Align Technology Announces Fourth Quarter and 2017 Financial Results

SAN JOSE, CA–(Marketwired – January 30, 2018) –

  • Q4 revenues up 43.7% year-over-year to a record $421.3 million, and diluted EPS of $0.13, includes $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act
  • Q4 operating income up 60.3% year-over-year to a record $109.6 million or operating margin of 26.0%
  • Q4 total Invisalign case shipments up 34.2% year-over-year to 255.0 thousand
  • Q4 Invisalign cases for teenage patients up 44.1% year-over-year to 63.5 thousand
  • Q4 scanner and services revenues up 37.0% year-over-year to $57.1 million
  • Record 2017 Invisalign revenues up 34.1% year-over-year to $1.3 billion with Invisalign case shipments up 31.4% year-over-year to 931.0 thousand
  • Record 2017 iTero scanner volume up 37.5%

Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the fourth quarter and year ended December 31, 2017. Invisalign case shipments in the fourth quarter of 2017 (Q4’17) were 255.0 thousand, up 34.2% year-over-year. North America and International case shipments were up year-over-year 24.2% and 52.3%, respectively. Q4’17 Invisalign cases for teenage patients were 63.5 thousand, up 44.1% year-over-year. Q4’17 revenues were $421.3 million, up 43.7% year-over-year with Q4’17 operating income a record $109.6 million, up 60.3% year-over-year resulting in an operating margin of 26.0%. Q4’17 net profit was $10.3 million, or $0.13 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

For 2017, record Invisalign revenues were $1.3 billion, up 34.1% year-over-year with Invisalign case shipments of 931.0 thousand, up 31.4% year-over-year. 2017 iTero revenues were $164.2 million, up 35.1% with record volumes, up 37.5% year-over-year. 2017 Invisalign cases for teenage patients were 237.5 thousand, up 40.4% year-over-year. For 2017, revenues were $1.5 billion, up 36.4% year-over-year and net profit was $231.4 million, or $2.83 per diluted share, which includes an $86.6 million tax expense, or $1.06 per diluted share negative impact due to the new U.S. Tax Cut and Jobs Act, comprised of a $10.0 million non-cash write-down of our deferred tax assets and a mandatory deemed repatriation tax of $76.6 million.

Commenting on Align’s Q4 and 2017 results, Align Technology President and CEO Joe Hogan said, “Overall, the fourth quarter was a strong finish to another outstanding year for Align, with better than expected revenues, volumes and operating income. Record Q4 revenues were up 43.7% year-over-year driven by increased Invisalign volumes across all geographies and customer channels, as well as by record iTero scanner revenue. Q4 Invisalign volume was up 34.2% year-over-year reflecting strong international growth from increased utilization and expansion of our customer base which included over 4,000 new customers for the third consecutive quarter. Notwithstanding this strong performance, our Q4 results were impacted by the new U.S. Tax Cut and Jobs Act which reduced our reported net income and EPS. However, Q4 operating income was a record $109.6M or 26.0%.”

Hogan continued, “For the full year, revenues of $1.5 billion increased 36.4% year-over-year driven by both record Invisalign revenue which surpassed the $1 billion mark for the first time ever and record iTero scanner revenues. These results reflect continued progress and execution of our four strategic growth drivers which focus on: driving international expansion; increasing Orthodontists utilization of Invisalign, especially with teenagers; enabling GP dentists to treat or refer more Invisalign cases; and generating consumer demand from millions of people worldwide and connecting them with an Invisalign doctor.”

As of December 31, 2017, Align had $761.5 million in cash, cash equivalents and marketable securities compared to $700.0 million as of December 31, 2016. We repurchased approximately 0.2 million shares of stock for $50.0 million in Q4’17 under the April 2016 Repurchase Program. We have $200.0 million remaining available for repurchases under the existing stock repurchase authorization.

2017 Business Highlights

The following list highlights Align’s key announcements over the past year:

  • Expanded restorative digital workflow solutions for iTero Element® scanner to include iTero Chairside CAD, a chairside prosthetics design software application that will support same-day dentistry as part of collaboration with Exocad GmbH.
  • Celebrated the 5 millionth Invisalign® patient, a 12-year old Canadian teenager starting Invisalign treatment with mandibular advancement.
  • Signed distribution agreement with Glidewell Dental for the iTero Element® intraoral scanning system in North America with glidewell.io™ In-Office Solution, a chairside restorative ecosystem designed to simplify the process of prescribing and delivering laboratory-quality dental restorations.
  • Opened the first Invisalign® store pilot in San Francisco to help consumers connect with an Invisalign® provider to improve their smile with Invisalign® treatment.
  • Awarded nearly $300,000 to researchers at universities in North America, Europe and Asia Pacific as part of the Company’s Research Award Program to support clinical and scientific dental research.
  • Signed distribution agreement Patterson Dental for iTero Element® intraoral scanning system in U.S. and Canada.
  • Opened first Invisalign® Treatment Planning Facility in Chengdu, China.
  • Launched TimeLapse technology for digital scan comparisons and ability to complete a scan in as little as 1 minute as part of a software upgrade for its iTero Element® intraoral scanners.
  • Received U.S. Patents for SmartTrack material, an innovative multi-layer polymer that delivers more gentle, constant force to improve control of tooth movements with Invisalign® clear aligners.
  • Celebrated the 1 millionth Invisalign® Teen patient, an 11 year-old boy from the U.S. starting Invisalign treatment.
  • Launched first global, multi-million dollar Invisalign brand platform and marketing campaign.
  • Achieved over 1 million scans submitted with iTero Element® scanner since its introduction in 2015.
  • Introduced of Invisalign® Teen with mandibular advancement feature, the first clear aligner solution for Class II correction in growing tween and teen patients. (Not yet available in the U.S., pending FDA approval).
  • Expanded digital implant workflow options for the iTero® intraoral scanner with Nobel Biocare implants and ELOS Medtech scan bodies.

Q1 2018 Business Outlook

For the first quarter of 2018 (Q1’18), Align provides the following guidance:

  • Net revenues in the range of $400 million to $410 million, up approximately 29% to 32% over the same period a year ago.
  • Invisalign case shipments in the range of 264 thousand to 269 thousand, up approximately 27% to 29% over the same period a year ago.
  • Operating margin in the range of 18.5% to 19.5%
  • Diluted EPS in the range of $0.94 to $0.98.

Align Web Cast and Conference Call
Align will host a conference call today, January 30, 2018 at 4:30 p.m. ET, 1:30 p.m. PT, to review its fourth quarter and year ended 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 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 13674959 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 February 13, 2018.

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 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 iTero 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 first quarter of 2018 year end, 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 September 30, 2017, which was filed with the SEC on November 2, 2017. 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
December 31,

  Year Ended
December 31,

  

 2017

  2016

  2017

 2016

  

   

    

    

   

 Net revenues

 $421,323

  $293,203

  $1,473,413

 $1,079,874

  

   

    

    

   

 Cost of net revenues

  103,406

   72,954

   356,466

  264,580

  

   

    

    

   

 Gross profit

  317,917

   220,249

   1,116,947

  815,294

  

   

    

    

   

 Operating expenses:

   

    

    

   

  Selling, general and adminstrative

  182,141

   130,268

   665,777

  490,653

  Research and development

  26,170

   21,609

   97,559

  75,720

   Total operating expenses

  208,311

   151,877

   763,336

  566,373

  

   

    

    

   

 Income from operations

  109,606

   68,372

   353,611

  248,921

  

   

    

    

   

 Interest and other income (expense), net

  2,581

   (7,516

)  11,188

  (6,355

   

    

    

   

 Net income before provision for income taxes and equity in losses (gains) of investee

  112,187

   60,856

   364,799

  242,566

  

   

    

    

   

 Provision for income taxes

  103,654

   12,028

   130,162

  51,200

 Equity in losses (gains) of investee, net of tax

  (1,731

)  1,207

   3,219

  1,684

  

   

    

    

   

 Net income

 $10,264

  $47,621

  $231,418

 $189,682

  

   

    

    

   

 Net income per share:

   

    

    

   

  Basic

 $0.13

  $0.60

  $2.89

 $2.38

  Diluted

 $0.13

  $0.59

  $2.83

 $2.33

  

   

    

    

   

 Shares used in computing net income per share:

   

    

    

   

  Basic

  80,080

   79,667

   80,085

  79,856

  Diluted

  81,863

   81,248

   81,832

  81,484

                   

  

  
ALIGN TECHNOLOGY, INC.

  

  
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

  
(in thousands)

  

  
 

  

  
 

 December 31,
2017

 December 31,
2016
ASSETS

   

   
 

   

   
Current assets:

   

   
 Cash and cash equivalents

 $449,511

 $389,275
 Marketable securities, short-term

  272,031

  250,981
 Accounts receivable, net

  322,825

  247,415
 Inventories

  31,688

  27,131
 Prepaid expenses and other current assets

  80,948

  38,176
  Total current assets

  1,157,003

  952,978
 

   

   
Marketable securities, long-term

  39,948

  59,783
Property, plant and equipment, net

  348,793

  175,167
Equity method investments

  54,606

  45,061
Goodwill and intangible assets, net

  89,068

  81,998
Deferred tax assets

  50,059

  67,844
Other assets

  38,379

  13,320
 

   

   
  Total assets

 $1,777,856

 $1,396,151
 

   

   
LIABILITIES AND STOCKHOLDERS’ EQUITY

   

   
 

   

   
Current liabilities:

   

   
 Accounts payable

 $36,776

 $28,596
 Accrued liabilities

  194,198

  134,332
 Deferred revenues

  266,842

  191,407
  Total current liabilities

  497,816

  354,335
 

   

   
Income tax payable

  114,091

  45,133
Other long-term liabilities

  15,579

  1,294
   Total liabilities

  627,486

  400,762
 

   

   
Total stockholders’ equity

  1,150,370

  995,389
 

   

   
  Total liabilities and stockholders’ equity

 $1,777,856

 $1,396,151
            Q4   Fiscal   Q1   Q2   Q3   Q4   Fiscal     2016   2016   2017   2017   2017   2017   2017  Invisalign Average Selling Price (ASP):                                     Worldwide ASP  $1,230   $1,265   $1,270   $1,285   $1,310   $1,305   $1,295   International ASP  $1,315   $1,335   $1,325   $1,335   $1,390   $1,390   $1,360                                       Invisalign Cases Shipped by Geography:                                     North America   122,555    463,810    132,885    146,510    144,870    152,245    576,510   International   67,500    244,690    75,175    85,380    91,195    102,785    354,535    Total Cases Shipped   190,055    708,500    208,060    231,890    236,065    255,030    931,045     YoY % growth   18.5 %  21.5 %  27.1 %  31.0 %  32.8 %  34.2 %  31.4 %   QoQ % growth   6.9 %       9.5 %  11.5 %  1.8 %  8.0 %                                          Number of Invisalign Doctors Cases Were Shipped To:                             North America   23,265    34,065    23,910    24,695    24,845    25,365    36,415   International   13,635    20,415    14,955    16,570    17,760    19,620    27,990    Total Doctors Cases Shipped To   36,900    54,480    38,865    41,265    42,605    44,985    64,405                                       Invisalign Doctor Utilization Rates*:                                     North America   5.3    13.6    5.6    5.9    5.8    6.0    15.8    North American Orthodontists   11.3    36.6    12.6    13.6    13.8    14.0    46.6    North American GP Dentists   3.2    7.6    3.1    3.3    3.1    3.3    8.2   International   5.0    12.0    5.0    5.2    5.1    5.2    12.7    Total Utilization Rates   5.2    13.0    5.4    5.6    5.5    5.7    14.5   * # of cases shipped/# of doctors to whom cases were shipped                                                                 Number of Invisalign Doctors Trained:                                     North America   1,420    4,720    980    1,620    1,460    1,340    5,400   International   2,280    6,960    2,280    3,255    2,820    2,745    11,100    Total Doctors Trained Worldwide   3,700    11,680    3,260    4,875    4,280    4,085    16,500    Total to Date Worldwide   115,470    115,470    118,730    123,605    127,885    131,970    131,970                                                              ALIGN TECHNOLOGY, INC.        STOCK-BASED COMPENSATION        (in thousands)                                  Q4  Fiscal  Q1  Q2  Q3  Q4  Fiscal    2016  2016  2017  2017  2017  2017  2017 Stock-based Compensation (SBC)                              SBC included in Gross Profit  $1,078  $3,966  $925  $768  $833  $804  $3,330  SBC included in Operating Expenses   13,136   50,182   13,887   13,477   14,134   14,026   55,524   Total SBC Expense  $14,214  $54,148  $14,812  $14,245  $14,967  $14,830  $58,854