Align Technology, Inc.

Good day, and thank you for standing by. Welcome to the Align Technology first quarter 2025 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 101 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 101 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Shirley Stacey. Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us. Joining me on today's call is Joe Hogan, President and CEO, and John Marucci, CFO. We issued first quarter 2025 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 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've provided historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable, and our first quarter 2025 conference call slides on our website under quarterly results. Please refer to these files for more detailed information. With that, I'd like to 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, I'll provide an overview of our first 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 financial performance and comment on our views for Q2 and full year 2025. Following that, I'll come back and summarize a few key points and open the call to questions. I'm pleased to report first quarter revenues operating margin and earnings in line with our outlook. Fiscal 2025 is off to a good start with Q1 clear aligner volumes up both sequentially and year over year. reflecting strength in both the teens and adult patient segments across all regions, driven year-over-year strength across the Asia Pacific and EMEA regions and growth in North America. It's also worth noting that Q1 was the highest year-over-year growth rate for both adult and teen patients since 2021. From a channel perspective, Q1 clear aligner volumes in the orthodontic and GP-dentist channels increased year-over-year with a record number of total submitters and utilization for GP dentists for the first quarter. For our systems and services business, Q1 revenues were down sequentially, reflecting Q1 seasonality, as well as unfavorable foreign exchange. On a year-over-year basis, Q1 systems and services revenues were up slightly, reflecting continued adoption of iTero Illumina scanner platform, as well as the launch of iTero Illumina with restorative software at the end of March. On a year-over-year basis, Q1 clear aligner volumes grew 6.2%, driven primarily by continued strength across the Maya and APAC regions, as well as growth in North America, offset by lower volumes in Latin America region. For North America, Q1 year-over-year increase in clear aligner volumes reflects continued adoption of Invisalign First for teens and kids, Invisalign DSP touch-up cases, and Invisalign Comprehensive 3 and 3. On a sequential basis, Q1 North America clear aligner volumes primarily reflect growth from Invisalign DSP touch-up cases, the Invisalign Pallet Expander System, as well as Invisalign Comprehensive 3-in-3. For the EMEA region, Q1 year-over-year clear aligner volume growth primarily reflects strength across the region in both the ortho and GP channels across teens, kids, and adult patients. On a year-over-year basis, Q1 EMEA volumes reflect continued adoption of Invisalign non-comprehensive cases, primarily driven by Invisalign moderate, Invisalign DSP touch-up cases, as well as the initial launch of the Invisalign pallet expander across EMEA region in Q1. On a sequential basis, Q1 EMEA growth was driven primarily by Invisalign DSP touch-up cases. For the APAC region, Q1 year-over-year clear liner volume growth reflects increased utilization in submitters, and both ortho and GP channels across teen, kid, and adult patients in nearly all country markets. On a sequential basis, Q1 growth reflects strength from China and many of our emerging markets led by India and Korea. From a product perspective, Invisalign First, Invisalign Standard, and adult products drove Q1 growth in APAC both on a year-over-year and sequential basis. For Q1, we had over 85,000 doctor submitters worldwide for a record total for first quarter, primarily reflecting a sequential increase in clear aligner volume for teens, kids, and adults in both non-comprehensive and comprehensive cases. In the teen and growing kids segment, approximately 226,000 teens and kids started treatment with Invisalign clear aligners during the first quarter, an increase of 4.5% sequentially and an increase of 13.3% year over year, reflecting growth across regions, especially from Invisalign First in the APAC and EMEA regions in North America, as well as growth from the Invisalign Pallet Expander System in North America. For Q1, the number of doctors submitting case starts for teens and kids was up 2.1% year-over-year, led by continued strength from doctors treating young kids and growing patients. During the quarter, we continued to commercialize the Invisalign Pallet Expander System with continued momentum for doctor submitters and shipments. In Q1, we announced that Align's Invisalign Pallet Expander system was commercially available in Turkey, and today we received confirmation of regulatory clearance in China. Along with Turkey and China, the Invisalign Pallet Expander is available in the U.S., Canada, Brazil, Australia, New Zealand, Hong Kong, Japan, Singapore, Thailand, EU, UK, UAE, and Switzerland, and is expected to be available in additional markets following regulatory clearances. This month we announced the commercial availability of the Invisalign system with mandibular advancement featuring occlusal blocks designed specifically to address Class II skeletal and dental correction by simultaneously advancing the mandible while aligning the teeth. Class II malinclusion is one of the most common orthodontic issues characterized by a discrepancy in jaw alignment where the lower jaw is positioned too far back relative to the upper jaw. It represents approximately 30 to 45% of malinclusions globally. Left untreated, this condition can lead to functional, aesthetic, and other challenges for patients. The Invisalign system with mandibular advancement featuring occlusal blocks is a direct response to the needs of orthodontic practices and underscores Align's ongoing commitment to innovation in orthodontics that enhances clinical outcomes and the patient experience. By integrating occlusal blocks into the mandibular advancement feature, We are providing doctors with a powerful new tool that they have asked for to effectively treat growing patients with class 2 malinclusions while maintaining the aesthetic and comfort benefits of clear aligner therapy. The Invisalign system with mandibular advancement featuring occlusal blocks is available to Invisalign trained doctors in the United States, Canada, Australia, and New Zealand. It was just launched in most EMEA countries this week, and we expect to be introduced in additional markets through 2025 pending regulatory clearance. Along with the Invisalign Pallet Expander System and Invisalign First, the latest innovation supports the commitment to establishing a unique and differentiated portfolio that supports growing patients throughout their continuum of care. Dental service organizations, or DSOs, continue to present one of the fastest-growing channels in digital dentistry as they recognize the practice and patient experience benefits of digital workflows enabled by our portfolio of products and services that make up the Align digital platform. This includes increased practice efficiency and profitability, as well as delivering a shorter treatment appointment cycle times for their patients. In short, DSOs are a force multiplier for practice growth and Invisalign adoption. The Q1 clear aligner volume from DSO customers worldwide increased sequentially and year over year, reflecting growth across all regions. Q1 iTero scanner sales growth was also strong with DSOs as they continued investing and their member practices and end-to-end digital workflows. The DSO business growth continues to outpace that of our retail doctors, driven primarily by some of the largest DSOs in each region. Turning to systems and services. For Q1, year-over-year revenue growth primarily reflects scanner and WAN revenue, driven by Itero-Lumina WAN upgrades, partially offset by lower scanner revenues and the impact of unfavorable foreign exchange. For Q1, we delivered more scanner systems and WANs in a quarter than ever before. On a sequential basis, Q1 systems and services revenues were down reflecting capital equipment seasonality, partially offset by higher Itero Illumina Scanner 1 upgrades. In Q1, we launched a new restorative capabilities and our next generation Itero Illumina inter-oral scanner and a new Itero Illumina Pro dental imaging system with Itero Neri technology to enable efficient, restorative, and multidisciplinary workflows and support the diagnosis of interproximal caries above the gingiva. The new restorative capabilities of ITERO-Lumina improves GP dentists' ability to diagnose and develop treatment plans that deliver exceptional clinical outcomes while concurrently helping GPs collaborate more effectively with their restorative labs, deliver incredible, precise, custom-fitting restorations, and reach new levels of practice efficiency and growth. The ITERO-Lumina interoral scanner with ITERO multi-direct capture, or MDC technology sets a new standard with effortless scanning and superior visualizations, and feedback from doctors, labs, and other stakeholders regarding our Lumina portfolio has been positive. Its intuitive design and ease of scanning is appealing and is making everyday scanning more viable, especially when compared to other scanners. Like any breakthrough technology, it's important to ensure that doctors and their staffs are properly trained on scanning. Even the most experienced iTero users may need to unlearn previous scanning techniques. We are working closely with our teams to offer follow-up training for our customers and their staff. The ITERA Lumina interaural scanner delivers faster scanning speed, higher accuracy, superior visualization, and a more comfortable scanning experience. The ITERA Lumina solutions include superior 3D and 2D visualizations that augment and amplify oral health assessment and patient communication using the Align Oral Health Suite, designed to increase patient engagement with greater visual understanding of their oral health conditions. Following regulatory clearances in applicable countries, starting earlier this month, existing iTera Lumina scanner owners began upgrading to the new software, which includes restorative diagnostic capabilities. We're excited about the continued technology evolution we deliver with iTera Lumina system and the depth of tools and features it offers for imaging, diagnostics, treatment planning, visualizations, restorations, and so much more. iTero has always been much more than a PBS replacement, and with iTero Lumina has truly become the gateway to digital treatment for orthodontics and any type of GP practice, from family dentistry to high-end aesthetic practices. With that, I'll now turn the call over to John.