All right, good morning. Why don't we get started? My name is Jeff Johnson. I'm the Senior Medical Technology Analyst at Baird. Our next presentation this morning is from Align Technology, a leading manufacturer in the $6.5 billion global orthodontics market with Invisalign, a system of clear aligners designed, well, we know what Invisalign is. I'm not going to read the whole description. We'll just stop it there. But with us today, we're happy to have Chief Financial Officer John Morici and Vice President of Finance, Corporate and Investor Communication, Shirley Stacy, and Madelyn Valente is out in the audience as well. Didn't want to leave her out. All right. John, I don't know if you have anything you'd want to start off with or if we should go right into Q&A, however you want to handle it. We could jump right into Q&A. Yeah. All right. So it's been a long time since we've seen each other. I think it was just Saturday afternoon. We had lunch in Las Vegas together. But that was at your GP Summit, a well-attended meeting. A couple of things there that came up, that maybe this is going a little bit off script, but that came up in those meetings. One, you talked about maybe coming up with some new alternatives on the pricing side. As you have introduced and gone from your full product to your 3x3, 3x3 has become, I think, your best-selling product. That's right. Just to level-set investors, that's over a three-year period. You can get up to three mid-course corrections or refinements, AAs, whatever you want to call them. But those come with a cost, and they're built in the upfront cost that gives those doctors the optionality to do those refinements. You're now talking about going to maybe a 3x2, a 3x1, even a 3x0 to where the doctor can take some of the risk himself or herself and pay a lower price upfront. If they need those refinements, they maybe pay $180 per refinement, something like that. I think I've described that correctly. That's right. When do you start to institute maybe these new price points, and what do you think reception will be? Just what conceptually do you think is going to play out here from that? Yeah, it's a good point. I think when you look at our product evolution, like you said, not long ago, we really had a comprehensive product that was a five-year unlimited amount of refinements. And as our products have improved, as we put technology into those products, there's a lot of variations in terms of what doctors want, how they want to use that product and those products. And some don't need the five years unlimited refinements. We've seen just two and a half years ago, as you mentioned, the 3x3 come out. That's our number one selling product on the comprehensive side because doctors have that flexibility to be able to perhaps have a shorter treatment time, not as many refinements. We want to continue to take that further as we've developed our products to be able to give the doctors the flexibility to say, "Look, we might only want to pay for two refinements upfront or one refinement upfront." Think of it almost as a service or a warranty on something that you buy. Let the person buying the product decide how he or she wants to utilize that product, and if they need refinements, they can, if they buy a product that doesn't have a lot of refinements upfront, they can always purchase them later, as you described, and so we've been introducing this, and some of our bigger customers and other customers are already using these types of products, and what we're finding is we're getting good adoption. We're getting the thought processes that, especially when doctors are making decisions about some of the pricing, if they're looking at using Invisalign versus wires and brackets, you want to have something that's maybe more comparable in terms of those product offerings, at least to start, so that the doctor can look at the lab bill and make a decision about whether they want to purchase everything upfront or perhaps almost pay as you go. And our products have that capability. And in the end, our focus is to provide the best technology and be able to grow our overall market. We want to be able to have Invisalign and clear aligners be the standard of care, giving doctors more choices about what they can purchase and how they want to purchase, we think, lends itself to that. All right. Let me ask a couple of follow-ups on that. So let's say somebody goes with a 3x0. I don't know if that's what it'll actually be called, but whatever you end up calling it. We heard some price points over the weekend. Maybe that gets them down to around $800, something like that. Is narrowing that entry-level pricing for a full robust system at $800 or whatever it ends up being versus brackets and wires, let's say, at $300, does that narrow that difference down, that it takes away that temptation from some doctors to use brackets and wires just as a cost savings move on their own? It does help. Being closer gets to that. Remember that doctor now still might purchase additional refinements, and that pricing will go up, and that shows up in our ASP, just how that timing comes through. But it gives them at least decisions that they can make that pricing is at that point. Remember, too, when you think about our products, the gross margin rate on a product that you just described, if it's three years with no refinements, that's a higher gross margin rate than any of the other products that we would have on the comprehensive side. Because when we do a refinement, you're ending up having to redo the treatment planning, actually manufacture the product, ship it out, and so on. Those are added costs that come back when you look at some of those comprehensive, like a comprehensive unlimited type of product. So this gives us a better gross margin rate. We just have to manage what it means from a gross profit dollar standpoint and when that happens. And then it's up to us to make sure that our cost to serve that type of product is commensurate with whatever that ASP is. But it's a continuation that we've seen really across our portfolio where doctors purchase in a way that better suits their needs of the practice. And sometimes, like some of the top-selling products that we have, like a doctor's subscription program where there's touch-up cases that are in there, sometimes a doctor just needs five sets of aligners to do whatever work he or she needs to move the teeth. It just comes at a lower list price. It's just the reality of our product portfolio. Yeah, fair enough. And the first question I think I asked you when I heard this new pricing strategy was, "Oh my God, what's that going to do to your ASPs?" But I think some investors have not believed me over the weekend and these last couple of days. But just to confirm, when you do a 3x3 case, you might defer a third to even more than a third of that revenue upfront. Your ASP that you report every quarter is calculated as your realized price X the deferred revenue. That's correct. Divided by cases. That's right. So theoretically, if you're charging, let's say, $800, and that's about what you would have recognized on a 3x3 case initially upfront, it shouldn't impact your ASP potentially. That's exactly right. Is that right? That's exactly because it's just over time, you're deferring for that future obligation. You're deferring for something that you have to do in the future. In this case, if it's the 3x3, we have to defer for the fact that potentially three refinements are needed and therefore the revenue that you recognize. So you get to the same place, essentially, from a deferred revenue standpoint. But the key point of this is it helps maybe sell to more doctors. That's a great thing. That's a big part of our equation. And it gets those doctors that are utilizing our product to do more. And that's something that, for us to be the standard of care, this is the path that gets us closer. Yeah. The only thing I was thinking over the weekend, and tell me, and this was after I had left your event, but will any doctors have less incentive to do a refinement, meaning that they'll say, "You know, that's close enough. I don't want to pay $180." And so the patient ends up being a little less benefited by this. Is there that risk at all, or for $180, docs aren't going to put their reputation at risk? I think when doctors might be charging six or seven or eight thousand in New York, they might charge $10,000 a case for 180. But we also have the flexibility from that DSP, the Doctor Subscription Program, that if they need four or five sets of aligners, it'd just be cheaper to use the DSP. But the other thing to recognize is the product is a great product. And so what we've learned over the last several years is most cases finish with less than two refinements. Some doctors have used them maybe almost as a crutch in some instances. So from a clinical perspective, the effectiveness of the product is not, I think, what you should question. Yeah. Yeah. No, and I wasn't questioning, well, okay, yeah, we don't need to. Does that make sense? Yeah, it does. I wasn't questioning the effectiveness of the product. More will a doc say, "I could do one more refinement here at the end and tweak this, but I don't want to pay the fee of it. I think there's a balance, but in the end, it is the quality of the product in that qualified doctor to be able to provide. Yeah. And I want to get into emerging markets and maybe some competitive things in that. So I don't want to spend too much time here. But the other thing I thought interesting from this weekend is you're starting to add kind of a financing pre-qualification check through what, HFD, I think, on your doc locator. Just remind investors maybe how frequent it happens where a patient comes in, they hear, "Maybe I should get ortho." But then they have to go check on financing, and you'd lose that patient and follow-up and things like that. What's the idea behind putting this pre-qualification on the doc locator? We're looking to try to make sure that whatever barrier is there from a potential patient to not going to treatment, we want to get rid of some of those barriers. Financing is a big piece of it. When many patients, especially in the general dentist's office, they see a scan, they see their before, they see their after with ortho treatment or maybe ortho restorative. We saw a lot of that at our GP Summit through Smile Architect and other visualization. People get excited about what they see. The question then becomes, is how do those potential patients become patients? They get excited. Maybe that doctor offers a discount. That's great. That discount is, instead of the overall price, they take something down that the patient is further excited about it. It ultimately comes down to how do they finance it. Many times people look at how much does this cost per month? In the end, for some of these treatments that are important to them, they look at it as, "I don't want to have to pay a lot of interest. I want to be qualified for this. I want to make sure that I can go into treatment if I'm going to go through all these steps to have this visualization and go back to the doctor and so on." HFD has been a good partner to be able to provide a wider range of acceptances, people with varying FICO scores and so on, and also be very mindful of the interest that they're charging. That combination has worked out well, and you're seeing a lot more acceptances. In challenging economies and so on, we want to make sure that we get rid of as many friction points as possible. And financing is a big one. And a lot of times when we talk about that last mile of what you have to overcome, the per month charge is it. Yeah. Okay. So theoretically, we go into a lower interest rate environment that should obviously. We think that overall is a positive because you have HFD and other financing companies that would be able to take things down. That would help on the Invisalign side, but also on the iTero side as well because much of that is financed as well. But we think interest rates would help in both cases. Yeah. Got it. All right. And it's been a little over a month since your second quarter call. The big news on the call was maybe June and July ended up falling short of expectations. You saw some incremental softening in those months. I think there was a lot of debate, especially back then, on was that kind of a lagging impact from some of the tariff noise in April and May? Or did the consumer really change in June and July? Just is there anything you would qualify differently today than what you were talking about on that Q2 call? Was June and July more of a transient? Is there anything you're seeing differently today? I think what I would clarify is when we think of the second quarter, as we step through the year, typically when you go first quarter to second quarter in our business, you see a ramp-up in volume and therefore revenue. It really has a lot to do with, especially in the Western world, North America, Western Europe, that teens go into treatment as they work their way through. And even especially as you go through the quarter, in the second quarter, June's bigger than April because of that. And you would expect to see that. What we didn't see play out as we would have expected in the second quarter is the June seasonality to be as big as what we had expected. We came out of the first quarter feeling like that volume and kind of the business was a good stability to build off of. And that build should have led to a bigger second quarter, which should have been fueled by a better June, and it just didn't materialize. And that's something that we look at as there's our economic concerns, whether you're a teen and a teen's going to the orthodontist or you're an adult going to your general dentist, maybe through financing and other things that we talked about. But in the end, discretionary from that standpoint. We're doing everything we can to help try to offset that, and we can get into things that you want to ask. But really, when we look at the second quarter, that's what we saw through June. We used that to project for the third quarter. So that informed us to give our guidance. Less about July, but really more about what we saw through June. Saw that the numbers that we had, used that for Q3 and ultimately the total year from a guidance standpoint. All right. Fair enough. And the other point that came up on that Q2 call was in Europe, maybe France, Germany, those kind of markets. Obviously, we're still seeing a lot of political uncertainty in France at this point. In Germany, we continue to hear decent things on the dental side, including just at a couple of presentations here this week at our conference. But just generally, what are you seeing in EMEA, which kind of had been holding in as a better market for you guys, but maybe softened up a little bit in Q2? Yeah, I would say it's mixed. I mean, just like any geography, it's not all one and not one size fits all. In EMEA, you've got parts of EMEA growing very strong. When you include Turkey and Eastern Europe and so on, very strong for us. Good double-digit growth. Other parts on the Western side, like we had noted with France and Germany, maybe not as strong, maybe related to some of the economic and tariff uncertainty as we had progressed through that second quarter. But other parts are strong. And what we do to try to move against some of the economic uncertainty and others, just like we saw in North America, it's product portfolio, things that we talked about, or some of the marketing spend, getting down to more of the customer level to drive that demand at the customer level, bringing in new patients, getting them excited about treatment, working with companies like HFD to try to get rid of some of that friction that's there. But doing everything we can to be able to, in a challenged market, and some markets challenge more than others. But in the end, we have an under-penetrated market that we want to grow in. And that's our focus to do. It just becomes, in some cases, more challenging in certain markets, but it doesn't stop us from trying different things to grow. Yeah. All right. I want to ask a couple of questions on competition. The first one, just as the market has slowed over the last couple of years, prior to that, it was a rapidly growing market. You saw a lot of players start to come in, especially post the kind of 2018, 2019 time period when some of your IP started to come off, things like that. But we've seen a lot of shakeout. I mean, all the DTC guys are now pretty much gone. I think it's pretty clear Straumann is pulling some ClearCorrect out of some markets. I think we hear that clearly in our checks. I'm assuming you guys probably do as well. I would argue that, well, not even argue. I know a couple of small lab-based companies here in the U.S. that three years ago were telling us to watch out for them have now discontinued their generic or whatever you want to call their clear aligner business. Great Lakes and some others come to mind there. Are we starting to see, because end markets are a little slow, but also just you guys moving to 3D printing, there's a lot of capital requirements to stay big and efficient in this market? Do you think we're going to see a shakeout here of some of this low-hanging or smaller competitors over time, and does that accrue to your benefit, I would assume, but just how to think about that? Look, I think you continue to see, look, it's a growing market. We know that in the end, to push against wires and brackets with clear aligners, we're the leader in that. To be able to do that, you need technology. You've got to have a great product both on the software side as well as the material side to be able to move teeth in a predictable, reliable way that doctors want to use. So there's a certain amount of technology you need on the product. There's a certain amount that you have to have to be able to scale this to do it the right way as you have big partners that you want to work with. You've got to be able to provide them the best product, but you've got to have lead times that are manageable and resources to be able to help them scale and to get to that. That requires investment, both on the product side for companies, that requires investment to be able to scale this. And I think what you find with competition that's come into the clear aligner space, they just don't have that scale or don't have those investments in there. So what they'll compete on is price. And they'll come in at a lower price or offer some significant discount on some of the cases. What they find, especially as you look at some of those companies that you mentioned and others that are here, they are having to raise price because they can't make it work on a gross margin rate, also on an op margin basis. I think you've got to be responsible from a pricing standpoint because there is a certain amount of investment into this business. For us, it's more of continuing to invest, continuing to do the things that we do as a company because in the end, our ultimate competitor is wires and brackets. I know we say that all the time, but that is the reality. Like Joe is sitting here. That is the reality of the business. When 80% of the cases worldwide are done with wires and brackets, when we have products in capable doctors' hands to get teeth moved faster, to have less visits, to have it be less painful, to have all the conditions that really get to a product that is better, we just have to work to be able to digitize orthodontics, be able to work with doctors who want to digitize their practice and move from analog to digital. And our product portfolio, all the things that we're trying to do are geared towards that. All right. Well, one competitor that has not lessened up their competitive pressures. I don't know if that's the right way to say it, but Angelalign, obviously a good competitor, strong competitor. They've been growing very rapidly. I think they grew, what, global case volumes 40% in the first half of this year. One, you just initiated some litigation against them. Just any thoughts there on how we should think about that and what the ultimate outcome could be, number one. And number two, just on their model, obviously at $800, $850 for a full case, going to the 3x0 and 3x1 does get you down closer to that. Is that a response to trying to hit that kind of closer price point that they have? No, that's not a response to that price. This is going after the wires and brackets to be able to get something that is more in line with trying to drive that utilization to the product. I would say on Angel, we've known them. We've competed against them in China for over a decade. And so we know how they go to market, what they try to do, the technology that they bring. What we saw in China and now we see it in even larger extent, it's price. It's a low price. That's kind of the model that they run. And when we look at what they're bringing to market, a lot of it's very similar to what we've done. And now you look at the technology that we spend, upwards of over $350 million a year. We've been doing that for a number of years. Billions of dollars of technology spent creates a large pool of intellectual property all over the world, including China. And so now you see a company that's further expanding out, getting into territories using our technology, what we feel is our technology. So this is something that's been in the making in terms of what they've been doing for a number of years. This is two years in the making in terms of filing. It was one where we not only filed in China where we see this, but U.S. and Europe. And look, when you spend this much money and have this much intellectual property, you're going to see competition kind of trip on your intellectual property. It's just the nature of the game. You have similar ways to be able to bring a product to market and certain technologies and so on. but when you see a company almost use your innovation as a roadmap for them, and then we feel taken from us, look, in the end, we're all for pushing this market forward and making clear aligners the standard of care. This lawsuit and the multi-jurisdiction is all about making sure it's fair. and if we're going to spend and go after the market, what we think through a technology-driven product portfolio that we have, we want to at least protect the technology that we spend. Yeah. And I think the only other thing to add to that, just context on that 40% year-over-year growth in the first half is I think the vast majority of that came from just them initially going into other markets. That's fair. Yeah, very fair. And I think if we're intellectually honest, I think in China, you've probably been out competing them. I mean, now they're getting picked off by Smartee on the low end, you guys on the high end. So they're getting attacked in a couple of different areas. But I think in China, you guys have been outperforming. All right. On the IP front, on the kind of spend front, I think Angelalign spends, I don't know, tell me if I'm wrong, $25 million a year on R&D or something like that. And if I look at your other couple of largest competitors on the clear aligner front, diversified manufacturers who are here at our conference, but they spend maybe $125 million a year on R&D across all of their businesses. So let's allocate even a quarter of that to clear aligner, something like that. So you guys are probably spending two to three times combined what your other competitors all spend. I would argue from 2019 when some of your IP started coming off until the last couple of years, I'm not sure how that made you guys a whole lot different, which I know Shirley's raising her eyebrows and I'm sure wants to say some things that she can't say publicly right now, and that's fine. But I think what I would grant you is MA, OB, IPE, I mean, Invisalign First, going to Invisalign First retainers here at the end of this. You guys are doing a lot to now really move into much more difficult cases to have much better product than anyone can offer in clear aligners. I mean, how do you think about your competitive positioning maybe over the next two or three years relative to the last several years? I think a key part of it is not just to have a better, so some of the money we spend on is improving treatment planning. We want better treatment planning to get to a case in a predictable, reliable way, but also faster. What we saw at the GP Summit, we show how you can have a scan done and essentially get a treatment plan back at chairside while that patient is still there and be able to show that patient, "Here's your current dentition, here's dentition with ortho, and here's dentition with restorative." Be able to have that in real-time conversations so that you're sitting in a chair, you can see kind of how your teeth are going to look like with treatment. Be able to provide that back on a real-time basis based on preferences that that doctor has, that he or she has for their preferences based on the algorithms behind that is very powerful. The other parts of it that our competition isn't really spending on is, and we will spend a certain amount of the R&D in research and development is on the direct fab printing. And being able to develop, in that case, a resin that didn't exist before with a printer that is really custom-made, a company that we bought, Cubicure, to be able to print that type of resin and be able to create performance plastic directly that's 3D printed. Because remember, the current manufacturing is you make the negative and then you take performance plastic and suck it down onto that negative and then laser trim it, and that's your aligner. Now, don't need the negative anymore with the direct fab printing. You need to print performance plastic to be able to move the teeth in a predictable, reliable way. That's what you need. But now direct fab printing is going to give that doctor unlimited customization. They're going to be able to make things thicker and thinner on the walls to move maybe stubborn teeth. You maybe have mixed dentition where you want to keep things open for that child while that permanent teeth comes in. A lot of different variations around retention and so on. So there's just a difference in terms of what we're spending. We want to be able to provide the best products, also drive a lot of productivity, which is good savings for that doctor around treatment planning where they don't have to do it. It's already done for them, which saves us on our end too. We don't have to have technicians to do that. And we think direct fab moves their business forward, moves it in a way that in the end will provide that customization and that flexibility for those doctors while being able to remove that material cost, which at scale is more productive than our current manufacturers. Don't forget scanning and the new Lumina. Yep. And iTero Lumina, sure. So on that, I think your R&D this year, what, over $350 million, pushing $400 million, something like that. I think I'd probably allocate a, well, not I wouldn't allocate it. You would allocate it, but let's call it a third of that or so probably is the direct fab. Is that ballpark accurate? So if you're spending north of $100 million a year on direct fab, it seems to me as if your competitors won't be there for a long, long, long time. We saw you roll, not roll direct fab out, but you showed direct fab to your GP users at this conference in Vegas Friday morning for the first time. I think it was the first time you ever talked publicly about that to your customer base. Maybe a— It wasn't the first time. There's been other events where we've done it earlier this year. Okay. Earlier this year, so it has to tell me you have some confidence in truly starting to get this out later this year. And I think we've talked about this before, going into Invisalign First retainers initially and maybe some IPE product. Is that right? Is that the roadmap? And then a kind of slow scale over the next couple of years into full primary treatments? That's right. You have to scale resin and a scale manufacturing process because those two come together that are unique, but they need to come together. Because remember, we make a million aligners a day under current manufacturing, over a million aligners a day. So as you scale this, it's some of the, maybe some of the difficult products that we have to manufacture under current technology. You start to use this direct fab for those difficult products or unique products, like you're saying with retention and so on. You start to get into that scaling up next year. You start to get to 2027 where you're actually starting to maybe start to scale up some of the actual aligners themselves. And then once you have some of that scale, now you're at a point where at least it's the same cost as it is between current manufacturing and this new manufacturing. Now you can get into some of the cost benefits as well, as well as differentiating the products compared to anything else in the market. As you scale that direct fab, there are going to be higher resin costs initially. You are going to have to put in a lot of new manufacturing lines, things like that. But you still sound committed, at least from talking to you this weekend, that 100 basis points a year of margin expansion for the next couple of years. Still committed there, even though we've had to kind of readjust our table of contents. That's factored in. And so this is about utilizing the most efficient equipment that we have, putting this equipment, at least to start, in the existing manufacturing facilities that we have. So you already have the building and so on and a lot of the labor and other support for it. So we've got this planned in, but we think this is the future. And this allows us to have that price premium, that high gross margin type product and products that no one else has. And obviously, with intellectual property and other things that we have around this, we think that it gives us protection and a huge growth opportunity for the future. Yep. All right. Well, I think we'll have to stop it there. Our time is up. So please join me in thanking John and Shirley for a great overview here of Align Technology. And as a reminder, next presentation is set to begin at 12:15 P.M. Eastern Time, including Vesta in the Grand Ballroom, Alignment Healthcare in Empire Ballroom A, AdaptHealth in Ballroom B, and Enanta Pharmaceuticals in Morgan Suite. Thank you.