All right. Good afternoon. Why don't we get started? My name's Jeff Johnson. I'm one of the Senior Medical Technology Analysts at Baird, and our next presentation this afternoon is from Align Technology, a leading manufacturer in the $6.5 billion global orthodontics market with Invisalign. Its system of clear aligners designed and manufactured by the company. Long explanation there. I'm just going to cut that. With us today from Align, we're happy to have Chief Financial Officer, John Morici. John, thanks for joining us. I don't know if you have 30 seconds of prepared remarks or anything you want to say to open the afternoon, but we can go straight into Q&A whenever you're ready. Yeah. Happy to go into Q&A. Yeah. All right. Well, let's start. Topic came up at dinner last night, and it definitely is something I get from investors, is just around the U.S. growth rate. I think a point of conversation last night was if I look at pre-COVID to today, your U.S. case volumes or America's case volumes, however we want to look at them, have grown at a compound annual growth rate, probably 5%, 6%, 7%. Globally, I think a little higher than that, but the Americas, somewhere in that 6%, 7% range. But if I look off 2022, which was that really, 2021 and 2022 were those heightened years, post-COVID, everybody sitting at home on Zoom deciding to get their teeth fixed. Case volume hasn't grown since then. Is the U.S. and America still a growth market? Are there still growth opportunities? Have we hit just some ceiling of you can only do 1.3, 1.25, whatever million cases a year? Just how to think about the next few years in growth opportunities in the U.S. from a clear aligner perspective. Well, when you look at the U.S., the opportunities that we have. You start with the backdrop of the overall market, and it has been challenged from an overall economy standpoint. You have higher inflation. You have maybe a reluctant patient to maybe want to go into treatment. That trickles into how the doctors view things and what they invest in and how they want to grow their practice. What you have in the last couple years here, really 18 months or so, you have had a challenged economy, but it has been relatively stable, meaning this is the environment that we have been in. This is something that we, as a company, are trying to push against. To do that, you have to be able to recognize that the predominance in the market is still wires and brackets. We have a huge opportunity to grow in U.S., just like the rest of the world, to get clear aligners, to have Invisalign. To be able to have that Invisalign and be able to make a difference in a market like the U.S., you have to give your doctor options. That options could come from different types of products in our portfolio. We push against that in terms of the economy to say, "Let us offer varying types of products that don't have as many refinements," and therefore, leave the upfront cost to be a little bit lower. That doctor then can look at, "I am going to use wires and brackets," or, "I am going to use Invisalign." The upfront price is closer. You don't have to have them make some of these tougher decisions from an economic standpoint. Same way, offering flexibility to the potential patients. I think in the past, patients would come, maybe they had financing alternatives, maybe they didn't. What we have been able to do and really help with the overall market is to have more financing options to those potential patients. Give them an ability to see what their teeth would look like with treatment, whether you are on the ortho side or GP side. Then as it eventually gets to the end idea of whether you are going to go into treatment or not, they want to see that the financing is affordable for them. I think even in the challenging market that we are in, you make changes like that can affect the doctor, the ortho or GP around products and what we do to go to market with them, as well as their potential patients. You can help overcome that, and that is what we are focusing on trying to drive. Okay. As I think about in the U.S., and this is true globally as well, but in the U.S., you have launched DSP, IPE, some of the Invisalign First stuff that is going back several years now. But you have been launching a cadence of new products. This year at the start of the year, No-AA has launched. You have the Smile Advantage, I think, program from Healthcare Finance Direct on the financing side as you were alluding to there. I guess in spite of all those efforts, the U.S. hasn't grown. Should we look at it as with those things in place, as the macro improves, now you have all these things that theoretically make you a better company and a better opportunity when the macro improves to get that growth back? Well, I think it is twofold. I think we are doing things to offset even the current macro, and we are seeing improvement. You are seeing that the business, certain parts of it can grow, and we can get some of that back. We need the overall business, especially on the retail side, for all the changes we are talking about to be able to help that grow. But I think we can see improvement even in the current environment. Then you are right. If there is maybe not as much headwind in the overall economy with inflation or concerns about fuel prices and so on, there is things that we can do that we are doing now that will become a benefit in the future if some of those headwinds Yeah move away. But we are focused in on helping our doctors at the point of sale that they have, what products and capabilities that they have, and then also translating that to the patients that they are seeing and finding that right combination to drive the conversion. Yeah. There has been some pressure on your stock just over the last several weeks. An independent data source that is out there talked about a weak July for ortho demand. You guys gave your third quarter guidance, though, in late July. So I guess, regardless of what the market did in July based upon that data source, which by the way, has been variable and all over the place, and it is one of the reasons we do not actually buy the data. But would you argue that your visibility through July at least, you are still comfortable with that third quarter guidance? Look, we gave guidance at a point in time, based on all the conditions that we see, whether it is the U.S. or the rest of the globe. Obviously, we have the benefit of several weeks into the quarter and understanding where things are at. I think you rightly said that some of the data, it becomes very much what subset of doctors and orthos are they using? What is the period in time? Whether it is July or August, I think it is less to do about some of these monthly fluctuations that comes through some of the data and survey. The reality is, from an overall macro standpoint, we have been in this environment for six, seven quarters, and it is just the reality that we are in. But it's what we do as a company to drive that initial demand generation, marketing and advertising, being able to arm our doctors with various types of tools to help their patients visualize what treatment's going to look like, and then really partnering with them so that they can find the right financing. And what you do see during this time, over the last five or six quarters, you start to see much more of financing playing a big part. And that affects the U.S. You see it with HFD and other lenders that come into it. We're also seeing that shift in Europe and in other places, where that last mile that you have to overcome sometimes is around that financing, where you can get that monthly payment that's maybe more affordable for those potential patients. And if you drive that right combination, you can see good results. Yeah. Fair enough. You talked about Europe. I think if I look at your European numbers, your EMEA numbers, I guess to be more precise, and your Asia-Pacific numbers, I think in those two markets, you've grown double digits now four quarters in a row. One, what's different about those markets? How much has something like IPE helped case volume growth in those markets, given that does count as a case in your case volume calculations in that? So what's different about those markets, and how much has been new product driven versus the end markets themselves? It's really a combination. And in those markets, they're more under-penetrated. Much more wires and brackets are done compared to even North America, which is still under-penetrated. 75% of the cases in North America are still done with wires and brackets, when you include teens and adults together. So, under-penetrated market. They've responded well to new products, so you have IPE and some of the touch-up cases. We expanded that into Europe. Now we've expanded that into APAC. Very receptive to new types of products that really fit with the types of cases that they do. But if you take just on a broad basis, you say 55% of our business is outside of North America, and as you said, has been growing double digits. And even if I looked at North America and say 45% of our business, a third of that is DSO. And those DSOs have been growing double digits. So the focus, and the focus that gets to the macro and trying to drive that conversion, is really on that 30% of our business. That's North America retail, that we've got to be able to try to reach those potential patients and ultimately help our orthos and general dentists drive conversion. And that's our focus that we've been working and trying to overcome. And through all that, we've still been in this mid-single digits as a company. But our expectation is we can grow faster. Okay. When you cycle through now in EMEA and APAC to those double-digit comps, Q3 will be your first time coming up against those tougher double-digit comps. Anything we should think about there? Is it tough to grow mid-single digits on a double-digit comp? Just how should we think about the split of your business between the Americas and EMEA and APAC, which has been much more biased from a growth perspective the last few quarters in those international markets? The international markets still have a huge opportunity because, like I said, under-penetrated market to start with. Then introducing many new products that take some time to get the adoption. Now you start new, just in this second half of this year, it is having that DSP in Asia, the touch-up cases that you have. The no-AA products goes to other locations as well, and you see some of that with moderate and other products that do not have refinements and many doctors like that. You see tremendous growth in places that we have invested our go-to-market resources with sales and marketing in places like India and Southeast Asia and Brazil and other places that we have seen really good growth. So we think that it starts with an under-penetrated market. There are markets that we can find ways to win with our technology and products there. Then you add to that some of the consumer financing, which is just as important, if not more important in some of those markets, where that patient is reluctant to maybe go into treatment. If you get that financing right, get it down to a monthly amount that they are more comfortable with, you can end up with varying degrees of success from a conversion standpoint. That is what we want to play for in those markets. Okay. Just kind of a gut check on the Q3 guidance. You are guiding to mid-single digit year-over-year case growth against a mid-single digits because, again, EMEA and APAC both hit double digits for the first time in a while last year in Q3. So that your Q3 comp this year is five or six points tougher than it was last quarter, but you are guiding to about the same level of year-over-year case growth. It just does not feel like in this economy that a comp-adjusted acceleration, but what am I missing there? I think you have to look at what you do. When you guide, you're looking at our business, we're looking at what we've been doing recently. Where's the marketplace now? Let's start with that, where the marketplace is, then you layer in new products that you're introducing that you didn't have last year. Yep. DSP didn't exist in APAC last year. Yep. It exists now. For the most part, really wasn't much in Europe. Yep. Now it is. Yep. You go into a lot of the patient financing, other things that was just a small part of what you had in the past. You have to look at what you've been doing to understand that I'm going to look at what I did prior month, prior quarter, and then be able to say, "Okay, based on that, here's the expectation that you have." You go into teen season in China. Europe becomes a little bit slower for holidays on a sequential basis, and you build your guidance off of that. But it's more relevant to see what's actually happening in the prior month or prior quarter, and then be able to project that forward. You look at those numbers. I think if you looked at just from an overall year-over-year standpoint, first half, our volume grew about 7% or so on average. If I just looked at the year-over-year in the second half, our guidance reflects 5% or 6% on a year-over-year basis. I get your stack point, but it's relevant when you think of what are you doing lately to be able to help change that trajectory. Yep in a relatively stable market. You use that current data to be able to project forward, and your year-over-year just more or less becomes a result. Yeah, fair enough. Just remind us where you are with the rollout of the no-AA product or the no refinement product. How broadly rolled out is that in the U.S. at this point, but also then across other markets, the plans? In the U.S., it started with some of the DSOs that we have. They look for different options to keep their upfront costs at a lower point, and then pay for refinements as it goes forward. We are happy to do that. Revenue recognition-wise, we will make that trade. You are just going to get maybe less cash upfront, but you get the cash later, and therefore, and that revenue later. We can manage through that, and I think our technology has really evolved to really allow for many times you can do a comprehensive case or even a moderate case with just no refinements or maybe one refinement. We are seeing that adoption across DSOs. We are introducing that across many of our retail doctors, and the adoption has been good. Doctors need to make sure that they plan a case properly so that they expect to be able to finish in a relatively short period of time with not a lot of refinements. If they were used to a lot of refinements, they have to make sure that upfront they manage that setup. But once they do that and they understand some of those trade-offs, the whole purpose of a no-AA type product is to keep that upfront cost more manageable compared to wires and brackets. This is a utilization expansion. This is getting doctors who would say, "I do not want to pay the upfront cost of the lab bill. I am going to stick to wires and brackets." We are trying to offset that and say, "Look, it is a little bit more expensive than wires and brackets, but it is not the bigger difference that you would have if it was a comprehensive unlimited." I look at that as wanting to win in the gray areas with those doctors. When those doctors are deciding, "Do I use Invisalign? Do I not?" Sometimes this upfront pricing can help with that. When we look at that, ASP is very manageable because you recognize the same upfront. But the important part is, as we see our shift more and more to these comprehensive or moderate without refinements, it helps our gross margin. We have been able to see that. You looked at really second half of last year when it was started to take off, and then into this year. Our gross margin has improved. A lot of it is around productivity and programs that we have, but some of it is due to some of the mix that we see with these no-AA products. Yeah. Just one question on no-AA, then I want to move on. On no-AA, let's put some round figures on things. If it was $800 upfront for a no-AA case, let's say that doc would've been paying $1,200 for a full comprehensive. One of the things you've talked about is docs are getting more comfortable going to a no-AA product because the need for refinements are going down because the system is getting more and more predictable. But at the end of the day, does that run the risk that instead of charging them, that physician, that doctor, for a couple refinements in year one or two, if they do no refinements, you ultimately still are ending up with less per case? It- And your deferred revenue is going to start coming down pretty aggressively in years two and three post no-AA. You get trade-offs on that, but what we find is many doctors are still doing similar amount of refinements. But the bigger point on this, Jeff, to drive is we want to drive utilization. Right. You might get trade-offs with this, just like we'd have a touch-up case. Might only be a $500 ASP product, but it's 10 sets of aligners that you would do. Yeah. And that meets the needs of that doctor. If we can meet the needs of that ortho or GP so that they use more of our product, and they want to use a product that you don't need comprehensive unlimited for five years and unlimited refinements, we'll take that trade-off. Because in the end, what we're seeing when we saw across our DSOs and what we see with the doctors that we're rolling it out to on the retail side, they end up doing more cases. Yep. That's what happens, and therefore, they do less wires and brackets and more Invisalign. That's a win for that product. All right. Fair enough. I want to talk about China just a little bit. You are predominantly in the private, not public, market in China. That's right. Yep. Obviously, we now know that the ortho VBP process has started on the public side. It seems as if most of the chatter in the industry has evolved that the privates will probably follow some of the public pricing changes that happen. I think maybe a year or two ago, there was some question on whether or not that would happen. It does seem like It seems that way. We would expect that. That's probably going to happen now. We're also hearing that now procedural price, which just typically comes down when the device price comes down as well, the procedural price may not come down from hospitals or private payers. One, what are you anticipating you might have to give up pricing-wise on even in your private side pricing for Invisalign, one. Two, if procedural price to the patient doesn't come down and we don't get an offsetting acceleration in demand from patients, then you're going to have to pick up some market share to be made whole on the lower prices. How does all that work out over the next maybe six- 12 months? Yeah, I think you have to start with China in general for ortho market. 90% of the cases are done with wires and brackets. Clear aligners are small. You're coming from a different spot from a VBP standpoint. Typically, you have a market, and you're a higher percentage of the market share. We're very low even across clear aligners. Our expectation would be is that there's a product portfolio of various products that will be put into VBP. We compete in that space. We've got a lot of different products, from the most comprehensive cases to the lower, more moderate cases, and lower stage cases, that will be able to compete into this. We would expect that there'd be, go through the public side. It will come to the private side. We look at that as opportunities to be able to increase our volume, being able to sell to more doctors who might not have used our product in the past because they'll look at pricing and other things. Incrementally, we'd be able to get additional volume. We'll do things in a way because we're headquartered. We've got a huge operation in China from a manufacturing standpoint and treatment planning. We've got other cost offsets that we can have there to be able to meet some of that, whatever pricing comes out of this. But we're set up to deliver in China in this environment. We've been expecting VBP for a number of years. As you know, it's been pushed many times because I think there is a question about what it means for the end patient. Yeah. Is the ortho and the GP, are they going to cut their prices to be able to meet this, or is it just on the supplier? Because you remember, the majority of cost to the end patient or the provider or the healthcare provider is the doctor's cost. Yeah. It still remains to be seen what that's going to happen. But look, we're coming as an industry coming from 10% of the market, and that all gets a lot of visibility in terms of VBP and so on. But it's not your traditional VBP. You've got doctors who kind of have their margin and their costs kind of in the middle, and you're coming from a market that majority is wires and brackets. If in the end, VBP helps us get to a higher market share of clear aligners and therefore a higher market share of Invisalign, given our cost structure and our product portfolio that we have, that's a good trade. We would welcome that. Would you expect to be, I think there are 5,600 hospitals across China, in the hospital systems for clear aligners over the next year or two, or are you going to remain predominantly private? I think we'll have the opportunity to play on the public side, and that's opportunity for us that we don't really have right now. So this might give us access to some of those markets that we haven't had before. Would you have to actively bid, though? Yeah into those tenders? If you have 0% share there historically, I thought the Chinese government historically will pit the top two or three vendors in the hospital and say, "Okay, one of you is going to be out, two of you are going to survive." How would you as a new vendor, quote-unquote, "new vendor" in the hospital? Well, we're recognized. They know from a revenue and market share standpoint, there's a few companies, and we're one of them, within China that would be a part of that. We would want to be able to at least be a part of it, be recognized in it, and then make a decision. If this pricing works for us and it's part of what we want to do, it's incremental, and you can manage your cost to show that it's incremental revenue and incremental volume, but you can manage your cost in the right way. You can make those trade-offs. And we would look at being in some of those markets that we might not have been in. Okay. We're down to 5 minutes, so let's hit maybe two or three topics very quickly. One on competition, one of your largest competitor. You've been involved in some IP litigation with back and forth. They do all of their treatment planning in China, so that means, as we discussed last night as well, taking patient data out of the U.S. into China, things like that. Is there real opportunity for you, risk to them, that as these governments start to think about data transmission across country lines, and especially to maybe not so friendly countries or countries that we're not so friendly with, that there could be some changes forced there? Look, I think when you start with what we invest in this marketing and really creating this market, we're the one that created the clear aligner market. There are competitors that come in. They have varying degrees of how they want to go to market and so on. Some competitors, as people might know, that there's been some intellectual property that we think that is ours and has been used by other competitors like Angelalign Technology, and there's been a broad intellectual property effort to enforce our intellectual property across China, Europe, U.S., against Angelalign Technology. In addition, it's like you had said, there's treatment planning and other things that are cross-border that I think is a bit of a challenge. But we're focused in on driving innovation, driving our business, meeting the needs of our customers, doing things so that they understand the trade-offs. What we could bring them is technology and the scale and the brand, and we think we stand apart from competition. And I think doctors might try different competitors based on price or what they assume or what they think they get, and then might realize that it's different when they get to the other side. And I think that gives us an opportunity to, if there's win backs or other opportunities, we get those. But I think the focus that we have, whether you're in the U.S. or any other country, the majority of cases in every country are done with wires and brackets. Our focus is on that competition and trying to win those with Invisalign. The other clear aligner companies, they're more into share shifting, but our focus is really on driving this business. You mentioned earlier that you are comfortable with the second half guide of mid-single digit, 5%- 6% case growth the second half. I think just below that in the third quarter. You are still talking about 100 basis points of operating margin expansion this year. Is it fair to think about that 100 basis points of margin expansion being able to Well, you already have basically said that it is fair to think about that for 2027. You have talked about this mid-single digit case growth. So it seems the street is set up at about mid-single digit revenue growth next year, 11% EPS growth, just a touch above that. It would seem like none of that is out of bounds relative to what you have communicated so far from an expectation standpoint. Yeah, we have not guided in that specific for next year. But I think when you look at the framework that we have, growing as much as we can across all our markets and really focusing on that while continuing to work with our DSOs and being able to grow while doing it in a profitable way. So a lot of the profitability, some of that is coming from the no-AA and some of the product portfolio that drives gross margin. Some of it is just on programs itself, localizing and making changes. We started a large part of this last year, moving things that maybe were made in Mexico and moving it to Europe or other parts of Asia to be able to reduce some of the freight costs and shipping times and so on and drive a lot of that productivity. We talked about a plant that we will put up in India, really India for India. A smaller plant, but focused in on reducing cycle times, improving productivity, customs, duties, all the other benefits that you get from being in. Those are the structural things that we are trying to build in, that whether it is a product portfolio that customers are adopting to, or it is some of the other productivity things that we are doing. We want to be able to build in these structural productivity cost benefits while still going after as much volume and revenue that we can, so that when we talk about the operating margin benefit this year of 100 basis points and at least 100 basis points for next year, you know that despite doing all these things to help try to grow our business, we are going to do it in a profitable way. Okay, last one I have in the last minute here is, R&D has gone from $160 million, $170 million a year pre-COVID to almost $400 million this year, right at $400 million or so this year. Is that something that can be leveraged going forward? We are now through not all of the direct fabrication, which we did not get to today, but you are moving forward on direct fabrication, but DSP, IPE, mandibular blocks, Lumina. I know iTero Lumina 2 coming next year. But you are through a lot of that heavy R&D spend, it seems, of the last few years. Can we start to see leverage at the R&D line going forward on an absolute dollar basis or as a percentage of revs? I think you see some of that leverage coming through because as a percentage of what we're spending within R&D, it's less on the R and more on the D. More on the development that we start to see these products come to market. I think as you get that migration happen, where we've developed products, we know the technology for the resin and the direct fabrication manufacturing and some of the Lumina platform and so on. That went from R to now it's moved to D. You start to get some benefit because you're also going to have sales and you're going to have that denominator is going to go up as well. As a percentage, we'll see some benefit there. As we migrate more and more to development, we'll also see some dollar improvement there. But we're constantly trying to drive this business. It takes a lot of R&D and resources to bring the latest technology to our customers, and we're focusing on being efficient as we can from an operating margin standpoint, and R&D is a piece of that. Yep. All right. Well, I think we're going to have to cut it there. We're about a minute over. Please join me in thanking John for a wonderful overview of Align. Our next presentation is set to begin at 3:45 P.M., include HealthEquity in the Grand Ballroom, Natera in Grand Ballroom 3, AdaptHealth in the Empire Ballroom, and Mirum Pharmaceuticals in the Empire Ballroom 2. Thank you.