Align Technology (NASDAQ:ALGN) Q1 2026 Earnings Call

0:00 Greetings. Welcome to the Align First Quarter twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Shirley Stacy with Align Technology. You may begin. Good afternoon and thank you for joining us. I'm Shirley Stacy, Vice President of Corporate Communications and Investor Relations. Joining me for today's conference call is Joe Hogan, President and CEO and John Marici, CFO. We issued first quarter twenty twenty six financial results today via Business Wire, which is available on our website at investor.aligntech.com. Today's conference call is being audio webcast and will be archived on our website for approximately one month. As a reminder, the information provided and discussed today will include forward looking statements, including statements about Align's future events, product outlook and financial expectations.

0:57 These forward looking statements are only predictions and involve risks and uncertainties that describe in more detail in our more 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 first quarter twenty twenty six conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information. With that, I'll turn the call over to Align Technology's President and CEO, Joe Hogan. Joe? Thanks, Shirley. Good afternoon and thanks for joining us today. On today's call, I'll start with an overview of our first quarter twenty twenty six results and discuss performance across our two operating segments, Clear Aligners and Systems and Services.

1:51 John will then walk us through our financial results and outlook for Q2 and twenty twenty six. After that, I'll come back to highlight a few key takeaways before we open the call for questions. We're pleased to report another better than expected quarter in Q1. Clear aligner volumes from both the GAAP and non GAAP operating margins exceeded our outlook. These results reflect continued execution against our strategic priorities and the resilience across our global business. We delivered first quarter revenues of 1,040,000,000 up 6.2% year over year, driven primarily by high clear aligner volumes and increased ASPs. Clear aligner shipments reached a record 686,000 cases, increasing 6.7% year over year, reflecting double digit growth across our international businesses and continued stability in North America.

2:41 Growth was broad based across customer channels, with shipments to orthodontists up 7.4% and GPs up 5.6% year over year, along with solid momentum across adult teen and growing kid patient categories. Dental and orthodontic service organizations continue to be force multipliers in every region, driving global double digit clear aligner volume growth during the quarter. We remain encouraged by how naturally our digital platform fits with DSO operating models and how it continues to benefit our customers and patients and support both Invisalign adoption and increased iTero scanner utilization. Q1 highlights the continued strength in Invisalign demand across age groups and geographies, even amid varying macro conditions. For Q1, four hundred and forty nine thousand adults were treated with Invisalign aligners, up seven point eight percent year over year, reflecting strong growth across both orthodontist and GP channels in all regions, led by EMEA, APAC and Latin America.

3:41 Teens and growing kids continue to represent the largest orthodontic patient opportunity globally. In Q1, two hundred and thirty seven thousand teens and kids started Invisalign treatment, up four point eight percent year over year, led by China and Latin America. Growth was supported by continued adoption of Invisalign First, Invisalign Palate Expander and mandibular advancement with occlusal blocks, reflecting broader use across growing patient indications. A clinical study by researchers at the University of Serbia in Italy found that Invisalign palate expander or what we call IPE was shown to effectively widen the upper jaw by opening a natural growth theme in the palate, achieving bone and bite changes similar to traditional metal hyrax expander.

4:27 IPE also delivered more controlled and predictable results in Hirex. When further considering the greater ability to maintain hygiene and the simplicity many parents desire compared to a Hirex device, these findings supported the use of IPE as a reliable option for growing patients and highlights its role as an important step towards fully digital orthodontic care. For imaging systems and CADCAM services, including iTero, Exo CAD and X-ray Insights software, Q1 revenues totaled $184,000,000 up 1% year over year and declined sequentially reflecting expected first quarter capital equipment seasonality. Q1 systems and services year over year revenue growth reflects continued adoption of iTero Lumina Full Systems, service revenues and CPO sales, along with a continued mix shift toward lower price scanner offerings included PC based configurations, leasing and rental units.

5:23 These offerings pride greater affordability and flexibility to doctors in certain markets and practice models. In addition, the number of scanners sold to new doctors increased double digits year over year. For Q1, the total installed base of active scanners exceeded 125,000 globally. In addition, during the quarter, over 12,000,000 iTero digital scans were performed supporting Invisalign, restorative wellness and numerous other digital workflows and applications. Exocad delivered double digit year over year revenue growth, reinforcing our strategy to integrate orthodontics and restorative dentistry within a customer and patient centric digital platform. Following the success of our inaugural Invisalign Advanced Restorative Treatment or ART pilot in EMEA, we recently began an Invisalign ART pilot in The United States with labs and doctors beginning training in several markets.

6:15 Invisalign ART integrates with exocad enabling clinicians and labs to plan tooth alignment ahead of restorative work within the exocad environment without changing the tools doctors and labs already use. We're very excited about this opportunity to enhance the goal of preserving patients' natural dentition as much as possible. ART allows us this by incorporating the prior alignment of teeth into the overall restorative treatment plan as opposed to the removal or grinding them down before minimally invasive restorative work. It allows us to further expand our reach and offer existing and new products to the large and growing restorative market through lab based channels. Clear aligner revenue in Q1 was $856,000,000 increasing 7.4% year over year and 2.1% sequentially.

7:08 Q1 clear aligner volume reached a record 686,000 cases, up 6.7% year over year and 1.3% sequentially. On a year over year basis, our clear aligners revenues reflected double digit volume growth in EMEA, APAC and Latin America, along with overall stability in North America. Importantly, growth was primarily driven by both submitter expansion and higher utilization across the orthodontist and GP channels and across adult teen and growing kid categories. During the quarter, more than 88,000 doctors submitted Invisalign cases globally, a year over year increase of 3% or an additional 3,000 orthodontists and GP driven primarily by increases at APAC and The Americas led by Latin America.

7:55 Doctor utilization also increased year over year by 3.4% led by EMEA, Latin America and APAC. These metrics illustrate the continued adoption and penetration of the Invisalign system through our strategic geographic growth efforts, as well as the meaningful addition opportunities in the large untapped demand for digital orthodontics, both in gaining share in the existing 22,000,000 annual orthodontic case starts and expanding access to care to the more than 600,000,000 potential patients that our digital technology can serve through GP dentists globally. Our DSO channel continued to be meaningful growth driver. In Q1, DSO clear aligner volumes grew double digit across all regions and represented approximately a quarter of total global volumes. The retail channel continued to be mixed, particularly in The United States, where our doctor customers reported less patient traffic during the quarter. To drive adoption and utilization across channels, we expect to continue to expanding targeted initiatives focused on affordability, patient conversion, clinical confidence and practice efficiency.

8:59 These initiatives are beginning to show traction with GPs, dentists, orthodontists and DSO helping to drive increased engagement and directional growth in case volumes. These initiatives include the doctor's subscription program or DSP. We continue to see strong growth from our DSP program, which includes retention and touch up or relapse cases. DSP touch up cases continue to grow double digit year over year across regions. DSP was originally launched in The United States in 2023, expanded into EMEA in 2025, and is expected to launch in APAC in Q2 of this year. North America DSP is also supporting early momentum with orthodontic groups and DSOs helping drive reengagement among competitive and historically lower utilizing doctors as pricing simplicity and bundled value resonate across accounts.

9:55 Patient financing in The United States Healthcare Financial Direct or HFD is now live in over 4,000 offices, enabling patients to pre qualify for financing before their first appointment, allowing doctors to see these patients directly within our Invisalign doctor site. We saw particularly strong adoption in Q1 among the American Academy of Clear Aligners or AACA member practices, where we expanded access to patient financing, is helping improve affordability, increase patient conversion, and drive meaningful directional growth in case starts. Beyond AACA, adoption continues to expand across independent practices, multi site groups, and DSOs. Practices report that AHD simplifies the front office workflows, reduces complexity and payment discussions, and increases staff confidence when offering financing during consultations and special patient events.

10:51 Pre qualification and flexible monthly payment options are helping practices broaden access to care, in many cases providing affordable options to patients to increase scope and types of treatment, including Invisalign clear aligners. Feedback we've received from offices highlights that the speed of approvals, clarity of options, and prompt funding are shifting conversations away from price and back toward delivering treatment options that match patient needs, while also easing administrative burdens for staff and operating teams. These benefits are proving particularly impactful in multi practice environments where consistency, simplicity, and scalability are critical. Invisalign Pay, which is available in Brazil, with further expansion planned across Latin America continues to improve affordability and treatment conversion and serves as a proof point for how patient centric embedded financing can complement our clinical and digital workflows.

11:46 In Brazil, Invisalign Pay is now used in a majority of Invisalign cases, reflecting strong doctor endorsement and patient adoption. Providers report that financing helps optimize cash flow, reduce friction for patients and supports reactivation of lower utilizing providers, reinforcing financing as a meaningful lever for sustained growth across the region. Peer to peer mentoring. On the clinician to clinician mentoring programs connect doctors over a structured twelve month period to build clinical confidence and drive engagement and treatment conversion. These programs are especially effective for accelerating adoption of new technologies, increasing confidence treating kids, teens, and more complex cases. Peer to peer programs are active across all regions and we expect to expand them over the year. These efforts complement our broader engagement strategy, particularly with GPs and competitive orthodontic accounts that benefit from hands on clinical support and shared best practices.

12:45 Treatment planning services or TPS. TPS addresses one of the largest barriers to adoption, low clinical confidence and uncertainty around treatment planning, particularly among GP dentists. TPS provides case assessment and treatment planning support through a combination of internal TPS and external TPS partners, enabling doctors to submit cases with confidence. TPS has emerged as a direct go to market engine with materially higher utilization among TPS users versus non users and strong adoption across regions and markets such as Canada. TPS adoption among participating GPs continues to increase with TPS users consistently outperforming non users and contributing to low double digit year over year growth in case starts.

13:33 From a regional standpoint, Americas Q1 clear aligner volumes increased year over year, reflecting very strong double digit growth in Latin America, partially offset by a modest but stable year over year decline in North America. Latin America delivered record first quarter shipments driven by increased submitters, higher utilization across both orthodontists and GP channels, along with strength across adult teen and growing kid categories. In EMEA, Q1 clear aligner volumes grew double digits year over year, reaching record first quarter levels, led by increases in Iberia, Italy, Nordics, UK and also Turkey. Growth was driven primarily by utilization gains across both GP and orthodontic channels and continued strength from adult and growing kid patients.

14:20 In APAC, Q1 clear aligner volumes also grew double digits year over year with record first quarter shipments for APAC led by China, India, Korea and Japan. In addition, eight APAC markets had record first quarters, including China, Japan, Korea, India and Taiwan. Growth was broad based with a teen and growing kid patients, growing double digits alongside continued growth among adult patients. Overall, while the operating environment remains uneven in some markets, our Q1 results illustrate the resilience of our global business and we continue to see orthodontics and oral health and digital dentistry as durable long term growth categories. With that, I'll turn it over to John. Thanks, Joe. Now for our Q1 financial results.

15:07 Total revenues for the first quarter were $1,040,100,000 up 6.2% from the corresponding quarter a year ago. On a constant currency basis, Q1 revenues were favorably impacted by approximately $44,900,000 year over year or approximately 4.5%, in line with our Q1 expectations. Q1 Clear Aligner revenues were $856,000,000 up 7.4% year over year, primarily due to higher volume, favorable foreign exchange, price increases and lower net deferrals, partially offset by higher discounts and a mix shift to lower priced countries and products. Favorable foreign exchange impacted Q1 clear aligner revenues by approximately $38,200,000 or approximately 4.7% year over year.

15:58 Q1 clear aligner average per case shipment price of $12.50 dollars increased 1% or $10 per case on a year over year basis, primarily due to favorable foreign exchange price increases and lower net deferrals, partially offset by higher discounts and mix shift to lower priced countries and products mentioned previously. Clear aligner deferred revenues on the balance sheet as of 03/31/2026, decreased $77,200,000 or 6.4% year over year and will be recognized as revenue as additional aligners, also known as refinements, are shipped. As we continue to scale our zero additional aligner configuration and introduce other streamlined configurations with limited or no additional aligners, which do not require revenue deferral because there are no future performance obligations, we expect the overall clear aligner deferred revenue balance to decrease over time.

17:02 This reflects earlier revenue recognition and cash conversion rather than any changes in free cash flow economics. Q1 systems and services revenues of $184,100,000 were up 0.9% year over year, primarily due to favorable foreign exchange, higher scanner systems and sales and nonsystem sales, partially offset by lower scanner wand sales. Foreign exchange favorably impacted Q1 systems and services revenues by approximately $6,700,000 year over year or approximately 3.8%. Systems and services deferred revenues decreased $22,400,000 or 10.8% year over year, due in part to the shorter duration of service contracts selected by customers on initial scanner system purchases.

17:54 Moving on to gross margin. First quarter overall gross margin was 70.8%, up 1.4 points year over year, primarily due to operational efficiencies and higher clear aligner ASP. Q1 overall gross margin was unfavorably impacted by foreign exchange of 0.4 points year over year. On a non GAAP basis, which excludes stock based compensation, amortization of intangibles related to certain acquisitions, depreciation expense on assets disposed of other than by sale, gain on assets held for sale and restructuring and other non GAAP charges, gross margin for the first quarter was 71.8%, up 1.6 points year over year.

18:41 Clear aligner gross margin for the first quarter was 71.6%, up 1.1 points year over year, primarily due to higher ASP and operational efficiencies. Q1 Clear aligner gross margin was impacted by unfavorable foreign exchange of approximately 0.5 points year over year. Beyond mix and cost actions, margin expansion is increasingly driven by lower refinement rates, improved treatment predictability and higher manufacturing throughput, benefits that scale with volume and data over time. Many of our lower priced product configurations, such as COM3 and three and DSP TouchUp, include fewer or no additional aligners and require less manufacturing production, which supports gross margins and improves cash conversion despite lower upfront pricing.

19:32 Because of the clinical capability of the Invisalign system, we are able to offer configurations such as Zero AA products that give doctors the ability to use and scale with the Invisalign system and deliver on patient expectations and enable us to more effectively compete with traditional wires and brackets and clear aligner suppliers that we believe primarily compete based on price. Over a year ago, we expanded the Invisalign portfolio to include Comp0AA configuration, primarily with US DSOs that began piloting in the retail channel in Q1. It is still early, but given results from DSO partners showing Comp0AA drives adoption by supporting improved efficiency, utilization, and overall practice economics for doctors, we see interest and momentum building around this offering and anticipate expanding it over the year.

20:31 Systems and Services gross margin for the first quarter was 67.2%, up 2.5 points year over year, primarily due to operational efficiencies, partially offset by lower ASP. On a year over year basis, foreign exchange had no significant impact on Q1 systems and services gross margin. Q1 operating expenses were $594,600,000 up 8.3% year over year. Year over year operating expenses increased by $45,600,000 primarily due to legal settlement costs and higher employee compensation. On a non GAAP basis, excluding stock based compensation, restructuring and other charges, amortization of acquired intangibles related to certain acquisitions and legal settlement costs, Q1 twenty twenty six non GAAP operating expenses were $523,100,000 up 4.5% year over year.

21:31 Our first quarter operating income of $142,000,000 resulted in an operating margin of 13.6%, up approximately 0.3 points year over year. Operating margin was unfavorably impacted from foreign exchange by approximately 0.1 points year over year. On a non GAAP basis, which excludes stock based compensation, restructuring and other non GAAP charges, amortization of acquired intangibles related to certain acquisitions, legal settlement costs, gain on assets held for sale, and depreciation of assets disposed of other than by sale, operating margin for the first quarter was 21.5, up 2.5 points year over year. The Q1 twenty twenty six GAAP effective tax rate was 24.3% compared to 33.6% in the first quarter of twenty twenty five.

22:27 The first quarter GAAP effective tax rate was lower than the first quarter effective tax rate of the prior year primarily due to change in our jurisdictional mix of income, lower tax expense related to uncertain tax provisions, lower tax expense recognized related to stock based compensation, and a decrease in U. S. Taxes on foreign earnings. Our Q1 twenty twenty six non GAAP effective tax rate was 20%, which reflects our long term projected tax rate. First quarter net income per diluted share was $1.57 up $0.31 compared to the prior year. Our EPS was favorably impacted by zero one dollars on a year over year basis due to foreign exchange.

23:13 On a non GAAP basis, net income per diluted share was $2.58 for the first quarter, up 21% year over year. Moving on to the balance sheet. As of 03/31/2026, cash and cash equivalents were $1,059,800,000 up $186,800,000 year over year. Of the $1,059,800,000 balance, dollars 206,600,000 was held in The U. S. And $853,200,000 was held by our international entities. Align maintains a disciplined capital return program. In August 2025, we announced our intention to repurchase $200,000,000 of our common stock under our previously authorized $1,000,000,000 stock repurchase program from April 2025.

24:08 Between August 2025 and January 2026, we repurchased approximately 1,400,000 shares at an average price per share of $143.85 completing the $200,000,000 repurchase plan. As of 03/31/2026, dollars 800,000,000 remains available for repurchase of common stock under our repurchase program. Today, we announced that we expect to repurchase up to an additional $200,000,000 of our common stock over a six month period beginning on or about 05/01/2026. We believe this action reflects our conviction that Align shares remain attractively valued, supported by improving underlying business fundamentals.

24:55 Q1 accounts receivable balance was $1,125,100,000 Our overall days sales outstanding was ninety seven days, flat as compared to Q1 of twenty twenty five. Cash flow from operations for the first quarter was $151,000,000 Capital expenditures for the first quarter were $30,800,000 primarily related to investments in our manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations minus capital expenditures, amounted to $120,300,000 Our financial priorities are centered on disciplined execution and long term value creation. Through restructuring actions and ongoing initiatives, we believe we are strengthening Align's cost structure and positioning the business for improved operating leverage as we grow returns.

25:49 We remain focused on managing input cost pressures, investing for long term returns and maintaining balance sheet flexibility to support sustainable margin expansion over time. We also continued to return capital to shareholders in Q1 through disciplined share repurchases, supported by our strong balance sheet and cash flow generation. With Q1 twenty twenty six results as a backdrop, we remain focused on executing our strategic growth initiatives and building on the recent quarterly results. At the same time, there is uncertainty and the potential for adverse impacts on patient traffic, consumer demand, and shipping and freight resulting from ongoing military action in The Middle East. With respect to The Middle East, we continue to monitor developments closely.

26:37 While our doctor customers in MEA have noted some impact on patient traffic and conversion, the overall effect on our EMEA results was immaterial in the first quarter. Given the ongoing uncertainty, we have taken a prudent approach in our second quarter outlook by assuming some impact on both clear aligner and scanner demand. Beyond the second quarter, it becomes increasingly difficult to predict how the conflict in The Middle East will affect our business, particularly in the event of further escalation, sustained constraints on oil and gas supplies, or broader softening in consumer and patient sentiment. As we look to Q2 and the remainder of 2026, assuming no circumstances occur beyond our control, such as additional ramifications as a result of the aforementioned military action in The Middle East, beyond what we have already assumed, adverse foreign exchange fluctuations, changes to currently applicable duties, including tariffs, or other fees that could impact our business, our outlook is as follows.

27:43 We expect Q2 twenty twenty six worldwide revenues to be in the range of $1,040,000,000 to $1,060,000,000 up approximately 3% to 5% year over year. We expect Q2 twenty twenty six Clear Aligner volume to be up sequentially and year over year, and Clear Aligner average selling price to be flat sequentially and year over year. We expect systems and services revenues to be up sequentially. We expect our Q2 twenty twenty six GAAP operating margin to be approximately 16.4% and non GAAP operating margin to be approximately 21.5. For fiscal twenty twenty six, we remain confident in our outlook that we provided previously and reaffirm our full year fiscal twenty twenty six guidance as follows.

28:35 We expect 2026 worldwide revenue growth to be up 3% to 4% year over year. Our full year 2026 revenue guidance continues to assume a benefit from foreign exchange that is consistent with the assumptions underlying our initial full year outlook. We expect the impact of foreign exchange to moderate in remaining quarters, trending toward the full year assumption of approximately 100 basis points. We expect 2026 clear aligner volume growth to be up mid single digits year over year. We expect 2026 GAAP operating margin to be slightly below 18%, an approximately 400 basis point improvement over 2025, and non GAAP operating margin to be approximately 23.7%, a 100 basis point improvement year over year consistent with our previous guidance.

29:26 We expect our investments in capital expenditures for fiscal twenty twenty six to be $125,000,000 to $150,000,000 Capital expenditures primarily relate to technology upgrades, additional manufacturing capacity, as well as maintenance. As we consider our full year 2026 guidance, we want to be clear about our approach. While we are encouraged by our first quarter performance and the outlook for the second quarter, we are maintaining a prudent stance with respect to the full year. The macroeconomic environment remains uncertain, and we believe it's appropriate to maintain the guidance framework established at the beginning of the year. We remain focused on disciplined execution in a dynamic environment, and we will provide updates as visibility improves over the course of the year.

30:15 As mentioned, we expect to repurchase an additional $200,000,000 of our common stock over a six month period commencing on or about May 1. With that, now I'll turn it back to Joe for final comments. Joe? Thanks, John. Stepping back, we're pleased with our Q1 performance and consistency of execution we're seeing across the business. Growth this quarter was broad based across region, patient segments and channels supported by record submitters for our first quarter and a higher utilization within our existing customer base. We also continue to see strong momentum from our doctor subscription program with Invisalign TouchUp and retention products growing double digits year over year. We continue to observe the dental needs we address such as orthodontics, restorative diagnostics, oral health and digital dentistry, and durable consumer demand, which we expect will continue to drive our long term growth expectations.

31:10 Importantly, teens and growing kids remain a central driver of Invisalign demand and long term opportunity. In Q1, we saw continued strength in teens, kids across key international markets, supported by adoption of Invisalign First, palate expansion and mandibular advancement. These products are helping doctors treat a broader range of growing patients with Invisalign aligners and allowing us to compete more effectively against traditional wires and braces at earlier stages of treatment. We have moved forward in 2026. Our focus is on maintaining discipline as we invest strategically in innovation and growth opportunities. That includes advancing digital dentistry through the Align Digital platform, scaling our Attero Lumina ecosystem, expanding internationally with localized strategies and continuing to build differentiated portfolio for teens and growing kids.

32:02 While macroeconomic conditions remain dynamic, we continue to benefit from long term investments in AI enabled treatment planning and integrated digital workflows that improve predictability, efficiency, and scalability across the business. These capabilities are designed to increase planning consistency and throughput and support more predictable outcomes for doctors helping us operate more efficiently across volume environments. A key part of strategy is expanding the role Align plays in oral health and restorative dentistry. Increasingly, doctors are using our platform not just to align teeth, but to identify oral health issues earlier and integrate orthodontics into comprehensive treatment plans. By connecting iTero, Exocad and Invisalign through digital workflows, we're helping doctors deliver better long term oral healthcare outcomes for patients, especially as they transition from orthodontic to restorative care.

33:00 Our vision is to make tooth alignment using clear aligner therapy, the standard of care. By revolutionizing traditional treatment modalities, appliances, tools, practice workflows, and businesses, and go to market models across the dental industry. By focusing on oral health and the benefits of tooth alignment as part of orthodontic and restorative treatment, we're developing products and technologies that are helping doctors deliver the best treatment experiences and clinical outcomes for their patients. To date, nearly twenty three million patients worldwide have been treated with the Invisalign system, including approximately seven million teens and kids. Every case adds to our proprietary clinical data set generated within our integrated digital platform. This data set continues to fuel our innovation and ability to scale across orthodontics, oral health, and change lives for our doctors, customers, and their patients.

33:53 Innovation remains central to our strategy, but always with a clear purpose, helping doctors deliver better outcomes, improving efficiency and enhancing the patient experience. Looking forward, that includes continued progress in direct fabrication, which we are advancing deliberately and in phases with quality and reliability as our guiding principles. While still early, direct printing unlocks new design flexibility, strengthens our long term cost structure and allows us to operate more cost effectively. We begin initial limited market releases of direct three d printed attachments and retainer products in Q1 and look forward to updating you further as direct printing programs progress. Our objective is straightforward to keep earning trust through clinical leadership, thoughtful innovation and consistent execution quarter after quarter.

34:41 With that, I thank you for your time today. And now I'll turn it over to the operator. 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, 11 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star, one, 1 if you would like to remove your question from the queue. Our first question comes from Daniel Grosslight with Citi. Your line is open.

35:29 Hi, guys. Thanks Hi, for Daniel. Taking the Hi. Congrats on another strong quarter here. I wanted to focus on the cadence of profitability for the remainder of the year. Obviously, a very strong beat this quarter. 2Q looks about flattish sequentially, which implies a fairly significant step up in the second half. Can you just comment on the underlying assumptions for the cadence of profitability this year? Particularly, I know there's a lot of uncertainty around The Middle East, but how much impact around the conflict are you assuming in 2Q? Kind of what are the assumptions around the second half? Thanks. Yeah, Daniel, this is John. So we're pleased with our profitability and what we saw in the first quarter. It's really a reflection of what we've been able to do is lot of the restructuring and other changes that we made last year, both from a COGS standpoint and OpEx standpoint really starting to take hold in the first quarter. So we're pleased with that. We expect that profitability and the productivity to continue as we go through the year and that's typically the cadence that we have as we go quarter over quarter. We see that profitability and especially as volume increases as well, we see that profitability come through as well. So good start to the year and we look forward to the rest of the year playing out as expected.

36:53 Thank you. Thank you. Our next question comes from Glenn Santangelo with Barclays. Your line is open. Hi, yes. Thanks for taking my questions. Just two quick ones for me. Hey, Joe, I want to touch on this Middle East situation. I know you guys don't break it out specifically, but we sort of place it in the mid to high single digit range with respect to revenues. Can you confirm, is that in the right zip code? And I'm just kind of curious if there's been any impact on the iTero manufacturing facility there. And if you have any insight on how that business trended in April, because I think that'd be helpful for us sort of assessing the balance of the year. And then I just have a follow-up on share repurchase. It's kind of interesting to me you know, that you completed the 200,000,000 in January, and you said you're gonna start on the next 200,000,000 over the over the next six months. But I'm kind of curious, given the transient nature of the conflict, like, why wouldn't it make more sense to kinda lean in here more heavily through that 800,000,000 in, you know, in 1Q, for example, you know, given you have over $1,000,000,000 in cash on the balance sheet? And so any any thoughts on the timing of your share repurchases, would be helpful. Thanks so much.

38:12 Yeah, Glenn, I can start with answering some of these questions. This is John. On Middle East, you're right, the Middle East part of our numbers to the company is in the single digits. And so there's some impact that we saw, but it was pretty minimal in March and our reflection is in the second quarter and kind of beyond based on that. In terms of iTero, Joe, you wanna? On the iTero side, Glenn, honestly, we didn't have any disruption from a product production or shipment standpoint. That team is very rigorous over there. We understand when to move equipment well and whatever. And so I'm not saying that's always perfect, but the team has responded well and we didn't have any really impact on the business in the first quarter. And then on the share repurchase, you're right. We saw the 200,000,000 that we just completed and now an additional $200,000,000 Remember, it comes down to US cash and about 20% of our cash is in The US versus out of The US, so we have that constraint as well. But it's part of our overall plan that we have. We want to grow the business as fast as we can, use our cash to be able to help do that. We have a good business model that generates a lot of cash, you saw that reflection in the first quarter and then we do the buybacks to be able to put cash back to our shareholders. So that's been the plan that we have and it's a disciplined approach that we've taken and we've seen that investments made

39:42 back in the business that way. Okay. Thank you. Thanks, Glenn. Thank you. Our next question comes from Brandon Vazquez with William Blair. Your line is open. Everyone. Hi, guys. Thanks for taking the question and congrats on a quarter here good quarter here in uncertain macro. I want to follow on the Middle East question, but actually not like the specific exposure to The Middle East, but you guys had kind of called out some prudence around the guidance just for the uncertainty around the Middle East situation. I assume you guys are talking about potential like impacts to consumers, things like that. Maybe just talk us through what are the potential risks? What is the prudence that's being baked into the guidance just so we understand, if we do have a prolonged situation in Middle East, what's the wiggle room within guidance and where you guys would expect across the P and L there could be an impact, right? Because it could be in revenue. And then maybe the other one I'll ask on margins related to this is like, are you guys exposed to resin costs that we keep seeing headlines about rising from The Middle East? Thanks.

40:51 Yes, Brandon, this is John. So there's a minimal direct impact. Like I said, The Middle East part of our business is actually relatively small in the single digits as a result, as a comparison to the rest of the business. It's really just the higher fuel prices that you see, that every country is seeing now as a result of this and what it means for their inflation and what they have to be able to purchase other products including ours. We've done a lot to be able to help drive the conversion, so much of what we talked about was helping potential patients with financing and helping doctors to be able to provide financing and so on and we'll continue those efforts, but it's really more around something that's prolonged with higher inflation and higher share of wallet that goes other places that puts us from a forecast standpoint just trying to be as prudent as possible.

41:50 Next question, please. Thank you. Our next question comes from Jon Block with Stifel. Your line is open. Hey, guys. Good afternoon. Hey, Jon. Two for me, maybe I'll break them up. But just on the first one, Joe Hey, John. Hey, John, you sound really low. Can you speak up? Okay, that's better. Is that better? All right. Sorry about that. Two questions, I'll try to break them up and I'll yell on top of that. So I was saying, trends are always really important, but certainly top of mind with investors with, call it, the current state of the globe and what's going on. So I'm wondering if you can give us any color just on how things trended or call it like closed in the first quarter, call it more the month of March.

42:36 And then any early 2Q trends to call out for the first month that you experienced in the month of April. Hey, John. Look, mean, overall, when I look at the quarter, I look at it globally and all, it was pretty consistent across the board when we look month to month. Obviously, iTero is kind of back end loaded, obviously, in the way capital equipment purchases go. But when we looked at Invisalign, we felt good about Invisalign, all country and country and the consistency of what we saw. So, and no, I would say overall pockets of weakness that was different than what we experienced in the fourth quarter. Overall, it felt good about that, and we felt good as how we entered the second quarter too. So Johnny, did that? Well, I mean, there's gonna be puts and takes as you go through any quarter, but on balance, we kind of take a balanced view of that from a guidance standpoint and reflect that.

43:31 Okay. And John, maybe the second one, hopefully you can hear me. Okay. Just a follow-up. So you mentioned zero refinement or no AA, and it seems like that rollout is going to broaden. You talked about seeing some good proof points with some of the accounts that had it like notably the DSO. So what's the assumption in 2026 guidance? Have you built out any call it like incremental contribution from zero refinement as that rolls out more broadly for the balance of the year and the tack on to that, but certainly related is in the wording on the 2Q guidance, you mentioned prudence, to what's going on in The Middle East for 2Q to be clear, have you seen it yet as in the month of April or are you building that in, in case it's on the call? Thanks for your time.

44:19 Yeah, so when we see the zero refinement, it's really not in a big way in our forecast for the year, so we're very pleased with what's happening and how this rollout happens. Again, doctors have to get comfortable with these products, they want to see results for themselves, they want to get that clinical confidence so that they can increase adoption. It's a rollout, but what we do see is doctors started to utilize it more and more. So we're pleased with that, but we're not expecting much just because of the time nature of the rollout for this year. And then when we look at the overall that we see, we're pleased with that and I think from a guidance standpoint, we've been able to see the puts and takes of first quarter and you factor that into April and that's what's gone into our guidance.

45:15 So I would say, it's a balanced view of all those puts and takes. Wouldn't say it's overly cautious, it's just a reflective of what we expect and from a guidance standpoint for Q2 and then the reflection of maintaining our overall for the year. Perfect. Thanks, guys. Yeah. Thanks, John. Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open. Elizabeth. Hi, Good afternoon, and thanks so much for the question. Maybe a two parter for me. One, can you go into a little bit more detail about your sort of like change in ASP view? It just seems a little bit more positive than what you're saying, so just wanted to like parse through that in a little bit more detail in terms of mix or FX and that kind of thing. And then two, as you think about the margin opportunities in 2026, do you see any changes in those buckets versus sort of what you were thinking about later last year? Are there any incremental opportunities?

46:17 Any more details on that would also be helpful. Thank you. So Elizabeth, on the ASP, you're right. There are moving pieces, certainly that we called out foreign exchange, we talk a lot about country mix and product mix, and certainly those play through our ASPs, but on an overall basis, when we look year over year, it's a $10 increase, which was good, it was as expected, and even on a quarter over quarter basis, dollars 10 and that's kind of how when we look forward, you're still going to have that country mix and product mix, but lot of times things are offsetting and we see that as a result. So ASP stable, it is when we see some of those lower stage products like we talked about with the No AA or some of the moderate products, they come at a higher gross margin and we see that coming through and first quarter is a good example of that. As you increase your No products, as you increase your moderates with NOAs, the cost of service is just less and we end up with being able to see improvements in gross margin. So as we go through the year, we should expect to see that in terms of our product mix, improvements in gross margin, we should continue to see productivity.

47:31 We made a lot of cost actions at the end of last year. We're seeing good effects of those cost changes, whether it's getting closer to our customers, in some cases it's just equipment that's more efficient, drives productivity, and certainly as we have more volume, we get that leverage as we go through. So that's how we expect things to play out this year and so far in the first quarter was a good start. Next question, please. Thank you. Our next question comes from Jeff Johnson with Baird. Your line is open. Hi, Jeff. Hey, guys. Hey, Joe. Hey, David. Good afternoon, everyone. So, Joe, I wanted to start maybe two questions, but let me start just on kind of your North American case growth. I think you mentioned it was down a little bit year over year.

48:18 Every other market, I think, up double digits, although correct me if I'm wrong on the every other market comment part of that. But what do you think the difference is in The U. S. Or North America versus rest of world? Is it just all consumer? Is it competition? What is driving such a stark contrast? I know that's not really different over the last several quarters or handful of quarters, but just what's your updated thought on how we get that kind of North American number back to something that can be contributing at least to the double digit elsewhere? Yeah, that's a good question, Jeff. First of all, I'd say the competition aspect hasn't changed. Just to take off on John's question a second ago, that no AA allows us to play offense out there, and we're playing more offense in that sense, and we feel good about it overall.

49:06 I'd say broadly, I was actually anticipating this question, Jeff, is it's broadly a macro the way I look at it versus here in the rest of the world. And it's almost like you'd put, the macro in Asia being the best. Secondly, in Europe spotty, Europe's a lot of different countries, but you can see the countries we highlighted like Iberia, UK and different parts of EMEA is growing pretty well. And then when you look at The Americas, which includes Latin America, it did extremely well. We're seeing some improvement in Canada right now and some improvement in The US. So overall, I feel good overall, but that variable you're looking for, Jeff, has been US macro as far as I can tell. All right. Fair enough. And then maybe just a two parter on OAA. One, I think last quarter you had talked about going into 2Q being pretty complete with the rollout of OAA across most markets.

49:58 It sounds like maybe that has a little extended launch timeline now. Just wondering if anything has changed there. And then on some of the LMR, the limited market release you did of No AA last year, any early evidence of whether these docs who are using NOAA are still doing one or two refinements in an ala carte way? Are they using DSP to pay for it? Just how to think about kind of years six months through year two of those NOAA cases. Do additional revenues come in over time or not on that product? Thanks. John, what do you see on that? So on the NOAA, when we look at it's being available to many doctors, it's just a question of do doctors wanna utilize it and start to utilize it right away. So there's a roll up based on the doctor's preference in terms of how much they wanna utilize that ramps up. In success, when doctors start to see the benefits of it, their clinical confidence that they can treat patients even on complicated cases with no refinements or maybe one refinement, then they continue to do more and more, and that's what we've seen in our data as we've gone. And now, as it's been out for over a year in many markets, now you see doctors saying, okay, they need to purchase a refinement, or they might have something that they need to add to the case to make sure it can finish properly, and you start to see some of the refinements come later. So that

51:29 was our expectation when we started this, that there would be an adoption, and those doctors then start to use it, they want to see what refinements they need, and now we are starting to see some refinements, but it really helps doctors be able to keep that initial case cost lower for them, so that they can fit that into their practice and see those patients as they would want. So good adoption that we've seen across the globe, you're starting to see refinements come in but it's pretty much as expected. We just want to keep rolling this out and getting doctors more and more options. Jeff, I guess just to add something what John said, I think one is over the years, the doctors have gotten more and more confidence in our product lines. I talked about TPS in my script and different things that we do to train doctors. And I think it gives them much more confidence to go out there with no AAs.

52:20 Secondly, is it aligns the doctor's economics along with our economics too. And so it helps to bring the two of us together in a much better way. Understood. Thank you. Thanks, Jeff. Next question. Thank you. Our next question comes from Michael Cherny with Leerink Partners. Your line is open. Good evening. Thanks for taking the question. I know we've been talking a lot about macro, obviously not something you can control, but you can control some of the reaction to macro. So as we sit here wondering what's going to happen with The Middle East, I appreciate all the color in terms of what's baked into the guidance on the top line as well as the COGS side. How are you thinking about the OpEx spend in the push and pull to make sure that the appropriate level of demand is being stimulated and especially in a world where you do have a broader product portfolio.

53:11 Is there any color you can give us in terms of the scenario analysis that could lead to ongoing margin upside? Michael, this is John. So we're constantly looking at understanding the macro and then our investments into that macro. And it's not one size fits all. Some countries, there's maybe not as much awareness and we're at different points in the overall journey of Invisalign there. You make different investment compared to maybe the bigger markets like you see within The US, but we're very attuned to making changes and being able to reflect what's working and what might not be working, what macro is happening in certain markets versus not, and we'll make adjustments to that, ultimately wanting to get the best return on investment, and when we take that approach, we can manage that in the short term to be able to hit the expectations we have, then of course we want to be able to drive the category and grow and that's something that we make maybe on a more longer term basis, but we're really looking at what's happening kind of market by market and even within the market, whether you advertise at the high level or more at the customer level, and we're making those trade offs and doing this active conversion that we talked about to really help doctors.

54:31 Thanks. Thank you. Our next question comes from Jason Bednar with Piper Sandler. Your line is open. Hi, Hey, good afternoon. Hey, thanks for taking the questions and nice start to the year here. Wanted to follow-up, I think, on Jeff's question earlier on focusing on here on The U. S. Good to see a lot of the record quarters in the international side. The U. S. Market seems like maybe it's had some green shoots, at least in some of the data that we look at, maybe more focused on the orthodontic channel. Is that consistent with what you're seeing too? I'm just sorry if I missed it, are you seeing any differences in your business when you look across that team focused U. S. Ortho channel relative to more of the retail adult oriented US GP segment?

55:20 Just deciphering your question, Jason, I'd say when you look at like a DSO approach versus a retail approach, we obviously get a broader signal on a DSO because we're looking at a lot more patients and doctors. And the DSOs traditionally have, they have really good skills to go out and recruit finance in different areas. On the retail doctor side, when I talked about HFD and those different things, those are types of systems that we're bringing together to address things that we feel hurt our retail doctors at times and inability to be able to finance or to make quick decisions and financing with patients in different areas, how we go about that as a business overall. So I'd say the macro is there, but I feel good about what we've been offering from a product standpoint, we do from a financing standpoint, and delivering it from a we changed our organization to move to call on both orthodontists and GPS going forward. That's given us more coverage out there to be able to deliver this kind of message and support to our doctors too.

56:21 All right, got it. And this is a follow-up, shifting over to a different side of the globe. China to us is a bit of a surprise, a good surprise, double digit growth record first quarter you referenced. Are you comfortable saying demand is returning to normal across China? And can you remind us what's embedded in your full year guide for China volumes and revenue this year? I think anybody in business has to be careful of using the word normal in China. Okay? It's just, yeah, I think you take that business almost on a year to year, sometimes quarter to quarter basis. We have a great team there, Jason. They execute well. Jun Ho that ran that business has been moved and he runs all of Asia right now. We have a great team there that helps to drive that. It's a very dynamic marketplace. We're well positioned with our manufacturing, well positioned with what we offer over there.

57:11 But I would never say it's always business as usual in China. It's the most competitive market in the world. All right. Thank you. Thank you. Our next question comes from Steven Valiquette with Mizuho Securities. Your line is open. Yes, thanks. Good afternoon. Hi, Steve. Hi, everybody. This question has been, I guess, sort of half asked so far, but just wanted to get a little more color around this 2Q guidance. It seems probably stronger than probably most people were expecting, which is certainly positive. But as far as just kind of the geographic mix across that, should we assume generally the same trends stronger in international than maybe Americas a little more I guess you're characterizing as stable in particular?

58:00 And also I think for just North America in particular, last year you talked about this ratio of patients getting scans versus patients starting treatment kind of being off a little bit. Have you been able to at least kind of close the gap on that across a lot of geographies, especially on the back of some of the patient financing programs you have in Thanks. Yes, Steve, when we think about Q2, I think the growth that we've seen is pretty consistent, or our expectation is pretty consistent to what we've seen. We would expect international to grow faster for many of the reasons that we spoke about. We've seen that for a number of quarters now compared to North America, so that would be our expectation for Q2. And I would say just on the conversion piece of it, that dislocation we saw in the second quarter of last year, and some of that as it played out, went through the quarter, we saw that dislocation.

58:54 It really has more or less returned to normal really since that second quarter, so we haven't seen some of that dislocation as we've gone through, which is good. We want to be able to drive our volume, with more and more, sell to more and more doctors and increase the utilization, and we want that conversion to be as active as possible. We're trying to make that happen and therefore more as predictable as possible and we've been able to see that and the expectation as it continues. Okay, that's perfect. Thanks. Thanks, Steve. Steve? Thank you. Our next question comes from Erin Wright with Morgan Stanley. Your line is open. Great.

59:39 Thanks. Another question on sort of the North America or U. S. Market. But what are you seeing in terms of the gauge data like, when it comes to the broader growth trends and then what you're seeing in terms of growth across brackets and wires versus clear aligners in the market, just more broadly? And then a follow-up on zero or no AA. I guess when could this move the needle for you? It sounds like you're not expecting much this year, or maybe you're just leaving that for upside in the guide. But I guess can you remind us the economics for you? And can you quantify also that relative margin profile for the offering? Thanks. Maybe I can start with the AA or the Zero AA product. Continues to ramp, as we said, we started more on the DSO side, now it's getting more and more retail doctors and we'll play that out. Look, as that adoption happens and it drives incremental cases, that would be upside compared to, what we've expected for the year because again, it's a slow gradual adoption and if doctors adopt faster and that's what they want to use, then great. And then in terms of the revenue recognition, we don't have to defer revenue on that, so it's basically revenue neutral kind of in that current period. Of course, there's additional refinements that come later, that will get that revenue as that comes later, but when we think of those lower or no AA product, the gross margin is excellent for us, it's accretive for us as a business, We're starting to see that in more and more of our results.

1:01:08 If you look back to last couple of quarters, including this first quarter, you start to see some of the benefits in there and it's very efficient for us because it's set of treatment planning, one manufacturing, one shipment, and you're kinda done with it unless there's a refinement that's needed. And then the most important part of it is it fits with how a doctor might wanna practice, where they don't wanna pay as much upfront, they want to look at it maybe pain as you go and an OA product gets to that. Erin, back to your question, it's Joe, on The US marketplace, particularly wires and brackets and ratios with clear aligners. I tell you, you gotta be careful with the data that you gather out there today and where it's coming from. We find there's a pretty big delta in that data overall. What I'd say is I feel good about our team play overall because with mandibular advancement with occlusal blocks, Invisalign First that I referenced in my script and also IPE, we're doing better and better on that preteen area because what we're offering is so much better than what the traditional kind of appliances were to be able to do that. And we see good progress in that area.

1:02:17 But overall, I wouldn't say a whole lot of change over the quarters in The US orthodontic market wires and brackets versus the liners, except for what we're seeing in the preteen side, it's been pretty substantial. Thanks, Aaron. Next question, please. Thank you. Our next question comes from Kevin Caliendo with UBS. Your line is open. Hey, guys. Thanks for getting me in. I appreciate it. I have two, if I can. First one is with all the questions around resin and oil, can you just remind us what percentage of your COGS are resin? And what would be the impact on direct fab in terms of reducing those costs, like the potential opportunity there?

1:03:06 Just trying to think about this as an overhang. And then the second question is more. I just want to make sure I understand the commentary broadly about your guidance. In essence, what you're doing is you're taking the trends that you've seen in 1Q and into April. You're sort of running those through for the full year, but then adding on some kind of undisclosed amount of prudence with regards to the macro and the war and everything else. Is that a fair way to describe it? Thanks, guys. That's a fair way to describe it, Kevin. In terms of the guidance, it's like you're going have puts and takes as you go through the quarter. We net those together, put that into Q2 and total years, so that's an accurate way to view that. And then in terms of oil prices, there's really two effects that can affect our business from that standpoint on a direct basis.

1:03:55 One is the actual material costs, say about 25% of our COGS is kind of the resin plastics. There's a lot of contracts that we have where we have fixed amounts that there's not a lot of room for negotiation in terms of inflationary effects that we take, so we feel we're pretty protected on that. The other piece might be on freight and logistics, and again, we're pretty controlled on that as well. So not to say that there's not some impact that we've seen from higher costs related to some inputs, but it's been manageable and we've managed it in the first quarter and expect to better manage it going forward. Hey, Kevin, Joe, on the direct fab side, I mean, you called out, I mean, there's an obvious aspect when you direct print, you don't have the 95% kind of scrap base that you use on our current vacuum forming piece.

1:04:48 So that's always there. And our feed stream is more of a natural feed stream. There's not really a feed stream from a petrochemical standpoint, so it helps isolate you overall. But remember, I mean, that play, it's a great thing about that on direct fab is it will help us significantly in the sense of efficiency in that way, but how you can make an aligner and the flexibility to make it and variable wall thickness and being able to be able to design aligners to each individual cases to an extreme, we can never do before still a primary driver, but you do have these auxiliary areas that really help in the sense of how the resin's obtained and how it's used. Thanks, Kevin. Next question. Thank you. Our final question comes from Michael Ryskin with Bank of America. Your line is open.

1:05:38 Hey, thanks guys. Thanks for squeezing me in. I'll try to be quick. One is, just following up on, I think, Elizabeth's question on ASPs. In the past, I think you talked about a 1% to 2% decline in ASPs for the year. Your 12.50 in 1Q, I think you pointed to around $12.52 implies still a little bit of a step down 3Q, 4Q. Is that still in the guide? I think it is, but I just want to confirm you didn't call out the full year ASP dynamic. Yes, Michael, the 1% to 2% decrease on a year over year basis is our expectation. You're going to have that mix that we talk about whether it's product or country mix, that plays out to each quarter and throughout the year. Okay. And then quick follow-up if I if I may.

1:06:24 You know, another question earlier asked sort of about US versus OUS and some of the you know, why is US not quite at the same level as the others? You talked about the macro. I'm ask it a different way. The DSO versus retail channel, is that some of the same dynamics? Know retail has obviously been weaker, DSO has been a strong point for a while, so it's nothing new. But just is that sort of the same answer of macro and just harder to push that through or is there anything new that's impacting that channel? Thanks. Yes, no change to what we've seen, Michael. We're very pleased with the DSO growth and it continues to be in many places double digit growth and that's a reflection of really those groups taking a lot of the tools that we offer and bring together, whether it's the scale, the technology and the brand, and they do a great job of bringing it all together and really being much more active to try to drive that conversion with their potential patients.

1:07:16 So that plays out and that's the force multiplier that we talk about. You just don't see that as much, at least on a consistent basis on the retail side. We're working to try to get those retail doctors to operate more like some of the DSOs, but broadly it plays out as we've seen and it's up to us to try to get after those retail doctors with our sales force, with the technology, with the marketing and so on to try to get them more active. Awesome, makes sense. Thanks a lot. Thanks Mike. Thank you. And we have reached the end of our question and answer session. I will now turn the call back over to Shirley Stacy for closing remarks. Great. Thank you, everyone, for joining us today.

1:08:02 We look forward to meeting you at upcoming conferences and industry meetings, including the AAO meeting in Orlando this Friday. If you have any follow-up questions, please contact Investor Relations. Have a great day. Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.