Northern, WI 4/24/12 (StreetBeat) -- Align Technology (Nasdaq: ALGN), known for its "invisible" dental braces, blew past analysts' first-quarter estimates Monday, as did its Q2 outlook, driving shares up 14% after hours.The company late Monday said sales rose 29% over the year-ago quarter to $135.1 million, $7 million more than analyst views. Earnings per share minus items hit 27 cents, 6 cents above views and up 29%.
The revenue growth came partly from the $11.8 million provided by Align's buyout of digital scanner maker Cadent in April 2011. But sales of the core Invisalign product line rose nearly 18% to $123.3 million.
"Strong Invisalign volume, particularly from North American orthodontists, drove better than expected revenue, margins and EPS, and we achieved a major milestone — our first $100 million quarter in North America sales," Align CEO Thomas Prescott said in a statement.
Matt Dolan, an analyst with Roth Capital Partners, says Align has a history of doing this sort of thing.
"This company has consistently outperformed over the last year and a half," Dolan told IBD. "Out of 10 quarters, they've beat expectations eight of them. When we ran that analysis, they beat on average by about 5% on the top line and about a nickel on the bottom line."
Dolan says the firm tends to guide conservatively, so he calls it significant that its second-quarter outlook is well ahead of consensus. Align guided revenue of $140.2 million to $143.7 million, up 18% at the midpoint, with EPS of 26 cents to 28 cents, up 35%. Analysts had expected sales of $135.6 million on profit of 24 cents a share.
The performance defied continuing headwinds for the dental sector. In a report issued Thursday, William Blair analysts said Align "is susceptible to feeling pressure from the sluggish broader economy, especially given its exposure to discretionary spending." The report also said Align has been very good at penetrating its markets.
The first Invisalign product came to market 10 years ago, requiring an awareness and education campaign among professionals and the public. The company conducts training sessions for dentists, doctors and orthodontists, and has been appealing directly to consumers through ads. On the conference call with analysts, Prescott said this summer Align will for the second time sponsor Disney's (NYSE: DIS) Next Big Thing Tour, to promote its Invisalign Teen product line.
Prescott also said improvements to the core adult product have helped drive volume growth. Last fall, the company launched Invisalign G4, which the company's surveys say is more accepted by orthodontists for complex cases. International markets, which provide about a quarter of total sales, were up slightly sequentially, though they normally drop a bit due to the European vacation schedule.
Prescott admitted that Align's transition with the Cadent acquisition didn't always go smoothly: Customer service, tech support and the delivery schedule had all suffered.
Nonetheless, he said the integration was proceeding ahead of schedule, as the company seeks to merge its Invisalign-related software with Cadent's hardware.
Align also sacrificed some margin with the buyout, because the scanners have much lower margins than Invisalign, and it's also incurring upfront expenses by moving Cadent's manufacturing to Latin America. The latter transition is expected to be completed by the third quarter of this year, and should bring long-term benefits, analysts say.
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