Earnings call transcript Q4 2022

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Operator

Greetings, welcome to the Align Fourth Quarter and 2022 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to your host, Shirley Stacy, with Align Technology.

You may begin.

Shirley Stacy

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

for Joe Joining CEO; call today's me is Morici, and Hogan, CFO. John and President

on via year We approximately website our through be X website will XX. Today's available X:XX being telephone financial X:XX access and be XXXXXX. fourth is investor.aligntech.com. which full month. call code by webcast the issued dial p.m. same replay, To February time using results available should XXX-XXX-XXXX telephone A dial quarter time will access replay at today XXX-XXX-XXXX should for audio Business p.m. conference Eastern on archived Wire, International approximately is our XXXX callers and on callers code. the Eastern access domestic with

today in available on periodic involve the forward-looking more detail update statements. described Commission uncertainties and results product and in obligation reminder, information include sec.gov. at Align assumes and website statements Align's are may no discussed statements risks reports and forward-looking the and provided only Actual Securities forward-looking expressly future our will about a predictions and to filed significantly, outlook. events our Exchange including statements, are As that and with any recent vary most These

financial Align quarter these under full website information. and year We Please reconciliations, including call the our fourth on for if results. historical including our files have our posted detailed reconciliation refer corresponding XXXX statements, And GAAP to more applicable. non-GAAP quarterly slides to conference

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

Joseph Hogan

will of a fourth I'll performance more joining from on detail our Systems financial and and X few provide operating comment Services Aligners. quarter us. on results Thanks, an On XXXX. our thanks discuss John afternoon, Clear call and for views Shirley. and segments, provide our our QX highlights for and today, our overview Good

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

to quarter regions, You'll note environment more remarks especially EMEA parts the Americas that well fourth report reflect for in that as shortened their doctors for I'm a of than stable Q&A. patients to our formal order the results in we have quarters, recent and as leave pleased APAC. and time Overall, more

orthodontic trends in iTero in patient consumer traffic QX, For interest scanner for practices treatment, improved. and doctors' demos

year However, of revenues the margins on unfavorable effect reduced exchange fourth XXXX our full and our quarter significantly. results foreign and

$XXX.X Aligner slight in quarter Services the reflecting Despite impact Aligner total exchange, shipments. million, and Clear of Clear year QX, and large QX that sequentially. of volumes increased increase is sequentially in Systems the This unfavorable revenues a our as well growth from a foreign first revenues increased as in

digital one We orthodontics XX-year an product and and XXXX in we'll our the year to remains in will technology cycles of and Align, we our history. anticipate stability everyone XXXX in Regardless, situation that and but untapped hopeful large As through fragile. an the we'll move confident innovation macroeconomic continued improving new largest exciting new operating remind commercialize that begin opportunity are restorative we at be dentistry. market environment, see for for

$XX.X approximately QX The were revenues XX.X% and sequentially by were $XXX.X revenue On approximately foreign Systems year-over-year. impacted and X.X% or million unfavorable constant million Systems Services X.X% basis, Services X.X% of exchange up and QX million currency and a of or sequentially down $X.X year-over-year.

EMEA I'll intraoral driven detail as deployment program well as programs certified sequential of continued shortly. growth continued sequentially, more describe desktop what call by growth increased regions, initial scanner Americas sales scanners, in XD. of of revenues we a Services with preowned, rental and CPO that scanner Systems rental our and leasing metal, in also especially QX the iTero reflecting growth reflects the QX, For

partners, transformation natural base which digital We and business opportunities and DSO progression scanners large to of our equipment for needs our growing capital is to develop the a meet sold. new with customers, continue equipment of a

products, opportunities introduce portfolio emerging scanner provide we increased markets. we our to the and scanners for customers to expands refurbished As for new make to trade-ins upgrade

We as environment offerings want rental such sheet leasing continue and way the current our selling our customers help in leveraging rolling out by to expect the and programs macroeconomic buy. to balance customers that

On revenue, scanners. field a basis, a QX services primarily subscription in number due increased year-over-year of revenues to increased resulting larger

adoption leasing of of We programs lab also related our help accelerate largest Desktop iTero the to to systems Element a dentists. To and Flex we to revenues Desktop non-case dentistry, collaboration strategic mentioned. in announced general in restorative serving U.S. one Labs, the rental supply QX, scanners digital scanner had higher orthodontics with Metal previously the networks

labs The traditional and digital preferred technologies. to desktop and the directly with desktop will of labs offerings simplifies restorative design restorations iTero the a now Element connect and digital both dentists Flex suite that for manufacture scanner from is

being significant files Our see We to printing collaboration their printed workflows a and enable XD order advanced Labs offices. Desktop with or to Desktop we market. from Metal commitment reflects opportunities data evolve can in to expect expand our for relationship digital use ready used dentists scan that restorative will services directly to restorative to be

as In customers Desktop addition System to about scanners, iTero of extending Exocad the Align Labs' Invisalign Platform, excited to and Digital we're including well. benefits the also the software

APAC volumes in by or was year-over-year. and volumes or regions, sequentially, X.X% Americas million basis, of were growth slightly down $XXX,XXX of sequentially XX.X% exchange of and QX, slightly, constant On X.X% $XXX.X up foreign sequentially Clear total Aligner Clear by QX QX Aligner reflecting $XX.X impacted million China. currency million offset revenues the a total were unfavorable Aligner X.X% primarily for For Clear EMEA in year-over-year. down revenues $XX.X lower and

by especially patients channel. were slightly teen lower higher For sequentially, down Aligner QX primarily starts increase the QX. Offset season an GP reflecting in Americas, cases, the typical ortho Clear compared adult as from the to dentist in volumes teen

For Clear outpace continue to from volume QX, Aligner customers. customers DSO non-DSO

wide across EMEA enabled in had dentists of Express, treat in to and in the are For products, range Iberia range broader Invisalign's markets a malocclusions segment old. for treatments and mild-to-moderate a a Aligner with volume of types especially for launched Plus as France easily of practice. iGO market iGO Clear continued a sequential all Moderate, recently EMEA, years as growth as available GP which demand which well packs, QX can cases, Invisalign teen be in sequentially treatment and integrated first restorative case kids in and Invisalign X Teen strong young dental increased as

in sequentially sequentially Taiwan, led Asia lower APAC, quarter. primarily Aligner and Japan, In Southeast to India volumes were impacted continues ongoing Outside lockdowns to of Clear persisted throughout by by increased QX, QX volumes be the and markets. APAC which China, China China, restrictions COVID COVID. due

On reflected Clear Taiwan led by increased year-over-year Korea, Aligner QX a basis, Japan, Vietnam. case India, and volumes shipments

China the time COVID restrictions in infection needed restore population and downward rates the the more of impacts COVID to While from recent encouraging, and confidence. many are COVID lingering trend the the easing and including across uncertainties in consumer remain, effort

Vivera training e-commerce, down quarter For a the education, year-over-year. digits other non-case programs and new revenues, sequentially as accessories, as such our subscription which Retainers, up double include were revenues such and clinical fourth retention slightly and our products DSP,

products, relatively e-commerce and unchanged QX. retention were QX from revenues For

other and our programs like sequentially expect subscription-based regions. in are DSP, DSP year-over-year with offerings We to and increased continue expanding pleased which

et seasonally of as in decreased being education Brazil. Invisalign the slower with primarily for trainings holidays, as trained total China fewer clinical cetera, fourth new For number period due doctors sequentially QX, well a and to quarter

Clear significantly was for worldwide treatment trained our of This opportunity of in new orthos. Aligner largest represents offset by the segment EMEA. market Invisalign orthodontic the numbers to higher and somewhat Teen largest doctors is orthodontic sales

specific team markets. sequentially Invisalign We X, braces continue all and and First on programs features, gaining was up as to share focus through product traditional kids, young sales as from marketing for across metal including which

to teen of total as primarily COVID team North sequentially down to China America were in cases Clear in well impact Aligner as QX. due starts seasonally QX, For as compared fewer the

tracks According to for of the clear more metal are pool put and approximately digital to between to report, go cause which improved practices new patient A significant failed slowed adults orthos wires more patients adopting have slightly. workflows, aligners orthos and believing may pressure traditional teen teens that December braces in understand patient in the the especially new brackets, profitable. benefits on while and them those Canada, efficient exams and of X,XXX exams States QX, for smaller United potential gauge

basis, In was QX EMEA, teen case case year-over-year were starts. QX record starts relatively a unchanged. a On quarter for teen

the For unique children results I. QX, needs Clear X for year-over-year addressing First growing First regions. positive to and increased Invisalign was across Phase Invisalign strong of designed Aligner young is while treat experience a as as from and all treatment predictive

record approximately year, kids For XXX,XXX the Clear Invisalign the young cases shipments a XX% and full mix cases, for overall teens shipped for aligner year. was our teen of case Invisalign was

in impact included major 'XX was shipped doctors primarily of number our a and China total decrease QX off the a onboarding XXX the QX, America. COVID due which point, to slight in North Finally, XX, in doctors, of DSO high

the we shipped treatment doctors Aligner Clear possible over number to year cumulative the XXX,XXX outcomes of For Invisalign safest patients. for highest and our full care trained to for XXXX, to doctors, best the treatment commitment doctor-directed reinforcing also achieve clinical

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

John Morici

Thanks, Joe.

$XX.X comment our a needs. Russia million million on included operating million operations other of charges, restructuring terminations fourth related during included in $X.X included of $X.X and through of and total the to in charges Restructuring of of XXXX, other $XX.X lease which we I million quarter to certain in QX financial asset and the expenses. of results. go million in severance-related $X.X business incurred want X net I Before revenues and of impairments, costs QX primarily and items results, details light was other of our charges, cost rightsizing in Restructuring and

for long-term rate. tax for to changed non-GAAP In provision our XXXX, tax QX non-GAAP projected we rate taxes. income a Second,

nonrecurring effective our methodology items. management effective fluctuating that rates for company's calculating rate. rates certain not included are non-GAAP of the That does tax previous tax reflective period-specific and tax long-term effective produced Our believe

taxes. to non-GAAP reporting have reflect this tax diluted recast income net Effective each net for XXXX change. for share in results and per provision We income rate, as for period income did We the change not our results. non-GAAP effective in computation XXXX tax reported make the of methodology for any immaterial our results changes to to XXXX rate the the for was reflecting our

information. Refer for XXXX in reconciliation rate for section Recast a press financial non-GAAP QX to prior to further GAAP periods titled our measures unaudited under change the for release tax in

were quarter financial the sequentially $XX or $XX.X X%. QX a quarter On or year-over-year results. approximately million basis, impacted revenues a approximately million down XX.X% unfavorable foreign from up of for X.X% approximately QX exchange from the fourth year prior were our quarter the Total and million, constant for currency revenues $XXX.X and approximately Now X.X% XXXX ago. by corresponding

XX.X% down For were year-over-year to by were lower basis, On ASPs, mostly and offset and QX flat ASPs, Clear lower due from Clear partially Aligners, primarily higher primarily a sequentially, revenues lower volumes volumes. non-case $XXX.X million Aligner QX offset of by higher revenues revenues.

exchange, For reflect QX, sequential flat ASPs a ASPs mix year-over-year. impact were foreign by offset product and for the higher unfavorable aligners treatment sequentially additional shift. from comprehensive partially and Invisalign decreased On basis,

the exchange, product foreign On higher comprehensive and a in impact mix shift offset aligners discounts the year-over-year ASPs processing partially additional unfavorable significant by basis, fees. decline per higher of order reflect and

a ASPs For for decline noncomprehensive sequentially On higher discounts, unfavorable exchange foreign reflect the sequential basis, ASPs QX, aligners. in decreased by offset Invisalign treatment partially mix higher impact shift, additional from and product and year-over-year.

order On impact basis, discounts, per the foreign higher by mix processing partially significant offset fees. exchange, ASPs unfavorable reflect product aligners higher shift year-over-year additional and decline and a in the of

as quarter, continue our for As some from other do not last account focus globally, metrics shipments to case ancillary we only revenues retainers the that mentioned and growth. products historical overall expand of grow on our and subscriptions,

will our which that increased In be and million our $XXX.X or revenues on earnings release total case X.X% and indicative are will Clear as per overall shipment, balance you growth Clear our sequentially more Aligner's sheet Aligner up added aligners the slides, of see recognized million or strategy. we've revenue the shipped. year-over-year and financial XX.X% deferred $XX.X is additional

by impacted of to scanner sequentially, lower exocad ASPs due volume ASPs, to Services primarily lower down to scanner $XXX.X partially higher foreign programs. million our revenue and up related our and or and were revenue partially were and revenues unfavorably installed preowned base approximately of rental from larger of X.X% and volume, were year-over-year primarily X.X% services offset XX.X% due $X.X leasing and sequentially. revenues, and Services and approximately services revenues offset higher scanners by XXXX certified Systems Systems XXXX QX million by QX exchange increased nonsystem

$X on million sequentially and year-over-year of the up basis, the and recognized X.X%. be sheet System up balance service of foreign revenues On deferral included primarily and will revenues unfavorably increase approximately scanner purchase, revenue and over ratably was $XX.X the sales or impacted Services a million $XX.X or exchange in million service or due to which were deferred The Services with by the X.X% XX.X% the Systems year-over-year, period. approximately scanner

Moving Overall, and gross quarter margin gross on by Fourth X.X gross down margin year-over-year year-over-year. unfavorably basis. X.X margin. X was on points X.X impacted sequentially points foreign by exchange and our sequentially overall revenues point to a points XX.X%, down on approximately was

a ramp volume. mix ASPs, operations and spend margin the year-over-year, for by X.X at fourth to points up point gross costs, facility we partially Poland higher to fourth increased manufacturing was Aligner and higher quarter costs. lower due training primarily was for improved the Aligner quarter down additional lower margin Clear new lower ASPs of continue warranty X.X our aligner XX.X%, down manufacturing manufacturing restructuring sequentially to as and in Clear absorption due offset gross and

for Services stated down inventory ASPs was by and previously. and revenues and inefficiencies, X.X due XX.X%, quarter points manufacturing gross the and to was the freight X.X for offset for margin higher the partially year-over-year fourth margin and points reasons Services costs. down fourth quarter gross Systems sequentially higher lower Systems costs lower services

proactively QX year-over-year. activities, million, and Year-over-year, manage and spend and $XX.X $XX.X were well our by higher restructuring down $XXX investment continued operating other as partially X.X% due restructuring of X.X% consulting up sales R&D mainly and by to compensation, up million, as charges. offset our to in sequentially expenses with due operating a basis, sequential expenses to and operating as along advertising efforts other expenses. part incentive and charges decreased costs million controlled were primarily on lower marketing expenses On

excluding sequentially $XXX.X On year-over-year. X.X% a amortization were up X% expenses related and compensation, up restructuring acquisitions, and operating and to stock-based intangibles other of basis, certain non-GAAP charges were million, down acquired

points margin. well by gross exchange and income in was impact sequentially and our by approximately margin year-over-year foreign points X.X operating $XXX.X operating exchange unfavorably primarily impacted operating The down to margin, primarily million technology year-over-year. of in quarter fourth margin to lower due of resulted go-to-market X.X as Our attributed in X.X X.X down foreign gross an and XX.X%, sequentially, points unfavorable teams decrease margin from lower investments is as Operating points.

income XX.X%, intangibles points X.X fourth the and related certain On other charges a points year-over-year. amortization non-GAAP and margin down compensation, million the basis, of quarter acquisitions. was of $X.X $XX expense X.X U.S. stock-based sequentially million $X.X loss QX compared down to a exchange other and Interest which Operating loss restructuring quarter excludes to in currencies a for gains due against of net and quarter fourth was the income third foreign certain for primarily XXXX, the the net and of from strengthening of in of to dollar. million foreign

due The XX.X% than quarter decreased low rate prior in quarter year. as U.S. tax in fourth tax rate The increase the in the -- compared in GAAP quarter in effective quarter effective to tax primarily XX.X% and foreign of and XX.X% fourth earnings tax on quarter tax effective the the of earnings. fourth higher the was the third rate to third amount an minimum jurisdictions was GAAP

non-GAAP Our change tax discussed and our XX% the rate was fourth reflects in was in effective methodology earlier. quarter that the

XXXX, prior reflect tax which change effective rate non-GAAP our quarter the methodology. in was does fourth in of the the XX.X% year in Our not

share down sequentially $X.XX prior to income net diluted down per Fourth year. quarter compared was the $X.XX and $X.XX,

$X.XX net diluted computation that down prior XXXX year-over-year. a $X.XX $X.XX to and sequentially non-GAAP fourth methodology the income was a $X.XX in year-over-year share income per basis, per quarter, diluted for our exchange. impacted foreign year net not basis effective rate. the the prior earnings XXXX year per EPS was non-GAAP by basis non-GAAP a Our the does or change and up unfavorably XXXX on reflect share QX Note sequential due $X.XX of share tax on for the On

sheet. Moving the on balance to

$X As million million entities. $XXX.X million balance long-term was held cash million billion billion, were Of $XXX.X short-term the by cash U.S. down and held our and and $XX.X of in marketable and December $XXX.X $X securities equivalents international down XXXX, year-over-year. our was XX, sequentially and

shares repurchase In million share October a stock billion share an through at stock $XXX.XX $XXX our repurchase May of XXXX, average we $X per purchased price under approximately common XXXX, program. XXX,XXX of accelerated our

We -- combination a market have either $XXX and starting through XXXX QX available completing this remaining either an accelerated to open million of of repurchases for repurchase or repurchases we this amount program, XXXX. QX repurchase under in the repurchase in plan agreement, or stock remaining

flat balance QX million, accounts sequentially. receivable $XXX.X was

down our approximately sales QX fourth compared cash quarter up days aligner cash for investment to to XX less from flow to operations related to $XXX.X primarily was the outstanding flow days, overall was $XX.X the flow, million, day and capital and were last X year. as expenditures capacity manufacturing as fourth million. Cash increase million, days Our amounted X $XX.X quarter Capital expenditures, Free sequentially for continued facilities. from operations defined

fiscal a We a $X and XXXX flow and with position exited billion investments, cash balance in sheet, strong cash no long-term healthy including debt.

while management shareholders. capitalize in on our and and ability cash the As announced of Directors concurrently earnings, trajectory new program. large our of capital a the returning stock This sheet has our generation strength repurchase $X $X as and our Align's reflects billion we flow to target authorized markets our growth confidence opportunities board's market $X in new with program our billion our to current as billion well continued balance to program succeed Board for

Now turning outlook. to our

in environment North As be we results America more pleased what and and our earlier, are QX with Joe EMEA. stable a mentioned to appears

year. we for We improving and continued trends are move optimistic the as stability through cautiously

and full uncertainty, fragile. signals, our macroeconomic approach. continued the would revisiting not the However, global including consumer challenges like in revenue demand guidance. China to year are in environment remains we given providing see improvements environment We in operating and And the before stability

are to time, ability our marketing, focus technology on for sales, digital orthodontics make in our same in intend restorative dentistry influence, the and We strategic innovation. market which towards strategic can progress we the and confident our investments to opportunity and things includes and At large, untapped we control initiatives.

For be full our we to margin material disruptions XX%. additional circumstances year our XXXX, anticipate beyond control, assuming XXXX operating non-GAAP above or slightly no

be to Americas due to to our primarily be and EMEA from to With Aligner QX rates. this due as We pricing anticipate we non-favorable be We sequentially, partially in backdrop anticipate down services XXXX, the QX and and some up for cycle. offset XXXX, foreign COVID, China more ASPs volumes typical from stability by Clear to sequentially primarily Clear favorable business follows anticipate down regions. a from higher revenue equipment Aligner and capital iTero exchange scanner weakness

total, expect in be of Taken QX to XXXX we QX flat to revenues about XXXX.

to non-GAAP make margin consistent QX go-to-market to our expect with R&D operating continue our investments be XXXX operating we margin QX activities. We in as non-GAAP other XXXX and

we XXXX, to capacity $XXX well to expenditures Capital as primarily as in million. exceed our manufacturing expect building For expansion. relate support expenditures additional and improvements construction to our capital investments international

to With that, back over turn comments. I'll for final it Joe? Joe

Joseph Hogan

saw APAC closing, with EMEA results that more pleased a Americas and and and environment their trends In stable growth sequential we parts the improved John. and fourth in of regions we're doctors patients. for in reflect Thanks, quarter the our

continued we'll remain, uncertainties China. and stability business hopeful especially regions, many see that the and early very still While across we're in

dentistry. in innovation and we're focus these challenges, through we to position our and our orthodontics to digital key in on technology continue furthers leadership restorative deliver ability customers As and that our confident work

helping and of unique around orthodontic investments transformative Align. a committed millions value We doctors transform digital smiles and business, Align the purpose-driven lives deliver are we change people world. through are balancing of is to to shareholder solutions to

both to our of we innovation. one making expect X platforms science. an room Over have from lot there of practices treatment. technology doctor-led with new improved and that and cycles X In and revolutionize the base and will of the that new But should patients for largest doctors' see material a new to in And In time faster. still doctors to last year, for product scanning, In outcomes. customer product it more our you continue clinical expectations software, both years, direct with next great simpler history. the saving us a printing, XD flooded deal is represents patients' in evolution

dreamt you look restorative These Invisalign We the before the of X to couldn't doctors your care, to more Thank make orthodontic for today. with focus next you platforms updating time call. earnings will singular and our a standard on give about excited tools of system forward be and only we it.

the over the I'll for questions. to turn operator Operator? Now back call

Operator

[Operator Instructions].

is Jason The first from with Bednar Sandler. call Piper

Jason Bednar

start the Joe seeing to with and on John, congrats business. Maybe point. that stability return I'll the

changed Teens little the If Could ago, sounds the has talk market you maybe summer that fall? about are in. saw what's you speak still part today or X you in the greater X confidence you visibility last led in could improvement. versus, sluggish, sequential to of forecasting? maybe where but say, to adult months versus have also a maybe the demand holding the What to you sat

Joseph Hogan

Jason, it's Joe.

I of that obviously, environment. reserve lot situation in economy China a have unprecedented more Mean was the macroeconomic ways. all, think put a you think in pretty really XXXX federal Europe, Ukraine rapid stable the rates situation, of increase when First about we

a we're mean platform better from I sense. working So in that

today And shows partners comments mean the Powell's what all. and little they're a confidence I and X.XX Fed's what I in directing and to. obviously, it bit of on think, increase seeing they're

Jason, stable looking we feel say, We We're just standpoint, about broad for and talk our just from a to I'd good about a about platform those an good feel all So really operate economic technology from. from standpoint we portfolio. the things.

Jason Bednar

cost Aligner motivated still on sure shortsighted, that docs, profit seems of brackets versus the maybe macro like more and but mentioned you I and piece. for one maybe And wires regarding pick on a lab bracket maybe, up anything the related Joe, It to Clear focus profit No, It motivated else. fee. But wanted decision helpful. helpful. then than that's wire Okay. they sounds that's as definitely point

think Clear come it's trend volumes you market guess, take that do up picking going to with to do to what especially Aligners in back meaningful share back to to your to reverse shift end I way stimulate teens, more Maybe time really Or is need Aligners? can there free a convince towards bigger you Invisalign? up do with something on doctors back that chair to Clear

Joseph Hogan

a Jason, great question. that's

emphasize year. developments all, doing too. sense First that able are patient this being I in think from environment really a areas. because they'll and mean, have like help pick faster really in move launch a in won't before doctors patients that and that sense, do to economic about interest with what able that's best patient the they in trade-off through of that the traffic why a of be different cases doctors financial talked are A as stronger faster standpoint, software as being their patient will with severe products have But in throughput. technology lot where we higher sense like we're us because investments one to our significant in of the IPP the technology help we just we I in are alone and making And the to and

put And advancements programs in technology important. get together line, models those are help So doctors like over too. subscription really business our how really then digital we that those

emphasize, a But we on going stand able format that good to a So I'll market again, can that I feel have predict. we need forward. be in address sense the we and to

Shirley Stacy

Appreciate it.

question, Next please.

Operator

Baird. with Johnson Jeff from comes question next The Absolutely.

Jeffrey Johnson

weaker had on for like EMEA, want volume here. sounds guidance one, Americas Aligner stability couple Clear to that kind a It XQ. the I in ask in of it's questions because of press you guess, the and the just release. I China, Joe, just incrementally

EMEA. stability and of there China thinking to words in You mean, due primarily are Americas here? got this we hedging be should and your some baseline EMEA about at point and the in a that Americas weakness some in I the kind

the you standard year? know, play from any of assuming recovery you absolute do And hospitals I in for baseline EMEA? level a there obviously, can those away, signs or change Are a seeing product be it could pickup the Americas now think in early adult here, change big at throughout macro anything? of And volumes are or some this we dental some of that but and China, macro new kind

Joseph Hogan

of see we we first what Western just is from the Jeff, market what talked see That's about. the saw end falling That's stability. the us. all, on we we versus with economies front away before

I So do better of about it of uncertainty about And now when have the a right second that that quarters refuse biggest give lot China, think China has a is sick in number mean, forecast On point. billion we being market a weeks. I over the right sick feel been being it you now the people couple now, see incredible or stable. last over And Jeff, because of our specifically, see with to and to China which uncertainty in we world. in there

you, a good reflect difficult, about blur China we We our to for right the tell can it's for very and standpoint. States but first for quarter feel you we as stand in too. stability with So I EMEA to see try where we us now. don't a want the from now forecast I try what much words, to and just

Jeffrey Johnson

XD kind guys on using early to printing connect of milling milling and/or Aligners? XD of any work And lab doing Metal the lot printing is more want to the there just Understood. be to a questions look iTero or for things. ask it right short-term with sure them deal, there's Are about now, restorations. Clear all you here on that, going don't I'm for though. the I On to Desktop of you

again can carve of your printing you out of competitive just in aligners with kind kind that most of recent seeing thoughts Align maybe And as advantages the in us -- of of setting? we the update your start office XD kind on might kind when think and you

Joseph Hogan

restore different see really labs restorative good There's think how The in the with and role areas primarily things, I on. development Metal help strong Jeff, is a dentists. about general resin a Metals represents that, Yes, play, leads iTero that dentistry Desktop around too. a printing dentures, great that's sense. they're going a mean, Desktop lot play a restorative What types really can question. scanner with in of we is really our some huge and Metal XD you Desktop of partners

into vision often I XD that Also, one facilities. don't kind not see loss run aligners to of but that. of The better in about. doctors I'm mass lot ortho reduce trying restorative in being Desktop than where printing difficult. a idea manufacturing standard materials you we operation. doctors of orthodontic and XD amount procedures, order are are we'll honestly, doctors that like work from together And printing a standpoint. comes types restorative with their a have too, use of to STL feel Jeff, the that to our is turn trying procedures There's sense hard. processes of production much think and that actually with physicians it, offices a The I doctors of should tooth

Jeffrey Johnson

in patient try pain first that that in case as customer? deal Even lock to and really the to seal a

Joseph Hogan

Maybe Jeff, don't But productivity as changes some I to of it don't. things a stands will the that sense are that. different really technology Jeff, and today, believe a from I make have that things the just think there kind standpoint point, conversation. some

Operator

from Anderson Our next question Evercore. comes with Elizabeth

Elizabeth Anderson

fourth profile, there around? sales you sort spend obviously, quarter of could switch you you incrementally and of the if that with Do in in uncertain the this of that how demand wondering was about you're one, spend particularly talk that and are quarter sort the things -- of OpEx in I terms think first doing marketing environment? about, sort

John Morici

is we the John. always think look I what return right always looking Elizabeth, We're to at Yes, trying this on find investment. at,

And make some the to stability of see, where about see continue we of we'll as back some come more. we'll and investments. EMEA. we and we even markets to Like see volumes start Americas talked invest you come that back, as So in that's the stabilize

also we pair the had kind ideally, some to that make a be situation And at this we'll see stabilize look we there. as the come So and as trying And invest find we on continue where year, in last return investment. on right to could those in back, you'll based year. conditions. And to said, markets us of better we can additional investments of back

Elizabeth Anderson

the anything price sense. GP was per basis. would be commentary. was if lower And heard maybe to about I said, that, it or how of bit case that. that? relative demand impacting about of profile, I was I'd a like market makes maybe the about that on or curious could you that it color you up more on That obviously, Is sort point interesting get sort more just little the teen holding what something because that wondering a be talk

Joseph Hogan

Joe. the it's entire restate you I get didn't question? Elizabeth, quite question. Could that

Elizabeth Anderson

dentist versus strength GP prepared talked I think in basis on ortho quarter. of sort a the the the about in your relative remarks, you

is if wondering you that this of So I think talk about underlying you could point? was that sort of why more at why -- sort the about color

Joseph Hogan

Yes, procedure, someone we're -- that's a straighten. we think procedure like it, is an good right? question. this to have elective an When And teeth on have you go to so about to going orthodontist a

different With the GP dentist, things. constantly and restorations cleaning and is with there there traffic patient

procedures where to would are now more right just it's period. it's not period GPs an seeing area there, so elective patients an feel than we -- compare you when just ortho just And since

Operator

from Block The comes with Jon Stifel. following question

Jonathan Block

Maybe for flat. is price The XQ cases, lower Joe, services XXXX? but and talk revs one, increase the about X.X% lower first guidance you scanner John for can just or the

comprehensive So to do X.X%, doc clearly, But goes X about And benefits. to know, think realized that flows you we 'XX? we is of balance a I how X. X% x John, I or what XQ XQ ASP realized from the think 'XX levels the the when ASP, of think sort X% stays and plus about the or 'XX a, don't into on

John Morici

at good later. comprehensive. where kind the them get little of carry to of shipped the of that between and going order they way is price kind some then over look a cases it, which going to they a to kind because shift bit and the have same And you're XxX, right, have full John, mix you're That's some then you're

X% So about in X% quarter that to in that is first range.

ahead, Go Okay. Jon.

Jonathan Block

That clarify. to to the know X% sequential, John, XQ? to I'm was just XQ X% from correct was sorry, I it

John Morici

Yes, that's correct.

Okay.

Jonathan Block

Okay.

margin, non-GAAP for sequential we year. that improvement -- a XQ than of might modeling Do load of said XXXX? And XX% I the think the I'll throughout then XX% think question just on for about And for up here. just second each for sorry, the be op question, quarters a greater you sort the John.

And you. Joe for

you OM titrate framed it moving could how you economy, when spend accordingly? comfortable wiggle the as you do China? the guide still I a fragile room, guide, you're feel have Just suppose, in OpEx lot where on you've get enough environment. think you on How that with that going comfortable you there's us of a I OM parts talk to in what's on with got

John Morici

that that take years maybe have would John. start of get Yes, year. as you just you start in some the you question, like throughout leverage, as improvement prior margin on, modeling expect the to to I'll so that go and Yes, we you'll see volume

kind we point slightly through some model the you of said, that would as and total at XX%. improvement year the And it above you starts like to So see go lower year.

Joseph Hogan

and the now we before. we've what more stable on related that are what right John, than experienced And and we the think to confidence is guide macro OM what trends see some is much

So and we and a from we revenues and give that, total as manage it I we we know our closely And X. watch John have the costs, percentage take. are it obviously what and of understand

have adjust. to revenues So

this numbers to. of adjust But again, can the think I And know within are that We to context we given. we've the the feel in we have what stability, levers we business. to manage

Operator

Nathan Rich Our Sachs. next Goldman question with from comes

Nathan Rich

you very I up seem guess of kind in could wanted and technology on just about excited Obviously, about cycle ortho I starting and maybe follow commercialize. restorative that to to product comments your sort that Joe, vision. of of that of kind that market opportunity? help of type us terms needs that of and after to investment in to of XXXX kind come kind that kind go for how crystallize company the make in to the just you of

Joseph Hogan

we Nathan, experience? do can So you overall, better give just overall. and a brackets, Align always do the the that invention do for in faster, in wires it's we a And right? doctors, how how just obviously, we you business. foundation for But And of revolutionized them amount do on simpler we a we're and what we're to predictably, talked versus not we see is about of cases statistic, because do which orthodontics realize digital significant the is basically after, history spend R&D sake, for inventions we one overall make more it patients the treatment these script. how

X your that and On the do that remote seats to knowing visits as and monitoring, consistency And from do doctor. long patients we fast right? you were. going are do technology, through an average, teeth when and XX% cases You moving months you a through algorithms as of to do fewer that patient those land

whether through of those communications real year of year. last areas, those And part about a the so of things we a move reduce can doctor lot plans. these up the technologies AI scanning and first traffic Plan, setting Inventions anticipate a the of Personal and faster. between technology treatment all, because it's like IPP, in you scans kinds a of Invisalign really us get better every through AI, on X important I lot scanning, talked in that is sense

print a over teeth. can XD control you in top vacuum-form mold, we the always really And is of critical vacuum printer you really it. think been but printing. because When XD print the you which printed thickness I all you can't this the in of devices, don't lastly, XD mentioned, over XD top And we devices, as we're biggest grail form molds, as has holy wall world, move to

So just lot about we be clinical opportunity excited time to so and huge patient for experience, efficacy, able us of see take overall, all and inventions money a a efficiency increase we're to for but doctors and why it. that's these

Nathan Rich

just clarification. a then And Great. quick Okay.

a America. sequentially the saw sounds side, were cases On like North modest adult you up X% it and improvement in

APAC didn't EMEA. I you're -- was more North as of is of reference Western adult to talking when well. economy the hear more I in the guess kind America. adult dynamic as about was case thinking I the think -- in in that guess, I kind about

also well? curious in thing same you Just out saw play if the as EMEA

Joseph Hogan

the get Europe moon third I you out came EMEA question it. the and in of good I teens. from I great, right, call they right? side quarter go If We the it, -- was both in a mean, the third dark from good fourth They the quarter, always around, had that. But felt came adults quarter, Nathan, when we about

Europe. on side And and we so good in the the both teen side adult felt

Operator

question next Kevin with Caliendo comes Our from UBS.

Kevin Caliendo

to lot my there I that the really you that? that docs, you number to ship when this? I ones Like grown. this. there's demand been of docs harder the Because find X willing the with this that number just and is, the But a be docs users haven't registered number guess just to is quarter. even And is out it need that it your And over the always struggle competitive grown while. to doctors? last it's every is understand haven't with algorithm Aligners change quarters? Or in now? of suggest number And a hasn't are don't pressures? issue would a part expanded who do is I really why it Invisalign an question Clear X doing really down, of penetration of growth are the it keep Is do you Or as that doctors to there expanding of world culture could right in

Joseph Hogan

a on both mean, you're about doctors I side the on GP mean, and globally, I side. And the right too. that. obviously, lot expand orthodontic obviously, we

is We -- buy is And to everything said questions just So the China just doctors thousands right China you I'll question the the of sense we that you we give doctors, your word issue of point now. down. penetrated now. China, it's since right why escape of more on overall in your downdraft can't China. we it's no down. ship true. can't the can't the on There's one ship is gone it's systemic that's in to us to China being like answer

John Morici

doctors well doctors, new ship That that metrics X It's those grow as right. our is as key are utilization. equation your to -- us business. help And is

Kevin Caliendo

months do we've ahead -- see X Like consumer Can you're you increase? can you something the I months you need there point an Meaning far point? improving. see feel the inflection signals X been made can to terms quick really demand you see of guess comfortable gets or that? of to plan? need demand what about ahead see You like a planning? and in ahead ordering talk it demand? follow-up? to forward -- -- an to is see in that there's we're before can is can Or terms And look you I ask actually like it how of see far consumer in starting really real time, is to starting How it inflection

Joseph Hogan

look get freebies what at it wins. leading the hasn't like the can XD consumer make. that Kevin, things, when watch But there's are in we're we indicator we obviously, when would business, say we good squared of or XX%. overnight, what no and have we do closely we a indices And States Europe where real-time you confidence

the we they Now expect last they're demand both in what reflect slightly in have more so. see from best than or that confirming or in the, the in flattened can predictive they but Europe the a confidence think, seeing and month indices we're I what standpoint are turned out of positive we consumer States

Shirley Stacy

Next question please.

Operator

Absolutely.

Blair. Brandon comes William one from with next Vazquez Our

Brandon Vazquez

back are couple trying us, who ask a to of wanted to I to one go kind at. get to of

year? the in to XX% the and are stable being, how op that thinking you're guided little improving? margin sequential a of rather prepared about the Like of a need through XX%, The to that? in you Or of that say, year were improvements op full sales below drive now, to improvements above year do course, kind be should probably bit sequential even transient. through rest margins then You the question let's than deliver we if just you

John Morici

we and mean as things we change the us would environment, it stabilized better good give we start the from revenue an of as operating would I expect it's And go see world as a see would in demand that in we question. op get through a Yes, us to expect need year. as some sequential you to standpoint. some leverage margin improvement the help that

Shirley Stacy

Next question please.

Operator

Absolutely. The comes from Erin with Morgan question Stanley. next Wright

Erin Wright

Great.

better? see But not environment to follow-up you're from a sustained You continue do it clarify, saying to XXXX. that to question, guidance year-over-year you're a is slightly year are last just volume giving full get where to today perspective. a understand in in if position the is I grow the Just volume you or what

today subscription then customers driver contribution? question revenue how will particularly think that retainers. another as And you be when practice. for a on resonating And separate material that's of in And with curious the that, in offerings, just I'm do terms

John Morici

the world I a give volume. more things We change expect the color start play things can to in we're watching closely. on mean rest we -- I as out would the the and of around lot QX tried the year signals to as the of will situation.

sequential we're So not I we'll improvement total. the some expect the forward we year. for is getting of like But watch said, would volume it But you through -- as closely. go what into specifics

Joseph Hogan

in because retainers brackets. primarily of that the the program, at own are DSP up and for room their making orthodontists back was a Joe, on lot orthodontists or wires retainers targeted and originally, It's picking

but also to tapped with doctor And of becomes cases touch-up implementing also that before. referring that them end And they it revenue program offer them worked that you're program is many we of have patients, subscription so a is through think the because There's to from -- we we're now. we the doctor lot and the a signed what reoccurring our into do for a subscription that XX that's enthusiasm from out doctors less. about we aligners the haven't a in haven't obviously That's we well. too the up, I stream

doctors to And more so that this implement And our we'll with we working year. fully feel that. closely be good about

Shirley Stacy

please. question, Next

Operator

Absolutely. Michael of from Ryskin comes Bank The with America. question next

Michael Ryskin

on very couple a some just real fast. are of quick, Also

First, on China.

sort in there used And then what's go of BPP is the of tax assume I out we that on forward? or updated Or which ongoing? think [indiscernible] on COVID is while more, kind But is the word tell to you tax tax also you ask called Can it wanted just a any understandable. mentioned XX% rate, the non-GAAP on should box. you any thoughts kind situation rate you that on rate, going the I XQ, of the

John Morici

tax for rate On assumed is Michael, So rate forward. tax this non-GAAP going XX% John. the

Joseph Hogan

times, mean, there. BPP, about up It's our China, there, primarily in X, competitors. picked Tier over private the it some was We're not of that program it's several cities. It obviously, X over On really Chinese portfolio. Tier by I talked we in middle

We program will not The that in public sell the is exclusive hospitals. sense, too.

So like in we fine. may right around manage now feel China we can this

Shirley Stacy

IDS We to We look our AAO. you This including forward upcoming Midwinter, conference Well, concludes your and at everyone. industry today. speaking financial Chicago thank meetings, and you, appreciate conferences time to call.

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

Operator

today's for your Thank you concludes This conference. participation.

your disconnect You may now lines.

Align Technology (ALGN) 1 Feb 232022 Q4 Earnings call transcript