Align Technology ((ALGN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Align Technology’s latest earnings call presents a mixed sentiment with record full-year revenue juxtaposed against market challenges and operational pressures. The company showcased impressive growth in Systems and Services but acknowledged hurdles in foreign exchange and the North American orthodontic market.
Record Full Year Revenue
Align Technology reported a record full year total worldwide revenue of $4 billion for fiscal 2024, marking a solid achievement in their business progress. This record revenue underscores the company’s robust performance across various segments.
Strong Growth in Systems and Services
The company experienced a robust year-over-year revenue growth of 14.9% in the Systems and Services segment. This growth was primarily driven by increased scanner volumes and rising non-systems revenues, reflecting a positive trajectory in this business area.
Clear Aligner Volume Growth
In the fourth quarter, Clear Aligner volumes grew by 6.1% year-over-year, with notable strength in regions such as EMEA, APAC, and LatAm, while maintaining stability in North America. This growth highlights the expanding adoption of Align’s products globally.
Expanding Doctor Network
Align Technology achieved significant milestones with 272,000 active Invisalign-trained practitioners and 19.5 million Invisalign patients, indicating a broad and growing network of professionals and users.
Positive Response to New Products
The Invisalign Palatal Expander system is gaining traction among orthodontists and patients, alongside receiving positive feedback from parents. Additionally, the company reached a significant milestone in regulatory approvals in Europe.
Impact of Unfavorable Foreign Exchange
The strengthening of the US dollar led to lower-than-expected Clear Aligner ASPs, impacting revenue by approximately $14 million in Q4. This exchange rate impact remains a challenge for the company.
Orthodontic Market Challenges in North America
The orthodontic channel in North America remained seasonally soft, with the segment seeing no significant growth over the past three years, presenting a stagnation issue for Align.
Sequential Decline in Teen and Kids Segment
The company reported a sequential decline of 8.6% in the teen and kids segment, with approximately 216,000 new treatments starting in Q4. This decline highlights a challenge in maintaining growth within this demographic.
Restructuring Costs
Higher-than-anticipated restructuring charges related to employee severance contributed to increased operating expenses, impacting the company’s financial performance.
Operating Margin Pressure
Align Technology faced a 2.1-point sequential and 3.4-point year-over-year decline in Q4 operating margin. Unfavorable foreign exchange further exacerbated these pressures.
Forward-Looking Guidance
Looking ahead to 2025, Align Technology anticipates year-over-year revenue growth in the low single digits, with a 2-point unfavorable impact from foreign exchange. Clear Aligner volume growth is projected to rise by mid-single digits, although ASPs are expected to decline due to exchange rates and product mix shifts. The company also expects a 2-point increase in GAAP operating margin, supported by restructuring actions and continued investments in capital expenditures ranging from $100 million to $150 million.
In conclusion, Align Technology’s earnings call reflected a complex landscape of achievements and challenges. While the company made significant strides in revenue and product adoption, it faces ongoing market and operational pressures. The forward-looking guidance suggests cautious optimism, with plans to navigate these challenges through strategic investments and restructuring efforts.
