Q2 2025 Align Technology Inc Earnings Call

Operator: Greetings. Welcome to the Align Second Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. 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.

Greetings welcome to the alliance second quarter 2025 earnings call. At this time. All participants are in a listen-only mode. 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 a line technology. You may begin.

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 Second Quarter 2025 financial results today via Business Wire, which is available on our website at investor.aligntech.com. Today's conference call is being 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 Align's 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. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statement.

Today's conference call is being audio, webcast and will be archived on our website for approximately 1 month.

As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Alliance's future events and product outlook.

These forward-looking statements are only predictions and involve risk and uncertainties that are described in more detail. In our most recent period reports filed with the Securities and Exchange Commission available on our website and at sec.gov

Shirley Stacy: We have posted historical financial statements with corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable, and our Second Quarter 2025 conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information. And with that, I'll turn the call over to Align Technology's President and CEO, Joe Hogan. Joe.

Actual results may vary significantly and Align expressly assumes no obligation to update any forward-looking statement.

Joe Hogan: Thanks, Shirley. Good afternoon, and thanks for joining us today. On our call today, I'll provide an overview of our second quarter results and discuss performance from our two operating segments, System Services and Clear Aligners. John will provide more detail on our Q2 financial performance and comment on our views for the remainder of the year. Following that, I'll come back and summarize a few key points and open the call to questions. On our second quarter results, we're mixed. Total Q2 revenues at $1 billion and $12 million reflect a solid year-over-year revenue growth for Systems and Services, driven primarily by stronger-than-expected sales of iTero Luminous scanner wand upgrades, offset by lower-than-expected sales of full iTero Luminous systems, and a slight year-over-year decrease in Clear Aligner revenues, driven primarily by lower-than-expected volumes in Europe and North America.

We have posted historical financial statements with corresponding reconciliations, including our gaap to non-gaap reconciliation. If applicable and our second quarter 2025 conference call slides on our website under quarterly results, please refer to these files for more detailed information and with that I'll turn the call over to the line Technologies president and CEO Joe Hogan Joe.

Thanks Julie, good afternoon, and thanks for joining us today.

On our call today, I'll provide an overview of our second quarter results and discuss performance from our 2 operating segments system services and clear aligners. John will provide more detail on our Q2 financial performance and comment on our views for the remainder of the Year. Following that I'll come back and summarize a few key points and open the call to questions.

On our second quarter results, were mixed total 22 revenues at 1 billion 12 million. Reflect to solve the year-over-year revenue growth for systems and services driven primarily by stronger than expected sales of itero luminous scanner wand upgrades offset by lower than expected sales of full itero luminous systems and a slight year-over-year decrease in. Clear, liner, revenues driven primarily by lower than expected, volumes in Europe. And

Joe Hogan: As a result, Q2 worldwide revenues and operating margins were below our Q2 outlook. During Q2, we continued to see strong consumer interest in Invisalign treatment, as reflected by iTero scans and Invisalign doctor case submissions. However, we experienced uneven patient case conversion, which led to a lower-than-typical seasonal uptick in case starts, which historically occurred late in the quarter. As we assessed our Q2 results and the activity in our customers' offices, we believe it was impacted in part by US tariff turmoil in and outside the United States and less affordable financing options for orthodontic treatment, as well as for capital equipment purchases. Recent dental industry surveys for the second quarter suggest that there was less overall patient traffic, fewer orthodontic case starts, and patient hesitation toward elective procedures.

North America.

As a result, Q2 worldwide revenues and operating margins were below our Q2 outlook.

We continue to see strong consumer interest in Invisalign treatment, as reflected by iTero scans and Invisalign doctor case submissions.

However, we experienced uneven patient case conversion.

Which led to a lower than typical seasonal uptick in case starts, which historically occurred late in the quarter.

As we assess our Q2 results in the activity in our customers' offices, we believe it was impacted in part by U.S. tariff turmoil, both in and outside the United States, as well as less affordable financing options for orthodontic treatment and for capital equipment purchases.

Joe Hogan: 2025 marks the fourth consecutive year of orthodontic starts being down, and third-party research reports indicate that practices that use both wires and brackets and clear aligners may often have shifted more of their case starts to metal braces in Q2. Uncertainty not only impacts the consumer purchasing decisions, but also the decisions that doctors make, especially practices who still use wires and brackets and weigh the sunk cost of their inventory and their available time over investing in digital solutions during times of financial uncertainty. As we begin the third quarter and plan for the remainder of the year, our outlook anticipates the potential continued economic uncertainty and spending hesitancy that impacted demand for our clear aligners and new iTero scanning systems in the second quarter.

Recent dental industry surveys for the second quarter suggest that there was less overall patient traffic, pure orthodontic, case starts and patient. Hesitation toward elective procedures.

Sonic starts being down.

And third-party resource reports indicate that practices that use both wires and brackets and clear aligners may often have shifted more of their case starts to metal braces in Q2.

And certainly not only impacts the uh consumer purchasing decisions but also the decisions that doctors make, especially practices who still use wires and brackets and weigh the sunk cost of their inventory and they're available time over investing in digital Solutions during times of finding Financial uncertainty.

Joe Hogan: Even though we know consumer interest in Invisalign treatment remains strong, we're continuing to drive engagement and effectiveness of commercial and marketing programs that leverage our innovation and new product cycle across our clear aligners and scanners, especially those for teens and kids. And at the same time, we're evaluating actions to reduce costs and thoughtfully manage our investments. For Q2, total revenues were $1 billion and $12.4 million, up 3.4% sequentially and down 1.6% year-over-year. In our Systems and Services segment, Q2 '25 revenues were $207.8 million and increased 13.9% sequentially and increased 5.6% year-over-year, primarily reflecting solid revenue driven by iTero Lumina wand upgrades and increased services as more doctors transition to iTero Element 5D Plus to the advanced iTero Lumina. The iTero Lumina scanner makes up a majority of iTero scanner systems mix. For clear aligners, Q2 '25 worldwide volumes were up slightly sequentially and year-over-year.

As we begin to third quarter and plan for the remainder of the Year, our Outlook anticipates, the potential continued economic uncertainty and spend it spending hesitancy, that impacted demand for a clearer liners, and new itero scanning systems in the second quarter. Even though we know consumer interest and Invisalign treatment remains strong, we're continuing to drive engagement and effectiveness of commercial and marketing programs. That leverage our Innovation and new product cycle across our clear, liners and scanners, especially those for teens and kids.

And at the same time, we're evaluating actions to reduce costs and possibly manage our investments.

For Q2, total revenues were $1 billion, up $12.4 million sequentially, and down $1.6 million year-over-year.

In our Systems and Services segment, Q2 2025 revenues were $207.8 million, an increase of 13.9% sequentially and an increase of 5.6% year-over-year, primarily reflecting solid revenue driven by Itero Lumina.

Wand upgrades and increased Services, as more doctors transitioned to itero element 5D plus to the advanced itera Lumina.

The Itera Luminous scanner makes up a majority of Itero scanner systems.

Joe Hogan: Year-over-year Q2 clear aligner volumes reflect growth across the APAC and EMEA regions, offset somewhat by the Americas regions. From a product perspective, Q2, we had a strong year-over-year growth from Invisalign first, DSP touch-up cases, Invisalign palate expander and retention, including DSP, as well as continued mix shift to non-comprehensive clear aligner products. From a channel perspective, Q2 clear aligner volumes increased slightly year-over-year in both orthodontist and general practitioner or GP dentist channels, with strong year-over-year growth from dental service providers. Growth in total submittals was primarily driven by strength in the orthodontic channel, while increased utilization was led by the GP channel. Notably, we also achieved a record number of doctors shipped to for the second quarter. For the Americas, Q2 aligner volumes were down slightly year-over-year and reflect solid growth in Latin America teen segment, offset by lower volumes in North America.

for Clear liners, 2225 worldwide volumes, roughly sequentially in year-over-year.

Over year Q2 clear liner volumes reflect growth across the APAC and the mayor regions offset somewhat by the America's regions.

For a product perspective, Q2 we had strong year-over-year growth from Invisalign First, DSP, touch-up cases, Invisalign, pallet expander, and retention including DSP, as well as continued mixed shift to non-comprehensive clear line of products.

From a channel perspective.

2 2, clear liner volumes, increase slightly year-over-year in both orthodontist and general practitioner or GP Dennis channels.

With strong year-over-year growth from dental service providers.

Growth in total, submitters are primarily driven by strength in the orthodontic Channel while increased utilization was led by the GP Channel.

Notably. We also achieved a record number of doctors shipped to for the second quarter.

Joe Hogan: Despite lower volumes, adoptions increased across several key product offerings, including Invisalign first for teens and kids, Invisalign DSP touch-up cases, and Invisalign palate expander system. In the EMEA region, Q2 clear aligner volume grew year-over-year, driven by increased utilization across both orthodontist and GP dentist channels, with strength in the adult segment. This performance reflects continued adoption of non-comprehensive Invisalign offerings, particularly moderate and DSP touch-up cases, including retention, as well as Invisalign comprehensive three and three and Invisalign first within our comprehensive portfolio. For the APAC region, Q2 clear aligner volume grew year-over-year, reflecting increased submittals across both orthodontist and GP channels across teens and kid patients, led by China. From a product standpoint, Invisalign first was a key contributor to year-over-year growth, reflecting rising demand for early intervention solutions. In Q2, over 223,000 teens and growing kids started treatment with Invisalign clear aligners.

For the Americas, Q2 aligner volumes were down slightly year-over-year and reflect solid growth in Latin America. The teen segment was offset by lower volumes in North America.

Despite lower volume, adoptions increased across several key product offerings, including a business line first for teens and kids Invisalign, DSP, touch-up cases, and Invisalign Palate Expander systems.

In the AMA region, Q2, clear, liner volume, grew year-over-year driven by increased utilization across both orthodontists and GP, Dennis Channels with strengthening the adult segment.

This performance reflects continue to adoption of non-comprehensive Invisalign offerings particularly moderate and DSP touch-up cases including retention as well as Invisalign comprehensive 3 and 3 and Invisalign first within our comprehensive portfolio.

For the APAC region, Q2 2025 clear liner volume grew year-over-year, reflecting increased submitters across both orthodontist and GP channels.

Across teen and kid patients led by China.

From a product standpoint, this line was a key contributor to year-over-year growth, reflecting rising demand for early intervention solutions.

Joe Hogan: This number represents a 1.1% sequential decline, primarily due to softer performance in EMEA and APAC, despite the continued strength in the Americas. On a year-over-year basis, case starts increased 3%, driven by growth in APAC and EMEA and Latin America, partially offset by North America. From a product standpoint, Invisalign first was a key year-over-year growth driver across all regions. Additionally, the Invisalign palate expander system contributed to year-over-year growth in North America. During the quarter, we achieved a record number of teen cases for a second quarter. Additionally, we've surpassed a significant milestone. Over 6 million teens and kids have now been treated with the Invisalign System Global. For Q2, the number of doctors submitting case starts for teens and kids was up 3.5% year-over-year, led by continued strength from doctors treating young kids and growing patients with Invisalign first and Invisalign palate expander.

In Q2, over 223,000 teens and Growing Kids started treatment with Invisalign clear aligners. This number represents a 1.1% sequential decline, primarily due to software performance in May and APAC, despite the continued strength in the Americas.

On the year-over-year. Basis case starts increased 3%, driven by growth in APAC and Amaya and Latin America, partially offset by North America.

From a product standpoint of the business line, First was a key year-over-year growth driver across all regions. Additionally, the Invisalign Powell expander system contributed to year-over-year growth in North America.

During the quarter, we achieved a record number of Team cases for a second quarter. Additionally, we've surpassed the significant Milestone over 6 million teens, and kids have. Now been treated with the Invisalign system, global

Joe Hogan: With that, I'll now turn the call over to John. Thanks, Joe. Now for our Q2 financial result. Total revenues for the second quarter were $1 billion and $12.4 million, up 3.4% from the prior quarter and down 1.6% from the corresponding quarter a year ago. On a constant currency basis, Q2 revenues were favorably impacted by approximately $26.4 million, or approximately 2.7% sequentially, and were favorably impacted by approximately $5.6 million year-over-year, or approximately 0.6%. For clear aligners, Q2 revenues of $804.6 million were up 1% sequentially, primarily from favorable foreign exchange, partially offset by higher discounts. Favorable foreign exchange impacted Q2 clear aligner revenues by approximately $21.6 million, or approximately 2.8% sequentially. Q2 clear aligner average per case shipment price of $1,250 increased by $10 on a sequential basis, primarily due to the impact of favorable foreign exchange.

With that, I'll now turn the call over to John.

Thanks Joe. Now for our Q2 Financial results total revenues for the second quarter were 1 billion. 12.4 million up 3.4% from the prior quarter and down 1.6% from the corresponding quarter, a year ago, on a constant currency basis. Q2 revenues were favorably impacted by approximately 26.4 million or approximately 2.7% sequentially and were favorably impacted by a proximately 5.6 million dollars year-over-year or approximately 0.6%.

For Clear liners. Q2 revenues of 804.6 million were up, 1% sequentially primarily from for favorable, foreign exchange, partially offset by higher discounts bearable foreign exchange impacted Q2 clear, line of revenues by approximately 21.6 million or approximately 2.8% sequentially.

Joe Hogan: On a year-over-year basis, Q2 clear aligner revenues were down 3.3%, primarily due to lower ASPs from discounts and product mix shift to lower price products, partially offset by a price increase. Favorable foreign exchange impacted Q2 clear aligner revenues by approximately $4.5 million, or approximately 0.6% year-over-year. Q2 clear aligner average per case shipment price of $1,250 was down $45 on a year-over-year basis, primarily due to discounts and a product mix shift to lower price products, partially offset by a price increase in Q1 2025 and favorable foreign exchange. Clear aligner deferred revenues on the balance sheet as of June 30, 2025 increased $1.4 million, or 0.1% sequentially, and decreased $65.5 million, or 5.2% year-over-year, and will be recognized as additional aligners are shipped under each sales contract.

Q2 clearer liner, average per perk shipment. Price of $1,250 increased by $10 on a sequential basis, primarily due to the impact of favorable foreign exchange on a year-over-year basis. In Q2, clearer line revenues were down 3.3%, primarily due to lower ASB from discounts and product mix shift to lower-priced products, partially offset by a price increase. Bearable foreign exchange impacted Q2.

Clear line of revenues by approximately 4.5 million for approximately 0.6% year-over-year.

To clear liner average per shipment, the price of $1,250 was down $45 on a year-over-year basis, primarily due to discounts and a product mix shift to lower-priced products. This was partially offset by a price increase in Q1 2025 and favorable foreign exchange.

Joe Hogan: Q2 Systems and Services revenues of $207.8 million were up 13.9% sequentially, primarily due to higher scanner system revenue and favorable foreign exchange. Q2 Systems and Services revenues were up 5.6% year-over-year, primarily due to an increase in scanner and wand upgrade revenue, higher non-system revenues, and favorable foreign exchange, partially offset by lower scanner system sales. Foreign exchange favorably impacted Q2 Systems and Services revenue by approximately $4.8 million, or approximately 2.3% sequentially. On a year-over-year basis, Systems and Services revenue were favorably impacted by foreign exchange of approximately $1 million, or approximately 0.5%. Systems and Services deferred revenues decreased $7.6 million, or 3.7% sequentially, and decreased $24.5 million, or 10.9% year-over-year, due in part to the shorter duration of service contracts selected by customers on initial scanner system purchases. Moving on to gross margin.

Clear line to deferred revenue on the balance sheet, as of June 30th, 2025 increase 1.4 million or 0.1% sequentially, and decreased 65.5 million or 5.2% year-over-year and will be recognized as additional aligners are shipped under each sales contract.

Q2 systems and services revenues of 207.8 million were up, 13.9%, sequentially, primarily due to higher scanner system revenue, and favorable foreign exchange.

Q2's systems and services. Revenues were up. 5.6% year-over-year, primarily due to an increase in scanner and wand upgrade Revenue, higher non-system revenues and favorable foreign exchange partially offset by lower scanner system sales.

Foreign exchange favorably impacted Q2 systems and services revenue by approximately $4.8 million, or approximately 2.3%.

Sequentially on a year-over-year basis systems and services. Revenue were favorably, impacted by Foreign Exchange of approximately, $1 million or approximately 0.5%.

Systems and services deferred revenues decreased $7.6 million, or 3.7% sequentially, and decreased $24.5 million, or 10.9% year-over-year.

Joe Hogan: Second quarter overall gross margin was 69.9%, up 0.5 points sequentially, and down 0.3 points year-over-year. Overall gross margin was favorably impacted by foreign exchange of 0.8 points sequentially and 0.2 points on a year-over-year basis. Clear aligner gross margin for the second quarter was 70.1%, down 0.5 points sequentially, primarily due to higher manufacturing costs, partially offset by freight savings. Foreign exchange favorably impacted clear aligner gross margin by approximately 0.8 points sequentially. Clear aligner gross margin for the second quarter was down 0.7 points year-over-year, primarily due to lower ASPs, partially offset by freight savings. Foreign exchange favorably impacted clear aligner gross margin by approximately 0.2 points year-over-year. Systems and Services gross margin for the second quarter was 69.4%, up 4.7 points sequentially, due to higher scanner system ASPs and manufacturing efficiencies, partially offset by tariffs.

Due in part to the shorter duration of service contracts selected by customers on initial scanner system purchases, moving on to gross margin for the second quarter overall, gross margin was 69.9%, up 0.5 points sequentially and down 0.3 points year-over-year. Overall, gross margin was favorably impacted by foreign exchange, contributing 0.8 points sequentially and 0.2 points on a year-over-year basis.

Clear aligner gross margin for the second quarter was 70.1%.

Down 0.5 Point sequentially primarily due to higher manufacturing costs, partially offset by Freight savings foreign exchange favorably impacted clear aligner gross margin by approximately 0.8 points sequentially.

Clear line at gross margin for the second quarter was down 0.7 points year-over-year, due primarily to lower ASPs, partially offset by freight savings.

Foreign exchange favorably impacted clear line gross margin by approximately 0.2 points year-over-year.

Joe Hogan: Foreign exchange favorably impacted the Systems and Services gross margin by approximately 0.7 points sequentially. Systems and Services gross margin for the second quarter was up 1.3 points year-over-year, due to manufacturing efficiencies, partially offset by tariffs, and lower scanner ASPs. Foreign exchange favorably impacted the Systems and Services gross margin by approximately 0.1 points year-over-year. Q2 operating expenses were $545.1 million, down 0.7% sequentially, and down 5.3% year-over-year. On a sequential basis, operating expenses were 3.9 million lower, primarily due to lower legal settlements not reoccurring in Q2 '25. Year-over-year operating expenses decreased by $30.5 million, primarily due to legal settlements not recurring in Q2. On a non-GAAP basis, excluding stock-based compensation, legal settlements, and amortization of acquired intangibles related to certain acquisitions, operating expenses were $497.6 million, down 0.6% sequentially, and down 0.4% year-over-year.

Is gross margin for the second quarter was 69.4% up 4.7 points. Sequentially due to higher scanner system asbs and Manufacturing efficiencies partially offset by tariffs. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.7 points sequentially.

For the second quarter, gross margin was up 1.3 points year-over-year, due to manufacturing efficiencies, partially offset by tariffs and lower scanner ASPs. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.1 points year-over-year.

Total operating expenses were $545.1 million, down 0.7% sequentially and down 5.3% year-over-year. Operating expenses were $3.9 million lower primarily due to lower legal settlements, which are not recurring in Q2 2025 year-over-year. Operating expenses decreased by $30.5 million, primarily due to legal settlements not occurring in Q2.

Joe Hogan: Our second quarter operating income of $163 million resulted in an operating margin of 16.1%, up 2.7 points sequentially, and up 1.7 points year-over-year. Operating margin was favorably impacted from foreign exchange by approximately 1.2 points sequentially and 0.2 points year-over-year. On a non-GAAP basis, which excludes stock-based compensation, legal settlements, and amortization of intangibles related to certain acquisitions, operating margin for the second quarter was 21.3%, up 2.3 points sequentially, and down 1 point year-over-year. Interest in other income and expense net for the second quarter was an income of $10.5 million compared to an income of $9.3 million in Q1 of '25, primarily driven by favorable foreign exchange movement of $10.1 million, partially offset by lower interest income.

On a non-gaap basis excluding stock-based, compensation legal settlements and amortization of acquired intangibles related to certain Acquisitions. Operating expenses were 497.6 million down, 0.6%, sequentially, and down, 0.4% year-over-year.

And income of 163 million dollars resulted in an operating margin of 16.1% up 2.7 points sequentially and up 1.7 points year over year. Operating margin was favorably. Impacted from foreign exchange by approximately 1.2 points sequentially and 0.2 points.

Year-over-year on a non-gaap basis which which excludes stock-based compensation legal settlements and amortization of intangibles related to certain Acquisitions operating margin for the second quarter was 21.3% up, 2.3 Point sequentially and down. 1 Point year-over-year.

Joe Hogan: On a year-over-year basis, Q2 interest in other income and expense were favorably compared to an expense of $3.2 million in Q2 of 2024, primarily driven by favorable foreign exchange movements. The GAAP effective tax rate in the second quarter was 28.2% compared to 33.6% in the first quarter and 32.9% in the second quarter of the prior year. The second quarter GAAP effective tax rate was lower than the first quarter effective tax rate, primarily due to discrete tax expenses related to stock-based compensation recognized in Q1 of 2025 that did not occur in Q2 of 2025. The second quarter GAAP effective tax rate was lower than the second quarter effective tax rate of the prior year, primarily due to a decrease in US taxes on foreign earnings, partially offset by a change in our jurisdictional mix of income.

And expense net. For the second quarter was an income of 10.5 million. Compared to an income of 9.3 million in q1 of 25, primarily driven by favorable foreign exchange movements of 10.1 million partially offset by lower interest income.

On a year-over-year basis, Q2, interests and other income and expense were favorably. Compared to an expense of 3.2 million in Q2 of 2024, primarily driven by favorable foreign exchange movements,

The Gap effective tax rate in the second quarter was 28.2%, compared to 33.6% in the first quarter and 32.9% in the second quarter of the prior year.

The second quarter Gap effective tax rate was lower than the first quarter effective tax rate, primarily due to discrete tax expenses related to stock-based, compensation recognized in q1 of 2025 that did not occur in Q2 of 2025. The second quarter Gap. Affected tax rate was lower than the second quarter effective tax rate of the prior year primarily

Joe Hogan: On a non-GAAP basis, effective tax rate in the second quarter was 20%, which reflects our long-term projected tax rate. Second quarter net income for diluted share was $1.72, up $0.45 sequentially and up $0.43 compared to the prior year. Our EPS was favorably impacted by $0.26 on a sequential basis and $0.13 on a year-over-year basis due to foreign exchange. On a non-GAAP basis, net income for diluted share was $2.49 for the second quarter, up $0.36 sequentially and up $0.09 year-over-year. Moving on to the balance sheet. As of June 30, 2025, cash and cash equivalents were $901.2 million up sequentially, $28.1 million and up $139.7 million year-over-year. Of the $901.2 million balance, $193.5 million was held in the US and $707.7 million was held by our international entities.

Really due to a decrease in US taxes, on foreign earnings, partially offset by a change in our jurisdictional mix of income.

On a non-GAAP basis, the effective tax rate.

In the second quarter was 20%, Which reflects our long-term projected tax rate.

Second quarter, net income per diluted share was 1.72 up. 45 cents, sequentially and up 43 cents compared to the prior year. Our EPS was favorably impacted by 26 Cents on a sequential basis and 13 cents on a year-over-year basis. Due to Foreign Exchange on a non-gaap basis. Net income per diluted share was $2.49 for the second quarter up. 36 Cents sequentially and up 9 cents a year-over-year.

On to the balance sheet, as of June 30th, 2025 cash and cash, equivalents were 901.

2.2 million, subsequently, 28.1 million, and up 139.7%.

Joe Hogan: During Q2 2025, we repurchased approximately 585.1 thousand shares of our common stock at an average price of $164.14 per share, completing the $225 million open market repurchase initiated in Q1 of 2025. This completed our $1 billion stock repurchase program approved in January of 2023 in its entirety. Over the last 12 months, we have repurchased $500 million of our common stock. Over the last 24 months, we have repurchased $1 billion of our common stock. In April 2025, our board of directors authorized a plan to repurchase up to $1 billion of our common stock, none of which has been utilized. The April 2025 repurchase program is expected to be completed over a period of up to three years. Q2 accounts receivable balance was $1,116.2 million up sequentially.

Of the 9 0 1. 2, 9 9.

Completing the $2.205 billion open market purchases initiated in Q1 of 2025. This completed our $1 billion stock repurchase program approved in January of 2023 in its entirety.

In April, 2025, our board of directors, authorized a plan to repurchase up to 1 billion dollars of our common stock, none of, which has been utilized. The the April 2025 repurchase program is expected to be completed over a period of up to 3 years.

Joe Hogan: Our overall day sales outstanding was 99 days, up approximately two days sequentially, and up approximately 10 days as compared to Q2 2024, and primarily reflects flexible payment terms that are part of our ongoing efforts to support Invisalign practices. Cash flow from operations for the second quarter was $128.7 million. Capital expenditures for the second quarter were $21.5 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 $107.2 million. Before I turn to our Q3 and fiscal 2025 outlook, Align is also announcing today that we expect to take a series of actions in the second half of fiscal 2025 to streamline operations and reallocate resources to better align with our long-term growth and profitability objectives. These actions are intended to sharpen operational focus, reduce ongoing costs, and enhance capital efficiency.

Q2 accounts receivable balance was 1 billion. Subsequently our overall de Sales of sanding was 99 days up, approximately 2 days sequentially and up approximately 10 days as compared to Q2 2024 and primarily reflects flexible, payment terms, that are part of our ongoing efforts to support Invisalign. Practices cash flow from operations. For the second quarter was 128.7 Million Capital expenditures for the second quarter were 21.

$5 million is primarily related to investments in our manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations minus capital expenditures, amounted to $107.2 million.

Joe Hogan: First, we expect to realign certain business groups and reduce our global workforce. Second, we are looking to optimize our manufacturing footprint and dispose of certain manufacturing capital assets as we transition to next-generation manufacturing technologies, increase automation, and regionalize manufacturing to be closer to our customers. We expect these actions will incur one-time charges of approximately $150 million to $170 million in the second half of 2025, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges. We expect approximately $40 million of these charges to be in cash, with the remainder in non-cash charges. We expect approximately $50 million to $60 million of these charges in Q3 of 2025. We expect these actions to deliver cost savings that will allow us to achieve a GAAP operating margin of approximately 13% to 14% and a non-GAAP operating margin of slightly above 22.5% in fiscal year 2025.

Before I turn to our Q3 and fiscal 2025 outlook, I'd like to announce today that we expect to take a series of actions in the second half of fiscal 2025 to streamline operations and reallocate resources to better align with our long-term growth and profitability objectives. These actions are intended to sharpen operational focus, reduce ongoing costs, and enhance capital efficiency.

First we expect to realign certain business groups and reduce our Global Workforce. Second we are looking to optimize our manufacturing footprint and dispose of certain manufacturing Capital assets as we transition to Next Generation. Manufacturing Technologies, increase Automation, and regionalized Manufacturing, to be closer to our customers. We expect these actions will incur 1-time charges of approximately 150 million dollars to 100 170 million dollars in the second half of 2025 primarily for the right down of assets, accelerate depreciation expense and restructuring charges. We expect approximately 40 million dollars of these charges to be in cash with the remainder in non-cash charges. We expect approximately 50 million to 60 million dollars of these charges. In Q3 of 2025, we expect these actions to deliver cost savings. That will allow us to achieve a gap

Joe Hogan: For fiscal year 2026, we expect these actions to improve our GAAP and non-GAAP operating margins by at least 100 basis points year-over-year. We are evaluating these difficult, but we believe necessary actions to position us for sustainable long-term success and improve profitability. While these decisions may impact valued members of our team, we believe they are essential to ensure we are positioned for upcoming technology changes and remain agile and focused in a rapidly evolving market. We are committed to executing our strategy with discipline and purpose. In addition to this, I'd like to provide the following remarks regarding the UK VAT and US tariffs as of July 30. As previously disclosed in our Q1 2025 earnings release and conference call on April 24, 2025, we received a favorable ruling in which the tribunal determined that our clear aligners are exempt from VAT.

Operate margin of approximately 13% to 14%, and a non-GAAP operating margin of slightly above 22.5% in fiscal year 2025.

For fiscal year 2026, we expect these actions to improve our gaap and non-gaap operating margins by at least 100 basis points year-over-year.

We are Val. We are evaluating these difficult, but we believe, necessary actions to position us for sustainable long-term success and improved profitability. While these decisions may impact valued members of our team, we believe they are essential to ensure we are positioned for upcoming technology, changes and remain agile and focused in a rapidly evolving Market. We are committed to executing our strategy with discipline and purpose. In addition to this, I'd like to provide the following remarks regarding the UK vat, and US tariffs as of July 30th.

Joe Hogan: In June of 2025, HMRC filed a petition to appeal to the upper tribunal to attempt to challenge the first tribunal's decision. On July 15, HMRC was given permission to appeal and has until August 15 to do so. For impacted customers, effective August 1, 2025, Align invoices will no longer include the United Kingdom VAT rate of 20% for all Invisalign treatment packages that are clean-checked approved as of August 1, 2025, and for refinement and replacement aligners, Bavaro retainers, PBS processing fees, and additional aligners orders placed on or after August 1, 2025. At the same time, we will simultaneously adjust prices for our clear aligners and retainers to keep the overall price consistent.

As previously disclosed in our Q1 2025 earnings release and conference call on April 24th, 2025, we received a favorable ruling in which the tribunal determined that our clear aligners are exempt from BAT.

In June of 2025 hmrc filed a petition to appeal, to the upper, tribunal, to attempt to challenge the first tribunal's decision.

On July 15th, hmrc was given permission to a PO and has until August 15th to do. So, for impacted customers effective, August 1st 2025, a line. Invoices will no longer include the United Kingdom bat, rate of 20% for all Invisalign, treatment packages, that are clinched, uh, approved as of August 1st, 2025, and for refinement and replacement aligners for Vera, retainers PBS processing fees and additional aligners orders placed on or after August 1st 2025. At the same time, we will simultaneously adjust prices for our clear aligners and retainers to keep the overall price consistent

Joe Hogan: There are no material changes to the expected impact of US tariffs, and we refer you to our Q1 2025 press release and earnings material, as well as our Q2 2025 webcast slides, which includes specifics regarding potential impacts of US tariffs. Assuming no circumstances occur beyond our control, such as foreign exchange, macroeconomic conditions, and changes to currently applicable tariffs that could impact our business, we expect Q3 2025 worldwide revenues to be in the range of $965 million to $985 million, down sequentially from Q2 of 2025. We expect Q3 2025 clear aligner volume to be down sequentially as a result of Q3 seasonality and Q3 2025 clear aligner ASPs to be slightly up sequentially from foreign favorable foreign exchange at current spot rate, partially offset by a continued product mix shift to non-comprehensive clear aligner products with lower list prices.

2, 2025 webcast slides, which includes specifics regarding potential impacts of us tariffs.

Assuming no circumstance circumstances, occur beyond our control such as foreign exchange macroeconomic conditions and changes to currently applicable tariffs that could impact our business. We expect Q3 2025 worldwide revenues to be in the range of 965 million to 985 million down sequentially from Q2 of 2025, we expect Q3 2025 clear, aligner volume to be down sequentially as a result of Q3 seasonality and Q3 2025 clear? Aligner asps to be slightly up sequentially from foreign.

Joe Hogan: We expect Q3 2025 systems and services revenues to be down sequentially because of Q3 seasonality. We expect Q3 2025 worldwide GAAP gross margin to be 64% to 65%, down sequentially by approximately 5% to 6% due to the incurrence of one-time charges expected to be approximately $45 to $55 million, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges in Q3 of 2025, and lower clear aligner volume. We expect non-GAAP gross margin to be flat from Q2 of 2025. We expect Q3 2025 GAAP operating margins to be 10.5% to 11.5%, down sequentially by approximately 5% to 6% due to the incurrence of one-time charges expected to be approximately $50 to $60 million, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges in Q3 of 2025, and lower clear aligner volume.

Favorable foreign exchange at current spot rates is partially offset by a continued product mix shift to non-comp comprehensive, clear aligners with lower list prices. We expect Q3 2025 systems and services revenues to be down sequentially because of Q3 seasonality.

We expect Q3 2025 worldwide gap growth margin.

To be 64 to 65% down sequentially by approximately 5 to 6 points. Due to the incurrence of 1-time charges expected to be approximately 45 to 55 million primarily for the right down of assets, accelerated depreciation, expense, and restructuring charges in Q3 of 2025 and lower. Clear, aligner volume we expect non-gaap gross margin to be flat from Q2 of 2025.

Joe Hogan: We expect the majority of these charges to be non-cash charges, with approximately $5 million in cash charges. We expect Q3 2025 non-GAAP operating margin to be approximately 22%. We expect 2025 clear aligner volume growth to be in the low single digits and revenue growth to be flat to slightly up from 2024. We expect 2025 clear aligner ASPs to be down year-over-year due to the continued product mix shift to non-comprehensive clear aligners with lower list prices and continued growth in our emerging markets with products that may carry lower list prices, partially offset by favorable foreign exchange at current spot rate. We expect 2025 systems and services year-over-year revenues to grow faster than clear aligner revenues.

We expect Q3 2025 Gap. Operating margins to be 10 10.5% to 11.5% down. Sequentially, be sequentially by approximately 5 to 6 points. Due to the incurrence of 1 time, charges expected to be approximately 50 to 60 million dollars. Primarily for the right down of assets, accelerated, depreciation, expense, and restructuring charges in Q3 of 2025 and lower. Clear. Aligner volume we expect the majority of these charges to be non-cash charges with approximately 5 million dollars in cash. Charges we expect Q3 2025 non-gaap operating margin to be approximately 22%.

We expect 2025 clear aligner volume growth to be in the low single digits, and revenue growth to be flat to slightly up from 2024. We expect 2025 clear aligner average selling prices (ASPs) to be down year-over-year due to the continued product mix shift to non-comprehensive clear aligners with lower list prices, and continued growth in our emerging markets with products that may carry lower list prices, partially offset by favorable foreign exchange at current spot rates.

Joe Hogan: We expect the 2025 GAAP gross margin to be 67% to 68%, down year-over-year by approximately 2% to 3% due to the incurrence of one-time charges expected to be approximately $115 to $130 million, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges in the second half of 2025, and lower clear aligner volume. We expect 2025 the non-GAAP gross margin to be flat to slightly lower than 2024 non-GAAP gross margin. We expect the fiscal 2025 GAAP operating margin to be 13% to 14%, down year-over-year by approximately 1% to 2 points below the 2024 GAAP operating margin due to the incurrence of one-time charges of approximately $150 to $170 million, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges in the second half of 2025.

We expect 2025 systems and services year-over-year revenues to grow faster than clear line of revenues.

We expect the 2025 gaap gross margin to be 67 to 68% down year-over-year by approximately 2 to 3 points due to the incurrence of 1 time. Charges expected to be approximately 115 to 130 million dollars, primarily for the right down of assets, accelerated depreciation, expense, and restructuring charges in the second half of 2025 and lower. Clear, aligner volume. We expect 2025 the non-gaap, gross margin to be flat to slightly lower.

Then 2024.

Non-gaap gross margin.

Joe Hogan: Most of the one-time charges will be non-cash, with the expected cash outlay for 2025 estimated to be around $40 million. We expect the 2025 non-GAAP operating margin to be slightly above 22.5%. We expect our investments in capital expenditures for fiscal 2025 to be between $100 million and $125 million. Capital expenditures primarily relate to technology upgrades as well as maintenance. With that, I'll turn it back over to Joe for final comments. Joe. Thanks, John. In the face of a challenging and uncertain macroeconomic backdrop characterized by global tariff volatility, ongoing inflation, elevated interest rates, and unstable consumer confidence, we're navigating with a clear focus to control what we can and to continue to invest with discipline in the areas that will define our future. In Q2, our customers reported a reduced patient traffic, fewer orthodontic case starts, and delayed case acceptance.

We expect the fiscal 2025 Gap operating margin to be 13% to 14%, down year-over-year by approximately 1 to 2 points. This is below the 2024 Gap operating margin due to the incurrence of one-time charges of approximately $150 million to $170 million, primarily for the write-down of assets, accelerated depreciation expense, and restructuring charges in the second half of 2025. Most of the one-time charges will be non-cash, with the expected cash outlay for 2025 estimated to be around $40 million.

We expect the 2025 non-gaap operating margin to be slightly above 22.5%. We expect our investments in capital expenditures for fiscal 2025, to be between 100 million and 125 million. Capital, expenditures, primarily rates relate to technology upgrades, as well as maintenance.

With that, I'll turn it back over to Joe for final comments. Joe

Consumer confidence is crucial. We're navigating with a clear focus to control what we can and continue to invest with discipline in the areas that will define our future.

Joe Hogan: But despite significant headwinds across the consumer discretionary spend landscape, our consumer interest metrics remain strong. Patients are still prioritizing care that delivers meaningful, visible results, even if timing and affordability concerns are reshaping how and when they choose to commit to treatment. Those that have transitioned to clear aligner therapy and digital practices, including larger practices and DSOs, are showing more resiliency and commitment to digital dentistry and orthodontics. This underscores the opportunity. Those who invest in customer trust, seamless experience, and value-based innovation will be best positioned for the long run. We're doubling down on the levers within our reach: innovation, efficiency, and execution. We're investing in next-generation technology and treatment platforms that meet today's patient expectations for fast, effective, and personalized treatment, while also providing value and growth opportunities for our doctor customers.

In Q2, our customers reported to reduce patient traffic, fewer orthodontic, case starts and delayed case acceptance.

But despite significant headwinds across the consumer, discretionary spend landscape. Our consumer interest methods remain strong, patients are still prioritizing care that delivers meaningful visible results. Even if the timing and affordability concerns are reshaping how and when they choose to commit to treatment

Joe Hogan: We believe these innovations are not only improving outcomes in Invisalign practices but also expanding our addressable market and strengthening our competitive differentiation. We're expanding our new product offerings to drive Invisalign volume growth in our business. Year to date, we've successfully introduced IPE and MAOB in over 70 markets and are expanding Invisalign DSP offerings in more markets in Europe and Latin America in the second half of the year and on track to introduce DSP for the first time in major APAC markets beginning in 2026. We are piloting integration of our X-ray diagnostics and our iTero Luminous scanner in some select markets outside the United States. In Q3, we will pilot our ortho restorative offering to GP dentists through labs, where we help non-Invisalign trained GPs who are interested in learning and offering Invisalign in their practice.

Those that have transitioned to clear aligners, line of therapy, and digital practices—including larger practices and DSOs—are showing more resiliency and commitment to digital dentistry and orthodontics. This underscores the opportunity: those who invest in customer trust, seamless experiences, and value-based innovation will be best positioned for the long run. We're doubling down on the levers within our reach: innovation, efficiency, and execution. We're investing in the next-generation technology and treatment platforms that meet today's patient expectations for fast, effective, and personalized treatment, while also providing value and growth opportunities for our doctor customers. We believe these innovations are not only improving outcomes in Invisalign practices, but also expanding our addressable market and enhancing our competitive differentiation.

We're expanding our new product offerings to drive Invisalign volume growth in our business year to date. We've successfully introduced ipe and maob in over 70 markets, and we're expanding Invisalign DSP offerings in more markets in Europe and Latin America in the second half of the year. We're also on track to introduce DSP for the first time in major APAC markets, beginning in 2026.

Joe Hogan: Finally, our commercial marketing teams are engaging practices with tools that improve case conversion at the point of care. Through digital channels, we're activating more prospective patients and connecting them directly to providers. In the face of lower consumer confidence and delayed spending, our engagement with potential patients remains high, and we are continuing to refine and scale our integrated consumer marketing programs. In a fragmented, choice-heavy market, we're continuing to make it easier for providers to succeed with our solution. Whether it's clinical training, financing tools, or personalized marketing support, our strategy is simple: surround our customers with the right support at every stage of their growth journey. We believe this commitment is helping drive greater adoption and turning one-time users into repeat champions.

We are piling integration of our x-ray, Diagnostics and our luminous scanner and some select markets outside the United States. In Q3, we will pilot our Ortho restorative offering to GP dentist through Labs where we help non- Invisalign, trained GPS, who are interested in learning and offering Invisalign in their practice.

Finally, our commercial and marketing teams are engaging practices with tools that improve case conversion at the point of care. Through digital channels, we're activating more prospective patients and connecting them directly to providers.

In the face of lower consumer confidence and delayed spending our engagement with potential patients remains high and we are continuing to refine and scale our integrated consumer marketing programs.

Joe Hogan: At the same time, we recognize the importance of operating with discipline and taking steps now to mitigate the impact of potential continued headwinds and volatility in the market. We are considering actions that right-size parts of our organization, aligning resources to current demand realities, and eliminating redundancy to drive leaner, faster execution across our organization, especially in areas where we can integrate innovation teams and take global decision-making and support closer to our customers in each region. These tough decisions are being made to preserve our investment in core technologies and protect the teams building our long-term growth. While we believe in the macroeconomic uncertainty will likely persist in the near future, we're confident in our ability to adapt and lead. Our long-term strategic initiatives and opportunities remain intact, as does our commitment to focused execution and to transforming treatment for doctors and patients.

In a fragmented Choice, heavy Market. We're continuing to make it easier for providers to see with our solution whether its clinical training financing tools or personalized, marketing support. Our strategy is simple, surround our customers with the right support at every stage of their growth Journey. We believe this commitment is helping Drive, greater adoption and turning 1 time users into repeat champions.

At the same time, we recognize the importance of operating with discipline and taking steps now to mitigate the impact of potential continued headwinds and volatility in the market. We are considering actions that rightsize parts of our organization, aligning resources to current demand realities and eliminating redundancy to drive leaner, faster execution across our organization, especially in areas where we can integrate innovation teams and take global decision-making and support closer to our customers in each region.

These top decisions are being made to preserve our investment in core Technologies, and protect the teams building our long-term growth.

While we believe in the macroeconomic, certainty will likely persist in the near future. We're confident in our ability to adapt and Lead.

Joe Hogan: With that, I'll thank you for your time, and I'll turn the call over to the operator for questions. Operator?

Our long-term strategic initiatives and opportunities remain intact. As does our commitment to focused execution is a transforming treatment for doctors and patients.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 11 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 11 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 pressing the star keys. One moment, please, while we pull for questions. And our first question comes from the line of Elizabeth Anderson with Evercore ISI. Your line is open.

With that, I'll thank you for your time and I'll turn the call over to the operator for questions. Operator.

Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star, 1, 1, 1 on your touch telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star, 1, 1, 1 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 pressing the star keys. One moment.

Moment, please while we pull for questions.

And our first question comes from the line of Elizabeth Anderson with evercore isi, your line is open.

Shirley Stacy: Hi, guys. Good afternoon. Thanks so much for the question. One, you know, obviously, I think the case conversion, as you called out, was not, you know, what you guys were hoping for in the quarter. Can you talk about how that trended across the quarter? Sort of, are we at a stability point? Are you saying it's still trending one way or the other? And two, can you remind us what I remember you said something about sort of a higher proportion of brackets and wires that orthos are using in this current sort of economic uncertainty. Can you talk about some of the levers that you pulled last time we saw this a year or two ago and sort of what you're learning from there and sort of how to think about the potential change in that contribution as we go into the back half of '25? Thanks.

But I remember you said something about sort of higher proportion of brackets and wires that orthos are using in, this current sort of, economic uncertainty, can you talk about some of the levers that you pulled? Last time we saw this a year or 2 ago and sort of what you're learning from there and sort of how to think about the the potential uh change in that contribution as we go into the back half of 25. Thanks.

Joe Hogan: Yeah, Elizabeth, thanks for the question. You know, as we started off the quarter, you know, we normally know that a lot happened in the last quarter of a month here. Remember, we're a real-time business. There's really no inventory outside of what we have with iTero. The clear aligner business is straight on. So we, you know, in normal kind of a sequence, I'd say for the quarter until June, and June just didn't materialize the way we thought it would. And that's the kind of the year-over-year increase from a sequential standpoint that we talked about that we see, you know, every year in this business. It just didn't materialize, and it was primarily in June. And then, you know, the levers as far as, you know, orthodontists moving back to wires and brackets and all, you know, it's the orthodontists that haven't really committed to digital.

Yeah, Elizabeth, thanks for the question, you know, as we started off the quarter, you know, we we normally know that it's a lot happens in the last quarter of a month here. Remember, we're a real-time business. Uh, there's really no inventory outside of outside of what we have with itero, the clear line of business is straight on, so we, you know, in normal kind of a sequence I'd say for the quarter until June and June just didn't materialize the way we thought it would. And that's kind of the year-over-year increase from a sequential standpoint. That we talked about that we see, you know, every year in this business it just didn't materialize and it was primarily in June

Joe Hogan: Maybe they're doing 30%, and it's mainly it's being done with adults or whatever. Their agendas aren't full. Their offices aren't full, and they obviously have an inventory of wires and brackets. So just from an overall standpoint from their profitability in that individual office, they'll sometimes push for the wires and brackets piece. And, you know, we see that. You know, how have we been able to address that? Obviously, we really help doctors through that. We usher patients through there. They're asking for digital treatment. We work with them so they can be more efficient and effective, you know, with our product lines too directly. And, you know, many of the doctors engage that way. But obviously, there's 10,000 orthos in North America, and some have chosen not to be digital and to be primarily analog, and that's what hurts us a ton. Johnny, any thoughts?

And then, you know the levers as far as you know, orthodontists moving back to wires and brackets and all, you know, it's, it's the orthodontist that haven't really committed to digital, maybe they're doing 30% since mainly. It's, it's being done with adults or whatever, uh, their patient. Their, their, their agendas aren't full their offices aren't full and, uh, they obviously have an inventory of wires and brackets. So just from an overall, an overall standpoint from their, their profitability in that individual office they'll sometimes push for the wires and brackets piece. And, you know, we see that you know, how we've been able to address that. Obviously, we really help doctors through that. We

For patients through there, that are asking for digital treatment, we work with them, so they can be more efficient, more efficient, and effective, you know, with our product lines, too directly. And, you know, many of the doctors engage that way. But obviously, there's 10,000 orthos in North America and, and some have chosen not to be digital and to be primarily analog in. And that's what hurts us at times.

Johnny, any thoughts?

That's good.

Shirley Stacy: Great. Thank you very much.

Joe Hogan: Thanks again, Elizabeth.

Operator: Thank you. And our next question comes from the line of John Block of Stifel. Your line is open.

Okay, thank you. Thanks again.

Thank you.

And our next question comes from the line of John block of Stow. Your line is open.

John Morici: Thanks, guys. Good afternoon. Hey, hey, guys. Maybe the first one and just deal with my sort of implied math here. But if I run the 2025 revenues flat vs. '24, John, which is the low end of your guide, I take the midpoint of the 3Q guidance. I arrive at 1.03 billion for 4Q '25. That would be up 6% Q over Q, which is well above the three-year average of 1%. So I guess just to start, what I'm struggling with is sort of this implied, and you know, that's obviously even worse or more dramatic if I grow '25, which you said is still possible. So help me out on that implied 4Q.

Thanks guys. Um, good afternoon.

hey I guess um maybe the first 1 and just deal with my sort of implied math here but if I run the 2025 revenues flat versus 24 John which is the low end of your guide,

I take the midpoint of the 3Q guidance. I arrived at 1. 0 3 4,

That would be up 6% Q over Q.

John Morici: Help me out on that sequential growth rate 3 to 4Q, what it's spitting out, and why that would be the case when we think about the trend line, you know, in June that you alluded to in the 3Q guidance, please.

Which is well above the 3 year average of 1%. So I guess, just to start what I'm struggling with is sort of this imp. And you know, that's that's obviously even worse or or more dramatic. If I, if I grow 25, which you said is still possible, so help me out on that implied. 4q, help me out on that.

Sequential growth rate, from 3 to 42. What it's indicating and why that would be the case when we think about the trend line, you know, in June that you alluded to in the 32 guys list.

Joe Hogan: Yeah. Yeah, John, this is John. I think when you look at what you've laid out for Q4, you know, we would expect that systems and services up sequentially. You know, we have the new scanner that we have as we go this year. You know, we would expect that those full systems that we were behind a bit in, you know, Q2 that would, you know, continue in the second half, and we'd have some benefit from some of those full systems that we have coming through. And then we'd look at what we're doing from trying to drive conversion and be more active about that conversion with teens and adults in our second half.

Joe Hogan: Products like we have with Invisalign First, products that we have with IPE and mandibular advancement, those products to be able to help us, you know, continue to grow and have that focus into the, you know, as you said, that sequential third quarter to fourth quarter.

Yeah. Yeah, John. This is John. I think when you look at uh, what you've, what you've laid out for Q4, you know, we would expect that uh systems and services up sequentially. Uh, you know we have a the new scanner that we have as we go this year. Um, you know, we would expect that those full systems that, um, that we were, we were behind a bit in in, you know, Q2 that would, you know, continue in the second half. And we'd have some some benefit from the sum of those full systems that that we have coming through. And then we'd look at what we're doing from trying to drive conversion and be more active about that conversion with, with, uh, teens and, and adults in that in our second half, uh, products. Like like, uh, we have with Invisalign first, uh, products that we have with IP and, and mandibular advancement those products to be able to help us, um, you know, continue to grow and and have that focus in into the, you know, as you said that sequential third quarter to fourth quarter.

John Morici: Okay. The second one, and maybe I'll just try to jam in as many questions as I can until you guys cut me off. But, Joe, can you just talk a little bit more about what happened late 2Q? I mean, I mean, arguably, your 2Q is, you know, the orders from like late May to late June because of the rev rec timing, and here we are in July 30. So, you know, any thoughts on what's transpired over the last five weeks into July or the end of July? And then were those conversion issues more prominent, you know, in some of the markets relative to others? I'll just, I'll pause there. Thank you.

Okay, um, the second 1 and maybe I'll just try to jam in as many questions as I can to you guys cut me off. But Joe can can you just talk a little bit more about what happened late to Q? I mean I mean arguably your 2 Q is

You know, the orders from like late, May to late June because of the Rev wreck timing. And here we are in July 30th. So, you know, any thoughts on what's transpired over the last 5 weeks into July or the end of July and then where those conversion issues, more prominent, you know, in some of the markets relative to others,

Joe Hogan: Yeah, I'll start with the back end of your question, John. I mean, we really, where we saw, you know, that lack of take-up that we normally would, I'd pin it primarily on North America and two countries in Europe, would be France and Germany. The rest of the world performed at expectation in that sense. So, when we look at it, we can see primarily that's that's where we have that issue. what is it? From what we can tell, it's just what we read in the scripts. It's, patients being concerned in the sense of, can they afford that kind of treatment at this point in time? there's a certain demographic with it too, obvious ones that are challenged. That's what we were worried about from a financing standpoint, what was being offered or not being offered in that quarter, you know, that quarter also.

I'll just I'll, I'll pause there. Thank you.

Joe Hogan: but like you said, we have, you know, record interest from a brand standpoint. our GRs, which is our gross receipts, which come in when a patient scans and is interested, was extremely high. We just didn't see the kind of conversion rate we normally would between what we call a general gross receipt and what we see as CCA.

Performed at expectation in that sense. So um, when we look at it we can see primarily that's that's where we have that issue. Uh, what is it from? What we can tell is just what we read in the scripts. It's, uh, patients, being concerned, in a sense of, can they afford that kind of treatment at this point in time? Uh, there's certain demographic with it too, obvious ones that are challenged. That's why we were worried about from a financing standpoint. What was being offered or not being offered in that quarter, you know, that quarter also. Uh but like you said, we have, you know, record interest from a brand standpoint, uh, our GRS, which is a gross receipts, which come in when a patient scan is interested was extremely high. We just didn't see the kind of conversion rate. We normally would be between what we call a general, a gross receipt and what we see is CCA,

John Morici: And the trends into month to date, July, or any color there that you can provide? I mean, has it started to unwind here in the first four weeks of July?

and the trends into

Month to date, July, or any color there. And that that you can provide, I mean, it has just started to unwind here in the first 4 weeks of July.

Joe Hogan: Yeah, I'd say when you look at our forecast, John, we've basically taken what we've seen in the end of the quarter and projected forward.

John Morici: Thank you.

Yeah, I I'd say when you look at our forecast, John, we've basically taken what we've seen and, and and uh, in the end of the quarter and projected forward.

Shirley Stacy: Thanks, John. Next question.

Thank you.

Operator: Thank you. And our next question comes from Jeff Johnson of RW Baird. Your line is open.

Thanks, John. Next question. Thank you.

And our next question comes from Jeff Johnson of RW bear. July is open.

Jeff Johnson: Thank you. Good afternoon, guys. Hey, Joe. Hey, so question, Joe. I guess, you know, as I hear your explanation on trading back down to some of the brackets and wires stuff, which is, you know, we've heard off and on over the last couple of years at times, I think what I've been hearing in my checks is kind of this profound pressure, if you will, on practice profitability. And your brackets and wires comments kind of feed into that. But I think my checks have kind of been saying it's almost more the doctors pulling back right now. I'm not so sure it's the patients pulling back as much. And of course, you have data that maybe does show it's the patients too. And I'm not trying to totally disaggregate those two.

Jeff Johnson: But I guess as I look at consumer confidence and some of the tariff fears maybe coming off over the last few months, I'm surprised that June was that week, unless we're at this point where doctors are the ones that are really freezing up almost more so than the patients. I don't even know if I have a question there, but I'd love your observation because this is definitely something I'm hearing kind of in my general dental checks as well.

Thank you. Good afternoon guys. Hey Joe, uh, Hey, so question Joe, I guess, you know, as I hear your explanation on trading back down to some of the brackets and wires stuff, which is, you know, we've heard off and on over the last couple years at times, I think what I've been hearing in my check is kind of just profound pressure, if you will, on practice profitability and in your brackets and wires comments kind of feed into that. Uh, but I think my checks have kind of been saying it's almost more, the doctor's pulling back right now. I I'm not so sure. It's it's the patients pulling back as much and and of course you have data that maybe does show its the patients too and I'm not trying to totally disaggregate those 2. But I I, I guess as I look at consumer confidence and some of the Tariff fears may be coming off over the last few months. I'm surprised that June was that week, unless we're at this point where doctors are the ones that are really freezing up, almost more so than the patients, I, I don't even know if I have a question, their question there. But I'd love your observation because this definitely is something I'm hearing. Kind of in my general Dental checks as well.

Joe Hogan: Yeah, you know, Jeff, I think it's a good question. I think you have to, or look, you have to split it between our DSOs or OSOs we work with, and which have gone, you know, really well from a quarter standpoint and a growth standpoint for us too. They offer good finance solutions. They're often aggressive in following back up with patients that showed some kind of an interest in having a marketing program to go back and, you know, offer a special deal at a certain point in time. And we see that really work. Again, in those channels, Jeff, I said it indicates that it is a reluctant consumer that needs to be encouraged in different ways for treatment and above and beyond what we've seen in the past. I mean, that's always been there, but in this case, I think where there's financial uncertainty.

Yeah, you know Jeff I think it's a good question. I think you have to our look you have to split it between our dsos or Osos we work with and which of have have gone, you know really well from a quarter standpoint in a growth standpoint for us to

Joe Hogan: When you look at the individual doctors, again, you know, like, you know, what do we have? 150,000 GPs in the United States and, you know, 10,000 orthodontic doctors. There's a story everywhere, but primarily what we see is, patients interested, again, reluctance to spend. doctors sometimes want to move the wires and brackets if they can and push them. And adults are more difficult to do that than teens. but from an adult standpoint, that's where the patient traffic has really been down to. So I wouldn't, I wouldn't pin this on the doctors. I think the aggregate we're talking about here is a reluctant consumer, like we talked about in our script. But look, there's a, you can find a million stories out there at different doctors on how they handle things, Jeff.

They offer, good Finance Solutions, they're often aggressive and falling back up with patients that that showed some kind of an interest in having a marketing program to go back. And, you know, offer a special deal at a certain point in time and we see that really work again in those channels Jeff. I think it said it indicates that it is a reluctant consumer. That needs to be encouraged in different ways for treatment, and above and beyond what we've seen in the past. I mean, that's always been there. But in this case, I think where there's Financial uncertainty when you look at the individual doctors again, you know, like, you know, what do we have 150,000 GPS in the United States and, you know, 10,000 orthodontic. Doctors, there's a story everywhere. But primarily what we see is, uh, patients interested, uh, again reluctant to spend, uh, doctors sometimes want to move in the wires and brackets that they can and push them. And adults are more diff difficult to do that than teens, uh, but for an adult standpoint, that's where the patient traffic is really been down to. So I I wouldn't, I wouldn't pin this on the doctors I think the aggregate we're talking about here is a reluctant consumer.

Joe Hogan: But I think the continuum in this is just uncertainty for an out-of-pocket, expensive type of procedure.

Jeff Johnson: Yeah, fair enough. And then I guess just one question on the restructuring, you know, as you talk about shutting down some manufacturing, assets and writing them off, any color there? And does this, you know, accelerate your move at all, to direct fab printing? just just any color on those two topics would be great. Thanks.

Like we talked about in our scripts but look there's a you can find a million stories out there at different doctors and how they handle things. Jeff. But I think they Continuum in this is just uncertainty for an out-of-pocket expensive type of procedure.

Joe Hogan: Jeff, I'll start to answer that question by saying, you know, over the last five years, we've done a lot to internationalize our production, right? So we used to be completely centered in Mexico, and we served the world. We opened in China, and then we opened in Poland. And what we're trying to do is, you know, remember, transportation costs for us are really important in this business. And moving closer to customers helps to helps to lower that. So what we're going to do is really refocus and make sure that we're as close to those customers as we possibly can. Also, we're taking advantage of some, what I would say, current, you know, vacuum form kind of technology and resin technology in our traditional line that's much more productive than what we've had in the past.

Yeah, fair enough. And and then I guess just 1 question on the restructuring, you know, as you talk about shutting down some manufacturing, uh, assets and and writing them off any color there and does this, uh, you know, accelerate your move at all, uh, to direct Fab printing. Uh, just just any colors on on those 2, topics would be great. Thanks.

Jeff, I started a question by saying, you know, over the last 5 years, we've done a lot to internationalize our production, right? So we used to be completely centered in Mexico and we serve the world. We opened in China, and then we opened in Poland and we're trying to do is, you know, remember Transportation costs for us are really important in this business and moving closer to customers, helps to helps to lower that. So what we're going to do is is really refocus and make sure that we're as close to those customers as we possibly can.

Joe Hogan: And so we'll be able to update our facilities both in Mexico, Poland, and also China with that kind of technology. And we're going to retire the technologies that aren't as productive, but we'll also, that's a big part of this. I'll stop there. Does that make sense to you, Jeff?

Than what we've had in the past, and so we'll be able to update our facilities, both in Mexico, Poland, and also China with that kind of technology. We're going to retire the technologies that aren't as productive overall. So that's a big part of this.

Jeff Johnson: Yeah, it doesn't sound like necessarily an acceleration then on the direct fab side. It's more kind of this intermediary, if you will, of going to some of the more efficient vacuum forming and resin stuff.

I'll stop there. Is that does that make sense to you, Jeff?

Joe Hogan: But in the back of those moves, Jeff, what we're doing is creating, you know, capacity and ability to be able to move into direct printing too. So what we'll do with direct printing will directly follow that footprint we're developing around the world with vacuum forming. I hope that helps.

Yeah, it doesn't sound like necessarily an acceleration, then, on the direct Fab side. It's more of kind of this intermediary, if you will, of going to some of the more efficient vacuum forming and resin stuff.

Jeff Johnson: Fair enough. Yep. Thanks, Jeff.

But in the back of those moves, Jeff, what we're doing is creating, you know, capacity and and abilities to be able to move in the direct printing, too. So, what we'll do with direct printing, we'll directly follow that footprint. We're developing around the world with vacuum cleaner. I hope that helps fair enough.

Operator: Thank you. And our next question comes from the line of Steven Valachet of Mizuho Securities. Your line is open.

Thank you.

Jason Bednar: Great. Thanks for taking the question. Hey, good afternoon. So, you know, I guess separate from the comments you made regarding the bracket and wire braces, I guess I'm curious, you know, with your softer Invisalign case volume due to all the market patterns you discussed, I guess, you know, just based on your market intelligence, do you think your, you know, softer volume was in line with the overall clear aligner market trend? Or do you think you're maybe losing share in clear aligners for some reason? Or also, you know, I thought in my mind that a line would maybe be more favorably positioned on the whole tariff impact relative to many of your, you know, clear aligner competitors. So maybe are you still perhaps maybe even gaining market share in the clear aligner market, you know, versus other manufacturers?

And our next question comes from the line of Steven valet of mizuho Securities. Your line is open.

Oh, great. Thanks for taking the question. Hey, good afternoon. So, uh, yeah, I guess separate from the comments you made regarding the bracket and wire braces, I guess I'm curious, you know, with your softer Invisalign case volume due to all the market factors you discussed.

Jason Bednar: Just curious to get some thoughts around just, you know, that part of the market in particular. Thanks.

I guess you know, just based on your Market intelligence do you think you're, you know, software volume was in line with the overall clear liner Market Trend or do you think you're maybe losing sharing clear liners for some reason? Or also, you know, I thought in my mind that a line would maybe be more favorably positioned on the whole tariff impact relative to many of your, uh, your clear line or competitors. So, maybe, are you still perhaps, maybe even gaining market share in the clear liner Market, you know, versus other manufacturers, just curious to get some thoughts around. Just you know that part of the market in particular, thanks.

Joe Hogan: Hey, Steve, it's a good question. I would say primarily from a competitive standpoint, nothing's really changed around the world between the first quarter and the second quarter. You know, if we think about it, it's mainly what we see is from an economic standpoint. So I can't pick out any one country. I mean, China did extremely well for us, and I think everyone on the call knows that we have, you know, some pressure from a Chinese competitor around the world. We don't think that's basically changed. We saw a competitor actually raise prices that they had to in the quarter also. So that was not the dynamic. If that was the dynamic in the quarter, I certainly would have pointed to it, but I didn't see that.

Hey Steve. It's a good question. I I would say primarily from a competitive standpoint nothing's really changed around the world between the first quarter and the second quarter. Um, you know, if we think about it it's mainly what we see is from an economic standpoint. So I can't pick out any 1 country. And I mean, China did extremely well for us. And I think everyone on the call knows that we have, you know, some pressure for from a Chinese competitor around the world. We don't think that's basically changed. We saw a competitor actually raise prices that they had to in the quarter also, so that was not the dynamic. That was the dynamic in the quarter. I certainly would have pointed to it, but I I didn't see that.

Jason Bednar: I got it. Thanks.

Joe Hogan: Yeah, sure.

I got it. Thanks.

Operator: Thank you. Our next question comes from the line of Jason Bednar of Piper Sandler. Your line is open.

Yeah, sure. Thank you.

Our next question comes from the line of Jason Bednar of Piper Sandler. Your line is open.

Jason Bednar: Hey, good afternoon. Pick up on a couple other themes here that have been discussed already. Joe, John, when we look at the patients that didn't materialize, the patients that didn't materialize in 2Q late in June, it seems like there's two buckets here. Your patients that aren't moving forward at all with treatment because of reluctance, be it for financing or tariff unease or what have you, and then another bucket of doctors pushing patients to brackets and wires. I guess the former would open the door to a potential release of volumes in the future with practices tapping into a maybe a backlog of patients down the road. But I guess how would you split the volumes across those two buckets?

Jason Bednar: I mean, how much do you think is falling into, you know, just clear aligner opportunity in the future but not seeing it in 2Q versus doctors putting patients in brackets and wires and those are no longer candidates for aligners?

Hey, good afternoon. Uh, pick up on a couple other themes here that have been discussed already. Joe John, we look at the, maybe the patients that didn't materialize. The cases did materialize into Q late in June. Um, it seems like there's 2 buckets here. Your patients that not aren't moving forward at all with with treatment because of reluctance. Be it for financing or tariff unease or what have you and then another bucket of doctors pushing patients to brackets and wires. Um I I guess the the former would open the door to a potential release of volumes in the future with practices tapping into a, a bank, maybe a backlog of patients down the road, but I guess how would you split the volumes across those 2 buckets? I mean, how much do you think is falling into, you know, just a clear line or opportunity in the future but not seen it in 2q versus doctors putting patients in Brackets and wires and those are no longer candidates for aligners.

Joe Hogan: You know, John, you want to?

Jason Bednar: Yeah, I would say, I would say, Jason, it's a mix. You would have, you know, they fall, those potential patients fall into those two categories. You've got some that, you know, we saw good interest. We continue to see good interest in Invisalign and people wanting to go into treatments. Some show up at doctors' offices, they see the pricing, and they say, not something we want to do now because of the end consumer price, the end patient price. So they put things off for their own personal reason. You have others, and it's really mostly on the ortho channel. They're in, they want to go into treatment. You might be a teenager and parents bring that child in.

You know, I I John, yeah, I would say, I would say Jason, it's it's a mix. Uh, you would have, you know, they followed our our dose potential patients fall into those, those 2 categories. You've got some that um, you know, we saw good interest. We continue to see good interest in and Invisalign and people wanting to go into treatments. Uh, so.

Jason Bednar: And, you know, due to some of the economics or other things that we see at that patient, at that practice that is there, that doctor, because of economics, puts that patient that's in their chair into wires and brackets versus maybe they might even came in asking for Invisalign. So that's the challenge that we have, you know, overall patients and then the patients that potential patients that come through, what can we do and what can we do to help our doctors keep them in Invisalign? But it's a mix, and it's going to vary kind of geography by geography in terms of which is larger than the other.

Some show up at doctor's offices, they see the pricing and they say, it's not something. And we want to do now because of the, the end Consumer Price, the end patient price. So they they put things off, uh, for their own personal reasons you have others, uh, and it's really mostly on the ortho, the ortho Channel, they're in, they want to go into treatment, you might be a teenager and parents bring bring that child in. And, um, you know, due to some of the economics or other things that we see at that patient at that practice. That, that is there, that doctor because of Economics. Puts that patient? That's in their chair into wires and brackets versus maybe they might even came in asking for, uh, Invisalign. So, that's the challenge that we have, um, you know, overall patients and then the patients that potential patients that come through. Uh What uh, what can we do and what do what can we do to help? Our doctors keep them in, uh, Invisalign. But it's it's a mix and it's going to vary kind of geography by geography in terms of which is which

Which is larger than the other.

Operator: Thanks, Jason. Next question, please. Thank you. And our next question comes from Brandon Vasquez of William Blair. Your line is open.

Question please.

Thank you.

Joe Hogan: Hi, Brandon.

And our next question comes from Brandon Vasquez of William Blair; your line is open.

Hi, Brent.

Jason Bednar: Hi, everyone. This is Russell on for Brandon. Thanks for taking the question.

Joe Hogan: Sure.

Jason Bednar: Could you guys give us some color on what the feedback has been recently on Lumina given the weakened consumer? Looking at industry surveys, there seems to be a general low willingness to purchase capital equipment. Has it been impacting your numbers or affecting product launch in some way, and how are you navigating it? Thanks.

Joe Hogan: That's a good question. You know, we didn't meet our sales goals for Lumina in the second quarter, but we did have a good increase, you know, close to 14% growth. And we saw a good tradeout. I mean, we see the same surveys, and we work around the industry that you do, and we know there's a reluctance because of lack of patient traffic in dental offices and ortho offices of them to commit to capital equipment. I mean, based on that, we felt good about how well we did. But when you look at it, and I talked about it in my script, is we thought we'd sell more full systems. And what we did is our 5D Plus product was upgradable to Lumina with a WAN switch, and the majority of our sales went to the WAN side.

Hi everyone. This is Russ. Lan for Brandon, thanks for taking the question. Um sure. Could you guys give us some color on what the feedback has been recently on Lumina given The Weeknd consumer? Uh, looking at industry surveys? That there seems to be a general low willingness to purchase Capital Equipment? Um, has it been impacting your numbers or affecting product launch launch in some way and how are you navigating it? Thanks.

Joe Hogan: And so that's just not the same amount of revenue in that switch, and that's basically what hurt us. And so we do see that reflected, but we felt good about the uptake of Lumina and the excitement we see in the marketplace.

That's a good question. You know, we, uh, we, we didn't meet our sales goals for lumen in the second quarter, but we did have a good increase, you know, close to 14% growth. Um, and we saw a good trade out and I mean, we've seen the same surveys and we work around the industry that you do. And we know there's a reluctance because of lack of patient, traffic and dental offices. In Ortho offices of them to commit to Capital Equipment. I mean based on that, we felt good about how well we did. But when you look at it and I talked about it in my script is we thought we'd sell more full systems and but we did is we are 5D. Plus product was upgradeable to Lumina with a wand switch and the majority of our sales, went to the WAN side. And so that's that's just not the same amount of Revenue in that switch and that's basically what her is. Uh, and so we do see that reflected but we felt good about the uptake aluminum and excitement we see in the market.

Operator: Thank you. And our next question comes from the line of Michael Cherny of LeRoink Partners. Your line is open.

Thank you.

And our next question comes from the line of Michael churny of Lee ring Partners through line is open.

Jason Bednar: Good afternoon, and thanks for taking the question. So maybe if I can get back to some of the dynamics of the expectations for the remainder of the year, as you think through the various different macro pictures that you've talked about, Joe, are there any changes you're making on the demand stimulation side? Should we expect anything on the promotional side that you may or may not push? How should we think through the proactive attempts that you're making to ensure that you're driving better patient conversion, better demand curve, satisfaction, etc.?

Um, good afternoon, and thanks for taking the question. So, maybe if I can get back to some of the Dynamics of the expectations for the remainder of the year, um, as you think through the various different macro pictures that you've talked about Joe, are there any changes you're making on the demand stimulation side? Should we expect anything on the promotional side that you may or may not push? How should we think through the, the proactive?

Joe Hogan: Yeah, Michael, it's a good question. We like to say that the last mile is where we really touch our doctors with this. And we obviously do a lot of advertising, national advertising. And we're going to try to move as close as we can to our doctors and channel that demand more closely with them. And so we know how to do this. We just have to scale it more broadly across the United States in different areas where we think it's going to work. But one of the things is really, you know, look, the DSOs and the OSOs, again, know how to do this. These individual doctor practices don't necessarily know. And so, but they do, there's Invisalign opportunities for them, and we're going to try to work more hand in hand to help to guide those patients through there so they can find Invisalign treatment.

Uh, attempts that you're making to ensure that you're in driving better patient conversion, better demand curve, um, satisfaction, etc.

Yeah, Michael. It's a good question. We like to say that the last mile is where we really talk. We touch our doctors with this and we all obviously do a lot of advertising National advertising and we're going to try to move as close as we can to our doctors and channel that demand more closely with them. And so we're, we're we're we know how to do this. Uh, we just have to scale it more broadly across the United States and different areas where we think it's going to work of 1 of the things is is is really, you know, look the dsos and the Osos. Again, know how to do this, these individual doctor practices don't necessarily know and so, but they do there's and there's a lot of opportunities for

Joe Hogan: And part of that is making sure they have the right kind of financing opportunities through HCA and other organizations that we work with.

For them. And we're going to try to work more hand in hand to help the guy those patients through there. So they can find the Visine treatment and part of that is making sure they have the right kind of financing opportunities to HCA and other organizations that we work with.

Jason Bednar: Thank you.

Operator: Thank you.

Joe Hogan: You're welcome.

Thank you. Thank you. You're welcome.

Operator: And our next question comes from the line of Erin Wright of Morgan Stanley. Your line is open.

I don't. The next question comes from the line of Aaron Wright of Morgan Stanley. Your line is open.

Erin Wright: Great. Thanks. And a similar type of question, but more so what kind of happened in the quarter and what sort of changed. And outside of just the sluggish demand and kind of conversion rates that you were seeing, were there any of your own initiatives, like promotional activity, that didn't really just play out to plan? Like we're hearing just some more promotional activity in June, for instance. You know, how did that strategy work relative to your expectations? Obviously, it fell short of that. But I mean, was there any sort of nuance to the strategy that that maybe changed at all? And was any of that a competitive response? Thanks.

Great, thanks. And, um, a similar type of question, but more. So what kind of happened in the quarter and what sort of changed and outside of just the sluggish demand? And and kind of conversion rates that you were seeing were there any of your own initiatives like promotional activity that didn't didn't really just play out to plan like we're hearing just some more promotional activity in June for instance. You know how did that strategy work relative to your expectations? Obviously it fell short of that. But I mean, was there any sort of nuance to the strategy that that maybe changed at all? And and it was any of that competitive response? Thanks.

Joe Hogan: You know, again, that's a good question, Erin. I'd say we ran the same play in the second quarter that we run in every quarter in the sense of, you know, promotions and things that we offer from a month-to-month standpoint. John, you just.

Jason Bednar: Yeah, and I would add that the awareness is there. The interest is there. We see it in search metrics. We see it in kind of that overall interest that we see from even getting a scan. It's just that conversion then to go from that scan to actually go into treatment that didn't materialize, didn't see that sequential improvement, especially as you think about, you know, moving into teen season in a bigger way with North America and Europe. So the play was set to decrease that interest, to get people wanting to go into treatment due to their own economic reasons. They did not.

I you know that again that that's a good question there that I'd say we ran the same play in the second quarter that we run in every quarter in the sense of you know promotions and things that we offer from a month-to-month standpoint John. Yeah. And and I would add the, the awareness is there, the the interest is there we see it in search metrics? We see it in in kind of that overall interest, that we see from even getting a scan. It's just that conversion then to go from that scan to, to

Erin Wright: Okay. All right. Thank you.

Operator: Thank you. And our next question comes from Kevin Caliendo of UBS. Your line is open.

Okay, all right. Thank you.

Thank you.

And our next question comes from Kevin colando of UPS. Your line is open.

Joe Hogan: Thank you. Thanks for taking my question. I'm going to ask this a little bit differently. Maybe it's a question specifically for Joe, but if I'm thinking about this and sort of the way a line's positioned, ortho versus GP, if we're seeing wires and brackets being more competitive, that's happening in the ortho space where you guys dominate. Does it make sense for you strategically to try to become somehow more aggressive in the GP space where your share is not as high, where there is more competition? Does that, you know, have you been defensive about that because of pricing or anything else? Like from a strategic perspective, given the environment, this isn't like a one, it happened this quarter, but we've seen this trend now for a couple of years.

Thank you, thanks for taking my question. Um, I'm gonna ask this a little bit differently, maybe it's a question specifically for Joe, but

If I'm thinking about this in sort of the way aligned positions. Um, Ortho versus GP, if we're seeing wires and brackets being more competitive that's happening in the orthos space, where you guys dominate, does it make sense for you strategically to, to try to become somehow more aggressive in the GP space where your share is not as high? Where there is more competition. Does that, you know, have you been defensive about that because of pricing or anything else? Like street from a strategic perspective, given the environment, this isn't like a 1, it happened this quarter but

Joe Hogan: I'm just asking just purely from a, hey, at the board level, what kind of decisions do we have to make strategically to grow faster? And you know, how do we gauge one segment versus the other, pricing power, market share, and all of the solutions we bring to the table? Kevin, I think it's a fair question. It's actually, it's a good question. You know, about, you know, over 40% of our business in the United States is GP now, you know, versus ortho. We have a dedicated GP sales force that's completely isolated from ortho. They're trained specifically to be able to work with GPs and understand their business and their different kinds of workflow. We have products like iGO. We have products like, you know, comprehensive, you know, three and three or, you know, modern kinds of products that are really geared often to get GP started.

We've seen this trend now for a couple years, I'm just asking, just purely from a hey at the board level. What kind of decisions do we have to make strategically the to grow faster? And you know how do we gauge 1 segment versus the other pricing power market share and and all of the solutions we bring to the table

Joe Hogan: We have tremendous doctors like Ryan Mollis and David Galler that train thousands of GPs out there in order to do these things. So we're excited about the GP marketplace. It does not have that possible competitive trade with wires and brackets the way the ortho market is. But remember, these are workflows. They're tight workflows. You have to be able to walk in and be able to explain into a GP practice how you engage with those workflows and walk through those workflows overall. And it's just, I think people, and I got lost in this business when I first started, is thinking that you would treat GPs just like you do orthos. And you don't. It's a different business person and a different business model altogether. They weren't trained to move teeth. That's why our GCP practices, which are you scan, we can give you a treatment plan.

Kevin, I think it's it's a fair question. It's, it's actually it's a good question. Um, you know, about, you know, over 40% of our business in the United States is uh, GP. Now, you know, versus Ortho. Uh, we have a dedicated GP Salesforce that's completely isolated from Ortho. Uh, they're trained specifically to be able to work with GPS and understand their business and, and their different kinds of workflow. We have products. Like go, we have products, like, you know, comprehensive uh, uh, you know, 3 and 3 or, you know, moderate kinds of products that are really geared often to this GP started. We got tremendous doctors like Ryan, molis and David Galler that trained thousands of GPS out there in order to do these things. So, we're excited about the GP Marketplace. It does not have that possible competitive trade with wires and brackets. The way the ortho Market is. Uh, but remember these are workflows. They're tight work flows. You have to be able to walk in and be able to explain and do a GP practice how you engage with those workflows and walk through those workflows overall. And um, it it just I think people

Joe Hogan: We have different doctors that can help them through that that we call, you know, technical support that we can walk them through. So I feel good about the resources, the products, and the focus that we have in that area. Where we put more pressure on the GP side, wherever we see opportunities, we'll work it to try to advance our business.

And I got lost in this. This is my first started, this thinking that you would treat GPS just like to do or of those and you don't it's a different business person. It's a different business model altogether. They weren't trained to move teeth. That's why our gcp practices. Which are you scan? We can give you a treatment plan. Uh, we have different doctors that can help them through that, that we call, you know, technical support that we can walk them through. So I feel good about the resources, the products, and the focus that we have in that area where we put more pressure on the GP side,

Where wherever we see opportunities, we'll work it to try to advance our business.

Jeff Johnson: Can I ask a question?

Can I ask a question?

Operator: Kevin, next question. Thank you. And our next question comes from the line of Vick Chopra of Wells Fargo. Your line is open.

Thank you.

And our next question comes from the line of Vic Chopra of Wells Fargo. Your line is open.

Vick Chopra: Hey, good afternoon, and thanks for squeezing me in. Maybe just a high-level question on the restructuring actions that you're planning on taking in the back half of the year. You know, I guess what gives you the confidence that these actions will yield the results that you desire and will indeed align with your long-term goals? You know, I guess I'm just trying to figure out, like, are these sufficient to counter the soft macro environment? Thanks.

Hey, good afternoon and thanks for squeezing me in.

Joe Hogan: Yeah, Vick, this is John. So when we look at some of the restructuring, like we had said in our prepared remarks, it's getting closer to our customers. We know that, you know, in this day and age, it's a key requirement to shorten cycle times, be closer to our customers. You know, their willingness to work with us, some of the programs that we have with our doctor subscription program and so on really rely on getting closer to our customers. And it also drives productivity where we can reduce our freight costs and so on, which has become a big part of our overall cost. And at the same time, to be able to, you know, change out some of the equipment that we have to be more productive, drive efficiency, drive savings. We wanted to reflect that in terms of our profitability.

Give me just a high level question. On the restructuring actions, you're planning on taking in the back half of the year. You know, I guess what gives you the confidence that these actions will yield the results that you desire and will indeed aligned with your long term goals. You know, I guess I just trying to figure out like are these sufficient to counter the soft macro environment. Thanks.

Joe Hogan: But we also want to be able to reflect that in, you know, how do we go to market with that, you know, with some of those actions and the savings that we generate. So think of, you know, being very active with our customers to help drive conversion, be able to work with them even on a practice-by-practice basis to make sure that they have that demand, they have the capabilities, they understand the products, and they can, you know, help digitize their practice and ultimately use our products. So we've got to play on our plays on how we're running to drive productivity, and it fits with what we want to do with our customers. And then we want to use some of that savings to really be able to get more active and be active with our customers so that we can help them drive increased patients.

Yeah, Vic, this is John. So when we look at some of the restructuring, like like we had said, in our prepared remarks, it's getting close to our customers. We know that that that, you know, in this day and age, uh, it's a key requirement to, to shorten cycle times because of our customers, um, you know, their willingness to work with us some of the programs that we have with our doctor subscription program. And so on really rely on, we getting closer to our customers and it also drives productivity where we can reduce our freight costs and so on which has become a big part of our, our overall costs and at the same time to, to be able to, uh, you know, change out some of the equipment that we have to, to be more productive Drive efficiency, Drive savings. Um, we wanted to reflect that in, in terms of our profitability, but we also want to be able to reflect that in, you know, how do we, how do we go?

I want to use some of that savings to really be able to get more active and engage with our customers, so that we can help them drive increased patient volume.

Operator: Thanks. Any questions? And our next question comes from the line of Michael Riskin of Bank of America. Your line is open.

Thanks, thank you.

Jason Bednar: Great. Thanks for taking the question. I'm going to preempt this, Joe, by saying I know it may be an unfair question, and if there's just, you know, no answer, there's no answer to that. But I just want to think about the analyst that you guys just had a couple of months ago and the vision you would have for the next couple of years. You gave us an updated LRP, and you sort of gave us the bridge for the next couple of years and then beyond. And the way I always remembered it was sort of like the, you know, there's the underlying macro and markets, and then there's, you know, what a line can deliver above that. Obviously, it's only been a couple of months, and it feels like it's, you know, it's been a very short amount of time in terms of what's changed.

And our next question comes from the line of Michael Riskin of Bank of America. Your line is open,

Jason Bednar: So like I said, maybe it's too early to say anything, but you're certainly leaving this year at a much lower starting point than you had imagined, right? You thought you'd be growing revenues more in the mid-single-digit rate. Now it's kind of flattish. So if you think about that 5 to 15 going forward, much bigger jump next year, does that change how you think you're going to be able to approach that in '26 and beyond, or is it just, you know, one month and we'll take it from there? Thanks.

Great, thanks for taking the question. Um, I'm at a preempt this job by saying I know it may be an unfair question and if there's a, you know, no no answer, there's no answer about that. But I just want to think about um the analysis that you guys just had a couple months ago and and the vision you would have for the next couple of years, you gave us an updated lrp and you sort of gave us the bridge over the next couple of years and then beyond. And the way I always remembered it was sort of like the, you know, there's the underlying macro and markets and then there's, you know what a line can deliver that. Um, obviously it's only in a couple months and it feels like it's, you know, it's been very short amount of time in terms of what's changed. Um, so like I said, maybe, maybe there's 2 early to say anything, but you're, you're really leaving the Sierra at a much lower starting point than you'd imagine, right? You thought you'd be growing revenues more in the midst of single digit right now. It's kind of flat. So if you think about it, at 5 to 15 going forward,

Joe Hogan: Michael, I'll start with you on that. It is one month. Okay. And I think to be fair, to project a business off of one month is tough. So what we're doing with our forecast this year is taking that month, shooting it forward, and we're going to work hard to do all we can to beat that if we can. We stick by what we presented in New York. We're excited about the future of the business. That 5 to 15, we truly believe it's there. And I think the best thing that can happen is we get somewhat of a more competent consumer. And, you know, being able to drive some of the conversion work that we're talking about, you know, on the front end with doctors overall, you know, work with DSOs and all the help of this too.

Much bigger jump next year. Um, does that change how you think you're going to be able to approach that in 26 and Beyond or is it just you know, 1 month and and we'll take it from there, thanks.

Joe Hogan: So I feel good about and stick to what we pitched in New York and the direction we have. Obviously, this looks like a setback, and it is in a sense of what we forecasted for the second quarter. But again, I think this business is on a strong foundation. We're going to do what we can to reposition the business, as John talked about, with some of these moves around the world. But look, I feel good about where we are, but the environment is challenging right now.

Mike, I'll start with you, it is 1 month, okay? And I think to be fair uh to project the business off of 1 month is tough. So what we're doing with our forecast, this year is taking that month, shooting it forward and we're going to work hard to do. All we can to to beat that if we can. Um, what we stick by what we presented in New York. We're excited about the future of the business. That 5 to 15. We truly believe it's there and I think the best thing it can happen is we get somewhat of a more competent consumer, uh, and, you know, being able to drive to some of the conversion work that we're talking about, you know, on the front end with doctors overall or work with dsos and all help through this too. So, I feel good about and stick to what we, what we pitched in, uh, in New York, in a direction we have. Obviously, this looks like a setback, uh, and it is in a sense of what we forecasted for the second quarter. But again, I think we're this business is on a strong Foundation. We're going to do what we can to reposition the business as John talked about with with some of these moves around the world. Um, but I look I I feel good.

Good about where we are, uh, but the environment is challenging right now.

Jason Bednar: All right. Thanks.

All right, thanks.

Operator: Thank you. And we've reached the end of our question and answer session. I will now turn the call back over to Shirley Stacy for closing remarks.

Thank you. And we've 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: Well, thank you, everyone, again for joining us today. We look forward to meeting you at upcoming investor conferences and bus trips. If you have any follow-up questions, please contact Investor Relations. Thanks and have a great day.

Well, thank you everyone again for joining us today. We look forward to meeting you at upcoming investor conferences and bus trips. If you have any follow-up questions, please contact Investor Relations. Thanks, and have a great day.

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

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