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I've been researching clear aligner manufacturers and how they've approached the markets historically. But more recently, say in the last decade or so, there's been a lot of consolidation and many DSOs grouping up. I'm trying to understand the DSO channel from the angle of aligners, but it's also just good to understand that part of the value chain as a whole.

Five years ago, Align's customer segment was predominantly the private industry, which includes private practices and dentists, with maybe 5% being the DSO market that we sold to. As of last year, Align's portfolio is 25% DSO and 75% retail, which includes private practices. This shows significant consolidation over the last five years. Currently, I work for a DSO that is funded by private equity, and we are actively acquiring practices at a rapid pace.

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I've been researching clear aligner manufacturers and how they've approached the markets historically. But more recently, say in the last decade or so, there's been a lot of consolidation and many DSOs grouping up. I'm trying to understand the DSO channel from the angle of aligners, but it's also just good to understand that part of the value chain as a whole.

The goal is that by 2035, 50% of Align's customer base will be the DSO market, and retail will only account for 50%. This consolidation is happening very quickly, as seen with MB2 and Heartland. Additionally, competition within the Clear Aligners has also increased significantly. While Align was the dominant Clear Aligner provider, it now faces competition from Spark, ClearCorrect, 3M, and Angel Aligners, which is emerging as a strong competitor due to many former Align employees joining them. There are also local mom-and-pop aligners, which small dentists are very comfortable working with.

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Presumably, they would still do some aligner volume, right? I mean, there's no way that if they have 1,000 locations, they only do 200 cases a quarter. That's what they do with you. So, that means they probably do more elsewhere.

If you have an internal periodontics program like orthodontics, they refer everything out to an orthodontist, right? Or an orthodontist is very different. You either do aligners or you do brackets and wires. Many large DSOs dabble in aligners. But let's be honest. If you're going to pay $100 for wires and brackets and have to pay $1,500 for a Clear Aligner lab fee, what are you going to do to preserve EBITDA and top-line revenue? That's also where it comes in. For instance, a company like SmileDocs, 60% of their volume is Clear Aligners. They have adopted the model where, if they operate Clear Aligners on a very efficient model, they're very profitable. However, there are other DSOs as big as SmileDocs that are even more profitable, but they do all wires and brackets; they do no Clear Aligners.

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