Align Technology(US:ALGN)2019-04-25 02:58Financial Data and Key Metrics Changes - Total revenue for Q1 2019 was $549 million, up 2.8% sequentially and up 25.6% year-over-year, including $16.5 million of unfavorable foreign exchange impact [32] - Gross margin for Q1 was 73.2%, up 1.5 points sequentially but down 1.7 points year-over-year [34] - Diluted earnings per share (EPS) for Q1 was $0.89, down $0.31 sequentially and down $0.28 year-over-year, impacted by store closure costs [37] Business Line Data and Key Metrics Changes - Clear aligners revenue for Q1 was $469.2 million, up 5.3% sequentially and up 21.7% year-over-year, driven by strong Invisalign shipment growth [32] - iTero scanner and services revenue for Q1 was $79.8 million, down 9.8% sequentially but up 55.1% year-over-year [33] - Total Q1 Invisalign shipments were 349,000 cases, up 4.6% sequentially and up 28.3% year-over-year [33] Market Data and Key Metrics Changes - Invisalign case volume in the Americas for Q1 was up 9.5% sequentially and up 25.9% year-over-year [33] - International Invisalign case volume increased by 38.5% year-over-year, with strong growth in EMEA and APAC regions [13] - In Q1, nearly 100,000 teenagers started treatment with Invisalign, an increase of 41.1% year-over-year [15] Company Strategy and Development Direction - The company is focusing on international expansion, with a significant increase in Invisalign volume in Latin America and strong growth in EMEA and APAC regions [12][14] - A new corporate structure is being implemented to better align with the international nature of the business, including relocating the EMEA headquarters to Switzerland [27][28] - The company aims to enhance consumer awareness and demand through marketing initiatives, including a new consumer advertising campaign and the expansion of the Invisalign Concierge program [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth, with expectations for Q2 revenues to be in the range of $590 million to $600 million, up approximately 20% to 22% year-over-year [42] - The company anticipates a strong summer season for North America orthodontists, contributing to sequential volume growth [41] - Management highlighted the importance of digital transformation in orthodontics and the ongoing investment in marketing to drive consumer engagement [46] Other Important Information - The company announced a settlement with Straumann, ending patent disputes and providing $35 million in settlement fees [29] - A new iTero Element 5D Imaging System was launched, enhancing the capabilities of dental imaging [23] - The company has plans to invest over $100 million annually in consumer marketing programs to build brand recognition [17] Q&A Session Summary Question: How should we think about the run rate for gross margin for the remainder of the year? - Management indicated that gross margin improvements are expected to continue, driven by operational efficiencies [52] Question: Can you speak to the incremental costs and opportunities associated with the corporate reorganization? - Management confirmed no additional costs beyond the previously discussed 1% for the year, emphasizing agility and operational benefits [54] Question: What impact will the store shutdown have on volumes in the near term? - Management stated that the impact would not be material from a revenue standpoint and indicated plans to reallocate expenses into marketing initiatives [56] Question: Should we expect operating margins to return to the 25% to 30% range in the second half of 2019? - Management expressed confidence that operating margins would align with the 25% range in the second half of the year [66]