Align Technology, Inc. (NASDAQ:ALGN) Q4 2023 Earnings Call Transcript

Brandon Vazquez: On the guidance, maybe one other way I wanted to ask you and see if I could tease out a little bit of color on what’s assumed here. If I kind of go back to some old sequentials in the teen side, assuming that’s a little less susceptible to macro headwinds, you can probably kind of get to a low single-digit volume growth, I think, for the entire Clear Aligner business already, but probably not even including some DSP. So is that — am I thinking about this correctly that really out of adults on a year-over-year basis for full year ’24, you’re really assuming kind of flattish, maybe even down depending on how teens and some of the DSP cases are doing?

John Morici: I would characterize it, Brandon, this is John, that both teen and adult are positive on a year-over-year basis, expect maybe adults to grow faster as we’ve seen compared to — teens grow faster than adults as we’ve seen in the past, but I would expect both of them to be up and show our numbers that way.

Brandon Vazquez: Okay. And then can you just reiterate maybe both for IPE and for Lumina exciting. It seems like they’re going to ramp over the coming quarters. Are there any like key quarters and catalysts that we should think about that might take that up. You’re talking about a ramp, but we get to the next level on the ramp on any of those when they go from maybe a limited launch to full market relief, anything like that?

Joseph Hogan: Brandon, Joe again. On the Lumina side, remember, our restorative scanner for GPs comes out in the third quarter. But as like John indicated, we indicated, we feel we can sell that into the market now with the capabilities it has, but that will ramp in — that will probably be more hinged to the regulatory approvals we have to get around the world. Right now, as I mentioned, we only have the United States and Canada and ANZ. Secondly, on IPE, it’s the same thing is we’re regulatory constrained. We still have to go through Europe. And as I mentioned, IPE will come out in the second quarter in Australia and also. And as we gave that, obviously, we’ll be scaling IPE too and understanding the dynamics around that. So it’s more of a ramp, as I mentioned a few calls ago than anything.

Operator: Our next question comes from Jason Bednar with Piper Sandler.

Jason Bednar: I’m going to pile on here on the guidance, just to focus there first. You mentioned noncomprehensive mix as being an offsetting factor to ASPs. I know you’ve got that DSP factor. I had thought maybe originally you were signaling adults growing better than teens, but doesn’t seem like that’s the case just given your comments there to Brandon. But I guess, regardless on adults, are you seeing this market getting its footing back, it sounds like it, but if you are, what’s giving you the confidence? Or what are you seeing that kind of the day-to-day or month-to-month that’s showing adults are coming back into the office for treatment. And then sorry to load a few in here, but should we expect this faster noncomprehensive mix also to have gross margin benefits for the year as well? I think it typically does, but I don’t think we’ve gotten kind of a gross margin cadence outlook for ’24.

Joseph Hogan: Jason, I’ll take the first part of your question and hand the rest off to John, is we feel we’re on a more stable, I’d call it, economic platform than last year. And so the adult and teen question that you had is we expect that to carry through in 2024, as we indicated with our guidance, too. So when I look back, everybody has a clear vision backwards than forward, we look back to last year, a pretty unstable platform that we experienced for the year and the third quarter was a tough one in that sense. But I think we all see it right now, we have more confidence that at least we’re dealing with stability from an economic standpoint in most parts of the world from what we see.

John Morici: And on the noncomprehensive and gross margin questions and related to that. Look, as we have the mix that shifts through and you might have an ASP lower on some of the non-comp DSP and others that fall into that. Those are our highest gross margin products from a rate standpoint. So they’re helpful for us as a business. It’s really what that customer wants for him or her to run their practice and that’s how we balance things out. But overall, we expect that we would see benefits in gross margin just like we’re talking about op margin year-over-year benefits, we should see a benefit as well in gross margin.

Jason Bednar: All right. That’s helpful. And then for the follow-up here, I’ll ask on teens. It does look like you’re back to gaining share against brackets and wires. It looks like the kind of the second consecutive quarter of that. I’m curious if you could talk maybe bigger picture, what’s changed to what you think has changed over the last 3 to 6 months versus maybe the 12-plus months that preceded that. But do you think the share gains you’re seeing versus brackets and wires, does that have to do with changes you made to that Teen Guarantee program middle part of last year? Or are there other items at the practice level or associated with your go-to-market activities that are driving that shift?

Joseph Hogan: You can always say that at Align, there’s no single variable equations. And this is another one. The Teen Guarantee, we think is some of it, obviously, our portfolio and how we put that together, our DSP programs, the uniqueness of Invisalign First. All those things really help. And from an adult standpoint, with the firmer economic platform I talked about, I just think there’s more confidence out there that we’re starting to see lead through.