Align Technology (NASDAQ:ALGN) CFO John Morici said the company continues to navigate a challenging but stable demand environment, with international markets and dental service organizations offsetting pressure in parts of North America.
Speaking at the Jefferies Global Healthcare Conference in a fireside chat moderated by Jefferies analyst Mike Sarcone, Morici said macroeconomic conditions have been broadly consistent over the past several quarters, including the effects of inflation. He said Align has seen double-digit growth outside North America, including in Asia-Pacific, EMEA and Latin America, while dental service organizations, or DSOs, in North America have also been growing at a double-digit rate.
“Where you have to go and really try to drive that conversion is be much more active,” Morici said, adding that the company is using tools and tactics to help doctors move patients “from being interested in treatment to actually going into treatment.”
Company Reiterates Focus on Profitable Growth
Morici said Align’s full-year outlook reflects expectations for 3% to 4% growth and a 100-basis-point improvement in operating margin. He said the company has taken cost actions from last year into this year to improve productivity.
In the first quarter, Morici said Align delivered a 250-basis-point improvement in operating margin on an ex-FX basis. He said volume increases should provide additional operating margin leverage.
Asked about second-quarter assumptions, including potential effects from conflicts in the Middle East, Morici said Align’s typical sequential revenue increase from the first to second quarter has historically been around 3% to 4%, helped by North America’s teen season, stronger volume in Western Europe and improved systems and services demand. For the current framework, he said the midpoint was set at 1% sequential growth, reflecting prudence in an uncertain environment.
Comp Zero Offering Aims to Expand Invisalign Utilization
Morici discussed Align’s comprehensive product with no refinements, which Sarcone referred to as “Comp Zero.” He said the product reflects advances in Align’s technology compared with earlier comprehensive offerings that included unlimited refinements over five years.
Morici said earlier versions were designed to give doctors confidence that they could reach a final outcome, but improvements in technology now allow some cases to be completed with no refinements or one refinement. The no-refinement product is being tested and adopted across DSOs, where Morici said doctors are showing increasing usage.
He described the product as helping Align win “gray areas,” particularly when orthodontists are deciding whether to use wires and brackets or Invisalign. Morici said the pricing is closer to the material cost of wires and brackets than Align’s comprehensive unlimited product, while also being competitive with other clear aligner offerings.
Morici said versions of the product are available in North America, Europe and Asia-Pacific, and he said he expects it to be broadly rolled out by the end of the year. He also noted that Align’s “3-and-3” product, which includes three years of treatment and three refinements, became the company’s top-selling product after being introduced about three and a half years ago.
From a margin standpoint, Morici said products with fewer refinements can carry attractive gross margins because there is less back-and-forth after the initial shipment. If refinements are needed later, doctors pay for them separately.
Financing Programs Target Patient Conversion
Align is also emphasizing financing options to help doctors convert patients. Sarcone referenced Align’s HFD partnership and Smile Advance program, including a $99 down payment and 0% APR for 24 months, and said more than 6,000 offices were enrolled.
Morici said Align is already seeing benefits from HFD and other financing programs, particularly in a more challenging market. He said the goal is to give patients low down payment options and, where possible, little or no interest, while helping doctors receive much of their cash upfront and outsource collections.
Morici emphasized that the financing is not on Align’s balance sheet. Instead, Align’s role is to help facilitate adoption by educating doctors and equipping sales representatives to present the programs.
He said DSOs can move faster on programs like these because they often operate with a top-down approach. Independent doctors also represent an opportunity, though Morici said general dentists may be more accustomed to patient financing than orthodontists, who often use internal pay-as-you-go models.
Practice Management Integrations and Lab Pilots
Morici said Align is working to integrate with practice management platforms to reduce handoffs in the patient journey. He cited the company’s integration with Greyfinch as producing immediate benefits by improving patient flow, appointment scheduling and follow-up.
He said Align Link integrations with additional practice management systems are on the company’s roadmap, with Align proceeding system by system. Morici said the goal is to connect interested consumers with doctors, move them through scans and visualizations, and support financing where appropriate.
Morici also highlighted pilots with dental labs aimed at restorative workflows. He said Align’s view is that teeth should be moved before restorative procedures when appropriate, potentially preserving more healthy tooth structure before veneers or other restorative work.
The lab model, Morici said, allows labs to act similarly to distributors. Align charges for the case, while labs can add a markup for treatment planning, education and related services provided to their dentist networks. He said this creates revenue opportunities for labs and doctors while generating incremental volume for Align.
Morici said there are about 2 million general dentists globally, and Align currently sells to roughly 5% of them. He also said there are more than 30,000 labs worldwide, and many general dentists have existing trusted relationships with labs. Align’s exocad business, acquired six years ago, is part of the company’s effort to support these workflows.
For Align, Morici said the lab-related cases are typically moderate or minimal movement cases, often 26 stages or fewer and with no refinements, making the margin profile attractive. He said the company views the program as incremental and a potential way to access doctors who have not previously offered Invisalign or have done only one or two cases.
About Align Technology (NASDAQ:ALGN)
Align Technology, Inc (NASDAQ: ALGN) pioneered the use of digital technology in orthodontics through the development of the Invisalign system, a series of clear, removable aligners that provide an alternative to traditional metal braces. Since its founding in 1997 by Zia Chishti and Kelsey Wirth, the Tempe, Arizona–based company has expanded its focus to include intraoral scanners, CAD/CAM software for dental laboratories and comprehensive digital dentistry solutions.
The company’s signature Invisalign system leverages 3D imaging and computer-aided design (CAD) to create customized aligners that gradually reposition teeth, improving patient comfort and treatment predictability.
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