ALGN - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to the Align Technology, Inc.

Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. to VP, conference Corporate liker host, to now Stacy, Shirley and would turn over the your I Investor Relations. you. Thank begin. Please

Shirley Stacy

Good joining for President and thank Shirley Relations. and Investor Vice Communications of us. Stacy, Corporate afternoon I'm you

will followed Today's Hogan, will audio is A telephone Joining and archived and website Eastern dial should available available months. To X:XX conference domestic be second XXXX XX on John the by is approximately with August via dial webcast today investor.aligntech.com. issued XXX-XXX-XXXX CEO; XXXXXXXX PM financial We our President on Time results replay website me access conference CFO. conference pound. GLOBE PM our be X:XX call International should number. being today replay, telephone with for for quarter callers through callers today's by and call Joe same is Morici, NEWSWIRE on the X. Eastern at which approximately XXX-XXX-XXXX Time number

statements reminder, are the about Align's posted As statement. statements web discuss expected second Align and product turn outlook and of Joe? third information. Please include the significantly these CEO, financial our slides, events, financial We've Joe XXXX. And I'll Hogan, including information that, forward-looking the more that vary will set Align our including Technology's quarter presenters Results. for a and and for to results may historical statements, future in our detailed any the involve Quarterly only the under obligation expressly refer risks are President website call over on forward-looking to the in reports no and call with most reconciliations Exchange more that uncertainties detail filed update statements, assumes periodic conference quarter and the corresponding Actual to Commission. results predictions forth recent with forward-looking and These Securities today files

Joseph M. Hogan

provide segments: aligners I'll detail financial joining the for and us. quarter. some will performance operating more thanks John then results quarter today, scanners. On the Shirley. briefly our discuss clear call afternoon for and and third our and the two discuss outlook our highlights Good on Thanks, provide on our of

summarize Following call the a another expected questions. quarter better up key back and open and to points I'm come that, few to for report I'll pleased than Align.

grew of XX.X% strong XX.X%. in volume by Our utilization and almost driven all time volume results every year-over-year base second and increased growth channels more market. the of revenue first quarter Invisalign Invisalign record reflect new included over Invisalign from which Year-over-year trained increased doctors. XX,XXX our across treatment for Invisalign QX patients momentum for growth and which X,XXX reflects regions doctors growth and adoption expansion teenage with XX.X% our country of customer than was customer was continued of

from saw scanner across also scanners as services scanner iTero Heartland shipments the includes Dental's first momentum well rollout We business China. offices to iTero iTero and which of the the as supported continued

results, Turning of region. start results specifics second Americas our our quarter around to let's with

more up X.X% year. volume region, and America growth and QX which we in orthodontic we half both XXX X,XXX doctors where did this alone, the good of than sequentially new in we Americas Invisalign all case were channels. QX, year trained first last dentist the in Latin in our of quarter Americas, GP with year-over-year doctors of the For XX.X% a In Invisalign trained was reflecting also

quarter. the reflecting cases of ortho quarter year-over-year per which XX,XXX at QX region, GPs orthodontist continued was XX.X over base the were year-over-year Invisalign North the utilization another first with expansion doctor. cases up for GP customer American represented at by doctor per utilization time dentist for North for in a growth customers For X.X Americas led American GP record also

as QX doctors, volume another by sequentially expansion across with increased international the board base. and strong adoption our case reflecting driven as growth was both Invisalign up volume XX.X% Invisalign well strong year-over-year, XX.X% of For customer

QX, treatment approximately of doctors Year-over-year was was trained a well for Invisalign newly aligner to volume segment in with For teenage expand in year-over-year. record in EMEA. help all clear X,XXX XX% the XX% we're the market EMEA as quarter up geographies up as with growth continuing which

by treatment conducted growth as Rica. announced in Central In facility by saw Zealand. In local in a facility will New markets, China, Cologne treatment we serve We clinical planning grand new led Invisalign first also support opening host in expansion doctors facility The we'll Invisalign opening and located in with May, of for treatment a German language. providing market. planning Until our APAC, recently, Madrid, in a our education Europe treatment Align's also Australia, which year-over-year planning grand market Eastern Iberia Costa XX.X% led training EMEA serve in Cologne, doctors September, across were facility Invisalign Invisalign Europe. Japan, was a up Spain the our planning volumes and In speaking facility of Germany. key for QX will

especially growth, marketing Our are had as were growth by well and a XX.X% which the and region majority reflect China social up scanners. from also leveraging driven teen strong QX Asia-Pacific media continued Invisalign orthodontists programs. year-over-year. results year-over-year continues increasingly as in continued iTero primarily to Japan the we of growth from uplift overall and strong drive cases digital

APAC their was QX addition, last volume Invisalign compared early still GP XX.X% India expansion for was year. which very and our smaller markets in in up in development cycle. Thailand and to in channel adoption dentist high are all-time In

tweens. aligners, and teens market, that North grew strong increase led and year-over-year, driven clear teenagers Now started teenage XX.X% toward Invisalign reflecting XX,XXX in teen seventh adoption by was to a patient of QX, a an consecutive faster major with than all QX shift continued sequentially American quarter regions, XX.X% Invisalign treatment orthodontists. volumes the across adults turning by younger

patient Invisalign XX%. North XX% were teen year-over-year QX, increased up growth international Orthos American doctors for For and

behind excited worldwide. new needs the accelerate Invisalign for will data-driven protocols Go automated easier also the tooth user-friendly treatments. experience for wider Invisalign patient. chairside On the growth product to Invisalign innovation. gap which and strong with cases individual and to or of One range new restorative greater Go continued of is predictable flexibility drivers X, digital of We're crowded our it for to incorporates key prior to straightening treat mild make tailor plans potential launched GP dentists adoption assessments clinical movement that teeth iTero dentists and a to we to July as a among each require help very moderate such a about Go teeth product the case more treatments

expanding continued to Mandibular among last consumers aim applicability Invisalign treatment alike, create we in from Advancement market, key management order EMEA patients' offering On half dentition for we Mandibular and Invisalign is greater approval pending eruption the we drive July As Invisalign in approval U.S. system of arch in adoption designed APAC. preference of factor to younger malocclusions, in year. the address feature has and began a the the launch even X, more is up FDA feature doctors broad specifically crowns, a especially help Invisalign of to in predictable treat and First, second this continue shorter of year to patients Advancement clinical and complex The teenage of including clinically dental expansion. and treatment range to ramp cases. teen of expect

consumer First While excitement all store regions month Invisalign The first on investment the digital, been programs event year media, to our TV, is marketing and Invisalign it's in service response X,XXX in only and Concierge and million cases $XXX reach path initial been to make the rising social marketing each doctors alone. more has we're a PR, pilot. Invisalign recently, top very include few a weeks, we First Invisalign positive among and across

office. Invisalign global QX, Our Invisalign campaign are markets. household a motivate to treatment a to the consumers year, our seek goals we to and integrated last Made campaign major make which across off kicked all is through first marketing to launched doctor's leverage the name worldwide fully continue Move brand consumer In we successfully to

on May. to in America APAC continued like in regional Mom programs also and launched and Teen new build initiative called in We Smile an entirely North campaign Asian

them our this growth QX slides go with strong consumers directly. I on the who marketing earnings them us posted our so key to up across We give APAC from call. in the won't Needless on the tracking Invisalign permission consumer are website on and consumer opt-ins say, and contact which region, metrics in action to our included have programs through website in interest website, visitors for take indicators captures Americas all an

to doctor. Invisalign patients. their connecting valuable continuing research Our ago consumer helping we U.S. to Invisalign over also them with become Smile every these traction launched service Invisalign It's more hundreds expanding working great that and day. while the program Concierge Year-to-date equates XX,XXX Concierge consumers And by to Concierge and consumers us Invisalign recently help countries still of to connecting U.S. exciting we the doctors seeing consumers day. them most year Smile connect every in is is outside treatment service in a these Invisalign are early, been online. consultations better that and cycle shortening which and to an practices is The send in doctors with also reflect scheduled very over more of and Australia, equipping how engage active our with with Singapore, their consumers start each Brazil, are help that UK. insights consumers teams see we it's doctors effectively insights the Invisalign initial the with more

store to patients for to awareness offices of treatment in purpose and raising get is Sole consumers Invisalign Invisalign some connect potential barriers their common removing the by doctors of started. Invisalign new with

dentistry in consumers, XXX area. Ziyang, scanner learn Element only continues scanner X,XXX of experience lot providers of of stores iTero the as front-end. have of and than X said between consumers in we referral average We end-to-end overall the greater iTero China. practices and doctors remainder sequentially orthodontic customer and iTero on from we interest have saw were (sic) continuing reflecting digital In receiving rates dozens network received you precision Many all Invisalign year. the up forward the strong the our April, see the Prussia, received we're commercial And their influx will with iTero stores The Invisalign notably an an Element satisfaction. in Pennsylvania. a on King significant from from grow regions look scanners of toward Francisco San And, launch has new have throughout do top to very San we the participating surpassed facility QX, an revenues update to in a and QX participating and experience in iTero marketplace. excited but manufacture to Align participating and and XX.X% announced trend our manufacturing this stores visited evolve sell higher locations and it to first over as learning To-date, the workflow our Not progress doctors, Earlier the we doctors. Year-over-year across Element Over to we'll also have in growth were with non-iTero the In on of impact sources. Invisalign approval revenues the Invisalign these scanner have received stores more consumers Element top Our these Flex, to doctors regulatory that iTero Maryland Bethesda, the continued pilot approval Invisalign we stores. have easily have benefit store the enables utilization shipments scanned XX.X%, reflects with as doctor starting with contributed Element efficiency are two [Invisalign] our China. and well in consumers. month, in the pilots to new we Jose opened consumer China the up today, higher far and FDA China.

rollout case their to to continues end over of iTero iTero scanners of Our U.S. across the dental the and are service have organizations the continued platform Dental In the in adopting offices scanners QX, to by XX% fit plan business. across Heartland strategic their their supported have remains scanners a beginning locations year. and to scanners for supported or recognized of DSO catalyst will Aspen impression Invisalign the PVS the submissions Invisalign place Similarly, iTero scanners in next QX. of and utilization. two iTero of begin base Dental in for grow positive to Use customer quarters rollout partners

XX.X% cases up total scanner from Americas submitted QX. a digital record in with from a increased XX.X%, For QX, XX.X% up in International increased scans Invisalign the QX. to in XX.X%,

is a clear portion Align are Finally, non-Invisalign aligners aligners. Home supplier We at SDC in third-party SDC. a to Doctor-Directed manufacture the Channel, which SmileDirectClub or of

a expected. April, applicable of were denied SDC's including Align. constitutes to that the injunction SDC Financial SDC XX, Entities' Pilot SDC Store shipments and Tennessee, and sequentially the for a Davidson of Align's XXXX, For On us County, operation stores. QX, program temporary Chancery to alleging additional prevent provisions to Court from members filed launch Invisalign In opening the higher of up than LLC, breach non-compete June complaint for Invisalign request

earlier, we treatment heard open stores of connect with in you their our part Invisalign As continue program consumers doctors designed additional Invisalign-trained as will pilot offices. to Invisalign interested to in

currently oppose SDC with for obligations to any continue a our the We breached in arbitration XXXX. and ourselves proceedings we December will under to the have defend dispute law allegations vigorous that scheduled Entities applicable the

believe and was working consumer aligners. for evolving them SDC, the market As with to it we shape way the influence a clear relates

to was their and would Invisalign with otherwise orthodontic is reach objective and not treatment consumers connect offices. who doctors still Our them consider in

with out as not has relationship Our expected. SDC worked

We hoped. hoped have the the when office scaled and had not not has we renewing do impact SDC XXXX. agreement transfer turn Invisalign in We John. been call we anticipate I'll decision-making the patients over an that, our able supply not process to doctor's out-of-scope to had at to as expires it now With with SDC

John F. Morici

Thanks, Joe.

secondary the was the the QX quarter all Year-over-year in of up million than XX% up results. revenue sales revenue year-over-year higher basis, Aligner and revenue XX.X% sequentially our ASPs reflected for expected Invisalign was sequentially million, to aligners. sales ASPs volume. shipment growth and ago. were customer (sic) approximately mix, increased and favorable company by Now were geographies up (sic) Aligner record and regions. $X,XXX, Year-over-year revenue all QX second favorable FX a and financial related ASPs. year up quarter a increases, $XX, $XXX.X offset deferrals and by from revenue increased promotions promotions. Invisalign on Clear product $XXX.X FX, and [product] (XX:XX) Total $X additional unfavorable (XX:XX) up for from quarter prior QX XX.X% across from reflecting channels approximately favorable partially was On [$XXX.X] QX to offset price a Clear Invisalign growth strong growth XX.X% of Invisalign corresponding reflecting price mix, partially

driven Invisalign total up and XXX.X thousand For all cases up by regions. were sequentially across growth the second quarter, of shipments XX.X% XX.X% year-over-year,

case For was volume Americas QX Invisalign X% up XX% and sequentially up orthodontists, year-over-year.

For XX.X% case Americas GP up was dentists, Invisalign volume year-over-year. X.X% up sequentially and

and For up Invisalign sequentially doctors, year-over-year. XX.X% international case was XX.X% volume up

the ASPs. volume, Our China. revenue the due Flex benefiting higher Year-over-year and launches Scanner first was up quarter ASP Element due from shipped was to sequentially and into $XX Services primarily increased and XX.X% product higher to Element & for second XX.X%, product million, X mix, scanner revenue up Elements

quarter expenses aligners operation X.X points manufacturing gross the manufacturing production per with points XX.X%, primarily second points due margin was points higher ASPs, Scanner higher higher and operating primarily sequentially Moving partially second increased points gross onto due X.X along by of due was up Clear year-over-year, expansion for and aligners X.X efficiencies. gross up gross to worldwide QX for cost. was increased scanner increased XX.X%, margins gross was partially variances to year-over-year. expenses down the scanner X.X margin quarter due offset were year-over-year Scanner points higher Clear to ASPs spending, gross of manufacturing our freight margin, in Aligner expansion, activities, Aligner XX.X%, geographic regional in including offset X.X regional higher expenses to reflects second up increased ASPs. down million, case. case, The to as head due activities as X.X $XXX.X to our investment margin per and the our primarily compensation by related expansion continued advertising were X% and up higher down from year-over-year. well sequentially, operating sequentially count. costs margin go-to-market quarter XX.X% increase overall sequentially and down

operating XX.X% up million, XX% Our $XXX.X sequentially second quarter and was up year-over-year. income

in on quarter as points stock-based as & rates. is and points Scanner from excess On in second the higher foreign $XX.X Aligner tax margin operating reflects operating leverage the to to increase tax of due margin compensation. sequential expense X.X impact Services, basis, was year-over-year. provision, and operating operating primarily With to leveraged was increase a quarter primarily up well revenues second related operating rate exchange Our The year-over-year tax up Clear sequentially both the favorable benefits efficiencies. XX%, X.X regards expenses margin in and our includes which X.X%, volume million

prior up share compared per earnings $X.XX, the year. and up $X.XX $X.XX was diluted quarter to Second sequentially

Moving onto the balance sheet.

Of quarter, the to $XXX both collections approximately including short securities, were was and million. equivalents, the approximately improvements. was at and QX up $XXX.X capital our to of working was receivable cash, This $XXX.X our million marketable million, equivalents $XXX.X entities. accounts $XX.X cash due held and by second As QX, held increase the international U.S. increased $XXX.X long-term end sequentially. primarily an million cash, million, and of in investments, balance marketable of million securities, X.X% cash of $XXX.X compared and million

days XX down was outstanding, last X DSOs, days year. days, days or sequentially XX days and in overall Our from X QX down sales

quarter, flow amounted second compared less to million. flow the $XXX.X prior down of quarter result from Cash aligner AR and improvements to Capital capacity were expenditures, million, collections quarter the operations primarily as Our related for cash for a second sequentially million in capital Free $XX.X defined $XX.X flow both cash facilities. second expenditures from aging. to DSO $XX.X was QX for the and operations is year. increased up million, as the

million quarter, the second buyback new authorization. we a During also $XXX stock announced

program the utilize our under remainder we and turn that XX, outlook. that, With the April have the $XXX demand let's we XXXX of expect QX outlook June our XXXX, million during that view, with XXXX. to repurchase starting inform the factors remaining of As to

business seasonality. our their to into EMEA APAC into going their sequential We on the basis market a as strong summer somewhat grow expect is by going international teen season, market offset

grow holiday. teen their For Americas, selling in demand, a strong due started on LATAM by slower we to QX be sequential seasonally on China iTero in will expect America Element summer North season. to XXXX. basis flat somewhat adult of We offset

its has effectively iTero DSO market. the North growing been Align business Additionally, America in

recognized as in go-to-market We units expect a these of sequential increase a result activities. iTero

We continue backdrop, over volume With be the be we period quarter a same the case in XX% up as of the XX% approximately minimal to as follows. to expect shape expect Invisalign volume third a range SmileDirectClub in quarter. this third to to is up ago. the to XXX,XXX XXX,XXX to year cases, expected

We expect of QX $XXX revenues increase of XX% the to to million year-over-year. be approximately $XXX range to XX% in an million,

We planning in to expenses margin expect reflecting gross ASPs. as offset the manufacturing range treatment QX and operations, regionalize we to XX% be higher our by higher partially of XX.X%,

be expenses range QX be to margins the sequential our $XXX to reflect of We basis of operating expect continued go-to-market should operating to range investment in million, million XX.X% QX the activities. XX.X%. a up in in on $XXX to

Our effective approximately tax should rate XX%. be

related be XX.X repurchases. shares of any approximately diluted SmileDirectClub. outstanding share approximately should expect million, exclusive We loss million of our $X.X to equity And share

share expect our of we in diluted earnings be together, $X.XX to Taken $X.XX. to range QX the per

million million to $XX QX we expansion to expect million, be CapEx depreciation be In $XX we $XX addition, $XX million. our expect approximately and to to and as for continue efforts, amortization we operational

now remainder year, let me for growth XXXX anticipate be rate above the view the our to-date mid-XXs. business planned investments our model our to to momentum the turn long-term of on in revenue we and XXXX. in and the total to of our Now low Based

comments. to our margin XXs. expect over growth Invisalign year back Notwithstanding from low for XXXX margin continued drivers, of the XX%. operating turn slightly I'll to expect be investments we in be Joe? in volume strategic the Joe operating that, it full to for With up final revenue We and

Joseph M. Hogan

driving our of our a strategic four the joining execution be up Thanks, goals for growth which of for is thanks good XXXX to to continued Align, those you expansion; on to year of John, for treat call international Invisalign and utilization of and drivers very shaping for millions Invisalign, today. reflects people especially teenagers; more generating with GP worldwide. cases; orthodontist that dentists Invisalign or increasing treatment we focus demand enabling consumer refer and

but see drive done customer and investments are optimize to all There continued underlying growth are industry. continue and Invisalign it that, steadfast fully to doctors. regions in with a to to be we is I our up partnership vision Operator? to momentum operator, well orthodontics I'll to over the our believe our making aligner your still we above questions. lot With open through We potential, work pleased continued enormous masses channels clear you the across the of the look and of the our updating forward turn to bring the our on progress. market remain will that call to we'll to

Operator

Thank you.

session. be now conducting a Thank will We you. question-and-answer

first Our with question Jon Block comes from line of proceed. Please Stifel. the

Jonathan David Block

around you Good one questions. what solid can incremental always In high a at if certainly Maybe you Joe, Great. the as one, Thanks. you the that months but room a follow-up. a the SureSmile competition? guys then anything and Two about to what be about the maybe afternoon. the if allows past Thanks, other just since the have offerings unknown to on level Clarity? bit more from for conservative anything, a Are curious leaving first bit seem talk these a guide. uptake show? XQ I've words, just if guidance, got you guys. heard wiggle on few to guidance, And over the And that due even follow-on ortho

John F. Morici

we that No John. I'll we've part of the start This how your guidance. in first like have. we Jon. of this taken We terms the question. best with guide Hey, guide always taking change is information

different this from in into and different factors we a is factor So standpoint. guidance many forecast our no

Joseph M. Hogan

a saw out nothing beat From again our here there's wouldn't from obviously, And we with that just offerings take recently. any now we we there. say than in there's at assessment that what from stronger right we – that the the it's in Clarity Ormco we competitive we'll future. the line see a product And saw see, saw Hey, way of different what from the I standpoint, in you that Jon. came mean, AAO. an AAO in on But out Australia changed competition really other I standpoint. have

Jonathan David Block

follow then going to I'm And you Helpful. the Okay. little up, put a trend. gross on the margin bit

So, I In if know to the XX% over one talk the XQ but long-term appears Invisalign past XX% in next years. can margin unchanged model, XX.X%. of of the trends lowest handful of gross is the months. my the it's that maybe how we And XX about guys

You the to attributable talked chain. about globalizing some being of deterioration the supply

do the about, start see trend? specific that sites maybe through stabilize Invisalign Thanks. coming even and So to volumes in we think maybe quarters, to we those possibly hey, go GM as reverse

John F. Morici

Jon. right, That's

us. also had and some And QX. add in we'll those think As we iTero as see globalizing, we facilities, of those standpoint to of in a But lot long-term production a of importance We'll we see a add improvement. investments. we're to too capacity from a you it's have investing some strategic mix lot as we remember and –

from QX long-term strategy the a part us it's growth you of us important But, for iTero from standpoint. standpoint. and So as our gross affects a margin a know,

Operator

Thank you.

Shirley Stacy

Thanks, Jon.

Joseph M. Hogan

Jon. Thanks,

Shirley Stacy

question? Next

Operator

you. Thank

proceed. Sachs. comes Robert the Our Jones line from next Goldman Please question with of

Robert Patrick Jones

share with the could share year. willing you around XX% came just deal Curious share think And, be guess their this any Heartland have for the broadly. you deal questions. that a how importantly, or to Aspen? And more or I targets tracked within the John, to Aspen? you uptake kind would think Joe, Heartland Aspen you iTero growth of I as there's practices or by anything about to you'd we willing at on DSO around if and arrangement, be as that Invisalign said I opportunity, for Thanks then, a of has the of the if proxy more commitments I expects guess, the correctly if maybe, maybe end heard few the structure any economic about? Joe, Great. how

Joseph M. Hogan

Yeah.

of think we've difficult First, in Heartland deal, it's focus had an is to really on times the from accounts Aspen to GP and want. are in be do business. have able just kind deal the across want DSOs high base. and ability level the know with to our the But individual our I with spread aligners of this strong sense We a just their standpoint that their what penetration workflow marketplace in a that drive partners to find we and great you digital focus for the us we on at to

And have with will businesses sense in the very them – Heartland clear and us with both iTero them so, been very aligners. and their working strong of allow position frontloading open that Aspen to in give a

in We've with working DSOs aligners great. of uptake their on that our us iTero for across it so multiply strategy really locations been that's help GP And allows line the have clear right Heartland with a – and been and able to it's just different us. while be to with of that scanners strategy a number

organizations Our able translate growth terrific. to well. been their And they've been with Heartland has really it across

Heartland make That's But going of us handle We and we at we're for getting and we in still that won't. there to haven't shared a how the a really about to how it's way development. to too. of We how from – productive. be for a internally, internally the want to And sense it Align a workflow critical standpoint a it front us do offices, of to you is iTero out customers. in of able GP lot that And in wants that's numbers the think that. and digital sense getting whole excited force of lot it's handle multiplier

Robert Patrick Jones

one sneak I No, just maybe And appreciate no, John. I could that, then Joe. in more for

softer EBIT margin expected following the looks XQ on On XQ little a line. than the relatively strong maybe margins, EBIT a

moving if pieces. And talk wondering about of the was so just could some you

about in of prepared your spend – talked remarks. the you of some areas think I spending

EBIT maybe what that XQ informs guide? So just

John F. Morici

costs I mean regionalize some the at are there's and we – I We – our to clients, to we quarter. that some of noted think when associated manufacturing saw globally second investing in with that. earlier, treatment we try as look as was so

see continue balanced. of investment which quarter. will third to we'll But from QX. we into from standpoint, saw standpoint, also what consistent is of in Some that our the high XX.X%, is expenditure end The guide it's an operating an pretty

Robert Patrick Jones

Thanks.

Joseph M. Hogan

Yeah. Thanks.

Operator

Thank you.

question Elizabeth Please with the proceed. of Our comes from Anderson ISI. next Evercore line

Suzie Yoon

quarter. is quick of a in and on you Suzie And drove question, talk quarter. up was congrats Yoon Elizabeth. the nice total the that guys. some Could then North Thanks Hey, like America? on just factors follow-up. my nicely utilization about for taking for in This another the Looks uptick

Given stores how are the so your about findings from store you far, plans? the thinking future

Joseph M. Hogan

a we on As APAC, I a America. And really that's marketplace focused EMEA, calls, North us in from uptick, known previous that you good And say think the see focus important is see the there's teen what a marketplace. Suzie, strong far for a an because the standpoint but a growth what of as and a from you've also I'd majority orthodontic piece. we orthodontic can from growth teen lot lot teens. of of lot internationally, – that's is the

the we allows we first do X go further X,XXX Phase treatment seeing We're to after almost the our that good (XX:XX) be on treatment about you have for teen in marketplace. – of evidence ability And like month. a starts we teens. about, put dental just So place. It launch able excited to start, talked to

Prussia, other that too. quarters seen opened overall to up this open We'll From one stores, in stores a and we Pennsylvania. reflects just up Maryland in store continue two standpoint, in we of year. King one you've some just it more momentum that So have

much integrate a preparing doctors, them in consumers communicate of visualization we're treatment. tools learning doing lot the of better to with with and then sense proper things to also in how of about hands-off patients, excite I doctors how store that Invisalign sense and the in the think we do do to with we're those doctor's And the office that. the to the

of just consumer for base. standpoint monetize it's for another vector our a advertising be and that us doctor So interaction the and with growth an to continuation able from

Suzie Yoon

you. helpful. very That's Great. Thank

Joseph M. Hogan

Welcome.

Operator

Thank you.

proceed. Please of question next Santangelo the Our from comes Deutsche line with Glen Bank.

Glen Santangelo

region this to business, want Hey, I the America growth about mean talk you to in think, a But percentage get your what out key trying at you really XX% the seeing to XX% that pretty We're XX% Yeah. on range. breaking it's I'm curious it feels like and kind that range. to very decent quarters Thanks docs teens, questions. but And in detail. growth just of number that already of side? ortho XX% terms in seems And flat guess of case six growth last that been shipment strong is this in XX% to have little strong for in to that what's the have XX% like more be the perspective bit quarter. accelerating because get growth of I of really in trended range we're posted growth the XX% what I sort seeing to I taking that trained? over to North lined steadily Joe, I'm to

there? on of in terms a can bit give little you what's more So going color us

Joseph M. Hogan

on a teen North at say standpoint. from talk the steady that, feel also as we about look the year-over-year you with When and going American a strong work you of States. North and state is reemphasize, at We about with the extremely good GPs North well. mentioned start to American Yeah, look comparisons piece as United our we And our that's the you doing well Are when I'd very through that? America, lighter I'll Canada cases performance still marketplace.

new course, and with continue have refreshes. market So of change market that? trained lot we've we obviously educate expand out that. of doing the probably to reenergize to continue as majority In we're segment, of there. things what to orthodontists the But There's products. a we that to there's There's orthodontics the the

DSOs the really talked into obviously side, turning consumer that and help kind patients. opportunity those for about we GP that And the too. On just and the stores an initiation then feel we consumers us of with

So that overall have in we momentum marketplace.

That help always a have The number third where you piece our there GP fourth in the a kind a you third orthodontic a we so quarter see of for marketplace. marketplace will that the reverses side number. to quarter on and in growth in is big ortho strong less time teens quarter see and of

Glen Santangelo

other are using really DSOs there. American what are stop any calling would on the I'm they the What you replacing quick they also they augment and trying the is understand – to have contracts is, just DSOs. say GPOs or technology And North maybe sort Thanks maybe have? of rather of these And or DSOs? Heartland are existing iTero to they I'll what already one by percentage And and just now market of represented out? sort worth follow-up above Aspen

Joseph M. Hogan

Yeah.

be last you start And the the to office And their I is think able the you augmentation say of of what of your they more for GPs depending have iTero quote what number The it's digital to there's make just currently have equipment you North don't. question. in more of that we've That workflow continue or commitment capability we work on for GPs of a percentage we in to a whole so kind The different to of new that when and the XX% we with a around you orthos. workflow iTero sure just It's not – an in replacement varies DSOs what and and with been kind and sense normally within that obviously more have a have. XX%. can inside that America, to that DSOs DSO dentistry. sense. we on you call market idea great tool to

on other answered XX% I use I've that question. XX%. upper the to is number the the one So, is hope and

Glen Santangelo

Thank you. Thank Yep. you. fine. That's

Operator

you. Thank

comes of question line Steve Please Morgan with the from next Beuchaw Our Stanley. proceed.

Steve Beuchaw

How team. are things? Hey,

Joseph M. Hogan

Hey, Steve.

John F. Morici

Steve. Hey,

Steve Beuchaw

China. first The is on question

were who access clearly give in you using somewhere for a bit PVS had more swap there. customers between? them mousetrap? I these it iTero China these in people I going specifically, where are think year dive could about Maybe, this think is the little customer you launch you how incremental, that on a when a drivers the wonder big the are one. about if So is better are Or a through really and to where scanners Intraoral process or they you're

Joseph M. Hogan

mean Steve, that there. replacing it's is it's not are This all I over amazing. scanners PVS.

So it's not a swap.

that offices Mexico. in to would if time see would point So previously PVS see rooms at boxes go China in any of full just you you our

So number going us. for of the scans to come of ago seeing trip. over on that those out days were couple digital VPNs (XX:XX) skyrocket China I just that we're John a a start and

foundation. is XX quickly So, the integrate over a it's for new workflow. into new in This I'm it China country's to amazed technology incredible. just so always just now and years the a about I've been target and ability doing business

it's new uptake I've last business saw medical I ever country in the the the in technology Just kind – in of equipment fastest any XX years. in seen that too.

You marketplace. have to train the

them You have ready. to get

place well. have be to what it know lot just to what them. But in not you infrastructure to successful you in do, be foundational service to You seeing There's things the of have that's and to uptake And now. right once place and to frustrate ready we're there a amazing. put is that's

Steve Beuchaw

this strong, the what trajectory the just we the looking Thanks model? factor to our for think that or much. some second puts was are reasonable a certainly year really, half China I and ought us of dynamics as that Should other and takes between given think reasons about mean the barometer That's to for. so into iTero then, to first DSO I And follow-up. you've the beating really remains for numbers. growth iTero there half we

Joseph M. Hogan

mean This initial anomalies going of to would call in not China. sense in right is great I you're Steve, the these out. to China. be uptake them think, call I uptake – there's the I in

We going expect forward. more

side, Heartland and DSO of two DSOs I the mean, the Aspen, On biggest going.

through draw necessarily the wouldn't of great the I But iTero. this with continue are rest draw to a year. we through line one it having success So, and

of from place a more Invisalign. foundation to drive able anybody, incredible an as much know as You, in be how having to standpoint important is that

so successes. big seeing And these you're

little have wouldn't say second that as big into and too. I XX times take penetration go We you But it the are should necessarily these ones moves half. you

Steve Beuchaw

Really appreciate it. Thanks again.

Operator

Thank you.

comes Please Couillard line next question with from of Jefferies. proceed. Brandon Our the

Brandon Couillard

afternoon. Good Thanks.

Joseph M. Hogan

afternoon. Good

Brandon Couillard

And discuss period to manufacturing location? Is in you time, if market Joe, to manufacture the would expect, decision actually a to that of some play? you that cost iTero play a over or would access some China. shift of kind systems

Joseph M. Hogan

actually than it be of seeing to make that okay. with And from work. really us That's That's how question, able to And those regulations that good being a standpoint – market is, done. in this those a before, access really too. an important sense easier Chinese governments of standpoint much provincial in to Chinese it's worked from have the play. having the government a some really it's experience well address case, just it's so Israeli Chinese And

standpoint, we're numbers a If to neutral. So you this a cost doing any in little that's expect won't they I'd or cost cost a play. why not From a way. be are worse it. better, is see our in little say it

wouldn't I So it put in model. your

Brandon Couillard

couple a for Thanks and John.

any of gross First, freight business? the the capacity on costs costs chance material margin then could any seeing quantify or you or from that the shipping in inflation expansions? business And impact you're the pockets or clear aligner manufacturing

John F. Morici

material live standpoint manufacturing a both that planning well regionalize QX. to we going cost or of from Nothing from freight manufacturing as costs. in a treatment There's is in China simply down from as note. It comes as start-up

facility. that adding You're

You're training workers.

that we QX. manufacturing that and getting of in up some running. You're saw And

then volume QX. We will you more And we and get facilities, of see as those out as that some some of see normalize we in grow again.

something And local, facility will QX. be to So, that and faster we're our of being have we running benefits running, other that then There's and customers. reduce fully get in we up once it's get we've and that up freight lot the but that We costs. see, It's expected. to a short-term. we offsets of

Brandon Couillard

Very good. Thank you.

Operator

you. Thank

patient rate Thanks. into to guess, your here, gave proceed. you it Erin you some and actual speak traction of of On with retail there's Erin Hey. customers? you the Investor an Credit all Please as stores I'm if with, Credit the of Our curious, scanned Day could that at do Suisse with retail at from after days Suisse. visiting. guess - I LLC Wilson these the next question store Securities scheduling sell-through appointments understand pilot, early (USA) I Invisalign metrics any comes to have update metrics and line on still your a majority relates conversion but Thanks. Wright Wright it's preliminary the the I

Joseph M. Hogan

question the Thanks for and the interest. thanks for

the in these iterations at as they We're of point wanted a good Investors we we Meeting. think, to we much that. call progress. and We you lot through gave about making pilot we feel this go still as give time, as But I at you stores are. the

But, year As be call more not I'd we'll as we then sense number X,XXX this mentioned them thing we that out move I our rates, move have share fair. in we those about stores (USA) and gone conversion patients as Okay. announcement, and Securities through already. more into that of pilots, And again, patients varying Credit close But, you rates. we through. of there's our stores - next LLC not Suisse have the more to Erin as on get the stores and there going firmly yet. with say Wilson open Totally Wright ready

had a evolved, how to conversation process? in DSO approach Aspen On that guess, the and DSO of you're taking there. and relationships, new and Is guess sales the can sales other any you perspective opportunity speak potentially that at I sort with there cycle from the the I DSOs

Joseph M. Hogan

We both of approach I very are They're call what These good extremely businesses. to successful too because take a they sense. in them. businesses a broad operate business

be sales. inside that and to to well big DSOs have able communicate going throughout. sales, those sales are can we I in able the how mean, – keys of I obviously, more can drive a a be to through help the drive growth and sense in-store to, able And is store help. we one being think, an bring to Invisalign iTero aligner to practice broad what we're So

months. the those terrific over be the Frank So, put much to bring job. we Quinn and a work and under DSOs in XX organization He's place resources in to business organized just with things we place American done it's better, able the North last within have

you. out partnerships us. just them These not Wright are Securities feel successful. we Erin it's Great. So, of we're Suisse LLC and DSOs the be good - Credit excited are both Thank us and It's (USA) understood reaching that too. about they'll Wilson for Okay. well

Joseph M. Hogan

you. Thank

Operator

you. Thank

from Our next Leerink Partners. proceed. line comes question the Newitter Please with of Richard

Richard Newitter

taking for questions. Thanks Hi. the

Thanks. of some kind back or there approaching trialing potentially and some at First there traction in initial in your one in into their including of bases you're customers is or competition. on launched that of competitors of growth with just anything then the terms of your getting quiet? they're all competition And factored has to how it relatively respect is the the kind any impact there competition? one, Joe, kind XXXX field from anything respect May to guidance been question revised and with the hearing since outlook, customer

Joseph M. Hogan

you to We'll from of uptakes. really a their they're the in And in different from Yeah. get XM, standpoint. and be contacted, few the on is that a in road AAO the feedback get I'd what the this like of say approach the America behind to most kind is staff. the I'd that's piece. at but EMC many there's look from a marketplace expect. what we from try slipstream more cautious brackets they standpoint say competitive talking a business out just a nothing that marketplace what competition output and I'd we customers, into – being North was you it's wires week see call if take

adjusting are right a And or customer the curiosity from but I'd not base, so around anything there's piece and some we momentum there's say interest a now. that business

John F. Morici

I market, we're happening the guide at that we coming, would what's in with happening Rich, products are always And forecast as competition. looking what's and as say, we

and So our coming. see our look to that way guidance we expect what at in that's we

XXXX we So a competitive of that that talk we inclusive what to we is for standpoint. low our to at revenue look see mid-XXs when from to

Richard Newitter

one follow-up. Okay. then And maybe Great. just quick

of You're would quarter helpful. the intra back Thank timeline? that Advancement give confidence XXXX. still half FDA that guiding there occurred approval of reiterate you. to to kind Mandibular Anything be the Any color in to you

Joseph M. Hogan

saying It's news no good the is an FDA on news. old

this looking year. quarter fourth for So at we're still the

Richard Newitter

Thank you.

Joseph M. Hogan

Yeah.

You're welcome.

Operator

you. Thank

proceed. of line Barclays. Valiquette Our from next the with question Steven comes Please

Steven Valiquette

SmileDirectClub in out me, just next consider about kind plan that Would taking Thanks. curious any year, you of is volume with direct renew do of guess, Thanks. just through initiatives? given agreement it question. your Good this. current that try still likely for the for not just kind afternoon. more your I that on direct loud partnering players own thinking to you'll just market? your Thanks you with you best Or partnerships, other in your that any various maybe capture market just to abandon mentioned

Joseph M. Hogan

teeth. other, is standpoint partners. in to with stores going that interest what a vector great take, play how supporting we in approach consumer that's of pursuing to a We're feel don't the this office of direct of aligner our a strongly from We work a run companies. Yeah. kind have our call, any sense doctor's we business. to moving we're seriousness our of approach given doctor and I And manufacturing the

else it'd SDC so agreement kind runs after that out with disingenuine someone aligners And we be find to. our to of is supply go

We have no interest in that from a standpoint strategic at all.

Steven Valiquette

it. Got Okay.

Thanks. Okay.

Joseph M. Hogan

thanks. Okay,

Operator

Thank you.

line Our Please of next question Lynch. America with of Michael comes Merrill from Ryskin proceed. Bank the

Michael Ryskin

for Hi, and the Joe one Real for guys. on Thanks quarter. Congrats quick taking then call. for John. the one

that bit products, for that's Is is the there and of business from second you you're guide whether seeing how it's confidence terms outlook you the year, internationally, in just call legacy from incrementally. the let's Invisalign noticed the revenue Or giving there started? new Advancement the up in? it or iTero more For more half anything the stability little launches, new I or Mandibular that First bumped you're fiscal it a with seeing that's

John F. Morici

Mike, this is John.

think a I it's combination.

seen business. growth legacy last our we're great growth. the across think We're teenage here, seeing, as driving quarters I couple we've in great

internationally, we've as seen seeing We as momentum iTero volume a we're then of well. seen we've lot and have that. But great

that being business the half. talked we in the so that quarter second to expect into China, have in second we've the about to that a continue So, DSO able release

given new and and other China of products the too, expansion have So there's we that doing but then a we're products iTero lot and we with the business, on of momentum iTero, some our various that existing places. Flex either have, in also

Michael Ryskin

China. about quick a question Great. previous Thanks. on specifically in then And iTero a follow-up

previously you PVS. going at get predominantly to market it to of of evolving? or elsewhere that all internationally? you in five a Or how can take is up? How least America see get was years or now right And similar North that mentioned ramp long quickly You digital it that as submission rates timeframe do you in

Joseph M. Hogan

I China The world. Western As up be last call, more more know were in than these We we're not equation in times in will the signing variable that they in doctors is ramp-up talked orthodontists the intervening and in that. but about China, faster GPs. just

And so more those too. could impressions, entitle PVS

we outside docs of look you'll could years. could still So that very not buy feel other doctors have installed submit of up hard into of through to this it's at confident come and just ramped the if dramatically the really next who to but to for might what in iTero that just an maybe And want who be. equation. that project But kind the we that, three two current see I base submits

Michael Ryskin

the one, one tail you Can quick FX X then really down of points in small in quantify? it? how quarter. was But And was Thanks. it first I'm sure XQ. much the

John F. Morici

Actually XQ was about X%.

quarter basis So saw at little bit a a less on on basis, FX than still year-over-year year-over-year we X%. benefit the but a first

Michael Ryskin

flow one-third through same bottom the the And to line?

John F. Morici

two-thirds about the We That's right. saw, actually, through line. flow to bottom

Michael Ryskin

you. Thanks Thank lot. a Okay.

Joseph M. Hogan

Yeah. Thanks, Michael.

Operator

you. Thank

Our with comes Jeff the Johnson proceed. W. from Please of question next Baird. line Robert

Jeff D. Johnson

guys. any here. end change the end there Is anything about you afternoon, SDC. I didn't hear just stake couple agreement that Maybe Joe, Good cleanup to the the a questions equity you at you. say with once Thank supply XX% of XXXX?

Joseph M. Hogan

we out to that We'll operational get that. I way say But have will Jeff. own that. think we honestly, after – reconcile conflict a know, find don't our addressed. way I'd be that's I of still the to

Jeff D. Johnson

many hear maybe on the some and through. us list questions walk Pilot I guys on concept year? John, getting obviously call on maybe cases. can the expenses opening at least been that's pricing involved that enough have full that And, in I'd of also those or sorry. Store, I of about on the or this store a There's very assume those How opening today, are Okay. the then cases those stores. more as are EBIT little Fair you you thinking guess, But good price well. bit you

would pretty there's stores. here quick on I breakeven that's So, these assume a

So or kind would on of that you be any color provide comments can Thanks. helpful.

John F. Morici

right. stores Stores year, now. got is four this of Yes, or have John. you're By the XX Jeff, we'll – so. the Yeah. end we've

places as We of start-up. think some some the those consumers expenses try spending more it a through place in money advertising. continue instead don't the as we offices. There's area. in we patients to targeted as incremental. maybe going as do all marketing the that Think targeted little certain to to consumer conversion. doctor's it us, marketing And can we're right of find of places our to bit strategic that on that and are related get There's turn to very to into of But go able to be broad, also

we what from half up second at we operating look that So margins be the guided for expect we've said XXXX. now when in year, and we've the to

anymore. So no there's flat

a think part our investments still and making, these of strategy. they're incremental that with we So, we're that our to key ultimately business

Jeff D. Johnson

Thank you.

Joseph M. Hogan

Yeah. you, See Jeff.

Operator

Thank you.

with William line the Blair. Kreger from comes question John proceed. of Please next Our

John C. Kreger

Thanks latest you've pilot. I very just us what much. if think you're that? thoughts timing Can considering more it be? broad, the Hi. on financing don't your Joe, taking might you give mentioned And the

Joseph M. Hogan

financing. expert on I'll turn my the you to over

John F. Morici

This is Hey, John. John.

so terms up can beneficial doctor. it's to the sales get It's period our financing to they tool have that time. give we financing, come options the to do fully as working doctors is to as Ultimately, things a is able with can pilot look beneficial we patients team released to be financing, a on over of a So, paid with some for faster. moved now. patients. they of in with really It's where our it's it what – from well And

into able it of to So to benefit be a patients and conversion. chain it's But to is get able we're customers, financing with trying wins. to them a end do get easier come able there's in for those value what to everybody higher really a end make be to to think be to lot treatment this those up we

So release. it's full get of actively pilot the potential and doctors from understanding with gone patients we're And to working this. to

John C. Kreger

more one just And Great. follow-up, Thank question. you. DSO then another

I you say of U.S., there's relationships you've XX in size of that's at those understanding. maybe at my got many with How the would think this least point?

Joseph M. Hogan

with the and I'd relationship we have Aspen Well, have say have I Heartland in that John. sense, say degree probably of them. with wouldn't to over we XX% we a contact

in So work make obviously our we're and on really want we But DSOs work sure we we've now are organization execute focused to that we put well agreements in list on a on to and place an these. (XX:XX) right the that. sense together to put and really with do

John C. Kreger

Great. Thank you.

Joseph M. Hogan

Yeah.

You're welcome, John.

John F. Morici

Thanks, John.

Operator

you. Thank

Q&A hand to over We the the our have remarks. Allow back session. for of closing me reached floor end

Shirley Stacy

This today. Well, concludes conference thank call. you, everyone, our for joining us

you have questions, contact great If Investor Have follow-up any department. Relations please our a day.

Operator

today's concludes This you. Thank conference.

participation. You may disconnect for your lines at your this time and thank you

Align Technology (ALGN) 25 Jul 182018 Q2 Earnings call transcript