Align Technology Q1 Earnings Call Highlights

Key Points

• Q1 beat expectations: Revenue was $1.04 billion (+6.2% YoY) driven by a record 686,000 clear aligner shipments (+6.7% YoY), with non-GAAP EPS of $2.58 (+21%) and a non-GAAP operating margin of 21.5%.
• Management reaffirmed its full-year framework (3%–4% revenue growth, mid-single-digit clear aligner volume growth, non-GAAP operating margin ~23.7%) and gave Q2 revenue guidance of $1.04B–$1.06B, while signaling continued capital returns—having completed $200M of repurchases and announcing up to an additional $200M beginning May 1 (about $800M remained under authorization).
• Growth was driven by international markets and DSOs plus initiatives like patient financing, exocad/ART integration and 3D-printed products, but the company flagged risks from macro conditions and the Middle East conflict and noted ~25% of COGS is exposed to resin/oil costs.

Align Technology NASDAQ: ALGN reported first-quarter 2026 results that management said came in better than expected, driven by record clear aligner volumes, higher average selling prices, and continued international growth, while North America remained stable to modestly down year over year.

First-quarter results topped internal expectations

President and CEO Joe Hogan said Align delivered “another better-than-expected quarter in Q1,” with clear aligner volumes and both GAAP and non-GAAP operating margins exceeding the company’s outlook. Total revenue was $1.04 billion, up 6.2% year over year, which Hogan attributed “primarily by high Clear Aligner volumes and increased ASPs.”

Clear aligner shipments reached a record 686,000 cases, up 6.7% year over year. Hogan said the increase reflected double-digit growth in international businesses and “continued stability in North America,” with broad-based gains across orthodontists and general practitioners (GPs). Align also reported 449,000 adult Invisalign patients treated in the quarter, up 7.8% year over year, and 237,000 teens and kids starting treatment, up 4.8%.

Segment performance: Clear aligners grew; systems and services flat

Clear aligner revenue rose to $856 million, up 7.4% year over year and 2.1% sequentially. CFO John Morici said the year-over-year increase was “primarily due to higher volume, favorable foreign exchange, price increases, and lower net deferrals,” partially offset by “higher discounts and a mix shift to lower-price countries and products.”

Average selling price per case shipment was $1,250, up $10 year over year. Morici said the increase was driven by foreign exchange, price increases, and lower net deferrals, offset by discounts and mix. He later reiterated that the company still expects a 1% to 2% decrease in ASPs on a full-year basis due to mix effects.

Systems and services revenue, which includes iTero scanners, exocad, and software, totaled $184.1 million, up 0.9% year over year but down sequentially due to what Hogan described as “expected first quarter capital equipment seasonality.” Hogan said growth reflected continued adoption of iTero Lumina full systems, service revenues, and a mix shift toward lower-priced offerings such as PC-based configurations, leasing, and rental units. Align ended the quarter with an installed base of more than 125,000 active scanners globally, and Hogan said more than 12 million iTero digital scans were performed during the quarter.

Hogan also said exocad delivered double-digit year-over-year revenue growth and highlighted the start of a U.S. pilot for Invisalign Advanced Restorative Treatment (ART), following an earlier pilot in EMEA. According to Hogan, ART integrates with exocad to allow clinicians and labs to plan tooth alignment ahead of restorative work within existing exocad tools.

Margins, cash flow, and capital return

Overall gross margin was 70.8% in Q1, up 1.4 percentage points year over year, which Morici attributed to operational efficiencies and higher clear aligner ASP, partly offset by foreign exchange. Non-GAAP gross margin was 71.8%.

Operating expenses increased 8.3% year over year to $594.6 million, with Morici citing legal settlement costs and higher employee compensation. GAAP operating income was $142 million, producing an operating margin of 13.6%. Non-GAAP operating margin was 21.5%, up 2.5 percentage points year over year.

Net income per diluted share was $1.57, up $0.31 from the prior year. Non-GAAP EPS was $2.58, up 21% year over year.

Align ended the quarter with $1.06 billion in cash and cash equivalents. Morici said Align completed a previously announced $200 million repurchase plan between August 2025 and January 2026, buying approximately 1.4 million shares at an average price of $143.85. As of March 31, $800 million remained under the company’s authorization. Align also announced it expects to repurchase up to an additional $200 million of common stock over a six-month period beginning on or about May 1, 2026, with Morici noting U.S. cash availability is a constraint because about 20% of cash is held domestically.

Cash flow from operations was $151 million, capital expenditures were $30.8 million, and free cash flow was $120.3 million.

Operational initiatives: DSOs, financing, subscription program, and no-additional-aligner configurations

Hogan said dental service organizations (DSOs) continue to be “force multipliers,” with DSO clear aligner volumes growing double-digit across all regions and representing about a quarter of total global volumes. However, Hogan said the retail channel remained mixed in the U.S., where doctors reported less patient traffic.

Align highlighted multiple initiatives aimed at affordability and conversion. Hogan said patient financing through Healthcare Finance Direct (HFD) is live in more than 4,000 U.S. offices, enabling patients to pre-qualify before appointments. He also pointed to Invisalign Pay in Brazil, noting it is now used in a majority of Invisalign cases there. The company also emphasized peer-to-peer mentoring and Treatment Planning Services (TPS), which Hogan said helps address clinical confidence barriers, particularly for GPs.

On product configuration, management discussed offerings with limited or no additional aligners (refinements), including “zero additional aligner” configurations and the “no AA” approach referenced in Q&A. Morici said these products can support gross margins due to lower manufacturing requirements and may also reduce deferred revenue because there are fewer future performance obligations. When asked about the impact on 2026 guidance, Morici said the company is “not expecting much” contribution this year because adoption is gradual, though faster uptake could represent upside.

Hogan also said the company began “initial limited market releases of direct 3D-printed attachments and retainer products in Q1,” and described direct printing as an effort being advanced in phases with quality and reliability as priorities.

Outlook and risk factors: Middle East conflict, macro, and Q2 guidance

Morici said Align’s Q2 outlook assumes some impact from “ongoing military action in the Middle East,” citing potential adverse effects on patient traffic, consumer demand, and shipping and freight. He said the impact on EMEA results was “immaterial in the first quarter,” though some MEA doctors noted effects on traffic and conversion. In Q&A, Morici described Align’s Middle East business as “in the single digits” as a portion of company results, and Hogan said there was no disruption to iTero production or shipments.

For the second quarter, Align expects revenue of $1.04 billion to $1.06 billion, up about 3% to 5% year over year. Morici said clear aligner volume is expected to be up sequentially and year over year, with clear aligner ASP flat sequentially and year over year, and systems and services revenue up sequentially. Align expects Q2 GAAP operating margin of approximately 16.4% and non-GAAP operating margin of approximately 21.5%.

For full-year 2026, Align reaffirmed its guidance framework, calling out ongoing macro uncertainty. The company maintained expectations for 3% to 4% revenue growth, mid-single-digit clear aligner volume growth, GAAP operating margin slightly below 18%, and non-GAAP operating margin of approximately 23.7%. Capital expenditures are expected to be $125 million to $150 million.

In Q&A, Morici said profitability improvements in Q1 reflected restructuring and cost actions taken last year and suggested productivity gains should continue as volume increases. Hogan attributed the contrast between international growth and North America performance primarily to macro conditions in the U.S., while noting competition dynamics have not materially changed.

Morici also addressed cost exposure tied to oil and resin, saying “about 25% of our COGS” relates to resin plastics, and added that Align has contracts with fixed amounts that limit inflationary exposure. Hogan said direct fabrication could reduce scrap compared to vacuum forming and offers “new design flexibility,” though he framed design and customization benefits as the primary driver.

About Align Technology NASDAQ: ALGN

Align Technology, Inc NASDAQ: ALGN pioneered the use of digital technology in orthodontics through the development of the Invisalign system, a series of clear, removable aligners that provide an alternative to traditional metal braces. Since its founding in 1997 by Zia Chishti and Kelsey Wirth, the Tempe, Arizona–based company has expanded its focus to include intraoral scanners, CAD/CAM software for dental laboratories and comprehensive digital dentistry solutions.

The company's signature Invisalign system leverages 3D imaging and computer-aided design (CAD) to create customized aligners that gradually reposition teeth, improving patient comfort and treatment predictability.

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