I'm an analyst on the U.S. Medical Supply and Devices team, and this is a session for Align Technology from the company. We've got Joe Hogan, President and CEO; John Morici, CFO; and we've also got Shirley Stacy here as well. Thank you all for joining us today. Of course. Thanks for having us. I guess just to start off, Joe, can you just talk about how you think Align is positioned strategically in the clear aligner market, and what are the key areas of focus over the next few years? Yeah. You know, I feel good about Align from a strategic standpoint. You know, we've been at this almost 30 years, obviously. There's no company in the world that knows how to move teeth better than us. When you look at our assets, the way they're spread right now, you know, strong plant in China, Poland, and Mexico. We have the different poles covered extremely well. The breadth of our technology has gotten better now with IPE and mandibular advancement and some different products. We can do 100% of the cases that are out there today. There's really no competitor that can really talk about that too. You know, we could talk about also the 3D printing and the next stages of 3D printing, and also touchless kinds of clean check. We can move cases faster with more predictability. I think, you know, from an overall global standpoint, from a technology standpoint, from a logistics and manufacturing standpoint, I feel really good about our position. Great. Thanks for setting that up. I guess I did want to start with kind of three key results. In the U.S. market, you saw some improved year-over-year growth, but some challenges remain. I guess, can you elaborate on those challenges and just, you know, talk about, you know, are there any efforts that Align can make outside of an improvement in the macro backdrop that can reduce those challenges and help us accelerate growth in the U.S.? Yeah. You know, Mike, I'll start and let John jump in. First of all, we felt good about the third quarter overall. You know, obviously, we beat guidance and, you know, following a, you know, disappointing second quarter overall. We felt good about Asia and strong growth in Europe also, and Latin America. North America was the one we pinned down. You know, obviously, that's still a challenge. You contrast that with our DSO business that's growing double digits, some over 20%, which is a significant part of our volume now, with more of a sluggish retail business. Look, we're not going to wait for the winds to blow again and tell you that's what we're doing. We're trying to, obviously, solidify and grow our DSO base, work with financing and some other tools that we know that can help that retail base too. We have a good sales force, and we feel we can make some progress in that sense. John, what would you add? Yeah. When we talked about our top 10 markets in the third quarter, 9 out of 10 got better on a year-over-year basis compared to the second quarter. That was good to see, including the U.S. As Joe said, it's not a great economy in many places, but when it doesn't get worse and it doesn't change, we have a better operating environment to be in. I think the key that we talked about, and it's true, is that active conversion or helping drive that active conversion really makes a difference. It's being able to work with our customer base, whether it's the aggregators like some of the DSOs or even individual doctors, to be able to help them drive patients to their practice. They scan every patient. They show a lot of the visualization. And then it's usually followed up with some type of discount or financing that that doctor provides. That's what's driving conversion. That's what you see with the DSOs, where they're taking that active approach. And many of our doctors are doing that so that they can operate in a challenging environment and be able to drive conversion. When the consumer gets better and maybe some of the economies get a little bit better, that should give us a tailwind. Even in this environment, that activity is driving results. Yeah. That's helpful. I did want to drill down there. You know, you've talked about the U.S. retail accounts recently and in the past and moving downstream from a marketing standpoint. I think you've also mentioned, and you can correct me if I'm wrong, DSOs are about 25% of the business. Overall. Of overall. With, you know, retail accounts accounting for the vast majority, I guess, how do you think about timelines for some of these efforts going downstream to actually bear fruit? You know, I think we're seeing it now. I mean, we talk about marketing going downstream, so we use our brand, which, you know, obviously, it's one of the major assets that we have. But we're moving close to certain zip code areas. We advertise aggressively for the doctors that we have in that particular area. And we've been trying that out over the last couple of quarters. We've had good success in that sense. So we're going to have, you know, we're getting better at it, and you'll see us do more of it. Some of it is product-related too. We talk a fair amount about some of the products where if we do not have to offer products with refinements, and that is what DSOs are doing a lot of. They are taking the product and saying, "Look, they want a comprehensive product, and they do not want to maybe have unlimited refinements. They just want to pay for the product." As they need to do refinements, they pay for them going forward. We are perfectly fine with that. That is driving increased utilization with DSOs. In addition to what Joe said, that activity that they drive and that go-to-market is bearing fruit, but also giving products to those doctors that give them a way to purchase. Sometimes you do not need to purchase this extra service, which is what refinements turn into. Just purchase the product. That acquisition cost is lower. That's a good way to go against some of the wires and brackets because that upfront price is still higher than wires and brackets, but it's closer. That gap that some of those doctors who haven't digitized as much might be more of an incentive. We see that with our DSOs. Okay. Can you remind us where we are in the rollout of some of those products with the lower upfront costs? Some doctors are already using that. We've seen with some of the DSOs that we have and more of that rolling out to more of the retail side. By early next year, we'll have more of a product assortment. It's still a continuation of really our strategy. As we put more technology into the products and really have them so that they can move teeth in a faster, more predictable way and really give doctors those tools, this is just a further evolution of that. Because those products have gotten better, if you give those doctors different choices so that they might want to do a refinement or they might not, but they do not have to pay for it upfront, that is a good evolution of our portfolio and something that we have tested for over a year now with some of the larger accounts. We think we can apply that to some more of the smaller accounts and retail accounts. We think that will drive utilization, and we should see some benefit early next year. You know, with John, I worry about sometimes too. We do not want the market to think we are somehow dumbing the product down in that sense. I mean, we sell a comprehensive product, a comprehensive product. Back in 2015, 2016, when I started, and we did the five-year additional aligner kind of a play. We had to do that because doctors, orthos, and GPs did not have the confidence that they could finish those cases, and they wanted to guarantee insurances. Today, we average, like what, John, 1.6 refinements per, the algorithms are much better. Material has been better, obviously. What we are able to do is, you know, similar or better margin rates or just say, "Look, buy the AA if you ever need it." That puts in line what the patients' need and the doctors' needs are with us. It helps us see that our technology's really evolved in the sense that the doctors have much more confidence digging close these cases, and they don't need five years to do it. Yeah, that makes sense. John, you mentioned you're seeing this resonate with the DSOs. I guess, what's the feedback from some of the retail accounts? Is there some element of elasticity of demand with the lower upfront products? They like the options. They like the flexibility to say, "Look, you know, I'll pay just for the initial case at the front." They like the flexibility to say, "Look, if I want to buy the product with extra service or extra confidence, I can buy that product, the three-in-three, the three years with three refinements, or the comprehensive unlimited, which is unlimited refinements over five years." You know, and a couple of the case histories that we've seen where, you know, just three years ago, we put out a product, the three-year with three refinements. Because before that, it was comprehensive unlimited. Now, three years later, our best-selling product is this three years with three refinements. It just goes to show you're selling to doctors the way they want to purchase. Give them that flexibility. This is another further example of if they want to have a product that is, you know, has a three-year life on it with no refinements built in, that's fine. They will just pay for them as they need them going forward. I think it's the product capability that we've seen benefits on, and then also the offering to give that flexibility to those doctors. That's what the retail doctors are coming back to us and saying that should be an effective way to go to market. The last part of your question too on the price elasticity piece, we know there's a big price elasticity curve in this business, and it gives doctors more freedom to be able to address that with their patients too. That's part of the deal. Got it. That is helpful. You know, you're coming down on the upfront price. Can you just remind us, have you incorporated that into your LRP guide? I think we've spoken about this in the past. You've mentioned the 1.6 additional aligners. Is the way to think about it basically assuming that 1.6 additional aligners holds, it gets us kind of to the price where we are today on an upfront basis? Yeah. Because remember, the way we calculate ASPs, I mean, when you have refinements that are in a future deliverable, we have to defer for that revenue. When you have a product that you do not have a future deliverable, you recognize all that revenue upfront. It is accounted for the same. Essentially, you are indifferent to whether you have one product or another. You know, the cash is a little bit different. You get more of the cash on a comprehensive unlimited upfront versus later. From an accounting-wise, you can see that benefit. That is contemplated in our ASP. Do not think of this as, "Hey, this is some price change that is going to turn into an ASP or impact and so on." This is, you know, helpful from an ASP standpoint in terms of our numbers. It is certainly helpful from a gross margin rate standpoint. When you think of our portfolio, when we have less refinements, less future deliverables, that's a higher gross margin rate on those products. Think of some of these products that are even comprehensive like this at 75% plus gross margin because you don't have to do all this additional, you know, treatment planning and then the manufacturing, the shipping that, you know, can happen several times later. This one is, in many cases, you could just do that initial shipment, and that satisfies and it does the case. If they need refinements, they pay for them later. The gross margin rate on these is excellent. Great. I did want to ask about 2026, not asking for you to give any guidance here, but, you know, how do you think about the growth levers you can pull to maybe accelerate from the low single-digit kind of total revenue growth we're expecting in 2025? Yeah, I look at, you know, from a regional standpoint, we felt good about growth in Europe and growth in Asia, particularly China and different parts of Asia overall, Latin America. Yeah, we look at that continuing. We think some of the items we talked about today that we'll be able to address more of a latent retail market in North America will push, continue to push our DSOs. Our portfolio expansion, when you look at IPE, when you look at mandibular advancement, those new products too, they'll have a whole full year of being distributed all throughout the world too. That'll be another, you know, tailwind for us from an expansion standpoint too. will leverage the work that we are doing in DSOs and continue to grow that, but really take that active conversion approach that, you know, we still need to spend, you know, that consumer marketing and getting that awareness. If we can work with our customers and get lower down to try to drive that conversion at their practices, we think that is a good use of our spend, and that will be something that we continue next year. It also makes it sticky too where someone comes in, they want Invisalign, they actually get Invisalign that they want. Having that activity at the lower level at those practices, we think is beneficial. That is good. I did want to ask on the iTero side. I believe you've mentioned in the past that you're ending servicing support for some of the older Element systems at the end of this year or maybe starting in early 2026. I think you've said there's about 4,000 kind of earlier Elements out there. Can you give us a framework for how we should think about a potential replacement cycle? You know, do you think macro conditions could, you know, maybe mitigate any impact of a replacement cycle in 2026? I mean, we will officially end the life of those on January 1, 2026. We have a good line of sight on where they are, what they do, how much Invisalign they produce. We have a lot of options, you know, besides Lumina and our, you know, our 5D series to be able to back them up. I do not think, Mike, there is any, I mean, you know, you go through end-of-life things all the time in different equipment businesses I have had or whatever. The trick is always to make sure that you understand where those are, that you take care of those customers as much as you can. You will see us. We will do a good job in the next 12 months to be able to switch most of those out too. Yeah. And we're actively, you know, we have promotions and opportunities for our doctors to be able to switch those in, trade it in, get a new scanner. Some of them maybe still even don't want to purchase a new scanner. There's ways that they can lease or rent and so on. So there's multiple options. That 4,000 is less now because many doctors have decided to do that. We want to give them the best digital experience possible. Having a newer scanner gets them to that as it's more integrated into our systems. It's part of the cycle that you go through where you have existing equipment that's in the marketplace. Got it. Also on the iTero front, I know you more recently launched the Lumina with restorative capabilities. Can you give us an update on kind of the latest and greatest trends there? Yeah. Feedback's been good. I mean, it's in the fourth quarter we rolled out. We had some issues on margin things for restorative kind of procedures and all that doctors weren't quite satisfied with. Our 5D Plus was fine, but Lumina had to. There's, you know, different technologies we call white light and different things that we've leveraged with our algorithms. The initial feedback as we start to roll it out, doctors feel really good about it. Form factor on Lumina's good, speed's really good, breadth and depth of scan and all those things. Making sure it's targeted at that restorative piece and our comfortable's key. I feel as we exit the fourth quarter, we're in good shape. Okay. Great. I did want to use that to segue maybe into your efforts on driving uptake among GPs. I guess can you talk to us, you know, how you're thinking about your efforts there? You know, what's the strategy and, you know, is that kind of resonating? Yeah. Yeah. It's a multifaceted strategy with GP and it's, you can somewhat, you know, regionalize it. But in general, GPs, as you start them out and you move, they need confidence that they can do these cases. And so we offer TPS kinds of activities through doctors, meaning if a GP doesn't necessarily want to take that full responsibility on themselves, they can hire or we help to hire an ortho or another GP to help them through the cycle. Dr. David Galler and Brian Molish are good examples of that too. We also have what we call a GCP product where we've done enough cases now. We have enough, you know, AI engine to say we've seen that before and we can tell them exactly what that case should look like and we'll back that case too. If you go to the years and how we work with GPs, it's about how do you gain confidence with them that they want to, that we can move teeth. With TPS, things like GCP, you know, using AI on the, you know, 20 million cases we have done, we can really address that now much better than we could two or three years ago. I think that's why you see our GP business continue to grow and doctors gain confidence with it. Sure. When you think about it internally, I guess where do you think you would see an asymptote in terms of the amount of practice time that a GP would dedicate to teeth movement? Yeah. I think it won't settle around one common mean with a, you know, I think it'll be a broad standard deviation. We know that, you know, doctors that work with someone like a Brian Molish and a David Galler, they'll move their GP practice to almost 50% of the revenue will come from Invisalign. And then they'll do other, you know, root canals and different things and, you know, drill and fill types of kinds of applications. Other doctors just want to maybe leverage their adult patient base to a certain extent. They won't want to sell, you know, they don't want to have it completely take over their practice. We see a wide variation in that. As they gain confidence and they see that there's a lot less touch on those kinds of a case, I feel you'll see them doing more and more. They will because they just have more confidence to do it. We have more tools to build that confidence with those guys. Yeah. It also allows them to keep, you know, more of the healthy dentition. If they move the teeth first and get them in a proper position, whether it's an implant or veneer or others, you can keep that healthy teeth by moving them in the right position and then some of the restorative work is more minimal. You know, John makes a really good point here. We have a product you'll see us rolling out. It's called Exocad Art. We bought Exocad with John four years ago or so. The idea there was that we could leverage labs to do ortho-restorative procedures, meaning instead of if you were going to have a social six in your front six teeth capped, usually you might lose 30% of your enamel on your teeth because doctors will grind that down to make room for the caps. Actually, what we do on an ortho-restorative through Exocad and a lab is we'll actually take a case and move those teeth out of harm's way. You save all that enamel. It might take three months more, but it helps you to guarantee that you're going to have that dentition for life then. We're seeing that we're just launching it now through the labs. There's a good uptake on it too. Also, when you do implants, often it's like if it's a back molar or something, teeth that move closer together, you have to shave off the adjacent enamel. You might only need five aligners to move those. You can save the enamel on those adjacent teeth. We call it Exocad Art. It's a primary reason we bought Exocad. We'll work that through the labs. Like John talked about, we also have, you know, an overall Invisalign Art piece that works if a doctor wants to do that themselves and not have to work it through the lab. They can do it as a GP also. I see. Yeah. You know, I attended the GP Summit in September and I was kind of upside surprised. There was a lot of buzz around kind of the minimally invasive dentistry. I guess you talked about building confidence on the GP side. Are there any other impediments to kind of broader adoption to call out? If so, how are you addressing them? You talked about also the technology that you're improving, but. Yeah. You know, I honestly think our key luminary doctors like, you know, Molish and Galler and, you know, different people here in the U.K., we have some just terrific people that work with us and all. They're the key in the front lines for us too. Behind that, obviously from our Salesforce standpoint, the products that we offer or whatever, Mike. It's the thing about dentistry, it's very fragmented. When you're in the retail segment, there's a lot of different ways that doctors want to practice. As John said, we want to sell and provide services the way that they want us to do that. A multitude of options about how to use our product line comprehensively or targeted-wise, just if you want to save enamel and not necessarily worry about aesthetics, but worry more about functionality and maintaining people's dentition. Does that make sense? It does. It does. That was actually the first time I saw Dr. Galler present. He's quite a character. He's got good stuff. Oh, you have to pay for that interview. Every room was packed. Wow. I did want to transition to margins. You've talked about at least 100 basis points of operating margin improvements in 2026. I guess can you just kind of refresh us on the moving pieces there? Yeah. Some of it is related to products. When we have, like I said, products that do not have as many refinements, the products themselves help drive improved gross margin. Some of the other activities that we have done around some of the restructuring, really on both sides of that span. Some of it on the COG side where we are able to, you know, move some of the equipment and get closer to our customers in some cases, saves a lot of freight for us. That is a benefit. A large part that has been done in the second half now, as well as retiring some of the equipment that may be not as efficient. There's still a lot of efficiency that we can drive in terms of, you know, whether it's the material costs or labor costs on some of the equipment, been able to get a lot of that changed out and in a better position as we exit this year. Also on the OpEx side, looked at structure, span of control, doing things so that we're as agile and as efficient as possible. When we look at the 100 basis point improvement for next year, some of it comes on the more variable side, gross margin side, and then some of it comes on the OpEx side. We feel good about how we're exiting. These changes are being made now and we'll be out of this year with these changes and really position ourselves for, you know, well into next year to be able to achieve the 100 basis points. I don't know if you're providing this level of detail, but what's kind of the rough split of that 100 between gross and. Say 50-50, but maybe even a little bit more on the gross margin side. Okay. Yeah, I was surprised to learn when you shared some info around, you know, the cases that get shipped out of Mexico for Europe. I guess can you, you know, talk about what the opportunity is like and the time to get to maybe supplying the vast majority of European cases out of Poland? Some of that is scale-up of Poland and we have some of that. Some of it is you just get, you know, you have some of the VAT rules that you have to follow in terms of manufacturing and where you're manufactured and so on. We have to do that. Yeah, it's a savings. More that we can service out of Europe with, you know, by Europe, that's a benefit for us just like we do with the Americas shipping out of Mexico. You want to be as close as you can, saves a lot of the freight. We're on a good path for that. We're utilizing our facilities more and more in those regions. You know, we'll continue to see productivity as we go into next year and really beyond because even, you know, we'll have this type of manufacturing for years to come on the thermoform. DirectFab will add to this and we'll have some more of the DirectFab manufacturing, but those will come out of those locations as well. It'll be for those customers in those regions. That was going to be my next question on the DirectFab. Could you kind of remind us where we stand today and, you know, where we're going over the next two or three years? Yeah. I'd say we are, our resin's in good shape in the sense of we have to scale up a resin we talked about before, Mike. And it's a resin never been used before. It's a different source. And we made really good progress on knowing we can scale that and we have the materials. It's not a petroleum-based product. It's made from natural substances. So we've confirmed that we have enough, you know, supply of that that we can make that work. And the product's consistent and stable in the sense from a reactor standpoint and when we use it. Secondly, the process with Cubicure, we're scaling it up both in our labs and also in Mexico to start with. We've made good progress on it. Remember, we have to, you know, we're aiming to get to a million of these a day. It's going to take time in order to get there. Our first product will be next year. You'll see us, we'll come out with the Invisalign first retainer we've been talking about. We'll start trialing that in the first quarter of next year. Also pre-formed attachments, which are 3D printed attachments that we'll use. It'll give you much more exactness and predictable movements on teeth too in the way they're placed. I feel really good about where we are on both the process side and on the resin side. It's just time and distance now to keep us moving. Okay. Great. I think we've got a minute left. I guess maybe just quickly, can you touch on how you're thinking about capital allocation and what are the near-term priorities? Yeah. We talked about, you know, as we're helping drive the business, we want to make sure we have, you know, our cash that we use and what we generate helps drive our business. You know, the OpEx that we spend and just the operating expenses that we have. That's first and foremost about to drive volume, drive revenue. As we look at some of the CapEx spend, it's been, you know, we talked about about $100 million or so this year. You know, because even as we have some of the new equipment that we need for some of the DirectFab and so on, it goes to our existing facilities and it's kind of made within. It's not a huge capital expenditure that we have. There's no other, you know, spend that we have that's really outside of our business. We've invested in some with some of our partners to help them grow more. That's been worked out well for us. Everything else has gone back to buybacks. We've put as much capital into buybacks as we can. Remember, it comes down to U.S. cash. You know, 80% of our cash is outside the U.S. As soon as we've had that U.S. cash, we've been able to put that back into buybacks and currently have a buyback working now. That $200 million will be done by the end of January. We'll assess what we need to do for next year. The only other thing I'd add is we won't ever surprise our investors. We move teeth. We're not looking to any kind of diversification acquisitions or anything like that. All right. Great. Thank you very much. That's all the time we have. Joe, John, and Shirley, thank you for joining us today. Thank you. Thanks, Mark.