Align Technology Announces First Quarter 2016 Results

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

• Q1 revenues were up 20.5% year-over-year to $238.7 million, and diluted EPS of $0.50
• Q1 Clear Aligner shipments were up 25.2% year-over-year to 163.7 thousand cases, international shipments up 34.1% year-over-year
• Q1 Scanner and Services revenues were up 72.0% year-over-year to $19.0 million

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the first quarter ended March 31, 2016. Clear Aligner case shipments in the first quarter of 2016 (Q1'16) were 163.7 thousand, a 25.2% increase year-over-year. For Q1'16, revenues were $238.7 million, a 20.5% increase year-over-year, and net profit was $40.5 million, or $0.50 per diluted share, up $0.06 over the prior year.

"Q1 was a solid start to 2016 with better than expected revenues and earnings, driven by continued strong year-over-year Invisalign volume growth across our customer base, with North American shipments up 21% and international shipments up 34%. Demand for our new iTero Element scanner remains strong driving a 72% year-over-year growth in scanner and services revenues," said Joe Hogan, Align Technology President and CEO. 

GAAP Summary Financial Comparisons

First Quarter Fiscal 2016

			Q1'16			Q4'15			Q1'15			Q/Q Change				Y/Y Change
Clear Aligner Shipments				163,695			160,400			130,780			+2.1	%		+25.2	%
Net Revenues			$	238.7M		$	230.3M		$	198.1			+3.7	%		+20.5	%
	Clear Aligner		$	219.7M		$	214.0M		$	187.0			+2.6	%		+17.5	%
	Scanner & Services		$	19.0M		$	16.2M		$	11.1			+17.2	%		+72.0	%
Net Profit			$	40.5M		$	48.9M		$	36.2			(17.0	)%		+12.1	%
EPS			$	0.50		$	0.60		$	0.44		$	(0.10	)		+$0.06

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

As of March 31, 2016, Align had $680.8 million in cash, cash equivalents and marketable securities compared to $678.7 million as of December 31, 2015.

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 Q1'16 revenues and pre tax income were lower by approximately $7.5 million due to this change.

Q2 2016 Business Outlook

For the second quarter of 2016 (Q2'16), Align provides the following guidance:

• Clear Aligner case shipments in the range of 174.5 thousand to 177.0 thousand, up approximately 20.7% to 22.4% over the same period a year ago.
• Net revenues in the range of $253.3 million to $258.3 million.
• Diluted EPS in the range of $0.46 to $0.49.

Align Web Cast and Conference Call

Align will host a conference call today, April 28, 2016 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first 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 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 13634117 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 May 12, 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 second 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, 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 on February 25, 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
			March 31, 2016				March 31, 2015
Net revenues			$	238,720			$	198,086
Cost of revenues				58,093				46,996
Gross profit				180,627				151,090
Operating expenses:
	Selling, general and adminstrative			112,210				88,281
	Research and development			15,083				13,885
Total operating expenses				127,293				102,166
Operating profit				53,334				48,924
Interest and other income (expense), net				(427	)			(1,452	)
Profit before income taxes				52,907				47,472
Provision for income taxes				12,361				11,295
Net profit			$	40,546			$	36,177
Net profit per share
	- basic		$	0.51			$	0.45
	- diluted		$	0.50			$	0.44
Shares used in computing net profit per share
	- basic			79,831				80,459
	- diluted			81,320				81,824

ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
				March 31, 2016			December 31, 2015
ASSETS
Current assets:
	Cash and cash equivalents			$	154,418		$	167,714
	Marketable securities, short-term				393,660			359,581
	Accounts receivable, net				178,000			158,550
	Inventories				22,618			19,465
	Prepaid expenses and other current assets				34,307			26,700
		Total current assets			783,003			732,010
Marketable securities, long-term					132,690			151,370
Property, plant and equipment, net					148,029			136,473
Goodwill and intangible assets, net					78,606			79,162
Deferred tax assets					57,527			51,416
Other assets					7,705			8,202
		Total assets		$	1,207,560		$	1,158,633
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	36,258		$	34,354
	Accrued liabilities				92,723			107,765
	Deferred revenues				145,769			129,553
		Total current liabilities			274,750			271,672
Other long term liabilities					40,780			39,035
		Total liabilities			315,530			310,707
Total stockholders' equity					892,030			847,926
		Total liabilities and stockholders' equity		$	1,207,560		$	1,158,633

ALIGN TECHNOLOGY, INC.

Q1 2016 FINANCIAL AND BUSINESS METRICS

(in thousands except average selling price, utilization and doctors trained)

					Q1				Q2				Q3				Q4				Fiscal				Q1
					2015				2015				2015				2015				2015				2016
Invisalign Clear Aligner Net Revenues by Geography:
	North America				$	118,844			$	126,137			$	124,085			$	129,663			$	498,729			$	135,699
	International					55,920				61,896				61,265				70,980				250,061				69,850
	Non-case*					12,265				12,784				12,942				13,405				51,396				14,149
		Total Clear Aligner Net Revenues			$	187,029			$	200,817			$	198,292			$	214,048			$	800,186			$	219,698
			YoY % growth			11.2	%			11.7	%			11.3	%			14.8	%			12.3	%			17.5	%
			QoQ % growth			0.3	%			7.4	%			-1.3	%			7.9	%							2.6	%
	*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
	International ASP				$	1,410			$	1,380			$	1,325			$	1,315			$	1,355			$	1,315
Invisalign Clear Aligner Cases Shipped by Geography:
	North America					91,110				99,630				101,260				106,390				398,390				110,500
	International					39,670				44,940				46,225				54,010				184,845				53,195
		Total Cases Shipped				130,780				144,570				147,485				160,400				583,235				163,695
			YoY % growth			16.6	%			28.9	%			23.6	%			26.4	%			22.0	%			25.2	%
			QoQ % growth			3.1	%			10.5	%			2.0	%			8.8	%							2.1	%
Number of Invisalign Doctors Cases Shipped To:
	North America					20,165				21,335				21,160				21,835				31,710				22,355
	International					9,050				9,790				10,150				10,865				16,460				11,280
		Total Doctors Cases Shipped To				29,215				31,125				31,310				32,700				48,170				33,635
Invisalign Doctor Utilization Rates*:
	North America					4.5				4.7				4.8				4.9				12.6				4.9
		North American Orthodontists				9.0				9.5				9.9				9.9				31.8				10.4
		North American GP Dentists				2.9				3.0				2.9				3.1				7.4				3.0
	International					4.4				4.6				4.6				5.0				11.2				4.7
		Total Utilization Rates				4.5				4.6				4.7				4.9				12.1				4.9
	* # 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				870
	International					1,540				1,335				1,200				1,400				5,475				1,600
		Total Doctors Trained Worldwide				2,410				2,455				2,260				2,670				9,795				2,470
		Total to Date Worldwide				96,405				98,860				101,120				103,790				103,790				106,260
Total Net Revenues:
	Clear Aligner Net Revenues				$	187,029			$	200,817			$	198,292			$	214,048			$	800,186			$	219,698
	Scanner & Services Net Revenues					11,057				8,671				9,344				16,228				45,300				19,022
		Total Worldwide Net Revenues			$	198,086			$	209,488			$	207,636			$	230,276			$	845,486			$	238,720
			YoY % growth			9.7	%			8.8	%			9.4	%			15.9	%			11.0	%			20.5	%
			QoQ % growth			-0.3	%			5.8	%			-0.9	%			10.9	%							3.7	%
Stock-based Compensation (SBC)
	SBC included in Gross Profit				$	980			$	970			$	984			$	1,008			$	3,942			$	961
	SBC included in Operating Expenses					10,670				11,860				13,677				12,799				49,006				11,563
		Total SBC Expense			$	11,650			$	12,830			$	14,661			$	13,807			$	52,948			$	12,524
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)
		Q2'16 Guidance
		GAAP
Net Revenues		$253.3 - $258.3
Gross Margin		75.0% - 75.5%
Operating Expenses		$142.7 - $144.2
Operating Margin		18.7% - 19.7%
Net Income per Diluted Share		$0.46 - $0.49
Business Metrics:		Q2'16
Case Shipments		174.5K - 177.0K
Capital Expenditure		$20M - $25M
Depreciation & Amortization		$5.0M - $5.5M
Diluted Shares Outstanding		81.4M*
Stock Based Compensation Expense		$14.3M
Tax Rate		24.0%
* Excludes any stock repurchases during the quarter