Align Technology, Inc.’s (ALGN - Free Report) fourth-quarter 2021 earnings per share (EPS) was $2.83, up from the year-ago $2.61, reflecting an improvement of 8.4%. The quarter’s EPS surpassed the Zacks Consensus Estimate by 6.4%.
GAAP EPS for the quarter was $2.40, up from the year-ago EPS of $2.00, reflecting an uptick of 20%.
Full-year adjusted EPS was $11.22, reflecting a 113.7% increase from the year-ago period. However, the metric surpassed the Zacks Consensus Estimate by 1.2%.
Full-year GAAP EPS was $9.69, reflecting a 56.8% fall from the year-ago period.
Revenues
Revenues surged 23.6% year over year to $1.03 billion in the quarter, beating the Zacks Consensus Estimate by 1.4%.
Full-year revenues were $3.95 billion, reflecting a 59.9% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 0.3%.
Segments in Detail
In the fourth quarter, revenues at the Clear Aligner segment rose 16.4% year over year to $815.3 million with strong revenue growth across all regions and the portfolio, including comprehensive and non-comprehensive products as well as Invisalign. Within the segment, Invisalign case shipments amounted to 631,145, up 11.1% year over year.
During the quarter, Clear Aligner volumes rose 11.5% and 10.7% year over year in the Americas and International regions, respectively. Clear Aligner volume for teenage patients rose 13% year over year.
Revenues from Imaging Systems & CAD/CAM Services surged 61.3% to $215.8 million in the quarter due to product mix, and increased services revenues from the company’s larger installed base and exocad's CAD/CAM services. Sequentially, the company’s revenues recorded an uptick of 21%. The company continues to gain traction for iTero Element 5D Plus imaging system across all regions, with the most recent launch in China in the fourth quarter.
Margins
Gross profit in the fourth quarter was $744.6 million, reflecting an improvement of 21.9% year over year. Gross margin in the quarter under review contracted 94 basis points (bps) year over year to 72.2% on a 27.9% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 29.5% year-over-year increase in selling, general and administrative expenses to $451.2 million and a 48.3% rise in research and development expenses to $72.5 million.
Operating income in the quarter under review was $220.9 million compared with operating profit of $213.2 million year over year, indicating an uptick of 3.6%. The operating margin contracted 412 bps to 21.4%.
Financial Details
Align Technology exited 2021 with cash, cash equivalents of $1.09 billion compared with $960.8 million recorded at the end of 2020.
Cumulative net cash provided by operating activities at the end of the year was $1.17 billion compared with $662.2 million a year ago.
Under the $1-billion repurchase program announced in May 2021, the company has $725 million remaining available for the repurchase of common stock.
Guidance
Align Technology has provided its financial outlook for 2022, assuming no new notable surges post the current wave, no significant practice disruptions, and no material supply chain problems throughout the year.
The company expects net revenue growth in the band of 20-30% despite the challenges posed by the Omicron variant. The Zacks Consensus Estimate for 2022 revenues is pegged at $4.76 billion.
The company expects 2022 operating margin to be about 24% on a GAAP basis. Meanwhile, adjusted operating margin is estimated at around 3 points higher than the GAAP operating margin, excluding stock-based compensation and intangible amortization from certain acquisitions.
Our Take
Align Technology exited the fourth quarter of 2021 with better-than-expected results. During the quarter, the company saw significantly higher sales of Invisalign clear aligners and iTero scanners, instilling confidence in the stock. Impressive international performance across geographies and increased shipment volumes also buoy optimism. Robust segmental performance and continued adoption of the Align Digital Platform are added advantages.
However, the contraction of both margins does not bode well for the company. The emergence of the highly contagious Omicron variant has impacted the company’s clear aligner volumes, thereby raising apprehension.
Zacks Rank and Key Picks
Align Technology currently carries a Zacks Rank #4 (Sell).
Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp has an Earnings ESP of +9.21% and a Zacks Rank of #1 (Strong Buy). LabCorp will release fourth quarter and full-year 2021 results on Feb 10. You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp’s long-term earnings growth rate is estimated at 10.6%. LH’s earnings yield of 6.8% compares favorably with the industry’s 4.3%.
AMN Healthcare Services, Inc. (AMN - Free Report) has an Earnings ESP of +10.29% and a Zacks Rank of #1. AMN Healthcare is slated to release fourth-quarter and full-year 2021 results on Feb 17.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 6.5% compares favorably with the industry’s 0.9%.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.94% and a Zacks Rank of #2. The company will report fourth quarter and full-year 2021 results on Feb 15.
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 6.2% compares favorably with the industry’s 4.3%.
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Align Technology, Inc.’s (ALGN - Free Report) fourth-quarter 2021 earnings per share (EPS) was $2.83, up from the year-ago $2.61, reflecting an improvement of 8.4%. The quarter’s EPS surpassed the Zacks Consensus Estimate by 6.4%.
GAAP EPS for the quarter was $2.40, up from the year-ago EPS of $2.00, reflecting an uptick of 20%.
Full-year adjusted EPS was $11.22, reflecting a 113.7% increase from the year-ago period. However, the metric surpassed the Zacks Consensus Estimate by 1.2%.
Full-year GAAP EPS was $9.69, reflecting a 56.8% fall from the year-ago period.
Revenues
Revenues surged 23.6% year over year to $1.03 billion in the quarter, beating the Zacks Consensus Estimate by 1.4%.
Full-year revenues were $3.95 billion, reflecting a 59.9% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 0.3%.
Segments in Detail
In the fourth quarter, revenues at the Clear Aligner segment rose 16.4% year over year to $815.3 million with strong revenue growth across all regions and the portfolio, including comprehensive and non-comprehensive products as well as Invisalign. Within the segment, Invisalign case shipments amounted to 631,145, up 11.1% year over year.
During the quarter, Clear Aligner volumes rose 11.5% and 10.7% year over year in the Americas and International regions, respectively. Clear Aligner volume for teenage patients rose 13% year over year.
Revenues from Imaging Systems & CAD/CAM Services surged 61.3% to $215.8 million in the quarter due to product mix, and increased services revenues from the company’s larger installed base and exocad's CAD/CAM services. Sequentially, the company’s revenues recorded an uptick of 21%. The company continues to gain traction for iTero Element 5D Plus imaging system across all regions, with the most recent launch in China in the fourth quarter.
Margins
Gross profit in the fourth quarter was $744.6 million, reflecting an improvement of 21.9% year over year. Gross margin in the quarter under review contracted 94 basis points (bps) year over year to 72.2% on a 27.9% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 29.5% year-over-year increase in selling, general and administrative expenses to $451.2 million and a 48.3% rise in research and development expenses to $72.5 million.
Operating income in the quarter under review was $220.9 million compared with operating profit of $213.2 million year over year, indicating an uptick of 3.6%. The operating margin contracted 412 bps to 21.4%.
Financial Details
Align Technology exited 2021 with cash, cash equivalents of $1.09 billion compared with $960.8 million recorded at the end of 2020.
Cumulative net cash provided by operating activities at the end of the year was $1.17 billion compared with $662.2 million a year ago.
Under the $1-billion repurchase program announced in May 2021, the company has $725 million remaining available for the repurchase of common stock.
Guidance
Align Technology has provided its financial outlook for 2022, assuming no new notable surges post the current wave, no significant practice disruptions, and no material supply chain problems throughout the year.
The company expects net revenue growth in the band of 20-30% despite the challenges posed by the Omicron variant. The Zacks Consensus Estimate for 2022 revenues is pegged at $4.76 billion.
The company expects 2022 operating margin to be about 24% on a GAAP basis. Meanwhile, adjusted operating margin is estimated at around 3 points higher than the GAAP operating margin, excluding stock-based compensation and intangible amortization from certain acquisitions.
Our Take
Align Technology exited the fourth quarter of 2021 with better-than-expected results. During the quarter, the company saw significantly higher sales of Invisalign clear aligners and iTero scanners, instilling confidence in the stock. Impressive international performance across geographies and increased shipment volumes also buoy optimism. Robust segmental performance and continued adoption of the Align Digital Platform are added advantages.
However, the contraction of both margins does not bode well for the company. The emergence of the highly contagious Omicron variant has impacted the company’s clear aligner volumes, thereby raising apprehension.
Zacks Rank and Key Picks
Align Technology currently carries a Zacks Rank #4 (Sell).
Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp has an Earnings ESP of +9.21% and a Zacks Rank of #1 (Strong Buy). LabCorp will release fourth quarter and full-year 2021 results on Feb 10. You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp’s long-term earnings growth rate is estimated at 10.6%. LH’s earnings yield of 6.8% compares favorably with the industry’s 4.3%.
AMN Healthcare Services, Inc. (AMN - Free Report) has an Earnings ESP of +10.29% and a Zacks Rank of #1. AMN Healthcare is slated to release fourth-quarter and full-year 2021 results on Feb 17.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 6.5% compares favorably with the industry’s 0.9%.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.94% and a Zacks Rank of #2. The company will report fourth quarter and full-year 2021 results on Feb 15.
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 6.2% compares favorably with the industry’s 4.3%.
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