Everybody, my name is Elizabeth Anderson. I'm the Healthcare Services Dental Analyst here at Evercore. I'm very pleased to be joined by John Morici from Align Technology, who I'm sure many of you know and probably doesn't need too much of an intro at this point. But maybe when we start talking about some of the dive right into some of the business questions, you've talked about over the past couple of years moving to more of a recurring revenue model, right? And I think that's most applicable in scanners and services, though obviously comes up in other parts of your business. How are you seeing the evolution of that sort of scanner and services revenue and that transition to sort of more leasing, more other programs that sort of make that a larger proportion of recurring revenue?
Yeah, it's a good question. As we've developed our portfolio for iTero and really expanded out in the most latest with Lumina, what we've created is a portfolio of products from the high-end Lumina scanner that can do a very fast scan and large field of view, small tip, to be able to provide that scanning capability that doctors want, and it's been selling on the ortho and GP side. What that creates is an opportunity to be able to round out that portfolio from a high end. As you get trade-in, we have certified pre-owned that we use, and what that allows doctors to be able to use is a lot of different products that fit the needs of their practice.
What it also does, and what we've been able to do, is really use as financing if doctors want to rent maybe the new scanner or lease that new scanner, they're able to do. So not only do they have a lot of product choices, they also have a lot of leasing or rental choices. And we don't necessarily break that out, but I would tell you some countries that we sell in, the majority of what that revenue comes from is now either rental or leasing. And many doctors, that's what they prefer to do. So I would say every quarter we see more and more of this. It starts to build. And especially in this economic environment, many doctors, they're cash constrained. And this is a way to help them use this scanner.
So we feel like we've really established things well from a product standpoint to give them a lot of choices and also from a financing standpoint. So I would expect the recurring revenue to continue. We see that in this part of it. You also see it on the service side too. Many doctors have a service contract that they set with us, and that occurs for a year to five years, depending on what they choose.
Yep, no, that makes sense. I mean, I think your Lumina launch has been notable for a number of reasons this year, but it's not been a great macro environment for dental equipment, right? But you've seen sort of some nice outperformance on there versus the broader market. And certainly, Lumina brings a number of new features that are exciting for doctors. But how do you sort of think about where that fits in the ecosystem? Is it mostly sort of core users looking to trade up? Is it sort of bringing the product to sort of a broader range of people? I know that you have the restorative launch coming. So can you talk to us a little bit about that and sort of who's buying that sort of core Lumina product?
The Lumina scanner that we have is really a breakthrough in our technology because the one that it really replaces, the 5D that we have, was confocal imaging, different technology. This is camera-based LED that emits a signal, and we have software to kind of recombine that back to have the good images that we need. That has been a platform change. What we originally thought, as you said, we kind of launched the ortho scanner piece of this, and then the restorative would come next year. We've seen good uptake by orthos as well as GPs. What they find is it's very easy to use, it's very fast, large field of view, small tip, all the good things.
It's very user-friendly from the standpoint that as you're taking a scan, it kind of stitches together the images in a way so that as you move things around with the wand and so on, it gives you the right view that you need. Very user-friendly from that standpoint. Of course, we're building a lot of software to be able to make it helpful in the future as well. We've seen great adoption there. I think it goes back to that product portfolio to be able to create from the high end to the mid-tier to all the way down to the certified pre-owned. Doctors have a lot of choices to be able to use. Providing different financing options, where some will buy, some will lease, some will rent. We just want them to use that scanner. That's really helped us.
We saw a sequential improvement in the first quarter versus the fourth quarter, which usually we don't have. And then as we've gone through this year, the sales have been building and very strong, so we're very pleased with that. When the restorative comes out in the first quarter, what that is, is on the software side. It doesn't change any of the hardware. But what that allows is many general dentists look for certain margin lines and some of the visual part of it that you really need to be precise and accurate when you put in an implant or veneer and so on. This new software will enable that as well, so we feel good about the business that we have. They have a lot of new technology that's coming out.
Of course, as you know, and with our business, this is the front end of our digital ecosystem. We need a scanner to be utilized by our doctors. If they have one scanner, we know that they'll do more Invisalign. If they add another scanner, it's an exponential increase. We need those practices to digitize, and a scanner is a great way to do that. Then ultimately drives more Invisalign volume.
Yep, no, I always refer to it as the gateway drug.
It's the gateway.
So it makes sense. If we think about some of those new incremental technology investments that you were just referring to, can you give us sort of a sneak peek of where you sort of see those future opportunities?
In terms of the scanner or on the scanner side, you're going to find that there's going to be a lot more software and integration within that scanner. As you take that scan, and especially with the restorative, you'll be able to have at a general dentist's office perform the scan and quickly be able to get the software to be able to show, here's what orthodontic treatment would look like in that person with that person's face, their smile, and so on, provide that ortho look. Then also be able to provide the restorative and be able to say, this is the ortho, this is the restorative, and be able to give that patient or that potential patient that's right in that chair a view of what their teeth would look like with treatment.
And it's very powerful to have that chair side to be able to provide what a treatment would look like. Because as that person's in getting whatever they're getting at the doctor's office for a checkup and so on, to be able to provide that information more real time and give that doctor the ability to show what their smile is going to look like with treatment, there's a lot of power to that to be able to have that patient potentially go into treatment.
So there's a lot of investments around how do we, as you said, kind of that digital gateway, use that to be able to enable other features that we have within our company so that they can see with exocad how things are going to look like from a restorative standpoint. How that ortho restorative piece of it to provide a view of how their teeth are going to move properly before you do restorative. Just giving that patient as well as the doctor a lot of chair side visualization to be able to help them make the best decision what they want to do for their treatment.
Okay, that makes sense, and have you talked about what proportion of the revenue you expect to be sort of leased versus purchased outright going forward? Do you see sort of where do you see that market shifting to over time?
I would say, especially in this economy, it's become more of a recurring. I mean, there's still the majority is equipment sales that you just get outright. But there's a higher proportion of continuing revenue that's going to come from rental and leases. Just the environment that we're in, not only just in the U.S. and Western Europe, but when you get to some of the emerging countries, and if you're in the Middle East or Southeast Asia or South America, much of it comes leasing or rental. And for us, that's a really good obviously, you get the recurring revenue, and that's a benefit. We want to be able to build that. About a quarter of our company is recurring revenue like that, not only on the iTero side, but also on the Invisalign side.
But what we want to be able to do is any way we can get a doctor into our digital ecosystem because we know that they'll do more Invisalign if that's the case. So we want to keep promoting that.
That makes sense. And I think over the last couple of years, you've also gotten more into sort of some of the doctor financing portions of that. How do you think about sort of the returns there and how has that program been so far?
We sell to 87,000 customers, and these are small businesses. As they're growing with Invisalign or they're adding an iTero and so on, they're looking for payment terms. They're looking for ways that they can maximize their cash flow. We're in a fortunate position as a company to have healthy cash flow, strong balance sheet, no debt, and so on. If there's ways that we can provide some working capital benefits to those doctors, that's something that is an important part of our strategy. What we provide is maybe additional payment terms where a doctor might have 60 days. If they're growing, they're taking on maybe new scanner and new volume that they have, we want to make sure their cash flow is set in a way. It might be if they're a good payer, they might go from 60 days to 120 days.
That gives them more working capital. And more importantly, what it gives those doctors is the ability to provide financing to their patients. We don't want to take on that patient financing directly, but if we can help our doctors improve their working capital, that'll give them the opportunity to provide that for their patients. And what we see is that's happening more and more. As you think about patients that are coming to a doctor, there's usually three categories that they fall into. A patient wants to go into treatment and they just pay for it upfront. In the U.S., it's maybe about 1/3 of the cases happen that way. About 1/3 of the cases, there's some type of pay-as-you-go financing that is usually with the doctor.
And then about 1/3 of the cases are some type of external financing, and they have to go to the outside and try to get this. But that middle third, that's something that we can help directly there. We provide some cash flow benefits to our doctors, and what they end up doing is providing a benefit to their patient. That helps patients get through some of the tougher economy that we face, the interest rates and other things that they face. This is a way to offset that.
Got it. No, that makes sense. Maybe switching over to China, you talked about some teen strength that you've been seeing in China recently. Can you talk a little bit more about what's been driving that and sort of how you see that evolving over the near term?
Yeah, China is an important business for us. It's less than 10% of our overall, but it's still a very important business. When we talked about the strength in China, it really came out of the third quarter. Very good teen quarter that we had, good teen business. We've got a wide portfolio of products there from kind of the minor smaller cases, lower stage aligners, all the way up to very comprehensive cases that we have there. We see great adoption in Invisalign First and some of the teen products that seem to be very successful there. I think the go-to-market that we have and the product portfolio has served us well there. Remember, China is a massive market, huge population, way underpenetrated from a clear aligner standpoint. 90%+ of the cases are done with wires and brackets there.
So you go after that market in the right way with products and how do you go to market. It's mostly a cash pay. 85% of our business there is on the private side, only 15% on the public. So you want to go after that market. We're typically in Tier 1, Tier 2 cities, but we feel good in terms of our positioning for China. We've got a direct sales force. You've got treatment planning. You've got manufacturing. All the data is kind of there. The manufacturing is really for China there and puts us in a good position to be able to go to market the right way.
No, that makes sense. Obviously, VBP is something that's rolling out further on the ortho side probably in 2025. I know you have talked about how, I guess, 20% of your business or less is on the public side and so not so susceptible to it. Are you seeing any kind of shorter-term dynamics? I know we saw a lot of sort of volatility when the implant VBP rolled out in the periods before and then after. So what are you sort of seeing as people are kind of waiting for the actual timeline to be fully rolled out?
Like you said, VBP. It'll get rolled out typically on the public side first. We'd see that. Like you said, it's under 20% of our business, 15%-20% of our business on the public side. There'll be pricing and there'll be certain products that we'll have to price in the right way to be able to make that. I look at it this way. If it gets more adoption to clear aligners versus wires and brackets there, and it gets us to the ability to drive additional volume there, like I said, we have a product portfolio there that can still stand up when VBP comes through because we're local, we're manufacturing there. The cost profile and what we've established there is being like a local Chinese company.
And I feel like we're in a good cost position to be able to still work in a way that we can maintain healthy margins there. And I think that'll be our focus. But I look at VBP as it's going to happen. It's just a matter of how much and how quickly it goes, most likely public, most likely starting in certain cities and so on, and we'll adapt to that. But again, it's such an underpenetrated market. And if it can drive more clear aligner and specifically more Invisalign sales there, given our cost profile and how we've gone to market there, I think we'll be able to adapt to whatever happens.
Got it. And just maybe one more on China. In terms of the go-to-market strategy in China, you've obviously had some leadership changes there. How do you think about the go forward? Is there something that changes now in your sort of go-to-market strategy in China? Or is it just so underpenetrated that it's kind of more of a question of just keep doing what you're doing?
I think it's keeping that focus. It's kind of the latter piece. It's so underpenetrated. Let's keep the focus. We've got a direct sales team. You've got treatment planning that's in the time zone, real language. Everything's a benefit there as well as manufactured. China moves quickly, as we know, and the market kind of moves quickly in terms of that. But we are there locally and we want to continue to grow because this is a massive market opportunity here. Like I said, most of it's wires and brackets. So the more that we can keep that attitude that we have there, we think the better it'll be.
That makes sense. And obviously, the hot button topic on China is sort of the new administration and the potential tariff situation in China and in Mexico. I know we talked about this when we met up on Monday, but if you wouldn't mind talking about sort of how do you think about the challenge there? I know there's no formal policy in place, so it's a little bit hypothetical, but sort of how do you think of you yourselves as positioned to kind of adapt to that?
I think when you look at our company overall compared to what we were talking about tariffs five or six years ago, we're a pretty different company. Now we've gone to manufacturing in China. We're in China kind of on a local basis. More recently, we have now manufacturing in Poland. It really wasn't designed to offset tariffs or anything else. It was really designed to we want to be closer to our customers.
Because you were shipping from Mexico.
Yeah, everything was coming out of Mexico and really treatment planning was all coming out of Costa Rica. We wanted to expand out and globalize, get closer to our customers, reduce cycle time, reduce freight costs, all those other good things. Plus, you also want, as we've gone through COVID and so on, a plant gets shut down. That's the last thing we want in one location. So this helped us diversify and get closer to our customers as well as minimize some of that risk. So as a result, in China, everything's in China and it really doesn't nothing comes back to the U.S. So we're in China as a local company there. So I don't think there's any tariff impact of importing things. I think on the Mexico side, remember we have manufacturing and large manufacturing in Mexico where then we ship up into the U.S.
We also are building up capacity in Poland, and if there was a significant enough tariff that would impact where we would say that we need to shift some of that production out of Mexico to, say, Poland and then ship from Poland back to the U.S. There's ways you can do that. It just would have to make sense from a freight standpoint because you would add some freight and some cycle time, but if we needed to, we would then maybe bulk ship from Poland to El Paso, where much of our product comes into, and then it would just get distributed throughout the U.S., so we've got some flexibility. I know you've done some higher-level math in terms of our COGS and so on.
That's not all manufacturing costs because we have obviously part of our manufacturing costs is treatment planning, which wouldn't be affected by this freight, which wouldn't be affected by this. So when you start to look at this, look, we're not going to create a policy or change things based on a tweet that comes up here or there because not only do you have these logistics, you have thousands of people working in places and kind of having to deal with that. But I think that the takeaway is we're a different company in terms of our global footprint than we were five or six years ago. And we have a lot of flexibility to be able to manage to whatever happens. And in the end, we want to provide the best products to our customers. That's the key.
So that wherever it's being manufactured from, it's the same exact product, the material, the process that's used, the equipment, the people, everything is the same exact. And we've gone through painstaking efforts to make sure of that. How we have to kind of where we have to manufacture it is just something that we'll have to deal with.
There's no regulatory hurdle to produce it.
We'll be able to pass that as well, so that's one where I think the biggest would be, okay, how much capacity can you bring up in Poland to be able because the U.S. is obviously a big market, 40% or so, 40%+ of our business, so that would be a part of it. But like I said, I think there'll be some discussions that'll go on with this, but in terms of what we want to do as a company, we have much more flexibility than we had years ago.
Yep. No, that makes sense. Talking about the overall sort of macro environment, maybe on the consumer side for the clear aligners, how are you guys adapting your marketing efforts and sort of messages given to the consumer and to the providers in the current environment?
I think obviously we're the brand in this business. Invisalign is synonymous for clear aligner and we recognize that. So there's a certain amount of marketing spend that we'll keep to let people remember that we're the number one brand and what this company is and what we can provide. But I think you'll see us getting a little bit closer to the customer in what I would call more active marketing. We want to be able to help consumers or potential patients understand differences between us and maybe the traditional wires and brackets that would be done or maybe us and other companies. Also being able to provide things where it's more of a public service announcement. So many parents might not know to bring your six or seven-year-old to the orthodontist to see if they have proper space. So maybe it affects you. So you should check that.
But I think being able to provide information to parents, being able to provide information to adults about differences and why we have because if we're letting parents know that they should bring their kids in, you can also let them know that we have products like the Invisalign Palatal Expander, which replaces a metal device that's been used where that'll expand your upper palate. And many more doctors are using that as we've introduced that this year. Or there's Invisalign First, which is really one of our best-selling products that we have that's really designed to expand out the arch for children that are six, seven, eight years old who have kind of the arch that needs to be expanded. So letting parents know this, working with our doctors.
So I think you'll see always there's a certain amount of brand that you advertise just to let people know or remind people about our company. But I think you'll see us doing a little bit more targeted, a little bit more active to be able to help explain the differentiation, to be able to explain things like a public service announcement. And then even further down to the actual customer itself where you have a customer who wants to be able to help drive traffic to their practice. We want to be a part of that. We want to be able to use our brand, use whatever local advertising that we have to be able to get qualified potential patients into their door, maintain that activity there so that that doctor has an opportunity to convert that patient.
Okay. And what kind of we think of obviously the kids and teen market as obviously being quite larger than the overall adult market in terms of the opportunity. If we start sort of how do you sort of think about that increased messaging and that sort of TAM expansion possibility from that focus on Invisalign First and the palate expander?
Yeah, you're right. Because of the 22 million orthodontic case starts every year, 75% of them are teens. And you want to be able to get at those potential patients because every year there's going to be a certain amount of teens or pre-teens that get to a certain age where they need some type of treatment. So I think it's educating parents, making sure they're aware to be able to bring their child in for at least a checkup to see if this is something, being able to go reach those children or teens through influencers and others and being able to let them know that there's alternatives. But in the end, the doctor's going to make that decision. An orthodontist or general dentist is going to make a decision to what is needed for that child.
But we want to be able to make sure people are educated in terms of the alternatives. And if we can do more to be able to bring additional patients into those doctors' offices so that they have that demand, they have that volume that's coming through because that's going to really incentivize those doctors to digitize. We started the conversation to talk about iTero and why it's important. That is the front end of the digital ecosystem that we want. We want to be able to move this industry from analog, which is wires and brackets and traditional, to digital orthodontics. That's something that we provide. If we can bring additional patients or more traffic to those doctors' offices, we think the only way for those general dentists or even orthodontists to be able to treat that volume of patients is through digital orthodontics.
We know it drives productivity by having the products that we offer, and if we can bring additional patients with those doctors, we know it's going to lead to more profitability.
Yep. No, that makes sense. When we thought through sort of prior cycles, whether sort of around COVID or whatnot, you've always talked about sort of there's a six- to nine-month lead-in time for a new salesperson in terms of them reaching their sort of productivity levels. How do we think about how you're sort of balancing the investment in sales force and sort of the expansion and that broader TAM that exists with sort of the current macro environment and the profitability over the next year or so?
Our sales team is very, very important to us. We have a very large sales force because in the end, last quarter, we sold to 87,000 doctors. These are small businesses where in order for that doctor to try to learn about new products or even want to demo an iTero or really start to use our products, you need a sales force or you need a person that's right there to be able to help them train, help them to develop. Like you said, a sales force needs six months or so to kind of burn in and really start to understand what they're selling, how they're selling and so on. But it's a critical part of our business. And that's why as we've grown over the years, we started with more of a distributed sales force. You got distribution and so on.
And we've gone through really the globe and moved from distribution to direct sales force. And we think that helps increase our volume. It helps that connection with that salesperson to that doctor to help them learn about what we can provide. They start to work through from the easier cases to the more complicated cases. And that sales force is critical for that. So it's a huge important part of our business. When we made changes to our business, we did some restructuring just recently. Direct line salespeople, that's not a change we want to make. That's a critical part of our business. And we want to continue that focus.
Okay. No, that makes sense. One of the newer areas you've been focusing on in terms of innovation is the DSP program, right, that's come out over the last couple of years. If we think about the uptake in North America versus Europe, how do we think about sort of the differences within the markets? I know you've talked about sort of different use cases almost. So how should we think about that? Technical difficulty here. There we go.
The Doctor Subscription Program, DSP that you were talking about, it's a very important program for us. We started it in North America a few years ago, and what that is, is many of our high-volume doctors, really the genesis of that was high-volume doctors that we had. They were doing all these complicated cases, mostly on the ortho side, but we noticed they weren't really giving us their retention business or maybe even some of these touch-up cases that they might need five or six sets of aligners, so the focus then was to say, well, look, can we go to these doctors, provide them with an alternative of maybe if they commit to a certain amount of aligners that they're going to use or aligners that they're going to use, then they would use these more for some of the touch-up cases as well as retainers.
And so what has happened with that? We started in North America. All the complicated cases that those orthos were doing, they continued to do. But what those orthos shifted over, instead of making them themselves or going to a lab, they started using this program for. So they started using the aligners that we would provide them and to be able to provide in some cases, touch-up cases where maybe someone did wear their retainers over the years and they need five sets or six sets or whatever to be able to help move those teeth to the proper position. So we're seeing more and more what we call touch-up cases. Last quarter, I think it was up 30% on a year-over-year basis. Tremendous growth there. It started in North America. We've rolled it out to Europe. And the adoption is the same.
More and more doctors use it because they like that flexibility. We kind of use the Doctor Subscription Program motto is sell the way the customers want to buy. They're used to buying kind of like from a lab and kind of working that type of the business. So we're providing that to them. So majority of what we sell related to this is retention. That's fine. That's business we didn't have. And then there's some occasional touch-up cases that they were going to a lab or making them themselves or using wires and brackets. Now they've switched over to us. So the rollout continues in Europe, and it will happen as well in APAC. And I would expect that this will continue to be a very good business for us.
But it's just another alternative to be able to use our product in a way that they want and they have flexibility to it. And it's also unique for Align because we have, going back to the manufacturing and being closer to the customer, it really relies on being able to manufacture kind of in the region for that customer and really be able to give them, in this case, those aligners when they need them. It can't be something that's going to take weeks to be able to get to them. Sometimes we're able to turn, whether it's a retainer or other aligners around in days. And that's really critical as well.
Yep. No, that makes sense. We've talked about bits of the teen market. I think we've discussed some of the Invisalign First and palate expander portion. Sort of if we think about the teen market and the opportunity there versus some of the recent growth rates, which have been accelerating in recent quarters, which has been nice to see, how do we think about sort of what's holding back that teen market from really sort of getting to more of a tipping point in terms of treatments? And sort of what are the levers that you can pull to help accelerate that?
Well, you're right. Our teen market and the teen business is critical for us at the company. It really starts with products, having the right products to be able to have the breadth of products that a doctor can provide the care that he or she needs. So the most recent with the Invisalign Palatal Expander, where if a child has crowding in the upper palate and it needs to be expanded, traditionally a metal device is used. We have a direct 3D printed product that kind of snaps to the upper part of the palate and slowly moves that upper palate over a number of days for that child. Having products like Invisalign First to be able to expand the arch. We've got now a portfolio of products where many doctors, 100% of the teen cases that they do can be done with Invisalign, which is great.
But what we have to do is make sure that parents are comfortable with using a removable device, educating parents to let them know that using Invisalign as a removable device, your child will wear their, especially a younger age, the younger and younger that they are, that child will wear. So the compliance is already there, and that should be a factor that we have. But it's really making sure that the parents are educated, the teens know that there's options. We have a product portfolio that we have. Now it's up to us to be able to help drive that conversion with the doctor because the doctor ultimately has the biggest influence on that decision. So if the doctor has two reasons why a doctor might not put Invisalign for a teen, one would be clinical confidence. Do they understand these products?
Are they able to use those into their business and so on? So that's the sales team. That's the direct interaction that we need with those doctors using some of the digital technology that we have with iTero and so on. Can they use our products and feel comfortable from a confidence standpoint to be able to use Invisalign? That's step one. And then step two is the business model. Doctors need to understand that productivity that the digital orthodontics bring gives them flexibility to how they want to run their practice. And if they use that productivity to ultimately have more patients come through their practice, they'll increase their profitability.
So you see this a lot with some of the DSOs where they understand that the productivity that we can give to those doctors in their offices can lead to additional profitability by having more patients come through where you don't need to add staff and extra resources to be able to provide. So teen is the final frontier of where we need to continue that adoption. You're right. It is growing the fastest. We see that grow faster than adults because of the opportunity that we have.
But we have to stay focused on the products that we have, making sure that the digital technology is understood and worked well within the doctors, and then also making sure they understand the business equation there because once we get a teen or even a preteen, if they use the Invisalign Palatal Expander as a six-year-old or seven-year-old, well, when their permanent dentition comes in as an 11-year-old or 12-year-old, they're going to use Invisalign. And we know that that's what's going to happen. So we have to stay focused to try to make that the reality.
Yep. No, that makes sense. One thing we haven't really touched on yet is sort of the direct fab. I mean, you've talked about that as sort of being an opportunity over the next few years. Can you remind us what portion of clear aligner COGS is sort of that raw materials and sort of what the potential uplift is once that happens? I understand that you're still working on it.
Yeah. No, direct fabrication is really the next frontier that we've been leading. Because remember, when we manufacture, traditional manufacturing that really all companies use is you make a negative, you make the mold, and then you vacuum form the plastic on and then laser cut so that you have the right aligner. And then that mold that you make is about 85%-90% of the plastic that you're using. And once you've made that mold and you vacuum form the plastic that you're going to use, in our case, SmartTrack, that mold is not used in the final product.
And so, to be able to have that from a productivity standpoint, to be able to not have all that plastic, plus there's some labor savings as we scale and so on, we will find that we'll have a huge benefit from a material standpoint where you save a lot of cost regarding that. In addition, that direct fabrication, now that you're not making that negative and you can just make whatever you need from that aligner standpoint, you can have a lot of flexibility from a design standpoint. You can be able to make things thicker in certain areas or open if there's maybe mixed dentition or do things where that doctor will have the ultimate flexibility. So when we look at the direct fabrication, it's really on two fronts.
One, it gives us and doctors the design flexibility to make aligners or retainers done in a way that you can't do right now, or it would be very labor-intensive to do, like having multiple thicknesses or open spaces or buttons on things or other things that maybe some doctors would want. So it's going to be that premium product in the marketplace as well. But we want to be able to have a premium product that is at a lower cost. So as we scale this, as you scale this business and what you have, on the product itself, you will run into some cost headwinds just because you need to be able to scale this unique resin as well as a unique manufacturing process that we have. But as you scale, you'll get the parity.
And as you further scale, you'll get to extra cost reduction for the material that I was saying. So it's very important for us. We've invested time and money into this process, developed a brand new resin that wasn't available in the past, and now it's something we have. And then we worked with a company called Cubicure for a number of years and then ended up buying the company this year because they're a company with the actual manufacturing of these printers that can match up with the resin that we have. And that combination provides the unique benefits that I spoke about.
Got it. No, that makes sense. And you've obviously talked about your Invisalign First retainer is going to be the next sort of 3D printed launch. That launch is expected in 2025. Is that?
Middle of 2025. You'll start to see, and that's a new product for us. So this is a unique retainer, essentially, that if they use Invisalign First or maybe the Invisalign Palatal Expander, you need to hold the child's mouth so that things don't relapse to what they were. So it's a certain type of direct fabricated retainers that will start to fit that. And then as you start to scale this up, you'll have other retainers. You'll have maybe difficult products for us to make. We'll be on this process. So if you have certain geometries that are unique, or we have a product called Mandibular Advancement with occlusal blocks, which is we have to do a manual process to kind of put those blocks on. We can't directly fabricate those.
For what I had said earlier about when you vacuum form on top, you limit your degrees of flexibility. So we want to take the more complicated products on that side and then directly fabricate them. So you'll see us start to scale up as we go through this year, and it'll further scale as you get into 2026.
Okay. Well, we're excited about the future opportunities there. If we think about that sort of balancing that investment need over the short term to get there versus the opportunity, how do you think that that plays out on the gross margins over the next few years?
So obviously, our focus is to be as productive and drive as much profitability as we can. So when we think about the direct fabrication, we know that there's a path in terms of the material savings that's dependent on having more and more throughput. So we know that that's something that just depended on the volume coming through. The traditional manufacturing, that will be something that will stay with us for a while. We're continuing to take costs out. We want to continue to improve. One of the big efforts that we have is around treatment planning. We have a certain amount of thousands of people who are technicians who are really helping the doctor design a treatment plan.
Over the years, especially with some of the protocols that doctors give us as well as our own AI, we've been able to now, in some cases, be able to take a scan that comes in and in five minutes put a clinical treatment plan back to that doctor based on their protocols. In many cases, or more and more cases, that doctor doesn't have to do anything to that treatment. It's what we would call touchless. Or if they do, it's maybe minor 2D, 3D adjustments to be able to finish to what they want. Then it goes back and it can quickly go into manufacturing. In those cases, from a productivity standpoint, we had hundreds, thousands of people working on those treatment plans. Now we don't need that anymore.
Every month, there's more and more treatments that are going through or cases that are going through where we don't have to touch. And that saves us, that saves the doctor, and it gives us flexibility. So we've got material savings that we continue to work, treatment planning savings that we continue to work. We know that we want to be able to maintain and grow our gross margins as we can across our products that we have. So there's a lot of investments that we are making to be able to help with that and ultimately be able to offset any pressure that we would have on the direct manufacturing side.
Okay. No, that makes sense. The last couple of minutes, what do you think at this point is the point that you feel like investors least well understand about Align?
I think one of them is probably the biggest one. You remember the market, as I was talking about for teens, 75% of it's teens, 25% adults, the traditional orthodontic market. We, as a company, about 75% of our business is adult and 30% is teen. The opportunity is on teen. And so all the things that I was talking about, we need to better grow into that teen market. But I think people don't necessarily realize that or kind of put together that as an adult, young adult or middle-aged person who wants to get some work done on their teeth and straighten them, that it's a $5,000-$8,000 purchase.
And people have to remember that in this economy, when you see some of the inflation or high interest rates, because remember I talked about 1/3, 1/3, 1/3, that third, that last group of people who have to finance something, they look at a purchase like this. And ultimately, it's discretionary. And they have to make a decision on whether they want to go into treatment or not. And if they can't afford to pay upfront, they have to do some type of financing. So I think people don't necessarily recognize or feel that there is a consumer confidence part to our business. People have to feel good about their finances. And if they do, then they'll most likely go into treatment.
And is there, as we've seen that consumer confidence turn in prior cycles? I mean, I'm sure there's some group of people who get a windfall of money or a raise or something like that and go straight to get some dental treatment of some kind. But do we typically see kind of a lag and they have to say, like, okay, I've now embedded this in or I've now done that? Because I think of it as like, is that part of it? And then the dentists have to see that or the orthodontists have to see that volume. How does that?
There's some lag t o that p eople need to see. You want to see those consumers feel comfortable that they can afford a treatment. And you see that as you see that more and more, then it leads to volume. You just go back to there's different reasons why it happened, but go back to the Great Recession, 2008, 2009, 2010. Those years that we had, the consumer confidence had fallen. Just use the Michigan study as an example. If you looked at that, Michigan had fallen and our volume was impacted as Michigan started to improve, our volume came up. And it's just, I know we're a different company than we were back then, but the logic still holds. People need to feel comfortable about what they're purchasing.
That doesn't say that we're not going to stop doing everything we can to try to drive conversion, whether it's products or educating doctors or educating consumers with marketing and so on. We'll do everything we can. But the benefit that we see is consumers need to feel like they can afford a product like ours and to be able to use. And once that happens, we see that turn. And we're positioning our company to be able to have that. And that's why when we look at some of the opportunities that we have, maybe in Western Europe and North America, it's been more muted because of what we just described. But we do see some countries starting to come back and seeing some of those green shoots. And we know that's based on the consumer sentiment that they have.
Makes sense. Well, unfortunately, we are out of time. Thank you so much, John, and thank you so much, everyone, for joining us today.