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Align Technology (ALGN) Q1 Earnings Beat Estimates, Margins Up

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Align Technology, Inc.’s (ALGN - Free Report) first-quarter 2021 earnings per share (“EPS”) were $2.49, up from the year-ago EPS of 73 cents, reflecting a surge of 241.1%. The quarter’s EPS surpassed the Zacks Consensus Estimate by 25.1%.

GAAP EPS for the quarter was $2.51, down from the year-ago EPS of $19.21, reflecting a plunge of 86.9%.

Revenues

Revenues surged 62.4% year over year to $894.8 million in the quarter, beating the Zacks Consensus Estimate by 8.5%.

Strength in Invisalign Clear Aligners and iTero scanners sales volumes during the first quarter despite the COVID-19 pandemic drove the top line.

Segments in Detail

In the first quarter, revenues at the Clear Aligner segment rose 56.4% year over year to $753.3 million due to strength in both adult and teen market segments, as well as across products and customer channels, especially in North America and the EMEA region, led by the United Kingdom, Germany and France. Within the segment, Invisalign case shipments amounted to 595.8 thousand, up 65.8% year over year.

During the quarter, Clear Aligner volumes were up 53.8% and 83.2% year over year in the Americas and International regions, respectively. The international business was driven by EMEA and APAC.

Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote

Clear Aligner volume for teenage patients was 165.3 thousand cases, up 58.9% year over year. In terms of products performance, the company recorded strong growth across the Invisalign portfolio for both comprehensive and non-comprehensive products, including Invisalign Go and Invisalign Moderate. Continued robust adoption of Invisalign Go, as well as the Invisalign Moderate product for non-comprehensive treatment in the general practitioner dentist channel, drove the top line.

Revenues from Imaging Systems & CAD/CAM Services surged 103.9% to $141.5 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 5.8%. The company also recorded continued momentum with the iTero Element 5D Imaging System, which is seeing strength in all regions, with significant Element Flex sales in APAC.

Margins

Gross profit in the first quarter was $677.1 million, reflecting an improvement of 71.7% year over year. Gross margin in the quarter under review expanded 410 basis points (bps) year over year to 75.7% despite a 38.9% uptick in cost of net revenues.

During the quarter, Align Technology witnessed a 40.4% year-over-year increase in selling, general and administrative expenses to $397.1 million and a 31.3% rise in research and development expenses to $54.5 million.

Operating income in the quarter under review was $225.4 million compared with operating profit of $69.9 million year over year, indicating an uptick of 222.4%. The operating margin expanded 1251 bps to 25.2%.

Financial Details

Align Technology exited the first quarter of 2021 with cash, cash equivalents of $1.13 billion compared with $960.8 million recorded at the end of 2020.

Net cash provided by operating activities at the end of the first quarter of 2021 was $227.2 million compared with $9.8 million a year ago.

The company currently has approximately $100 million left under its May 2018 repurchase program.

2021 Guidance

Align Technology, on the back of its impressive performance, has issued its financial outlook for the year 2021.

The company expects its revenue for the year to lie within the range of $3.7 billion-$3.9 billion, indicating a surge of 50-58% from 2020. The Zacks Consensus Estimate for the same is currently pegged at $3.52 billion.

Our Take

Align Technology exited the first quarter of 2021 with better-than-expected results despite the challenging business environment. The company saw significantly higher sales of Invisalign clear aligners and iTero scanners amid the pandemic. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock. Robust segmental performances and margin expansions look encouraging. Continued adoption of the company’s digital platform has also been looking impressive. The company’s Consumer and Patient app, My Invisalign, is currently available in 58 markets, thus instilling confidence on the stock.

Additionally, the company’s focus on expanding its global operations, both in existing and emerging international markets, and increasing orthodontic adoption and utilization of Invisalign Treatment, especially with teens, raises our optimism.

However, the pandemic-led continued choppy market conditions remain a concern for the company.

Zacks Rank and Key Picks

Align Technology currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are AmerisourceBergen Corporation (ABC - Free Report) , Owens & Minor, Inc. (OMI - Free Report) and Omnicell, Inc. (OMCL - Free Report) .

The Zacks Consensus Estimate for AmerisourceBergen’s second-quarter fiscal 2021 revenues is pegged at $49.94 billion, suggesting a year-over-year improvement of 5.3%. The same for EPS stands at $2.50, indicating growth of 4.2% from the year-ago reported figure. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Owens & Minor’s first-quarter 2021 revenues is pegged at $2.29 billion, implying 7.9% increase from the year-earlier reported figure. The same for EPS stands at 97 cents, indicating a surge of 2,325% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Omnicell’s first-quarter 2021 EPS is currently pegged at 67 cents, indicating growth of 1.5% from the year-ago reported figure. The same for revenues stands at $245.4 million, indicating growth of 6.8% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

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