Align Technology misses Q3 estimates, acquires Cubicure amid challenging macro environment

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Align Technology misses Q3 estimates, acquires Cubicure amid challenging macro environment
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Align (NASDAQ: ALGN ) Technology, known for its Invisalign orthodontic products, reported lower-than-expected Q3 fiscal 2023 results on Thursday, citing a challenging macro environment and a decrease in demand. The company reported an adjusted EPS of $2.14, up 31.3% YoY, but missing estimates by 5.3%. Revenues increased by 7.8% to $960.2 million but fell short of estimates by 3.7%.

The company's Clear Aligner revenues rose 8.5% to $794.9 million, while its Imaging Systems & CAD/CAM Services segment saw a revenue increase of 4.9% to $165.3 million. Gross profit for Q3 was $663.1 million, a 7.1% YoY increase, but the gross margin contracted by 49 basis points to 69.1%. Operating income was $166.4 million, a 15.8% increase, with an expanded operating margin of 17.3%.

Align Technology ended Q3 with cash and cash equivalents of $1.24 billion and net cash provided by operating activities at $738.9 million. The company also announced an agreement to acquire Cubicure GmbH for approximately €79 million ($92 million), a move anticipated to bolster Align’s existing intellectual property portfolio and know-how in direct 3D printing of appliances.

Looking forward to Q4 fiscal 2023, Align Technology anticipates revenues between $920-$940 million. For the full year of 2023, the company expects revenues between $3.83-$3.85 billion and an adjusted operating margin slightly higher than 21%. Capital expenditures are expected to be around $200 million.

Align Technology's $1 billion Stock Repurchase Program is available for repurchases, and the company has introduced innovations such as the ClinCheck Live Update for 3D controls and the Invisalign Practice App. The Doctor Subscription Program continues to be well received by Align’s customers in the United States, Canada, Iberia, and the Nordics, with further ongoing expansion in the EMEA region.

Despite these developments, the company faced deteriorating trends in Dental practices. However, Align Technology holds a Zacks Rank #3 (Hold), indicating a neutral outlook for the stock in the near term.

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