Align Technology, Inc. Announces Q1 2007 Results

- 1st Quarter Total Revenues Grew 30% to $63.8 Million Year Over Year

- First Quarter 2007 GAAP Net Profit of $7.0 Million, or $0.10 per share

- Case Shipments Increased 23% Year Over Year

- 1,800 New Doctors Trained Worldwide

- 2007 Revenues Expected Between $268-278 Million

    SANTA CLARA, Calif., April 26 /PRNewswire-FirstCall/ -- Align
 Technology, Inc. ( ALGN), the inventor of Invisalign(R), a
 proprietary method of straightening teeth without wires and brackets, today
 reported financial results for the first quarter of 2007. Total revenues
 for the first quarter of 2007 were $63.8 million, compared to $48.9 million
 in the first quarter of 2006, an increase of 30.4 percent.
     "We are pleased that we are off to a strong start in 2007," stated
 Thomas M. Prescott, President and CEO of Align Technology. "Improved
 operating performance yielded a welcome return to profitability, and our
 solid growth in volume and revenue on an increasing base of customers is
 very gratifying. We are committed to evolving our products to meet the
 specific needs of our Orthodontists and GP Dentists, which is key to
 generating and sustaining our top line growth."
     First Quarter 2007 Revenue Analysis
     Revenue was $63.8 million for the first quarter, an increase of 30.4%
 from the first quarter of 2006. In the first quarter, revenue per channel
 was:
     * $21.5 million for U.S. Ortho, including $2.1 million for Invisalign
       Express;
     * $29.8 million for U.S. GP, including $2.8 million for Invisalign
       Express;
     * $9.2 million for International; and
     * $3.3 million for Training and Other.
 
     Key metrics include:
 
     * 3,800 U.S. Orthos, 9,700 U.S. GPs and 2,100 International doctors
       submitted cases in the first quarter. Also in the first quarter, cases
       were shipped to 3,600 U.S. Orthos, 8,700 U.S. GPs and 2,000
       International doctors.
     * Utilization in the first quarter of 2007 was 4.8 for U.S. Orthos,
       2.6 for U.S. GPs and 2.8 for International.  Sequentially, utilization
       rates increased for U.S. Orthos and U.S. GPs on a growing base of
       participating doctors.  Utilization rates have remained consistent for
       International.
     * In the first quarter, worldwide average selling price (ASP) for
       Invisalign was $1,340. Excluding Invisalign Express, worldwide ASP was
       $1,450.
     * Total number of cases shipped increased 23 percent year over year to
       45,000. Included in this were 6,700 Invisalign Express cases.
     * Doctors trained worldwide in the first quarter increased by 1,800,
       including 1,300 U.S. GP dentists, to a cumulative total of 42,600.
     * Since product inception, 30,100 doctors worldwide have used Invisalign:
       6,400 U.S. Orthos; 18,200 U.S. GPs; and 5,500 International doctors. 84
       percent of these doctors have started more than one case.
     A full list of quarterly metrics is available in the Fact Sheet
 following the financial tables of this release. Additionally, quarterly
 metric information for the last 9 quarters is available on Align's website
 at investor.aligntech.com.
     Operating results reflect stock-based compensation expense of $2.5
 million for Q1. It also reflects a reversal of $1.8 million of the $8.3
 million expense we recorded in the fourth quarter of 2006 for the Patients
 First Program. The expense reversal results from a reduction in the number
 of cases and associated costs we will incur to fulfill our obligations
 under the Patients First Program. These items have been excluded in the
 non-GAAP financials. A reconciliation of GAAP (U.S. generally accepted
 accounting principles) to non-GAAP results and outlook is contained in the
 tables below.
     First Quarter 2007 Operating Results
     Key GAAP operating results for the first quarter of 2007 include:
 
     * Gross margin was 72.5 percent, compared to 70.8 percent in the first
       quarter 2006.
     * Operating expenses were $39.2 million, compared to $39.8 million in the
       first quarter 2006. First quarter 2007 operating expense includes the
       $1.8 million reduction in the cost of completing the Patients First
       Program cases.
     * Net profit was $7.0 million, compared to a net loss of $4.8 million in
       the first quarter 2006.
     * Earnings per share was $0.10, compared to a loss per share of $0.08 in
       the first quarter 2006.
 
     Key non-GAAP operating results for the first quarter of 2007 include:
 
     * Gross margin was 72.9 percent, compared to 71.1 percent in the first
       quarter 2006.
     * Operating expenses were $38.7 million, compared to $37.8 million in the
       first quarter 2006.
     * Net profit was $7.6 million, compared to a net loss of $2.6 million in
       the first quarter 2006.
     * Earnings per share was $0.11, compared to a loss per share of $0.04 in
       the first quarter 2006.
     Liquidity and Capital Resources
     As of March 31, 2007, Align had $65.7 million in cash, cash
 equivalents, marketable securities and restricted cash, compared to $64.1
 million as of December 31, 2006. During the first quarter Align reduced the
 borrowings against its credit facility by $3.5 million. $8.0 million
 remains outstanding.
     Patients First Program Update
     The fourth quarter of 2006 included an $8.3 million operating expense
 for the anticipated cost of completing the 30,500 registered Patients First
 Program cases. As of March 31, 2007, Align had received 24,700 of the
 30,500 registered cases. In accordance with the Patients First Program
 terms and conditions, the program was closed to receipt of additional cases
 as of March 30, 2007. As a result, the first quarter includes a $1.8
 million reversal of operating expense to reflect the reduction in the
 number of cases and associated costs we will incur to fulfill our
 obligation under the program. 16,300 cases have been shipped as of March
 31, 2007 with the remaining 8,400 in process cases expected to ship in the
 second quarter of 2007.
     Business Outlook for the Second Quarter 2007 and Full Year 2007
     For the second quarter 2007, Align Technology expects revenues between
 $72.0 and $74.0 million and GAAP earnings per share between $0.10 and
 $0.12. Non-GAAP EPS is expected to be between $0.15 and $0.17.
     For the fiscal year 2007, Align Technology expects revenues between
 $268.4 and $278.0 million and GAAP earnings per share between $0.30 and
 $0.38. Non-GAAP EPS for fiscal year 2007 is expected to be between $0.46
 and $0.55.
     A more comprehensive business outlook, including a reconciliation of
 GAAP to Non-GAAP financial measures, is available following the financial
 tables of this release.
     Align Webcast and Conference Call
     Align Technology will host a webcast and conference call today, April
 26, 2007 at 10:00 a.m. EDT, 7:00 a.m. PDT, to review the first quarter 2007
 results and discuss future operating trends and a business outlook. To
 access the webcast, click on "Webcasts & Presentations" 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 through 5:30
 p.m. EDT on April 25, 2008. Additionally, a telephonic replay of the call
 can be accessed by dialing (877) 660-6853 with account number 292 followed
 by # and conference number 227477 followed by #. The replay may 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. EDT on May 10, 2007.
     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 www.invisalign.com or call 1-800-INVISIBLE.
     About non-GAAP Financial Measures
     To supplement our consolidated financial statements, which statements
 are prepared and presented in accordance with GAAP, we use the following
 non-GAAP financial measures: non-GAAP gross profit, profit (loss) from
 operations, net profit (loss) and certain expenses (including sales and
 marketing, general and administrative and research and development), which
 exclude stock-based compensation and the Patients First Program reversal.
 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 "Reconciliation of GAAP to Non-GAAP Condensed Consolidated
 Statements of Operations" and "Business Outlook" 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 not only non-cash charges, such as
 stock-based compensation, but also discrete cash charges that are
 infrequent or one-time in nature, such as the Patients First Program. 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 help them analyze the health of our business.
     Forward-Looking Statement
     This news release, including the tables below, contain forward-looking
 statements, including statements regarding Align's anticipated financial
 results and certain business metrics for the second quarter and full year
 of 2007, including anticipated revenue, operating expense, earnings per
 share, percentage of revenue by channel, case shipments and average selling
 prices, and statements regarding the anticipated timing of the completion
 of the remaining Patients First Program cases. 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, 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, including
 during the summer vacation periods in the United States and Europe in the
 third 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, including members of its direct sales force. 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, 2006,
 which was filed with the Securities and Exchange Commission on March 12,
 2007, and its Quarterly Reports on Form 10-Q. Align undertakes no
 obligation to revise or update publicly any forward-looking statements for
 any reason.
     Investor Relations Contacts:             Press Contact:
     Eldon Bullington                         Shannon Mangum Henderson
     Align Technology, Inc.                   Ethos Communication, Inc.
     (408) 470-1000                           (678) 540-9222
     investorinfo@aligntech.com               align@ethoscommunication.com
 
     Matt Clawson
     Allen & Caron, Inc.
     (949) 474-4300
     matt@allencaron.com
 
 
     ALIGN TECHNOLOGY, INC.
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
     (unaudited)
 
                                                       Three Months Ended
                                               March 31, 2007    March 31, 2006
     (in thousands, except per share data)
 
     Revenues                                       $63,761           $48,908
 
     Cost of revenues                                17,529            14,297
 
     Gross profit                                    46,232            34,611
 
     Operating expenses:
 
     Sales and marketing                             23,150            20,066
     General and administrative                      12,185            15,064
     Research and development                         5,693             4,694
     Patients First Program                          (1,796)                -
 
     Total operating expenses                        39,232            39,824
 
 
     Profit (loss) from operations                    7,000            (5,213)
 
     Interest and other income, net                     455               698
     Provision for income taxes                        (477)             (249)
 
     Net profit (loss)                               $6,978           $(4,764)
 
     Net profit (loss) per share
          - basic                                     $0.11            $(0.08)
          - diluted                                   $0.10            $(0.08)
 
     Shares used in computing net profit
      (loss) per share
          - basic                                    65,433            62,518
          - diluted                                  69,331            62,518
 
 
 
     ALIGN TECHNOLOGY, INC.
     CONDENSED CONSOLIDATED BALANCE SHEETS
     (unaudited)
 
                                              March 31, 2007  December 31, 2006
     (in thousands)
                    ASSETS
 
     Current assets:
     Cash and cash equivalents                      $56,209           $55,113
     Restricted cash                                     95                93
     Marketable securities, short-term                9,384             8,931
     Accounts receivable, net                        38,203            33,635
     Inventories, net                                 3,725             3,090
     Other current assets                             7,624             7,227
        Total current assets                        115,240           108,089
 
     Property and equipment, net                     26,208            26,904
     Goodwill and intangible assets, net             13,457            14,303
     Other long-term assets                           2,134             2,262
 
          Total assets                             $157,039          $151,558
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities:
     Line of credit                                  $8,000           $11,500
     Accounts payable                                 6,761             5,034
     Accrued liabilities                             31,831            40,307
     Deferred revenue                                11,226            10,942
        Total current liabilities                    57,818            67,783
 
     Other long term liabilities                        233               219
 
         Total liabilities                           58,051            68,002
 
     Total stockholders' equity                      98,988            83,556
 
           Total liabilities and
            stockholders' equity                   $157,039          $151,558
 
 
 
     ALIGN TECHNOLOGY, INC.
     RECONCILIATION OF GAAP TO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
     OPERATIONS
     (unaudited)
 
     (in thousands, except per share data)
                                             Three Months Ended March 31, 2007
 
                                             Reported   Adjustments   Non GAAP
 
     Revenues                                 $63,761       $-         $63,761
 
     Cost of revenues                          17,529       (234)(a)    17,295
 
     Gross profit                              46,232        234        46,466
 
     Operating expenses:
 
     Sales and marketing                       23,150       (857)(a)    22,293
     General and administrative                12,185     (1,103)(a)    11,082
     Research and development                   5,693       (328)(a)     5,365
     Patients First Program                    (1,796)     1,796             -
 
     Total operating expenses                  39,232       (492)       38,740
 
 
     Profit (loss) from operations              7,000        726         7,726
 
     Interest and other income, net               455          -           455
     Provision for income taxes                  (477)       (80)(b)      (557)
 
     Net profit (loss)                         $6,978       $646        $7,624
 
     Net profit (loss) per share
          - basic                               $0.11                    $0.12
          - diluted                             $0.10                    $0.11
 
     Shares used in computing net profit
      (loss) per share
          - basic                              65,433                   65,433
          - diluted                            69,331                   69,331
 
 
     (a)   Non cash stock-based compensation included in cost of sales and
           operating expenses.
     (b)   Tax impact on non-GAAP adjustments.
 
 
     ALIGN TECHNOLOGY, INC.
     RECONCILIATION OF GAAP TO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
     OPERATIONS
     (unaudited)
 
     (in thousands, except per share data)
                                             Three Months Ended March 31, 2006
 
                                             Reported   Adjustments   Non GAAP
 
     Revenues                                 $48,908       $-         $48,908
 
     Cost of revenues                          14,297       (148)(a)    14,149
 
     Gross profit                              34,611        148        34,759
 
     Operating expenses:
 
     Sales and marketing                       20,066       (679)(a)    19,387
     General and administrative                15,064     (1,088)(a)    13,976
     Research and development                   4,694       (290)(a)     4,404
     Patients First Program                         -          -             -
 
     Total operating expenses                  39,824     (2,057)       37,767
 
 
     Profit (loss) from operations             (5,213)     2,205        (3,008)
 
     Interest and other income, net               698          -           698
     Provision for income taxes                  (249)         -          (249)
 
     Net profit (loss)                        $(4,764)    $2,205       $(2,559)
 
     Net profit (loss) per share
          - basic                              $(0.08)                  $(0.04)
          - diluted                            $(0.08)                  $(0.04)
 
     Shares used in computing net profit
      (loss) per share
          - basic                              62,518                   62,518
          - diluted                            62,518                   62,518
 
 
     (a)   Non cash stock-based compensation included in cost of sales and
           operating expenses.
     (b)   Tax impact on non-GAAP adjustments.
 
 
     ALIGN TECHNOLOGY, INC.
     FACT SHEET
     The following information highlights business metrics for Align's first
 quarter of 2007. For prior quarter information, please refer to the
 Investor Relations website at http://investor.aligntech.com.
     (rounded to the nearest hundred, except in utilization, ASPs and
 percentage amounts)
 
 
     Cases Delivered                        Patients First Program Information
                              1Q 2007                               1Q 2007
     U.S. Orthodontists - Full   14,200     Cases registered            30,500
     U.S. Orthodontists                     Final number of
      - Invisalign Express        2,800       OC Cases Received         24,700
     U.S. GP dentists - Full     18,600     Cases shipped               16,300
     U.S. GP dentists                       In process cases
      - Invisalign Express        3,800      to be shipped               8,400
     International - Full         5,500
     International
      - Invisalign Express          100
     Total Cases Delivered       45,000
 
     Doctors Trained           1Q 2007      Cumulative Total
     U.S. Orthodontists             100                8,100
     U.S. GP dentists             1,300               23,300
     International                  400               11,200
     Total Doctors Trained        1,800               42,600
 
 
     Submitting Doctors                      Doctors Cases Are Shipped To
                              1Q 2007                              1Q 2007
     U.S. Orthodontists           3,800     U.S. Orthodontists          3,600
     U.S. GP dentists             9,700     U.S. GP dentists            8,700
     International                2,100     International               2,000
     Total Submitting Doctors    15,600     Total Shipped to Doctors   14,300
 
 
     Doctors Starting Invisalign Treatment     % of Multiple-Case Doctors
                      Since Inception                      Since Inception
     U.S. Orthodontists           6,400     U.S. Orthodontists            88%
     U.S. GP dentists            18,200     U.S. GP dentists              87%
     International                5,500     International                 74%
     Total Doctors Starting
      Invisalign Treatment       30,100     Total Worldwide               84%
 
     Doctor Utilization*                 Blended ASP incl. Invisalign Express
                              1Q 2007                              1Q 2007
     U.S. Orthodontists             4.8     U.S. Orthodontists         $1,260
     U.S. GP dentists               2.6     U.S. GP dentists           $1,330
     International                  2.8     International              $1,650
                                            Total Worldwide ASP        $1,340
 
     * Doctor Utilization = # of cases / # of doctors cases are shipped to
 
 
     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.
     Financials (including reconciliation of GAAP to non-GAAP financial
     measures)
     (in millions, except per share amounts and percentages)
 
 
                                                    2Q 2007
 
                                    GAAP         Adjustment      Non-GAAP
     Revenue                   $72.0 - $74.0         --        $72.0 - $74.0
     Gross Margin              71.4% - 73.0%        0.4% (a)   71.8% - 73.4%
 
       Sales and Marketing     $24.2 - $24.5        $1.0 (a)   $23.2 - $23.5
       R&D                      $6.4 - $6.9         $0.4 (a)    $6.0 - $6.5
       G&A                     $13.8 - $14.1        $1.6 (a)   $12.2 - $12.5
       Patient's First Costs         --              --             --
     Operating Expenses        $44.4 - $45.5        $3.0       $41.4 - $42.5
 
     Net Profit                 $7.1 - $8.5         $3.2       $10.3 - $11.8
     Net Profit per Share      $0.10 - $0.12       $0.05      $0.15 - $0.17
 
 
                                                   FY 2007
 
                                    GAAP         Adjustment       Non-GAAP
     Revenue                  $268.4 - $278.0        --      $268.4 - $278.0
     Gross Margin              71.5% - 72.6%        0.4% (a)  71.9% - 73.0%
 
       Sales and Marketing     $94.6 - $96.2    $4.0 - $4.3(a) $90.6 - $91.9
       R&D                     $25.3 - $26.7    $1.5 - $1.7(a) $23.8 - $25.0
       G&A                     $52.7 - $54.6    $6.1 - $6.6(a) $46.6 - $48.0
       Patient's First Costs       ($1.8)          ($1.8)            --
     Operating Expenses       $170.8 - $175.6   $9.7 - $10.6 $161.1 - $165.0
 
     Net Profit                $21.1 - $26.3   $10.9 - $12.0  $32.1 - $38.3
     Net Profit per Share      $0.30 - $0.38   $0.16 - $0.17   $0.46 - $0.55
 
 
     (a)  Non cash stock-based compensation included in cost of sales and
          operating expenses
 
 
     Business Metrics
                                              2Q 2007            FY 2007
     Channel as a % of Revenue
       U.S. Orthodontists - Full                     29%                28%
       U.S. GP Dentists - Full                       45%                45%
       International Invisalign                      14%                14%
       Invisalign Express                             8%                 9%
       Training/Other                                 4%                 4%
     Case Shipments                        53.0K - 54.0K    200.0K - 206.0K
     Blended ASP, excl Express             $1410 - $1420      $1390 - $1400
     Blended ASP, incl Express             $1300 - $1310      $1290 - $1300
     Cash                                                       $82.0-$87.0
     DSO                                                           ~55 days
     Capex                                                       $12.0-14.0
     Depreciation & Amortization                                 $13.0-14.0
 
 

SOURCE Align Technology, Inc.