Align Technology, Inc.

Greetings. Welcome to the Align fourth quarter and full year 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 fourth quarter and full year 2024 financial results today via Business Wire, 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 outlook. 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 Align expressly assumes no obligation to update any forward-looking statement. We have posted historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliations, if applicable, and our fourth quarter and full year 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 fourth quarter and full year results and discuss a few highlights from our two operating segments, system services and clear aligners. John will provide more detail on our financial performance and comment on our views for 2025. Following that, I'll come back and summarize the two key points. and open the call to questions. I'm pleased to report that Q4 total revenues, clear liner volumes, and system and services revenues were in line with our Q4 outlook, and both GAAP and non-GAAP operating margins were better than our Q4 outlook. Q4 clear liner ASPs were lower than our Q4 outlook due primarily to the impact of unfavorable foreign exchange from the strengthening of the US dollar against major currencies from late October through December, as John will explain his remarks. On a year-over-year basis, fourth quarter revenues of $995 million increased 4%, reflecting 14.9% growth from systems and services revenues and 1.6% growth from clear liner revenues. On a year-over-year basis, clear liner volumes grew 6.1%, driven by increased shipments across all regions, with strength in EMEA, APAC, and LATAM regions, and stability in North America. From a channel perspective, clear aligner volumes in the ortho and GP channels were up a year-over-year basis with a number of submitters in utilization amongst the highest in the past few years. On a sequential basis, fourth quarter revenue growth of 1.8% reflects continued momentum from sales of iTero luminous scanners and increased Invisalign clear aligner volumes in the amazed Maya region, especially from teens and growing patients as well as growth from the LATAM regions. Across the orthodontists and GP dentists offset by clear aligner seasonality in APAC, mostly in China, which had a strong team quarter in Q3. For the Americas, Q4 clear aligner volumes reflect a seasonally soft orthodontic channel offset somewhat by strength in the GP channel in the adult segment. For the full year 2024, total revenues of $4 billion and clear aligner volumes of 2.5 million cases were both up 3.5% year-over-year, we delivered fiscal 2024 non-GAAP operating margin of 21.8%, above fiscal 2023 and in line with our 2024 outlook. As of Q4-24, we achieved several cumulative milestones, including 272,000 active Invisalign trained practitioners, 19.5 million Invisalign patients, including over 5.6 billion teens and kids, and over 2 billion clear aligners manufactured worldwide. For clear aligners in Q4, year-over-year volume growth in the Americas reflects strength in Latin America, as well as improving trends in North America, especially for GP dentists. In the EMEA region, Q4 year-over-year clear aligner volume growth reflects increased volumes from core Europe, as well as strong growth from EMEA, Eastern Europe, Middle East, and Africa markets. From a channel perspective, EMEA clear aligner Growth reflects strength in both ortho and GP, as well as teens, kids, and adult patients. In APAC region, Q4 year-over-year clear liner volume growth was driven by China and Japan, as well as strong growth from our emerging APAC countries led by India, Thailand, and Korea. For Q4, APAC growth also reflects increased utilization and submitters in both doctor channels and growth in both patient segments. Q4, we had 85,700 doctor submitters worldwide, a record total in a fourth quarter, primarily reflecting a sequential increase in clear aligner volume for adults in non-comprehensive cases. In the adult clear aligner segment, we're pleased to see both year-over-year and sequential growth across all regions. In the teen and growing kid segments, approximately 216,000 teens and kids started treatment with Invisalign clear aligners during the fourth quarter, a decrease of 8.6% sequentially off a record Q3 teen season, and an increase of 9.8% year over year, reflecting growth across regions, especially from Invisalign First in the APAC and EMEA regions. For Q4, number of doctors submitting cases starts for teens and kids was up 6.2% year over year, led by continued strength from doctors treating young kids or growing patients. For fiscal 2024, total Invisalign clear aligner shipments for teens and kids reached a record total of 868,000 Invisalign cases and shipped up to a year up to 7.7% compared to the prior year and comprising approximately 35% of the 2.5 million total clear aligner case shipments for the year. Teen specific consumer marketing and sales programs along with the continued momentum for Invisalign first for kids as young as six in Invisalign Pallet Expander systems help drive adoption globally. During the quarter, we continue to commercialize the Invisalign Pallet Expander with steady momentum for doctors, submitters, and shipments. In its first full year of availability in North America, Invisalign Pallet Expander adoption was followed by similar trajectory in Invisalign First, which launched in 2017. Invisalign First did not require regional or country-specific regulatory approvals like Invisalign Pallet Expander is required. In Q4, we received the CE mark under the medical device regulation to market the Invisalign Pallet Expander system in most of Europe and also completed registration with the Medicines and Healthcare Products Regulatory Agency for the United Kingdom and overseas territory. Both approvals are for broad patient applicability, including growing children, teens, and adults with surgery or other techniques. These approvals mark a significant milestone in our efforts to enhance clinical outcomes and efficiency in orthodontics and enable us to commercialize Invisalign Pallet Expander across most of the major region in 2025. We are continuing to make progress in establishing the clinical efficacy and improved patient experience of Invisalign Pallet Expander, which recently made the cover of the Journal of Clinical Orthodontics, or JCO, In an article published by Dr. Jonathan Nicosesis, there have been multiple peer review studies published on the effectiveness of the Invisalign Pallet Expander as well as mandibular advancement. We also are receiving positive parental feedback as reflected in the article, Seven Reasons Parents Love the Invisalign Pallet Expander System. Overall, the Invisalign Pallet Expander System is gaining traction among orthodontists and patients due to its innovative design and user-friendly features. As more clinical data becomes available and practitioners gain experience with the device and parents become informed, we believe adoption will continue to grow. Q4 non-case revenues were up year over year primarily due to continued growth in retainers and our doctor's subscription program, or DSP, including non-invisalign patients getting retainers. Non-case revenues, including our Bevere retainers, retention, aligners ordered to our doctor's subscription program, clinical training, education, accessories, and e-commerce. DSP also includes Invisalign touch-up cases, which includes up to 14 stages and is currently available in North America and certain countries in Europe. It was most recently launched in Brazil. For Q4, total Invisalign DSP touch-up cases were up nearly 37% year-over-year to more than 27,000 cases. For fiscal 2024, total DSP touch-up cases shipped were over 100,000, up 37% compared to 2023. 224 clear line or volume from DSO customers increased sequentially and year over year, reflecting growth across all regions. The DSO business continues to outpace our retail doctors globally. And in the U.S., it's driven by our largest DSO partners, Smile Doctors and Heartland Dental. And also had strong growth in iTero scanner sales as DSO invested in their members' practices end-to-end digital workflows. In December, we completed 30 million equity investment in Smile Doctors, the largest orthodontic-focused DSO in the U.S., with more than 450 locations in 32 states. Smile Doctors has a rich history of developing and growing affiliated practices by providing tools and technology that allow their orthodontists to focus entirely on patient care, and we are continuously exploring collaboration with DSOs that share our vision of furthering the adoption of digital dentistry. HDSO has a different strategy and business model. We're focused on working and with encouraging the DSOs aligned with our vision strategy and business model goals. Those DSOs that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the aligned digital platform, including increased practice efficiency and profitability, as well as delivering a better patient experience for shorter cycle times and proximity to their customers. Turning to systems and services, Q4 was another strong quarter, with year-over-year revenue growth of 14.9%. On a sequential basis, Q4 systems and services revenues were up 5.2%. In Q124, we launched the ITERA Lumina with orthodontic workflows as a new standalone scanner or as a WAND upgrade from our ITERA Element 5D Plus scanner. Overall, we continue to be very pleased with the ongoing adoption of ITERA Lumina scanner, and we're looking forward to building on its success with the launch of the ITERA Lumina scanner with restorative capabilities. During the fourth quarter, we began a limited market release of our restorative software on the iTera Illumina scanner, and doctor feedback has been outstanding. Our iTera Illumina innovation represents continuous advancement in our mission to deliver unparalleled value to customers and dental professionals worldwide. Doctors can continue to purchase the current version of iTera Illumina scanner today, knowing that it will automatically update to the free new version free of charge once it becomes available at the end of March. With that, I'll now turn the call over to John.