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Align Technology (ALGN) Q2 Earnings Lag Estimates, Margins Drop
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Align Technology, Inc.’s (ALGN - Free Report) second-quarter 2022 earnings per share (EPS) were $2 compared with the year-ago period earnings of $3.04, thus reflecting a decline of 34.2%. The quarter’s EPS lagged the Zacks Consensus Estimate by 5.7%.
GAAP EPS for the quarter was $1.44, down from the year-ago EPS of $2.51, reflecting a 42.6% slash year over year.
Revenues
Revenues declined 4.1% year over year to $969.6 million in the quarter and missed the Zacks Consensus Estimate by 1.8%.
Segments in Detail
In the second quarter, revenues at the Clear Aligner segment were down 5.1% year over year to $798.4 million, unfavorably impacted by foreign exchange translation of approximately $32.9 million or 4% year over year. Within the segment, Invisalign case shipments amounted to 598,990, down 10% year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Invisalign case starts for teens and younger patients were down 2.1% year over year due to a difficult year-ago comparison. In Q2, Invisalign First for kids as young as six years old grew year over year and was strong across all regions. During Q2, Align Technology introduced Invisalign Teen Packs in the United States, Canada and France.
Revenues from Imaging Systems & CAD/CAM Services edged up 0.8% to $171.2 million in the quarter, primarily from higher services revenues from larger installed base, partially offset by lower scanner volume and lower ASP. Revenues had an unfavorable currency impact of 3.9% year over year.
Margins
Gross profit in the second quarter was $687.6 million, reflecting a 9.4% decline year over year. Gross margin in the quarter under review contracted 413 basis points (bps) year over year to 70.9% on an 11.8% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 1.3% year-over-year fall in selling, general and administrative expenses to $426.4 million and a 26.4% rise in research and development expenses to $72.9 million.
Operating income in the quarter under review was $188.2 million compared with operating profit of $268.9 million year over year, indicating a decline of 30%. The operating margin contracted 719 bps to 19.4%.
Financial Details
Align Technology exited the second quarter of 2022 with cash, cash equivalents of $877.5 million compared with $926.1 million recorded at the end of Q1.
Cumulative net cash provided by operating activities at the end of the quarter was $157.5 million compared with $544.7 million a year ago.
The company repurchased $200 million of its common stock in the second quarter of 2022.Currently, Align Technology has $450.0 million remaining for repurchase under its existing $1.0 billion repurchase program.
Guidance
Align Technology has not provided revenue guidance for 2022, given the growing unpredictable nature of the current operating environment.
However, the company noted that it expects to reach its goal for fiscal 2022 to deliver GAAP operating margins above 20% while making strategic investments in sales, marketing, R&D and operations. For 2022, Align Technology expects its investment in capital expenditures to exceed $300 million.
Our Take
Align Technology registered disappointing revenue and EPS performance in the second quarter of 2022 with both missing the respective Zacks Consensus Estimate. The sluggish results were due to the dull underlying market, which per management was impacted by macro-economic environmental factors and lingering effects of COVID-19 variants in certain markets.
The contraction of both margins is worrisome. 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 #5 (Strong Sell).
Glaukos’ loss per share estimates have improved from $1.94 to $1.78 for 2022 in the past 60 days. GKOS has gained 5.7% over the past year.
Glaukos delivered an earnings surprise of 28.68%, on average, in the last four quarters.
Estimates for ShockWave Medical have moved north from earnings per share of $1.85 to $2.02 for 2022 in the past 60 days. SWAV has gained 22.5% over the past year.
ShockWave Medical delivered an earnings surprise of 189.99%, on average, in the last four quarters.
STERIS’ earnings per share estimates have improved from $8.70 to $8.71 for 2022 in the past 60 days. STE has improved 2.1% over the past year.
STERIS delivered an earnings surprise of 9.2%, on average, in the last four quarters.
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Align Technology (ALGN) Q2 Earnings Lag Estimates, Margins Drop
Align Technology, Inc.’s (ALGN - Free Report) second-quarter 2022 earnings per share (EPS) were $2 compared with the year-ago period earnings of $3.04, thus reflecting a decline of 34.2%. The quarter’s EPS lagged the Zacks Consensus Estimate by 5.7%.
GAAP EPS for the quarter was $1.44, down from the year-ago EPS of $2.51, reflecting a 42.6% slash year over year.
Revenues
Revenues declined 4.1% year over year to $969.6 million in the quarter and missed the Zacks Consensus Estimate by 1.8%.
Segments in Detail
In the second quarter, revenues at the Clear Aligner segment were down 5.1% year over year to $798.4 million, unfavorably impacted by foreign exchange translation of approximately $32.9 million or 4% year over year. Within the segment, Invisalign case shipments amounted to 598,990, down 10% year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote
Invisalign case starts for teens and younger patients were down 2.1% year over year due to a difficult year-ago comparison. In Q2, Invisalign First for kids as young as six years old grew year over year and was strong across all regions. During Q2, Align Technology introduced Invisalign Teen Packs in the United States, Canada and France.
Revenues from Imaging Systems & CAD/CAM Services edged up 0.8% to $171.2 million in the quarter, primarily from higher services revenues from larger installed base, partially offset by lower scanner volume and lower ASP. Revenues had an unfavorable currency impact of 3.9% year over year.
Margins
Gross profit in the second quarter was $687.6 million, reflecting a 9.4% decline year over year. Gross margin in the quarter under review contracted 413 basis points (bps) year over year to 70.9% on an 11.8% uptick in cost of net revenues.
During the quarter, Align Technology witnessed a 1.3% year-over-year fall in selling, general and administrative expenses to $426.4 million and a 26.4% rise in research and development expenses to $72.9 million.
Operating income in the quarter under review was $188.2 million compared with operating profit of $268.9 million year over year, indicating a decline of 30%. The operating margin contracted 719 bps to 19.4%.
Financial Details
Align Technology exited the second quarter of 2022 with cash, cash equivalents of $877.5 million compared with $926.1 million recorded at the end of Q1.
Cumulative net cash provided by operating activities at the end of the quarter was $157.5 million compared with $544.7 million a year ago.
The company repurchased $200 million of its common stock in the second quarter of 2022.Currently, Align Technology has $450.0 million remaining for repurchase under its existing $1.0 billion repurchase program.
Guidance
Align Technology has not provided revenue guidance for 2022, given the growing unpredictable nature of the current operating environment.
However, the company noted that it expects to reach its goal for fiscal 2022 to deliver GAAP operating margins above 20% while making strategic investments in sales, marketing, R&D and operations. For 2022, Align Technology expects its investment in capital expenditures to exceed $300 million.
Our Take
Align Technology registered disappointing revenue and EPS performance in the second quarter of 2022 with both missing the respective Zacks Consensus Estimate. The sluggish results were due to the dull underlying market, which per management was impacted by macro-economic environmental factors and lingering effects of COVID-19 variants in certain markets.
The contraction of both margins is worrisome. 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 #5 (Strong Sell).
Some better-ranked stocks from the medical sector include Glaukos (GKOS - Free Report) , ShockWave Medical (SWAV - Free Report) and STERIS (STE - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos’ loss per share estimates have improved from $1.94 to $1.78 for 2022 in the past 60 days. GKOS has gained 5.7% over the past year.
Glaukos delivered an earnings surprise of 28.68%, on average, in the last four quarters.
Estimates for ShockWave Medical have moved north from earnings per share of $1.85 to $2.02 for 2022 in the past 60 days. SWAV has gained 22.5% over the past year.
ShockWave Medical delivered an earnings surprise of 189.99%, on average, in the last four quarters.
STERIS’ earnings per share estimates have improved from $8.70 to $8.71 for 2022 in the past 60 days. STE has improved 2.1% over the past year.
STERIS delivered an earnings surprise of 9.2%, on average, in the last four quarters.