ALGN Q1 Earnings Call: New Product Launches and International Growth Offset Margin Pressure

May 14, 2025 at 10:15 AM EDT

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Dental technology company Align Technology (NASDAQ: ALGN) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 1.8% year on year to $979.3 million. The company expects next quarter’s revenue to be around $1.06 billion, close to analysts’ estimates. Its non-GAAP profit of $2.13 per share was 7.1% above analysts’ consensus estimates.

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Align Technology (ALGN) Q1 CY2025 Highlights:

Revenue: $979.3 million vs analyst estimates of $975 million (1.8% year-on-year decline, in line)
Adjusted EPS: $2.13 vs analyst estimates of $1.99 (7.1% beat)
Adjusted EBITDA: $225.9 million vs analyst estimates of $217.9 million (23.1% margin, 3.7% beat)
Revenue Guidance for Q2 CY2025 is $1.06 billion at the midpoint, roughly in line with what analysts were expecting
Operating Margin: 13.4%, down from 15.5% in the same quarter last year
Free Cash Flow Margin: 14.9%, up from 1.9% in the same quarter last year
Sales Volumes rose 6.2% year on year (2.4% in the same quarter last year)
Market Capitalization: $13.8 billion

StockStory’s Take

Align Technology’s first quarter results reflected steady underlying demand for its clear aligner products, with notable year-over-year volume growth in both teen and adult segments across Asia Pacific, Europe, and North America. CEO Joe Hogan emphasized strong adoption of new offerings such as the Invisalign Palate Expander system and iTero Lumina scanner, which contributed to increased case submissions from dental professionals and broader customer engagement. The company’s segment performance was supported by record numbers of doctor submitters and growing utilization among general practitioners, despite headwinds from unfavorable foreign exchange and product mix shifts.

Looking ahead, management expects sequential revenue and margin improvement, citing continued rollout of new restorative scanner capabilities and product innovations. CFO John Morici highlighted the company’s ability to mitigate potential tariff impacts and the flexibility provided by a diversified manufacturing footprint. Management acknowledged ongoing macroeconomic uncertainty and foreign exchange volatility, but remains focused on cost discipline and operational efficiency to support full-year operating margin targets. As Hogan noted, "there's a lot of volatility out there, but we feel we're well positioned."

Key Insights from Management’s Remarks

Align Technology attributed first quarter performance to product innovation, international expansion, and increased engagement among dental practitioners. Management discussed several drivers that influenced Q1 results and shared updates on new product introductions and operational developments.

Clear Aligner Volume Growth: Strong year-over-year growth in clear aligner volumes was driven by higher adoption in both teen and adult segments, particularly in Asia Pacific and Europe, as well as renewed growth in North America. CEO Joe Hogan noted, "Q1 was the highest year-over-year growth rate for both adult and teen patients since 2021."
Product Innovation Impact: The launch of the Invisalign Palate Expander and the introduction of the Invisalign system with Mandibular Advancement featuring Occlusal Blocks were highlighted as key factors in driving case volume and expanding treatment options for younger patients. These new offerings address common orthodontic conditions and aim to improve clinical outcomes and patient experience.
Growth in Dental Service Organizations (DSOs): Management identified DSOs as an important and fast-growing distribution channel, with increased clear aligner and scanner sales to these organizations outpacing growth among individual practices. DSOs benefit from digital workflows, supporting both practice efficiency and patient throughput.
Systems and Services Expansion: The iTero Lumina intraoral scanner and its new restorative software capabilities were cited as contributors to year-over-year revenue gains in the Systems and Services segment. Management pointed to positive customer feedback and increased scanner wand upgrades, while acknowledging that broader adoption requires training and support for dental teams.
Margin Pressures and Mitigation: CFO John Morici explained that operating margin was affected by unfavorable foreign exchange, higher discounts, and a shift toward lower-priced products. However, cost efficiencies in manufacturing and ongoing investments in innovation partially offset these pressures. Management emphasized actions to maintain profitability targets despite external challenges.

Drivers of Future Performance

Management’s outlook for the upcoming quarter and year centers on product innovation, operational resilience, and the ability to navigate macroeconomic and regulatory headwinds. The main themes shaping guidance are the ramp-up of new product lines and ongoing cost control.

Product Mix Shifts: The continued growth of noncomprehensive clear aligner products in emerging markets is expected to put downward pressure on average selling prices (ASPs), although management anticipates that premium product launches like Mandibular Advancement with Occlusal Blocks could provide some offset.
Tariff and Currency Risks: Management acknowledged ongoing uncertainty around tariffs and foreign exchange, but stated that the company is positioned to mitigate most direct impacts through its global manufacturing footprint and supply chain adjustments. They noted that tariff-related headwinds have been included in operating margin projections.
Operational Efficiency Initiatives: The company plans to leverage manufacturing efficiencies, digital workflow tools, and automation—such as AI-powered ClinCheck treatment planning—to improve margins and support volume growth while maintaining disciplined investment in research and development.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) the commercial ramp of new products, including the Invisalign system with Mandibular Advancement and the restorative iTero Lumina scanner; (2) the ability of Align’s global supply chain to absorb or mitigate any further tariff or foreign exchange shocks; and (3) the pace of volume growth among new doctor submitters and Dental Service Organizations. The company’s forthcoming Investor Day may also provide additional strategic clarity and product pipeline updates.

Align Technology currently trades at a forward P/E ratio of 18.6×. Should you double down or take your chips? The answer lies in our free research report.

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