Align Technology (ALGN) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues reached $1,028.5 million, up 3.1% sequentially and 2.6% year-over-year, with growth in clear aligner volumes and Imaging Systems and CAD/CAM Services revenues.

• Clear aligner volumes increased 6.2% sequentially and 3.2% year-over-year, with strong performance in adult and teen segments, especially in Asia Pacific, EMEA, and Latin America.

• Record number of doctors submitted cases and were shipped to in Q2, reflecting expanding global engagement.

• Q2 net income was $96.6 million, with diluted EPS of $1.28 (non-GAAP EPS $2.41); non-GAAP operating margin was 22.3%, up 2.5 points sequentially and 1.0 point year-over-year.

• Imaging Systems and CAD/CAM Services revenues rose 9.2% sequentially and 16.1% year-over-year, driven by iTero Lumina adoption.

Financial highlights

• Q2 clear aligner revenues were $831.7 million, up 1.8% sequentially but down 0.1% year-over-year; Systems and Services revenues were $196.8 million, up 9.2% sequentially and 16.1% year-over-year.

• Gross margin was 70.3%, up 0.3 points sequentially but down 0.9 points year-over-year; non-GAAP gross margin was 70.9%.

• Q2 operating income was $147 million (14.3% margin), down from $171.9 million year-over-year; non-GAAP EPS was $2.41, up $0.27 sequentially and $0.19 year-over-year.

• Cash, cash equivalents, and marketable securities totaled $782.1 million at quarter end; free cash flow for Q2 was $106.4 million.

• Operating expenses were $575.6 million, up 5.9% sequentially and 6.3% year-over-year, mainly due to legal settlements and higher employee compensation.

Outlook and guidance

• Q3 2024 revenues expected between $980 million and $1 billion, with clear aligner volume and ASPs projected to decline sequentially due to seasonality and FX.

• FY 2024 revenue growth expected at 4%-6% year-over-year, with lower clear aligner ASPs from FX and product mix; non-GAAP operating margin for 2024 expected to be above 2023.

• Commercial launch of iTero Lumina with restorative capabilities delayed to Q1 2025, impacting 2024 revenue outlook by less than 1%.

• Capital expenditures for 2024 projected at approximately $100 million, focused on manufacturing and facility expansion.

• Legal settlement payments of $31.1 million expected in the second half of 2024, subject to court approval.