Record revenue. Record earnings. Record Invisalign clear aligner shipments.
It seems that every quarter, Align Technology (NASDAQ:ALGN) sounds like a broken record (pun fully intended). After getting off to a great start in 2018 with its first-quarter results, investors might have wondered if the orthodontic device maker might take a breather at some point.
It could happen down the road, but there was no breather for Align Technology in the second quarter. The company announced its second-quarter results after the market closed on Wednesday. Here are the highlights from yet another record quarter for Align.
Align Technology results: The raw numbers
|$490.3 million||$356.5 million||
Net income from continuing operations
|$106.1 million||$69.2 million||
Diluted earnings per share (EPS)
What happened with Align Technology this quarter?
Align Technology's core business continued to thrive in the second quarter. Shipments of the company's Invisalign clear aligner cases increased 30.5% year over year. That growth doesn't include any clear aligners provided to SmileDirect Club.
What's especially notable about the Invisalign shipment growth is that Align is making solid inroads into the teen market. The company reported that Invisalign cases for teenage patients jumped 42.1% year over year and comprised nearly 26% of total shipments.
Align's scanner business is also rocking. Revenue from selling scanners and services soared 60.9% year over year to $57 million. This business now generates nearly 12% of the company's total revenue.
But the most impressive aspect of Align's second-quarter performance is how much the company is growing each quarter. Revenue was up 12.2% from the first quarter. Net profit increased 10.7% from just three months earlier.
Align Technology also notched several other noteworthy achievements in the second quarter. The company opened an Invisalign treatment planning facility in Germany, its first such facility in Europe. It rolled out new products, including Invisalign First for younger patients with a mixture of baby teeth and permanent teeth, the iTero Element 2 scanner, and the iTero Element Flex scanner. In addition, Align received an important regulatory approval in China to market its iTero Element intraoral scanner.
What management had to say
Align Technology CEO Joe Hogan stated:
I'm pleased to report another better than expected quarter for Align. Our second quarter results reflect strong growth across our customer channels with record volume in all regions and in almost every country market. Year-over-year revenue growth of 37.5% was driven by continued momentum from Invisalign doctors and increased adoption of Invisalign treatment for teenage patients which grew 42.1%. Q2 Invisalign volume growth of 30.5% year-over-year reflects increased utilization and expansion of our customer base, which was over 50,000 for the first time and included more than 5,000 new Invisalign-trained doctors. We also saw momentum from the iTero scanner and services business which includes the continued rollout of iTero scanners across Heartland Dental's installed base, as well as the first iTero scanner shipments to China.
Earlier this year, Morgan Stanley expressed a negative outlook about Align's growth prospects, saying that the sizzling growth of the past would cool off. So far, however, that hasn't happened. But Align's guidance for the third quarter could hint that a slowing of growth is around the corner.
Align Technology projects that third-quarter revenue will be between $493 million and $503 million. That's 28% to 31% higher than revenue reported in the prior-year period. However, the midpoint of that range reflects quarter-over-quarter revenue growth of only 1% -- well below the trend that Align has experienced recently.
The company expects diluted earnings per share of $1.13 to $1.18. While that reflects a big jump from the third quarter of 2017, even the upper end of the range is less than what Align reported for the second quarter of 2018.
Investors might want to take Align's guidance with a grain of salt, though. The company likes to sandbag with its projections. For example, in April 2018 Align projected second-quarter revenue between $460 million and $470 million with diluted EPS between $1.02 and $1.06. The company went on to blow those numbers out of the water with its actual second-quarter performance.
History might not repeat itself. At this point, though, there's no reason to think that demand for Align's Invisalign aligners and iTero scanners will taper off.