Align Posts Solid 1Q - Analyst Blog

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Align Technology ( ALGN ) reported first quarter 2012 EPS of 26 cents, which was 30% higher than the year-ago level. Adjusting for certain one-time items, the adjusted EPS came in at 27 cents, beating the Zacks Consensus Estimate of 22 cents as well as the year-ago quarter adjusted EPS of 21 cents. The adjusted EPS also surpassed the company's guidance range of 19−21 cents.

Total revenue increased 28.7% year over year to $135.1 million in the quarter, exceeding the Zacks Consensus Estimate of $129 million and the company's guidance of $125.4−$127.9 million. Total Invisalign clear aligner revenue came in at $123.3 million, up 17.6% year over year, driven by case shipments of 85.3 thousand (up 19.5%) during the quarter.

Scanner and CAD/CAM services revenues were $11.8 million in the reported quarter, up 17.8% sequentially. The company derives revenues from scanner and CAD/CAM services following the acquisition of Cadent Holdings in April 2011. Sales derived from scanners and CAD/CAM services were $5.3 million and $6.4 million, respectively.

Align aims to strengthen its foothold in the fast growing intra-oral scanning market on the back of Cadent Holdings acquisition and expects to maintain the growth momentum in the upcoming quarters, with scanner sales and new opportunities in the digital dentistry and restorative markets.

The company recorded 33.7% of the total Invisalign Clear Aligner sales from North America orthodontists (up 19.1% year over year to $41.6 million), 36.6% from North American GP Dentists (up 15.1% to $45.2 million), 24.1% from international (up 17.9% to $29.7 million) and 5.5% from non-case revenues (up 24.6% to $6.8 million).

The company's highest contribution (66.8% of Invisalign Clear Aligner revenues) came from Invisalign Full, which grew 15.8% year over year to $71.1 million. Additionally, Invisalign Express/Lite (up 17.5% to $11.8 million), Invisalign Assist (up 12.7% to $6.4 million),Invisalign Teen (up 27.5% to $15.1 million) and Non-case Invisalign (up 24.7% to $6.7 million) registered impressive performance.

During the quarter, gross margin contracted 380 basis points (bps) year over year to 74.6%. Operating margin, however, was up 70 bps to 20.7%.

Align reported international average selling price ( ASP ) of $1,485 versus $1,555 in the year-ago quarter. Blended pricing slipped 1.8% to $1,370.

Align exited the quarter with $257.2 million in cash, cash equivalents and marketable securities compared with $248.1 million at the end of fiscal 2011. During the quarter, Align also purchased 100,000 million shares for $2.5 million. Currently, the company has $139.7 million remaining under its existing stock repurchase authorization.

Guidance

Align provided outlook for the second quarter of fiscal 2012. The company expects net revenue in the range $140.2−$143.7 million, higher than the current Zacks Consensus Estimate of $136 million. Also, the company expects adjusted EPS in the range of 26−28 cents, which is above the Zacks Consensus Estimate of 24 cents.

We believe that based on its several strategic initiatives, Align will continue to exhibit strong growth momentum. The company considers Invisalign G3 to be the key driving force behind its continuous penetration in Ortho practices at a faster rate compared to the overall market, a trend expected to persist with the launch of Invisalign G4. 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 3M ( MMM ), Danaher Corporation ( DHR ) and Dentsply International ( XRAY ).

We currently have a Neutral recommendation on the company in the long term.


 
ALIGN TECH INC ( ALGN ): Free Stock Analysis Report
 
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3M CO ( MMM ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ALGN , ASP , DHR , MMM , XRAY

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