Financial Trends -- 5/10
Volume growing but economics stagnant. Revenue recently re-accelerating (+6.2% Q1'26) but FY2025
was essentially flat (+0.9%). Gross margin compressed ~710bps from FY21 peak (74.3% to 67.2%).
GAAP op margin nearly halved (24.7% to 13.5%). FCF positive but declining -21% FY24 to FY25.
Share count declining ~3%/yr via buybacks. "Revenue growing but operating income declining"
penalty applies (-1). Base 6 - 1 = 5/10.
Weight: 25%
Quarterly Performance (Q1 2024 -- Q1 2026)
| Quarter | Revenue ($M) | YoY | Gross Margin | Non-GAAP OM | GAAP OM | FCF ($M) | Invis Cases (K) |
|---|---|---|---|---|---|---|---|
| Q1 2024 | $997 | +5.8% | 70.0% | 19.8% | 15.5% | $19 | 605.1 |
| Q2 2024 | $1,029 | +2.6% | 70.3% | 22.3% | 14.3% | $106 | 643.0 |
| Q3 2024 | $978 | +1.8% | 69.7% | 22.1% | 16.6% | $234 | 617.0 |
| Q4 2024 | $995 | +4.0% | 70.0% | 23.2% | 14.5% | $263 | 629.0 |
| Q1 2025 | $979 | -1.8% | 69.5% | 19.1% | 13.4% | $27 | 642.3 |
| Q2 2025 | $1,012 | -1.6% | 69.9% | 21.3% | 16.1% | $107 | 644.4 |
| Q3 2025 | $996 | +1.8% | 64.2% | 23.9% | 9.7% | $169 | 647.8 |
| Q4 2025 | $1,048 | +5.3% | 65.3% | 26.1% | 14.8% | $187 | 676.9 |
| Q1 2026 | $1,040 | +6.2% | 70.8% | 21.5% | 13.6% | $120 | 685.7 |
Quarterly data from Q1 2024 through Q1 2026. Data sourced from Daloopa.
Key Trends
Revenue re-accelerating off H1'25 trough (-1.8% to +6.2%), but FY2025 was only +0.9%.
Invisalign case volume accelerating (FY25 +4.7%, Q1'26 +6.8%) but revenue grows slower -- confirms
persistent ASP/mix erosion. Gross margin down 710bps from FY21 peak; GAAP op margin nearly halved.
Non-GAAP op margin resilient at ~22-23% -- GAAP erosion partly charge-driven. FCF positive but
FY25 $491M vs FY24 $623M = -21%.
Annual Performance (FY2021 -- FY2025)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $3,953 | $3,735 | $3,862 | $3,999 | $4,035 |
| Revenue YoY | — | -5.5% | +3.4% | +3.5% | +0.9% |
| GAAP Gross Margin | 74.3% | 70.5% | 70.1% | 70.0% | 67.2% |
| GAAP Op Margin | 24.7% | 17.2% | 16.7% | 15.2% | 13.5% |
| Non-GAAP Op Margin | 27.9% | 21.5% | 21.4% | 21.8% | 22.7% |
| FCF ($M) | $772 | $277 | $608 | $623 | $491 |
| Shares Outstanding (M) | 79.7 | 78.4 | 76.6 | 75.0 | 72.6 |
FY2021-FY2025 annual data. Data sourced from Daloopa.
Penalty: Revenue Growing, Operating Income Declining
Revenue growing but operating income declining (-1 penalty).
FY2025 revenue grew +0.9% while GAAP operating income fell -10.2% ($607.6M to $545.8M). This is the
third consecutive year of GAAP operating income decline despite revenue growth, reflecting gross margin
compression and restructuring charges outpacing top-line gains. Base score 6 minus 1 penalty = 5/10.
Score Derivation
| Component | Assessment | Impact |
|---|---|---|
| Base Score | Volume recovering, non-GAAP margins resilient, buybacks accretive; but annual revenue near-flat, GM compressing, FCF declining | 6 |
| Penalty | Revenue growing but GAAP operating income declining for 3 consecutive years | -1 |
| Final Score | Base 6 minus 1 penalty | 5/10 |
Data sourced from Daloopa.