Joseph M. Hogan
Director, President and Chief Executive Officer at Align Technology
Thanks, Shirley. Good afternoon, and thanks for joining us. On our call today, I'll provide some highlights from the fourth quarter then briefly discuss the performance of our two operating segments Services systems and Clear Aligners. John will provide more detail on our financial results and discuss our outlook. Following that, I'll come back, summarize a few key points, and open the call to questions.
Overall, I'm very pleased to report fourth quarter results and another record year of full year for Align. Net revenues of $4 billion and operating margin of 24.7% were both at the high end of our guidance for fiscal 2021. For systems and services, full year revenues increased 90.4% over the prior year to a record $705.5 million. For Clear Aligners, full year revenues increased 54.5% over the prior year to a record $3.2 billion.
During 2021 we achieved several major installed base milestones, including our 12 millionth Invisalign patient 68,000th iTero scanner sold, and 47,000th exocad software license installed. Together, these elements are the foundation of the Align digital platform, proprietary combination of software systems and services designed to provide a seamless experience and workflow the integrates and connects all users, doctors, labs, patients and consumers.
For Q4, revenues reflect continued strong growth and momentum from iTero scanners services revenues, particularly North America, offset by lower than expected Invisalign clear aligner revenues. Through most of the fourth quarter, our clear aligner volumes were trending in line with our Q4 seasonality. However, the environment quickly changed in December with the rise of COVID-19 Omicron variant. We believe our Q4 clear aligner volumes were impacted by an increase in COVID-19 Omicron cases that cost customer lab shortages from a staff standpoint, practice closures or reduced hours, and less patient traffic in December, and that continued in into Q1. This compounded an already slower seasonal period for many practices in which offices took time off in between the holidays. We estimate that our Q4 was negatively impacted by roughly 3 points of year-over-year revenue growth as a result of these factors.
While there are some similarities to what we experienced two years ago when COVID-19 first appeared especially in China, which currently has a zero-tolerance COVID policy, the environment today is total is -- today is different. There aren't broad government-mandated shutdowns, stay-at-home orders or extended quarantines but there is more consumer caution, self-imposed quarantines, higher inflation, less economic stimulus, and supply chain shortages, which makes it more difficult to predict when recovery may occur. Nonetheless, Invisalign doctor submitters and case submissions are improving. We are working closely with our customers to support their needs and protect the health and safety of our employees.
For Q4, systems and services revenues were up 61.3% year-over-year and up 21% sequentially with strong revenue growth across all regions. Q4 results reflect the continued adoption of the iTero Element 5D Plus imaging system, which we launched last year and that features innovative technology like near-infrared technology, which aids in the detection and monitoring of interproximal caries lesions or cavities above the gingiva without harmful radiation.
The iTero Element 5D Plus imaging system represents 75% of iTero volumes in Q4. In addition, over 50% of iTero scanner sales in Q4 were sold to first-time scanner buyers who are just beginning their Align digital platform journey. We also continue to see growth in our iTero scanner installed base with strong service revenues, which historically have been a leading indicator of increased digital adoption amongst doctors.
For Q4, clear aligner revenues were up 16.3% year-over-year with strong revenue growth across all regions and across the portfolio, including comprehensive and non-comprehensive products as well as Invisalign First, Invisalign Moderate, and Invisalign Go products.
Our fourth quarter revenues also include non-case revenue for clinical training and education, doctor-prescribed retainer products, and other dental consumables. During the quarter, we saw good performance from our retainer business overall delivering strong revenue growth along with increased enthusiasm for the doctor subscription program pilot in North America.
As we mentioned last quarter, our share of the retention market is significantly underpenetrated even more so than our share of the orthodontic case starts. We have been developing a robust retainer strategy including a separate marketing team focused solely on driving adoption and increasing market share in the U.S. Our objective is to build brand awareness for Vivera retainers and drive engagement with doctors through clinical education and sales initiatives while connecting consumers to doctors through demand creation programs and our concierge service.
We've also recently implemented social media campaigns featuring the benefit of Vivera from the makers of Invisalign clear aligners. We believe that incremental investments will increased value for Invisalign practices and contribute to growth consistent with our long-term financial model target. Q4 non-case revenues also included accessories and consumables such as Align aligner cases, clam shells, cleaning crystals, Invisalign Whitening Pen, and other oral health products that are available on our e-commerce channels including the Invisalign accessory store, Walmart.com, and Amazon.com. We view these ancillary products as a natural brand extension enabling patient and doctor behavior with the power in the Invisalign brand.
Our full year results reflect continued adoption and demand for both the Invisalign system, and iTero systems and services, and exocad CAD/CAM software as more doctors transform their practices to digital and more consumers seek to transform their smiles through doctor-directed Invisalign treatment. Now let's turn to the specifics around our fourth quarter results starting with the Americas.
With Americas region, full year 2021 Invisalign case volumes were up 57.6%. For Q4 Invisalign case volumes were up 11.5% year-over-year reflecting growth across the region especially in LATAM. On a sequential basis, Americas shipments were down 7.9%, primarily reflecting the impact of Omicron previously described as well as a seasonally slower teen season from Q3 to Q4. We also saw higher GP and adult case volume and continued momentum from our Doctor Subscription Plan pilot.
In Q4, we pledged a $1 million donation to the American Association of Orthodontists Foundation, the charitable arm of the American Association of Orthodontists in support of the science of orthodontics. We're also investing in educational grants programs to provide universities with greater access to all Align products for education and training purposes. Through these programs, our partnership with The Aligner Intensive Fellowship, and the other in-person educational programs, we are investing in the orthodontic profession through the people who care for and treat patients directly.
For systems and services, Q4 was a strong quarter for Americas driven by continued adoption of iTero 5D Plus imaging system across customer channels including our DSO partners. Services revenues continue to grow nicely reflecting the growth of the iTero scanner installed base in North America.
For the full year, international Invisalign case volume was up 51.6%. For our international business, Q4 Invisalign case volumes were up 10.7% year-over-year on tough comps compared to 2020. On a sequential basis, international shipments were up 1.7%. Notwithstanding the impact of the Omicron in December, we still saw strong growth in EMEA offset somewhat by a seasonally slower period, primarily in China.
For the full year, EMEA Invisalign volume was up 69.5%. For EMEA, Q4 Invisalign case volumes were up 14.9% year-over-year with broad-based growth across all markets led by Italy and Iberia along with continued growth in our expansion markets in Turkey, Russia, CIS, and Benelux. For Q4, year-over-year Invisalign case volume in EMEA was driven by increased submissions primarily from the orthodontist channel. On a sequential basis, despite the impact of Omicron, EMEA Invisalign case volume was up 13.6% primarily as a result of strong ortho channel performance, especially in the teen market.
During Q4, we began commercial operations in Africa with our initial focus on North Africa, and then plan to enter Sub-Sahara Africa and South Africa this year, further broadening our expansion markets in EMEA. It's exciting opportunity for Align in this untapped and expanding totally addressable market. We're also making great progress on building our Europe manufacturing facility in Wroclaw, Poland, which will be our third global aligner manufacturing operation. The Europe manufacturing facility is on track to go live during the first half of 2022 further increasing our ability to efficiently provide the Invisalign system to our valued doctor-customers within the European region.
For Q4, we saw strong scanner shipments during the quarter as more doctors in the EMEA region continue to digitize their practices. For the full year, APAC Invisalign case volume was up 27.1%. For Q4, APAC Invisalign case volumes led by Japan, Korea and India were up 3.4% year-over-year on tough comps despite continued COVID resurgences and lockdowns radically impacting various APAC countries including China. We also saw strength in the GP dentist channel with increased Invisalign submitters and in the teen market with increased submissions from the orthodontic channel.
On a sequential basis, APAC was down 15.4% notwithstanding the impact of Omicron in December and Q4 seasonality in China. We had strong growth in Thailand, Southeast Asia, Taiwan. Overall, it was encouraging to see record numbers of shipments to those markets in APAC that were not as impacted by the most severe lockdowns. In Q4, systems and services in APAC saw the highest percentage of iTero scanners sold to new doctors.
Today, we announced new Invisalign systems innovations for the Align Digital Platform, a proprietary combination of software systems and services designed to provide a seamless experience and workflow that integrates and connects all users, doctors, labs, patients and consumers. These new innovations inclusion ClinCheck Live Update for 3D controls, the Invisalign Practice App, Invisalign Personalized Plan or IPP, and the Invisalign Smile Architect. We believe they will revolutionize digital treatment planning for orthodontics and restorative dentistry by providing doctors with greater flexibility, consistency of treatment preferences and real-time treatment planning access and modification capabilities. Each of these innovations is designed to enhance Invisalign treatment planning quality, efficiency and scale, and contribute to better doctor-patient engagement and treatment outcome. ClinCheck Live Update for 3D controls enables real-time ClinCheck treatment plan modifications that improve practice productivity significantly, while also improving quality of treatment plans.
Invisalign Practice App provides mobile integration with the Invisalign Doctor Site or IDS. It enables doctors to manage their practices at their fingertips. Invisalign Personal Plan or IPP automatically applies a doctor's specific treatment preferences for comprehensive cases, enhancing efficiency and step-changing treatment planning consistency. Invisalign Smile Architect software is designed for GP dentists to create and visualize orthodontic-restorative treatment plans for their patients using iTero digital scans, and wide-smile photos on the Invisalign Go platform. The technical design assessment go-to-market is scheduled for Q4 '22.
We know that every Invisalign-trained doctor has distinct preferences, every patient is unique and every treatment plan can vary depending on a variety of factors such as the type of malocclusion, patient age and desired outcome. Because of that, doctors spend time planning, reviewing and modifying their ClinCheck plans and it multiplies with practice growth. IPP and ClinCheck Live Update for 3D controls are game-changing innovations. They represent a step-change in digital treatment planning to help doctors achieve more personalized ClinCheck treatment plans. By using 3D controls, doctors can see greater efficiency with changes reflected in real-time. Invisalign Smile Architect combines facially-driven and ortho-restorative treatment planning within the power of ClinCheck's software, providing flexibility across treatment planning to address a variety of patient needs, whether it may be orthodontic, restorative or ortho, restorative combined. It allows doctors to share their vision with patients and use digital technology and tools to achieve the best quality clinical outcomes for their patients.
It's through the convergence of advancements in digital technology, Align's unique capabilities and know-how, and data from millions of Invisalign patients that we're able to bring these new Invisalign innovations to our customers this year. The journey to deliver ClinCheck Live Update in Invisalign personal plan has taken thousands of combined person years of development, testing and learning. It is only possible through the experience data and insights we have gained from over 12 million Invisalign cases. Across our innovations, we're also using a combination of AI and automation to re-imagine what the treatment planning experience looks like for our doctors, doctor-customers in augmenting their expertise and experience to help them create and personalize and modify Invisalign treatment plans more efficiently and more consistently than ever before. What used to take several days can now be accomplished in just a few minutes. And it's a huge productivity win for doctors and their patients.
Our consumer marketing is focused on educating consumers about the Invisalign system and driving that demand to Invisalign doctor's offices, ultimately, capitalizing on the massive market opportunity to transform 500 million smiles. Consumer interest in the Invisalign brand remains high and we are continuing to invest in building the brand in key markets and customer segments. This includes investments in social media as an effective channel to increase awareness and interest for Invisalign treatment, we're continuing to work closely with our media partners to reach consumers with the right creative and compelling campaigns, optimize our buys and test new approaches. In Q4, we continue to build on our successful Invis Is multimedia campaign across the Americas, EMEA and APAC, and drove awareness and interest in Invisalign treatment with adult, teen and parent consumer segments.
Globally, we delivered record impression volume with over 8 billion impressions representing 84% year-over-year growth and 21.7 million unique visitors to our website, 127% increase year-over-year. In U.S., we amplified our campaigns across the top social media platforms such as TikTok, Snapchat, Instagram and YouTube to increase awareness with teens about Invisalign treatment. Our campaigns continue to feature some of the largest teen influencers from our Invisalign Smile Squad such as Collins, Devan Key, Charli D'Amelio, and Michael Le, each of whom share their personal experiences with Invisalign treatment and why they chose to transform their smiles with Invisalign aligners. Our consumer marketing programs also include connecting with teens within gaming, specifically on Twitch, with a customized integration that was awarded the gold medal in the Annual Internationalist Awards for Innovation in Digital Marketing Solutions.
To continue growing our young adult business across the Americas, EMEA, and APAC, we build upon our successful Invis is a Powerful Thing campaign, which highlights the power of Invisalign treatment transformation for every young adult's self-confidence. Our integrated media plans across YouTube, Snapchat, Instagram, Facebook and TikTok connected with young adults in the media channels they consume the most. In Brazil, we continue to amplify our Invis is a Powerful Thing campaign, featuring mega influencer, Tais Araujo, driving a 400% year-over-year increase in web traffic.
In the EMEA region, we successfully expanded into new markets such as Italy and the Netherlands. To complement our integrated media plan with Google and YouTube, we also leveraged newer media channels such as TikTok and Snapchat to drive engagement with consumers, resulting in more than 170% year-over-year increase in unique visitors. We continue to expand our investment in consumer advertising across the APAC region, resulting in a 192% year-over-year increase in unique visitors and a 235% year-over-year increase in impressions. We continue to strengthen our investments in Australia, leveraging leading influencers featured in premium placements in TikTok and also YouTube. In Japan, we continue to see strong response from consumers as evidenced by 117% year-over-year increase in unique visitors.
Lastly, we expanded our advertising investments in India and Taiwan, which generated a strong consumer response. We saw 1200% and 628% increase in impressions and a 470% and 116% increase in unique visitors to our websites in India and Taiwan, respectively.
Adoption of our consumer and patient app, My Invisalign, continued to increase with 1.4 million downloads to-date. Usage of our four digital tools continues to increase. For example, in addition to My Invisalign just mentioned, the Invisalign Virtual Appointment Tool was used over 14,000 times and our insurance verification feature was used 24,000 times in Q4. Further, globally we received more than 45,000 patient photos in our Virtual Care feature globally, which continues to provide us with rich data to leverage our AI capabilities and improve our services for doctors and patients.
For our systems and services business, Q4 revenues grew 61.3% year-over-year, reflecting strong scanner shipments and services, up 21% sequentially. This is the sixth consecutive quarter of sequential revenue growth for our systems and services business. And as I had mentioned earlier, over 50% of scanner sales in Q4 went to first-time iTero scanner buyers. We're pleased to see doctors continue to go digital and invest in the Align Digital Platform. The iTero Element 5D Plus Imaging System continued to gain traction across all regions with the most recent launch in China during Q4. The series expands the portfolio of iTero Element scanners and imaging systems to include new solutions that more broadly serve the needs of doctors and patients in the dental market.
A strong indicator of digital acceleration within the dental offices is a number of intraoral digital scans used for Invisalign case submissions. Total worldwide intraoral digital scans submitted to start an Invisalign case in Q4 increased to 85.% from 79.3% in Q4 last year. International intraoral digital scans for Invisalign case submissions increased 80.8% up from 73.7% in the same quarter last year. For the Americas, 89.1% of Invisalign cases were submitted using an intraoral digital scan compared to 84% in the same quarter last year. Cumulatively, the over 50 million orthodontic scans and 10.3 million restorative scans have been performed with iTero scanners.
With continued growth of the iTero scanner, at 68,000 scanners sold worldwide as of Q4, approximately 30% is services revenue, which includes reoccurring revenue subscriptions, CAD/CAM software, and ancillary products. And we continue to make improvements in our scanner and imaging systems making iTero systems and services the integral part of orthodontic and GP dentist workflow. For example, we streamlined the Invisalign case submission process with the iTero Element 5D imaging system's auto-upload functionality.
Turning to exocad. For Q4, systems and services revenues also include exocad CAD/CAM products and service. Exocad's expertise in restorative dentistry, implantology, guided surgery, and smile design extends our digital dental solutions and broadens Align's digital platform towards a fully integrated interdisciplinary end-to-end workflows. Cumulatively, as of Q4, exocad now has over 47,000 software licenses worldwide.
During the quarter, exocad announced the release of ChairsideCAD3.0 Galway. It's a next generation of easy-to-use CAD software for single-visit dentistry. With this new release, exocad offers dentists design tools for a vast range of indications with a wide choice of integrated devices. Also during the quarter, exocad announced the availability of ChairsideCAD3.0 Galway software in the U.S. and Canada where the software is now available in North America, EU, and other selected markets.
Exocad's ChairsideCAD is a groundbreaking open-architecture CAD software for single-visit dentistry. It received the 2021 Cellerant Best of Class Technology Award from Cellerant Consulting Group during the quarter as well. This is the third consecutive year that ChairsideCAD has been recognized for this award.
With that, I'll now turn this over to John.
