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Align Technology (ALGN) Q1 Earnings Lag Estimates, Margins Fall
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Align Technology, Inc.’s (ALGN - Free Report) first-quarter 2022 earnings per share (EPS) were $2.13 compared to the year-ago $2.49, reflecting a decline of 14.5%. The quarter’s EPS lagged the Zacks Consensus Estimate by 4.9%.
GAAP EPS for the quarter was $1.70, down from the year-ago EPS of $2.51, reflecting a plunge of 32.3%.
Revenues
Revenues surged 8.8% year over year to $973.2 million in the quarter, missing the Zacks Consensus Estimate by 2.9%.
Segments in Detail
In the first quarter, revenues at the Clear Aligner segment rose 7.5% year over year to $809.7 million, with strong revenue growth across regions and products. Within the segment, Invisalign case shipments amounted to 598,835, up 0.5% year over year.
During the quarter, Clear Aligner case volumes declined 1.5% and rose 3% year over year in the Americas and International regions, respectively. Clear Aligner case volume for teenage patients increased 6% year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Revenues from Imaging Systems & CAD/CAM Services surged 15.5% to $163.5 million in the quarter due to increased services revenues from the company’s iTero scanner installed base and exocad's CAD/CAM services. The company also continued to witness the growing adoption of the iTero Element 5D Plus imaging system in the first quarter.
Margins
Gross profit in the first quarter was $709.3 million, reflecting an improvement of 4.8% year over year. Gross margin in the quarter under review contracted 279 basis points (bps) year over year to 72.9% on a 21.2% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 10.7% year-over-year increase in selling, general and administrative expenses to $439.5 million and a 31.7% rise in research and development expenses to $71.8 million.
Operating income in the quarter under review was $198.1 million compared with operating profit of $225.4 million year over year, indicating a decline of 12.1%. The operating margin contracted 484 bps to 20.4%.
Financial Details
Align Technology exited the first quarter of 2022 with cash, cash equivalents of $926.1 million compared with $1.09 billion recorded at the end of 2021.
Cumulative net cash provided by operating activities at the end of the quarter was $30.5 million compared with $227.2 million a year ago.
The company expects to repurchase up to $200 million of its common stock in the second quarter of 2022, through either open market repurchases or an accelerated stock repurchase agreement, or a combination of the two.
Guidance
Align Technology has not provided revenue guidance for 2022, given the growing unpredictable nature of the current operating environment. However, going by the last-reported fourth-quarter earnings update, the company anticipated net revenue growth for 2022 in the band of 20-30%. The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $4.74 billion.
For 2022, the company expects operating margin above 20% (down from the earlier projected 24%) on a GAAP basis, assuming no further material disruptions or situations beyond control.
Our Take
Align Technology registered robust revenue growth in the first quarter of 2022 despite a challenging business environment. The top line was driven by strong performances across the Clear Aligner and Imaging Systems & CAD/CAM Services segments. The increased Invisalign case shipments during the reported quarter look impressive. Continued adoption of the iTero Element 5D Plus imaging system also buoys optimism.
However, Align Technology’s first-quarter earnings and revenues missed the Zacks Consensus Estimate. The year-over-year decline in EPS does not bode well. The contraction of both margins is worrisome. Further, the volatility surrounding COVID-19 lockdowns, inflationary pressure, the ongoing conflict in Russia and Ukraine and other macroeconomic headwinds continue to pose challenges for the company.
Zacks Rank and Key Picks
Align Technology currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are QIAGEN N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) .
QIAGEN, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
QIAGEN has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 11.7%.
UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Centene reported first-quarter 2022 adjusted EPS of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. Revenues of $37.2 billion outpaced the Zacks Consensus Estimate by 7.2%. It currently has a Zacks Rank #2.
Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.
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Align Technology (ALGN) Q1 Earnings Lag Estimates, Margins Fall
Align Technology, Inc.’s (ALGN - Free Report) first-quarter 2022 earnings per share (EPS) were $2.13 compared to the year-ago $2.49, reflecting a decline of 14.5%. The quarter’s EPS lagged the Zacks Consensus Estimate by 4.9%.
GAAP EPS for the quarter was $1.70, down from the year-ago EPS of $2.51, reflecting a plunge of 32.3%.
Revenues
Revenues surged 8.8% year over year to $973.2 million in the quarter, missing the Zacks Consensus Estimate by 2.9%.
Segments in Detail
In the first quarter, revenues at the Clear Aligner segment rose 7.5% year over year to $809.7 million, with strong revenue growth across regions and products. Within the segment, Invisalign case shipments amounted to 598,835, up 0.5% year over year.
During the quarter, Clear Aligner case volumes declined 1.5% and rose 3% year over year in the Americas and International regions, respectively. Clear Aligner case volume for teenage patients increased 6% year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote
Revenues from Imaging Systems & CAD/CAM Services surged 15.5% to $163.5 million in the quarter due to increased services revenues from the company’s iTero scanner installed base and exocad's CAD/CAM services. The company also continued to witness the growing adoption of the iTero Element 5D Plus imaging system in the first quarter.
Margins
Gross profit in the first quarter was $709.3 million, reflecting an improvement of 4.8% year over year. Gross margin in the quarter under review contracted 279 basis points (bps) year over year to 72.9% on a 21.2% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 10.7% year-over-year increase in selling, general and administrative expenses to $439.5 million and a 31.7% rise in research and development expenses to $71.8 million.
Operating income in the quarter under review was $198.1 million compared with operating profit of $225.4 million year over year, indicating a decline of 12.1%. The operating margin contracted 484 bps to 20.4%.
Financial Details
Align Technology exited the first quarter of 2022 with cash, cash equivalents of $926.1 million compared with $1.09 billion recorded at the end of 2021.
Cumulative net cash provided by operating activities at the end of the quarter was $30.5 million compared with $227.2 million a year ago.
The company expects to repurchase up to $200 million of its common stock in the second quarter of 2022, through either open market repurchases or an accelerated stock repurchase agreement, or a combination of the two.
Guidance
Align Technology has not provided revenue guidance for 2022, given the growing unpredictable nature of the current operating environment. However, going by the last-reported fourth-quarter earnings update, the company anticipated net revenue growth for 2022 in the band of 20-30%. The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $4.74 billion.
For 2022, the company expects operating margin above 20% (down from the earlier projected 24%) on a GAAP basis, assuming no further material disruptions or situations beyond control.
Our Take
Align Technology registered robust revenue growth in the first quarter of 2022 despite a challenging business environment. The top line was driven by strong performances across the Clear Aligner and Imaging Systems & CAD/CAM Services segments. The increased Invisalign case shipments during the reported quarter look impressive. Continued adoption of the iTero Element 5D Plus imaging system also buoys optimism.
However, Align Technology’s first-quarter earnings and revenues missed the Zacks Consensus Estimate. The year-over-year decline in EPS does not bode well. The contraction of both margins is worrisome. Further, the volatility surrounding COVID-19 lockdowns, inflationary pressure, the ongoing conflict in Russia and Ukraine and other macroeconomic headwinds continue to pose challenges for the company.
Zacks Rank and Key Picks
Align Technology currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are QIAGEN N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) .
QIAGEN, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
QIAGEN has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 11.7%.
UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Centene reported first-quarter 2022 adjusted EPS of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. Revenues of $37.2 billion outpaced the Zacks Consensus Estimate by 7.2%. It currently has a Zacks Rank #2.
Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.