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ALIGN TECHNOLOGY INC (ALGN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3’25 delivered a clean top-line and EPS beat with total revenue of $995.7M (+1.8% Y/Y, -1.7% Q/Q) vs S&P Global consensus $976.3M*, and non-GAAP EPS $2.61 vs $2.41*; GAAP EPS was $0.78 reflecting $88.3M of restructuring/impairment/accelerated depreciation and inventory charges .
  • Clear Aligner volume rose 4.9% Y/Y to 647.8k cases, driven by EMEA/APAC/LatAm and strong teens & kids (256.0k; +8.3% Y/Y, +14.7% Q/Q), while Systems & Services declined seasonally; non-GAAP operating margin expanded to 23.9% (vs ~22% outlook), despite macro softness in North America retail .
  • Q4’25 outlook implies sequential growth: revenue $1.025–$1.045B, GAAP GM 65.5–66.0% (non-GAAP ~71%), GAAP OM 15.3–15.8% (non-GAAP ~26%); FY25 GAAP OM refined to 13.6–13.8% and non-GAAP ~22.5% with capex ~ $100M .
  • Product catalysts: ClinCheck Live Plan (AI-enabled treatment planning in ~15 minutes) and new iTero Digital Solutions enhancements to elevate chairside conversion; Align repurchased ~0.5M shares at $136.77 average during Q3 .

What Went Well and What Went Wrong

  • What Went Well

    • International demand and teens/kids strength: “year-over-year Clear Aligner volume growth rate improved from Q2 to Q3 for all our top 10 country markets, except for Canada,” with teens & kids cases at 256.0k (+8.3% Y/Y, +14.7% Q/Q) .
    • Margin execution: non-GAAP operating margin reached 23.9% (above ~22% outlook) on better execution and despite macro headwinds; management highlighted breadth of portfolio and consumer preference for Invisalign .
    • Innovation cadence: ClinCheck Live Plan automates initial, doctor-ready plans in ~15 minutes; iTero Digital Solutions added chairside visualization and broader 3D printing/milling compatibility to improve patient conversion and workflow .

  • What Went Wrong

    • North America retail softness persisted; ASP mix headwind from higher China mix weighed sequentially on Clear Aligner ASP ($1,245, down $5 Q/Q), partially offset by FX and UK price change; management expects ASP to improve in Q4 on EMEA mix .
    • Systems & Services down seasonally Q/Q (-8.6%) and slightly Y/Y (-0.6%), with gross margin impacted by excess inventory write-off .
    • GAAP results pressured by one-time charges ($88.3M) including impairment on assets held for sale, accelerated depreciation on assets to be disposed of, and inventory impairment; GAAP OM fell to 9.7% .

Financial Results

Revenue, EPS and Margin (chronological: Q3’24 → Q2’25 → Q3’25)

MetricQ3 2024Q2 2025Q3 2025
Total Revenue ($M)$977.9 $1,012.4 $995.7
GAAP Diluted EPS ($)$1.55 $1.72 $0.78
Non-GAAP Diluted EPS ($)$2.35 $2.49 $2.61
GAAP Gross Margin (%)69.7% 69.9% 64.2%
Non-GAAP Gross Margin (%)70.4% 70.5% 70.4%
GAAP Operating Margin (%)16.6% 16.1% 9.7%
Non-GAAP Operating Margin (%)22.1% 21.3% 23.9%

Actual vs Consensus (Q3’25)

MetricQ3’25 ActualQ3’25 Consensus
Total Revenue ($M)$995.7 $976.3*
Non-GAAP EPS ($)$2.61 $2.41*

Values with asterisk (*) retrieved from S&P Global.

Segment Revenue

Segment ($M)Q3 2024Q2 2025Q3 2025
Clear Aligner$786.8 $804.6 $805.8
Imaging Systems & CAD/CAM$191.0 $207.8 $189.9

KPIs and Operating Metrics

KPIQ3 2024Q2 2025Q3 2025
Clear Aligner Shipments (k)617.2 644.4 647.8
Clear Aligner ASP ($/case)$1,275 $1,250 $1,245
Invisalign Trained Doctors Cases Were Shipped To87,380 86,250 88,155
Utilization Rate7.1 7.5 7.3
Teens & Kids Cases (k)——256.0
Cash & Cash Equivalents ($M)—$901.2 $1,004.6

Notes: Teens & Kids case detail disclosed for Q3’25. Free cash flow in Q3’25 was $169M (CFO definition: CFO less capex) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)Q4 2025N/A$1.025–$1.045 New
GAAP Gross Margin (%)Q4 2025N/A65.5–66.0; non-GAAP ~71.0 New
GAAP Operating Margin (%)Q4 2025N/A15.3–15.8; non-GAAP ~26.0 New
Clear Aligner Volume GrowthFY 2025Low-single digit Mid-single digit Raised
Revenue GrowthFY 2025Flat to slightly up Flat to slightly up Maintained
GAAP Operating MarginFY 202513.0–14.0% 13.6–13.8% Slightly raised/narrowed
Non-GAAP Operating MarginFY 2025Slightly >22.5% Slightly >22.5% Maintained
One-time Charges (non-cash heavy)FY 2025$150–$170M $145–$155M Lower
CapexFY 2025$100–$125M ~ $100M Lower
Margin improvementFY 2026≥+100 bps Y/Y ≥+100 bps Y/Y Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1’25 and Q2’25)Current Period (Q3’25)Trend
AI/Technology InitiativesQ1: Align X-ray Insights in EU/UK; iTero Lumina restorative launch . Q2: iTero Lumina wand upgrades strong; continued digital workflow push .ClinCheck Live Plan to cut treatment planning to ~15 minutes; expanded iTero Digital Solutions for chairside conversion and 3D printing/milling .Accelerating product cycle; AI-driven planning scaling in 2026 rollout .
Supply Chain/ManufacturingQ2: Announced footprint optimization and disposal of certain manufacturing assets, shift to next-gen tech; expected H2’25 charges .Q3 booked $88.3M of restructuring & non-cash charges tied to assets held for sale, accelerated depreciation, inventory .Restructuring progressing; near completion per FY25 outlook .
Tariffs/MacroQ1: Tariff update—USMCA compliance; limited expected impacts; scanner tariffs baseline noted . Q2: Tariff turmoil cited; macro hesitancy affecting conversions .No material change expected from latest U.S. tariff actions; North America retail still mixed; DSO stronger .Macro headwinds persistent in NA retail; broadly manageable tariffs.
Product PerformanceQ1: Clear Aligner volumes up Y/Y across regions; teens strong . Q2: Systems & Services up Y/Y; Clear Aligner slightly down Y/Y; uneven conversions .Clear Aligner volume +4.9% Y/Y; Systems & Services down as expected; teens & kids record 40% mix of cases .Int’l and youth segments leading; S&S seasonality intact.
Regional TrendsQ1: APAC/EMEA strength; NA growth . Q2: Weaker Europe/NA; strong iTero lease growth .Double-digit Y/Y growth in APAC/EMEA; NA retail challenged; NA DSO strong double-digit .International outperformance; NA bifurcation (DSO vs retail).
Regulatory/LegalQ1: Positive UK VAT tribunal; pending appeals .Stopped charging UK VAT from Aug 1; adjusted prices to keep overall price consistent; filed ITC complaint vs Angelalign .VAT transition executed; IP enforcement active.
R&D ExecutionQ1: Continued investments; next-gen iTero . Q2: Digital scans and case submissions strong .Non-GAAP OM above outlook (23.9%); continued platform innovation (ClinCheck Live Plan; iTero suite) .Sustained innovation while improving non-GAAP margins.

Management Commentary

  • “Q3 results reflect Y/Y growth in Clear Aligner volumes… driven primarily by the EMEA, APAC, and Latin America regions… non-GAAP operating margins of 23.9% was above our outlook of approximately 22%.” — Joe Hogan, CEO .
  • “Q3 Clear Aligner average per case shipment price was $1,245… down $30 Y/Y primarily due to discounts and product mix shift to lower priced countries and products partially offset by price increases and favorable foreign exchange.” — John Morici, CFO .
  • “ClinCheck Live Plan… automates the generation of initial doctor-ready treatment plans in 15 minutes… can reduce the Invisalign treatment planning cycle from days to minutes.” — Product announcement .
  • “We expect Q4’25 worldwide revenues to be in the range of $1,025M to $1,045M… GAAP operating margin 15.3% to 15.8%… non-GAAP operating margin approximately 26%.” — CFO .

Q&A Highlights

  • ASP dynamics: Sequential ASP dip driven by mix (China up in Q3; EMEA rises in Q4, aiding ASP); like-for-like ASPs up in U.S./Europe .
  • DSO outperformance vs retail: DSOs represent ~25% of business and are scanning more, offering competitive pricing and financing (e.g., HFD), driving better conversion; retail remains macro-sensitive .
  • China and VBP: Monitoring; timing/scope unclear; portfolio positioning underway; Q3 saw strong teen seasonality in China .
  • Teens & kids: Global growth aided by Invisalign First and palatal expander (IPE); teens & kids cases a record 40% of total in Q3 .
  • Free cash flow: Q3 FCF $169M; DSO at 101 days on flexible terms to support practices .

Estimates Context

  • Q3’25 results vs S&P Global consensus: Revenue $995.7M vs $976.3M*; non-GAAP EPS $2.61 vs $2.41*; EBITDA $211.8M vs $250.7M* (SPGI methodology; company does not guide to EBITDA) .
  • Q4’25 consensus (pre-guide): Revenue $1,030.9M*, EPS $2.97*; management outlook is broadly consistent with sequential growth; watch for ASP uplift from EMEA mix and S&S seasonality into Q4 .
    Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise setup: Q3 beat on revenue and non-GAAP EPS, Q4 guide implies sequential reacceleration; non-GAAP margin inflecting to ~26% in Q4 despite macro noise .
  • Mix watch: Strong APAC/EMEA and teens/kids underpin volumes; Q4 ASP should benefit from EMEA mix after China-heavy Q3, aiding revenue quality .
  • Transformation charges largely behind: FY25 one-time charges lowered to $145–$155M (mostly non-cash); restructuring near completion with ≥100 bps margin uplift targeted in FY26 .
  • Product-led conversion: ClinCheck Live Plan and iTero Digital Solutions upgrades are tangible catalysts to improve chairside conversion and speed-to-approve, supporting medium-term growth .
  • North America bifurcation continues: DSOs executing well (double-digit growth) while retail remains pressured; Align’s localized marketing and financing partnerships aim to narrow the gap .
  • Capital returns intact: ~$0.5M shares repurchased in Q3; $928.4M remains under the April 2025 program, offering downside support .
  • Watch UK VAT/pricing normalization and ITC action vs Angelalign; both are manageable/strategic rather than structural earnings risks near term .