
Image source: The Motley Fool.
Align Technology (ALGN 26.59%)
Q4 2022 Earnings Call
Feb 01, 2023, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings, welcome to the Align fourth quarter and 2022 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] Please note this conference is being recorded.
I will now turn the conference over to your host, Shirley Stacy with Align Technology. You may begin.
Shirley Stacy — Vice President, Corporate Communications and Investor Relations
Thank you. Good afternoon. Thank you for joining us. I’m Shirley Stacy, vice president of corporate communications and investor relations.
Joining me for today’s call is Joe Hogan, president and CEO; and John Morici, CFO. We issued fourth quarter and full year 2022 financial results today via Business Wire which is available on our website at investor.aligntech.com. Today’s conference call is being audio webcast and will be archived on our website for approximately one month. A telephone replay will be available by approximately 5:30 p.m.
10 stocks we like better than Align Technology
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Align Technology wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of January 9, 2023
Eastern Time through 5:30 p.m. Eastern Time on February 15. To access the telephone replay, domestic callers should dial 866-813-9403 with access code 328900. International callers should dial 929-458-6194 using the same access code.
As a reminder, the information provided and discussed today will include forward-looking statement, including statements about Align’s future events and product outlook. These forward-looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission available on our website and at sec.gov. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statements. We have posted historical financial statements, including the corresponding reconciliations, including our GAAP to non-GAAP reconciliation if applicable.
And our fourth quarter and full year 2022 conference call slides on our website under Align quarterly results. Please refer to these files for more detailed information. With that, I’d like to turn the call over to Align Technology’s president and CEO, Joe Hogan. Joe?
Joe Hogan — President and Chief Executive Officer
Thanks, Shirley. Good afternoon, and thanks for joining us. On our call today, I’ll provide an overview of our fourth quarter results and discuss a few highlights from our two operating segments: systems and services and clear aligners. John will provide more detail on our Q4 financial performance and comment on our views for 2023.
Following that, I’ll come back and summarize a few key points and open the call to questions. You’ll note that we have shortened our formal remarks in order to leave more time for Q&A. Overall, I’m pleased to report fourth-quarter results that reflect a more stable environment for doctors and their patients than the recent quarters, especially in the Americas and EMEA regions, as well as parts of APAC. For Q4, trends in consumer interest for orthodontic treatment, patient traffic and doctors’ practices, and iTero scanner demos improved.
However, the unfavorable effect of foreign exchange on our fourth quarter and full year 2022 results reduced our revenues and margins significantly. Despite the large impact of unfavorable foreign exchange, Q4 revenues of $901.5 million increased sequentially from Q3, reflecting growth in systems and services, as well as a slight increase in clear aligner shipments. This is the first quarter in a year that our total revenues and clear aligner volumes increased sequentially. As we move through 2023, I’m hopeful that we’ll see continued stability in an improving operating environment but remind everyone that the macroeconomic situation remains fragile.
Regardless, we are confident in our large untapped market opportunity for digital orthodontics and restorative dentistry. We anticipate 2023 will be an exciting year for new innovation at Align, and we’ll begin to commercialize one of the largest new product and technology cycles in our 25-year history. The Q4 systems and services revenue of $169.9 million were up 7.8% sequentially and down 21.3% year over year. On a constant-currency basis, Q4 Systems and Services revenues were impacted by unfavorable foreign exchange of approximately $2.7 million or 1.5% sequentially and approximately $11.2 million or 6.2% year over year.
For Q4, Systems and Services revenues increased sequentially, driven by growth in the Americas and EMEA regions, reflecting continued sales of intraoral scanners, especially the iTero 5D. Q4 sequential growth also reflects continued growth of our scale rental programs, as well as initial deployment of a certified preowned, what we call CPO scanner leasing rental program with desktop metal, that I’ll describe in more detail shortly. We continue to develop new capital equipment opportunities to meet the digital transformation needs of our customers, and DSO partners, which is a natural progression for our equipment business with a large and growing base of scanners sold. As our scanner portfolio expands and we introduce new products, we increased the opportunities for customers to upgrade to make trade-ins and provide refurbish scanners for emerging markets.
We expect to continue rolling out programs such as leasing and rental offerings that help customers in the current macroeconomic environment by leveraging our balance sheet and selling the way our customers want to buy. On a year-over-year basis, Q4 services revenues increased primarily due to increased subscription revenue, resulting in a larger number of field scanners. We also had higher noncase systems revenues related to our scanner leasing rental programs previously mentioned. To help accelerate the adoption of digital orthodontics and restorative dentistry.
In Q4, we announced a strategic collaboration with Desktop Metal to supply iTero Element Flex scanners to desktop labs, one of the largest lab networks in the U.S. serving general dentists. The iTero Element Flex is now the preferred restorative scanner for desktop labs and will connect dentists directly to a suite of offerings from desktop labs that simplifies the digital design and manufacture restorations with both traditional and digital technologies. Our collaboration with Desktop Metal reflects our commitment to a relationship we expect will evolve and expand to being advanced restorative workflows to market.
We see significant opportunities to enable dentists to use scan data to directly order restorative services or printed ready digital files from desktop labs that we can be used for 3D printing in their offices. In addition to iTero scanners, we’re also excited about extending the benefits of the Align Digital platform, including the Invisalign System and Exocad software to desktop labs customers as well. For Q4, total clear aligner revenues of $731.7 million were down slightly, 0.2% sequentially and down 10.3% year over year. On a constant-currency basis, for Q4 clear aligner revenues were impacted by unfavorable foreign exchange of $13.4 million or 1.8% sequentially and $56.4 million or 7.2% year over year.
Q4 total clear aligner volumes of $583,000 was up slightly sequentially, reflecting growth in the Americas and EMEA regions, offset by lower APAC volumes primarily in China. For the Americas, Q4 clear aligner volumes were down slightly sequentially, reflecting lower ortho cases, expecting team starts as compared to the typical higher teen season in Q3. Offset primarily by an increase in adult patients from the GP dentist channel. For Q4, clear aligner volume from DSO customers continue to outpace non-DSO customers.
For EMEA, Q4 clear aligner volume increased sequentially in all markets and across products, especially recently launched Invisalign Moderate, IGO Plus, and IGO Express, which enabled GP dentists to treat a broader range of cases. Mild to moderate types of malocclusions and can easily be integrated in a wide range of restorative treatments in a dental practice. EMEA had a strong sequential growth in the teen market segment with continued demand for Invisalign Teen case packs, which are available in France and Iberia, as well as Invisalign First treatment for…
Read More: Align Technology (ALGN) Q4 2022 Earnings Call Transcript