Tag: Recommendations

Business Strategy & Outlook

In the 25 years since Align was granted U.S. Food and Drug Administration approval for its clear dental aligners, the Invisalign brand has become synonymous with effective and discreet orthodontic treatment. The serviced addressable market comprises 15 million new orthodontic case starts each year, three fourths of which represent the teen market and the remainder adults. The Invisalign has achieved low-teens market penetration, largely due to its success at appealing to the adult market. Through two decades of research and development and an unrivaled database from roughly 10 million treated patients, Invisalign estimates that the system can treat over 90% of malocclusion cases (misaligned teeth), a substantially wider array of patients than seen with most other clear aligner firms.

Align is focused on disrupting the traditional metal braces market, which represents the lion’s share of the 21 million orthodontic cases today (over 80%), through innovation in customized 3D-printed clear aligners and industry-leading scanners and design software. The dental industry is still in the early stages in the shift to digital technologies, largely stuck to old workflows. Intraoral scanners, such as Align’s iTero device, combined with computer-aided design software (CAD/CAM) are typically seen as the gateway for dental providers to shift new case volumes over to clear aligners (nearly 90% of all Invisalign cases are submitted via digital scan). On the demand side, Align’s largest obstacle has been capturing a more meaningful share of the teen market (currently mid-single-digit penetration). In recent years, Align has invested heavily to develop and market its offerings to juveniles and win over parents, adding solutions for younger patients with mixed dentition, free replacement trays, and physical indicator “dots” that monitor treatment compliance. Additionally, Align has been focused on driving growth through treatments initiated by general practitioner dentists. While traditional metal braces are under the domain of orthodontists, clear aligner treatments offer a separate, incremental stream of revenue to the general dentist.

Financial Strengths

As of fiscal year-end 2021, cash and cash equivalents were $1.2 billion, and the company held no outstanding debt. One cannot have any concerns about Align’s ability to meet minimum purchase agreements with suppliers and do not foresee any liquidity issues facing the company. The free cash flow of $933 billion in 2022 and do not anticipate the firm initiating a dividend in the near term, as Align prefers to return capital to shareholders via share repurchases. The company has $650 million remaining under its existing share-repurchase plan, and recently announced it would use $200 million for accelerated repurchases.

Bulls Say

• Align’s first-mover advantage has allowed the company to build a dominant market share and a brand synonymous with clear aligners. 

• Align’s 10 million-plus treated patient data set is unrivaled by competitors and grants the company an edge in developing new indications of treatment. 

• Invisalign starts saw a tailwind in 2021 as a result of the so-called Zoom effect, with a sharp uptick across cosmetic procedure categories.

Company Description

Align is the leading manufacturer of clear dental aligners globally, having pioneered the technology with the introduction of its Invisalign branded aligners in 1998. Since then, Invisalign has become a household name, having treated over 10 million patients with malocclusion (misaligned teeth) through orthodontist and dentist-guided treatment plans. The company maintains dominant market share of clear aligners, despite the introduction of direct-to-consumer competitors upon the expiration of key patents that began in 2017. Align also manufactures intraoral scanners (iTero), used for orthodontic treatment and restorative dental procedures (digital models for crowns, veneers, and implants).

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Business Strategy and Outlook 

Twilio is a cloud-based communication-platform-as-a-service, or CPaaS, company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows developers to embed messaging, voice, and video functionality into other applications. Twilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform. In a go-to-market model that focuses on empowering developers to utilize the APIs to rapidly build and deploy solutions, Twilio has been able to expand into use-cases that would be difficult to penetrate otherwise. For common use cases, Twilio has developed applications, like Flex Contact Center, which combine various channel APIs into a unified interface to create use-case-specific solutions.

Twilio’s platform as an incrementally value-additive technology stack, with each layer of the stack building on top of and enhancing the prior. The foundational components of the stack are the Super Network, a global network of connections to carriers that provides efficient communication routing, and the Segment Customer Data Platform, which collects first-party data to assemble customer profiles that inform and optimize customer engagement. The communication channel APIs are deployed through the Programmable Communications Cloud and then are combined and expanded into application platforms in the Engagement Cloud to offer higher level functionality for specific use-cases. It can be viewed this full stack as best-in-breed in the CPaaS space, enabling deeply integrated, sticky communication solutions. Twilio has stellar customer metrics, with churn consistently below 5% and net dollar expansion in excess of 130% in recent years. Twilio’s market opportunity to be significant as the communications industry is still early in its transition to software-based communications. Twilio to lead the charge in the CPaaS space by continuing to gain share from legacy communication vendors and expanding into greenfield markets.

Financial Strength

Twilio’s financial position is sound. Revenue is growing rapidly, and the company is beginning to scale, while the balance sheet is in good shape. As of December 2021, the firm had cash and short-term investments of $5.4 billion and a debt balance of $986 million. In March 2021, Twilio issued $1.0 billion of senior notes, consisting of $500 million of 3.625% notes due 2029, and $500 million of 3.875% notes due 2031. In June 2021, the company redeemed its prior convertible notes, due March 2023, in their entirety. Since raising approximately $150 million in its IPO in 2016, Twilio has completed several secondary offerings, recently announcing a $1.8 billion offering of its Class A common stock in 2021. Twilio has yet to achieve GAAP profitability, as the company remains focused on reinvesting excess returns back into the company, both on an organic and inorganic basis, to build out the platform and enhance future growth prospects. Twilio does not pay a dividend, nor repurchase stock, and for a young company in a relatively nascent industry, it is appropriate that it focuses capital allocation on reinvestments for growth.

Bulls Say’s

• The addition of SI partnerships and solution APIs should lead to increasing success in winning enterprise customers, which not only offer a greater lifetime value, but also tend to be stickier customers. 

• Twilio has stellar user retention metrics, with churn consistently below 5% and net dollar retention north of 130% in recent years. 

• As Twilio focuses on developing more solution APIs and growth shifts from usage-based messaging to SaaS-like priced solutions, there should be a natural uptick in both gross margins and recurring revenue.

Company Profile 

Twilio is a cloud-based communication platform-as-a-service company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows software developers to integrate messaging, voice, and video functionality into new or existing business applications. The company leverages its Super Network, Twilio’s global network of carrier relationships, to facilitate high speed cost-optimized global messaging and voice-based communications.

 (Source: MorningStar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do, business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and is not liable for any unintentional errors in the document. The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Business Strategy & Outlook:   

Twitter has captured the attention of nearly 200 million daily active users, including prominent celebrities and public figures worldwide. Its access to, and interactions around, real-time information and content create value for its users and for advertisers. While Twitter user growth has accelerated since 2018, a potential slowdown remains a concern. Slower user growth could make higher user monetization more difficult as advertisers may allocate a bit more toward other platforms such as Snap, which has a faster-growing user base. Twitter might have carved out an economic moat. Twitter is an open distribution platform for (and a conversational one around) short-form text, image, and video content. Its users can access real-time information regarding a wide array of topics or news events. They can also share information and content, interact with content, and express their reactions to other Twitter users. These types of interactions allow Twitter to compile more data about its users, which is then licensed and/or utilized by Twitter and advertisers to launch online brands and targeted ads. 

While Twitter remains one of the main real-time online content distribution platforms, its user base is smaller than other social networks such as Facebook (including Instagram) and Snap’s Snapchat. As such, Twitter is not benefiting from increased spending on mobile and online video advertising as much as its peers. Product enhancements such as the Explore tab may have helped increase initial user engagement and improve user retention, but the firm’s potential network effect is weakening as its user base shrinks in size relative to rivals, which could lead to generating less data and drive advertisers to spend more on other platforms. However, Twitter has introduced some subscription products which could lessen dependence on ad revenue.

Financial Strengths:  

Twitter has a strong balance sheet with net cash of $5.9 billion. The firm generates cash from operations, and expects it to generate free cash flow going forward. Twitter’s free cash flow to equity/revenue ratio averaged 18% over the past three years, and they projected this ratio to improve to over 26% in 2025.

Bulls Say: 

• Growth in ad revenue per user remains strong at Twitter, more than offsetting the deceleration in user growth. 
• Agreements with various professional sports leagues provide a platform for interaction and conversation about the games, which may attract more premium content providers to use the Twitter platform. 
• Investments in product enhancements and video content could return the monthly active user growth rate to the double digits.

Company Description:  

Twitter is an open distribution platform for and a conversational platform around short-form text (a maximum of 280 characters), image, and video content. Its users can create different social networks based on their interests, thereby creating an interest graph. Many prominent celebrities and public figures have Twitter accounts. Twitter generates revenue from advertising (90%) and licensing the user data that it compiles (10%). (Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Business Strategy & Outlook

Fortinet is a leading cybersecurity company that has amassed an extensive customer base because of its solutions’ high performance relative to price as well as its broad product offerings covering various security concerns. The company developed a centralized cybersecurity management plan and is at the forefront of networking and security converging with its secure software-defined wide-area networking offerings. Fortinet sells security appliances and subscriptions as well as technical and professional services. It has established customer switching costs alongside its network effect and has a nice runway for growth through its holistic approach to network and cloud cybersecurity. As organizations expand their networking footprint beyond on-premises data centers, Fortinet keeps customers locked into its ecosystem via holistic security management across any location. 

The vast creation of data and the dispersed nature of network traffic due to hybrid environments, software-as-a-service applications, and remote access needs create a larger threat surface. Attacks are becoming more masqueraded and serpentine, which drives up the complications associated with cybersecurity management and threat prevention. Fortinet gleans threat insights from its massive customer base, which keeps it at the forefront of security requirements. Compounded by a dearth of cybersecurity talent, consolidated security platforms, like Fortinet’s Security Fabric, will remain in high demand, as customers prefer to add capabilities via subscriptions over managing disparate software and hardware vendors. The company has a build-versus-buy mentality, with a penchant for making custom processors. While this strategy has helped establish its name within the perimeters of localized networks, Fortinet is expected to supplement its engineering prowess with inorganic growth in areas like cloud-based security, machine learning, and automated threat responses. These high-growth areas can help drive new product growth on top of a considerable base of durable services and support income.

Financial Strengths

Fortinet is a financially sound company that will continue to generate strong cash flow. At the end of 2021, Fortinet’s deferred revenue of $3.5 billion is a strong indication of predictable revenue streams and should help insulate the company from any IT spending downturns. Fortinet had $3.0 billion in cash and equivalents and $1 billion of debt at the end of 2021. The company has never paid a dividend, but used over $2 billion to repurchase shares between 2017 and 2021, and Fortinet is anticipated to continue repurchasing shares. Beyond returning capital, cash outflows are expected to be focused on research and development alongside sales and marketing efforts and with some smaller tuck-in acquisitions to be completed for areas such as cloud-based security and analytics.

Bulls Say

• A growing enterprise customer base and nascent technologies like software-defined networking and 5G create sizable revenue growth potential for Fortinet. 

• The firm’s consolidated cybersecurity platform could be enticing for customers attempting to decrease the quantity of vendors, which would drive more revenue per customer for Fortinet. 

• With no end to cybersecurity threats, Fortinet’s products should remain in high demand from SMBs, government entities, service providers, and enterprises.

Company Description

Fortinet is a cybersecurity vendor that sells products, support, and services to small and midsize businesses, enterprises, and government entities. Its products include unified threat management appliances, firewalls, network security, and its security platform, Security Fabric. Services revenue is primarily from FortiGuard security subscriptions and FortiCare technical support. At the end of 2021, products were 38% of revenue and services were 62% of sales. The California-based company sells products worldwide.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Business Strategy & Outlook:   

Illumina aims to transform human health practices through its leadership of genomic sequencing and related applications. The firm provides a broad range of instruments and related consumables to help researchers and clinicians identify and understand genetic variations. The scale of these projects can be wide, such as population genomic initiatives being pursued in many countries, or narrow, such as noninvasive prenatal screening. Illumina will continue to benefit from the rapidly expanding applications of genomic sequencing tools through its own innovation and select acquisitions. Over the past decade or so, technological advancements in the sequencing industry have largely been led by Illumina and brought down the cost of assembling one genome from nearly $3 billion in the 13-year Human Genome Project completed in 2003 to $1,000 after Illumina introduced HiSeq X in early 2014. 

Further innovation, like the NovaSeq, continue to push down these costs, and Illumina expects its new Chemistry X, to eventually enable the $100 genome, which could greatly increase the accessibility of genomic sequencing. At a lower cost, genome sequencing could have wide appeal in clinical applications beyond current strongholds in oncology and reproductive health. Threats from disruptive technologies may never fully disappear, though. For example, new or cheaper sequencing tools may eventually displace Illumina’s stronghold in genomic sequencing. Overall, emerging systems shall dethrone Illumina’s sequencing technologies, especially given the switching costs associated with its large installed system base and its own development initiatives. Additionally, the company’s recent bet on Grail’s liquid biopsy technology exposes the company to a new risk of disruptive technologies in the very large but nascent preventative care testing market for cancer. So while Grail’s technology looks like it will have a first-mover advantage and should have a decent runway to expand before competitive forces materially alter that target market, future entrants may eat into its liquid biopsy potential, eventually.

Financial Strengths:  

Illumina’s financial flexibility has declined a bit to purchase Grail. Of the $10 billion cumulative purchase price, the company issued about $5 billion of equity, and cash for the remainder, including $1 billion in recently issued debt ($500 million due in 2023 and $500 million due in 2031). Illumina should be able to handle this mild increase in financial leverage. At the end of March 2022, the company held about $1.4 billion of cash and investments and owed $1.7 billion in debt, which the company should be able to easily manage. Additionally, a Delaware jury recently awarded BGI’s Complete Genomics $334 million in past damages related to a patent dispute. While Illumina plans to appeal that decision, the company should be able to easily manage that potential outflow and potential royalty streams, along with a potential fine from the EU antitrust regulator for jumping the gun on the Grail transaction. 

Bulls Say: 

• Genome sequencing remains a relatively early-stage market, and expanding sequencing indications, including the nascent liquid biopsy applications, create large growth opportunities for Illumina’s legacy and recently acquired operations.
• Illumina’s very large and growing installed base of sequencing instruments should translate into significant ongoing sales of high-margin consumables and maintenance services.
• The Grail assets hold substantial promise, so even if antitrust regulators force Illumina to unwind the transaction, it should get a decent return on its investment.

Company Description: 

Illumina provides tools and services to analyze genetic material with life science and clinical lab applications. The company generates over 90% of its revenue from sequencing instruments, consumables, and services. Illumina’s high-throughput technology enables whole genome sequencing in humans and other large organisms. Its lower throughput tools enable applications that require smaller data outputs, such as viral and cancer tumor screening. Illumina also sells microarrays (less than 10% of sales) that enable lower-cost, focused genetic screening with primarily consumer and agricultural applications.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Business Strategy & Outlook:   

RingCentral is a leading unified communication as a service, or UCaaS, provider that enables omnichannel business communication and collaboration on a single cloud-native platform, creating a holistic user experience. As an increasingly mobile workforce requires greater flexibility in business communications, the company believes the firm’s offerings become more critical, and narrow-moat RingCentral should exhibit healthy long-term growth. The company believes the market opportunity for UCaaS providers is significant as 450 million-plus on-premises private branch exchange, or PBX, seats migrate to the cloud. At this point, although cloud penetration of hosted PBX seats is accelerating, less than 5% of seats have moved to the cloud. In a go-to-market model that focuses on leveraging channel partners such as Avaya and Mitel, RingCentral has gained first access to an on-premises PBX install base of over 210 million of these seats. These partnerships provide RingCentral a powerful advantage over competitors in winning a significant portion of the legacy install base. Company foresees healthy long-term growth as the firm increases seat penetration, expands enterprise adoption, and develops its international presence. 

RingCentral’s core product, RingCentral Office, deploys a global unified communications platform that integrates messaging, video, phone, and other cloud-based communication solutions. Users are assigned a single business phone number and profile that allows for connection to the business network from any device and location. Company viewed the platform’s 5,000-plus integration offerings as being particularly important in defining the value and competitiveness of the Office product. RingCentral’s moat is supported by strong user metrics, with a subscription model and net dollar retention rates in excess of 100%. They expect enterprise penetration, which has been the fastest growing business segment, to expand further in coming years, and benefit both deal size and retention. This should lead to lower churn and higher seat penetration, further cementing RingCentral’s position as a leader in the UCaaS space.

Financial Strengths:  

RingCentral’s financial position is reasonably sound but skews toward risky. As of December 2021, RingCentral has $267 million in cash and cash equivalents versus $1.4 billion in debt. In March 2020 and September 2020, RingCentral issued $1.0 billion of convertible senior notes, due 2025 and convertible at $360 per share, and $650 million of convertible senior notes, due 2026 and convertible at $424 per share, respectively. RingCentral has yet to achieve GAAP profitability, as it remains focused on reinvesting excess returns back into the company. RingCentral does not pay a dividend and has only repurchased stock sporadically. In December 2021, the company announced a $100 million share repurchase authorization, which is expected to occur opportunistically. The firm has historically demonstrated descent cash flows, with free cash flow margins averaging 5% over the last five years, including a downward skew from 2020 where free cash flow was pressured as a result of the COVID-19 pandemic. 2021 has shown a rebound to strong free cash flows, and the company expects healthy free cash flow expansion in the coming years. RingCentral has delivered positive non-GAAP operating margins in each year since 2016, which is expected to continue over the next five years, as well. The firm’s non-GAAP operating margin has averaged 10% over the last three years. Over the next 10 years,  margins expand significantly as the company scales, which should translate to GAAP profitability as well.

Bulls Say: 

• Partnerships with legacy PBX vendors give RingCentral access to a significant portion of the 450 million on-premises users, providing a powerful advantage over competitors in winning a large portion of the legacy installed base. 
• RingCentral is the first in its space to offer a CCaaS solution in addition to UCaaS, an offering to prove influential in winning enterprise deals again. 
• As an increasingly mobile workforce requires greater flexibility in business communications, RingCentral should face robust demand and have success in expanding enterprise adoption.

Company Description:  

RingCentral is a unified communication as a service, or UCaaS, provider. RingCentral’s unified communications platform replaces on-premises private branch exchange (PBX) phone systems, which support voice-only desktop phones, with its cloud phone system. Beyond its flagship voice product, the company’s platform enables cloud-based integrated omnichannel communications, including voice, messaging, SMS, video meetings, conferencing, and contact center software solutions, among others. The software allows businesses to communicate and collaborate all on one platform across various device-types.

 (Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.