SOURCE: Align Technology

Align Technology

October 26, 2017 16:00 ET

Align Technology Announces Record Third Quarter 2017 Results

SAN JOSE, CA--(Marketwired - October 26, 2017) -

  • Q3 revenues up 38.3% year-over-year, up 8.1% sequentially to a record $385.3 million
  • Q3 total Invisalign case shipments up 32.8% year-over-year to 236.1 thousand
  • Q3 Invisalign case shipments to teenage patients up 46.3% year-over-year, up 26.5% sequentially
  • Q3 scanner and services revenues up 25.0% year-over-year, up 23.2% sequentially to $43.7 million
  • Q3 diluted EPS $1.01, up 60.3% year-over-year

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the third quarter ended September 30, 2017. Invisalign case shipments in the third quarter of 2017 (Q3'17) were 236.1 thousand, a 32.8% increase year-over-year. North America and International case shipments were up year-over-year 25.0% and 47.4%, respectively. Q3'17 Invisalign case shipments to teenage patients were 69.8 thousand, a 46.3% increase year-over-year. For Q3'17, revenues were $385.3 million, a 38.3% increase year-over-year, and net profit was $82.6 million, or $1.01 per diluted share, up 60.3% per diluted share compared to the same period in the prior year.

Commenting on Align's Q3 2017 results, Align Technology President and CEO Joe Hogan said, "I'm pleased to report another strong quarter and results that exceeded our expectations across our key financial metrics including revenue, volume, margins, and EPS. Third quarter revenues increased 38.3% year-over-year driven by increased Invisalign volumes across all our geographies, as well as strong growth from iTero scanners. Our strong third quarter results also reflect accelerated growth from teenager patients in both North America and the Asia Pacific region, with total Invisalign shipments up 46.3% year-over-year and up 26.5% from the second quarter. On a sequential basis, revenues increased 8.1% driven by continued strength across Asia Pacific, which offset expected seasonality in Europe, as well as higher than expected revenues from shipments to SmileDirectClub."

GAAP Summary Financial Comparisons
Third Quarter Fiscal 2017

   Q3'17  Q2'17  Q3'16  Q/Q Change  Y/Y Change
Invisalign Case Shipments*  236,065  231,890  177,755  +1.8%  +32.8%
Net Revenues  $385.3M  $356.5M  $278.6M  +8.1%  +38.3%
 Clear Aligner**  $341.6M  $321.0M  $243.7M  +6.4%  +40.2%
 Scanner & Services  $43.7M  $35.4M  $34.9M  +23.2%  +25.0%
Net Profit  $82.6M  $69.2M  $51.4M  +19.3%  +60.7%
Diluted EPS  $1.01  $0.85  $0.63  +$0.16  +$0.38

Note: Changes and percentages are based on actual values and may affect totals due to rounding
* Invisalign Shipment figures do not include SmileDirectClub aligners
** Clear aligner revenue includes revenues from Invisalign clear aligners and SmileDirectClub aligners

As of September 30, 2017, Align had $737.9 million in cash, cash equivalents and marketable securities compared to $676.6 million as of June 30, 2017. During Q3'17, Align concluded its previously announced $50.0 million accelerated stock repurchase program (ASR) receiving a total of 0.4 million shares at a weighted average share price of $146.48 under the ASR. We have $250.0 million remaining available for repurchases under the existing stock repurchase authorization.

Q3 2017 Business Highlights

  • Align Technology Introduces a New Brand Identity for iTero® Scanning System and Tools: Align announced a new global brand identity for the company's leading iTero® scanning system and innovative tools at the recent bi-annual Invisalign GP Summit customer event. The introduction of a new, vibrant brand identity for the iTero scanner reflects its critical and central role in digital treatment and the practice of the future.
  • Patterson Dental and Align Technology Announce Distribution Agreement for iTero® Element Intraoral Scanning System: Align announced a distribution agreement for Align's iTero Element intraoral scanning system. This agreement provides access to Patterson's sales force and general dentist customers who are looking to grow their business through practice digitization. The iTero scanner enables dentists to scan in as little as 60 seconds, visualize changes in dentition, and perform restorative and orthodontic workflows that enhance their patient care and help them grow their practice.
  • Align Technology Moves Corporate Headquarters to New Buildings in San Jose, California: In August, Align relocated its corporate headquarters to a new location at 2820 Orchard Parkway, San Jose, CA. The Company had purchased the new buildings in January 2017 in anticipation of the lease expiration for its prior location.
  • Align Technology Expands Its Presence in Raleigh, North Carolina with Larger Office to Support Continued Headcount Growth: Align has opened a larger office in Raleigh, North Carolina to accommodate headcount growth and leverage the area's diverse and broad-based talent resources. Align intends to hire more than 200 employees over the next several years in Raleigh in various areas illustrating its commitment to driving continued innovation and supporting its expanding customer base globally.
  • Align Technology Opens First Office in Canada to Support Continued Growth: In August, Align opened its' first office in Canada to support continued growth across the region. Canada is Align's second largest country market and has a large opportunity for expansion and accelerated growth. Sian Roberts, who joined Align earlier this year as VP and General Manager, will lead the strategy and execution for Canada.

Q4 2017 Business Outlook
For the fourth quarter of 2017 (Q4'17), Align provides the following guidance:

  • Invisalign case shipments in the range of 245 thousand to 250 thousand, up approximately 29% to 32% over the same period a year ago.
  • Net revenues in the range of $391 million to $398 million, up approximately 33% to 36% over the same period a year ago.
  • Diluted EPS in the range of $0.92 to $0.95.

Align Web Cast and Conference Call
Align will host a conference call today, October 26, 2017 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter 2017 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 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 13671493 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 November 9, 2017.

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 for more information.

For additional information about the Invisalign system or to find an Invisalign provider in your area, please visit For additional information about iTero digital scanning system, please visit

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 2017, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, diluted earnings per share, tax rate and case shipments. 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, Align's ability to protect its intellectual property rights, continued compliance with regulatory requirements, competition from existing and new competitors, 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, 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, the security of customer and/or patient data is compromised for any reason, 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 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, 2016, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2017, and its latest Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which was filed with the SEC on August 3, 2017. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

(in thousands, except per share data)
   Three Months Ended  Nine Months Ended
   September 30,
 September 30,
 September 30,
 September 30,
Net revenues  $385,267  $278,589  $1,052,090  $786,671
Cost of net revenues   92,779   69,387   253,060   191,626
Gross profit   292,488   209,202   799,030   595,045
Operating expenses:                
 Selling, general and adminstrative   169,524   126,708   483,636   360,385
 Research and development   24,201   20,415   71,389   54,111
  Total operating expenses   193,725   147,123   555,025   414,496
Income from operations   98,763   62,079   244,005   180,549
Interest and other income (expense), net   3,750   1,463   8,607   1,161
Net income before provision for income taxes and equity in losses of investee   102,513   63,542   252,612   181,710
Provision for income taxes   18,344   11,698   26,508   39,172
Equity in losses of investee, net of tax   1,614   477   4,950   477
Net income  $82,555  $51,367  $221,154  $142,061
Net income per share:                
 Basic  $1.03  $0.64  $2.76  $1.78
 Diluted  $1.01  $0.63  $2.71  $1.74
Shares used in computing net income per share:                
 Basic   80,163   79,977   80,086   79,920
 Diluted   81,789   81,466   81,757   81,523
(in thousands)
   September 30,
 December 31,
Current assets:      
 Cash and cash equivalents  $362,613  $389,275
 Marketable securities, short-term   316,454   250,981
 Accounts receivable, net   321,328   247,415
 Inventories   36,941   27,131
 Prepaid expenses and other current assets   63,667   38,176
  Total current assets   1,101,003   952,978
Marketable securities, long-term   58,842   59,783
Property, plant and equipment, net   295,901   175,167
Equity method investments   52,875   45,061
Goodwill and intangible assets, net   90,070   81,998
Deferred tax assets   73,532   67,844
Other assets   25,400   13,320
  Total assets  $1,697,623  $1,396,151
Current liabilities:        
 Accounts payable  $45,942  $28,596
 Accrued liabilities   173,851   134,332
 Deferred revenues   241,576   191,407
  Total current liabilities   461,369   354,335
Income tax payable   45,375   45,133
Other long-term liabilities   8,921   1,294
  Total liabilities   515,665   400,762
Total stockholders' equity   1,181,958   995,389
  Total liabilities and stockholders' equity  $1,697,623  $1,396,151
   Q1  Q2  Q3  Q4  Fiscal  Q1  Q2  Q3
   2016  2016  2016  2016  2016  2017  2017  2017
Invisalign Average Selling Price (ASP):                        
 Worldwide ASP  $1,255  $1,285  $1,285  $1,230  $1,265  $1,270  $1,285  $1,310
 International ASP  $1,315  $1,345  $1,365  $1,315  $1,335  $1,325  $1,335  $1,390
Invisalign Cases Shipped by Geography:                                
 North America   110,500   114,855   115,900   122,555   463,810   132,885   146,510   144,870
 International   53,195   62,140   61,855   67,500   244,690   75,175   85,380   91,195
  Total Cases Shipped   163,695   176,995   177,755   190,055   708,500   208,060   231,890   236,065
   YoY % growth   25.2%   22.4%   20.5%   18.5%   21.5%   27.1%   31.0%   32.8%
   QoQ % growth   2.1%   8.1%   0.4%   6.9%       9.5%   11.5%   1.8%
Number of Invisalign Doctors Cases Were Shipped To:                            
 North America   22,355   22,575   22,570   23,265   34,065   23,910   24,695   24,845
 International   11,280   12,485   12,720   13,635   20,415   14,955   16,570   17,760
  Total Doctors Cases Shipped To   33,635   35,060   35,290   36,900   54,480   38,865   41,265   42,605
Invisalign Doctor Utilization Rates*:                                
 North America   4.9   5.1   5.1   5.3   13.6   5.6   5.9   5.8
  North American Orthodontists   10.4   10.7   11.1   11.3   36.6   12.6   13.6   13.8
  North American GP Dentists   3.0   3.1   3.0   3.2   7.6   3.1   3.3   3.1
 International   4.7   5.0   4.9   5.0   12.0   5.0   5.2   5.1
  Total Utilization Rates   4.9   5.1   5.0   5.2   13.0   5.4   5.6   5.5
* # of cases shipped/# of doctors to whom cases were shipped                            
Number of Invisalign Doctors Trained:                                
 North America   875   1,125   1,300   1,420   4,720   980   1,620   1,460
 International   1,605   1,760   1,315   2,280   6,960   2,280   3,255   2,820
  Total Doctors Trained Worldwide   2,480   2,885   2,615   3,700   11,680   3,260   4,875   4,280
  Total to Date Worldwide   106,270   109,155   111,770   115,470   115,470   118,730   123,605   127,885
Note: Historical public data may differ due to rounding. Additionally, rounding may affect totals.
*Invisalign business metrics exclude SmileDirectClub aligners.
(in thousands)
   Q1  Q2  Q3  Q4  Fiscal  Q1  Q2  Q3
   2016  2016  2016  2016  2016  2017  2017  2017
Stock-based Compensation (SBC)                        
 SBC included in Gross Profit  $961  $932  $995  $1,078  $3,966  $925  $768  $833
 SBC included in Operating Expenses   11,563   12,767   12,716   13,136   50,182   13,887   13,477   14,134
  Total SBC Expense  $12,524  $13,699  $13,711  $14,214  $54,148  $14,812  $14,245  $14,967
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)   
   Q4'17 Guidance   
Net Revenues  $391 - $398   
Gross Margin  75.0% - 75.5%   
Operating Expenses  $198 - $202   
Operating Margin  24.3% - 24.8%   
Net Income per Diluted Share  $0.92 - $0.95  (1)
Business Metrics:  Q4'17   
Case Shipments  245K - 250K   
Capital Expenditure  $55M - $60M   
Depreciation & Amortization  $10.5M - $11M   
Diluted Shares Outstanding  81.9M  (2)
Stock Based Compensation Expense  $15.3M   
Effective Tax Rate  22%  (1)
(1) Includes the benefit from the adoption of the new accounting standard update for share-based compensation
(2) Excludes any stock repurchases during the quarter

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