SOURCE: Align Technology

Align Technology

July 28, 2016 16:00 ET

Align Technology Announces Second Quarter 2016 Results

SAN JOSE, CA--(Marketwired - July 28, 2016) - Align Technology, Inc. (NASDAQ: ALGN) -

  • Q2 revenues up 28.6% year-over-year to $269.4 million
  • Q2 results driven by Clear aligner revenues up 21.2% year-over-year and Scanner revenues up almost 200% year-over-year
  • Q2 Clear Aligner shipments up 22.4% year-over-year to 177 thousand cases, international shipments up 38.3% year-over-year
  • Diluted EPS $0.62, up $0.23 year-over-year

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the second quarter ended June 30, 2016. Clear Aligner case shipments in the second quarter of 2016 (Q2'16) were 177 thousand, a 22.4% increase year-over-year. For Q2'16, revenues were $269.4 million, a 28.6% increase year-over-year, and net profit was $50.1 million, or $0.62 per diluted share, up $0.23 per diluted share compared to the same period in the prior year.

"Q2 was driven by better than expected revenue due to continued strong year-over-year Invisalign volume across our customer base and record utilization, with international case volume up 38.3%, and North America up 15.3%," said Joe Hogan, Align Technology President and CEO. "We also had continued strong demand for our iTero Element with record shipments this quarter resulting in revenue growth of almost 200% year-over-year."

GAAP Summary Financial Comparisons

Second Quarter Fiscal 2016

   Q2'16  Q1'16  Q2'15  Q/Q Change   Y/Y Change  
 Clear Aligner Shipments   176,995   163,695   144,570   +8.1 % +22.4 %
 Net Revenues  $269.4M  $238.7M  $209.5M   +12.8 % +28.6 %
  Clear Aligner  $243.4M  $219.7M  $200.8M   +10.8 % +21.2 %
  Scanner & Services  $26.0M  $19.0M  $8.7M   +36.3 % +199.0 %
 Net Profit  $50.1M  $40.5M  $31.4M   +23.7 % +60.0 %
 Diluted EPS  $0.62  $0.50  $0.39  $0.12   +$0.23  

Note: Changes and percentages are based on actual values and may effect totals due to rounding

As of June 30, 2016, Align had $685.0 million in cash, cash equivalents and marketable securities compared to $678.7 million as of December 31, 2015. On May 3, 2016, as part of our $300.0 million April 2014 stock repurchase program, we entered into an Accelerated Stock Repurchase agreement and funded the repurchase of $50.0 million of our common stock. On that date we received an initial delivery of approximately 0.5 million shares based on current market prices. The final number of shares to be repurchased will be based on our volume-weighted average stock price during the term of the agreement, less an agreed upon discount. Upon completion of this agreement, we will commence repurchasing an additional $50.0 million of our common stock on the open market. These two actions will complete the April 2014 stock repurchase program. During the quarter the Company also announced a new plan to repurchase up to an additional $300.0 million of the Company's stock, all of which remains available for repurchase as of June 30, 2016.

Additional Aligners at No Charge Effective July 18, 2015

Align implemented its new Additional Aligners policy on July 18, 2015 in which the Company no longer distinguishes between mid-course corrections and case refinements providing doctors the ability to order additional aligners to address either treatment need at no charge, subject to certain requirements. These changes were effective for all new Invisalign Full, Teen, and Assist treatments shipped worldwide after July 18, 2015, as well as any cases that were open as of this date. While this policy change was largely immaterial to the Company's cash flows, it did impact the timing at which the Company recognizes revenue. The Company estimates Q2'16 revenues and pre-tax income were lower by approximately $8.3 million due to this change.

Q3 2016 Business Outlook

For the third quarter of 2016 (Q3'16), Align provides the following guidance:

  • Clear Aligner case shipments in the range of 174.2 thousand to 176.9 thousand, up approximately 18.1% to 19.9% over the same period a year ago.
  • Net revenues in the range of $267.2 million to $273.5 million.
  • Diluted EPS in the range of $0.49 to $0.52.

Align Technology to Supply Non-Invisalign Clear Aligners to SmileDirect Club in North America

In a separate press release today, Align announced a supply agreement with SmileDirectClub to manufacture non-Invisalign clear aligners for SmileDirectClub's doctor-directed, at-home program for affordable, cosmetic teeth straightening.

Align Web Cast and Conference Call

Align will host a conference call today, July 28, 2016 at 4:30 p.m. ET, 1:30 p.m. PT, to review its second quarter 2016 results, discuss future operating trends and the 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's Investor Relations web site at http://investor.aligntech.com. To access the conference call, please dial 201-689-8261. An archived audio web cast will be available beginning approximately one hour after the call's conclusion and will remain available for approximately 12 months. Additionally, a telephonic replay of the call can be accessed by dialing 877-660-6853 with conference number 13640324 followed by #. For international callers, please dial 201-612-7415 and use the same conference number referenced above. The telephonic replay will be available through 5:30 p.m. ET on August 11, 2016.

About Align Technology, Inc.

Align Technology is the leader in modern Clear Aligner orthodontics that designs, manufactures and markets the Invisalign® system, which provides dental professionals with a range of treatment options for adults and teenagers. Align also offers the iTero 3D digital scanning system and services for orthodontic and restorative dentistry. Align was founded in March 1997 and received FDA clearance to market the Invisalign system in 1998. Visit www.aligntech.com for more information.

For additional information about the Invisalign system or to find an Invisalign provider in your area, please visit www.invisalign.com. For additional information about the iTero 3D digital scanning system, please visit www.itero.com.

Forward-Looking Statement

This news release, including the tables below, contains forward-looking statements, including statements regarding certain business metrics for the third quarter of 2016, including, but not limited to, anticipated net revenues, gross margin, operating expenses, operating profit, diluted earnings per share, 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, 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, our ability to successfully achieve the anticipated benefits from the scanner and services business, 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 year ended December 31, 2015, which was filed with the Securities and Exchange Commission (SEC) on February 25, 2016, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which was filed with the SEC on May 5, 2016. 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,
   
2016
 2015  
2016
 2015
                 
Net revenues  $269,362  $209,488  $508,082  $407,574
                 
Cost of net revenues   64,146   50,854   122,239   97,850
                 
Gross profit   205,216   158,634   385,843   309,724
                 
Operating expenses:                
 Selling, general and adminstrative   121,467   100,625   233,677   188,906
 Research and development   18,613   15,684   33,696   29,569
Total operating expenses   140,080   116,309   267,373   218,475
                 
Income fom operations   65,136   42,325   118,470   91,249
                 
Interest and other income (expense), net   125   174   (302)   (1,278)
                 
Net income before provision for income taxes   65,261   42,499   118,168   89,971
                 
Provision for income taxes   15,113   11,149   27,474   22,444
                 
Net income  $50,148  $31,350  $90,694  $67,527
                 
Net income per share                
 Basic  $0.63  $0.39  $1.14  $0.84
 Diluted  $0.62  $0.39  $1.11  $0.83
                 
Shares used in computing net income per share                
 Basic   79,951   80,257   79,891   80,358
 Diluted   81,281   81,394   81,440   81,729
             
     
ALIGN TECHNOLOGY, INC.    
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands)    
       
   June 30,
2016
 December 31,
2015
ASSETS        
         
Current assets:        
 Cash and cash equivalents  $167,706  $167,714
 Marketable securities, short-term   404,107   359,581
 Accounts receivable, net   192,660   158,550
 Inventories   22,992   19,465
 Prepaid expenses and other current assets   37,942   26,700
  Total current assets   825,407   732,010
         
 Marketable securities, long-term   113,158   151,370
 Property, plant and equipment, net   161,685   136,473
 Goodwill and intangible assets, net   83,749   79,162
 Deferred tax assets   60,051   51,416
 Other assets   7,223   8,202
         
  Total assets  $1,251,273  $1,158,633
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
 Current liabilities:        
 Accounts payable  $30,927  $34,354
 Accrued liabilities   107,505   107,765
 Deferred revenues   160,557   129,553
  Total current liabilities   298,989   271,672
         
 Income tax payable   41,244   37,512
 Other long term liabilities   1,182   1,523
  Total liabilities   341,415   310,707
         
 Total stockholders' equity   909,858   847,926
         
  Total liabilities and stockholders' equity  $1,251,273  $1,158,633
       
 
 
                      
ALIGN TECHNOLOGY, INC.              
Q2 2016 FINANCIAL AND BUSINESS METRICS              
(in thousands except average selling price, utilization and doctors trained)

               
   Q1  Q2  Q3  Q4  Fiscal  Q1  Q2
   2015  2015  2015  2015  2015  2016  2016
Invisalign Clear Aligner Net Revenues by Geography:                            
 North America  $118,844  $126,137  $124,085  $129,663  $498,729  $135,699  $143,909
 International   55,920   61,896   61,265   70,980   250,061   69,850   83,703
 Non-case*   12,265   12,784   12,942   13,405   51,396   14,149   15,824
  Total Clear Aligner Net Revenues  $187,029  $200,817  $198,292  $214,048  $800,186  $219,698  $243,436
   YoY % growth   11.2%   11.7%   11.3%   14.8%   12.3%   17.5%   21.2%
   QoQ % growth   0.3%   7.4%   -1.3%   7.9%       2.6%   10.8%
  *includes Invisalign training, ancillary products, and retainers                            
                             
Average Invisalign Selling Price (ASP):                            
 Worldwide ASP  $1,335  $1,300  $1,255  $1,250  $1,285  $1,255  $1,285
 International ASP  $1,410  $1,380  $1,325  $1,315  $1,355  $1,315  $1,345
                             
                             
Invisalign Clear Aligner Cases Shipped by Geography:                            
 North America   91,110   99,630   101,260   106,390   398,390   110,500   114,855
 International   39,670   44,940   46,225   54,010   184,845   53,195   62,140
  Total Cases Shipped   130,780   144,570   147,485   160,400   583,235   163,695   176,995
   YoY % growth   16.6%   28.9%   23.6%   26.4%   22.0%   25.2%   22.4%
   QoQ % growth   3.1%   10.5%   2.0%   8.8%       2.1%   8.1%
                             
Number of Invisalign Doctors Cases Shipped To:                            
 North America   20,165   21,335   21,160   21,835   31,710   22,355   22,575
 International   9,050   9,790   10,150   10,865   16,460   11,280   12,485
  Total Doctors Cases Shipped To   29,215   31,125   31,310   32,700   48,170   33,635   35,060
                             
Invisalign Doctor Utilization Rates*:                            
 North America   4.5   4.7   4.8   4.9   12.6   4.9   5.1
  North American Orthodontists   9.0   9.5   9.9   9.9   31.8   10.4   10.7
  North American GP Dentists   2.9   3.0   2.9   3.1   7.4   3.0   3.1
 International   4.4   4.6   4.6   5.0   11.2   4.7   5.0
  Total Utilization Rates   4.5   4.6   4.7   4.9   12.1   4.9   5.1
  * # of cases shipped/# of doctors to whom cases were shipped                            
                             
Number of Invisalign Doctors Trained:                            
 North America   870   1,120   1,060   1,270   4,320   875   1,125
 International   1,540   1,335   1,200   1,400   5,475   1,605   1,760
  Total Doctors Trained Worldwide   2,410   2,455   2,260   2,670   9,795   2,480   2,885
  Total to Date Worldwide   96,405   98,860   101,120   103,790   103,790   106,270   109,155
                             
Total Net Revenues:                            
 Clear Aligner Net Revenues  $187,029  $200,817  $198,292  $214,048  $800,186  $219,698  $243,436
 Scanner & Services Net Revenues   11,057   8,671   9,344   16,228   45,300   19,022   25,926
  Total Worldwide Net Revenues  $198,086  $209,488  $207,636  $230,276  $845,486  $238,720  $269,362
   YoY % growth   9.7%   8.8%   9.4%   15.9%   11.0%   20.5%   28.6%
   QoQ % growth   -0.3%   5.8%   -0.9%   10.9%       3.7%   12.8%
                             
Stock-based Compensation (SBC)                            
 SBC included in Gross Profit  $980  $970  $984  $1,008  $3,942  $961  $932
 SBC included in Operating Expenses   10,670   11,860   13,677   12,799   49,006   11,563   12,767
  Total SBC Expense  $11,650  $12,830  $14,661  $13,807  $52,948  $12,524  $13,699
                             
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 appropriate 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 the press release.
   
   
   
Financial Outlook
(in millions, except per share amounts and percentages)
   
  Q3'16 Guidance
   
  GAAP
   
Net Revenues $267.2 - $273.5
   
Gross Margin 74.4% - 74.8%
   
Operating Expenses $147.1 - $148.1
   
Operating Margin 19.3% - 20.6%
   
Net Income per Diluted Share $0.49 - $0.52
   
   
Business Metrics: Q3'16
   
Case Shipments 174.2K - 176.9K
Capital Expenditure $20M - $25M
Depreciation & Amortization $7.0M - $7.5M
Diluted Shares Outstanding 81.4M*
Stock Based Compensation Expense $14.4M
Tax Rate 24.5%
   
* Excludes any stock repurchases during the quarter