Analyst Note| Dylan Finley, CFA |
No-moat Align reported strong results in the second quarter, with total revenue exceeding the $1 billion watermark for the first time, a 13% increase sequentially and 186% increase year over year. We plan to incorporate these results in our model, but upon this preliminary look we don’t expect to change our fair value estimate and no-moat rating. The substantial year-over-year growth can largely be attributed to weakness in the prior-year period when many practices closed during shelter-in-place orders at the onset of the COVID-19 pandemic. Top-line growth continues to be fueled by a strong consumer marketing effort, utilizing social media influencers to propel growth in both teen and adult markets. Average selling price during the quarter was slightly impacted by higher discounts and credits offered to orthodontists and general practitioners, reflecting pressures from continued competition in the space. Following Align's positive second quarter financial results, management revised its 2021 revenue guidance to a range of $3.85 million-$3.95 million, up from a range of $3.70 million-$3.80 million, reflecting a strong outlook for the second half of 2021. Management also revised its outlook for GAAP operating margin, raising the guidance midpoint by 0.5% to 24.5%.