UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 0-32259
Align Technology, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3267295 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
881 Martin Avenue
Santa Clara, California 95050
(Address of principal executive offices) (Zip Code))
(408) 470-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of July 31, 2004 was 60,357,259.
| Table | Of Contents |
ALIGN TECHNOLOGY, INC.
INDEX
| PART I— FINANCIAL INFORMATION |
3 | |||
| ITEM 1 |
3 | |||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
10 | ||
| ITEM 3. |
23 | |||
| ITEM 4. |
23 | |||
| PART II— OTHER INFORMATION |
25 | |||
| ITEM 1. |
25 | |||
| ITEM 2. |
CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES |
25 | ||
| ITEM 3. |
25 | |||
| ITEM 4. |
26 | |||
| ITEM 5. |
26 | |||
| ITEM 6. |
26 | |||
| 28 | ||||
-2-
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 56,099 | $ | 44,939 | ||||
| Restricted cash |
281 | 439 | ||||||
| Marketable securities, short-term |
— | 2,292 | ||||||
| Accounts receivable, net of allowance |
25,737 | 21,265 | ||||||
| Inventories |
1,359 | 1,395 | ||||||
| Deferred costs |
1,042 | 939 | ||||||
| Prepaid expenses and other current assets |
5,350 | 5,845 | ||||||
| Total current assets |
89,868 | 77,114 | ||||||
| Property and equipment, net |
23,174 | 23,121 | ||||||
| Other assets |
1,914 | 1,967 | ||||||
| Total assets |
$ | 114,956 | $ | 102,202 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,314 | $ | 3,095 | ||||
| Accrued liabilities |
19,496 | 19,180 | ||||||
| Deferred revenues |
13,132 | 13,113 | ||||||
| Debt |
1,914 | 1,989 | ||||||
| Total current liabilities |
37,856 | 37,377 | ||||||
| Debt, net of current portion |
931 | 1,849 | ||||||
| Total liabilities |
38,787 | 39,226 | ||||||
| Commitments and contingencies (Note 4) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock: $0.0001 par value; Authorized: 5,000 shares; Issued and outstanding: none at June 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock: $0.0001 par value; Authorized: 200,000; Issued: 60,068 and 58,793 at June 30, 2004 and December 31, 2003, respectively; Outstanding: 60,028 and 58,753 shares at June 30, 2004 and December 31, 2003, respectively |
6 | 6 | ||||||
| Additional paid-in capital |
373,874 | 368,796 | ||||||
| Deferred compensation |
(1,443 | ) | (5,219 | ) | ||||
| Notes receivable from stockholders |
— | (17 | ) | |||||
| Accumulated other comprehensive income |
(5 | ) | 2 | |||||
| Accumulated deficit |
(296,263 | ) | (300,592 | ) | ||||
| Total stockholders’ equity |
76,169 | 62,976 | ||||||
| Total liabilities and stockholders’ equity |
$ | 114,956 | $ | 102,202 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-3-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
$ | 44,204 | $ | 29,225 | $ | 83,409 | $ | 52,185 | ||||||||
| Cost of revenues |
14,250 | 13,269 | 27,643 | 25,193 | ||||||||||||
| Gross profit |
29,954 | 15,956 | 55,766 | 26,992 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
13,399 | 11,416 | 26,671 | 22,046 | ||||||||||||
| General and administrative |
8,656 | 9,014 | 16,933 | 16,908 | ||||||||||||
| Research and development |
3,558 | 3,712 | 6,904 | 6,697 | ||||||||||||
| Total operating expenses |
25,613 | 24,142 | 50,508 | 45,651 | ||||||||||||
| Profit (loss) from operations |
4,341 | (8,186 | ) | 5,258 | (18,659 | ) | ||||||||||
| Interest and other income (expense), net |
(175 | ) | 427 | (402 | ) | 230 | ||||||||||
| Net profit (loss) before provision for income taxes |
4,166 | (7,759 | ) | 4,856 | (18,429 | ) | ||||||||||
| Provision for income taxes |
(394 | ) | — | (527 | ) | (1 | ) | |||||||||
| Net profit (loss) |
$ | 3,772 | $ | (7,759 | ) | $ | 4,329 | $ | (18,430 | ) | ||||||
| Net profit (loss) per share, basic |
$ | 0.06 | $ | (0.13 | ) | $ | 0.07 | $ | (0.32 | ) | ||||||
| Shares used in computing net profit (loss) per share, basic |
59,692 | 57,489 | 59,391 | 57,339 | ||||||||||||
| Net profit (loss) per share, diluted |
$ | 0.06 | $ | (0.13 | ) | $ | 0.07 | $ | (0.32 | ) | ||||||
| Shares used in computing net profit (loss) per share, diluted |
64,461 | 57,489 | 64,392 | 57,339 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-4-
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net profit (loss) |
$ | 4,329 | $ | (18,430 | ) | |||
| Adjustments to reconcile net profit (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
4,351 | 4,640 | ||||||
| Stock-based compensation expense |
3,999 | 8,611 | ||||||
| Loss on retirement and disposal of fixed assets |
46 | 145 | ||||||
| Provision for doubtful accounts |
166 | (61 | ) | |||||
| Non-cash interest income on notes receivable from stockholders |
— | (35 | ) | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(4,638 | ) | (1,746 | ) | ||||
| Inventories |
36 | (128 | ) | |||||
| Deferred costs |
(103 | ) | 96 | |||||
| Other current assets |
495 | (1,201 | ) | |||||
| Accounts payable |
(37 | ) | (40 | ) | ||||
| Accrued liabilities |
316 | 4,946 | ||||||
| Deferred revenue |
19 | 3,763 | ||||||
| Net cash provided by operating activities |
8,979 | 560 | ||||||
| Cash Flows from Investing Activities: |
||||||||
| Purchase of property and equipment |
(5,052 | ) | (3,511 | ) | ||||
| Proceeds from sale of property and equipment |
851 | — | ||||||
| Decrease (increase) in restricted cash |
158 | (13 | ) | |||||
| Purchases of marketable securities |
— | (3,392 | ) | |||||
| Maturities of marketable securities |
2,292 | 2,669 | ||||||
| Other assets |
53 | (353 | ) | |||||
| Net cash used in investing activities |
(1,698 | ) | (4,600 | ) | ||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from issuance of common stock |
4,855 | 720 | ||||||
| Proceeds from payment on stockholders’ notes receivable |
17 | 573 | ||||||
| Repurchase of common stock |
— | (5 | ) | |||||
| Payments on debt obligations |
(993 | ) | (1,085 | ) | ||||
| Net cash provided by financing activities |
3,879 | 203 | ||||||
| Net increase (decrease) in cash and cash equivalents |
11,160 | (3,837 | ) | |||||
| Cash and cash equivalents at beginning of period |
44,939 | 35,552 | ||||||
| Cash and cash equivalents at end of period |
$ | 56,099 | $ | 31,715 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-5-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Align Technology, Inc. (the “