Align Technology(US:ALGN)2024-04-24 20:02Company Information & Contact This section provides essential contact details for Align Technology's media relations team Contact Information Align Technology's media contacts are Madelyn Valente and Sarah Johnson, handling communications for Align Technology and Zeno Group respectively - Align Technology's media contacts are Madelyn Valente (mvalente@aligntech.com) and Sarah Johnson (sarah.johnson@zenogroup.com) 1 First Quarter 2024 Financial Results Overview This section details Align Technology's key financial performance metrics, CEO commentary, and liquidity position for Q1 2024 Key Financial Highlights Align Technology achieved year-over-year revenue and earnings growth in Q1 2024, with total revenue up 5.8% and non-GAAP diluted EPS at $2.14 Key Financial Data Q1 2024 (Year-over-Year) | Metric | Q1'24 Amount (Million USD) | Year-over-Year Growth | | :--- | :--- | :--- | | Total Revenue | $997.4 | 5.8% | | Clear Aligner Revenue | $817.3 | 3.5% | | Clear Aligner Shipments | 605.1 Thousand Cases | 2.4% | | Teen Clear Aligner Shipments | 199.2 Thousand Cases | 5.8% | | Imaging Systems and CAD/CAM Services Revenue | $180.2 | 17.5% | | Operating Income | $154.1 | - | | Operating Margin | 15.5% | - | | Non-GAAP Operating Margin | 19.8% | - | | Diluted Net Earnings Per Share | $1.39 | - | | Non-GAAP Diluted Net Earnings Per Share | $2.14 | - | - Foreign exchange had a favorable sequential impact of approximately $10 million on Q1'24 revenue, but an unfavorable year-over-year impact of approximately $4.8 million 2 - Foreign exchange had a favorable sequential impact of approximately 0.1 percentage points on Q1'24 GAAP operating margin, but an unfavorable year-over-year impact of approximately 0.7 percentage points 2 CEO Commentary CEO Joe Hogan expressed satisfaction with Q1'24 results, highlighting strong revenue growth across all regions and successful product launches - Q1'24 total revenue increased 5.8% year-over-year, with Clear Aligner business growing 3.5% and Systems and Services business growing 17.5% 4 - Revenue growth was primarily driven by strong Clear Aligner volume in the Asia Pacific region and a 5.8% year-over-year increase in Invisalign® case starts for teen and younger patients 4 - The company completed the acquisition of Cubicure GmbH, launched the iTero Lumina™ intraoral scanner, and introduced the Invisalign® Palatal Expander System in the US, Canada, Australia, and New Zealand 4 Financial Summary Table Align Technology reported Q1 2024 total revenue of $997.4 million, with GAAP net income of $105.0 million and non-GAAP net income of $161.4 million Key Financial Metrics Q1 2024 | Metric | Q1'24 | Q4'23 | Q1'23 | Sequential Change | Year-over-Year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Clear Aligner Shipments | 605,060 Thousand Cases | 592,635 Thousand Cases | 590,940 Thousand Cases | +2.1% | +2.4% | | GAAP Net Revenue | $997.4M | $956.7M | $943.1M | +4.3% | +5.8% | | Clear Aligner Revenue | $817.3M | $781.9M | $789.8M | +4.5% | +3.5% | | Imaging Systems and CAD/CAM Services Revenue | $180.2M | $174.8M | $153.3M | +3.1% | +17.5% | | GAAP Net Income | $105.0M | $124.0M | $87.8M | (15.3)% | +19.6% | | GAAP Diluted EPS | $1.39 | $1.64 | $1.14 | ($0.24) | +$0.26 | | Non-GAAP Net Income | $161.4M | $183.5M | $140.6M | (12.0)% | +14.8% | | Non-GAAP Diluted EPS | $2.14 | $2.42 | $1.82 | ($0.28) | +$0.32 | Cash and Liquidity As of March 31, 2024, the company held over $902.5 million in cash and marketable securities, with a $300 million revolving credit facility - As of March 31, 2024, total cash, cash equivalents, and marketable securities were $902.5 million, down from $980.8 million as of December 31, 2023 6 - The company has a $300 million revolving credit facility 6 Q1 2024 Business and Strategic Highlights This section outlines Align Technology's recent product launches, regulatory approvals, legal milestones, and strategic acquisitions in Q1 2024 Product Launches & Regulatory Approvals Align Technology launched a new Invisalign advertising campaign, received regulatory approvals for its Palatal Expander System, and introduced the iTero Lumina™ intraoral scanner - On April 8, 2024, Align announced a new Invisalign brand advertising campaign, "Better Way," featuring the "Invis is for Kids" tagline to promote the Invisalign® Palatal Expander System 7 - On April 2, 2024, the Invisalign® Palatal Expander System received regulatory approval and launched in Australia and New Zealand, with expected rollout in other APAC markets starting in 2024 7 - On January 31, 2024, Align launched the next generation of digital scanning technology, the iTero Lumina™ intraoral scanner 9 Legal & Intellectual Property Milestones Align Technology won summary judgment in two US antitrust class action lawsuits and was recognized among the top 300 patent-issuing organizations - On February 22, 2024, the U.S. District Court for the Northern District of California ruled in favor of Align Technology in two U.S. antitrust class action lawsuits 8 - On January 31, 2024, Align Technology was included for the first time in the Intellectual Property Owners Association's annual report of the top 300 organizations granted U.S. patents 8 Strategic Acquisitions Align Technology completed the acquisition of Cubicure GmbH, a pioneer in direct 3D printing solutions for polymer additive manufacturing - On January 2, 2024, Align completed the acquisition of Cubicure GmbH, a pioneer in direct 3D printing solutions for polymer additive manufacturing 9 Stock Repurchase Program This section details Align Technology's recent stock repurchase activities and the remaining authorization under its current program Stock Repurchase Program Details Align Technology repurchased approximately 1.1 million shares at an average price of $230.13, with $650 million remaining under the 2023 plan - Under the Q4'23 ASR contract, the company repurchased approximately 1.1 million shares of common stock at an average price of $230.13 per share 10 - The January 2023 repurchase program still has $650 million available 10 - The company expects to repurchase up to $150 million of common stock in Q2'24 10 Business Outlook This section provides Align Technology's financial guidance and key operational expectations for the second quarter and full fiscal year 2024 Second Quarter 2024 Outlook Align Technology projects Q2 2024 global revenue between $1.03 billion and $1.05 billion, with Clear Aligner volume increasing sequentially Second Quarter 2024 Business Outlook | Metric | Outlook | | :--- | :--- | | Global Revenue | $1,030M - $1,050M | | Clear Aligner Volume | Sequential increase | | Clear Aligner ASP | Slight sequential decrease (primarily due to foreign exchange) | | Systems and Services Revenue | Sequential increase | | GAAP Operating Margin | Slightly above Q1'24 | | Non-GAAP Operating Margin | Slightly above Q1'24 | Full Year 2024 Outlook The company raised its full-year 2024 total revenue growth forecast to 6% to 8% year-over-year, with capital expenditures around $100 million Full Year 2024 Business Outlook | Metric | Outlook | | :--- | :--- | | Total Revenue Growth | Year-over-year +6% to +8% (up from prior "mid-single-digit growth" expectation) | | Clear Aligner ASP | Slight year-over-year increase | | GAAP Operating Margin | Slightly above 2023 | | Non-GAAP Operating Margin | Slightly above 2023 | | Capital Expenditures | Approximately $100M | - The incremental revenue growth is expected to be split evenly between the two operating segments 13 - Capital expenditures are primarily for building construction and improvements, and manufacturing capacity to support ongoing expansion 13 Investor Information This section provides details on Align Technology's investor webcast and clarifies the use of non-GAAP financial measures Webcast and Conference Call Details Align Technology held a conference call and webcast on April 24, 2024, to review Q1 2024 results and discuss business outlook - The conference call and webcast were held on April 24, 2024, to review Q1'24 results and discuss the business outlook 15 - An archived audio webcast will be available within 2 hours of the call's conclusion and will remain on the company's investor relations website for one month 15 About Non-GAAP Financial Measures The company provides non-GAAP financial measures to supplement GAAP statements, excluding items like stock-based compensation and intangible asset amortization - Non-GAAP financial measures exclude stock-based compensation, amortization of certain acquired intangible assets, restructuring and other charges, acquisition-related costs, and related tax impacts 16 - Management believes non-GAAP measures provide meaningful supplemental information about core operating performance, aiding in performance evaluation, planning, forecasting, and analysis of future periods 17 - Non-GAAP financial measures are not a substitute for GAAP, and investors should review both GAAP and non-GAAP data along with their reconciliation tables 18 About Align Technology This section offers a concise overview of Align Technology's core business, products, and market presence as a global medical device leader Company Profile Align Technology is a leading global medical device company, designing and manufacturing Invisalign® clear aligners, iTero™ scanners, and exocad™ CAD/CAM software - Align Technology designs and manufactures the Invisalign® system, iTero™ intraoral scanners, and exocad™ CAD/CAM software 19 - The company serves over 261,000 doctor customers and has helped over 17.6 million patients with the Invisalign system 19 - The Align Digital Platform™ is the company's integrated suite of proprietary technologies and services designed to improve patient outcomes and practice efficiency 19 Forward-Looking Statements & Risk Factors This section highlights the forward-looking nature of the report's statements and outlines various risks that could impact Align Technology's future performance Forward-Looking Statements This press release contains forward-looking statements regarding future events, business growth, product launches, stock repurchase plans, and financial outlook - Forward-looking statements involve expectations for Q2'24 and full-year 2024 revenue, Clear Aligner volume, ASP, Systems and Services revenue, operating margins, and capital expenditures 21 - The company undertakes no obligation to publicly revise or update any forward-looking statements 24 Risk Factors The company faces various risks including macroeconomic conditions, changes in customer behavior, increased competition, and supply chain disruptions - Risk factors include macroeconomic conditions (inflation, exchange rates, interest rates), changes in customer and consumer purchasing behavior, product mix shifts, competition, geopolitical conflicts, new product development and launch timing, supply chain disruptions, intellectual property protection, regulatory compliance, and loss of key personnel 2223 Unaudited Condensed Consolidated Financial Statements This section presents Align Technology's unaudited consolidated statements of operations, balance sheets, and cash flows for the reported periods Statements of Operations Align Technology reported Q1 2024 net revenue of $997.4 million, gross profit of $697.8 million, and net income of $105.0 million, showing year-over-year growth Summary of Statements of Operations Q1 2024 | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net Revenues | $997,431 | $943,147 | | Cost of Sales | $299,615 | $282,493 | | Gross Profit | $697,816 | $660,654 | | Selling, General and Administrative Expenses | $451,822 | $439,691 | | Research and Development Expenses | $91,859 | $87,447 | | Total Operating Expenses | $543,681 | $527,138 | | Income from Operations | $154,135 | $133,516 | | Income Before Income Taxes | $158,386 | $134,624 | | Income Tax Expense | $53,358 | $46,826 | | Net Income | $105,028 | $87,798 | | Diluted Net Income Per Share | $1.39 | $1.14 | Balance Sheets As of March 31, 2024, Align Technology's total assets were $6.156 billion, with a slight increase from December 31, 2023, driven by higher receivables and intangible assets Summary of Balance Sheets Q1 2024 | Metric (Thousand USD) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $865,805 | $937,438 | | Short-term marketable securities | $33,101 | $35,304 | | Accounts receivable, net | $950,738 | $903,424 | | Inventories | $280,076 | $296,902 | | Prepaid expenses and other current assets | $349,594 | $273,550 | | Total current assets | $2,479,314 | $2,446,618 | | Long-term marketable securities | $3,619 | $8,022 | | Property, plant and equipment, net | $1,281,709 | $1,290,863 | | Goodwill | $458,235 | $419,530 | | Intangible assets, net | $121,424 | $82,118 | | Deferred tax assets | $1,570,626 | $1,590,045 | | Total assets | $6,155,754 | $6,083,877 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $2,023,041 | $2,066,611 | | Total liabilities | $2,395,894 | $2,453,388 | | Total stockholders' equity | $3,759,860 | $3,630,489 | Statements of Cash Flows In Q1 2024, Align Technology reported net cash inflow from operating activities of $28.66 million, with net cash outflows from investing and financing activities Summary of Statements of Cash Flows Q1 2024 | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,664 | $199,895 | | Net cash used in investing activities | ($79,584) | ($52,829) | | Net cash used in financing activities | ($11,716) | ($258,961) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | ($9,004) | $2,221 | | Net decrease in cash, cash equivalents and restricted cash | ($71,640) | ($109,674) | | Cash, cash equivalents and restricted cash at end of period | $866,879 | $832,681 | Invisalign Business Metrics This section provides key operational metrics for Align Technology's Invisalign business, including doctor training and utilization rates Invisalign Key Metrics In Q1 2024, Invisalign trained doctors totaled 83,510, with North America utilization at 9.5% and Clear Aligner revenue per case at $1,350 Invisalign Business Key Metrics | Metric | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Invisalign trained doctors | 82,730 | 83,440 | 85,195 | 83,700 | 83,510 | | North America utilization (%) | 9.5 | 9.8 | 9.6 | 9.1 | 9.5 | | North America Orthodontist utilization (%) | 28.7 | 29.2 | 28.8 | 25.9 | 28.2 | | North America GP Dentist utilization (%) | 4.9 | 5.2 | 4.9 | 5.0 | 4.9 | | International utilization (%) | 6.2 | 6.6 | 6.1 | 6.5 | 6.3 | | Total utilization (%) | 7.1 | 7.5 | 7.1 | 7.1 | 7.2 | | Clear Aligner revenue per case ($) | $1,335 | $1,335 | $1,320 | $1,320 | $1,350 | - Starting Q3 2023, Touch Up cases were included in case revenue, and prior period data was restated 34 Stock-Based Compensation This section details Align Technology's stock-based compensation expenses allocated across cost of sales and operating expenses Stock-Based Compensation Details In Q1 2024, Align Technology's total stock-based compensation was $38.788 million, with $2.064 million allocated to cost of sales Summary of Stock-Based Compensation | Metric (Thousand USD) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Fiscal Year 2023 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | SBC included in cost of sales | $1,807 | $1,901 | $1,974 | $1,780 | $7,462 | $2,064 | | SBC included in operating expenses | $35,928 | $35,959 | $37,628 | $37,049 | $146,564 | $36,724 | | Total SBC | $37,735 | $37,860 | $39,602 | $38,829 | $154,026 | $38,788 | GAAP to Non-GAAP Reconciliations This section provides detailed reconciliations of Align Technology's GAAP financial measures to non-GAAP measures, including constant currency adjustments Constant Currency Net Revenues Q1 2024 GAAP net revenue was $997.4 million; constant currency net revenue was $987.5 million sequentially and $1.002 billion year-over-year Constant Currency Net Revenue Analysis (Sequential) | Metric (Thousand USD) | March 31, 2024 | December 31, 2023 | Revenue Impact (%) | | :--- | :--- | :--- | :--- | | GAAP Net Revenues | $997,431 | $956,726 | | | Constant currency impact | ($9,950) | | (1.0)% | | Constant currency net revenues | $987,481 | | | | GAAP Clear Aligner Net Revenues | $817,251 | $781,912 | | | Clear Aligner constant currency impact | ($8,421) | | (1.0)% | | Clear Aligner constant currency net revenues | $808,830 | | | | GAAP Imaging Systems and CAD/CAM Services Net Revenues | $180,180 | $174,814 | | | Imaging Systems and CAD/CAM Services constant currency impact | ($1,529) | | (0.9)% | | Imaging Systems and CAD/CAM Services constant currency net revenues | $178,651 | | | Constant Currency Net Revenue Analysis (Year-over-Year) | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | Revenue Impact (%) | | :--- | :--- | :--- | :--- | | GAAP Net Revenues | $997,431 | $943,147 | | | Constant currency impact | $4,823 | | 0.5% | | Constant currency net revenues | $1,002,254 | | | | GAAP Clear Aligner Net Revenues | $817,251 | $789,804 | | | Clear Aligner constant currency impact | $3,899 | | 0.5% | | Clear Aligner constant currency net revenues | $821,150 | | | | GAAP Imaging Systems and CAD/CAM Services Net Revenues | $180,180 | $153,343 | | | Imaging Systems and CAD/CAM Services constant currency impact | $924 | | 0.5% | | Imaging Systems and CAD/CAM Services constant currency net revenues | $181,104 | | | Constant Currency Gross Profit and Gross Margin Q1 2024 GAAP gross profit was $697.8 million with a 70.0% margin; constant currency gross profit was $687.9 million sequentially and $702.6 million year-over-year Constant Currency Gross Profit and Gross Margin Analysis (Sequential) | Metric (Thousand USD) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | GAAP Gross Profit | $697,816 | $669,524 | | Net revenue constant currency impact | ($9,950) | | | Constant currency gross profit | $687,866 | | | GAAP Gross Margin (%) | 70.0% | 70.0% | | Gross margin constant currency impact (%) | (0.3) | | | Constant currency gross margin (%) | 69.7% | | Constant Currency Gross Profit and Gross Margin Analysis (Year-over-Year) | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | GAAP Gross Profit | $697,816 | $660,654 | | Net revenue constant currency impact | $4,823 | | | Constant currency gross profit | $702,639 | | | GAAP Gross Margin (%) | 70.0% | 70.0% | | Gross margin constant currency impact (%) | 0.1 | | | Constant currency gross margin (%) | 70.1% | | Constant Currency Income from Operations and Operating Margin Q1 2024 GAAP operating income was $154.1 million with a 15.5% margin; constant currency operating income was $151.1 million sequentially and $161.9 million year-over-year Constant Currency Income from Operations and Operating Margin Analysis (Sequential) | Metric (Thousand USD) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | GAAP Income from Operations | $154,135 | $171,545 | | Income from operations constant currency impact | ($3,015) | | | Constant currency income from operations | $151,120 | | | GAAP Operating Margin (%) | 15.5% | 17.9% | | Operating margin constant currency impact (%) | (0.1) | | | Constant currency operating margin (%) | 15.3% | | Constant Currency Income from Operations and Operating Margin Analysis (Year-over-Year) | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | GAAP Income from Operations | $154,135 | $133,516 | | Income from operations constant currency impact | $7,802 | | | Constant currency income from operations | $161,937 | | | GAAP Operating Margin (%) | 15.5% | 14.2% | | Operating margin constant currency impact (%) | 0.7 | | | Constant currency operating margin (%) | 16.2% | | Financial Measures Other Than Constant Currency Q1 2024 non-GAAP gross profit was $703.6 million with a 70.5% margin, and non-GAAP diluted EPS was $2.14, adjusted for specific non-operating items Summary of Non-GAAP Financial Measures Reconciliation | Metric (Thousand USD) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | GAAP Gross Profit | $697,816 | $660,654 | | Stock-based compensation | $2,064 | $1,807 | | Amortization of intangible assets | $3,724 | $2,774 | | Non-GAAP Gross Profit | $703,604 | $665,227 | | GAAP Gross Margin (%) | 70.0% | 70.0% | | Non-GAAP Gross Margin (%) | 70.5% | 70.5% | | GAAP Total Operating Expenses | $543,681 | $527,138 | | Non-GAAP Total Operating Expenses | $506,094 | $490,520 | | GAAP Income from Operations | $154,135 | $133,516 | | Stock-based compensation | $38,788 | $37,735 | | Amortization of intangible assets | $4,587 | $3,641 | | Non-GAAP Income from Operations | $197,510 | $174,707 | | GAAP Operating Margin (%) | 15.5% | 14.2% | | Non-GAAP Operating Margin (%) | 19.8% | 18.5% | | GAAP Net Income | $105,028 | $87,798 | | Non-GAAP Net Income | $161,439 | $140,615 | | GAAP Diluted Net Income Per Share | $1.39 | $1.14 | | Non-GAAP Diluted Net Income Per Share | $2.14 | $1.82 | - Non-GAAP adjustments include stock-based compensation, amortization of certain acquired intangible assets, and restructuring and other charges 57 - The non-GAAP effective tax rate for Q1 2024 was 20.0%, consistent with the prior year period 57 Outlook - GAAP to Non-GAAP Reconciliation This section presents the reconciliation of Align Technology's GAAP and non-GAAP operating margin outlook for Q2 and full fiscal year 2024 Q2 2024 Outlook Align Technology forecasts Q2 2024 GAAP operating margin slightly above 15.5% and non-GAAP operating margin slightly above 19.8% Second Quarter 2024 Operating Margin Outlook | Metric | Outlook | | :--- | :--- | | GAAP Operating Margin (%) | Slightly above 15.5% | | Stock-based compensation (%) | ~4.0% | | Amortization of intangible assets (%) | ~0.4% | | Non-GAAP Operating Margin (%) | Slightly above 19.8% | Fiscal 2024 Outlook Align Technology projects full-year 2024 GAAP operating margin slightly above 16.7% and non-GAAP operating margin slightly above 21.4% Fiscal Year 2024 Operating Margin Outlook | Metric | Outlook | | :--- | :--- | | GAAP Operating Margin (%) | Slightly above 16.7% | | Stock-based compensation (%) | ~4.4% | | Amortization of intangible assets (%) | ~0.4% | | Non-GAAP Operating Margin (%) | Slightly above 21.4% |