) reported second quarter 2012 EPS of 34 cents, considerably higher
than the year-ago level of 14 cents. Adjusting for certain one-time
items, adjusted EPS came in at 34 cents, beating the Zacks
Consensus Estimate of 28 cents and the year-ago quarter adjusted
EPS of 20 cents. The adjusted EPS was also ahead of the company's
guidance of 26−28 cents.
Total revenue increased 21.2% year over year to $145.6 million
in the quarter, exceeding the Zacks Consensus Estimate of $143
million and the company's guidance of $140.2−$143.7 million.
Align presently has two operating segments, Clear Aligner (known
as the Invisalign system) and Scanner and CAD/CAM Services (known
as iTero and iOC intra-oral scanners and OrthoCAD services). Total
Invisalign clear aligner revenue came in at $133.7 million, up
17.6% year over year, driven by case shipments of 95.3 thousand (up
25.3% year over year) during the quarter.
Scanner and CAD/CAM services revenues were $11.9 million in the
reported quarter, up 85.9% year over year. The company derives
revenues from scanner and CAD/CAM services following the
acquisition of Cadent Holdings in April 2011. Thus, the year-ago
quarter result included two months of scanner and CAD/CAM services
The company recorded 32.8% of the total Invisalign Clear Aligner
sales from North America orthodontists (up 18.4% year over year to
$43.9 million), 36.7% from North American GP Dentists (up 15.0% to
$49.1 million), 24.6% from international (up 17.9% to $32.8
million) and 5.8% from non-case revenues (up 30.1% to $7.8
The company's highest contribution (66.3% of Invisalign Clear
Aligner revenues) came from Invisalign Full, which grew 15.6% year
over year to $76.6 million. Additionally, Invisalign Express/Lite
(up 22.9% to $11.1 million), Invisalign Assist (up 2.1% to $7.3
million), Invisalign Teen (up 27.8% to $16.4 million) and Non-case
Invisalign (up 30.1% to $7.8 million) delivered impressive
During the quarter, gross margin contracted 119 basis points
(bps) year over year to 74.7%. The company witnessed 1.3% increase
in sales and marketing expenses to $39.1 million; 15.2% rise in
research and development expenses to $10.6 million, offset by 15.1%
drop in general and administrative expenses to $22.2 million.
Operating margin of 24.7% was significantly up from the year-ago
quarter level of 13.8%
Align reported international average selling price (ASP) of
$1,455 versus $1,660 in the year-ago quarter. The lower ASP
resulted from advantage rebate, promotional activity, product mix
combined with unfavorable foreign exchange rates. Blended pricing
slipped 5.6% to $1,335.
Align exited the quarter with $304.0 million in cash, cash
equivalents and marketable securities compared with $248.1 million
at the end of fiscal 2011.
Align provided outlook for the third quarter of fiscal 2012 with
net revenue of $136.8−$140.8 million, much lower than the Zacks
Consensus Estimate of $146 million. For the quarter, Align expects
scanner and CAD/CAM service business to drop sequentially due to
summer seasonality for capital equipment purchases.
The company does not expect any major events providing
additional selling opportunities. Added to this, scanner sales in
Europe are likely to remain flat during the quarter.
However, the Invisalign clear aligner case shipments are
expected to be in a range of 94.8-96.3 thousand cases,
(year-over-year growth of 19.5% to 21.3%). Also, the company
expects adjusted EPS in the range of 27−29 cents. The Zacks
Consensus Estimate of 29 cents remains at the upper end of the
We believe that based on its several strategic initiatives,
Align will continue to exhibit strong growth momentum. Banking on
its core product, Invisalign, the company witnessed balanced sales
growth across all its channels. Cadent's contribution is also
helping Align to expand further its presence in the malocclusion
Considering the strong untapped potential of the malocclusion
market, we are optimistic about the prospects of the company, which
retains a Zacks #3 Rank (Hold) in the short term.
However, the current economic uncertainty continues to cast a
negative impact on dental procedures because of its elective
nature. Moreover, the company faces significant competition from
players such as
We currently have a Neutral recommendation on the company in the
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