Q1 2025 Align Technology Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by and welcome to the align technology first quarter 2025 earnings call.
Speaker Change: At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you didn't hear automated message advising your hand is race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand the.
Speaker Change: Conference over to your speaker today, Shirley Stacy Vice President of corporate Communications and Investor Relations. Please go ahead.
Speaker Change: Good afternoon, and thank you for joining US joining me on today's call is Joe Hogan, President and CEO and John Morici CFO.
Speaker Change: Issued first quarter 2025 financial results today via business wire, which is available on our website at investor <unk> Com.
Speaker Change: Today's conference call is being audio webcast and will be archived on our website for approximately one month.
Speaker Change: 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 Exchange Commission available on our website and 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 provided historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable and our first quarter 2025 conference call slides on our website under quarterly results. Please result, please refer to these files for more detailed information with that I'd like to turn the call over to align technology's President and CEO Joe Hogan.
Speaker Change: Joe.
Joe Hogan: Thanks, Shirley good afternoon, and thanks for joining us today on our call I will provide an overview of our first quarter results.
Speaker Change: Discuss a few highlights from our two operating segments systems and services and clear liners, John will provide more detail on our financial performance and comment on our views for Q2 and full year 2025, following that I'll come back and summarize a few key points and open the call to questions. I am pleased to report first quarter revenues operating margin and earn.
Speaker Change: <unk> earnings in line with our outlook fiscal 2025 is off to a good start with Q1 clear aligner volumes, both sequentially and year over year, reflecting strength in both the teen and adult patient segments across all regions driven year over year strength across the Asia Pacific and EMEA regions and growth in North America. It's also.
Speaker Change: Worth, noting that Q1 was the highest year over year growth rate for both adult <unk> patients since 2021 from a channel perspective, Q1, clear aligner volumes and new orthodontic and GP dentist channels increased year over year with a record number of total submitters and utilization for GP dentists for first quarter.
Speaker Change: For our systems and services business.
Speaker Change: Q1 revenues were down sequentially, reflecting Q1 seasonality as well as unfavorable foreign exchange on a year over year basis, Q1 systems and services revenues were up slightly reflecting continued adoption of vitaros illumina scanner platform as well as the launch of Vitaros illumina with restore to software at the end of March.
Speaker Change: On a year over year basis, Q1 clear aligner volumes grew six 2% driven primarily by continued strength across EMEA and APAC regions as well as growth in North America offset by lower volumes in Latin America region for North America Q.
Speaker Change: Q1 year over year increase in clear Aligner volumes reflects continued adoption of Invisalign first for teens and kids Invisalign DSP touch up cases, and Invisalign comprehensive three and <unk> III.
Sequential basis, Q1, North America clear aligner volumes, primarily reflect growth from Invisalign DSP touch-up cases.
Speaker Change: Invisalign palate expander system as well as Invisalign comprehensive three and three.
Speaker Change: For the EMEA region Q1 year over year clear Aligner volume growth, primarily reflects strength across the region and both the ortho and GP channels across teens kids and adult patients on a year over year basis Q1, EMEA volumes reflect continued adoption of invisalign non comprehensive cases, primarily driven by invisalign moderate.
Speaker Change: Invisalign Dias a P touch up cases as.
Speaker Change: As well as the initial launch of Invisalign palate expander across EMEA region in Q1.
Speaker Change: On a sequential basis.
Speaker Change: Q1, EMEA growth was driven primarily by Invisalign DSP touch up cases.
Speaker Change: The APAC region Q1 year over year clear Aligner volume growth reflects increased utilization and submit <unk> in both ortho and GP channels across teen Kid and adult patients and nearly all country markets.
Speaker Change: Sequential basis Q1 growth reflects strength from China, and many of our emerging markets led by India and Korea.
Speaker Change: From a product perspective, and the Invisalign first.
Speaker Change: <unk> standard and adult products drove Q1 growth in APAC, both on a year over year and sequential basis for Q1, we had over 85000 doctors submitters worldwide for a record total for first quarter, primarily reflecting a sequential increase in clear aligner volume for teens kids and adults and both non comprehensive and.
Speaker Change: Comprehensive cases.
Speaker Change: And the team and growing kids segment, approximately 226000 teens and kids started treatment with Invisalign clear liners. During the first quarter, an increase of four 5% sequentially and an increase of 13, 3% year over year, reflecting growth across regions, especially from Invisalign first in the APAC and EMEA regions and nor.
Speaker Change: America as well as growth from the Invisalign palate expander system in North America for.
Speaker Change: For Q1, the number of doctors submitting case starts for teens and kids was up two 1% year over year led by continued strength from doctors treating young kids in growing patients.
Speaker Change: During the quarter, we continued to commercialize invisalign palate expander system with continued momentum for doctors to meters in shipments in.
Speaker Change: In Q1, we announced that aligns invisalign palate expander system was commercially available in Turkey and today, we received confirmation of regulatory clearance in China.
Speaker Change: Along with Turkey, and China, the Invisalign palate expander is available in the U S Canada, Brazil.
Speaker Change: Australia, New Zealand, Hong Kong, Japan, Singapore, Thailand, EU U K UAE in Switzerland, and is expected to be available in additional markets following regulatory clearances.
Speaker Change: This month, we announced the commercial availability of the Invisalign system with Mandibular advancement, featuring occlusal blocks designed specifically to address class II skeletal and dental correction by simultaneously advancing the mandible, while aligning the teeth.
Speaker Change: Class II <unk> inclusion as one of the most common orthodontic issues characterized by discrepancy in jaw alignment, where the lower jaw is positioned too far back relative to the upper jaw. It represents approximately 30% to 45% of model inclusions globally left untreated. This condition can lead to functional aesthetic and other challenges for patients.
Speaker Change: The Invisalign system with Mandibular advancement, featuring occlusal blocks as a direct response to the needs of orthodontic practices and underscores aligned ongoing commitment to innovation and orthodontics that enhances clinical outcomes and the patient experience.
Speaker Change: By integrating occlusal blocks into the Mandibular advancement feature we're providing doctors with a powerful new tool that they have asked for to effectively treat growing patients with class II malocclusion, while maintaining the aesthetic and comfort benefits of clear aligner therapy.
Speaker Change: <unk> system with Mandibular advancement, featuring occlusal blocks is available to Invisalign trained doctors in the United States, Canada, Australia, and New Zealand. It was just launched in most EMEA countries. This week and we expect to be introduced in additional markets through 2025 pending regulatory clearance.
Speaker Change: Along with the Invisalign palate expander system and Invisalign first the latest innovation supports the commitment to establishing a unique and differentiated portfolio that supports growing patients throughout their continuum of care.
Speaker Change: Dental service organizations or Dsos continue to present, one of the fastest growing channels and digital dentistry as they recognize the practice and patient experience benefits of digital workflows enabled by our portfolio of products and services that make up the align digital platform. This includes increased practice efficiency and profitability as well as delivering a <unk>.
Speaker Change: Order treatment appointment cycle times for their patients.
Speaker Change: In short Dsos are a force multiplier for practice growth in Invisalign adoption for Q1 clear aligner volume from DSO customers worldwide increased sequentially and year over year, reflecting growth across all regions Q1, <unk> scanner sales growth was also strong with dsos as they continue to investing in their member Pratt.
Speaker Change: Mrs and end to end digital workflows, the DSO business growth continues to outpace that of our retail doctors driven primarily by some of the largest dsos in each region.
Speaker Change: Turning to systems and services for.
Speaker Change: For Q1 year over year revenue growth, primarily reflects scanner in one revenue driven bioterror alumina wind upgrades, partially offset by lower scanner revenues and the impact of unfavorable foreign exchange for Q1, we delivered more scanner systems and one in a quarter than ever before on.
Speaker Change: On a sequential basis Q1 systems and services revenues were down reflecting capital equipment seasonality, partially offset by higher <unk> alumina scanner one upgrades in Q1, we launched a new restored of capabilities and our next generation <unk> aluminum inner oral scanner and a new <unk> alumina pro dental imaging system.
Speaker Change: With <unk> technology to enable efficient restorative and multi disciplinary workflows and support the diagnosis of <unk> mental carries above the gingiva.
The new historic capabilities of <unk> alumina improved GP dentist ability to diagnose and develop treatment plans that deliver exceptional clinical outcomes, while concurrently helping gp's collaborate more effectively with their restorative lat deliver incredible precise custom fitting restorations and reached new levels of practice efficiency and growth.
Speaker Change: The ITER alumina inner oral scanner with <unk> multi direct capture MDC technology sets, a new standard with effortless scanning and superior Visualizations and feedback from doctors labs and other stakeholders regarding our aluminum portfolio has been positive.
Speaker Change: It's intuitive design and ease of scanning as appealing as making everyday scanning more viable, especially when compared to other scanners like any breakthrough technology. It is important to ensure that doctors and their staffs are properly trained on scanning even the most experienced <unk> users may need to unlearn previous scanning techniques, we are working closely.
Speaker Change: With our teams to offer follow up training for our customers and their staff.
Speaker Change: Taro alumina and oral scanner delivers faster scanning speed higher accuracy superior visualization in a more comfortable scanning experience.
Speaker Change: Yes, Tara alumina solutions include superior <unk> into the Visualizations that argument augment and amplify oral health assessment and patient communication using the align oral health suite designed to increase patient engagement with greater visual understanding of their oral health conditions following regulatory clearance.
Speaker Change: As an applicable countries starting earlier this month existing <unk> alumina scanner owners began upgrading to the new software, which includes restorative diagnostic capabilities. We're excited about the continued technology evolution, we deliver with Taro illumina system and the depth of tools and features that offers for imaging diagnostics treatment planning.
<unk> restorations and so much more taro has always been much more than our pvs replacement and with Antara alumina as truly become the gateway to digital treatment for photonics and any type of GP practice from family Dentistry to high end aesthetic practices with that I'll now turn the call over to John.
Joe Hogan: Joe now for our Q1 financial results total revenues for the first quarter were $979 3 million down one 6% from the prior quarter and down one 8% from the corresponding quarter a year ago on a constant currency basis Q1 revenues were unfavorably impacted by approximately $21 four.
Speaker Change: $4 million or approximately two 1% sequentially.
Speaker Change: And were unfavorably impacted by approximately $31 $1 million year over year or approximately three 1% for clear Aligner Q1 revenues of.
Speaker Change: $796 $8 million were up <unk>, 3% sequentially, primarily from higher volumes, partially offset by the impact of unfavorable foreign exchange unfavorable foreign exchange impacted Q1 clear aligner revenues by approximately $17 9 million or approximately two two.
Speaker Change: Percent sequentially.
Speaker Change: One clear aligner average per case shipment price of $1240 decreased by $25 on a sequential basis, primarily due to the impact of unfavorable foreign exchange on a year over year basis, Q1 clear aligner revenues were down two 5% primarily due to unfavorable.
Foreign exchange of $25 8 million or approximately three 1% and lower asps due to product mix shift to lower priced products and discounts, partially offset by higher volumes Q1 clear aligner average per case shipment price of $1240 was down 100.
Speaker Change: $10 on a year over year basis, primarily due to higher discounts product mix shift to lower priced products and the impact from unfavorable foreign exchange, partially offset by price increases.
Clear aligner deferred revenues on the balance sheet as of March 31, 2025 decreased $9 3 million or 0.8% sequentially and decreased 74 point.
Speaker Change: $7 million or five 8% year over year and will be recognized as additional liners are shipped under that each sales contract.
Speaker Change: Q1 systems and services revenue of $182 $4 million were down nine 2% sequentially, primarily due to lower scanner systems revenue revenues and unfavorable foreign exchange. This was partially offset by increased scanner, one revenues, mostly due to <unk> aluminum <unk>.
Speaker Change: Upgrades Q1 systems and services revenue were up one 2% year over year, primarily due to higher <unk> alumina scanner, one revenues, partially offset by lower scanner systems revenues and unfavorable foreign exchange.
Speaker Change: Foreign exchange negatively impacted Q1 systems and services revenues by approximately $3 5 million or approximately one 9% sequentially on a year over year basis system and services revenues were unfavorably impacted by foreign exchange of approximately $5 $3 million or approximately two eight.
Speaker Change: <unk>.
Speaker Change: Systems and services deferred revenues decreased $11 3 million or five 1% sequentially and decreased 37 two.
Speaker Change: Or 15, 2% year over year, primarily due to decline in deferred revenues due in part to shorter duration of service contracts applicable to initial scanner system purchases moving on to gross margin first quarter overall gross margin was 69, 5% DAU.
Speaker Change: <unk> six points sequentially and down <unk> five points year over year foreign exchange negatively impacted the overall gross margin by 0.7 points sequentially and <unk> nine points on a year over year.
Speaker Change: Clear aligner gross margin for the first quarter.
Speaker Change: Was 75% of 0.4 points sequentially, due primarily to lower manufacturing costs and lower restructuring expenses, partially offset by unfavorable foreign exchange.
Speaker Change: 0.6 points.
Speaker Change: Clear aligner gross margin for the first quarter was down 0.3 points year over year, primarily due to unfavorable foreign exchange, partially offset by lower manufacturing spend foreign exchange negatively negatively impacted clear aligner gross margin by 0.9 points year over year.
Speaker Change: Systems and services gross margin for the first quarter was 64, 7% down four seven points sequentially, primarily due to lower wind asps and unfavorable foreign exchange, partially offset by manufacturing efficiencies.
Speaker Change: Foreign exchange negatively impacted the systems and services gross margin by 0.7 points sequentially.
Speaker Change: Systems and services gross margin for the first quarter was down one two points year over year, primarily due to lower scanner and Wanda Asps and unfavorable foreign exchange, partially offset by manufacturing and services efficiencies foreign exchange negatively impacted the systems and services gross margin.
Speaker Change: By 1.0 points year over year.
Speaker Change: Q1 operating expenses were 549.
Speaker Change: <unk>, 0.7% sequentially and up 1% year over year on a sequential basis, we saw $3 $8 million decrease in operating expenses, primarily due to lower restructuring and other nonrecurring charges in Q1, which were partially offset by consumer marketing spend year over year operating.
Speaker Change: <unk> increased by $5 3 million.
Speaker Change: Primarily due to our continued investments in R&D activities on a non-GAAP basis, excluding stock based compensation restructuring and other charges and amortization of acquired intangibles related to certain acquisitions and legal settlement loss operating expenses were 500.
Speaker Change: $7 million up five 5% sequentially and down one 1% year over year.
Speaker Change: Our first quarter operating income of $131 $1 million resulted in an operating margin of 13, 4% down one one points sequentially and down two one points year over year foreign exchange negatively impacted operating margin by approximately one one points sequentially and $1.
Speaker Change: Four points year over year on a non-GAAP basis, which excludes stock based compensation restructuring and other charges amortization of intangibles related to certain acquisitions and legal settlement loss operating margin for the first quarter was 19, 1% down four one points sequentially and down zero.
Seven points year over year.
Speaker Change: Interest and other income expense net for the first quarter was an income of $9 $3 million compared to an expense of $3 4 million in Q4, 24, driven by favorable foreign exchange movements, partially offset by lower interest income and gain on investments from last quarter.
On a year over year basis, Q1 interest and other income and.
Speaker Change: <unk> expense were favorable compared to income of $4 $3 million in Q1, 'twenty four primarily driven by a favorable foreign exchange movements, partially offset by gain on investments in the first quarter of the prior year.
Speaker Change: The GAAP effective tax rate in the first quarter was 33, 6% compared to 26, 3% in the fourth quarter of last year and 33, 7% in the first quarter of the prior year.
Speaker Change: The first quarter GAAP effective tax rate was higher than the fourth quarter effective tax rate, primarily due to the tax expense recognized related to stock based compensation and the release of uncertain tax provision reserves in Q4 of 24, partially offset by a onetime tax deferred.
Speaker Change: Tax adjustment in foreign jurisdictions in Q4 dollars 20 for the first quarter GAAP effective tax rate was roughly in line with the first quarter effective tax rate of the prior year.
Speaker Change: On a non <unk>, our non-GAAP effective tax rate in the first quarter was 20%, which reflects our long term projected tax rate.
Speaker Change: First quarter net income per diluted share was $1.27 down 13% sequentially and down 13 compared to the prior year foreign exchange negatively negatively impacted our EPS by eight cents on a sequential basis and 12.
Speaker Change: On a year over year basis due to foreign exchange on a non-GAAP basis net income per diluted share was $2 13 for the first quarter down 31% sequentially and down one said year over year.
Speaker Change: Moving onto the balance sheet as of March 31, 2025, cash and cash equivalents were $873 million down.
Speaker Change: Down sequentially $179 million and up seven $2 million year over year of our 873 million dollar balance.
Speaker Change: $133 1 million was held in the U S and $739 9 million was held by our international entities.
Speaker Change: In Q1, we repurchased the remaining $72 $1 million of the $270 million $275 million open market repurchase initiated in Q4 of 'twenty four.
Speaker Change: Q1, we initiated a new plan to repurchase the remaining $225 million of our common stock under our January 2023 approved stock repurchase program of $1 billion through open market repurchases.
Speaker Change: As of March 31, 2025, we had repurchased $129 million. Once completed this open market repurchase will complete our $1 billion stock repurchase program approved in January of 2023.
Speaker Change: Q1 accounts receivable balance was.
Speaker Change: $1 billion 1.062 billion up sequentially.
Speaker Change: Our overall days sales outstanding was 97 days up approximately seven days sequentially and up approximately 11 days as compared to Q1 last year and primarily reflects flexible payment terms, we have extended as part of our ongoing efforts to support invisalign practices cash flow from operations.
Speaker Change: For the first quarter was $52 $7 million.
Speaker Change: Capital expenditures for the first quarter were.
Speaker Change: $25 3 million, primarily related to investments in our manufacturing capacity and facilities free cash flow defined as cash flow from operations minus capital expenditures amounted to $27 4 million.
Speaker Change: Before I turn to our Q2 and fiscal 2025 outlook I'd like to provide the following remarks regarding the UK bat and U S tariffs as of April 30th.
Speaker Change: As previously disclosed in our Q4 24 earnings release and conference call, we anticipated receiving a ruling regarding the applicability of that to our clear aligner sales in the U K on April 24, 2025, we received a favorable ruling in which the tribunal determined that our clear liners or dental.
Speaker Change: Our thesis for the purposes of VAT in the U K, which is key condition to be considered exempt from VAT. This outcome reaffirms our commitment to enhancing patient access to oral Hal leveraging digital technology.
Speaker Change: <unk> has until June 19th to appeal that tribunals ruling Herc may also attempt to challenge the applicability of that on a different basis.
Speaker Change: Moving on to tariffs align technology has it has.
Speaker Change: Clear aligner manufacturing operations in Mexico, Poland, and China for the U S. Domestic market. We currently manufacture clear liners in Mexico prior to shipment to the U S. Align does not currently ship clear liners from Poland or China to the U S. We.
Speaker Change: We currently manufacture clear liners for the Chinese market in China.
Speaker Change: Our clear liners in intra oral scanners made in Mexico that are imported into the U S.
Speaker Change: Are compliant with the United States, Mexico, Canada agreement U S. MCA as noted in President Trump's Executive order dated April <unk> 2025 U S. MCA compliant goods are exempt from tariffs under the executive order. However, the U S Mexico tariff.
Speaker Change: Situation remains fluid and we are unable to predict whether U S MCA compliant products.
Speaker Change: We remain exempt whether there will be other changes to the announce executive order or if other tariffs will be imposed in the future.
Speaker Change: We expect an incremental tariff if implemented to be applied to the to the transfer price on goods shipped for Mexico.
Speaker Change: With respect to our clear Aligner is made in China, all manufacturer for China. It takes place in China, we have assessed the potential impact of China's retaliatory tariffs and believe that we are able to mitigate most of the tariff exposure through adjustments in our supply chain based on the current situation, we do not expect a significant impact to our cause.
Speaker Change: From these retaliatory tariffs.
Speaker Change: We have also assessed the potential direct impact of additional Europe U S tariffs on China.
Speaker Change: And our business and currently do not expect to realize the significant impact from these retaliatory tariffs are intra oral scanner manufactured primarily occurs in Israel with scanner ship from there to worldwide locations. We produced a small number of scanners in China, primarily for the market.
Speaker Change: Regarding tariffs on Israel goods imported into the U S. At the current 10% baseline tariffs, we estimate the average monthly potential impact to be approximate $1 million, which we have considered in our guidance for Q2 and fiscal 2025.
Speaker Change: Moving onto 2025 business outlook, assuming no circumstances occur beyond our control such as foreign exchange macroeconomic conditions and changes to our currently known tariffs that could impact our business.
Speaker Change: We expect Q2, 'twenty 'twenty five worldwide revenues to be in the range of 1.05.
Speaker Change: Two $1.07 billion up sequentially from Q1, 2025, we expect Q2, 'twenty five clear aligner volume to be up sequentially in Q2, 25 clear Aligner Asps.
Speaker Change: To also be up sequentially due to favorable foreign exchange at current spot rates.
Speaker Change: Partially offset by the continued product mix shift to non comprehensive clear aligner products with lower list prices. We expect Q2, 25 systems and services revenue to be up sequentially. As we continued to ramp up the ITER alumina scanner with restore to software. We expect Q2 'twenty five worldwide gross margin.
Speaker Change: <unk> to be up sequentially, primarily from higher Asps and clear aligner volume.
Speaker Change: We expect our Q2 'twenty five GAAP operating margin and Q2, 25% non-GAAP operating margin to be up sequentially by approximately three points for each GAAP and non-GAAP operating margin.
Speaker Change: For fiscal 2025, we expect.
Speaker Change: 2025, clear aligner volume growth to be up approximately mid single digits year over year, we expect 2025 clear aligner asps to be down year over year due to continued product mix shift to non comprehensive clear aligner products with lower list prices and continued growth in our emerging markets.
Speaker Change: Where those products products may carry lower list prices, we expect 2025 systems and services revenues.
Speaker Change: Our systems and services year over year revenues to grow faster than clear aligner revenues, we expect 2025 year over year revenue growth to be in the range of three 5% to five 5% at current spot rates, we expect fiscal 2025, GAAP operating margin to be approximately two points above that.
Speaker Change: 24.
Speaker Change: GAAP operating margin and we expect 2025 non-GAAP operating margin to be approximately 22, 5%. We expect our investments in capital expenditures for fiscal 'twenty 2025 to be between $100 million and $150 million capital expenditures, primarily relate to technology.
Speaker Change: Grades as well as manufacturing capacity in support of our ongoing business.
Joe Hogan: With that I'll turn it back over to Joe for final comments Joe.
Speaker Change: John I am pleased with the results of our first quarter, the strength of our clear aligner business, including the return to stability in the United States and the response to our recent innovations such as Invisalign palate expander system in Ontario aluminum.
Speaker Change: All of US are aware, the global economic uncertainty and the headwinds of tariffs or changes in consumer sentiment might bring along.
Speaker Change: <unk> is focused on what we can control as I mentioned last quarter that means building on the innovations introduced in 2024 that drive efficiency and growth for our customers' practices, while delivering the best customer and patient experiences in the industry.
Speaker Change: First through our digital scanning technology.
Speaker Change: <unk> has long been valued and orthodontic and GP practices as much more than a replacement for Pvs impressions. Our next generation <unk> aluminum solution with comprehensive dentistry capabilities provides transformative solutions for GP dental practices to enable diagnostics restorative multi disciplinary ortho restorative workflow.
Speaker Change: <unk>, including Neurotechnology and the ITER alumina approach dental imaging system with <unk> alumina.
Speaker Change: We truly have a gateway to any type of digital orthodontics and dental treatment.
Speaker Change: Second driving practice transformation to fully.
Speaker Change: Digital practices must address two key variables doctor and patient efficiency less patient share time and fewer patient visits increased this practice profitability.
Speaker Change: We're helping customers drive efficiency and create more time and capacity in their practices with our digital treatment planning software delivering clean check in minutes for most treatment plans. The latest innovations in <unk> signature experience combines automation that these doctors clinical preferences with AI powered tools that deliver customized treatment plans in near real time.
Speaker Change: Based on doctors building personalized treatment preferences are pre properly templates, a doctor chooses or almost touchless digital workflows klimczak in minutes technology, which is revolutionizing treatment planning for doctors and enabling chair side treatment planning improving patient.
Speaker Change: Conversion and getting patients started in treatments within days.
Speaker Change: Building on the world's most advanced clear aligner system to make it even more effective and efficient for all patients with innovations such as the Invisalign system with Mandibular advancement, featuring occlusal blocks that expands aligns class II treatment portfolio for growing patients with a comprehensive solution for treating growing patients in class II <unk> inclusions caused by.
Speaker Change: <unk> Retrusion.
Speaker Change: Finally, we are delivering on the promise of <unk> technology that as part of alliance DNA with direct three D printed orthodontic devices, demonstrating our commitment to pushing the boundaries of digital orthodontics. The first example is the Invisalign palate expander system, a series of removable devices that expanded patients pallet without traditional metal expanders and screws in a way.
Speaker Change: It is both effective clinically and comfortable and easy.
Speaker Change: To use for kids and parents.
Speaker Change: This is the first direct three D printed appliance align is commercialized.
Speaker Change: Others in development, we believe direct three D printing will give doctors new levels of precision and appliance fit in shape and deliver the best possible outcome for patients.
Speaker Change: As we celebrate 28 years of digital innovation. This year. We're also proud to be grateful and highlight that we met a significant milestone with over 20 million invisalign patients treated globally, representing 20 million smiles 20 million stories, and 20 million lives transformed a testament to the passion and purpose of our employees our doctor customers and.
Speaker Change: And their patients with that I. Thank you for your time today I look forward to speaking with you at our Investor Day meeting next week.
Speaker Change: Now I will turn the call over to the operator for questions operator.
Speaker Change: Thank you and as a reminder to ask a question you need to press Star one one on your telephone.
Speaker Change: For name to be announced to withdraw your question. Please press star one again.
Speaker Change: So Tom please limit yourself to one question one moment for our first question.
Brandon: Our first question comes from the line of Brandon <unk> from William Blair. Your line is open.
Brandon: Hi, everyone. Thanks for taking my question and congrats and I started the year here.
Brandon: Maybe just to start.
Brandon: Pleasant pleasantly surprised that kind of the strength in the quarter and the strength of the guide given historically, we've relied a lot on and we've talked a lot about the ties as consumer sentiment in the dental space.
Brandon: So again kind of a nice surprise in this quarter I was hoping you guys can just spend a little time talking result, consumer sentiment come down, but it seems like the business is doing well so talk a little bit about maybe why does decoupling and what kind of confidence that gives you any guidance on a go forward basis, even though in April we were seeing sentiment drawdown. Thanks guys.
Speaker Change: Hi, Brandon Thanks for the question.
Speaker Change: We saw.
Brandon: Good volume.
Brandon: Great to see North America grow again, it's been a while as I mentioned.
Brandon: Good strength in APAC overall, including China, and Europe are really across the board in Europe. We saw good demand also and obviously the alumina scanner coming out now with restore to capability gives us a tailwind in that sense too so.
Brandon: Loved also was a team you saw teens grow but you also saw a cultural also so what I'd just add that comment by saying, we saw breadth and a sense of the growth whether it was product line or whether its by country or region.
Brandon: And also by our different segments, including Ontario.
Speaker Change: Thank you one moment our next question.
Speaker Change: Our next question comes from the line of Nick.
Chopra from Wells Fargo. Your line is open.
Speaker Change: Good afternoon.
Speaker Change: Can you hear me.
Speaker Change: Hey, guys. Good afternoon, thanks for taking the questions and congrats on a nice quarter, maybe just two for me I. Appreciate all the color you provided on the tariff front, but can you just talk about plans to potentially mitigate that by moving production.
Speaker Change: Two different locations or putting in some price increases and then adequate follow up thank you.
Joe Hogan: Hey, Nick it's Joe.
Speaker Change: Obviously were I think pretty well situated right now when you look at how the tariffs would affect us we're in China for China and as John said, there is some material movements and all that will take care of it we don't see much of an impact there if anything.
Speaker Change: Good with Mexico, right now, we feel pretty solid on that in our Poland plant is fully operational and working well in Europe I guess, the only issue we really have is.
Speaker Change: So a lot of the shipments are coming out of Israel, but we have some plans will be able to address that but as you can see in our forecast we're planning on holding our margin that we've committed to and so we think we'll be able to mitigate that so overall I feel fortunate I think we positioned ourselves as a truly global business, meaning we have global supply lines and each one of those specific regions that we can maximize and work through an <unk>.
Speaker Change: So we feel good about the situation right now, but you know as I mentioned in my comments too is there's a lot of volatility out there, but we feel we're well positioned in the sense of what we've seen so far.
Speaker Change: Got it that's super helpful and you're hosting a.
Speaker Change: Much anticipated Investor Day next week I'm, just wondering if you can just provide some insight as to what we can expect next week. Thanks, so much.
Speaker Change: I think what you can expect is we'll give you a good portfolio look at the company a good demand what we think the next few years look like in a sense of how we are positioned overall from a technology standpoint, and also a commercial standpoint, it's been a while since we've been with our investors. So we're really excited to share with you we develop a lot since the last meet.
Speaker Change: And we look forward to the time in New York.
Speaker Change: Our next question.
Speaker Change: Our next question comes from the line of Jon Block from Stifel. Your line is open.
Speaker Change: Scott.
Scott: Hey, guys.
Scott: The first one John will have some sort.
Scott: Sort of detailed questions on the 2025 revenue guidance. So I think I've got it right you raise it from low single digits.
Scott: To four 5% at the midpoint.
Scott: The language around Asps didn't change I'd still expect it to be down low single digits year over year clear aligner.
Scott: We didn't change the volatile still expected to be up mid single digits year over year. So maybe this is a pretty straightforward question, but like any more color on the ASP or the ASP thoughts basically.
Scott: Call it unchanged from three months ago, but now we should be thinking like down one in the prior was down three that both fits the LSD narrative with that 200 basis point Delta sort of specific to just updating for the spot rate and let me know if that came across that.
Speaker Change: <unk> is accurate the way you phrased that John.
Speaker Change: Okay. It was an easy one can say so again another one Joe.
Speaker Change: I would love to spend time on team.
Speaker Change: This was always sort of like the Holy Grail and it went to the Moon. During Covid and then you had some tough comps and here you are with new products in the double digit growth of 13%. It was a pretty good beat on team versus where we were in the two year stack is mid twenties. It wasn't up against an easy comp. So the 13 off the 12.
Speaker Change: <unk>, maybe just elaborate on that like what are you seeing with IV clearly that's helping the balls, but are you seeing the IPA to alignment pull through which I think we would still be in the early stages of that.
Speaker Change: Maybe I'm getting a little bit aggressive here, but can we think about <unk> is this.
Speaker Change: Low double digit plus grower going forward as long as the innovation continues to step up and you've got MAA with occlusal blocks first hitting the market. Thanks.
Hey, John first of all I like the breadth of what you saw in <unk>, we saw it across each geography too.
Speaker Change: Obviously IP is a big part of that but it combines well with Invisalign first we see that some doctors specified immediately some in sequence, but overall, that's just a great we call it kids product.
Speaker Change: But in the teen segment, but those two products function very well together you are right about mandibular advancement with occlusal blocks it addresses.
Speaker Change: <unk> block kind of a system that's been out there for years, it's kind of an invasive system.
Speaker Change: We've done that before with Mandibular advancement, but not to the extent that these strong occlusal blocks will be able to address the class II like I mentioned before so.
Speaker Change: So I feel I feel good about our distribution capability in each geography to take that kind of technology forward, there's a lot of specificity and stuff like IPA and.
Speaker Change: Occlusal blocks that you need a great.
Speaker Change: Distribution team to be able to explain and help to integrate in doctors' offices. So I hope I have answered your question John but overall, it's not just look more like one region or one product is really good synergy in our portfolio across the different regions.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: One moment our next question.
Speaker Change: Our next question comes from the line of Jeff Johnson from Baird. Your line is open.
Jeff Johnson: Thank you good afternoon, guys, Hey, Joe how are you. So let me ask I guess John's AFP question, but let me kind of dig down a little bit more if I can ask one question about asps. This quarter and then one quick question about Asps going forward hopefully that's all blended it counts as one question, but John I think asps were down eight 2% year over year not sequentially.
Jeff Johnson: Two year over year. This quarter can you just remind us how much the vap the price discount yet again to normalize that the impact of the UK that how much that contributed out of that eight 2% and how much <unk> contributed as a negative headwind I think that was 200 basis points by my math, but just trying to confirm that.
Jeff Johnson: Yes, the FX is.
Jeff Johnson: Is that impact that we have on a year over year basis. So we have a.
Jeff Johnson: Unfavorable FX I mean on a year over year basis. The FX on the overall company is three one points.
Jeff Johnson: And then remember we started the VAT withholding the VAT a year ago in Q1, so on a year over year basis, it's already in the baseline numbers from last year.
Jeff Johnson: Okay, and then on going forward.
Jeff Johnson: Currency should switch to a positive contributor to Asps.
Jeff Johnson: You mentioned the 310 I thought that was the top line impact, but just is that the flow through impact asp's as well the 310 headwind in the first quarter, but going forward FX switches to a positive tailwind any.
Jeff Johnson: Heart rates can you just kind of put us in the ballpark there I can do my math later Tonight, but would love to hear your opinion, there and then.
Jeff Johnson: The H M. R C doesn't appeal.
Jeff Johnson: Can you really raise those UK prices would that actually be a contributor or do you look at these prices you just don't have to pay that.
Jeff Johnson: Providers don't have to pay that tax I guess does that could that potentially switch to an ASP tailwind and then lastly, just <unk> the mandibular advancement blocks.
Jeff Johnson: I think I was hearing that thats going to be $100 add on charge. If we start mixing more and more MAA cases does that theoretically then drive a little bit of ASP tailwind the way ITE and DSP has created a little bit of ASP headwind right now thank you.
Jeff Johnson: Let me, let me try to take these three asps.
Jeff Johnson: Question Jeff.
Speaker Change: Jeff on this so MLB, yes, slightly higher price that that would help our overall asps as we sell more of that that's a premium product on our comprehensive cases, and we'd add to that for the <unk>.
Speaker Change: <unk> on that regarding the UK, we have to hear back on whether Herc will will appeal and what they do we have a lot of flexibility to that if we win either they don't appeal or win an appeal, we can always make changes to our our discount and and not discount as much and if we.
Speaker Change: Do that then that gives us a benefit in asps going forward that has not been contemplated in our forward looking ESP I'm, just kind of taking the UK VAT.
Speaker Change: That impact completely out from a forecast, but it does give us flexibility depending on what what herc decides to do or if it gets.
Speaker Change: Works its way through and then regarding now overall FX, yes. It turns into now at current spot rates, a slight benefit on a year over year basis.
Speaker Change: And then you still have what we've talked about before just at list price.
Speaker Change: Lower list price products, which would be comprehensive as well as some of the other growth in certain countries at just at a lower list price but.
Speaker Change: Gross margin as you know as is.
Any cases of favorable as a result of those those lower stage products because the cost to serve for us is less but that's how the dynamics shape up for Asp's.
Speaker Change: I appreciate it thank you.
Joe Hogan: Thanks, Joe.
Speaker Change: One moment our next question.
Speaker Change: Our next question comes from the line of Michael Cherny from Leerink Partners. Your line is open.
Michael Cherny: Afternoon, and congrats on a really nice quarter and the guidance I just want to make sure.
Speaker Change: We have all the pieces right I'm not going to do as much mental math as Jeff.
Speaker Change: <unk> slower there, but in terms of the margin uptick that you now expect nice margin expansion on the year.
Speaker Change: Much of it do you would you accrue to kind of better revenue expectations on a organic basis for operational changes I know we've spent a lot of time talking about the ASP regarding the impact from FX, there, but anything else you can allude to relative to the operating margin dropped down how much of it has been within your control versus how much is market conditions.
Speaker Change: That'd be great yeah. Thanks, so much.
Speaker Change: I think when you look at our margin expansion.
Speaker Change: And like I said in the prepared remarks that still net of 270 basis point improvement in op margin from 2024 to 2025 with the known tariff impact that we would have now and where we're seeing the expansion improvements has continued to to improve our manufacturing efficiencies.
Speaker Change: With volume with material savings logistical savings.
Speaker Change: Things that we talk about from an innovation standpoint, when we do touch us Glenn check a lot less activity for us.
Speaker Change: As well as some of the new products that we have that are at.
Speaker Change: Alright, good margins.
Speaker Change: Several of them higher ASP like we talked about with <unk> and so on so it's really a host of initiatives that we have it. It's what we continue to do and the business and.
Speaker Change: And with this forecast we're pleased to report that.
As we know tariffs now we can still get to our margin targets that we have because we're seeing productivity in other areas.
Speaker Change: Got it and just one really quick last follow up did you give the DSP number for the quarter I apologize if I missed it in the slides or anywhere else.
Speaker Change: No we did not give the DSP, but but as we've said in our prepared remarks, and what we see as this helps grow the low stage part of our portfolio.
Speaker Change: It's rolling out in other areas and we're pleased with the performance.
Got it thanks, so much.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of.
Speaker Change: Jason Bednar from Piper Sandler Your line is open.
Speaker Change: Hi, Jason.
Speaker Change: Hey, there.
Speaker Change: Wanted to first start on two financing topics.
Speaker Change: We saw higher rates credit denials were an issue over the past year or so you've got a new preferred financing partner in <unk>. Just curious if youre seeing that help resolve any of the challenges with consumers early on in that relationship and then on the provider side. John I think you said that you attributed the ryzen dsos to extending financing or better.
Speaker Change: Favorable terms to practices.
Speaker Change: Just wanted to understand what's going on there if you can double quick just to.
Speaker Change: To be behind that's a pretty big increase in Dsos for policy you've had in place for multiple years. So just wondering what's changed just in the last few months that would materially shut that line higher.
Speaker Change: Yes, I think.
Speaker Change: Really you you highlighted kind of the components about how people pay in general. So you had some patients such as paid directly and they pay the 100% of the <unk>.
Speaker Change: <unk> that debt.
Speaker Change: The treatment that they want so that happens in many markets and that continues maybe it's less of that because of some of the pressures that they might be facing and so the other two ways that that essentially patients will pay us. Some will will you utilize that some of the doctor financing so they'll kind of pay as you go to the Doctor.
Speaker Change: That's where really where it helps it helps to have favorable terms with those doctors. So that we can provide a little bit.
Speaker Change: Longer time for them to pay and we continue that effort. So that those doctors can take a little bit more time to pay us back so that they can use their balance sheets or their working capital to help kind of that patient financing that they provide and then the third way is is external and <unk> is one of them theres many different.
Speaker Change: Companies that provide this but we're seeing a good combination of of <unk>.
Speaker Change: Finding the right.
Speaker Change: Way to get the <unk> meeting the requirements that they have or others that are providing this and getting those <unk>.
Speaker Change: <unk> patients into into financing. So we're seeing a good combination of this but we know that how much things cost at how much they have to pay over a monthly basis is important and this is a good way to offset that.
Speaker Change: Okay, all right understood.
Speaker Change: And then just maybe real quick on some of the tariff dynamics and not necessarily as it influences.
Speaker Change: What you have to pay but more so from a competitive standpoint. It seems like you might have some competitors that may get dislocated or may have may be facing higher costs as they have to M corridor.
Speaker Change: Reconfigure their supply chains. It seems like this is a good opportunity to lean in with your business, but I wanted to ask are you seeing any dislocation with doctor customers.
Speaker Change: That happening where youre now.
Speaker Change: Call it.
Speaker Change: Relatively more favorable from a cost perspective than maybe what you were pre tariffs.
Joe Hogan: Hi, It's Joe I would say, we haven't seen anything material in that sense, a change so far and I can't.
Speaker Change: Really speak of are.
Speaker Change: Most of our competitors supply lines and so a lot of intricacies in the sense of manufacturing whatever.
Speaker Change: I mean, obviously some of them are going to be very disadvantaged, we don't know to what extent, but we just continue to operate in the marketplace focus on.
Speaker Change: Can focus on like I mentioned, our product capability, our digital platform.
Speaker Change: <unk> alumina and just the efficiencies that we really can gain with doctor so without the tariffs kind of take care of themselves, we'll see how that goes but we really feel good about our position in it and we will continue to execute.
Speaker Change: Alright, Thanks, Jeff.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Steve Valiquette from Mizuho Securities. Your line is open.
Speaker Change: Hi, Thanks, Good afternoon, Joe and John Yes, Thanks for taking the question here. So one of my questions was just answered on the tariffs I think I'll just hold off on that one.
Speaker Change: But one of the things that you mentioned you said that you assess the potential impact of China's retaliatory tariffs and you believe you're able to mitigate the tariff exposure through adjustments in your supply chain.
Speaker Change: I guess my high level thought was that if you're manufacturing in China for the Chinese market, you would essentially have zero impact from tariffs, but it's I'm not sure if I'm reading too much into your wording there, but just hoping that you could probably a little more color on the dynamics on making adjustments here supply chain. Thanks.
Speaker Change: Yes, you are right, Steve from a product movement between China, and U S and vice versa.
Speaker Change: There's no there's no movement across that there are some raw materials that debt.
Speaker Change: For the our China manufacturing location, there are some raw materials that come from U S. As well as other places that that's the piece that were adjusted from a supply standpoint, so that it.
Speaker Change: It should not impact us from a tariff standpoint.
Speaker Change: Got it Okay, alright, that's it for me thanks.
Speaker Change: Great. Thanks, Steve.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Elizabeth Anderson from Evercore ISI. Your line is open.
Elizabeth Anderson: Hi, guys. Good afternoon. Thanks, so much for the question.
Elizabeth Anderson: So yeah, I see what you're saying about the <unk> guidance and I understand what you've been saying in some of the math about the FX flipping thing.
Elizabeth Anderson: You're talking about in the Q2 guidance you know Keith is volume being up.
Elizabeth Anderson: Sequentially can you say that.
Elizabeth Anderson: Obviously, a lot of the <unk> results happened sort of BT before tariffs can you sort of talk about how the demand are you starting to see any impact from demand would you characterize the demand since sort of the tariff announcements.
Elizabeth Anderson: As broadly stable like I guess any sort of color you can help provide on that would be helpful. Just as people kind of put through the puts and takes of the current macro Choppiness and then I have a follow up.
John: Yes, Elizabeth Hi, this is John.
Speaker Change: Look we're pleased with our volume and our performance in Q1 despite.
John: Some of the Choppiness that that people allude to and so on.
John: When we look at how we're guiding in what we're using.
John: Normal process that we go through to bear to come up with guidance.
John: And we're showing that we expect that sequential improvement from Q1 to Q2, I think I would just remind everybody that it's a global business theres a lot of different parts to our business.
John: And various products as well that.
John: I think sometimes gets gets a little bit lost so I think that you look at the global breadth of our business the strength that we saw in <unk>.
John: In EMEA and in APAC and the stability that we saw in.
John: In the Americas.
John: There is there is there is always something about tariffs and some of the noise around that but.
John: We're guiding to for for that increase and it's based on the data that we see.
Speaker Change: Got it and as a follow up obviously, you've launched the restart of ical at Ids late in the quarter. So I would assume that there's almost no benefit in the first quarter from that can you just help.
Speaker Change: Help us think through sort of what's the uptake for that and sort of how you expect that based on sort of prior launches to come across as you should have launched a new products like the <unk>.
Speaker Change: <unk> Ortho version last year.
Speaker Change: The second version is a restorative scanner, obviously as you know it's been so it's broadening the GP segment.
Speaker Change: Focused on right now.
Speaker Change: Obviously, we'll deliver through our channels. So it was over globally, we feel really good about some of the capability of that from a store to standpoint.
Speaker Change: We're seeing images right now that most of these images will go to labs into restorative procedure.
Speaker Change: And we're pretty excited about the degree of detail and specificity. The alumina has because of its multi projection type of a system. So.
Speaker Change: I can't tell you what.
Speaker Change: Exact growth's going to be I can tell you we will take it to the marketplace, we'll take it from a lab side, the GP side, and we feel really good about our competitive positioning much stronger refuel in the restorative way than some of our scanners in the past.
I hope that helps.
Speaker Change: Yes. Thank you so much.
Speaker Change: Sure.
Speaker Change: Our next question.
Speaker Change: Our next question will come from the line of Evan <unk> from Morgan Stanley.
Speaker Change: Your line is now open great great. Thanks for taking my questions I'll ask them both upfront here.
Speaker Change: I'm keen to any metric that you have on the actual conversion rates in <unk>.
Speaker Change: Currency palate, expander, and how youre seeing that translating to growth. There I know that currently are at more higher levels I'm curious.
Speaker Change: If we are hitting that inflection point and what kind of metric maybe and maybe it's just too early and then the second question I have is just on direct path I mean in your latest thoughts on contribution where you're at with kind of how that shapes Mcgrath immediately made for investor day on that.
Speaker Change: Pension contributions there.
Speaker Change: First of all.
Speaker Change: From a teen conversion standpoint.
Speaker Change: I wouldn't say, we're hitting critical mass or something like that but I mean, what you see is in that pre teen our kids stage, we do have a very strong portfolio and that phase one area Orthodontists talk about obviously theyre excited about it because it's a group of products that are much simpler from a patient standpoint.
Speaker Change: A lot less painstaking I'd say them before and so we see really all over the world.
Speaker Change: Good uptake and interest in those product lines as we expected and I'd say that includes Mandibular advancement. It also happens so it will take time.
Speaker Change: That penetration piece.
Speaker Change: Nothing about the market that moves really quickly in the sense, it's an individual doctor's office piece by piece all over the world, but we certainly feel really good with the momentum of those three products in general and kids.
Speaker Change: Overall from a.
Speaker Change: When I look around the world right now.
Speaker Change: I just think from a we have good momentum like I mentioned before in every region that we've had we haven't seen this since 2021, the teen growth overall being double digits is terrific.
Speaker Change: So the penetration rate is improving but I think we have to take this thing quarter to quarter and report to you on it.
Speaker Change: I hope that helps.
Speaker Change: Thank you one moment our next question.
Speaker Change: Our next question comes from the line of Mike Risking from Bank of America. Your line is open.
Speaker Change: Hey, Thanks for taking my question guys I appreciate you squeezing men.
Speaker Change: A couple small ones just kind of following up on prior points people brought up associated them real quick.
Speaker Change: You talked about tariffs, you're talking about China, I kind of want talk about the indirect impact of tariffs.
Speaker Change: Trade War, there is a lot of thoughts of maybe.
Speaker Change: Indirectly, China will try to punish American companies by sort of pushing people towards local brands, even more the question how much they can really do that but just from that perspective.
Speaker Change: Are you seeing anything obviously, you've got a local competitor there just thoughts on that and what have you kind of assume for the rest of the year. If the trade war continues to escalate.
Speaker Change: Yes, Mike based on what we saw in the first quarter. Obviously, we're looking for that there was some kind of consumer backlash, we haven't really experienced that at all we had a good quarter in China across the board.
Speaker Change: And so as far as where we stand today, we haven't seen that kind of a of an issue and again I think we're at we're in in China for China type a company there to and then obviously, we're a western company, but we.
Speaker Change: We don't deliver from a western sense, we deliver within a country that technology the manufacturing the treatment planning and all those things. So it's very local in a sense of how we operate there.
Speaker Change: Okay, Great and then you talked about FX on revenues and Asps.
Speaker Change: What about on margins I mean, it's just a pretty big swing in terms of how rates have gone.
Speaker Change: Is there any impact on margins I see that you're keeping your full year non-GAAP op and the same so just any anything we should keep in mind in terms of how that flows through the P&L.
Speaker Change: There is with the FX favorable FX, just slight improvement in our in our op margin as a result of that but we have that as well as being able to offset some of the tariffs and so on so that's the components did that show up in op margin, but.
Speaker Change: We're pleased with the start of the year in terms of our op margin, we're showing guiding to sequential improvement into the into the second quarter and <unk>.
Speaker Change: FX rates stay stable as they are now we will end up with a good accretive op margin for 2025.
Speaker Change: Okay, and then a quick one if I could squeeze in a third just sort of a technical question some.
Speaker Change: Some of the disclosures you mentioned, you're not giving DSP anymore. It looks like unless I'm missing. It you are not giving Americas versus international clear Aligner net revenues.
Speaker Change: Some of the new disclosure going forward is that something we'll all find out the 10-Q or just sort of what's the rationale behind that.
Speaker Change: But we're looking at we're always looking to simplify and provide information we get a lot of feedback that we provide so much information and it gets a bit confusing as to what's really driving things. So we've tried to give the best information that helps you and others being able to understand and analyze the business and.
Speaker Change: We look to make changes that that make the most sense to help provide more clarity to the business.
Speaker Change: Alright, Thank you I appreciate it thanks.
Speaker Change: Good morning.
Speaker Change: Thank you one moment our next question.
Speaker Change: Our next question comes from the line of Kevin Caliendo from UBS. Your line is open.
Kevin Caliendo: Thanks for getting me in I appreciate it.
Speaker Change: I wanted to go back Hey, guys.
Speaker Change: I wanted to go back to the ASP.
Question, It was down eight 3% FX.
Speaker Change: I think as how to think about it which would imply that between discounting and mix. It was down sort of five right.
Speaker Change: Don't think that any of your expectations are going forward that asp's.
Speaker Change: <unk>, 5% in perpetuity, so what gets better.
Speaker Change: In your mind between either mix, either customer mix or product mix or discounting programs.
Speaker Change: Or are you anticipating.
Speaker Change: No that I've contemplated this until right now but.
Speaker Change: As there used to be every July there would be price increases are you thinking that you have the ability to do that broadly speaking in that and that helps I guess, it's a short term question, but it's also sort of a long term question.
Speaker Change: When we think about the asps, because if we're going to get back that sort of you know.
Speaker Change: The kind of growth that we think the business can do it we don't want ESP to be a huge overhang in that on the clear aligner side.
Speaker Change: I think you have to look at it when you think about it Kevin wherever growing certain countries grow faster there just at a lower list price product that they have there or some of the product growth that we have.
Speaker Change: Is lower and we certainly saw some of the shift where we starting this year have introduced DSP in several markets and and other new products with IP and some of the other growth that we've had.
Speaker Change: Whereas we didn't have those in the past so I think some of it's just the products and the locations that that impacts the mix.
And then you see as doctors, we sell to more and more doctors record number of first quarter doctors that we sell to many of these doctors that come in are just they're at a a and ASP our product list price that are.
Speaker Change: Maybe not the comprehensive and they're lowered list price type products, but that's the expectation that you have we have things that we can be able to and mitigate with some of the new products. We have some of the additional pricing like we have on <unk> and others to.
Speaker Change: To be able to get us to two.
That stability in ASP and then of course as you as you work your way down the P&L, we're very mindful of making sure that gross margin is accretive and being able to drive the gross margin ultimately to op margin.
Speaker Change: What we look at as we work our way down the P&L.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you Sean.
unknown: Any further questions in the queue I'd like to turn the call back over to Shirley for closing remarks.
unknown: Thank you and thank you everyone for joining us today as a reminder, we are hosting an investor day meeting.
unknown: Next Tuesday May six in New York City.
unknown: You would like more information about that or to register he says that our website align tech dot com and that are or you can contact investor relations. If you have any.
unknown: Is there questions. We look forward to hearing from you.
unknown: And have a great day.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
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