Earnings call transcript: Align Technology misses Q2 2025 earnings expectations

Align Technology reported its Q2 2025 earnings, revealing a miss in both earnings per share (EPS) and revenue forecasts. The company’s EPS came in at $2.49, below the anticipated $2.57, while revenue reached $1.012 billion, falling short of the projected $1.06 billion. This performance led to a 1.09% decline in Align’s stock price, closing at $205.81, with the aftermarket session showing a slight uptick. With a market capitalization of $14.77 billion, Align maintains its position as a significant player in the dental technology sector. InvestingPro data shows the company has maintained strong profitability with a robust gross margin of 70.02%.

Key Takeaways

• Align Technology’s Q2 2025 EPS of $2.49 missed the forecast by 3.11%.
• Revenue was $1.012 billion, down 1.6% year-over-year.
• Stock price fell by 1.09% in regular trading.
• The company announced restructuring plans with expected charges of $150-$170 million.
• Economic uncertainties and reduced orthodontic starts impacted performance.

Company Performance

Align Technology’s performance in Q2 2025 showed a mixed picture. While the company maintained its market position, it faced challenges with declining orthodontic starts for the fourth consecutive year. Revenue from Clear Aligner products decreased by 3.3% year-over-year, while Systems and Services saw a 5.6% increase. The company is focusing on restructuring and strategic investments to navigate economic uncertainties and stimulate demand.

Financial Highlights

• Revenue: $1.012 billion (down 1.6% year-over-year)
• Earnings per share: $1.72 (up $0.45 sequentially)
• Gross margin: 69.9%
• Clear Aligner revenues: $804.6 million (down 3.3% year-over-year)
• Systems and Services revenues: $207.8 million (up 5.6% year-over-year)

Earnings vs. Forecast

Align Technology’s EPS of $2.49 fell short of the $2.57 forecast, representing a 3.11% miss. Revenue also missed expectations, coming in at $1.012 billion against the forecasted $1.06 billion, a 4.72% shortfall. This underperformance is notable compared to previous quarters, where the company had shown stronger alignment with market expectations.

Market Reaction

The stock of Align Technology closed at $205.81, marking a 1.09% decline following the earnings announcement. This movement reflects investor concerns over missed earnings and revenue targets. Despite the drop, the stock remains above its 52-week low of $141.74, indicating some resilience amidst broader market challenges. According to InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels. Investors can explore similar opportunities through the Most Undervalued Stocks list.

Outlook & Guidance

For the remainder of 2025, Align Technology anticipates Clear Aligner volume growth in the low single digits, with overall revenue growth expected to be flat to slightly up. The company projects Q3 2025 worldwide revenues between $965 million and $985 million. Strategic focus areas include patient conversion and digital dentistry investments.

Executive Commentary

CEO Joe Hogan emphasized the company’s commitment to navigating current challenges with a focus on future growth. "We’re navigating with a clear focus to control what we can and to continue to invest with discipline in the areas that will define our future," Hogan stated. He reiterated the importance of customer trust and value-based innovation for long-term success.

Risks and Challenges

• Economic uncertainty affecting consumer spending on elective procedures.
• Continued decline in orthodontic case starts.
• Potential impact of restructuring charges on short-term financials.
• Competitive pressures in key markets.
• Need for effective patient conversion strategies.

Q&A

During the earnings call, analysts questioned Align Technology’s strategies for addressing patient conversion challenges and the rationale behind its restructuring efforts. The company expressed confidence in its long-term growth strategy, despite current market headwinds.

Full transcript - Align Technology Inc (ALGN) Q2 2025:

Conference Operator: Greetings. Welcome to the Align Second Quarter twenty twenty five 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.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology: Good afternoon and 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 Maricci, CFO. We issued second quarter twenty twenty five financial results today via Business Wire, which is available on our website at investor.aligntech.com. Today’s conference call is being audio webcast and will be archived on our website for approximately one month.

As a reminder, the information provided and discussed today will include forward looking statements, including statements about Align’s future events and product outlook. These forward looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission available on our website and at sec.gov. Actual results may vary significantly and Align expressly assumes no obligation to update any forward looking statement. We have posted historical financial statements with corresponding reconciliations, including our GAAP to non GAAP reconciliation, if applicable, and our second quarter twenty twenty five conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information.

And with that, I’ll turn the call over to Align Technology’s President and CEO, Joe Hogan. Joe?

Joe Hogan, President and CEO, Align Technology: Thanks, Shirley. Good afternoon, and thanks for joining us today. On our call today, I’ll provide an overview of our second quarter results and discuss performance from our two operating segments, System Services and Clear Aligners. John will provide more detail 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 to questions.

On our second quarter results were mixed. Total Q2 revenues at 1,012,000,000 reflect a solid year over year revenue growth for systems and services, driven primarily by stronger than expected sales of iTero lumina scanner, wand upgrades offset by lower than expected sales of full iTero lumina systems and a slight year over year decrease in clear aligner revenues, driven primarily by lower than expected volumes in Europe and North America. As a result, Q2 worldwide revenues and operating margins were below our Q2 outlook. During Q2, we continue to see strong consumer interest in Invisalign treatment as reflected by iTero scans and Invisalign doctor case submissions. However, we experienced uneven patient case conversion, which led to a lower than typical seasonal uptick in case starts, which historically occurred late in the quarter.

As we assessed our Q2 results and the activity in our customers’ offices, we believe it was impacted in part by US tariff turmoil in and outside The United States and less affordable financing options for orthodontic treatment, as well as for capital equipment purchases. Recent dental industry surveys for the second quarter suggest that there was less overall patient traffic, fewer orthodontic case starts and patient hesitation toward elective procedures. Twenty twenty five marks the fourth consecutive year of orthodontic starts being down. And third party research reports indicate that practices that use both wires and brackets and clear aligners may often have shifted more of their case starts to metal braces in Q2. And certainly not only impacts the consumer purchasing decisions, but also the decisions that doctors make, especially practices who still use wires and brackets and weigh the sunk cost of their inventory and their available time over investing in digital solutions during times of financial uncertainty.

As we begin the third quarter and plan for the remainder of the year, our outlook anticipates the potential continued economic uncertainty and spending hesitancy that impacted demand for our clear aligners and new iTero scanning systems in the second quarter. Even though we know consumer interest in Invisalign treatment remains strong, we’re continuing to drive engagement and effectiveness of commercial marketing programs that leverage our innovation and new product cycle across our clear aligners and scanners, especially those for teens and kids. And at the same time, we’re evaluating actions to reduce costs and thoughtfully manage our investments. For q two, total revenues were 1,000,000,012,400,000.0, up 3.4 sequentially and down 1.6 year over year. In our systems and services segment, q two twenty five revenues were 207,800,000.0 and increased 13.9% sequentially and increased 5.6% year over year, primarily reflecting solid revenue driven by iTero Lumina, wand upgrades and increased services as more doctors transitioned to iTero Element 5D plus to the advanced iTero Lumina.

The iTero Lumina scanner makes up a majority of iTero scanner systems mix. For clear aligners, Q two twenty five worldwide volumes were up slightly sequentially in year over year. Year over year Q two clear aligner volumes reflect growth across the APAC and EMEA regions, offset somewhat by The Americas regions. From a product perspective, Q2, we had a strong year over year growth from Invisalign First, DSP touch up cases, Invisalign pallet expander and retention, including DSP, as well as continued mix shift to non comprehensive clear aligner products. From a channel perspective, Q2 clear aligner volumes increased slightly year over year in both orthodontist and general practitioner or GP dentist channels, with strong year over year growth from dental service providers.

Growth in total submitters were primarily driven by strength in the orthodontic channel, while increased utilization was led by the GP channel. Notably, we also achieved a record number of doctors shipped to for the second quarter. For The Americas, Q2 aligner volumes were down slightly year over year and reflects solid growth in Latin America teen segment, offset by lower volumes in North America. Despite lower volumes, adoptions increased across several key product offerings, including Invisalign First for teens and kids, Invisalign DSP touch up cases, and Invisalign palate expander system. In the EMEA region, Q2 clear aligner volume grew year over year driven by increased utilization across both orthodontists and GP dentist channels with strength in the adult segment.

This performance reflects continued adoption of non comprehensive Invisalign offerings, particularly moderate and DSP touch up cases, including retention, as well as Invisalign comprehensive three and three and Invisalign First within our comprehensive portfolio. For the APAC region, Q2 clear aligner volume grew year over year, reflecting increased submitters across both orthodontist and GP channels, across teens and kid patients led by China. From a product standpoint, Invisalign First was a key contributor to year over year growth, reflecting rising demand for early intervention solutions. In Q2, over 223,000 teens and growing kids started treatment with Invisalign clear aligners. This number represents a 1.1% sequential decline, primarily due to softer performance in EMEA and APAC, despite the continued strength in The Americas.

On a year over year basis, case starts increased 3%, driven by growth in APAC and EMEA and Latin America, partially offset by North America. From a product standpoint, Invisalign First was a key year over year growth driver across all regions. Additionally, the Invisalign Palatal Expander system contributed to year over year growth in North America. During the quarter, we achieved a record number of teen cases for a second quarter. Additionally, we’ve surpassed a significant milestone.

Over six million teens and kids have now been treated with the Invisalign system globally. For Q2, the number of doctor submitted case starts for teens and kids was up three point five percent year over year, led by continued strength from doctors treating young kids and growing patients with Invisalign First and Invisalign Palate Expander. With that, I’ll now turn the call over to John.

John Maricci, CFO, Align Technology: Thanks, Joe. Now for our Q2 financial results. Total revenues for the second quarter were $1,012,400,000 up 3.4% from the prior quarter and down 1.6% from the corresponding quarter a year ago. On a constant currency basis, Q2 revenues were favorably impacted by approximately $26,400,000 or approximately 2.7% sequentially and were favorably impacted by approximately $5,600,000 year over year or approximately 0.6%. For clear aligners, Q2 revenues of $804,600,000 were up 1% sequentially, primarily from favourable foreign exchange, partially offset by higher discounts.

Favourable foreign exchange impacted Q2 clear aligner revenues by approximately $21,600,000 or approximately 2.8% sequentially. Q2 Clear Aligner average per case shipment price of $12.50 dollars increased by $10 on sequential basis, primarily due to the impact of favorable foreign exchange. On a year over year basis, Q2 Clear Aligner revenues were down 3.3%, primarily due to lower ASPs from discounts and product mix shift to lower priced products, partially offset by a price increase. Favorable foreign exchange impacted Q2 Clear Aligner revenues by approximately $4,500,000 or approximately 0.6% year over year. Q2 Clear Aligner average per case shipment price of $12.50 dollars was down $45 on a year over year basis, primarily due to discounts and a product mix shift to lower priced products, partially offset by a price increase in Q1 twenty twenty five and favorable foreign exchange.

Clear aligner deferred revenues on the balance sheet as of 06/30/2025, increased $1,400,000 or 0.1 sequentially and decreased $65,500,000 or 5.2% year over year and will be recognized as additional aligners are shipped under each sales contract. Q2 systems and services revenues of $207,800,000 were up 13.9 sequentially, primarily due to higher scanner system revenue and favourable foreign exchange. Q2 systems and services revenues were up 5.6% year over year, primarily due to an increase in scanner and wand upgrade revenue, higher non system revenues, and favourable foreign exchange, partially offset by lower scanner system sales. Foreign exchange favourably impacted Q2 systems and services revenue by approximately $4,800,000 or approximately 2.3% sequentially. On a year over year basis, systems and services revenue were favourably impacted by foreign exchange of approximately $1,000,000 or approximately 0.5%.

Systems and services deferred revenues decreased $7,600,000 or 3.7% sequentially and decreased $24,500,000 or 10.9% year over year due in part to the shorter duration of service contracts selected by customers on initial scanner system purchases. Moving on to gross margin. Second quarter overall gross margin was 69.9%, up 0.5 points sequentially and down 0.3 points year over year. Overall gross margin was favorably impacted by foreign exchange of 0.8 points sequentially and 0.2 points on a year over year basis. Clear aligner gross margin for the second quarter was 70.1%, down 0.5 points sequentially, primarily due to higher manufacturing costs, partially offset by freight savings.

Foreign exchange favorably impacted Clear aligner gross margin by approximately 0.8 points sequentially. Clear aligner gross margin for the second quarter was down 0.7 points year over year due primarily due to lower ASPs, partially offset by freight savings. Foreign exchange favorably impacted Clear aligner gross margin by approximately 0.2 points year over year. Systems and Services gross margin for the second quarter was 69.4%, up 4.7 points sequentially due to higher scanner system ASPs and manufacturing efficiencies, partially offset by tariffs. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.7 points sequentially.

Systems and services gross margin for the second quarter was up 1.3 points year over year due to manufacturing efficiencies, partially offset by tariffs and lower scanner ASPs. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.1 points year over year. Q2 operating expenses were $545,100,000 down 0.7% sequentially and down 5.3% year over year. On a sequential basis, operating expenses were $3,900,000 lower, primarily due to lower legal settlements not recurring in Q2 ’twenty five. Year over year operating expenses decreased by $30,500,000 primarily due to legal settlements not recurring in Q2.

On a non GAAP basis, excluding stock based compensation, legal settlements and amortization of acquired intangibles related to certain acquisitions, operating expenses were $497,600,000 down 0.6% sequentially and down 0.4% year over year. Our second quarter operating income of $163,000,000 resulted in an operating margin of 16.1%, up 2.7 points sequentially and up 1.7 points year over year. Operating margin was favorably impacted from foreign exchange by approximately 1.2 points sequentially and 0.2 points year over year. On a non GAAP basis, which excludes stock based compensation, legal settlements, and amortization of intangibles related to certain acquisitions, operating margin for the second quarter was 21.3%, up 2.3 points sequentially and down one point year over year. Interest and other income and expense, net for the second quarter, was an income of $10,500,000 compared to an income of $9,300,000 in 2025, primarily driven by favorable foreign exchange movement of $10,100,000 partially offset by lower interest income.

On a year over year basis, Q2 interest and other income and expense were favorably compared to an expense of $3,200,000 in 2024, primarily driven by favorable foreign exchange movements. The GAAP effective tax rate in the second quarter was 28.2% compared to 33.6% in the first quarter and 32.9% in the second quarter of the prior year. The second quarter GAAP effective tax rate was lower than the first quarter effective tax rate primarily due to discrete tax expenses related to stock based compensation recognized in 2025 that did not occur in 2025. The second quarter GAAP effective tax rate was lower than the second quarter effective tax rate of the prior year, primarily due to a decrease in U. S.

Taxes on foreign earnings, partially offset by a change in our jurisdictional mix of income. On a non GAAP basis, effective tax rate in the second quarter was 20%, which reflects our long term projected tax rate. Second quarter net income per diluted share was $1.72 up $0.45 sequentially and up $0.43 compared to the prior year. Our EPS was favorably impacted by $0.26 on a sequential basis and $0.13 on a year over year basis due to foreign exchange. On a non GAAP basis, net income per diluted share was $2.49 for the second quarter, up $0.36 sequentially and up $09 year over year.

Moving on to the balance sheet. As of 06/30/2025, cash and cash equivalents were $901,200,000 up sequentially $28,100,000 and up $139,700,000 year over year. Of the $901,200,000 balance, dollars 193,500,000.0 was held in The U. S. And $707,700,000 was held by our international entities.

During Q2 twenty twenty five, we repurchased approximately 585,100.0 shares of our common stock at an average price of $164.14 per share, completing the $225,000,000 open market repurchase initiated in 2025. This completed our $1,000,000,000 stock repurchase program approved in January 2023 in its entirety. Over the last twelve months, we have repurchased $500,000,000 of our common stock. Over the last twenty four months, we have repurchased $1,000,000,000 of our common stock. In April 2025, our Board of Directors authorized a plan to repurchase up to $1,000,000,000 of our common stock, none of which has been utilized.

The April 2025 repurchase program is expected to be completed over a period of up to three years. Q2 accounts receivable balance was $1,116,200,000 up sequentially. Our overall days sales outstanding was ninety nine days, up approximately two days sequentially and up approximately ten days as compared to Q2 twenty twenty four and primarily reflects flexible payment terms that are part of our ongoing efforts to support Invisalign practices. Cash flow from operations for the second quarter was $128,700,000 Capital expenditures for the second quarter were $21,500,000 primarily related to investments in our manufacturing capacity and facility. Free cash flow, defined as cash flow from operations minus capital expenditures, amounted to $107,200,000 Before I turn to our Q3 and fiscal twenty twenty five outlook, Align is also announcing today that we expect to take a series of actions in the 2025 to streamline operations and reallocate resources to better align with our long term growth and profitability objectives.

These actions are intended to sharpen operational focus, reduce ongoing costs, and enhance capital efficiency. First, we expect to realign certain business groups and reduce our global workforce. Second, we are looking to optimize our manufacturing footprint and dispose of certain manufacturing capital assets as we transition to next generation manufacturing technologies, increase automation, and regionalize manufacturing to be closer to our customers. We expect these actions will incur one time charges of approximately $150,000,000 to $170,000,000 in the 2025, primarily for the write down of assets, accelerated depreciation expense and restructuring charges. We expect approximately $40,000,000 of these charges to be in cash, with the remainder in non cash charges.

We expect approximately $50,000,000 to $60,000,000 of these charges in 2025. We expect these actions to deliver cost savings that will allow us to achieve a GAAP operating margin of approximately 13% to 14% and a non GAAP operating margin of slightly above 22.5% in fiscal year twenty twenty five. For fiscal year twenty twenty six, we expect these actions to improve our GAAP and non GAAP operating margins by at least 100 basis points year over year. We are evaluating these difficult but, we believe, necessary actions to position us for sustainable long term success and improved profitability. While these decisions may impact valued members of our team, we believe they are essential to ensure we are positioned for upcoming technology changes and remain agile and focused in a rapidly evolving market.

We are committed to executing our strategy with discipline and purpose. In addition to this, I would like to provide the following remarks regarding The UK VAT and US tariffs as of July 30. As previously disclosed in our Q1 twenty twenty five earnings release and conference call on 04/24/2025, we received a favorable ruling in which the tribunal determined that our clear aligners are exempt from VAT. In June 2025, HMRC filed a petition to appeal to the Upper Tribunal to attempt to challenge the First Tribunal’s decision. On July 15, HMRC was given permission to appeal and has until August 15 to do so.

For impacted customers, effective 08/01/2025, Align invoices will no longer include The United Kingdom VAT rate of 20% for all Invisalign treatment packages that are ClinCheck approved as of 08/01/2025, and for refinement and replacement aligners, Bevero retainers, PVS processing fees, and additional aligners orders placed on or after 08/01/2025. At the same time, we will simultaneously adjust prices for our clear aligners and retainers to keep the overall price consistent. There are no material changes to the expected impact of U. S. Tariffs and we refer you to our Q1 twenty twenty five press release and earnings material, as well as our Q2 twenty twenty five webcast slides, which includes specifics regarding potential impacts of U.

S. Tariffs. Assuming no circumstances occur beyond our control, such as foreign exchange, macroeconomic conditions, and changes to currently applicable tariffs that could impact our business, we expect Q3 twenty twenty five worldwide revenues to be in the range of $965,000,000 to $985,000,000 down sequentially from 2025. We expect Q3 twenty twenty five clear aligner volume to be down sequentially as a result of Q3 seasonality and Q3 twenty twenty five clear aligner ASPs to be slightly up sequentially from favorable foreign exchange at current spot rates, partially offset by a continued product mix shift to non comprehensive clear aligner products with lower list prices. We expect Q3 twenty twenty five systems and services revenues to be down sequentially because of Q3 seasonality.

We expect Q3 twenty twenty five worldwide GAAP gross margin to be 64% to 65%, down sequentially by approximately five to six points due to the incurrence of one time charges expected to be approximately $45,000,000 to $55,000,000 primarily for the write down of assets, accelerated depreciation expense and restructuring charges in 2025 and lower clear aligner volume. We expect non GAAP gross margin to be flat from 2025. We expect Q3 twenty twenty five GAAP operating margins to be 10.5% to 11.5%, down sequentially by approximately five to six points, due to the incurrence of one time charges expected to be approximately $50,000,000 to $60,000,000 primarily for the write down of assets, accelerated depreciation expense and restructuring charges in 2025 and lower clear aligner volume. We expect the majority of these charges to be non cash charges, with approximately $5,000,000 in cash charges. We expect Q3 twenty twenty five non GAAP operating margin to be approximately 22%.

We expect 2025 Clear Aligner volume growth to be in the low single digits and revenue growth to be flat to slightly up from 2024. We expect 2025 clear aligner ASPs to be down year over year due to the continued product mix shift to non comprehensive clear aligners with lower list prices and continued growth in our emerging markets with products that may carry lower list prices, partially offset by favorable foreign exchange at current spot rates. We expect 2025 systems and services year over year revenues to grow faster than Clear Aligner revenues. We expect the 2025 GAAP gross margin to be 67% to 68%, down year over year by approximately two to three points due to the incurrence of one time charges expected to be approximately 115,000,000 to $130,000,000 primarily for the write down of assets, accelerated depreciation expense and restructuring charges in the 2025 and lower clear aligner volume. We expect 2025, the non GAAP gross margin, to be flat to slightly lower than 2024 non GAAP gross margin.

We expect the fiscal twenty twenty five GAAP operating margin to be 13% to 14%, down year over year by approximately one to two points below the 2024 GAAP operating margin due to the incurrence of one time charges of approximately $150,000,000 to $170,000,000 primarily for the write down of assets, accelerated depreciation expense and restructuring charges in the 2025. Most of the one time charges will be non cash, with the expected cash outlay for 2025 estimated to be around $40,000,000 We expect the 2025 non GAAP operating margin to be slightly above 22.5%. We expect our investments in capital expenditures for fiscal twenty twenty five to be between $100,000,000 and $125,000,000 Capital expenditures primarily relate to technology upgrades as well as maintenance. With that, I’ll turn it back over to Joe for final comments. Joe?

Joe Hogan, President and CEO, Align Technology: Thanks, John. In the face of a challenging and uncertain macroeconomic backdrop characterized by global tariff volatility, ongoing inflation, elevated interest rates, and unstable consumer confidence, we’re navigating with a clear focus to control what we can and to continue to invest with discipline in the areas that will define our future. In Q2, our customers reported reduced patient traffic, fewer orthodontic case starts and delayed case acceptance. But despite significant headwinds across the consumer discretionary spend landscape, our consumer interest metrics remain strong. Patients are still prioritizing care that delivers meaningful visible results, even if timing and affordability concerns are reshaping how and when they choose to commit to treatment.

Those that have transitioned to clear aligner therapy and digital practices, including larger practices and DSOs are showing more resiliency and commitment to digital dentistry and orthodontics. This underscores the opportunity. Those who invest in customer trust, seamless experience and value based innovation will be best positioned for the long run. We’re doubling down on the levers within our reach, innovation, efficiency and execution. We’re investing in next generation technology and treatment platforms that meet today’s patient expectations for fast, effective and personalized treatment, while also providing value and growth opportunities for our doctor customers.

We believe these innovations are not only improving outcomes in Invisalign practices, but also expanding our addressable market and strengthening our competitive differentiation. We’re expanding our new product offerings to drive Invisalign volume growth in our business. Year to date, we’ve successfully introduced IPE and MAOB in over 70 markets and are expanding Invisalign DSP offerings in more markets in Europe and Latin America in the second half of the year and on track to introduce DSP for the first time in major APAC markets beginning in 2026. We are piloting integration of our X-ray diagnostics and our iTero luminous scanner in some select markets outside The United States. In Q3, we will pilot our ortho restorative offering to GP dentists through labs, where we help non Invisalign trained GPs who are interested in learning and offering Invisalign in their practice.

Finally, commercial marketing teams are engaging practices with tools that improve case conversion at the point of care. Through digital channels, we’re activating more prospective patients and connecting them directly to providers. In the face of lower consumer confidence and delayed spending, our engagement with potential patients remains high, and we are continuing to refine and scale our integrated consumer marketing programs. In a fragmented choice heavy market, we’re continuing to make it easier for providers to succeed with our solution. Whether it’s clinical training, financing tools, or personalized marketing support, our strategy is simple, surround our customers with the right support at every stage of their growth journey.

We believe this commitment is helping drive greater adoption and turning one time users into repeat champions. At the same time, we recognize the importance of operating with discipline and taking steps now to mitigate the impact of potential continued headwinds and volatility in the market. We are considering actions that right size parts of our organization, aligning resources to current demand realities, eliminating redundancy to drive leaner, faster execution across our organization, especially in areas where we can integrate innovation teams and take global decision making and support closer to our customers in each region. These tough decisions are being made to preserve our investment in core technologies and protect the teams building our long term growth. While we believe in the macroeconomic uncertainty will likely persist in the near future, we’re confident in our ability to adapt and lead.

Our long term strategic initiatives and opportunities remain intact, as does our commitment to focused execution as a transforming treatment for doctors and patients. With that, I’ll thank you for your time, and I’ll turn the call over to the operator for questions. Operator?

Conference Operator: Thank you. At this time, we’ll be conducting a question and answer session. If you would like to ask a question, please press star one one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star one one if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. And our first question comes from the line of Elizabeth Anderson with Evercore ISI. Your line is open.

Elizabeth Anderson, Analyst, Evercore ISI: Hi, guys. Good afternoon. Thanks so much for the One, obviously, think the case conversion, as you called out, was not what you guys were hoping for in the quarter. Can you talk about how that trended across the quarter? Sort of are we at a stability point?

Are saying it’s still trending one way or the other? And two, can you remind us what I mean, you said something about sort of higher proportion of brackets and wires that orthos are using in this current sort of economic uncertainty. Can you talk about some of the levers that you pulled last time we saw this a year or two ago and sort of what you’re learning from there and how to think about the potential change in that contribution as we go into the back half of twenty five? Thanks.

Joe Hogan, President and CEO, Align Technology: Yeah, Elizabeth, thanks for the question. As we started off the quarter, we normally know there’s a lot happened in the last quarter of a month here. Remember, we’re a real time business. There’s really no inventory outside of what we have with iTero, the clear aligner business is straight on. So we, a normal kind of a sequence, I’d say for the quarter until June.

And June just didn’t materialize the way we thought it would. And that’s the kind of the year over year increase from a sequential standpoint that we talked about that we see every year in this business. It just didn’t materialize, and it was primarily in June. And then the levers as far as orthodontists moving back the wires and brackets and all, it’s the orthodontists that haven’t really committed to digital. Maybe they’re doing 30% and mainly it’s being done with adults or whatever.

Their agendas aren’t full, their offices aren’t full, they obviously have an inventory of wires and brackets. So just from an overall standpoint from their profitability in that individual office, they’ll sometimes push for the wires and brackets piece. And we see that, how we’ve been able to address that. Obviously, help doctors through that. We usher patients through there that are asking for digital treatment.

We work with them so they can be more efficient and effective with our product lines to directly. And many of the doctors engage that way. But obviously, there’s 10,000 orthos in North America and some have chosen not to be digital and to be primarily analog. That’s what hurts us at times. Johnny, any thoughts?

Great.

Elizabeth Anderson, Analyst, Evercore ISI: Thank you.

Conference Operator: Thank you. And our next question comes from the line of John Block of Stifel. Your line is open.

John Block, Analyst, Stifel: Thanks, guys. Good afternoon. Hey, guys. Maybe the first one and just deal with my sort of implied math here. But if I run the 2025 revenues flat versus ’24, John, which is the low end of your guide, I take the midpoint of the 3Q guidance, I arrive at $1,030,000,000 for 4Q ’twenty five.

That would be up 6% Q over Q, which is well above the three year average of 1%. So I guess just to start, what I’m struggling with is sort of this that’s obviously even worse or more dramatic if I grow 25%, which you said is still possible. So help me out on that implied 4Q. Help me out on that sequential growth rate three to 4Q, what it’s spitting out and why that would be the case when we think about the trend line in June that you alluded to in the 3Q guidance, please.

John Maricci, CFO, Align Technology: Yeah, John, this is John. I think when you look at what you’ve laid out for Q4, we would expect that systems and services up sequentially. We have the new scanner that we have as we go this year. We would expect that those full systems that we were behind a bit in Q2 that would continue in the second half when we’d have some benefit from some of those full systems that we have coming through. And then we’d look at what we’re doing from trying to drive conversion and be more active about that conversion with teens and adults in our second half, products like we have with Indigilon First, products that we have with IPE and Mandibular Advancement, those products to be able to help us continue to grow and have that focus into the, as you said, that sequential third quarter to fourth quarter.

John Block, Analyst, Stifel: Okay. The second one, and maybe I’ll just try to jam in as many questions as I can until you guys cut me off. But Joe, can you just talk a little bit more about what happened late 2Q? I arguably your 2Q is the orders from like late May to late June because of the rev rec timing and here we are in July 30. Any thoughts on what’s transpired over the last five weeks into July or the July?

And then were those conversion issues more prominent in some of the markets relative to others?

John Maricci, CFO, Align Technology: I’ll pause there. Thank you.

Joe Hogan, President and CEO, Align Technology: Yeah, I’ll start with the back end of your question, John. Mean, really where we saw that lack of take up that we normally would, I’d pin it primarily on North America and two countries in Europe would be France and Germany. The rest of the world performed at expectation in that sense. So, when we look at it, we can see primarily that’s where we had that issue. What is it from what we can tell is just what we read in the scripts.

It’s patients being concerned in a sense of, can they afford that kind of treatment at this point in time? There’s a certain demographic with it too, obvious ones that are challenged. That’s what we were worried about from a financing standpoint, what was being offered or not being offered in that quarter, that quarter also. But like you said, we have record interest from a brand standpoint, our GRs, which is our gross receipts, which come in when a patient scan and is interested was extremely high. We just didn’t see the kind of conversion rate we normally would between what we call a general gross receipt and what we see a CCA.

And the trends into month to date, July, or

John Block, Analyst, Stifel: any color there that you can provide? Mean, has it started to unwind here in

Joe Hogan, President and CEO, Align Technology: the first four weeks of July? Yeah, I’d say when you look at our forecast, John, we’ve basically taken what we’ve seen the end of the quarter and projected forward.

Analyst: Thank you.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology: Thanks, John. Next question.

Conference Operator: Thank you. And our next question comes from Jeff Johnson of R. W. Baird. Your line is open.

Jeff Johnson, Analyst, R.W. Baird: You. Hey, Good afternoon, Joe. Hey, so question, Joe. I guess, as I hear your explanation on trading back down to some of the brackets and wires stuff, which is we’ve heard off and on over the last couple of years at times, I think what I’ve been hearing in my checks is kind of this profound pressure, if you will, on practice profitability. And in your brackets and wires comments kind of feed into that.

But I think MyChecks have kind of been saying it’s almost more the doctors pulling back right now. I’m not so sure it’s the patients pulling back as much. And of course, have data that maybe does show it’s the patients too. And I’m not trying to totally disaggregate those two. But I guess, as I look at consumer confidence and some of the tariff fears maybe coming off over the last few months, I’m surprised that June was that week, unless we’re at this point where doctors are the ones that are really freezing up almost more so than the patients.

I don’t even know if I have a question there, but I’d love your observation because this is definitely something I’m hearing in my general dental checks as well.

Joe Hogan, President and CEO, Align Technology: Jeff, think it’s a good question. I think you have to split it between our DSOs or OSOs we work with and which have gone really well from a quarter standpoint and a growth standpoint for us too. They offer good finance solutions. They’re often aggressive in following back up with patients that showed some kind of an interest in having a marketing program to go back and offer a special deal at a certain point in time. We see that really work.

Again, in those channels, Jeff, said it indicates that it is a reluctant consumer that needs to be encouraged in different ways for treatment and above and beyond what we’ve seen in the past. I mean, that’s always been there, but in this case, I think where there’s financial uncertainty. When you look at the individual doctors again, know, like, you know, what we have 150,000 GPs in United States and you know, 10,000 orthodontic doctors, there’s a story everywhere. But primarily what we see is, patients interested, again, reluctance to spend. Doctors sometimes want to move in the wires and brackets if they can and push them.

And adults are more difficult to do that than teens. But from an adult standpoint, that’s where the patient traffic has really been down to. So I wouldn’t pin this on the doctors. I think the aggregate we’re talking about here is a reluctant consumer, like we talked about in our script. But look, can find a million stories out there at different doctors and how they handle things, Jeff.

But I think the continuum in this is just uncertainty for an out of pocket expensive type of procedure.

Jeff Johnson, Analyst, R.W. Baird: Yeah, fair enough. Then I guess just one question on the restructuring, as you talk about shutting down some manufacturing assets and writing them off, color there? And does this accelerate your move at all to direct fab printing? Just any color on those two topics would be great. Thanks.

Joe Hogan, President and CEO, Align Technology: Jeff, I’d start to answer that question by saying, over the last five years, we’ve done a lot to internationalize our production, right? So we used to be completely centered in Mexico and we serve the world. We opened in China, then we opened in Poland. And we’re trying to do is, remember transportation costs for us are really important in this business and moving closer to customers helps to lower that. So what we’re going to do is is real refocus and make sure that we’re as close to those customers as we possibly can.

Also, we’re taking advantage of some, what I would say, current, you know, vacuum form kind of technology and resin technology in our traditional line. That’s much more productive than what we’ve had in the past. And so we’ll be able to update our facilities both in Mexico, Poland, and also China with that kind of technology. And we’re gonna retire the technologies that aren’t as productive overall. So that’s a big part of this.

I’ll stop there.

John Maricci, CFO, Align Technology: Does that

Joe Hogan, President and CEO, Align Technology: make sense to you, Jeff?

Jeff Johnson, Analyst, R.W. Baird: Yeah, it doesn’t sound like necessarily an acceleration than on the direct fab side. It’s more of kind of this intermediary, if you will, of going to some of the more efficient vacuum forming and resin stuff.

Joe Hogan, President and CEO, Align Technology: But in the back of those moves, Jeff, what we’re doing is creating, you know, capacity and and ability to be able to move into direct printing too. So what we’ll do with direct printing will directly follow that footprint we’re developing around the world with vacuum forming. I hope that helps.

John Maricci, CFO, Align Technology: Fair enough.

Analyst: Yep. It does. Thanks, Jeff.

: Thank you.

Conference Operator: And our next question comes from the line of Steven Valiquette of Mizuho Securities. Your line is open.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology0: Great. Hey, Thanks for taking the good afternoon. So I guess separate from the comments you made regarding the bracket and wire braces, I guess I’m curious with your softer Invisalign case volume due to all the market factors you discussed, I guess, just based on your market intelligence, do you think your softer volume was in line with the overall clear aligner market trend? Or do you think you’re maybe losing share in clear aligners for some reason? Or also, I thought in my mind that Align would maybe be more favorably positioned on the whole tariff impact relative to many of your clear aligner competitors.

So maybe are you still perhaps maybe even gaining market share in the clear aligner market versus other manufacturers? Just curious to get some thoughts around just that part of the market in particular. Thanks.

Joe Hogan, President and CEO, Align Technology: Hey, Steve, it’s a good question. I would say primarily from a competitive standpoint, nothing’s really changed around the world between the first quarter and the second quarter. If we think about it, it’s mainly what we see is from an economic standpoint. So I can’t pick out any one country. Mean, China did extremely well for us.

And I think everyone on the call knows that we have, you know, some pressure from a Chinese competitor around the world. We don’t think that’s basically changed. We saw a competitor actually raise prices that they had to in the quarter also. So that was not the dynamic. If that was a dynamic in the quarter, I certainly would have pointed to it, but I didn’t see that.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology0: Got it. Thanks.

Joe Hogan, President and CEO, Align Technology: Yeah, sure.

: Thank you.

Conference Operator: Our next question comes from the line of Jason Bednar of Piper Sandler. Your line is open.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology1: Hey, good afternoon. Pick up on a couple other themes here that have been discussed already. Joe, John, we look at patients that didn’t materialize, the cases didn’t materialize in 2Q late in June. It seems like there’s two buckets here, your patients that aren’t moving forward at all with treatment because of reluctance, be it for financing or tariff or unease or what have you. And then another bucket of doctors pushing patients to brackets and wires.

I guess the former would open the door to a potential release of volumes in the future with practices tapping into a bank, maybe a backlog of patients down the road. But I guess, how would you split the volumes across those two buckets? How much do you think is falling into just clear aligner opportunity in the future, but not seen it in 2Q versus doctors putting patients in brackets and wires and those are no longer candidates for aligners?

Joe Hogan, President and CEO, Align Technology: John, you want to add anything?

John Maricci, CFO, Align Technology: Yeah, would say, Jason, it’s a mix. You would have, those potential patients fall into those two categories. You’ve got some that you know, we saw good interest, we continue to see good interest in Invisalign and people wanting to go into treatments. Some show up at doctor’s offices, they see the pricing and they say, it’s not something we want to do now because of the end consumer price, the end patient price, so they put things off for their own personal reasons. You have others and it’s really mostly on the ortho channel.

They’re in, they wanna go into treatment, you might be a teenager and parents bring that child in, due to some of the economics or other things that we see at that patient, at that practice that is there, that doctor, because of economics, puts that patient that’s in their chair into wires and brackets versus maybe they might even came in asking for Invisalign. So that’s the challenge that we have, overall patients and then the potential patients that come through, what can we do and what can we do to help our doctors keep them in Invisalign. But it’s a mix and it’s gonna vary kind of geography by geography in terms of which is larger than the other.

Analyst: Jason. Thank Next question,

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology: you.

Conference Operator: And our next question comes from Brandon Vasquez of William Blair. Your line is open.

Joe Hogan, President and CEO, Align Technology: Hi, Brandon.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology2: Hi, everyone. This is Russell on for Brandon. Thanks for taking the question.

John Maricci, CFO, Align Technology: Sure.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology2: Could you guys give us some color on what the feedback has been recently on Lumina given the weakened consumer? Looking at industry surveys, there seems to be a general low willingness to purchase capital equipment. Has it been impacting your numbers or affecting product launch in some way? How are you navigating it? Thanks.

Joe Hogan, President and CEO, Align Technology: That’s a good question. We didn’t meet our sales goals for Lumen in the second quarter, but we did have a good increase, close to 14% growth. And we saw a good trade out. Mean, we’ve seen the same surveys and we work around the industry that you do. And we know there’s a reluctance because of lack of patient traffic and dental offices and ortho offices, then they commit to capital equipment.

I mean, based on that, we felt good about how well we did. But when you look at it, and I talked about it in my script is we thought we’d sell more full systems. And what we did is our 5D plus product was upgradable to Lumina with a wand switch, and the majority of our sales went to the wand side. And so that’s just not the same amount of revenue in that switch, and that’s basically what hurts. And so we do see that reflected, but we felt good about the uptake of Lumina and the excitement we see in the marketplace.

Conference Operator: Thank you. And our next question comes from the line of Michael Cherny of Leerink Partners. Your line is open.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology3: Good afternoon and thanks for taking the question. So maybe if I can get back to some of the dynamics of the expectations for the remainder of the year, as you think through the various different macro pictures that you’ve talked about, Joe, are there any changes you’re making on the demand stimulation side? Should we expect anything on the promotional side that you may or may not push? How should we think through the proactive attempts that you’re making to ensure that you’re driving better patient conversion, better demand curves, satisfaction, etcetera?

Joe Hogan, President and CEO, Align Technology: Yeah, Michael, it’s a good question. We like to say that the last mile is where we really talk we touch our doctors with this. And we obviously do a lot of advertising, national advertising. And we’re going to try to move as close as we can to our doctors and channel that demand, more closely with them. And so we’re we’re we know how to do this.

We just have to scale it more broadly across The United States in different areas where we think it’s going to work. But one of the things is really, you know, look, the DSOs and the OSOs again know how to do this. These individual doctor practices don’t necessarily know. So, but they do, there’s Invisalign opportunities for them. And we’re gonna try to work more hand in hand to help to guide those patients through there so they can find Invisalign treatment.

And part of that is making sure they have the right kind of financing opportunities to HCA and other organizations that we work with.

Analyst: Thank you.

Conference Operator: Thank you.

Joe Hogan, President and CEO, Align Technology: You’re welcome.

Conference Operator: And our next question comes from the line of Erin Wright of Morgan Stanley. Your line is open.

: Great, thanks. And a similar type of question, but more so what kind of happened in the quarter and what sort of changed. Outside of just the sluggish demand and kind of conversion rates that you were seeing, were there any of your own initiatives like promotional activity that didn’t really just play out to plan? Like we’re hearing just some more promotional activity in June, for instance. How did that strategy work relative to your expectations?

Obviously, it fell short of that. But was there any sort of nuance to the strategy that maybe changed at all? And was any of that a competitive response? Thanks.

Joe Hogan, President and CEO, Align Technology: Again, that’s a good question, Erin. I’d say we ran the same play in the second quarter that we run-in every quarter in the sense of promotions and things that we offer from a month to month standpoint. John, do want take

John Maricci, CFO, Align Technology: Yeah, and I would add, the awareness is there, the interest is there. We see it in search metrics, we see it in kind of that overall interest that we see from even getting a scan. It’s just that conversion then to go from that scan to actually go into treatment that didn’t materialize, didn’t see that sequential improvement, especially as you think about moving into teen season in a bigger way with North America and Europe. So the play was set to increase that interest, to get people wanting to go into treatment due to their own economic reasons, they did not.

: Okay, great. Thank you. Thank you.

Conference Operator: Our next question comes from Kevin Caliendo of UBS. Your line is open.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology4: Thank you. Thanks for taking my question. I’m gonna ask this a little bit differently. Maybe it’s a question specifically for Joe. But if I’m thinking about this in sort of the way Align’s positions, ortho versus GP, if we’re seeing wires and brackets being more competitive that’s happening in the ortho space where you guys dominate, does it make sense for you strategically to to try to become somehow more aggressive in the GP space where your share is not as high, where there is more competition?

Does that you know, have you been defensive about that because of pricing or anything else? Like, from a strategic perspective, given the environment, this isn’t like a one it happened this quarter, but we’ve seen this trend now for a couple years. I’m just asking just purely from a, hey. At the board level, what kind of decisions do we have to make strategically to grow faster? And how do we gauge one segment versus the other pricing power, market share, and all of the solutions we bring to the table?

Joe Hogan, President and CEO, Align Technology: Kevin, I think it’s it’s a fair question. It’s it’s actually it’s a good question. You know, about, you know, over 40% of our business in United States is GP now, you know, versus ortho. We have a dedicated GP Salesforce. It’s completely isolated from ortho.

They’re trained specifically to be able to work with GPs and understand their business and their different kinds of workflow. We have products like iGo. We have products like comprehensive three and three or moderate kinds of products that are really geared often to get GP started. We have tremendous doctors like Ryan Mollis and David Galler that trained thousands of GPs out there in order to do these things. So we’re excited about the GP marketplace.

It does not have that possible competitive trade with wires and brackets where the ortho market is. But remember, these are workflows. They’re tight workflows. You have to be able to walk in and be able to explain into a GP practice how you engage with those workflows and walk through those workflows overall. And, it just, I think people, and I got lost in this business when I first started is thinking that you would treat GPs just like you do orthos.

And you don’t, it’s a different business person, a different business model altogether. They weren’t trained to move teeth. That’s why our GCP practices, are you scan, we can give you a treatment plan. We have different doctors that can help them through that, that we call technical support that we can walk them through. So I feel good about the resources, the products and the focus that we have in that area.

Will we put more pressure on the GP side? Wherever we see opportunities, we’ll work it to try to advance our business.

Analyst: I ask

Joe Hogan, President and CEO, Align Technology: you Thank quick

Conference Operator: you. And our next question comes from the line of Vik Chopra of Wells Fargo. Your line is open.

Analyst: Hey, good afternoon, and thanks for squeezing me in. Maybe just a high level question on the restructuring actions that you’re planning on taking in the back half of the year. I guess what gives you the confidence that these actions will yield the results that you desire and will indeed align with your long term goals? I guess just trying to figure out, like, are these sufficient to counter the soft macro environment? Thanks.

John Maricci, CFO, Align Technology: Vic, this is John. So when we look at some of the restructuring, like we had said in our prepared remarks, it’s getting closer to our customers. We know that in this day and age, it’s a key requirement to shorten cycle times, be closer to our customers, their willingness to work with us, some of the programs that we have with our doctor subscription program and so on, really rely on getting closer to our customers. And it also drives productivity, where we can reduce our freight costs and so on, which has become a big part of our overall cost. And at the same time, to be able to change out some of the equipment that we have to be more productive, drive efficiency, drive savings.

We wanted to reflect that in terms of our profitability, but we also want to be able to reflect that in how do we go to market with some of those actions and the savings that we generate. So think of being very active with our customers to help drive conversion, be able to work with them even on a practice by practice basis to make sure that they have that demand, they have the capabilities, they understand the products and they help digitize their practice and ultimately use our products. So we’ve got to play on plays on how we’re running to drive productivity and it fits with what we want to do with our customers and then we want to get use some of that savings to really be able to get more active and be active with our customers so that we can help them drive increased patients.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology: Thanks.

: Next question please.

Conference Operator: And our next question comes from the line of Michael Ryskin of Bank of America. Your line is open.

Analyst: Great. Thanks for taking the question. I’m going to preempt this, Joe, by saying I know it may be an unfair question and if there’s no answer, there’s no answer to But I just want to think about the Analyst Day you guys just had a couple of months ago and the Vision ULEF in the next couple of years. You gave us an update on LRP and you sort of gave us the bridge over the next couple of years and then beyond. And the way I always remembered it was sort of like the there’s the underlying macro and markets and then there’s what a line can deliver above that.

Obviously, it’s only been a couple of months and it feels like it’s been very short amount of time in terms of what’s changed. So like I said, maybe that’s too early to say anything, but you’re certainly leaving this year at a much lower starting point than you had imagined, right? You thought you’d be growing revenues more in the mid single digit rate. Now it’s kind of flattish. So if you think about that 5% to 15 going forward, much bigger jump next year, does that change how you think you’re gonna be able to approach that in ’26 and beyond?

Or is it just, you know, one month and and we’ll take it from there? Thanks.

Joe Hogan, President and CEO, Align Technology: Michael, I’ll start where we ended. It is one month. Okay. And I think to be fair, to project the business off of one month is tough. So what we’re doing with our forecast this year is taking that month, shooting it forward, and we’re gonna work hard to do all we can to to beat that if we can.

We stick by what we presented in New York. We’re excited about the future of the business. That five to 15, we we truly believe it’s there. And I think the best thing that can happen is we get somewhat of a more competent consumer and being able to drive some of the conversion work that we’re talking about on the front end with doctors overall, work with DSOs and all the help of this too. So I feel good about and stick to what we pitched in New York and the direction we have.

Obviously, this looks like a setback, and it is in a sense of what we forecasted for the second quarter. But again, I think we’re businesses on a strong foundation. We’re going to do what we can to reposition the business as John talked about with some of these moves around the world. I feel good about where we are, but the environment is challenging right now.

Analyst: Alright, thanks. You. And

Conference Operator: we’ve reached the end of our question and answer session. I will now turn the call back over to Shirley Stacy for closing remarks.

Shirley Stacy, Vice President of Corporate Communications and Investor Relations, Align Technology: Thank you everyone again for joining us today. We look forward to meeting you at upcoming investor conferences and bus trips. If you have any follow-up questions, please contact Investor Relations. Thanks and have a great day.

Conference Operator: Thank you. This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

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