Q1 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Align Technology reports stable demand and market conditions, providing confidence in their guidance and growth outlook. , ,
- The new iTero Lumina intraoral scanner has received enthusiastic response from orthodontic and general dentistry communities, and is expected to set a new industry standard and drive growth.
- The Digital Subscription Program (DSP) is very popular among doctors, contributing incremental volume and revenue growth, with continued expansion planned.
- Macro uncertainties, including higher inflation and interest rates, might impact consumer demand for Align's products.
- Investors are concerned about potential weakness in consumer discretionary spending, with reports of downticks in March that could affect Invisalign demand. Align's management indicates stability but acknowledges differences across regions.
- To drive growth in Clear Aligner volumes amid tougher comparisons, Align may need to increase investments in marketing and traffic generation, potentially impacting profitability margins.
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Raised Guidance and Outlook
Q: What drove the raise in full-year guidance?
A: Management increased the full-year revenue outlook for Clear Aligners from mid-single digits to a midpoint of 7%, citing continued stability in the market and strong execution on core strategies. New products like Lumina and Invisalign Palatal Expander (IPE) are expected to supplement growth, particularly in the teen segment. This combination of stability and innovation gives them confidence in the updated guidance. -
Operating Margin and Investments
Q: Why is operating margin guidance only slightly up despite higher revenues?
A: Although revenues are increasing, operating margins are only slightly up due to continued investments in go-to-market activities and new products like Lumina and IPE. These investments are expected to drive growth, especially in the second half. Management emphasized balancing growth initiatives with profitability, and they aim for sequential improvement in operating margin while delivering year-over-year expansion. -
Demand Environment Stability
Q: Did you see a downturn in demand like others did in March?
A: Unlike other consumer discretionary companies, Align did not experience a downtick in March. The demand environment remained stable globally, with both adult and teen segments holding up well. Management attributes this stability to their international business, which benefits from varying demand patterns across regions. -
Growth in Teen and Tween Market
Q: How will new products impact growth in the teen segment?
A: The introduction of the Invisalign Palatal Expander (IPE) and Invisalign First allows Align to address 20% of the pre-teen (tween) market they couldn't serve before. These products are expected to attract more orthodontists to begin Phase I treatments, potentially driving significant growth in the teen segment over time. However, acceptance in the orthodontic community may take time. -
Patient Financing Impact
Q: Are tougher lending standards affecting patient financing?
A: Roughly one-third of cases in the U.S. receive external financing, but management perceives the lending environment as stable. While higher interest rates last year caused some sticker shock, they believe patients and providers have adjusted. Align is assisting doctors by offering extended payment terms and working with partners to provide better financing options to patients. -
Lumina Scanner Launch
Q: What is the progress and impact of the Lumina scanner launch?
A: The Lumina scanner, a new platform six years in the making, has received enthusiastic responses, particularly from orthodontists. Its speed and simplicity are unmatched, and while it's still early in the rollout, it's expected to set a new industry standard and contribute to growth. The full restorative capabilities are anticipated in the fourth quarter. -
U.S. Orthodontic Market Trends
Q: Is there structural change in the U.S. orthodontic market?
A: Management observed more stability in the U.S. orthodontic market this year compared to last, with both teen and adult segments performing well. While new products like Lumina and IPE are strengthening their position, they caution against projecting a major shift, noting that the market can fluctuate month to month. -
Investments in 3D Printing
Q: How is spending on 3D printing impacting finances?
A: Investments in 3D printing, including the acquisition of Cubicure, are part of their R&D spending aimed at building a scalable platform for direct fabrication printing. While the spending varies over time, management is committed to balancing these investments with growth in their core business.