Align Technology, Inc.

Greetings and welcome to the Align 4Q and Fiscal Year Earnings 2020 call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shirley Stacey. Thank you, Shirley. You may begin.

Good afternoon. Thank you for joining us. I'm Shirley Stacey, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO, and John Marici, CFO. We issued fourth quarter and full year 2020 financial results today via Globe Newswire, which is available on our website at investor.aligntech.com. Today's conference call is being audio webcast and will be archived on our website for approximately one month. A telephone replay will be available today by approximately 5.30 p.m. Eastern Time through 5.30 p.m. Eastern Time on February 17th. To access the telephone replay, domestic callers should dial 877-660-6853 with conference number 13714292 followed by pound. International callers should dial 201-612-7415 with the same conference number. As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Align's future events and product outlook. These forward-looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission, available on our website and at sec.gov. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statements. We have posted historical financial statements, including the corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable, and our fourth quarter and full-year 2020 conference call slides on our website under quarterly results. Please refer to these files for more detailed information. With that, I'd like to turn the call over to Align Technologies President and CEO, Joe Hogan. Joe?

Thanks, Shirley. Good afternoon, and thanks for joining us. On our call today, I'll provide some highlights from the fourth quarter and full year, then briefly discuss the performance of our two operating segments, clear aligners and systems and services. John will provide more detail on our financial results and share additional color on business trends. Following that, I'll come back and summarize a few key points and open the call to questions. Our fourth quarter was a strong finish to the year with record revenues and volumes from both Invisalign aligners and iTero scanners, as well as increased gross margins, operating margins, EPS, and cash flow. Our fourth quarter performance was driven by strong year-over-year growth across customer channels and regions and continued momentum sequentially. During the quarter, we achieved a major milestone in EMEA, with the shipment to our two millionth Invisalign patient that will be amplified with the EMEA-wide campaign that will launch next month. This milestone for EMEA reflects strong acceleration in Invisalign adoption and growth. For Q4, total revenues were $834.5 million, up 13.7% sequentially, and up 28.4% year over year. Q4-20 clear line of revenues of $700.7 million, were up 12.9% sequentially and increased 28.9% year-over-year. In Q4, we shipped a record 568,000 Invisalign cases, an increase of 14.5% sequentially and 37.3% year-over-year. Q4 reflects increased Invisalign adoption from both adults and teenagers, which are up 36.7% and 38.7% year-over-year, respectively. Our teen and mom-focused consumer campaign generated 77% year-over-year increase in unique visitors to our website and 76% increase in leads generation. In addition, Invisalign social media influencers like Charlie D'Amelio, Marseille Martin, Christina Milana, Tisha Campbell-Martin, Rachel Zhou, Tiffany Ma, and TASMARI continue to deliver exciting new content and increased engagement for the Invisalign brand with consumers and among their millions of followers. Our digital platform continues to gain traction as doctors' usage of iTero scanners increase. Our consumer and patient app was rolled out to more than 50 markets, resulting in more than a 2.5x increase in apps download and monthly active users in 2020 versus a year ago. Our patient feature uses continues to increase. For example, Invisalign virtual appointment was used 68,000 times. Our insurance verification feature was used 26,000 times and more than 30,000 patients enrolled in Invisalign virtual care in 2020. Our new consumer website was rolled out to more than 40 markets around the world and is driving increased effectiveness and lead generation. We also launched an improved new doctor recruitment website in the US and Canada to support our digital conversion journey. This will be expanded to other markets in the next few months. From a product perspective, growth was strong across Invisalign portfolio, especially for non-comprehensive cases, including Invisalign Go and Invisalign Moderate. There are also more doctors engaging with us through the Aligned Digital and Practice Transformation, or ADAPT program, as more practices are moving towards digital practice optimization. As you'll recall, ADAPT was piloted over two years ago and is being commercialized as a standalone service providing the relevant workforce, clinical, and marketing support to enable doctors to digitally transform their practices. In Q4, we shipped a record 77,000 Invisalign doctors worldwide, of which a record 7.3 thousand were first-time customers. We also trained over 6,400 new docs in Q4, including over 3,900 international doctors. Q4 20 system and services revenues of $133.8 million were up 18% sequentially, driven by momentum in the Americas and EMEA, and up 26% year-over-year, reflecting strong growth in EMEA and Asia Pacific. Our results reflect continued strong uptake of the iTero Element 5D, the only inter-world scanner with CARES detection, which is scaling rapidly across each region and represented approximately a third of iTero volumes in Q4. Innovation remains a cornerstone of our business. Today we announce the availability of the iTero Element Plus series, which expands our portfolio of iTero Element scanners and imaging systems to include new solutions that serve a broader range of the dental marketplace. The new iTero Element Plus series of scanners and imaging systems builds on the success of the award-winning iTero Element family and offers all the existing orthodontic and restorative digital capabilities doctors have come to rely on. plus faster processing time and advanced visualization capabilities for a seamless scanning experience in a new sleek, ergonomically designed package. We announced the launch of our NextGen ClinCheck Pro 6.0 proprietary treatment planning software with in-phase visualization and our Invisalign G8 improved predictability in our last earnings call we announced. Their availability is being expanded across all regions. Further, we launched several enhancements to our treatment planning including improved final teeth position and auto segmentation. We also added several new features to our virtual care tool. For the full year 2020, total revenues were a record $2.5 billion, up 2.7% year over year. Clear aligner revenues of $2.1 billion were up 3.7%, reflecting a record 1.6 million Invisalign shipments and growth of 7.9%. During the year, 30.3% of total Invisalign cases, or nearly one half a million teens or younger, started Invisalign treatment. This is up 11.5% from 2019. System and services revenues were down slightly compared to 2019. 2020 was a year unlike any other we've experienced. The COVID-19 pandemic and its impact have been life-changing, marked by loss and separation, recovery and renewal, record highs and lows, and significant milestones and accomplishments. Even in a time of huge disruption, we all had to adapt, evaluate priorities, and develop new ways of doing things, both personally and professionally. Through it all, Align's priority has been the health and well-being of our employees and their families and our doctor customers and their staff, and that remains a constant. Despite the swift onset of the pandemic and the uncertainty through 2020, we didn't hold our plans or change our strategy for continued growth. We completed the acquisition of Exocad, accelerated our investments in marketing to create Invisalign brand awareness and drive consumer demand for our doctors' offices, accelerated new technology to market with virtual tools that enabled our doctors to stay connected with their patients, provided PPE to those in need, and supported doctors and their teams with online education and digital forums that went beyond products to help them navigate the uncertainties of the pandemic. As a result of our continued strategic focus and investments, we exited the year stronger than we started, and 2021 is off to a great start. Now let's turn to the specifics around our fourth quarter, starting with the Americas. For the Americas region, Q4 Invisalign case volume was up 12.7% sequentially and up 34.1% year-over-year, reflecting increased utilization of Invisalign treatment for both orthodontic and GP channels. Our continued investments in digital marketing and sales programs and focus on market segmentation are helping drive strong growth of Invisalign clear aligners and iTero products. During the quarter, we continued offering sales initiatives to our doctor partners to help drive adoption of Invisalign and iTero products. The bracket buyback switch program, which we launched in North America in Q2 2020, continues to drive conversions from wires and brackets to Invisalign clear aligners. During Q4, this program resulted in about 10,000 new cases similar to Q3. We believe it is also causing a halo effect with patients switching from wires and brackets to Invisalign clear aligners with increased awareness of the benefits of Invisalign treatment and how it is less disruptive to their lives with the outcome of a beautiful smile through an Invisalign trained doctor. The Teen Awesomeness Centers programs direct patients to Invisalign doctors who are experts at treating teens, and are seen as the go-to docs for treatment. We continue to see growth with Invisalign first for treatment in younger kids, driving increased comprehensive treatments within North America ortho channel. Latin American volume was also up year over year, led by strong growth in Brazil and Mexico. We believe the market for orthodontic treatment is huge in Latin America, as we continue to grow our presence across the region. We saw increased utilization in the GP channel with Invisalign Go and the continued adoption of Moderate. The GP Accelerator program, designed exclusively for general practitioner dentists, provides an all-encompassing support plan based on practice needs that is centered around maximizing iTero integration, clinical support needs, and implementing new marketing strategies. We also see increased utilization with GP dentists that have enrolled in the iPRO program, as well as with doctors that have installed the iTero scanner. DSO utilization also increased and continues to be a strong growth driver led by Heartland and SmileDocs. For the full year, American Invisalign volume was up 3.6%. For international business, Q4 Invisalign case volume was up sequentially 6.7%, led by strong growth in EMEA, as doctors returned from summer holiday season, offset somewhat by seasonally slower period in China. On a year-over-year basis, international shipments were up 41.1%, reflecting increases throughout both EMEA and APAC. For the full year, international Invisalign volume was up 13.3%. For EMEA, Q4 volumes were up sequentially 47.9% and 48.3% on a year-over-year basis across all markets, with strong performance across both ortho and GP channels. Within the GP channel specifically, we saw acceleration in both utilization and shipments with Invisalign Go. We also saw acceleration of both core and expansion markets, with growth in our core markets led by Iberia, UK, and France, along with continued growth in our expansion markets led by Central and Eastern Europe and the Benelux. We introduced the Ortho Recovery 360 program in EMEA last quarter to support our orthodontists as they started reopening their businesses. As of Q4, 3,200 orthodontists have enrolled in the program. During the quarter, we launched a Recovery 2 program with a refreshed website featuring all digital tools, growth programs, and education events for EMEA doctors to support their relief efforts during COVID-19. We also held our Digital Innovation Forum at the beginning of December, where approximately 900 doctors, both ortho and GP, attended the two-day forum event with keynotes on the digitization of dental practices. We also continued our Digital Excellence series of webinars launched by the iTero team. Throughout the quarter, the following digital innovations were also launched across the MEA, Invisalign G8, ClinCheck Pro 6.0, and Invisalign Go Plus to help drive Invisalign Clear aligner utilization. To support our GP doctors, we launched our GP Recovery 360 program last quarter with over 2,700 GPs enrolled so far. We continue to offer online and on-demand education events which reached over 15,000 GPs cumulatively. For the full year, the May Invisalign volume was up 12.6%. For APAC, Q4 volumes were down sequentially 14.7%, notwithstanding typical Q4 seasonality in China following a strong Q3. We had strong growth in Japan and ANZ and Southeast Asia. On a year-over-year basis, APAC was up 30% compared to the prior year, reflecting continued strong growth across the region. We were pleased to see the growth in the adult segment with non-comprehensive cases with the Invisalign moderate product and the GP channel. In the teen segment, we also saw an increase in utilization amongst Invisalign doctors, and we saw continued acceleration from Japan and ANZ. For the full year, APAC Invisalign volume was up 14.3%. Last year, we launched a new and improved digital learning environment for our doctors, offering a comprehensive learning platform with role-specific content for orthos, GPs, and their teams. The improved functionality enables more online learning opportunities with spotlight features for what's trending now, recommended learning path based on doctors' experiences, and expanded categories, including digital treatment planning, comprehensive dentistry, and team education. For the year, over 127,000 doctors have accessed recorded lectures completed self-paced learning modules, and watched how-to videos with new certified doctors viewing more than 1.4 million pages of content. Among the ortho channel, over 47,000 unique users have engaged with a digital learning site, with an additional 80,000 unique users from the GP channel. As we've mentioned, we are seeing good adoption of the ADAPT program, which is an expert and independent fee-based business consulting service opera by a line to optimize clinic's operational workflow and processes to enhance the patient's experience and customer and staff satisfaction, which will in turn translate into higher growth and greater efficiencies for orthodontic practices. As a result, the ADAPT service participating process in Q4 improved profitability significantly after implementation. Our consumer marketing is focused on capitalizing on the massive market opportunity to transform 500 million smiles, educating consumers about the Invisalign system and driving that demand to our Invisalign doctor offices. In Q4, we saw strong digital engagement globally with more than a 77% increase in unique visitors, 108% increase in doc locator searches, and 76% increase in leads created, driven by our global adult and mom-focused campaigns and teen-focused influencer content. Our U.S. mom-teen multi-touch, multi-million dollar campaign with influencer-led YouTube videos, a mom-focused TV spot, a custom Twitch activation, and mega-teen sensation Charlie D'Amelio continued to perform very well and garnered 2.7 billion impressions in Q4. The statistics I shared previously speak to the successful reach of this marketing campaign as having to not only drive demand with consumers but also in educating them on the benefits of Invisalign treatment through a doctor's office. In Q4, we also launched media tests in the EMEA region, in the UK, Germany, and France, and in the APAC region in Australia and Japan. These have worked very well and resulted in more than a 6x increase in leads in EMEA and a 3x increase in leads in APAC. Several key metrics that show increased activity and engagement with the Invisalign brand are included in our Q4 quarterly presentation slides available on our website. Align is always looking for new opportunities to reach consumers and be relevant to potential patients wherever they work, live, and play, which is why we announced the Invisalign brand as the official clear aligner sponsor of the National Football League, the NFL, and 11 NFL teams, including the Tampa Bay Buccaneers and Kansas City Chiefs. The NFL League partnership, designed to expand our reach with consumers, generated over 150 million impressions in 2020, helping to drive awareness of Invisalign clear aligner treatment at a national level, while the team agreements are designed to help us engage within key markets and connect consumers with doctors in those markets. For our systems and services business, Q4 revenues were up 18% sequentially due to higher shipments and services revenue. We continue to see momentum with the iTero Element 5D imaging system gaining traction in all regions with significant Element Flex sales in EMEA. On a year-over-year basis, systems and services revenues were up 26% due to higher shipments and services. For the year, our system and services total revenues were down 2.8% year-over-year, cumulatively over 31.4 million orthodontic scans and 6.7 million restorative scans had been performed with iTero scanners. For Q4, total Invisalign cases submitted with a digital scanner in the Americas increased to 84% from 79.5% in Q4 of last year. International scans increased to 73.7% up 64.7 in the same quarter last year. We're pleased to see that within the Americas, 94.8% of cases submitted by North American orthodontists were submitted digitally. We're also proud to share that iTero Element Intramural Scanners are the winners of the 2020 Dentaltown Townie Choice Award for Digital Impressing Category. Also during the quarter, the National Association of Dental Laboratories judging panel selected the iTero Element 5D as the winner of the 2020 Journal of Dental Technology Weill Award. The award represents a recognition of our commitment to enhancing patient engagement and communications that support efficient laboratory production. For ExoCAD during the quarter, we launched two of the largest software releases in history, DentalCAD and Exoplan. DentalCAD 3.0 Galway includes over 90 new features and over 80 enhanced functionalities with significant improvements to reduce design time, such as instant and atomic morphing. Exoplan 3.0 Galway includes over 40 new features and over 60 enhanced functionalities that support planning of indentureless cases, including the design of surgical guides. During the quarter, ExoCat also added two new large implant manufacturers as OEMs for Exoplan in Brazil. With that, I'll now turn it over to John.

Thanks, Joe. Now for our Q4 financial results. Total revenues for the fourth quarter were $834.5 million, up 13.7% from the prior quarter and up 28.4% from the corresponding quarter a year ago. For clear aligners, Q4 revenues of $700.7 million were up 12.9% sequentially and up 28.9% year over year, reflecting Invisalign volume growth in all regions, partially offset by lower ASPs. Clear aligner revenues growth was favorably impacted by foreign exchange of approximately $5 million, or approximately 0.8 points sequentially, and on a year over year basis by approximately $10.3 million, or approximately 1.9 points. Q4 Invisalign ASPs were down sequentially $15, primarily due to increased revenue deferrals related to a higher mix of new cases versus additional liners, partially offset by favorable foreign exchange and lower promotional discounts. As we mentioned last quarter, we did not implement a price increase in 2020, given our continued commitment to helping our customers in the recovery efforts during the pandemic. On a year-over-year basis, Q4 Invisalign ASPs decreased approximately $75 primarily due to our decision not to raise prices last summer, increased revenue deferrals for new cases versus additional aligners, and higher promotional discounts, partially offset by favorable foreign exchange. As a result, clear aligner deferred revenue on the balance sheet increased $83 million sequentially and $195 million year-over-year and will be recognized as the additional aligners are shipped. Total Q4 clear aligner shipments of 568,000 cases were up 14.5% sequentially and up 37.3% year-over-year. Our system and services revenues for the fourth quarter was $133.8 million, up 18% sequentially due to an increase in scanner sales and increased services revenues from our larger installed base and higher ASPs. Year-over-year systems and services revenue was up 26% due to higher scanner sales, services revenue, and the inclusion of exoCAD CAD-CAM services, partially offset by lower scanner ASPs. Imaging systems and CAD-CAM services deferred revenue was up 30% sequentially and up 69% year-over-year, primarily due to the increase in scanner sales and the deferral of service revenues. which will be recognized relatively over the service period. Moving on to gross margin, fourth quarter overall gross margin was 73.2%, up 0.4 points sequentially, and up 0.5 points year-over-year. On a non-GAAP basis, excluding stock-based compensation expense and amortization of intangibles related to Exocad, overall gross margin was 73.6% for the fourth quarter. up 0.3 points sequentially, and up 0.7 points year-over-year. Clear aligner gross margin for the fourth quarter was 74.9%, up 0.1 points sequentially due to lower additional aligner volume, partially offset by higher warranty, other manufacturing costs, and lower ASPs. Clear aligner gross margin was up 0.7 points year-over-year, primarily due to favorable product mix from increased itero scanner absorption as a result of increased manufacturing volumes partially offset by lower ASPs, higher warranty costs, and other manufacturing costs. Systems and services gross margin for the fourth quarter was 64.2%, up 2.2 points sequentially, primarily due to higher ASPs and increased manufacturing efficiencies from higher production volumes. Systems and services gross margin was down 0.7 points year over year due to lower ASPs, higher freight, and other manufacturing costs, partially offset by higher services revenue. Q4 operating expenses were $397.3 million, up sequentially 11.3%, and up 23.8% year over year. The sequential increase in operating expenses is due to increased marketing and media spend and spending commensurate with business growth. Year-over-year, operating expenses increased by $76.5 million, reflecting our continued investment in sales and marketing, R&D activities, and manufacturing operations. On an on-gap basis, operating expenses were $372.3 million, up sequentially 12.1%, and up 23.4% year-over-year due to the reasons as described earlier. Our fourth quarter operating income of $213.2 million resulted in an operating margin of 25.5% up 1.4 points sequentially and up 2.3 points year-over-year. The sequential and year-over-year increases in operating income and the operating margin are primarily attributed to higher gross margin in operating leverage. On a non-GAAP basis, which excludes stock-based compensation, amortization of intangibles related to EXOCAD, and acquisition-related costs, operating margin for the fourth quarter was 28.9%, up 0.9 points sequentially, and up 2.5 points year-over-year. Interest and other income expense. Net for the fourth quarter was a benefit of $1.4 million, primarily driven by favorable foreign exchange. With regards to the fourth quarter tax provision, our GAAP tax rate was 25.9%, which includes tax benefits of approximately $11 million related to adjustments in prior years' unrecognized tax positions. The fourth quarter tax rate on a non-GAAP basis was 14.5%, compared to 16.6% in prior quarter and 20.9% in the same quarter a year ago. The fourth quarter non-GAAP tax rate was lower than the third quarter's rate, primarily due to the reasons previously stated. Fourth quarter net income per diluted share was $2, up 24 cents sequentially and up 47 cents compared to the prior year. On a non-GAAP basis, net income per diluted share was $2.61 for the fourth quarter, up 37 cents sequentially and up 85 cents year over year. Moving on to the balance sheet. As of December 31st, 2020, cash and cash equivalents were $960.8 million, an increase of approximately $345.3 million from the prior quarter. which is primarily due to higher cash flow from operations. Of our $960.8 million of cash and cash equivalents, $548.3 million was held in the US and $412.5 million was held by our international entities. Due for accounts receivable balance was $657.7 million, up approximately 5% sequentially. Our overall day sales outstanding was 71 days, down approximately six days sequentially, and down approximately five days as compared to Q4 last year due to strong cash collections. Cash flow from operations for the fourth quarter was $381.4 million. Capital expenditures for the fourth quarter were $53.2 million, primarily related to our continued investment in increasing the liner capacity and facilities. Free cash flow, defined as cash flow from operations, less capital expenditures, amounted to $328.3 million. Under our May 2018 repurchase program, we have $100 million still available for repurchase of our common stock. Before we move to the outlook, I would like to make a few comments on the full year 2020 results. In 2020, we shipped a record 1.6 million Invisalign cases, up 7.9% year-over-year. This reflects 13.3% volume growth from our international doctors and 3.6% volume growth from our America's doctors. Systems and services volumes were down 12% compared to 2019, reflecting the impact of COVID-19 pandemic on equipment sales. Total revenue was a record $2.5 billion, up 2.7% year-over-year, with clear line of revenues a record $2.1 billion, up 3.7% year-over-year. 2020 systems and services revenue were $370.5 million, including ExoCAD revenues from April 1, 2020 forward, compared to $381 million in 2019. Full year 2020 operating income of $387.2 million, down 28.6% versus 2019, and operating margin at 15.7% versus 22.5% in 2019. 2019 operating income included a litigation benefit of $51 million and Invisalign store closures of $23 million for a net benefit on operating margin of 1.1%. With regards to a full-year tax provision, our GAAP tax rate was negative 368.6%, which includes a one-time tax benefit of approximately $1.5 billion net of current year amortization associated with the recognition of a deferred tax asset related to an intra-entity sale of certain intellectual property rights resulting from our corporate structure reorganization completed in the first quarter of 2020. Excluding the tax benefit related to our corporate structure reorganization and the related tax effects of stock-based compensation and other non-GAAP adjustments, the full-year tax rate on a non-GAAP basis was 17.6% compared to 22% for 2019. 2020 diluted EPS was $22.41. On a non-GAAP basis, 2020 diluted EPS was $5.25. Free cash flow was $507.3 million for 2020, down $90.3 million versus 2019. Now let me turn to our outlook. Overall, we are very pleased with our Q4 performance and the strong momentum in our business. which has continued through January for both clear aligners and systems and services. As we discussed at our Investor Day in November, we are committed to making significant investments to drive growth, and we are seeing good return on these investments across all regions and customer channels. These strong returns give us confidence to continue investing in sales, marketing, innovation, and manufacturing capacity to accelerate adoption in a huge, underpenetrated market. These investments coupled with typically higher seasonal operating expenses as a percentage of revenue are expected to result in sequentially lower operating margin percent in Q1, as we have historically seen. While the global operating environment surrounding the pandemic remains uncertain, we will continue to focus on what we can control, and we are confident in our ability to continue to execute. Our responsibility is to continue driving innovation and delivering on the needs of our customer doctors and their patients. Over the past 24 years, Align has invested billions in technology, innovation, consumer marketing, and demand creation to connect millions of consumers with our doctor customers. We will continue to invest in this business to drive demand and drive adoption of the Align digital platform, including manufacturing and operational expansion. We will always be responsible. Just like we've done in the past, we make investments to drive growth and maximize ROI. We remain committed to our long-term target model of 20% to 30% revenue growth for clear aligners and systems and services, an operating margin of 25% to 30%. With that, I'll turn it back over to Joe for final comments. Joe.

Thanks, John. The choices we made in 2020 to protect employees, support customers, and press forward on our strategy for growth were possible because of the strength of our balance sheet and the confidence we have in our business model. Our actions reflect our conviction in the enormous opportunity we have to transform smiles and change lives. With 15 million orthodontic cases starts annually and more than 500 million consumers who can benefit from a better smile, The market for digital orthodontics and restorative dentistry is massive and has been unleashed by the need for digital. In a macro sense, COVID-19 has accentuated the benefits and pervasiveness of the digital economy. From an aligned standpoint, practices across every region are embracing digital treatment in new ways and more purposely than ever before. Invisalign providers are using our virtual tools to minimize in-office appointments and deliver doctor-directed, personalized treatment that meets the needs of the moment and that will reshape the future of treatment. Digital acceleration is not just around Invisalign treatment. It includes digital workflows around iTero scanners and general dentistry. Doctors tell us that the iTero scanner is central to their practice and their practice workflows, and it's key to driving digital treatment. We've also known this, iTero and now ExoCat are core components of the Align digital platform, our integrated suite of unique proprietary technologies and services delivered as a seamless end-to-end solution for patients and consumers, orthodontists and GP dentists, and lab partners. And particularly, we now have all the building blocks to create digital workflows leveraging the combined power of Invisalign treatment, iTero scanners, and ExoCAD software become more relevant to the GP market, which is critical to accessing the 500 million consumer opportunity. Align is a growth business with huge opportunities. but the environment remains uncertain due to COVID-19. Our plan is still to counter uncertainty by staying focused on our long-term strategy, living our values, supporting our employees and customers, and keeping in mind the demand drivers we've identified over the past year. The redirection of disposable income for many consumers, channel focus that allows us to reach and support a wider range of customers within each channel. And most importantly, the digital mindset that's taking hold with more and more of our customers and that we are supporting through innovative products and programs that can help support their digital transformation. We are not ignoring the reality of COVID-19 and how long it may be part of our lives, but we're also not going to stop driving the business forward for the good of the customers and their patients, our employees, and our stakeholders. In closing, I want to leave you with a few thoughts as we begin the new year. While there is considerable amount of turmoil in the world, our focus is on what we can control as a company. We have strong momentum. We'll stay focused on our strategic priorities, international expansion, patient demand and conversion, orthodontist utilization, and GP dentist treatment. In summary, we're very pleased with the fourth quarter and the full year results of 2020, during a remarkable year with events beyond our control as a result of COVID-19. It is during times such as this when having a solid strategy combined with focused execution can lead to outcomes that support growth. not only for Align's business, but also practice growth for Align's customers, which also leads to more and more Invisalign smiles. With that, turn over to the operator, and we'll take calls.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Ravi Misra with Barenburg Capital Markets. Please proceed with your questions.

Hi, thanks for making the question. Hi, how are you? Happy New Year. So I just wanted to maybe start one. I'll let the others maybe talk about the quarterly trends. But one of the things that kind of stood out to me was, you know, you're driving extremely strong volume growth amidst, you know, what's kind of a stable to slightly declining pricing environment. Just curious first, you know, when do you think you'll be able to go back to the kind of prior model where you're able to take pricing? Is that still in the cards? And then secondly, you know, I think the teen market is an area that we've kind of always been, you know, looking at as the next leg of growth, the kind of huge market that's out there. And you're talking about some of the conversion and the lead generation. Can you help us understand, you know, some of the conversion rates around the leads that you generate in terms of timing and how long this takes to get the ROI that, you know, is put into the advertisements that you're putting out there?

Hey, Robbie. First of all, I guess your first question is on average selling prices. We try to communicate this as strongly as we can is to keep your eyes on gross margin because we have huge mix, whether it's international mix or it's product mix. You see a lot of progress in iGo and products like Moderate and Invisalign First and those products that carry actually lower average selling prices but higher margins. And so you could often mix up on those things. So I'd say As we keep emphasizing, don't be overly concerned about ASPs or focused on ASPs. Like John said, we didn't increase ASPs this year because we're interested in supporting our customers and making sure that this is a really difficult transition for many practices right now. And instituting a price increase just wouldn't have been responsible in that sense. But at the same time, we drove incredible productivity across the business, and we were able to show those kind of gross margins. So I hope you and the rest of the analyst community out there can actually see that. We've been talking about this for a few years, but it's actually taken place. On the teen side and the conversion spot from an advertising standpoint, we come at this from a lot of different ways and a lot of different areas. If we're going to start teen season, you really have to start in February in the United States and you have to really work through a lot of different aspects of social media. You advertise differently for moms and you do teens and different things like that. I can't give you a correlation coefficient in the sense of here we invest in how much we get back, but we understand as well as a business, we've been doing it for years. We'll understand the timing of it. And more and more, we become more specific on the social advertising pieces and how to implement that properly. And John, do you have anything you want to add?

No, that's just it. I mean, there's others that are in the equation. You have to reach the teen, as Joe described, and we talked about social influencers and so on. You have to reach the parents, and we try that. And then also have the right formula with the doctor. So getting those three to think about going into treatment is really the key.

Okay, there may be one last one if I can ask one more. Just on the reopening and vaccination progress and kind of volumes, how are you guys kind of thinking about the consumer spending environment as, you know, the options that the patient's going to have start increasing? I mean, is that going to require more investment here in the near term, or do you think kind of where we're at a baseline where you've kind of gotten the ramp where things are starting to really click here with the advertisements that you're doing as is? Thank you.

Yeah, Robbie, it's a good question. I mean, look, we're always looking to maximize our return on investment. We talk about that to grow in this vastly under-penetrated market. In some countries, like in the U.S., it's just a matter of refining how we spend. We talk about the influencers, talk about NFL and other things. And in other countries, we've really started spending some of that consumer investment. advertising, and we see a great response, and we see a strong return. And those are areas that as we see that response, we see it turn into volume. Those are areas that will continue. So we're always looking at return on investment, and we'll find ways to be able to grow our volume that way.

Thanks, Robbie.

Thank you. Our next question comes from John Block with Stifel. Please proceed with your question.

Hey, John. Yep.

Hey, Joe. Good afternoon. Joe, you mentioned 2021 is off to a great start. From 2015 to 2019, so I'm sort of isolating pre-COVID, management guidance for 1Q cases, the guidance for 1Q cases were up pretty consistently, just low single digits off of what you did in the fourth quarter. And I guess where I'm going with this is, at a high level, what's the expectation for case growth this And I'm just trying to level set as, you know, the back part of 2020 likely benefited from some pent-up demand. So just how we should think about the trend line, if you would, into the early part of 2021.

John, I'll let John have the specifics of it. I'll just tell you that, you know, January was a really strong orders quarter. So that momentum really continues.

And look, John, I think as we've said, we're controlling what we can control, making investments that help drive this business. We look at, as Joe said, we felt really good about how we exited Q4. We saw that in January as well. And we don't want to guide. We specifically haven't because there's things that are outside of our control. And we'll leave that as it is. What we're trying to give you is kind of the latest information without projecting forward.

Okay, fair enough. And I'll ask a quick two-parter for the second one. Amita was just gangbusters. I mean, I think it was up 48% off a 32% comp. Shout out to Marcus. But anything to call out there, I mean, the number was huge. And then the second part is teen up, you know, almost 40%. Joe, what do you think the underlying ortho market was growing? Where I'm going with this is just your conviction of sort of maybe a type of inflection point, if you would, with teen share of chair. Thanks, guys.

Hey, John, you know, I appreciate you bringing up EMEA. I mean, that was just an amazing performance when you see that. I've been doing business in Europe since I was 30 years, and you see growth like that by countries. It's amazing. And I think that's, to me, that was really a story on the fourth quarter, too, was the breadth of that growth. It wasn't just North America. It wasn't just, you know, Asia. It was deep. It was cross-segments, cross-GPs, across orthos. So, John, you know, I'm not ready to talk about an inflection point. All I can say is when you think about we had 77,000 doctors that I talked about in my script, and then 7.2 to 7.3 thousand more doctors. Well, that's 10% more doctors. That's a record for us, too. So we see Invisalign, this digital treatment, really catching on in a big way, and it's meaningful. Look, we're gearing up for it. We're obviously advertising to drive that demand, and we'll stay focused on just executing, John, right now.

Thanks, guys.

Thanks, John. Next question?

Thank you. Our next question comes from Steve Buchaw with Wolf Research. Please proceed with your question.

Hi, Steve. Hi. Thanks for the time here, guys. I wanted to try to understand a little bit better the relationship between some of the things that you flagged, John, in your prepared remarks as it relates to deferrals and ASP. I certainly agree with the view that gross margins are really the critical metric, but I'm sure we're going to get a lot of questions about ASP, you know, tonight and over the next couple of days. So, I wonder if you could help us understand a little bit more deeply, one, you know, why would we be seeing more deferred revenue here, both on aligners and on scanners, and what's the relationship to ASP, and do we see that reversed?

Yeah, Steve, the basic way to think about this is as we look at our revenue, we've got revenue on a new case that we ship out, and there's a certain amount that you recognize on that shipment based on our rev rec, and then there's a certain amount for future aligners or future modifications that are needed that'll be deferred revenue. And then you also get into your revenue, so those deferrals that you've made for maybe previous quarters or even previous year, that as that doctor needs to use that additional line, you're gonna get revenue for that. When you have a mix like we have, where there's much more, there's this demand for future volume for new cases, you get a mix where we just have a lot more as a percentage of new cases, and that's what impacts ASPs. When we look at that from a margin standpoint, it's margin accretive. We're getting that as new cases. Many of the cases that we get back from a deferred revenue standpoint where there's refinements, we just don't make as much margin on that. You get the deferred revenue, but you don't get as much of the margin. So there's those dynamics that we have. We saw it just when you have a significant volume increase like we saw in our third and fourth quarter.

Okay. Thank you, John. And then I wanted to follow up about the GP channel. GP has been just gangbusters here lately. I wonder if I could try to understand that a little bit more deeply. One is, do you think it continues to grow at this sort of clip relative to the Ortho channel? Maybe two, do you think Exocad has been a driver of incremental growth in that channel at this point? And then lastly, you know, should we think about the shift to DSOs being a variable one way or another? And I apologize for my kids screaming in the background.

That's the life we live now, Steve. We understand. It happens on like every call. From a GP channel standpoint, I mean, three years ago when we first started segmenting in Europe and now we had to do it in the States and we do it all over the world. And then we introduced products like, you know, iGo that were specific to it. And just, you know, a sales force that can communicate with GPs because it's a different conversation than with orthos. You know, see, I can't tell you where it's going, but when we talk about that 500 million patients like I did in my script, that's where they are. And that's where you touch them. And it's a different, it's not a big teen market. It's a lot of adults. But it has to have a workflow that's specific to a GP. And that's why we've derived our products. That's why iTero is so important from a front-end standpoint. Your question on ExoCat is we think that's going to be a big GP driver for us. It's a big legitimate piece for us, but I don't think it's adding to volume right now. We're just rolling out these new products. We're just starting to integrate that kind of software code into iTero and into our programs, and that certainly will drive increased penetration in the future.

Got it. Thank you so much for all the perspective here.

Yeah, thanks, Steve.

Thank you. Our next question comes from Jeff Johnson with Robert W. Barrett & Co. Please proceed with your question.

Thank you. Good evening, guys. Hey, Joe. You know, I wanted to start with, I know it's tough and maybe there's not even a way to do it, but any way to think about, especially over the last two quarters, how much of this patient volume has been backlogged versus the zoom effect versus true kind of accelerating penetration of clear aligners versus brackets and wires? Just You know, is there any way to bucket or any metrics you're looking at that tells you this is truly kind of that secular uptick we've all been waiting for versus, you know, backlog and some of the Zoom effect?

I think as we get further and further from the second quarter, you know, obviously the backlog question becomes, you know, less and less as part of the noise of the structure, right? I feel a lot of, you know, analysts, Jeff, they wondered, hey, we had a great third quarter, obviously, and it was, well, how much of that was really the second quarter that was rolled into the third? We really don't know what that was. We don't. And our doctors don't know it either as we talk to them. The fourth obviously had less of that. And, you know, we really felt good about our orders in January, too. So I think we're really moving away from that question here soon. The number of docs, like I just quoted, with over 7,000 new docs ordering from us, 77,000 in total shows you the breadth of what's going on in What's really struck me in this entire thing, too, Jeff, is really this is not just the United States. This is all over the world. It's Latin America. It's APAC. It's tremendous growth in Japan and ANZ and traditional markets in China and Europe. So there's breadth to this. And then the segments we talked about, both GPs and orthos. So, look, there have to have been backlog in the third quarter. There has to be some backlog in the fourth quarter, whatever. But we don't think that's the overriding story here.

Yeah, that's fair. And then one other kind of maybe more conceptual question, just as I think about, you know, I think about it through your advantages program, but, you know, are you seeing doctors that are the high volume guys, the platinum guys moving up to diamond and double diamond? Is it the lower, you know, uh bronze and or gold guys moving up to uh platinum does it matter to you which it is but but more importantly conceptually is it getting those low volume guys to really go all in here or the high volume guys to convert you know completely to Invisalign and I'm sure you're going to tell me it's a mix of both that but just kind of what you're seeing would be helpful there on your own customer base yeah you you helped answer that question Jeff it is it is a mix um

But it is really broad. I mean, we see it in the bronze accounts and golds and all the way to diamond and diamond plus. And we see growth in all those segments. And I think it's kind of logical, right, that people that know how to do digital are going to expand on it because digital really allows them to function in this COVID environment in a way that, you know, allows them fewer customer touches and they can actually carry on their practices in a normal way. Other doctors actually see the advantages of that. They have patients asking for it, and they start to move toward a digital kind of a platform. So, you know, overall, again, it's a breadth discussion. It's not just one area. It's not just one country. It's not one segment of the Advantage program. We've just been seeing adoption across the board. John, anything to add on that?

No, I'd echo the breadth. I mean, you have new doctors, like Joe said. 7,000 new doctors that come in with, you know, and want to do cases that come into our ecosystem and start cases. You see doctors who have done just a few cases really start to accelerate. And then, you know, at the top of the pyramid, you have people that are doing a lot of cases, and they do even more cases. So that's part of when we talk about the breadth of this growth and what makes us excited. And it's, like Joe said, not just the U.S., phenomena, it's pretty much everywhere.

And Jeff, the last thing you said is do you care, which I thought was kind of interesting. It's like we really don't care. We just want to serve the doctors who want to work with us. We see this market. We talk about how large this market is and how underpenetrated it is. And we just want to see wherever that growth is, that's great. If it's on the low end, that's terrific. If it's on the high end, that's terrific. We set this company up to be able to service either side and to work well with them.

Thank you. Appreciate the comments. Thank you. Our next question comes from Elizabeth Anderson with Evercore. Please proceed with your question.

Hi, guys. Thanks so much for the question. Hey, Joe. I was going to say, obviously, one of the many nice points of the quarter was the scanner and CAD-CAM revenue. Can you talk a little bit about what you sort of see as – sort of market growth there? Like, where are you taking share? Is it in the GP, more in the ortho channel? Is it, you know, orthodontists adding their third scanner? Is it people finally saying, yes, I'll go digital? Obviously, the total number of cases, you know, submitted digitally was very high. Any other color you could provide there would be really helpful.

You know, Elizabeth, you could work for us, okay? You kind of described exactly how that demand is. It's coming from all these different places. And a lot of it, when you say, where are you taking share, a lot of it is just analog share. There's so much of dentistry still just completely analog. They're still doing impressions and different pieces. And so it's, you know, the growth's been tremendous in that sense. Your question about orthodontists that start to move up into a significant part of their practice, you know, being Invisalign, you'll see a scanner at every chair. And they use these things constantly. It's part of what they do. And what we see on the GP segment is the communication tool ends up being the scanner and the front of the scanner. Because, you know, in the past, they'd hold up a mirror and say, can you see that, you know, that second molar back there? And you'd say, yeah, but you really couldn't. Right now, you'd throw it on a screen. It's live. You can see exactly what's going on. It becomes an incredible patient communication tool in the sense of, you know, where's your dentition? What needs to be done? And it helps to convince patients of what the doctor wants to do and the validity of that kind of treatment. So this is where dentistry is going. And when you look at ITERO, it is arguably the highest performing scanner in the world. The speed of it, the exactness of it, color rendering, and also with NERI technology, being able to see caries or cavities is a real benefit. Even the orthodontists who want to make sure that before you start the treatment that that dentition is in good enough shape to be able to accept that kind of movement. This is the time for digitization inside of dentistry, and iTero plays a big role in that, and it front-ends our digital platform.

Especially in a COVID environment, given the fact that you don't want to have as much time for impressions and so on, and you want to be able to have something that's fast and really be part of that digital workflow, iTero lends itself well.

Okay, that's super helpful. And two sort of like just follow-up more housekeeping questions. One, obviously you announced the new products today, and, you know, I imagine that that's something you'll be talking about as sort of the virtual Chicago midwinter and what you would have discussed, you know, a lot of at IDS. Is there anything we should keep in mind in terms of the ramp of sort of new products or impact from, you know, IDS moving to the back half of the year? And then on the other side, you know, obviously we saw your announcement about the move to Arizona. I just didn't know if that had any impact in terms of something we should model in on taxes or anything else just to touch on that as well.

Yeah, I think I can answer the tax piece of it. Really not a tax impact. It really came down to when we look at the campus that we have in San Jose and the expansion that we have from a technology center, we become space constrained. We want to keep that technology center, that innovation center in San Jose, and expand that out and add more to help with that innovation. And then moving to here in Tempe for kind of that head office just made sense to us.

Yeah, Elizabeth, on the new product pieces, keep in mind, you know, we talked about we spend a half a billion dollars a year on advertising and also new product development. You'll see a lot of new products. We don't pace ourselves on those introductions based on IDS, you know, and that's why we obviously announced the new iTero scanner. We talked about the new 6.0, you know, software that we have. A lot of changes to FiPos, which is our final positioning aspect of Dentition. You know, we had the Plus product from iGo, the in-face visualization. This is a digital business, and it requires constant iterations and products. And obviously, you know, midwinter and those things were great places to highlight it, but Our innovation, we looked at it as agile, not waterfall anymore. In a sense, waterfall used to be, you know, invent during the year, release one period of the year. More and more, you'll see us just monthly, just rolling out new products as we adapt to a more kind of an agile philosophy of development than a waterfall type of, if that's what you're asking, Elizabeth.

Makes total sense. Thank you so much.

Yeah, you're welcome.

Thank you. Our next question comes from Richard Newiter with SVB Learink. Please proceed with your question.

Hi. Thank you for taking the questions. Just maybe to start off, the SWITCH program, which has clearly been extremely successful for you, I'm curious to know how much more runway, you know, there is associated program, and maybe if you could just comment on kind of how you're at least thinking about that for your internal modeling.

Yeah, look, I think it has a huge amount of breadth to it. I mean, it's not just U.S. We started this in Japan actually years ago, you know, introduced to the United States. And you think about, you know, it's just a great winner, you know, detaching those wires and brackets from people's teeth, using Invisalign, understanding, like we said in our script, just how much more simple it is and better for people and comfortable for people to go with our product line. We think it has a lot of room to grow, and we're going to keep supporting it.

Yeah, and Rich, this is John. I mean, we are always looking at those types of promotions for an ROI, and in these cases, many cases, looking at it from an incremental standpoint. Nothing can be more incremental than it was glued onto someone's teeth, and now they come off and they go to Invisalign. So we like those dynamics. It sends a great message. And those people who had wires and brackets on their teeth, can talk about their experience with Invisalign. So there's a lot of positives to it, and as Joe said, it started in Japan, and we've seen great success in the US, and we look to other places as well.

Got it. Helpful. And Joe, you said a few times how encouraging the trends have been in January. I'm just curious, you know, understanding it's only one month, but all else equal, if the trends that you're seeing now were to hold kind of, you know, for a good portion of the year, where in your long-term kind of long-range plan of 20% to 30% do you think you'd be falling, you know, towards the mid to upper end? I'm just trying to get a sense for kind of what you think in there.

Nice try, Richard. You know, look, we were very committed to our long-term growth model, 20%, 30%. That's really all I can say right now. You know, Rich, you know, we're in a really uncertain environment. You know, we're happy about January. It is why we're not giving guidance. We're all living with volatility right now. We'll just continue to execute and keep our heads down. But we're committed to that 20% to 30% growth model that we've been talking about for several years. Okay. Thanks. Thank you.

Thank you. Our next question comes from John Krieger with William Blair. Please proceed with your question.

Hey, John. Hey, Joe. Hey, just sticking with that answer, you were obviously above that in terms of volumes in the fourth quarter. How do you feel about your ability to deliver on that if the order flow were sustained in terms of fabrication and fulfillment? How are those metrics holding up at this point?

You know, our supply chains, we try to keep ahead in that sense, so I feel we have adequate plans and capacity right now to handle the surge in demand.

Great. Okay, and then, John, I think you've talked about in the past a reasonable assumption is kind of a flattish ASP and realize there's a lot of puts and takes, but is that still a reasonable kind of planning thing for us, or are you guys thinking less on the pricing front and and therefore maybe more of a downward trend over the coming year?

You know, it's tough because it really becomes kind of the end result because if you have more primary cases, as I spoke, compared to secondaries, you can get some of these impacts in ASPs. I think, you know, in general, there's not a significant change that we would expect in some of the mix or some of that pricing. So that being said, you wouldn't expect too much fluctuations in ASPs, but like I said, it depends on that demand that comes forward from our doctors.

Got it. Okay. And then one more, Joe, so in a typical year, you know, we'd assume kind of teens would be big in Q3 and adults would be bigger in Q4. Is that same sort of seasonal pattern likely, do you think, in 21, given what we know now, or... would you expect kind of teen order flow to be more kind of spread evenly throughout the year?

Yeah, John, we don't know, but I'll tell you, it became muted this year. Obviously, we saw a much stronger fourth quarter in the United States in teens than we saw, you know, as you normally see from a season standpoint, it continued. So, you know, I think all of us are expecting, you know, summer and fall months, it's COVID, to start to retreat a little bit. That might you know, take us back to the patterns that we had before. But I don't think it's going to be binary. I really don't. I think this could have, you know, this could have changed the pattern. We're just going to have to, you know, we're going to have to just ride the curve here and see how it goes. But we'll continue to advertise through this. We'll execute on the plays that we talked about in our scripts. And we really feel confident we can continue to drive significant team demand.

Great. Thank you.

Thanks, John. Operator, we'll take one or two more questions, please.

Okay. Our next question comes from Jason Bednar with Piper Sandler. Please proceed with your question.

Hey, good afternoon, everyone. Thanks for taking the questions here. Congrats on another really strong quarter. I appreciate all the details you discussed. Maybe building off some of the real-time commentary you shared in your prepared remarks there, Joe, I'm just curious if you can expand on what you're seeing in January from maybe a utilization perspective. maybe in the context of where we were October through December, any notable call-outs in January from a geographic perspective or teens or adults?

I think the call-out, Jason, really is just a breath of it, really. There wasn't, you know, any geography in particular that dominated or it was just in, you know, segment two, GP and ortho continued to be strong. So, you know, when you exit a year and you enter a new year, you're obviously glued to that month to see, especially in a business like this, what the momentum is, and we just see a continuation of the strong momentum that we had in the fourth quarter. John, anything to add on your end?

I think the breadth of it is my note on this, that we have across geographies between GP and orthos, and what we described is a lot of doctors that are higher up in the tier, they're continuing to do a lot of volume, and then a lot of new doctors that come in with cases in hand and and we can get them to start the Invisalign system into our digital ecosystem. So that continued from Q4 into Q1.

Okay, that's awful, guys. And then just focusing on China here just for a quick moment. There wasn't a great deal of discussion, probably less than this call than maybe any other call in recent memory on China in particular. But I appreciate the seasonality that happens here in the fourth quarter, but maybe just wondering if you can expand on what you're seeing with your business and the clear line of market in China specifically, and maybe compare that against some of your other APAC markets.

We felt good about our growth in China, 26%, you know, for the quarter overall. You know, China's, you know, we see shutdowns periodically. You know, issues in Shanghai are different places. The Chinese are pretty draconian, I'd use the move, is when they see COVID, they move pretty quickly. The public hospitals have been throttled to a certain extent on elective procedures. So, But we felt good about the quarter, and we feel, honestly, our investments in China, we really feel good about those. The manufacturing piece helps to legitimize us. Our IT systems, you know, from a data protection standpoint, have to be, you know, geared toward China. We're in good shape with that. We're assembling ITERO there now. We're really great about our training centers, you know, great about our treatment planning capabilities. So, you know, overall, we remain bullish on China, and we think that, you know, China will start to, you know, with the rest of the world, will start to, to recover in the second half of next year, too, and we expect to be a big part of that.

All right, very helpful. Thanks, guys.

Thanks, Jason. We'll take one more question, please. I know we ran over.

Okay, our last question comes from Nathan Rich with Goldman Sachs. Please proceed with your question.

Hi, Nathan.

Hey, Joe. Good afternoon. Thanks for squeezing me in. Obviously, results over the past couple of quarters have been really strong. I guess, you know, when we look out to 2021, you know, tough to know what happens with COVID, but hopefully, you know, we'll start to get back to, you know, normal life, you know, later this year or 2022. I think, you know, as we look at where consensus is modeled, you know, I think kind of high teens revenue growth, it seems like you still feel comfortable with the 20 to 30% target. So, you know, do you feel like we should be expecting that type of growth in line with the long-term range off of this, like, this new higher level of volumes that you're starting to see in the back half of this year?

You know, Nathan, we try to emphasize as much as we can. We feel very confident about those 20% to 30% ranges of growth and, you know, continuing to target 25% to 30% operating profit, too, in order to do that. So you'll see us, you know, in the investment rates that John talked about we're putting in place to drive that demand. So we remain committed to that model of growth.

It starts with the vastly under-penetrated market and the investment opportunity we talked about. We try to give you kind of the breadth of all the different levers that we have to pull to be able to drive that return. And we continue to make that. It changes over time in terms of how we invest and where and so on, but that belief is still there. And when we make those forward investments, we're investing into that under-penetrated market that we think we can grow 20% to 30% in. and do it at a 25-plus percent off-margin rate.

Great. Well, congratulations on a strong quarter.

Thanks a lot, Nathan. Appreciate it.

Thanks, Nate. Thanks, Nate. Well, thank you, everyone, for joining us today. This concludes our earnings call. If you have any follow-up questions, please contact our Investor Relations Department. And we look forward to following up with you in upcoming conferences and virtual events. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.