Align Technology Inc
) reported adjusted earnings of 39 cents per share, up 50% from
the year-ago level of 26 cents. Earnings per share also topped
the Zacks Consensus Estimate of 36 cents by a wide margin.
However, the 4.7% drop in share price since the earnings release
does not give a true reflection of the company's performance in
the first quarter of 2014. Align Technology's shares closed at
$50.00 on April 25.
Including certain one-time items, the company reported
earnings per share same as the adjusted earnings figure,
comparing favorably with a loss of 52 cents incurred in the first
quarter of 2013.
Revenues in Detail
Revenues improved 17.6% year over year to $180.6 million in
the quarter, steering ahead of the Zacks Consensus Estimate of
Growth in revenues was primarily driven by strong Invisalign
sales from international doctors in Europe, Middle East and
Africa (EMEA) and also the Asia Pacific regions.
Segments in Detail
Invisalign Clear Aligner
segment (93.1% of total revenue) increased 18.8% year over year
to $168.2 million in the reported quarter. Growth in the top line
was driven by higher Invisalign volumes from international
doctors, as well as higher international average selling prices
(ASP). For the quarter, total Invisalign case shipments were
112,180, up 14.3% year over year, propelled by continued
expansion of the company's customer base and increased Invisalign
Scanner and CAD/CAM Services
segment (6.9% of total revenue) rose 3.3% to $12.4 million in the
reported quarter. This increase reflects continued penetration in
the market and increasing market share gains.
Gross margin expanded by about 240 basis points (bps) year
over year to 75.9% in the first quarter. The increase came on the
back of higher ASPs and lower inventory reserves.
Align Technology witnessed a 25.1% year-over-year increase in
sales and marketing expenses to $52.9 million, a 3.9% fall in
general and administrative expenses to $29.2 million, and a 18.6%
rise in research and development expenses to $13.4 million in the
quarter. Operating margin during the quarter expanded by 430 bps
to 23.1% due to higher sales volume and increased gross
Align Technology exited reported quarter with cash and cash
equivalents and short-term investment of $364.4 million compared
with $369.9 million at the end of 2013. The company had no debt
at the quarter-end.
During the reported quarter, Align Technology generated $18.0
million in cash flow from operations. Capital expenditure
incurred by the company was $5.0 million resulting in a free cash
flow of $13.0 million, for the quarter.
For the second quarter of 2014, Align Technology expects
revenues in the range of $181.7-$186.5 million, with an
annualized growth rate of 10.9-13.8%. The current Zacks Consensus
Estimate of $186 million approximately coincides with the higher
end of the guided range.
Earnings per share are expected in the range of 36-39
cents. The Zacks Consensus Estimate is at par with the
higher end of the guided range. Shipments for the Invisalign
clear aligner are expected in the range of 116,500-119,500.
Align Technology's fourth-quarter 2013 financial results are
encouraging with the company beating the Zacks Consensus Estimate
on both earnings and revenue fronts.
We are also optimistic about the company's strong balance
sheet and healthy cash flow position. Management expects
second-quarter 2014 to be busier thus, making us more optimistic
about continued growth driven by consistent progress in the EMEA
and Asia Pacific regions. The popularity gained on the back of
the two newly launched products - Invisalign G5 and ClinCheck Pro
further strengthens our confidence in the company's
Another positive highlight during the quarter was Align
Technology's achievement of the tax exemption status for its
clear aligner business in Mar 2014, which benefited the first
quarter by approximately $600,000.
Overall, we believe Align Technology possesses positive
potential with management successfully channelizing the three key
strategic growth drivers of the company, viz. market expansion,
product innovation and brand strength.
However, Align Technology currently carries a Zacks Rank #3
Other Stocks to Consider
Some better-ranked stocks in the broader healthcare sector
that warrant a look are
Myriad Genetics Inc.
Natus Medical Inc.
). Enzymotec and Myriad Genetics sport a Zacks Rank #1 (Strong
Buy) while Natus Medical carries a Zacks Rank #2 (Buy).
ALIGN TECH INC (ALGN): Free Stock Analysis
NATUS MEDICAL (BABY): Free Stock Analysis
ENZYMOTEC LTD (ENZY): Free Stock Analysis
MYRIAD GENETICS (MYGN): Free Stock Analysis
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