Company Overview - Align Technology, Inc. is the company behind Invisalign, a clear plastic alternative to traditional metal braces, headquartered in Tempe, AZ, with a market cap of $9.5 billion [2] - Since receiving FDA clearance in 1998, Invisalign has gained traction, particularly among adult users seeking a discreet solution for teeth alignment [2] Market Dynamics - The treatment process involves consultation, digital scanning with Align's proprietary iTero technology, and the delivery of custom plastic aligners, with dental professionals monitoring progress [3] - Demand surged during COVID lockdowns in 2020–21, but growth has moderated in recent years due to intensified competition following the expiration of key patents in 2017 [3] - In 2024, approximately 65% of volume came from adult customers, making the business sensitive to economic trends [3] Financial Performance - Align maintains a strong franchise with roughly 20.8 million lifetime patients and a 70% gross margin pre-charges [4] - The company has over 100,000 installed iTero scanners, representing about half the global intraoral scanning market [4] - Clear aligner average selling prices (ASPs) have been pressured by product mix shifts and discounting, while volume growth remains flat [4] Competitive Position - Align's economic moat now relies more on its digital workflow platform, ADP tools, and scanner ecosystem, along with significant brand recognition [4] - Many consumers refer to all clear aligners as "Invisalign," indicating strong brand loyalty and high switching costs for dental offices already embedded in its system [4] - The company's leading innovation position continues to make it the most likely source of future breakthroughs in clear aligner technology, providing long-term upside potential despite near-term margin pressures and competitive headwinds [4] Investment Thesis - The bullish thesis emphasizes Align Technology's clear aligner leadership, digital workflow platform, and brand recognition as core drivers of long-term value [5]

Company Overview - Align Technology is a leading manufacturer in the global orthodontics market, which is valued at $6.5 billion, primarily known for its Invisalign system of clear aligners [1]. Leadership Presentation - The presentation features key executives including Chief Financial Officer John Morici and Vice President of Finance, Corporate and Investor Communications Shirley Stacy, indicating a strong leadership presence [2].

Align Technology Conference Summary Company Overview - Align Technology operates in the global orthodontics market valued at $6.5 billion, primarily known for its Invisalign clear aligners [2][2]. Key Points and Arguments Pricing Strategy - Align Technology is exploring new pricing alternatives, including a potential shift to a 3x2, 3x1, and 3x0 model, allowing doctors to take on some risk and pay lower upfront costs [5][6]. - The introduction of these pricing models aims to make Invisalign more competitive against traditional brackets and wires, with entry-level pricing potentially around $800 [11][12]. - The gross margin for products with fewer refinements is higher, as refinements incur additional costs [13][14]. Market Dynamics - The company is experiencing mixed growth across different regions, with strong performance in Eastern Europe and Turkey, while facing challenges in Western Europe due to political and economic uncertainties [36][37]. - Align Technology is focused on reducing barriers to treatment, particularly through financing options, to convert potential patients into actual customers [27][30]. Competitive Landscape - The clear aligner market is seeing a shakeout, with many smaller competitors exiting due to high capital requirements and the need for technological investment [39][42]. - Align Technology is committed to maintaining its leadership position by investing heavily in R&D, spending over $350 million annually, which is significantly higher than many competitors [50][58]. Innovation and Technology - The company is advancing its manufacturing capabilities through DirectFab printing technology, which allows for greater customization and efficiency in producing aligners [60][66]. - Align Technology aims to scale this technology over the next few years, enhancing its product offerings and maintaining a competitive edge [67][68]. Financial Performance and Guidance - The second quarter of the year showed softer performance than expected, particularly in June, which was attributed to economic concerns affecting consumer behavior [32][33]. - Align Technology is committed to achieving 100 basis points of margin expansion annually over the next few years, despite initial higher costs associated with new manufacturing technologies [68][69]. Additional Important Insights - The company is actively pursuing litigation against competitors like Angel Align to protect its intellectual property and ensure fair competition in the market [48][53]. - Align Technology's strategy includes enhancing treatment planning and patient engagement through real-time visualization tools, which are expected to improve conversion rates from consultations to treatments [59][60]. This summary encapsulates the critical insights from the Align Technology conference, highlighting the company's strategic direction, market challenges, and innovative approaches to maintain its leadership in the orthodontics industry.

Financial Data and Key Metrics Changes - The company experienced sequential improvement in volume from Q1 to Q2, but the growth was not as significant as expected, particularly in the teen treatment season [2][3] - Guidance for Q3 was based on June's performance, with expectations for a step-up in Q4, particularly in Europe and North America [4][5] - Anticipated margin improvement in Q4 is driven by volume leverage and benefits from the UK VAT, with an annualized impact of approximately $35 million [9][10] Business Line Data and Key Metrics Changes - The iTero segment is expected to see increased full system sales in Q4, following a period of upgrades [5][36] - The company is introducing new products, including mandibular advancement and occlusal blocks, which are expected to drive volume in Q4 [6][48] Market Data and Key Metrics Changes - The clear aligner market is experiencing double-digit growth in regions such as Southeast Asia, Eastern Europe, and Latin America, despite challenges in North America and Western Europe [15][57] - The company noted that DSOs (Dental Service Organizations) are growing faster than individual practices due to their digital orthodontic strategies [43][61] Company Strategy and Development Direction - The company aims to leverage its diverse product portfolio to meet varying customer needs, including lower-priced options to drive conversion [24][27] - There is a focus on educating potential patients and their parents about the benefits of clear aligners, particularly in the teen demographic [46][51] Management's Comments on Operating Environment and Future Outlook - Management highlighted that elevated interest rates and inflation are impacting patient purchasing behavior, with interest rates being a significant factor in elective dental procedures [11][13] - The company remains optimistic about its long-term growth potential, targeting 5% to 15% top-line growth, driven by underpenetrated markets and increased adoption of clear aligners [60][64] Other Important Information - The company is actively pursuing patent infringement lawsuits against competitors, emphasizing the importance of protecting its intellectual property [70][71] Q&A Session Summary Question: What investor feedback have you received since reporting Q2? - Management noted that discussions focused on the quarter's performance and expectations versus actual results [2] Question: How do you see the rest of the year playing out for Q3 and Q4? - Guidance for Q3 was based on June's performance, with expectations for a step-up in Q4 driven by seasonal trends and new product introductions [4][5] Question: What is the impact of the macro environment on elective dental procedures? - Interest rates are a key factor influencing patient decisions, with lower rates potentially driving higher conversion rates [11][13] Question: How is the clear aligner market expected to recover? - The company sees growth opportunities in underpenetrated markets, with many regions experiencing double-digit growth [15][57] Question: What strategies are being deployed to overcome uneven patient case conversion? - The company is focusing on educating patients and offering a range of product options to meet different price sensitivities [24][27] Question: What are the trends in teen and kid case starts? - Teen case starts are expected to grow faster than adult cases, with a significant market opportunity available [44][46] Question: How should we think about pricing in 2026? - Pricing is expected to trend slightly down due to a mix shift towards lower-priced products, but the company aims to maintain gross margins [56][58] Question: What is the latest on the patent infringement lawsuits? - The company is serious about protecting its intellectual property and is pursuing legal action against competitors using its technology [70][71]

Financial Data and Key Metrics Changes - The company experienced sequential improvement in volume from Q1 to Q2, but the growth was not as strong as expected, particularly in the teen treatment segment [2][3] - Guidance for Q3 was based on June data, with expectations for a step-up in Q4, particularly in Europe and North America [4][5] - Margin guidance indicates a significant increase in Q4, driven by volume leverage and benefits from UK VAT adjustments [9][10] Business Line Data and Key Metrics Changes - The iTero segment is expected to see increased sales of full systems in Q4, alongside upgrades [5][34] - New product introductions, such as mandibular advancement and occlusal blocks, are anticipated to drive volume growth in Europe [6][10] - The company is adapting its product offerings to meet changing customer preferences, with a shift towards lower-cost options [20][23] Market Data and Key Metrics Changes - The clear aligner market is facing challenges in North America, but many international markets are experiencing double-digit growth [14][15] - DSOs are growing faster than individual practices, indicating a shift in market dynamics [40][41] - The teen segment represents a significant growth opportunity, with 75% of orthodontic case starts being in this demographic [42][43] Company Strategy and Development Direction - The company aims to leverage its diverse product portfolio to meet varying customer needs, including lower-priced options [20][23] - There is a focus on educating potential patients and their parents about the benefits of clear aligners [49][50] - The company is committed to innovation and protecting its intellectual property through legal actions against competitors [67][68] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of elevated interest rates and inflation on patient purchasing behavior, with interest rates being a key factor in elective dental procedures [11][12] - The company remains optimistic about its long-term growth potential, despite current macroeconomic challenges [58][62] - Future pricing strategies are expected to reflect a shift towards lower-priced products, impacting average selling prices [54][56] Other Important Information - The company is actively working to enhance its manufacturing capabilities to improve profitability [65][66] - There is an ongoing effort to drive conversion rates among orthodontists and dental practices [17][20] Q&A Session Summary Question: What investor feedback have you received since reporting Q2? - Discussions focused on the quarter's performance and expectations versus actual results, with a particular emphasis on the teen treatment segment [2][3] Question: How do you see the rest of the year playing out for Q3 and Q4? - Guidance for Q3 is based on June data, with expectations for a step-up in Q4 driven by seasonal trends and new product launches [4][5] Question: What is the impact of the macro environment on elective dental procedures? - Interest rates are seen as a significant factor affecting patient conversion rates, with lower rates potentially driving more patients to seek treatment [11][12] Question: How is the clear aligner market expected to recover? - While North America faces challenges, many international markets are experiencing strong growth, and the company is focused on driving conversion through education and product offerings [14][15] Question: What strategies are being deployed to overcome uneven patient case conversion? - The company is actively working with orthodontists to promote the benefits of clear aligners and provide financing options to patients [20][21] Question: What are the expectations for pricing in 2026? - Pricing is expected to trend down slightly due to a shift towards lower-priced products, but the company aims to maintain profitability through volume growth [54][56] Question: Can you provide an update on the patent infringement lawsuits? - The company is pursuing legal action against competitors for patent infringement, emphasizing the importance of protecting its intellectual property [67][68]

Core Insights - Align Technology (ALGN) reported Q2 2025 adjusted earnings per share (EPS) of $2.49, a 3.3% increase year-over-year, but missed the Zacks Consensus Estimate by 3.1% [1] - GAAP EPS for the quarter was $1.72, reflecting a 43.4% increase from $1.28 in Q2 2024 [1] - Revenue for the quarter was $1.01 billion, down 1.6% year-over-year, and also missed expectations by 4.6% [1][8] Financial Performance - Following the earnings announcement, ALGN shares dropped 36.6% the next day [2] - Full-year EPS estimates were revised down from $10.33 to $10.10, indicating an annual profit growth of 8.25% [2] - The topline estimate for 2025 has been adjusted to $4 billion, suggesting nearly zero growth [2] Stock Repurchase and Insider Activity - During the reported quarter, the company repurchased approximately 585.1 thousand shares at an average price of $164.14, completing a $225 million repurchase program [3] - The total stock repurchase program approved in January 2023 was fully completed, amounting to $1 billion [3] - CEO Joe Hogan purchased $1 million worth of shares on August 1, 2025, acquiring 7,576 shares at $131.4851 each [4] Business Segments and Growth - Clear Aligner revenues fell 3.3% year-over-year, while Imaging Systems & Services grew by 5.6% due to iTero upgrades [7] - The company achieved a record number of teen cases, treating over 6 million teens and kids globally with the Invisalign system [10] - Growth in Clear Aligner volume was noted in APAC and EMEA regions, driven by increased utilization among orthodontists and general practitioners [9] Market Outlook - Despite the weaker-than-expected results, the downward revisions in estimates were not severe, indicating a potential buying opportunity [10] - The company is focusing on digital services and aggressive growth in markets like China and India, where demand is significant [6]

Financial Data and Key Metrics Changes - Total Q2 revenues were $1,012,400,000, reflecting a 3.4% sequential increase but a 1.6% year-over-year decrease [6][16][24] - Clear aligner revenues for Q2 were $804,600,000, up 1% sequentially but down 3.3% year-over-year [16][17] - Overall gross margin for Q2 was 69.9%, up 0.5 points sequentially but down 0.3 points year-over-year [19][20] - Q2 operating income was $163,000,000, resulting in an operating margin of 16.1%, up 2.7 points sequentially and 1.7 points year-over-year [22][24] Business Line Data and Key Metrics Changes - Systems and services segment revenues for Q2 were $207,800,000, up 13.9% sequentially and 5.6% year-over-year, driven by higher scanner system revenue [9][18] - Clear aligner volumes increased slightly year-over-year in APAC and EMEA regions, but were offset by lower volumes in The Americas [10][12] - The average per case shipment price for clear aligners was $12.50, down $45 year-over-year due to discounts and a product mix shift [17][20] Market Data and Key Metrics Changes - In North America, clear aligner volumes were down slightly year-over-year, reflecting solid growth in the Latin America teen segment [11][12] - EMEA region saw year-over-year growth in clear aligner volume driven by increased utilization across both orthodontists and GP dentist channels [12] - APAC region experienced year-over-year growth in clear aligner volume, particularly in China [12][13] Company Strategy and Development Direction - The company plans to streamline operations and reallocate resources to align with long-term growth and profitability objectives, including reducing the global workforce and optimizing manufacturing [28][30] - The focus will be on innovation, efficiency, and execution, with investments in next-generation technology and treatment platforms [38][39] - The company aims to enhance customer engagement and improve case conversion through integrated consumer marketing programs [40][41] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty, including US tariff turmoil and less affordable financing options, impacted demand for clear aligners and new iTero scanning systems [8][9] - Despite challenges, consumer interest in Invisalign treatment remains strong, and the company is focused on driving engagement and effectiveness of commercial marketing programs [9][38] - The outlook for Q3 anticipates continued economic uncertainty, with expected revenues in the range of $965,000,000 to $985,000,000 [33][34] Other Important Information - The company repurchased approximately 585,100 shares at an average price of $164.14 per share, completing a $1,000,000,000 stock repurchase program [26][27] - Cash and cash equivalents as of June 30, 2025, were $901,200,000, up $28,100,000 sequentially [25][27] Q&A Session Summary Question: Can you talk about case conversion trends across the quarter? - Management noted that case conversion was uneven, particularly in June, which did not materialize as expected, primarily affecting North America and parts of Europe [44][46] Question: What are the levers being pulled regarding orthodontists using more brackets and wires? - Management indicated that orthodontists who have not fully committed to digital solutions may revert to using wires and brackets due to economic pressures and inventory considerations [46][48] Question: How does the company view its market position relative to competitors? - Management stated that competitive dynamics have not changed significantly, and while there are pressures from competitors, the company remains confident in its market position [77][78] Question: Can you provide insights on the restructuring and its impact on manufacturing? - Management explained that the restructuring aims to optimize manufacturing and reduce costs, with a focus on transitioning to more efficient technologies [68][69]

Financial Data and Key Metrics Changes - Total Q2 revenues were $1,012,400,000, reflecting a 3.4% sequential increase but a 1.6% year-over-year decrease [5][14] - Clear aligner revenues for Q2 were $804,600,000, up 1% sequentially but down 3.3% year-over-year, primarily due to lower average selling prices (ASPs) and discounts [14][15] - Overall gross margin for Q2 was 69.9%, up 0.5 points sequentially but down 0.3 points year-over-year [18][19] - Net income per diluted share for Q2 was $1.72, up $0.45 sequentially and up $0.43 year-over-year [24] Business Line Data and Key Metrics Changes - Systems and services segment revenues for Q2 were $207,800,000, up 13.9% sequentially and 5.6% year-over-year, driven by higher scanner system revenue [8][17] - Clear aligner volumes increased slightly year-over-year in the APAC and EMEA regions, but were offset by lower volumes in The Americas [9][10] - The iTero Lumina scanner sales were strong, but full system sales were lower than expected, impacting overall revenue [5][14] Market Data and Key Metrics Changes - In North America, clear aligner volumes were down slightly year-over-year, while Latin America saw solid growth in the teen segment [10][11] - EMEA region clear aligner volume grew year-over-year, driven by increased utilization across both orthodontists and GP dentist channels [11] - APAC region clear aligner volume also grew year-over-year, led by increased submitters in China [11] Company Strategy and Development Direction - The company plans to streamline operations and reallocate resources to align with long-term growth and profitability objectives, including reducing workforce and optimizing manufacturing [28][29] - Focus on innovation and new product cycles to drive engagement and effectiveness in commercial marketing programs [7][38] - The company is committed to enhancing customer trust and providing value-based innovation to remain competitive [37][40] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty, including US tariff turmoil and less affordable financing options, impacted demand for clear aligners and new iTero scanning systems [6][7] - Despite challenges, consumer interest in Invisalign treatment remains strong, and the company is focused on driving engagement and improving case conversion [36][39] - The outlook for Q3 anticipates continued economic uncertainty, with expected revenues in the range of $965,000,000 to $985,000,000 [32] Other Important Information - The company repurchased approximately 585,100 shares of common stock at an average price of $164.14 per share, completing a $1,000,000,000 stock repurchase program [26] - Clear aligner deferred revenues decreased year-over-year, indicating potential future revenue recognition challenges [17] Q&A Session Summary Question: Can you talk about case conversion trends across the quarter? - Management noted that case conversion was weaker than expected, particularly in June, which did not materialize as anticipated [44][45] Question: What levers can be pulled regarding the shift back to brackets and wires? - Management indicated that orthodontists not fully committed to digital solutions may revert to traditional methods due to economic pressures [46][47] Question: How does the company view its market share in the clear aligner market? - Management believes that competitive dynamics have not significantly changed, and they are not losing market share despite economic challenges [78] Question: What actions are being taken to stimulate demand? - The company is focusing on closer collaboration with doctors and enhancing marketing efforts to drive patient conversion [97]

Q2 2025 Financial Results Align Technology, Inc. July 30, 2025 ©2025 Align Technology Inc. All rights reserved. ©2025, Align Technology Inc. All rights reserved. Safe Harbor and Forward-Looking Statements This presentation, including the tables below, contains forward-looking statements, including statements of beliefs and expectations regarding our ability to successfully manage our business and operations, reduce costs, manage investments and pursue our strategic growth drivers, our expectations regarding ...

Core Viewpoint - Align Technology, Inc. (ALGN) is expected to report its second-quarter 2025 results on July 30, with adjusted earnings per share (EPS) anticipated at $2.57, reflecting a 6.6% increase year-over-year, and revenues projected at $1.06 billion, indicating a 3.2% rise from the previous year [1][2][7]. Group 1: Earnings and Revenue Estimates - The Zacks Consensus Estimate for revenues is set at $1.06 billion, suggesting a 3.2% increase from the year-ago figure [2]. - The Zacks Consensus Estimate for earnings is pinned at $2.57 per share, implying a 6.6% rise from the year-ago recorded actuals [2]. - Estimates for second-quarter earnings have remained unchanged at $2.57 per share over the past 30 days [3]. Group 2: Business Performance Factors - The Clear Aligner business is expected to show strength in volumes for both teens and adult patients, particularly in the APAC and EMEA regions, driven by orthodontic and GP dentist channels [4]. - In the first quarter, Clear Aligner volume from DSO customers increased year-over-year, with significant growth in the U.S. DSO business, benefiting from partnerships with SmileDoctors and Heartland Dental [5]. - The approval of the Invisalign Palatal Expander System in China and the introduction of the Invisalign System with mandibular advancement are anticipated to contribute positively to second-quarter revenues [6]. Group 3: Systems & Services Business - The Systems & Services business is projected to experience growth due to increased scanner volumes and non-system revenues from iTero Lumina wand upgrades [7]. - The launch of next-generation iTero Lumina solutions and Align X-ray Insights is expected to have a positive impact on the company's second-quarter top line [9]. - The positive customer response to the iTero Lumina Scanner with ortho workflow is likely to have boosted revenues [8].