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Align Technology Announces Fourth Quarter And Fiscal 2010 Results

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, revenues 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.

Forward-Looking Statement

This news release, including the tables below, contains forward-looking statements, including statements regarding, certain business metrics for the first quarter of 2011, 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, 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, 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, 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 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, 2009, which was filed with the Securities and Exchange Commission on February 26, 2010. 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 Year Ended
  December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009
         
Net revenues  $ 92,893  $ 86,616  $ 387,126  $ 312,333
         
Cost of revenues  21,137  22,810  83,709  78,841
         
Gross profit  71,756  63,806  303,417  233,492
         
Operating expenses:        
Sales and marketing  30,223  27,893  114,013  112,542
General and administrative  18,631  15,487  64,790  61,718
Research and development  6,893  5,781  25,997  22,252
Restructuring   --   --  --  1,319
Litigation settlement   1,239  --  4,549  69,673
Insurance settlement  --   --  (8,666)  --
Total operating expenses  56,986  49,161  200,683  267,504
         
Profit (loss) from operations  14,770  14,645  102,734  (34,012)
         
Interest and other income (expense), net  (251)  (315)  (731)  119
         
Profit (loss) before income taxes  14,519  14,330  102,003  (33,893)
         
Provision for (benefit from) income taxes  4,614  2,838  27,750  (2,624)
         
Net profit (loss)  $ 9,905  $ 11,492  $ 74,253  $ (31,269)
         
Net profit (loss) per share        
 - basic  $ 0.13  $ 0.15  $ 0.98  $ (0.45)
 - diluted  $ 0.13  $ 0.15  $ 0.95  $ (0.45)
         
Shares used in computing net profit/loss per share        
 - basic  76,333  74,482  75,825  69,094
 - diluted  78,724  76,831  78,080  69,094
 
 
ALIGN TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands) 
     
  December 31, 2010 December 31, 2009
     
ASSETS    
     
Current assets:    
Cash and cash equivalents  $ 294,664  $ 166,487
Marketable securities, short-term  8,615  19,978
Accounts receivable, net  65,430  54,537
Inventories  2,544  2,046
Other current assets  17,358  18,251
Total current assets  388,611  261,299
     
Marketable securities, long-term  9,089  -- 
Property and equipment, net  30,684  24,971
Goodwill and intangible assets, net  2,666  5,466
Deferred tax asset  42,439  61,535
Other long-term assets  3,454  1,969
     
Total assets  $ 476,943  $ 355,240
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable  $ 7,768  $ 6,122
Accrued liabilities  51,358  42,822
Deferred revenue  33,848  32,299
Total current liabilities  92,974  81,243
     
Other long term liabilities  6,222  961
     
Total liabilities   99,196  82,204
     
Total stockholders' equity  377,747  273,036
     
Total liabilities and stockholders' equity   $ 476,943  $ 355,240
 
 
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS
 
Reconciliation of GAAP to Non-GAAP Gross Profit
(in thousands) 
  Three Months Ended     
  December 31, 2010 September 30, 2010 December 31, 2009
       
GAAP Gross profit  $ 71,756  $ 74,933  $ 63,806
Ormco royalties  --   --   4,259
Non-GAAP Gross profit  $ 71,756  $ 74,933  $ 68,065
       
Reconciliation of GAAP to Non-GAAP Operating Expenses      
(in thousands)       
   Three Months Ended 
  December 31, 2010 September 30, 2010 December 31, 2009
       
GAAP Operating expenses  $ 56,986  $ 53,010  $ 49,161
Litigation settlement   (1,239)  (3,310)  --
Non-GAAP Operating expenses  $ 55,747  $ 49,700  $ 49,161
       
Reconciliation of GAAP to Non-GAAP Profit from Operations      
(in thousands)      
   Three Months Ended 
  December 31, 2010 September 30, 2010 December 31, 2009
       
GAAP Profit from operations  $ 14,770  $ 21,923  $ 14,645
Ormco royalties  --   --   4,259
Litigation settlement   1,239  3,310  -- 
Non-GAAP Profit from operations  $ 16,009  $ 25,233  $ 18,904
       
Reconciliation of GAAP to Non-GAAP Net Profit       
(in thousands, except per share amounts)       
   Three Months Ended 
  December 31, 2010 September 30, 2010 December 31, 2009
       
GAAP Net profit   $ 9,905  $ 16,815  $ 11,492
Ormco royalties  --   --   4,259
Litigation settlement   1,239  3,310  -- 
Tax effect on non-GAAP adjustments  (179)  (790)  (3,605)
Non-GAAP Net profit   $ 10,965  $ 19,335  $ 12,146
       
Diluted Net profit per share:      
GAAP  $ 0.13  $ 0.22  $ 0.15
Non-GAAP  $ 0.14  $ 0.25  $ 0.16
       
Shares used in computing diluted GAAP net profit per share  78,724  78,109  76,831
Shares used in computing diluted non-GAAP net profit per share  78,724  78,109  76,831
     
     
ALIGN TECHNOLOGY, INC.    
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS  
     
Reconciliation of GAAP to Non-GAAP Net Revenues    
(in thousands)     
   Year Ended 
  December 31, 2010 December 31, 2009
Net revenues  $ 387,126  $ 312,333
Teen deferred revenue release  (14,298)  -- 
Non-GAAP net revenues  $ 372,828  $ 312,333
     
Reconciliation of GAAP to Non-GAAP Gross Profit    
(in thousands)     
   Year Ended 
  December 31, 2010 December 31, 2009
     
GAAP Gross profit  $ 303,417  $ 233,492
Teen deferred revenue release  (14,298)  -- 
Ormco royalties  827  6,165
Non-GAAP Gross profit  $ 289,946  $ 239,657
     
Reconciliation of GAAP to Non-GAAP Operating Expenses    
(in thousands)     
   Year Ended 
  December 31, 2010 December 31, 2009
     
GAAP Operating expenses  $ 200,683  $ 267,504
Litigation settlement   (4,549)  (69,673)
Insurance settlement   8,666  -- 
Restructuring   --   (1,319)
Non-GAAP Operating expenses  $ 204,800  $ 196,512
     
Reconciliation of GAAP to Non-GAAP Profit from Operations    
(in thousands)    
   Year Ended 
  December 31, 2010 December 31, 2009
     
GAAP Profit (loss) from Operations  $ 102,734  $ (34,012)
Teen deferred revenue release  (14,298)  -- 
Ormco royalties  827  6,165
Litigation settlement   4,549  69,673
Insurance settlement   (8,666)  -- 
Restructuring  --   1,319
Non-GAAP Profit from Operations  $ 85,146  $ 43,145
     
Reconciliation of GAAP to Non-GAAP Net Profit     
(in thousands, except per share amounts)     
   Year Ended 
  December 31, 2010 December 31, 2009
     
GAAP Net profit (loss)  $ 74,253  $ (31,269)
Teen deferred revenue release  (14,298)  -- 
Ormco royalties  827  6,165
Litigation settlement   4,549  69,673
Insurance settlement   (8,666)  -- 
Restructuring  --   1,319
Tax effect on non-GAAP adjustments  5,631  (16,818)
Non-GAAP Net profit   $ 62,296  $ 29,070
     
Diluted Net profit (loss) per share:    
GAAP  $ 0.95  $ (0.45)
Non-GAAP  $ 0.80  $ 0.41
     
Shares used in computing diluted GAAP net profit/loss per share  78,080  69,094
Shares used in computing diluted non-GAAP net profit per share  78,080  70,602
 
 
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 
(in millions, except per share amounts and percentages)
   
  Q1 2011
   
Net Revenue $99.0 -- $102.5
   
Gross Profit $76.5 -- $79.8
   
Gross Margin 77.3% - 77.8% 
   
Operating Expenses $59.5 -- $60.5
   
Operating Margin 17.2% - 18.8%
   
Net Income per Diluted Share $0.15 -- $0.17
   
Stock Based Compensation Expense:  
Cost of Revenues $0.3
Operating Expenses $4.7
Total Stock Based Compensation Expense $5.0
   
Business Metrics:  
  Q1 2011
Case Shipments 67.0K - 69.5K
Cash $315M -- $320M
Capex $8.0M -- $10.0M
Depreciation & Amortization $2.0M -- $3.0M
Diluted Shares Outstanding 79.2M
   
Full Year 2011: FY 2011
Diluted Shares Outstanding 80M
CONTACT: Investor Relations Contact
         Shirley Stacy
         Align Technology, Inc.
         (408) 470-1150
         sstacy@aligntech.com
         
         Press Contact
         Shannon Mangum Henderson
         Ethos Communication, Inc.
         (678) 261-7803
         align@ethoscommunication.com

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