Align Technology (ALGN) 25 Oct 232023 Q3 Earnings call transcript

Welcome to Align Technology's Third Quarter 2023 Earnings Call. [Operator Instructions] Please note that this conference call is being recorded.

I would now like to turn the conference over to your host, Shirley Stacy, with Align Technologies.

You may begin.

Thank you. you us. thank and afternoon, for joining Good I'm Investor Relations. Vice President Communications and of Corporate Shirley Stacy,

Joining today's and John me and Morici, President for CFO. call is Hogan, Joe CEO;

Wire, financial We month. quarter conference approximately archived call webcast website results on which audio Today's is being will today at issued investor.aligntech.com. available XXXX X via and third is our our on for Business be website

and the and Align's and our risks include more reminder, a expressly products to obligation These forward-looking future any our in Securities information and assumes and about forward-looking including statements and reports Commission update described discussed are will statement. As statements provided most today statements, detail involve significantly, events, only filed website that with results outlook. the forward-looking and Align recent periodic Actual in and at predictions no on available sec.gov. are uncertainties Exchange vary may

our We results. have detail. non-GAAP on to financial the applicable. statements, website reconciliation, call including posted files for reconciliations, these historical refer And quarterly third under conference quarter GAAP our if slides XXXX to Please our more including corresponding

category. quarter, associated of clear were reflected clear non-comprehensive DSP touch-up cases Invisalign as cases have otherwise they in volumes, reported revenues are all Unless touch-up case non-case the and stated, Prior aligner aligner volumes. Note, reclassified this been not in metrics. to clear and to and QX segment metrics reported aligner include revenues now our business the DSP and reported

CEO, the to Joe Joe? President turn Technology's over and call I'll that, With Hogan. Align

aligners. year. call of and operating will and an of thanks provide performance remainder detail few from discuss and our our the and clear Good third on more John X our Shirley. afternoon, views joining provide for the results financial for overview Systems and our on us. QX a comment highlights Services quarter our segments: I'll Thanks, today, On

back summarize points, and come take and we'll questions. a key we'll Following that, few

we Our trends, the industry third half a patient starts XXXX. in orthodontic than visits of including experienced in lower-than-expected fewer especially deteriorating macro adult environment have with overall, patients. and among patient along decreased reflect quarter increased first and reported practices results cancellations, demand case research firms more difficult Dental

report, the more The reflects year. year-over-year, September X,XXX appointments were Practices new were Gaidge patient orthodontic American deceleration biggest which treatment over North in for and Ortho than decrease a starts X.X% ortho orthodontic year-over-year, X.X% down down case shows and

across up total Despite with these growth were regions. of year-over-year million headwinds, all QX $XXX X.X% worldwide revenues

to strength For record QX, patients, Invisalign aligner year-over-year, had driven X.X% increased clear sequentially from by shipments we which continued teenage XX% First. and younger and

by growth QX year-over-year in pronounced North summer America. seasonality and APAC, more EMEA also in reflects improvement revenue offset

equipment cycle despite trade XD capital due well services X.X% were by APAC increased reflecting for primarily as equipment, higher and revenues. Plus reflecting revenues mix customer offset was services This as more in the partially Americas, iTero trade volumes weaker scanners, for QX. due scanner to lower primarily down including as sequentially, the a in and DSO of were nonsystems revenue. QX higher year-over-year continued ups in leasing capital certified Our iTero up what revenues well or to QX call rental programs scanner and Systems and CPO Americas scanner regions, we preowned sales, and volumes as systems Services increased challenges the

includes program, retainers due of from subscription-based XX.X% up continued to increased QX our or Program, Vivera touch aligner and aligner Doctor Invisalign low-stage which growth were non-case and clear DSP, year-over-year, primarily revenues retainers, clear up monthly adoption Subscription treatment.

of from North more For America, than XX% an over DSP year-over-year QX, cases, touch-up in shipped XX,XXX 'XX. we QX increase primarily

Nordics. to currently in Iberia available be is the and received U.S., and Canada, customers continues well the DSP our by

patients. their the about excited and and expand the continuing with We're certain to proving doctors QX. partners in are DSO We in to DSP program EMEA is helpful

For clear reflecting down weaker-than-expected year-over-year, X.X% were especially demand up primarily sequentially for patients. X.X% and aligner for volumes adult QX, total orthodontic treatment,

trends, strong sequentially teen and younger soft Invisalign across X our patient and up As due adoption business both First was kids regions, I as said all year-over-year, continued old. despite to for years young earlier, as consumer of primarily

From terms driven for the perspective, submitters X orthodontist number a sequentially especially total were up by of APAC Americas. XX,XXX In year-over-year, the shipped the in in fewer from particularly year-over-year, increased approximately doctors doctors, GP dentists Invisalign Americas doctors years, by offset teenage number submitters, of the highest QX and to regions. submitting cases, channel

aligner basis, as North On well was American North This increase the Invisalign America, clear lower volume more cases. teenage American and APAC from and cases. by EMEA from shipments Invisalign a offset in Latin softness summer geographic regions Invisalign pronounced primarily as sequential QX seasonality volumes a reflect in adult and

due in is Americas 'XX September case channel adult was channel down which Data, the shows Gaidge aligners. driven reflect in and GP QX Invisalign by Invisalign Ortho to reflected brackets and other teen the submitters clear starts, lower than case from ortho QX shipments and aligner Invisalign and perform the with an increase the wires year-over-year. starts momentum 'XX younger primarily in clear For First. better Invisalign in This down sequentially, slightly volumes volume, increased

growth Comprehensive cases year-over-year. sequentially Invisalign Three drove Three QX in America America, drove DSP North product In in volume growth sequential of Invisalign adoption 'XX. also North touchup and

Moderate, primarily were as aligner was of by traveling. volumes Italy, our seasonality QX and the impact Three in partially were consumers Benelux, well continued case case the offices Comprehensive EMEA, vacations product sequentially, closed up Three growth Invisalign volumes starts, as East. doctors' summer the clear down and Turkey when For adoption increase new Year-over-year, teen primarily by from of reflecting and aligner are in sequential are First summer clear offset Middle more for an Invisalign Invisalign packs. QX This and Teen driven

volumes markets like Japan clear key patients, especially other Korea, well sequentially Taiwan, results also Thailand. reflecting China APAC Invisalign submitters QX aligner utilization, and India, QX increased APAC, year-over-year, higher as were trends and up as and First reflected teen growth in up For our in increased improving higher in teen QX by season and and channel Invisalign strong in driven orthodontic channel Invisalign the China. growth submitters reflect typically GP sequentially utilization from also year-over-year. during with APAC results the for

product Three During Kong, India. in rollout continued Taiwan China. Comprehensive available of Three Three the Korea, and in also Comprehensive QX, we Invisalign Hong Three and recently Invisalign APAC, is launched most and in

within of the comprehensive, more are pleased adoption product are where the We Three of with allowing Invisalign cases portfolio. Three majority treated doctor in customers flexibility APAC the product and our

industry we number and and increasing that doctors the shipped year-over-year. record a also in quarter, in the to brand is During we APAC, important the orthodontic Invisalign of trusted it's both globally and most demand delivered continue In Invisalign impressions XX.X patients. billion aligners, visits QX, websites their XX.X create to to especially clear given for and our globally. we macroeconomic million doctors the on had pressures sequentially

significantly young teens for teens increase YouTube, across adults, Invisalign clear and parents the WeChat, to especially aligner of To of for market and the Douyin markets. opportunity brand, and The Instagram, top such invest Snapchat, continue and educate benefits underpenetrated. awareness underlying as create we about media remains in TikTok, huge and kids treatment platforms campaigns

increasing clear of orthodontic wires. using cases Differentiation their orthodontic and share to brackets among Invisalign braces, are is especially of case treatment know and aligner majority faster parents. than still key is Invisalign's yet starts, teens more vast treated effective and the We the

benefits the through We are significant uses campaign, teen to our to as juxtapose is differentiate continuing humor such Invis over new braces. treatment novel of which campaigns, metal Free Drama Invisalign

also new campaigns stories Similarly, is the and teens creator-centric the QX. right patient engagement to differentiate well that and launched Invisalign which globally we their increases in Invisalign lives. as adults to X.X campaigns, using transforms adults, influencers treatment requires billion that young a Americas impressions how parents and self-confidence Reaching important treatment share as delivered for in how powerful Invisalign smile

Creators Jaylyn also with and showed such results Darren Michael chose Leilani and to aligners. NFL their they as their Hall, transform Invisalign why Green smiles Cimino, player, Waller

and highlighting treatment media braces. platforms, and consumer our including benefits with teens TikTok of Invisalign consumers In EMEA the influencers reach to versus region, campaign we launched across parents the partnered Meta teens, and of social for global

continue to quarter. campaigns in previous testimonial our patient the engagement we launched positive Germany, In with see

X.X delivered X.X campaigns media than consumer our billion more to visitors website. and million impressions Our

brand consumers Japan. reach in social with across increased by saw evidenced from more We expanded We India continue resulting X.X to billion to invest to media. We in XXX% India and in in partner increase than and quarter. increase an impressions key our a XX.X consumers Japan Meta region, via in million interest visitors our XXX% website consumer over unique advertising and the across the APAC in our as influencers websites visitors and in YouTube, and reach to

X.X digital My date growth. consumer continued increase Finally, to million tools to year-over-year users, as patient XX% active and XXX,XXX such monthly over and downloads representing Invisalign app a with

With turn John. that, call to now I'll over the

Thanks, Joe.

for approximately financial Total down impacted revenues quarter corresponding X.X% $X.X impacted quarter year-over-year year QX constant X.X% by sequentially third On from were X.X%. Now $XXX.X favorably the $X.X a of were by quarter our approximately from and million, unfavorable revenues the 'XX or up the for a currency and QX exchange X.X% approximately million prior results. million basis, approximately foreign ago. or

primarily a QX of lower clear $XXX.X revenues clear sequentially, basis, down QX primarily up X.X% X.X%, ASPs, revenues. lower aligner and and due volumes to million higher higher higher volumes revenues were For were aligners, On from ASPs. year-over-year non-case

to exchange, a treatment aligners. product mix Invisalign up shift offset sequentially foreign and were On larger partially lower-priced for ASPs by sequential QX, For year-over-year. ASPs and higher products unfavorable shift additional down discounts, -- reflect comprehensive basis,

aligners On unfavorable comprehensive additional product a and ASPs shift. partially in larger the mix increases, basis, higher offset price discounts year-over-year by reflect increase and

mix, noncomprehensive reflect for by credits a favorable basis, and and discounts, For and treatment in the foreign additional Invisalign larger exchange. year-over-year. down On offset sequential unfavorable decrease partially ASPs QX, were product aligners sequentially higher higher ASPs up sales

mix higher year-over-year in exchange, noncomprehensive product increases, basis, and partially ASPs foreign a the reflects price offset by additional increase On aligners shift. favorable

Invisalign Comprehensive and Three the X included at within date. the end doctor Invisalign additional years product. we Comprehensive of the price. The Instead 'XX, In date configuration aligners Invisalign treatment launched XXXX within of unlimited treatment years treatment Three with QX additional Three and X of our offers end X Three the aligners product customers comprehensive

markets certain America and Kong recently Taiwan. in launching product in is Invisalign in Comprehensive Korea, EMEA and Three North in Hong China, most available APAC, and and Three

Three to time Three product recognized our We they more upfront deferred traditional allowing continue providing will a increase with us are Invisalign adoption continued being revenue want shorter the the it of period anticipate recognize product. flexibility to compared doctors Comprehensive the with revenue and pleased over to of Invisalign and Comprehensive and

to Comprehensive expect we aligners more begin we to products, ship additional see Three for As ASP an and Three benefit.

other ancillary focus expected globally, some growth. and retainers metrics on for shipments historical subscriptions, case the products continue that from only our percentage overall account to a revenues lesser As grow of are of to

In our strategy. QX by clear 'XX slides, our $X.X aligner believe favorably of $X see earnings you On impacted financial growth to revenues aligner a our X.X% clear basis, were and revenues indicative were we total revenue approximately shipment, X.X%. we or of approximately million have approximately exchange more will aligner overall which added per by that sequentially. impacted a of unfavorable case measure be million foreign or clear approximately year-over-year exchange release foreign

and down 'XX as ASPs preowned program, balance be sheet and X.X% revenues revenues. by increased revenues $XXX.X sequentially, aligners unfavorable and our scanner deferred higher shipped. QX up certified from mostly or $XXX volume recognized up offset $XX.X X.X% Clear million Systems the the are were million will services lower partially Services due of or and sequentially higher X.X% to additional on and aligner million year-over-year revenues up

X.X%. 'XX certified favorably leasing $X.X unfavorable System and Services revenues and 'XX revenues of and due and On by exchange sequentially. On foreign a ASPs. a larger from basis, QX Services partially or rental higher our foreign from and revenues services X.X% scanner of higher were of Systems by approximately base higher impacted $X.X QX were offset approximately impacted Systems unfavorable scanners or Services programs, year-over-year year-over-year to revenue basis, up volume, by exchange million our million revenue were sold approximately preowned approximately X.X%

to Systems up flat the revenues X.X% on to and the balance due deferral purchases of $X.X or decrease or service million year-over-year. and the primarily Services with in deferred scanner was sheet included down slightly $X.X or revenues essentially million sequentially, X.X%

Services over ratably the service period. deferred revenues will recognized be

of scanners is increased developing and we of business scanner our trade-ins As opportunities new for purchase to upgrade, we and our base equipment preowned customers our to expands partners portfolio products, needs and growing a a introduce for DSO the and new in sold. the scanners transformation equipment capital customers certified large natural meet certain make digital with opportunities markets, progression

to gross margin. Moving on

down impacted gross exchange on sequential X.X was foreign overall XX.X%, points and sequentially X.X X.X and by Overall margin down quarter year-over-year. by point on unfavorably margin a Third foreign favorably approximately a impacted points point was approximately basis. exchange year-over-year basis gross X.X by by

gross and and margin for was from a aligner higher additional third lower points ASPs. sequentially, of manufacturing spend higher down aligner Clear volume X.X quarter XX.X%, the primarily mix

for Clear to aligner ASPs. facility the ramp new flat increased our primarily manufacturing spend as we gross by in in margin quarter offset partially due roughly Poland, third was higher to up continue year-over-year, operations manufacturing

costs and third from partially gross quarter sequentially, lower for by higher manufacturing ASPs, services lower margin freight revenues. favorable service Services XX%, primarily and the offset Systems points was X.X and down variances,

X.X for foreign offset and manufacturing higher ASPs, and freight year-over-year, favorable variances, service and Services margin lower gross was third from primarily favorable costs, quarter by service lower Systems down points the partially revenues. exchange

and operating 'XX incentive up and expenses marketing primarily lower $XX.X $XXX.X down million, sequentially were spend consumer compensation. lower from X.X% QX million, down On expenses sequential operating X.X% basis, were a year-over-year.

partially primarily increased to advertising our and higher manage activities, marketing operating our compensation due incentive efforts offset $XX.X proactively part continued investments as and sales on expenses by of Year-over-year spending in and by million costs. controlled to R&D

to acquired down basis, were stock-based X.X% non-GAAP a expenses and On acquisitions, intangibles excluding sequentially million, amortization operating and compensation up of year-over-year. related X.X% $XXX.X certain

XX.X%, of point and X.X sequentially in Our Operating primarily million sequentially points approximately third margin by resulted margin impacted of $XXX.X foreign operating unfavorably up was X.X X.X up quarter to year-over-year. points an operating income due exchange.

points in operating point. third basis, the up loss margin partially and approximately a non-GAAP margin teams in compensation a ago, and was loss exchange. our increase amortization stock-based and $XX third investments operating the related in technology which to the due X.X XX.X%, year-over-year a well intangibles as attributable impact quarter of million of by quarter by was for points exchange X.X $X.X offset a unfavorable go-to-market the leverage, foreign acquisitions, operating million year-over-year. Interest of million from The is X.X primarily year expense quarter for income primarily net up as in of second to to On to excludes loss and sequentially certain foreign other quarter compared $X.X and third a

third The XX.X% XX.X% effective tax quarter GAAP the rate than of the quarter effective lower effective tax of rate than for year. lower the third and was XX.X% second the quarter of tax prior rate

effective rate, earnings GAAP issued the the application The newly of quarter third lower guidance quarter tax QX. U.S. was on rate lower in and effective second to tax foreign taxes due than tax primarily

January XXXX, XXXX. effect tax changed our As long-term reported of periods a effective a in from QX non-GAAP we methodology the rate reminder, for projected in quarterly methodology have to rate previously given the new tax and computation X, recast and our XXXX, to

third the in was our change rate in tax quarter the methodology. effective non-GAAP Our XX%, reflecting

$X.XX, sequentially the $X.XX to and income $X.XX prior year. diluted compared Third was up quarter net share up per

by to sequential basis EPS year-over-year basis unfavorably a impacted foreign a was impacted and $X.XX unfavorably by $X.XX Our exchange. on on due

non-GAAP a net EPS the XXXX our for On for methodology $X.XX 'XX prior sequentially -- income share diluted the in and third non-GAAP non-GAAP of reflects note per year computation was non-GAAP XXXX effective prior down quarter, year the QX that tax and our income basis, net up the $X.XX rate. prior change year-over-year. Note the $X.XX

balance to on Moving sheet. the

U.S. $XXX.X were sequentially international $XXX.X our held XX, billion up our long-term year-over-year. of and cash short in held was million $XXX.X $X,XXX.X the cash, $XXX $X.X marketable September and up by Of million million million entities. and million, was balance, As securities XXXX, equivalents and

was million, balance receivable down accounts QX sequentially. $XXX.X

to was Our overall Cash days operations down sales third was up last outstanding sequentially million. our days $XXX.X the approximately XX and compared for X days, approximately X year. flow as days from quarter QX

to increase our $XX.X to were and primarily third aligner million investments facilities. manufacturing Capital the expenditures quarter related capacity for continued

million. defined cash operations from as cash amounted capital expenditures flow, Free to less flow $XXX.X

Now quarter turning fourth outlook. to our

worldwide are beyond down anticipate 'XX. from to million million, QX we 'XX, be of of assuming $XXX to our sequentially that control, our the in $XXX range occur circumstances no For revenue QX

and and for reflecting purchases. more challenging capital macro fewer the a We orthodontic given currencies expect revenues down against patients case sales doctors Systems for aligner sequentially, to clear starts foreign of exchange, Services overall, cycles longer both be with strengthening and environment U.S. dollar unfavorable equipment and the key

clear anticipate expect to adult volume volumes. business, clear aligner in don't of aligner we our be teen in and QX seasonally 'XX, improvement For we lower

due dollar. be expect to to QX U.S. the down primarily we ASPs For 'XX, sequentially, aligner also clear strengthening

For anticipate East. war in issues Middle macro from headwinds related uncertainty increasing to business, our we and supply Systems potential and Services the the

We headcount margin expect as of GAAP due 'XX We our QX 'XX. severance related margin for up to of be down operating anticipate to environment. to to sequentially QX sequentially restructuring primarily from be adjust from non-GAAP our 'XX QX operating we this

QX we available authorized program $X During billion stock program. a our Board Currently, billion repurchase the Directors program. that billion repurchase to $X $X for new stock announced of repurchase 'XX, XXXX the under remains succeed XXXX

or common stock up million agreement. repurchase an to 'XX, through we combination repurchases a expect either QX $XXX open During of of accelerated repurchase our market or to stock

our of $X.XX assuming For no are billion. the $X.XX XXXX, circumstances that full revenue to in anticipate year XXXX to beyond be billion occur control, our worldwide we range

X expect to non-GAAP full than XXXX above margin XXXX and margin also operating XX%. lower year our our operating point GAAP be roughly We to XXXX slightly be

manufacturing as comments. back over capacity I'll of investments $XXX expenditures continued relate be expenditures as and that, for approximately Joe primarily expansion. With turn final Joe? to expected to to capital expect in building we international to in million. well our are it XXXX, Capital improvements For construction support

John. Thanks,

and and foreign reflect dental doctors platform. sentiment our consumer headwinds, quarter continue in Invisalign a is digital the clear fourth and quarter the weaker practices iTero position driving increased results While grow scanners with transform exchange, and revolution outlook aligners, to industry unique help digital Align in third Align including to their

for and treatment are about modification Pro help Personal flexibility, customers important are treatment and solutions developed and recent our excited in to greater further digital AI which productivity patient Live the to restorative by planning XD efficiencies. orthodontics controls, the and connector, innovations App, practice digital to capabilities digital dentistry real-time experience, very Care more revolutionize current plan Invisalign Virtual gain with and Invisalign Invisalign Practice We're doctors Simulator iTero-exocad even also improve software. IPP to providing environment. This These adoption Outcome ClinCheck for includes Smile Update or Architect, Plan Invisalign gain continuing Invisalign help tools and doctors

during In spent cases, used actively treatment in ClinCheck time XXX,XXX by was Update with XX,XXX Live the about quarter doctors on is Practice XX%. QX, X.X via photos over reducing doctors uploaded by Practice App. App now XX,XXX million Invisalign than the by used more modifying

expander, we boost launch palate a quarter, of IPE to IPE printed provides device that our portion addition, orthodontic in alternative market palate IPE. teen a without Invisalign and metal will treat couldn't In system expanders cases safe, is market otherwise direct effective and clinically in this our or comfortable addressing first we the Canada by opportunity

while improved near- balancing operating and in to margin. committed our we're summary, the In delivering growth long-term investments drivers

and we environment. As an the one doctors to for and to restorative opportunity and we environments optimize responsibility increasing our patients, continue recent orthodontics enormous most driving of macroeconomic on history current digital have their dentistry navigate with operating pressure challenging the investments in of adoption

in developments continues East evolve the I'd business. address is The like turning fluid. we questions, closely. to situation very scanner Middle and are call iTero over the our for And monitoring to and war the Before

and families their of singular is safety security staff at Our their and and doctors stage on the and our our and patients. this employees focus

and scanner Israel offices manufacturing operating. Align and open in facility are currently

continuity While we will preparing as and our we're to improve, situation other hope the update needed. ensure business will mitigation plans customers stakeholders and

for over Operator? call the the back turn to questions. I'll operator Now

from our Jason And first Bednar comes Sandler. Instructions] Piper [Operator from line the question of

do come you next question to and the Operator, to go back? want we'll

line of next And Blair. question Brandon William comes the from from Vazquez our

now. kind start into talk end just talking you On the getting given first the quarter, data bit -- on the little worse year. about sounds it macro a Maybe like maybe the a about of just one, the little can of trended we how how were that is and we're through guys that probably trending

into head I our are lot dental of what you get into as is of of end the in what's a macro at look CapEx consumer us the scanner. on space the the and then especially and the XXXX, of to trying kind direction think going around year

year-end that you how now? from are right So seeing guys

we a And it's teen quarter you great us. third When felt at way really when we the and what adult about But done adults And an we too. through in the the were and forecast look big quarter quarter, season third fourth the run China our highly fourth have season quarter, primarily teens too. the you for is overall, affected. reported in

you some at So they're the our basically September projected around profiles for even in and seen when we feeling see fourth just in and far October the data so Gaidge finances about consumer what to how quarter. all, their what September forward the -- we've look of and we and

the teens sequentially, looks market or data but It you maybe channel it the is the the side. up guys like. Okay. both, guys have based least ortho follow-up you a And that off on you are then at declining sounds year-over-year, as teen like -- are

funny guys market? underlying were got How they I are And driving but a you're ortho going as seeing is earlier durable taking brackets, a dynamic and it So like the It's what kind year, wires seems channel that that? guys bit a that's share. to teen in weaker, are taking of you because now you little share this of within the think market? the little

going all wires we we one thing data in offer and and efficiencies We But line good going change down us have stimulant all sense. through up. Gaidge But that's dot. going to a that We happy to this and the to that a brackets that right now, and about again see to competitive think quarter down to going can't were presenting, and take and feel you and we're aligners the showed we're quarter. that orthodontists, good the technology draw

Bednar Piper I Shall Sandler. from Jason on? move

please. Yes,

question Johnson And Jeff our of from the comes next line Baird. from

Block question, go Stifel. comes We'll to our next next the from Jon our from question of line

All right.

Maybe questions. good. some [indiscernible] you've couple so now, a tethered of Canada. just 'XX, far, right you IPE consumer. in right? to launched incrementals, highly So You got the seem in But just

scanner. you You've got think remote We monitoring. have a maybe new

ability So own just the the in XH 'XX? grow that year-over-year on your 'XX. in revenues like where growth going thoughts for in the company even to is, XXXX. guidance, And manufacture your I'm more of year-over-year commitment to you'll with revised grow Any

sort dynamic But a more XQ just set if it, arguably you year-over-year land of rate and with of annualize a, I that, run down your number innovation. call

for growth to asking positive any moving 'XX? we own are commitment means, your And think 'XX? in not So And manufacture again, but how things have around. about a revenue clearly, do in number, growth that to what

technologies talk things obviously, are our Jon, the presented it's expand control a good Conference the amount of we're we call at certain the we Investors That's here offering, question. our penetration marketplace new what we can the and one we that those about, and areas what in that really a destiny. with is of

a anybody, standpoint that, as of affect market. some can't know you way. think fight It's sense in us as [indiscernible] a I we that in from well won't

you model a because growth I'd also in question DSP the whole continued change. that business into DSP see throw and would say I

as like of we can drive feel more those things, XXXX. the kinds get I into demand we so And marketplace in

the look just up talked that certainly different I can't -- what in that and I consumer too you in about preclude in and sentiment is through your going to efficiency gives like be we surveys us Jon. with hold also at just seem But also, the point to taken that that it gains script that pick show software my time. orthodontists

get this It's we we third out the uncertainty have about more about going that through those into So go surprised specific us obviously can the do to is. quarter. quarter. We're that that. And just to as -- of good XXXX, of what what marketplace this opportunity we feel be coming think we

earlier. And then in on the very when That half question you got you've almost was Okay. Brandon's quarter helpful. But to build guys the bag. just guide, maybe

notably XQ of changed What called deviation? in weeks the guys quarter. know things the data, in October. X you last out Gaidge's third clearly, referenced you So the Joe was September I

North seems If mean was consumer think like EMEA. not it where we But it's guess changed around you that largely is And expected? it struggling perform robust I as if a not, doesn't and answer know Did America landing and that APAC that I or it true. soft could I'm I holds like all there narrative that. weeks. in things seem X out last all dramatically the then

you the Joe, can out. anything so And than clearly, different very way things elaborate started in to give, because the exit rate the quarter was

most it our it and had call it's seasonality in it back in to did the we the is that Jon. Yes, and not our most is European of it. quarters, quarter, to vacation the And X has I way because business base major of whatever case, because difficult One and hoped -- predict. nonlinear third it's obviously way the -- Jon. this back not And the always come consistent, that or would. comes components

China [indiscernible]. States, Secondly, a cases. mean, was that standpoint. And overall feel teen. did standpoint. patients I of growth -- on we into I it and of United But wasn't as it rebound thing really from slower offset the last European from you adult lack a That in we September a is well a lack that in adult the we went did count well had on that teen big point could market, a China. we to

I went out we of so And this key anticipated it's how we is those X in. came than as that think we differently variables what

Evercore our from question [Operator the ISI. And from next Anderson of Elizabeth Instructions] comes line

about like obviously, spend, so about and think us like to on is, little demand. in a talking as margin of how weaker reduction a longer the largely SG&A if order market to to like question the of we cuts like preserve to out seeing period? continue push about what's can you up we're how like we're -- you My underpenetrated cycle think we then and sort of about like the to help a sort very of weakness And of and the [indiscernible] invest over again parse consumer like more sort about headcount If business. how penetration think in bit obviously sort cyclical need the

is John. this Elizabeth,

grow we business. to through every that process, continue investments like as invest So planning prioritizing we're go we can do we the to to able help our year, be

R&D investments at look that some of we we make. some and So the

We have at reaching want products coming make We We talked Investor preserve a of our lot we've as want product. sure that market, to customers. we're to new of properly to flow Day. about

quarter combination what investments then for we've all continuation that year see through. just of the deliver the sure that those sales we've okay, the accretion. accretion. priorities grow some looking that's we help we're make we margin What future. activities we're this of But is to but at adjustments gone profitability that in the parts also a to we looking and And We've So as we seen, business essentially, we just margin around can able properly all making that and that. the means as to calling of to, what try we go-to-market our say, fourth through to for that deliver business being And prioritize with still have is invest that at and to the on the can adjust? have of a seen

for sort the a all maybe of follow-up, it. employees Israel. of I of where situation. talk of Got drawing produce sort capacity of Can on more that obviously, as you're you about organization safety our is you in down something the And have as Is they could provide that, that obviously, are? sort not details inventory stay able things to if elsewhere, any of unfortunate hope

But now too, to this, of producing you over feel other can businesses Joe. in is a Back right those it's I -- where this situations, like now. it. reasonable like manage give this We're times it not capacity. at we I had Israel bad. there in I've don't amount

working can't guarantee what the bringing We're materials, war things But a a or As converting we materials. We're sides out. there. team. get about over those we very we we It's have. dedicated those we're shipping They're in angle now. have if the talked right terrific both worse of in team there, script,

just So the to in see the develops now, and their what upcoming fine weeks we business on homeland. have but operating right to is wait

the And Wright Morgan question from line Our comes next from of Erin Stanley.

thinking curious I'm components across Americas over that a about First I that think volume driving we some have environment? just and quarter in the of inherent of And cohort geography, key like in bit you that? teen you what's down given mentioned the specifically trends you the region. control in more by if patient how case could visibility be break And saw this maybe the you should little Invisalign segment sort

understand to have And guess, saw more this the is there's a the the at assume of second part that just of macro quarter fourth it question I what my a guidance, I expectation in then deterioration buffers, just in or just in clarification, September experience. And you a of further of I want point. the terms that continuation specifically does guess, in you

teenage again, teen saw as in we're it's that really a season. As growth the pleased important the far patients, with very teens, and we

well. performed and has Europe, also saw extremely geography, We teen every in saw it China. North the in we think strength in saw we we across America, I saw

think be us are to XX lot. Remember, First with portfolio anywhere X old. between that that. our Invisalign a are and patients years led those helps I

saw dentition. with permanent have also growth, in terrific too. really good results We areas. some But those We

like the So that where advertising sense and and John? consumers talked hitting then rolls with also the that strong platform the it's specific those want overall, through IPE digital into First of and programs then that into like in Invisalign through specific to broadly products we're the our then we move as sense indication in about and I a XXXX. we I Canada dot feel the more

that get fourth things It the taken don't better than on continues what we've saw we just in really we into And quarter, assume what Erin, September. October. in see September. And we

traffic. tough it's case starts, environment. lower So patient less a macro There's orthodontic

And and we that's on factor those based for so projection what QX. all we is what in saw our

Jeff And the our of from from comes line question Baird. Johnson next

Piper Bednar next from Sandler. question from comes our And Jason

question, up certainly please? Operator, both with next We mind and do Jason. Jeff strange. will to That's just follow the going you

Certainly.

from from comes question Nathan Rich the next Our line of Goldman Sachs.

improved margin guidance. take and the additional guided to to the actions there for the revenue despite margins Joe, for that guess and the are mentioned environment being the side you sequentially cost going business? about XQ reduction as a going can focus non-GAAP level you delivering I as give additional in margins cushion demand operating business up fourth base should margins, on an you the the on quarter yourself some in forward? we we think about Even good think forward, uncertain in

of the the us of have You've enough -- know kind in we our to a been operating watching certain each of sense profit our that deliver. long quarters personality

You order about. and we see but to that we quarter, margin pull the the fourth operating good levers where about that right deliver in John the now feel talked can can in we stand

environment think that I have responsible more technology, we'll So be cost. we in uncertain to to than -- demand investors I just standpoint, focus anything, on this invest going areas. the want understand from in we're those a We'll and while I

John, always the will areas rationalize in in we're to can prioritize profit of that we operating different in where add also sense you closely that can looking help area. we on? anything want where But

mean I it. that's

But to basis. benefit make see as there can our properly to being this sure able finalize -- So said, plan invested year. margin Joe want at and for we We that got as well we as see improvement. time on we're next to deliver look in be prioritizing that a as but operating to technology have we'll all investments. And a like of able we margin the our lot coming, we we're we year that see

if And could follow-up aligner Okay. I Great. just the volumes. for ask XQ guidance a on clear

to quarter had that up, given like off saw sounds together, shaped through level the think specifically? we about, of I you in improvement adult XXX,XXX. adult that fourth for should expect about what should in XXX,XXX don't cases quarter. guess and I modeling had a I how guess, September you we when it the said decline September adult in the think take the you talked guess, that expect I cases how relative we fourth

showed up at well when down with as to what in we I Nathan, pleased comes based you you that. it things, think see adults We're think in quarter. down Seasonally, well. like in the look third the far and said, I would on October, so I saw in teen expect September And fourth quarter.

line the from Brandon Couillard next Jefferies. question from our And comes of

be you clarification, chance a John, Just the on extend it willing loan adult if you're whether some or may stab and a U.S.? Or that Is to of at the the behind Joe or customer to in psyche well? student sentiment some also the of that outside in And base. trends [indiscernible]. the any have repayments predominantly factors not is as take contributing U.S. that

third are teen big that. obviously we of component it saw Remember, but America, across large saw in a [indiscernible] quarter, quarter geography. North but is that adults a We each adult

up up bounce on that a expect quarter John, the all as margins, well? just would margins sequentially operating with Or you fourth down to then sequentially. Is And margins from gross Okay. OpEx? follow-up, coming [indiscernible]

on sequentially to we was expect -- talked work we're we the specific a restructuring and kind non-GAAP to a basis, right of now, from other basis sequential down about margin our margin of sure margin. gross on working make the guidance, include When op some QX. GAAP gross And margin, give on guidance improvement we try have things on given down well. we've that but didn't as that down our that we to QX we But to

question line from of Mike comes of And our Ryskin the Bank next from America.

couple here. real quick a got of I

me. Great. hear can you hopefully, First,

being other and it the or in you want announced the you panicking and some peak you held to and XXXX I thinking back I'm growth First, and in dental ready one space rebound. discussed. sort of you invest fast I wanted want of of to ask and the on just when powered -- some competitors that players sort be as argument to layoffs some for was to sort and saw the your layoffs everyone through transient of of the is COVID or rightsizing

of cuts decision that. compare sheet the with anything that slowed your slowdown. a of macro rebound, on if not September why is macro thoughts mean, contrasting to just in balance terms and there free flow the strong? and implement Why related out sort and given here. the is duration contrast cash the you strong, continue pretty some is lay -- if is suddenly, said, the that to your just So as thinking this does I invest Just on mean of

a go an clear you as looked Mike, I that. Personally, we think when beginning end. I I a an anticipated kind and back all, at as of issue, that obviously clear you first that what it economic referenced, through XXXX a had have I at not -- of that was looked power that to issue. pandemic did And to

process it's -- whether of make it's kind that I a think that's with thought right wrong in that And that or to decision so mind. easier in sense,

In this than this have through I down. data, to you economic case, we're the sentiment probably mean better economic all seeing unprecedented consumer change me. I'll from seeing know go We're standpoint. an

lot a there's of uncertainty So there.

sure a that way. make going company misinterpreted we'll We're areas, and no But be we're to going we're to the rebound, to have too, right We're that I in resources to of sense that make of respond be the key disadvantage products. in too. if the about, going the of well don't right responsible and we with the want kind positioned rebound, to sure able capacity that John the that kind in a this restructuring we're talked

we're right well like now. balancing feel that I So

I contributed year, certainly of you price revenue second you the on to think question All sort earlier. Okay. about I year to And Block's point, took going it that. the the specifics on but not earlier I'm growth. this piggybacking right. thinking for ask was then just this appreciate 'XX,

have even or how think feel you price you take price you pressure we bit. the much there year? have has or demand give the to opportunity forward your take do changed. dynamics has on to potentially side, to pricing again give How are getting As potentially given and some changed to the and next to macro next about any a products, up flip how and little that ability Or again year

I sense. that we know we're price question. as through far goes, And an announcement until working our as make Mike, appreciate still But in the doctors really would XXXX.

This question-and-answer Shirley back session further to the hand I'd for does like program. any conclude the remarks. Stacy to program today's of

you, thank call the for conferences financial to and upcoming look meetings. at joining speaking Thank you you industry forward operator, to and today. We

will please get any our on follow day. we Investor Jeff up to questions, Thanks, great with back and a have And Relations If Have call you everyone. one-on-one. Jason, certainly you and the speak the team. after

does for the gentlemen, conference. today's This conclude and in ladies you, participation program. your Thank

may Good day. disconnect. You now