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Align Technology (ALGN) Q4 Earnings Top Estimates, Margins Drop
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Align Technology, Inc.'s (ALGN - Free Report) fourth-quarter 2022 earnings per share (EPS) were $1.73, reflecting a 38.9% plunge from the year-ago earnings. The quarter’s EPS, however, exceeded the Zacks Consensus Estimate by 13.8%.
GAAP EPS for the quarter was 54 cents, significantly down from the year-ago EPS of $2.40, reflecting a 77.5% decline year over year.
Full-year adjusted EPS was $7.76, plunging 30.8% from the year-ago period. However, it exceeded the Zacks Consensus Estimate by 10.5%.
Revenues
Revenues declined 12.6% year over year to $901.5 million in the quarter and beat the Zacks Consensus Estimate by 1.4%. Revenues were impacted by unfavorable foreign exchange of approximately $67.6 million or 7% year over year.
For 2022, revenues were $3.73 billion, down 5.5% from 2021. The figure exceeded the Zacks Consensus Estimate by 0.3%.
Segments in Detail
In the fourth quarter, revenues at the Clear Aligner segment were down 10.3% year over year to $731.7 million. Revenues were unfavorably impacted by lower volumes and lower ASPs. This was partially offset by higher non-case revenues. Within the segment, Invisalign case shipments amounted to 583,655, down 7.5% year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Revenues from Imaging Systems & CAD/CAM Services were down 21.3% to $169.9 million in the quarter. Lower scanner volume and ASPs were partially offset by higher services revenues from the larger installed base of scanners and increased non-system revenues related to the company’s certified preowned and leasing and rental programs. Revenues witnessed an unfavorable currency impact of 6.2% year over year.
Margins
Gross profit in the fourth quarter was $617.7 million, reflecting a 17% decline year over year. Gross margin in the quarter under review contracted 369 basis points (bps) year over year to 68.5% despite a 0.9% decline in cost of net revenues.
During the quarter, Align Technology witnessed a 9.1% year-over-year fall in selling, general and administrative expenses to $410.1 million and a 15.3% rise in research and development expenses to $83.5 million.
Operating income in the quarter under review was $124.1 million, indicating a decline of 43.8%. The operating margin contracted 766 bps to 13.8%.
Financial Details
Align Technology exited 2022 with cash, cash equivalents of $942 million compared with $1.09 billion recorded at the end of 2021.
Cumulative net cash provided by operating activities at the end of the year was $568.7 million compared with $1.17 billion a year ago.
The company repurchased $475 million shares in 2022), with plans to repurchase $250 million more starting the first quarter of 2023 and expects to entirely complete its 2021 $1 billion Stock Repurchase Program in the second quarter of 2023.
Full-Year Guidance
Align Technology expects to report 2023 GAAP operating margin to be slightly above 16% and adjusted operating margin to be slightly above 20%.
For 2023, the company expect investments in capital expenditures to exceed $200 million. Capital expenditures primarily related to building construction and improvements, as well as additional manufacturing capacity to support Align Technology’s international expansion.
Our Take
Align Technology registered dismal revenue and EPS performance in the fourth quarter of 2022, with significant year-over-year decline. However, both the metrics exceeded the respective Zacks Consensus Estimate. The sluggish year-over-year results were due to a dull underlying market, which, per management, was impacted by macroeconomic environmental factors and extremely unfavorable currency translation. The quarter witnessed the significant foreign exchange impact.
The contraction of both margins is worrisome. The volatility surrounding inflationary pressure, weaker consumer confidence, the lingering impacts of COVID-19 shutdowns, primarily in China and Japan, 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 Neogen Corporation (NEOG - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Neogen, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of 15 cents, beating the Zacks Consensus Estimate of loss of 8 cents per share. Revenues of $230 million outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Neogen has an earnings yield of 2.5% compared with the industry’s 0.2%. NEOG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 70.11%.
McKesson, having a Zacks Rank #2, reported third-quarter 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 4.79%.
Hologic reported first-quarter 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 46.08%.
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Align Technology (ALGN) Q4 Earnings Top Estimates, Margins Drop
Align Technology, Inc.'s (ALGN - Free Report) fourth-quarter 2022 earnings per share (EPS) were $1.73, reflecting a 38.9% plunge from the year-ago earnings. The quarter’s EPS, however, exceeded the Zacks Consensus Estimate by 13.8%.
GAAP EPS for the quarter was 54 cents, significantly down from the year-ago EPS of $2.40, reflecting a 77.5% decline year over year.
Full-year adjusted EPS was $7.76, plunging 30.8% from the year-ago period. However, it exceeded the Zacks Consensus Estimate by 10.5%.
Revenues
Revenues declined 12.6% year over year to $901.5 million in the quarter and beat the Zacks Consensus Estimate by 1.4%. Revenues were impacted by unfavorable foreign exchange of approximately $67.6 million or 7% year over year.
For 2022, revenues were $3.73 billion, down 5.5% from 2021. The figure exceeded the Zacks Consensus Estimate by 0.3%.
Segments in Detail
In the fourth quarter, revenues at the Clear Aligner segment were down 10.3% year over year to $731.7 million. Revenues were unfavorably impacted by lower volumes and lower ASPs. This was partially offset by higher non-case revenues. Within the segment, Invisalign case shipments amounted to 583,655, down 7.5% 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 were down 21.3% to $169.9 million in the quarter. Lower scanner volume and ASPs were partially offset by higher services revenues from the larger installed base of scanners and increased non-system revenues related to the company’s certified preowned and leasing and rental programs. Revenues witnessed an unfavorable currency impact of 6.2% year over year.
Margins
Gross profit in the fourth quarter was $617.7 million, reflecting a 17% decline year over year. Gross margin in the quarter under review contracted 369 basis points (bps) year over year to 68.5% despite a 0.9% decline in cost of net revenues.
During the quarter, Align Technology witnessed a 9.1% year-over-year fall in selling, general and administrative expenses to $410.1 million and a 15.3% rise in research and development expenses to $83.5 million.
Operating income in the quarter under review was $124.1 million, indicating a decline of 43.8%. The operating margin contracted 766 bps to 13.8%.
Financial Details
Align Technology exited 2022 with cash, cash equivalents of $942 million compared with $1.09 billion recorded at the end of 2021.
Cumulative net cash provided by operating activities at the end of the year was $568.7 million compared with $1.17 billion a year ago.
The company repurchased $475 million shares in 2022), with plans to repurchase $250 million more starting the first quarter of 2023 and expects to entirely complete its 2021 $1 billion Stock Repurchase Program in the second quarter of 2023.
Full-Year Guidance
Align Technology expects to report 2023 GAAP operating margin to be slightly above 16% and adjusted operating margin to be slightly above 20%.
For 2023, the company expect investments in capital expenditures to exceed $200 million. Capital expenditures primarily related to building construction and improvements, as well as additional manufacturing capacity to support Align Technology’s international expansion.
Our Take
Align Technology registered dismal revenue and EPS performance in the fourth quarter of 2022, with significant year-over-year decline. However, both the metrics exceeded the respective Zacks Consensus Estimate. The sluggish year-over-year results were due to a dull underlying market, which, per management, was impacted by macroeconomic environmental factors and extremely unfavorable currency translation. The quarter witnessed the significant foreign exchange impact.
The contraction of both margins is worrisome. The volatility surrounding inflationary pressure, weaker consumer confidence, the lingering impacts of COVID-19 shutdowns, primarily in China and Japan, 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 Neogen Corporation (NEOG - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Neogen, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of 15 cents, beating the Zacks Consensus Estimate of loss of 8 cents per share. Revenues of $230 million outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Neogen has an earnings yield of 2.5% compared with the industry’s 0.2%. NEOG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 70.11%.
McKesson, having a Zacks Rank #2, reported third-quarter 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average being 4.79%.
Hologic reported first-quarter 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 46.08%.