ALGN - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to Align Technologies Q3 2019 Earnings Conference. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Shirley Stacy, Vice President, Corporate and Investor Communications. Thank you.

begin. may You

Shirley Stacy

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

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

set expressly presenters and results information to statements, expected product any the financial reminder, Securities including a statements These fourth are only in about forward-looking that outlook Actual Align's risks forward-looking statements may forward-looking Commission. and are predictions As and today events, with most forth reports obligation that uncertainties our Exchange more detail the significantly, vary and results for of assumes quarter recent future the will periodic no XXXX. involve include Align in the filed statements. the and discuss update

quarter our for Quarterly have conference including Results. posted and files to corresponding slides third refer these information. more XXXX We on historical statements, website Please financial call reconciliations detailed our under the

Hogan. CEO, Align to Technology's that, over and call like to I'd With Joe? Joe turn the President

Joseph Hogan

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

few a up back questions. and call Following to I'll key summarize the open points that, come and

third record quarter the was in by were up as highs product revenues, across For pleased as reflecting report I'm across worldwide. by QX, Asia for growth driven up to Latin portfolio well outlook, doctors of earnings and our both across continued seasonality, growth off our Pacific America, continued and driven the Invisalign down for teens active second total a region, better-than-expected quarter. XX,XXX doctors of The year-over-year, young above volume volumes and the expansion in board. XX.X% First from trends scanner across increased by portfolio volumes American and services business X,XXX year-over-year, EMEA saw and patients we XX.X% improving a regions QX each reflecting orthodontics the Invisalign as summer adoption using sequentially Notwithstanding customer especially channel. and Invisalign North the iTero base, the expected new coming which record Invisalign

Now the let's quarter results, starting specifics our around Americas the turn region. third to with

Americas. and adult in American of that starts the doctors growth momentum the For promotion by orthodontists. typical new XX% had market over year-over-year well comps. Latin 'XX, QX X,XXX approximately X region, QX Recall to offset in strength the on X we adult a seasonality America teen drove growth tough was in the Americas trained X% and as sequentially for American summer of QX, points case region, we In up as teen in case the in investment in QX fourth First from North was Invisalign we're into volume from seeing of quarter, lower North we Americas seasonally from utilization volume overall, added by were was resources the the QX, in Latin sequential Americas doctor, nearly American patients. growth saw throughout the for North per reflects XX.X improving cases sales quarter American in QX driven our region which the good at basis, volume increased trends a and North teens the growth On and half Orthos doctors. Invisalign where American improved reflecting beginning Invisalign GP at year. benefit

continuing further the ramp year. existing progress up, we to remainder reps would of the expect and over New are and

comprehensive than We also including DSOs. QX led and remains non-comprehensive in an GP Ortho and volume by had grows Year-over-year, the products continued region channel America, Invisalign from Brazil. both was the driven important channel DSO The non-DSO strength and by practices. the consistently across Latin faster for growth Americas channels, continued

Invisalign pronounced XX% Asia region. volumes new expected, treatment. momentum more year-over-year business, increased in summer led in volume in teen practices growth by reflects and the the segment growth QX were Invisalign EMEA and in base. doctors from the holidays most customer trained expansion international with QX our up in Pacific in across In the we XX.X%, U.K. quarter to product On for -- portfolio changed QX, portfolio X,XXX broad-based were seasonality QX continued Asia our across Invisalign of strength countries. volumes the first product in Pacific, due the the by over reflecting strong continued year-over-year as a partially of our lower we our from in with momentum internationally, increased For half reflecting Iberia European basis, In down XX% China, half, back volume sequentially sequentially EMEA, especially Invisalign Invisalign Invisalign Go offset with

serve markets continue site order well, our In Africa. of acquisition, strong expansion reorganization, centralized across QX, for as sales for by our order as we East as key Eastern to growth also We local and corporate structure Netherlands support. a Poland. acquisition the the and part Europe and EMEA Central from see reallocated facility This Middle will led and to

location markets. and will EMEA for of Germany, support markets planning also we'll treatment their support all country this except offer to Spain addition, to In continue where local

by Invisalign China For year-over-year, APAC, QX increased Japan. Greater and volume led XX.X%

sequential APAC teen momentum cases expectations. China, growth QX growth We continue in to continued dentist, a basis, and of especially from Korea. up volume continues strong year-over-year, from from was On especially for adoption and Japan, which GP Go in XX.X% to Taiwan see Invisalign where Invisalign exceed reflects

We from marketing Invisalign Teen to results ANZ well and Invisalign also professional as programs, First of helping positive adoption saw which in drive are Edge growth. and increased as Japan Taiwan

quarter, treatment support to reflects the time zones. the we our remains business huge better commitment providing During opportunity local for customers our Yokohama, the in continued doctors Japan, and APAC and growth Japanese and local across grow investment a region. planning opened with we language in this scale Align, our support as facility

continue braces to worldwide. up replace growth represent kids portion largest metal orthodontic market treatment of huge the and to Teens for Invisalign a the and make opportunity

addresses patients treatment while with treatment old, mandibular doctors segment. X addresses aligner Invisalign we First first X as X and cases in this for move the roughly same clear years, to helped Phase continued patients at orthodontic Over past young more the each introduced help grow teeth of the is worldwide. of Invisalign is aligner the as have case advancement for teen growing X treatment to Invisalign forward straightening time. product products product clear utilization starts year. years increase XX% mandible the to only the innovations treat with designed features XX% and specifically Both and

an kids old aligners. increase started all have especially and teenagers younger patients years China. as aligners, with X nearly as clear major across Invisalign treatment million XXX,XXX used adoption reflecting Invisalign young teens Cumulatively, regions, clear continued X of QX, XX.X% year-over-year, or In

see X.X reaching unique a visitors to of dental In QX, websites on worldwide consumers, visitors million XX to strong total Invisalign continue engagement million date. over we for with

slides. engagement approach and key to and the with Our metrics activity and included interested drive brand to digital practices. Invisalign teen show continues in are increased QX Other marketing quarterly awareness teenagers our into Invisalign

paid launched addition, over new launched XXX reach North media a paid TV key the across robust million at beginning and search channels social North quarter. the channels all with media broadcast, America campaign consumers, was combining to The connected prime and media. strategy campaign In we cable of for advertising a American a across with

still marketplace XX% searches the a very shown KPIs have more the Concierge consumers. few and weeks, service. a from strong positive cycle, response momentum in While and all than from in last metrics increase scheduled and the Smile in Locator we're Doctor In seeing early leads with doctors our new in

Finally, XXers, looking the professional to teens, as and to Align work, announced the be Carolina Patriots. Hurricanes seen, many where marketing sports of brand relationships evolve to relevant Francisco Raptors, England potential for recently including ways is always play. they may Toronto have New we you the marketing San the patients with and several our live

years, us ways and of last families Over a platforms. marketing direct to touch and brands few an gives engagement through fan omni-channel individual bases loyal approach and variety large, reach access fan points. multiple to brand existing many have helps teens and brand Partnering whole through consumers to the who engage of a own with evolved fans their with programs variety sports in have us

same power right awareness of practices awareness With engaged team us: as the we create Invisalign is doctor in partners, winning And the smiles. for Invisalign the to consumers markets. and for always, their connect treatment demand and the with build can for goal

includes all Invisalign adoption XXX,XXX in For including was doctor and reflecting down DSOs. DSO XX.X%, customer important iTero celebrated XX.X% with dentistry. X.X expected scans over their million sequentially recently up nearly add is of is large offices across year-over-year, digital XXX month. scans started per how now services QX, Cumulatively, as were growth to their digital and practices, highlighting continued and revenues Heartland million largest millionth our scans iTero of one and up regions partners, scanner revenue the enabling Year-to-date, have scan, reflecting Dental, continued and and across channels, XX orthodontic U.S. which scanners. iTero iTero workflow iTero restorative them

case a Use and to for positive of Invisalign Invisalign grow iTero catalyst scanners for continues remains submissions utilization.

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

Within North cases orthos Americas, American submitted were of by submitted the XX.X% digitally.

expand to doctors' them to practices. more Invisalign address needs continue the their enable adopt easily in portfolio and to treatment We iTero

first we August, to our the Align's China continued with The iTero X exemplifies Element X in advance In in in Element commercial China, in produced of China. and the digital made investment facility launch Ziyang. dentistry iTero announced the innovation scanner in manufacturing availability

comprehensive Dental. announced further enables family force to with Zimmer leverage Biomet September, distribution extensive customers to services for and aligners sales key annually this the penetration collaboration, iTero global and direct facilitate clear iTero dental differentiator drive approach. treatment in Element the know ecosystem practice agreement to a access clinicians evolution their The education. digital a market. scanner doctors help to exclusive dental us an network European Zimmer of the In in We of Zimmer we intraoral Through interdisciplinary ultimate The becomes and platform to a Biomet and Institutes, the the of to laboratories intraoral that the clinical restorative outcomes. through also the in scanner a of environment, offers scanners trains and iTero Biomet U.S. clinical agreement iTero Dental's global which growing is Zimmer goal in improved used scanners interactive collaboration the digital Invisalign learning of Biomet thousands with Dental

Meeting at Implantology EAO iTero at were Portugal, Zimmer Oral Japan the scanners in of joined Japan intraoral also and the We Society where the showcased. in

over John. that, the With call now to I'll turn

John Morici

Thanks, Joe.

was favorable a our quarter million, and in year XX.X% revenue third Year-over-year for the results. corresponding financial prior Now up growth quarter the X.X% QX was regions. quarter from up Total from for the all revenue $XXX.X ago.

of approximately $XXX.X ASPs. million $XX, Invisalign growth promotional regions, unfavorable discounts QX by XX.X% QX ASPs QX partially and offset ASPs On sequentially geographies increases foreign $X,XXX, shipment all volume aligner in growth a most discounts. to offset higher basis, strong aligners, sequentially promotional all up Invisalign by channels all ASPs. primarily due Invisalign clear Year-over-year up primarily of customer geographies and to in price to up Invisalign were revenue reflects clear higher reflecting and $XX and increases price partially in revenue by exchange. growth were For due year-over-year across was regions,

-- Total were of QX point year-over-year. sequentially X.X% cases shipments XX.X% up XXX Invisalign XXX,XXX up and

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

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

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

scanners scanner higher sequentially XX.X% expected, Year-over-year, down strong by another off services of Our revenue QX, revenue base up was lower reflecting and increased million, driven for off third $XX.X ASPs. and was volume. and a revenue services offset quarter partially installed services higher the by volume XX.X%, as coming higher

margin. gross to on Moving

the offset by increased by approximately due overall quarter flat to higher sequentially, margin year-over-year. margin offset partially up year-over-year and sequentially due quarter increased case, due primarily and exchange. per XX%, margin X.X manufacturing partially seasonally was down X.X higher Clear aligner third and X.X margin Third X.X Gross for aligner was by lower doctor for gross year-over-year, Scanner margin aligners points to points per gross aligners impacted points higher down gross ASPs the up unfavorable X.X primarily case, foreign XX.X%, ASPs. gross training. year-over-year, was was points increased and Clear ASPs was due XX.X%, points down sequentially X.X quarter to efficiencies. points primarily to third

year-over-year. up benefit $XX operating to litigation QX expenses up the of million, sequentially The Straumann $XXX.X XX.X% reflects increase million second quarter. the XX.X% in were the recorded settlement and sequential related

benefit the go-to-market $X.X Additionally, the store the with reflects third and leases. campaign geographic American million increase includes year-over-year Invisalign a from termination leases. offset August, our our by of partially brand-new -- the the and continued Invisalign in North continued investment early in investment expansion quarter of activities, consumer store launched a from benefit R&D, The our early termination advertising in

Our third in in lease from as the primarily decrease in third an margin, a activities, partially XX.X%, decrease margin by operating and to year-over-year. geographic related terminations The Straumann year-over-year $XX the to gross by X.X of points and Invisalign million benefit in leases is resulted down our in $XXX.X lower our QX, investments store offset of go-to-market operating earlier, recorded benefit termination margin attributed settlement early third partially margin increased offset quarter to Invisalign the primarily quarter. points operating down in benefit the The related the million store to and in sequentially the expansion income the the million X.X is of described $X.X quarter. sequential operating due

$XX.X quarter Operating margin The and basis. million decrease down approximately due $X.X investment income year-over-year the was the equity was to our flat during year-over-year $XX.X points the by quarter. in of impacted to related Interest, a third million, the and gain sequential foreign sequentially for exchange. X.X other reflects unfavorable the expense SmileDirectClub second sale million on

tax to rate tax With our provision, quarter third regards was XX.X%.

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

sheet. the on to balance Moving

marketable September primarily entities. flow million million million the is U.S. XX, equivalents prior XXXX, due offset QX both $XXX.X balance which $XXX.X operations, of repurchase of our cash, million approximately X.X $XXX short- securities, shares of million international used investments, partially held cash long-term million our of increase from As cash equivalents Of to were cash and to and accounts by million, the by was our including cash, quarter, an from and marketable stock. held $XX.X in million, was $XXX.X receivable $XXX.X up was securities, sequentially. and $XXX.X approximately X.X% higher

sales days, was year. days X X days last up QX overall Our days and sequentially from XX outstanding up

cash defined for quarter third from capital for expenditures, flow aligner were to million Cash year. up facilities. and continued our amounted for $XXX.X compared the flow operations the third cash million. in less from capacity as to the expenditures quarter primarily Capital increasing Free $XXX.X $XX.X was prior to third $XXX.X quarter related million, the flow investment million, operations,

into XXXX, common We was million agreement, stock, of and repurchase a repurchase an price $XXX shares X.X we million $XXX.XX total XXXX. which of completed an share. accelerated approximately entered our During of ASR, received stock for in completed QX average to of per September

We repurchase have repurchase available the program. under remaining for XXXX $XXX.X May million

the with a continued factors view, all has to across our into With turn let's build outlook the and starting momentum demand regions. inform our that quarter, solid was QX QX, QX and that, outlook. to

expect doctors from EMEA, to up reflecting as across uptick come back sequentially, For QX summer international, we be holidays. strong volumes from

expect along momentum increased American with as reflecting we new well earlier. as country the media consumer and campaign, Ortho volumes advertising our key Joe in across launch of GPs sequentially, QX North to as Americas, the and spend growth For markets up be all described

the We expect up regions. year and to iTero across purchases QX of investment our equipment be to growing in in iTero sequentially business the capital reflect end business all

Invisalign expected up follows. XXX,XXX shape With to is XXX,XXX the approximately this XX% the of quarter as to volume be range expect up to fourth backdrop, to XX% a we in year-over-year. as cases, case

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

Our $X.X SDC compared QX contributed no the when aligner quarter volume same year a million about SDC assumes to revenue to revenue. to ago outlook supply

We to to of the margin in be expect compared QX QX X.X QX manufacturing range as is volumes. XX.X% margin improvements efficiencies gross expect higher gross associated with to points continued XX.X%. up we in our

We $XXX in range to margin to expect operating QX QX expenses in be should range million of $XXX the operating XX% of to the be XX.X%. million.

of is exclusive Our Diluted expected to repurchases. XX%. share to million, be effective $XX.X expected tax approximately outstanding any rate approximately be shares is

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

addition, to least market QX. repurchase stock million open In at in $XXX we our the expect of in

QX expect $XX As million, we be we to operational million $XX continue approximately depreciation to to efforts, be $XX amortization million. expenditures for expansion expect capital our we million $XX to and and

XXXX, turning Before our Switzerland. you back the will to headquarters I reorganization. on corporate On want Netherlands to entity our call move EMEA January the X, Joe, update in to officially

Our regional, operational local network existing the EMEA established headquarters as commercial the be across and will for new supported offices the Swiss will all region. serve activities of by location and in

and entity, corporate Technology iTero of services B.V. distribution assume for the sale previously and Invisalign Technology in EMEA, GmbH, responsibility the intraoral new by system, Align associated and will all scanners provided Switzerland Align Our Align goods

their in been hard ensure stay to I whom company on to will this working doctors, all employees local global major Switzerland to suppliers dedication thank for want a have our not employees, but transitional decided Our work our in have supporting needed. and transition many supporting smooth of very and of initiative. as diligently teens roles while and to relocate

team and business it EMEA have our helped to this Switzerland. never make excited overall to change, in the members are much is of While have especially very who we kind new about build easy contributed our operations success, impacts so it when

call turn back closing Now Joe comments. for to I'll the

Joseph Hogan

Thanks, has a thanks carried us joining board across John, solid APAC for with that the over and America and today. in momentum increasing QX was our Overall, into for quarter call us QX. North

As guidance, to . can growth end in with volume from XXs. you our Invisalign year see high rate growth the is full mid the XX.X%, high the implied international of from

enormous the Overall, lead opportunity comprehensive of in numerous with confident our to our drivers growth adoption market. ability and and a our customers, doctor our in of both very with increase to business remain globally. remains digital vastly to underpenetrated We ahead orthodontics strategy dentistry the healthy in execute Invisalign treatment evolution

With want Las again to joining seeing our I Vegas. look that, you for upcoming in November call. you GP many meetings, including forward in at thank financial conferences and the Summit Invisalign of Operator? the to I

Operator

[Operator Instructions].

first question Crédit comes with Erin from Our Suisse. Wright

Erin Wright

the you are you terms marketing spend, marketing returns from just fourth the America, about contribute the that of we based fourth higher volume will And North kind far? as I expected? media that this, from of level as in on how the stepped-up you're In so of seeing and as I quarter campaigns OpEx trends And spend into the accelerating the spend thinking to XXXX? be should momentum into guess, the guess, quarter responses seeing well the

Joseph Hogan

recorded, doctors have from service Yes, we a handling. a that Joe. actually and a Erin, they're service tell locator them of Remember, customers certainty real or the those have we're which into searches, takes and degree them primary can high concierge think that directly concierge they'll what directs the is you convert Invisalign. statistics doc to when about it's then you we we large take-up seeing, as just

same Americas expect the is we of put we sales the improvements additions quarter, the force investment. fourth the seeing move too into and also with together. our in As the Also you're amount

sales it the we As of usually least months, takes traction we're year, X at with force, some months, at X the said kind to that see too. of X the beginning to seeing

to we from think, the added momentum and advertisements America are both we standpoint really that North contributing So the just salespeople, reported. a

Erin Wright

of China, Okay. in quarter us just that great. that then you're be what just had given you the around the you some in give commentary previous geography? could Great. to there, update particular. you in seeing softness on the Can follow-up, And an market, speak that my If across would

Joseph Hogan

-- China in in Well, we the momentum throughout had second we quarter. that our the continued we when quarter, the reported announcement

think second the growth I had in China we So quarter. XX% in

the them acclimatized, there. As uptake. become had we good move quarter, just more into while We've trained in takes seeing teen a actually XX% we're in have in and to also. China upper Overall, season effective range. a them the also. China third good We be people hired we're XX% It

China. momentum good we in feel So the about

the made right we I growth some a economic have slowest there we the reporting situation reported that now headwind the too. we good right adjustments But because we've seen we overall, think XX it in to have continues, years, the growth think with in quarter, focus the there right know there. continue we've second and

Operator

with from comes question Steve Wolfe next Our Research. Beuchaw

Stephen Beuchaw

were actually sure different I'm want One and where was for number ask a there'll commercial had around Do about couple going was the seasonally think things. doing disruption with in operationally, the product in I'm go key sure make Invisalign but iTero be you given move things you a coming saw what trends Zimmer, like of to I I a effort you for the a force a it's of the quarter, actually is questions quarter? quarter. launch a there I you during this, so was as in iTero so, sales iTero about terms direction where the see normal to a know appropriately lot region. time any in a wonder, other the which lot investment and on -- significant there

John Morici

look if it's on year-to-date -- No, you at XX%. -- for it's disruption. mean, up we basis, a I there's Steve, iTero John. are no

good is we year. where have to of happens so our going very far by ecosystem, this critical but very to some have timing we iTero the feel where to feel iTero going that front quarter. It's is. But fluctuations you're business, You're digital by good our end quarter, and very

Stephen Beuchaw

on but transition -- sorry, you then here, couple what might One of and costs you you a an for Netherlands the rate could going as between you the duplicative change you can us operations Switzerland much the that on been Joe, the could speak capacity and I got is John. have carrying Europe, operations leaving how for the might to out in And Okay. be be margins? tax time I the facilities' over gross And mean utilization update give organization. you the going then on think to what if for impact wonder of manufacturing is domicile forward prospectively

John Morici

Yes, Steve.

In that terms in of we the and making of to that we some that of have make changes simplify organization changes other it's the many we tax to really had light create. the in EMEA, and and structures of

that simplifies that flexibility standpoint. So from our bit an from to look happen gives globally. at to entity some -- changes tax us it little standpoint things taxes and to a It

there's feel always we're be up. a manufacturing to see a Treatment From to forecasting. about globally to China putting about planning productivity, and ramp made where standpoint, our important the manufacturing, investments very gross now transition more sense. more would us. we're but we become they as that period in And the customers. facility and it margin in We've a lot of and very that continues That's good that makes closer that talked we productive, what we've and terms

Operator

from comes Kreger question next Our with William Blair. John

John Kreger

all or money And health curious into if worse? your on getting of Align the spending is that to I'm what's net bit about models or -- be proving SDC, direct-to-consumer-oriented think it going the sense competitive sort you of detriment of like the of benefit a awareness this orthodontics consumer a weigh some versus as you the point? little any better a Joe, underlying at shifts? to Is

Joseph Hogan

think your is, spending you right in out other do orthodontic and from it now look John, we an too of specifically. see survey Align up up picked spending all, we at in when consumer good it you standpoint. that stands people mean, when I first picked I

the far have advertising, driven, that brand also. of done obviously, As do how think raises consumer a consumer and that as more No some we've awareness. I that's competitors that, into lot question. DTC put

answer Internet consumers to go try to those to answer try too. questions. They'll to the I think go the to their questions, doctors to those

John. can't I deny, So

competitive our a advertising all to and I think some extent. sense does certain probably that boats in advertising raise that

John Kreger

one way the North quick about over to follow-up. your X? American flat has drive year kind that next And or best of your thinking among What utilization over the last GPs Great. is of then higher The years. the couple been

Joseph Hogan

think know First John, I all, you of that.

been us with long GPs XXX,XXX year. You've a we add so year. of for them, We of numbers each time. significant every train them many

end you in dilutive sense. so that effect up with And a

for to identify time, just them be a stand product, well cases, system those like system. I X.X% this. when one quantify workflow that it confident It front do needed qualify X that their we our but GPs So workflow. because this It really their for your fits groups. work help reported, thought patients business, do force talked and that from them. it we being as approach good own with I over always to we back the a it's allows X.X% numbers different But the things in It's about around a is think multiplier think works to DSOs, really isn't is: they obviously, they their have iGo of They a is like for to behind we way I this a before they're quarter-to-quarter. with learned DSO to question, a product can you patients in that with and that years product, handle these training strong we've one,

better become overall, So right working systems, right us products, too. -- penetration, it's help to drive with DSOs that

Operator

comes Ravi question with next Berenberg from Misra Our Markets. Capital

Ravi Misra

hear Can okay? me

Shirley Stacy

Sure. Yes.

Ravi Misra

Great.

of the about third flow-through we us quarter? could not fourth margin, question pricing uptick the quarter, good of in I the a you in in seeing why think what quarter a on pretty it gross aren't seeing, to emerged we looks the pricing like given think on at a too just was gross ASPs. just aligner the kind more margin the for help fourth So clear if pick why quarter, that aren't much maybe the And

it a second pretty I quarter, that. think about lot and that's would last you be with the quarter, better much than even said

do take So you feel ability in to confidence price your here? more

John Morici

Yes. John. Robbie, this is

discussed, our up be to third also we've price in quarter, see I ASPs. mean, that -- the we've plant in manufacturing to our closer treatment taken customers. to As show We're and in up you and investing

change said, continue benefit. ASPs, you volume you able a offsets that $XX come $X,XXX, we'll gross mentioned, guidance, when third QX. sequentially down and a mix was in like -- reflection QX, see The quarter, to continue And the these that, of there to was productivity manufacturing I is -- comprehensive was standpoint at from at sites. about We from see forecast much of up high In not more our we that in will were talked increase really It's QX. Sometimes that to about margin. to in expect which we slightly. a good the at think we look as it QX. When to from

think, that as about take is very when to So go through which we've flat consistent be, year. we as down $X,XXX, being we to it'll we QX, talked it closer essentially this

Ravi Misra

or just the with just then if on implications follow-up if And provide you there teen confirm in maybe the some can to maybe could color. I a comprehensive, squeeze Great.

kind that that growth market, of pricing? comprehensive XX% the the shift -- with How cases? mix few penetration should be good we should you've doing think more the about the like at you a quarters. right, as get That looks deeper on As guy, it last been here

Joseph Hogan

clinical growth we're mix right. it's and marketplace Yes, our Remember, we Rob, XX% are good a way a teen say. our still all teen globally, -- below you're we're entitlement, teen cases. utilization Joe. Today, almost but shift. rates handle really in growth I It's above would the can reporting standpoint, Yes, that from

that in that address a mind, able all with really is So be It now. teen good how primarily ortho It's that to marketplace. ASPs is we long though, think marketplace a the portfolio it our works. We on term, we right mix-up. And comprehensive a patients feel an see as about. about to counterbalance in it primarily

Operator

Stifel. Next is Block question Jon from with

Jonathan Block

Joe, maybe first for one you.

this call growth on there cases got that it, missed quarter. sort with any And And I've plan acuity of month, then this any then comprehensive pursue but aggressively non-comprehensive summit comments, follow-up. channel? a sort to lower the Just I GP more of is it versus through next approaching maybe

Joseph Hogan

obviously, traditionally I part with EX, line goes with our mean, is. all these XX% like more way. introduction iGo, product mean, products mean still that that quarter, adjustment a I thing we of comprehensive made of products. I Yes. our of But and Lite, portfolio from the Jon, EX honestly, been standpoint, growing faster this, comprehensive this has other the on an

small numbers, we large of growth in that law versus increased numbers it's area. see but Now do a

a channel, When what of do kind we look GP as kind we to way that. look GP of do at get call we to sub-acute at patients, a the at base the channel a patient on

on being iGo the allows I also. a also last that. So mentioned as do does call that us to Obviously, system that Lite

quickly well. GPs line, you'll iTero, that finish just but not really to closely to So when able on the increasingly adopt significant Jon, to the critical working be growth. treatment how system planning drive are they'll that hit the really and product have finish think on Those with us, channel, with know these to also GPs do to that variables they'll confidence focused see itself and but the cases, they we give X we about

Jonathan Block

reorg year, Very of Or is it that that a then sort maybe John, Is the follows helpful. this is And still question it X%? to sort of refined is it. there Got X.X% or in B range? number? Ravi's. on for just that And part up then

probably Just in globalizing QX, is the specific as aligners more per supply the to because it asking is per event. gross of to case headwind? with aligners case, that more headwind? supply the the it continues a chain that QX seems flattish that but be Or 'XX cetera, is of et sort possible, margin as teen, than event globalizing a I'm 'XX And chain, a more

can So detail helpful. give gross would margin any be more you around

John Morici

work The when and doctors much more as at, with more end end that's those impacting and up our gross Yes, look doing more so Jon, it's our doing, do comprehensive really and term. First and more globalization Invisalign both. you we're margin. we and up short that teen on, especially aligners grows complicated being cases, I mean, and as

you our customers improvements. capacity as you very, more close is Treatment planning, get more getting said, But we manufacturing. As see scale to very productivity that, critical and and to us. there

Operator

from UBS. is next with Caliendo question Our Kevin

Shirley Stacy

Kevin, you there?

Kevin Caliendo

Yes.

grow you first And then that overall we percentage? you one. shifting Sorry, and revenue as I increases how trend, seasonality think the That's is Did the apologize. should internationally going And quick as take quarterly forward? a growth, at the price case as same did international domestically? about just looking growth sales trend in

Joseph Hogan

Kevin, Joe.

it's same. pricing the yes, the On about piece,

and I globally think increase price versus on the But there's same mix board. Lite some the basically across comprehensive. tucks

revenue the growth, On of it. seasonality the

in this kind the the out thing down in you I of where China it's that GPs for one, think a you period in past. North come for Europe, the that the time, third move biggest business side is you got is, teen mean, couple lights obviously in tend to into on biggest compensates a there's other think quarter, and vacation, But for can I season September. you of and trends long in really of basically America, go back decline. go then mix the for us that And then of,

the are we say, or have business. countercyclical So I would movements that those cyclical the in big,

Operator

comes Our next with Leerink. SVB question Newitter Richard from

Richard Newitter

I Joe. have two,

Just the first one.

that gave comment there? And follow-up. I taking the on quarter could a the what have the I anecdotally just if you that's the was place. of seeing last last Anything you Just of and on and on little be might into in saw bit quarter, out from doctor-directed you're trend current what curious surprising quarter those? or the you -- on from you seeing competition different color some discounting you're a field what

Joseph Hogan

made to third with and had do that Richard, start North on from some saw actually the endpoint. and doctor-directed comment primarily quarter adult -- last improve actually young DYI with stabilize in model order to that quarter to We the segments. an of I America kind and

momentum in good the right there. direction saw actually So

Richard Newitter

DTC... to as more might to be traditional the referring was the And recently trialing. there improving, some that competitors what That's referring not just I Okay. started you're launching products where

Joseph Hogan

No. in that, quarter both. had which in we that versus we we Actually, what fundamental traditional second but quarter, we in competitors saw are there, to, quarter. no mean the thought the change what third I'd saw them the I we last acknowledged say there's out

Richard Newitter

say And the -- on trend sitting you the Joe. ago, conference in plan see What the your you some from foreseeable with picked just call. quarter. it quarter? the for future. versus America what maybe third were takeaway last And just improved of months is greater Okay. long-range directional I you right of China, China the today that level have in sense kind were would that trends kind that then more call on say, this top would Clearly, line of at that the get as data kind China quarter up visibility and you Is have growth your points focus. the particularly where fourth you confidence into you than those last relative XX% to now of North in X time hand in

Joseph Hogan

second be hired come in what be of We China kind pretty season we to hold called in move the said I'll able I'd comments Rich, in looking shaped teen that is quarter. for that this my But the what We've to forward. thought to business We're We a keep to salespeople. and is much lift. China. the year. up going be say, would the take

better just execution taken the have visibility of quarter-to-quarter. had that with Actually, some the I consumer took in standpoint, so on And the about second ground, we it I we're good we've on good that operational we an the result steps the that pressure demand the seeing we feel visibility, think we quarter, a China same and to we we in steps have say for that from reported it. think

Operator

Brandon Our Couillard question from with Jefferies. comes next

Brandon Couillard

a housekeeping the the Maybe on with mandibular Joe, approval update any share of And U.S. in as for color the us the then uptake of as scanner? couple any XD just items. can timing U.S.? you far

Joseph Hogan

FDA detection feel is XD the been next best piece from on forecast a you, scanner, tell year that through would uptick part Early and been carries my we Brandon, be standpoint, confident of world we'll or cracks teeth in get able -- be has here. good. the the The sense. FDA, could in has terrific. to to the I see around XD the deterioration the

carries can't the them really to aspect so infrared to a without changing a see that it's see And really in GP clinical way been be a able practice to you near technology.

it to excited America. excited North really actually get we're So into about And that. we're

Operator

question comes Our W. Robert Johnson Baird. Jeff next from with

Jeffrey Johnson

into of China, and normalizes kind to to talk did that in that. as go the that go call, to to want all as of like, tailwind and would sounds But adds back just this you've patients the I other next quarter teen and last see that said you sales adult force with some on some you're Joe, quarter efforts you lose of good starting fourth that you kind it area. traction some

-- there kind at think, above, you look where in you of brought recent going given XX% these from or that the that number and some least XQ, that again QX this kind of forward, of quarter we should So here, our at somewhere up efforts? is from baseline as should be

Joseph Hogan

think quarter China. we did third well Jeff, in obviously, we the in

had We're of too. But we growth, of good teen some out was there. season Some the season. teen it adult actually, obviously pretty moving

As about, fourth the we has been going into the talked momentum good quarter too. there,

the or Jeff, China be is the we're continue in planning, second be as there. is hey, wouldn't we're whatever, growth largest to treatment We we be investments market As market manufacturing feel a make goes wouldn't the us. that growing making, putting far wouldn't China to that putting with. over We unless baseline, going we for

forward. What about have you think think So to way going it is I Jeff? that's it, the

Shirley Stacy

on. Hang are. you There

Sorry, what you did say?

Jeffrey Johnson

said I hook quick tonight. has a Shirley got

on you for thank follow-up... for So a the keeping

Shirley Stacy

we're ahead. we to Well, can, but many go trying get as analysts to as

Joseph Hogan

[indiscernible] that with She's about upset

Jeffrey Johnson

doctors want I But do I'd numbers. those states or your Illinois an to on the the as or to combat provide? and can doctors fan, there of comment your be with really some it's where understand on that point Joe, you quarter. enact other you Obviously, doing ask see you Are third what of angle? for be Just direct-to-consumer some competition? in are number are success of try as Is in of that kind to helping in your that seen Well, too channel what of combat that. of anything any price you've like kind hurdles to to direct support kind I'm at? interested, need I early having won't sure they you kind some models channel these all to doing that. of kind

Joseph Hogan

having in. or this think when think people a people about teeth thing, we things all, -- of center of X-ray, through majority the about, that think hang doctor on from or orthodontic out talking the there first treatment patients I that in moving a an understand Jeff, you're are in bone, boned go of seeing having you're going should through not. indicator teeth gums. you actually pretty just They that don't the what's And that actually teeth is think bone good if

straighten asking mean? tools They're of how coming have And then I'm able right many which in, dialogue after with a price said, now. to my they're patients And Their we they're are now does as to far we this patients. "Hey, have as as product saying, anterior in. lot these is their what being doctors with to really workflow about can a we tools, talked the trying platform from and you of I teeth?" more do and for me? point is What can go really iTero questions hearing iGo is as possibly what GPs, to products sixth more your them in confidence What's GPs give the they and iGo, can sense that with educate have for But with in patients. we having that of more more and that really previous caller the best the are

been States say our initial has would United push I that significantly. in So improving on

a that. strong what focus obviously, see But Jeff. rolling Summit, it out have that the in of areas around very focus we'll the we kind GP we're You'll area, have at and

Operator

Our with Elizabeth next from Evercore. question comes Anderson

Elizabeth Anderson

of my this you you just rising of the up -- like just point has at know in sort bit if inventory A quarter-over-quarter lot wanted But but guys seems was to comment been something were rise on else little It to quarter? that? or if was I something could that know if it been taken. wanted the there questions in behind year-over-year. have a in And what doing I just ticked

John Morici

the ordinary. nothing manufacturing at inventory, rise loading volume is Elizabeth, the it's look fourth how from quarter on the the side. the it's a standpoint. John. we in that When the this you really And really of of Really level really and much anticipation out And the third manufacture we quarter. we primarily is iTero more that expect saw in

all that's is. it So

Operator

Piper comes from Jaffray. Our with O'Brien Matt question next

Andrew Stafford

financing. options on any the And asking expanding interest that is you This Matt, past, demand in hearing consumer I more on a touch to Drew wanted little I for congrats from it quarter. would you've bit further? about and on through you provider. for program Are you're have in know customers a third-party talked there? nice and a working

John Morici

Yes, Drew, is John. this

we Of those patients into can to course, do whatever help consumers we a to at to try doctor. turn want

those well, down financing understand try to of And working how of consumers, the much not as so give places in payments friction, a more just with other monthly is we're that the companies, So but some piece U.S. to to what are, options remove and it. on.

those that progress, new friction So that there's can see help, more consumers. ways making there. lot remove we'll of do and that a you'll we again, some some We're to coming be for

Andrew Stafford

provide chose on then of you Okay. early on as just partner you sort why on? some maybe And them be the a maybe Zimmer, geographies the deal of focusing thoughts you'll than some could with on

Joseph Hogan

Drew, it's Joe.

at to implant supply history Zimmer, When really and company needed to an of out iTero there. digital They pleased the actually have one the end, you standpoint, what leaders as from a front of the that really that's partners. look them we're On them. they're

implantology, put time, start conjunction dentists to has modern that a sense in for want line period space. of do that product lot of remove if in. there's to mouth over the with in not is and that, fill a at to creation you our place at a look enamel to look teeth out you kind treatments move tooth a your more of And that more implant of space When take of often when like to is that,

didn't able So allow separate and less that if invasive it to spacing. an able to for to you lot account would using implant a aligners to be those than be teeth be be

about many strong So in it. mean they're overall, us we're China. the obviously world. over places, all excited I including They complement so

the well And starting think off so excited sense we're partnership, a the we we in reported. about and of all having training really that we're pretty and

Operator

Bank. comes from Our next with question Barclays Valiquette Steven

Steven Valiquette

increased about to dentist, consumer the the one whether here, the results or also, the improve overall? spend, to of these to basis was Align I guess, the even points sort just any And of not death everything. of of in improvement? if I'm doc Or on China program cases per marketing really any rest over of things you variables but on relative centered there, of on it driver was Invisalign when even as it force, beat GP, do investments stood bit some just the little data on then curious of absolute out China to sales a sales you or have sort an talked did in Go you So high-level the

Joseph Hogan

GP say in here. be do you we put improvement, consumer mix into effort, and ones, efforts, properly two That's But point of which would we those we're in unfortunately, you, sold it's add I the too, force we're really. variables when really contributing an to the are Things our a focus them just and place. those a But we're that, you arranging weigh think, for in also. the increase on variables. just that equation a of But can't binary I multi-variable moving Steve, also. aligners. that big sales get -- to are then think I'd X

Steven Valiquette

the Okay. color per What in on doc cases China? Any about that?

Joseph Hogan

No, Right have ramp in we penetration any -- that lot on to as say driving as look give doctors we're it now, just a I'd you training don't want it's we're up color of to China. one. there, at we and

Operator

Nathan from Our Sachs. next with comes question Goldman Rich

Nathan Rich

quick two here. ones Just

ASPs. on First,

there something can you forward? level Do of of ASP ASPs factors kind of year. we disruption any think that in And $X,XXX catch-up XQ. think was in going key the then like follow-up. highlighted the kind forward? at post a guidance you wondering think benefit And John, as put about of the you maintain would if quick to just for just cases you very be that that quarter, can through talk kind kind I what of just ClinCheck would going you

John Morici

first really with start was no because there one no catch that benefit I'll Well, that. up or from

that in -- hit we quarter quarter. much wasn't that an As had the said minimis. the second of de it's There call, really affected effect

really an impact in the third there So quarter. wasn't

going be takes. number and of In and terms are. talked puts there's ASPs, what puts times we've to about takes And those a of

internationally, in had quarter, at As growing we we are comprehensive ASP. grow a higher, in comprehensive, third strong higher quarter like the ASPs generally a

also the in But can have well. significant then growth that you as stage, low affect the mix and

The would be thought relatively consistent. offset. it we that would takes fourth said saw third quarter takes thought Notwithstanding and and in would puts year, in puts all guiding we've look quarter. what as we So the are we at any kind offset. FX we we the and and the things, changes, And of that

Operator

Michael with from of Our next Ryskin question comes Bank America.

Michael Ryskin

I'll brief. try to be

it some options? response follow-on the doctor-directed docs docs doesn't if from you discounts was time. what that increase, some advantaged the therefore, on on move if third in of from some to in this Because weighing got biggest really First, up highest was in also qualitative maybe full I in it sort absorb getting you've feedback results just there? one I got paying quick the the lower-tier ASP. are the are of quarter. but more improvement that quite the show maybe or you've And the of Obviously, and, numbers, close some some divergence the maybe realize that any -- quarter-over-quarter versus the some pushback price docs can wondering the of utilization nice your saw other price was

Joseph Hogan

Michael, it's Joe.

John I our I will us our price. raised want margins is exchange the sometimes, it, the analysts But obviously, like follow one the gross about aspect, of before, piece, remember, think meaning we some up. thing But going down who fluctuate. said whatever. ASPs ASP On to go ASP talked we

it than a counterintuitive, line. have higher actually it's products product gross comprehensive but lower-end Our I works. that's margin how our know actually

mind in that keep think, I mean, I going So forward.

on of a just see standpoint down, are add lumpiness as that trajectory John, those your don't lower do gross end? an some way. you heading from start separate to you If that X ASP want for anything take margin. It's And

John Morici

ASP, starts that us. market be those all at we offsets, the but we a way to are And trying low from going we in that that help have but to you're cases. can we're believe so And those expansion we like is the market -- to at said, teeth, case at simple product look some have some that as incremental products lower-stage that going of the from business lower more expansion stage, cases, all grow move and but traditional way the a orthodontic the for complicated to

Michael Ryskin

prepared sure the you how just January disruption and you're it's follow-up next bracing preparing you -- XXXX, in of your in remarks, headquarters on make that? the that for How mentioned early going year? EMEA expectation on into are Any smooth the for expecting transition a quick business sort move in to some to And you turnover personnel. are

Joseph Hogan

a staff We of years Joe began about to sense, it's did in Look, EMEA, which we X fortuitous big in decentralize. a had out Yes, was ago, did headquarters It regions to specialization dictated we needed business again. back that we Netherlands. it's what and of what keep relatively to lot and headquarters. small because then, a the had at do the really a

three the it into countries, last years, Germany moved that Spain out and France and really Over moved the and areas. different into we

I those we take real feel so And embedded has that good in will through. countries some talent continuity really them

hard that a there's at big, I talent it for Now to save, all. business to don't lose want but that headquarters overall see being we're disruptor big we some don't working the

John Morici

And year. this going -- on all something been this Mike, that been has has

who's clear how so moving as We very things complete it's come transition have very a happening that to and X, plan, January are clear.

as the to of we've in the this the since hit it's we feel these talked we've and ground good that, XXXX. calls beginning able move be that running now about about the plan So have talked we really about year, and something on

Shirley Stacy

for everyone, This you seeing you, concludes to look upcoming conferences thank and, in the our at We joining Well, call. November. conference GP today. course, us forward of at Summit

Homick Relations. any questions, contact please If follow-on you in Investor have Madeline

Operator

conference. This concludes today's

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

Align Technology (ALGN) 23 Oct 192019 Q3 Earnings call transcript