Align Technology, Inc. (NASDAQ:ALGN) Q4 2022 Earnings Call Transcript

Jonathan Block: I’m sorry, I know it was to clarify. That was just 2% to 3% sequential, John, correct from the 4Q to 1Q?

John Morici: Yes, that’s correct. Okay.

Jonathan Block: Okay. And sorry, the second question, just on the op margin, I think you said 18% non-GAAP for 1Q greater than 20% for the year. I’ll just sort of load up a modeling question here. Do we think about a sequential improvement for each of the quarters throughout 2023? And then — that might be for John. And Joe for you. Just talk to us on how you’re comfortable on that OM guide, when you still have a lot of moving parts with the economy, you’ve got what’s going on in China? I think you framed it as a fragile environment. How do you get comfortable with that OM guide there’s enough wiggle room, I suppose, in the OpEx where you feel you could titrate spend accordingly?

John Morici: Yes, I’ll take the modeling question, John. Yes, you would expect that just like we have in maybe prior years and so on, as you start to get that volume leverage, you’ll start to see some of that margin improvement as you go throughout the year. So kind of starts at that lower point and you would model it to see some improvement as you go through the year. And like we said, total year slightly above the 20%.

Joseph Hogan: And John, on the OM guide and the confidence is related to what we see right now and what we think is some macro trends that are much more stable than what we’ve experienced before. So from that, we understand our costs, and we know what we have give and take. And John and I watch it closely and we obviously manage it as a percentage of the total revenues are 2. So revenues have to adjust. We have to adjust to. But again, I think we know what the levers are in this business. And within the context of stability, we feel we can manage to the numbers that we’ve given.

Operator: Our next question comes from Nathan Rich with Goldman Sachs.

Nathan Rich: Joe, I just wanted to kind of follow up on your comments about starting to commercialize. Obviously, product and technology cycle that you seem very excited about in that sort of ortho and restorative vision. I guess could you maybe just kind of help crystallize that for us in terms of how that kind of come to market in 2023 and the kind of type of investment that the company needs to make to kind of go after that opportunity?

Joseph Hogan: Nathan, overall, obviously, we do spend a significant amount on R&D in the business. And the foundation of that is the history of Align because basically we realize we’re a revolutionized digital orthodontics overall. But what we see is it’s not just invention for inventions sake, we’re always after, how can we do these cases faster, how do we do them more predictably, how do we make it simpler for doctors, a better treatment for patients overall and experience? And just to give you one statistic, right? So versus wires and brackets, which you talked about in the script. On an average, we do patient cases 5 months fast and 35% fewer visits to a doctor. And you do that from technology, right? You do that through remote monitoring, you do that through the consistency of your algorithms and moving teeth and knowing when those seats are going to land as long as patients were.