Align Technology, Inc.

Greetings. Welcome to the Align Third Quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Shirley Stacey, with Align Technology. You may begin.

Good afternoon, and thank you for joining us. I'm Shirley Stacey, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO, and John Marici, CFO. We issued third quarter 2024 financial results today via BusinessWire, which is available on our website at investor.aligntech.com. Today's conference call is being audio webcast and will be archived on our website for approximately one month. As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Align's future events and product outlooks. These forward-looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission, available on our website and at sec.gov. Actual results may vary significantly, and a line expressly assumes no obligation to update any forward-looking statement. We've posted historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable, and our third quarter 2024 conference call slides on our website under quarterly results. Please refer to these files for more detailed information. With that, I'll turn the call over to Align Technologies president and CEO, Joe Hogan. Joe?

Thanks, Shirley. Good afternoon, and thanks for joining us today. On our call today, I'll provide an overview of our third quarter results and discuss a few highlights from our two operating segments, systems and services and clear aligners. John will provide more detail on our Q3 financial performance and comment on views for the remainder of the year. Following that, I'll come back and summarize a few key points and open the call to questions. Overall, Q3-24 results were mixed and reflect strong system services year-over-year revenue growth, as well as good clear aligner volume in Asia Pacific, EMEA, and Latin America regions, partially offset by declines in the United States. As recently reported by many analysts and third-party research firms, the underlying dental market in the United States remains sluggish, and our doctor customers cite similar trends. Q3 24 revenues of $978 million increased 1.8% year-over-year, and clear liner volumes of 617,000 were up 2.5% year-over-year. Despite strong growth from systems and services revenues, a record 87,000 doctor submitters, a record of 236,000 teens starting treatment driven by record teen case starts in China, and a record 25,000 of DSP Invisalign touch-up cases. Total revenues for Q3 were slightly below our Q3 revenue outlook, in part due to more pronounced seasonality for clear aligners than expected, as well as continued weak consumer sentiment and a soft dental market, especially in the United States. Q3 24 non-gap operating margin of 22.1% was better than expected and increased year over year compared to 21.8% in Q3 of 23. For clear aligners, Q3 volumes were up year-over-year and down slightly sequentially. Year-over-year volumes were driven by strong growth in APAC, especially China, as well as growth from the EMEA and Latin American regions. On a sequential basis, clear liner volumes were down from Q2, reflecting more pronounced seasonality in soft dental markets in the U.S., offset somewhat by strength in APAC and Latin American regions. In the teen and growing kids segment, a record 236,000 teens and younger patients started treatment with Invisalign clear aligners during the third quarter, and an increase of 9.1% sequentially, and up 6.7% year over year, reflecting growth across regions, especially from Invisalign first and the APAC and EMEA regions. In Q3, the number of doctors submitting teen or younger patient case starts was up over 6% year over year, fed by continued strength from doctors treating young kids also known as growing patients. During the quarter, we continue to commercialize the Invisalign Pallet Expander, Align's first direct 3D printed orthodontic appliance. Q3 reflected steady momentum for doctors, submitters, and shipments in the United States and Canada. We recently announced commercial availability in Singapore, and we're excited to extend the availability of the transformative Invisalign Pallet Expander system to even more doctors and their patients in markets across the Asia-Pacific region. We expect it to be available in other markets pending future applicable regulatory approvals. Non-case revenues include our Vivera retainers, retention aligners ordered through our doctor subscription program or DSP, clinical training and education accessories and e-commerce. In Q3, non-case revenues were up year over year, primarily due to continued growth in retainers and the DSP program, including non-invisalign patients getting retainers. DSP includes Invisalign touch-up cases up to 14 stages and is currently available in North America and certain countries in Europe. For Q3, total Invisalign DSP touch-up cases were up nearly 30% year-over-year to more than 25,000 cases. Q3 24 clear liner volume from DSO customers increased sequentially and year-over-year, reflecting growth across all regions. The DSO business in the United States continues to outpace our retail doctors, driven by our largest DSO partners, Smile Docs and Heartland Dental. We also had strong growth in iTero scanner sales from DSOs investing in their member practices and end-to-end digital workflows. Q3 was another strong quarter for our systems and services business, and year-over-year revenue growth was up 15.6%, reflecting higher scanner ASPs and non-systems revenues, driven by iTero Illumina, WAND upgrades, increased scanner rentals, and certified pre-owned or CPO leasing programs, as well as increased services revenues, partially offset by lower scanner volumes. On a sequential basis, Q3 systems and services revenues were down 2.9%, reflecting lower scanner ASPs and non-systems revenues, particularly offset by higher scanner volumes. The Itero Lumina's new multi-direct capture technology replaces the confocal imaging technology in earlier models and has a 3x wider field of capture and a 50% smaller and 45% lighter wand, delivering faster scanning speed, higher accuracy, super visualization, and a more comfortable scanning experience. Lumina is currently available with orthodontic workflows as new standalone scanner or as a wand upgrade from the Itero Element 5D Plus scanner. Overall, for Q3, we continue to be very pleased with the ongoing adoption of Itero Lumina scanner with ortho workflow and response from customers. We currently expect to begin a limited market release for the restorative software on the Itero Lumina scanner in Q125, followed by full commercialization by the end of Q1. Today, we announced new Itero scanner products, innovations to further enhance digital dentistry workflows and integrated treatment options in oral health. restorative and aesthetic treatment in general dentistry. Align oral healthcare suite with new comparison tools that aid in multimodality assessments and personalized oral health records and reports. Invisalign Outcome Simulator, a pro in multiple treatment simulation to drive chair-side patient education about treatment options. And iTero Design Suite with intuitive design capabilities for in-practice 3D printing, now commercially available in selected markets. We believe the ITERO Intraoral Scanner innovations introduced today enable doctors to present a variety of treatment options to their patients, supporting chair-side education and communications. That helps deliver a great patient experience and supports patients in making more informed choices about their dental treatment and consultation with their doctors. We're also pleased to share that Invisalign Japan was recently awarded the Golden Design Award for 2024 for the ITERO Illumina Intraoral Scanner, making this the second time we received this prestigious award in the past two years. The Good Design Award is globally known and recognized by domestic and international designers and is the only comprehensive evaluation and recommendation system of design in Japan. The award designation increases the recognition and reliability of awarded works in companies, promotes problem solving through design, and focuses on the significance of design to people and society. Before I turn the call over to John, I want to comment on the employment actions we announced today resulting from a global reorganization and restructuring. As part of Align's 2025 annual operating plan process, we identified positions to be eliminated or transferred to other locations. These are difficult actions and valuable employees will leave the company. As part of this restructuring, Raj Puttapedi's position as EVP and MD Americas and Chief Marketing Officer has been eliminated and he will leave in the fourth quarter. We thank Raj for his contributions to Align over the past five plus years in leading our marketing and product innovation management, as well as overseeing the APAC in America's regions. We wish Raj well. I'm pleased to welcome Frank Quinn back to Align. He's a well-established leader with a customer focus and proven track record in orthodontics and digital dentistry. Frank's deep experience, understanding, and insights into what digital means for our doctor customers is key, and he's excited to be rejoining Align. With that, I'll now turn the call over to John.