Slide 1: Quarterly Financial Results Q3 2012
Quarterly Financial Results Q3 2012 Align Technology, Inc.
Slide 2: Q3 FY2012 Conference Call
Align Technology Q3 FY2012 Conference Call • Speakers: - Tom Prescott, president and CEO - Ken Arola, vice president of finance and CFO • Moderator: - Shirley Stacy, vice president, corporate and investor communications • Replay and Web cast Archive - Telephone replay will be available through 5:30p
Slide 3: Safe Harbor and Forward Looking Statement
Safe Harbor and Forward Looking Statement This presentation, including financial tables, contains forward-looking statements, including statements regarding certain business metrics for the fourth quarter of 2012, including anticipated net revenue, gross margin, operating expense, operating income,
Slide 4: Goodwill Impairment Testing
Goodwill Impairment Testing • The preliminary Q3 2012 results are subject to change based upon the conclusion of goodwill impairment testing being undertaken by the Company. • The discontinuation of Align’s distribution relationship with Straumann in Europe and North America and the decline in resul
Slide 5: Q3 FY2012 Overview
Q3 FY2012 Overview Tom Prescott President and CEO Align Technology, Inc. All rights reserved5
Slide 6: Q3 FY2012 Financial Highlights
Q3 FY2012 Financial Highlights • Despite a strong summer season for Invisalign teenager cases, which increased 21% sequentially and year over year, our third quarter revenue was slightly lower than our outlook. • Q3 is historically a slower period for North American GP dentists who have fewer days i
Slide 7: Q3 FY2012 Invisalign Performance Highlights
Q3 FY2012 Invisalign Performance Highlights • We’re taking a complete look at our results, including demand for our products and analyzing the industry and the markets in which we operate. We are evaluating a lot of data, much of which is conflicting, and none of which supports a fundamental decreas
Slide 8: Q3 FY2012 Invisalign Geographic Performance North America
Q3 FY2012 Invisalign Geographic Performance North America • N.A. Orthodontists: 35,885 Invisalign Shipments, +1.3% Q/Q, +19.3% Y/Y - Year-over-year growth was driven primarily from growth across nearly all Invisalign products, especially Invisalign Teen - On a sequential basis, Q3 Ortho volume refle
Slide 9: Q3 FY2012 Teenage Orthodontic Segment
Q3 FY2012 Teenage Orthodontic Segment • Q3 Invisalign Teen product cases of 15,265 or 16.5% of WW volume, +28.7% Q/Q, +30.1% Y/Y - a positive indication of our continued progress. • Invisalign Teen/Vivera Retainer promotion - As expected, both Orthos and some GPs took advantage of the Invisalign Tee
Slide 10: Q3 FY2012 Teenage Orthodontic Segment
Q3 FY2012 Teenage Orthodontic Segment Align Technology, Inc. All rights reserved10 0 4,000 8,000 12,000 16,000 20,000 24,000 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 All teenagers using Invisalign Invisalign Teen cases
Slide 11: Q3 FY2012 Invisalign Geographic Performance International
Q3 FY2012 Invisalign Geographic Performance International • International Doctors: 21,905 Invisalign Shipments, (-3.1%) Q/Q, +20.6% Y/Y - Fourth consecutive quarter of 20%+ year-over-year growth for International. This growth was driven primarily by an increase from Invisalign distributors, especial
Slide 12: APAC Distributor to Revert to Direct Sales Region Beginning May 1, 2013
APAC Distributor to Revert to Direct Sales Region Beginning May 1, 2013 • Great quarter for our Invisalign distribution partners in the APAC, EMEA, and Latin America regions. - Year-over-year as well as sequential growth was driven by continued strength in the APAC region, especially Australia and H
Slide 13: Q3 FY2012 Invisalign Adoption Metrics
Q3 FY2012 Invisalign Adoption Metrics Doctor Utilization and Training Align Technology, Inc. All rights reserved13 Quarterly Doctors Trained Worldwide Average Channel Utilization • Total utilization was 4.2 cases per doctor - N.A. Orthodontists 7.7 cases/doc - Y/Y volume growth was driven by both an
Slide 14: Announcing SmartTrack Aligner Material
Announcing SmartTrack Aligner Material Align Technology, Inc. All rights reserved14 • SmartTrack is a significant improvement in the entire Invisalign system and how we leverage force systems for more predictable tooth movement - Specifically engineered a flexible material that more precisely confor
Slide 15: Consumer Demand Strategy Q3 Program Highlights
Consumer Demand Strategy Q3 12 Program Highlights – North America • Goal to raise awareness of Invisalign and Invisalign Teen as the best option for a healthy, beautiful smile among adults and teens. • Consumer web site - During Q3, we passed a big milestone and ended the quarter with more than 4.2
Slide 16: Scanner and CAD/CAM Services Q3 Performance
Scanner and CAD/CAM Services Q3 12 Performance • Scanner and CAD/CAM Services revenues of $9.8M, compared to $11.9M in Q2 12 - Scanner revenues of $4.0M, compared to $6.0M in Q2 12 - CAD/CAM Services revenues of $5.8M, compared to $5.9M in Q2 12 • Scanner and CAD/CAM services business sequential dec
Slide 17: Termination of Straumann Distributorship Effective December 31, 2012
Termination of Straumann Distributorship Effective December 31, 2012 in Europe and North America Align Technology, Inc. All rights reserved17 • Since acquiring Cadent 18 months ago, we have been committed to enabling a digital shift within restorative dentistry, with the iTero scanner as the center
Slide 18: Q3 FY2012 Financial Review
Q3 FY2012 Financial Review Ken Arola Vice President, Finance and CFO Align Technology, Inc. All rights reserved18
Slide 19: Goodwill Impairment Testing
Goodwill Impairment Testing • The preliminary Q3 2012 results are subject to change based upon the conclusion of goodwill impairment testing being undertaken by the Company. • The discontinuation of Align’s distribution relationship with Straumann in Europe and North America and the decline in resul
Slide 20: Q3 FY2012 Trended Financials
Q3 FY2012 Trended Financials Align Technology, Inc. All rights reserved20 $114.3 $118.9 $123.3 $133.7 $126.7 $11.6 $10.0 $11.8 $11.9 $9.8 Q311 Q411 Q112 Q212 Q312 WW Net Revenue ($M) Scanner & CAD/CAM Clear Aligner $125.9 $128.9 $135.1 $145.6 $136.5 79.4 82.6 85.3 95.3 92.5 Q311 Q411 Q112 Q212 Q312
Slide 21: Q3 FY2012 Revenue by Geography and Products
Q3 FY2012 Revenue by Geography and Products Full: 59% • (9%) Q/Q • +7% Y/Y Express: 10% • (6%) Q/Q • +21% Y/Y Invisalign Non-case: 5% • (4%) Q/Q • +19% Y/Y Product Mix Teen: 14% • +17% Q/Q • +24% Y/Y Assist: 5% • (3%) Q/Q • +1% Y/Y Teen Invisalign Full Express Non-case Assist Scanners CAD/CAM Servic
Slide 22: Q3 FY2012 Invisalign Shipments by Geography and Product
Q3 FY2012 Invisalign Shipments by Geography and Product N.A. Ortho: 39% • + 1% Q/Q • + 19% Y/Y N.A. GP: 37% • (- 7%) Q/Q • + 12% Y/Y Int’l: 24% • (- 3%) Q/Q • + 21% Y/Y Product Mix N.A. GPN.A. Ortho Int’l Align Technology, Inc. All rights reserved22 Q3 12 Invisalign Case Shipments: 92,515 Channel Mi
Slide 23: Q3 FY2012 Income Statement Highlights
Q3 FY2012 Income Statement Highlights Q3 12 Q2 12 SequentialChange Q3 11 Year/YearChange Revenue $136.5M $145.6M (6.3%) $125.9M 8.4% Gross Margin 73.5% 74.7% (1.2%) pts 73.4% 0.1% pts Non-GAAP Gross Margin 73.7% 75.0% (1.3%) pts 73.9% (0.2%) pts Operating Expenses $71.2M* $72.8M (2.2%) $66.1M 7.8% N
Slide 24: Revenue Trend
Revenue Trend Align Technology, Inc. All rights reserved24 $95.9 $92.9 $104.9 $113.6 $114.3 $118.9 $123.3 $133.7 $126.7 $6.4 $11.6 $10.0 $11.8 $11.9 $9.8 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 $M Clear Aligner Scanner & CAD/CAM $145.6 $136.5 Q3 12 Revenue Highlights • Revenues of $136.5M • (-
Slide 25: Gross Margin Trend
Gross Margin Trend Align Technology, Inc. All rights reserved25 78.1% 77.2% 78.4% 76.1% 73.9% 74.9% 75.1% 75.0% 73.7% Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q312 Gross Margin Highlights * * * Non-GAAP A reconciliation of GAAP to Non-GAAP can be found at http://investor.aligntech.com under Fina
Slide 26: Operating Expense Trend
Operating Expense Trend Align Technology, Inc. All rights reserved26 $49.7 $55.7 $59.7 $68.1 $63.8 $66.9 $71.1 $71.6 $70.0 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 $M Q3 12 Op Ex Highlights • GAAP operating expense was $71.2M • Non-GAAP operating expenses were $70.0M • (-2.2%) Q/Q, + 9.7% Y/Y •
Slide 27: Operating Margin Trend
Operating Margin Trend Align Technology, Inc. All rights reserved27 26.3% 17.2% 21.5% 19.4% 23.2% 23.0% 22.4% 25.8% 22.4% Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q3 12 Non-GAAP Operating Margin Highlights • Non-GAAP operating income was $30.6M • Non-GAAP Operating Margin 22.4% • (-3.4%) pts. Q/
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Q3 12 Q2 12 Q3 11 Cash, Cash Equivalents, & Marketable Securities $348.9M $304.0M $211.1M Cash Flow from Operations $40.3M $27.3M $41.5M DSOs 70 days 63 days 62 days Align Technology, Inc. All rights reserved28 DSO’s for the quarter were 70 days, compared to 63 days in Q2 an
Slide 29: 3 – 5 Year Financial Model Targets
3 to 5 Year Financial Model Targets Q3 12 Actual Q3 11 Actual 3 – 5 Year Model Revenue CAGR% 15 - 25% Non-GAAP Gross Margin 73.7% 73.9% 73% - 78% Non-GAAP Op Ex % 51.3% 50.7% 45% - 50% Non-GAAP Op Margin 22.4% 23.2% 25% - 30% *Non-GAAP A reconciliation of GAAP to Non-GAAP can be found at http://inve
Slide 30: Financial Outlook
Financial Outlook Align Technology, Inc. All rights reserved30
Slide 31: Factors That Inform Our View of Q4 2012
Factors That Inform Our View of Q4 2012 • We had greater than expected summer seasonality in North America, from both GP dentists and Orthodontists. This softness has persisted into October which resulted in lower case receipts from which Q4 shipments are generated. However, busy sales force activit
Slide 32: Q4 Fiscal 2012 Outlook
Q4 Fiscal 2012 Outlook Align Technology, Inc. All rights reserved32 Q4 12 Outlook GAAP Non-GAAP Revenue $134.2 M – $137.8 M Invisalign Case Shipments 90.0 K – 93.0 K Gross Margin 71.7 % – 72.1 % 71.9 % – 72.3 % Operating Expenses $73.6 M – $74.9 M** $72.6 M – $73.9 M Operating Margin 16.9 % – 17.7 %
Slide 33: Contact Align Technology
Contact Align Technology at: •Website: investor.aligntech.com/ •Email: investorinfo@aligntech.com •Tel: (408) 470-1000 •Corporate and Investor Communications: - Shirley Stacy, sstacy@aligntech.com - Yin Cantor, ycantor@aligntech.com Align Technology, Inc. All rights reserved33
Slide 34: Additional Invisalign Data
Additional Invisalign Data Historical Information as of 9/30/12 Align Technology, Inc. All rights reserved34
Slide 35: Invisalign Cases Shipped By Geography
Invisalign Cases Shipped By Geography 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 International 12,970 15,940 16,245 16,295 16,190 16,790 18,170 19,600 19,985 22,595 21,905 N.A. GP 28,490 28,460 26,840 25,275 28,290 30,710 31,120 33,100 33,045 37,265 34,725 N.A. Ortho 22,150 23
Slide 36: Total Doctors Invisalign Cases Shipped To
Total Doctors Invisalign Cases Shipped To 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 International 3,535 4,165 4,245 4,180 4,150 4,260 4,590 4,795 5,085 5,480 5,400 N.A. GP 10,850 10,235 10,035 9,600 10,250 10,665 11,040 10,875 11,365 12,120 11,925 N.A. Ortho 4,015 3,990 3,985
Slide 37: Invisalign Utilization Rate
Invisalign Utilization Rate* *Utilization Rate = # of Cases Shipped / # of Doctors Cases Are Shipped To 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 N.A. Ortho 5.5 5.8 5.8 5.6 6.5 6.9 7.1 7.0 7.2 7.7 7.7 N.A. GP 2.6 2.8 2.7 2.6 2.8 2.9 2.8 3.0 2.9 3.1 2.9 International 3.7 3.8 3
Slide 38: Invisalign Average Selling Price (ASP) Billed and Net
Invisalign Average Selling Price (ASP) Billed and Net 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 International, billed $1,590 $1,415 $1,430 $1,525 $1,555 $1,660 $1,560 $1,530 $1,485 $1,455 $1,355 Worldwide, billed $1,395 $1,355 $1,390 $1,400 $1,395 $1,410 $1,385 $1,360 $1,370