SOURCE: Align Technology

Align Technology

October 17, 2012 16:27 ET

Align Technology Announces Preliminary Third Quarter Fiscal Year 2012 Results

SAN JOSE, CA--(Marketwire - Oct 17, 2012) - Align Technology, Inc. (NASDAQ: ALGN)

  • Q3 net revenues of $136.5 million increased 8.4% year-over-year
  • Q3 Invisalign clear aligner revenue of $126.7 million increased 10.9% year-over-year
  • Q3 Invisalign case shipments of 92.5 thousand increased 16.6% year-over-year
  • Q3 Invisalign teenager case shipments of 24.5 thousand increased 21.5% year-over-year
  • Q3 scanner and CAD/CAM services revenue of $9.8 million decreased 15.9% year-over-year
  • Preliminary Q3 diluted GAAP EPS was $0.29, non-GAAP was $0.28
  • Company Evaluating Possible Goodwill Impairment Charge

Align Technology, Inc. (NASDAQ: ALGN) today reported preliminary financial results for the third quarter of fiscal 2012 ended September 30, 2012. The preliminary results are subject to change based upon the conclusion of goodwill impairment testing being undertaken by the Company.

Total net revenues for the third quarter of fiscal 2012 (Q3 12) were $136.5 million. This is compared to $145.6 million reported in the second quarter of 2012 (Q2 12) and compared to $125.9 million reported in the third quarter of 2011 (Q3 11). Q3 12 Invisalign clear aligner revenue was $126.7 million, compared to $133.7 million in Q2 12 and $114.3 million in Q3 11. Q3 12 Invisalign clear aligner case shipments were 92.5 thousand, compared to 95.3 thousand in Q2 12 and 79.4 thousand in Q3 11, and included Align's 2 millionth case milestone. Q3 12 scanner and CAD/CAM services revenue was $9.8 million, compared to $11.9 million in Q2 12 and compared to $11.6 million in Q3 11.

The discontinuation of Align's distribution relationship with Straumann in Europe and North America, announced in a separate press release today, and the decline in results of operations of the Company's Scanner and CAD/CAM Services reporting unit triggers the risk of impairment of goodwill associated with the acquisition of Cadent. As a result, Align is in the process of conducting step one of a goodwill impairment test as prescribed by GAAP. This test is currently in progress and the Company has not concluded as to whether goodwill, which had a carrying value of $135.3 million as of September 30, 2012, is impaired and for this reason the Company's results are preliminary. Prior to filing its Form 10-Q for the third quarter of 2012, the Company expects to complete the step one impairment test. If the result of the step one analysis indicates an impairment, the Company will conduct a step two evaluation to determine the amount of the non-cash impairment charge, if any. If step two cannot be completed prior to filing of the Form 10-Q for the third quarter, the Company may estimate a range of potential impairment and may record an estimated non-cash charge in the third quarter of 2012 results. Any difference between an estimate and the final step two evaluation, would be recorded in the fourth quarter 2012. The Company's evaluation could result in a non-cash impairment charge for a substantial portion of the $135.3 million book value of goodwill which would negatively affect net income although revenue and cash flow from operations would not be impacted.

"Despite a strong summer season for Invisalign teenager cases, which increased 21% sequentially and year-over-year, our third quarter revenue was slightly lower than our outlook," said Thomas M. Prescott, Align president and CEO. "Q3 is historically a slower period for North American GP Dentists and International doctors due to summer vacations. This year summer seasonality was more pronounced in North America and as a result, we did not see the expected ramp in Invisalign cases for GP Dentists and Orthodontists. This softness has continued through October and is reflected in our Q4 guidance, which despite that slowdown, still projects a healthy annual growth rate for the company overall, with volume growth of at least 16%."

Preliminary net profit for Q3 12 was $24.3 million, or $0.29 per diluted share. This is compared to net profit of $28.5 million, or $0.34 per diluted share in Q2 12 and net profit of $19.3 million, or $0.24 per diluted share in Q3 11. Preliminary net profit for Q3 12 includes pre-tax acquisition and integration related costs of $0.2 million, pre-tax amortization of acquired intangible assets of $1.1 million, pre-tax severance and benefit costs of $0.1 million with a total income tax-related adjustment of $2.1 million. Net profit for Q2 12 includes pre-tax acquisition and integration related costs of $0.3 million, pre-tax amortization of acquired intangible assets of $1.1 million, pre-tax severance and benefit costs of $0.2 million with a total income tax-related adjustment of $1.5 million. Net profit for Q3 11 includes pre-tax acquisition and integration related costs of $1.5 million, pre-tax amortization of acquired intangible assets of $1.1 million, pre-tax severance and benefit costs of $0.2 million with a total income tax-related adjustment of $0.2 million.

To supplement our consolidated financial statements, we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating expense, non-GAAP operating margin, non-GAAP net profit, non-GAAP earnings per diluted share, EBITDA and adjusted EBITDA. Detailed reconciliations between GAAP and non-GAAP information are contained in the tables following the financial tables of this release.

Non-GAAP net profit for Q3 12 was $23.7 million, or $0.28 per diluted share. This is compared to non-GAAP net profit of $28.6 million, or $0.34 per diluted share in Q2 12 and non-GAAP net profit of $21.9 million, or $0.27 per diluted share in Q3 11. 

Q3 12 Operating Results ($M)  
    Preliminary               
Key GAAP Operating Results   Q3 12     Q2 12     Q3 11  
Revenue   $ 136.5     $ 145.6     $ 125.9  
- Clear Aligner   $ 126.7     $ 133.7     $ 114.3  
- Scanner and CAD/CAM Services   $ 9.8     $ 11.9     $ 11.6  
                         
Gross Margin     73.5 %     74.7 %     73.4 %
- Clear Aligner     77.6 %     79.0 %     78.6 %
- Scanner and CAD/CAM Services     20.6 %     26.6 %     21.5 %
                         
Operating Expense   $ 71.2     $ 72.8     $ 66.1  
Operating Margin     21.4 %     24.7 %     20.9 %
Net Profit   $ 24.3     $ 28.5     $ 19.3  
Earnings Per Diluted Share (EPS)   $ 0.29     $ 0.34     $ 0.24  
                         
Key Non-GAAP Operating Results     Q3 12       Q2 12       Q3 11  
Non-GAAP Gross Margin     73.7 %     75.0 %     73.9 %
- Non-GAAP Clear Aligner     77.6 %     79.0 %     78.6 %
- Non-GAAP Scanner & CAD/CAM Services     23.8 %     30.3 %     27.1 %
                         
Non-GAAP Operating Expense   $ 70.0     $ 71.6     $ 63.8  
Non-GAAP Operating Margin     22.4 %     25.8 %     23.2 %
Non-GAAP Net Profit   $ 23.7     $ 28.6     $ 21.9  
Non-GAAP Earnings Per Diluted Share (EPS)   $ 0.28     $ 0.34     $ 0.27  
EBITDA   $ 33.2     $ 40.8     $ 31.0  
Adjusted EBITDA   $ 33.6     $ 41.3     $ 32.8  
                         

Total stock-based compensation expense included in Q3 12 was $5.4 million compared to $5.3 million in Q2 12 and $5.0 million in Q3 11. Stock based compensation expense included in GAAP gross margin in Q3 12, Q2 12 and Q3 11 was $0.5 million. Stock-based compensation expense included in GAAP operating expense in Q3 12 was $4.9 million compared to $4.8 million in Q2 12 and $4.5 million in Q3 11.

Liquidity and Capital Resources
As of September 30, 2012, Align Technology had $348.9 million in cash, cash equivalents, and marketable securities compared to $248.1 million as of December 31, 2011. During Q3 12, we purchased approximately 213,000 shares of our common stock at an average price of $34.15 per share for a total of approximately $7.3 million. There remains approximately $132.5 million available under the Company's existing stock repurchase authorization.

Q4 Fiscal 2012 Business Outlook
For the fourth quarter of fiscal 2012 (Q4 12), Align Technology expects net revenues to be in a range of $134.2 million to $137.8 million. Invisalign clear aligner case shipments for Q4 12 are expected to be in a range of 90.0 to 93.0 thousand cases, which reflect a year-over-year increase of 9.0% to 12.6%. GAAP earnings per diluted share for Q4 12 is expected to be in a range of $0.21 to $0.23, excluding any potential impairment charge. Non-GAAP earnings per diluted share for Q4 12 is expected to be in a range of $0.21 to $0.23. A more comprehensive business outlook is available following the financial tables of this release.

Align Announces SmartTrack™, Next Generation Invisalign Aligner Material
In a separate press release today, Align announced SmartTrack™, the next generation of Invisalign clear aligner material. SmartTrack is a proprietary, custom-engineered material that delivers gentle, more constant force considered ideal for orthodontic tooth movements. SmartTrack will become the standard Invisalign aligner material in the first quarter of 2013 for Invisalign clear aligner products in North America and Europe, as well as other international markets where regulatory approval has been obtained.

Align Web Cast and Conference Call
Align Technology will host a conference call today, October 17, 2012 at 4:30 p.m. ET, 1:30 p.m. PT, to review its preliminary third quarter fiscal 2012 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 201-689-8261 approximately fifteen minutes prior to the start of the call. 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 400990 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 October 25, 2012.

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. The Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express 10, Invisalign Express 5, Invisalign Lite, and Vivera Retainers. To learn more about Invisalign or to find an Invisalign trained doctor in your area, please visit www.invisalign.com.

Cadent Holdings, Inc. is a subsidiary of Align Technology and is a leading provider of 3D digital scanning solutions for orthodontics and dentistry. The Cadent family of products includes iTero and iOC scanning systems, OrthoCAD iCast, OrthoCAD iQ and OrthoCAD iRecord. For additional information, please visit www.cadentinc.com.

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 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, acquisition and integration related costs, amortization of acquired intangible assets, severance and benefit costs, and any related income tax-related adjustments, and EBITDA and adjusted EBITDA. 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.

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 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. A reconciliation of the GAAP and non-GAAP financial measures for the quarter and year and a more detailed explanation of each non-GAAP financial measure and its uses are provided in the footnotes to the table captioned "Reconciliation of GAAP to non-GAAP Key Financial Metrics" and "Business Outlook Summary" included at the end of this release. 

Forward-Looking Statement
This news release, including the tables below, contains forward-looking statements, including statements regarding certain business metrics for the fourth quarter of 2012, including anticipated net 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, growth related risks, including capacity constraints and pressure on our internal systems and personnel, our ability to successfully achieve the anticipated benefits from the acquisition of Cadent Holdings, Inc., 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, 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 protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing 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, 2011, which was filed with the Securities and Exchange Commission on February 29, 2012. In addition to that information, the possibility of an impairment charge, which could result in a substantial reduction against goodwill and a commensurate charge against earnings, could have a material adverse impact on the preliminary results reported in this press release and on results during a subsequent period. While the Company expects to reflect the outcome of its impairment testing in its Form 10-Q and final reported results for the third quarter ended September 30, 2012, 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     Nine Months Ended  
    Preliminary
September 30,
2012
    September 30,
2011
    Preliminary
September 30,
2012
    September 30,
2011
 
                                 
Net revenues   $ 136,496       125,894     $ 417,201       350,836  
                                 
Cost of revenues     36,146       33,524       107,291       85,103  
                                 
Gross profit     100,350       92,370       309,910       265,733  
                                 
Operating expenses:                                
  Sales and marketing     36,468       34,655       114,272       106,062  
  General and administrative     23,896       21,609       68,674       66,695  
  Research and development     9,952       8,926       31,158       27,586  
  Amortization of acquired intangible assets     866       868       2,620       1,460  
Total operating expenses     71,182       66,058       216,724       201,803  
                                 
Profit from operations     29,168       26,312       93,186       63,930  
                                 
Interest and other income (expense), net     (353 )     (118 )     (624 )     (335 )
                                 
Profit before income taxes     28,815       26,194       92,562       63,595  
                                 
Provision for income taxes     4,494       6,930       18,765       17,328  
                                 
Net profit   $ 24,321     $ 19,264     $ 73,797     $ 46,267  
                                 
Net profit per share                                
  - basic   $ 0.30     $ 0.25     $ 0.92     $ 0.60  
  - diluted   $ 0.29     $ 0.24     $ 0.89     $ 0.58  
                                 
Shares used in computing net profit per share                                
  - basic     81,437       78,455       80,356       77,735  
  - diluted     83,906       80,266       83,016       80,040  
                                   
                                   
                                   
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
         
    Preliminary
September 30,
2012
  December 31,
2011
         
ASSETS        
             
Current assets:            
  Cash and cash equivalents   $ 304,907   $ 240,675
  Restricted cash     1,564     4,026
  Marketable securities, short-term     23,142     7,395
  Accounts receivable, net     105,902     91,537
  Inventories     15,137     9,402
  Other current assets     33,594     31,781
    Total current assets     484,246     384,816
             
Marketable securities, long-term     20,802     -
Property and equipment, net     75,248     53,965
Goodwill and intangible assets, net     182,644     185,405
Deferred tax asset     27,189     22,337
Other long-term assets     2,700     2,741
             
      Total assets   $ 792,829   $ 649,264
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 14,415   $ 19,265
  Accrued liabilities     71,949     76,600
  Deferred revenue     65,324     52,252
    Total current liabilities     151,688     148,117
             
Other long term liabilities     14,311     10,366
             
      Total liabilities     165,999     158,483
             
Total stockholders' equity     626,830     490,781
             
    Total liabilities and stockholders' equity   $ 792,829   $ 649,264
                 
                 
                 
ALIGN TECHNOLOGY, INC.  
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS  
                   
                   
                   
Reconciliation of GAAP to Non-GAAP Gross Profit                  
(in thousands)                  
    Three Months Ended  
    September 30, 2012     June 30, 2012     September 30, 2011  
                         
GAAP Gross profit   $ 100,350     $ 108,800     $ 92,370  
  Acquisition and integration costs related to cost of revenues (1)     55       72       202  
  Amortization of acquired intangible assets related to cost of revenues (2)     213       232       267  
  Severance and benefit costs related to cost of revenues(3)     39       135       175  
Non-GAAP Gross profit   $ 100,657     $ 109,239     $ 93,014  
                         
Reconciliation of GAAP to Non-GAAP Gross Profit Scanner and CAD/CAM Services                        
(in thousands)                        
      Three Months Ended  
      September 30, 2012       June 30, 2012       September 30, 2011  
                         
GAAP Scanner and CAD/CAM Services gross profit   $ 2,016     $ 3,183     $ 2,500  
  Acquisition and integration costs related to cost of revenues (1)     55       72       202  
  Amortization of acquired intangible assets related to cost of revenues (2)     213       232       267  
  Severance and benefit costs related to cost of revenues(3)     39       135       175  
Non-GAAP Gross profit   $ 2,323     $ 3,622     $ 3,144  
                         
Reconciliation of GAAP to Non-GAAP Operating Expenses                        
(in thousands)                        
      Three Months Ended  
      September 30, 2012       June 30, 2012       September 30, 2011  
                         
GAAP Operating expenses   $ 71,182     $ 72,788     $ 66,058  
  Acquisition and integration costs related to operating expenses (1)     (179 )     (261 )     (1,296 )
  Amortization of acquired intangible assets related to operating expenses (2)     (866 )     (869 )     (868 )
  Severance and benefit costs related to operating expenses (3)     (105 )     (49 )     (72 )
Non-GAAP Operating expenses   $ 70,032     $ 71,609     $ 63,822  
                         
Reconciliation of GAAP to Non-GAAP Profit from Operations                        
(in thousands)                        
      Three Months Ended  
      September 30, 2012       June 30, 2012       September 30, 2011  
                         
GAAP Profit from operations   $ 29,168     $ 36,012     $ 26,312  
  Acquisition and integration costs (1)     234       333       1,498  
  Amortization of acquired intangible assets (2)     1,079       1,101       1,135  
  Severance and benefit costs (3)     144       184       247  
Non-GAAP Profit from operations   $ 30,625     $ 37,630     $ 29,192  
                         
Reconciliation of GAAP to Non-GAAP Net Profit                        
(in thousands, except per share amounts)                        
      Three Months Ended  
      September 30, 2012       June 30, 2012       September 30, 2011  
                         
GAAP Net profit   $ 24,321     $ 28,492     $ 19,264  
  Acquisition and integration costs (1)     234       333       1,498  
  Amortization of acquired intangible assets (2)     1,079       1,101       1,135  
  Severance and benefit costs (3)     144       184       247  
  Income tax-related adjustments (4)     (2,078 )     (1,512 )     (203 )
Non-GAAP Net profit   $ 23,700     $ 28,598     $ 21,941  
                         
Diluted Net profit per share:                        
  GAAP   $ 0.29     $ 0.34     $ 0.24  
  Non-GAAP   $ 0.28     $ 0.34     $ 0.27  
                         
Shares used in computing diluted GAAP Net profit per share     83,906       82,954       80,266  
Shares used in computing diluted Non-GAAP Net profit per share     83,906       82,954       80,266  
                         
Reconciliation of GAAP Net Profit to EBITDA and Adjusted EBITDA                        
(in thousands)                        
      Three Months Ended  
      September 30, 2012       June 30, 2012       September 30, 2011  
                         
GAAP Net profit   $ 24,321     $ 28,492     $ 19,264  
Provision for income taxes     4,494       8,061       6,930  
Depreciation and amortization (5)     4,374       4,267       4,823  
EBITDA (6)     33,189       40,820       31,017  
                         
Adjustments or charges:                        
  Acquisition and integration related costs (1)     234       333       1,498  
  Severance and benefit costs (3)     144       184       247  
EBITDA after adjustments (6)   $ 33,567     $ 41,337     $ 32,762  
                         
                         
                         

References to GAAP in the third quarter tables above are preliminary GAAP results and do not include the impact of any potential impairment charge.

(1) Acquisition costs and integration related. We have incurred acquisition-related and other expenses which include legal, banker, accounting and other advisory fees of third parties, retention bonuses, integration and professional fees. We do not engage in acquisitions in the ordinary course of business. We believe that it is important to understand these charges; however, we do not believe that these charges are indicative of future operating results. We believe that eliminating these expenses from our non-GAAP measures is useful because we generally would not have otherwise incurred such expenses in the periods presented as part of our continuing operations.

(2) Amortization of acquired intangible assets. When conducting internal development of intangible assets (including developed technology, customer relationships, trademarks, etc.), GAAP accounting rules require that we expense the costs as incurred. In the case of acquired businesses, however, we are required to allocate a portion of the purchase price to the accounting value assigned to intangible assets acquired and amortize this amount over the estimated useful lives of the acquired intangibles. The acquired company, in most cases, has itself previously expensed the costs incurred to develop the acquired intangible assets, and the purchase price allocated to these assets is not necessarily reflective of the cost we would incur in developing the intangible asset. We eliminate these amortization charges for our non-GAAP operating results to provide better comparability of pre and post-acquisition operating results and comparability to results of businesses utilizing internally developed intangible assets.

(3) Severance and benefits costs. These costs are related to the closure of our New Jersey operations and were realized through the first three quarters of 2012. We have engaged in various restructuring and exit activities in 2011 and 2009 that have resulted in costs associated with severance and benefits. Such activity has been a discrete event based on a unique set of business objectives or circumstances, and each has differed from the others in terms of its operational implementation, business impact and scope. We do not engage in restructuring and/or exit activities in the ordinary course of business. We believe that it is important to understand these charges and, we believe that investors benefit from excluding these charges from our operating results to facilitate a more meaningful evaluation of current operating performance and comparisons to past operating performance.

(4) Income tax-related adjustments. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for discrete tax items and items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be re-calculated during the year to take into account events or trends that we believe materially impact the estimated annual rate.

(5) Includes the amortization of acquired intangible assets.

(6) EBITDA and adjusted EBITDA. We use EBITDA as a performance measure for benchmarking against our peers and competitors. We believe EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in the medical technology industry. We also use adjusted EBITDA which excludes certain special or non-recurring expenses, net of certain special or non-recurring benefits, detailed in the reconciliation tables that accompany this release, as an internal measure of business operating performance. We believe such financial measures provide a meaningful perspective of the underlying operating performance to our current business. EBITDA and adjusted EBITDA are not recognized terms under GAAP. Because all companies do not calculate EBITDA and similarly titled financial measures in the same way, those measures as used by other companies may not be consistent with the way we calculate such measures and should not be considered as alternative measures of operating or net profit.

   
ALIGN TECHNOLOGY  
Q3 2012 EARNINGS RELEASE ADDITIONAL DATA  
REVENUE PERFORMANCE AND CLEAR ALIGNER METRICS  
(in thousands except per share data)  
                                               
    Q1     Q2     Q3     Q4   FISCAL     Q1     Q2     Q3  
    2011     2011     2011     2011   2011     2012     2012     2012  
Invisalign Clear Aligner Revenues by Geography:                                              
  North America   $ 74,258     $ 79,755     $ 79,678     $ 81,789   $ 315,480     $ 86,871     $ 92,997     $ 89,568  
    North American Orthodontists     35,017       37,112       37,450       37,939     147,518       41,688       43,942       43,090  
    North American GP Dentists     39,241       42,643       42,228       43,850     167,962       45,183       49,055       46,478  
  International     25,179       27,898       28,346       30,054     111,477       29,700       32,883       29,700  
  Non-case*     5,419       5,994       6,254       7,089     24,756       6,757       7,789       7,457  
    Total Clear Aligner Revenue   $ 104,856     $ 113,647     $ 114,278     $ 118,932   $ 451,713     $ 123,328     $ 133,669     $ 126,725  
      YoY% growth     16.4 %     5.0 %     19.1 %     28.0 %   16.7 %     17.6 %     17.6 %     10.9 %
      QoQ% growth     12.9 %     8.4 %     0.6 %     4.1 %   3.7 %     8.4 %     -5.2 %        
  *includes Invisalign training, ancillary products, and retainers                                                              
Invisalign Clear Aligner Revenues by Product:                                                              
  Invisalign Full   $ 71,128     $ 76,636     $ 75,158     $ 79,469   $ 302,391     $ 82,424     $ 88,617     $ 80,294  
  Invisalign Express/Lite     10,051       11,095       10,498       10,865     42,509       11,806       13,632       12,779  
  Invisalign Teen     11,876       12,817       15,393       14,443     54,529       15,148       16,380       19,144  
  Invisalign Assist     6,382       7,105       6,974       7,066     27,527       7,193       7,251       7,051  
  Non-case*     5,419       5,994       6,255       7,089     24,757       6,757       7,789       7,457  
    Total Clear Aligner Revenue   $ 104,856     $ 113,647     $ 114,278     $ 118,932   $ 451,713     $ 123,328     $ 133,669     $ 126,725  
                                                               
Average Invisalign Selling Price (ASP), as billed:                                                              
  Total Worldwide Blended ASP   $ 1,395     $ 1,410     $ 1,385     $ 1,360   $ 1,385     $ 1,370     $ 1,335     $ 1,320  
  International ASP   $ 1,555     $ 1,660     $ 1,560     $ 1,530   $ 1,575     $ 1,485     $ 1,455     $ 1,355  
                                                               
Invisalign Clear Aligner Cases Shipped by Geography:                                                              
  North America     55,180       59,230       61,190       62,990     238,585       65,280       72,685       70,610  
    North American Orthodontists     26,890       28,520       30,070       29,890     115,370       32,235       35,420       35,885  
    North American GP Dentists     28,290       30,710       31,120       33,100     123,215       33,045       37,265       34,725  
  International     16,190       16,790       18,170       19,600     70,750       19,985       22,595       21,905  
    Total Cases Shipped     71,370       76,020       79,360       82,590     309,335       85,265       95,280       92,515  
                                                               
Invisalign Clear Aligner Cases Shipped by Product:                                                              
  Invisalign Full     48,110       51,100       51,360       55,700     206,270       57,145       62,510       57,400  
  Invisalign Express/Lite     10,500       11,310       11,020       11,385     44,215       12,855       15,300       14,610  
  Invisalign Teen     7,930       8,615       11,730       9,810     38,080       9,935       11,860       15,265  
  Invisalign Assist     4,830       4,995       5,250       5,695     20,770       5,330       5,610       5,240  
    Total Cases Shipped     71,370       76,020       79,360       82,590     309,335       85,265       95,280       92,515  
                                                               
Number of Invisalign Doctors Cases Shipped to:                                                              
  North American Orthodontists     4,150       4,160       4,260       4,280     5,280       4,460       4,575       4,660  
  North American GP Dentists     10,250       10,665       11,040       10,875     17,305       11,365       12,120       11,925  
  International     4,150       4,260       4,590       4,795     7,625       5,085       5,480       5,400  
    Total Doctors Cases were Shipped to Worldwide     18,550       19,085       19,890       19,950     30,210       20,910       22,175       21,985  
                                                                 
Invisalign Doctor Utilization Rates*:                                                              
  North American Orthodontists     6.5       6.9       7.1       7.0     21.9       7.2       7.7       7.7  
  North American GP Dentists     2.8       2.9       2.8       3.0     7.1       2.9       3.1       2.9  
  International     3.9       3.9       4.0       4.1     9.3       3.9       4.1       4.1  
    Total Utilization Rates     3.9       4.0       4.0       4.1     10.2       4.1       4.3       4.2  
  * # of cases shipped/# of doctors to whom cases were shipped                                                              
Number of Invisalign Doctors Trained:                                                              
  North American Orthodontists     75       80       100       100     355       90       95       125  
  North American GP Dentists     715       765       630       855     2,960       720       995       675  
  International     165       520       855       970     2,510       715       965       685  
    Total Doctors Trained Worldwide     955       1,365       1,585       1,925     5,825       1,525       2,055       1,485  
    Total to Date Worldwide     64,780       66,145       67,730       69,655     69,655       71,180       73,235       74,720  
                                                               
Scanner and CAD/CAM Services Revenue:                                                              
  North America Scanner and CAD/CAM Services   $ -     $ 5,241     $ 9,098     $ 9,611   $ 23,950     $ 11,120     $ 11,752     $ 9,439  
  International Scanner and CAD/CAM Services     -       1,198       2,518       362     4,078       631       205       332  
    Total Scanner and CAD/CAM Revenue   $ -     $ 6,439     $ 11,616     $ 9,973   $ 28,028     $ 11,751     $ 11,957     $ 9,771  
                                                                 
  Scanner Revenue   $ -     $ 2,735     $ 5,420     $ 5,228   $ 13,383     $ 5,361     $ 6,032     $ 4,023  
  CAD/CAM Services Revenue     -       3,704       6,196       4,745     14,645       6,390       5,925       5,748  
    Total Scanner and CAD/CAM Revenue   $ -     $ 6,439     $ 11,616     $ 9,973   $ 28,028     $ 11,751     $ 11,957     $ 9,771  
                                                               
Total Revenue by Geography:                                                              
  Total North America Revenue   $ 74,258     $ 84,996     $ 88,776     $ 91,400   $ 339,430     $ 97,991     $ 104,749     $ 99,007  
  Total International Revenue     25,179       29,096       30,864       30,416     115,555       30,331       33,088       30,032  
  Total Non-case Revenue     5,419       5,994       6,254       7,089     24,756       6,757       7,789       7,457  
    Total Worldwide Revenue   $ 104,856     $ 120,086     $ 125,894     $ 128,905   $ 479,741     $ 135,079     $ 145,626     $ 136,496  
      YoY% growth     16.4 %     11.0 %     31.2 %     38.8 %   23.9 %     28.8 %     21.3 %     8.4 %
      QoQ% growth     12.9 %     14.5 %     4.8 %     2.4 %           4.8 %     7.8 %     -6.3 %
                                                               
Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals.                                                              
                 
                 
                 
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)            
                 
    Q4 2012
                 
    GAAP     Adjustment   (a) Non-GAAP
                 
Net Revenue   $134.2 - 137.8           $134.2 - 137.8
                 
Gross Profit   $96.2 - $99.3     $0.3     $96.5 - 99.6
                 
Gross Margin   71.7% - 72.1%           71.9% - 72.3%
                 
Operating Expenses   $73.6 - $74.9   (b) $1.0     $72.6 - $73.9
                 
Operating Margin   16.9% - 17.7%   (b)        17.8% - 18.7%
                 
Net Income per Diluted Share   $0.21 - $0.23   (b) $0.00     $0.21 - $0.23
                 
Stock Based Compensation Expense:                
Cost of Revenues   $0.5           $0.5
Operating Expenses   $5.2           $5.2
Total Stock Based Compensation Expense   $5.7           $5.7
                 
(a) Includes scanner and CAD/CAM services amortization of acquired intangibles assets, and severance and benefit costs.
(b) Excludes the impact of any potential impairment charge.
                 
Business Metrics:                
    Q4 2012            
Case Shipments   90.0K - 93.0K            
Cash, Cash Equivalents, and Marketable Securities   $385M - $395M *            
Capex   $11.0M - $12.5M            
Depreciation & Amortization   $3.7M - $4.1M            
Diluted Shares Outstanding   84.5M*            
                 
* Excludes any stock repurchases during the quarter