Why Orthodontics Company Align Technology Shares Are Plummeting Today

Align Technology Inc ALGN shares are trading lower by around 25% after the company reported worse-than-expected Q3 FY23 financial results.

Revenues rose 7.8% Y/Y to $960.2 million, missing the consensus of $994.5 million. Revenues fell 4.2% sequentially.

Clear Aligner revenues were up 8.5% Y/Y to $794.9 million, with volumes of 602.3 thousand cases (+2.3% Y/Y).

Clear Aligner volume for teens rose 8.4% Y/Y to 221.8 thousand cases, driven by continued strength in Invisalign First.

Imaging Systems and CAD/CAM Services revenues stood at $165.3 million, up 4.9% Y/Y.

Adjusted operating income rose to $209.7 million from $180.0 million a year ago, with margins of 21.8%. 

Adjusted EPS of $2.14 missed the street view of $2.26.

Joe Hogan President and CEO said, "Our third quarter results reflect lower than expected demand and a more difficult macro environment than we experienced in the first half of 2023."

"Dental practices and industry research firms have reported deteriorating trends, including decreased patient visits and increased patient appointment cancellations, along with fewer orthodontic case starts overall, especially among adult patients."

As of September 30, 2023, the company held over $1.3 billion in cash, cash equivalents, and short-term and long-term marketable securities.

In Q3, the company penned a deal to acquire privately held Cubicure GmbH, for about €79 million, expected to close in Q4 2023 or early 2024.

Outlook: For Q4, ALGN projects WW revenue of $920 million-$940 million (vs consensus of $1.02 billion), down Q/Q. 

The company expects Clear Aligner and Systems and Services Revenues to be down Q/Q/ due to the challenging macroeconomic environment, patients with fewer orthodontic case starts, unfavorable FX, and longer sales cycles for capital equipment purchases. 

For FY23, ALGN lowered WW revenue guidance to $3.83 billion- $3.85 billion (vs. consensus of $3.97 billion) from $3.97 billion-$3.99 billion earlier.

Repurchase: ALGN expects to repurchase shares up to $250.0 million in Q4, with $1.0 billion worth of stocks currently available under its 2023 Stock Repurchase Program.

Price Action: ALGN shares are down 24.09% at $192.57 premarket on the last check Thursday.