Align Technology, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Q3 results show revenues, Clear Aligner volumes, and non-GAAP operating margins above outlook. Clear Aligner volumes grew year-over-year, driven by EMEA, APAC, and Latin American regions, especially the teens and kids category.
• Systems and Services revenues were down due to Q3 capital equipment seasonality. iTero scanner installations globally exceeded 120,000 units, a 12% year-over-year increase.
• Introduced new product innovations for iTero Digital Solutions, including AI-enabled X-ray assessment and expanded compatibility with 3D printers. Exocad ART was piloted in several European countries.
• Record number of teen and kids cases shipped in Q3, representing 40% of total Clear Aligner cases shipped. ClinCheck Live Plan launched, automating initial treatment planning in 15 minutes.

Segment Performance

• Clear Aligners: Q3 revenues were $806 million, increasing 2.4% year-over-year. Volume was 648,000 cases, up approximately 5% year-over-year. Revenue contribution: Approximately 80.9% of total revenues.
• Systems and Services: Q3 revenues were $190 million, decreasing slightly year-over-year and down 8.6% sequentially. Revenue contribution: Approximately 19.1% of total revenues.

Guidance

• Q4 2025: Expected worldwide revenues in the range of $1.025 billion to $1.045 billion, up sequentially. Clear Aligner volume and average selling price expected to be up sequentially. Systems and Services revenues expected up sequentially.
• 2025: Clear Aligner volume growth mid-single digits, revenue flat to slightly up. GAAP operating margin around 13.6%-13.8%, non-GAAP operating margin slightly above 22.5%.
• 2026: Restructuring actions and other initiatives expected to improve GAAP and non-GAAP operating margins by at least 100 basis points year-over-year.

Risks

• Foreign exchange fluctuations impacting financial results.
• Macroeconomic conditions affecting the dental market and consumer spending.
• Changes in duties, tariffs, or other fees that could impact business operations.

Question and Answer

• Q: Congrats on a nice quarter. Any early 4Q color on end market and ClinCheck launch impact on margins?

A: Technology helps efficiency and communications, 15-minute live update helps closing cases.

• Q: ASP down Q-over-Q, but 4Q expected up. What drives that?

A: Geographic mix, Europe and others contribute to ASP increase.

• Q: China market competitive landscape and VBP?

A: Aware of VBP, positioning for potential implementation but no new updates.

• Q: HFD patient financing partnership impact?

A: Healthy, more doctors using it, expected to continue.

• Q: Confidence in LRP targets?

A: Sticking with 5%-15% growth plan.

• Q: ASP mix shift?

A: Country mix (emerging markets like China) affects ASP, like-for-like in certain regions up.