Align Technology reports strong Invisalign demand but weaker sales due to COVID
Align Technology CEO Joe Hogan sits down with Yahoo Finance Live to discuss the company's Q4 earnings report, patient cancellations, growth while facing price pressures, and outlook on working past future waves of the pandemic.
Video Transcript
AKIKO FUJITA: Well, we are seeing shares of Invisalign-maker Align Technology moving to the downside in the session. After reporting those fourth quarter results yesterday, the company posted a beat on the top and bottom lines. Align saw total revenues in 2021 rise nearly 60% year over year, with revenue in the clear, Aligner segment up more than 54%.
Let's bring in Align Technology CEO, Joe Hogan. Joe, we've got some-- certainly a strong quarter. And yet, I want to ask you about something we've heard over and over from these companies during earnings calls, which is about the price pressures that are building, as well as the challenges in the labor market. How do things look from your standpoint?
JOE HOGAN: Well, again, we had a terrific year. We're really proud of what we did in 2021. We grew, like you said, 60%. And we came in right at the earnings target of 25% from an operating standpoint. What we did mention is we had a slowdown in Invisalign sales in the last few weeks of the quarter in December. And we attribute it around the world to omicron. We could see those holes in schedules that doctors were experiencing.
And that was both from a patient standpoint, some patients canceling and also, overall, doctors having trouble with staff with infections with COVID. But let me just say, I think that's what it is. If you look at our iTero sales, which are our scanner sales-- is the front end of our digital platform-- they were up significantly. And so it just shows the demand still out there because that's a capital cycle. And the doctors are rapidly moving to digital dentistry. And we really lead that trend. So outside of omicron, we're just seeing really positive aspects from a demand standpoint with our doctor base.
BRIAN CHEUNG: Hey, Joe, Brian Cheung here. So that's really interesting because that suggests that if the demand is still strong, that the inability to actually get your Invisalign product, for example, to consumers might be due to the fact that the offices that might deliver them are closed or had to close because of the omicron variant. So how much would you say, percentage wise based off of, let's say, canceled orders during the omicron experience was due to cancelations from the consumer versus cancelations because of offices closing?
JOE HOGAN: Hi, Brian. Wouldn't use the word cancelations, but we just say, just the patients didn't show up or doctors really couldn't consummate a deal in some way. But we said it was three points of growth in the fourth quarter overall. So that was significant in our sense in the size of our business, but again, it's an external-- an aspect that we think-- it doesn't mask at all that we grew. If you take a two-year stack, we grew 62% over the last two years. So cut that in half, it's 30% from each year. And there's nothing that's really affected that underlying demand. That's why we're so confident with the 20% to 30% that we communicated to the Street that we expect for 2022.
AKIKO FUJITA: Looking ahead, you forecast net revenue growth between 20% and 30%, but you say that also assumes that you don't have these additional waves coming. How do you look at that headwind? I mean, we talk to doctors all the time on the show here, who said another wave is inevitable. But with every one that comes, people are kind of learning to live with it.
JOE HOGAN: Yeah, I feel the same way, Akiko. I think we see that in Europe right now, where Spain and Denmark is just basically going to treat COVID with the new variants just like the flu, and the responsibility around that and not infecting people if you are infected. But I think as these other variants come out, they're not quite as virulent as other ones, as what you're going to see countries start to move more and more toward a more of a practical way to manage COVID. That's going to be great for our business.
And, you know, I'd just like to say, you know, what we are so excited about is we introduced digital orthodontics. The size of the market is incredible, 500 million patients out there that can afford to have their teeth straightened. And you can do it with a digital process like we lead with. It's so exciting for us. So we're going to do all we can to support our doctor base and support consumers to get over this and be able to function in a way to receive the treatments that they want.
BRIAN CHEUNG: And Joe, lastly here, I took this note from your earnings call. You noted what we learn in life-- I'm quoting you. "What we learn in life, both in business and our personal lives, is that we're not fully in control of our environment and destiny." It's a very introspective thing to be hearing on an earnings call where it's usually about EBITDA or margins or what have you. Who are you talking to there in saying that?
JOE HOGAN: Yeah, I was talking to my team at the end of the year. I was just trying to explain that look, we can't control COVID. We can't control the externalities of the marketplace that we see right now. But we can control within that to make good decisions for the business. And if you look back, Brian, when we went through the initial COVID wave back in 2020, we didn't lay off anyone at all.
We used our balance sheet to help customers through it. We supplied PPE to our customer base or whatever. We did that because we thought it was the right thing to do in that sense. So you don't really want to have to conduct business that way. But the externalities actually force you to do that. And so just that we will make good decisions that will help our business and help our shareholders. And we're just so confident in the sense of our technology, the underlying demand of the product line, and the future of this business.
AKIKO FUJITA: Align Technology CEO Joe Hogan, appreciate you joining us today and hope to have you back on the show again soon.
