The paragraph is from Align Technology's First Quarter 2025 Earnings Call. It introduces the participants, including Shirley Stacy, the Vice President of Corporate Communications and Investor Relations, and Joe Hogan, the President and CEO. The call will include discussions of the company's financial results and forward-looking statements, which involve risks and uncertainties. Historical financial data and reconciliations are available on Align's website. Joe Hogan will discuss the first-quarter results and highlights from the company's operating segments: Systems and Services and Clear Aligners.

The paragraph reports that the company's fiscal 2025 started well, with first-quarter revenues, operating margin, and earnings aligning with expectations. Q1 saw a strong year-over-year increase in Clear Aligner volumes, especially in the Asia Pacific, EMEA, and North American regions, driven by growth in both teen and adult segments. The orthodontic and GP dentist channels recorded increased Clear Aligner volumes and utilization. The Systems and Services business experienced a slight year-over-year revenue increase, despite a sequential decline due to seasonality and foreign exchange issues, aided by the adoption of the iTero Lumina scanner platform. North American growth was bolstered by products like Invisalign First and Invisalign Comprehensive Three and Three.

In Q1, the EMEA region saw year-over-year growth in Clear Aligner volumes due to increased adoption of noncomprehensive cases and the launch of the Invisalign Palate Expander. Sequential growth was mainly driven by Invisalign DSP touch-up cases. In the APAC region, Q1 growth was attributed to increased utilization in orthodontic and GP channels, notably in China, India, and Korea. Invisalign First, Standard, and Adult products contributed to this growth. Globally, over 85,000 doctors submitted cases, marking a record for the first quarter, with notable increases in treatment initiations for teens and kids, especially in APAC and EMEA. The number of doctors engaging in case starts for young patients rose by 2.1% year-over-year.

In this paragraph, the company highlights the expansion and innovation of its Invisalign products. The Invisalign Palate Expander system has gained regulatory clearance in China, with availability in multiple countries such as the U.S., Canada, and several others. Additionally, the company has introduced the Invisalign system with Mandibular Advancement featuring Occlusal Blocks, targeting the common Class II malocclusion issue by advancing the mandible while aligning teeth. This new feature is designed to improve clinical outcomes and patient experience and is available to trained doctors in select countries.

In most EMEA countries, Align Technology has recently launched its latest innovation, aimed at expanding its portfolio for growing patients, including products like the Invisalign Palate Expander and Invisalign First. Dental service organizations (DSOs) are rapidly adopting the Align digital platform, which enhances practice efficiency, profitability, and improves patient experience with shorter treatment cycles. These organizations have become a key growth channel for Invisalign, as shown by an increase in Clear Aligner and iTero scanner sales in Q1. The DSO-driven growth surpasses that of retail doctors, largely due to the involvement of major DSOs. In Q1, significant year-over-year revenue growth in Systems and Services came from scanner and wand sales, particularly the iTero Lumina, despite some decline due to seasonality and currency impacts.

In the first quarter, new restorative and imaging technologies were launched, including the iTero Lumina intraoral scanner and iTero Lumina Pro dental imaging system, which enhance diagnostic and treatment capabilities for dentists. These innovations improve practice efficiency by enabling better collaboration with labs for custom restorations and offering advanced scanning and visualizations. Positive feedback indicates that its intuitive design integrates well into everyday practice. Training is essential as even experienced users may need to adapt to new scanning techniques. The technologies offer faster, more accurate scans and improved patient communication through superior 3D and 2D visualizations.

The paragraph discusses the recent upgrades to the iTero Lumina scanner software, which now includes new restorative and diagnostic features. This evolution positions iTero Lumina as a comprehensive digital treatment gateway for various dental practices. The paragraph then shifts to financial results for Q1, presented by John Morici, highlighting a total revenue of $979.3 million, which is down from previous periods due to unfavorable foreign exchange impacts. Clear Aligner revenues saw a slight sequential increase due to higher volumes but were negatively affected by exchange rates, leading to decreased average shipment prices and a decline in year-over-year revenues due to product mix shifts and discounts.

In the first quarter, the average per case shipment price for Clear Aligners dropped to $1,240, a $110 decrease from the previous year, due to increased discounts, a shift to lower-priced products, and unfavorable foreign exchange, despite some price increases. Clear Aligner deferred revenues decreased both sequentially (by $9.3 million) and year-over-year (by $74.7 million). Systems and Services revenue fell 9.2% sequentially but rose 1.2% year-over-year, influenced by varying scanner revenues and foreign exchange impacts, which negatively affected revenues by $3.5 million sequentially and $5.3 million year-over-year. Systems and Services deferred revenues also declined due to shorter service contract durations. The overall gross margin was 69.5%, decreasing by 0.6 points sequentially and 0.5 points year-over-year, largely impacted by foreign exchange.

In the first quarter, Clear Aligner's gross margin improved by 0.4 points sequentially to 70.5%, mainly due to reduced manufacturing costs and restructuring expenses, though it was down 0.3 points year-over-year due to unfavorable foreign exchange impacts. Systems and Services gross margin declined by 4.7 points sequentially to 64.7%, influenced by lower wand ASPs and adverse foreign exchange effects, though partially offset by manufacturing efficiencies. Operating expenses totaled $549 million, decreasing 0.7% sequentially due to reduced restructuring and nonrecurring charges but increasing 1% year-over-year, driven by R&D investments. Excluding certain non-GAAP items, operating expenses were $500.7 million, rising 5.5% sequentially but dropping 1.1% year-over-year.

In the first quarter, the company reported an operating income of $131.1 million, with an operating margin of 13.4%, impacted by negative foreign exchange effects. On a non-GAAP basis, excluding certain expenses, the operating margin was 19.1%. Interest and other income were $9.3 million, benefiting from favorable foreign exchange movements. Compared to the first quarter of the previous year, these figures showed improvements in income. The GAAP effective tax rate was 33.6%, influenced by tax expenses related to stock-based compensation and other adjustments, while the non-GAAP effective tax rate was 20%. Net income per diluted share was $1.27, showing a decrease both sequentially and year-over-year.

The paragraph outlines the financial results for the company as of March 31, 2025. The foreign exchange negatively impacted EPS both sequentially and year-over-year. Non-GAAP net income per diluted share decreased both sequentially and year-over-year. Cash and cash equivalents stood at $873 million, having decreased sequentially but increased year-over-year, with most held internationally. The company repurchased $72.1 million of stock in Q1, completing a previous program and continuing a new $1 billion repurchase initiative. Accounts receivable rose to $1.062 billion, with days sales outstanding increasing due to flexible payment terms. Cash flow from operations was $52.7 million and capital expenditures $25.3 million, resulting in a free cash flow of $27.4 million. The paragraph also mentions upcoming remarks on U.K. VAT and U.S. tariffs.

The paragraph outlines Align Technology's recent favorable VAT ruling in the U.K., classifying their Clear Aligners as dental prostheses, thus making them exempt from VAT, unless challenged by HMRC by June 19. Align manufactures clear aligners in Mexico for the U.S. market, compliant with the USMCA, which exempts them from tariffs under a U.S. Executive Order, though the tariff situation remains subject to change. Align also manufactures in China for the Chinese market and believes it can mitigate the impact of any Chinese retaliatory tariffs through supply chain adjustments.

The paragraph discusses the company's financial outlook, indicating that retaliatory tariffs, particularly concerning U.S. and China, are not expected to significantly impact costs. The company's intraoral scanners are mainly produced in Israel, with a minor impact from a 10% tariff being estimated at $1 million monthly, considered in their financial guidance for Q2 and fiscal 2025. Assuming no major external disruptions, Q2 2025 revenues are projected to rise to $1.05-$1.07 billion. The Clear Aligner segment is expected to see volume and average selling price increases, while Systems and Services revenue will benefit from the iTero Lumina scanner's ramp-up. Margins are forecasted to improve, with operating margins rising by approximately 3 points. Overall, Clear Aligner volume growth for fiscal 2025 is expected to be in the mid-single digits year-over-year.

The paragraph discusses the anticipated financial performance and strategic focus for the company in 2025. It expects a decline in Clear Aligner average selling prices due to a shift towards lower-priced, non-comprehensive products and growth in emerging markets. However, it forecasts faster revenue growth in Systems and Services compared to Clear Aligners. Overall revenue growth is projected between 3.5% and 5.5%, with improvements in both GAAP and non-GAAP operating margins. Planned capital expenditures are between $100 million and $150 million, primarily for technology upgrades and manufacturing capacity. Joseph Hogan, the speaker, expresses satisfaction with the company's performance, particularly in the Clear Aligner business, and emphasizes a focus on innovation and efficiency to navigate global economic challenges.

The paragraph describes the advancements in iTero and Invisalign technologies aimed at enhancing efficiency and effectiveness in orthodontic and GP dental practices. The iTero Lumina solution offers comprehensive dental capabilities, including diagnostics and multidisciplinary workflows, through innovations like NIRI technology and the iTero Lumina Pro dental imaging system. The ClinCheck software enhances practice efficiency by providing rapid, personalized treatment plans using AI-powered tools and automated workflows. Additionally, the Invisalign system has been improved for treating Class II malocclusions with features like Mandibular Advancement and Occlusal Blocks, expanding treatment options for growing patients. These advancements aim to reduce patient chair time, increase practice profitability, and enable faster treatment initiation.

The paragraph discusses Align's advancements in 3D technology, particularly highlighting the launch of a direct 3D-printed Invisalign Palate Expander system. This system is designed to expand a patient's palate without traditional metal components, offering a more comfortable solution for children and parents. Align is proud of reaching the milestone of 20 million treated Invisalign patients and credits this achievement to the dedication of its employees, doctors, and patients. As they celebrate 28 years of digital innovation, they express optimism about the impact of direct 3D printing on orthodontics. Additionally, there is a mention of Align's positive performance despite consumer sentiment trends, with Brandon Vazquez from William Blair acknowledging the company's strong quarterly results and outlook.

In the paragraph, Joseph Hogan discusses the positive growth in various regions, including North America, APAC, China, and Europe, as well as the increased demand across different segments such as teens and adults. He also highlights the introduction of the Lumina scanner with restorative capability as a beneficial factor. In response to a question from Vik Chopra, Hogan addresses concerns about tariffs, expressing confidence in their ability to mitigate impacts through strategic production locations in China, Mexico, and Europe, and acknowledging the need to address the iTero shipments from Israel.

The paragraph discusses a company's strategic positioning in the global market, emphasizing its ability to maintain margins despite volatility. The CEO, Joseph Hogan, expresses confidence in the company's global supply chains and overall situation. Vik Chopra asks about the upcoming Investor Day, and Hogan indicates they'll present a comprehensive overview of the company's portfolio, future demand, technology, and commercial strategies. Jon Block from Stifel then asks for clarification on 2025 revenue guidance, noting a revision to 4.5% growth at the midpoint and queries about average selling prices (ASPs) and Clear Aligner expectations.

The paragraph discusses updates in product performance and growth in the teen segment, particularly focusing on innovations like Invisalign First and Mandibular Advancement with occlusal blocks. John Morici confirms the stability of ASP adjustments, while Jon Block highlights the impressive 13% growth in the teen segment despite tough comparisons. Joseph Hogan attributes the success to the effective combination of new products across geographies and references the potential for continued growth if innovation continues.

The paragraph involves a financial discussion during a conference call. The speaker addresses questions about the company's ASP (Average Selling Price) figures and the impact of various factors on these numbers. They note that ASPs were down 8.2% year-over-year, and explain that unfavorable foreign exchange (FX) rates contributed a 3.1-point impact. The speaker also mentions adjustments related to VAT (Value Added Tax) in the U.K., which had already been accounted for in the previous year's baseline numbers. Going forward, FX effects are expected to become a positive factor for ASPs, and the 3.1-point impact was part of the overall impact on revenue. The discussion highlights specifics about the influence of currency and tax adjustments on financial performance, indicating tuned-in financial management and strategy considerations.

The paragraph discusses factors affecting the Average Selling Price (ASP) for the company's products. Firstly, the introduction of the Mandibular Advancement blocks (MAOB) is expected to positively impact ASP due to its higher add-on charge. Secondly, there is uncertainty regarding the U.K. VAT and its potential effect on pricing; if HMRC doesn't appeal a decision, the company may adjust discounts, potentially benefiting ASP. Finally, foreign exchange (FX) rates are currently favorable, providing a slight year-over-year benefit. However, the overall ASP is affected by lower-priced products in certain markets.

In the paragraph, Michael Cherny from Leerink Partners asks about the factors contributing to the expected margin expansion for the year. John Morici responds by attributing the 70 basis point improvement in operating margin from 2024 to 2025 to various factors, including enhanced manufacturing efficiencies, material and logistical savings, and innovations like touchless ClinCheck. He also mentions contributions from high-margin products and improved revenue expectations. Morici expresses confidence in achieving margin targets despite known tariff impacts, thanks to productivity gains in other areas.

The paragraph discusses two main topics: DSP numbers and financing issues. John Morici states that the DSP number for the quarter was not provided but mentions it aids in growing a specific part of their portfolio. Jason Bednar from Piper Sandler asks about the impact of a new financing partnership with HFD and recent changes in Days Sales Outstanding (DSOs). John explains that while some patients pay directly, others utilize doctor financing, which has recently seen increased DSOs due to expanded or more favorable terms offered to practices. This policy shift aims to provide more time for doctors to pay, which may help in addressing consumer challenges.

The paragraph discusses financing options for doctors, mentioning efforts to give them more time to pay back loans, potentially using their balance sheets or working capital for patient financing. External financing options, like HFD and others, are also being considered to help patients. Jason Bednar inquires about the impact of tariffs on competitive dynamics, questioning if competitors are facing higher costs due to changes in supply chains. Joseph Hogan responds, indicating no significant changes have been observed yet, though some competitors might be at a disadvantage. The focus remains on their product capabilities and efficiencies in the market, without worrying too much about tariffs.

The paragraph is part of an earnings call involving a discussion about the impact of China's retaliatory tariffs on a company's supply chain. Steve Valiquette from Mizuho Securities asks about the company's strategy to mitigate tariff exposure, noting that manufacturing in China for the Chinese market should theoretically avoid tariffs. John Morici responds, explaining that while products aren't moved between China and the U.S., some raw materials for their Chinese manufacturing come from the U.S., necessitating supply chain adjustments to avoid tariff impacts. Elizabeth Anderson from Evercore ISI then queries about the company's second-quarter guidance, particularly concerning case volume and demand stability post-tariff announcement.

In the paragraph, John Morici discusses the company's positive performance in Q1 despite macroeconomic challenges, emphasizing their global business's diverse and stable nature. Elizabeth Anderson highlights the launch of the restorative iTero scanner at IDS, noting its minimal impact in Q1. Joseph Hogan explains that the scanner, aimed at GP segments, will be distributed globally and is showing promising capabilities, especially for restorative procedures involving lab collaborations. The overall outlook suggests optimism for sequential growth into Q2.

In the paragraph, the speaker discusses the positive reception and detailed capabilities of the Lumina system in the restorative field, noting its stronger market positioning compared to previous scanners. The conversation then shifts to a question from Erin Wright of Morgan Stanley, who inquires about the conversion rates for Invisalign First and Palate Expander among teens and the progress of the direct fabrication initiative. Joseph Hogan responds by stating that while critical mass hasn't been reached in teen conversion, there is significant global interest and uptake in their Phase I orthodontic product line, including Mandibular Advancement. However, he acknowledges that full market penetration will take time.

The paragraph discusses the market dynamics for a company with a focus on doctor’s offices globally, highlighting positive momentum, especially in products for kids, with significant growth in teen engagement since 2021. The speaker emphasizes a need for quarterly evaluation and reporting. Mike Ryskin asks about the indirect impact of tariffs and the trade war with China on the company, particularly if China is favoring local brands over American ones. Joseph Hogan responds that there has been no consumer backlash in China, evidenced by a strong quarter there, and notes the company is integrated locally in China, despite being a Western company.

The paragraph discusses a company's operations and financial considerations, focusing on the impacts of foreign exchange (FX) rates on revenues and operating margins. John Morici mentions that favorable FX rates have slightly improved their operating margin and helped offset tariffs. The company is optimistic about their operating margin for 2025 if FX rates remain stable. There's also a discussion about changes in company disclosures, with Morici explaining that they aim to simplify and clarify financial information to better help analysts understand and evaluate the business.

Kevin Caliendo is asking about the decline in Average Selling Price (ASP), which was down 8%, attributing 3% to foreign exchange impacts and the remaining 5% to discounting and product/customer mix changes. He questions whether ASPs will continue to decline and what factors might improve this, such as changes in customer or product mix, discounting programs, or potential price increases traditionally made in July. John Morici responds by explaining that growth in certain countries or product lines with lower list prices impacts ASP. Additionally, the introduction of new products and increasing sales to doctors—many of whom opt for lower-priced products—also affects ASP. This dynamic reflects both short-term considerations and long-term strategic planning to achieve business growth without ASP being a hindrance.

The paragraph discusses a strategy to achieve stability in average selling prices (ASP) by utilizing new products and adjusted pricing. The focus is on ensuring gross margins are improved and positively impacting operating margins as they progress through the Profit & Loss (P&L) statement. The operator then concludes the Q&A session, and Shirley Stacy provides closing remarks, mentioning an upcoming Investor Day meeting on May 6 in New York City. She invites participants to visit the company's website or contact Investor Relations for more information and thanks everyone for joining the call. The operator ends the conference, wishing everyone a great day.

This summary was generated with AI and may contain some inaccuracies.