.S. Orthodontists - Full 29% 28%
U.S. GP Dentists - Full 45% 45%
International Invisalign 14% 14%
Invisalign Express 8% 9%
Training/Other 4% 4%
Case Shipments 53.0K - 54.0K 200.0K - 206.0K
Blended ASP, excl Express $1410 - $1420 $1390 - $1400
Blended ASP, incl Express $1300 - $1310 $1290 - $1300
Cash $82.0-$87.0
DSO ~55 days
Capex $12.0-14.0
Depreciation & Amortization $13.0-14.0
Non-GAAP Supplementary 9-Quarter Financial Model – Ending 1Q 2007
SOURCE Align Technology, Inc.
investors, Eldon Bullington of Align Technology, Inc., +1-408-470-1000, investorinfo@aligntech.com; or Matt Clawson of Allen & Caron, Inc., +1-949-474-4300, matt@allencaron.com; or press, Shannon Mangum Henderson of Ethos Communication, Inc., +1-678-540-9222, align@ethoscommunication.com, both for Align Technology, Inc.
http://www.invisalign.com/
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