Thanks for joining us. My name is Mike Ryskin. I'm on the Bank of America Life Science Tools and Diagnostics team. For next session, I'm excited to host Align Technology. We're joined by Frank Quinn, EVP and Managing Director of the Americas Region. We also have Shirley Stacy from Investor Relations on board. Frank, Shirley, thanks for being here.
Thanks for having us.
Maybe just to kick things off, sort of high-level, intro question. You reported one key result recently, better than expected, steady result to start the year. If you could talk about sort of the key moving pieces of the quarter, how that played out relative to expectations, and how things played out.
Yeah, I think the breadth of it was great because both ortho, GP, growth, and regionally as well. Then you look at both teen and adult growth. It was a good combination of things that drove good quarterly Q1 results.
Yeah, broad-based in terms of international as well, right? So across all the regions.
OK. And then the other major update was you had your analyst day last week, I think a week ago today. First analyst day in a number of years, provided a lot of updates. Maybe you could just talk about what you thought were the key takeaways from that and what the reception has been.
Yeah, no, it was good, actually. I mean, we try to do investor activities every year, so usually at one of our orthodontic or GP summits. This is the first time I think we've been back in New York for a while. It was good. It was a pretty broad-based update across coming off of earnings that allowed us to talk about innovation across the board, whether you're talking about our digital scanning and software or 3D printing. It allowed us to bring in the technology teams and talk about, think about the front end of the system, our scanning technology with Illumina Launch, and now both ortho and restorative software on that platform, which is, we think, really critical to kind of digitizing the orthodontic practice.
In terms of software and treatment planning, we spent a fair amount of time talking about both clinical opportunity from an orthodontic and from a GP perspective and what those customers are looking for in terms of solutions. A lot of innovation focused on our treatment planning and the tools that we're bringing to market in ClinCheck Signature, which is very kind of personalized treatment planning, the ability through Invisalign personalized plans and Flex
Rx and other aspects of allowing the doctors to have more control, if you will, but a lot of automation leveraging AI and machine learning and our very large database of patient data. From a kind of global perspective around how those tools are coming to market through the channels you heard from each one of the regional leaders, including Frank, talked about a lot of the go-to-market opportunities and the growth programs.
Finally, of course, from an operations and manufacturing perspective, how we're continuing to really drive global operations and manufacturing for our existing 3D printing, which is an indirect process today, right? We produce a million aligners every single day around the world. How we're, through the acquisition of Cubicure, and we showed, actually, I think, some really great video of the innovation around how we're looking at 3D printing direct fabrication of appliances and going to market to scale that. Both processes continuing for some time. Of course, John and Joe kind of brought it all together in terms of what that looks like from a midterm to a longer-term look at our model. Happy to dive in anywhere you like.
Yeah, of course. A lot there. I want to dive into all those points. Maybe I'll pick up on the last point you just made, Shirley, the new LRP, the new growth profile. First update you've given, first change you made to the LRP in a number of years. Now it's sort of 2025 guide is what it is. You're talking about 2026-2028 being in that 5%-15% range and then 15% plus in 2029 and beyond. Can you talk us through, at a high level, what underpins that? And then especially if you compare that to what's been going on in the market over the last three to five years. Where is the acceleration coming from? What are the various factors driving that?
I think Shirley hit it before, too. It's the innovations that have come into the market. I think we showed a roadmap of what's coming next. The way I would look at the way Joe framed it, even, in the three decades of this company, right? Starting it in the first 10 years, figuring out how to move teeth with plastic, identifying, needing a new polymer and approach, and scaling manufacturing treatment planning. Now you're into this touchless place that we're moving into from a digital orthodontics perspective. The underpinnings in there are the innovations, right? We've expanded our capabilities for, let's say, growing kids and teen, right? The launch of the Invisalign Palatal Expander, which is a custom-made appliance, removable, has an option to replace those fixed appliances that have been used for probably centuries. It gets us into that six to seven-year-old category.
We've had first for quite some time for mixed dentition and growing kids, can do dental expansion. MAOB, which is the occlusal block, which is a common thing used for class two, which is roughly 35%-40% of malocclusion in teenagers. Those teenagers represent 75% of the starts in the Americas, right? Roughly 8 million orthodontic starts per year, 70%-75% of them are teen, and 40% of those teenagers show up with a class two malocclusion. Having something for the doctors to use for that is really critical. Obviously, the things that are coming with direct fab are we're piloting right now are 3D Vivara, which is for growing kids, fully customizable appliance.
The advent of what we're working through on scaling the direct fab and having both the indirect and direct fab as options as we go to the market and putting the ultimate level of control in the customer's hands and their decision-making on the best ways they can treat their patients. I think those, obviously, Illumina is a big part of this. There are other enablers that are in there as well, like virtual care, creating a high level of efficiency at the practice so you can do a 12-18 month treatment plan and have minimal visits to the practice because you're tracking as they're changing their aligners as they go. It is just that seamlessness across all the innovations and getting implementation done correctly at the practice level.
Yeah, and then hopefully what came through also is the product and the innovation is really critical, but also it is about expansion into emerging markets, existing and emerging markets. Those products and technologies that Frank is talking about are important for us to expand. In every demographic, in every geography, you need a portfolio, a pretty broad portfolio of products for kids and teens and adults in different price points. Hopefully that came through.
OK, yep. I want to follow up on a lot of that innovation, but first just on the LRP, the other question we had, or that came up, was the range for the next couple of years, the 5%-15%. I think there were some questions on how much does macro matter or not matter for that. Could you just talk about sort of what your expectation is or what the underlying assumption is for just the broader market?
Yeah, the underlying market, yeah. Hopefully, when John showed that one slide that shows kind of the current 2025 and then what you call maybe a nearer term, 2026-2028, and then 2029 and beyond, I think he was pretty clear that we're focused on what we can do to drive adoption and utilization globally with or without the market, meaning we're not assuming any change from this point, right? What we have is what we get. Hopefully, I think folks have seen, at least more recently, the resilience of the business to really kind of drive execution and adoption.
I think 2029 and beyond, if you looked at the way he was talking about how you build up the kind of the growth drivers, that is assuming at some point post-2029, there starts to be some impact from the underlying market, but that's not the expectation in the near term.
OK, OK. Maybe let's dig into some of that innovation. Things like maybe let's start with occlusal blocks and the void advancement. Frank, maybe if we think about what that could do to teen growth and what that could do for teen market expansion, especially if you look at something like the Americas and like the U.S., which is a little bit more of an advanced market or just sort of further along in aligner penetration, do you think that's something that could sort of unlock the next level of growth in those markets? Is that something that's been holding back growth?
Yeah, I mean, we're very early, right? We just launched. Ideally, we're innovating to address a need in the market. Primarily, it's driven by doctor feedback, right? It always comes back saying, if you could, would you add this? Can you do that? Building the occlusal block, which is very unique because it's a solid format as opposed to the hollow ones that sometimes are used in other clear aligners that crush because your jaw is very strong. Having something solid, we believe it addresses a need in the market, and it's really based on customer feedback. Still early, but we're feeling very positive about the launch.
I think the initial feedback, and it's been in pilot for a fair amount of time. The customer feedback has been really, really good.
Yeah. And then similarly on Illumina and the restorative versus ortho workflows, what's been the feedback over the last couple of months as you've expanded that?
It's been really good. It comes from interesting places, too, right? What you see primarily, doctors are excited about it, right? The speed, the size of the wand, the field of view, the accuracy of the image, all of the restorative workflows opened up. When you hear from labs that come back and ask, where did this image come from? This is amazing. That's pretty telling to me. The labs that work with not only analog type of things that come from practices like impressions and pours, but they see a ton of scan data. We are really getting some great positive feedback from the labs as well. Highly complex click cases, all-on-four type stuff, implants with high level of accuracy, great color. We are really getting great feedback there.
We've always thought about it's not a true razor-razor blade model between the iTero and the aligner, but it is sort of symbiotic or synergistic in that sense where it should drive increased adoption and utilization over time. Do you think Illumina, again, continues that trajectory and takes that to the next level?
Yeah. You think about what happens in a GP practice, right? That's a very hygiene-driven practice. You come in every six months. Your insurance has to get your cleaning. Ideally, they're doing oral health scans. A lot of the doctors in the GP space are using the scanner as another diagnostic tool beyond X-rays. As you're scanning patients, whether it's every six months or once a year, you're keeping a very close eye through the Align Oral Health Suite on your permanent dentition and your teeth, your soft tissue, occlusion, how are you biting? If you're hitting too hard, you're inevitably going to have oral health issues. Really getting that runway to scanning often, getting that oral health component in place, all the diagnostics that come with that, also adding in AXI, which is our X-ray inside.
You really have this full package, including CBCT, and then you have this oral health report that the patient leaves with. They may not start Invisalign that day, but they are now very much aware of what is happening in their mouth and how they can address it through orthodontic treatment and fixing their bite and occlusion. Secondarily, the impact will have less removal of permanent dentition, right? I think Joe Hogan shared this. The hardest component in your body is your enamel on your teeth. Save that, protect it as much as possible, get your teeth in the right position, and do minimally invasive restorative. On the ortho side, it's great because I think you probably saw on Investor Day, you've got three years of pressure on starts in the orthodontic space, which has never happened in the history of it being measured.
Maybe a little lower foot traffic in exams, but the primary focus is convert. If you're getting the at-bats, you've got to convert to the highest level. Utilizing the tools that come with Illumina, like Outcome Simulator Pro and the Smile Video, I think we demoed this in the cafe at Investor Day, where you can actually see what your teeth, you're fixing, what your current view is of your mouth and your bite and your teeth. If you just did orthodontics, what it would look like, and then if you did post-orthodontic restorative work, those are the things that are really helping to, and a video with it where you're speaking with what your teeth would look like after. Those are really great conversion tools that the Illumina lends itself to in both channels. I think there's an opportunity there.
OK. I want to touch on direct fab as well. Something you've talked about for some time. You mentioned Cubicure. Could you remind us, like you said, I think it's still in relatively early stages of implementation now, but how should we think about timing of rolling out? Because we know what the end plan is, but just sort of what the roadmap will look like?
Yeah, I think we really want to focus on both our existing indirect kind of processes for SLA and producing a million aligners a day. We really see, and when you think about what Frank just talked about, our ability to do touchless, Joe talked about 20% this year of our cases being touchless, right? Coming through, using our software and our tools to allow that. If you think about the combination of our existing manufacturing process, that is, we think, a pretty competitive differentiator for us. Do not anticipate that that is something that we are moving away from. We will leverage that competitively. The opportunity, though, with direct fab is a really good one, we think, to scale.
There was a couple of slides in our presentations in both Srini's presentation and Emory where they showed examples of the products that we're looking to move to direct fab. The first one Frank just referenced is the retainer that's in pilot right now with Cubicure. Over time, how do we move other appliances that are really optimized for direct fab? Think about MAOB, the occlusal block that Frank just talked about in terms of that design and how that could be optimized for that technology. As we scale, what John talked about is kind of post-2027 is when we start to see some contribution, positive contribution on margins in products.
In terms of the impact of the model, talk about margins, the COGS component is pretty straightforward. Is there a benefit from direct fab to volume growth? I mean, I guess it would be in terms of what you can make with direct fab that maybe you can't do with traditional 3D printing. Like is there.
Yeah, there are some design, there are some new appliances that we haven't really talked about yet that would be optimized for the design freedom you get from direct fabrication. That is certainly an opportunity that as we kind of get through milestones, we certainly want to talk to those. We're probably not going to signal everything just yet, but yeah, I mean, you should anticipate. I mean, one of the beauties, aside from the fact that you get rid of the molds, which we do think is important over time, but really it's the design freedom and it's the capability to bring new innovation, we think, to market in terms of better efficacy and faster treatment times and a whole host of other things, we think.
OK, yeah. And at doctor discretion, too, right? With direct fab, you could have variable thickness on a single aligner on the lower or the upper, however they determine they'd like to treat, which is very difficult to do in a vacuum form, indirect type scenario. It just creates a tremendous amount of opportunity for the doctor to pick and choose how they would like to treat a case with clear aligners.
OK. Just another degree of freedom.
Just customization.
Yeah, customization. Yep. OK. Frank, I want to spend a good amount of time talking about America specifically, given your role there. I mean, maybe at a high level, if we could talk about sort of the United States versus sort of the LATAM, Mexico, Canada markets, just starting with the U.S., what have you seen over the last couple of quarters? How has that market evolved between both ortho and GP, independent of the innovation we talked about? What do you think? What are your thoughts for the rest of the year there?
Yeah, you know, I think what we've said over the last two quarters is that we've seen stability from our perspective. Look, there's obviously a ton of uncertainty going on in the macro market. There may have been new news. I missed today even. Who knows? But we've seen stability, submitter base, utilization. I shared at Investor Day, we've got a really nice mix of bi-channel, GP, and ortho. We see really doctors diving into the new technology and innovations and starting to use it. Getting early adopters that start driving utilization as well. The things that we're really focused on, it may sound simple, but it's really surrounding the customer in every aspect of the journey. We do this through the use of what we call clinical pathways or growth programs.
These programs are uniquely designed by doctor to help them move from what their current state of their business is to the future state. In some of those instances, maybe I want to treat more complex cases, or I'd like to go down into the growing children category and treat that at a younger age in phase one. Then really designing these clinical pathways that are anchored in clinical education. I'd say that's probably the thing I would say I talked about. It's a foundational component in any health care business. You really have to focus on the doctors, and the peer-to-peer and community building is critical, and that is all anchored on education.
We'll do, in the Americas and pretty heavy up in the U.S., over 500 live education events that are, some of them are smaller, 25-50 doctors in treatment planning workshops. Some of it's like buttonology about how do you get the most out of your ClinCheck setups? How do you set up your Flex Rx and your templates? You're getting your ClinCheck back in minutes with live update. You're basically sending it right into manufacturing. Other ones are really like on the GP side called CDI. It's comprehensive dentistry. How do you implement the fully digitized workflow from scanner to design to pre-ortho, pre-restorative ortho, leveraging OrthoCAD connection to labs, all of those things? How do you actually implement a fully digitized practice? We also do the same thing on the ortho universe, too.
Anywhere from 200 to 300 doctors attending, maybe larger regional events. We have seen great attendance, really great engagement, and doctors wanting and willing to learn more and apply it. That is where our focus is in the U.S.
OK. From a competitive landscape perspective, again, kind of let's stick with the U.S. for now. You've seen some changes here, too, over the last couple of quarters, last couple of years, some exits, especially. Is that an opportunity to pick up some incremental share? Sort of how have you seen that part of the market evolve?
Yeah, I mean, there may be some dormant opportunity out there, if you will, because if you're talking about the exits of DTC, and I think the beauty in that is our portfolio has such breadth to it. So DSP is a great example. It's our subscription plan, and it includes both retention and what we call touch-up, so up to 14-stage cases. So a lot of those folks that are out there that may have been attracted by the DTC can be certainly treated doctor-directed in the practice with products like that. It's minimal tooth movement. Somebody who has occlusion and a bite they want to fix is a much more comprehensive case. If they want to straighten their social six, you don't need a comprehensive case to do that. Yeah, I think there's opportunity, and the portfolio is designed to address all of those things.
OK. Any questions from the audience? Want us to jump in? All right, we'll keep going. I wanted to ask about other parts of the Americas, if you want to talk about LATAM, what's happening outside the United States.
Sure. Canada is quite similar to the U.S., some nuance there as well. It's more of a GP-driven business model up there. You have a lot of GP orthos, is what we call them. They're fairly deep in the curve with treating orthodontic at a GP level, great ortho community there. A lot of similarities there. In Latin America, you have some unique, it's a unique environment. I was joking before that that culture, they'll buy a T-shirt and pay it on equal payments over 12 months for a T-shirt. You have to approach the market with affordability options as well so that patients can get started. There is a fair amount of orthos and general dentists in Latin America.
What's unique there is that there's a lot of multidisciplinary type practices where it may be a GP-owned and led practice, but the specialties are working within the practice. It could have an ortho, perio, oral surgeon, whatever the case may be. We have reoriented the way we go to market and approach to ensure that we're capturing the multidisciplinary option as well. Illumina has been great for that, too, because that scanner can be used in any one of those specialties or disciplines. Not to beat a dead horse here, but education is key. It's critical in those markets.
Can you talk about sort of if you think about Brazil, other parts of LATAM , which of those markets are most exciting to you from a growth opportunity and sort of accretive to total company growth?
Yeah, I think Brazil is a great market, great population, highly aesthetic market as well. Even when you look at our consumer work down there, it's different than what you would see in North America. It's got some aesthetics to it, improve yourself type scenarios, right? Be your best self type things, which it works in Brazil. Obviously, tremendous opportunity. We've been in business down there for quite some time, and our leader down there does a great job. Mexico, unique opportunity as well. We're in CALA also. Each market is unique from each other. Really making sure that we're closest to the customer, identifying any of the problems to solve that they have for conversion. We're highly focused on those markets, and they're each really good opportunities for us.
Still far behind the U.S. in terms of sort of where you are in the evolution of that market, adoption and technology.
Yeah, yeah. How long have we been open down there?
They're actually for many years, right? About seven years.
More of an emerging market from that perspective, but still a good contributor to the business.
Yeah. And a strong submitter base, too, primarily ortho in CALA. Those practices are different. Those are much smaller practices, almost like EMEA, Europe actually. You may have an ortho in a practice that does 100 starts a year, which is very common in Brazil, let's say, where average in the U.S. or North America could be 275-300. It is just a different practice design. There are a lot more orthos down there, too. Yeah, I think they are contributing. There is a growth opportunity there for sure. I think the team is highly focused on working with the right customers at the right time. Same thing enrolling in education pathways.
OK. All right. We've got a couple of minutes left. I want to hit a couple of items, kind of rapid fire. One was tariffs. There was a lot of concern on this topic earlier in the year, given the Mexico manufacturing base. I think what you commented on the Q1 call was that USMCA protects you from a lot of that. Really the only tariff impact is iTero coming out of Israel and very manageable on a cost basis in terms of total company. Is there any risk of that changing? Is there anything in Europe that you see on the horizon where that could reverse, where Mexico tariffs could again come into play? Do you feel like that's pretty safe?
Not that we're aware of. I mean, if things were to change from a tariff situation, certainly, I mean, things can change. Right now, based on everything we know, no. I mean, that's the exposure we've got is about $1 million a month for iTero coming in from Israel. We're in China for China, right? We have treatment planning in China. We have manufacturing in China. Any kind of marginal cost associated with some things from a supply perspective that we might import, we think we can manage.
Between Mexico and Poland and China, like you said, you're developing more of an in-region, for-region. That was the direction you were moving in anyway, long before tariffs were on the horizon.
Yeah, exactly. We've been in Poland, and we've been in China for a long time.
Yeah. OK. So no change from that perspective. OK. There's no questions in the audience. I'll go to my customer closing questions. Sort of what's most misunderstood or underappreciated about Align?
Yeah. I would say, and I actually had the benefit of leaving for two and a half years and got to hear from customers, not as an Align person, which was always surprising to me. We are all for the doctor, right? All of our 20 million cases were because the doctor trusted Align and Invisalign to get the outcomes and treat their patient. Yeah, we are really excited about driving consumer awareness and brand awareness and demand into the practices. It really is about the doctor, everything. All the things that we design and do, that's feedback from the doctor on ways to improve, how to be easier to do business with, all of those things.
I would say it's probably my own personal insight from having been out in the wild for two and a half years and hearing from customers like, why didn't you tell me this when I was here the first time? It really is framing that the doctor is the hero. If the doctor trusts us and feels confident in using our appliance and our workflow, that's exactly what we're focused on doing.
OK. I remember that was a little bit of a point of contention years ago when sort of the move between ortho and GP and some of the consumer work. It seems like it's been a focal point of Joe's to address that over the years.
Absolutely.
Messages resonating.
Yeah. When you think about it, the GP referral is still really important for the ortho. The greatest thing about having digital and Invisalign with iTero is the ability to collaborate. Like I said, in the practice, the hygienist is scanning every patient. You're identifying a lot of opportunity for treatment for the ortho as well. That is the way the motion is supposed to work. We make that as clear as possible.
OK. Great. On that note, that's all the time we have for today. Thanks so much, Frank.
Thank you.
Appreciate it. Thank you.
Thanks, everyone.
Thank you.
Thank you.
Thank you.
Appreciate it.
Of course.
Did a double take there. Sorry. How are you?
I'm good. I'm good. Try to balance everything. I think that was.
Yeah, I appreciate that very much. I think it was good.
Thank you.
Awesome.
We'll catch up with you later.
Yes.
Let me know if there's any follow-up.
Yeah, same to you. If there's anything else from your other section.
If I don't see you before we head out, we'll see you next time.