Align at Stifel Jaws & Paws: Strategic Growth Amid Market Challenges

On Wednesday, 28 May 2025, Align Technology (NASDAQ:ALGN) participated in the Stifel Jaws & Paws Conference 2025, outlining its strategic plans for revenue acceleration and margin expansion. While the company expressed optimism about growth in APAC and EMEA regions, it acknowledged challenges in North America and the broader market turbulence.

Key Takeaways

• Align anticipates double-digit growth in APAC and EMEA, while North America remains flat.
• The company raised its 2025 revenue guidance due to favorable FX rates.
• New products like IPE and MAOB are key growth drivers, especially in the teen segment.
• Align aims to improve conversion rates with immediate simulations and cost estimates.
• Direct fabrication is expected to become accretive by 2027, after being dilutive in 2025 and 2026.

Financial Results

• Q1 2025: Volume growth consistent with mid-single-digit projections.
• 2025 Revenue Guidance: Increased due to favorable currency exchange rates.
• Tariff Impact: Offset approximately $1 million monthly, primarily from scanner imports.
• Gross Margin: Held steady at 22.5%.
• 2026-2028 Long-Range Plan: Predicts revenue acceleration and operating margin growth.
• ASP Degradation: Expected to decline by 200 basis points due to product mix and other factors.

Operational Updates

• APAC and EMEA: Targeting double-digit growth driven by strong consumer demand.
• North America: Growth expected to be relatively flat.
• Product Innovations: IPE and MAOB are driving growth, particularly in the teen market.
• Direct Fabrication: Currently dilutive but expected to be accretive by 2027, with resin scalability being a key challenge.
• Treatment Planning: Aiming to increase touchless planning from 20% to 80% to cut costs.

Future Outlook

• Geographic Expansion: Continued focus on APAC and EMEA regions.
• Product Portfolio: Expanding to enhance relevance in the teen segment.
• Doctor Subscription Program: Launching in various regions to boost sales.
• Systems and Services: Ongoing improvements to the Lumina platform.
• Go-to-Market Strategy: Emphasizing volume and revenue growth on the current platform.

Q&A Highlights

• Consumer Confidence: Align is not overly reliant on consumer confidence indices.
• Conversion Rates: Focused on providing immediate simulations and cost estimates to improve rates.
• Direct Fabrication Timeline: Expected to be accretive by 2027, after initial dilution.
• Competitive Landscape: Observing more strategic pricing behavior among competitors, except Angel.
• HMRC Appeal: Awaiting potential appeal by June 19th, with no appeal filed yet.

Readers are encouraged to review the full transcript for more detailed insights into Align Technology’s strategic direction and market positioning.

Full transcript - Stifel Jaws & Paws Conference 2025:

Jon Block, Analyst, Stifel: All right, guys. I think we’re all set. Good morning, Jon Block at Stifel, And welcome to the twenty twenty five Stifel Jaws and Paws Conference. We really have a great day. It’s fully loaded.

We’ve got 15 total sessions. Overall, we have 23 companies, four physician panels, an animal health industry discussion across our two day conference, and I will largely be your emcee for most of that. Importantly, we’re going to open up the conference with Align Technology. We have their CEO, Joe Hogan their CFO, John Morici. And thanks again, guys, and pretty constant for participating in the conference this year.

I’m going to get into it. Guys, if you have questions, throw up your hand or shout out if I have my head down. But, Joe, I want to start with the business, and I’ll start off by circling back to the recent Investor Day. You guys provided a 2026 to 2028 LRP, which at the midpoint implies a decent revenue acceleration and op margin expansion from your 2025 or the 2025 estimate. So Joe, just touch on how you see the business right now and what allows Align to accomplish those goals?

Joe Hogan, CEO, Align Technology: John, we talked about a marketplace that we felt relatively good about in the first quarter. We talked about double digit growth overall. We saw in Asia. We also saw in Europe, North America, it’s relatively flat in that sense. We feel good about the momentum we’ve seen in the business overall, especially overseas.

And we feel good about our strategy when we look at from a distribution standpoint in North America going forward. We feel we have with IPE, MAOB, some of the products that you know you keep up with too, gives us good momentum in the marketplace. It opens up segments that we really haven’t participated in, particularly in that teen segment that we talk about a lot that gives us more confidence. And so we felt pretty good about the foundation of the company, what we’re seeing distribution wise right now, and at least North America being stable and with our new products. John, what about from a margin standpoint?

John Morici, CFO, Align Technology: From a margin standpoint, we have a lot of, as we know, a lot of initiatives underway to try to take costs out productivity wise. Even on treatment planning, a lot of the you know, automated, automated, ClinCheck and other things to be able to drive productivity. So we feel like we have, as Joe said, that revenue or that volume in a in a good place, but then also the productivity that we could drive to be able to show. And even for this year to be able to offset some of that relatively minor tariff impact, but we have productivity to better offset that.

Jon Block, Analyst, Stifel: Okay. And then hopefully, plan on getting more into gross margin in a little bit. I want to maybe go a little bit more near term oriented. And I remember, I think it was in some of our conversations back in the February, March timeframe. Hey, where should investors’ heads be at when you look at some of these different metrics that are scrutinized?

And so you have Google Trends that gets a lot of eyeballs. On the flip side, you’ve got consumer confidence. And those have diverged more recently than in the past. And so when we look at those metrics, which one is more prevalent for your business, Joe, in your view?

Joe Hogan, CEO, Align Technology: Well, I think, you know, first of all, when you talk about consumer confidence indices, they’re mostly associated with The United States or North America, you have to keep that in mind. Google is more global, right, in general. So I’d say I wouldn’t overly focus on either of the two. I’d kind of take them in conjunction. Google shows that interest.

You know, some of it could be driven by us and our advertising or whatever we’re doing around the world. And it just, you know, those kinds of trends show you the interest overall that patients have. It doesn’t necessarily mean they’re going to convert, it means that they’re interested. And then there are certain paths along the way that might trip a switch that they’ll decide to take treatment in some way. But it’s a good indicator that people are interested product line and that kind of growth is available.

On the consumer confidence industry in The States, I just think it’s become a little more political maybe in the past, the way they’re doing the surveys now, not versus phone, but web based or whatever. I think there’s some continuity there that you have to be careful with. But I think you look at them both and you just kind of triangulate around them.

Jon Block, Analyst, Stifel: Okay. And you mentioned the interest being there, anything that you guys can do on the conversion rates, right? Obviously, the interest does look like it’s going up or a favorable trend line on a worldwide basis. You guys have had certain conversion tools. You’ve got some more rolling out.

Do you want to briefly touch on some of those and how you think that may help conversion rates in coming quarters?

Joe Hogan, CEO, Align Technology: Yeah. I think specifically is once we have someone in a dental chair, an orthodontic chair, or whatever, we know that the closure rates can be much higher. If you can actually see a simulation, or we have a video now that actually shows really good response that way. So this is an emotional purchase often. It’s not one that someone might have to take, but they want to take in some way.

And actually seeing themselves in a video or seeing themselves in real time makes a difference. The way we’ve changed that programming recently is our new IO SIM Pro, is rather than just showing someone kind of a simulated look at what their teeth would look like if they’re straight, we actually can run the algorithms immediately during the scan. And we can tell that patient exactly how many aligners it will take and what the cost of that would be, rather than okay, I’m interested, now I want to do a treatment plan that will take two weeks to go back and forth to try to figure it out. And the immediacy of that I think helps with that urgency of people wanting to make a decision here or there.

Jon Block, Analyst, Stifel: Okay, so the thought is get the sales force, push it out, get the adoption notably in the GP channel where it’s adult, it’s discretionary. Exactly. It’s more emotional. That’s right. Okay.

And just sticking more in the near term for a moment. For the 2025 guidance on the 1Q print, you guys decided to raise revenue and flush through the favorable FX rates, John, relative to the beginning of the year. Despite the volatility, it was sort of just post Liberation Day that was occurring notably in The U. S. So can you talk to us on what you’re seeing out there that gives you the confidence to do that despite the variability?

And is that confidence more driven, call it, U. S. Or international markets?

John Morici, CFO, Align Technology: Yes. I think when we look at the total year, we looked at what we saw at first quarter, and the volume was consistent to our mid single digits for the year. So we felt good about that. And the new products and other initiatives that Joe talked about, those continue. So we feel good about the underlying business in terms of being able to achieve that mid single digits.

So we didn’t change that from a volume standpoint. And like you said, FX for us, the dollar got weaker, and we just let that favorability come through. So a couple points more of of foreign exchange and put us above mid single digits for revenue as well. And then the added piece that we did and and really, showed that we could offset is there was some impact from tariffs. It’s about a million million dollars or so a month, mostly coming from our our flow of scanner from Israel to The US, and we’re able to offset that and be able to hold that 22 and a half percent.

So it was just a reflection of Q1 was as expected. We let that volume through. It makes the numbers for the total year, and then we just adjust it for FX.

Jon Block, Analyst, Stifel: Okay. And one last one, and Joe, maybe this is for you. But there’s the markets and then there’s business, right? And so you had the tariffs, you had Liberation Day, the markets go into a tailspin. Like did you see that run through the business in the month of April and then things sort of smooth out or get more predictable?

Or was that just again more isolated to a Wall Street issue?

Joe Hogan, CEO, Align Technology: I I don’t think you can just call it a Wall Street issue. I think it permeates and flows through the business or whatever. But I’d say there’s been a lot of turmoil in this marketplace, even pre Liberation Day and post Liberation Day. So I’m just looking at a straight line of turbulence in general that we’re going to navigate through.

Jon Block, Analyst, Stifel: Okay, fair enough. APAC and EMEA, I’ll sort of go down some of the markets by region. So at the Analyst Day, the company conveyed confidence on double digit growth in APAC and EMEA. And actually the double digit is really critical, right, because it’s 50% of the biz. I think people are questioning the midpoint of the LRP.

And if 50% of the business is low double digit, call it, it implies very modest growth in North America to get to that 10% bogey. So why the confidence in the double digit? And if you could break it apart, Joe, maybe start with APAC, if you don’t mind, and then take us to EMEA. Are there certain things that you would flag that’s geography specific?

Joe Hogan, CEO, Align Technology: Yeah, John, let’s start with APAC. Obviously, APAC’s a lot of different economies. But in general, you know, they didn’t necessarily devastate their economies during COVID, right? So most of them are in pretty good fiscal shape. And we’ve seen patient, you know, closing and patient interest in our business really good.

I’d take Australia out of that discussion because Australia has been kind of burdened from a consumer standpoint. But the rest of them, Japan, China, as we reported in the quarter, is a good quarter. It’s been growing well, too. And then the Southeast Asian countries have shown a good positive growth also. Look, our portfolio of products, we’re just moving IP over to that area now.

That’s going to help too. We got approval in China. We have to ramp up production in China to make that happen. MAOB, we’ll start to move that into that in the second half of this year too. And so from a product portfolio standpoint and from a consumer acceptance standpoint, we feel good about Asia and what we’ve seen.

Europe, actually the same thing. We see Look, there’s, you know, Europe’s never Europe. You know, what Henry Kissinger say, who do I call when I call Europe, right? It’s just there’s no phone number. But Spain and Italy have been pretty good from the Latino side.

You know, Germany’s been Germany’s been tough. UK’s come back pretty well. And, you know, our UAE business has been extremely strong and very helpful. I would say gives us confidence, they’re not single points of growth. Okay?

We have growth and expansion of the portfolio. We have growth in different countries and around the area, and we don’t expect those to all collapse at one point in time. We expect some continuity through that.

Jon Block, Analyst, Stifel: And it seems like you called it the double digit growth that you’re currently experiencing, and then on top of that you may layer in new products, right? I mean, everything sort of started in North America, so DSP is going over there, IPE is going over there, MAOB will go over there. That could in my words maybe further augment what you’re currently experiencing. What about in North America? And is there anything that you guys can do to help thaw what’s largely been a pretty stagnant market of late?

Joe Hogan, CEO, Align Technology: Yeah. Well, think our You know, we try to take advantage of as much demand. But I think our relationship with Hartford, when look at Heartland overall, our relationship there has been good. Being able to tap into consumer demand, work together to help to drive that, and still be able to leverage those types of relationships have been good. You’ve seen our uptick from a team standpoint.

I think IPE helps with that again, MAOB helps with that. It helps to drive Invisalign first also. And so where we see a difficult demand pattern, we do have relationships that I think are good that can help us move forward. Heartland being a really good example. And then secondly is our product portfolio is much broader in the sense of what we can

And pretty much any of those phase one customers for teens or kids that I’m sure we’ll get into really helps to drive it too. So, I think in this business too, we know the market in North America is static. We’ve seen that overall from a dental standpoint, orthodontic standpoint. Our job is to be able to leverage different areas where we know we have an opportunity, whether it’s our partners out there or whether it’s through our portfolio to drive as much growth as we possibly can until that market actually seeks a new balance here.

Jon Block, Analyst, Stifel: Or through a geographic perspective as well? That’s right. Okay. And you sort of teed me up and I’ll go into teen and then maybe I’ll try to wrap it back to the LRP if possible. But if you can talk to the uptake of IPE and is it time or when is it time where you start to lean in from a DTC perspective?

I think you want to give it some time out in the market for the uptake for orthos to increase. But can we see the company lean in from a DTC perspective shortly?

Joe Hogan, CEO, Align Technology: I mean advertising to consumers is a big part of our strategy. And so that product line is easy to advertise to consumers because if anyone’s had a child and you’ve had a pallet expander, an Essex device, and you had to slam a wrench in their mouth and turn it, right? We all know the anxiety associated with that. We want to make sure though that with our orthodontic partners too that we have that product, that it’s understood, before we really go out with it. And we think most patients understand this.

We don’t necessarily have to show the graphics of turning the screw, but most patients know the difference between the two. And we think as we’ll just enhance, hey, this device is available out there, talk to your orthodontist or talk to a local dentist or anyone who might administer that, and we feel there’ll be good uptake on that. Right now, demand’s not necessarily our problem with that product line, It’s not a problem at all. We’re just ramping up production or ramping up efficiency of it. So I feel good based on our strategy for this year with IPE, we’re tracking pretty well.

Jon Block, Analyst, Stifel: And you say demand is not an issue with IPE. I remember doing some of the early work on that product but still when I’m running the numbers and then you slap on the roughly $500 ASP versus what you get on the aligner side of things and you do it over a $4,000,000,000 base, right, that’s sort of a good problem to have. But the contribution to growth is somewhat muted. It’s incremental but it’s somewhat muted. So can you talk to us Joe what you’re experiencing because I always thought, hey it’s sort of a double whammy.

One, are you going get the revenue for IP and then do you see the flow through and a higher attachment rate call it on a team because you’ve proven to the parent, hey this kid’s actually more compliant than you might think. They can wear these things and swap them out. So are you seeing the pull through? Because now we’re a good twelve months plus with that product in North America that I think you’d have a good database to evaluate that.

Joe Hogan, CEO, Align Technology: Yeah. We see the pull through with Invisalign First too. You know, what’s interesting with Invisalign First and with IPE, you’re moving bone, a lot of bone. Now with Invisalign First, you’re moving teeth and bone, but when you’re on IPE, you’re basically moving bone in that sense. And so there’s kind of a time sequence of when an individual would be in either of them.

But also when you want to move your lower arch, you know, while you’re doing IPE, we have many docs now starting to move with Invisalign First to do the lower one to keep those things in sequence too. So there is a pull through there and I feel MAOB has the thing. MAOB timeframe is 11 to 13 years old, depending on kids and their growth cycles. And so, those things all come together under that Phase I kind of thing that we talk about. Remember there are certain doctors out there, orthodontists that practice phase one, some don’t, but we focus obviously on the phase one docs that want to use that technology.

Jon Block, Analyst, Stifel: Okay. And then one more on teen and then John maybe I’ll try to wrap it up and go back to the LRP and pull you back in. But the 1Q twenty twenty five double digit teen volume growth was a solid number. It’s one of the more solid results in teen in some time. You’re just going into the international markets with IPE.

You have MAOB in your back pocket. You’re talking about this attach rate, obviously a little bit of a leading question, but like how do you see this unfolding in terms of team durability with that double digit attached to it?

Joe Hogan, CEO, Align Technology: Well, it certainly supports it, John. Mean, it really helps it. And I think for years we’ve worked on this portfolio to be more relevant in the teen segment. And that phase one is, on an average, 20% to 25% of the procedures that are out there are phase one. So if I’m answering your question, there’s a certain amount of continuity in that market utilization or penetration that we’re pushing through with those product lines that help.

And obviously that positions us well. If we can pick up

Jon Block, Analyst, Stifel: the teams on Phase one, if there is a Phase

Joe Hogan, CEO, Align Technology: two sequence, they’re used to our system, they’re used to that product line, we feel that flows well with it too.

Jon Block, Analyst, Stifel: And I’ve been covering you guys long enough to go back to Mandibular Advancement. You launched Mandibular Advancement with Wingtips and Invisalign First out of the gate. I remember getting a ton of emails coming in from clients like none of these kids are going to wear it anymore. Invisalign First ended up being a huge pardon me, think wingtips struggled a little bit sometimes with the durability. So specific to MA, when we look out two or three years, is it mostly the MAOB?

Like how do you see the split between MAOB and wingtips? Is it ninetyten? Is it fiftyfifty? Just briefly address that, you don’t mind.

Joe Hogan, CEO, Align Technology: It’s a guess, John. But with a and you can effectively, in a class two, you can move the mandible forward well with the wingtips. But there’s a collapsing issue. There’s a fit issue with those product lines. It works really well with certain dentition, certain way the molars are positioned.

But my guess, and you got to take this from a non clinical person, seventy five percent will be MAOB, twenty five percent will be wings. Okay. You’re going need both product lines to hit that market.

Jon Block, Analyst, Stifel: Okay. You’re pricing MAOB at a premium?

Joe Hogan, CEO, Align Technology: That’s right. Okay.

Jon Block, Analyst, Stifel: John, so let’s take everything that we just kicked around for fifteen minutes and go back to the initial question on the LRP. Is the thought there, hey, you see a line of sight to durable double digit APAC, durable double digit EMEA. I know I’m double counting in here, but there’s a team that’s got momentum of double digit, and it implies a very modest ask in North America even if we try to do that build to the midpoint ish

John Morici, CFO, Align Technology: of the LRP? That’s the right way to think of the regions. Like we said, we would expect faster growth, in APAC and in Europe, maybe not as much in North America, that’s kind of the market that we’re in. But then you you supplement it with additional products that we have that we’re talking about, IPE and MAOB and so on, And also some of the go to market opportunities that we have with some of the doctor subscription program and other products that really are just launching in many of those other places. And you take that all together, that’s that’s the framework when we think about that 5% to 15%.

And if we can accelerate some of those with some of the new products and some of the ways that we’re selling on a go to market basis, we can be, you know, within that range and maybe on the high end of that range if that takes off.

Jon Block, Analyst, Stifel: Okay. And I might go back and address ASP in more detail later. But within that range, just think about a 200 bps spread approximately of volume to revenue by some ongoing price or ASP degradation because of mix and other issues and apply that to what, John, the 2025 ASP where we’re all landing? Does that make sense?

John Morici, CFO, Align Technology: Yeah. That’s a that’s a good starting point. To apply it to 2025, we’re still gonna have and we’ve talked a lot about this from an ASP standpoint. Look, as you’re selling to more doctors, we sold to the more doc the most doctors that we ever sold to in the first quarter, many of those new doctors, they don’t necessarily do the most comprehensive cases to start. And many times, they’ll just do some type of touch up case or some type of low stage case.

Those are at lower list prices that contributes to the mix that we talk about. So I think if you start with that that ASP kind of from this year and you add in some of the mix that you have in in products as well as also regional mix. We talk about some of these areas that are growing tremendously for us in Turkey and India and other places. Those are just lower list price products that we have to be able to sell there. It doesn’t mean that it’s a lower gross margin, and we can get into whatever gross margin we wanna get into.

And we’ve talked about that difference where some of those lower list price products, they might contribute to lower ASPs, and that’s a reality that we have. But they also give us better gross margin rates because the cost to serve is less. It’s kind of a one and done. There’s not additional follow-up or other work that we have to do to

Jon Block, Analyst, Stifel: great. I’m going try to hit on three important topics, and I’ll roll through them pretty quickly. Systems and services, Joe, you had a big product cycle with Lumina. You had mid teen revenue growth in 2024. You’re guiding to systems and services to be above CA growth in 2025, so maybe call it mid single digit plus.

My concern is, hey, we look out to 2026, here we are year three of our product cycle, iOS just continues to experience a lot of pricing pressure. Can you guys continue to sort of fend that off and have durable growth into ’26 in that third year and why?

Joe Hogan, CEO, Align Technology: Well, know John, when you look at what Lumen is, it’s not a continuation of our convo imaging we had before with like five D plus and five D, right? It’s a brand new platform that’s never been introduced in IOS scanning before. And so as you look, you saw our portfolio from a confocal kind of span five, six, seven years, right, as we maximize on that technology. There are several areas of the new Lumina technology. Remember, just don’t want to be too physics based here, but when you look at what we were constrained to in ConFocal Image from its wand size, actually picture size, everything we were kind of trying to eliminate noise and have more signal.

What we did with Illumina was actually, know, we got what, five, six cameras and five LEDs on that thing. Huge signal, you can scan the whole mouth. Even John and I can actually scan with Illumina, right? It’s that simple to do. And so what we’re going do with that product line is we’re going to do several iterations to make that better.

And inherently, that’s a less expensive platform. We spent a lot of money in software to get to where it is. But from a hardware standpoint, it’s a less expensive platform. We’ll be able to utilize that going forward too. So I really think that Luminess sets a new standard of iOS capability in the marketplace and we’re going to work that platform to take advantage of it.

Jon Block, Analyst, Stifel: Okay. And in the background, we certainly have seen the systems and services gross margin, John, improve, right? And so that goes to Joe’s point of lower cost, 50% still recurring.

John Morici, CFO, Align Technology: That’s right. The mix there is right. I mean the cost base for those new products is better for us. That’s great, higher ASP. And then like you said, for the overall business, it’s 40%, fifty % recurring business and high margin software.

Jon Block, Analyst, Stifel: And one more on the systems and services and it’s more of like a strategic question and I love staring at a computer screen and then coming up with these strategy questions because it’s not easy to run a business. So I still get the surveys that come in with like the anger and the angst of these guys I can’t submit for Invisalign, right? And they have a prime scanner, they’ve got some

Joe Hogan, CEO, Align Technology: I read

Jon Block, Analyst, Stifel: those too. I wish you

Joe Hogan, CEO, Align Technology: give us some names sometimes.

Jon Block, Analyst, Stifel: We can’t disclose that. So when you think about iOS, tremendous product cycle for dentistry, we hear different numbers, but maybe 20, 20 five percent penetration, we could probably debate that. You get to the flattening of the S curve, so does the growth of the market slow? You came out with a huge product, Lumina, that’s entering year three, which I’m sure you wanted to capitalize on that. And you’ve got the killer app, right?

You can only you can send for Invisalign. When we look out a couple of years, Joe, do you ever think about completely opening up the platform, taking the scans from competing iOS systems in an effort to further accelerate your Invisalign business?

Joe Hogan, CEO, Align Technology: I mean obviously that’s we hear that from customers, we understand that backlash or whatever. But when you look at, that’s the front end of our system. When you talk about our digital platform and how we work, you start with iTero. And iTero is a workhorse in the sense of once you scan, whether you want to do a simulation, what do you want to do with an XPAC. It is the, it’s also a diagnostic to a certain extent that allows that.

As we talk about, you know, touchless ClinCheck, all those algorithms we write are based on the signals that we have on Lumen and five D plus, right? If I have to take, let’s say, a three shaped scanner and run it through that kind of thing, it’s a completely, right now I don’t want to take a bunch of software resources and put it on that. We have to really reflect that kind of productivity through our own automation and capabilities. So, the signatures of those machines are really different, John, right? If you’re just taking a picture and you’re reflecting it back to someone on a screen somewhere, they’re going walk through it.

That’s one part, right? And even DDT, so when you scan, what happens is you have verify that that scan is a scan, right? So, one of the sequences, whether we come back to someone, and for a minute or two minutes, three minutes, they’ll look up on the screen and say, you know, John had corn for lunch, so we’ve to pull that out of his teeth, you know, back and forth. With the algorithms we write today, it’s like we extract that distraction from your tooth at that point in time and then run the algorithms to our pieces. It’s very strategic for us.

And if we wanted to open that up from a scan standpoint, we can’t offer the same experience to doctors.

Jon Block, Analyst, Stifel: Quality of that scan from Lumina opens up a whole bunch of other And

Joe Hogan, CEO, Align Technology: the speed and everything else. Okay.

Jon Block, Analyst, Stifel: So let’s stick with technology and I’ll go to direct fabrication. And John, I do want to kick something off on direct fab because I thought there was a little bit of confusion coming out of the Analyst Day. You had the slides and I always see this when companies give like interim metrics and then long term. And then ’26 to ’28, I think you had direct fab dilutive and people were going, oh man, this thing is not going to be accretive till 2029. I think you did have a slight delay.

The way I read it is direct fab dilutive in ’25, dilutive in ’26, but you still believe accretive in ’27.

John Morici, CFO, Align Technology: Can you address that? It really comes down to you know, what you have with direct fab when you think about our overall cost that we have to produce. Let’s just say it’s split across, you know, the four buckets that we have, material, labor, overhead, and then freight, for our products. This direct fab really addresses the material piece of this where, you know, our traditional manufacturing we have now, we have to make the negative, make the mold, and it’s a significant amount of material for that, and then you vacuum form the plastic on top of it and kinda throw away or don’t use that that negative in terms of your product. Whereas when you’re direct fab, you make the product.

You don’t need to make a negative and so on. So it’s a tremendous, savings from a material standpoint that we have in our overall. And when we think of the direct fabrication and how we’re trying to scale this up, you know, you’ve got a scaling, efforts that you have on the resin itself. It’s a brand new resin. You’ve gotta get the right quantities and so on to be able to get this on a per cost, per unit basis to be to be reasonable from a costing standpoint.

And then you also have to scale up the manufacturing, the the cubicure printers that we have. That combination needs utilization. You need to be able to get new products, through there. So we’ll have a series of new products that come in, you know, this year into next year, and you really start to scale those up. Now you’ve achieved a a throughput that is gonna lend itself to to productivity.

Because then you’re gonna capitalize on that material savings that we have in that direct fab. So it really comes down to we know that we know what the technology is. We know how to to produce these. It’ll just come down to how much throughput we have. And that’s where we think by by 2027, you’d have enough throughput coming coming through that process to be able to start seeing those savings.

Joe Hogan, CEO, Align Technology: Hey, John. I I think what’s tough to to digest sometimes what John said, is it’s resin and it’s process, right? And the process, understand this process, we’ll work it out. The resin piece, this isn’t like, okay, it’s a new polyester, okay? So we’re to use a different reactor or something like that.

This is a completely different resin that’s really ever been commercialized. And so that sequence too is we’re going to go through it. We can see how to there. But it’s just important that we focus as much on that resin scale up to get those costs down as it is on the cost down process too.

Jon Block, Analyst, Stifel: And Joe, to try to ask a tough question down the direct fab, the pushback that I get is like, John, this seems like it’s transformational, right? And hey, I think they’ve got a better line of sight and they’re going to get there. But they’re probably going to get there in a bigger way in 2017, ’20 ’18 with the accretion to GMs and new products. So if I’m an investor here in May of twenty twenty five, how do I get paid over the next twelve months in direct fab? And if I pose that question to you, your answer is?

Joe Hogan, CEO, Align Technology: Well, think we still run our current business. Like John said, we see accretion in 2027, right? But in the meantime, I mean, still taking cost out of our vacuum form line. We’re still making investments in those areas with different kinds of Treatment planning piece is big. I mean, we have how many thousand people in treatment planning right now, Jeremy?

John Morici, CFO, Align Technology: There’s thousands of people doing treatment planning that every month we have less and less that we need to manually do something and more of that.

Jon Block, Analyst, Stifel: There’s 200,000,000, roughly, of your COGS in treatment planning?

Joe Hogan, CEO, Align Technology: Yeah. About try.

Jon Block, Analyst, Stifel: And as you go from 20% touchless to 80% touchless, you that can down significantly.

John Morici, CFO, Align Technology: You’re certainly going to get productivity there. And you’re also going to get resources now that we have to help new doctors do treatment planning and really provide this treatment planning services to be able to help those doctors be able to do some more complicated cases. So they could help with the clinical efficiency as well. But but it’s working on the current platform, drive as much volume and and revenue as we can there, and be as productive as possible. And then on the direct fabrication, we’re gonna start selling products to be able to help us from a volume and revenue standpoint.

But then as that scale, that’s where you start to see that productivity.

Jon Block, Analyst, Stifel: Couple minutes left. I want to hit on competition. And, you know, Joe, how do you see this unfolding where you have a handful of lab based players? And let’s put Angel aside for a moment, the other guys where growth has slowed for the industry and some of these platforms still are not profitable and they’re part of a bigger dental MD. And I think a lot of people, if you look at some of these competitors, LRPs, everyone thought the clear aligner market was going to grow 15% to 20%.

So the thought was like, well, I’ll eventually scale into it, right? Because industry grows 15% to 20%, I’ll grow 20% plus, I’ll take some share. But now industry is growing three to five and they’re growing five to seven. And so have you seen like a better behavior from a pricing perspective amongst, again let’s do X Angel first.

Joe Hogan, CEO, Align Technology: Yeah, X Angel, situationally we have some respectful nature in a sense of pricing in some areas. I wouldn’t say it’s across the board for sure. But I’d say more maybe continuity in a strategy from some of our I don’t want to point them out specifically. But I think there’s just a realization, it costs a lot of money to scale this business. We’re talking about treatment planning, we’re talking about what, you know, when you have to do what, 1,500,000 aligners a day now.

They don’t have to scale to that extent, but that takes a lot of money to scale that. So I think there’s a realization of our competitors in the sense of what it takes to get from A to B. And you have

Jon Block, Analyst, Stifel: to be respectful of price to really make that jump. And Angel will continue to try to subsidize through their China ops and they’ve got backing as well. So the thought is that they’ll probably remain a little bit more price focused in the near term?

Joe Hogan, CEO, Align Technology: That’s our strategy. There’s

Jon Block, Analyst, Stifel: got to conclude but I’ll end with a speed dating one. I’m just curious if I’ve got it right, HMRC’s got till June 19 to appeal. Have they appealed as of yet?

John Morici, CFO, Align Technology: They have not.

Jon Block, Analyst, Stifel: No. And if they don’t hear, it’s This presentation has now finished. Please check back shortly for the archive.

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