Align Technology, Inc. (ALGN) Earnings Call Transcript & Summary
May 30, 2024
Earnings Call Speaker Segments
Jonathan Block
analystSee we're going to get going and we're going to open Day 2 from a company perspective, Align technology, and we're pleased to have on stage their CEO, Joe Hogan, and their CFO, John Morici. Thanks guys for coming back, participating again this year. No shocker I've got a pretty long Q&A talk truck. So we're going to jump into things. If you guys have questions, throw up your hand. But I'll start where I'm getting the most, call it, incoming or questions, and it's maybe just on the environment or the overall environment.
Jonathan Block
analystOver the past couple of months, some of the macro data points have gotten, I'll call it, a bit more mixed. Notably, U.S. consumer confidence, what you guys have said, it's a relevant metric for your company. How do you guys view the current environment in the US? And then are there any distinctions to call out between the U.S. versus what you might be seeing and experiencing in EMEA and APAC?
Joseph Hogan
executiveI'll start off, John, we both live this every day, John, is, first of all, when we ended the quarter, first quarter, we talked about stability. Stability versus 2023 and we stay with that feeling overall. APAC overall is holding up well for us. What we see in United States and what we see in Europe are very similar in your question in the sense of the consumer being muted somewhat. But still, there's a stability in the sense of what we see across those dynamics. Latin America, we feel good about it. We feel good about Eastern Europe and Africa and that part of our business, too. So overall, again, we use the term stability. I know the consumer confidence in sea drop from Michigan standpoint, somewhat challenging. And look, 10-point drop's big. It's not something that we'd look at because you understand the lag correlation that exists there. But it's also interesting that it's still 5 points above what it was in May of last year too. So if you flip back to that end too. So it's a big drop, but also we've seen it before.
Jonathan Block
analystOkay. John, anything there or...
John Morici
executiveNo, I think that's what we see. And I think we've taken the approach as a company under that stability, and I know we'll probably get into a lot of that. But there's a lot of new innovation that we're actually introducing that has given our sales team a lot to be selling that really builds off of that stability like Invisalign Palatal Expander, with Lumina that we just launched, really gives us an opportunity to help build off of that and really create our own momentum.
Jonathan Block
analystSo maybe just to push a little bit. If I get the incoming of like, look, these guys gave guidance in '23. Consumer confidence really crash and then they had to draw the guidance. Come on, John, what's different this time around, right? That's the incoming I'm getting. Would it be fair to sort of say, yes, U.S. consumer confidence, one, it hasn't crashed, to your point, Joe, it's come in. But there are other dynamics you called out APAC, you called out LatAm and you're more on your front foot with the product cycle that's still allowing you to operate in an overall net worldwide state consumer.
Joseph Hogan
executiveIt's a good summary. Yes. Good summary.
Jonathan Block
analystOkay. Okay. I'll push forward then, and I'll move right to gross margin. It's funny. I think going into the first quarter, there were so many concerns on the top line exit rate in 1Q. And then would you guys do? You put up a good quarter, you beat you raised. And then I think some of the concern moved to the margins, gross margin and notably on the clear aligner side of things, John. So maybe just talk to us a little bit, we isolate COGS per case because you take an ASP, the clear aligner gross margins have compressed. So the implied COGS per case has moved higher. Why has that happened? What could slow the increase? And is there anything to rely on, if you would, on clear aligner gross margins before maybe we get to direct fab further down the road?
John Morici
executiveYes, I think when you look at that gross margin, very dependent on utilizing the facilities that we have. So we're still expanding out some of the Poland facility that we have as we increase utilization drives additional productivity. As you said, we've taken price increase. We saw a price increase in the first quarter. You get part of the quarter, maybe 2/3 of the quarter in terms of that price benefit. And then we also have offsets in labor and other changes that really kick in at the beginning of the year that we have to make sure that we can try to offset. But we know how to play and operate in a productive way. It's a matter of continuing to do that. Volume really helped. And as you said, as you get to more to the direct fab, as you scale that, it takes a lot of productivity.
Jonathan Block
analystOkay. And Joe, I think part of the positive surprise has been ongoing price realization, nothing out of bounds or overstepping. But even in a more competitive environment, your ability to innovate, highlight that to your customers and have some price realization behind it. There's been other selling strategies like 3 x 3. Just as we look forward over the next couple of years, do you still feel like that's at your disposal in terms of your willingness to realize price a bit?
Joseph Hogan
executiveI mean we have pricing power in the market. I think we show that every year. I think we're responsible in the sense keeping up with inflation or pricing to value and what we have, John. And I can consider with what we offer in the marketplace. And our customer base and all that, we can continue to drive price when we need to. But it's not unlimited. There is a big price inflection point in this business. But I feel like our accounts -- though they don't like the price increases, they understand the value that we're bringing to them and many times they accepted.
John Morici
executiveAnd I would say the biggest change in the pricing philosophy that we have is it's not typically across the board price increases. You price certain products that change in terms of what it costs us to serve those products. And so some products like the 3 and 3 haven't seen a price increase really in 2 years because we want to be able to drive that type of behavior, get doctors to use that 3 and 3, maybe supplement it with the subscription program. From a margin standpoint, that's a good trade for us.
Jonathan Block
analystI think if I got this right to that point, one of your prior price increases, I believe, was more specific to the comprehensive portfolio, which is the more differentiated from your standpoint versus the lower acuity and so you're finding your places where you want to leverage and lean into.
Joseph Hogan
executiveJohn, I get one [indiscernible] and maybe too much of this as we watch this through our NPS scores really closely. We know when we announce those NPS scores, we have taken a certain drop and we watch it how fast they do come back and those inflection points. So it's not that we're not into the marketplace. We watch it closely, and it's a very similar pattern in a sense of -- you can see the doctors, they accept it, but don't necessarily like it, but then it comes back pretty quickly, too, given the logic of the price increase.
Jonathan Block
analystOkay. Maybe one last one on sort of a gross margin topic. And again, we'll get into the direct fab conversation in a bit. But John, is it trying to stabilize Clear Aligner gross margin in the near term, but I think there are several tailwinds in my opinion, to systems and services, right? The services continues to positive mix shift that's got a higher margin. And again, we'll touch on this, but Lumina, I think, is gross margin accretive versus prior system. So if I think of total corporate gross margin, is it -- yes, the tailwind might be in systems and services in the near term and then longer term, maybe that flows back into Clear Aligner once direct fab starts to scale?
John Morici
executiveThat's the right way to look at it. We have -- we have a lot of margin place. Obviously, we want to be able to grow our business, and that helps with utilization and productivity, but a lot of margin plays around it, like you said, with Lumina, where new scanner, it's a lower cost, higher ASP. So that helps us from a margin standpoint in terms of the overall company, but then we still have to be focused on driving that productivity and increasing the margins on Clear Aligner.
Jonathan Block
analystAnd Joe, maybe I'll turn to you for the SG&A leverage. Our SG&A per case is a metric that we look at and talk to us about you've got a dynamic environment with the consumer, how you titrate spend. And then your level of comfort that you can still realize leverage in SG&A per case, even though the other guys, they're not really getting out there in advertising or they're trying to pick off the customer when they walk through the door. So even with those headwinds, are you still able to titrate the spend effectively and drive some leverage in SG&A per case?
Joseph Hogan
executiveJohn and I watch that real closely. We feel we can. I mean, John, when you look at our we -- a big part of what we drive is our brand through consumers, those consumers that go into the doctors and you know this better than us in a sense of insisting on Invisalign as the brand that they want. Given that depending on how you want to rate our market share anywhere between 75% and 80%, we're still predominantly were the recipients of that. But I would say -- and John, you can jump in. I'd say over the last 3 years, we've learned much more specifically top of the funnel, where to advertise. We're much more diligent in the sense of our doctors using our brand and trying to switch us to a competitive aligner in some way and taking actions against those doctors to make sure our brands removed. We've really sharpened our focus on that, too. So I think how we advertise, how we interact with our customers in the sense of that advertising spend, who we send those accounts to, I think we've gotten better over couple of years.
Jonathan Block
analystMake sure you sort of have that leaky bucket, right? Where they go through a different door and it goes to someone else.
John Morici
executiveYes, there's always going to be some. But I think when we -- when you do some of that advertising in conjunction with some of the new products that we have, like Invisalign Palatal Expander, that gives -- drives different awareness, helps differentiate our products versus others. And this is new product that no one else produces. So you do things in a way that give us a differentiation, which is great. And as Joe said, the investments that you make, a lot of it you see in the U.S., but we also make investments outside the U.S. where you can see a big change in driving awareness, getting people to come to our website, invisalign.com, then put in their ZIP, be able to find out a doctor close to them. We watch that very closely and can almost titrate that on a real-time basis to make sure that we're getting the right return.
Joseph Hogan
executiveOkay. John, last point in that notice on IPE, we had initial ad that we were in, and we're going to follow up at the end of the quarter. We had the strongest consumer response on that IPE ad and then a kind of ad that we've ever run...
Jonathan Block
analystShowing that, that market is ripening and getting some...
Joseph Hogan
executiveYes. It's showing that the general population has experience with the hyrax device, tightening the screw at night. And there's a certain amount of empathy, I think we've seen.
Jonathan Block
analystAnd we'll get into IP. I think maybe just one more on the margin side quickly. Taking a step back, gross margin, okay, maybe you have the tailwinds from the systems and services in the near-term direct fab long term. You seem to feel good that you're doing the right things on SG&A. R&D, right? It's a hot topic. It's funny. We had a doc up here right before you. And he was making the case of the other doc to get a Lumina cause he's like, "Hey, you have no idea how much R&D these guys spend." And I said, in my opinion, maybe a little too much. But what do I know, right? You almost hold an extra alumina 30 minutes ago. So this is -- it's been 6% -- it was 6% of sales from 2018 to 2021. We went to 7.5% in '22, it's got an 8% handle. You got Lumina through, which I think was a 3-year plus project. You got IPE through that clearly took some time, direct fab still out there and you're working on that. But maybe walk us through, is this a high watermark for R&D as a percent of sales? And when can we expect or can we expect the leverage to return over the next couple of years?
Joseph Hogan
executiveLet John hit the number percent, and I'll give you the specifics on...
John Morici
executiveOkay. I think from -- it's less about the percentage, it's more about the program spend that you need to make in order to deliver these programs. And like you said, there's many programs that are delivering now, and you're going to see the revenue on. It's really moved from the research part of it to develop it. And then ultimately, you don't need to spend on it because you've actually introduced the product. So I think we're getting to that point, I would expect that as a percentage as we look forward, it would not be this high going forward. You're going to have that revenue. But we're still going to make investments where especially around places that really help get us to that next level from a product standpoint? And maybe Joe, you can deliver on that.
Joseph Hogan
executiveSo if you look at when we started investing heavily, probably 3 or 4 years, we really started to invest heavily into the 3D printing piece on the Cubicure side and the new resin, John and whatever. And that's expensive. And we have a group of people in San Jose, California, that are combination of chemists and physicists and all the other kinds of engineering capabilities you need in order to do this. We put in state-of-the-art labs because we had to synthesize our own materials and to make those things. And so I would say that was an inordinate spend on top of that 6% that historically hadn't been part of the company...
Jonathan Block
analystIt was all incremental.
Joseph Hogan
executiveYes. But when you look at it, John, I mean, it's a phase change in the sense of, as we talked about last night in a sense of how you actually make an aligner, what the cost of the aligner can be, hopefully, from a clinical standpoint, what it can do in the marketplace. So it's one of those opportunities. It's probably the biggest change in any business and I've run some pretty big businesses. Of any business I've ever run, biggest technology change I've ever seen in my life is the opportunity through 3D printing, direct 3D printing of aligners.
Jonathan Block
analystOkay. So embedded in that R&D number, like you said, is a lot of the incremental expense associated with this massive initiative, which, in your opinion, Joe, might have -- sorry if I'm putting word in your math, correct me, the highest return associated with it of any business that you've run when we look out over a number ...
John Morici
executiveAnd it's investing in that mindset to be able to invest in business and products that we know it's difficult to follow. We know that providing products like the direct fab type of product where doctors have the ultimate flexibility. They can create a design and a product that really is useful to their practice and give them that design flexibility and provide the predictive type of treatment, that's where we want to invest because we know it's taken so much time and money to get to. We know that it will give us -- and maintain our competitive advantage.
Jonathan Block
analystAnd I'm going to push on that a little bit, and I'm going to run some annoying math by you, John. We do have it in the note that we published last night as well for investors. But direct fab will eliminate -- I think you've talked about 80% to 90% of the plastic needed to fabricate the aligners right? Because you no longer printing the negative, you're just directly printing the aligners. So 80% to 90% of the plastic goes away. Plastic is 20% to 30% of your total COGS. That's a fair exercise?
Joseph Hogan
executiveYes.
Jonathan Block
analystOkay. So you run the math on that and just straight math is it could be a 500 basis point tailwind to your clear line of gross margin. If I went to the extreme, if I did the 30% of COGS and the 90% being eliminated, you run closer to 700 bps. Again, sound math. And then the question that maybe that we have to determine is what percent of your business -- or pardon me, what percent of your clear aligner volume moves to a direct fab process because you're probably not going to entirely eliminate or move away from your SLA? And Joe, do you want to talk to some of those dynamics?
Joseph Hogan
executiveYes. I mean, first of all, on your COGS equation, everything else lines up with just what John...
Jonathan Block
analystThe Excel spreadsheet works.
Joseph Hogan
executiveExactly. Your math is good. surprising, but good -- but when you look at overall how much clarity do you have 5 years down the road, you're not sure. But we still have a lot of productivity we can drive in our normal thermoform aligner business. And there's productivity in 2 parts of it. One is how you do treatment planning. We spent an [ important ] amount of money, too, on being able to use -- this is way before artificial intelligence became this thing to talk about. As the CEO, for the last 3 years, we've been finding how in the world can you do [ touchless ] cases? How can you scan a case haven't moved through, doctor make to change on we call 3D controls, which is like a photo shop, make a few tooth changes send it right into manufacturing. So taking a 2-week process, it was kind of like an analog hairball between 2 digital systems and turning that into a seamless kind of a play. We're pretty close on marching forward on that. So we feel like in the future, we can be very efficient on vacuum formed aligners, and we can be very competitive with it, too, in that kind of mode where you want as a scan, and you'll be able to ship with doctors' preferences.
Jonathan Block
analystLow acuity cases, sorry, your low acuity case, someone comes in low acuity case, you scan. There's almost just a quick turnaround. Your software is able to turn around, boom, you are able to print and you've got it off the old SLA process.
Joseph Hogan
executiveJust to take it -- if you were in a doctor's chair, our vision when we feel we'll be there within this 2-year period we're talking about new scan, it's called a 5-minute ClinCheck. Your whole system comes, right. You'll see your smile, you'll see what it looks like, but your whole case treatment is there, 40 aligners, 50 aligners, it's done. And you in a chair can say, I'll go with it. Here's a quoted price, you push your button and you go. It's a completely different dimension than how we grew this business.
Jonathan Block
analystSo that's going to be that legacy SLA and maybe that's more pertains to the lower acuity cases. How about that 3D printing the direct fab? Maybe walk us through that? And is there rough numbers to think about in terms of conversion to that percentage by a 2026 timeline?
Joseph Hogan
executiveYes. Well, on the 3D printed aligners, what we feel and we have to prove it from a clinical standpoint is today, when you vacuum form, we use all these terms, so in vacuum form, you start with 30 mils of sheet and then you suck that down over top of a mold, right? So we're talking last night, if you get to incisor or something that 30 mils might be 10 mill at the bottom of your longest teeth. It's hard to move teeth with 10 mils of plastic. It just doesn't have the right type of [ modulus ] to that kind of thickness. With 3D printing, forget about the efficiencies of 3D printing for a second and saving all the plastics, we can put the plastic where we want to put it. So your molders are the toughest teeth in your mouth to move. If we can put 40 mils on your molders, instead of what you end up with 20 mils in a vacuum form at 15 mils, we feel we can move those more as faster with more certainty than before. It only makes sense from a mechanical standpoint and physical standpoint that would exist. Also, if it's a Class III, it's a deep bite and you're going to have attachments to it or you want to use bite ramps. And bite ramps are things that we really struggle with because it's hard to incorporate that into a vacuum forming kind of a system and bite ramps are -- if you have a deep bite or Class III, which is an over bite. If you want to keep your front teeth from going down too far, you put ramps on these things or stop those teeth overall. That's a highly kind of manual process outside of our normal what I'd call automated process that we do. On 3D printing, it's simple. You tell us how thick those bite ramps be, how many do you want? You can put them anywhere. Mandibular occlusal block. We work on that. We're just finally launching that, taken 3 years is a secondary operation to put those plastic blocks in the back of your occlusal area in order to make those. 3D printing, you just put them. So John, the freedom of design, the ability to put material where we want to put it, all those things tell us you'll gain efficiencies, but you also gain a certain amount of clinical capability and certainty that you can't do on normal vacuum forming. It's a long answer to your question.
Jonathan Block
analystVery helpful. No, very helpful. And maybe just to put a bullet in that a little bit. If I look at your business, [everything] flow, but roughly 70% comprehensive, 30% noncomprehensive. Is that maybe the right direction to think about of, hey, comprehensive, you want the advanced features and functionality. Maybe that's what accompanies the direct fab process longer term, the lower acuity, turn it around SLA might be a good ballpark figure to use?
John Morici
executiveI think longer term, we'll eventually get to direct fab being over 50% of our business, I would expect. But there's going to be, for a long tail, we expect that some of the SLA production that we have will continue for a period of time for those low acuity cases, retainers, things like that, that may be just turn into something that a doctor wants and doesn't have the customization that...
Jonathan Block
analystCan you be 50% '26, '27 direct just to tie back to the 500 to 700 bps total math, can you be around 50% of your valves, direct fab '26, '27?
Joseph Hogan
executiveThree years out, that could be in that range.
Jonathan Block
analystOkay. Very helpful. Thank you. Any questions, direct fab, math or anything that we've covered so far?
Joseph Hogan
executiveAny kids who need treatment or anything out there?
Jonathan Block
analystOtherwise, I'm going to go to the product cycle, and we'll touch on IPE. So Invisalign Palatal Expander you rolled out in North America, you talked about the campaign with a really good hit rate. I think you're in the midst of what you're entering APAC as we speak and think about EMEA being more 2025. Is that fair?
Joseph Hogan
executiveYes. Well, I would look at EMEA itself as being more fourth quarter this year. Certain countries in Asia, like China and some of the other countries in Asia, more first quarter 2025.
Jonathan Block
analystOkay. And are you in areas of APAC though I think it launched in some areas...
Joseph Hogan
executiveNo, we're in Australia.
Jonathan Block
analystAustralia, okay.
Joseph Hogan
executiveWe will consider that part of Asia.
Jonathan Block
analystJust for us on manufacturing, this is technically your first 3D -- or pardon me, direct 3D-printed products. So you got to get it right, pardon me. And so Joe, talk to us on how that process has gone, scaling up the process, fulfilling demand, any stumbling blocks or surprises, positive or negative that you've encountered?
John Morici
executiveHonestly, we -- on this particular 3D printing process being working IPE about 3 years on a turn. And we have a great team as far as how to scale in general for 3D printing. So Shiba and Emory and the team, you saw the move with Emory, we can talk about. In short, there's been no surprises. Frankly, I feel really good about how the manufacturing people have taken the process from R&D and actually improved upon it within the first 2 or 3 months as far as efficiency, in other words, how much plastic you get out of a certain load, the consistency of what we're doing. And so right now, scaling has not gotten in front of demand too much as we start off here, which is what we want to do, to make sure that we keep that together.
Jonathan Block
analystOkay. And maybe we'll go to the Emory topic in a little bit. But to stick with IPE for the moment. Unlike some of your other products, when you rolled out mandibular advancement, right, you've got to advance the mandible, that could take some time, feedback is on a lag. But for IPE, you're expanding the pallet, some of these can be 30-, 60-day cases. So you've had people that have ordered IPE, completed IPE, we're probably going to try to go after that in our 2Q survey. But Importantly, what have you heard? What has been the reaction? Are they getting the expansion that they desire? Are they seeing the compliance, the kids are wearing this all the time, but maybe talk to those variables.
Joseph Hogan
executiveWell, I think at the -- recently in New Orleans that you attended to, you could see the docs in that booth, there's a lot of excitement around the IPE. And so within -- that's what's great about this is you do get the feedback so quickly versus the normal Invisalign case that we had launched like mandibular advancement takes 1.5 years before you really understand where it is, I'd call it a huge amount of enthusiasm from doctors. Now the broad orthodontic community when we first launched said, you'll never split the suture with a removable device. And so [we got a streaming] in the back room, we just kind of squint our eyes and say, do you really think we would do this if you can't make that work. And so I just -- I'll tell you one story, so we'll get into the specifics. So when we were at the ortho show down in New Orleans, I had a doctor come up to me from Dallas, Texas. So we do these roadshows where I just take my staff out. We jump into plane, we dropped down. And all of us will go out and make calls for 2 days, 3 days with doctors and come back. And we learn together and we will be agile and will make changes in the organization whatever. I met this doctor in Texas. His name is John, and he was using mandibular advancement, but he wasn't using Invisalign first. And I was just giving a lot of grief, right? He says, I don't -- just don't want to do young patients. It doesn't make any sense. I have a hyrax device for suture splitting whatever. Long story short, he comes up to me, says, "Hey, do you remember me in Texas." I said, "Yes, yes, I remember you, John." I said, "Are you using any first set." He says, "No, but I love IPE." I said, how many of you got." He said, "I've done 15 in the last 2 months." And I said, really, said, yes, he says, look, I'm just coming here, 2 days before that. He says I was taking a hyrax device out on one of my former accounts. And it became immediately when I'm taking that device out an extraction episode because that kid was going to lose his tooth. And the kid's screaming, the mother's crying, and I'm saying I'm never going to use a stinking device again. And he says, what you guys did is brilliant. And I think the great thing is we see the enthusiasm with this. And I think you get more feedback from docs and how easy this is and patient-friendly it is, you'll start to get -- So right now, our utilization rates, John, we're seeing orders. It takes about 17 days from the data that I've seen so far before they start ordering the next one. And then about 14 days because they're getting confidence as they see the results to continue to work.
Jonathan Block
analystOkay. So can we maybe try to quantify and go through some math behind IPE? John, maybe over to you? I know it's or -- I think it's the list is $700, but should we think more of a realized ASP of $450 to $500 because you get your volume breaks...
John Morici
executiveYes, $500 million is a realistic ASP.
Jonathan Block
analystOkay. And then as I pull my notes going back, I got Invisalign First did 32,000 cases, 18 months post launch. Just talk about that as an analog, good, bad, low, high, why, right? I mean that's Phase I treatment arguably.
John Morici
executiveWell, in my opinion, it's low because I think we have a product that we know works. There's a huge amount of demand for this type of -- I mean you think about there's 16 million orthodontic case starts for teens every year and upwards of 10% or more could be done with IPEs. So you've got 1.6 million potential patients out there. And as Joe described, you have more doctors coming in. We're seeing more and more [simitors] start to use the product. Right now, it's just -- it's North America and ANZ. And those doctors are getting confident that they're seeing the results. They're seeing the split. They're seeing the compliance. They're seeing that it's less pain and all the other good things about it. So they're using it more and more. So I look at that, say, Invisalign First, it was a good launch that we had. It just took time to actually start seeing those results. And it addressed a certain part of the portfolio. But I think this really gets that to 1.6 million potential cases. And it also addresses the shortness of the time for treatment. So I would say if it's not above that, then I'd be surprised.
Jonathan Block
analystAnd you're seeing the good reorder rates, Joe, that you alluded to earlier. So part of this is like we can all do the math from the 30,000 and the $500 million and we'll get there, and that's all incremental revenue, right? Because you didn't play largely incremental. I know there's Invisalign First. But maybe talk about the attachment rates or how that could translate into the alignment side of things, right? So at AAO, I think you were running a little bit of a bundled approach, maybe roughly $200 off if you proceed with -- from IPE to Invisalign First, does it increase that attachment rate? What does IPE do for your team business on the Invisalign side of things?
John Morici
executiveI think it does increase our attachment rate. We just got to get a percentage on it, John, at some point in time. And what we're seeing is doctors kind of struggling with, okay, how do I want to do this? Do I want to use the first product in conjunction with IPE to move the lower jaw to try to bring those teeth in alignment at the same time. Do I want to just do IPE first, do I want to rest it for 4 months and then want to move first in again. But in general, I think the doctors, especially the ones that are comfortable with, first, see incorporating IPE in this way makes sense.
Jonathan Block
analystOkay. Very helpful. Maybe I'll just move to Lumina. I want to make sure I touched on that in the last couple of minutes. Your first quarter systems and services results were really solid. They were up Q-over-Q. That's usually not the case, 4Q to 1Q. John, I'm going to go ahead and try to real-time math again, in your filing, in your 1-Q, 10-Q, you had an additional disclosure where your upgrade revenue in Alumina -- sorry, your upgrade revenue part, was $9.5 million right? Joe, you've talked about in the past, you got 100,000 iTeros out there, 1/3 are upgradable. Those are the 5D Pluses. That's where you can buy a [indiscernible] for an extra 12,000, 15,000 and go to Alumina. So if I just do some crude math and you've got 33,000 that are upgradable and I say 1/3, I land at 10,000 of those move over the next 24 months at 15,000 it's $150 million. I think we saw $10 million in the first quarter. What's off about that? Or is this like -- No, look, this upgrade opportunity might really materialize over the next 24 months.
Joseph Hogan
executiveBefore John answers that, though, he just want to say thanks to [indiscernible] ...
John Morici
executiveNo, the math works, and we're very pleased with the upgrades. It's doctors coming -- it's GPs and orthos. We thought may be more ortho upgrades. We've seen both, which we're happy about. The excitement is there. We're seeing that happen. And really, what we like about this is it keeps doctors engaged in our portfolio in terms of technology. Many times now, they're trading something else in, which gives us an opportunity at the right price point to be able to get that refurbish that certified preowned back to doctors to be able to use in their practice and at the right price point. So it really opens up a lot of opportunities for us in that product portfolio. And as we look forward, we'll see a lot of upgrades come through and as we saw in the first quarter. And then it also gives us the opportunity to sell new scanners, and we're really excited about that because we know that, that front edge of the digital ecosystem that we have starts with iTero. And so it's really important for us.
Jonathan Block
analystGot it. Very helpful. And then maybe I'll just sort of close in competition. I'm always going to get that question right? And so I've been sort of framing, Angel as a new kid on the block, and I saw them in AAO. And I had your rate of share losses versus the other main players. That rate of share loss has abated. It's actually sort of a 3-year low in 1Q '24. That's against like the legacy other lab guys. But Angel's relatively new they're pushing outside of China. They're pushing a little bit more into the U.S. and EMEA. Any surprises, Joe, how they're coming to market, the strategy, the pricing and what that means for a Align?
Joseph Hogan
executiveAgain, we know Angel really well. We've competing with the tenure in China. I have a lot of respect for Angel. I call them what we automate and do a lot of deep automation things. Angel uses a lot of arms and legs. In other words, the thing I talked about with treatment planning and how you make that digital episode as much as you can, they'll throw arms and legs at it. I think they scale the same way in factories or whatever. I'm not saying that it's better or worse. I'm just saying as you grow, that starts the compound becomes an issue, especially at the average selling prices that you're trying to offer these products outside of China. They are a focused, clear aligner company, I think, which makes them good. They face a lot of competition at home with Smartee, also us on the top end, Smartee on the other end, too. But in general, John and I take them seriously. But over time, what we found is just certain cases, certain acuity, how cases finish or whatever, they're going to have to get better at as they move into the Western world because of the expectations that are here too. And I'm not saying they can't do that. There's this time and distance between that and they have to spend some money to do it too.
Jonathan Block
analystAnd last question for you. We talked a little bit about this last night, but just I go back and cover you guys for a while. And ever since 2017, some of the key patents came due, but I've been answering competition questions for 2 years before that, right? So from 2015 to what's today 2024, it's been almost a decade of who's coming next, what do they have? You've taken a lot of good punches from other dental companies. You faced in office printing and the lower acuity. Once you get behind Angel, no one's really after them, and then you're closer to direct fab, which no one is going to be there for, I don't know, 10 years. And so do you feel like the narrative changes where you go more on your front foot from a competition standpoint or innovation standpoint versus what you've had to face over the past 5, 10 years?
Joseph Hogan
executiveWell, I think with Alumina and 3D printing, John, I mean, we can play the front foot in a big way, but I feel that we've always played the front from a technology standpoint. If you look at Invisalign First and how we expand that mandibular advancement and what we did with 5D Plus, all those things, what we do with the oral health care suite now as part of iTero and our digital platform. I feel we play offense. I just feel like we have a much stronger offense when you look at the flexibility we'll have on 3D printing as that ramps.
Jonathan Block
analystOkay. We're a little bit over. Guys, thanks very much for your time.
Joseph Hogan
executiveAppreciate it.
John Morici
executiveAppreciate it.
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