SAN JOSE, CA--(Marketwired - Apr 18, 2013) - Align Technology, Inc. (
- Q1 net revenues of $153.6 million increased 7.5% sequentially and 13.7% year-over-year
- Q1 Invisalign clear aligner shipments of 98.2 thousand increased 8.5% sequentially and 15.1% year-over-year
- Q1 Invisalign clear aligner revenue of $141.6 million increased 6.6% sequentially and 14.8% year-over-year
- Q1 GAAP diluted EPS was $(0.52), non-GAAP diluted EPS was $0.26
- Align records charge to long-lived assets and goodwill for scanner and CAD/CAM services reporting unit
Align Technology, Inc. (
Total net revenues for the first quarter of fiscal 2013 (Q1 13) were $153.6 million. This is compared to $142.8 million reported in the fourth quarter of 2012 (Q4 12) and compared to $135.1 million reported in the first quarter of 2012 (Q1 12). Q1 13 Invisalign clear aligner revenue was $141.6 million, compared to $132.8 million in Q4 12 and $123.3 million in Q1 12. As expected, Q1 13 clear aligner revenue includes $4.4 million from the planned consolidation of Vivera Retainer product shipments from four shipments per year down to one shipment per year, as well as a $2.7 million decrease in revenue due to the change in our mid-course correction policy effective June 15, 2013. Q1 13 Invisalign clear aligner case shipments were 98.2 thousand, compared to 90.5 thousand in Q4 12 and 85.3 thousand in Q1 12. Q1 13 scanner and CAD/CAM services revenue was $12.0 million, compared to $10.0 million in Q4 12 and compared to $11.8 million in Q1 12. Q1 13 scanner and CAD/CAM services revenue includes $1.4 million that was deferred in Q3 and Q4 2012 for the new iTero scanner upgrade program which was launched in Q1 13.
Recent changes in the competitive environment for intra-oral scanners including announcements in March 2013 of new low-priced scanners targeted at Orthodontists and GP Dentists in North America caused us to lower our expectations for growth and profitability for our scanner and CAD/CAM services business during Q1 13. As a result, we conducted an impairment analysis of long-lived assets and goodwill related to our scanner and CAD/CAM services reporting unit. Based on these analyses, we recorded a $26.3 million impairment of our long-lived assets and a $40.7 million impairment of goodwill. The $40.7 million represents the remaining goodwill balance in the scanner and CAD/CAM services reporting unit.
"Q1 was a solid quarter across the board. We've started the year with better than expected revenue and non-GAAP earnings driven primarily by record Invisalign case volume. Strong Invisalign case shipments in North America, especially among Orthodontists, reflect stable patient traffic in our customers' offices as well as continued activity to encourage doctor engagement," said Thomas M. Prescott, Align president and CEO. "Although we determined it was appropriate to record the impairment charges related to the scanner and CAD/CAM services unit, our long term view of this business remains positive and we will continue to execute plans to be a leader in this business. In addition, we continue to see leverage in the Invisalign business from scanner technology and maintain our belief in the long term benefits of the scanner and CAD/CAM services business."
Net loss for Q1 13 was $42.0 million, or $(0.52) per diluted share. This is compared to net profit of $9.6 million, or $0.12 per diluted share in Q4 12 and net profit of $21.0 million, or $0.26 per diluted share in Q1 12. Net profit for Q1 13 includes an impairment of long-lived assets of $26.3 million and a goodwill impairment charge of $40.7 million. Net profit for Q4 12 includes a goodwill impairment charge of $11.9 million resulting from finalizing our Q3 12 preliminary estimate. Net profit for Q1 12 includes pre-tax acquisition and integration related costs of $0.7 million, pre-tax severance and benefit costs of $0.5 million with a total tax effect of $0.6 million.
Prescott continued, "During the quarter we launched SmartTrack, our next generation aligner material, which is now the standard aligner material for Invisalign clear aligners worldwide. We have received consistently positive initial feedback from our customers and their patients. We're excited about the potential for SmartTrack material to help doctors increase confidence in using Invisalign more often and for more complex cases due to the improved control of tooth movements and the added benefit of increased patient comfort. We are committed to improving the Invisalign customer experience by continually evaluating and striving to improve our products, customer support processes, and policies to help doctors achieve the best results for their patients."
As previously disclosed, beginning in Q1 13, Align began consolidating Vivera Retainer shipments down to one shipment per year instead of four shipments per year. As a result, the full amount of Vivera Retainer revenue is now recognized upon shipment rather than ratably over four quarters. For Q1 13 clear aligner revenue includes $4.4 million from consolidating Vivera Retainer product shipments. This shipment change was based on feedback from our customers that it would make their practices more efficient.
Beginning June 15, 2013, Align will no longer charge a fee associated with mid-course correction orders. Mid-course correction provides Invisalign customers with the option of ordering a treatment adjustment during active treatment if the case is not tracking to the original treatment plan or goals, giving doctors the ability to "adjust course" based on the needs of the individual patient. As of June 15, Align will include up to three free mid-course correction orders per case in our list prices for Invisalign Full and Invisalign Teen. As a result, Invisalign clear aligner revenues for Q1 13 were decreased by $2.7 million, representing the revenue deferred to provide free mid-course corrections for open cases that we expect to be eligible for this new policy when it is implemented.
To supplement our consolidated financial statements, we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating expense, non-GAAP operating margin, non-GAAP net profit, non-GAAP earnings per diluted share, EBITDA and adjusted EBITDA. Detailed reconciliations between GAAP and non-GAAP information are contained in the tables following the financial tables of this release. Starting in fiscal year 2013, amortization of acquired intangible assets is no longer excluded as a non-GAAP measure. This expense is included in GAAP gross profit, operating expenses, profit (loss) from operations and net profit (loss) for the periods presented below and therefore is no longer a reconciling item.
Non-GAAP net profit for Q1 13 was $21.2 million, or $0.26 per diluted share. This is compared to non-GAAP net profit of $21.5 million, or $0.26 per diluted share in Q4 12 and non-GAAP net profit of $21.5 million, or $0.26 per diluted share in Q1 12.
| Q1 13 Operating Results ($M) | ||||||||||
| Key GAAP Operating Results | Q1 13 | Q4 12 | Q1 12 | |||||||
| Revenue | $ | 153.6 | $ | 142.8 | $ | 135.1 | ||||
| Clear Aligner | $ | 141.6 | $ | 132.8 | $ | 123.3 | ||||
| Scanner and CAD/CAM Services | $ | 12.0 | $ | 10.0 | $ | 11.8 | ||||
| Gross Margin | 73.5 | % | 74.5 | % | 74.6 | % | ||||
| Clear Aligner | 77.2 | % | 78.8 | % | 79.0 | % | ||||
| Scanner and CAD/CAM Services | 29.3 | % | 18.5 | % | 28.7 | % | ||||
| Operating Expense | $ | 150.9 | $ | 89.4 | $ | 72.8 | ||||
| Operating Margin | (24.8 | )% | 12.0 | % | 20.7 | % | ||||
| Net Profit (Loss) | $ | (42.0 | ) | $ | 9.6 | $ | 21.0 | |||
| Earnings (Loss) Per Diluted Share (EPS) | $ | (0.52 | ) | $ | 0.12 | $ | 0.26 | |||
| Key Non-GAAP Operating Results | Q1 13 | Q4 12 | Q1 12 | |||||||
| Non-GAAP Gross Margin | 73.5 | % | 74.5 | % | 74.9 | % | ||||
| Non-GAAP Clear Aligner | 77.2 | % | 78.8 | % | 79.0 | % | ||||
| Non-GAAP Scanner & CAD/CAM Services | 29.3 | % | 18.5 | % | 32.4 | % | ||||
| Non-GAAP Operating Expense | $ | 83.9 | $ | 77.5 | $ | 72.0 | ||||
| Non-GAAP Operating Margin | 18.8 | % | 20.3 | % | 21.6 | % | ||||
| Non-GAAP Net Profit | $ | 21.2 | $ | 21.5 | $ | 21.5 | ||||
| Non-GAAP Earnings Per Diluted Share (EPS) | $ | 0.26 | $ | 0.26 | $ | 0.26 | ||||
| EBITDA (Loss) | $ | (34.2 | ) | $ | 21.7 | $ | 31.1 | |||
| Adjusted EBITDA | $ | 32.9 | $ | 33.6 | $ | 32.2 | ||||
Total stock-based compensation expense included in Q1 13 was $6.4 million compared to $6.0 million in Q4 12 and $4.9 million in Q1 12. Stock based compensation expense included in GAAP gross margin in Q1 13 was $0.6 million, and Q4 12 and Q1 12 was $0.5 million. Stock-based compensation expense included in GAAP operating expense in Q1 13 was $5.8 million compared to $5.5 million in Q4 12 and $4.4 million in Q1 12.
Liquidity and Capital Resources As of March 31, 2013, Align Technology had $377.4 million in cash, cash equivalents, and marketable securities compared to $356.1 million as of December 31, 2012. During Q1 13, we purchased approximately 75 thousand shares of our common stock at an average price of $32.47 per share for a total of approximately $2.4 million. There remains approximately $92.7 million available under the Company's existing stock repurchase authorization.
Q2 Fiscal 2013 Business Outlook For the second quarter of fiscal 2013 (Q2 13), Align Technology expects net revenues to be in a range of $153.6 million to $157.4 million. Invisalign clear aligner case shipments for Q2 13 are expected to be in a range of 102.2 to 104.7 thousand cases, which reflect a year-over-year increase of 7.2% to 9.8%. Earnings per diluted share for Q2 13 is expected to be in a range of $0.26 to $0.28.
Align Web Cast and Conference Call Align Technology will host a conference call today, April 18, 2013 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first quarter 2012 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 201-689-8261 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 411500 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 April 26, 2013.
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 teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998. The Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express 10, Invisalign Express 5, Invisalign Lite, and Vivera Retainers. To learn more about Invisalign or to find an Invisalign trained doctor in your area, please visit www.invisalign.com .
Cadent Holdings, Inc. is a subsidiary of Align Technology and is a leading provider of 3D digital scanning solutions for orthodontics and dentistry. The Cadent family of products includes the iTero scanning systems, OrthoCAD iCast and OrthoCAD iRecord. For additional information, please visit www.cadentinc.com .
About non-GAAP Financial Measures To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating expenses, non-GAAP profit from operations, non-GAAP net profit and non-GAAP earnings per share, which exclude, as applicable, acquisition and integration related costs, severance and benefit costs, impairment of goodwill, impairment of long-lived assets and any related income tax-related adjustments, and EBITDA and adjusted EBITDA. 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.
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 expenditures and other items that may not be indicative of our operating performance including discrete cash and non-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. A reconciliation of the GAAP and non-GAAP financial measures for the quarter and year and a more detailed explanation of each non-GAAP financial measure and its uses are provided in the footnotes to the table captioned "Reconciliation of GAAP to non-GAAP Key Financial Metrics" and "Business Outlook Summary" included at the end of this release.
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 2013, including anticipated net revenue, gross margin, operating expense, operating income, earnings per share, case shipments and cash. 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 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 the CAD/CAM 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, the loss of key personnel and impairments in the book value of goodwill or other intangible assets. 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, 2012, which was filed with the Securities and Exchange Commission on March 1, 2013. 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, 2013 | March 31, 2012 | |||||||
| Net revenues | $ | 153,580 | 135,079 | |||||
| Cost of revenues | 40,731 | 34,319 | ||||||
| Gross profit | 112,849 | 100,760 | ||||||
| Operating expenses: | ||||||||
| Sales and marketing | 42,281 | 38,717 | ||||||
| General and administrative | 30,348 | 23,511 | ||||||
| Research and development | 11,282 | 10,526 | ||||||
| Impairment of goodwill | 40,693 | - | ||||||
| Impairment of long-lived assets | 26,320 | - | ||||||
| Total operating expenses | 150,924 | 72,754 | ||||||
| Profit (loss) from operations | (38,075 | ) | 28,006 | |||||
| Interest and other income (expense), net | (988 | ) | (812 | ) | ||||
| Profit before income taxes | (39,063 | ) | 27,194 | |||||
| Provision for income taxes | 2,920 | 6,210 |
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