Align Technology, Inc. (ALGN) Earnings Call Transcript & Summary

I'm Elizabeth Anderson. I am the health care services and dental analyst here at Evercore. Very excited to be joined by John Morici, one of the CFOs that I've worked longest with in my career, and Madelyn Valente is here too in the audience. So thanks for joining us today, John.

Of course.

So as we get started, you've continued to evolve the product portfolio in many ways on the Aligner front. And this year, I think -- and as we finished up 2025, you've talked about introducing the 0x3 product suite. Maybe just for those people not in the weeds, let's talk about what that is. And then sort of how do you think about that rollout in terms of 2026?

Yes, it's a good question. As we look at our product portfolio and just the evolution of our product portfolio. I mean, if you went back 10 years ago, we had a product that was the comprehensive unlimited -- was 5 years, unlimited refinements. And it was really a reflection of making sure that we could get to especially orthodontists and give them the confidence to finish a case and give them the understanding that, okay, over 5 years with the unlimited refinements, you're going to get to that final position. And 3 years ago, we looked at that product and introduced a product that said, look, it's a 3-year product. It doesn't need all the refinements. We're going to keep it at 3. And based on the technology that we put in, the advancements that we put into the products, we think we can help you finish this case over this period of time. So that was introduced almost exactly 3 years ago. And now it's our #1 selling product. And so doctors like it. They are able to finish cases and feel comfortable that with those refinements, they can get to that. So the evolution now has come to -- look, as we spend hundreds of millions of dollars to improve predictability and reliability so that doctors can help finish cases, we have a product that we've been using in some of our DSOs, and they've been very successful with it. It's a 3-year product. They can get refinements over that 3 years, but it doesn't come with a refinement, no refinements to build in. And we'll price accordingly to be able to get to that. So it's an evolution of our technology that we put into the products. It's really the most important part of it is giving doctors, giving our customers the ability to choose what they want. They can continue to use, and it's still a popular product, the 5-year unlimited refinements. It's higher priced, but if that's what a doctor wants. They use the 3 and 3 that -- like I said, that's been off for 3 years. And now they can use the no refinements over 3 years and give doctors choices. And think of those refinements as almost an insurance policy. Do you want to buy the insurance policy to make sure that if a case goes off track or if it's not getting to the outcome that you want, you can have a refinement and you can build that in. And of course, in all those scenarios, they can just purchase refinements and have that. And the way we've set the accounting, the deferral -- deferred revenue that we have on those -- the 3-year, it will match what's at the no refinement product. It will just be a difference in cash flow, whether you get the cash upfront or not. But really from an accounting standpoint and the purchasing behavior of the refinements, it just will come later, and we'll account for that way. And like I said, we've used it with various customers that we've had, some of the larger customers, they love the flexibility. Not everyone uses it across their groups, but they love the flexibility in this product line.

And how do we think about the sort of ASP differential? Like how do you find the right fit between sort of the value you're obviously providing to the practice and then allowing them to capture some of that?

Yes. So from an ASP standpoint, when you have the no refinement, there's no future obligation from a revenue standpoint. And we book all the revenue upfront. Now if they need a refinement in the U.S., it's at $180 per refinement. They would just pay for that as they went. So the case -- the original case is always the volume that we have. The refinements then become part of ASP, but it's just on a future basis. So it really just gives doctors more flexibility. And I think the basis from it really comes down to the technology that we put into the product. Some doctors can finish in no refinements. Some doctors need 1 or 2 refinements. Some doctors that are new or maybe taking on complicated cases want more refinements. And I think that's the product evolution that we have in our portfolio. It's just making changes and giving flexibility to these doctors.

Okay. That makes sense. And remind me, you're doing it in the U.S. first starting in the beginning of '26. And then when does the rest of the world?

You'll see different versions of it coming out in Europe and APAC as we go through the year. But we'll have North America set, like I said, some of the DSOs, some of the larger organizations that we sell to have been doing this. We've seen good uptake and traction, and it will be out broader in the first quarter in North America.

That makes sense. And is that -- do you see also as you move to like the 3x3, you're seeing more uptick in the DSP program, too? Is that sort of -- do you think of that as like an accompaniment to that as well?

That's a good combination because you can always do a refinement on something like this. But the DSP, which is our doctor subscription program, and that gives the doctor the ability to just purchase aligners at a set price. They commit to a certain amount of aligners that they're going to use for that year. and that's a price per aligner. Most of that is for retention, but there are some touch-up cases that would be there. Maybe they don't need to purchase a full refinement, they need 4 or 5 sets of aligners, and they can use their DSP allotment of aligners to be able to supplement that. So that's another part of the portfolio evolution where we didn't have that 10 years ago. We didn't have that 3 years ago. DSP has been more recent and it's very popular. That was introduced in North America a couple of years ago. And now it's been released in Europe and very successful in other parts of the world soon to come.

That makes sense. So given sort of that roll-up and the mix in some of the new countries that have had higher growth and FX, how do you sort of -- which is always hard to say, but how do you sort of think about the ASP trend? I think that's been something that there's been some worry about, but I think you've been talking about it sort of being very focused on that kind of low single digits based on the mix forecast.

Yes. So when you think about ASPs for us, there's 2 major mix factors that hit our ASPs. When we have country growth in certain countries that we're in, the list prices are lower. So you grow fast and we're growing very fast in India and Turkey and Latin America and parts of Southeast Asia, Eastern Europe, the list prices for our ASPs are lower. And so you get that country mix. It's almost kind of in a small way, what happened when go to the -- go from the second quarter to third quarter, China becomes bigger. It's a lower list price. You see that ASP impact. It reverses when you go from third quarter to fourth quarter. China is not as big. Europe becomes bigger at a higher ASP. So there's going to be this mix effect that you have within. And -- but that doesn't mean the gross margin rate is impacted like that. It really comes down to the fact that it's these countries. The other part of the mix is product, what you were describing with like a DSP type touch-up product or even Invisalign Palate expander, those might be ASPs that are $500, $600, $700. They're less cost to serve. They're just kind of a one and done. That's what the doctor needs to be able to help finish a case or just do a minor movement that they need. Lower list prices, that will impact our ASPs. But when you think about the gross margin on all those types of products, the gross margin is great, 75%, 80% gross margin because many of those -- the doctor set up templates and we've worked with them to get their preferences in. We know exactly how to treatment plan it. There's not much back and forth, if any. And then it goes from the case accepted to manufactured and shipped out and is very, very efficient. So ASPs will be impacted by that. The other part of ASPs, as doctors do more and more cases and they work their way if they're on the Advantage program, they get a bigger discount as they do more cases. And -- but it's really designed to drive that utilization anyway. So that's a part of that. So when we think about ASPs just in the near term, 1% to 2% decrease related to that. You're going to have new doctors coming in. We sell to more and more doctors. They come in at maybe not as complicated cases. You have advantage tier changes that impacts and then you have the country and product mix that's a part of that. But in all cases, we have to make sure that we're managing the gross margin, the gross margin rate on that. And everything I've described there is set up to be able to help us improve our gross margin.

So we should think about that as having some -- a little bit of upward trajectory...

In gross margin, our expectation, and we talked about next year, 100 basis point improvement in our op margin. Some of that is related to the gross margin improvement that we expect in this product portfolio and the kind of the evolution of that. And some of it is some of the restructuring that we've done to really kind of rightsize our business, get closer to customers, improve some of the equipment and really the next-gen equipment to be more efficient with our current manufacturing. We wanted to make sure that we got in front of that, and we've made a lot of good changes this year that we'll see those benefits as well.

Nice. Okay. That makes sense. And then maybe switching to the U.S. to talk about that a little bit more specifically. What have you learned in 2025 about how to support clear aligner demand in the U.S.?

Well, U.S. is -- gets a lot of attention. Obviously, it's a big part of our market. What we see in the U.S. and in certain markets, but I'll stay with the U.S. that to get in this environment, which I would classify as more stable now, it's definitely we've seen some stability. It's not a great consumer market in terms of purchasing our products because it is somewhat discretionary, maybe not as much for teen for adults, it's somewhat discretionary. But in this environment, with -- when you have higher inflation, you have interest rates that are higher and so on, you've got to do a good job of being active with those potential patients. And so we use the word active versus passive. So what do we mean by active? And our DSOs are doing a good job about being active. So active with a potential patient is when they come in, you're scanning them. You're giving them visualization. You're showing them the tools to say, hey, this is how your bite is misaligned. Here's where your teeth are colliding. Here's where a chip that you might have. Here's how your teeth looked like now with your face and teeth. And then with that same -- with your face and a simulation as to what your teeth will look like with treatment, both on just ortho treatment and ortho restorative and giving that potential patient a visual of what's actually happening. And if that doctor, whether it's a GP or ortho is also price conscious as well in some cases that -- not necessarily that we're funding, but they fund, they go back to that patient and say, look, if you go into treatment now, we'll give you $500 off. We'll give you $750 off. They'll do something to really entice that potential patient to say, hey, it looks really good. I like what I see, but I'm also going to get a discount. The last mile that we've seen, especially in the U.S. and where we're seeing good traction is if they can pair everything I just described up with financing, get some external financing, keep interest rates low, maybe they can be more aggressive on some of the FICO scores and so on, so that, that potential patient can get into a monthly payment, ideally sub-$100, they can get into treatment. That's a winning combination. So in the U.S. really North America, but U.S., it is about doing all of that to drive activity. And the ones that do that are winning. And DSOs are a great example. Even in the U.S., as we go through this year, our DSOs are growing double digit. And so in a tougher environment, by taking that active approach, they can win. We'll help with products to be able to help, as we described at the beginning on giving them more of a product portfolio and options that we'll also help with customer marketing. If there's local marketing that we can do, we found that we'll spend a lot, and we still want to create that awareness and brand differentiation and so on at the high level. But if we can take that down also to the customer level, help them with local advertising, help them attract patients who bring in -- who bring their potential cases in and ask for Invisalign by name and create that solid conversion there, that's money well spent. So -- and it's not incremental on our side. It's just changing it where you spend. Do you spend at the high level, we spend there and awareness, but we also can spend at the lower level. And if we do both, we're finding that we're getting that good conversion. But again, it goes to being active about that conversion versus passive.

Yes. No, that makes a lot of sense. One thing I think there's also been a lot of talk about, and that is a little bit speculative at this point is there are stimulus checks next year. Could that be something that helps to kickstart demand? And obviously, last time we had the stimulus checks during COVID, that was probably helpful. Just could you help us think through that? And I know that's probably -- it's a little bit speculative at this point, but just sort of any comments you have there.

Yes. I think, as I said, there's a discretionary nature to our business. There's a purchase that some patient has to spend, sometimes $6,000 or $7,000. And so they have to decide, can they afford this now? Do they -- is it the right timing financially? What's the share of wallet that they're competing with against and so on? A stimulus check or maybe they get a better tax refund or something that comes to them that they might not have been expecting that is a benefit. That certainly benefits our business. And when we correlate that back to, I guess, the latest ones that were out in 2021 coming out of COVID and some of the things that happened, there was tremendous demand from potential patients who had more money, and they spent money on things that they might not have spent otherwise. And it did give some of that benefit. So I think it just really comes down to the, in some ways, the health of the consumer, how -- what do they feel about some of the purchasing that they want to do. You still want to be active that I described earlier in trying to drive that conversion. But getting either a tax refund or stimulus check or something else would only add to that the amount of money that, that potential patient has, which would be a good thing.

Yes. No, that makes sense. Maybe going back to your DSO comment and sort of the double-digit growth you're seeing there. How do we think about that sort of as a share gain activity? I mean those DSOs tend to have higher volumes and growth in general. But are there sort of still new logo opportunities at this point? Or is it really about pushing utilization within practices that you're already working with? How do we think about that?

Yes. Our DSOs -- and really, the way we're working with DSOs and why it's a good partnership is the DSOs are really -- they're looking for productivity and profitability. Many of them are private equity owned, and they have that focus, which is great. They -- the DSOs that we're working well with and actually more and more DSOs that we're continuing to work with share this digital orthodontic mindset. They have that shared vision of how they want to treat patients. They want to improve productivity. They want to help standardize things across the practices. They want to be able to leverage some of the marketing and other spend that they have and really make this as efficient as possible. That's exactly what we want. When we think of DSOs, we look at them as a force multiplier. I mean the tools that we have, they embrace. They're doing treatment planning and setting up templates and creating workflows that really are conducive to exactly how we think of digital dentistry and how we want to move things forward. So it's a good match. We have more and more DSOs that we work with. The DSOs that we have are really taking this to the next level, and it's helping drive growth. It shows up -- it's maybe more visible in the U.S. But we're doing this -- it's the same type of approach that we're doing in APAC and EMEA as well. So that approach is becoming bigger and bigger. And for us, it's something that it helps drive the business. And also when you look at that, the gross margin, very good gross margin because of the productivity that it drives. And we don't have to do as much that the DSOs are taking more of that -- some of that work that we would otherwise do. And certainly at the op margin level, they're training the doctors. They're working through workflows and so on. And therefore, we're not doing as much. So at an op margin level, these are accretive to our business. And like I said, it really is a good proving ground to be able to make sure that what we're trying to do and what we're doing go-to-market you've got, like I said, that force multiplier across many doctors to see how things are working.

That makes sense. Maybe sort of switching geographies. How would you characterize the current demand trends in the major European markets?

Overall, Europe has been good for us. We're starting to see some of the signs of recovery. We saw it first actually in kind of Eastern Europe, Middle East and so on, where that volume has been double digit and strong for us. Now our presence there is -- there're smaller businesses. So there's that room to grow that we've seen, but that's been very solid for us for a number of quarters now. We're starting to see Europe with the activities that we have, some of the new products that we've now just put there with IPE and DSP and so on as well as working with DSOs and the like in Europe, you're seeing some improvement there, Italy and even parts of Western Europe that are stronger for us and really starting to see some traction there. So we want to continue that. We want to continue to grow there and doing everything we can with our doctors, adding new doctors there, which has been good through training and so on. So we feel that Europe is on a good track. And like I said, the Eastern Middle East Europe has been on a really strong track. It just gets sometimes overshadowed by everything else, but it's good to see Western Europe in its path that it's on.

And maybe one more from a regional perspective. David Carr has been running Asia for a bit more than a year now. How has the company's strategy changed over that time?

I think he's brought a good focus to the business to say, looking at it from a holistic standpoint business-wise from revenue all the way down to margin and saying, okay, what's the right levers that we want to pull to be able to drive volume, be profitable revenue and make sure that our cost to serve all the way down, including iTero, make the most sense. So we've seen good improvements in some of the smaller regions like we've seen in Europe, where you're in some of that Southeast Asia that we've seen double-digit growth. His focus has been how do we get growth in ANZ, how do we get growth in Japan and China. Those are the big markets there. And every market is different in terms of what we're trying to do, but it comes down to some of the basics training doctors, get more and more doctors to be able to use Invisalign. He's making good progress with that, and the team is engaged. Then once we have those doctors trained, how do we get them to do more and more cases. And so driving that utilization. And the team is good. It's separated. We got a full operation there, treatment planning in various countries. We have treatment planning in China and in Japan to be able to work with the local language and time zone and so on. And operations, obviously, manufacturing in China. So we're in China for China and really taking that approach as we go forward. But every country is different in terms of what we're trying to do, but the basics are there. Get more doctors to use Invisalign. And once they do, increase that utilization. That's driving the volume benefits there.

That makes sense. And I know obviously not a huge component in your business, but have you heard any updates on the ortho [ VBP ] rollout because that still seems stalled from...

Yes, it's delayed. I think you'll see this next year. It will start in the public hospitals first within China. Our business that we have in China is really small from a public standpoint. It's 85% is private. So it's a different dynamic. It will eventually, I think the pricing will get -- will make its way into private. But it remains to be seen how this will be implemented because you still have this difference between how it affects wires and brackets because it affects that as well compared to clear aligners and Invisalign. Remember, in China, the difference is, especially on the private side, doctors pass on extra cost for Invisalign or clear aligners in general. So they might charge $3,000 for wires and brackets and $5,000 for Invisalign. So it's just -- there's a different dynamic there. It's not your traditional [ VBP ] where if you got a hip replacement, it's government is paying a certain amount. So they're going to push back on the cost and so on. So you don't have that same. But I think the takeaway for China for us would be is we're in China for China. We've made that decision years ago to have manufacturing, treatment planning, sales, customer support, all the operations that we need to kind of self-contain within China. So as that cost and other cost changes happen, we're in a position to be able to help manage that because we're there. We're not importing and having to deal with other restrictions that might come with that. So we feel like we're properly positioned. We want to grow as much as we can within China. And look, if this helps reduce the gap that you end up with either to the consumer or the doctor between clear aligners and wires and brackets, we think that's a good thing because when you look at China's opportunity, 85-plus percent of the cases that are done with wires and brackets. Clear aligner is small, even after being there for a dozen years, this is still a relatively small piece of that overall pie. So if this helps us push the market through doctors or through end patients and get them to use more clear aligners, and we can help with that, I think that's a good thing in the end because I also feel that, that cost structure will help us be able to navigate that in the right way.

Yes. No, that makes sense. Every year for the past couple of years, maybe switching topics, you've rolled out a new direct fab product in terms of moving your evolution of that. And obviously, you've talked about your longer-term goal of doing the aligners via direct fabrication. What do you see coming down the pipeline for 2026 in that regard?

So the direct fabrication is an important part to our business. Again, the current manufacturing, you make the mold, you make the negative and then we have SmartTrack material, proprietary plastic that gets vacuum formed and then laser trimmed and then that makes the aligner. That's how most -- pretty much everybody manufacturers, and that's what we put out over 1 million a day under that process. The direct fabrication essentially will eliminate the mold and you're going to actually print the aligner itself. And to be able to print the aligner itself, you've got to do it in a way that is going to give the properties to the aligner so that it can move teeth in a predictable, reliable way. It has to be performance plastic. And typically, when you direct fab something, it's usually prototype. It's just make it kind of one and done and you're not using it for what we need and to have that performance plastic. So we've had to scale up and first develop and now trying to scale up the resin. It's a resin that has never been used before, and it's a proprietary that we've created, biosourced actually to be able to make that resin and is very high viscosity. It's almost like -- it's not like the water that you would have or the liquid that you would have on normal 3D printing. This is almost like a butter at room temperature, very high viscosity. And that creates some of the performance plastic that we need to go into the aligner. And to actually print that, there's not a lot of companies. We worked with a company that we've worked for a long time. We ended up buying the company called Cubicure a couple of years ago. That is really specialized into printing with high-performance plastics, this high viscosity plastics. And so that combination is what we've been able to use. And now we're starting to test and get to a point where we can now start to scale up. So the answer to your question is next year, we'll have our first retainer that will be -- it's a very specific retainer, especially for young children where say they use our IPE, the palate expander and they want to expand that upper palate. And as that happens, it always gets followed up with a retainer. You want to hold that position so that the bone can grow and give that child that upper palate that he or she needs. Same with like Invisalign First to expand the arch after that happens, you want to be able to hold that arch to be able to allow the permanent teeth to come in and so on. So there's retention that's needed there. We don't sell at all nowadays. And when we create these -- the directly fabricated aligners, the doctor will have ultimate design flexibility to make that specific for that child, hold it in the right way, make it thicker or thinner in some places, maybe open when there's a permanent teeth coming in, but to be able to have this flexibility. You start with retainers and be able to -- be able to give this design flexibility. And then as you -- it will allow us to be able to scale up and we'll be able to start making more and more resin, you start making this on our machines and you start to be able to scale up such that you can then get to products, especially aligners that are maybe more complicated to make. We introduced a product called mandibular advancement with occlusal blocks. And it's a great product. And -- but for us to manufacture it, you make the aligner, the vacuum formed aligner and then you have to ultrasonically weld the occlusal blocks to it. And it's manual or if you put buttons on, some doctors want to put elastics on their aligners and those buttons that Elastic attaches to, you have to manually put on. And so they'll evolve from retention next year to starting to do products that are maybe more complicated, time-consuming under the current manufacturing start to do them on direct fab. And that will play into 2027. And like I said, once you get to then manufacturing of aligners, that's been our holy grail. That's when we want to be able to give on a more mass basis, those doctors flexibility to make the aligner how they see fit. So from that standpoint, unlike the current manufacturing where it's basically the same thickness on everything. Now the doctor will have flexibility. They could put -- maybe put more plastic on molars and cut it differently and do whatever is the best to be able to move teeth in a predictable, reliable way, that gives those doctors that opportunity, and it opens up a lot of opportunities for us to be able to manufacture in the future. And as we've scaled this up and you think about under the current technology where you throw away 80-plus percent of the material that you make because that's the negative, in the current manufacture -- or the new manufacturing, you won't have that negative. You just print the aligner. So you save yourself a lot of material costs. And as we scale up, you not only get the design flexibility that I described, but you also get some of the material and labor savings that we'll have, which will end up being cheaper than our current manufacturing. So you get that productivity as you scale up. So there's various steps to go through. And remember, we make over 1 million aligners a day under the current manufacturing. So you want to titrate this the right way, but it starts with retention, then gets into more complicated products that we currently make. We'll use this new manufacturing and then you start to get more mainstream aligners. And as you get to that, you see that productivity benefit as well.

That makes sense. And how do we think about the CapEx investments needed to roll that out?

Yes. So the Cubicure we own, so that's -- they make the machine. So we'll be scaling those up. Really, when you think about it, we're adding CapEx on a regular basis, mostly for equipment to meet our current demand. So that will shift from current manufacturing to future manufacturing. For the most part, to start, the manufacturing will be in our current manufacturing locations, so Poland or Mexico. So you don't need to build a different building or just modify kind of where you're at. So we'll be able to leverage some of the assets that we already have to be able to scale this up. And then some of that manufacturing capacity, we're always adding. So we'll have this. So I don't expect a dramatic change in terms of our profile that we have. We're kind of spending in the 3%, 4% of revenue. That should be something that we need as we scale this up as we go forward. And right now, that's kind of how we see the trajectory for CapEx.

That makes sense. Your margins in the third quarter took a nice step up from the benefits of the cost plan that you previously announced. As we sort of sit here at the end of 2025, how do you think about the opportunities and sort of what was easier to do shorter term? And now as you move into some of the sort of medium-term things, how would you -- what are the opportunities there?

Well, some of the benefits get to the products that we have. The gross margin that we have in the products that we talked about, when you don't have refinements, either 0 refinements or low refinements, it's better gross margin for us. So we see that. We also see some of the productivity that we've restructured and done some things in the third and fourth quarter, and that's playing out. You saw some of that in the third quarter where we had some capacity that we had in certain areas that we didn't need, accelerated that depreciation, moved to some equipment that drives more productivity. That starts to play out really the second half of this year, but then in a full way next year. The U.K. VAT has gotten a lot of visibility, but that's $30 million or $35 million of pure price that we were giving to HMRC for that lower court rule, we didn't have to do that. That went away in August of this year. That continues to benefit at least on a year-over-year basis so that we don't have that. So there's multiple ways. Some of it's product. Some of it is just leveraging our facilities. When we have more and more product coming through, we get that return on the assets that we have. That shows up in productivity and then some of the one-off things that we have with the U.K. VAT and others that we have. But we're committed to being able to grow the business, grow the volume and revenue, but do it in a profitable way, being able to generate gross margin improvement, and we want to be able to show that and then also deliver the op margin and earlier said, the 100 basis point improvement. That's despite the scale-up that I talked about with the direct fabrication because the scale up initially, there is that direct fab itself as you -- before you've reached kind of a critical mass of production, it is negative from a gross margin standpoint. You just -- you need scale to be able to see that productivity. But despite that, there's a lot of other things that we'll do that will net us out to positive gross margin improvement as well as op margin improvement.

That makes sense. And then longer term, how do you think about what the right operating margin is for the company if you're growing at the low end of your long-term guidance of 5% to 15% versus the higher end?

So as we continue to grow and like I said, all the initiatives that we have, we want to be into our long-term model. And that 5% to 15%, we think that, that can still generate op margin leverage. And so that's our expectation for next year, some of the cost actions and other activities that we have. But we want -- we're really committed to our long-term model, the opportunity is there for both on the ortho and GP side and the efforts that we have to be able to grow, sell to more doctors. We were really pleased with the fact that we sold to more doctors than we ever had in the third quarter, 88,000, but there's 2 million doctors across the globe. So there's a lot more opportunities to sell. There's a lot more opportunities when you think of 80 plus -- 80% of the patients in the world for orthodontic treatment are done with wires and brackets. So we want to grow volume. We want to do it in the right way to generate the revenue benefit. But when we think about the productivity and the other margin improvements, we want to get things right. We want to make sure that our cost to serve is right. That's what some of that restructuring was on the variable side. It was also done on the OpEx side, looking at layers and span of control and so on so that we can generate that op margin benefit. Because in the end, what we're doing with that op margin, it generates a significant amount of free cash flow for us. We've got no debt, $1 billion on our balance sheet of cash. We're able to use that cash to fund the business. That's first and foremost, some of the CapEx that we described, but then excess cash goes back to our buybacks. And we've committed to that, and we saw a fair amount of that this past year. And and we'll look to the future to see how much more we can do.

That makes sense. And maybe also ties into my next question. How has your approach to M&A changed in the past couple of years? Historically, for good reasons, you haven't wanted to do growth dilutive deals, but the sort of the industry growth rate has maybe changed a little bit and your growth rate has changed a little bit. How does that present additional opportunities that maybe previously wouldn't have worked out?

Our focus is clear on where we would do an M&A. It's got to be M&A around moving teeth. We move teeth. We are a digital orthodontic business that moves teeth that way. That's how we were set up almost 30 years ago, and that's our focus. When we add in companies that we had or make investments, it's all around that. When we bought Cubicure, they're making our printers that are going to be for the direct fab. When we bought exocad a number of years ago, they had the lab interface and a lot of the visualization that we're now enjoying the benefits of with Smile Architect and some of the other restorative tools and so on that they brought to it. But it's all around kind of that ecosystem of moving teeth, doing that digital approach to things. So that's our focus. There's not a lot of companies that are kind of in that space that would fit that overall. But if it's the right company or the right partnership that we could have, that's around moving teeth in the digital way that we do, that's something that we would look at. But it's really staying focused on what we have. We have invested in some DSOs and others who share that like digital orthodontic mindset. That's something that's done well for us, but it's very limited in terms of what we do within the market. Don't look to us to surprise some of you or anybody else on we're going to do something that's just in the dental space. It's got to be very specific to our business.

Got it. No, that makes sense. Maybe in the last couple of minutes, like if we're sitting here in 2026 in December, what are you, a, going to have been most excited about that you accomplished over the course of the next 12 months? And then sort of what are you going to be looking forward to as you go into '27 at that point?

That's a good question. When I look at what we're trying to do now and into next year is basically assuming that the markets kind of stay where they're at. There's -- economies are kind of where they're at. Maybe there's some tailwind that happens as you talked about stimulus or taxes or maybe just inflation gets better and so on, maybe that happens. But our plan for next year is it stays as it is. And with that, we should be able to do things that drive this active conversion approach. We should be able to help our doctors with products, the product portfolio that we have to give them choices to help them with some of the customer marketing and co-marketing to be able to drive demand and drive demand to their practice that leverages our brand and our products and so on so that it increases Invisalign volume and therefore, revenue, but really get -- so that what we're seeing in DSOs and what we're seeing with some of our larger doctors gets to the mainstream, regular doctors, what we call like these retail doctors on the ortho and GP side so that they can really start to embrace more of the digital technology, show the productivity that they get and not only the productivity that they can get the profitability that comes from that. So really just getting more and more doctors to see this and to believe this and see it firsthand. And if we can make -- get more and more doctors to do that, we can control our destiny. We can control our destiny into next year. And if we fast forward to 12 months, I'd love to be able to have made progress on that. Maybe the economies get better in certain areas, great. That's a tailwind for us, and we could be talking about even more growth as a result of that. And then as we're sitting here in 12 months, I'd like to also be able to talk about some of the success that we've had with our directly printed products, retention, the features that doctors are using, the excitement that would be around that and to be able to make sure that we're building that up and starting to scale that up so that we're actually doing aligners and being able to talk to the first aligners that are going to be coming out, maybe the more complicated products. But it's run the core business, be active about that conversion and then start to scale up some of the direct printing. If we're doing that in 12 months from now, that will be a good 12 months.

Got it. And then for that demand side, what would you advise investors who are looking at the company externally to sort of focus on to sort of check up on progress on that?

Yes. I think you'll look to see some of the volume that we're driving. Can we drive the volume? Can we get into some of the longer-term models that we have? Where are we seeing that volume across geographies between DSOs and not. Obviously, North America gets a lot of attention. We want to be able to see that stability there and be able to grow against that. I know a lot of external metrics get there with Michigan index and so on. I would say don't be as concerned about if it changes by 1 point or 2 points here or there. It's really the more significant changes that affect our business. And like I said, right now, in a stable environment, a 1- or 2-point change is not going to be as much of a difference. So -- but I think it's just looking for our volume growth, looking for us to sell to more doctors. As we sell to more doctors, they should be able to use the products and increase the volume that they have, increase their utilization. Those are key metrics that we have, selling to those more doctors, getting a higher volume and then seeing where that growth is, getting some stability in North America and then seeing some of that growth that we talked about international as well as DSOs those will be key metrics that we want to be able to talk about as we go forward.

Sounds great. Well, I think that's a great place to leave it. So thank you so much.

Thank you.