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Align Technology Announces First Quarter Fiscal 2009 Results

- Net revenues of $70.1 million, compared to outlook of $65.0 to $69.0 million

- Case shipments of 50.1 thousand, compared to outlook of 44.5 to 47.0 thousand

- GAAP diluted EPS of $0.04, compared to outlook of ($0.04) to $0.00

SANTA CLARA, Calif., April 23 /PRNewswire-FirstCall/ --Align Technology, Inc. (Nasdaq: ALGN) today reported financial results for the first quarter of fiscal 2009, ended March 31, 2009.

Total net revenues for the first quarter of fiscal 2009 (Q1 09) were $70.1 million compared to $74.1 million reported in the fourth quarter of 2008 (Q4 08) and compared to $74.8 million reported in the first quarter of 2008 (Q1 08). Invisalign case shipments for Q1 09 were 50,060, compared to 52,640 in Q4 08 and compared to 51,770 in Q1 08.

Net profit for Q1 09 was $2.6 million, or $0.04 per diluted share. This is compared to net profit of $65.5 million, or $0.98 per diluted share in Q4 08 and net profit of $5.3 million, or $0.07 per diluted share in Q1 08. Q4 08 net profit of $0.98 per diluted share included a favorable impact of approximately $64.6 million, or $0.97 per diluted share from the release of a tax valuation allowance on specific deferred tax assets. Stock-based compensation expense included in Q1 09 net profit was $3.7 million compared to $3.9 million in Q4 08 and $4.0 million in Q1 08.

"I'm pleased that the year is off to a good start with financial results that were better than our outlook," said Thomas M. Prescott, president and CEO of Align Technology. "Our first quarter performance reflects higher than expected revenue, case volumes and gross margins, and the benefit of our lower operating expenses. This combined with a $1.5 million credit for reimbursement of legal costs resulted in earnings that exceeded our guidance."

To supplement our consolidated financial statements, we use the following non-GAAP financial measures: non-GAAP operating expense, non-GAAP operating margin, non-GAAP net profit and non-GAAP earnings per share. For Q1 09, the non-GAAP financial measures excluded the impact of the Company's restructuring plan announced previously. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables following the financial tables of this release.

Non-GAAP net profit for Q1 09 was $3.2 million, or $0.05 per diluted share. This is compared to non-GAAP net profit of $4.9 million, or $0.07 per diluted share in Q4 08. In Q1 08, there was no difference between GAAP and non-GAAP net profit.

Q1 09 Operating Results

Q1 09 operating expense includes a $1.5 million credit for an insurance reimbursement of legal costs associated with OrthoClear litigation, which was settled in October 2006. Q4 08 operating expense includes a $1.7 million asset impairment charge.

    Key GAAP Operating Results               Q1 09       Q4 08       Q1 08
    Gross Margin                              75.2%       72.7%       73.8%
    Operating Expense                       $47.4M      $52.6M      $50.5M
    Operating Margin                           7.5%        1.8%        6.2%
    Net Profit                               $2.6M      $65.5M       $5.3M
    Earnings Per Diluted Share (EPS)         $0.04       $0.98       $0.07

    Key Non-GAAP Operating Results           Q1 09       Q4 08       Q1 08
    Non-GAAP Operating Expense              $46.5M      $48.5M      $50.5M
    Non-GAAP Operating Margin                  8.8%        7.2%        6.2%
    Non-GAAP Net Profit                      $3.2M       $4.9M       $5.3M
    Non-GAAP Earnings Per Diluted Share
     (EPS)                                   $0.05       $0.07       $0.07

Liquidity and Capital Resources

As of March 31, 2009, Align had $124.7 million in cash, cash equivalents, and short term marketable securities compared to $110.2 million as of December 31, 2008.

Key Business Metrics

The following table highlights business metrics for Align's first quarter of 2009. Additional historical information is available on the Company's website at

    Revenue by Channel ($M):                   Q1 09  % of Revenue Q1 09/Q1 08
                                                                   % Change
    North American Orthodontists               $21.1       30.1%    (6.5%)
    North American GP Dentists                 $30.9       44.1%    (8.9%)
    International                              $14.3       20.3%     0.5%
    Non-case Revenue*                           $3.8        5.5%    (5.7%)
    Total Revenue                              $70.1      100.0%    (6.2%)
    *includes training, ancillary products, and retainers

    Cases Shipped by  Channel:                 Q1 09   % of Cases  Q1 09/Q1 08
                                                                  % Change
    North American Orthodontists              16,890       33.7%    (4.0%)
    North American GP Dentists                23,335       46.6%    (9.7%)
    International                              9,835       19.7%    18.1%
    Total Cases Shipped                       50,060      100.0%    (3.3%)

    Cases Shipped by  Product:                 Q1 09   % of Cases  Q1 09/Q1 08
                                                                  % Change
    Invisalign Full                           37,245       74.4%   (14.6%)
    Invisalign Express                         8,010       16.0%   (1.9%)
    Invisalign Teen                            3,895        7.8%    N/A
    Invisalign Assist                            910        1.8%    N/A
    Total Cases Shipped                       50,060      100.0%   (3.3%)

    Average Selling Price (ASP), as billed:   Q1 09
    Total Worldwide Blended ASP               $1,365
    International ASP                         $1,450

    Number of Doctors Cases were Shipped to:   Q1 09
    North American Orthodontists               3,670
    North American GP Dentists                10,625
    International                              3,070
    Total Doctors Cases were Shipped to
     Worldwide                                17,365

    Number of Doctors Trained Worldwide:       Q1 09    Cumulative
    North American Orthodontists                  75       8,740
    North American GP Dentists                   815      33,475
    International                                330      14,515
    Total Doctors Trained Worldwide            1,220      56,730

    Doctor Utilization Rates*:                  Q1 09      Q4 08       Q1 08
    North American Orthodontists                 4.6         4.6         4.8
    North American GP Dentists                   2.2         2.3         2.4
    International                                3.2         3.4         3.2
    Total Utilization Rate                       2.9         3.0         3.1

    * Utilization = # of cases shipped/# of doctors to whom cases were shipped

    Total Invisalign Patients (cases             Q1 09      Cumulative
    Number of Patients Treated or in
     Treatment (cases)                           50,060       994,115

Align Ships One Millionth Case

Subsequent to Q1 09, Align achieved a significant milestone, shipping its one millionth Invisalign case to Dr. James Kohl, of Wilmette, Illinois for his teenage patient. Align now has over a million patients who have completed or are in treatment using the Invisalign System.

Q2 Fiscal 2009 Business Outlook

For the second quarter of fiscal 2009 (Q2 09), Align Technology expects net revenues to be in a range of $67.5 million to $70.5 million. Operating margin for Q2 09 is expected to be in a range of 0% to 1%. GAAP earnings per diluted share for Q2 09 is expected to be in a range of a breakeven to $0.01. Non-GAAP earnings per diluted share for Q2 09 is expected to be in a range of $0.01 to $0.02. Stock-based compensation expense for Q2 09 is expected to be approximately $4.9 million.

A more comprehensive business outlook is available following the financial tables of this release.

Align Web Cast and Conference Call

Align Technology will host a conference call today, April 23, 2009 at 4:30 p.m. ET, 1:30 p.m. PT, to review its first quarter fiscal 2009 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 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 318996 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 5:30 p.m. ET on May 6, 2009.

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. Today, the Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express, and Vivera Retainers.

To learn more about Invisalign or to find a certified Invisalign doctor in your area, please visit or call 1-800-INVISIBLE.

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 operating expenses, non-GAAP profit from operations, non-GAAP net profit, and non-GAAP earnings per share, which exclude the effect of charges associated with the restructuring, release of the tax valuation allowance and the related tax effect. 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 expenditures and other items 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, certain business metrics for the second quarter of 2009, including anticipated 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, failure to achieve the expected cost savings and efficiencies related to the restructuring, including a delay in the implementation of the relocation of certain customer facing organizations from Santa Clara, California to Costa Rica and greater than anticipated costs resulting from the relocation, changes in the size of the expected restructuring charge, loss of key personnel responsible for execution of the relocation in a timely manner, failure to effectively manage the relocation resulting in decreased customer service levels, 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 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 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, 2008, which was filed with the Securities and Exchange Commission on February 27, 2009. Align undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

    (in thousands, except per share data)

                                                     Three Months Ended
                                                  March 31,         March 31,
                                                    2009              2008

    Net revenues                                  $70,132           $74,776

    Cost of revenues                               17,425            19,608

    Gross profit                                   52,707            55,168

    Operating expenses:
      Sales and marketing                          27,854            28,059
      General and administrative                   13,468            15,188
      Research and development                      5,191             7,295
      Restructuring                                   910                 -
    Total operating expenses                       47,423            50,542

    Profit from operations                          5,284             4,626

    Interest and other income (expense), net          148               966

    Profit before income taxes                      5,432             5,592

    Provision for income taxes                     (2,796)             (288)

    Net profit                                     $2,636            $5,304

    Net profit per share
         - basic                                    $0.04             $0.08
         - diluted                                  $0.04             $0.07

    Shares used in computing net profit
     per share
         - basic                                   65,983            69,053
         - diluted                                 66,447            70,860

    (in thousands)

                                                     March 31,    December 31,
                                                        2009          2008

    Current assets:
      Cash and cash equivalents                       $97,051        $87,100
      Marketable securities, short-term                27,633         23,066
      Accounts receivable, net                         51,665         52,362
      Inventories, net                                  2,068          1,965
      Other current assets                             14,588         13,414
        Total current assets                          193,005        177,907

    Property and equipment, net                        26,000         26,979
    Goodwill and intangible assets, net                 7,566          8,266
    Deferred tax asset                                 61,133         61,696
    Other long-term assets                              1,573          4,493

          Total assets                               $289,277       $279,341


    Current liabilities:
      Accounts payable                                 $6,064         $5,580
      Accrued liabilities                              35,656         38,282
      Deferred revenue                                 19,654         16,710
         Total current liabilities                     61,374         60,572

    Other long term liabilities                           204            229

         Total liabilities                             61,578         60,801

    Total stockholders' equity                        227,699        218,540

         Total liabilities and stockholders'
          equity                                     $289,277       $279,341


    Reconciliation of GAAP to Non-GAAP Operating
    (in thousands)
                                                      Three Months Ended
                                                March 31,  December  March 31,
                                                  2009     31, 2008    2008

    GAAP Operating expenses                     $47,423    $52,567    $50,542
     Restructuring                                 (910)    (4,042)         -
    Non-GAAP Operating expenses                 $46,513    $48,525    $50,542

     Reconciliation of GAAP to Non-GAAP Profit from
    (in thousands)
                                                    Three Months Ended
                                              March 31,   December   March 31,
                                                 2009     31, 2008     2008

    GAAP Profit from Operations                  $5,284    $1,325     $4,626
     Restructuring                                  910     4,042          -
    Non-GAAP Profit from Operations              $6,194    $5,367     $4,626

    Reconciliation of GAAP to Non-GAAP
     Net Profit
    (in thousands, except per share amounts)
                                                    Three Months Ended
                                               March 31,   December  March 31,
                                                   2009    31, 2008    2008

    GAAP Net profit                              $2,636    $65,496    $5,304
     Restructuring                                  910      4,042         -
     Tax effect on non-GAAP adjustments            (355)       (43)        -
     Release of tax valuation allowance               -    (64,608)        -
    Non-GAAP Net profit                          $3,191     $4,887    $5,304

    Diluted Net profit per share:
     GAAP                                         $0.04      $0.98     $0.07
     Non-GAAP                                     $0.05      $0.07     $0.07

    Shares used in computing diluted net
     profit share                                66,447     66,816    70,860


    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.

    (in millions, except per share amounts and percentages)

                                             Q2 2009
                                  GAAP      Adjustment(a)  Non-GAAP

    Net Revenue               $67.5 - $70.5              $67.5 - $70.5

    Gross Margin               74.5% - 75.0%              74.5% - 75.0%

    Operating Expenses        $50.5 - $52.0    $0.6  (a) $49.9 - $51.4

    Operating Margin              0% - 1%         1%         1% - 2%

    Net Income per Diluted
      Share                   $0.00 - $0.01   $0.01      $0.01 - $0.02

    Stock Based Compensation
    Cost of Revenues               $0.5                      $0.5
    Operating Expenses             $4.4                      $4.4
    Total Stock Based
     Compensation Expense          $4.9                      $4.9

    (a)  Restructuring charges

    Business Metrics:
                                         Q2 2009
    Case Shipments                    48.0K - 50.0K
    Cash                              $122M - $126M
    DSO                                    mid 60's
    Capex                             $2.0M - $4.0M
    Depreciation &
     Amortization                     $2.0M - $3.0M
    Diluted Shares Outstanding                  67M

    Full Year 2009:                 FY 2009

    Stock Based Compensation        $17.5M
    Diluted Shares Outstanding         67M

    Investor Relations Contact                Press Contact
    Shirley Stacy                             Shannon Mangum Henderson
    Align Technology, Inc.                    Ethos Communication, Inc.
    (408) 470-1150                            (678) 540-9222            

SOURCE Align Technology, Inc.
Copyright©2009 PR Newswire.
All rights reserved

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