Align Technology Q1 2025 slides: Revenue dips despite volume growth, hits 20M patient milestone

Introduction & Market Context

Align Technology , Inc. (NASDAQ:ALGN) reported its first quarter 2025 financial results on April 30, 2025, revealing mixed performance as the company reached a significant milestone of 20 million Invisalign patients. Despite growth in Clear Aligner shipments, overall revenue declined year-over-year, primarily due to foreign exchange headwinds and lower average selling prices.

The company’s stock responded positively in after-hours trading, rising 7.91% to $187 after closing the regular session down 2.5% at $177.75. This reaction suggests investors may have been anticipating worse results or were encouraged by the company’s volume growth and outlook.

Quarterly Performance Highlights

Align Technology reported total revenue of $979.3 million for Q1 2025, representing a decline of 1.8% year-over-year and 1.6% sequentially. This performance was significantly impacted by unfavorable foreign exchange rates, which had an approximate $31.1 million negative impact year-over-year.

As shown in the following chart of quarterly revenue and Clear Aligner case volume trends:

Despite the revenue decline, Clear Aligner case shipments showed healthy growth, reaching 642.3K cases in Q1 2025, an increase of 6.2% year-over-year and 2.2% sequentially. This volume growth demonstrates continued demand for Invisalign treatments even as revenue per case continues to decline.

The company’s financial performance was mixed across key metrics:

GAAP operating margin declined to 13.4% in Q1 2025, down 2.1 percentage points year-over-year and 1.1 percentage points sequentially. Similarly, non-GAAP operating margin fell to 19.1% from 23.2% in the previous quarter. Diluted earnings per share came in at $1.27 on a GAAP basis and $2.13 on a non-GAAP basis.

Clear Aligner Segment Analysis

The Clear Aligner segment, which represents Align’s core business, generated revenue of $796.8 million in Q1 2025, up 0.3% sequentially but down 2.5% year-over-year. This segment was particularly affected by foreign exchange headwinds, which had a negative impact of approximately $25.8 million year-over-year.

A key metric to watch is the average selling price (ASP) per case, which continued its downward trend:

The ASP declined to $1,240 in Q1 2025, down from $1,350 in Q1 2024, representing a significant drop of $110 per case. This continuing decline in ASP has been offsetting the positive impact of volume growth on overall revenue.

One bright spot in the Clear Aligner segment was the teen and kids market, which showed robust growth:

Approximately 226,000 teens and kids started treatment with Invisalign clear aligners during Q1 2025, representing increases of 4.5% sequentially and 13.3% year-over-year. The number of doctors submitting case starts for teens or kids was up 6.2% year-over-year, indicating growing adoption in this important demographic.

Systems and Services Segment

The Systems and Services segment, which includes iTero scanners and exocad CAD/CAM services, generated revenue of $182.4 million in Q1 2025, down 9.2% sequentially but up 1.2% year-over-year. This segment was also impacted by foreign exchange headwinds of approximately $5.3 million year-over-year.

CAD/CAM and Services revenues represented 49.8% of the Systems and Services business, highlighting the growing importance of digital services alongside hardware sales. The company continues to innovate in this segment, introducing the next-generation iTero Lumina intraoral scanner and the new iTero Lumina Pro dental imaging system during the quarter.

Financial Analysis

Align Technology’s gross margin decreased slightly to 69.5% in Q1 2025, down 0.5 percentage points year-over-year and 0.6 percentage points sequentially. Operating expenses were $549.0 million, representing a 1.0% increase year-over-year but a 0.7% decrease sequentially.

The company’s balance sheet remains strong, though accounts receivable increased to $1,062.0 million, with days sales outstanding (DSO) rising to 97 days compared to 86 days in Q1 2024. Cash and cash equivalents stood at $873.0 million, down from $1,043.9 million at the end of Q4 2024, partly due to the completion of a share repurchase program.

Cash flow from operations improved to $52.7 million in Q1 2025, up from $28.7 million in Q1 2024. Free cash flow was $27.4 million, compared to $19.3 million in the same period last year. During Q1 2025, the company completed the remaining $72.1 million of a $275.0 million open market repurchase program initiated in Q4 2024.

Strategic Initiatives and Outlook

A significant milestone for Align Technology in Q1 2025 was reaching 20 million Invisalign patients worldwide as of March 31, 2025, including approximately 5.8 million teens and kids. This achievement underscores the company’s market leadership in clear aligner therapy.

The company’s strategic growth drivers remain focused on four key areas:

For the remainder of fiscal 2025, Align Technology provided the following outlook:

• Q2 2025 worldwide revenues are expected to be in the range of $1,050 million to $1,070 million
• Q2 2025 Clear Aligner ASPs are expected to increase sequentially
• 2025 Clear Aligner volume growth is projected to be up approximately mid-single digits year-over-year
• 2025 year-over-year revenue growth is expected to be in the range of 3.5% to 5.5% at current spot rates
• Fiscal 2025 GAAP operating margin is expected to be approximately 2 percentage points above the 2024 GAAP operating margin
• Capital expenditures for fiscal 2025 are expected to be between $100 million and $150 million

The company continues to see significant market opportunity, with an estimated 600 million potential consumers who could benefit from clear aligner treatment:

Align Technology remains committed to innovation, with recent product introductions including the Invisalign Palatal Expander System, which is now commercially available in Turkey and has received regulatory clearance in China in Q1, and the Invisalign System with mandibular advancement featuring occlusal blocks for treating Class II malocclusion.

In conclusion, while Align Technology faced revenue headwinds in Q1 2025 primarily due to foreign exchange impacts and declining ASPs, the company demonstrated continued growth in Clear Aligner volumes, particularly in the teen and kids segment. The achievement of 20 million Invisalign patients represents a significant milestone, and management remains optimistic about growth prospects for the remainder of 2025, projecting improved ASPs and operating margins.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.