Q1 2024 Align Technology Inc Earnings Call

April 24, 2024

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Speaker Change: Greetings welcome to the Alliance first quarter 2024 earnings call at this time, all participants are in a listen only mode.

Operator: Greetings. Welcome to the Align first quarter 2024 earnings call. At this time, all participants are in a listen only mode.

Operator: 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.

Speaker Change: 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.

Speaker Change: 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 call is Joe Hogan, President and CEO and John Morici CFO, We issued first quarter 2024 financial results today via business wire, which is available on our website at Investor data line check Dot Com Today's conference call is being.

Shirley Stacy: 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 call is Joe Hogan, President and CEO, and John Morici, CFO. We issued our first quarter 2024 financial results today via Business Wire, which is available on our website at investor.aligntech.com. Today's conference call is being 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 and product outlook.

Speaker Change: 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 aligns future events and product outlook. These forward looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the securities and <unk>.

Shirley Stacy: These forward-looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission, available on our website at sec.gov. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statements. We've posted historical financial statements with corresponding reconciliations, including our gap to non-gap reconciliation, if applicable, and our first quarter 2024 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 Technologies President and CEO Joe Hogan. Joe.

Change Commission available on our website at SEC Gov.

Speaker Change: Actual results may vary significantly and align expressly assumes no obligation to update any forward looking statement.

Speaker Change: We have posted historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable and our first quarter 2024 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.

Joseph Hogan: Thanks, Shirley. Good afternoon, and thanks for joining us on our call today. I'll provide an overview of our first quarter results and discuss a few highlights from our two operating segments, System Services and Clear Liners. John will provide more detail on our Q1 financial performance and comment on our views for the second quarter of 2024 in total. Following that, I'll come back and summarize a few key points and open the call to questions.

Joseph Hogan: Thanks, Shirley good afternoon, and thanks for joining us on our call today I'll provide an overview of our first quarter results and discuss a few highlights from our two operating segments system services and clear liners, John will provide more detail on our Q1 financial performance and comment on our views for the second quarter in 2024 in total following that I'll come back and summarize.

Joseph Hogan: A few key points and open the call to questions I am pleased to report better than expected revenue and earnings for the first quarter and a solid start to the year for Q1 total worldwide revenues were up five 8% year over year, reflecting three 5% growth from our clear Aligner segment, 75% growth from systems and services on a year.

Joseph Hogan: I'm pleased to report better-than-expected revenue and earnings for the first quarter and a solid start to the year. For Q1, total worldwide revenues were up 5.8% year-over-year, reflecting 3.5% growth from our clear aligners segment and 17.5% growth from systems and services. On a year-over-year basis, Q1 revenue growth was up across all regions and was driven by strong clear aligner volumes, primarily in the Asia-Pacific region. Year-over-year growth also reflects strength in the orthodontic channel, with total Invisalign case starts from teens and younger patients up 5.8% year-over-year, driven by continued momentum across all regions from Invisalign First as well as Invisalign DSP TouchUp.

Joseph Hogan: Over year basis, Q1 revenue growth was up across all regions and was driven by a strong clear aligner volumes, primarily in the Asia Pacific region year over year growth also reflects strength in the orthodontic channel with total Invisalign case starts from teens and younger patients up five 8% year over year, driven by continued momentum across all regions.

Joseph Hogan: From Invisalign first as well as Invisalign DSP touch up cases.

Joseph Hogan: On a sequential basis, Q1 total revenues were up 4.3%, reflecting a sequential increase in the clear line of revenue, Specialty for North American Orthodontists, as well as strong systems and services revenues primarily driven by Terra Lumina wand upgrades in North America. During the quarter, we achieved several significant milestones. We completed the acquisition of Cubicure, a leader in direct 3D printing solutions, which is the foundation for our next generation of liner manufacturing.

Joseph Hogan: On a sequential basis Q1 total revenues were up four 3%, reflecting a sequential increase in clear aligner revenues, especially for North American orthodontist as well as strong systems and services revenues, primarily driven by a tear illumina wind upgrades in North America during the quarter, we achieved several significant milestones we completed the acquisition of <unk>.

Joseph Hogan: You're a leader in direct three D printing solutions, which is the foundation for our next generation Aligner manufacturing, we successfully launched the <unk> illumina in oral scanner. Our next generation of digital scanning technology, we launched Invisalign palate expander IP system in the U S and Canada and received regulatory approval for the Invisalign.

Joseph Hogan: We successfully launched the ITERA Lumina interworld scanner, our next generation of digital scanning technology. We launched the Invisalign Palette Expander, our IPE system in the U.S. and Canada and received regulatory approval for the Invisalign Palette Expander in Australia and New Zealand. Q1 systems and services revenue year-over-year growth reflects non-systems revenues driven by ITERA-Lumina wand upgrades and higher scanner volumes and increased services revenue from a larger base of scanners sold. On a sequential basis, Q1 systems and services revenue were up 3.1%, reflecting growth from non-systems revenues and higher scanner ASPs, partially offset by lower volumes due to seasonality and a strong fourth quarter. The ITERA-LUMINA interaural scanner is available now with orthodontic workflows as a new stand-alone scanner or as a wand upgrade to ITERA-ELEMENT 5D+.

Expander in Australia, and New Zealand.

Joseph Hogan: Q1 system and services revenue year over year growth reflects non systems revenue, driven bioterror alumina want upgrades and higher scanner volumes and increased services revenue from a larger base of scanner sold.

Joseph Hogan: On a sequential basis Q1 systems and services revenue were up three 1%, reflecting growth from non systems revenues and higher scanner asps.

Joseph Hogan: Partially offset by lower volumes due to seasonality our strong fourth quarter.

The idea of alumina in oral scanners available now with orthodontic workflows as a new standalone scanner or is a wand upgrade to <unk> element <unk> plus the restorative workflow is expected to be available in the fourth quarter of 2024 in the meantime, GP practices can benefit from the ITER alumina as new multi direct capture technology.

Joseph Hogan: The restorative workflow is expected to be available in the fourth quarter of 2024. In the meantime, general practitioners can benefit from the ITERA-LUMINA's new multi-direct capture technology that replaces the confocal imaging technology in earlier models. The Atera Lumina Interworld Scanner has a 3x wider field of capture and a 50% smaller and 45% lighter wand, delivering faster scanning speed, higher accuracy, enhanced visualization, and a more comfortable scanning experience.

Joseph Hogan: That replaces the confocal imaging technology and earlier models.

Joseph Hogan: <unk> alumina inner world scanner has a three X wider field capture and a 50% smaller than 45% lighter one delivering faster scanning speed higher accuracy supervision nation and more comfortable scanning experience overall, we're really pleased with the launch of that Taro alumina scanner customer feedback is.

Joseph Hogan: Been positive and we're really excited about the feedback from doctors. So we've included some are great for <unk> and our web cast slides.

Joseph Hogan: Overall, we're really pleased with the launch of that TerraLumina scanner. Customer feedback has been positive, and we're really excited about the feedback from doctors. So we've included some great verbatims in our webcast.

Q1, total clear aligner revenues were up year over year, reflecting revenue growth across the regions from strong year over year volume growth across APAC markets as well as the EMEA region.

Joseph Hogan: Q1 total clear line of revenues were up year over year reflecting revenue growth across the region, from strong year-over-year volume growth across APAC markets as well as the EMEA region. For the Americas region, Q1 clear liner volume was consistent with prior year for Q1 total clear liner shipments were up 2.1% sequentially, reflecting seasonality with increased volumes in the Americas regions offset somewhat by EMEA and APAC. For Q1, clear aligner shipments include over 23,000 Invisalign doc Description Cases or DSP Touch-Up Cases, primarily from the North America Ortho Channel.

Joseph Hogan: For the Americas region, Q1 clear Aligner volume was consistent with prior year for Q1 total clear aligner shipments were up two 1% sequentially, reflecting seasonality with increased volumes in the Americas regions offset somewhat by EMEA and APAC regions for Q1 clear aligner shipments.

Joseph Hogan: Crude over 23000, Invisalign doctors subscription cases, our DSP touch up cases, primarily from North America Ortho channel an increase of approximately 49% year over year from Q1 'twenty three.

Joseph Hogan: These DSP touch-up cases are component of the overall DSP program, which consists of retainers and touch up cases are aligned and it continues to be an important offering for our customers and their patients DSP is currently available in the United States, Canada, Iberia Nordics, the U K and most recently in Italy, France, and Poland, We expect to continue expanding DSP.

Joseph Hogan: An increase of approximately 49% year over year from Q123. These DSP touch-up cases are a component of the overall DSP program, which consists of retainers and touch-up cases or aligners, and it continues to be an important offering for our customers and their patients. DSP is currently available in the United States, Canada, Iberia, the Nordics, the UK, and most recently in Italy, France, and Poland.

To other country markets in EMEA in Q2, including a 14 states touch up aligner offering for.

Joseph Hogan: Non case revenues Q1 was up seven 5% year over year, primarily due to continued growth from avera retainers, along with Invisalign DSP retainer revenues.

Joseph Hogan: And the teen market, nearly 200000 teens and younger patients started treatment with Invisalign clear liners in Q1 up five 8% year over year. This represents a record number of teen cases shipped as compared to prior quarters, reflecting strength in APAC and EMEA team starts were up sequentially, one, 2%, reflecting strength in EMEA and North America.

Joseph Hogan: We expect to continue expanding DSP into other country markets in May and Q2, including a 14-stage touch-up aligner offer. For non-case revenues, Q1 was up 7.5% year-over-year, primarily due to continued growth from Vivera retainers along with Invisalign DSP retainer revenue. In the teen market, nearly 200,000 teens and younger patients started treatment with Invisalign Clear Aligners in Q1, up 5.8% year over year. This represents a record number of teen cases shipped as compared to prior quarters, reflecting strength in APAC and EMEA. Teen starts were up sequentially 1.2%, reflecting strength in EMEA in North America, offset by seasonally fewer teen starts in China.

Joseph Hogan: Offset by seasonally fewer team starts in China.

Joseph Hogan: While the team market tends to be less susceptible to consumer demand around discretionary spending and more resilient than adult ortho orthodontic case starts. We're pleased that in Q1, our clear aligner volumes for both adults and teens were up sequentially and year over year.

Joseph Hogan: We believe the Invisalign palate expander system is one of the most exciting innovations we've developed in our 27 year history and is a better option for expanding or growing patients narrow pallet initial response from doctors and patients for Invisalign palate expander system is positive Invisalign palate expander system is not a traditional invisalign aligner, it's a seer.

Joseph Hogan: As a direct <unk> printed orthodontic appliances based on proprietary and patented technology that has four systems designed for skeletal expansion.

Joseph Hogan: While the teen market tends to be less susceptible to consumer demand around discretionary spending and more resilient than adult orthodontic case starts, we're pleased that in Q1, our clear liner volumes for both adults and teens were up sequentially and year over year. We believe the Invisalign Palette Expander System is one of the most exciting innovations we've developed in our 27-year history and is a better option for expanding a growing patient's narrow palette. The initial response from doctors and patients for the Invisalign Palette Expander System is positive. The Invisalign Palette Expander System is not a traditional Invisalign aligner.

Joseph Hogan: Clinical data shows that Invisalign palate, expander system as safe effective improving the delivery schedule of expansion specifically.

Joseph Hogan: Specifically, our clinical data is based on 49 patients across the United States and Canada between the ages of $6 911, with a mean age of eight eight years and this group. The mean expansion of six millimeters was achieved with minimal chipping with ranges between three four and $10 seven millimeters as measured using the change in <unk>.

Joseph Hogan: Intermodal or with between the initial and post expansion scans with a mean expansion efficacy at 97%.

Joseph Hogan: In addition, we found that survey doctors agree the Invisalign palate expander is less painful than traditional expanders and facilitates better oral hygiene compared to traditional metal standards.

Joseph Hogan: It's a series of direct 3D printed orthodontic appliances based on proprietary and patented technology that has four systems designed for skeletal expansion. Clinical data shows that the Invisalign Palette Expander System is safe, effective, and proven to deliver scheduler expansion. Specifically, our clinical data is based on 49 patients across the United States and Canada between the ages of 6.9 and 11, with a mean age of 8.8 years. In this group, the mean expansion of six millimeters was achieved with minimal tipping with ranges between 3.4 and 10.7 millimeters, as measured using the change in intermolar width between the initial and post-expansion scans with a mean expansion efficacy of In addition, we found that surveyed doctors agree the Invisalign Palette Expander is less painful than traditional expanders and facilitates better oral hygiene compared to traditional metal expanders.

Joseph Hogan: Phase one of our early intercept treatment includes both skeletal orthopedic and dental orthodontic arch expansion. It makes up to 20% of the orthodontic case starts each year combined with Invisalign first aligner treatment Invisalign palate expander as provide doctors with the full early interceptor treatment solution that allows doctors to treat.

Joseph Hogan: All phase one patients, we expect invisalign palate expander to be available in other markets pending future applicable regulatory approvals.

Joseph Hogan: Today Invisalign as the most recognized orthodontic brand globally, and Invisalign clear aligner treatment is faster and more effective than traditional metal braces.

Joseph Hogan: Underlying market opportunity remains huge and untapped.

We continue to invest in consumer marketing and demand creation initiatives, the raise awareness and drive potential patients to invisalign practices globally.

Joseph Hogan: Below are several highlights from Q1 and more information is available in our Q1 'twenty four earnings webcast slides.

In Q1, 'twenty four we delivered.

Joseph Hogan: $14 5 billion impressions and had 43 million visits to our websites globally to increase awareness and educate young adults parents and teens about the benefits of the Invisalign brand, we continue to invest and create campaigns and top media platform, such as tick Tock, Instagram Youtube Snapchat and wechat across markets.

Joseph Hogan: Phase I or Early Interceptive Treatment includes both skeletal, orthopedic, and dental orthodontic arch expansion and makes up to 20% of the orthodontic case starch each year. Combined with Invisalign First, Align-Invisalign Palette Expanders provide doctors with a full, early, interceptive treatment solution that allows doctors to treat all Phase I patients. We expect Invisalign Palette Expander to be available in other markets pending future applicable regulatory approval. Today, Invisalign is the most recognized orthodontic brand globally, and Invisalign Clear Aligner treatment is faster and more effective than traditional metal braces.

And young adults as well as teens and their parents parents also requires the right engagement through Invisalign Influencers and creator centric campaigns are teen envisage drama Free campaign was recently recognized by the association of National advertisers with a Silver award in the Reggie Awards for creative and strategic excellence.

Joseph Hogan: <unk>.

In the U S. In addition to our ongoing Influencer campaigns, we partner with athletes such as mass Crosby Tictoc Gen Z influencer overtime, Meg and the famous fashion designer Christine <unk> to create a compelling brand activation at the Super Bowl, our campaigns delivered more than $6 1 billion impressions and $18 one.

Joseph Hogan: 1 million unique visitors to our consumer websites across the Americas, and EMEA region, we partner with the Influencers to reach consumers across social media platforms, including tick Tock, and meta and launched our global consumer campaigns for teens and parents are campaigns delivered more than $1 6 billion media impressions and $8 9 million visitors to our website.

Joseph Hogan: The underlying market opportunity remains huge and untapped. We continue to invest in consumer marketing and demand creation initiatives that raise awareness and drive potential patients to Invisalign practices globally. Below are several highlights from Q1, and more information is available in our Q1-24 earnings webcast. In Q124, we delivered 14.5 billion impressions and had 43 million visits to our websites globally. To increase awareness and educate young adults, parents, and teens about the benefits of the Invisalign brand, we continue to invest in and create campaigns on top media platforms such as TikTok, Instagram, YouTube, Snapchat, and WeChat across markets.

Joseph Hogan: We continue to invest in consumer advertising across the APAC region, resulting in more than $6 6 billion impressions 16 million visitors to our websites, 195% increase year over year with.

Joseph Hogan: We expanded our reach in Japan, and India via meta in Youtube and partnering with key influencers to reach consumers across social media. We saw increased brand interest from consumers as evidenced by a 285% year over year increase in unique visitors to our website and in India and 129% increase in Japan.

Joseph Hogan: Finally, digital tools, such as my Invisalign consumer and patient App continue to increase with 4 million downloads to date and over 381000 monthly active users 50, 15% year over year growth rate.

Joseph Hogan: Reaching young adults as well as teens and their parents also requires the right engagement with influencers and creator-centric campaigns. Our Teen In Viz's drama-free campaign was recently recognized by the Association of National Advertisers with a Silver Award and the Reggie Awards for creative and strategic efforts. In the U.S., in addition to our ongoing influencer campaigns, we partner with athletes such as Mads Crosby, TikTok Gen Z influencer, Overtime Meg, and the famous fashion designer, Christine Juszczyk, to create a compelling brand activation at the Super Bowl.

Joseph Hogan: Q1, 'twenty four clear aligner volume from DSL customers increased sequentially, reflecting growth in the Americas and a major may regions and increased year over year, reflecting growth across international regions Dental service organizations or Dsos represents a large and growing opportunity to help drive adoption of digital technology across the dental industry.

Efficiency and profitability as well as delivering a better patient experience from shorter cycle times and proximity to their customers' smile docs and heartland dental or some of the largest DSO partners and we are continuously exploring collaborations with dsos that can further adoption of digital dentistry.

Joseph Hogan: Our campaigns delivered more than 6.1 billion impressions and 18.1 million unique visitors to our consumer websites across the Americas. In the Maya region, we partner with influencers to reach consumers across social media platforms, including TikTok and Meta, and launched our global consumer campaigns for teens and parents. Our campaigns delivered more than 1.6 billion media impressions and 8.9 million visitors to our website. We continue to invest in consumer advertising across the APAC region, resulting in more than 6.6 billion impressions and 16 million visitors to our websites, a 195 percent increase year over year.

Joseph Hogan: Each DSO has a different strategy a business model and our focus is on working with the encouraging dsos align with our vision strategy and business model goals.

Today, we announced an additional $75 million equity increase in heartland. Following the previous $75 million equity investment a year ago Heartland is a multi disciplinary DSO with GP and ortho practice across the United States. Their growth strategy includes Heartlands de Novo dental practices, which feature modern technology located in areas with a strong community.

Joseph Hogan: <unk> need for dentistry.

Where heartland provides practices with opportunities for Mentorship leadership training and continuing education.

Joseph Hogan: And the last four years Heartland opened 240 state of the art de Novo practices across the U S. On our planning to continue investing through more de novo openings. We have a shared sense of purpose with heartland. Their mission is to help doctors and their teams deliver the highest quality digital dental care to the communities. They serve with that I'll now turn it over to John.

Joseph Hogan: We expanded our reach in Japan and India via Meta and YouTube and partnered with key influencers to reach consumers across social media. We saw increased brand interest from consumers, as evidenced by a 285% year-over-year increase in unique visitors to our website in India and a 129% increase in sales. Finally, digital tools such as my Invisalign Consumer and Patient app continue to increase, with 4 million downloads to date and over 381,000 monthly active users, 15% year-over-year growth.

John F. Morici: Thanks, Joe now for our Q1 financial results total revenues for the first quarter were $997 4 million up four 3% from the prior quarter and up five 8% from the corresponding quarter a year ago on a constant currency basis Q1, 'twenty four revenues were impacted.

John F. Morici: By favorable foreign exchange of approximately $10 million or approximately 1% sequentially and were unfavorably impacted by approximately $4 $8 million year over year or approximately.

Joseph Hogan: Q124 clear liner volume from DSO customers increased sequentially, reflecting growth in the Americas and the major regions, and increased year-over-year, reflecting growth across international regions. Dental Service Organizations, or DSOs, represent a large and growing opportunity to help drive the adoption of digital technology across the dental industry. We've established relationships with many DSOs globally that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the Align digital platform, including increased practice, efficiency, and profitability, as well as delivering a better patient experience from shorter cycle times and proximity to their customers.

John F. Morici: 0.5% for clear liners, Q1 revenues of $817 $3 million were up four 5% sequentially, primarily from higher asps and higher volumes on a year over year basis, Q1 clear aligner revenues were up three 5%, primarily due to higher volumes and Asps and <unk>.

John F. Morici: Increased non case revenues for Q1, Invisalign Asps for comprehensive treatment were up sequentially and up year over year and up year over year on a sequential basis asps, primarily affect hire additional lighters and price increases and the favorable impact of foreign exchange, partially offset by.

John F. Morici: Our product mix shift to lower ASP products on a year over year basis. The increase in comprehensive asps, primarily reflect higher additional liners and price increases partially offset by a product mix shift to lower ASP products and higher discounts and the unfavorable impact from foreign exchange for Q1.

Joseph Hogan: Smile Docs and Heartland Dental are some of the largest DSO partners and are continuously exploring collaborations with DSOs that can further the adoption of digital demonstration. Each DSO has a different strategy and business model, and our focus is on working with and encouraging DSOs aligned with our vision, strategy, and business model goals. Today, we announce an additional $75 million equity increase in Heartland, following the previous $75 million equity investment a year ago. Heartland is a multidisciplinary DSO with GP and ortho practices across the United States.

Invisalign asps for non comprehensive treatment were down sequentially and year over year on a sequential basis the decline in asps reflect unfavorable country mix.

John F. Morici: Shifting and higher discounts, partially offset by the favorable impact from foreign exchange.

John F. Morici: On a year over year basis, the decrease in non comprehensive asps reflect the product mix shifts to lower ASP products unfavorable country mix shift and higher discounts, partially offset by lower net revenue deferrals as a reminder, we announced.

Joseph Hogan: Their growth strategy includes Heartland's DeNova dental practices, which feature modern technology located in areas with a strong community need for dentistry, where Heartland provides practices with opportunities for mentorship, leadership training, and continuing education. In the last four years, Heartland opened 240 state-of-the-art de novo practices across the U.S. and is planning to continue investing through more de novo openings. We have a shared sense of purpose with Heartland.

John F. Morici: About at 5% global price increase for some invisalign products across most markets effective January one 2020 for this price increase did not include Invisalign comprehensive <unk> III product.

John F. Morici: Invisalign comprehensive three and three product is available in North America and in certain markets in EMEA and APAC. Most recently launching in French territories and in the Middle East. We are pleased with the continued adoption of the Invisalign comprehensive three and three product and anticipate it will continue increasing.

John F. Morici: Their mission is to help doctors and their teams deliver the highest quality digital dental care to the communities they serve. With that, I'll now turn it over to John. Thanks, Joe.

John F. Morici: Providing doctors the flexibility they want and allowing us to recognize more revenue upfront with deferred revenue being recognized over a shorter period of time compared to our traditional invisalign comprehensive product.

John F. Morici: Now for our Q1 financial results. Total revenues for the first quarter were $997.4 million, up 4.3% from the prior quarter and up 5.8% from the corresponding quarter a year ago. On a constant currency basis, by favorable foreign exchange of approximately $10 million, or approximately 1% sequentially, and were unfavorably impacted by approximately $4.8 million year-over-year, or approximately 0.5%. For clear aligners, Q1 revenues of $817.3 million were up 4.5% sequentially, primarily from higher ASPs and higher volumes.

John F. Morici: Q1, 'twenty four clear aligner revenues were impacted by favorable foreign exchange of approximately $8 4 million or approximately 1% sequentially on a year over year basis clear aligner revenues were unfavorably impacted by foreign exchange of approximately $3 9 million or approximately <unk>, 5%.

John F. Morici: Clear aligner deferred revenues on the balance sheet decreased $26 7 million or 2% sequentially and increased $15 $8 million or one 2% year over year and will be recognized as the additional liners are shipped.

John F. Morici: Q1, 24 systems and services revenue.

John F. Morici: On a year-over-year basis, Q1 clear aligner revenues were up 3.5% primarily due to higher volumes and ASBs and increased non-case revenues. For Q1, Invisalign ASPs for comprehensive treatment were up sequentially and up year-over-year and up year-over-year. On a sequential basis, ASPs primarily affect higher additional aligners and price increases and the bearable... impacts of foreign exchange, partially offset by a product makeshift to lower ASB products. On a year-over-year basis, the increase in comprehensive ASBs primarily reflect higher additional liners and price increases, partially offset by a product makeshift to lower ASB products and higher discounts, and the unfavorable impact from foreign exchange. For Q1, Invisalign ASPs for non-comprehensive treatment were down sequentially and year-over-year. On a sequential basis, the decline in ASBs reflects an unfavorable country mix.

John F. Morici: $182 million were up three 1% sequentially, primarily due to increased non systems revenues, mostly related to upgrades and higher asps, partially offset by lower volumes.

John F. Morici: Q1, 24 systems and services revenue.

John F. Morici: Were up 17, 5% year over year, primarily due to increased non systems revenues, mostly related to upgrades higher scanner volumes and higher services revenues from our large larger base of scanner sold.

John F. Morici: CAD Cam.

John F. Morici: And services revenue for Q1 represent approximately 51% of our systems and services business.

John F. Morici: Q1, 24 systems and services revenues were favorably impacted by foreign exchange of approximately $1 5 million or approximately 0.9% sequentially on a year over year basis systems and services revenues were unfavorably impacted by foreign exchange of approximately <unk> 9 million or approximately.

John F. Morici: 0.5%.

John F. Morici: Systems and services deferred revenues on the balance sheet was down $14 3 million or five 5% sequentially and down $25 3 million or nine 4% year over year, primarily due to the recognition of services revenues, which will which is.

John F. Morici: Shift, and Higher Discounts Partially Upset by the Favorable Impact from Foreign Exchange On a year-over-year basis, the decrease in non-comprehensive ASBs reflect the product mix shifts to lower ASB products, unfavorable country mix shifts, and higher discounts, partially offset by lower net revenue deferrals. As a reminder, we announced about a 5% global price increase for some Invisalign This price increase does not include Invisalign Comprehensive 3in3 products.

John F. Morici: <unk> ratably over the service period, the decline in deferred revenues, both sequentially and year over year reflects the shorter duration of service contracts with initial scanner purchases.

John F. Morici: As our scanner portfolio expands and we introduce new products, we increase the opportunities for customers to upgrade to make trade. It. In addition to other scanner leasing and rental programs developing new capital equipment opportunities to meet the digital transformation needs of our customers and our DSO partners is a natural progression for our equipment business.

John F. Morici: The Invisalign Comprehensive 3-in-3 product is available in North America and in certain markets in EMEA and APEC, most recently launched in French territories and in the Middle East. We are pleased with the continued adoption of the Invisalign Comprehensive 3-in-3 product and anticipate it will continue increasing. This will give doctors the flexibility they want and allow us to recognize more revenue up front, with deferred revenue being recognized over a shorter period of time compared to our traditional Invisalign Comprehensive product.

John F. Morici: With a large and growing base of scanner. So we're pleased to be able to leverage our.

John F. Morici: Technological innovation and operational capabilities and efficiencies to provide different types of go to market models to our customers such as rentals and leasing sell in the way that our customers want to buy more.

Moving on to gross margin first quarter overall gross margin was 70% approximately flat sequentially and year over year. Overall gross margin was favorably impacted by foreign exchange by approximately 0.3 points sequentially and unfavorably impacted by approximately 0.1 points on a year over year basis cleared.

John F. Morici: Q124 clear aligner revenues were impacted by a favorable foreign exchange of approximately $8.4 million, or approximately 1% sequentially. On a year-over-year basis, Clearliner revenues were unfavorably impacted by foreign exchange of approximately $3.9 million, or approximately 0.5%.

John F. Morici: Gross margin for the first quarter was <unk> <unk>.

John F. Morici: 79% down <unk> three points sequentially due primarily due to higher manufacturing spend partially offset by higher asps.

John F. Morici: Clearer liner deferred revenues on the balance sheet decreased $26.7 million, or 2% sequentially, and increased $15.8 million, or 1.2% year-over-year, and will be recognized as additional liners are shipped. Q124 systems and services revenue of $180.2 million were up 3.1% sequentially, primarily due to increased non-systems revenues, mostly related to upgrades, and higher ASPs, partially offset by lower volumes. Q124 systems and services revenue was up 17.5% year-over-year, primarily due to increased non-systems revenues mostly related to upgrades, higher scanner volumes, and higher services revenues from our larger base of scanners sold.

John F. Morici: Clear aligner gross margin for the first quarter was down <unk> eight points year over year, primarily due to higher manufacturing spend partially offset by favorable ASP.

John F. Morici: Systems and services gross margin for the first quarter was 65, 9% up one one points sequentially due to higher ASP, partially offset by manufacturing variances.

John F. Morici: And services gross margin for the first quarter was up four three points year over year, primarily due to higher ASP lower service and manufacturing costs.

Q1, operating expenses were $543 7 million up nine 2% sequentially and three 1% year over year on a sequential basis operating expenses.

John F. Morici: Were up by $45 7 million from higher incentive compensation and consumer marketing spend partially offset by restructuring and other charges not recurring in Q1.

John F. Morici: [inaudible] and Services Revenue for Q1 represents approximately 51% of our systems and services business. Q124 systems and services revenues were favorably impacted by foreign exchange of approximately $1.5 million, or approximately 0.9% sequentially. On a year-over-year basis, systems and services revenues were unfavorably impacted by foreign exchange of approximately $0.9 million, or approximately 0.5%. Systems and Services deferred revenues on the balance sheet were down $14.3 million or 5.5% sequentially and down $25.3 million or 9.4% year-over-year, primarily due to the recognition of services revenues, which is recognized readily over the service period.

John F. Morici: Year over year operating expenses increased by $16 $5 million, primarily due to our continued investments in sales and R&D activities and higher incentive compensation.

John F. Morici: On a non-GAAP basis, excluding stock based compensation amortization of acquired intangibles related to certain acquisitions and restructuring and other charges operating expenses were $506 1 million up 13, 3% sequentially and up three 2% year over year.

John F. Morici: Our first quarter operating income of $154 $1 million resulted in an operating margin of 15, 5% down two five points sequentially and up one three points year over year. The sequential decrease in operating margin is primarily attributed to investments in our.

John F. Morici: Go to market teams and higher incentive compensation the year over year increase in operating margin is primarily attributed to operating leverage and proactively managing our costs, partially offset by unfavorable impact from foreign exchange of approximately 0.7 points on a non-GAAP basis, which excludes stock based.

John F. Morici: The decline in deferred revenues both sequentially and year-over-year reflects the shorter duration of service contracts with initial scanner purchases. As our scanner portfolio expands and we introduce new products, we increase the opportunities for customers to upgrade and make trades, in addition to other scanner leasing and rental programs. Developing new capital equipment opportunities to meet the digital transformation needs of our customers and our DSO partners is a natural progression for our equipment business, with a large and growing base of scanners sold.

Station amortization of intangibles related to certain acquisitions and restructuring and other charges operating margin for the first quarter was 19, 8% down four points sequentially and up one three points year over year.

John F. Morici: Interest and other income expense net for the first quarter was an income of $4 3 million compared to an income of $1 $3 million in Q4 of 23, and an income of $1 $1 million in Q1 of 'twenty, three primarily driven by a gain on our equity investments and net interest income.

John F. Morici: We're pleased to be able to leverage our technological innovations and operational capabilities and efficiencies to provide different types of go-to-market models to our customers, such as rentals and leases, selling the way that our customers want to buy. Moving on to gross margin, first quarter overall gross margin was 70%, approximately flat sequentially and year over year. Overall gross margin was favorably impacted by foreign exchange by approximately 0.3 points sequentially and unfavorably impacted by approximately 0.1 points on a year over year basis.

John F. Morici: And offset by unfavorable foreign exchange.

John F. Morici: The GAAP effective tax rate in the first quarter was 33, 7% compared to 28, 3% in the fourth quarter and 34, 8% in the first quarter of the prior year.

John F. Morici: First quarter GAAP effective tax rate was higher than the fourth quarter effective tax rate, primarily due to discrete tax benefits recognized in Q4 of 'twenty three partially offset by increased earnings in low tax jurisdictions in Q1 of 'twenty four our non-GAAP effective tax rate in the first quarter was 20%, which.

John F. Morici: Clearliner gross margin for the first quarter was 70.9%, down 0.3 points sequentially due primarily to higher manufacturing spend partially offset by higher ASP. Clearliner gross margin for the first quarter was down 0.8 points year-over-year, primarily due to higher manufacturing spend, partially offset by favorable ASV.

John F. Morici: Flex our long term projected tax rate.

John F. Morici: First quarter net income per diluted share was $1 39.

John F. Morici: Down sequentially 24, and up 26 compared to the prior year, our EPS was not impacted on a sequential basis from foreign exchange. Our EPS was unfavorably impacted by <unk> <unk> on a year over year basis to foreign exchange on a non-GAAP basis net income per diluted share was.

John F. Morici: $2 14 for the first quarter down, 28% sequentially and up 32 cents year over year.

John F. Morici: Moving onto the balance sheet as of March 31, 2024, cash cash equivalents and short term and long term marketable securities were $902 $5 million down sequentially, seven $8 $2 million and down $18 $9 million year over year.

Of our $902 $5 million balance $217 5 billion was held in the U S and $685 million was held by our international entities.

John F. Morici: On a sequential basis, operating expenses were up by $45.7 million from higher incentive compensation and consumer marketing spend, partially offset by restructuring and other charges not recurring in Q1. Year over year, operating expenses increased by $16.5 million, primarily due to our continued investments in sales and R&D activities and higher incentive compensation. On a non-GAAP basis, excluding stock-based compensation, amortization of acquired intangibles related to certain acquisitions, and restructuring and other charges, operating expenses were $506.1 million, up 13.3% sequentially, and up 3.2% year over year.

John F. Morici: In January of 2024, we received approximately 37000 shares of our common stock upon final settlement of the $250 million accelerated share repurchase from Q4 of 2003 in total we repurchased approximately one 1 million shares at an average price per share of $230 13.

John F. Morici: Under the Q4 ASR contract.

John F. Morici: We have $650 million available for repurchase of our common stock under our January 2023 repurchase program.

John F. Morici: During Q2, 'twenty four we expect to repurchase up to $150 million of our common stock through either a combination of open market repurchase or an accelerated stock repurchase agreement.

John F. Morici: One accounts receivable balance was $957 million up sequentially.

John F. Morici: Our first quarter operating income of $154.1 million resulted in an operating margin of 15.5%, down 2.5 points sequentially and up 1.3 points year over year. The sequential decrease in operating margin is primarily attributed to investments in our go-to-market teams and higher incentive compensation. The year-over-year increase in operating margin is primarily attributed to operating leverage and practically managing our costs, partially offset by an unfavorable impact from foreign exchange of approximately 0.7 points. On a non-GAAP basis, which excludes stock-based compensation, amortization of intangibles related to certain acquisitions, and restructuring and other charges, operating margin for the first quarter was 19.8%, down 4 points sequentially, and up 1.3 points

John F. Morici: Our overall days sales outstanding was 86 days up approximately one day sequentially and up approximately three days as compared to Q1 last year cash flow from operations for the first quarter was $28 7 million capital expenditures for the first quarter were $9 $4 million.

John F. Morici: Primarily related to our continued investments to increase aligner manufacturing capacity and facilities free cash flow defined as cash flow from operations less capital expenditures amounted to $19 $3 million will continue to use our healthy balance sheet to drive growth and profitability during the quarter, we continued to make.

John F. Morici: Disciplined investments in our strategic growth drivers, we completed the acquisition of <unk>, which will enable us to scale, our three D printing operations to.

John F. Morici: Eventually direct print millions of custom appliances per day, and we exited the quarter with a healthy cash flow position and no long term debt maintaining a strong position to support our additional $75 million investment in our DSO partner.

John F. Morici: Interest and other income expense net for the first quarter was $4.3 million compared to an income of $1.3 million in Q4 of 23 and an income of $1.1 million in Q1 of 23, primarily driven by a gain on our equity investments and net interest income and offset by unfavorable foreign exchange. The GAAP effective tax rate in the first quarter was 33.7% compared to 28.3% in the fourth quarter and 34.8% in the first quarter of the prior year.

John F. Morici: Heartland, dental and $150 million stock buyback.

John F. Morici: Now turning to our outlook, assuming no circumstances occur beyond our control we provide the following framework for Q2 and fiscal 2024.

John F. Morici: For Q2, 'twenty four we provide the following business outlook for.

John F. Morici: For Q2, 'twenty four we expect worldwide revenues to be in the range of.

John F. Morici: $1.030 billion to $1.050 billion.

John F. Morici: We expect clear aligner volume to be up sequentially and clear aligner ASP to be down slightly sequentially, primarily as a result of unfavorable foreign exchange, we expect systems and services revenue to be up sequentially. As we continued to ramp <unk> Illumina in Q2 2024, we expect Q2 2000.

John F. Morici: The first quarter GAAP effective tax rate was higher than the fourth quarter effective tax rate primarily due to discrete tax benefits recognized in Q4 of 23 partially offset by increased earnings in low tax jurisdictions in Q1 of 24. Our non-GAAP effective tax rate in the first quarter was 20%, which reflects our long-term projected tax rate. First quarter net income per diluted share was $1.39, down sequentially by $0.24 and up $0.26 compared to the prior year.

John F. Morici: GAAP operating margin and non-GAAP operating margin to be slightly above Q1 dollars 24, GAAP and non-GAAP operating margins respectively.

For fiscal 'twenty four we provide the following business outlook, we expect fiscal 2000 and for total revenue to be up 6% to 8% versus 2023, which is higher than our prior outlook of up mid single digit growth compared to 2023, the increase in our 2020 for revenue outlook reflects our Q.

John F. Morici: Our EPS was not impacted on a sequential basis from foreign exchange. However, our EPS was unfavorably impacted by $0.09 on a year over year basis due to foreign exchange. On a non-GAAP basis, net income per diluted share was $2.14 for the first quarter, down $0.28 sequentially and up $0.32 year over year. Moving on to the balance sheet. As of March 31, 2024, cash, cash equivalents, and short-term and long-term marketable securities were $902.5 million, down sequentially $78.2 million, and down $18.9 million year over year. Of our $902.5 million balance, $217.5 million was held in the U.S., and $685 million was held by our international entities.

<unk> results Q2 outlook and continued execution of our growth strategies, we anticipate that the incremental revenue reflected in our 2024 outlook will be roughly split 50 50 between our two operating segments.

John F. Morici: We expect fiscal 2024 clear aligner asps to be slightly up year over year.

We expect our capital invest our investments in capital expenditures for fiscal 2024 to be approximately $100 million cap.

John F. Morici: Capital expenditures, primarily relate to building construction and improvements as well as manufacturing capacity in support of our continued expansion with that I'll turn it back over to Joe for final comments Joe.

John F. Morici: In January 2024, we received approximately 37,000 shares of our common stock upon final settlement of the $250 million accelerated share repurchase from Q4 of 23. In total, we repurchased approximately 1.1 million shares and an average price per share of $230.13 under the Q4 ASR contract. We have $650 million available for repurchase of our common stock under our January 2023 repurchase program. During Q2-24, we expect to repurchase up to $150 million of our common stock through either a combination of open market repurchase or an accelerated stock repurchase agreement.

Joseph Hogan: Thanks, John in summary, Q1 was a good start for the year, while I am pleased with our results I'm, even more excited about our lines innovation in 2024 on our next wave of growth drivers that we believe will continue to revolutionize the orthodontic and dental industry and scanning software and direct three D printing our focused execution of our <unk>.

Joseph Hogan: <unk> roadmap and innovation pipeline has resulted in the largest introduction of new products and technologies in our history further advancing our software scanning and three D printing capabilities. We're excited about the potential for these strategic investments to enable a new phase of growth the transform the orthodontic industry again.

Joseph Hogan: Alumina into oral scanner has the potential to set a new standard of care for dental practices by simplifying the scanning of complex oral regions, while offering superior chair side visualization in a more comfortable experience for patients, especially kids.

John F. Morici: Q1 accounts receivable balance was $950.7 million dollars, up sequentially. Our overall day sales outstanding was 86 days, up approximately one day sequentially and up approximately three days as compared to Q1 last year. Cash flow from operations for the first quarter was $28.7 million. Capital expenditures for the first quarter were $9.4 million, primarily related to our continued investment to increase aligner manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations less capital expenditures, amounted to $19.3 million.

Joseph Hogan: Invisalign palate expander increases the clinical applicability of Invisalign system to nearly 100% of orthodontic case starts. It is a revolutionary removable <unk> printed appliance that is clinically proven to be safe and effective it is less painful than traditional metal expanders and promotes better oral hygiene.

Joseph Hogan: And our recent acquisition of cubic cure a pioneer of <unk> printing solutions for polymer additive manufacturing brings a talented team and unique cutting edge technology into aligned to help us scale, our three D printing operations, providing ultimate design freedom and highly customized outcomes from our customer and patient standpoint, as well as operational benefits to the business.

John F. Morici: We'll continue to use our healthy balance sheet to drive growth and profitability. During the quarter, we continued to make disciplined investments in our strategic growth drivers. We completed the acquisition of Cubicure, which will enable us to scale our 3D printing operations to eventually directly print millions of custom appliances per day.

Joseph Hogan: We see incredible opportunities in this business and continue to make the Invisalign system. The standard of care in orthodontics by continually innovating and developing digital technologies and services that enable more doctors to easily diagnose and treat patients with cricket T.

Joseph Hogan: And help them retain their healthy beautiful smiles, we're increasing access to care for millions of people who might not otherwise receive orthodontic treatment.

John F. Morici: And we exit the quarter with a healthy cash flow position and no long-term debt. Maintaining a strong position to support our additional $75 million investment in our DSO partner, Heartland Dental, and a $150 million stock flyback.

Speaker Change: With that I. Thank you for your time today, we look forward to sharing our continued progress in leading the digital transformation of the orthodontic and restore the dental industry.

Speaker Change: I'll now turn the call over to the operator for your questions.

John F. Morici: Now turning to our outlook, assuming no circumstances occur beyond our control, we provide the following framework for Q2 and fiscal 2024. For Q224, we provide the following business outlook. For Q224, we expect worldwide revenues to be in the range of... $1,030,000,000 to $1,050,000,000.

Speaker Change: Operator.

Speaker Change: Thank you.

Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star one if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before price.

Speaker Change: The Star Keys, one moment, please while we pull for questions.

John F. Morici: We expect clear aligner volume to be up sequentially and clear aligner ASB to be down slightly sequentially, primarily as a result of unfavorable foreign exchange. We expect systems and services revenue to be up sequentially as we continue to ramp ITERO Lumina in Q2 2024. We expect Q2 2024 gap operating margin and non-gap operating margin to be slightly above Q1 2024 gap and non-gap operating margins, respectively.

Speaker Change: Our first question comes from Elizabeth Anderson with Evercore ISI you May proceed.

Elizabeth Anderson: Hi, guys. Thanks, so much for the question.

Elizabeth Anderson: I was wondering if you could talk about how youre seeing the overall demand environment, I guess I'm, particularly curious about the <unk>.

Elizabeth Anderson: Sort of how you're seeing it from like a consumer demand perspective, especially any comments you could make on the smile direct impact on volumes in the quarter and then secondarily.

Elizabeth Anderson: If you could comment a little bit more on the broader demand environment in China that would be super helpful. Thank you.

Elizabeth Anderson: Elizabeth I'll start off in <unk>.

Elizabeth Anderson: John jump in on anything first of all we describe the business right. Now is the stable same things that we talked about as we came out of the fourth quarter and we see that stability.

John F. Morici: For fiscal 24, we provide the following business outlook. We expect fiscal 24 total revenue to be up 6 to 8% versus 2023, which is higher than our prior outlook of mid single-digit growth compared to 2023. The increase in our 2024 revenue outlook reflects our Q1 results, our Q2 outlook, and continued execution of our growth strategies. We anticipate that the incremental revenue reflected in our 2024 outlook will be roughly split 50-50 between our two operating segments.

Elizabeth Anderson: Around the globe.

John F. Morici: And you saw in our script, we just read too that it's good from an adult standpoint, and also a teen standpoint, too, which again led to that kind of stability that we talk about if I look around the world I mean, we've.

John F. Morici: That stability exists whether it's in Asia, whether we've seen it in parts of Europe, and we see in the United States and.

John F. Morici: In the Americas also so it's hard for us to call out a particular region or whatever that is dramatically down dramatically up we just see them moving pretty much in unison in the first quarter John would you add.

John F. Morici: No I agree and Thats.

John F. Morici: We're driving the growth strategies.

John F. Morici: As we said we've seen that stability in.

John F. Morici: We expect fiscal 2024 clear aligner ASBs to be slightly up year over year. We expect fiscal 2024 gap operating margin and non-gap operating margin to be slightly above the 2023 gap operating margin and non-gap operating margin, respectively. We expect our capital invest, our investments in capital expenditures for fiscal 2024 to be approximately $100 million. Capital expenditures primarily relate to building construction and improvements as well as manufacturing capacity in support of our continued growth. With that, I'll turn it back over to Joe for final comments. Joe?

John F. Morici: In the environment and we're executing against that.

John F. Morici: Lastly on your Smile direct club comment not being advertising like they were before whatever we can attribute any part of the demand equation up or down as part of that.

John F. Morici: And obviously that was more pronounced in the United States and it was anywhere else in the world, but I can't attribute any change in the marketplace because of them not advertising at this point in time.

Speaker Change: Great great. Thank you so much I appreciate the commentary thanks David.

Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Brandon <unk> with William Blair You May proceed.

Brandon: Hi, everyone. Thanks for taking the question I wanted to focus for a second on the.

Brandon: On the team side, you have that Paolo will expand are out there now getting great reviews, and it seems like it closes if I'm understanding the numbers correctly, maybe 20% of that market that you haven't been able to hit before this is such a big opportunity I'm curious if you can just reflect on like how does commercialization within teams look in the next couple of.

Joseph Hogan: Thanks, John. In summary, Q1 was a good start for the year. While I'm pleased with our results, I'm even more excited about Align's innovation in 2024 on our next wave of growth drivers that we believe will continue to revolutionize the orthodontic and dental industry in scanning software and direct 3D printing. Our focused execution of our product roadmap and innovation pipeline has resulted in the largest introduction of new products and technologies in our history, further advancing our software scanning and 3D printing capabilities.

Brandon: <unk> now that you have kind of a broader and more full portfolio here compared to the prior couple of years and what does that mean for growth rates within that team section and adoption within team that's underpenetrated relative to teams as we look forward. The next couple of years. Thanks.

Speaker Change: That's a good question, Brian I think.

Speaker Change: I mentioned, its 20% and we call them Tweens really they're young students before they really hit the teen years and have.

Speaker Change: Mature dentition.

Speaker Change: Invisalign first and now with IP, we can handle the 20% it's out there on the phase one and some teams just need between just need dental expansion and some you really have to split the suture and widen the pallet overall, we feel in both those cases with IP and Invisalign first these are very unique products.

Joseph Hogan: We're excited about the potential for these strategic investments to enable a new phase of growth to transform the orthodontic industry again. The ITERA Illumina Interoral Scanner has the potential to set a new standard of care for dental practices by simplifying the scanning of complex oral regions while offering superior chair-side visualization and a more comfortable experience for patients, especially kids. The Invisalign Palette Expander increases the clinical applicability of the Invisalign system to nearly 100% of orthodontic case starts. It is a revolutionary, removable, 3D-printed appliance that has been clinically proven to be safe and effective. It is less painful than traditional metal expanders and promotes better oral hygiene.

Speaker Change: Specific to that area and we think it will actually make Doc doctors that aren't comfortable with phase one maybe even more comfortable now because of the impact on patients.

It's not what it was before when you tried to work these kinds of cases with wires and brackets or hybrid expanders and those kinds of things, but like anything in the orthodontic community. It takes time it takes time for acceptance and the good thing about this is IPD is about a 30 to 35 day kind of an episode so our feedback loop is really good.

Speaker Change: You can tell from my script. My transcript also is right now were approved in the United States and Canada and recently in ANZ and right now we're throttled by the regulatory procedures. We have to go throughout the world. So we will be able to give you more specificity on this brand as we go forward, but as I mentioned in my closing two we're really excited about that technology.

Joseph Hogan: Our recent acquisition of Hubicure, a pioneer of 3D printing solutions for polymer additive manufacturing, brings a talented team and unique cutting-edge technology into Align to help us scale our 3D printing operations, providing ultimate design freedom and highly customized outcomes from a customer and patient standpoint, as well as operational benefits to the business. We see incredible opportunities in this business and continue to make the Invisalign system the standard of care in orthodontics by continually innovating and developing digital technologies and services that enable more doctors to easily diagnose and treat patients with crooked teeth and help them retain their healthy, beautiful smiles while increasing access to care for millions of people who might not otherwise receive orthodontic care. With that, I thank you for your time today. We look forward to sharing our continued progress in leading the digital transformation of the orthodontic and restorative dental industry. I'll now turn the call over to the operator for your question. Operator.

Speaker Change: And we didn't tie together the new Lumina scanner I have such a broad kind of a bandwidth from a scanning standpoint. It scans that pilots that you have to cover with Invisalign first extremely well so those technologies thread together very well.

Speaker Change: Out there so we're excited about it and more to come.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Jon Block with Stifel. You May proceed.

Jonathan David Block: Thanks Scott.

Jonathan David Block: Hey, Joe Good afternoon, I'm going to ask to maybe just the first one.

Jonathan David Block: About the quarter, there was sort of like an obsession or a big focus from investors on month to month trends.

We've talked about in February strains mortgage weakness I don't know.

Jonathan David Block: If anyone really knew who was the consumer or the calendar. So maybe you guys can talk a little bit about how it played out for you guys elaborate on February and March and then as much as you can just touch on April here for the first two to three weeks and then I'll ask my follow up thanks.

Jonathan David Block: Yes, John This is John look from as we as we talk about the quarter and think about we're very pleased with our results in Q1, we saw stability as Joe mentioned.

Operator: Thank you. We'll be conducting a question and answer session. If you would like to ask a question, please press star 1 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 1 1 if you would like to remove your question from the queue.

John F. Morici: And that really continued from the end of the year into the quarter.

John F. Morici: Less about month to month I mean, it was the stability of then then the execution that we had throughout the quarter with our with our products.

John F. Morici: Okay.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions. Our first question comes from Elizabeth Anderson with Evercore ISI. You may proceed. Hi guys, thanks so much for the question. I was wondering if you could talk about how you're seeing the overall demand environment. I guess I'm particularly curious about the U.S., sort of how you're seeing it from a consumer demand perspective, especially and any comments you could make on the Smile Direct impact on volumes in the quarter. And then, secondarily, if you could comment a little bit more on the broader demand environment in China, that would be super helpful. Thank you. Hey, Elizabeth, I'll start off and have John jump in on anything.

Speaker Change: And then I'll just shift gears, John I'll, maybe stick with you I believe the word even slightly above.

John F. Morici: 2023, which I think is 21, 4% unchanged. Despite the higher revenues the midpoint going from roughly 5% to 7%. So can you talk about where that extra spend is going.

Speaker Change: Do we see the returns on that this year or will that aid and give you some more tailwind into 2025, and then just to tack on to that.

Speaker Change: New higher guidance doesn't and pleasure to 6% in the back part of this year year over year growth, which isn't too dissimilar from one each.

Speaker Change: The comps get more difficult to the stacks need to accelerate.

Why should we be comfortable with that is that just an accelerating contribution from some of those new products like alumina at IP. Thanks, guys.

Speaker Change: That latter point is how I would look at it John we're making investments we make investments throughout the year when we get the shorter longer term investors that we make different returns on whether they're short or long term, but.

Joseph Hogan: First of all, we describe the business right now as stable, the same things that we talked about, you know, as we came out of the fourth quarter, and we see that stability, you know, broadly around the globe. And you saw in our script, we just read, that it's good from an adult standpoint, and also from a teen standpoint, too, which, again, led to that kind of stability that we talked about. If I look around the world, I mean, we've found that stability exists, you know, whether it's in Asia, whether we've seen it in parts of Europe, and we see it in the United States. And in the Americas, also.

Speaker Change: What we see is is a step.

A stable environment continued investments in go to market activities, we have new products coming so that helps us accelerate with with things that will have on the <unk> side as well as <unk>.

Speaker Change: IP and others that Joe talked about where we really get the approval later in the year. So.

Speaker Change: It's about a state as stable environment, making investments into that environment, and then executing on our growth strategy and that should give us the benefits that you described in the second half.

Joseph Hogan: So it's hard for us to call out a particular region or whatever that is dramatically down or dramatically up. We just see them moving pretty much in unison in the first quarter. John, would you add anything to that? No, I agree.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Jeff Johnson with Baird You May proceed.

Jeffrey D. Johnson: Thank you good afternoon, guys, Hey, guys. How are you so and John maybe following up on John's question, there and just a little finer point on the guidance itself.

John F. Morici: And that's, you know, we're driving the growth strategies. As we've said, we've seen stability in the environment, and we're executing against that. And there's one last thing about your Smile Direct Club comment, you know, and them not being, you know, advertising like they were before or whatever. We can't attribute, you know, any part of the demand equation up or down as part of that. And, you know, and obviously, that was more pronounced in the United States than it was anywhere else in the world.

Jeffrey D. Johnson: You've taken that guidance from mid single digits to six to eight scanner and Cadcam services came in obviously strongly in the double digits upper teens.

Jeffrey D. Johnson: Should we think about kind of that double digits, maybe not the upper teens double digits is kind of where does the scanner and services continues this year and you are.

Jeffrey D. Johnson: You are clear aligner revenue guidance kind of still in the mid single digits I think last quarter, we were talking about both those segments being mid single digit growers. It seems like to me now maybe the raise here is being driven more by the scanner <unk> services.

Cause the market stable, then maybe to clear aligner revenue is still kind of expect it to be in that mid ish single digits is that a fair kind of way to look at guidance.

Joseph Hogan: But I can't attribute any change in the marketplace because of them not advertising it at this point. Great, great to hear. Thank you so much. I appreciate the commentary.

Jeffrey D. Johnson: That's a fair way to look at it Jeff I mean, you would see given the new products that we have with lumina and <unk>, we'll see a little bit faster growth. We're very pleased with what we saw in the first quarter typically first quarter, you don't have a sequential <unk>.

Operator: Thanks. Thank you. One moment for questions. Our next question comes from Brandon Vazquez with William Blair. You may proceed.

Operator: Hi everyone, thanks for taking the question. I want to focus for a second on the team side. You know, you have the Palo Alto Expander out there now, getting great reviews, and it seems like it closes, if I'm understanding the numbers correctly, maybe 20% of that market that you haven't been able to hit before. This is such a big opportunity.

Jeffrey D. Johnson: And revenue from the fourth quarter being an equipment business. So we're very pleased with what we saw there. But then we also look at the clear aligner business and we expect to be able to to grow and continue to grow there.

Jeffrey D. Johnson: Both in terms of the investments that we're making in a relatively stable environment and some of the new products that should help supplement that growth.

Joseph Hogan: I'm curious if you can just reflect on like, how commercialization within teams looks in the next couple of years now that you have kind of a broader and more full portfolio here, compared to the prior couple of years? And what does that mean for growth rates within that team section and adoption within teams that's underpenetrated relative to other teams as we look forward to the next couple of years? Thanks. That's a good question, Brandon.

Speaker Change: Yes, that's helpful and then one.

Speaker Change: One other follow up I think it's been asked in the past maybe at an analyst day or something I don't remember if you have given a clear answer.

Speaker Change: But it's something I keep getting asked here more recently and that as a percentage of your patient base or maybe orthodontic cases, they get financed through some sort of.

Speaker Change: Third party patient financing company, we have seen in areas like full arch.

Speaker Change: Some of the aesthetic procedures outside of dental.

Speaker Change: We're lending standards have gone up FICO scores have gone from the 500 to 700, something like that to qualify for patient financing and this.

Joseph Hogan: You know, I think, you know, we, as we mentioned, it's 20%. And then we don't, you know, we call them tweens, really, they're young students before they really hit the teen years and have, you know, mature dentition.

Speaker Change: Cost of capital and tougher capital environment. So what percentage do you know what percentage of roundabout, what cases get financed and if those lending standards have changed at all or put any incremental pressure on on patients here more recently thanks.

We see Jeff is it varies country by country I'll say U S is being made the most in our carbide ortho and GP together roughly a third of the cases that we see get some type of external financing remember many many patients are or parents will pay in advance that's great for doctors, many doctors, especially ortho. So we'll do some type of kind of internal financing.

Joseph Hogan: With Invisalign First and now with IPE, we can handle the 20% that's out there on phase one. And, you know, some teens just need, the tweens just need dental expansion, and some of you really have to split the suture and widen the palate overall. We feel in both those cases, with IPE and Invisalign First, these are very unique products specific to that area, and we think it'll actually make doctors that aren't comfortable with phase one maybe even more comfortable now because of the impact on patients is not, you know, what it was before when you tried to work these kinds of cases with wires and brackets or Hyerix expanders and those kinds of things. And we didn't tie it all together.

Speaker Change: We kind of pay as you go and so on and many doctors are continued to do that especially in the tougher environment and we're doing things to help doctors to try to give them a little bit more extension in payments. So that they can provide and pass that onto to their patients as well and we'll work with.

Speaker Change: DSO partners to really try to help them work with these external companies to try to give better financing rates to try to get these patients to go into treatment. So we are well aware. We know we can help we have the balance sheet and the cash to be able to help with our customers. So that they can pass that on.

Joseph Hogan: The new Lumina scanner has such a broad bandwidth from a scanning standpoint. It scans that pilot that you have to cover with Invisalign first extremely well, so those technologies thread together very well out there. So we're excited about it, and there will be more to come. Thank you. One moment for questions. Our next question comes from John Block with Stiefel. You may proceed. Thanks, guys. Hey, Joe, good afternoon. I'm going to ask, too, maybe just the first one.

Speaker Change: And that's something that we want to keep working towards.

Speaker Change: John any any change to note over just the past few months, even in those lending standards getting tougher or do you feel like that stable as well as just kind of the overall environment as you've described that way I look at that as more stable I think there was a lot of things.

Operator: You know, throughout the quarter, there was sort of like an obsession or a big focus from investors on month-to-month trends. There was talk about February strength and March weakness. I don't think anyone really knew if it was the consumer or the calendar or both. So maybe you guys can talk a little bit about how it played out for you guys. Elaborate on February and March.

Speaker Change: Things if you go back to last year people were really getting a bit of sticker shock in terms of the higher interest rates. When they came to to try to go into treatment. I think people are past that I think when I when I see this or what I hear from doctors or or see from our customers that it's it's a little bit more stable there is not a big change.

Speaker Change: Thank you.

John F. Morici: And then, as much as you can, just touch April here for the first, you know, two to three weeks, and then I'll ask you to follow up. Thanks. Yeah, John, this is John. You know, as we talk about the quarter and think about how we're very pleased with our results in Q1, we saw stability, as Joe mentioned, and that really continued from the end of the year and into the quarter, less about month to month. I mean, it was the stability and then, then the execution that we had to do throughout the quarter with our product. Okay, um, in order to shift gears, John, I might stick with you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Michael Cherny with Leerink Partners you May proceed.

Michael Ryskin: Hey can you hear me okay.

Speaker Change: Thank you for your time.

Speaker Change: Okay.

Michael Ryskin: Just relative to the spend I want to dive in a little bit more if possible.

Michael Ryskin: You talked about the investment in growth can you delineate relative.

Michael Ryskin: Relative to the investment how youre thinking about the growth into call your core markets for some of the new product launches.

Michael Ryskin: And especially with regards to the ramp on the printing side, how much incremental printing spend so to speak is coming now versus where you think it's going to grow with the run rate should be on ramping that overtime.

Michael Ryskin: Yes, I think we have a core business that we're running and obviously there is a certain amount of investment that you have to be able to grow our route sales sales and marketing and the go to market activities that we have there's also R&D spending that we've had throughout the throughout the time and now is that R&D in any case of cubic cure.

John F. Morici: I believe the wording is slightly above, you know, the 2023 OM, which I think is 21.4% unchanged despite the higher revenues, the midpoint going from roughly 5% to 7%. So can you talk about where that extra spend is going? Do we see the returns on that this year? Or will that aid and give you some more tailwinds into 2025?

Michael Ryskin: Now turning this into more of a platform to be able to build our our three D printing theres a certain amount of spend that we have.

Michael Ryskin: How that lays out.

Michael Ryskin: It varies over time that will have but rest assured we know how to scale products. We know how to scale <unk> printing will make the right investments to be able to start scaling up that that direct fab printing, while while making sure that the core business has the right investments for growth and we'll balance that as we go forward.

John F. Morici: And then just to add to that, you know, the new higher guidance doesn't, implies sort of 6% in the back part of this year, year over year growth, which isn't too dissimilar from 1H. But the comps get more difficult, so the stacks need to accelerate. Why should we be comfortable with that?

John F. Morici: Is that just an accelerating contribution from some of those new products like Lumina and IPE? Thanks, guys. I think that latter point is how I would look at it, John. You know, we're making investments. We make investments throughout the year. We get different returns on the shorter and longer-term investments that we make, depending on whether they're short or long-term.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Jason Bednar with Piper Sandler You May proceed.

Hey, good afternoon.

Thanks for taking the questions first wanted to build on some of the macro questions have been asked I don't want to belabor the point, but.

Jason M. Bednar: Other consumer discretionary companies called out a downtick in March it doesn't sound like you saw any of that but just wanted to confirm that's the case with respect to invisalign demand and.

Operator: But, you know, what we see is a stable environment, continued investments in go-to-market activities. We have new products coming, so that helps us accelerate with things that we'll have on the ITERO side as well as IPE and others that Joe talked about where we really get approval later in the year. So, you know, it's about a stable environment, making investments in that environment, and then executing on our growth strategies. And that should give us the benefits that you described in the second half. Thank you. One moment for questions. Our next question comes from Jeff Johnson with Beard. You may proceed.

Jason M. Bednar: Maybe speak to your confidence to drive clear aligner volumes going forward now that comps turn a little bit tougher.

Jason M. Bednar: How much do you think you might need to fund that growth with investments to drive more traffic into the office.

Speaker Change: Hey, Jason on the first part is we talk about the stable environment that we've seen that stability of it.

Speaker Change: We read and I read.

Jason M. Bednar: What's going on there with the consumer investments some concerns, particularly on the luxury goods or what's going on out there but.

Operator: Scanner and CAD CAM services came in, obviously, you know, strongly in the double digits and upper teens. Should we think about kind of that double digits, maybe not in the upper teens, but double digits is kind of where the scanner and services industry continues to grow this year. And your clear line of revenue guidance is kind of still in the mid-single digits. I think last quarter we were talking about both those segments being mid-single digit growers.

Jason M. Bednar: Honestly I think often what we see and as a follow up here just really pick up the U S data and what we see as you know the difference is all around the world and that's what's great about having international business you have some countercyclical in the sense of the demand patterns and what goes on out there, but I would say there is nothing that we would highlight right now that would say that we think something has changed what.

Jason M. Bednar: We saw in the second half of 2023 to what we saw in the first quarter of this year Chinese yes, and in terms of investments we make the investments that we need to go to market and manufacturing and other expansion as we continued to grow we will continue those investments, but as we've talked about not only for the.

Operator: It seems like to me now, maybe the raise here is being driven more by the scanner and CAD CAM services. And as Joe calls the market stable, then maybe the clear line of revenue is still kind of expected to be in that mid-ish single digits. Is that a fair way to look at guidance? That's a good way to look at it, Jeff.

Jason M. Bednar: Now the second quarter, when we were talking about that sequential improvement in op margin and what we've talked about in total year, where we expect the year over year improvement in margin, where we're making sure that we're investing with that right amount of profitability to still be able to grow into a market and expand.

John F. Morici: I mean, you know, given the new products that we have with Lumina and iTero, we'll see a little bit faster growth. But we're very pleased with what we saw in the first quarter. Typically, in the first quarter, you don't have a sequential gain in revenue from the fourth quarter being an equipment business. So we're very pleased with what we saw there. But then we also look at the clear aligner business, and we expect to be able to grow and continue to grow there, both in terms of the investments that we're making in a relatively stable environment and some of the new products that should help supply. Yeah, that's helpful.

Jason M. Bednar: The opportunity to expand on the opportunities that we have but then being respectful in terms of what margin we need to be able to deliver for the company.

Speaker Change: Alright, very helpful, Joe and John and maybe one follow up here.

Speaker Change: So maybe a multi parter on team so bear with me.

Speaker Change: Might be a nuanced look.

Speaker Change: It seems like a lot of emphasis here just recently in product development and marketing, that's really trying to tap into that much younger market that phase one opportunity IP fits in there your new marketing branding plan is an emphasis there.

John F. Morici: And then one other follow-up question, I think it's been asked in the past, maybe on analyst day or something. I don't remember if you gave a clear answer. But it's something I keep getting asked here more recently.

Speaker Change: Recent benefits for younger patients with Lumina.

Speaker Change: It's really it seems intentional but wondering if you could bifurcate for us how youre Invisalign business is performing in this younger patient population relative to the team as a whole where does your penetration sit in those younger patients versus the broader team channel and maybe what kind of outsized growth youre expecting from from this part of the channel as we look out over the near to intermediate term.

John F. Morici: And that's a percentage of your patient base or, maybe, orthodontic cases that get financed through some sort of third-party patient financing company. You know, we have seen in areas like full arch implants, some of the aesthetic procedures outside of dental, where lending standards have gone up, FICO scores have gone from giving them a little bit more extension in payments so that they can provide and pass that on to their patients as well. And we'll work with DSL partners to really try to help them work with these external companies to try to give better financing rates to try to get these patients into treatment.

Speaker Change: Hey, Jason just to back up on your question just give you a kind of a conceptual view when you think of phase one it's actually been controversial in the orthodontic market for years. Some orthodontists don't wanted to phase one because as I mentioned before the kind of devices that have been used as they've been kind of difficult from a from a consumer standpoint.

And so those wafer all permanent dentition and move on to there we feel confident that with Invisalign first now for dental expansion and then palate expansion or a morphological change IP will do that and we think it will attract more orthodontists to begin phase one treatment, but this isn't an industry. It takes a while for things to bake in and so then the gain confidence and I understand it because.

John F. Morici: So we're well aware. We know we can help. We have the balance sheet in cash to be able to help our customers so that they can pass that on. And that's something that we want to keep working on. John, any change to note over just the past few months, even in those lending standards getting tougher, or do you feel like that's stable, as well as just kind of the overall environment as you've described that way? Thanks.

Speaker Change: We're working with kids Tees and miles.

Dentition, but we actually think of a significant amount of growth could come from this area, but we think it will take time.

John F. Morici: I look at that as more stable. I think there were a lot of things if you go back to last year, people were really getting a bit of sticker shock in terms of the higher interest rates when they came to, to try to go into treatment. I think people are past that.

Speaker Change: But it's been a great focus for us and it's going to be interesting to watch how orthodontists in the future actually focused on phase one phase II because these kinds of devices make it simpler for them and for patients in the future. So right now I can't I can't really just kind of give you. The ground rules on that that we've changed those rules and essentially but I can't project exactly.

John F. Morici: I think when I see this, or what I hear from doctors, or see from our customers, that it's a little bit more stable. There's not a big change. Thank you. Thank you. One moment for questions. Our next question comes from Michael Cherny with Lyric Partners. He may proceed. Hey, can you hear me okay?

Where it's going.

Speaker Change: Any sense penetration wise, or maybe where you're at relative to the broader team market.

Speaker Change: I'll say, we're just in that sorry, I mean, they have even invisalign first as you sometimes on more permanent dentition too. So it's hard you would have to split our cases out of Invisalign first is what the age of patients or whatever but as we get more data and we really get through with IP and some more specificity around this will we'll share it with you and the rest of the people the only thing.

Operator: Yeah, we can hear you fine. Okay, so just relative to the spend, I want to dive in a little bit more if possible. You talked about the investment growth; can you delineate, relative to that investment, how you're thinking about the growth into what you call your core markets for some of the new product launches? And especially with regard to the ramp on the printing side, how much incremental printing spend, so to speak, is coming now versus where you think it's going to grow, and what the run rate should be on ramping that over time?

I mean, if you've tracked us for a while you know that our average age of teen patients gets younger and younger I think were 14 now versus 15 plus before.

Speaker Change: So I mean, that's a reflection of just being able to go after those younger patients with first.

Speaker Change: Alright very helpful. Thank you.

Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Nathan Rich with Goldman Sachs. You May proceed.

Great.

Afternoon.

Nathan Rich: Thanks for the questions.

Operator: Yeah, I think, you know, we have a core business that we're running. And obviously, there's a certain amount of investment that you have to be able to grow around sales, sales, and marketing, and, you know, the go-to-market activities that we have.

Nathan Rich: I wanted to go back to the guidance.

Nathan Rich: I know, it's kind of been touched on a few different times, but I wanted to ask on the clear aligner revenue outlook. It looks like you're raising the outlook for the full year by about 1% I guess can you maybe just.

John F. Morici: There's also R&D spending that we've had throughout the throughout the time. And now is that R&D in the case of, you know, acquiring Cubicure and now turning this into, you know, more of a platform to be able to build our, our 3d printing, there's a certain amount of spend that we have, you know, how that lays out, it it varies over time that we'll have, but rest assured, we know how to scale products, we know how to scale 3d printing, we'll make the right investments to be able to start scaling up that that direct fab printing, while while making sure that the core business has the right investments for growth. And we'll balance that as we go forward. Got it.

Nathan Rich: Touch on what changed specifically with respect to that outlook. It sounds like maybe its expectations around <unk> and DSP versus market improvement.

Nathan Rich: But I'd be curious any color you could share there and maybe anything on team versus adult within the updated guidance would be great.

Speaker Change: Yeah I'll start Nate.

Nate: So overall, we went from we had talked to a mid single digits us call it 5% to raising it to the midpoint of 7% on a year over year, so up two points and really that's a reflection of a few things. One is is the continued stability that we're seeing we're operating in an environment. That's more stable, we saw thats come in coming into the fourth quarter and now.

Nate: Ill now into this quarter as well so that's good we want that stability. There and then you then you look at the execution that we have about <unk> on our core business to be able to grow.

John F. Morici: Thank you. Thank you. One moment for questions. Our next question comes from Jason Bednar with Piper Sandler. You may proceed. Hi Jason.

Nate: With a lot of the innovations that we have to promotions and other things that we have as we get into further into teen season supplemented with the various new products that we talked about we feel really good about our alumina and that launch that we have in <unk> and the further expansion that that can that can drive as well as some of the new products like <unk> and other.

Operator: Hey, good afternoon. Hey, thanks for taking the questions. First, I want to build on some of the macro questions that have been asked. I don't want to belabor the point, but, you know, other consumer discretionary companies called out a downtick in March. It doesn't sound like you saw any of that, but just wanted to confirm that's the case with respect to Invisalign demand and maybe speak to your confidence to drive clear liner volumes going forward now that comps are turning a little bit tougher.

Nate: To really not only help those unit sales there, but that as Joe described we had a pull in other products around Invisalign first and others to really helped drive.

Operator: You know, how much do you think you might need to fund that growth with investments to drive more traffic into the office? Hey, Jason, the first part is, you know, we talk about the stable environment, that we've seen that stability of it. We, we read, and I read, you know, what's going on there with consumer investment, some concerns, particularly on luxury goods, or what's going on out there. But, you know, honestly, I think often what we see and listen to, follow us here, just really pick up on US data. And what we see is, you know, differences all around the world.

Nate: Some of that growth that we could see in the teen business. So it's a combination of things Nate, but it's what we're seeing in stability, how we're executing on our core strategies and then some of the new products really supplementing that extended growth to help us and that's why we adjusted our total year.

Nate: Okay. That's helpful.

Nate: And then John maybe just sticking with you.

John F. Morici: The <unk> operating margin I know up slightly sequentially, but down year over year and I think the.

John F. Morici: Historically, it's been a little bit variable, but you've seen more of a step up in the second quarter than I think what the guidance implies.

Joseph Hogan: And that's what's great about having international business; you have some countercycling in a sense of the demand patterns and what goes on out there. But I would say there's nothing that we would highlight right now, John. It would say that we think something's changed from what we saw in the second half of 2023 to what we saw in the first quarter of this year. Yeah, and in terms of investments, you know, we make the investments that we need to go to market and manufacture and other expansions as we continue to grow.

John F. Morici: Anything to call out with respect to FX or I think you mentioned some manufacturing.

John F. Morici: <unk> spend but just anything there that we should keep in mind is it.

John F. Morici: Regarding the margin cadence.

And certainly we are seeing a stronger dollar so that that's something that we talked about when we think about our guide too.

John F. Morici: We see a stronger dollar coming out of out of the first quarter into the second quarter, our guidance reflects that as well, but then you look at the continuing investments that we're making to bear to drive.

Joseph Hogan: But as we've talked about, not only for the second quarter, when we're talking about that sequential improvement and higher margin, but what we've talked about for the full year, where we expect the year over year improvement in margin, we're making sure that we invest with that right amount of profitability to still be able to grow into a market and expand the opportunity, expand on the opportunities that we have, but then being respectful in terms of what margin we need All right, very helpful, Joe and John. And maybe one follow-up here to maybe a multi-parter on the team.

John F. Morici: More submitters more doctors into our ecosystem and then ultimately drive more and more utilization some of it sets that core business that we have to be able to drive growth and some of it's some of the new products, where theres a certain amount of of Opex spend that we have with that but we're being very mindful of what we can do to be able to drive growth and then what it all.

John F. Morici: So means from an operating margin standpoint, and we're delivering that sequential improvement from <unk> to <unk> and operating margin and then talk to the total year of being up on a year over year basis.

Joseph Hogan: So bear with me. This might be a nuanced look. It seems like a lot of emphasis here just recently in product development and marketing that's really trying to tap into that much younger market, that phase one opportunity. You know, IPE fits in there, your new marketing branding plan has an emphasis there. There seems to be some benefits for younger patients with Lumina. It's really, it seems intentional, but I was wondering if you could bifurcate for us.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Erin Wright with Morgan Stanley You May proceed.

Erin Wilson Wright: Great. Thanks.

Erin Wilson Wright: I'll ask me upfront here, but.

Erin Wilson Wright: Follow up on the guidance and I don't want to belabor. This too much but do you think you have better visibility now just on the underlying demand trends globally are would you say that there is still an element or a healthy element of.

Erin Wilson Wright: Macro uncertainty that still embedded in your guidance in some conservatism there and then second would be on alumina into launching just can you talk about where youre seeing the most success with the launch in the target markets and promotions that where you're focused in terms of expanding share and upgrades as well. Thanks.

Joseph Hogan: How is your Invisalign business performing in this younger patient population relative to teens as a whole? Where does your penetration sit in those younger patients versus the broader teen channel? And maybe what kind of outsized growth you're expecting from this part of the channel as we look out over the near to intermediate term? Hey, Jason, I'll just back up on your question and give you kind of a conceptual view. When you think of phase one, it's actually been controversial in the orthodontic market for years; some orthodontists don't want to do phase one because, as I mentioned before, the kind of devices that have been used have been kind of difficult from a consumer standpoint. And so those wait for all permanent dentition to erupt and then move on to there.

Erin Wilson Wright: Hi, Aaron This is John I'll talk a little bit about visibility and guidance I think what we enjoy now and what we want to be able to have in an operated virus more stability and that stability is there markets are open there's a higher overall higher inflation.

John F. Morici: And interest rates, but people are operating in that environment that stability transcends. Its two other things that we have we see the Michigan index or other indices that kind of point to that stability based on that stability. The investments that we're making how we're going to market. Some of the new products that we have other things that we know that on a core <unk>.

John F. Morici: <unk> drive our business as well as the new products and initiatives we have that.

John F. Morici: Thats, what gives us confidence to be able to have a guidance that we gave for Q2 and what it means for the total year.

Joseph Hogan: We feel confident that within this line, first now for dental expansion, and then for palate expansion, or a morphological change, IPE will do that. And we think it'll attract more orthodontists to begin phase one treatment. But this is an industry that takes a while for things to bake in and for them to gain confidence. And I understand that because you're working with kids, their teeth, and mouths, and their dentition. But we actually think that a significant amount of growth could come from this area, but it'll take time.

John F. Morici: On alumina piece.

John F. Morici: It's Joe obviously as well.

Speaker Change: As I mentioned in the closing on my script, we're really excited about that technology, we've been working on it for six years.

Speaker Change: Is a true new platform, it's not a derivative of the oil confocal imaging platform and there's really no other scanner in the world, it's like that and how we build it so.

Speaker Change: And it'll take a while for the I think the market to absorb that as you know we have to do this doctor by Doctor in place by place, but we've had a very enthusiastic response from the orthodontic community, but also the general dentistry community to even though we're not.

Speaker Change: Completely ready for the restored at peace and we mentioned will be the fourth quarter of this year, we'll have that capability out.

Joseph Hogan: But it's been a great focus for us, and it's going to be interesting to watch how orthodontists in the future actually focus on phase one, phase two, because these kinds of devices make it simpler for them and for patients in the future. So right now, I can't I can only just kind of give you the ground rules on that, that we've changed those rules, in a sense, but we I can't project exactly where it is, penetration wise, or maybe where you're at relative to the broader team market. I'd say we're just in that story.

Speaker Change: Just the speed of that won the simplicity of being able to scan.

Speaker Change: The dimension dimensional tolerances and all of its use in the sense of both comprehensive and orthodontic cases are really unmatched. So we're excited about that but we just have to take this thing we've only had it out now for roughly a couple of months, but.

Speaker Change: But we are expecting to have a really strong year, but more importantly to have that really be set the standard from a scanner standpoint for the industry going forward.

Thank you.

Speaker Change: And as a reminder to ask a question. Please press star one on your telephone keypad.

Joseph Hogan: I mean, even Invisalign First is used sometimes on more permanent dentition, too. So it's hard, we'd have to split our cases out of Invisalign First based on what the age of patients are or whatever. But, you know, as we get more data and we really get through with IPE and some more specificity around this, we'll share it with you and the rest of the people. The only thing that, you know, I mean, if you've tracked us for a while, you know that our average age gets younger and younger. I think we're 14 now, so go after the, All right.

Speaker Change: And our next question comes from Michael <unk> with Bank of America. You May proceed.

Speaker Change: Hey.

John Thanks for taking my question and congrats on Hey, Michael on a quarter lag.

Speaker Change: Okay.

Michael: I want to follow up on something I think Joe you touched on the prepared remarks, if I caught it correctly, you've kind of pointed to.

Michael: A little bit of strength in the U S or so or Americas or so in the quarter.

Michael: So that for us it seems like it's one of the stronger results.

Michael: And a number of quarters just wanted I was just wondering if you could expand on that a little bit is it the alumina launches of the fact that you're moving into into younger.

Operator: Very helpful. Thank you. Thank you. One moment for questions. Our next question comes from Nathan Rich with Goldman Sachs. You may proceed. Great, good afternoon. Hi, and thanks for the questions. I wanted to go back to the guidance.

Michael: Younger teas, and younger kids, which obviously is going to be little more ortho focused and any structural change youre seeing there with that.

Michael: That group of dentists or.

I'm just reading it too much.

Speaker Change: Michael I'm, sorry, I understand your question I would say.

Speaker Change: We feel it's we've seen more stability in that market. This year than we have last year.

Operator: I know it's kind of been touched on a few different times, but I wanted to ask about the Clearliner revenue outlook. It looks like you're raising the outlook for the full year by about 1%. I guess, could you maybe just touch on what changed specifically with respect to that outlook? It sounds like maybe it's expectations around IPE and DSP versus market improvement, but I'd be curious, any color you could share there, and maybe anything on teen versus adult within the updated guidance would be great. Yeah, I'll start, Nate.

Speaker Change: We've always known that the teen segment of that much more solid in the adult segment, but the salt segment held up for us in the quarter, two and so that aspect of the adults with good force also but I'm very cautious about projecting this market going forward because as you can see with a lot of the surveys that are done this moves pretty dramatically from month to month, but again, it's not just the United States.

Speaker Change: We're focused on the global market has been good for us too in that sense. So we're going to take this thing a month at a time, but we're confident enough to say this is stable.

John F. Morici: So overall, we went from, you know, we talked to a mid single-digit, so call it 5%, to raising it to the midpoint of 7% on a year over year basis, so up two points. And really, that's a reflection of a few things. One is the continued stability that we're seeing; we're operating in an environment that's more stable. We saw that, you know, coming into the fourth quarter and now into this quarter as well.

Speaker Change: We have products in here that are very helpful from an orthodontic standpoint, and new like you mentioned alumina and also IPA that gives us more ground to stand on the sense of those orthos and so we're excited about that but in no way do I think theres a phase change between what we saw last year and this year and worked so it's just more stable and more cotton.

Speaker Change: Annuity is another word that I'd use to describe it.

John F. Morici: So that's good. We want that stability there. And then you look at the execution that we have with Visalign first and others to really help drive some of that growth that we can see in the team business. So it's a combination of things, Nate, but it's what we're seeing instability, how we're executing on our core strategies, and then some of the new products really supplementing that extended growth to help us. And that's why we adjusted our total. Okay, that's helpful.

Speaker Change: Okay, and if I could squeeze in a follow up if there's time.

Speaker Change: Again also impressed by the DSP touch of progress.

Speaker Change: You called it out in the deck.

Speaker Change: You've got some additional launches later this year, you've got the 14th stage Touchable honor offering you're talking about.

Speaker Change: Any way you can start framing in terms of.

Speaker Change: Would you incorporate that into guidance at some point in terms of where you think that can go in terms of volumes revenues or any update on longer term, how you see DSP and touch on evolving overtime. Thanks, yeah.

John F. Morici: And then, John, maybe just sticking with you, the 2Q operating margin, I know, up slightly sequentially, but down year over year. And I think, you know, historically, it's been a little bit variable, but you've seen more of a step up in the second quarter than I think the guidance implies. Anything to call out with respect to, you know, FX or, you know, I think you mentioned some manufacturing cost spend, but just anything there that we should keep in mind as it regards the margin of the market? Okay.

Speaker Change: I'll take that one look DSP is.

Speaker Change: Is very popular because it it really serves the needs that doctors have they went up.

Speaker Change: They want to be able to buy things kind of the way they want to buy they want to be able to instead of making things or doing things themselves. They can use use our liners as part of that DSP and be able to treat those types of cases, and so we like that that's incremental for us in terms of what we see there and they can also then use a lot of that.

John F. Morici: Well, and certainly we are seeing a stronger dollar. So that's something that we talked about when we think about our guide to, you know, we see a stronger dollar coming out of the first quarter into the second quarter. Our guide reflects that, as well. But then you look at the continuing investments that we're making to be able to drive more submitters, more doctors into our ecosystem, and then ultimately drive more and more utilization.

Speaker Change: Ah liners that they have for retention and thats, great too because thats typically incremental volume that we have so I think when we see us rolling this out like like we said a few years ago was U S and North America now into Europe.

Speaker Change: It continues to do what we expected to do doctors start they adopt it more and more because part of their workflow and we see positive volume from that end.

John F. Morici: Some of it's that core business that we have to be able to drive growth. And some of it's some of the new products where there's a certain amount of OPEX spend that we have with that.

Speaker Change: And success for projects programs like that we will continue to expand those out.

Speaker Change: Alright, Thanks, Michael.

John F. Morici: But we're being very mindful of what we can do to be able to drive growth, and then what it also means from an operating margin standpoint. And we're delivering that sequential improvement from 1Q to 2Q in operating margin, and then we talk about the total year of being up. Great. Thank you. Thank you.

Speaker Change: Operator, we can take one more question.

Speaker Change: Thank you one moment for questions.

Speaker Change: And our last question comes from Kevin Caliendo with UBS you May proceed.

Kevin Caliendo: Hi, Thanks for getting me in I appreciate it.

Kevin Caliendo: I have two questions. So the first one is on heartland.

Kevin Caliendo: Can you talk a little bit about the benefits of the Heartland investment.

Kevin Caliendo: Operationally and also Heartland is my understanding is a pretty profitable business and now with two separate investments there.

Operator: One moment for questions. Our next question comes from Aaron Wright with Morgan Stanley. You may proceed. Great.

Operator: Thanks. Hi. I'll ask my two up front here, but I'll follow up on the guidance. And I don't want to belabor this too much, but do you think you have better visibility now just on the underlying demand trends globally, or would you say that there's still an element, or a healthy element of macro uncertainty that's still embedded in your guidance and some conservatism there? And then, second, on Lumina and the launch.

Kevin Caliendo: How does how does their profits or how does the accounting work for that from your perspective at this point.

Kevin Caliendo: And then secondly, if you can provide I guess with regards to the guidance I think we understand it but was that in any way based on the trends that you've seen so far in April or if you can elaborate on those.

Speaker Change: And any way that would be great. Thanks.

Joseph Hogan: And just can you talk about where you're seeing the most success with the launch and the target markets and promotions where you're focused in terms of expanding share and upgrading as well? Thanks. Hi Aaron, this is John.

Speaker Change: I can start with the guidance.

Speaker Change: Part of that Kevin look we use a lot of factors to look at where we're our guidance is so we're using data from Q1 and the most recent information but.

John F. Morici: I'll talk a little bit about visibility and guidance. I think, you know, what we enjoy now and what we want to be able to have in an operating environment is more stability. And that stability is there. Markets are open, there's higher overall inflation and interest rates, but people are operating in that environment. That stability transcends to other things that we have.

Speaker Change: It goes back to the stability that we've seen.

Speaker Change: Can see it in a lot of the surveys and other things that a lot of people do but what we see is that stability coupled with what we're trying to do to go to market to drive the initiatives, we have and the new products that we have so that's.

John F. Morici: We see the Michigan Index or other indices that kind of point to that stability. Based on that stability, the investments that we're making, how we're going to market some of the new products that we have, other things that we know that can, on a core basis, drive our business, as well as the new products and initiatives that we have. That's what gives us confidence to be able to have the guidance that we gave for Q2 and what it means for the company. And they're on an aluminum piece.

Speaker Change: A key part of what we factor in into our guidance no change from what we what we normally do this is this is.

Speaker Change: How are you.

Speaker Change: Come together in terms of our guidance standpoint.

Speaker Change: In terms of Heartland, we look at Heartland as it's a great investment from.

Speaker Change: Investing in a company that shares a digital orthodontic mindset that we have to be able to do things in a similar mindset to be able to.

John F. Morici: Joe, obviously, as I mentioned in the closing of my script, we're really excited about that technology. We've been working on it for six years. It is a true new platform. It's not a derivative of the old confocal imaging platform, and there's really no other scanner in the world that's like that and how we've built it.

Expand like they're expanding to be able to get into markets that.

Speaker Change: In some cases, we don't have much more.

Speaker Change: Market share with or or or a big presence there and they share that same mindset that expansion.

Speaker Change: <unk> been around for a lot of years as well.

Speaker Change: With this investment.

And 5% Theres, no consolidation or anything else that's required.

Joseph Hogan: And it'll take a while for the market to absorb that, as you have to do this doctor by doctor and place by place. But we've had a very enthusiastic response from the orthodontic community, but also the general dentistry community, too, even though we're not completely ready for the restorative piece. And we mentioned it'll be the fourth quarter this year; we'll have that capability out. It's just the speed of that wand, the simplicity of being able to scan, the dimensional tolerances, and all that's used in the sense of both comprehensive and orthodontic cases are really unmatched. So we're excited about that, but we just have to take this thing.

Speaker Change: We'll evaluate going forward on whether there is any.

Speaker Change: Mark to market that we have to do going forward, but its a continuation of that investment.

Speaker Change: The expansion that they're doing and we're pleased with the results that we've seen over the last year.

Speaker Change: Okay Super helpful. Thank you.

Speaker Change: Thanks, Kevin.

Speaker Change: Thank you usually conclude.

Speaker Change: Sorry go ahead operator.

Speaker Change: 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.

Shirley Stacy: Thank you so much and thank you everyone for joining US today, we look forward to speaking to you at upcoming financial conferences and industry meetings, including the American Association of Orthodontists meeting in New Orleans on May 4th and fifth if you have any questions. Please give us a call. Thank you.

Operator: We've only had it out now for roughly a couple months, but we are expecting to have a really strong year. But, more importantly, to have that really set the standard from a scanner standpoint for the industry going forward. And as a reminder, to ask a question, please press star 1 1 on your telephone keypad. And our next question comes from Michael Ryskin with Bank of America. You may proceed.

Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Shirley Stacy: [music].

Operator: Hey, hey, Joe, John, thanks for taking the question and congrats on the quorum. I want to follow up on something I think, Joe, you touched on in the prepared remarks. If I caught it correctly, you kind of pointed to... A little bit of strength in U.S. Ortho or America's Ortho. Spit out for us.

Shirley Stacy: Okay.

Shirley Stacy: [music].

Okay.

Shirley Stacy: [music].

Joseph Hogan: It seems like it's one of the stronger results, and a number. I'm just wondering if you could expand on that a little bit, you know, is it the Lumina launch? Is it the fact that, you know, you're moving into younger, uh, Younger Teens and Younger Kids, which obviously is going to be a little bit more ortho-focused? Any structural change you're seeing there with that? Unknown Speaker Yeah, I know, Michael. I understand your question. I'd say, you know, it is.

Shirley Stacy: Yeah.

Shirley Stacy: [music].

Shirley Stacy: Okay.

Joseph Hogan: We feel it's, you know, we've seen more stability in that market this year than we did last year. You know, we've always known that the teen segment of that is much more solid than the adult segment, but the adult segment held up for us in the quarter too. And so that aspect of the adults was good for us also.

Shirley Stacy: [music].

Joseph Hogan: But I'm very cautious about projecting this market going forward because, as you can see with a lot of the surveys that are done, this moves pretty dramatically from month to month. But, you know, again, it's not just the United States market we're focused on. The global market has been, you know, good for us too in that sense. So we're going to take this thing a month at a time, but we're confident enough to say this is stable, that we have products here that are very helpful from an orthodontic standpoint and new, like you mentioned Lumen and also IPE, that gives us more ground to stand on in the sense of those orthos.

Joseph Hogan: And so we're excited about that, but in no way do I think there's a phase change between what we saw last year and this year in ortho. It's just more stable and with more continuity is another word that I'd use to describe it.

Joseph Hogan: And if I could squeeze in a follow-up, if there's time, you know, again, also impressed by the DSP touch of progress. You've got some additional launches later this year. You've got the 14-stage touchable honor offering you're talking about. Any way you can start framing it in terms of, would you incorporate that into guidance at some point in terms of where you think that can go in terms of volumes and revenues or any update longer term on how you see DSP and touch up evolving? Yeah, Mike, I'll take that one.

John F. Morici: Look, DSP is, is very popular because it really serves the needs that doctors have. They want to, they want to buy things kind of the way they want to buy them, they want to be able, Instead of making things or doing things themselves, they can use, use our aligners as part of that DSP, and be able to treat those touch-up cases. We like that. That's incremental for us in terms of what we see there.

John F. Morici: They can also then use a lot of the aligners that they have for retention, and that's great too, because that's typically incremental volume that we have. I think when we see us rolling this out, like we said a few years ago, it was the U.S. and North America, and now it's into Europe.

John F. Morici: It continues to do what we expect it to do. Doctors start using it more and more because it's part of their workflow, and we see positive volume from that. And in terms of success for projects, programs like that, we'll continue to expand those out. All right.

Operator: Thanks, Michael. Operator, we can take one more question. Thank you. One moment for questions. And our last question comes from Kevin Caliendo with UBS. You may proceed. Hi, thanks for getting me. I appreciate it. I have two questions.

Operator: So the first one is Heartland. Can you talk a little bit about the benefits of the Heartland investment operationally and, Also, Heartland, my understanding, is a pretty profitable business, and now with two separate investments there. How does their profits or how does the accounting work for that from your perspective at this point? And then secondly, if you can provide, I guess, with regard to the guidance. I think we understand it, but was that in any way based on the trends that you've seen so far in April? Or if you can elaborate on those points in any way, that would be great.

John F. Morici: Thanks. I can start with the guidance part of that, Kevin. Look, we use a lot of factors to look at where our guidance is. So we're using data from Q1 and the most recent information, but it goes back to the stability that we've seen.

John F. Morici: You can see it in a lot of the surveys and other things that a lot of people do. But what we see is that stability coupled with what we're trying to do to go to market, to drive the initiatives we have and the new products that we have. So that's a key part of what we factor into our guidance. No change from what we normally do, come together in terms of a guided step, terms of Heartland. We look at Heartland as this is a great investment from investing in a company that shares a digital, orthodontic mindset that we have to be able to do things in a similar mindset to be able to mark to market that we have to do going forward, but it The expansion that they're doing, and we're pleased with the results that we've seen over the last few years. Very helpful. Thank you. Thanks, Kevin. Well, that actually concludes...

Shirley Stacy: [music].

Operator: Sorry, go ahead, operator. And we have reached the end of our question and answer session. I will now turn the call back over to Shirley Stacy for a closing. Thank you so much. And thank you everyone for joining us today. We look forward to speaking to you at upcoming financial conferences and industry meetings, including the American Association of Orthodontics meeting in New Orleans on May 4th and 5th. If you have any questions, please give us a call. Thank you. Thank you.

Shirley Stacy: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Please see the complete disclaimer at https://sites.google.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Copyright © 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Operator: Greetings. Welcome to the Align first quarter 2024 earnings call. At this time, all participants are in a listen only mode.

Shirley Stacy: 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.

Joseph Hogan: 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 call is Joe Hogan, President and CEO, and John Morici, CFO. We issued our first quarter 2024 financial results today via Business Wire, which is available on our website at investor.aligntech.com. Today's conference call is being 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 and product outlook that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission, available on our website at sec.gov.

Joseph Hogan: Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statement. We've posted historical financial statements with corresponding reconciliations, including our gap to non-gap reconciliation, if applicable, and our first quarter 2024 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.

Joseph Hogan: Good afternoon, and thanks for joining us on our call today. I'll provide an overview of our first quarter results and discuss a few highlights from our two operating segments, System Services and Clear Liners. John will provide more detail on our Q1 financial performance and comment on our views for the second quarter of 2024 in total. Following that, I'll come back and summarize a few key points and open the call to questions.

Joseph Hogan: On a sequential basis, Q1 total revenues were up 4.3%, reflecting a sequential increase in clear line of revenue, with special thanks to the North American Orthodontists, as well as strong systems and services revenues primarily driven by Atera Lumina wand upgrades in North America. During the quarter, we achieved several significant milestones. We completed the acquisition of Cubicure, a leader in direct 3D printing solutions, which is the foundation for our next generation of liner manufacturing. We successfully launched the ITERA Lumina interworld scanner, our next generation of digital scanning technology.

Shirley Stacy: [music].

Joseph Hogan: We launched the Invisalign Palette Expander, our IPE system in the U.S. and Canada, and received regulatory approval for the Invisalign Palette Expander in Australia and New Zealand. Q1 systems and services revenue year-over-year growth reflects non-systems revenues driven by Atera Lumina wand upgrades and higher scanner volumes and increased services revenue from a larger base of scanners sold. On a sequential basis, Q1 systems and services revenue was up 3.1%, reflecting growth from non-systems revenues and higher scanner ASPs, partially offset by lower volumes due to seasonality and a strong fourth quarter.

Speaker Change: Greetings welcome to the align first quarter 2024 earnings call at this time, all participants are in a listen only mode.

Speaker Change: 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.

Joseph Hogan: The ITERA-Lumina inter-aural scanner is available now with orthodontic workflows as a new stand-alone scanner or as a wand upgrade to ITERA Element 5D+. The restorative workflow is expected to be available in the fourth quarter of 2024. In the meantime, GP practices can benefit from the ITERA-Lumina's new multi-direct capture technology that replaces the confocal imaging technology in earlier models. The Arterial Luminous Interworld Scanner has a 3x wider field of capture and a 50% smaller and 45% lighter wand, delivering faster scanning speed, higher accuracy, super visualization, and a more comfortable scanning experience. Overall, we're really pleased with the launch of that TeraLumina scanner; customer feedback has been positive, and we're really excited about the feedback from doctors. So we've included some great verbatims in our webcast.

Speaker Change: The 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 aligns future events and product outlook. These forward looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the securities and.

Speaker Change: Exchange Commission available on our website at SEC Gov.

Speaker Change: Actual results may vary significantly and align expressly assumes no obligation to update any forward looking statements.

Joseph Hogan: Q1 total clear line of revenues was up year over year, reflecting revenue growth across the region, from strong year-over-year volume growth across APAC markets as well as the EMEA region. For the Americas region, Q1 clear liner volume was consistent with prior year; for Q1, total clear liner shipments were up 2.1% sequentially, reflecting seasonality with increased volumes in the Americas regions offset somewhat by EMEA and APAC. For Q1, clear aligner shipments include over 23,000 Invisalign docked Description Cases or DSP Touch-Up Cases primarily from the North America Ortho Channel.

Joseph Hogan: A few key points and open the call to questions I am pleased to report better than expected revenue and earnings for the first quarter and a solid start to the year for Q1 total worldwide revenues were up five 8% year over year, reflecting a three 5% growth from our clear Aligner segment, 75% growth from systems and services on a year.

Joseph Hogan: An increase of approximately 49% year-over-year from Q123. These DSP touch-up cases are a component of the overall DSP program, which consists of retainers and touch-up cases or aligners, and it continues to be an important offering for our customers and their patients. DSP is currently available in the United States, Canada, Iberia, the Nordics, the UK, and most recently in Italy, France, and Poland.

Year over year basis, Q1 revenue growth was up across all regions and was driven by a strong clear aligner volumes, primarily in the Asia Pacific region year over year growth also reflects strength in the orthodontic channel with total Invisalign case starts from teens and younger patients up five 8% year over year, driven by continued momentum across all regions.

Joseph Hogan: From Invisalign first as well as Invisalign DSP touch up cases.

Joseph Hogan: We expect to continue expanding DSP into other country markets in May and Q2, including a 14-stage touch-up aligner offer. For non-case revenues, Q1 was up 7.5% year over year, primarily due to continued growth from Vivera retainers along with Invisalign DSP retainer revenue. In the teen market, nearly 200,000 teens and younger patients started treatment with Invisalign Clear Aligners in Q1, up 5.8% year over year. This represents a record number of teen cases shipped as compared to prior quarters, reflecting strength in APAC and EMEA. Teen starts were up sequentially 1.2%, reflecting strength in EMEA in North America, offset by seasonally fewer teen starts in China.

Joseph Hogan: Cubic's, you're a leader in direct three D printing solutions, which is the foundation for our next generation Aligner manufacturing, we successfully launched the ITER alumina in oral scanner. Our next generation of digital scanning technology, we launched Invisalign palate expander IP system in the U S and Canada and received regulatory approval for the Invisalign.

Joseph Hogan: Expander in Australia, and New Zealand.

Joseph Hogan: Q1 systems and services revenue year over year growth reflects non systems revenue, driven bioterror alumina warrant upgrades and higher scanner volumes and increased services revenue from a larger base of scanners are sold.

Joseph Hogan: While the teen market tends to be less susceptible to consumer demand around discretionary spending and more resilient than adult orthodontic case starts, we're pleased that in Q1, our clear liner volumes for both adults and teens were up sequentially and year over year. We believe the Invisalign Palette Expander System is one of the most exciting innovations we've developed in our 27-year history and is a better option for expanding a growing patient's narrow palette. The initial response from doctors and patients for the Invisalign Palette Expander System is positive. The Invisalign Pallet Expander System is not a traditional Invisalign aligner.

Joseph Hogan: On a sequential basis Q1 systems and services revenue were up three 1%, reflecting growth from non systems revenues and higher scanner asps.

Partially offset by lower volumes due to seasonality our strong fourth quarter.

Joseph Hogan: The idea of alumina in oral scanners available now with orthodontic workflows as a new standalone scanner or is a wand upgrade to <unk> element Fived D plus the restorative workflow is expected to be available in the fourth quarter of 2024 in the meantime, GP practices can benefit from the ITER alumina as new multi direct capture technology.

Joseph Hogan: That replaces the confocal imaging technology and earlier models there.

Joseph Hogan: The idea of alumina inner world scanner has a three X wider field capture and a 50% smaller than 45% lighter one delivering faster scanning speed higher accuracy supervision nation and more comfortable scanning experience overall, we're really pleased with the launch of that entire alumina scanner customer feedback is.

Joseph Hogan: Been positive and we're really excited about the feedback from doctors. So we've included some are great for <unk> and our web cast slides.

Joseph Hogan: Q1, total clear aligner revenues were up year over year, reflecting revenue growth across the regions from strong year over year volume growth across APAC markets as well as the EMEA region.

Joseph Hogan: In this group, the mean expansion of 6 millimeters was achieved with minimal tipping with ranges between 3.4 and 10.7 millimeters, as measured using the change in intermolar width between the initial and post-expansion scans with a mean expansion efficacy of 97%. In addition, we found that surveyed doctors agree the Invisalign Palette Expander is less painful than traditional expanders and facilitates better oral hygiene compared Phase I or Early Interceptive Treatment includes both skeletal, orthopedic, and dental arch expansion and makes up to 20% of the orthodontic case starts each. Combined with Invisalign First, Align, or treat, Invisalign Palette Expanders provide doctors with a full, early, interceptive treatment solution that allows doctors to treat all Phase I patients.

Joseph Hogan: <unk> over 23000, Invisalign doctors subscription cases, or DSP touch up cases, primarily from North America Ortho channel an increase of approximately 49% year over year from Q1 'twenty three.

These DSP touch-up cases are a component of the overall DSP program, which consists of retainers and touch up cases are aligned and it continues to be an important offering for our customers and their patients DSP is currently available in the United States, Canada, Iberia Nordics, the U K and most recently in Italy, France, and Poland, We expect to continue expanding DSP.

Joseph Hogan: The other country markets in EMEA in Q2, including a 14 stage touch up aligner offering for.

Joseph Hogan: We expect Invisalign Palette Expander to be available in other markets pending future applicable regulatory approval. Today, Invisalign is the most recognized orthodontic brand globally, and Invisalign Clear Aligner treatment is faster and more effective than traditional metal braces.

Joseph Hogan: Non case revenues Q1 was up seven 5% year over year, primarily due to continued growth from avera retainers, along with Invisalign DSP retainer revenues.

Joseph Hogan: Yet, the underlying market opportunity remains huge and untapped. We continue to invest in consumer marketing and demand creation initiatives that raise awareness and drive potential patients to Invisalign practices globally. Below are several highlights from Q1, and more information is available in our Q124 earnings webcast. In Q124, we delivered 14.5 billion impressions and had 43 million visits to our websites globally. To increase awareness and educate young adults, parents, and teens about the benefits of the Invisalign brand, we continue to invest in and create campaigns on top media platforms such as TikTok, Instagram, YouTube, Snapchat, and WeChat across markets.

Joseph Hogan: Offset by seasonally fewer team starts in China.

Joseph Hogan: Reaching young adults as well as teens and their parents also requires the right engagement with Invisalign influencers and creator-centric campaigns. Our Teen Invisi-Drama Free campaign was recently recognized by the Association of National Advertisers with a Silver Award and the Reggie Awards for creative and strategic efforts. In the U.S., in addition to our ongoing influencer campaigns, we partner with athletes such as Mads Crosby, TikTok Gen Z influencer, Overtime Meg, and the famous fashion designer Christine Juszczyk to create a compelling brand activation at the Super Bowl.

Joseph Hogan: As a direct three D printed orthodontic appliances based on proprietary and patented technology that has four systems designed for skeletal expansion.

Joseph Hogan: Clinical data shows that Invisalign palate, expander system is safe effective and proven to deliver scheduler expansion specifically.

Specifically, our clinical data is based on 49 patients across the United States and Canada between the ages of $6 nine and 11 with a mean age of eight eight years and this group. The mean expansion of six millimeters was achieved with minimal chipping with ranges between three four and $10 seven millimeters as measured using the change in <unk>.

Joseph Hogan: Intermodal or with between the initial and post expansion scans with a mean expansion efficacy at 97%.

Joseph Hogan: Phase one of our early intercept treatment includes both skeletal orthopedic and dental orthodontic arch expansion. It makes up to 20% of the orthodontic case starts each year combined with Invisalign first aligner treatment Invisalign palate expander as provide doctors with the full early intercepted treatment solution that allows doctors to treat.

Joseph Hogan: All phase one patients, we expect invisalign palate expander to be available in other markets pending future applicable regulatory approvals.

Today Invisalign as the most recognized orthodontic brand globally, and Invisalign clear aligner treatment is faster and more effective than traditional metal braces, yet the underlying market opportunity remains a huge and untapped we continue to invest in consumer marketing and demand creation initiatives, the raise awareness and drive potential patients to invisalign practices globally.

Joseph Hogan: We saw increased brand interest from consumers as evidenced by a 285% year-over-year increase in unique visitors to our website in India and a 129% increase in sales. Finally, digital tools such as my Invisalign Consumer and Patient app continue to increase, with 4 million downloads to date and over 381,000 monthly active users, a 15% year-over-year growth rate. Q124 clear liner volume from DSO customers increased sequentially, reflecting growth in the Americas and the major regions and increased year over year, reflecting growth across international markets. Dental Service Organizations, or DSOs, represent a large and growing opportunity to help drive the adoption of digital technology across the dental industry.

Joseph Hogan: There are several highlights from Q1 and more information is available in our Q1 'twenty four earnings webcast slides.

Joseph Hogan: In Q1, 'twenty four we delivered for $14 5 billion impressions and had 43 million visits to our websites globally to increase awareness and educate young adults and parents and teens about the benefits of Invisalign brand, we continue to invest and create campaigns and top media platform, such as tick Tock, Instagram Youtube Snapchat and wechat across markets.

Joseph Hogan: <unk>, reaching young adults as well as teens and their parents parents also requires the right engagement through Invisalign Influencers and creator centric campaigns are teen envisage drama Free campaign was recently recognized by the association of National advertisers with a Silver award in the Reggie Awards for creative and strategic.

Excellent.

Joseph Hogan: In the U S. In addition to our ongoing Influencer campaigns, we partner with athletes such as mass Crosby Tictoc Gen Z influencer overtime, Meg and the famous fashion designer Christine <unk> to create a compelling brand activation at the Super Bowl our campaigns delivered more than $6 1 billion impressions, an 18 point.

Joseph Hogan: We've established relationships with many DSOs globally that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the Align digital platform, including increased practice, efficiency, and profitability, as well as delivering a better patient experience from shorter cycle times and proximity to their customers. Smile Docs and Heartland Dental are some of the largest DSO partners and are continuously exploring collaborations with DSOs that can further the adoption of digital demonstration.

Joseph Hogan: 1 million unique visitors to our consumer websites across the Americas, and EMEA region, we partner with the Influencers to reach consumers across social media platforms, including tick tock, and meta and watched our global consumer campaigns for teens and parents are campaigns delivered more than $1 6 billion media impressions and $8 9 million visitors to our web.

Joseph Hogan: Each DSO has a different strategy and business model, and our focus is on working with and encouraging DSOs aligned with our vision, strategy, and business model goals. Today, we announce an additional $75 million equity increase in Heartland, a multidisciplinary DSO with GP and ortho practices across the United States.

Joseph Hogan: Right.

Joseph Hogan: We continue to invest in consumer advertising across the APAC region, resulting in more than $6 6 billion impressions and 16 million visitors to our web sites, a 195% increase year over year.

John F. Morici: Thanks, Joe. Now for our Q1 financial results. Total revenues for the first quarter were $997.4 million, up 4.3% from the prior quarter and up 5.8% from the corresponding quarter a year ago. On a constant currency basis, Q1 24 revenues were impacted by favorable foreign exchange of approximately $10 million, or approximately 1% sequentially, and were unfavorably impacted by approximately $4.8 million year-over-year. For clear aligners, Q1 revenues of $817.3 million were up 4.5% sequentially, primarily due to higher ASPs and higher volumes.

Joseph Hogan: We have established relationships with many dsos globally that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the <unk> digital platform, including increased practice efficiency and profitability as well as delivering a better patient experience from shorter cycle times and proximity to their customers.

Small docs and heartland dental or some of the largest DSO partners and are continuously exploring collaborations with dsos that can further adoption of digital dentistry. Each DSO has a different strategy and business model and our focus is on working with them and encouraging dsos align with our vision strategy and business model goals.

Joseph Hogan: Today, we announced an additional $75 million equity increase in Heartland. Following the previous 75 million equity investment a year ago Heartland as a multidisciplinary DSO with GP and ortho practice across the United States. The growth strategy includes Heartlands de Novo dental practices, which feature modern technology located in areas with a strong community.

John F. Morici: On a year-over-year basis, Q1 clear aligner revenues were up 3.5% primarily due to higher volumes and ASBs and increased non-case revenues. For Q1, Invisalign ASPs for comprehensive treatment were up sequentially and up year-over-year and up year-over-year. On a sequential basis, ASPs primarily affect higher additional aligners and price increases, and the variable impacts of foreign exchange, partially offset by a product makeshift to lower ASB products and higher discounts. And on a year-over-year basis, the increase in comprehensive ASBs primarily reflect higher additional liners and price increases, partially offset by a product makeshift to lower ASB products and higher discounts, and the unfavorable impact of For Q1, Invisalign ASPs for non-comprehensive treatment were down sequentially and year-over-year. On a sequential basis, the decline in ASBs reflects an unfavorable country mix.

Joseph Hogan: <unk> need for dentistry.

Joseph Hogan: Where heartland provides practices with opportunities for Mentorship leadership training and continuing education.

Joseph Hogan: And the last four years Heartland opened 240 state of the art de Novo practices across the U S and are planning to continue investing through more de novo openings. We have a shared sense of purpose with heartland. Their mission is to help doctors and their teams to deliver the highest quality digital dental care to the communities. They serve with that I'll now turn it over to John.

John F. Morici: Thanks, Joe now for our Q1 financial results total revenues for the first quarter were $997 $4 million up four 3% from the prior quarter and up five 8% from the corresponding quarter a year ago on a constant currency basis Q1, 'twenty four revenues were impacted.

John F. Morici: Shift, and Higher Discounts Partially Upset by the Favorable Impact from Foreign Exchange On a year-over-year basis, the decrease in non-comprehensive ASBs reflect the product mix shifts to lower ASB products, unfavorable country mix shifts, and higher discounts, partially offset by lower net revenue deferrals. As a reminder, we announced about a 5% global price increase for some Invisalign This price increase did not include Invisalign Comprehensive 3 in 3 products. Invisalign Comprehensive 3-in-3 is available in North America and in certain markets in EMEA and APEC, most recently launched in French territories and in the Middle East.

John F. Morici: Increased non case revenues for Q1, Invisalign Asps for comprehensive treatment were up sequentially and up year over year and up year over year on a sequential basis asps, primarily affect hire additional liners and price increases and the favorable impact of foreign exchange, partially offset by.

John F. Morici: We are pleased with the continued adoption of the Invisalign Comprehensive 3-in-3 product and anticipate it will continue increasing, providing doctors with the flexibility they want and allowing us to recognize more revenue up front. With deferred revenue being recognized over a shorter period of time compared to our traditional Invisalign comprehensive product, Q124 clear aligner revenues were impacted by a favorable foreign exchange of approximately $8.4 million, or approximately 1% sequentially. On a year-over-year basis, Clearliner revenues were unfavorably impacted by foreign exchange of approximately $3.9 million, or approximately 0.5%.

John F. Morici: Invisalign asps for non comprehensive treatment were down sequentially and year over year on a sequential basis the decline in asps reflect unfavorable country mix.

Shifting and higher discounts, partially offset by the favorable impact from foreign exchange.

John F. Morici: Clearer liner deferred revenues on the balance sheet decreased $26.7 million, or 2% sequentially, and increased $15.8 million, or 1.2% year-over-year, and will be recognized as additional liners are shipped. Q124 systems and services revenue of $180.2 million were up 3.1% sequentially, primarily due to increased non-systems revenues mostly related to upgrades and higher ASPs, partially offset by lower volumes. Q124 systems and services revenue were up 17.5% year-over-year, primarily due to increased non-systems revenues mostly related to upgrades, higher scanner volumes, and higher services revenues from our larger base of scanners sold.

John F. Morici: Q1, 'twenty four clear aligner revenues were impacted by favorable foreign exchange of approximately $8 $4 million or approximately 1% sequentially on a year over year basis clear aligner revenues were unfavorably impacted by foreign exchange of approximately $3 $9 million or approximately <unk>, 5%.

John F. Morici: CAD CAM, and Services revenue for Q1 represent approximately 51% of our systems and services business. Q124 systems and services revenues were favorably impacted by foreign exchange of approximately $1.5 million, or approximately 0.9% sequentially. On a year-over-year basis, systems and services revenues were unfavorably impacted by foreign exchange of approximately $0.9 million, or approximately 0.5%. Systems and Services Deferred Revenues on the balance sheet were down $14.3 million, or 5.5% sequentially, and down $25.3 million, or 9.4% year-over-year, primarily due to the recognition of services revenues, which is recognized readily over the service period.

John F. Morici: Clear aligner deferred revenues on the balance sheet decreased $26 $7 million or 2% sequentially and increased $15 $8 million or one 2% year over year and will be recognized as the additional liners are shipped.

John F. Morici: Q1, 24 systems and services revenue.

John F. Morici: $182 million were up three 1% sequentially, primarily due to increased non systems revenues, mostly related to upgrades and higher asps, partially offset by lower volumes.

John F. Morici: Q1, 24 systems and services revenue.

John F. Morici: CAD Cam.

John F. Morici: And services revenue for Q1 represent approximately 51% of our systems and services business.

John F. Morici: The decline in deferred revenues both sequentially and year-over-year reflects the shorter duration of service contracts with initial scanner purchases. As our scanner portfolio expands, and we introduce new products, we increase the opportunities for customers to upgrade and make trade-ins. In addition to other scanner leasing and rental programs, developing new capital equipment opportunities to meet the digital transformation needs of our customers and our DSO partners is a natural progression for our equipment business with a large and growing base of scanners sold.

John F. Morici: 0.5%.

John F. Morici: Systems and services deferred revenues on the balance sheet was down $14 $3 million or five 5% sequentially and down $25 3 million or nine 4% year over year, primarily due to the recognition of services revenues, which will which is recognized ratably over the service period.

John F. Morici: The decline in deferred revenues, both sequentially and year over year reflects the shorter duration of service contracts with initial scanner purchases.

John F. Morici: As our scanner portfolio expands and we introduce new products, we increased the opportunities for customers to upgrade to make trade. It. In addition to other scanner leasing and rental programs developing new capital equipment opportunities to meet the digital transformation needs of our customers and our DSO partners is a natural progression for our equipment business.

John F. Morici: Moving on to gross margin, first quarter overall gross margin was 70%, approximately flat sequentially and year over year. Overall gross margin was favorably impacted by foreign exchange by approximately 0.3 points sequentially and unfavorably impacted by approximately 0.1 points on a year over year basis. Clearliner gross margin for the first quarter was 70.9%, down 0.3 points sequentially due primarily to higher manufacturing spend partially offset by higher ASB. Clearliner gross margin for the first quarter was down 0.8 points year-over-year, primarily due to higher manufacturing spend, partially offset by favorable ASV.

John F. Morici: With a large and growing base of scanner. So we're pleased to be able to leverage our <unk>.

John F. Morici: Moving on to gross margin first quarter overall gross margin was 70% approximately flat sequentially and year over year. Overall gross margin was favorably impacted by foreign exchange by approximately 0.3 points sequentially and unfavorably impacted by approximately 0.1 points on a year over year basis clearly.

John F. Morici: Systems and Services gross margin for the first quarter was 65.9%, up 1.1 points sequentially due to higher ASP, partially offset by manufacturing variance. Systems and Services gross margin for the first quarter was up 4.3 points year-over-year, primarily due to higher ASP, lower service, and manufacturing costs. Q1 operating expenses were $543.7 million, up 9.2% sequentially and 3.1% year-over-year. On a sequential basis, operating expenses were up by $45.7 million from higher incentive compensation and consumer marketing spend, partially offset by restructuring and other charges not recurring in Q1.

John F. Morici: Gross margin for the first quarter was <unk> <unk>.

John F. Morici: 79% down <unk> three points sequentially due primarily due to higher manufacturing spend partially offset by higher ASP.

John F. Morici: Clear aligner gross margin for the first quarter was down <unk> eight points year over year, primarily due to higher manufacturing spend partially offset by favorable ASP.

John F. Morici: Systems and services gross margin for the first quarter was 65, 9% up one one points sequentially due to higher ASP, partially offset by manufacturing variances systems and services gross margin for the first quarter was up four three points year over year, primarily due to higher ASP lower service.

John F. Morici: And manufacturing costs.

Q1, operating expenses were $543 $7 million up nine 2% sequentially and three 1% year over year on a sequential basis operating expenses.

John F. Morici: Year over year, operating expenses increased by $16.5 million, primarily due to our continued investments in sales and R&D activities and higher incentive compensation. On a non-GAAP basis, excluding stock-based compensation, amortization of acquired intangibles related to certain acquisitions, and restructuring and other charges, operating expenses were $506.1 million, up 13.3% sequentially, and up 3.2% year over year. Our first quarter operating income of $154.1 million resulted in an operating margin of 15.5%, down 2.5 points sequentially and up 1.3 points year over year.

John F. Morici: Were up by $45 $7 million from higher incentive compensation and consumer marketing spend partially offset by restructuring and other charges not recurring in Q1 year over year operating expenses increased by $16 $5 million pre.

John F. Morici: Primarily due to our continued investments in sales and R&D activities and higher incentive compensation.

John F. Morici: On a non-GAAP basis, excluding stock based compensation amortization of acquired intangibles related to certain acquisitions and restructuring and other charges operating expenses were $506 $1 million up 13, 3% sequentially and up three 2% year over year or.

John F. Morici: First quarter operating income of $154 $1 million resulted in an operating margin of 15, 5%.

John F. Morici: Two five points sequentially and up one three points year over year. The sequential decrease in operating margin is primarily attributed to investments in our go to market teams and higher incentive compensation the year over year increase in operating margin is primarily attributed to operating leverage and.

John F. Morici: The sequential decrease in operating margin is primarily attributed to investments in our go-to-market teams and higher incentive compensation. The year over year increase in operating margin is primarily attributed to operating leverage and effectively managing our costs, partially offset by an unfavorable impact from foreign exchange of approximately 0.7 points. On a non-GAAP basis, which excludes stock-based compensation, amortization of intangibles related to certain acquisitions, and restructuring and other charges, operating margin for the first quarter was 19.8%, down 4 points sequentially and up 1.3 points year-over-year.

John F. Morici: Proactively managing our costs, partially offset by unfavorable impact from foreign exchange of approximately 0.7 points on a non-GAAP basis, which excludes stock based compensation amortization of intangibles related to certain acquisitions and restructuring and other charges operating margin for the first quarter.

John F. Morici: 19, 8% down four points sequentially and up one three points year over year.

John F. Morici: Interest and other income expense net for the first quarter was an income of $4 $3 million compared to an income of $1 $3 million in Q4 of 23, and an income of $1 $1 million in Q1 of 'twenty, three primarily driven by a gain on our equity investments and net interest income.

And offset by unfavorable foreign exchange.

The GAAP effective tax rate in the first quarter was 33, 7% compared to 28, 3% in the fourth quarter and 34, 8% in the first quarter of the prior year. The first quarter GAAP effective tax rate was higher than the fourth quarter effective tax rate, primarily due to discrete tax.

John F. Morici: The first quarter GAAP effective tax rate was higher than the fourth quarter effective tax rate primarily due to discrete tax benefits recognized in Q4 of 23, partially offset by increased earnings in low tax jurisdictions in Q1 of 24. Our non-GAAP effective tax rate in the first quarter was 20%, which reflects our long-term projected tax rate. First quarter net income per diluted share was $1.39, down sequentially by $0.24 and up $0.26 compared to the prior year. Our EPS was not impacted on a sequential basis from foreign exchange.

<unk> recognized in Q4 of 'twenty, three partially offset by increased earnings in low tax jurisdictions in Q1 of 'twenty four our non-GAAP effective tax rate in the first quarter was 20%, which reflects our long term projected tax rate.

John F. Morici: First quarter net income per diluted share was $1.39 down sequentially 24, and up 26 compared to the prior year. Our EPS was not impacted on a sequential basis from foreign exchange. Our EPS was unfavorably impacted by <unk> <unk> on a year over year basis.

John F. Morici: Our EPS was unfavorably impacted by $0.09 on a year over year basis due to foreign exchange. On a non-GAAP basis, net income per diluted share was $2.14 for the first quarter, down $0.28 sequentially and up $0.32 year over year. Moving on to the balance sheet, as of March 31, 2024, cash, cash equivalents, and short-term and long-term marketable securities were $902.5 million, down sequentially $78.2 million, and down $18.9 million year-over-year. Of our $902.5 million balance, $217.5 million was held in the U.S., and $685 million was held by our international entities.

John F. Morici: As to foreign exchange on a non-GAAP basis net income per diluted share was $2 14 for the first quarter down 28% sequentially and up 32 cents year over year.

John F. Morici: Of our $902 5 million dollar balance $217 5 billion was held in the U S and 685 million was held by our international entities.

John F. Morici: In January 2024, we received approximately 37,000 shares of our common stock upon final settlement of the $250 million accelerated share repurchase from Q4 of 23. In total, we repurchased approximately 1.1 million shares and an average price per share of $230.13 under the Q4 ASR contract. We have 650 million available for repurchase of our common stock under our January 2023 brief purchase program. During Q2'24, we expect to repurchase up to $150 million of our common stock through either a combination of open market repurchase or an accelerated stock repurchase agreement.

John F. Morici: In January 2024, we received approximately 37000 shares of our common stock upon final settlement of the $250 million accelerated share repurchase from Q4 of 23 in total we repurchased approximately one 1 million shares at an average price per share of $230 13.

John F. Morici: Under the Q4 ASR contract.

We have $650 million available for repurchase of our common stock under our January 2023 brief purchase program.

John F. Morici: In Q1, the accounts receivable balance was $950.7 million, up sequentially. Our overall day sales outstanding was 86 days, up approximately one day sequentially and up approximately three days as compared to Q1 last year. Cash flow from operations for the first quarter was $28.7 million. Capital expenditures for the first quarter were $9.4 million, primarily related to our continued investment to increase aligner manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations less capital expenditures, amounted to $19.3 million.

John F. Morici: Q1 accounts receivable balance was $957 million up sequentially.

John F. Morici: Continued investments to increase aligner manufacturing capacity and facilities free cash flow defined as cash flow from operations less capital expenditures amounted to $19 $3 million.

John F. Morici: We're continuing to use our healthy balance sheet to drive growth and profitability. During the quarter, we continued to make disciplined investments in our strategic growth drivers. We completed the acquisition of Cubicure, which will enable us to scale our 3D printing operations to eventually directly print millions of custom appliances per day.

John F. Morici: We're continuing to use our healthy balance sheet to drive growth and profitability during the quarter. We continued to make disciplined investments in our strategic growth drivers. We completed the acquisition of <unk>, which will enable us to scale, our three D printing operations to <unk>.

John F. Morici: Heartland, dental and $150 million stock buyback.

Joseph Hogan: Now turning to our outlook, assuming no circumstances occur beyond our control, we provide the following framework for Q2 and fiscal 2024. For Q224, we provide the following business outlook. In Q224, we expect worldwide revenues to be in the range of $1,030,000,000 to $1,050,000,000. We expect clear aligner volume to be up sequentially and clear aligner ASB to be down slightly sequentially, primarily as a result of unfavorable foreign exchange. We expect systems and services revenue to be up sequentially as we continue to ramp ITERO-Lumina in Q2 2024.

John F. Morici: Now turning to our outlook, assuming no circumstances occur beyond our control we provide the following framework for Q2 and fiscal 2024.

John F. Morici: For Q2 2004, we provide the following business outlook for.

John F. Morici: For Q2, 'twenty four we expect worldwide revenues to be in the range of.

$1.030 billion to $1.050 billion.

John F. Morici: We expect clear aligner volume to be up sequentially and clear aligner asps to be down slightly sequentially, primarily as a result of unfavorable foreign exchange, we expect systems and services revenue to be up sequentially. As we continued to ramp ITER alumina in Q2 2024, we expect Q2 2000.

Joseph Hogan: We expect Q2 2024 gap operating margin and non-gap operating margin to be slightly above Q1 2024 gap and non-gap operating margins, respectively. For fiscal 24, we provide the following business outlook. We expect fiscal 24 total revenue to be up 6 to 8% versus 2023, which is higher than our prior outlook of up mid-single-digit growth compared to 2023. The increase in our 2024 revenue outlook reflects our Q1 results, Q2 outlook, and continued execution of our growth strategies.

John F. Morici: GAAP operating margin and non-GAAP operating margin to be slightly above Q1 dollars 24, GAAP and non-GAAP operating margins respectively.

John F. Morici: For fiscal 'twenty four we provide the following business outlook, we expect fiscal 'twenty for total revenue to be up 6% to 8% versus 2023, which is higher than our prior outlook of up mid single digit growth compared to 2023, the increase in our 2020 for revenue outlook reflects our Q1.

John F. Morici: <unk> results Q2 outlook and continued execution of our growth strategies, we anticipate that the incremental revenue reflected in our 2024 outlook will be roughly split 50 50 between our two operating segments.

Joseph Hogan: We anticipate that the incremental revenue reflected in our 2024 outlook will be roughly split 50-50 between our two operating segments. We expect fiscal 2024 clear aligner ASBs. Slightly up year over year. We expect fiscal 2024 gap operating margin and non-gap operating margin to be slightly above the 2023 gap operating margin and non-gap operating margin, respectively. We expect our capital invest, our investments in capital expenditures for fiscal 2024 to be approximately $100 million. Capital expenditures primarily relate to building construction and improvements, as well as manufacturing capacity, in support of our continued growth. With that, I'll turn it back over to Joe for final comments. Joe Thanks, John.

John F. Morici: We expect fiscal 2024 clear aligner asps to be slightly up year over year we.

John F. Morici: We expect fiscal 2024, GAAP operating margin and non-GAAP operating margin to be slightly above the 2023, GAAP operating margin and non-GAAP operating operating margin, respectively. We expect our capital invest our investments in capital expenditures for fiscal 'twenty 'twenty four to be approximately 100.

Joseph Hogan: Thanks, John in summary, Q1 was a good start for the year, while I'm pleased with our results I'm, even more excited about our lines innovation in 2024 on our next wave of growth drivers that we believe will continue to revolutionize the orthodontic and dental industry and scanning software and direct three D printing our focused execution of.

Joseph Hogan: In summary, Q1 was a good start for the year. While I'm pleased with our results, I'm even more excited about Align's innovation in 2024 and our next wave of growth drivers that we believe will continue to revolutionize the orthodontic and dental industry in scanning software and direct 3D printing. Our focused execution of our product roadmap and innovation pipeline has resulted in the largest introduction of new products and technologies in our history, further advancing our software scanning and 3D printing capabilities.

Joseph Hogan: Our product roadmap and innovation pipeline has resulted in the largest introduction of new products and technologies in our history.

Joseph Hogan: Further advancing our software scanning and three D printing capabilities. We're excited about the potential for these strategic investments to enable a new phase of growth to transform the orthodontic industry again, Dr. Terrell alumina into oral scanner has the potential to set a new standard of care for dental practices by simplifying the scanning of complex oral regions while.

Joseph Hogan: Offering superior chair side visualization in a more comfortable experience for patients, especially kids.

Joseph Hogan: Palate expander increases the clinical applicability of the Invisalign system to nearly 100% of orthodontic case starts. It is a revolutionary removable three D printed appliance that is clinically proven to be safe and effective it is less painful than traditional metal expanders and promotes better oral hygiene.

Joseph Hogan: It is a revolutionary, removable, 3D-printed appliance that has clinically proven to be safe and effective. It is less painful than traditional metal expanders and promotes better oral hygiene, and our recent acquisition of Hubicure, a pioneer 3D printing solutions for polymer additive manufacturing brings a talented team and unique cutting-edge technology to the market.

Joseph Hogan: And our recent acquisition of cubic cure a pioneer of <unk> printing solutions for polymer additive manufacturing brings a talented team and unique.

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