Back to top

Align Technology (ALGN) Beats on Q2 Earnings and Revenues

Read MoreHide Full Article

Align Technology, Inc. (ALGN - Free Report) reported adjusted earnings per share (EPS) of 85 cents in the second quarter of 2017, up a substantial 37.1% year over year. Earnings were also higher than the company’s guided range of 71−74 cents. The figure handily beat the Zacks Consensus Estimate of 73 cents.


Revenues grew 32.3% year over year to $356.5 million in the quarter, surpassing the Zacks Consensus Estimate of $343 million.

Per management, strong top-line was driven by robust Invisalign case shipments of 31% year over year to 41.3 thousand doctors shipped during the second quarter. The upside was backed by growth in North America and international regions and a 37.6% year-over-year increase in teenage cases across the board, thereby reaching a new benchmark of 1 million teen patients who adopted the Invisalign treatment.

Align Technology, Inc. Price, Consensus and EPS Surprise


Segments in Detail

Revenues at the Clear Aligner segment (90.0% of total revenue) increased 31.9% year over year to $321.0 million in the reported quarter, primarily driven by continued strong Invisalign case volume growth across all customer channels and geographies.

In the second quarter, Invisalign case shipments amounted to 231,890, up 31.0% year over year, aided by growth across all regions. During the quarter, Align Technology added 41,265 Invisalign doctors worldwide, out of which 24,695 were from North America while 16,570 were from international regions.

Revenues from Scanner and Service (10.0%) improved substantially by 36.7% to $35.4 million.


Gross margin in the second quarter was down 20 basis points (bps) year over year to 75.9% on a 33.4% rise in cost of net revenue.

During the quarter, Align Technology witnessed a 34.2% year-over-year increase in selling, general and administrative expenses to $162.9 million and a 31.0% hike in research and development (R&D) expenses to $24.4 million. The operating margin, however, contracted 80 bps to 23.4% due to higher operating expenses.

Financial Details

Align Technology exited the second quarter with cash and cash equivalents and short-term marketable securities of $601.9 million, which marked a 10.3.% rise from the preceding quarter.

In the reported quarter, Align Technology paid $50 million under an accelerated stock repurchase plan (ASR) in which the company received an initial delivery of roughly 0.3 million shares of common stock. Management has $250 million available for repurchase under the 2016 repurchase plan, which was announced last April.


For the third quarter of 2017, the company projects EPS of 78−81 cents on revenues of $355–$360 million. The company also expects Invisalign case shipments in the band of 231,000 to 234,000, up 27%–29% over the same period a year ago.

Our Take

Align Technology ended the second quarter on a solid note, with both earnings and revenues beating the Zacks Consensus Estimate.We are upbeat about the continued strong Invisalign volumes, which in turn drove the top line.

Additionally, in May, the company announced the receipt of two U.S. patents for Align’s SmartTrack aligner material that is exclusively used for Invisalign aligner treatment. Going forward, management anticipates consistent growth in the Asia-Pacific region. In a bid to grow in this region, the company also opened new Invisalign Treatment Planning Facility in China. We are also upbeat about the multi-million dollar marketing campaign initiated by the company for its Invisalign brand in order to gain through increased awareness.

We are also optimistic about the company expanding work flow options of its leading iTero scanners. In this context, Align Technology recently launched a software upgrade for its iTero Element intraoral scanners that is capable of comparing patient scans over time with the new TimeLapse technology.

Additionally, the company has a strong cash balance that enables it to carry out share repurchase programs and in turn provide solid returns to investors.

On the flip side, unfavorable foreign currency might affect the company’s revenues in the to-be-reported quarter. Also, the company is exposed to seasonal demand fluctuations, higher operating expenses pertaining to increased head count along with higher investments targeted toward growth acceleration in geographical expansion and portfolio expansion.

Zacks Rank & Other Key Picks

Currently Align Technology sports a Zacks Rank #2 (Buy).

Other top-ranked medical stocks are Mesa Laboratories, Inc. (MLAB - Free Report) , INSYS Therapeutics, Inc. (INSY - Free Report) and Becton, Dickinson and Company (BDX - Free Report) . Notably, INSYS Therapeutics sports a Zacks Rank #1 (Strong Buy), while Mesa Laboratories and Becton, Dickinson and Company carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock has gained around 1.9% over the last three months.

Mesa Laboratories has a positive earnings surprise of 2.8% for the last four quarters. The stock has added roughly 2.6% over the last three months.

Becton, Dickinson and Company has a positive earnings surprise of 5.58% for the last four quarters. The stock has gained around 4.4% over the last month.

The Hottest Tech Mega-Trend of All

 Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.   See Zacks' 3 Best Stocks to Play This Trend >>

More from Zacks Analyst Blog

You May Like