NASDAQ: ALGN
COMPANY DESCRIPTION
Founded
in –1997 | Current Market Cap – 26.30 Billion USD
Align
Technology, Inc. designs, manufactures, and markets a system of clear aligner
therapy, intra-oral scanners, and computer-aided design and computer-aided
manufacturing (CAD/CAM) digital services. The company’s Clear Aligner segment
offers Invisalign Full, a treatment used for a range of malocclusion;
Invisalign Teen treatment that addresses orthodontic needs of teenage patients,
such as compliance indicators, compensation for tooth eruption, and six free
single arch replacement aligners; and Invisalign Assist treatment for anterior
alignment and aesthetically-oriented cases. It also provides Invisalign Express
(10 and 5) and Invisalign Lite/i7 treatments for orthodontic cases,
non-comprehensive treatment relapse cases, or straightening prior to
restorative or cosmetic treatments. The company is headquartered in San Jose,
California.
RECOMMENDATION
We rate Align Technology a BUY at USD 312
for a target of USD 351 in two months.
Below are the basic reasons to
recommend this stock as a BUY.
·
Align Technology has been outperforming its
industry over the past year. The stock has gained 100.9% in comparison to the
industry's 14.7% gain. The company
started off 2018 on a solid note. Align Technology ended the second quarter on
a solid note. We are optimistic about continued strength in Invisalign volumes.
The company’s upbeat Invisalign Technology prospects and growth in North
America and outside, particularly in the Asia-Pacific and EMEA regions. The
strong uptake of iTero scanners across all geographies is impressive as well.
Further, Align Technology’s receipt of CFDA approval to manufacture the iTero
Element intraoral scanner in China buoys optimism. We are also upbeat about the
company expanding the iTero Element portfolio with the launch of iTero Element
2 and iTero Element Flex scanners.
·
In sync with its last-year performance, Align
Technology continued with its streak of delivering a strong InvisAlign
Technology volume growth across the company’s entire customer base. In North
America, Invisalign Technology case volumes grew 22.2% in the second quarter.
Volumes were also up 45.4% year over year internationally. Moreover, management
observed solid demand for Align Technology’s new iTero Element scanner, thereby
resulting in scanner revenue growth of 60.9% year over year. Geographically,
the company witnessed strength in North America as well as overseas. In North
America, the company continued to witness an expanding GP Dentist customer base
along with sustained strength in Invisalign utilization by orthodontists.
Internationally, we are encouraged by solid performance in the Europe, Middle
East and Africa (EMEA) and Asia Pacific (APAC) markets.
·
In EMEA, second-quarter volumes were up 38% on
solid adoption of Invisalign technology in markets like Eastern Europe and
Central Europe. In the APAC region, the company witnessed second-quarter volume
growth of 58.7%, led by China, Japan, Australia and New Zealand.
·
Align Technology witnessed sales growth across
all channels in the second quarter. Revenues at the Clear Aligner segment
(88.4% of total revenues) soared 35% year over year driven by growth in North
America and international regions from expanded customer base and increased
utilization along with solid worldwide teen case growth. In the same time,
InvisAlign Technology case shipments were up 30.5% year over year on growth
across all regions as well as expansion of customer base. During the quarter,
Align Technology Invisalign cases were shipped to 50,085 doctors worldwide, of
which 28,280 were to North America and 21,805 to international regions.
·
The Sales from Scanner and Service (which
account for rest of the revenues) rose 60.9% year over year. The company
witnessed strong uptake of iTero scanners across all geographies. Moreover, the
company continues to see increased adoption of iTero scanners for Invisalign
case submissions instead of PVS impressions, thereby driving Invisalign utilization.
Moreover, Align Technology has been gaining from shipments of the iTero Element
intraoral scanner to China.
·
Align Technology’s Invisalign portfolio offers
orthodontic treatment to straighten teeth without metal braces. In May, Align
Technology announced the opening of its first Invisalign treatment planning
facility in Europe. This apart, the company announced the addition of
Invisalign First clear aligners for treatment of younger patients with early
mixed dentition. The company commercially launched the new offering for
Invisalign-trained doctors in the United States, Canada, Australia, New
Zealand, Japan, and the EMEA region starting from July 2018. At the same time,
the company extended its Invisalign clear aligner range with the latest launch
of Vivera Retainers with Precision Bite Ramps. Solid developments in Invisalign
are likely to provide Align Technology with a competitive edge in the U.S.
MedTech space.
·
Align Technology has been focusing on expanding
work flow options of its leading iTero scanners. The company has been gaining
from shipments of the iTero Element intraoral scanner to China. Moreover, it
received the Certificate of Medical Device Registration and Certificate of
Production from the China Food and Drug Administration (CFDA) to manufacture
the iTero Element intraoral scanner in China.
·
The company is also gaining from dental service
organizations or DSO partners adopting the iTero platform across their
business. During the second quarter, Heartland Dental continued to roll out
iTero scanners across their U.S. supported locations. Per Align Technology,
Heartland Dental further plans to install scanners in 90% of supported offices
by 2018-end. Moreover, Aspen Dental will start rolling out iTero scanners to
its customer base over the next two quarters beginning third-quarter 2018.
·
We are also upbeat about the company expanding
the iTero Element portfolio with the launch of iTero Element 2 and iTero
Element Flex scanners in the United States and majority of European countries,
including France, Germany, Italy, Spain, and the United Kingdom.
·
Align Technology also announced plans to launch
a new Invisalign Go product with an improved user-interface in iTero digital
chairside experience and increased flexibility for treating variety of mild to
moderate cases. Notably, the product was planned to be commercially available
in North America, Australia, New Zealand, and certain country markets in Europe
from Jul 1, 2018.
·
Align Technology has undertaken several strategies
to improve adoption of InvisAlign Technology that includes product/technology
development, extending clinical effectiveness, extension of the InvisAlign
Technology brand and driving international growth. On a year-over-year basis,
Align Technology’s international InvisAlign Technology volumes were up 43.4%,
reflecting continued strength in both EMEA and APAC regions. In EMEA,
second-quarter volumes were up 38% on solid adoption of Invisalign technology
in markets like Eastern Europe and Central Europe. The company also recently
announced the completion of one million shipments in the EMEA region.
·
In the Asia-Pacific region, the company
witnessed second-quarter volume growth of 58.7% led by China, Japan, Australia
and New Zealand.
·
China continued to be a strong market for Align
Technology in the APAC region. On the back of increasing orthodontists as well
as continued uptake of iTero scanners, Japan witnessed strong Invisalign
growth. Further, Align Technology saw highest Invisalign volume in the smaller
markets like Thailand and India.
·
The international teen case grew 73% year over
year in the same quarter. Notably, it is the seventh consecutive quarter when
Invisalign teenage patient base grew faster than the adult patient’s customer
base.
·
The company had introduced a clear Aligner
solution for teen Class II correction — the InvisAlign Technology Teen with
mandibular advancement — in certain markets of Canada, EMEA and APAC in 2017.
The FDA approval for the same is expected in second half of 2018. These
developments are indicative of the growing popularity of Align Technology’s
dental products in the international market. Over the long term, we expect G6,
G7 and similar innovation to act as major catalysts for Align Technology in new
as well as existing markets.
·
Align Technology exited the second quarter with
cash and cash equivalents and short-term marketable securities of $712.5
million, compared with $662.7 million at the end of first-quarter 2018. In the
reported quarter, Align Technology received an additional $600 million stock
buy-back authorization. The company currently has approximately $100 million
left under the existing stock repurchase program. This indicates the company’s
strong cash balance that enables it to adopt share repurchase programs and in
turn provide solid returns to investors.
EARNINGS
Align Technology's second-quarter
2018 adjusted earnings per share (EPS) came in at $1.30, up 52.9% year over
year. Earnings also came above the company’s guided range of $1.02 - $1.06.
Revenues grew 37.5% year over year
to $490.3 million in the quarter, surpassing the Consensus Estimate of $469.2
million. Revenues were well ahead of the company’s guided range of $460-$470
million.
Disclaimer:
No comments:
Post a Comment