- Record Q2 net revenues of $79.9 million increase 6.9 percent sequentially - Q2 GAAP net profit of $4.0 million, or $0.06 per diluted share
SANTA CLARA, Calif., July 29 /PRNewswire-FirstCall/ -- Align Technology,
Inc. (Nasdaq: ALGN) today reported financial results for the second quarter of
fiscal 2008, ended June 30, 2008.
Total net revenues for the second quarter of fiscal 2008 (Q2 08) were a
record $79.9 million. This reflects a year-over-year increase of 4.3 percent
compared to $76.6 million in the second quarter of 2007 (Q2 07). On a
sequential basis, net revenues increased 6.9 percent from $74.8 million in the
first quarter of 2008 (Q1 08). Q2 07 shipments included approximately four
thousand cases and revenue of $5.2 million from the reduction in backlog and
cycle times caused by the allocation of capacity to the Patients First Program
during the fourth quarter of 2006 and the first quarter of 2007.
"I'm pleased with our solid performance in the second quarter despite an
ever more challenging economic environment for our doctors and their
patients," said Thomas M. Prescott, president and CEO of Align Technology.
"During the second quarter, we continued to execute on our strategic
initiatives including today's launch of Invisalign Teen following the
successful pilot of the product."
Net profit for Q2 08 was $4.0 million, or $0.06 per diluted share. This is
compared to net profit of $13.6 million, or $0.19 per diluted share in Q2 07,
and net profit of $5.3 million, or $0.07 per diluted share in Q1 08.
Stock-based compensation expense included in Q2 08 net profit was $4.8
million, compared to $2.9 million in Q2 07, and $4.0 million in Q1 08.
The Company also announced measures to reduce operating expenses.
Prescott said, "As consumer spending has continued to soften, so has our
outlook for revenue growth. As a result, we're reducing overall company
spending and slowing headcount growth while preserving the important
investments in strategic priorities. Unfortunately, valued employees will be
affected, and those are decisions that the management team and I do not take
lightly. These actions are only the first steps in actively reducing our cost
structure and moving towards a financial model with greater operating
leverage."
The cost-saving measures include: a reduction in full time headcount of
38, slowing headcount growth for the remainder of 2008, and cuts in
discretionary spending. These actions will reduce expenses in the second half
of 2008 by approximately $5 million to $6 million. In addition, the company
is implementing a phased consolidation of its order acquisition operations in
Santa Clara, California into its existing operations in Juarez, Mexico by the
end of 2008. Upon completion, 29 positions in Santa Clara will be eliminated,
resulting in annualized cost savings of approximately $1.0 to $1.5 million in
2009. As part of these actions, Align will record a restructuring charge
estimated to be approximately $2.6 million in the second half of fiscal 2008,
of which approximately $2.2 million will be realized in Q3 08. At the end of
Q2 08, Align had a regular employee base of approximately 1,400 worldwide.
Q2 08 Operating Results
Key GAAP Operating ResultsQ2 08 Q1 08 Q2 07
Gross Margin 74.7% 73.8% 73.6%
Operating Expense$55.8M $50.5M$42.9M
Operating Margin 4.8%6.2% 17.6%
Net Profit$4.0M $5.3M$13.6M
Earnings Per Diluted Share (EPS) $0.06 $0.07 $0.19
Liquidity and Capital Resources
As of June 30, 2008, Align had $110.1 million in cash, cash equivalents,
and short term marketable securities compared to $127.9 million as of December
31, 2007. During Q2 08, Align purchased 2.2 million shares at an average price
of $12.65 per share for a total of $27.7 million. There remains $22.3 million
under the Company's existing stock repurchase authorization.
Key Business Metrics
The following table highlights business metrics for Align's second quarter
of 2008. Additional historical information is available on the Company's
website at http://investor.aligntech.com.
Revenue by Channel: Q2 08Q2'08/Q1'08 Q2'08/Q2'07
% Change% Change (a)
U.S. Orthodontists $23.3M2.1% (6.7%)
U.S. GP Dentists $36.6M5.2% 0.6%
International$16.4M 15.8% 41.3%
Training and Other$3.6M 20.2% (1.1%)
Total Revenue$79.9M6.9% 4.3%
Average Selling Price (ASP): Q2 08Q2'08/Q1'08 Q2'08/Q2'07
% Change % Change
Total Worldwide Blended ASP $1,3900.7% 4.5%
Total Worldwide ASP excluding
Invisalign Express $1,500 (0.7%) 4.9%
U.S. Orthodontists Blended ASP $1,290 (0.8%) 4.9%
U.S. GP Dentists Blended ASP $1,3400.0% 2.3%
International$1,7000.0% 4.3%
Number of Cases Shipped: Q2 08 Q2'08/Q1'08 Q2'08/Q2'07
% Change % Change (a)
U.S. Orthodontists -- Full
Invisalign 14,8302.3%(11.9%)
U.S. Orthodontists --
Invisalign Express 3,2505.2% (3.6%)
U.S. GP Dentists -- Full
Invisalign 22,1405.9% (2.7%)
U.S. GP Dentists --
Invisalign Express 4,9700.4% 1.2%
International -- Full
Invisalign 9,520 16.1% 35.4%
International --
Invisalign Express 160 23.1% 45.5%
Total Cases Shipped 54,8706.0% (0.3%)
Number of Doctors Cases
were Shipped to: Q2 08
U.S. Orthodontists3,730
U.S. GP Dentists 11,030
International 2,910
Total Doctors Cases were
Shipped to Worldwide17,670
Number of Doctors Trained
Worldwide: Q2 08 Cumulative
U.S. Orthodontists 100 8,510
U.S. GP Dentists 1,630 30,260
International 600 13,340
Total Doctors Trained Worldwide 2,330 52,110
Multiple Case Doctors
(Cumulative as of): Q2 08
U.S. Orthodontists90.5%
U.S. GP Dentists 86.6%
International 77.2%
Doctors Starting Invisalign
Treatment (Cumulative as of):Q2 08
U.S. Orthodontists6,920
U.S. GP Dentists 23,820
International 7,390
Total Doctors Starting
Invisalign Treatment38,130
Doctor Utilization Rates*:Q2 08 Q1 08Q2 07(a)
U.S. Orthodontists 4.9 4.8 5.3
U.S. GP Dentists2.5 2.4 2.7
International 3.3 3.2 3.1
Total Utilization Rate 3.1 3.1 3.4
* Utilization = # of cases/# of doctors to whom cases were shipped
(a) Q2 07 shipments included approximately four thousand cases and revenue
of $5.2 million from the reduction in backlog and cycle times caused
by the allocation of capacity to the Patients First Program during the
fourth quarter of 2006 and the first quarter of 2007
Business Outlook
For the third quarter of fiscal 2008 (Q3 08), Align Technology expects net
revenues to be in a range of $74 million to $76 million. GAAP earnings per
diluted share for Q3 08 is expected to be in a range of $0.01 to $0.03.
Non-GAAP earnings per diluted share for Q3 08 is expected to be in a range of
$0.04 to $0.06. Stock-based stock compensation expense for Q3 08 is expected
to be approximately $4.7 million.
For fiscal 2008, Align Technology expects net revenues to be in a range of
$309 million to $314 million. The increase in deferred revenue for fiscal
2008 is expected to be in the range of $5 million to $8 million primarily
associated with new products, which will be recognized in future periods,
bringing the Company's total deferred revenue balance at the end of 2008 to a
range of $17 million to $20 million. GAAP earnings per diluted share for
fiscal 2008 is expected to be in a range of $0.26 to $0.30. Non-GAAP earnings
per diluted share for fiscal 2008 is expected to be in a range of $0.29 to
$0.33. Stock-based compensation expense for fiscal 2008 is expected to be
approximately $17.9 million.
A more comprehensive business outlook is available following the financial
tables of this release.
Invisalign Teen
In a separate announcement today Align also announced a new addition to
its Invisalign product family: Invisalign Teen for non-adult, comprehensive
orthodontic treatment. For more information, please see Align's press release
titled, " Align Technology Targets Mainstream Orthodontics Market with
Invisalign Teen."
Align Web Cast and Conference Call
Align Technology will host a conference call today, July 29, 2008 at 4:30
p.m. ET, 1:30 p.m. PT, to review its second quarter fiscal 2008 results,
discuss future operating trends and 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
Technology's Investor Relations web site at http://investor.aligntech.com. To
access the conference call, please dial 201-689-8341 approximately fifteen
minutes prior to the start of the call. If you are unable to listen to the
call, an archived 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 account number 292 followed by # and conference
number 289687 followed by #. The replay must be accessed from international
locations by dialing 201-612-7415 and using the same account and conference
numbers referenced above. The telephonic replay will be available through 4:30
p.m. ET on August 12, 2008.
About Align Technology, Inc.
Align Technology designs, manufactures and markets Invisalign, a
proprietary method for treating malocclusion, or the misalignment of teeth.
Invisalign corrects malocclusion using a series of clear, nearly invisible,
removable appliances that gently move teeth to a desired final position.
Because it does not rely on the use of metal or ceramic brackets and wires,
Invisalign significantly reduces the aesthetic and other limitations
associated with braces. Invisalign is appropriate for treating adults and
older teens. Align Technology was founded in March 1997 and received FDA
clearance to market Invisalign in 1998.
To learn more about Invisalign or to find a certified Invisalign doctor in
your area, please visit http://www.invisalign.com or call 1-800-INVISIBLE.
About non-GAAP Financial Measures
To supplement our business outlook, we use the following non-GAAP
financial measures: non-GAAP operating expenses, net profit (loss), earnings
(loss) per share, which excludes the restructuring charge. The presentation of
this financial information is not intended to be considered in isolation or as
a substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP. For more information on these non-GAAP
financial measures, please see the tables captioned "Business Outlook Summary"
included at the end of this release.
We use these non-GAAP financial measures for financial and operational
decision making and as a means to evaluate period-to-period comparisons. Our
management believes that these non-GAAP financial measures provide meaningful
supplemental information regarding our "core operating performance".
Management believes that "core operating performance" represents Align's
performance in the ordinary, ongoing and customary course of its operations.
Accordingly, management excludes from "core operating performance" certain
expenses and expenditures that may not be indicative of our operating
performance including discrete cash charges that are infrequent or one-time in
nature. We believe that both management and investors benefit from referring
to these non-GAAP financial measures in assessing our performance and when
planning, forecasting and analyzing future periods. These non-GAAP financial
measures also facilitate management's internal evaluation of period-to-period
comparisons. We believe these non-GAAP financial measures are useful to
investors both because (1) they allow for greater transparency with respect to
key metrics used by management in its financial and operational decision
making and (2) they are provided to and used by our institutional investors
and the analyst community to facilitate comparisons with prior and subsequent
reporting periods.
Forward-Looking Statement
This news release, including the tables below, contains forward-looking
statements, including statements regarding Align's anticipated amount of cost
savings due to the cost-saving measures, the expected amount of and timing of
the charges to be incurred in connection with these measures and Align's
anticipated financial results and certain business metrics for the third
quarter and full year of 2008, including anticipated revenue and deferred
revenue, gross profit, gross margin, operating expense, net profit, earnings
per share, percentage of revenue by channel, case shipments and average
selling prices. 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, failure to achieve the expected
cost savings, including a delay in the implementation of the relocation of
order acquisition to Mexico and greater than anticipated costs resulting from
the relocation, changes in the size of the expected restructuring charge, 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, continued customer demand
for Invisalign and new products, changes in consumer spending habits as a
result of, among other tings, 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 Invisalign by
consumers and dental professionals, Align's third party manufacturing
processes and personnel, foreign operational, political and other risks
relating to Align's international manufacturing operations, Align's ability to
protect its intellectual property rights, competition from manufacturers of
traditional braces 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 fiscal year ended
December 31, 2007, which was filed with the Securities and Exchange Commission
on February 26, 2008. Align undertakes no obligation to revise or update
publicly any forward-looking statements for any reason.
Investor Relations Contact Press Contact
Shirley Stacy Shannon Mangum Henderson
Align Technology, Inc. Ethos Communication, Inc.
(408) 470-1150 (678) 540-9222
sstacy@aligntech.comalign@ethoscommunication.com
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
Net revenues $79,902 $76,603 $154,678 $140,364
Cost of revenues 20,243 20,24739,85137,776
Gross profit 59,659 56,356 114,827 102,588
Operating expenses:
Sales and marketing 32,464 24,35360,52347,503
General and administrative 16,322 11,88031,51024,065
Research and development 7,0016,67514,29612,368
Patients First Program -- -(1,796)
Total operating expenses 55,787 42,908 106,32982,140
Profit from operations 3,872 13,448 8,49820,448
Interest and other income, net 443 680 1,409 1,135
Profit before income taxes 4,315 14,128 9,90721,583
Provision for income taxes (285)(510) (573) (987)
Net profit$4,030 $13,618$9,334 $20,596
Net profit per share
- basic $0.06$0.20 $0.14 $0.31
- diluted $0.06$0.19 $0.13 $0.29
Shares used in computing net profit
per share
- basic 68,581 66,69668,81766,068
- diluted69,916 71,20770,47870,346
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2008 December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents$64,339 $89,140
Marketable securities, short-term 45,72338,771
Accounts receivable, net 51,17344,850
Inventories, net 3,017 2,910
Other current assets 10,132 8,846
Total current assets 174,384 184,517
Property and equipment, net 29,52525,320
Goodwill and intangible assets, net 9,67511,093
Other long-term assets 3,585 1,831
Total assets $217,169 $222,761
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,965$9,222
Accrued liabilities 34,70839,875
Deferred revenues 14,14412,362
Total current liabilities 57,81761,459
Other long term liabilities133 148
Total liabilities 57,95061,607
Total stockholders' equity 159,219 161,154
Total liabilities and stockholders'
equity $217,169 $222,761
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. This outlook excludes the effects of any stock
repurchases.
Financials (including reconciliation of GAAP to non-GAAP financial
measures):
(in millions, except per share amounts and percentages)
Q3 2008
GAAPAdjustment(a) Non-GAAP
Net Revenue $74.0 - $76.0$74.0 - $76.0
Gross Margin 73.6% - 74.4%73.6% - 74.4%
Operating Expenses$53.7 - $55.2 $2.2(a) $51.5 - $53.0
Net Profit % 1% - 2%3%4% - 5%
Net Profit per Diluted
Share$0.01 - $0.03$0.03 $0.04 - $0.06
Stock Based Compensation
Expense:
Cost of Revenues $0.4$0.4
Operating Expenses $4.3$4.3
Total Stock Based
Compensation Expense $4.7$4.7
(a) Restructuring charges
Business Metrics:
Q3 2008
Case Shipments51.0K - 53.0K
Cash $116M - $120M
DSO~57 days
Capex $3.0M - $5.0M
Depreciation &
Amortization $2.0M - $3.0M
Diluted Shares
Outstanding 70.0M
FY 2008
FY 2008 Adjustment(a) Non-GAAP
Net Revenue $309.0 - $314.0 $309.0 - $314.0
Gross Margin 73.7% - 74.2% 73.7% - 74.2%
Operating Expenses$210.8 - $213.8 $2.6(a)$208.2 - $211.2
Net Profit % 6% - 7%1% 7% - 8%
Net Profit per Diluted
Share $0.26 - $0.30$0.03 $0.29 - $0.33
Stock Based Compensation
Expense:
Cost of Revenues$1.7 $1.7
Operating Expenses $16.2 $16.2
Total Stock Based
Compensation Expense $17.9 $17.9
Increase in Deferred
Revenue$5.0 - $8.0 $5.0 - $8.0
Total Deferred Revenue
Balance $17.0 - $20.0 $17.0 - $20.0
(a) Restructuring charges
Business Metrics:
FY 2008
Case Shipments 213.0K - 216.5K
Cash $130M - $135M
DSO~57 days
Capex $14.0M - $18.0M
Depreciation &
Amortization $13.0M - $14.0M
Diluted Shares
Outstanding 70.0M
SOURCE Align Technology, Inc.
