Align Technology Announces Record First Quarter 2017 Results
SAN JOSE, CA--(Marketwired - April 27, 2017) -
-- Q1 revenues up 5.8% sequentially, up 30.0% year-over-year to a record $310.3 million
-- Q1 Invisalign case shipments up 9.5% sequentially, up 27.1% year-over-year to a record 208 thousand cases
-- Q1 International Invisalign case shipments up 41% year-over-year, North America Invisalign case shipments up 20% year-over-year
-- Q1 Invisalign case shipments to teenage patients up 11.3% sequentially, up 31.6% year-over-year
Align Technology, Inc. (NASDAQ: ALGN) today reported financial results for the first quarter ended March 31, 2017. Invisalign case shipments in the first quarter of 2017 (Q1'17) were 208.1 thousand, a 27.1% increase year-over-year. For Q1'17, revenues were $310.3 million, a 30.0% increase year-over-year, and net profit was $69.4 million, or $0.85 per diluted share, up $0.35 per diluted share compared to the same period in the prior year. Q1'17 EPS included the benefit of $21.3 million, or $0.26, from excess tax benefits on stock based compensation in accordance with the new accounting guidance.
Commenting on Align's Q1 2017 results, Align Technology President and CEO Joe Hogan said, "2017 is off to a great start with first quarter revenues, volumes, gross margin and EPS above our expectations. For the quarter, net revenues were up 30% year-over-year, driven by strong Invisalign case shipments of 27% year-over-year to a record 38.9 thousand doctors shipped to during the quarter. These results reflect growth from both our North America and International regions, and higher than expected teenage cases across the board, which increased 32% year-over-year. iTero scanner revenues increased 47% year-over-year, and were down sequentially as expected."
GAAP Summary Financial Comparisons
First Quarter Fiscal 2017
---------------------------------------------------------------------------- Q1'17 Q4'16 Q1'16 Q/Q Change Y/Y Change ---------------------------------------------------------------------------- Invisalign Case Shipments* 208,060 190,055 163,695 +9.5% +27.1% Net Revenues $310.3M $293.2M $238.7M +5.8% +30.0% Clear Aligner** $282.4M $251.5M $219.7M +12.3% +28.5% Scanner & Services $27.9M $41.7M $19.0M (33.0)% +46.9% Net Profit $69.4M $47.6M $40.5M +45.8% +71.2% Diluted EPS $0.85 $0.59 $0.50 +$0.26 +$0.35 ----------------------------------------------------------------------------
Note: Changes and percentages are based on actual values and may effect totals due to rounding
* Invisalign Shipment figures does not include SmileDirectClub aligners
** Clear aligner revenue includes revenues from Invisalign clear aligners and SmileDirectClub aligners
As of March 31, 2017, Align had $644.2 million in cash, cash equivalents and marketable securities compared to $700.0 million as of December 31, 2016. In Q1'17, we purchased a new headquarters building in San Jose, California for approximately $44.1 million. We also paid $36.5M for employee taxes related to the net settlement of vesting employee stock awards during the quarter. Lastly, we repurchased approximately 0.04 million shares of stock for $3.8 million in Q1'17 under the 2014 Repurchase Program. Align has $300.0 million available for repurchase under its 2016 Repurchase Program announced on April 28, 2016.
Q2 2017 Business Outlook
For the second quarter of 2017 (Q2'17), Align provides the following guidance:
-- Invisalign case shipments in the range of 221 thousand to 224 thousand, up approximately 25% to 27% over the same period a year ago.
-- Net revenues in the range of $340 million to $345 million, up approximately 26% to 28% over the same period a year ago.
-- Diluted EPS in the range of $0.71 to $0.74, which includes $0.03 of excess tax benefit.
Regarding our tax rate: During the first quarter of 2017, we adopted accounting standards update entitled "Improvements to Employee Share-Based Payment Accounting". Under this new standard, excess tax benefits and deficiencies associated with employee share-based payments are no longer recognized as additional paid-in capital on the balance sheet but instead are recognized directly to income tax expense or benefit in the income statement for the reporting period in which they occur. Under this new standard, we expect our Q2 effective tax rate to be approximately 21%, which includes $2 to $3 million in excess tax benefits.
Align Web Cast and Conference Call
Align will host a conference call today, April 27, 2017 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first quarter 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 13658703 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 11, 2017.
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 second quarter of 2017, 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, 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. 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, 2017 March 31, 2016 ----------------- ----------------- Net revenues $ 310,341 $ 238,720 Cost of net revenues 74,716 58,093 ----------------- ----------------- Gross profit 235,625 180,627 ----------------- ----------------- Operating expenses: Selling, general and adminstrative 151,148 112,210 Research and development 22,804 15,083 ----------------- ----------------- Total operating expenses 173,952 127,293 Income from operations 61,673 53,334 Interest and other income (expense), net 1,645 (427) ----------------- ----------------- Net income before provision for income taxes and equity in losses of investee 63,318 52,907 Provision (benefit) for income taxes (7,223) 12,361 Equity in losses of investee, net of tax 1,121 - ----------------- ----------------- Net income $ 69,420 $ 40,546 ================= ================= Net income per share: Basic $ 0.87 $ 0.51 ================= ================= Diluted $ 0.85 $ 0.50 ================= ================= Shares used in computing net income per share: Basic 79,904 79,831 ================= ================= Diluted 81,534 81,320 ================= =================
ALIGN TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) March 31, December 31, 2017 2016 ----------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 261,027 $ 389,275 Marketable securities, short-term 284,559 250,981 Accounts receivable, net 267,128 247,415 Inventories 35,174 27,131 Prepaid expenses and other current assets 70,279 38,176 ----------------- ----------------- Total current assets 918,167 952,978 Marketable securities, long-term 98,574 59,783 Property, plant and equipment, net 231,692 175,167 Equity method investments 43,940 45,061 Goodwill and intangible assets, net 92,447 81,998 Deferred tax assets 60,068 67,844 Other assets 14,405 13,320 ----------------- ----------------- Total assets $ 1,459,293 $ 1,396,151 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,028 $ 28,596 Accrued liabilities 125,631 134,332 Deferred revenues 202,895 191,407 ----------------- ----------------- Total current liabilities 365,554 354,335 Income tax payable 46,322 45,133 Other long term liabilities 2,542 1,294 ----------------- ----------------- Total liabilities 414,418 400,762 Total stockholders' equity 1,044,875 995,389 ----------------- ----------------- Total liabilities and stockholders' equity $ 1,459,293 $ 1,396,151 ================= =================
ALIGN TECHNOLOGY, INC. INVISALIGN BUSINESS METRICS* Q1 Q2 Q3 Q4 2016 2016 2016 2016 Invisalign Average Selling Price (ASP): Worldwide ASP $ 1,255 $ 1,285 $ 1,285 $ 1,230 International ASP $ 1,315 $ 1,345 $ 1,365 $ 1,315 Invisalign Cases Shipped by Geography: North America 110,500 114,855 115,900 122,555 International 53,195 62,140 61,855 67,500 --------- --------- --------- --------- Total Cases Shipped 163,695 176,995 177,755 190,055 ========= ========= ========= ========= YoY % growth 25.2% 22.4% 20.5% 18.5% QoQ % growth 2.1% 8.1% 0.4% 6.9% Number of Invisalign Doctors Cases Were Shipped To: North America 22,355 22,575 22,570 23,265 International 11,280 12,485 12,720 13,635 --------- --------- --------- --------- Total Doctors Cases Shipped To 33,635 35,060 35,290 36,900 ========= ========= ========= ========= Invisalign Doctor Utilization Rates*: North America 4.9 5.1 5.1 5.3 North American Orthodontists 10.4 10.7 11.1 11.3 North American GP Dentists 3.0 3.1 3.0 3.2 International 4.7 5.0 4.9 5.0 Total Utilization Rates 4.9 5.1 5.0 5.2 * # of cases shipped/# of doctors to whom cases were shipped Number of Invisalign Doctors Trained: North America 875 1,125 1,300 1,420 International 1,605 1,760 1,315 2,280 --------- --------- --------- --------- Total Doctors Trained Worldwide 2,480 2,885 2,615 3,700 ========= ========= ========= ========= Total to Date Worldwide 106,270 109,155 111,770 115,470 ========= ========= ========= ========= Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals. *Invisalign business metrics exclude SmileDirectClub aligners. ALIGN TECHNOLOGY, INC. STOCK-BASED COMPENSATION (in thousands) Q1 Q2 Q3 Q4 2016 2016 2016 2016 Stock-based Compensation (SBC) SBC included in Gross Profit $ 961 $ 932 $ 995 $ 1,078 SBC included in Operating Expenses 11,563 12,767 12,716 13,136 --------- --------- --------- --------- Total SBC Expense $ 12,524 $ 13,699 $ 13,711 $ 14,214 ========= ========= ========= ========= ALIGN TECHNOLOGY, INC. INVISALIGN BUSINESS METRICS* ------------------- Fiscal Q1 2016 2017 Invisalign Average Selling Price (ASP): Worldwide ASP $ 1,265 $ 1,270 International ASP $ 1,335 $ 1,325 Invisalign Cases Shipped by Geography: North America 463,810 132,885 International 244,690 75,175 ------------------- -------------------- Total Cases Shipped 708,500 208,060 =================== ==================== YoY % growth 21.5% 27.1% QoQ % growth 9.5% Number of Invisalign Doctors Cases Were Shipped To: North America 34,065 23,910 International 20,415 14,955 ------------------- -------------------- Total Doctors Cases Shipped To 54,480 38,865 =================== ==================== Invisalign Doctor Utilization Rates*: North America 13.6 5.6 North American Orthodontists 36.6 12.6 North American GP Dentists 7.6 3.1 International 12.0 5.0 Total Utilization Rates 13.0 5.4 * # of cases shipped/# of doctors to whom cases were shipped Number of Invisalign Doctors Trained: North America 4,720 980 International 6,960 2,280 ------------------- -------------------- Total Doctors Trained Worldwide 11,680 3,260 =================== ==================== Total to Date Worldwide 115,470 118,730 =================== ==================== Note: Historical public data may differ due to rounding. Additionally, rounding may effect totals. *Invisalign business metrics exclude SmileDirectClub aligners. ALIGN TECHNOLOGY, INC. STOCK-BASED COMPENSATION (in thousands) ------------------- Fiscal Q1 2016 2017 Stock-based Compensation (SBC) SBC included in Gross Profit $ 3,966 $ 925 SBC included in Operating Expenses 50,182 13,887 ------------------- -------------------- Total SBC Expense $ 54,148 $ 14,812 =================== ====================
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) Q2'17 Guidance --------------- GAAP --------------- Net Revenues $340 - $345 Gross Margin 74.0% - 75.0% Operating Expenses $180 - $184 Operating Margin 21.0% - 21.7% Net Income per Diluted Share $0.71 - $0.74 (1) Business Metrics: Q2'17 --------------- Case Shipments 221K - 224K Capital Expenditure $30M - $35M Depreciation & Amortization $8M - $9M Diluted Shares Outstanding 81.6M (2) Stock Based Compensation Expense $14.7M Effective Tax Rate 21% (1) (1) Includes the benefit from the adoption of the new accounting standard update for share-based compensation (2) Excludes any stock repurchases during the quarter