Align's Guidance: Wearing a Retainer in Public (ALGN)

Align Technology Inc. (NASDAQ: ALGN) has just posted some mixed earnings.  Regardless of Wall Street’s and Main Street’s love of Invisalign, the stock is being pounded.  The company reported earnings at $0.06 EPS on a 4.3% revenue rise to $79.9 million.  First Call had estimates of $0.05 EPS on $79.7 million in revenues.  The problem is guidance. 

The company believes it will see non-GAAP EPS of $0.04 to $0.06 andRevenues at $64 to $65 million.  Unfortunately, First Call estimatesare $0.11 EPS and $80.17 million.  For fiscal 2008, it sees non-GAAPEPS in a range of $0.29 to $0.33 on $309 to $314 million, whileestimates are $0.40 EPS and $320.99 million in revenues.

As far as share buybacks, it bought back 2.2 million shares for a $27.7million at an average price of $12.65; and it has $22.3 million leftunder its existing buyback.  The company can easily fund this buybackwith its $110.1 million in cash and equivalents and $57.95 million intotal liabilities.  The company is eliminating $5M to $6M from expensesin the second half as well, which will be from layoffs and othermeasures.

The company did note that its revenue growth expectations have come inas consumer spending has continued to soften.  In short, when you arefeeling poor it’s easier to put off a decision to straighten your teeth.

Despite the fact that this was already down close to 60% from its52-week highs, shares are challenging 52-week lows at $9.50.  Its prior52-week range was $9.65 to $29.30.

Jon C. Ogg
July 29, 2008