Note: This is an earnings call transcript. Content may contain errors.

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Date

Wednesday, Oct. 29, 2025, at 4:30 p.m. ET

Call participants

  • President and Chief Executive Officer — Joseph Hogan
  • Chief Financial Officer — John Morici
  • Vice President, Corporate and Investor Communications — Shirley Stacy

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Risks

  • Gross margin decline — Gross margin for the third quarter of fiscal 2025 (period ended September 30, 2025) was 64.2%, down 5.7 percentage points sequentially and 5.5 percentage points year over year, with management attributing the decrease primarily to restructuring and non-cash charges, impairments, and excess inventory write-offs.
  • Operating margin compression — Operating margin dropped to 9.7% in the third quarter of fiscal 2025, down approximately 6.4 points sequentially and 6.9 points year over year, driven by $36.3 million in restructuring and related one-time expenses.
  • North America retail weakness — Joseph Hogan noted, "Our biggest issue is actually North America retail," and described retail account growth as continuing to be challenged during the third quarter of fiscal 2025.
  • Elevated effective tax rate — The effective tax rate rose to 40.1% for the third quarter of fiscal 2025, up from 28.2% in the second quarter of fiscal 2025 and 30.1% in the third quarter of fiscal 2024, primarily due to the change in jurisdictional mix of income from restructuring actions.

Takeaways

  • Total revenues -- $995.7 million total revenue for the third quarter of fiscal 2025, up 1.8% year over year and down 1.7% sequentially, with a constant currency tailwind of $15.6 million year over year and $11.7 million sequentially.
  • Clear aligner revenues -- $805.8 million for the third quarter of fiscal 2025, up 2.4% year over year, slightly up sequentially, aided by higher volumes, price increases, and favorable foreign exchange, offset by discounts and lower-priced geographic/product mix.
  • Clear aligner volumes -- 648,000 cases for the third quarter of fiscal 2025, up approximately 5% year over year and slightly up sequentially, with record doctor submissions and a record-high number of teen and kid cases representing 40% of total clear aligner shipments.
  • Clear aligner average selling price (ASP) -- $1,245 per case for the third quarter of fiscal 2025, down $5 sequentially (more pronounced mix shift to lower-priced geographies) and down $30 year over year (primarily due to discounts and geographic/product mix), though ASPs for the U.S. and EMEA were up sequentially on a like-for-like basis.
  • Systems and services revenues -- $189.9 million for the third quarter of fiscal 2025, down 0.6% year over year and down 8.6% sequentially, primarily due to lower scanner wand and scanner system sales sequentially, and lower scanner system sales year over year, partially offset by higher scanner wand sales.
  • iTero install base -- Over 120,000 units active, a 12% year-over-year increase as of the end of the third quarter of fiscal 2025, with iTero Lumina comprising over 90% of full system units shipped.
  • Non-GAAP operating margin -- 23.9% (non-GAAP) for the third quarter of fiscal 2025, up 2.6 percentage points sequentially (non-GAAP) and 1.8 points year over year, exceeding management's non-GAAP operating margin outlook of approximately 22% for the quarter.
  • GAAP net income per share -- $0.78 net income per share for the third quarter of fiscal 2025, down $0.93 sequentially and down $0.77 year over year, with sequential and year-over-year impacts partially offset by $0.02 and $0.03, respectively, from favorable foreign exchange.
  • Non-GAAP net income per share -- $2.61 (non-GAAP) for the third quarter of fiscal 2025, up $0.11 sequentially (non-GAAP).
  • Cash and cash equivalents -- $1.46 billion ending balance as of Sept. 30, 2025, up $103.4 million sequentially, down $37.3 million year over year, with $190.8 million in the U.S., and $813.8 million internationally.
  • Restructuring and one-time charges -- $36.3 million for the third quarter of fiscal 2025, largely related to post-employment benefits and non-cash asset impairments, with expected fiscal 2025 non-cash charges of $145 million-$155 million and expected cash outlay for fiscal 2025 estimated to be around $45 million.
  • Share repurchases -- 500,000 shares repurchased in the third quarter of fiscal 2025 at an average price of $136.77; $928.4 million remains available for repurchase as of Sept. 30, 2025.
  • Business outlook -- Margin expansion, both GAAP and non-GAAP, forecasted for fiscal 2026 (period ending December 31, 2026).
  • Geographic trends -- EMEA and APAC produced double-digit clear aligner volume growth year over year, while North America volume declined, offset partially by Latin America growth and DSO channel strength.
  • Innovation milestones -- Launch of ClinCheck Live Plan for 15-minute initial digital treatment plans and continued adoption of AI and automation in orthodontic workflow; 100+ palate expander clinical cases published in Align Technology's Global Gallery.

Summary

Align Technology (ALGN +4.94%) reported low single-digit revenue and volume growth for the third quarter of fiscal 2025 (period ended September 30, 2025), but continued to face margin compression from restructuring and non-cash charges, as well as ongoing North American retail market softness. The company highlighted strong double-digit DSO and international growth year over year, record engagement from doctors and pediatric patients, and the rapid adoption of its latest flagship products and digital workflow innovations. Notable product launches, such as ClinCheck Live Plan, and commercial partnerships, including expanded patient financing, were emphasized as drivers of higher case conversions and greater affordability. Guidance called for near-term sequential improvements across revenue and profitability metrics for the fourth quarter of fiscal 2025, including both GAAP and non-GAAP measures, along with a forecast of operating margin recovery, both GAAP and non-GAAP, in fiscal 2026 after the majority of announced restructuring is completed.

  • Joseph Hogan stated, "We're sticking with our five to fifteen. Plan for the future. That hasn't changed," reiterating management's long-term revenue and volume outlook targets.
  • Management expects fiscal 2025 clear aligner volume growth in the mid-single digits, according to John Morici, with revenue for fiscal 2025 expected to be flat to slightly up, and fiscal 2025 non-GAAP operating margin slightly above 22.5%.
  • Performance from dental support organizations (DSOs) accounted for approximately 25% of business in the third quarter of fiscal 2025, according to John Morici, with double-digit growth year over year, according to Joseph Hogan, sustained across several regions and segments.
  • The iTero Lumina system maintained rapid adoption momentum, representing over 90% of full system shipments for the third quarter of fiscal 2025, and expanded the overall system install base by 12% year over year as of the third quarter of fiscal 2025.
  • Management described a sustained, "mix shift to lower priced countries and products" according to John Morici as influential on reported ASPs, with sequential ASP improvement expected in the fourth quarter of fiscal 2025 as the geographic mix shifts toward EMEA.

Industry glossary

DSO (Dental Support Organization): Business entity providing non-clinical support services to dental practices, often driving scale and operational efficiency in the dental market.

ClinCheck: Align Technology's proprietary digital orthodontic treatment planning platform for Invisalign cases.

iTero Lumina: Latest generation of Align Technology's intraoral scanner hardware and software, enabling advanced imaging and workflow integration.

Exocad ART: Module within exocad dental CAD software focused on advanced restorative treatment, integrating orthodontic and restorative digital workflows.

Full Conference Call Transcript

Joseph Hogan: Thanks, Shirley. Good afternoon, and thanks for joining us today. On our call today, I'll provide an overview of our third quarter results and discuss performance from our two operating segments, Systems and Services and Clear Aligners. John will provide more detail on our Q3 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. I'm pleased to report third quarter revenues, Clear Aligner volumes, and non-GAAP operating margins are all above our outlook.

Our Q3 results reflect year-over-year growth in Clear Aligner volumes driven primarily by EMEA and APAC in Latin American regions, as well as strong sequential growth from APAC and Latin American regions. Driven primarily by teens and kids category, our Q3 systems and services revenues were down year over year and sequentially as expected, given Q3 capital equipment seasonality. Q3 non-GAAP operating margin of 23.9% was above our outlook of approximately 22%. While activity in the orthodontic and dental markets remains mixed, especially in North America, the initiatives we are taking to track consumer demand and patient conversion, including working with our DSO partners, are delivering results, and we continue to focus on execution of these go-to-market programs.

In addition to the breadth and depth of our global business and product portfolio, and consumer preferences for the Align Technology, Inc. brand, our unique advantages provide balance in a dynamic global market. In fact, the year-over-year clear aligner volume growth rate improved from Q2 to Q3 for our top 10 country markets except for Canada. For Q3, total revenues of $996 million increased 1.8% year over year and decreased 1.7% sequentially. Q3 Clear Aligner revenues of $806 million increased 2.4% year over year and were up slightly sequentially. 648,000 cases increased roughly 5% year over year and were up slightly sequentially.

Q3 imaging systems and CADCAM services revenues of $190 million decreased slightly year over year and were down 8.6% sequentially. For Q3, Systems and Services revenues decreased sequentially as expected primarily due to seasonality. On a year-over-year basis, Q3 Systems and Services revenues decreased slightly, primarily due to lower volumes offset somewhat by increased scanner services and exocad CADCAM sales. Q3 revenues also reflect strong growth from the iTero scanner leases, an important option for doctors that enables greater access to our advanced digital technology. At the end of Q3, the installation of active iTero systems, which includes sales and leasing, continues to expand, and there are over 120,000 units, a 12% year-over-year increase.

From a regional perspective, Q3 scanner sales increased sequentially in North America among GPs as well as in Latin America and APAC regions. On a year-over-year basis, Q3 scanner sales increased in EMEA and Latin American regions. ITero Lumina with iTero Direct Capture technology sets a new standard with effortless scanning and superior visualizations helping doctors transition to our advanced imaging systems. For Q3, iTero Lumina represented over 90% of our full system units, and we are still driving adoption and utilization through wand upgrades as well as new full systems installations.

Today, we announced a series of new product innovations for iTero digital solutions, a comprehensive ecosystem that includes intraoral scanners, integrated software tools, designed to transform dental consultations into a modern multi-modal oral health assessment that helps doctors and their teams deliver exceptional chairside experiences supporting Invisalign treatment conversion. These new capabilities span key practice workflows that underline the Align Technology, Inc. digital workflow. From AI-enabled X-ray assessment to dynamic personalized visualization, and patient engagement tools at chairside to expand compatibility with 3D printers and milling machines. These new innovations simplify workflows, improve doctor-to-patient communications, increase patient acceptance, and drive practice growth. More information on these innovations is available in today's press release and our webcast slides.

For exocad, Q3 revenues increased sequentially and year over year. During Q3, we began piloting Exocad ART in several countries in Europe. Based on the initial learnings, we are expecting to expand to more countries in 2026. Exocad ART stands for advanced restorative treatment, a module with exocad dental CAD software that bridges orthodontics and restorative dentistry. It enables orthodontists, dentists, and dental labs to integrate tooth alignment with restorative procedures and deliver better function, less invasive restorations, and longer-lasting and aesthetically superior treatment outcomes. Exocad ART further extends the value of the Align Technology, Inc. digital platform. With comprehensive digital workflows and integrated solutions from Invisalign, iTero, and Exocad.

For clear aligners, Q3 worldwide volumes were up 0.5% and up 4.9% year over year. For Q3, 88,000 doctors globally submitted Invisalign cases, an all-time record. Driven primarily by the GP channel. In addition, Q3 reflects a new all-time high in the number of doctors submitting Invisalign case starts for teens and kids. On a sequential basis, Q3 clear aligner volumes reflect strength in the international adult and teen patients as well as North American DSO adult patients, partially offset by the North American retail doctor. Year over year, Q3 clear aligner volume reflects strong growth across the APAC and EMEA regions, offset somewhat by North America. Q3 clear aligner volumes increased year over year for both orthodontists and GPs.

Driven by growth across adults, teens, and kids, and continued strength by DSOs. From a product perspective, for Q3, we had strong year-over-year growth from Invisalign First, DSP touch-up cases, Invisalign Pallet Expander, retention including DSP as well as continued mix shift from non-comprehensive clear aligner products. For The Americas, Q3 clear aligner volumes were down year over year primarily due to North America, partially offset by continued growth in Latin America. Despite lower volumes, increased adoption of several products, including Invisalign First for teens and kids, Invisalign DSP touch-up cases, including retention and the Invisalign pallet expander system continued. We also saw double-digit growth year over year from North America DSOs.

Given the economies of scale and more effective optimal cost structures inherent in their business model, we anticipate that our DSO partners will continue to grow their Invisalign business and are one of the best examples of how to incorporate our digital technology and workflows to accelerate practice growth. To offset a financial barrier for patients interested in Invisalign treatment, Align Technology, Inc. and Health Care Finance Direct or HFD are partnering to increase the affordability of treatment. HFD is a preferred patient financing partner and provides our Invisalign-trained doctors with greater options to support their patients and enhance their practices.

Among DSOs and doctors enrolled in HFD, enrollment is growing, and we have noticed an incremental lift in Invisalign treatment that we expect will continue. In the EMEA region, Q3 clear aligner volumes grew double digits year over year, driven by increased submitters and utilization in the orthodontic channel, which strengthened teens, kids, and adult categories. This performance reflects continued adoption of non-comprehensive products, including moderate, DSP touch-up cases, including retention and Invisalign palate expander, as well as Invisalign comprehensive three and three and Invisalign First, within our comprehensive portfolio. During the quarter, we saw strong double-digit DSO growth in EMEA, on a year-over-year basis.

For the APAC region, Q3 clear aligner volume grew double digit year over year, reflecting increased submitters and utilization across both the GP and orthodontist channel. Across teens and growing kids led by China. Invisalign First continues to contribute to year-over-year growth where the growing patient portfolio provides a significant opportunity in the region with some of the highest rates of complex malocclusion. DSO performance has also is also up double digits, on a year-over-year basis, led by China and Japan. In addition, Q3 strong retention performance on a year-over-year basis reflects increasing submitters, and utilization across both the GP and orthodontist channel. In Q3, over 256,000 teens and growing kids started treatment with Invisalign clear aligners.

This number represents a 14.7% sequential increase primarily due to strength in APAC, North America, and Latin America, partially offset by softer performance in EMEA due to seasonality. On a year-over-year basis, case starts increased 8.3% driven by growth in APAC, EMEA, and Latin America. Partially offset by North America. From a product standpoint, Invisalign First and Invisalign Pallet Expander or IPE continued to drive growth year over year across all regions. During the quarter, we achieved a record number of teen and kids cases shipped in a quarter, representing a record 40% mix of total clear aligner cases shipped.

The number of doctors submitting cases for Q3 starts for teens and kids was up 3.8% year over year, led by continued strength from doctors treating young kids, or growing patients with Invisalign First aligners and Invisalign palate expander. During Q3, we continued to roll out the Invisalign Pallet Expander system Invisalign system with mandibular advancement featuring occlusal blocks or what we call MAOB, IPE offers a more hygienic and comfortable alternative to traditional metal expanders that has proven clinically effective at achieving the expansion doctors want for their patients. MAOB is designed to create class two skeletal and dental malocclusions in growing patients ages 10 to 16. By simultaneously advancing the mandible, and aligning the teeth.

By integrating solid occlusal blocks into clear aligners, MAOB offers greater durability and vertical opening. For early mandibular advancement precision wings that guide the lower jaw forward and Smartrac material and SmartForce features for predictable tooth movement. Today announced ClinCheck Live Plan, It's a new feature in Invisalign digital treatment planning that automates the generation of initial doctor-ready treatment plans in fifteen minutes. This advancement represents a major technical milestone for the Align Technology, Inc. digital platform that can reduce the Invisalign treatment planning cycle from days to minutes.

ClinCheck Live Plan is built on Align Technology, Inc.'s proprietary data and algorithms derived from decades of research and development and the experience of doctors who have treated more than 21 million Invisalign worldwide. With ClinCheck Live Plan, doctors have the option to treatment plan in the moment. And can receive a fully customized initial ClinCheck treatment plan in about fifteen minutes. After submitting an eligible case with FlexRx. Doctors then have the option to review the proposed tooth movements and approve the case while the patient is still in the office. This can enable the doctor to receive and approve the treatment plan faster.

Which can lead to the patient starting Invisalign faster, ultimately increasing the office efficiency and improving the patient experience. Over the past few years, Align Technology, Inc. has introduced a range of new treatment planning tools to enhance consistency, doctor control, and speed in treatment planning. I often refer to these innovations as touchless ClinCheck, or ClinCheck in minutes to emphasize the potential for the software to totally transform the treatment planning experience for doctors and their patients. To that end, we continue to make great progress in automation with machine learning and AI-powered technologies that are the foundation of our next-generation treatment planning offerings. I'm excited by our continued progress and the measurable impact we are beginning to see.

The use of Invisalign FlexRx has doubled every year, and to date, over a million Invisalign cases have been submitted through FlexRx for personalized treatment plans. In addition, we now have over 100 Invisalign palate expander clinical cases published in the Align Technology, Inc. Global Gallery, both unprecedented milestones for new product introductions in the orthodontic market. With that, I'll turn the call over to John. Thanks, Joe. Now for our Q3 financial results.

John Morici: Total revenues for the third quarter were $995.7 million, down 1.7% from the prior quarter and up 1.8% from the corresponding quarter a year ago. On a constant currency basis, Q3 revenues were favorably impacted by approximately $11.7 million or approximately 1.2% sequentially and were favorably impacted by approximately $15.6 million year over year or approximately 1.6%. Q3 Clear Aligner revenues were $805.8 million, slightly up primarily due to favorable foreign exchange and a price increase in The UK on August 1. Partially offset by product mix. Shift to lower prices lower priced countries and products. Favorable foreign exchange impacted Q3 clear aligner revenues by approximately $9.8 million or approximately 1.2% sequentially.

Q3 Clear aligner average per case shipment price was $1,245, a $5 decrease on a sequential basis primarily due to slightly more pronounced product mix shift to lower priced countries and products. Partially offset by favorable foreign exchange a price increase in The UK. On a like-for-like basis, Q3 clear aligner ASPs for The US and EMEA up sequentially. On a year-over-year basis, Q3 Clear Aligner revenues were up 2.4% primarily from higher volume price increases, and favorable foreign exchange lower net deferrals, partially offset by higher discounts and product mix shift to lower price countries and products. Favorable foreign exchange impacted Q3 clear aligner revenues by approximately $13 million or approximately 1.6% year over year.

Q3 clear aligner average per case shipment price was $1,245, down $30 on a year-over-year basis primarily due to discounts and product mix shift to lower price countries and products. Partially offset by price increases and favorable foreign exchange. Clear aligner deferred revenues on the balance sheet as of 09/30/2025 decreased $19.5 million or 1.6% sequentially and decreased $78.7 million or 6.2% year over year and will be recognized as additional aligners are shipped under each sales contract. Q3 systems and services revenues, of $189.9 million were down 8.6% sequentially, primarily due to lower scanner Wand sales and Scanner System sales. Partially offset by favorable foreign exchange and higher non-system sales.

Q3 systems and services revenues were down 0.6% year over year, primarily due to lower scanner system sales partially offset by higher scanner wand sales higher non-system sales, and favorable foreign exchange. Foreign exchange favorably impacted Q3 systems and service revenues by approximately $1.8 million sequentially, approximately 1%. On a year-over-year basis, systems and services revenues were favorably impacted by foreign exchange of approximately $2.6 million or approximately 1.4%. Systems and Services deferred revenues decreased $7.9 million or 4% sequentially and decreased $30.9 million or 13.9% year over year due in part to shorter duration of service contracts selected by customers on initial scanner system purchases. Moving on to gross margin.

Third quarter overall gross margin was 64.2%, down 5.7 points sequentially and down 5.5 points year over year, primarily due to restructuring and other non-cash charges impairment, on assets held for sale, depreciation expense on assets to be disposed of, other than the sale other than by sale. And excess inventory write-off, partially offset by operational efficiencies. Overall gross margin was favorably impacted by foreign exchange of 0.4 points sequentially and 0.6 points on a year-over-year basis. On a non-GAAP basis, which excludes the impact of the above-mentioned restructuring and other non-cash charges, gross margin for the third quarter was 70.4%, down 0.1 points sequentially and flat year over year.

Clear aligner gross margin for the third quarter was 64.9%, down 5.2 points sequentially primarily due to restructuring and other non-cash charges Foreign exchange favorably impacted clear aligner gross margin by approximately 0.4 points sequentially. Clear aligner gross margin for the third quarter was down 5.4 points year over year, primarily due to the restructuring and other non-cash charges partially offset by operational efficiencies. Foreign exchange favorably impacted clear aligner gross margin by approximately 0.6 points year over year. Systems and Services gross margin for the third quarter was 61.3%, down 8.2 points sequentially, primarily due to excess inventory write-off. Foreign exchange favorably impacted the systems and services gross margin by approximately 0.4 points sequentially.

Systems and Services gross margin for the third quarter was down 6.2 points year over year, primarily due to excess inventory write-off Foreign exchange favorably impacted the systems and services gross margin by approximately 0.5 points year over year. Q3 operating expenses were $542.9 million, down 0.4% sequentially and up 4.5% year over year. On a sequential basis, operating expenses were $2.2 million lower primarily due to lower consumer marketing spend, partially offset by restructuring costs. Year over year operating expenses increased $23.4 million primarily due to restructuring costs and partially offset by lower consumer marketing spend.

On a non-GAAP basis, excluding stock-based compensation, restructuring and other charges, and amortization of acquired intangibles related to certain acquisitions operating expenses were $463.3 million, down 6.9% sequentially and 22% year over year. Our third quarter operating income of $96.3 million resulted in an operating margin of 9.7%, down approximately 6.4 points sequentially down approximately 6.9 points year over year.

Due to Q3 restructuring and other charges of $36.3 million primarily related to post-employment benefits and other non-cash items including the impairment of assets held for sale, depreciation expense on assets to be disposed of other than by sale, an impairment loss on inventory for an aggregate of $88.3 million Operating margin was favorably impacted from foreign exchange by approximately 0.4 points sequentially and 0.5 points year over year.

On a non-GAAP basis, which excludes stock-based compensation, restructuring and other charges, impairments on assets held for sale, impairment loss on inventory, depreciation expense on assets disposed of other than by sale, and amortization of intangibles related to certain acquisitions operating margin for the third quarter was 23.9%, up 2.6 points sequentially and up 1.8 points year over year. Interest and other income and expense net for the third quarter was an expense of $1.6 million compared to an income of $10.5 million in Q2 2025 primarily due to foreign exchange fluctuations on open assets and liabilities. On a year-over-year basis, Q3 interest and other income and expense was unfavorable compared to an income of $3.6 million in Q3 2024.

Primarily driven by unfavorable foreign exchange movements and lower interest income. The GAAP effective tax rate for the third quarter was 40.1%, compared to 28.2% in the second quarter and 30.1% in the quarter of the prior year. The third quarter GAAP effective tax rate was higher than the second quarter effective tax rate and the third quarter effective tax rate of the prior year primarily due to the change in our jurisdictional mix of income due to restructuring, partially offset by lower US minimum tax on foreign earnings and changes in the newly enacted tax law. On a non-GAAP basis, our effective tax rate in the third quarter was 20%, which reflects our long-term projected tax rate.

Third quarter net income per share was $0.78, down $0.93 sequentially and down $0.77 compared to the prior year. Our EPS was favorably impacted by $0.02 on a sequential basis and $0.03 on a year-over-year basis due to foreign exchange. On a non-GAAP basis, net income per diluted share was $2.61 for the third quarter, up $0.11 sequentially and up $0.26 year over year. Moving on to the balance sheet. As of September 30, 2025, cash and cash equivalents were $1.46 billion, up sequentially $103.4 million and down $37.3 million year over year. Of the $1.46 billion balance, $190.8 million was held in The U.S. and $813.8 million was held by our international entities.

During Q3, we repurchased approximately 500,000 shares of our common stock at an average share price of $136.77. These repurchases were made pursuant to the $200 million open market repurchase plan announced on 08/05/2025, which we expect will be completed in January 2026. As of 09/30/2025, $928.4 million remains available for repurchase of our common stock under our previously announced April 2025 repurchase program. Q3 accounts receivable balance was $1.0994 billion, down sequentially. Our overall day sales outstanding was 101 days, up approximately two days sequentially and up approximately eight days as compared to Q3 2024 and primarily reflects flexible payment terms that are part of our ongoing efforts to support Invisalign practices.

Cash flow from operations for the third quarter was $188.7 million. Capital expenditures for the third quarter were $19.8 million, primarily related to investments in our manufacturing capacity and facilities. Free cash flow defined as cash flow from operation minus capital expenditures, amounted to $169 million. I'd like to provide the following remarks regarding UK VAT and U.S. Tariffs as of September 30. As previously disclosed in our Q3 earnings release, and conference call, on 07/30/2025, we stopped charging VAT to impacted customers in The UK. As of 08/01/2025, our invoices no longer include The UK VAT rate of 20% for all Invisalign treatment packages that were ClinCheck approved as of 08/01/2025.

And for and replacement aligners, Bavara retainers, PVS processing fees, and additional aligners placed on or after 08/01/2025. At the same time, we simultaneously adjusted prices for our clear aligners and retainers to keep the overall price consistent. Currently, we do not expect a material change to result of operations as a consequence of the latest U.S. Tariff actions, and we refer you to our Q1 2025 press release and earnings materials as well as our Q2 2025 webcast slides, which includes specifics regarding potential tariffs of impacts of U.S. Tariffs.

Assuming no circumstances occur beyond our control, such as foreign exchange, macroeconomic conditions, and changes to our current applicable duties, including tariffs and other fees that could impact our business, We provide the following business outlook for Q4. We expect Q4 2025 worldwide revenues to be in the range of $1.25 billion to $1.045 billion, up sequentially from 2025. We expect Q4 clear aligner volume and clear aligner average selling price to be up sequentially from favorable geographic mix. We expect Q4 2025 systems and services revenues to be up sequentially consistent with typical Q4 seasonality. We expect Q4 2025 worldwide GAAP gross margins to be 65.5% to 66%.

Up sequentially from higher revenue lower restructuring and other charges, non-cash items such as impairment loss on assets held for sale, and impairment loss on inventory, partially offset by higher depreciation on disposed of other than by sale. We expect non-GAAP gross margin to be approximately 71%. We expect our Q4 2025 GAAP operating margin to be 15.3% to 15.8%, up sequentially primarily from lower restructuring and other charges non-cash items such as impairment loss on assets held for sale and impairment loss on inventory, partially offset by higher depreciation on assets disposed of other than by sale. We expect Q4 non-GAAP operating margin to be approximately 26%.

For fiscal 2025, we expect 2025 clear aligner volume growth to be mid-single digits, and revenue growth to be flat to slightly up from 2024. Assuming foreign exchange at current spot rates. We expect fiscal 2025 GAAP operating margin to be around 13.6% to 13.8%, down year over year due to higher restructuring and other charges and the incurrence of non-cash charges expected to be approximately $145 million to $155 million primarily for the impairment loss on assets held for sale depreciation on assets disposed of other than by sale, and impairment loss on inventory, partially offset by lower legal settlement loss.

Most of the one-time charges will be non-cash with the expected cash outlay for 2025 estimated to be around $45 million. We expect the 2025 non-GAAP operating margin to be slightly above 22.5%. We expect our capital investments in capital expenditures for fiscal 2025 to be approximately $100 million. Capital expenditures primarily relate to technology upgrades. We are nearing completion of the restructuring actions that are intended to sharpen operational focus, reduce ongoing cost, and enhance capital efficiency. For fiscal 2026, we expect these restructuring actions as well as other initiatives to improve our GAAP and non-GAAP operating margins by at least 100 basis points year over year. With that, I'll turn it back over to Joe for final comments.

Joe?

Joseph Hogan: Thanks, John. In summary, I'm pleased with our third quarter results and encouraged by the sequential and year-over-year growth in the Clear Aligner segment. As well as the continued expansion of our digital scanning solutions and footprint. While the North American retail doctor channel remains mixed, we continue to see strength in our other key geographies and areas of our portfolio including teens and kids and digital workflow innovation as demonstrated by continued strong double-digit year-over-year growth by our DSOs. Our investment in AI-powered treatment planning software, direct 3D printing of aligners, and next-generation iTero Lumina scanning technology are key to helping doctors deliver better outcomes, more effectively and efficiently while enhancing the patient experience.

Looking ahead, we intend to remain flexible in navigating headwinds in The US dental market and are committed to supporting our doctor customers with localized marketing, education, and clinical support across all regions. We're making good progress against our strategic initiatives to drive long-term growth across our business, and we're excited about the opportunities to further expand our reach, deepen engagement with consumers and providers, and deliver value to our shareholders. Before we wrap up, I want to take a moment to express my sincere gratitude to the around the world who continue to trust the Align Technology, Inc. team. And our technology to transform files and change lives. Your partnership and commitment to patient care inspire us every day.

We appreciate your continued support and confidence. I also want to thank our employees who continue to demonstrate agility, innovation, and resilience in everything they do to deliver and extend our leadership in digital orthodontics and restorative dentistry. With that, I thank you for your time today. And I'll turn it over to the operator.

Operator: Thank you. At this time, we will be conducting a question and answer session. 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. Our first question comes from the line of Elizabeth Anderson at Evercore ISI.

Elizabeth Anderson: Hi, guys. Good afternoon, and thanks so much for the question. Congrats on a nice quarter. It was really nice to see the acceleration in cases in the quarter. I was wondering if you would mind commenting on any early 4Q comments or color that you've seen in terms of the end markets and also just if you could comment a little bit further about the new ClinCheck launch and what you think the expected impact on the gross margins will be? Thank you.

Joseph Hogan: Yep. Hi, Elizabeth. Look. We obviously felt good about the third quarter, you know, overall. We just looking forward to moving forward. The technology we're talking about, you know, incorporating overall it's this is a comprehensive type of solution we've been developing over a series of years. I could see it two critical targets here is, one, to make it much more efficient for our doctors to be able to convert cases, understand the difficulty of cases and get the proper, you know, type of structure for that case. And secondly, it helps us from an efficiency standpoint also in the sense that we can take our time with customers on other things that are maybe more difficult.

So it's great to see these things coming together. It's not just a productivity tool for those doctors also. It also helps them in their communications. We talked about the fifteen-minute, the live update piece. Is you can be able to address that patient in that chair in fifteen minutes have a much better chance of closing the case because you know what the extent of the case will be and how long it will be. So we're excited about that.

Elizabeth Anderson: Awesome. Thank you.

Operator: Our next question comes from Jonathan David Block at Stifel.

Jonathan David Block: Thanks, guys. Good afternoon. Yes, hey there. Look. Not many blemishes, but I'll try to find one. So ASP was supposed to be up a smidge q over q. It was down a bit. John, I think I heard you right. You mentioned country mix. So I think like for like, was still maybe what you expected. But for 4Q, you do expect it to be up sequentially. Just help me out with that. So I'm guessing a full quarter of that probably helps with that. What else gets it up sequentially?

Then just more big picture, Joe, for you, if you want to comment on the pricing environment and really any thoughts on the timing about the potential rollout of what we're at least referring to as no refinement plan? And then I'll ask the follow-up.

John Morici: Yeah, John, I'll take the first one on the ASP. It was really just the growth that we saw in some of the markets like China that, has a lower ASP, compared to Europe. So the opposite of that happens in Q4. Europe becomes bigger as a percentage of our total. And China as a percentage, comes down in Q4. So they come out of their holiday season, and that shows up in Q4. You really those two geographies drive a fair amount of ASP impact.

Joseph Hogan: And, John, your bigger picture on the no refinement plan, you know, you could see we've been evolving on that route for a while, John. I mean, obviously, we went from a five by five to a three by three. Our modern products and those kinds of things normally didn't have any more than, you know, one aligner associated with it. So I look at this as not like a phase transfer. I look at this as a continual evolution in the sense of serving our doctors the way they want to be served. And you think about it too, John.

I think what we've done is to develop a technology over the years in a sense that doctors understand these malocclusions. They don't need five additional aligners in most cases to be able to address things. And they want that optionality to say, I know this case. I think I can get it done without refinements or I could buy one if I do get in trouble, or I'll buy an insurance policy because I'm not sure. So it's just it's an improvement in technology, but it's also an improvement in confidence in the sense that we have in developing our cases and the doctors do too.

Jonathan David Block: Okay. That was helpful. Thank you. And I'll pivot for the second one. Maybe this falls to both of you guys again. Like, you've certainly given some 2026 margin thoughts in the 100 bps is good to see. Just any high-level discussion, the top line, next year? It seems like, Joe, like half the clear aligner business is growing double digit. The other half is flat to down. Being North America. Systems and services, at least in my view, is maybe a little bit longer in the tooth regarding the Lumina product cycle, John, you talked about ASPs being down low single digits.

Like, when I roll all that up, I land up LSD when you think about all those moving parts. But anything directionally for us to think about to sort of pair with the margin commentary? Thank you.

Joseph Hogan: Hey, John. I'll take a shot at that one. That's a big question. Right? So, I mean, obviously, we gave you a fourth quarter. And, you know, we feel good about those projections that we have in the fourth quarter overall. You know, obviously, if you look at, you know, in my script, John, we talked about, you know, third quarter versus second quarter. We had nine of our top 10 countries were up. And so we're seeing good robust growth. Our biggest issue is actually North America retail. And, obviously, North America DSO, we talk about it a lot. That growth is, you know, over 20% in some areas.

And so you know, we look to, you know, help us solidify that as we go into the fourth quarter. You know, it's we think we'll continue with a strong global type of presence that we have. Right now, I'm not making any predictions for 2026.

Jonathan David Block: Fair enough. Thank you, guys.

Operator: Our next question comes from Michael Aaron Cherny at Leerink Partners.

Michael Aaron Cherny: Afternoon. Thanks for taking the question. Maybe, Joe, if you can just follow-up on that last comment you made, at least in terms of the markets in North America. As you think about that retail customer, I'm trying to wrap in a lot of comments you already had, but what do you think is the biggest gating factor that you think gets them back to some level of I don't want to call it, normalized demand, new normal demand, whatever it might be, and what can Align Technology, Inc. proactively do relative to waiting out the macro in order to help them get there? Thank you.

Joseph Hogan: Michael, it's a good question. I'd say if you break down, again, North America retail side, Canada, we've had more pressure in Canada than I reported than we, you know, had in The United States. But overall, I think we continue to push hard on the DSO side because we know that works. Both on the GP side and on the orthodontic side.

You know, secondly is we feel like moving downstream from a marketing standpoint, getting close to our customers, advertising more, you know, around ZIP codes and all, they can direct those patients to those doctors because, you know, I still lean into these are economic issues that I think that the retail customers feel more than what I call the business-oriented DSOs that we have out there. As much as we can leverage our brand and the strength of our portfolio, to help to drive that, I think will help to drive the marketplace too. So I mean, ultimately, what addresses this I think, is a much more confident US consumer, but we can't wait for that.

So we're gonna use our brand. We're gonna use our technology. You'll see us use our field force to get closer to our retail customers. And doctors and try to help them out as much as we possibly can.

Shirley Stacy: Thanks, Mike. Next question, please.

Operator: Our next question comes from Jeffrey D. Johnson at Baird.

Jeffrey D. Johnson: Thank you. Good afternoon, guys. Hey, Joe. Just I promised you when I met you or when I saw you last time in Vegas that I was gonna try to maybe get you to give us a little more detail by geography. Than you do on these high-level comments. So on EMEA and APAC, I think I heard you say up double digits year over year in both markets. Clear aligner volumes. Just one, want to confirm that was the case on a year-over-year basis. And two, are we talking kind of 10%, 11% there? Just trying to kind of use those numbers to back into much if North America would have been down a few points.

Or down more than kind of that low single digits more in the mid-single-digit range from a North American case volume standpoint?

Joseph Hogan: Hey, Jeff. You know, overall, confirm that double-digit year-over-year growth that we talked about. You know, again, it was widespread. We talked about our top 10 countries. India being one that's growing well, Turkey in different areas. Really strong performance in EMEA overall. So Jeff, I'm not ready to give any kind of broad specific numbers on the double-digit piece, but it's robust. A lot of different parts of the world, which gives us a lot of confidence in the sense that we can keep that kind of momentum, but also make sure from a resource standpoint and a focus standpoint, start to move our retail doctors in The United States more toward positive growth.

Jeffrey D. Johnson: Yeah. Alright. And then just on The US side, I mean, obviously, that's where the biggest headwind remains. You talked last quarter about kind of the gross receipts looking good, but then the case is not closing. Any change in behavior? Did any of that clear itself up a little bit? Did it get a little worse? And I think more importantly on that front, just as 3Q itself played out in that retail channel, just again, any kind of incrementally improvements or degradations throughout the period, we did see consumer confidence come off in September and then again in October.

So we'd just love to hear kind of what the exit rate might have looked like on 3Q as we head into 4Q here as well from a U.S. standpoint? Thanks.

Joseph Hogan: Yeah. And, Jeff, I'd say, you know, we did dig down into, you know, gross receipts and CCAs last quarter to try to explain, you know, whether it occurred. I could tell you there's no primary change or any kind of material change in that data at all. It differs all over the world. We watch each of those countries. There's really nothing to report on in that sense. I think what you just mentioned at the end of your question is obviously, you're watching the North American marketplace pretty closely and what you see consumer confidence in different things.

And again, nothing's really changed in the sense of how from an overall sales standpoint, how our DSOs continue to grow and how our retail accounts continue to be challenged. You know, I guess I'd overemphasize it didn't get any worse. It's consistent.

Shirley Stacy: Thanks, Jeff. Next question, please.

Operator: Our next question comes from Brandon Vazquez at William Blair.

Brandon Vazquez: Everyone. Thanks for taking the question. Hey. Sure. Can I first start on the orthodontics side and or more specifically, the teams? That seem to be a nice highlight of the quarter. Last quarter, we were talking about this kind of shift back towards wires and brackets and kind of difficult macro times. I didn't hear any of that this quarter encouragingly. Maybe just spend a minute on Teams. What was driving kind of the growth there? And do you think we're moving past this kind of shifts back to wires and brackets again and we're a little bit back on the offensive there?

Joseph Hogan: Yeah. I think you know but overall, when you look at that teen increase, I mean, it was pretty phenomenal when you look at the growth. Remember, it's a big China growth period for us from a teen standpoint. That's their season, and we saw really substantial growth there, which is tremendous. What's helping to drive the growth also are our new products like IP and mandibular advancement with Occlusal Blocks. Just, you know, gives us more leverage to be able to start those patients earlier. And often, as we mentioned before, you know, Brandon, is Invisalign First. Goes along with those products one way or another.

To be able to address, you know, different types of expansions or different, like, kinds of malocclusions. So what I like about the teams is it had good breadth to it. All over the world. We saw the same thing in Europe also. And of the emerging economies that we're doing. Again, I think it's the penetration that we're getting in those areas, but also our technology, the breadth of our technology particularly for early interventions in kids.

Brandon Vazquez: Okay. And maybe as a follow-up here, switching gears a little bit, the, one of the common themes that I've been hearing among many of the dental space, including yourselves, is that DSOs seem to have some kind of algorithm working correctly here. Driving growth in some different segments within dental. I don't know if you guys will give this number, but just out of curiosity, if you will, what percent of your business is DSOs at this point, roughly speaking? Can maybe spend a minute too on why they specifically are doing better if that should be durable as we head into next year. For taking the questions.

John Morici: Yeah. Yeah. Overall, Brandon, it's, you know, about in the 25% or so. It varies by country as you know, but that's a probably good ballpark to be in.

Shirley Stacy: Next question, please.

Operator: Next question comes from Steven James Valiquette at Mizuho Securities.

Steven James Valiquette: Thanks. Yeah. Good afternoon. And John. Yes, thanks for taking the question. So I guess from my side, was just curious to hear more color on the evolution of the HFD patient financing partnership. Just curious if that helped in any notable way to help get patients across the finish line in the third quarter. Is that still maybe going to be just a bigger factor for the fourth quarter and into 2026, the way that stands right now? Thanks.

John Morici: Hey, Steve. This is John. Yeah. I would say it's helping. We're seeing more and more doctors use it. You see it across some of the DSOs. They take advantage of that as well. But, when patients are, you know, potentially patients are deciding whether they want to go into treatment and it usually comes down to some type of pricing, what's the overall price, and then in all cases, it gets down to how much is it per month if I don't pay it outright. So HFD becomes, more critical with that. We like the partnership that we're seeing, and more and more doctors are using it.

So I would say it's playing out how we wanted it, to in the third quarter, and I would expect that we'd see more of that in Q4 and beyond.

Steven James Valiquette: Okay. Thanks.

Joseph Hogan: Thanks, Steve.

Shirley Stacy: Next question, please.

Operator: Our next question comes from Jason M. Bednar at Piper Sandler.

Jason M. Bednar: Hi, Jason.

Jason M. Bednar: Hey. Hey there. Good afternoon. Wanted to start on the China market. Sounds like a pretty good third quarter you had there. Just wondering any updated perspective on the competitive landscape and anticipated VBP in that market? As well as how or whether you plan to adjust your go-to-market and pricing strategy in light of VBP?

Joseph Hogan: Yeah, Jason. I mean, we're aware of what's going on from the VBP standpoint. It's still not clear exactly what provinces and all will be included in that and exactly when we'll be implemented. But we're positioning ourselves because we know ultimately that's probably gonna happen in one way or another. But I don't have any new news to report versus what we had in the second quarter.

Jason M. Bednar: Okay. And Joe, when you say you're positioning yourself, maybe what exactly do you mean by that? And then as a I'll just ask my follow-up now. I wanted to drill down on the topic to your here that U.S. Retail commentary you're giving The DSOs doing well. They're up strong double digits. You know, sure, they're more sophisticated, but it's also evidence this isn't necessarily just a consumer spending problem in The US.

So guess I'm wondering out loud if it's not an economic or consumer spending problem and maybe the business that you're that's more sensitive here, some you know, maybe lower volume, maybe lower ROI business for you and accounts that more economic incentive to switch or convert to a cheaper alternative. I guess how much effort do you put behind defending that business especially at a time when you're really committed to delivering on margin expansion targets next year? Thanks.

Joseph Hogan: Yeah. I guess the first part of your second question was about China again. Remember, these are a lot of Tier three and Tier four cities. We did have to make sure that our portfolio is structured properly to be able to get at those types of patients because, primarily, we've been structured around part private patients and in the larger areas of China. You know, overall when you say a things, I think I like to think that we expand markets. With our new technology and what we do. And, I mean, obviously, we have, you know, we have to defend certain territories in certain areas. But I look at this market as a market that we can expand.

And, obviously, we've had a, you know, difficult second quarter and whatever. And but as we continue to develop technology, you 75% of the people out there still have a malocclusion. There's a lot that we can address by this overall. So part of this is I'm not just playing defense. It's playing offense to help to grow that marketplace. And so that's not just you know, in The United States or, you know, different parts of North America. That's all over the world. And you could see that strength in the business as we reported the third quarter.

John Morici: And I would say just to close on your DSO comment, I think that some DSOs are doing a really good job. They're recognizing what's happening in the marketplace, and they're seeing that maybe consumers that they're out, maybe they're coming in for a cleaning. What are those DSOs do? They're scanning most patients. They're giving them a lot of visualization kind of before or after. Many of them are competitive from a price standpoint, an overall price standpoint. And almost all of them are doing external internal and external financing, like an HFD. And so they're really working. It's not to say everybody's on everybody's on the same page, and some retail doctors are doing this as well.

But DSOs, kind of in mass, are taking that digital orthodontic approach and then being very patient sensitive in terms of how do they get that patient into treatment. And that's just a great example of the market opportunities that's there, doing it in a way that really tries to get those potential patients excited about treatment.

Shirley Stacy: Thanks, Jason. Next question, please.

Operator: Our next question comes from Vikramjeet Singh Chopra at Wells Fargo.

Vikramjeet Singh Chopra: Hey. Good afternoon. Thanks for taking the question. Congrats on a nice quarter. I just want to confirm that you're still confident in your 5-15% growth targets that you laid out in your LRP. And if so, is mid-single-digit top-line growth on the table for next year? Thank you.

Joseph Hogan: Hey, Vik. We're sticking with our five to fifteen. Plan for the future. That hasn't changed. And we really believe the business can do it.

Vikramjeet Singh Chopra: Thanks. Yep.

Operator: Our next question comes from Michael Leonidovich Ryskin at Bank of America.

Michael Leonidovich Ryskin: Great. Thanks for taking the question. I'll just ask one. You called out some of the geographic mix shift in terms of how that impacts ASP. As you went through the year between Americas and China and EMEA. You also had an FX tailwind that, I mean, actually started as a headwind in 1Q. Kinda was essentially neutral in February, and it became more of a it's a tailwind in March. And then I look at the sort of, like, list or reported ASP. It's been relatively consistent, you know, twelve forty, twelve fifty range.

So if you adjust for something on FX becoming more and more favorable as we go through the year, there is it does look like the underlying ASP is a little bit weaker. Is that purely just attributed to the geo mix and maybe product mix? Or is there anything else going on there you can point to? Thanks.

John Morici: Yeah, Michael. This is John. So when you look at a like-for-like, on, say, Europe or like-for-like within The US? Actually, ASPs are up on a quarter-over-quarter basis. We just have as such we're very pleased with the volumes that we saw in some of these emerging markets like China and so on for us. It's just that the ASP is lower. And that's the effect that we saw. So despite the FX and everything else, it's that country mix that drives that ASP lower. Had we not if you took China out, our ASPs would have been up significantly or pretty well from Q2 to Q3.

It's just that you've got that country mix piece of it that comes in. And then you see the converse of that in Q4. You have less China in Q4, more Europe as an example. There's just a difference in ASP. And you will see an ASP improvement as we go from 3Q to 4Q.

Michael Leonidovich Ryskin: Alright. Fair enough. Thanks.

Shirley Stacy: Thanks, Michael.

Operator: Our last question comes from Erin Wright at Morgan Stanley.

Joseph Hogan: Hi, Erin.

Operator: Erin, your line is open. Erin, your line is open.

Joseph Hogan: Hey, Aaron. Sorry. We can't we can't hear anything.

Shirley Stacy: Yeah. We're happy to circle back.

Operator: He has left.

Shirley Stacy: Okay. Thank you, operator. Okay. Well, we Yeah. I'm gonna go I think we'll go ahead and close off the conference call. So thank you, everyone, for joining us today. We appreciate it and look forward to the opportunity to meet with you at upcoming investor conferences and industry events. If you have any follow-up questions, please contact Align Technology, Inc. Investor Relations, and I hope you have a great day.

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