ALIGN TECHNOLOGY INC (ALGN)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $995.2M (+1.8% q/q, +4.0% y/y) with GAAP EPS $1.39 and non-GAAP EPS $2.44; Systems & Services grew 14.9% y/y and Clear Aligner volumes rose 6.1% y/y, while ASP pressure from FX and mix weighed on margins; GAAP operating margin was 14.5% (non-GAAP 23.2%) .
• Management guided Q1’25 revenue to $965–$985M (down q/q on seasonality, FX and scanner timing), and FY2025 to low single-digit revenue growth (≈2 pts FX headwind), mid-single-digit Clear Aligner volume growth, and non-GAAP operating margin ≈22.5% (GAAP ≈17%) .
• Key puts/takes: Clear Aligner ASPs were below outlook due to a stronger USD and mix shift to non-comprehensive products; Systems & Services momentum continued on iTero Lumina uptake; restructuring charges in Q4 (≈$37M) and FX created GAAP headwinds; non-GAAP margins beat outlook .
• Tariffs are not in guidance; if a 25% U.S.-Mexico tariff were implemented, management sizes cost at ~$4–$5M per month, with shipping from Mexico still more economical than alternatives at those levels .
• Wall Street consensus (S&P Global) for Q4 was unavailable via our feed, so we cannot quantify beat/miss vs Street here; management said results were “in line” with their Q4 outlook (not Street) and margins were better than company outlook .

What Went Well and What Went Wrong

• What Went Well

  • Systems & Services revenue +14.9% y/y (Q4 $200.9M) on strong scanner volumes and upgrades; segment GM up 4.7 pts y/y on manufacturing and freight efficiencies .
  • Clear Aligner volumes +6.1% y/y driven by EMEA, APAC, and LATAM; teen/kids starts +9.8% y/y to ~216k; record total doctor submitters in Q4 .
  • Non-GAAP operating margin 23.2% (+1.1 pts q/q) and above company outlook; management reiterated FY2025 non-GAAP OM ≈22.5% despite FX headwinds, reflecting restructuring benefits .
  • CEO: “Q4 total revenues, Clear Aligner volumes, and Systems and Services revenues were in line with our Q4 outlook and both GAAP and non-GAAP operating margins were better than our Q4 outlook.” .

• What Went Wrong

  • Clear Aligner ASPs were lower than outlook due to unfavorable FX and product mix; Q4 per-case ASP was $1,265, down $10 q/q and $55 y/y .
  • GAAP net income and EPS declined y/y (Q4 GAAP NI $103.8M vs $124.0M; GAAP EPS $1.39 vs $1.64) with a ~$0.14 EPS drag from FX revaluations; GAAP OM 14.5% (-3.4 pts y/y) also reflected restructuring expense .
  • Q1’25 guide implies a sequential revenue step-down ($965–$985M) on seasonality, FX, and scanner timing; Clear Aligner ASPs guided down q/q and Systems & Services guided down q/q .

Financial Results

Segment and volume detail:

KPIs:

Additional P&L and cash items (Q4 2024):

• GAAP operating income $144.1M; GAAP net income $103.8M; restructuring and other charges $37.0M .
• Cash & equivalents $1,043.9M; no debt; repurchased ~$202.9M in Q4 under a $275M plan (completed in Jan-25) .

Guidance Changes

Business trends commentary: 3% list price increase on Clear Aligners (Americas/EMEA) effective Mar-1-2025 offset by eliminating $10–$15 processing fees; net ASP impact expected to be ~zero for 2025 . Tariffs not assumed in outlook; a 25% U.S.-Mexico tariff would be ~$4–$5M per month in costs at current volumes, still favoring Mexico shipments vs rerouting .

Earnings Call Themes & Trends

Management Commentary

• “Q4 total revenues, Clear Aligner volumes, and Systems and Services revenues were in line with our Q4 outlook and both GAAP and non-GAAP operating margins were better than our Q4 outlook. Q4 Clear Aligner ASPs were lower than our Q4 outlook due primarily to the impact from unfavorable foreign exchange…” — Joe Hogan, CEO .
• “Overall, I am pleased with our fourth quarter and fiscal 2024 results… continued momentum from our Systems and Services business, and our operating margin improvement… we concluded the year with no debt and approximately $1.044 billion in cash” — John Morici, CFO .
• “We will raise the list price of Clear Aligners by about 3%… and remove the $10 to $15 per order processing fee… We expect the net effect… on ASPs to be 0 for 2025.” — John Morici .
• “Assuming a new 25% tariff on shipments to the U.S. from Mexico, we believe it still would be more economically viable to ship… from Mexico… [impact] $4–$5 million per month.” — John Morici .
• “In another year where the dental industry is down and we continue to grow… excited to kick off 2025… iTero Lumina… ClinCheck in minutes… commercialize the Invisalign Palatal Expander…” — Joe Hogan .

Q&A Highlights

• Clear Aligner growth drivers: management expects mid-single-digit volume growth in 2025; competitive dynamics viewed as stable with innovation (ClinCheck in minutes) supporting productivity; no macro improvement assumed .
• ASP headwinds quantified: ~2 pts FX revenue headwind for FY25; FX impact bigger in Q1 (~3–3.5 pts); ASP down in Q1 on FX and mix .
• Margin cadence: Q1 typically lowest; FY25 non-GAAP OM ≈22.5% despite >1 pt FX OM drag, helped by restructuring and productivity .
• DSOs vs independent GPs: DSO channel is a “force multiplier” and outpacing retail; learnings transferable, but GP “last mile” adoption is slower .
• Product roadmap: iTero Lumina restorative software end-March; direct fabrication ramp with Invisalign First retainers in 1H25, broader release 2H25 .
• Policy risk: tariffs not embedded in guide; sensitivity ~$4–$5M/month at 25% .
• China: stable demand exiting Q4; APAC seasonality after strong teen Q3 .

Estimates Context

• S&P Global consensus estimates were unavailable via our connection at the time of analysis, so we cannot determine beat/miss versus Street for Q4 2024 or prior quarters. Values would typically be sourced from S&P Global; please note this unavailability.
• Management stated Q4 revenue, volume, and Systems & Services were “in line” with company outlook and margins better than outlook, but this is not a proxy for consensus .

Key Takeaways for Investors

• Near-term: Expect a Q1 step-down (seasonality, FX, scanner timing) to $965–$985M; ASPs down q/q; Systems & Services down q/q — sets up a 2H ramp as Lumina restorative becomes broadly available and IPE/teen momentum expands geographically .
• Medium-term: FY25 guide embeds low-single-digit revenue growth with mid-single-digit Clear Aligner volumes and non-GAAP OM ≈22.5% despite FX — restructuring and operating leverage are key to holding margins .
• Mix/FX remain central debates: Clear Aligner ASP pressure from FX and shift to non-comprehensive cases; pricing action offset by fee removal leaving 2025 ASP neutral — follow currency and product mix closely .
• Systems & Services is a durable growth driver: sustained double-digit y/y growth and margin expansion; leasing and rental options broaden customer access; watch Q1 seasonal dip, then restorative lift .
• DSO channel strategy continues to outperform and is being reinforced with strategic investments (Heartland, Smile Doctors); expect continued penetration and scanner pull-through .
• Policy risk not in numbers: any U.S.-Mexico tariff would pressure COGS (~$4–$5M/month at 25%), but management sees Mexico as still optimal at that level; an enacted tariff would be a negative surprise versus the guide .
• Legal/regulatory: Ongoing antitrust litigation headlines surfaced in late 2024; monitor for any developments, though not cited as impacting Q4 guidance/outlook .

Appendix: Additional Context and Highlights

• Q4 stock repurchase: ~$202.9M in Q4 at ~$222.94 avg price; remaining $72.1M completed in Jan-25; $225M remains on authorization as of 1/31/25 .
• Brand/marketing: Patrick Mahomes joins Invisalign Smile Squad (multi-year ambassador) — supports consumer awareness initiatives .
• CE mark for Invisalign Palatal Expander and UK MHRA registration broadened EMEA opportunity ahead of 2025 commercialization .

Citations:

• Q4/FY2024 8-K and press release, financials and guidance .
• Earnings call transcript (themes, Q&A, sensitivities) .
• Prior-quarter references: Q3’24 PR ; Q2’24 PR .
• Other press releases: Mahomes brand ambassador ; late-2024 litigation PR .