Align Technology (NASDAQ:ALGN) reported a year-over-year decline in earnings back in the third quarter. However, the orthodontic device maker best known for its Invisalign clear dental aligners still chalked up a win by easily beating its guidance for the quarter. Align reported its fourth-quarter results after the market closed on Thursday. This time around, the company scored another win -- and not just by beating expectations. 

Align results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Net Revenue

$230.3 million

$198.6 million


Net Profit

$48.9 million

$39.5 million


GAAP Diluted EPS





What happened with Align this quarter?
You probably noticed from Align's raw numbers that earnings grew at a faster clip than sales. That's primarily due to two reasons. First, the company kept expenses under control, with year-over-year growth of 14.4%. Second, Align made significantly more in interest and other income during the fourth quarter of 2015 compared to the prior year period.

Align managed to generate solid sales growth despite the major policy change made by the company in July. Under its new policy, Align began providing free additional aligners for eligible Invisalign treatments. The company estimates that this policy change caused fourth-quarter revenue to be around $7 million lower than it would have otherwise been.

Other highlights for Align in the fourth quarter included:

  • Clear aligner shipments were up 26.4% year over year to 160,400.
  • Clear aligner revenue increased to $214 million, up 15.9% versus fourth quarter of 2014.
  • Scanner and services revenue of $16.2 million reflected a 33.4% year-over-year jump.
  • Align firmed up its cash position, increasing its cash, cash equivalents, and marketable securities on hand as of end of year 2015 to $678.7 million from $630 million at the end of September.
  • The company repurchased around 200,000 shares of stock for $11.2 million. 

Align thinks that its growth will continue in the first quarter of 2016. The company expects clear aligner case shipments to increase 23%-25% from the same period in 2015. Align projects first-quarter net revenue to be between $232.5 million and $236.6 million. Diluted earnings for the first quarter are expected to come in between $0.37 and $0.40 per share.

What management had to say
Align's President and CEO Joe Hogan sang the praises of his company's performance. Hogan said, "Better than expected revenue and earnings were driven by record Invisalign volume, which was up 26% year over year. These results reflect strong growth across our customer base and geographies -- from both an increase in the number of submitters as well as cases per doctor."

Hogan also was positive about Align's overall performance throughout 2015. He added, "Our increased growth rate reflects continued adoption and utilization from international doctors and a solid rebound in North America, both driven by investments in territory coverage and sales and marketing programs, including clinical education. Product and technology innovation is also a key growth driver for the Company, and as a result, in 2015 we continued to see increased clinical confidence in Invisalign treatment for our customers worldwide."

Looking forward
Align's Invisalign aligners will clearly (no pun intended -- well, maybe just a little bit) remain the primary driver of the company's growth. However, the fastest-growing part of Align's business on a percentage basis is scanners.

The iTero Element intraoral scanner that Align launched in March 2015 could become an even larger success story for the company in 2016. For that success to fully materialize, though, iTero must win against Sirona's (UNKNOWN:SIRO.DL) competing technology.

Align's relationship with Sirona is both competitive and cooperative. Around the same time that it introduced iTero Element to the market, Align announced a deal with Sirona to support integration with Sirona's CEREC Omnicam intraoral scanner. Sirona was the first company that Align partnered with for this kind of integration.

Look for the competitive aspect of the relationship to intensify in 2016. Dentsply (NASDAQ:XRAY) and Sirona plan to merge in the first quarter. While Dentsply is a little bigger than Sirona in terms of market cap, the two companies are treating this as a merger of equals. The combined company will likely present a formidable rival for Align in gaining more market share for iTero.