Align Technology's CEO Discusses Q3 2012 Results - Earnings Call Transcript
October 18, 2012 2:52 AM ET
Align Technology, Inc. (ALGN)
Q3 2012 Earnings Conference Call
October 17, 2012, 16:30 p.m. ET
Shirley Stacy - VP, Corporate and Investor Communications
Tom Prescott - President and CEO
Ken Arola - VP and CFO
Matt Dolan - Roth Capital Partners
Glen Santangelo - Credit Suisse
Brandon Couillard - Jefferies & Company
Steve Beuchaw - Morgan Stanley
Jeremy Feffer - Cantor Fitzgerald
John Kreger - William Blair
Welcome to the Align Technology Q3 2012 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce, Shirley Stacy of Align Technology. Ms. Stacy, you may begin.
Good afternoon and thank you for joining us. I'm Shirley Stacy, Vice President of Corporate and Investor Communications. Joining me today is Tom Prescott, President and CEO; and Ken Arola, Vice President and CFO.
We issued preliminary third quarter financial results press release today on Marketwire, which is available on our website at investor.aligntech.com. Today's conference call is being audio webcast and will be archived on our website for approximately 12 months.
A telephone replay will be available today by approximately 5.30 pm Eastern Time through 5.30 pm Eastern Time on October 25. To access the telephone replay, domestic callers should dial 877-660-6853 with conference number 400990 followed by pound. International callers should dial 201-612-7415 with the same conference number.
As a reminder, the information that the presenters discuss today will include forward-looking statements, including without limitation statements about Align's future product, product outlook and the expected financial results for the fourth quarter of fiscal year 2012. These forward-looking statements are only predictions and involve risks and uncertainties such that actual results may vary significantly. These and other results are set forth in more detail in our Form 10-K for the fiscal year ended December 31, 2011. These forward-looking statements reflect beliefs, estimates and predictions as of today and Align expressly assumes no obligation to update any such forward-looking statements.
Please also note that on this conference call we will provide listeners with several financial metrics determined on a non-GAAP basis for comparisons to previous quarters. Most of these items, together with the corresponding GAAP numbers and the reconciliations to the comparable GAAP financial measures, where practical, are contained in today's financial results press release, which we have posted on our website at investor.aligntech.com under financial releases, and have been furnished to the SEC on Form 8-K. We encourage listeners to review these items. In addition the possibility of an impairment charge which could result in a substantial reduction against goodwill and a commensurate charge against earnings could have a material adverse impact on the company’s preliminary results. We have posted a set of GAAP and non-GAAP historical financial statements, including the corresponding reconciliations and our third quarter conference call slides on our website at investor.aligntech.com under quarterly results. Please refer to these files for more detailed information.
With that, I'd like to turn the call over to Align Techology’s President and CEO, Tom Prescott. Tom?
Thanks Shirley. Good afternoon everyone. On the call today, I’ll provide an overview of preliminary third quarter results and discuss the performance of our two operating segments Invisalign clear aligners and scanner and CAD/CAM services.
As Shirley discussed these results are preliminary based on the outcomes of our goodwill impairment analysis which is currently incomplete. Ken will cover these circumstances and a discussion of our preliminary Q3 financial results as well as outlook for Q4 in more detail. I’ll come back with a few closing comment and open up the call to questions.
Q3 revenue of 136.5 million increased 8.4% year-over-year and yet decreased 6.3% sequentially. 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 in office due to vacations as well as for International doctors who typically take extended summer holidays, especially in southern Europe.
This year summer seasonality was more pronounced in North America and as a result, we did not see the expected ramp in Invisalign cases for GPs and Orthodontists. This softness has continued through October and is reflected in our Q4 guidance, which despite that slowdown, still projects a healthy annual growth rate for the company overall, with volume growth of at least 16%.
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 decrease in demand for Invisalign.
On the one hand, data such as the surprisingly strong, recent consumer sentiment ratings, as well as the uptick in visitors to Invisalign.com, and Find A Doctor searches point to continued strong consumer interest. On the other hand, additional insight from our customers regarding Invisalign in their practices indicate that more adult patients were delaying or pushing out acceptance of their ClinCheck treatment plans this summer and early fall, possibly due to concerns about the economy.
Several recent analyst reports based on AFG Research suggest that conditions within the dental space during the calendar third quarter were slightly less desirable than in the second quarter and AFG reports developed for Align corroborates these trends.
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