Align Technology, Inc.

Greetings. Welcome to the Align Third Quarter 2026 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 Stacy, with Align Technology. You may begin.

Good afternoon. Thank you for joining us. I'm Shirley Stacy, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO, and John Morici, CFO. We issued third quarter 2026 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, product outlook, and financial expectations. 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 posted historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable. and our third quarter 2026 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. On today's call, I'll review our third quarter performance and the growth priorities we're executing across Align. John will then discuss our financial results and outlook for Q4 and fiscal 2026. Before we start, I'd like to note that we announced our CEO succession plan earlier today. I'll return to this topic at the end of the call. For now, let's focus on our third quarter results. We delivered a solid third quarter results with record doctor submitters, record third quarter clear aligner shipments, improved utilization, and broad-based international growth. Worldwide revenue was $1.015 billion, up 1.9% year over year, or 2.4% at a constant currency. and in line with our outlook. Clear liner shipments increased 6.6% to 691,000 at the high end of our expectation for mid single digit growth in Q3. And systems and services revenue was 175.5 million down 7.6 year over year and generally consistent with the guidance we provided at Q2. Reported revenue continues to reflect a shift toward lower price scanner configurations and more flexible acquisition models and stable ASP on a like-for-like basis, while our installed base and customer footprint continue to expand. From a profitability perspective, non-GAAP gross margin was 70.4%, modestly below our expectation, reflecting higher fuel-related transportation costs. Lower clear-liner ASP and the impact of geographic and product mix. Disciplined expense management and productivity improvements contributed to non-GAAP operating profit Margin of 24.4% above our outlook. Overall Q3 demonstrated our ability to execute in a challenging environment, delivering continued clear aligner growth, expanding our digital platform and consumer footprint and improving profitability. We remain focused on continuing to drive growth and building on this progress across several key areas. We continue to drive adoption utilization across customer channels. That includes increasing utilization among orthodontists, expanding Invisalign adoption among GP dentists and growing with DSOs and strategic accounts. During Q3, a record 91,000 doctors submitted Invisalign cases, up more than 3% year over year, while overall utilization increased 3.4%. We are expanding the patients and clinical needs that we address. Younger patients remain one of our largest growth opportunities and were again an important contributor to our Q3 performance. Younger patient shipments increased at a double-digit rate in international markets with strong teen performance across APAC and EMEA. Our growing patient portfolio, including Invisalign First, Invisalign Pallet Expander, and Manipulator Advancement with Occlusal Blocks, enables doctors to address younger and more complex patients while expanding the range of orthodontic needs that can be addressed with Invisalign treatment. Affordability and patient conversion continue to be important focus for us. are zero additional aligner offering, providing doctors with a greater treatment and pricing flexibility, while patient financing and commercial programs are designed to help practices convert more prospective patients. Worldwide, zero AA volume increased triple digits year over year during Q3. We're also continuing to expand the value of the Align Digital platform. The opportunity goes beyond clear aligners or scanner placements individually. We are connecting iTero, scanning diagnostics, AI-enabled treatment planning, Invisalign treatment, ExoCAD restorative workflows, and practice applications to create a more integrated digital workflow for doctors and patients. This also represents a growth opportunity beyond traditional orthodontics. Through dental laboratories, we can reach GP dentists more broadly and enable digital workflows that integrate tooth movement with restorative treatment and planning. Invisalign Advanced Restorative Treatment, or ART as we refer to, is a compelling example of lines expanding its role in comprehensive dentistry, creating new clinical use cases, strengthening ecosystem connectivity, and increasing our long-term opportunity across the broader dental marketplace. Importantly, this approach also aligns with the growing focus on oral health by helping clinicians plan treatment more holistically, recognizing the relationship between tooth position, function, restorative outcomes, and long-term patient care. These growth opportunities reinforce one another, expanding our doctor customer base, increasing utilization, addressing more patients and clinical needs, improving affordability and conversion, and deepening adoption of our digital platform. Together, they give us multiple pathways to drive growth across the line. With that context, let me turn to our regional performance and the commercial priorities we're executing to drive growth. In the Americas, clear aligner shipments increased approximately 1.5% year over year, reflecting different performance trends across North America and Latin America. For the first time in six quarters, North America total orthodontist shipments increased year-over-year supported by growth from DSOs. North American DSO shipments increased a double-digit rate overall, including growth across both orthodontist and GP customers. While the broader retail channel remains pressured, particularly for GP customers, orthodontist retail shipments improved sequentially in Q3, with teen orthodontist retail shipments also increasing year-over-year. We view the return to year-over-year orthodontist case growth, strong DSO performance, and sequential improvements in orthodontic retail as an encouraging indicator, particularly given continued consumer softness. These early signs of improvement in North America reflect our focus on what we can control, strengthening commercial execution, sharpening our go-to-market strategies, and deepening key partnerships to help drive conversion. Through sustained efforts to further this progress, we believe we will return North America back to growth. Our collaboration with HFD, Healthcare Finance Direct, integrates patient financing options into the Invisalign workflow to give patients greater payment flexibility and reduce administrative function for practices. We're seeing encouraging early traction with these offerings and are evaluating additional financing opportunities, including our new care credit pilot. Patient interest in Invisalign remains strong, but affordability can be a barrier to starting treatment. These initiatives are part of our broader effort to address that barrier and convert more patient interest into treatment starts, rather than waiting for consumer environment to improve. During the quarter, we launched the Shift Happens campaign to consumers to increase adult consumer awareness and Invisalign consideration. Our commercial focus is on helping practices convert that interest into consultation and treatment starts. In Latin America, clear aligner growth remained strong across channels and was up double digits year-over-year. DSO shipments increased significantly year-over-year, while retail also grew, including positive performance across both GP dentists and orthodontists. Our Latin American priorities are centered on affordability and digital adoption, including expanding DSP availability, advancing Invisalign pay initiatives, and broadening iTero access through additional partners, financing alternatives, and scanner configurations. Turning to EMEA, clear aligner shipments increased a double-digit growth rate year-over-year, supported by strong utilization across orthodontists and GP dentists and double-digit DSO growth. Retail was also an important contributor. EMEA retail shipments increased 8% year-over-year, with growth across both orthodontists and GP dentists customers. In EMEA, we are focused on orthodontist utilization, teen and growing patient treatment, and clinical education. especially Class 2. We're working to expand the GP engagement through digital workflows and broader treatment opportunities, including ART. With DSOs, we continue to focus on improving conversion and scale adoption across practice locations. In systems and services, our focus is on expanding Illumina PC, targeting competitive and legacy iTero scanner users, and expanding submitters through ART and third-party partnerships. In APAC, clear liner shipments were up double digits sequentially and increased year over year, driven by record doctor submitters and strong younger patient demand. Teen shipments increased double digits year over year, led by China. Retail was the primary channel growth driver in APAC during Q3. APAC retail shipments increased 16% year over year, with double digit growth across both orthodontist and GP dentist customers. In APAC, we are focused on expanding adoption, improving conversion, and strengthening the customer experience. This includes expanding private distributor coverage in China, increasing penetration in lower tier cities, and activating DSOs and accelerating tween and teen treatment. We're also focused on improving patient conversion in Japan through orthodontist growth programs as well as driving iTero initiatives. Across the rest of Asia, our focus is on building on the momentum and higher growth markets including India, Korea and Taiwan. Customer experience is also an important growth lever across APAC. We're focused on clinical support, customer service, simplifying commercial processes and improving the digital experience. Together, these actions give us multiple avenues to expand growth across orthodontists, GP dentists, retail practices, DSOs, younger patients and digital workflows. We continue to see a significant opportunity to expand Invisalign adoption among GP dentists by connecting Orthodontic treatment more closely with restorative and broader oral health care workflows. GP performance remains variable by market and channel. North America GP retail remains pressured, while EMEA and APAC GP retail both delivered positive year-over-year growth, and North America GP DSO grew double digits. These results reinforce our view that GP adoption can expand through clinical education, affordability, digital workflows, and broader restorative treatment opportunities. ARD is one example of how we are connecting alignment and restorative treatment planning. Along with iTero, ExoCAD and our broader digital platform, these workflows help us engage GP dentists across a wider range of treatment options and create new opportunities to incorporate Invisalign into restorative patient care. Turning to systems and services, Q3 revenue was $175.5 million, down 7.6% year over year. The difference between reported revenue and underlying adoption remains important. This reflects a deliberate strategic shift toward flexible acquisition models rather than weakening demand. Revenue continues to reflect a greater mix of lower price configurations as well as flexible acquisition models, including leasing, financing, rentals, and certified pre-owned systems. The mix of itero leased units continues to grow and was up double digits again year over year. These customer-focused solutions are designed to lower the initial barrier to adoption, expand our customer footprint, and give doctors more ways to access our digital technology. Our focus remains on expanding iTero's reach, and in Q3, the number of scanner units placed, including leased, rented, and certified pre-owned systems, increased double-digit year-over-year to more than 157,000 systems globally. and Limited Pilot 11 DSO location practices integrating ITERA Illumina with Invisalign practice staff increased new patient exam capacity by approximately 15% without adding staff or extending operating hours. Nearly three quarters of participating locations improved productivity. The long-term value of systems and services extends beyond the initial scanner placement. A larger, more engaged and trained installed base creates opportunities to expand adoption of restorative workflows and Generate Reoccurring Software and Services Revenue. Before turning the call over to John, I want to briefly update you on our strategic initiatives we discussed last quarter. Following our constructive and ongoing discussions with Elliott Management, the first of our three independent directors joined Align Forward in August. Quinton Blackford, President and CEO of iRhythm Technologies, is an accomplished global healthcare and med tech leader, and we're pleased to welcome him to Align. Our strategic and operating model review is progressing with work focused on commercial effectiveness, organizational scalability, operating efficiency, and resource allocation. We're particularly focused on ways to improve performance in North America and identifying additional margin expansion opportunities without compromising growth. We are incorporating early observations into our planning and operating process and will provide additional detail as objectives are finalized and we can quantify their expected impact. The operating improvements we are already delivering also reflect broader work across manufacturing, productivity, automation, treatment efficiency, and discipline resource allocation. Our goal is straightforward. Drive profitable growth while building a more efficient and scalable business. With that, I'll turn the call over to John.