Annual report 2023 – Chairman and Chief Executive Officer’s Letter

Deep foundational capabilities enable long-term growth

Dear shareholders, business partners, and colleagues,

Thank you for supporting Angelalign over the past year! It was a year of opportunities and challenges for the industry. Through it all, we made progress by continuing clinical innovation and by improving the customer experience.

In one of our frequent customer visits recently, we chatted with a local orthodontist in Germany. The gentleman with silver white hair discussed several recent cases, and then expressed his irritation over a few areas where aligners needed to be improved. However, when we asked if he preferred brackets for these complex cases, he said, “my clinic will likely use more aligners this year. Handling this aligner approach well is challenging, but it’s what patients want, and it’s where the industry is headed. I’m older, but I still want to keep up with these changes.” He then smiled and said, “like driving my sports car whenever possible. It’s tougher to control, but I love it!”

Similar views have been repeated by clinicians from multiple European countries, as well as from Asia- Pacific, South America, and North America. Comfortable and appealing clear aligner technology has become a global trend. Orthodontists, being some of the smartest clinicians, are quickly learning to master aligner techniques to better meet patient needs. Especially in the child and teenage segment, where penetration is low, aligner technology is growing quickly.

As one of the global innovators in aligner technology, Angelalign is committed to contributing to our industry’s quality growth. In 2023, Angelalign’s total case number reached 245,000, with a year-on-year growth of around 33%. Our adjusted net profit reached RMB179 million. Excluding losses incurred for the startup phase of our international business, our business in China reached an adjusted net profit of RMB256 million, representing a year-on-year growth of around 30%.

Two years ago, we made an important decision to enter the mainstream orthodontic markets of Europe, Australia, and the Americas, where orthodontics is practiced at a sophisticated level, rather than the more accessible markets of Southeast Asia and Eastern Europe. We believed that well-trained orthodontists and more demanding patients would recognize the full value of Angelalign. This strategy is showing some success. Angelalign products and services have been positively received by some of the top orthodontists in Europe, Asia Pacific, and the Americas. In 2023, Angelalign’s international case number reached 33,000, accounting for 14% of total cases. We expect that proportion to increase.

International Business on Track

Last summer, our clinical design department’s soccer team in Wuxi lost a friendly match by “1 to 4” against a group of much older Brazilian orthodontists. After the disheartening match, the frail orthodontist patted the back of our young and strong technician and consoled him: “Your soccer skills can improve a lot; you can come to Brazil to learn. But more importantly, your treatment setups are terrific and we got to learn from your team!”

Since launching our international business, positive feedback from doctors have encouraged us. They particularly like the quality of our treatment setups, the maturity of our product quality and delivery, and our friendly customer service that puts clinicians in the driver seat. As a result, customers have recommended us to each other and enabled us to grow.

Currently, our products and services are available in over 30 countries and regions, with Europe being one of our fastest-growing markets. We have eight international offices , with local staff across Europe, Asia-Pacific and the Americas ready to meet daily clinical and operational needs. We helped our subsidiary Aditek to upgrade its advanced manufacturing base in Brazil, thereby establishing two major production centers in China and South America, laying a foundation for robust global growth.

The global market for aligners is vast and despite our rapid development, we occupy only a tiny fraction of the market. The foundational capabilities we accumulated through continual feedback and improvement over the last 20 years enable us to continue to grow in the global markets. There is a long road ahead and we are motivated to work hard with humility.

Leading in China Focused on Case Quality

Unlike the pleasant surprise felt by European or Brazilian clinicians upon first using Angelalign, our brand is well-known in the Chinese market, which has a large number of complex malocclusions. Clinicians come to us having high expectations for our products and services. Authoritative orthodontists and scholars wish to deepen collaboration to explore cutting-edge academic research on complex cases. Clinicians want to have mature and effective digital tools. Clinic owners and operators ask for more efficient diagnostic and treatment workflow.

The biggest common need of clinicians is to have a growing orthodontic market built upon trust and treatment quality. This is also our goal. In 2023, Angelalign’s case numbers maintained the number one position in China for the third consecutive year, leading in the child and teenage segment, and increasing share in tier-3 and tier-4 cities. However, case number is only one measure. In the past few years, clinicians around the world have started to understand, after having tried different aligner systems, that treatment quality is very different from one system to another. We are focused on helping clinicians complete each case with a high level of quality, and we will continue to improve.

Accelerating Technology Investment

In July last year, Angelalign appointed Mr. HU Jiezhang as the new CEO. At the time, our software and engineering teams became anxious, not knowing whether Mr. Hu would reduce the Company’s R&D investments. The board of directors said to them, “Even better days are coming for your team. Because you have a CEO who truly understands software and technology and is also a master in team collaboration.”

Many companies focus on “technology innovation “, but we believe the true challenge is achieving “clinical maturity” through repeated improvement in clinical usage and operational workflow. Angelalign not only creates exciting new technology, but we also listen to users and iterate technology until it evolves to a mature product that doctors desire to use, is easy to use and achieves predictable results.

Based on this philosophy, in 2023, we introduced products like the angelLink interface system, and the KiD anterior traction solution, allowing skilled doctors to add advanced accessories to the aligner platform for more precise treatments. For software, iOrtho released more convenient tools and services for doctors to manage treatment plans through software. The remote oral care solution (“MOOELI”) has improved doctor communication and follow-up efficiency. Our manufacturing technology improved both in efficiency and in being more friendly for the environment. We added to our portfolio of high- quality patents in multiple countries and regions around the world. As of December 31, 2023, Angelalign has registered 185 patents and 16 software copyrights.

Consistent Treatment Planning and Delivery

One winter afternoon returning to our large office, under bright florescent lights, we heard laughter and shouts throughout the office. It turned out that a group of orthodontists from Europe were visiting. They were so emotionally moved to see some of their treatment planning teams, that they immediately embraced them. Over hundreds of days and nights, they worked together across the globe, to build treatment systems tailored to each doctor’s preferences, helping doctors refine each case, creating deep rapport and friendships.

With our large team of treatment technician, and with our regional clinical support teams, we provide comprehensive support to tens of thousands of doctors worldwide. Doctors also share their experiences to improve the products and services. With our advanced custom manufacturing technology, we continuously enhance product performance and reliability, while ensuring quality and quantity in delivery. In any country we serviced last year, from the submission of an order by a doctor to the delivery of custom designed and manufactured aligners took only 8.5 business days on average. Concurrently, our case design received high ratings from orthodontists. Last year, we designed, produced, and quality controlled over 40 million aligners, each a unique medical product, a feat of non-trivial scale and complexity.

Deep Foundational Capabilities

Upon hearing about our progress, some medical product executives visited us to learn how to better manage a large international staff, data security operations, IP operations and training, etc.  After our discussions, they often say upon leaving, “your business is just too hard. Building an international team, customizing your product and software for each country, training each doctor, training clinic staff and doing professional marketing. By comparison, our business is so much easier, we just make standard products at volume and send it to our distributor, and immediately we make money.”

These feedback are what we like to hear. Because scale is so hard to achieve, our industry has hundreds of niche players across different countries but few are profitable and sizable. Success requires deep foundational capabilities that are iterated over decades, in product development, manufacturing, materials, software, clinical support, treatment design and specialist sales. It also requires an open and inclusive culture that’s collaborative instead of being centralized. We believe we have accumulated these deep foundational capabilities, and have completed the most challenging aspects of our international building phase.

Another important foundational capability is data security and compliance. Angelalign is deeply committed to following international and regional data protection laws and implementing best practices, while continually improving with annual consulting projects and audits.

Winning Talented Professionals

A while ago, a senior executive joined our European team from a world-class company. He was surprised by many familiar faces at lunch. Chatting about what attracted them to join, the common theme was Angelalign’s great products, the empowered start-up-like culture, while having the resources and systems of a mature company.

Over the past couple of years, we have also leveraged the global dental network and brand of CareCapital to attract outstanding talent from various countries in the field of orthodontics and dentistry. Angelalign aims to integrate global talents quickly by building trust and by collaborating efficiently across different offices and teams. We have also partnered with universities to offer systematic training for our managers to adapt to the fast-changing environment.

We would like to appeal to clinical, commercial, and technical talents worldwide to join us. Together we can learn from the fascinating history of orthodontics while developing winning technologies for the coming decades. Together we can push forward innovation in clinical, technology, and education. You would enjoy a customer-centric and collaborative culture that evoke the true heritage of the orthodontic field.

Let us work together and make the orthodontic field even better!


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