Align Technology, Inc.

Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO, and John Marucci, CFO. We issued third quarter 2025 financial results today via BusinessWire, which is available on our investor 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 reconciliation, if applicable, and our third quarter 2025 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 performance from our two operating segments, systems and services, and clear aligners. John will provide more detail on our Q3 financial performance and comment on our views for the remainder of the year. Following that, I'll come back and summarize a few key points and open the call if questions. I'm pleased to report third quarter revenues, clear aligner volumes, and non-GAAP operating margins are all above our outlook. Our Q3 results reflect year-over-year growth in clear aligner volumes driven primarily by EMEA and APAC in Latin American regions, as well as strong sequential growth from APAC in Latin American regions. Driven primarily by teens and kids category, our Q3 systems and services revenues were down year-over-year and sequentially as expected, giving Q3 capital equipment seasonality. Q3 non-gap operating margin of 23.9% was above our outlook of approximately 22%. While activity in the orthodontic and dental markets remains mixed, especially in North America, the initiatives we're taking to drive consumer demand and patient conversion, including working with our DSO partners, are delivering results, and we continue to focus on execution of these go-to-market programs. In addition to the breadth and depth of our global business and product portfolio and consumer preferences for the Align brand, our unique advantages that provide balance in a dynamic global market. In fact, the year-over-year clear liner volume growth rate improved from Q2 to Q3 for our top 10 country markets except for Canada. For Q3, total revenues of $996 million increased 1.8% year-over-year and decreased 1.7% sequentially. Q3 clear liner revenues of $806 million increased 2.4% year-over-year and were up slightly sequentially. Q3 clear aligner volume of 648,000 cases increased roughly 5% year over year, was up slightly sequentially. Q3 imaging systems and CAD CAM services revenues of 190 million decreased slightly year over year and was down 8.6% sequentially. For Q3 systems and services revenues decreased sequentially as expected, primarily due to seasonality. On a year over year basis, Q3 systems and services revenues decreased slightly primarily due to lower volumes offset somewhat by increased scanner services and ExoCAD CAD CAM sales. Q3 revenues also reflect strong growth from the iTero scanner leases, an important option for doctors that enables greater access to our advanced digital technology. At the end of Q3, the installation of active iTero systems, which includes sales and leasing, continues to expand, and there are over 120,000 units globally, a 12% year-over-year increase. From a regional perspective, Q3 scanner sales increased sequentially in North America among GPs, as well in Latin America and APAC regions. On a year-over-year basis, Q3 scanner sales increased in EMEA and Latin American regions. iTero Lumina, with iTero multi-direct capture technology, sets a new standard with effortless scanning and superior visualizations, helping doctors transition to our advanced imaging systems. For Q3, iTero Lumina represented over 90% of our full system units. and we're still driving adoption and utilization through WAND upgrades, as well as new full systems installations. Today, we announced a series of new product innovations for iTero Digital Solutions, a comprehensive ecosystem that includes inter-oral scanners, integrated software tools designed to transform dental consultations into a modern multimodal oral health assessment that helps doctors and their teams deliver exceptional chair-side experiences, supporting Invisalign treatment conversion. These new capabilities span key practice workflows that underline the aligned digital workflow. From AI-enabled x-ray assessment to dynamic personalized visualization and patient engagement tools at Chairside to expand compatibility with 3D printers and milling machines. These new innovations simplify workflows, improve doctor-to-patient communications, increase patient acceptance, and drive practice growth. More information on these innovations is available in today's press release and our webcast slides. For ExoCAD, Q3 revenues increased sequentially and year over year. During Q3, we began piloting ExoCAD ART in several countries in Europe. And based on the initial learnings, we're expecting to expand to more countries in 2026. ExoCAD ART stands for Advanced Restorative Treatment, a module with ExoCAD DentalCAD software that bridges orthodontics and restorative dentistry. It enables orthodontists, dentists, and dental labs to integrate tooth alignment with restorative procedures and deliver better function, less invasive restorations, and longer lasting and aesthetically superior treatment outcomes. ExoCat ART further extends the value of the aligned digital platform with comprehensive digital workflows and integrated solutions from Invisalign, iTero, and ExoCat. For clear aligners, Q3 worldwide volumes were up 0.5% sequentially and up 4.9% year over year. For Q3, 88,000 doctors globally submitted Invisalign cases, an all-time record. driven primarily by the GP channel. In addition, Q3 reflects a new all-time high for the number of doctors submitting Invisalign case starts for teens and kids. On a sequential basis, Q3 clear aligner volumes reflect strength from the international adult and teen patients, as well as North American DSO adult patients, partially offset by the North American retail doctor channel. Year over year, Q3 clear aligner volume reflects strong growth across the APAC and EMEA regions, offset somewhat by North America. Q3 clear aligner volumes increased year over year for both orthodontists and GPs, driven by growth across adults, teens, and kids, and continued strength by DSOs. From a product perspective, for Q3, we had strong year over year growth from Invisalign First, DSP touch-up cases, Invisalign Pallet Expander, retention including DSP, as well as continued mix shift from non-comprehensive clear aligner products. For the Americas, Q3 clear aligner volumes were down year-over-year, primarily due to North America, partially offset by continued growth in Latin America. Despite lower volumes, increased adoption of several products, including Invisalign First for teens and kids, Invisalign DSP touch-up cases, including retention, and the Invisalign Pallet Expander system continued. We also saw double-digit growth year-over-year from North America DSOs. Given the economies of scales and more effective optimal cost structures inherent in their business model, we anticipate that our DSO partners will continue to grow their Invisalign business and are one of the best examples of how to incorporate our digital technology and workflows to accelerate practice growth. To offset a financial barrier for patients interested in Invisalign treatment, Align and Healthcare Finance Direct, or HFD, are partnering to increase the affordability of treatment. HFD is a preferred patient financing partner and provides our Invisalign trained doctors with greater options to support their patients and enhance their practices. Among DSOs and doctors enrolled in HFT, enrollment is growing, and we have noticed an incremental lift in Invisalign treatment that we expect will continue. In the EMEA region, Q3 clear lighter volumes grew double digits year over year, driven by increased submitters and utilization in the orthodontic channel, with strength in teens, kids, and adult categories. This performance reflects continued adoption of non-comprehensive products, including moderate DSP touch-up cases, including retention and Invisalign Pallet Expander, as well as Invisalign Comprehensive 3-in-3 and Invisalign First within our comprehensive portfolio. During the quarter, we saw strong double-digit DSO growth in EMEA on a year-over-year basis. For the APAC region, 2-3 clear liner volume grew double-digit year-over-year, reflecting increased submitters and utilization across both the GP an orthodontist channel, across teens and growing kids led by China. Invisalign First continues to contribute to year-over-year growth where the growing patient portfolio provides a significant opportunity in the region with some of the highest rates of complex malocclusion. DSO performance is also up double digits on a year-over-year basis led by China and Japan. In addition, Q3 strong retention performance on a year-over-year basis reflects increasing submitters, and utilization across both the GP and orthodontist channel. In Q3, over 256,000 teens and growing kids started treatment with Invisalign clear liners. This number represents a 14.7% sequential increase, primarily due to strength in APAC, North America, and Latin America, partially offset by softer performance in EMEA due to seasonality. On a year-over-year basis, case starts increased 8.3%, driven by growth in APAC, EMEA, and Latin America, partially offset by North America. From a product standpoint, Invisalign First and Invisalign Pallet Expander, or IPE, continue to drive growth year over year across all regions. During the quarter, we achieved a record number of teen and kids cases shipped in a quarter, representing a record 40% mix of total clear aligner cases shipped. For Q3, the number of doctors submitting cases starts for teens and kids was up 3.8% year-over-year, led by continued strain from doctors treating young kids or growing patients with Invisalign First Aligners and Invisalign Pallet Expander. During Q3, we continued to roll out the Invisalign Pallet Expander system, an Invisalign system with Mangeable Advancements featuring occlusal blocks, or what we call MAOB. IPE offers a more hygienic and comfortable alternative to traditional metal expanders that has proven clinically effective at achieving the expansion doctors want for their patients. MAOB is designed to create class II skeletal and dental malocclusions in growing patients ages 10 to 16 by simultaneously advancing the mandible and aligning the teeth. By integrating solid occlusal blocks into clear aligners, MAOB offers greater durability and vertical opening for early mandibular advancement precision wings that guide the lower jaw forward and smart track material and smart force features for predictable tooth movement. Today announced ClinCheck Live Plan. It's a new feature in Invisalign digital treatment planning that automates the generation of initial doctor-ready treatment plans in 15 minutes. This advancement represents a major technical milestone for the Align Digital platform that can reduce the Invisalign treatment planning cycle from days to minutes. ClinCheck Live Plan is built on Alliance proprietary data and algorithms derived from decades of research and development and the experience of doctors who have treated more than 21 million Invisalign patients worldwide. With ClinCheck Live Plan, doctors have the option to treatment plan in the moment and can receive a fully customized initial ClinCheck treatment plan in about 15 minutes after submitting an eligible case with FlexRx. Doctors then have the option to review the proposed tooth movements, and approve the case while the patient is still in the office. This can enable the doctor to receive and approve the treatment plan faster, which can lead to the patient starting Invisalign faster, ultimately increasing the office efficiency and improving the patient experience. Over the past few years, Align has introduced a range of new treatment planning tools to enhance consistency, doctor control, and speed in treatment planning. I often refer to these innovations as touchless ClinCheck or ClinCheck in minutes, to emphasize the potential for the software to totally transform the treatment planning experience for doctors and their patients. To that end, we continue to make great progress in automation with machine learning and AI-powered technologies that are the foundation of our next-generation treatment planning offerings. I'm excited by our continued progress and the measurable impact we're beginning to see. The use of Invisalign FlexRx has doubled every year, and to date, over a million Invisalign cases have been submitted through FlexRx for personalized treatment plans. In addition, we now have over 100 Invisalign Pallet Expander clinical cases published in the Align Global Gallery, both unprecedented milestones for new product introductions in the orthodontic market. With that, I'll turn the call over to John.

Thanks, Joe. Now for our Q3 financial results. Total revenues for the third quarter were $995.7 million, down 1.7% from the prior quarter, and up 1.8% from the corresponding quarter a year ago. On a constant currency basis, Q3 revenues were favorably impacted by approximately $11.7 million, or approximately 1.2% sequentially, and were favorably impacted by approximately $15.6 million year-over-year, or approximately 1.6%. Q3 clear aligner revenues were $805.8 million, slightly up, primarily due to favorable foreign exchange and a price increase in the UK on August 1st, partially offset by product mix shift to lower-priced countries and products. Favorable foreign exchange impacted Q3 clear aligner revenues by approximately $9.8 million, or approximately 1.2% sequentially. Clear Aligner average per case shipment price was $1,245, a $5 decrease on a sequential basis, primarily due to slightly more pronounced product mix shift to lower priced countries and products, partially offset by favorable foreign exchange and a price increase in the UK. On a like-for-like basis, Q3 Clear Aligner ASPs for the US and EMEA were up sequentially. On a year-over-year basis, Q3 clear aligner revenues were up 2.4%, primarily from higher volume price increases and favorable foreign exchange, lower net deferrals, partially offset by higher discounts, and product makeshift to lower-priced countries and products. Favorable foreign exchange impacted Q3 clear aligner revenues by approximately $13 million, or approximately 1.6% year-over-year. ClearLiner average per case shipment price was $1,245, down $30 on a year-over-year basis, primarily due to discounts and product makeshift to lower-priced countries and products, partially offset by price increases and favorable foreign exchange. ClearLiner deferred revenues on the balance sheet as of September 30, 2025, decreased $19.5 million, or 1.6% sequentially, and decreased $78.7 million, or 6.2% year-over-year, and will be recognized as additional aligners are shipped under each sales contract. Q3 systems and services revenues of $189.9 million were down 8.6% sequentially, primarily due to lower scanner wand sales and scanner system sales. partially offset by favorable foreign exchange and higher non-system sales. Q3 systems and services revenues were down 0.6% year-over-year, primarily due to lower scanner system sales, partially offset by higher scanner WAN sales, higher non-system sales, and favorable foreign exchange. Foreign exchange favorably impacted Q3 systems and services revenues by approximately $1.8 million sequentially, or approximately 1%. On a year-over-year basis, systems and services revenues were favorably impacted by foreign exchange of approximately $2.6 million or approximately 1.4%. Systems and services deferred revenues decreased $7.9 million or 4% sequentially and decreased $30.9 million or 13.9% year-over-year due in part to shorter duration of service contracts contracts selected by customers on initial scanner system purchases. Moving on to gross margin. Third quarter overall gross margin was 64.2%, down 5.7 points sequentially, and down 5.5 points year over year, primarily due to restructuring and other non-cash charges, impairment on assets held for sale, depreciation expense on assets to be disposed of other than the sale other than by sale, and excess inventory write-off, partially offset by operational efficiencies. Overall gross margin was favorably impacted by foreign exchange of 0.4 points sequentially and 0.6 points on a year-over-year basis. On a non-GAAP basis, which excludes the impact of the above-mentioned restructuring and other non-cash charges, gross margin for the third quarter was 70.4%, down 0.1 points sequentially and flat year-over-year. Clear aligner gross margin for the third quarter was 64.9%, down 5.2 points sequentially, primarily due to restructuring and other non-cash charges. Foreign exchange favorably impacted clear aligner gross margin by approximately 0.4 points sequentially. Clear aligner gross margin for the third quarter was down 5.4 points year-over-year, primarily due to the restructuring and other non-cash charges, partially offset by operational efficiencies. Foreign exchange favorably impacted clear line of gross margin by approximately 0.6 points year over year. Systems and services gross margin for the third quarter was 61.3%, down 8.2 points sequentially, primarily due to excess inventory write-off. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.4 points sequentially. Systems and services gross margin for the third quarter was down 6.2 points year-over-year, primarily due to excess inventory write-off. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.5 points year-over-year. Q3 operating expenses were $542.9 million, down 0.4% sequentially, and up 4.5% year-over-year. On a sequential basis, operating expenses were $2.2 million lower, primarily due to lower consumer marketing spend partially offset by restructuring costs. Year-over-year operating expenses increased $23.4 million, primarily due to restructuring costs and partially offset by lower consumer marketing spend. On an on-gap basis, excluding stock-based compensation, restructuring, and other charges, and amortization of acquired intangibles related to certain acquisitions, operating expenses were $463.3 million, down 6.9% sequentially, and 2% year over year. Our third quarter operating income of $96.3 million resulted in an operating margin of 9.7%, down approximately 6.4 points sequentially, and down approximately 6.9 points year over year, due to Q3 restructuring and other charges of $36.3 million, primarily related to post-employment benefits and other non-cash items, including the impairment of assets held for sale, depreciation expense on assets to be disposed of other than by sale, and impairment loss on inventory, for an aggregate of $88.3 million. Operating margin was favorably impacted from foreign exchange by approximately 0.4 points sequentially and 0.5 points year over year. On a non-GAAP basis, which excludes stock-based compensation, restructuring, and other charges, impairments on assets held for sale, impairment loss on inventory, depreciation expense on assets disposed of other than sale, and amortization of intangibles related to certain acquisitions, Operating margin for the third quarter was 23.9%, up 2.6 points sequentially, and up 1.8 points year-over-year. Interest and other income and expense net for the third quarter was an expense of $1.6 million compared to an income of $10.5 million in Q2 2025, primarily due to foreign exchange fluctuations on open assets and liabilities. On a year-over-year basis, Q3 interest in other income and expense was unfavorable compared to an income of $3.6 million in Q3 2024, primarily driven by unfavorable foreign exchange movements and lower interest income. The GAAP effective tax rate for the third quarter was 40.1% compared to 28.2% in the second quarter and 30.1% in the quarter of the prior year. The third quarter GAAP effective tax rate was higher than the second quarter effective tax rate and the third quarter effective tax rate of the prior year, primarily due to the change in our jurisdictional mix of income due to restructuring, partially offset by lower U.S. minimum tax on foreign earnings and changes in the newly enacted tax law. On a non-GAAP basis, Our effective tax rate in the third quarter was 20%, which reflects our long-term projected tax rate. Third quarter net income per share was 78 cents, down 93 cents sequentially, and down 77 cents compared to the prior year. Our EPS was favorably impacted by 2 cents on a sequential basis and 3 cents on a year-over-year basis due to foreign exchange. On a non-GAAP basis, net income per diluted share was $2.61 for the third quarter, up 11 cents sequentially, and up 26 cents year-over-year. Moving on to the balance sheet, as of September 30, 2025, cash and cash equivalents were $1,004.6 million, up sequentially $103.4 million, and down $37.3 million year-over-year. Of the $1 billion, $4.6 million balance, $190.8 million was held in the US, and $813.8 million was held by our international entities. During Q3, we repurchased approximately 0.5 million shares of our common stock at an average share price of $136.77. These repurchases were made pursuant to the $200 million Open Market Repurchase Plan announced on August 5, 2025, which we expect will be completed in January of 2026. As of September 30, 2025, $928.4 million remains available for repurchase of our common stock under our previously announced April 2025 Repurchase Program. Q3 Accounts Receivable Balance was $1,099.4 million down sequentially. Our overall day sales outstanding was 101 days, up approximately two days sequentially, and up approximately eight days as compared to Q3 2024, and primarily reflects flexible payment terms that are part of our ongoing efforts to support Invisalign practices. Cash flow from operations for the third quarter was $188.7 million. Capital expenditures for the third quarter were $19.8 million, primarily related to investments in our manufacturing capacity and facilities. Free cash flow, defined as cash flow from operation minus capital expenditures, amounted to $169 million. I'd like to provide the following remarks regarding UK VAT and US tariffs as of September 30th. As previously disclosed in our Q3 earnings release, and conference call on July 30th, 2025, we stopped charging VAT to impacted customers in the UK. As of August 1st, 2025, our invoices no longer include the UK VAT rate of 20% for all Invisalign treatment packages that were ClinCheck approved as of August 1st, 2025. And for refinement and replacement aligners, Vivera retainers, PVS processing fees, and additional aligners placed on or after August 1, 2025. At the same time, we simultaneously adjusted prices for our clear aligners and retainers to keep the overall price consistent. Currently, we do not expect a material change to our result of operations as a consequence of the latest U.S. tariff actions, and we refer you to our Q1 2025 press release and earnings materials as well as our Q2 2025 webcast slides, which includes specifics regarding potential tariffs, impacts of US tariffs. Assuming no circumstances occur beyond our control, such as foreign exchange, macroeconomic conditions, and changes to our current applicable duties, including tariffs and other fees that could impact our business, we provide the following business outlook for Q4. We expect Q4 2025 worldwide revenues to be in the range of $1.25 billion to $1.45 billion, up sequentially from Q3 of 2025. We expect Q4 clear aligner volume and clear aligner average selling price to be up sequentially from favorable geographic mix. We expect Q4 2025 systems and services revenues to be up sequentially consistent with typical Q4 seasonality. We expect Q4 2025 worldwide GAAP gross margins to be 65.5% to 66%, up sequentially from higher revenue, lower restructuring and other charges, non-cash items such as impairment loss on assets held for sale, and impairment loss on inventory partially offset by higher depreciation on assets disposed of other than by sale. We expect non-GAAP gross margin to be approximately 71%. We expect our Q4 2025 GAAP operating margin to be 15.3% to 15.8%, up sequentially primarily from lower restructuring and other charges, non-cash items such as impairment loss on assets held for sale, and impairment loss on inventory, partially offset by higher depreciation on assets disposed of other than by sale. We expect Q4 non-GAAP operating margin to be approximately 26%. For fiscal 2025, we expect 2025 clear aligner volume growth to be mid-single digits and revenue growth to be flat to slightly up from 2024, assuming foreign exchange at current spot rates. We expect fiscal 2025 GAAP operating margin to be around 13.6% to 13.8% down year over year due to higher restructuring and other charges and the occurrence of non-cash charges expected to be approximately $145 to $155 million, primarily for the impairment loss on assets held for sale, depreciation on assets disposed of other than by sale, and impairment loss on inventory, partially offset by lower legal settlement loss. Most of the one-time charges will be non-cash, with the expected cash outlay for 2025 estimated to be around $45 million. We expect the 2025 non-GAAP operating margin to be slightly above 22.5%. We expect our investments in capital expenditures for fiscal 2025 to be approximately $100 million. capital expenditures primarily relate to technology upgrades. We are nearing completion of the restructuring actions that are intended to sharpen operational focus, reduce ongoing costs, and enhance capital efficiency. For fiscal 2026, we expect these restructuring actions as well as other initiatives to improve our GAAP and non-GAAP operating margins by at least 100 basis points year over year. With that, I'll turn it back over to Joe for final comments. Joe.