SOURCE: Align Technology

Align Technology

November 07, 2016 16:00 ET

Align Technology Announces Third Quarter 2016 Results

SAN JOSE, CA--(Marketwired - November 07, 2016) -

  • Q3 revenues up 34.2% year-over-year to $278.6 million
  • Q3 results driven by Clear Aligner revenues up 22.9% year-over-year and Scanner revenues up 273.7% year-over-year.
  • Q3 Clear Aligner shipments up 20.5% year-over-year to 177.8 thousand cases, international shipments up 33.8% year-over-year
  • Diluted EPS $0.63, up $0.29 year-over-year

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the third quarter ended September 30, 2016. Clear Aligner case shipments in the third quarter of 2016 (Q3'16) were 177.8 thousand, a 20.5% increase year-over-year. For Q3'16, revenues were $278.6 million, a 34.2% increase year-over-year, and net profit was $51.4 million, or $0.63 per diluted share, up $0.29 per diluted share compared to the same period in the prior year.

"Q3 was a solid quarter with revenue, margins and EPS above the high end of our guidance. Our results were driven by record Invisalign case volume, up 20.5% year-over-year reflecting growth across all customer channels and geographies, as well as continued demand for iTero scanners," said Joe Hogan, Align Technology President and CEO.

GAAP Summary Financial Comparisons
Third Quarter Fiscal 2016

   Q3'16  Q2'16  Q3'15  Q/Q Change  Y/Y Change
Clear Aligner Shipments  177,755  176,995  147,485  +0.4%  +20.5%
Net Revenues  $278.6M  $269.4M  $207.6M  +3.4%  +34.2%
 Clear Aligner  $243.7M  $243.4M  $198.3M  +0.1%  +22.9%
 Scanner & Services  $34.9M  $25.90M  $9.3M  +34.7%  +273.7%
Net Profit  $51.4M  $50.1M  $27.6M  +2.4%  +86.0%
Diluted EPS  $0.63  $0.62  $0.34  $0.01  $0.29
           

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

As of September 30, 2016, Align had $675.8 million in cash, cash equivalents and marketable securities compared to $678.7 million as of December 31, 2015. During Q3'16, Align concluded our previously announced $50 million accelerated stock repurchase (ASR) with final delivery of 143,310 shares and purchased an additional 88,000 shares amounting to $8.2 million in open market repurchases. These repurchases were collectively part of a three-year, $300 million stock repurchase program announced on April 23, 2014 ("the Align 2014 Repurchase Plan") of which the third $100 million was authorized to be purchased through April 2017. In addition to the April 2014 Repurchase Plan, Align also announced on April 28, 2016 a new plan to repurchase up to an additional $300.0 million of the Company's stock. There remains approximately $341.8 million available for repurchases under the two existing stock repurchase authorizations.

Q4 2016 Business Outlook

For the fourth quarter of 2016 (Q4'16), Align provides the following guidance:

  • Clear Aligner case shipments in the range of 182.5 thousand to 184.5 thousand, up approximately 13.8% to 15.0% over the same period a year ago.
  • Net revenues in the range of $289.2 million to $293.9 million.
  • Diluted EPS in the range of $0.64 to $0.67.

Align Web Cast and Conference Call

Align will host a conference call today, November 7, 2016 at 4:30 p.m. ET, 1:30 p.m. PT, to review its third 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 webcast, 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 13646649 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 21, 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 fourth 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 June 30, 2016, which was filed with the SEC on August 4, 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 Nine Months Ended
  September 30, 
 September 30, 
  
2016
 2015 
2016
 2015
         
Net revenues $278,589 $207,636 $786,671 $615,210
             
Cost of net revenues  69,387  50,060  191,626  147,910
             
Gross profit  209,202  157,576  595,045  467,300
             
Operating expenses:            
 Selling, general and adminstrative  126,708  101,751  360,385  290,657
 Research and development  20,415  17,779  54,111  47,348
Total operating expenses  147,123  119,530  414,496  338,005
             
Income fom operations  62,079  38,046  180,549  129,295
             
Interest and other income (expense), net  1,463  (1,568)  1,161  (2,846)
             
Net income before provision for income taxes and equity in losses of investee  63,542  36,478  181,710  126,449
             
Provision for income taxes  11,698  8,862  39,172  31,306
Equity in losses of investee, net of tax  477  -  477  -
             
Net income $51,367 $27,616 $142,061 $95,143
             
Net income per share            
 Basic $0.64 $0.35 $1.78 $1.19
 Diluted $0.63 $0.34 $1.74 $1.17
             
Shares used in computing net income per share            
 Basic  79,977  79,808  79,920  80,173
 Diluted  81,466  81,092  81,523  81,576
              
     
ALIGN TECHNOLOGY, INC.      
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS   
(in thousands)      
       
   September 30,
2016
 December 31,
2015
ASSETS      
       
Current assets:        
 Cash and cash equivalents  $419,948  $167,714
 Marketable securities, short-term   193,018   359,581
 Accounts receivable, net   244,992   158,550
 Inventories   26,341   19,465
 Prepaid expenses and other current assets   27,469   26,700
  Total current assets   911,768   732,010
         
Marketable securities, long-term   62,820   151,370
Property, plant and equipment, net   172,658   136,473
Equity method investments   46,268   -
Goodwill and intangible assets, net   82,987   79,162
Deferred tax assets   68,918   51,416
Other assets   13,474   8,202
         
  Total assets  $1,358,893  $1,158,633
         
   LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
 Accounts payable  $33,104  $34,354
 Accrued liabilities   132,538   107,765
 Deferred revenues   177,409   129,553
  Total current liabilities   343,051   271,672
         
Income tax payable   42,539   37,512
Other long term liabilities   993   1,523
  Total liabilities   386,583   310,707
         
Total stockholders' equity   972,310   847,926
         
  Total liabilities and stockholders' equity  $1,358,893  $1,158,633
         
ALIGN TECHNOLOGY, INC.
Q3 2016 FINANCIAL AND BUSINESS METRICS
(in thousands except average selling price, utilization and doctors trained)
                        
   Q1  Q2  Q3  Q4 Fiscal  Q1  Q2  Q3
   2015  2015  2015  2015 2015  2016  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  $143,800
 International   55,920   61,896   61,265   70,980  250,061   69,850   83,703   84,304
 Non-case*   12,265   12,784   12,942   13,405  51,396   14,149   15,824   15,564
  Total Clear Aligner Net Revenues  $187,029  $200,817  $198,292  $214,048 $800,186  $219,698  $243,436  $243,668
   YoY % growth   11.2%   11.7%   11.3%   14.8%  12.3%   17.5%   21.2%   22.9%
   QoQ % growth   0.3%   7.4%   -1.3%   7.9%      2.6%   10.8%   0.1%
 *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  $1,285
 International ASP  $1,410  $1,380  $1,325  $1,315 $1,355  $1,315  $1,345  $1,365
                                
                                
Invisalign Clear Aligner Cases Shipped by Geography:                               
 North America   91,110   99,630   101,260   106,390  398,390   110,500   114,855   115,900
 International   39,670   44,940   46,225   54,010  184,845   53,195   62,140   61,855
  Total Cases Shipped   130,780   144,570   147,485   160,400  583,235   163,695   176,995   177,755
   YoY % growth   16.6%   28.9%   23.6%   26.4%  22.0%   25.2%   22.4%   20.5%
   QoQ % growth   3.1%   10.5%   2.0%   8.8%      2.1%   8.1%   0.4%
                                
Number of Invisalign Doctors Cases Shipped To:                               
 North America   20,165   21,335   21,160   21,835  31,710   22,355   22,575   22,570
 International   9,050   9,790   10,150   10,865  16,460   11,280   12,485   12,720
  Total Doctors Cases Shipped To   29,215   31,125   31,310   32,700  48,170   33,635   35,060   35,290
                                
Invisalign Doctor Utilization Rates*:                               
 North America   4.5   4.7   4.8   4.9  12.6   4.9   5.1   5.1
  North American Orthodontists   9.0   9.5   9.9   9.9  31.8   10.4   10.7   11.1
  North American GP Dentists   2.9   3.0   2.9   3.1  7.4   3.0   3.1   3.0
 International   4.4   4.6   4.6   5.0  11.2   4.7   5.0   4.9
  Total Utilization Rates   4.5   4.6   4.7   4.9  12.1   4.9   5.1   5.0
 * # 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   1,300
 International   1,540   1,335   1,200   1,400  5,475   1,605   1,760   1,315
  Total Doctors Trained Worldwide   2,410   2,455   2,260   2,670  9,795   2,480   2,885   2,615
  Total to Date Worldwide   96,405   98,860   101,120   103,790  103,790   106,270   109,155   111,770
                                
Total Net Revenues:                               
 Clear Aligner Net Revenues  $187,029  $200,817  $198,292  $214,048 $800,186  $219,698  $243,436  $243,668
 Scanner & Services Net Revenues   11,057   8,671   9,344   16,228  45,300   19,022   25,926   34,921
  Total Worldwide Net Revenues  $198,086  $209,488  $207,636  $230,276 $845,486  $238,720  $269,362  $278,589
   YoY % growth   9.7%   8.8%   9.4%   15.9%  11.0%   20.5%   28.6%   34.2%
   QoQ % growth   -0.3%   5.8%   -0.9%   10.9%      3.7%   12.8%   3.4%
                                
Stock-based Compensation (SBC)                               
 SBC included in Gross Profit  $980  $970  $984  $1,008 $3,942  $961  $932  $995
 SBC included in Operating Expenses   10,670   11,860   13,677   12,799  49,006   11,563   12,767   12,716
  Total SBC Expense  $11,650  $12,830  $14,661  $13,807 $52,948  $12,524  $13,699  $13,711
                                
 

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)
   
  Q4'16 Guidance
   
  GAAP
   
Net Revenues $289.2 - $293.9
   
Gross Margin 74.7% - 75.1%
   
Operating Expenses $149.6 - $150.6
   
Operating Margin 23.0% - 23.9%
   
Net Income per Diluted Share $0.64 - $0.67
   
   
Business Metrics: Q4'16
   
Case Shipments 182.5K - 184.5K
Capital Expenditure $63M - $68M
Depreciation & Amortization $7.0M - $7.5M
Diluted Shares Outstanding 81.5M*
Stock Based Compensation Expense $14.7M
Tax Rate 22.0%
   
* Excludes any stock repurchases during the quarter
 

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