SOURCE: Align Technology

Align Technology

October 22, 2015 16:00 ET

Align Technology Announces Third Quarter 2015 Results

SAN JOSE, CA--(Marketwired - Oct 22, 2015) - Align Technology, Inc. (NASDAQ: ALGN)

  • Q3 worldwide Clear Aligner shipments of 147.5 thousand, up 23.3% year-over-year, with North America up 18.6% and International up 35.1%
  • Q3 Clear Aligner teenage shipments of 40.6 thousand, up 22.3% year-over-year
  • Q3 revenues of $207.6 million, up 9.4% year-over-year, and diluted EPS of $0.34

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the third quarter ended September 30, 2015. Clear Aligner shipments for the third quarter of 2015 (Q3'15) were 147.5 thousand, a 23.3% increase year-over-year. Net revenues for Q3'15 were $207.6 million, a 9.4% increase year-over-year from $189.9 million in the third quarter of 2014 (Q3'14). Net profit for Q3'15 was $27.6 million, or $0.34 per diluted share, compared to $38.2 million, or $0.47 per diluted share in Q3'14. Q3'15 reported revenue was lower by approximately $7.0 million, or approximately $0.06 per diluted share, due to Align's new Additional Aligners at No Charge policy that launched on July 18, 2015. As a result of this new policy, which provides free additional aligners for eligible Invisalign treatments, the Company now defers more revenue per treatment and will recognize this revenue in a future period as the additional aligners are shipped.

"Q3 was another good quarter, with revenues and EPS above the high-end of our guidance," said Joe Hogan, Align Technology President and CEO. "Our results were driven by strong Invisalign case volume, with growth across all customer channels and geographies, reflecting our highest year-over-year growth in North America in three years with continued strength coming from EMEA and APAC, expansion in low-stage product segment and seasonally strong uptake by teenage patients, which account for 75% of the Orthodontic market."

Summary Financial Comparisons
(In millions except for shipments and per share amounts)

                         
    Q3'15   Q2'15   Q3'14   Q/Q     Y/Y  
GAAP                        
Clear Aligner shipments     147,485     144,570     119,615     2.0 %     23.3 %
Net revenues   $ 207.6   $ 209.5   $ 189.9     (0.9) %     9.4 %
  Clear Aligner   $ 198.3   $ 200.8   $ 178.1     (1.3) %     11.3 %
  Scanner & Services   $ 9.3   $ 8.7   $ 11.7     7.8 %     (20.4) %
Net profit   $ 27.6   $ 31.4   $ 38.2     (11.9) %     (27.8) %
Net profit per share   $ 0.34   $ 0.39   $ 0.47   $ (0.05)     $ (0.13)  
                                   

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

As of September 30, 2015, Align had $630.0 million in cash, cash equivalents and marketable securities compared to $602.6 million as of December 31, 2014. During Q3'15, Align repurchased 662,000 shares of stock, including the final delivery of 332,000 shares related to the completion of our previously announced $70 million accelerated stock repurchase (ASR) and 330,000 shares amounting to $18.8 million in open market repurchases. There remains approximately $111.2 million available for repurchases under the existing stock repurchase authorization. These repurchases were collectively part of a three-year, $300 million stock repurchase program announced on April 23, 2014 of which the second $100 million was authorized to be purchased through April 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 does influence the rate at which the Company recognizes revenue.

Q4 2015 Business Outlook
For the fourth quarter of 2015 (Q4'15), Align provides the following guidance:

  • Clear Aligner case shipments in the range of 154.9 thousand to 157.4 thousand, up approximately 22% to 24% over the same period a year-ago.
  • Net revenues in the range of $223.0 million to $227.9 million.
  • Diluted EPS in the range of $0.50 to $0.53.

Q4'15 net revenues include the expected impact of approximately $7.0 million to $8.0 million, or approximately $0.06 to $0.07 per diluted share, due to the impact on deferred revenues from Align's new Additional Aligners at No Charge policy that launched on July 18, 2015.

Align Announces Patent Infringement and False Advertising Lawsuit Against SmileCareClub, Sharper Image, and Brookstone
In a separate press release today, Align announced that it has filed a lawsuit in the United States District Court for the Northern District of California against SmileCareClub LLC ("SmileCareClub"), Camelot SI, LLC d/b/a SharperImage.com ("Sharper Image"), and Brookstone, Inc. ("Brookstone") for patent infringement, false advertising, and unfair competition.

On October 21, 2015 Align and ClearCorrect agreed to mutually dismiss the claims and cross-claims in the California Superior Court action. This litigation is unrelated to Align's pending patent infringement case against ClearCorrect.

Align Web Cast and Conference Call
Align will host a conference call today, October 22, 2015 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third quarter 2015 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 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 13621393 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 29, 2015.

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 the expected impact that the "Additional Aligners at No Charge" policy will have on net revenues in the fourth quarter of 2015, in addition to certain other business metrics for the fourth quarter of 2015, including, but not limited to, anticipated net revenues, deferrals, 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, 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, 2014, which was filed with the Securities and Exchange Commission on February 26, 2015. 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  
    September 30,
2015
  September 30,
2014
  September 30,
2015
  September 30,
2014
 
                   
Net revenues   $ 207,636   $ 189,876   $ 615,210   $ 563,053  
                           
Cost of revenues     50,060     44,822     147,910     135,272  
                           
Gross profit     157,576     145,054     467,300     427,781  
                           
Operating expenses:                          
  Selling, general and adminstrative     101,751     80,653     290,657     246,175  
  Research and development     17,779     12,854     47,348     39,523  
Total operating expenses     119,530     93,507     338,005     285,698  
                           
Operating profit     38,046     51,547     129,295     142,083  
                           
Interest and other income (expense), net     (1,568 )   (1,999 )   (2,846 )   (1,491 )
                           
Profit before income taxes     36,478     49,548     126,449     140,592  
                           
Provision for income taxes     8,862     11,301     31,306     34,301  
                           
Net profit   $ 27,616   $ 38,247   $ 95,143   $ 106,291  
                           
Net profit per share                          
  - basic   $ 0.35   $ 0.47   $ 1.19   $ 1.31  
  - diluted   $ 0.34   $ 0.47   $ 1.17   $ 1.29  
                           
Shares used in computing net profit per share                          
  - basic     79,808     80,629     80,173     80,924  
  - diluted     81,092     82,014     81,576     82,443  
                             
 
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    September 30,
2015
  December 31,
2014
ASSETS        
         
Current assets:        
  Cash and cash equivalents   $ 174,040   $ 199,871
  Marketable securities, short-term     310,715     254,787
  Accounts receivable, net     148,395     129,751
  Inventories     18,939     15,928
  Prepaid expenses and other current assets     59,644     56,823
    Total current assets     711,733     657,160
             
Marketable securities, long-term     145,246     147,892
Property, plant and equipment, net     120,738     90,125
Goodwill and intangible assets, net     79,715     82,056
Deferred tax assets     14,542     3,099
Other assets     7,588     7,665
             
    Total assets   $ 1,079,562   $ 987,997
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
  Accounts payable   $ 32,599   $ 23,247
  Accrued liabilities     95,914     87,880
  Deferred revenues     115,998     90,684
    Total current liabilities     244,511     201,811
             
Other long term liabilities     36,792     33,415
             
    Total liabilities     281,303     235,226
             
Total stockholders' equity     798,259     752,771
             
  Total liabilities and stockholders' equity   $ 1,079,562   $ 987,997
               
 
ALIGN TECHNOLOGY, INC.
Q3 2015 FINANCIAL AND BUSINESS METRICS
(in thousands except average selling price, utilization and doctors trained)
 
                                                 
    Q1     Q2     Q3     Q4     Fiscal     Q1     Q2     Q3  
    2014     2014     2014     2014     2014     2015     2015     2015  
Invisalign Clear Aligner Net Revenues by Geography:                                                
  North America   $ 107,910     $ 111,648     $ 113,349     $ 113,670     $ 446,577     $ 118,844     $ 126,137     $ 124,085  
  International     49,848       55,988       53,439       60,467       219,742       55,920       61,896       61,265  
  Non-case*     10,481       12,099       11,350       12,300       46,230       12,265       12,784       12,942  
    Total Clear Aligner Net Revenues   $ 168,239     $ 179,735     $ 178,138     $ 186,437     $ 712,549     $ 187,029     $ 200,817     $ 198,292  
      YoY % growth     18.8 %     17.2 %     16.0 %     12.2 %     15.9 %     11.2 %     11.7 %     11.3 %
      QoQ % growth     1.2 %     6.8 %     -0.9 %     4.7 %             0.3 %     7.4 %     -1.3 %
  *includes Invisalign training, ancillary products, and retainers                                                                
                                                              -  
Average Invisalign Selling Price (ASP):                                                                
  Worldwide ASP   $ 1,405     $ 1,405     $ 1,395     $ 1,370     $ 1,395     $ 1,335     $ 1,300     $ 1,255  
  International ASP   $ 1,620     $ 1,625     $ 1,560     $ 1,510     $ 1,575     $ 1,410     $ 1,380     $ 1,325  
                                                                 
                                                                 
Invisalign Clear Aligner Cases Shipped by Geography:                                                                
  North America     81,420       84,850       85,405       86,855       338,530       91,110       99,630       101,260  
  International     30,760       34,450       34,210       40,050       139,470       39,670       44,940       46,225  
    Total Cases Shipped     112,180       119,300       119,615       126,905       478,000       130,780       144,570       147,485  
                                                                 
Number of Invisalign Doctors Cases Shipped To:                                                                
  North America     19,015       19,505       19,550       19,745       29,890       20,165       21,335       21,160  
  International     7,185       7,685       7,950       8,945       13,450       9,050       9,790       10,150  
    Total Doctors Cases Shipped To     26,200       27,190       27,500       28,690       43,340       29,215       31,125       31,310  
                                                                 
Invisalign Doctor Utilization Rates*:                                                                
  North America     4.3       4.4       4.4       4.4       11.3       4.5       4.7       4.8  
     North American Orthodontists     8.1       8.4       8.8       8.6       27.7       9.0       9.5       9.9  
     North American GP Dentists     2.9       2.9       2.8       2.9       6.9       2.9       3.0       2.9  
  International     4.3       4.5       4.3       4.5       10.4       4.4       4.6       4.6  
    Total Utilization Rates     4.3       4.4       4.4       4.4       11.0       4.5       4.6       4.7  
  * # of cases shipped/# of doctors to whom cases were shipped                                                                
                                                                 
Number of Invisalign Doctors Trained:                                                                
  North America     700       1,150       1,125       1,170       4,145       870       1,120       1,060  
  International     1,255       1,380       1,400       1,255       5,290       1,540       1,335       1,200  
    Total Doctors Trained Worldwide     1,955       2,530       2,525       2,425       9,435       2,410       2,455       2,260  
    Total to Date Worldwide     86,515       89,045       91,570       93,995       93,995       96,405       98,860       101,120  
                                                                 
Total Net Revenues:                                                                
  Clear Aligner Net Revenues   $ 168,239     $ 179,735     $ 178,138     $ 186,437     $ 712,549     $ 187,029     $ 200,817     $ 198,292  
  Scanner & Services Net Revenues     12,407       12,796       11,738       12,163       49,104       11,057       8,671       9,344  
    Total Worldwide Net Revenues   $ 180,646     $ 192,531     $ 189,876     $ 198,600     $ 761,653     $ 198,086     $ 209,488     $ 207,636  
      YoY % growth     17.6 %     17.5 %     15.4 %     11.4 %     15.4 %     9.7 %     8.8 %     9.4 %
      QoQ % growth     1.3 %     6.6 %     -1.4 %     4.6 %             -0.3 %     5.8 %     -0.9 %
                                                                 
Stock-based Compensation (SBC)                                                                
  SBC included in Gross Profit   $ 800     $ 940     $ 865     $ 965     $ 3,570     $ 980     $ 970     $ 984  
  SBC included in Operating Expenses     8,300       9,370       9,045       9,510       36,225       10,670       11,860       13,677  
    Total SBC Expense   $ 9,100     $ 10,310     $ 9,910     $ 10,475     $ 39,795     $ 11,650     $ 12,830     $ 14,661  
                                                                 
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.
 
Financial Outlook    
(in millions, except per share amounts and percentages)    
     
    Q4'15 Guidance
     
    GAAP
     
Net Revenues   $223.0 - $227.9
     
Gross Margin   75.7% - 76.2%
     
Operating Expenses   $114.7 - $116.3
     
Operating Margin   24.3% - 25.1%
     
Net Income per Diluted Share   $0.50 - $0.53
     
Q4'15 net revenues include the expected impact of approximately $7.0 million to $8.0 million, or approximately $0.06 to $0.07 per diluted share, due to the impact on deferred revenues from Align's new Additional Aligners at No Charge policy that launched on July 18, 2015.
 
Business Metrics:   Q4'15
     
Case Shipments   154.9K - 157.4K
Capital Expenditure   $20M - $25M
Depreciation & Amortization   $5.0M - $5.5M
Diluted Shares Outstanding   81.4M*
Stock Based Compensation Expense   $14.2M
Tax Rate   24.5%
     
* Excludes any stock repurchases during the quarter