Joseph M. Hogan
Director, President and Chief Executive Officer at Align Technology
Thanks, Shirley. Good afternoon, and thanks for joining us. On our call today, I'll provide an overview of our first quarter results and discuss a few highlights from our two operating segments, Systems and Services and Clear Aligners. John will provide more detail on our Q1 financial performance and comment on our views for the second quarter and 2023. Following that, I'll come back and summarize a few key points and open the call to questions.
Overall, I'm pleased to report better-than-expected first quarter revenues and earnings. The sequential increase in first quarter revenues of $943 million reflects stability across all regions for our Clear Aligner business and favorable average selling price for the Clear Aligner and Systems and Services segments. Q1 sequential growth reflects an increase in non-case revenues, which also increased year-over-year, driven by continued growth from our Invisalign Doctor Subscription Program in Vivera retainers.
In the teen segment, which represents the largest portion of the 21 million annual orthodontic case starts, 182,000 teens and kids started treatment with Invisalign clear aligners during the first quarter, increasing both sequentially and year-over-year, which is encouraging as we head into the important summer season for teens and kids. Overall, we remain confident in our large underpenetrated market opportunity globally and our ability to deliver digital products and technology that are helping doctors transform smiles and change lives for millions of people.
For Systems and Services in Q1, revenues of $153.3 million were down 9.7% sequentially and 6.2% year-over-year. As expected, Q1 Systems and Services revenues decreased sequentially, consistent with seasonal capital equipment cycles compared to Q4. For Q1, Systems and Services revenues were sequentially lower primarily in the Americas and APAC regions, offset somewhat by an increase in EMEA.
For non-system scanner revenues, Q1 was up sequentially and year-over-year reflecting increased scanner rentals, upgrades and certified preowned or CPO leasing programs. Q1 CPO sales include initial shipments of leasing units to desktop metal, who supply iTero Element Flex scanners to Desktop Labs, one of the largest lab networks in the United States serving general dentists. On a year-over-year basis, Q1 services revenues increased primarily due to higher subscription revenues, resulting from the large number of iTero scanners in the field. We also had higher non-systems revenues related to our scanner leasing and rental programs previously mentioned.
For Q1, total Clear Aligner revenues of $789.8 million was up sequentially and down year-over-year. Q1 sequential revenue growth reflects increases across the regions, driven by price increases, favorable foreign exchange and more additional aligners. Q1 non-case revenues were up sequentially and year-over-year, reflecting continued growth from DSP, Vivera retainers and commerce [Phonetic] sales, which include everything from aligner cases to whitening and cleaning products.
DSP has been very successful and is enabling doctors to purchase aligners on a subscription basis, giving them flexibility to treat simple touch-up cases or offer their patients a superior flexible and convenient retention solution. We introduced DSP in North America during the pandemic and are continuing to expand DSP offerings in the EMEA region. The contribution of DSP to non-case revenues is important to understand, especially the impact to overall clear aligner volumes. While we don't report the number of DSP clear aligner shipped and we don't include them in our total clear aligner volumes, if we were to calculate an equivalent case shipment for touch-up patients using our DSP aligners, we estimate those cases would increase approximately 25% sequentially.
Q1 total clear aligner volumes of 575,400 were down slightly sequentially, reflecting stability across regions and improvements in consumer confidence, as well as the easing of COVID restrictions recently in China. For the Americas, Q1 clear aligner volumes were up slightly sequentially, reflecting higher orthodontic cases, especially teen case starts, with growth in both Invisalign Teen case packs and Invisalign First treatment for kids as young as six, offset primarily by a decrease in adult patients from the GP dental channel.
Based on the most recent gauge practice analysis tool that collects and consolidates data from approximately 700 ortho practices in North-America, overall new patient flow and adult exams were lower this period, while teens outpaced adults. During this period, wires and brackets cases continued to grow ahead of clear aligners, although at a slower rate than in recent quarters, and Invisalign cases outpaced other clear aligner brands.
The gauge report also included a few data points regarding no shows in future exams scheduled, which we believe may provide insight into consumer sentiment and macro conditions. Regarding no shows, over the last 12 months, there has been a large increase in the number of patient no shows. However, that rate appears to be stabilizing.
Conversely, over the last 12 months, future exams scheduled were negative year-over-year, but the rate has steadily improved in the most recent months covered by the report, which we believe may be a good gauge for consumer optimism. For EMEA, Q1 clear aligner volumes includes strong adoption of Invisalign Moderate across the region in both the adult and teen segments.
Invisalign Moderate Package is a 20-stage treatment option designed for patients whose treatment goals fall between the existing Invisalign Lite and Invisalign Comprehensive packages. For APAC, Q1 clear aligner volumes reflect the improvement in China and continued growth in markets like Japan, Korea and India with positive year-over-year growth, including teens.
Teen orthodontic treatment is the largest segment of the orthodontic market worldwide and represents our largest opportunity for clear aligner sales to orthos. We continue to focus on gaining share from traditional metal braces through teen-specific sales and marketing programs and product features, including Invisalign First for Kids as young as six, which was up sequentially across all markets.
For Q1, total clear aligner cases for teenagers were up sequentially and year-over-year, reflecting improving trends across the regions. On a sequential basis, growth was driven by increased submitters in the APAC and Americas region. On a year-over-year basis, teen case starts were up in EMEA region, reflecting increased utilization and the recent introduction of Invisalign Moderate across the region, which outpaced the year-over-year growth rate of Invisalign First, which also continues to perform very well across markets.
Invisalign First was also up sequentially and year-over-year across all regions. Invisalign First is designed to treat a broad range of teeth straightening issues in growing children from simple to complex. And because Invisalign First is removable, it's easier for kids to brush and floss. There's also no discomfort from rubbing braces or poking wires for metal braces. These benefits, along with positive compliance experience, may also contribute to continued momentum from Invisalign First. In fact, the majority of surveyed Invisalign orthodontists agree that their young patients are highly compliant with Invisalign First treatment, understanding younger kids are highly compliant and Invisalign First provides an opportunity to support overall practice growth.
For Q1, clear aligner volume from dental service organizations or DSO customers continue to outpace non-DSO customers. Q1 clear aligner volume from DSO customers increased sequentially, reflecting growth in the Americas region. DSOs make up approximately 20% of the dental market and represent one of the most important channels for digital orthodontics and restorative dentistry. Through their network of doctors and systematic approach to clinical education and practice management, DSOs are uniquely positioned to drive adoption of new technologies and tools that increase practice efficiency and profitability and deliver a better patient experience. We have well-established relationships with many DSOs, especially in the United States with DSOs such as Smile Docs and Heartland Dental.
And we are continuously exploring collaboration with others that drive adoption of digital dentistry. Each DSO has a different strategy and business model, and our focus is working with them and encouraging DSOs align with our vision, strategy and business model goals. One of the most digitally minded DSOs is Heartland Dental. And today, we announced a $75 million equity investment in Heartland. Heartland is a multi-disciplinary DSO with GP and ortho practices across the US. Their growth strategy includes Heartland's de novo dental practices, which feature modern technology are located in areas with strong community need for dentistry, where Heartland provides practices with opportunities for mentorship, leadership training and continuing education.
In the last three years, Heartland opened 188 state-of-the-art de novo practices across the United States and are planning to continue investing through more de novo openings. We have a shared sense of purpose with Heartland. Their mission is to help doctors and their teams deliver the highest-quality digital dental care to the communities they serve.
Demand creation remains an important strategic growth driver, and we continue to invest in consumer marketing programs that create awareness of the Invisalign system and that drive demand to Invisalign practices. In Q1 '23, we delivered 7.8 billion impressions and had 22.1 million visits to our websites and continue to invest in top media platforms such as TikTok, Snapchat, Instagram and YouTube across markets. For more details on our programs in key Q1 performance metrics, please see our presentation slides on our website.
We're also developing digital tools and apps for consumers, patients and for doctors. For Q1, adoption of the My Invisalign consumer and patient app continue to increase with 3.1 million plus downloads to-date and over 350,000 monthly active users, representing 28% year-over-year growth. Usage of our other digital tools includes ClinCheck Live Update, which is used by 38,000 doctors to reduce time spent in modifying treatment plans were up 30% and Invisalign Practice app with 58,000 doctors actively using this feature and uploading more than 5.1 million photos to-date.
Finally, in addition to our focus on consumer marketing and digital tools, we're committed to driving excellent treatment in Align Innovation through industry and Align hosted clinical education events. Our team has just participated in the annual AAO Conference, which took place in Chicago, where we engaged with a broad range of orthodontists.
In March, we participated in IDS in Cologne, Germany, one of the largest dental shows in the world, focused on digital dentistry and the technologies shaping the industry. Earlier in the quarter, we hosted the second Align Symposium on the digital practice, a smaller Align event for the most engaged and experienced Invisalign orthodontists in the world. It was an amazing opportunity that come together with long-term global partners and thought leaders in orthodontics to see how we are driving the digital transformation of dentistry together.
By our participation in each of these events and opportunities, we continue to reinforce the importance of peer-to-peer clinical education and our investments in the orthodontic specialty. We are grateful for all of our customers, GP, orthodontists, corporate practices, but we know that the orthodontics especially leads the way in adoption of digital orthodontics. We are excited about the future we see then in the orthodontic profession. Align avidly support the orthodontic profession through education, grants and continuing innovation.
Our educational pathway was created to support recent graduates and early career doctors at critical career transition points. As a result of schooling and early career initiatives, graduates will be educated on digital dentistry and digital orthodontics, connected with and supported by colleagues, more experienced ortho experts in the Align team and engaged with Align digital platform.
Align supports doctors throughout all stages of their career, from educating facility at dental schools and orthodontic programs to education for residents, early-to-mid career providers and more seasoned professionals looking to expand our clinical capabilities and practices. Align is expanding its global footprint of education centers to provide a forum for hands-on learning and continued development in key cities across our regions.
We are also focused on continuing to innovate in digital dentistry, scaling capacity to manage the millions of digital requests, patient scans and orders flowing through our systems, while also using technologies like AI and machine learning to increase efficiencies, speed treatment planning and quickly deliver products so patients can begin their past to transforming their smiles.
In the next one to two to three years, Align believes our newest technologies and innovations will revolutionize our existing offerings and the ways in which doctors and their patients experience orthodontic treatment. Together with our customers, we are developing the future of digital dentistry and digital orthodontics, not just a technology that drives treatment, but the models reshaping how we interact with customers and deliver treatment experiences for their patients. We look forward to sharing more with you in the coming months.
With that, I'll now turn it over to John.
