Align Technology(ALGN) - 2025 Q2 - Quarterly Results

Executive Summary & Q2'25 Financial Highlights Align Technology's Q2'25 saw mixed financial results, with sequential revenue growth but a slight year-over-year decline, alongside strategic operational updates Q2'25 Financial Overview Align Technology reported mixed Q2'25 financial results, with sequential growth but a slight year-over-year decrease, and favorable foreign exchange impact | Metric | Q2'25 Value | Sequential Change | Year-over-Year Change | | :-------------------------------- | :---------------- | :---------------- | :-------------------- | | Total Revenues | $1,012.4M | +3.4% | -1.6% | | Clear Aligner Revenues | $804.6M | +1.0% | -3.3% | | Clear Aligner Volume | 644.4 thousand cases | +0.3% | +0.3% | | Imaging Systems & CAD/CAM Services Revenues | $207.8M | +13.9% | +5.6% | | Operating Income | $163.0M | N/A | N/A | | Operating Margin (GAAP) | 16.1% | N/A | N/A | | Operating Margin (Non-GAAP) | 21.3% | N/A | N/A | | Diluted Net Income Per Share (GAAP) | $1.72 | N/A | N/A | | Diluted Net Income Per Share (Non-GAAP) | $2.49 | N/A | N/A | | Cash and Cash Equivalents | $901.2M | N/A | N/A | - Foreign exchange favorably impacted Q2'25 total revenues by approximately $26.4 million (2.7% sequentially) and $5.6 million (0.6% year-over-year)[3][4] CEO Commentary and Market Conditions CEO commentary cited mixed Q2'25 results, with strong scanner upgrades offset by lower sales and decreased Clear Aligner volumes, impacting outlook - Q2'25 results were mixed, with total revenues of $1,012.4 million reflecting solid year-over-year growth for Systems and Services (driven by iTero Lumina scanner wand upgrades) but a slight year-over-year decrease in Clear Aligner revenues due to lower-than-expected volumes in Europe and North America[5] - Worldwide revenues and operating margins were below Q2 outlook, impacted by uneven patient case conversion, U.S. tariff turmoil, and less affordable financing options for orthodontic treatment and capital equipment purchases[5] - Dental industry surveys suggest less overall patient traffic, fewer orthodontic case starts, and patient hesitation toward elective procedures, marking the fourth consecutive year orthodontic starts are down[5] - The company is evaluating actions to reduce costs and manage investments while driving commercial and marketing programs, especially for teens and kids, in anticipation of continued economic uncertainty[5] Detailed Financial Results This section details Align Technology's Q2'25 GAAP and non-GAAP financial performance, cash position, and key business metrics Q2'25 GAAP and Non-GAAP Financial Summary This summary compares key GAAP and Non-GAAP metrics for Q2'25 against prior quarters, detailing changes in revenues, net income, and diluted EPS | Metric | Q2'25 | Q1'25 | Q2'24 | Q/Q Change | Y/Y Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Clear Aligner Shipments | 644,370 | 642,305 | 642,725 | +0.3% | +0.3% | | GAAP | | | | | | | Net Revenues | $1,012.4M | $979.3M | $1,028.5M | +3.4% | (1.6)% | | Clear Aligner Revenues | $804.6M | $796.8M | $831.7M | +1.0% | (3.3)% | | Imaging Systems and CAD/CAM Services Revenues | $207.8M | $182.4M | $196.8M | +13.9% | +5.6% | | Net Income | $124.6M | $93.2M | $96.6M | +33.7% | +29.0% | | Diluted EPS | $1.72 | $1.27 | $1.28 | +$0.45 | +$0.43 | | Non-GAAP | | | | | | | Net Income | $181.1M | $156.9M | $181.0M | +15.5% | +0.1% | | Diluted EPS | $2.49 | $2.13 | $2.41 | +$0.36 | +$0.09 | Cash and Liquidity As of June 30, 2025, Align Technology maintained a strong cash position with over $900 million in cash and cash equivalents and an available revolving line of credit - Cash and cash equivalents were approximately $901.2 million as of June 30, 2025, up from $873.0 million as of March 31, 2025[9] - The company had $300.0 million available under its revolving line of credit as of June 30, 2025[9] Invisalign Business Metrics Invisalign business metrics for Q2'25 show a slight increase in the number of trained doctors and stable utilization rates, while clear aligner revenue per case shipment experienced a minor sequential increase but a year-over-year decrease | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------- | :------ | :------ | :------ | | Number of Invisalign Trained Doctors Cases Were Shipped To | 86,250 | 85,275 | 86,135 | | Invisalign Trained Doctor Utilization Rates* | 7.5 | 7.5 | 7.5 | | Clear Aligner Revenue Per Case Shipment** | $1,250 | $1,240 | $1,295 | Stock-Based Compensation Total stock-based compensation for Q2'25 increased sequentially and year-over-year, with the majority allocated to operating expenses | Stock-based Compensation (SBC) | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------- | :------ | :------ | :------ | | SBC included in Gross Profit | $1,636 | $1,538 | $2,582 | | SBC included in Operating Expenses | $46,572 | $43,459 | $44,446 | | Total SBC | $48,208 | $44,997 | $47,028 | Strategic Initiatives & Corporate Updates This section outlines Align Technology's operational streamlining, product and market expansions, corporate governance, share repurchase program, and regulatory updates Operational Streamlining and Resource Reallocation Align Technology announced plans for operational streamlining in the second half of fiscal 2025, including workforce reduction and manufacturing optimization, to enhance profitability and align with long-term growth - Align expects to streamline operations, reallocate resources, realign business groups, and reduce its global workforce in H2 2025[10] - Plans include optimizing manufacturing footprint, disposing of certain capital assets, and transitioning to next-generation manufacturing technologies[10] - Expected one-time charges of approximately $150 million to $170 million in H2 2025, primarily non-cash, with about $40 million in cash charges[10] - These actions are projected to achieve a GAAP operating margin of 13.0%–14.0% and a non-GAAP operating margin slightly above 22.5% in FY 2025, and improve GAAP and non-GAAP operating margins by at least 100 basis points year-over-year in FY 2026[10] Product and Market Announcements Align Technology made several announcements in Q2'25 and early Q3'25, focusing on expanding the commercial availability of its Invisalign System with mandibular advancement and Palatal Expander System in new markets, alongside new marketing initiatives and collaborations - Commercial availability of the Invisalign System with mandibular advancement expanded to Malaysia (July 22, 2025), India (July 14, 2025), U.S. and Canada (April 24, 2025), and Australia and New Zealand (April 1, 2025)[13] - The Invisalign Palatal Expander System became commercially available in Malaysia (July 22, 2025) and India (July 14, 2025), and was approved in China (May 15, 2025)[13] - Align announced a collaboration with Disney's 'Freakier Friday' movie sequel (July 16, 2025) and launched an integrated consumer and professional brand campaign focused on Invisalign treatment for kids and teens (June 17, 2025)[13] Corporate Governance and Research Align Technology strengthened its Board of Directors with a new appointment and continued its commitment to research through its annual award program - Britt Vitalone, EVP and CFO of McK