TechDogs-"Align Technology Announces Fourth Quarter and Fiscal 2023 Financial Results"

Manufacturing Technology

Align Technology Announces Fourth Quarter and Fiscal 2023 Financial Results

By Business Wire

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Unveils Next-Generation iTero Lumina™ Intraoral Scanner Featuring a 3X Wider Field of Capture1 in a 50% Smaller Wand2 that Delivers Faster Scanning, Higher Accuracy3, and Superior Visualization4 for Greater Practice Efficiency

Q4 and FY2023 total revenues up 6.1% year over year and up 3.4% year over year, respectively

Major 2023 milestones: 17 million Invisalign® patients, 4 million Vivera™ retainers, and 100 thousand iTero™ scanner units

  • 2023 total revenues of $3.9 billion, Clear Aligner revenues of $3.2 billion and Systems and Services revenues of $662.9 million
  • 2023 revenues were unfavorably impacted by foreign exchange of approximately $36.3 million compared to 2022(5)
  • 2023 operating margin of 16.7%, non-GAAP operating margin of 21.4%, and diluted net income per share of $5.81, non-GAAP diluted net income per share of $8.61
  • 2023 operating margin was favorably impacted by foreign exchange of approximately 0.7 points compared to 2022(5)
  • Repurchased $600 million of common stock in 2023
  • Q4 total revenues of $956.7 million, and diluted net income per share of $1.64, non-GAAP diluted net income per share of $2.42
  • Q4 revenues were unfavorably impacted by foreign exchange of approximately $12.8 million sequentially and favorably impacted by approximately $13.8 million year over year(5)

TEMPE, Ariz.--(BUSINESS WIRE)--Align Technology, Inc. (Nasdaq: ALGN), a leading global medical device company that designs, manufactures, and sells the Invisalign® system of clear aligners, iTero™ intraoral scanners, and exocad™ CAD/CAM software for digital orthodontics and restorative dentistry, today reported financial results for the fourth quarter ("Q4'23") and year ended December 31, 2023 ("2023"). Q4'23 total revenues were $956.7 million, down 0.4% sequentially and up 6.1% year-over-year. Q4'23 Clear Aligner revenues were $781.9 million, down 1.6% sequentially and up 6.9% year-over-year. Q4'23 Clear Aligner volume was down 1.6% sequentially and down 0.6% year-over-year. Q4'23 Imaging Systems and CAD/CAM Services revenues were $174.8 million, up 5.8% sequentially and up 2.9% year-over-year. Q4’23 Clear Aligner revenues were unfavorably impacted by foreign exchange of approximately $10.7 million or 1.4% sequentially and favorably impacted by approximately $12.0 million or 1.6% year over year.(5) Q4'23 Imaging Systems and CAD/CAM Services revenues were unfavorably impacted by foreign exchange of approximately $2.1 million or 1.2% sequentially and favorably impacted by approximately $1.9 million or 1.1% year over year.(5) Q4'23 operating income was $171.5 million resulting in an operating margin of 17.9%. Q4'23 operating margin was unfavorably impacted by foreign exchange of approximately 0.6 points sequentially and favorably impacted by approximately 0.6 points year over year.(5) Q4'23 net income was $124.0 million, or $1.64 per diluted share. On a non-GAAP basis, Q4'23 net income was $183.5 million, or $2.42 per diluted share.

2023 Clear Aligner revenues of $3.2 billion were unfavorably impacted by foreign exchange of approximately $29.7 million or 0.9% compared to 2022.(5) 2023 Imaging Systems and CAD/CAM Services revenues of $662.9 million were unfavorably impacted by foreign exchange of approximately $6.6 million or 1.0% compared to 2022.(5) During Q4’23, we incurred a total of $14.0 million of restructuring and other charges, primarily related to post-employment benefits.

Commenting on Align's Q4'23 and 2023 results, Align Technology President and CEO Joe Hogan said, “I am pleased to report fourth quarter results with better-than-expected revenues and earnings, primarily reflecting a sequential increase in clear aligner volume for adults and non-comprehensive cases, growth in Canada and the EMEA region, as well as increased revenues from systems and services. Fourth quarter revenues were up year-over-year primarily reflecting an increase in clear aligner volumes for teens and Invisalign DSP touch-up cases, as well as growth in the EMEA and APAC regions. For fiscal 2023, total revenues were up year over year, and we delivered fiscal 2023 non-GAAP operating margin above 21%, as expected. As of Q4, we achieved 17 million Invisalign® patients—including 4.7 million teens, as well as 4 million Vivera™ retainer cases, and over 100 thousand iTero™ scanners sold."

Hogan continued by announcing the launch of the company's latest iTero Lumina scanner, "Today, I’m excited to unveil a breakthrough technology — the iTero Lumina™ intraoral scanner - with 3X wider field of capture in a 50% smaller wand that delivers faster scanning, higher accuracy, and superior visualization for greater practice efficiency. iTero Lumina quickly, easily, and accurately captures more data while delivering exceptional scan quality and photorealistic visuals that remove the need for intraoral photos altogether. Doctors can now scan at twice the speed with a wide field of capture, multi angled scanning, and a large capture distance, meaning they can capture more dentition in greater detail throughout the scanning process. Align has filed over 30 patent applications covering technology related to the iTero Lumina intraoral scanner. I believe iTero Lumina has the potential to set a new standard of care for dental practices by simplifying the scanning of complex oral regions, while offering superior chair-side visualization and a more comfortable experience for patients, especially kids.”

(1) Compared to the field of view of the iTero Element™ 5D imaging system, when the iTero Lumina™ intraoral scanner’s scanning distance is 12 mm.*
(2) Compared to iTero Element™ 5D imaging system wand, excluding the wand cable.*
(3) The iTero Lumina™ intraoral scanner has scientifically proven greater accuracy* for your clinical orthodontic needs.
(4) For Invisalign record-taking cases only. Based on a survey in September 2023 of n=22 users who participated in a global limited market release, working with iTero Lumina™ intraoral scanner for an average period of 6 months, representing both Invisalign trained general practitioners and orthodontists in NA, EU and APAC, who were presented with a 4 point level of agreement scale from strongly agree to strongly disagree with the following statements: “iTero Lumina™ intraoral scanner 3D model is comparable to that of an intraoral photo.” and “iTero Lumina™ intraoral scanner photorealistic scans enable orthodontic clinical assessment the same way intraoral photos do.” and “iTero Lumina™ intraoral scanner 3D model’s superior 3D model eliminates the need to take intraoral photos.” and “iTero Lumina™ intraoral scanner 3D model’s superior 3D model boosts patient engagement.”*
*Data on file at Align Technology, as of November 15, 2023.
(5) For more information, please see the tables captioned "Unaudited GAAP to Non-GAAP Reconciliation."

Financial Summary - Fourth Quarter Fiscal 2023

Q4'23

Q3'23

Q4'22

Q/Q Change

Y/Y Change

Clear Aligner Shipments*

592,635

602,335

596,155

(1.6)%

(0.6)%

GAAP

Net Revenues

$956.7M

$960.2M

$901.5M

(0.4)%

+6.1%

Clear Aligner

$781.9M

$794.9M

$731.7M

(1.6)%

+6.9%

Imaging Systems and CAD/CAM Services

$174.8M

$165.3M

$169.9M

+5.8%

+2.9%

Net Income

$124.0M

$121.4M

$41.8M

+2.1%

+196.9%

Diluted EPS

$1.64

$1.58

$0.54

+$0.06

+$1.10

Non-GAAP

Net Income(6)

$183.5M

$164.3M

$134.2M

+11.7%

+36.7%

Diluted EPS(6)

$2.42

$2.14

$1.73

+$0.28

+$0.69

Financial Summary - Fiscal 2023

2023

2022

Y/Y Change

Clear Aligner Shipments*

2,408,520

2,398,370

+0.4%

GAAP

Net Revenues

$3,862.3M

$3,734.6M

+3.4%

Clear Aligner

$3,199.3M

$3,072.6M

+4.1%

Imaging Systems and CAD/CAM Services

$662.9M

$662.1M

+0.1%

Net Income

$445.1M

$361.6M

+23.1%

Diluted EPS

$5.81

$4.61

+$1.20

Non-GAAP

Net Income(6)

$659.2M

$608.2M

+8.4%

Diluted EPS(6)

$8.61

$7.76

+$0.85

Changes and percentages are based on actual values. Certain tables may not sum or recalculate due to rounding.
*Clear Aligner shipments include Doctor Subscription Program Touch-Up cases.

(6) In Q4'22, we changed our methodology for the computation of the non-GAAP effective tax rate to a long-term projected tax rate and have given effect to the new methodology from January 1, 2022.

As of December 31, 2023, we had $980.8 million in cash, cash equivalents and short-term and long-term marketable securities compared to over $1.3 billion as of September 30, 2023. As of December 31, 2023, we had $300.0 million available under a revolving line of credit.

Commenting on Align's 2023 results, Align Technology CFO and EVP Global Finance, John Morici said, "I am pleased with our fourth quarter and fiscal 2023 results, and I am especially proud of our continued focused execution of our product roadmap and innovation pipeline. We are committed to delivering on our strategic growth drivers of International Expansion, Patient Demand, Orthodontist Utilization, and GP Dentist Treatment to extend our leadership in digital orthodontics and dentistry. I believe that the next wave of innovation that we are introducing into the market will further differentiate Align and allow us to increase our share of the large untapped market opportunity of 22 million annual orthodontic case starts as well as the additional 600 million consumers who could benefit from a healthy beautiful smile using Invisalign® clear aligners."

Q4'23 Announcement Highlights

  • On November 6, 2023, we announced the opening of Align's 2024 Annual Research Award Program to support clinical and scientific dental research in universities across the globe. Under the program, up to $300,000 is being awarded to university faculty for scientific and technological research initiatives to advance patient care in the fields of orthodontics and dentistry. Align Technology’s Research Award Program has funded approximately $3 million in research since the program’s inception in 2010.
  • On December 5, 2023, we announced the appointments to Align's board of directors of Mojdeh Poul, former EVP and Group President of 3M Health Care, and Kevin Conroy, President, Chief Executive Officer, and Chairman of the Board of Exact Sciences.
  • On December 13, 2023, we announced that Health Canada issued an updated medical device license to Align for the Invisalign® Palatal Expander system* ("IPE"). The updated license for broad patient applicability includes growing children, teens, and adults (with surgery or other techniques).
  • On December 18, 2023, we announced that the U.S. Food and Drug Administration ("FDA") cleared Align’s IPE system* for commercial availability in the U.S. The FDA 510(k) clearance is for broad patient applicability, including growing children, teens, and adults (with surgery or other techniques). The IPE system is available on a limited basis in Canada and the U.S. It is expected to be available in other markets pending future applicable regulatory approvals.
  • On January 2, 2024, Align completed the acquisition of privately-held Cubicure GmbH, a pioneer in direct 3D printing solutions for polymer additive manufacturing that develops, produces, and distributes innovative materials, equipment, and processes for novel 3D printing solutions.

*Based on a survey in August 2023 in Canada of 10 Invisalign trained orthodontists who participated in the IPE system Technical Design Assessment and have treated at least 1 patient age 6-11 years with IPE. Data on file at Align Technology, Inc. as of October 30, 2023.

Q4'23 Stock Repurchases

In October 2023, we purchased approximately 1.0 million shares of our common stock at an average price of $190.56 per share through a $250.0 million Accelerated Share Repurchase* and, in November and December 2023, we purchased approximately 466 thousand shares of our common stock at an average price of $214.81 per share through $100.0 million open market repurchase, both under Align's current $1.0 billion stock repurchase program.

We have $650.0 million remaining available for repurchase of our common stock under this stock repurchase program.

*Contract was open, as of Dec. 31, 2023.

Fiscal 2024 Business Outlook

Turning to our outlook, assuming no circumstances occur beyond our control, we provide the following framework for Q1 and fiscal 2024:

First quarter 2024 outlook:

  • For Q1’24, we expect our worldwide revenues to be in the range of $960M to $980M, up slightly from Q4’23.
  • We expect clear aligner volume and ASPs to be up slightly sequentially.
  • We expect systems and services revenue to be down slightly sequentially, although less than the historical seasonal decline given the launch of the iTero Lumina™ for ortho workflows in Q1’24.
  • We expect our Q1’24 GAAP operating margin and non-GAAP operating margin to be slightly above Q1’23 GAAP operating margin and non-GAAP operating margin, respectively.

Full year 2024 outlook:

  • We expect our 2024 total revenues to be up mid-single digits over 2023.
  • We expect our 2024 clear aligner and systems and services revenues to grow year over year in the same approximate range as 2024 total revenues.
  • We expect our 2024 clear aligner ASPs to be up slightly year-over-year, primarily due to price increases and favorable foreign exchange, partially offset by a higher mix of non-comprehensive products which have lower ASPs.
  • We expect our full year 2024 GAAP operating margin and non-GAAP operating margin to be slightly above the 2023 GAAP operating margin and non-GAAP operating margin, respectively.
  • For 2024, we expect investments in capital expenditures to be approximately $100M. Capital expenditures are expected to primarily relate to building construction and improvements as well as manufacturing capacity in support of our continued expansion.

Align Web Cast and Conference Call

We will host a conference call today, January 31, 2024, at 4:30 p.m. ET, 2:30 p.m. MT, to review our fourth quarter and full year 2023 results, discuss future operating trends, and our business outlook. The conference call will also be webcast live via the Internet. To access the webcast, go to the "Events & Presentations" section under Company Information on Align's Investor Relations website at http://investor.aligntech.com. To access the conference call, participants may register for the call by clicking here. Once registered, participants will receive an email with dial-in number and unique PIN number to access the live event. An archived audio webcast will be available 2 hours after the call's conclusion and will remain available for one month.

About Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we may provide investors with certain non-GAAP financial measures which may include constant currency net revenues, constant currency gross profit, constant currency gross margin, constant currency income from operations, constant currency operating margin, gross profit, gross margin, operating expenses, income from operations, operating margin, interest income and other income (expense), net, net income before provision for income taxes, provision for income taxes, effective tax rate, net income and/or diluted net income per share, which excludes certain items that may not be indicative of our fundamental operating performance including, foreign currency exchange rate impacts and discrete cash and non-cash charges or gains that are included in the most directly comparable GAAP measure. In Q4'22, we changed to a long-term non-GAAP effective tax rate in our computation of the non-GAAP income tax provision to provide better consistency across reporting periods. Our previous methodology for calculating our non-GAAP effective tax rate included certain non-recurring and period-specific items, that produced fluctuating effective tax rates that management does not believe are reflective of the Company's long-term effective tax rate. We have given effect to this new methodology effective January 1, 2022. Unless otherwise indicated, when we refer to non-GAAP financial measures they will exclude the effects of stock-based compensation, amortization of certain acquired intangibles, restructuring and other charges, acquisition-related costs, and associated tax impacts.

Our management believes that the use of certain non-GAAP financial measures provides meaningful supplemental information regarding our recurring core operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the performance of our business.

There are limitations to using non-GAAP financial measures as they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. The presentation of non-GAAP financial information is meant to be considered in addition to, not as a substitute for or in isolation from, the directly comparable financial measures prepared in accordance with GAAP. We urge investors to review the reconciliation of our GAAP financial measures to the comparable non-GAAP financial measures included herein and not to rely on any single financial measure to evaluate our business. For more information on these non-GAAP financial measures, please see the tables captioned "Unaudited GAAP to Non-GAAP Reconciliation."

About Align Technology, Inc.

Align Technology designs and manufactures the Invisalign® system, the most advanced clear aligner system in the world, iTero™ intraoral scanners and services, and exocad™ CAD/CAM software. These technology building blocks enable enhanced digital orthodontic and restorative workflows to improve patient outcomes and practice efficiencies for over 256 thousand doctor customers and are key to accessing Align’s 600 million consumer market opportunity worldwide. Over the past 26 years, Align has helped doctors treat approximately 17 million patients with the Invisalign system and is driving the evolution in digital dentistry through the Align Digital Platform™, our integrated suite of unique, proprietary technologies and services delivered as a seamless, end-to-end solution for patients and consumers, orthodontists and GP dentists, and lab/partners. Visit www.aligntech.com for more information.

For additional information about the Invisalign system or to find an Invisalign doctor in your area, please visit www.invisalign.com. For additional information about the iTero digital scanning system, please visit www.itero.com. For additional information about exocad dental CAD/CAM offerings and a list of exocad reseller partners, please visit www.exocad.com.

Invisalign, iTero, exocad, Align, Align Digital Platform, iTero Element and iTero-exocad Connector are trademarks of Align Technology, Inc.

Forward-Looking Statements

This news release, including the tables below, contains forward-looking statements, including statements of beliefs and expectations regarding anticipated capital expenditures, clear aligner volumes, clear aligner ASPs, iTero scanner and services revenue, total revenues and operating margin, customer and consumer demand trends and market opportunities, our ability to successfully control our business and operations and pursue our strategic growth drivers, our expectations regarding the timing and impact of new products and technologies, our beliefs for the impacts of our stock repurchase programs and our ability to generate cash flow, and our beliefs regarding the trajectory of our business. Forward-looking statements contained in this news release relating to expectations about future events or results are based upon information available to Align as of the date hereof. Readers are cautioned that these forward-looking statements reflect our best judgments based on currently known facts and circumstances and are subject to risks, uncertainties, and assumptions that are difficult to predict. As a result, actual results may differ materially and adversely from those expressed in any forward-looking statement.

Factors that might cause such a difference include, but are not limited to:

  • macroeconomic conditions, including inflation, fluctuations in currency exchange rates, rising interest rates, market volatility, weakness in general economic conditions and recessions and the impact of efforts by central banks and federal, state and local governments to combat inflation and recession;
  • customer and consumer purchasing behavior and changes in consumer spending habits as a result of, among other things, prevailing macro-economic conditions, levels of employment, salaries and wages, debt obligations, discretionary income, inflationary pressure, declining consumer confidence, and military conflicts in Ukraine and the Middle East;
  • the economic and geopolitical ramifications of the hostilities in the Middle East as well as the military conflict in Ukraine, including sanctions, retaliatory sanctions, nationalism, supply chain disruptions and other consequences, any of which may or will continue to adversely impact our operations and assets and our research and development activities;
  • variations in our product mix, product adoption and selling prices regionally and globally;
  • competition from existing and new competitors;
  • declines in, or the slowing of growth of, sales of our clear aligners or intraoral scanners domestically and/or internationally and the impact either would have on the adoption of Invisalign products;
  • the timing and availability and cost of raw materials, components, products and other shipping and supply chain constraints, disruptions or costs;
  • unexpected or rapid changes in the growth or decline of our domestic and/or international markets;
  • rapidly evolving and groundbreaking advances that fundamentally alter the dental industry or the way new and existing customers market and provide products and services to consumers;
  • the ability to protect and enforce our intellectual property rights;
  • continued compliance with regulatory requirements;
  • the willingness and ability of our customers to maintain and/or increase product utilization;
  • the possibility that the development and release of new products or enhancements to existing products do not proceed in accordance with the anticipated timeline or may themselves contain bugs, errors or defects in software or hardware requiring remediation and that the market for the sale of these new or enhanced products may not develop as expected;
  • a tougher consumer demand environment in China gene

Contacts

Align Technology
Madelyn Valente
(909) 833-5839
mvalente@aligntech.com

Zeno Group
Sarah Johnson
(828) 551-4201
sarah.johnson@zenogroup.com

Read full story here

First published on Thu, Feb 1, 2024

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