Align Technology, Inc. Q4 FY2025 earnings call

• Fourth quarter results: Better-than-expected revenues and clear aligner volumes, non-GAAP gross margin and non-GAAP operating margin above outlook, highest non-GAAP operating margin since 2021. Q4 revenues record $1,048M, up 5.3% YOY and 5.2% QOQ. Full year 2025 total revenues record $4,000M, up 1% YOY. - Segment performance: Clear Aligners had Q4 revenues $838M up 5.5% YOY and 4% QOQ, volume 677k cases up 7.7% YOY and 4.5% QOQ. System Services Q4 revenues $209.4M up 4.2% YOY and 10.3% QOQ. - DSOs: Important strategic growth channel, DSOs in Americas, EMEA, APAC driving growth. In Americas, top 10 DSOs grew double digits YOY. In EMEA, DSOs drive expansion in case volume and iTero scanner penetration. - Regional markets: Americas clear aligner volumes up, Latin America had record quarter shipments. North America focused on driving adoption, EMEA clear aligner volumes grew double digits YOY, APAC clear aligner volumes grew double digits YOY. - Product milestones: Surpassed one million patients treated with Invisalign in Latin America, UK, and Iberia. Over 296,000 active Invisalign-trained doctors treated over 22 million people worldwide. - Technology and product progress: Advancing direct fabrication, limited market release of Invisalign First Direct 3D printed retainers and Invisalign Specifics 3D printed prefab attachments in 2026. Exocad delivering sequential year over year revenue growth with broader rollout plan for ExelCAD ART.

For the fourth quarter, Q4 revenues were a record $1,048,000,000, up 5.3% year over year and 5.2% sequentially. The two operating segments are System Services and Clear Aligners. Clear Aligners: Q4 revenues were $838,000,000, up 5.5% year over year and 4% sequentially. Q4 clear aligner volume was a record 677,000 cases, up 7.7% year over year and 4.5% sequentially. For the full year 2025, fiscal 2025 clear aligner revenues were $3,200,000,000, up 0.5% year over year on record clear aligner volumes of 2,600,000 cases, up 4.7% year over year. System Services: Q4 Systems and Services revenues were $209,400,000, up 4.2% year over year and 10.3% sequentially.

• Q1 2026: Worldwide revenues expected in the range of $1,010,000,000 to $1,030,000,000, up 3% to 5% year over year. Clear aligner volume expected to be up mid single digits year over year. Systems and services revenue expected to be down sequentially. GAAP operating margin expected 12.4% to 12.8%, non-GAAP operating margin approximately 19.5%. - Fiscal 2026: Worldwide revenue growth expected up 3% to 4% year over year. Clear aligner volume growth expected up mid single digits year over year. GAAP operating margin expected slightly below 18%, non-GAAP operating margin approximately 23.7%. Capital expenditures for fiscal 2026 expected $125,000,000 to $150,000,000.

• Foreign exchange risks: Can impact revenues and margins. - Macroeconomic conditions: May affect consumer spending and market demand. - Tariffs: Potential changes could impact results of operations.

Q: Elizabeth Anderson asked about how to parse apart the improved volume performance, whether market trends are accelerating and sales strategy impact.

A: Joe Hogan said it's on top of market stability, execution well with DSOs globally, portfolio like young patient products (Invisalign First, pallet expander, MAOB) contributing, and DSP touch-up cases growth. John Morici talked about mix of favorable ASP mix in certain countries and balancing product portfolio.

Q: Brandon Baskas asked about the DSO adoption curve and how many DSOs can continue double-digit or triple-digit growth in 2026.

A: Joe Hogan said continued DSO penetration as they move to larger market percentages, increased penetration in DSOs globally, natural partner due to ability to scale on many dimensions with them, and DSOs continuing to expand globally and Align to take advantage.

Q: Jeff Johnson asked about the adult business improvement, including drivers like NOAA, HFD tailwinds, ClinCheck Live, and North American retail business.

A: Joe Hogan said a lot comes through DSOs, broad portfolio, scanning every patient, using chairside visualization tools, offering patient financing, and HFD partnership. John Morici added North America got better due to less negative retail and DSO growth combination.

Q: Jon Block asked about ASP details, tax receipts/stimulus impact on Q1, and NOAA rollout.

A: John Morici said expect ASPs to be down 1-2% year over year, quarter over quarter had slight FX and country mix impact. Joe Hogan said on taxes, planned on execution as in fourth quarter, NOAA products mix and match globally with different profiles by geography, rolling out by end of first quarter into second quarter.

Q: Michael Cherny asked about margin side dynamics, including product mix, geographic mix, channel mix, and Lumina behavior.

A: John Morici said mix shift to lower stage more profitable products, productivity improvements, volume helps. Joe Hogan said feel good about Lumina platform, well accepted in marketplace, foundation of business, and will have iterations on the platform.

Q: Vikramjeet Chopra asked about guidance range, DSO channel sales percentage, and expansion of DSO partnerships.

A: John Morici said guide based on actions to drive performance, new products and go to market activities. Joe Hogan said DSOs are about 25% of business on volume basis, share digital orthodontic mindset, want to continue expanding and help retail doctors grow too.

Q: Jason Bednar asked about operating margin expansion target risks.

A: John Morici said to execute, better help grow business, volume benefits and leverage, update as go forward.

Q: Jason Bednar asked about China VBP, pricing assumptions, and volume uptick post implementation.

A: Joe Hogan said not expecting major disruption for China based on current situation, John Morici said guidance does not include VBP impact.

Q: Michael Sarcone asked about system sales growth in 2026 between replacement cycle and de novo placements.

A: Joe Hogan said transition of old iTero scanners to Lumina is ongoing, not a major variable in success equation, working with doctors to transition.

Q: Steven Valiquette asked about thoughts on overall clear aligner pricing trends across the broader global marketplace.

A: John Morici said not factored into guidance, but noted competition pricing changes, which is evolution of the business.

Q: David Saxon asked about impact of direct fab on gross margins.

A: Joe Hogan said direct fab will be margin dilutive in 2026, John Morici said contemplating direct fab impact in overall guidance, need to scale resin and utilization.

Q: Michael Reiskin asked about scanners and services segment growth in 2026.

A: John Morici said systems and services grows equal to or about at what clear aligners grow, considering upgrades and trade ins.

Q: Kevin Caliendo (Dylan Finley on behalf) asked about NOAA impact on ASP decline and rollout.

A: John Morici said NOAA product rolled out, recognized revenue upfront, not an initial ASP impact, contemplated in volume and ASP guidance.

Q: Erin Wright asked about broader clear aligner growth across the industry and team segment conversion rates.

A: Joe Hogan said no big difference in conversion rates in ortho segment holistically, conversion rates related to doctor scanning, visualization, and workflow.