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Align Technology financial analysis

Align Technology (NASDAQ: ALGN)
is a medical device company which designs and manufactures the Invisalign system, the clear orthodontic appliance. The company was founded in 1997 and listed on the NASDAQ in 2001.

Overview


  • Align Technology invented the clear mouth guard for braces known as Invisalign. The company gained $1.9 billion in revenue in 2018 (+33.5% year-over-year).

  • The company shipped 1.2 million cases of Invisalign worldwide in 2018 (+31.9% YOY). The average sold price was around $1,300.

  • Approximately 10% of adults receive dental orthopedic treatments in the U.S. In 2019, the company expects revenue to grow by 20-30% from 2018.

Product Overview

Align Technology is best known for inventing their signature product Invisalign, which is a clear mouth guard shaped form of braces. Traditional braces use metal arch wires and brackets and often stand out in appearance, which cause hesitation for people to wear or try braces. By contrast, Invisalign is made of clear plastic and is less obvious in appearance and as such is globally accepted and used in over 90 countries.

Align Technology developed an original software that enables doctors to scan and create a 3D image of patient’s teeth and a treatment plan. With this software, the final teeth alignment and the length of treatment became predictable. The Invisalign will then be created based on this data and delivered to patients. Compared to the traditional wire-type braces, Invisalign requires patients less frequency of orthodontist visits.

Financial Results

Align Technology reported $1.9 billion in revenue (+33.5% year-over-year) and $466 million in income (+31.9% YOY) in 2018.

The number of trained doctors of Invisalign increased to nearly 20,000 in 2018. It has more than doubled since 2015.

The number of cases shipped surged in the last 5years. The company shipped 1.2 million cases of Invisalign in 2018. As the number of trained doctors increased outside of Americas, cases shipped to those countries increased by 3.6 times in the last 4 years. Cases shipped to Americas increased by 2.1 times in the last 4 years.

The average selling price of Invisalign has been around $1,300. The price decline outside of Americas has pushed down the average price worldwide.

Looking into the cost breakdown, the largest expense is selling, general and administrative cost, which has remained at around 45% each year. Cost of revenue was 26.4% in 2018, which used to stay at around 25% each year.

The company valued total assets at $2.0 billion as of December 2018. Cash and cash equivalents were at $637 million which accounts for 31.2% of total assets. By adding the $98 million of short-term marketable securities, monetary assets were $735 million. Stockholder’s equity was valued at $1.2 billion and takes up 61% of total liabilities and stockholder’s equity.

Cash flow from operating activities was $555 million in 2018 which has remained positive in the last 5years.

Business Outlook

12.4% of Americans between 50-64 years old underwent orthopedic treatment in the last 3 years. More than 8% of other generations has also experienced the treatment. In the U.S., the dental orthopedic treatment is a normal procedure that people take during adulthood.

The company expects to increase revenue by 20-30% to $2.3-2.5 billion in 2019 ($525-535 million in 19Q1). The number of Invisalign shipments is also expected to increase by 20-30% in 2019.

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The original article was published by Stockclip, Inc. on 21/02/2019.

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