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  "documentTitle": "Align Technology, Inc. (ALGN)",
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  "authorName": "Ben Axler",
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  "presentationDate": "2020-04-09 00:00:00",
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  "notes": "Uses a combination of financial data, CEO quotes, and expert/orthodontist counter-quotes to expose a contradiction in management's narrative.",
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      "kind": "callout",
      "text": "exocad Justification: Align Management vs. Independent Orthodontist",
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      "text": "Management Deceptive About exocad Performance?",
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      "text": "10% YoY Growth",
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      "text": "Why was management not transparent about exocad's sales growth trajectory?",
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      "text": "YoY Growth: 10%",
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      "text": "On March 4, Align spent €376 ($419) – half of its available cash – to purchase exocad Global Holdings, GmbH, a producer of dental CAD/CAM software. Spruce Point finds it curious that a business such as Align – which, given its early communication to investors about the impact of coronavirus in China, was well-aware of the threat that COVID-19 could pose to sales in a given geography – would decide to make such a significant non-earnings accretive acquisition at 24x TTM sales just as it enters a period of extreme uncertainty and risk to forward performance. Management claimed that the goal of the acquisition was to sell more clear aligners by integrating Align more closely with GP dentists, but experts with whom we spoke are skeptical that it will gain traction.",
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      "text": "Spruce Point is concerned that management is overspending on M&A in order to support growth as competition from both doctor-directed and DTC players makes it harder for Align to grow into the remaining dental channel TAM.",
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      "text": "\"The overall trend that we're really addressing here, Steve, is a whole idea of digital dentistry... this is all about how in the future we sell more clear aligners and how we sell more clear aligners through these specific channels.\" - Joseph Hogan - Align Technology, CEO",
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      "text": "\"If you're not familiar with exocad, they're a 10-year-old innovative software company based in Darmstadt, Germany, growing approximately 20% annually.\" - Joseph Hogan - Align Technology, CEO",
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      "text": "\"Trying to make it smoother to integrate Invisalign with dentists restorative treatment. And get more involved with the restorative nuts and bolts. It's a risky play I think with all the other restorative platforms with scanning and milling.\" - Orthodontist",
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      "text": "\"If you're not familiar with exocad, they're a 10-year-old innovative software company based in Darmstadt, Germany, growing approximately 20% annually.\" — Joseph Hogan – Align Technology, CEO; \"Trying to make it smoother to integrate Invisalign with dentists restorative treatment. And get more involved with the restorative nuts and bolts. It's a risky play I think with all the other restorative platforms with scanning and milling.\" — Orthodontist",
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      "text": "2.2.1 Earnings situation Income statement (01/01/2018 - 12/31/2018) Sales 19,380 17,662 Other targeted income 230 176 Cost of materials -2,803 -2,118 Personnel expenses -3,767 -2,569 Depreciation -282 -233 Other operating expenses -3,359 -3,192 EBIT 9,399 9,726",
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