ALGN - Earnings call transcript Q3 2024

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Operator

Greetings. Welcome to the Align Third Quarter 2024 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.

begin. may You

Shirley Stacy

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

for approximately today being and on website via at Joe audio is Wire, which John webcast issued today's Today's X on and website Business quarter our me our available third results and We Morici, archived conference Hogan, financial will XXXX investor.aligntech.com. month. be is CEO; for CFO. Joining President call call is

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

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

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

Joseph Hogan

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

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

growth regions, services as mixed strong offset system as America by Clear Pacific, in Latin volume EMEA results and Aligner partially States. 'XX United year-over-year were QX Asia in well declines the Overall, and good reflect revenue

cite States. strong in Services [ up DSP and touch-up below remains China record third-party Total revenues were slightly well margin doctors similar soft the outlook XX.X% continued weak by Aligner and for of United were and 'XX our non-GAAP aligners in expected starting and our submitters, as especially many by a underlying year-over-year. Despite of and X.X% part QX year-over-year than starts a compared the clear million $XXX,XXX expected customers record sentiment States record increased and consumer revenue United research X.X% XX.X% case teams doctor operating sluggish XX,XXX market XXX,XXX of teen from year-over-year, in driven $XXX 'XX. more growth Systems QX to As Invisalign of the a of recently firms, was as trends. in QX treatment increased of in reported analysts volumes Clear record XX, cases. dental due XXX better seasonality a ] QX QX for to dental than pronounced revenues market, and revenues,

Latin growth American as and QX were The China, growth Aligners, sequentially. volumes year-over-year slightly down APAC, were and Clear For especially the from reflecting APAC in seasonality sequential as volumes and Aligner pronounced soft somewhat On QX, U.S., and a regions. down by Latin basis, in from markets regions. Clear American were driven strong by well up volumes in strength dental and offset Year-over-year EMEA the more

kids, by as doctors EMEA the up regions. In also and and sequentially doctors treating from continued X.X% X% growing teen younger known First QX, the from Invisalign and third Clear quarter growing Aligners an number the of in or record young of increase and over teens up submitting year-over-year, X.X% was growth during across patient XXX,XXX led case the and APAC treatment younger a Invisalign In started starts patients regions, teen year-over-year, segment, reflecting kids patients. especially with strength

commercialize the in aligns Canada. printed to continue to doctors, United commercial patients first Invisalign the appliance. direct shipments We for markets reflected Pacific we're States the Invisalign we doctors availability submitters system orthodontic steady transformative and During XD announced in Palatal more momentum in and recently Singapore, QX Expander, and Asia even and the availability across excited the extend their region. Expander quarter, Palatal to the

currently to non-case America aligners were available is continued expect and retainers. including and patients subscription up countries Retainers, revenues our XX markets We clinical training our touch-up or In non-Invisalign it in regulatory stages up be growth include includes to doctor to education, spending in and in due the certain getting North and future DSP e-commerce. cases retainers Vivera program, year-over-year, applicable DSP other Europe. approvals. Non available DSP, primarily case and revenues program, Invisalign through QX, retention in accessories ordered

Invisalign cases to up QX, year-over-year were DSP total nearly For XX,XXX touch-up cases. than more XX%

driven Docs XX Smile and The all our business regions. Dental. by continues DSO largest Aligner reflecting from QX volume States Clear customers DSO increased the doctors and DSO to outpace sequentially partners, across our growth year-over-year, United Heartland retail in

had strong from iTero in growth digital practices end-to-end their DSOs also We investing Scanner workflows. in and sales member

quarter up scanner leasing as scanner well Services lower nonsystems as and revenues ASPs certified was by reflecting revenue revenues business driven by XX.X%, increased scanner increased rentals services programs for and our preowned wand offset or year-over-year Systems upgrades, Lumina, partially higher another and strong iTero and QX volumes. CPO growth was

in technology faster comfortable lighter and experience. a and a visualization more higher a wider revenues Systems speed, models multi-direct and volumes. nonsystems a new super QX the and scanner accuracy, replaces basis, iTero capture The higher down confocal Services scanning delivering XX% and were has earlier smaller ASPs X.X%, scanning imaging reflecting lower offset field Xx technology of capture particularly Lumina's and one, On by sequential revenues, scanner XX%

followed workflows be for with QX, ongoing Element available of upgrade Lumina adoption wand iTerolumina Lumina is or Overall iTero by the for release on as the restorative by a the orthodontic iTero continue new market and Ortho pleased response QX. limited software standalone 'XX, currently as currently XD commercialization with to We of to very we the workflow the scanner expect with scanner. full scanner from QX end in from customers. begin Scanner

workflows personalized printing products, assessments in oral about records Scanner design in suite care oral in-practice enhance drive tools further and in to intuitive digital treatment new and options dentistry iTero Today, new reports. in esthetic health and selected to design treatment It that suite outcome innovations options health wide and markets. commercially in is multiple education aid oral Pro treatment we and for available multimodality with side capabilities with iTero XD now simulation Align health, restored comparison integrated dentistry. patient general simulator, chair announced treatment

Japan. Intraoral was doctors of recommendation variety patients enable to designers treatment making that Japan also received their side share That awarded international and Invisalign the to system is present in comprehensive in XXXX prestigious design doctors. the informed supporting Award this past X Scanner education for only award globally Intraoral choices experience domestic good care is pleased recently a We second The Lumina for supports in communications. of to their time believe years. deliver Golden recognized We're introduced great the today the and a and patient our and we and about helps iTero dental and making this design evaluation the options by Design the consultation Scanner treatment known award iTero patients, more innovations with and

works the through and and award recognition increases society. reliability of on awarded and focuses designation people design of companies, promotes problem-solving design of The significance the to

Before the and I announced reorganization on comment over to I global we John, turn a employment to restructuring. today call from actions want the resulting

These operating are annual valuable process, or Align's XXXX plan the to the As will actions, part difficult of and eliminated be identified other positions to employees locations. leave we company. transferred

part marketing Marketing for thank leave has eliminated, Raj the of to the -- in and we well quarter. years and and overseeing contributions X-plus we in he will past over product EVP and management as as and this the leave APAC regions, Align as Americas position wish Raj our and innovation As his fourth We Pudipeddi well. restructuring, Americas leading Chief been Raj will Officer, MD

and what doctor Frank in is and proven Align. With a I'll pleased Quinn deep be over means turn now I'm orthodontics experience, a our the to well-established into he's digital understanding Frank's digital to record rejoining customers with track John. and leader call insights key, that, to to a welcome customer dentistry. excited He's Align. for and focus back

John Morici

Joe. Thanks,

down Now million, impacted $XX.X the year-over-year for X.X% from were approximately year impacted our QX exchange ago. quarter currency financial X.X%. foreign were by unfavorably up or and not quarter million X.X% results. approximately significantly Total $XXX.X from for On constant the revenues sequentially basis, revenues quarter were corresponding third a by QX 'XX and a prior the

lowered foreign by $XX on offset product Aligners by lower-priced by lower mix Clear sequentially. net product exchange per million QX and For 'XX down $X,XXX case not offset discounts products Aligner were deferrals. geographic $XXX.X sequential net QX shipment mix, and lower were partially revenues higher was Clear deferrals. X.X% volume, partially revenue Clear Aligners, by to revenues impacted shift discounts higher basis to QX sequentially, primarily mix, significantly revenue lower due geographic a from of of

X%, exchange a approximately the year-over-year geographic the a million increases, U.K. U.K. tax be VAT higher and price shift QX and were in higher down basis, offset Product the of requires revenues lower ruling reflecting On discounts. from mix decrease Clear partially sales and revenues. higher $XX.X that in unfavorable Aligner lower-priced applied authorities XX% with non-case mix primarily was Aligner a U.K. X.X%, offset from reduction XX% or price along to foreign and 'XX deferrals a impact by the XXXX products, net of lower by ASPs to volumes Clear in This to QX

year-over-year increases. VAT case higher Clear geographic $XX 'XX $XX, product of and down due impact a partially discounts by was $X,XXX offset lower to $XX, of of exchange per mix, unfavorable basis and net U.K. deferrals price and QX, foreign revenue shipment Aligner of on

Three available markets APAC. EMEA Invisalign and and in America, product Three Our across in certain Comprehensive North is

Three We are adoption adoption Comprehensive of product will continued anticipate with the Invisalign continue. and the pleased Three and

want as the each Comprehensive our favorable revenues benefit decreased $XX.X or a Three compared million more which balance while shorter X% provides Invisalign under upfront, they to us and in and us recognized sales aligners Comprehensive turn decreased million X.X% allows recognize be will traditional with are product, recognized margin. doctors gross deferred revenue shipped to more allowing from deferred over being a sequentially Clear $X.X on to Three and period sheet contract. Aligner year-over-year flexibility additional or the revenue

due Systems offset were primarily and leasing rental our to in higher to offset were Services increased up revenue, upgrades nonsystem revenues, XX.X% primarily by down decreased programs and 'XX Services volumes. $XXX related mostly revenue revenue partially partially due higher year-over-year, to and million X.X% and lower higher QX upgrades, mostly by scanner 'XX and QX related scanner volumes. ASPs services sequentially to lower Systems fewer ASP of revenues nonsystem

million and XX.X% Services sequentially service foreign unfavorably revenues approximately $XX.X sequentially to QX of primarily exchange applicable impact duration the shorter services million 'XX scanner over On X.X% basis, Systems foreign Systems are ratably approximately down The reflects Services of to impacted service period. revenues, revenues revenue, a both The primarily of initial $X.X revenues exchange and which and approximately decline million contracts or purchases. and balance the by or year-over-year, $X.X and by recognition year-over-year down recognized the or year-over-year and deferred was was due deferred flat were the sheet Services X.X%. on Systems sequentially. in

to margin. on gross Moving

was year-over-year partially mix points by was year-over-year. points down due down sequentially sequentially overall higher exchange X.X points approximately significantly of to was margin up gross impacted X.X was spend. lower primarily not quarter by and gross unfavorably and aligners, for offset margin Third third margin XX.X%, quarter impacted X.X XX.X%, Overall basis. Aligner by foreign Clear on manufacturing lower gross points X.X sequentially a additional the ASPs and

year-over-year unfavorably quarter margin currency points was partially -- lower due to due basis, sequentially ASPs, primarily partially due Clear Aligner and spend. a offset gross third exchange freight gross by Services quarter Clear On points spend margin gross costs. the the for manufacturing X.X to and was constant Systems lower Aligner foreign offset by for third by down XX.X%, X.X year-over-year. was primarily margin manufacturing points mix, lower by impacted X.X down

year-over-year. was a costs. and up Services unfavorably currency year-over-year Systems gross ASPs, impacted and Services due service On and margin exchange quarter points gross by primarily to offset higher the margin by points third partially X.X basis, constant foreign freight by Systems was higher X.X for

$XX.X compensation. On operating increased million, million X.X% primarily and QX Year-over-year, million, sequential sequentially year-over-year. employee were expenses were compensation. expenses by down operating advertising settlements, and employee down a basis, due X.X% to $XXX.X operating and nonrecurring expenses due primarily legal marketing $XX.X up to

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

of an points and charges, amortization operating primarily quarter for by million the which $XXX.X year-over-year. an expense to $X.X approximately compensation, margin income up year-over-year. acquisitions, 'XX margin legal and $X.X X.X income points to XX.X%, for quarter was related $X.X and operating third of sequentially 'XX. was the X.X non-GAAP sequentially sequentially expense QX of year-over-year. On of exchange stock-based million, XX.X%, of operating restructuring, Our points Operating margin to in and point income impacted from net resulted down and of impacted in quarter down favorably settlements of million of of expense intangibles excludes certain QX was third an million X.X points compared other up third Interest a other foreign an X.X foreign X.X X.X and and basis, due unfavorably in points exchange

prior tax The quarter XX.X% in of third and effective in XX.X% the the quarter year. the the GAAP in third to rate second XX.X% quarter compared was

quarter tax GAAP position offset rate the increase in return tax due than adjustments related to rate quarter effective primarily tax uncertain third tax to lower partially small effective The filings, was a reserves. by second

third application issued of was to GAAP prior third in guidance to higher tax the a third the quarter rate primarily during year. tax quarter the rate related prior The effective in quarter, benefit effective due tax than quarter recognizing third year the the onetime of the

Our non-GAAP third our which long-term the projected rate XX%, tax reflects tax in was effective rate. quarter

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

share On primarily impacted favorably to and income and a for exchange due basis. $X.XX was net basis, on quarter, per a a the year-over-year. unfavorably due up year-over-year on by $X.XX non-GAAP EPS down $X.XX was by diluted sequential Our foreign impacted sequentially third $X.XX $X.XX basis

on Moving to sheet. the balance

XX, entities. As million $XXX.X million $X.XXX down was [ by the in $XXX.X cash XXXX, and year-over-year. our held and were and Of balance, our of million held cash ], sequentially billion up equivalents international U.S. billion $XXX September $X.XXX was $XXX.X million

common $XXX stock have January We available for million repurchase our our repurchase under of program. XXXX

Beginning expect a our an QX XXXX accounts QX accelerated was open $XXX $X.XXX common and receivable of billion, stock down in through market agreement. repurchase repurchase either million of continued QX we 'XX or sequentially. to into combination balance up to repurchases stock

approximately Our year. X last up overall sales outstanding as X day QX was XX days days to approximately days sequentially and up compared

quarter million. Free cash $XXX.X Cash amounted related flow $XXX.X $XX.X flow were million, primarily less as for third our investments for from operations flow, manufacturing operations and the cash expenditures in million. expenditures to defined quarter third capacity facilities. capital to Capital from was the

Turning to our XXXX outlook.

occur Assuming fourth we for following circumstances including control, exchange, the no beyond outlook business foreign quarter. our expect the

$X.XXX $XXX We billion. revenues expect the to range be QX of 'XX in worldwide to million

slightly and Aligner Clear 'XX volume QX up ASPs expect We sequentially. to be

consistent typical We Services QX 'XX and revenues sequentially Systems seasonality. up with QX be to expect

operating QX to margin than GAAP related XX% restructuring due lower be impacted expect We slightly severance to to 'XX employees. charges for primarily

restructuring impact these QX 'XX slightly points. operating QX non-GAAP estimate operating approximately will GAAP margin anticipate margin We by sequentially. X to 'XX We up be charges

as expansion. we million. in expect well to building XXXX, improvements of construction capacity primarily $XXX support and expenditures expenditures relate be fiscal above investments to Capital capital For manufacturing in continued as

them have responsibly. our to patients said while to treat the doctors managing we need and evaluate tools our and that As operations continually they best many with resources their evolve model provide business we times, help

our more closely environment. business Today's designed the adjust is with to align existing restructuring business action to

today announced we even year us XXXX expect the restructuring as full up printing give will for in accretion margin direct we XD next-generation scale our fabrication We actions manufacturing.

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

Joseph Hogan

our positive EMEA today I Thanks, John. impact Invisalign in next-generation workflow, of strong customers' in continued also was In services America systems software this business QX, on Latin for quarter, regions. QX released I'm another about strong and and and to Lumina QX Clear our be digital Asia pleased and expected next report and year. was Pacific, Scanner excited closing Ortho software Aligner the to with for restorative our

to growth other are we is in and States markets despite challenging, fastest-growing market. especially our continued weak sluggish outperformance adapting more that helped geographies. those driving balance strategy operating We demand United trends. For environment and regions are the understand and our in a consumer in dental

differentiate orthodontists It traffic longer many of for especially are become their we challenges In impacts our adult dentists and that the by facing them patients, and more practices, customers more than creating partner the their and high treatment. face and patient patients best that drive ever experience line. less profitability in is growth and interest bottom for products cycles, services of conversion approach practice way orthodontic treatment accelerates our important rates, improves and and inflation, the solutions to that conversion

smiles the digital the help it's engage customers and growth their focus As of in to the technology, our love. patients practice rigor connect they potential and innovation job consumers doing and to ensure these realize by have practices structure, more doctor full organizational opportunity this to doctors to potential that support leader and our to to get we with help dentistry

and our deserve. with continue doctors the tools business to to and evaluate best resources We provide evolve they

scanning revolutionize several in the and developments printing. that of growth that technology of the in for are the we drivers of will to digital are direct wave is leader the XD committed critical digital We're business. the innovation. and innovation excited we key Align midst orthodontics, and and believe next the the orthodontic the software doctor customers industry in of doctor committed to We're customers supporting are digital and supporting future future

the announced the that business. in get we while including and through our transform this, room we the us future industry key and our revenue in know operations. time The investments restructuring focused technologies, at investing drive enable XD take areas investments making and will today will printing critical We same margin on scaling actions actions to needed while that ROI activities for expansion our direct

I With time today. that, forward for over you our your updating coming on the look I thank progress quarters. to continued you

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

Operator

Instructions]. [Operator

from Our Brandon Blair. William first comes question with Vazquez

Brandon Vazquez

if are XXXX, about backdrop. worse bit in wanted comp from to can I just had weak. on curious macro year, a remember, little of which start in September year-over-year now. also the weakness sense. bit little just the period, little year, I get last a a Last already so things case talk did I'm in worse if doesn't things And little you make bit was a that the

talk guys crux just of that Is markets? have you thoughts you before? essentially us seeing stable? worsening? The Just it phrase going about any question I the is where Is into think macro year-end? on guys to is it end are used

Joseph Hogan

third Yes, quarter because tough Brandon, on countries I'd we say, a times. down the always have Europe with different it's is all, discontinuities of at being Joe. shutting quarter first different of vacation and

it's our the the just try markets, we worse I'd quarter is I say this say that the market. What last some you of quarter year. that could seems third call the third largest was one than wouldn't in be and one So seasonality really of that market kind as of United way out, most the year States to it in too. to affected was difficult see,

do that a challenge sense add also. to want in you And been John, so that's anything?

John Morici

great. That's

Brandon Vazquez

somewhat are this like now. things as should a could guys look if right, stable, markets on the How right, what business what look XXXX, the could quickly, remain And say top P&L right? we as let's towards do about stable. macro hindered follow-up, we in stable, You think my and right assume are then we end just things and Okay. are just where year line

is a get a that we're of helpful. expectations in more and there little 'XX? be it Any seeing bit Are would excited the So continuation business? what reasons to accelerate around

Joseph Hogan

than better you in line some consumer States an feels and look to of United overall is external like it We say at the just consumers. confidence, obviously, increased in rates, see internal that just economy United the issue an growth I'd a again. Joe, particularly this is feel an we'd States. When our that in issue. more to

And consumer economic activity so increase in turn. think increase in then really customers we be Align any confidence, kind would and positive our and for for in of

Operator

with question next Our Block Stifel. from comes Jon

Jonathan Block

up but as versus maybe with But different sort out on Joe, last words, to up international? mentioned, call think right, start the globally. cases Anything in to just down X.X% with question. U.S. U.S. you, results the that got I've in picks I you the In of other this

on ]? the more is a have Is to that to go-to-market thoughts strategy? think OUS it U.S. acute there the that consumer? dynamic. be would So anything just incremental love [ from Do competition focus versus in we -- might about your on Just

Joseph Hogan

competitive largest they they're a I'd throughput too. of good at morning sense pay say the not want sense the talking our now or more and ability -- economic channel look comparison I it Jon, think This in, dental is close. are was don't at when to dramatic been the close really pay treatment, for from look marketplace. come external confident the channels. it's our -- this in customers mainly our of our their these we it know of but some in right it. to It's patient is wanting any are for situation. there's changes and ability customers at and just Ortho no, the I standpoint Yes, difficult, their and similar. to to They're question. I both challenged in a it's rates I the DSOs in

consumer and little countries that because the little Europe, more situations, in pronounced and have those a and but wouldn't Jon, a different all see, United what issue so externally call it's in uniform better large the we anything so external States. it's standpoint This from out is But feel different the same but or competitive I the whatever. Europe United sense. in States has thing a in confidence we is more economics So been because

Jonathan Block

Got it.

start, sort want second famous question X just parter. of I clear. crystal a be to And John, be Okay. But to will then

the are or margin thoughts be XD call if 'XX, the would on it that's You somewhat A. can muted guys to correct, question op line. overall by That that and top direct initiative. fabrication you expansion in Maybe if part any committing be then printing just it will verify first

John Morici

was to going margin we've room and The talked margin. in op giving the the year-over-year restructuring Lumina us [ give things investing get that the made yes, X-minute I margin, op Fab so the while that we and on. ClinCheck can still and accretion all we so actions about with Direct ]

So restructuring investments us accretion. we're making going room those some to that continue the gives show to margin

Jonathan Block

overall our Do financing you It store like out checks. we guarantees you impact of it at up a case problem. more for to a expect been Where sort prominent initiative? recently, new more you're second Okay. a need if start you perspective? the if of top to with a like of initiative. seems part off In seems on the one, the be on line And and was on had when talk do -- the in question that sort picked other then pivot expansion, of And that what approval. again, slow you're the from to any rolling And has top are if and just to the can initiatives goes Joe, some can a thoughts does I cost it words, OM that line there. the mean you to the P&L. other committing Denial out have

Joseph Hogan

just just kind of your Jon, frame And question. Yes.

some first strategy. do Costco, it's But think as that a material we Costco. success The It's business have the look for one, nothing had but at like I now. that's internally. you right brand We've in to

We're We we consumers to how #X world. can this looking try Invisalign entertaining the in areas have of leverage brand in treatment. that to different encourage of brand at the more sense

that right and consumers are DSO, we challenged a and forward. they're all to John of And far challenged an also orthodontic confidence standpoint. customers we know our what sense from they financial to the from can are more are -- big the doing but standpoint, financing, the treatment give partners they do move really financing As team as in that now offer DSO can a type doing would that want

John Morici

on balancing more and where we've closer But the our of Jon, growth, And we've we'll to that have investments know overall can technologies on get the as an revenue, of as new find investing we're business. said this some committed we XXXX. that adjustments, update into give we will driving we as made that we growth, transform

at of So XXXX and close. give mindful now that more on we'll that's we're things as all update stake an we of, but

Operator

ISI. comes from question Elizabeth with Evercore Anderson Next

Elizabeth Anderson

parter at going a I'm to also try my hand X as well.

bit. . [indiscernible] So to One, little know back it restructuring, it's the coming at as little I or think early. as hinted the Frank I mean, a you about I a talk organization, you bit

are consumer. to he And closer you What So about drive is when of you're about do -- the what sort business mean what that there corollary sort thinking as what is you inflection your going sort an how -- sort sort talked the think to of like. he that, do high-level you're I operates or of too quality of thoughts you would differently? getting -- this like of be fine of like a you to on

secondarily, talk about about maybe could commentary you hear And that of portion If nice it it? China. then the was to positive

thinking to as little that about a how market consumer you're and about sort bit outlook So love that for I'd of well. more hear market

Joseph Hogan

coming On from been XXXX. business Frank Frank was the it's Elizabeth, -- in Joe. had back,

Frank want about business One where from relationships a and This about a it's really is type of good he and think is Look, things. you transactional another have doctors in to left good for standpoint. X is not this one with XXXX venture. is relationships. I -- trust brings us leadership that business. This

you technology a help to programs that understanding and types as need would can of the growth. drive Secondly, of good the

area. shown that at that DSO XXXX, our first has look Frank really over in back back really been when today, an arrived, XXXX program is that you I put years. that it's When and happen. He's expert Frank really in made to the together effective. happened

the how make a in that, general sense it commodity Thirdly versus is and the the what the Frank in industry, knows really he's with someone competition, business. understands and decisions within doctors make trusted orthodontists decisions understands scope has all they you need makes the practitioners.

So we're excited to have back. them

John Morici

And then pleased on part results. your with the last We're Elizabeth China. China question, of

the in doctors of season good more others, China. It's there. including for us good we saw a and products, utilization. various with Invisalign saw to adoption team where great Sold We utilization First pleased

for from really standpoint, especially China, So team us. for us, played out a well

Operator

Sandler. comes question next Piper with Bednar from Our Jason

Jason Bednar

questions. can the to of you today dilutive of trying some over 'XX. time, seem come -- margin going here I estimate initiative, of XD impact the the us the from the but to the follow lot I'm of a benefits restructuring know back maybe making, you're the like just given to it be upside offsetting have that printing comment and John's on up been cost margin the may one from initiative this in some would realize investments gross with margins or

you reconcile those kind just comments of the if comments takes. the of maybe So quantify and you're help making us and in can, these today thinking that bridge puts some

John Morici

Yes. at my this. best I'll take

basis to on restructuring We So despite up be that is overall, that all accretive margin investments. think a we were talking the the we're going year-over-year of margin. making

margin standpoint. gross a from right You're

capability As we start we're scale gives direct lot fab a it love for doctors will But and printing, initially to of the new that. come is what products next the know are cost us as our basis year a higher lot market for to that of that that to year-over-year have a there committed we then we're bringing while to a things, on scale up. we until that, benefits and accretion we scale and despite margin op going doctors,

drives from then up, the and the into the that the overall we see primarily will less to go side, gross really margin scales the on need that as materials we productivity And material that product. that

Jason Bednar

right. when XD follow-up historical All maybe of just gross the expansion margin to line But that guess another Understood. I follow-up. does there time any and we or see benefits norms? printing separate might off one then scale? on Once

The more U.S. part inside with data the what's your outside past season, and kind years. aligner in has U.S., maybe several we bit the that assessment has of I guess a mostly and the And then part the the just in X.X teen market, mixed your bracket Joe, wire see decently past business complete. of the been between grown markets months. the clear of the now of

just this I'm a have the bit better broader just So market? little the on again part the do trying in of U.S. understand of the to in you this visibility you're making -- softer? comments context

John Morici

able to resin So can help with this. I that we've gross progress We're at being able part cost. margin. John. right scale X- and on this up. scale we're very first about question the journey it making and a take to Look, of it like Jason, pleased being the this X-year around to that get the I'll say be talked your is to

good there. that's progress So

new good the give some see in it on But as the direct years. showing this. the X equipment to X As fab when up will really it's and you you we hands But on year to extent, of this have in a we're well progress those able side, making capabilities. around them to that doctors' up get scale to terms next actual and of being scale products manufacturing larger

Joseph Hogan

Just obviously, teen at I market, you international quarter. in good market. the in when mean, success look we the Asia on the really had teen

We Invisalign for is portfolio years old. blocks, and think call have now that Palatal really Invisalign II, you which Class product occlusal XX also is XX With Expander. terrific usually have what advancement with our for between a about mandibular we are when used patients First

when that look good in portfolio we a you really line have pre-teenage sense. up So at to those

So XX% XX% an I you really challenged our When sales of on our what on reflect do obviously, are United States, customers and orthodontic with overall. seeing are the that they back average, come think teens. through you're

some on the even And past, that close of teen side, on tougher we the rates the to teens, the it's doctors than the different close rates too. some orthodontic and DSOs on just in talking what segment been the are of have

profitability are, and for benefits press press early they're back what to And understand we that. to particularly their support practice. to communicate they're margin, our can they and do. job wires so this We and We to know it. to what this consumers to for treatment of orthodontists reflect will traffic like and where the It's their times brackets

right again, an make individual But the reluctant obviously, are so practice is and this consumers decisions responding it's an pocketbooks they're at orthodontists and external doctor-to-doctor where from to a And now, with situation. their times. environment close concerned And are standpoint accordingly.

Operator

next Our Saxon David Needham comes with question from & Company.

David Saxon

with with context in I'd the how but ongoing and like get we year, should I'd interest from iTero restorative high out ortho initial workflow literally early the launch. color then to comps coming around next rates actually. particularly then to love the of start remaining think Lumina rollout, lapping on iTero growth the some about

Joseph Hogan

Yes, pressure customers equipment to David, the capital what to a get to way. I I and lot in in think with, marketplace, your that talking we're being think there's of on of with you given sales just question, have start about challenged I

technology think have think platform. I our it's truly brand-new of about It's phase of the Lumina iteration older do to with like not a what and old you an technology. it, the next

doctors' that's well captured people. think really slower, a in traditional attention. of And particularly bit size little think of and and new It's our third I I how done, a the lot it's sales we've surprised quarter, it that's it's something the --

that. a of coming be to the we've restorative is kinds excited on testimony think The We're I we this the uniqueness So making team this in progress is on brought time. and technology, the forward have technology good point quarter. in to about that that at able sales to those first the of why

and great applications will line So going to that areas grow that just platform platform, we'll a target overall, wonderful foundation in is forward diversify from from really What's it's different certain about future. the to iterate in the help that us product too, them.

John Morici

of with the that helped the on really things a kind especially we have through that X and this, iTero And iTero It's of and products other sell lot really family. go kind on. so within of opportunity given us product new

to Ds CPOs the this all way actually XG. the way sold preowned the certified all that we quarter. We X from have So a lot past of

that So giving economy, buy. then lot of added the they to more want in helps tougher part to way to doctors and that a the really we're flexibility sell kind us a

so to conditions want outright and purchase on. don't the economic of Some because

that a rental. a get doctor different more we great So more when trade. or those leasing see see uses they'll that's great in lot we recurring more a selling know iTero places, It us, it's use Invisalign. of will we because off options, revenue And other for but then

David Saxon

on is side, specifically of the aligners, that portfolio and coming And from? on give Great. you color kind can then weakness Is ortho where on the actually the is U.S. more it from Or clear a then -- anywhere it channel? perspective?

Joseph Hogan

ortho see Yes. as both. industry We entering side. challenged now kind right if of you it's the dental far on the almost industrial pressure overall. I as right mean the at GP mean in it's look data any space, now, patients I equal

see So we on pressure of areas. both those

we same talked the For before. reasons about

Operator

Our comes with Baird. next from question Jeff Johnson

Jeffrey Johnson

then from me one this question for X% just question year-over-year down was Let ask your maybe level, a high-level quarter. R&D a modeling and John. But high

years, the below million is You're of last $XXX making the at well closer XXX even those couple years. headcount reductions. CapEx to

about the talking increasing are year. improvement margin You buyback, next

that's not at of kind mature that's a a critique comments a to more just point company, all. these of not All and

know all you we where that's and you are see where think are. I

change that's your there go organization company an question years? this So and few well? on having this really but the I management this this style lead led evolution my how your Obviously, guess came next to pushing as does objectives business with how line, into you is the is, you over management top

Joseph Hogan

Jeff, millions the the I company the here. on or hundreds have States all. sense there's We're ever question. so only I'd way Don't need and the straight but a it's that you digital a what people responding we're over all really could at say is whatever, underpenetrated, reflection just times not make or is America to that team with think to the it North of of good their orthodontics. opportunity a in United the world. of in broad do And

point, don't that So Jeff. miss

now We now. like a see different on and any and you manufacturing things CapEx are CapEx through putting with right spell that, going more and not is the R&D we're right down what

future, from right? growth with orthodontics. a Lumina. just next really enough cycle have plant, still Jeff, ClinCheck, this responsible play X-minute at leadership lot of another we're We digital we in new printing, shareholders situation, standpoint, tech. is technology but We're these being same and come enter a really All market This when you brand putting specific XD up of money the for business manufacturing, our into into time, the are our if want the back bringing Poland to in will things of phases to starts this

being that the are what think So what funding responsible future. doing enthusiasm opportunities losing but on shareholders not is our we in we're to our

Jeffrey Johnson

Yes. No, that's fair. all

sell-side intermediate that holding an are be evaluate, at You top time week longer-term least Would that investor event Saturday. to LRP, the expectation? event a XX% though or a growth XX% from to that line

Joseph Hogan

the markets going Jeff, grow the think XX biggest economy how represents until the we right world, particularly I in that read market the the a conditions, feel I States get think economic to future. in United on is that participate what in that to could we Well, the have we XX have do, better to we like in.

Jeffrey Johnson

one modeling John, question. And Okay.

the that between quick listen on like Just think the VAT I I of the should at next when the anniversary is that math start year. sounds to ASPs, issue

remind But be Just what I've correct. dollar we'll year. started me should see headwinds Currency post year, got U.S. anniversary timing moderating should be from next if reasonably the does the on here. should that, -- but election

So I think VAT, One and correct? had down is currency ASP ex ex X.X% year-over-year. math that about you

FX about of into a bit? head normalizes be and that what 'XX we kind is we about thinking should as two, on hopefully, VAT And

John Morici

be slightly to to down. the normalize. FX, beginning of year. Jeff, what VAT ASPs predict. You're said the at about that And the right we've would past does flat anniversary It's hard hopefully in next

range. So your in about percentage you're talking that is

Operator

from UBS. with comes question next Kevin Caliendo Our

Kevin Caliendo

may GLP-Xs is there's done this This And you that's bit analysis of that between maybe Aligners. the people the have shortages as guys correlation investing for has to be cost thinking Have terms be market, any if the off, come you treatment an seen because adults getting and going to Clear wondering weakness if I'm a close. the down if just or little Invisalign ever way Venn people maybe of anyway, have part might the GLP-Xs analysis opposed -- and wondering adult seen guys or anything? in have diagram just into guys that purchasing in $X,XXX done any you people but about have

Joseph Hogan

we've of kind that been sense that say I of lot a kind GLP obviously can't I I There's device in and corollaries something lot. in it's would of it can't that quantified we've cost what hear the the talk say what the about a do marketplace with overall. an with one might we drivers in that, treatment. wanted the basis expense medical it, companies a Kevin, be of that that seeing Invisalign overly high haven't a that's to as that annual into line because on of here. to it's factor not But you're lean

about in what a of I money in think be going now their where economy right might pocket And lot the have a it's just future. an not. it overwhelmed to and or GLP by don't confidence role consumers play might it's

the not is, as like of necessarily Europe that's too. I it United and as maybe seen around can piece I Continental world think in look can't markets, States that see also you by I've the affected also some

I so So now. And would right? that correlation there's causation an old right with saying that doesn't stay mean

Kevin Caliendo

that a is starting more as think impact might and that. think might 'XX, don't Fair exiting Lumina about for economy what to adult a of whatever how just -- want do, think of sort the about your of that the and you add-on to talk guide fourth enough. the I thinking you're as like know about the X%. Should quarter but of side for at helpful. the And in just marketplace mean, I just business. sort of you're that That's year an adjust take sort we let's sort midpoint the of then we about point implying

John Morici

Yes.

about point economy? this a build I good year we interest to We're look, happen do is say, but that and rates to the off going election think will -- some probably and and that. of think kind view I in starting going think year, closer, other we'll of to more we'll going think, with that. that know better we'll to closer other obviously about the about get to what you of of things to be and give add come as a But get to we've as maybe things think starting Lumina the you're point it's give come look, more as next able you you more and then build good have things. in about, of we details restorative and out talked of But that off obviously. I a

Operator

Leerink comes question Cherny next from with Michael Partners. Our

Michael Cherny

up work in on of following out. question the earlier one just Maybe pushing be some related XD the -- a printing to on that the going fab products you're

different thinking new obviously the customer we rollout types the right you experience, like? products, look that introduction that manufacturing right about tracking set sure products, right think a right obviously pursuing? that hitting but out be to potential beta Will it of get overlap, of making should as about you're to set be opportunities of is going scalable introduction word, terms the before the tracks about that on bit a this process very approach to the -- of How you what the think the market? could customers any in will that given you are what look different how you're those you've of for As taken

Joseph Hogan

Joe. it's Michael,

teams, and appreciate could the more amount think be Is, -- to that that products difficult in I produce what that geometry form, of able doctor. our business you help what would obviously, than it the the consumers opportunity you we will we'll particular cases, a and think to of it, your class can do tailored product that that how you huge you today. orthodontic lot specific question a of of as we a differentiate when of do will taking today, and Just The do about think condition community back lose to are when this, more sector most young be is, one in

appealing offer that so And to would the it them. we product would And way. very be think we

Secondly, do them there's our line to a a it's we too, of help dentistry -- from big standpoint, product with that this a also. marketplace can part general lot

certainly I use have kinds have So hope to long I'm take. will freedom to that, thicknesses, the and I in question, as more we sense your in to that would move expect will the do you you different we're different certain communicate different patient of might that. certainly appreciate issues can going have it, think how the patients. we a when answering here of that can we prove that appreciate that, more have are can But and for think And fast clinical design too, relatively teeth you I doctors those we predictability cases how and those but to patients configurations end of and

Michael Cherny

year to No, that attempt then numerous times and question. there thinking onetime dynamics to U.K. maybe one modeling be something that's else that at that's should could at it's the outliers the we U.K. this an that obviously, anything into year. certainly next or any 'XX in or -- ASPs just quick about does I guidance go -- promise mentioned contemplating at relative not not impacting specifically. But the that normal. internationally, you the factor like Is or

John Morici

does half I and it to passing would anniversary. to Obviously, like on it bad doctors impact. that, and say that there's anniversary the about thing not John. affects they as there nice nothing the that the and the of Nothing of But government Michael, much how ideally mean things what is on doing is see work we patients. because U.K. then that goes try on products to not to it with that is would type pay explain of our to we this normal. the potential we're horizon

Operator

from with Wright comes question Stanley. Morgan Next Erin

Erin Wilson Wright

just and a you about you but give now, guess, for changed? guess, of executive the table? little changes in just and translates change in also backdrop XXXX this broadly that that the sluggish what's of time. were magnitude today, from of time Can scope, how terms profit your what been the kind it's changed restructuring just into what benefit consumer that What view into a speak quantifying or that some about since I in of bit terms nature on us kind of anything speaking, really the a the outside you outlook on your in of more line terms can perspective were the else has came thinking of that I business backdrop

John Morici

where you an Erin, give of Yes, could I overview of are things kind to try at.

it? Just How of where are to as a going always and part where on. you you're are normal AOP so make fund going evaluating process, you to it? investments, going you're to fund

last grow part we year. our is process where of mean go all we're we to the did through and planning for we that of next things this year through. do This do we end where how want it about going we're This So what to that and year for of restructuring. up Xx what out is and talk type does the

fund focused was XXX this about we we those accretive to that XXX. margin year, go did a back basis. XXX people. on There's our Lumina we some talking I talked what just and want what to so, We can is in standpoint, the we've direct it's we some from got fab, does over be to really, Joe X-minute But can it want accretion, Last what about drive a be or we This restructuring as year. show whether but ClinCheck, to margin -- about, charges. platform what to on what also to business, close and do We year-over-year want restorative. growth

some to show for fund be a our year. these us position So really be we really fund able set next we'll and fund based need we what can it to to changes margin here, on but that to it driving business up of accretion

Erin Wilson Wright

guidance anticipate Okay. your or have across kind head or of a then of acceleration the deterioration environment Great. does same continued does the the across changes it in in assume you of we that I either other geographies into here? Or sort continuation regions terms of quarter, other fourth markets as any sluggish And the guess, U.S.?

John Morici

great. assumes in parts Yes, Latin just expect to kind grow invest kind of Erin. pointed like places, U.S., of in actually Middle East, America, we've of out, and the It We same. and we saw those we not as we to good seen, North America, improvement assume places, Other other Asia what continue areas.

at to the take to what upcoming the what any have did and like forecast, going that's that's quarter. for best for information you the time, So you try mean you to we fourth translate quarter,

Operator

Our next Ryskin Instructions] question of [Operator comes with America. Mike Bank from

Michael Ryskin

following off natural up And again, attrition, couple Aaron the and this clean on of questions. kind up of of famously of But just Just just while. that expect we restructuring row is the follow-up in natural of to John, years you as a business. the One, touched there now. what think for well. forward touched of a should in I a that normal you going guys on -- kind terms held part be sort this X of on cleanup

cut reinvested famously very to others when refused during actually were think you and cutting. I COVID, you

how help of in going -- we should that think just in terms So think us forward. factor

Joseph Hogan

well as the off pay States, COVID, When on call it our and sustained we're we're off COVID market stretch that, with cause a economic fortunately, But that was overall. [indiscernible] strongly. would this responding anybody wouldn't now, was Right it, United to at expectation did. in that Comparing last just a looking time decision I to malaise, the so didn't we came as accordingly. a back lay long as

belief standpoint. We business a responsible that digital our sure this is this fund in key in into being an business. future seeing grow pressures this you're and haven't in we enthusiasm restructuring potential X the the these see and we lost responding of external being orthodontics in will we What can that our technologies from lead we're how standpoint overall know from business market that to

John Morici

point of it. the that's And key

to this. we no Now able to company these be make No we the and future else to things do fund what to key other doing drive space have that it's that's it's to and can because know going able one trying know do. with do the being technologies budget we're can

pull accretion. it focus a assess current in that We show and This the about environment. is part as basis of do companies know it, important a you a really to comes to to now way could talk pull. we be margin or more we push about annual always it on. that future what not levers we keep the It's and just on it's budget us responsible these could do through where for so and changes able So

Michael Ryskin

Okay. the And on then cleanup, a quick if could, I ASPs.

it so FX reverse those the factors year? don't of in through mix of a and on October some the guided for in about far I What number next thoughts you'll be to headwinds I in quarters a think of fade quarter about up that discounting that's row. of until some seeing talked But your are giving able You dynamics, Q&A, think you you confidence that? Because think on the sequentially, XQ, these touched and impacted of you that earlier, had you've next the some you year. some just ASP you I and

John Morici

think -- as kind June of into at programs Well, that all you I come of part our from advantage end reset second they the of half. ended really they and go then

third that discounts. so So changes, kind shows of up took quarter advantage in the

the So Europe I quarter where a fourth bigger less, of and other some that's don't mix become then benefit in and becomes have do our business continue. good a expect standpoint. of to that China And from the and where you case, the part in businesses our

have and ASP lower ASP a a China. in higher We in Europe

the ASP hurt the seasonality. quarter the on that we fourth on country lower in standpoint, whereas So benefit that a get actually the third quarter, mix in us from based in

Operator

closing Q&A our Stacy Shirley have for end reached Thank you. back to the of call now the over I'll And remarks. we session. turn

Shirley Stacy

on look for us Great. Thank for you, to you today. We thanks, financial the forward at will everyone, call Ortho who at next speaking see Vegas Invisalign Summit and and Las you those of operator, joining in the to conferences week. upcoming

day. and Relations, If any contact to feel a great you questions, Investor please free other have have

Operator

you Thank Thank for you disconnect this may at you. participation. your concludes your today's conference, time. This and lines

Align Technology (ALGN) 23 Oct 242024 Q3 Earnings call transcript