Align Technology, Inc.

Greetings. Welcome to the Align Q2 22 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Shirley Stacey, with Align Technology. You may begin.

Good afternoon, and 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 second quarter 2022 financial results today via Business Wire, 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. The telephone replay will be available today by approximately 5.30 p.m. Eastern Time through 5.30 p.m. Eastern Time on August 10th. To access the telephone replay, domestic callers should dial 866-813-9403 with access code 137829. International callers should dial 929-458-6194 using the same access code. As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Align's future events and product outlooks. 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 statement. We have posted historical financial statements, including the corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable. and our second quarter 2022 conference call slides on our website under quarterly results. Please refer to these files for more detailed information. And 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 an overview of our Q2 results and discuss the performance of our two operating segments, systems and services, and clear aligners. John will provide more detail on our financial performance on our view for the remainder of the year. Following that, I'll come back and summarize a few key points and open the call to questions. I'm pleased to report solid second quarter results with top line revenues relatively unchanged from Q1, an operating margin of approximately 20% despite unfavorable foreign exchange. The underlying market for orthodontics continues to be impacted by macroeconomic environment factors and lingering effects of COVID-19 variants in certain markets. Notwithstanding these headwinds, we've remained focused on achieving our strategic initiatives, including opening new offices in the Middle East and Africa, and our new manufacturing facility in Poland, launching new solutions to better support the way our customers want to do business, such as a doctor subscription program, and team case packs, and announcing new products and innovation to help our doctors and their patients. These new innovations are revolutionizing the digital treatment planning, and helping to drive the evolution of digital orthodontics and comprehensive dentistry. Align is well positioned to withstand the current market conditions to lead to digital revolution in orthodontics and dentistry as the environment and growth trends improve. For systems and services, Q2 revenues were up 4.7% sequentially and up slightly year over year compared to Q2 21, year over year growth of 215%. Q2 services, And systems revenues increased sequentially, driven by scanner volume growth in the Americas and APAC, partially offset by lower volume in EMEA and unfavorable impact of foreign exchange. The iTero Element 5D imaging system continues to represent the majority of our scanner volume, as doctors recognize the benefits of going digital. In APAC, the iTero entry-level FlexScanner offering was up sequentially in Q2, reflecting increased adoption. I'm also pleased with sequentially increasing services revenues in Q2, reflecting growth from the installed base. Services revenues represent approximately 40% of our systems and services business. For our clear aligner segment, Q2 revenues were down slightly sequentially and down 5.1% year over year, compared to our Q2 21 record year over year revenue growth of 182%. For the quarter, Q2 clear aligner volumes reflect sequential growth across the Americas, and parts of EMEA, partially offset by China and the UK. Q2 Invisalign case starts for teens and younger patients was 177.3 thousand up slightly sequentially and down 2.1% year over year compared to Q2 last year when our teen case shipments growth rate was at an all-time high. For Q2 Invisalign first for kids as young as six years old grew year over year and was strong across all regions. During Q2 we introduced Invisalign Teen Packs in the US and Canada and France. Teen Packs are a new subscription program which enables orthodontists to buy clear aligners and packs in advance, similar to the way they buy wires and brackets today. Our Teen Case Packs simplify the ordering process and make the billing more predictable for doctors. Teen Case Packs also include exclusive practice development benefits with the Invisalign brand and requires an incremental volume commitment from doctors. To date, enrollment has been encouraging, with early adoptions highest among doctors who have not historically used Invisalign aligners to treat their teen patients. For other non-case revenues, which include retention products such as Vivera retainers, clinical training and education, accessories, e-commerce, and our new subscription programs such as our DSP revenues, we're up both sequentially and year over year. For retainers, Q2 shipments had strong momentum, with sequential and year-over-year growth across all regions, driven by both submitters and utilization. Momentum in our doctor subscription program continued, and Q2 revenues increased over 60% sequentially. Now let's turn to the specifics around our second quarter results, starting with the Americas. For the Americas region, Q2 Invisalign case volumes were up sequentially, reflecting increased submissions from the orthodontic channel and increased utilization from the GP channel. From a product standpoint, Q2 sequential Invisalign case growth reflects increases in both comprehensive and non-comprehensive products, including Invisalign First and Invisalign Moderate. Q2 also benefited from increased utilization in the DSO channel. For our international clear aligners, Q2 Invisalign case volumes were down 1.7% sequentially, primarily as a result of the headwinds described previously. For EMEA, Q2 Invisalign case volumes were down slightly, primarily reflecting a slight increase in Iberia and Italy, offset primarily by slightly lower sequential volumes in the UK and France. For Q2, expansion market shipments declined sequentially. Q2 Invisalign team patients increased sequentially, driven by an increase in the number of doctors submitting team cases. Turning to APAC, Invisalign case volumes were down slightly, reflecting a full quarter effect of continued lockdowns in China. For Q2, Taiwan, Hong Kong, Japan, and India performed well during the quarter. On a year-over-year basis, Invisalign case shipments growth was strong in Japan, India, Taiwan, Thailand, and Korea. The APAC team case volume increased year-over-year, primarily driven by increased doctor submitters. Turning to new innovations, the Align Digital Platform is an integrated suite of proprietary technologies and services delivered as a seamless end-to-end solution to customers that connects all users, doctors, labs, patients, and consumers to transform smiles and change lives. Our technology advancements help our doctor customers deliver superior clinical outcomes, treatment efficiency, and also superior patient experience. In Q2, we introduced Invisalign Outcome Simulator Pro and comb beam computed tomography systems integration for ClinCheck software, building on several new innovations announced last quarter that will begin rolling out across the regions in August. Invisalign Outcome Simulator Pro, the next generation patient communication tool that empowers doctors to help patients visualize their potential new smile after Invisalign treatment, use in-face visualization in 3D dentition view all done chair-side in minutes. ConeBeam computer tomography systems, or what we call CBCT, integration for ClinCheck software, is designed to deliver a complete view of a patient's roots, crown, and jawbone. CBCT integration for ClinCheck software enables doctors to confidently deliver a more informed Invisalign clear aligner treatment plan for a wide range of cases. The user-friendly interface makes it easy for doctors to see their patient's root, crown, and jawbone, and one automatically digitally fused 3D model. This allows doctors to tailor their treatment plan based on their experience and their patients' needs. CBCT integration for ClinCheck software gives doctors the control and confidence to expand treatment planning to a broad range of malinclusions, including surgical, restorative, expansion, extraction, as well as teen cases with impacted or uninterrupted teeth. While it is still early in the commercialization of these new products, initial feedback from doctors is encouraging. We are excited to begin scaling them across our customer base in the second half of 2022. Also during the quarter, we awarded 11 new research grants, totaling $275,000 to universities around the world. Through our annual research awards program, we help advance orthodontic and dental research, furthering our commitment to the future of digital orthodontics and restorative dentistry. Our consumer marketing focused on educating consumers about the Invisalign system and driving that demand to Invisalign doctor's offices, ultimately capitalizing on the massive market opportunity to transform 500 million smiles. For Q2, we had over 16.2 million visits to our websites, a 15% year-over-year increase, and delivered over 6.3 billion impressions. Both metrics were lower versus Q1. as we chose to right-size our size and media spending Q2, given the macroeconomic environment. During the quarter, we built on our successful Invis-Is multimedia campaign and launched in the U.S. the next evolution with two new campaigns, Invis-Is Drama Free, targeted at teens, and Invis-Is When Everything Clicks, targeted at adults. Our Invis-Is Drama Free campaign highlights the benefits of Invisalign treatment while humorously juxtaposing teens with the significant hassles involved with using braces. Our Invis is when everything clicks campaign showcases Invisalign treatment, transforming smiles, and the resulting confidence it gives to young adults. Both campaigns will be rolled out to markets around the world in Q3. Adoption of our consumer patient app, My Invisalign, continued to increase with 1.8 million downloads to date. Usage of our four digital tools continues to increase, for example, Invisalign virtual appointment tool was used over 12,000 times, and our insurance verification feature was used 36,000 times in Q2. Further, we received more than 91,000 patient photos in our virtual care feature globally, which continues to provide us with rich data to leverage our artificial intelligence capabilities and improve our services for doctors and patients. Additional consumer demand metrics are included in our Q2 earnings slides posted on our website. We are pleased with our Q2 systems and services revenues, which are up 5% sequentially and up 1% year over year. Q2 sequential growth primarily reflects higher scanner volumes in the Americas and APAC and increased subscriptions. Year over year, results primarily reflect increased scanner revenues in the Americas, offset by lower volume in APAC and EMEA. Growth of our iTero scanner installed base is driving an increase in services revenue. On a year-over-year basis, systems and services growth reflects increased service revenues from our largest scanner installed base, higher subscription revenues, and increased sales of scanner wand sleeves. The number of inter-world digital scans used for Invisalign case submissions in Q2 reflect continued adoption of our digital scanners and our larger installed base. Total worldwide inter-world digital scans submitted to start an Invisalign case in Q2 increased 88.4% from 82.2% in Q2 of last year. International interaural digital scans for Invisalign case submissions increased 84.4% up from 76.2% in Q2 of last year. For the Americas, 91.4% of Invisalign cases were submitted using an interaural digital scan compared to 87% in Q2 last year. Cumulatively, over 60.4 million orthodontic scans, and over 12.6 million restorative scans have been performed with iTero scanners. Our Q2 ExoCAD CAD-CAM products and services, which include restorative dentistry, implantology, guided surgery, and smile design offerings, are included in our systems and services revenue. ExoCAD products and services are helping extend our digital dental solutions and broaden the aligned digital platform towards fully integrated interdisciplinary end-to-end workflows. During the quarter, ExoCAD released DentalCAD 3.1 Recova in a new powerful lab software which saves design time and offers more intuitive workflows along the design journey from CAD to CAM. In addition, the ExoCAD release launched a new MyExoCAD portal introducing mandatory end-user software use registration that for the first time allows ExoCAD to collect information about who and how customers are using the software. This expands the opportunities for future product improvements. Also during the quarter, we signed a new long-term contract with ExoCAD's largest customer, Armin Gierbach, further strengthening our relationship. Finally, we continue to execute our strategy of geographic expansion. In June, our European manufacturing facility in Wrocław, Poland, began manufacturing clear aligners for the EMEA region. locally for the first time. We also continued our operational expansion in Poland with our latest treatment planning facility. Our expanded operation in Poland supports Invisalign doctors in local languages, increases our flexibility and timeliness in supporting our doctor customers across the region, and we expect will positively influence the quality and time of preparation of ClinCheck treatment plans and provide our doctor customers with benefits of digital orthodontics with the Invisalign system. We are uniquely positioned with manufacturing and treatment planning in all three regions, and no other clear aligner manufacturer has our global footprint and capabilities. With that, I'll now turn the call over to John.

Thanks, Joe. Now for our Q2 financial results. Total revenues for the second quarter were $969.6 million, down 0.4% from the prior quarter, and down 4.1% from the corresponding quarter a year ago. This is compared to Q2 21 revenues of $1 billion, which had a year-over-year growth rate of 186.9%. For clear aligners, Q2 revenues of $798.4 million were down 1.4% sequentially, due primarily to product mix and unfavorable foreign exchange, partially offset by higher non-case revenues, and down 5.1% year-over-year, primarily reflecting lower volumes. unfavorable impact from foreign exchange and product mix shift, partially offset by higher additional aligners per order processing fees and higher non-case revenues. Q2 22 clear aligner revenues were unfavorably impacted by foreign exchange of approximately $12.3 million or approximately 1.5% sequentially and approximately $32.9 million or approximately 4% year over year. For Q2, Invisalign comprehensive ASPs decreased sequentially and increased year-over-year. On a sequential basis, the decline in comprehensive ASPs reflect higher discounts and unfavorable impact from foreign exchange, partially offset by higher additional aligners. On a year-over-year basis, higher comprehensive ASPs reflect the impact of higher additional aligners and per-order processing fees, partially offset by the impact of unfavorable foreign exchange and higher discounts. Q2 Invisalign non-comprehensive ASPs increased sequentially and year-over-year. On a sequential basis, Invisalign non-comprehensive ASPs were favorably impacted by lower discounts, partially offset by product mix, and unfavorable foreign exchange. On a year-over-year basis, higher Invisalign non-comprehensive ASPs reflect lower discounts, per-order processing fees, and higher additional aligners, partially offset by the impact of unfavorable foreign exchange and product mix shift. Clear aligner deferred revenues on the balance sheet increased $25.4 million, or 2.3%, sequentially, and $231 million, or up 25.5% year-over-year, and will be recognized as the additional aligners are shipped. Q2-22 systems and services revenue of $171.2 million, were up 4.7% sequentially, primarily due to higher scanner volume and ASP, and were up slightly by 0.8% year-over-year, primarily from higher services revenues from our larger installed base, partially offset by lower scanner volume and lower ASP. Systems and services revenue were unfavorably impacted by foreign exchange of approximately $2.9 million, or approximately 1.7% sequentially. On a year-over-year basis, system and services revenue were unfavorably impacted by foreign exchange of approximately $7 million or approximately 3.9%. Systems and services deferred revenues on the balance sheet was $13.3 million or 5.4% sequentially and up $99.6 million or 62.3% year-over-year, primarily due to the increase in scanner sales and the deferred deferral of service revenues included with the scanner purchase, which will be recognized relatively over the service period. Moving on to gross margin, second quarter overall gross margin was 70.9%, down two points sequentially, and down 4.1 points year-over-year. Overall gross margin was unfavorably impacted by approximately 0.5 points sequentially and 1.1 points on a year-over-year basis due to foreign exchange. Clear aligner gross margin for the second quarter was 73.3%, down 1.5 points sequentially due to lower ASBs and higher freight costs. Clear aligner gross margin was down 3.6 points year over year due to a higher mix of additional aligner volume, higher freight, and manufacturing spend, partially offset by higher ASBs. Systems and services gross margin for the second quarter was 59.8%, down 3.6 points sequentially due to higher manufacturing variances and freight costs, partially offset by higher ASPs. Systems and services gross margin was down 6.1 points year-over-year due to lower ASPs and higher manufacturing variances, partially offset by higher service mix. Q2 operating expenses were $499.4 million, down sequentially 2.3% and up 2% year-over-year. On a sequential basis, operating expenses were down by $11.9 million, mainly due to lower incentive compensation and controlled spend on advertising and marketing as part of our efforts to proactively manage costs. Year over year, operating expenses increased by $9.7 million, reflecting our continued investment in marketing, sales, and R&D activities, and investments commensurate with business growth. On a non-GAAP basis, excluding stock-based compensation, amortization of acquired intangibles related to certain acquisitions, and acquisition costs, operating expenses were $466 million, down sequentially 3%, and up 1% year over year. Our second quarter operating income of $188.2 million resulted in an operating margin of 19.4%, down 0.9 points sequentially, and down 7.2 points year over year. Operating margin was unfavorably impacted by approximately 1.1 points sequentially due to foreign exchange. The year over year decrease in operating margin is primarily attributable to lower gross margin, investment in our go-to-market teams and technology, as well as unfavorable impact from foreign exchange by approximately 2.4 points. On a non-GAAP basis, which excludes stock-based compensation, amortization of intangibles related to certain acquisitions, and acquisition costs, operating margin for the second quarter was 23.3%, down 0.7 points sequentially, and down 6.5 points year-over-year. Interest and other income expense. Net for the second quarter was a loss of $14.6 million, down sequentially by $4 million, and down year over year by $14.5 million, primarily due to larger net foreign exchange losses from the weakening of certain foreign currencies against the U.S. dollar. The GAAP effective tax rate in the second quarter was 35% compared to 28.4% in the first quarter and 25.7% in the second quarter of the prior year. Our non-GAAP effective tax rate was 25.6% in the second quarter compared to 24.2% in the first quarter and 19.5% in the second quarter of the prior year. The second quarter gap effective tax rate was higher than the first quarter effective tax rate, primarily due to foreign income tax at different rates and lower excess tax benefits from stock-based compensation. Second quarter net income per diluted share was $1.44, down sequentially 26 cents, and down $1.07 compared to the prior year. Our EPS was unfavorably impacted by $0.26 on a sequential basis and $0.42 on a year-over-year basis due to foreign exchange. On a non-GAAP basis, net income per share was $2 for the second quarter, down $0.13 sequentially and down $1.04 year-over-year. Moving on to the balance sheets. As of June 30, 2022, cash, cash equivalents, and short and long-term marketable securities were $977.2 million, down sequentially $143.4 million, and down $109.2 million year-over-year. Of our $977.2 million balance, $251.4 million was held in the U.S., and $725.8 million was held by our international entities. Q2 accounts receivable balance was $931.9 million, down approximately 2% sequentially. Our overall day sales outstanding was 85 days, down approximately two days sequentially, and up approximately 13 days as compared to Q2 last year. Cash flow from operations for the second quarter was $127 million. Capital expenditures for the second quarter were $76 million, primarily related to our continued investments to increase aligner manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations, less capital expenditures, amounted to $51 million. In Q2, we purchased $200 million of our common stock through an accelerated stock repurchase program. receiving approximately 757,000 shares and an average price of $264.37 per share. We are over halfway through our May 2021 $1 billion repurchase program and have approximately $450 million remaining available for purchase. Now turning to full year 2022 and the factors that influence our views on our business outlook. Overall, our Q2 results were solid, and we feel good about the execution across the business, especially in an increasingly challenging global economic environment. Delivering revenues and volumes relatively unchanged from Q1 and down only slightly year over year, despite unfavorable impacts from foreign exchange, speak to the strength of our underlying products and services and the size of our market opportunity. We remain confident in the huge underpenetrated market for digital orthodontics. and restorative dentistry, our technology and our industry leadership, and our ability to execute and make progress toward our long-term model of 20% to 30% revenue growth. We also remain committed to our goal for fiscal 2022 to deliver GAAP operating margins above 20%, while making strategic investments in sales, marketing, R&D, and operations. Notwithstanding the impact from unfavorable foreign exchange, which was not factored into our operating margin guidance for the full year. Capital expenditures primarily relate to building construction and improvements, as well as a digital manufacturing capacity to support our international expansion. For 2022, we expect our investment in capital expenditures to exceed $300 million. This includes our investment in our liner fabrication facility in Wroclaw, Poland. In times like these, our strong fundamental Business differentiates align, and we are grateful to have a profitable underlying business model that generates strong cash flow as well as a healthy balance sheet that provides flexibility to invest in our growth while supporting our employees, customers, and shareholders. As we move into the second half of the year, we will continue to manage our investments to account for headwinds and uncertainty while focusing on successfully delivering on our strategic growth drivers. With that, I'll turn it back over to Joe for final comments. Joe?

Thanks, John. Closing Q2 in the first half of 2022 has proved to be tougher than we expected. As we continue to navigate macroeconomic uncertainty and weaker consumer confidence and impacts related to COVID-19 variants, we cannot lose sight of the strong fundamentals of our business and the enormous market opportunity for digital orthodontics and restorative dentistry. The decisions we make this year will have lasting strategic implications for the future of our industry, and a competitive landscape. We are holding true to our business strategy and making good progress in a very difficult operating environment. We remain committed to balancing investments to drive growth and long-term strategic priorities with near-term headwinds while acting with a sense of urgency to ensure that we're ready to capitalize and extend our global innovation leadership as growth resumes. Thanks for your time today. We look forward to updating you on our next earning call. With that, I'll turn it over to the operator. Operator? Thank you.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 start key. One moment while we pull for questions. The first question is from Nathan Rich with Goldman Sachs. Please proceed.

Thank you. Good afternoon. Hey, Joe and John. I guess I wanted to start high level. You know, Joe, you kind of highlighted the, you know, consistent kind of case and revenue trends in the second quarter relative to the first. But, you know, within the context of a challenging macro environment, I guess, you know, how does that influence your thinking on the trajectory of the business? And have you seen an impact on patient traffic to dental practices or treatment acceptance rates that's kind of driving that commentary?

David, if you look at this from a domestic standpoint, you can pull out some signal. But I think you have to, when you're asking a demand question like that, you have to look at this globally. And I think like John and I were just clear in our introduction basically if you took Asia, you know, COVID-19 impacted us pretty tremendously in Asia, Japan for a little bit in the first part of the quarter in China, almost throughout the quarter. So it was really a COVID discussion there. And it's hard to pull a demand signal out, uh, in the United States. I mean, if you look at the data that we do, you'll see from a general practitioner standpoint or whatever, some stability in patient vision. So what's going on, uh, you know, our concern here is obviously this isn't, you know, a product where like a cap or a crown or a cleaning or something that needs to be done. it's somewhat discretionary. And we see that from an adult standpoint, more variability in adult selection than in teens. Teens have been pretty stable in that way, as we talked about before. Moving over to Europe, you know, we're working off 300% growth rates in Europe last year, okay, which you kind of have to internalize that. It's a pretty big comparison year on year. And, you know, and there weren't standard vacations being taken, you know, in Europe to the beginning of the end of the second quarter and third quarter. So, you know, overall, I'd say as you look around the globe, you know, I feel like I felt good, as we mentioned in the script, about Q1 versus Q2 and pretty much the same kind of demand pattern. But right now, I can't really give you a trajectory as a third quarter and a fourth quarter because of the macro environment, concerns again in China from another COVID shutdown and those types of things. I hope that makes sense, Dave.

Yeah, definitely. And maybe just a quick follow-up. Were you, I guess, able to size kind of the headwind from the lockdowns in China and in that market specifically? Have you started to see those volumes recover as we're starting to see those lockdowns ease?

Oh, for sure. I mean, direct correlation there. As soon as they let Shanghai open again, we saw it reflected in our order rates there. And look, we continue to feel good about China in a stable market. It's just the dramatic way that China continues to address COVID cases by major cities. This creates a huge amount of uncertainty as when the next lockdown will be.

Thank you. Thank you.

Thank you, Mr. Rich. The next question is from the line of Elizabeth Anderson with Evercore. Please proceed.

Hi, guys. Thanks so much for the question. One thing I was wondering is if you could comment about, I know in the sort of fourth quarter of last year and into the first quarter, you did increase the sales hiring sequentially in year over year. Could you sort of talk through sort of the impact those salespeople, where are they in the RAMP process, and how should we think about their potential for contributing in the back half of the year? Thanks.

That's a good question, Elizabeth. Obviously, in our sales force, being a direct sales force is really important to us in that way. And so the way we do this, obviously, as you indicated, we hire a lot of salespeople up front. We have sales training programs, too, that help to initiate them as they come into the corporation. But I would tell you, depending on where you are around the globe, there is a six-month and nine-month burn-in period before you really feel that they're up to speed. They understand the Invisalign system, the digital platform, and those types of things. So I would say in some simpler kinds of situations geographically, it could be six months. But in general, it's nine months or so before we have confidence that they're going to be really good on their feet as they talk to our doctors.

Got it. That's helpful. And then one thing that surprised me in the quarter a little bit was about the teen number. I know that sometimes this quarter, you know, it's been off because of COVID in terms of seasonality, and it's not necessarily always the strongest quarter for teens. But how are you thinking about that versus the economic sensitivity of, you know, adult cases and sort of how do you expect that to sort of trend in the sort of near term?

Yeah, you know, keep in mind, we see a lot more concern from an adult standpoint when you look year over year in the sense of our order growth in adults. I mean, it's been affected, Elizabeth, and there's a lot of data that we produce that will show you that. On the team side, you know, it's hard to pull a signal out of the second quarter because it really starts in the third quarter. But, you know, I felt, you know, overall good about it. But, again, not surprised because we've always felt that, you know, teams have a certain window of time from a treatment standpoint. And so it's not necessarily an emotional purchase in a way. It's usually planned for and anticipated. And what we saw between the second quarter and, you know, beginning of the third quarter really bears that out.

Got it. Okay. Thank you very much.

you thank you miss anderson our next question is from the line of john block with stifle please proceed great thanks guys um good afternoon i'll follow up on team maybe just to go there i think worldwide team was down year over year and i believe joe you mentioned that teen and aipac was up year over year which sort of implies that north american team was down you know maybe a decent amount so Anything to call out there? You know, why do we see that maybe specific to North America? And then more importantly, you know, you did have some positive commentary around teen case packs. You talked about an enrollment. So maybe just talk to us on how long it might take for, you know, the teen case pack program in North America to give that segment a shot in the arm and then your plans to roll that out internationally. I've got to follow up.

You know, John, on a teen side, remember, we kind of lost – or we had a muted signal on a team side. It needs to be very clear from quarter to quarter before COVID. If you remember last year, it was much more muted. This year, we're hoping to see a less muted cycle. And I think we're starting to feel that, John. So it's, I don't think you can look too much between, you know, what we're doing between the first quarter and second quarter and pull a clear team signal out of there. The other thing on team two is, you know, there's always competitive concern, you know, with other clear liner, whatever. You know, but, but basically this is a wires and brackets competition with us. It's always been, it continues to be that way. And, uh, you know, in new products that we're launching these teen packs, we feel good about them. They've been, as I mentioned in my script too, they've been received well. And, uh, and it's been with a lower end, uh, orthodontics from our standpoint that haven't done a lot of teen cases in the past. And, and that's the segment that we were fishing for to give them more confidence to be able to move in with teens. So. we're not declaring victory, but we feel we have a good product. It's timed well. And we're not seeing, you know, the cycles in the team marketplace as we're seeing in the adult marketplace. And, you know, obviously, John, as we get through the third quarter, you know, we'll have a much better understanding of how we turn out that way. But I didn't pull anything out between the first and the second quarter that concerned me.

Got it. Helpful. Thank you. And then for my second one, let me try to maybe jam two in a one and hopefully not make a mess of it. So it just first on the, on the three Q versus two Q overall case volumes, you know, China's reopened China's a decent chunk of business for you guys. So if China snaps back, you talked about Shanghai and maybe talk to us on why we wouldn't see you guys resume some sequential growth, three Q versus two Q. I know there's many other markets and then maybe just to stick with China, Now, I just love your thoughts on what's going on over there, maybe in terms of market share. Your main competitor had some quasi numbers out recently. It looked like they were down mid-single digits in cases, 1H22 year over year, which quite honestly, I actually thought that was a good number considering the environment. So we'd love your thoughts on just China and your ability to hold share or what's going on from a market share perspective. Thanks, guys.

i'll start with a china and kind of move backwards john get i'll get john involved here too uh but from the china side uh you know obviously we saw what you published there whatever but you know i looked at angel line numbers and it basically same thing we experienced i mean we experienced the shutdown of shanghai slowdowns in some other regions and there was nothing in those numbers that really surprised me um you know as i as i look at china our ability to compete there i feel great about it and again know our investments we've made there in treatment planning and manufacturing we've only added to that the efficiency of those organizations have done well um you know our product is great for that marketplace and some of the most you know difficult cases that we encounter exist there too so i feel good about our ability to compete in that market against angel or anyone else who's there we just need a stable marketplace that we can operate in and it hasn't been stable for uh you know good you know goodness it's been what what almost two years and I mean, I just read this morning that Wuhan's looking at a close down. So, I mean, John, there's a lot of variability there that I'm concerned with COVID and shutdowns, you know, particularly in the second half of this year in China that I continue to be concerned about that can disrupt the marketplace. But if that stays clear, you know, we're going to have, you know, a China in the second half that we can operate from. To answer your question, I feel good about our competitive position there, our ability to compete with anyone.

And we should see some of the sequential history that we normally see in our business. It goes to what Joe said, that there's just some unforeseen variables that are still there. If there is a shutdown in China, that'll impact our numbers. If there's no shutdown, we should see sequential improvement. And then you have some of the other macroeconomics that we've talked about in terms of potential recession or other things that people are concerned about. That affects their decisions on whether they go into treatment, but we're watching closely to see how sequentially things are, are behaving and making investments appropriate based on what we see.

And John, sorry, Joe, I was just going to say, you know, John and Joe, maybe to follow up on that last comment, just for clarity purposes, because I think it's an important one. Are you guys saying sort of, as you sit here today, who the heck knows what's going on with Wuhan or, you know, I don't know, something worse incrementally with the economy. As we sit here today in late July, you're expecting the resumption of sequential growth off the 2Q number this evening?

Well, I'd say, John, expecting anything in this market might be a sign of a low IQ. When you look at what's going on in China, I'm not going to sit here and tell you I expect a stable market in the second half based on their COVID policies. So I hope, you know, from the United States standpoint, there's a lot going on. I'm trying to explain to the teen market overall outside of China, I feel is the most stable market we have and the one that we're ready to compete with and we're moving into seasonality where it really makes a difference. We have, you know, we're positioned well with products. But as you know, John, as well as anybody, that's always been a wires and brackets marketplace. We've been taking share, you know, point and a half, two points a year. We're hoping some moves we make can make that better. but we'll know a lot more when the third quarter is over. All good. Very helpful. Thanks guys.

Thank you, Mr. Block. Our next question comes from the line of Jeff Johnson with Baird. Please proceed.

Thank you. Good afternoon, guys. Joe, hey, Joe. So just wanted to talk maybe on the doctor ship to that number this quarter. You know, it's trended down each of the last couple quarters. This quarter in the Americas, it did trend back up just a touch. You know, what are your... What are your views on what that means? Is that a, you know, market stabilized a little bit? Is that maybe the competitive positioning is stabilizing a little bit? Just how do you view that number in the Americas? And is there room left in the Americas for that number over the next couple years to keep moving higher? Are you kind of at a point where you've saturated kind of the Americas market with number of doctors who are going to be performing these cases?

uh you know just to answer your last part of your question first jeff no we have a lot of room to grow in the americas too and uh united states canada but also you have to throw in latin america and brazil in that there's a you know a lot of growth in that sense you know john and i have poured over these numbers a lot you know what happens yeah i feel good if you if you back these numbers up before really the big surge in orders that we had before we can draw a line through these things it doesn't upset us you have to split orthos and gps very clearly Remember you have some GPs that do like, you know, three cases a year, uh, is things kind of slow down. They'll just, they'll be out of the circulation for awhile and then they'll order another one, whatever. And these numbers will go up, you know, 81, you know, thousand 82,000, we'll see them go up and down, but don't look at this in any way is that we're saturated in this marketplace, uh, both from an orthodontic standpoint and a GP standpoint, you know, Jeff, the other thing too, I think that. People forget from an orthodontic standpoint. is there are orthodontists who do teens. These are orthodontists that are really committed to Invisalign for the most part, and they do a lot of teens. But we still have a significant amount of orthodontists that do Invisalign almost exclusively for adults. And so you'll see that whole piece from a utilization standpoint. As we increase our teen penetration, you should see the utilization rates there, you know, improve.

Yeah, that's helpful. And then maybe kind of a follow up on all that, a two parter, just the international number, you know, again, kind of did tick down a little bit that number of doctors shipped to internationally. You know, one, I would assume you think there's a lot more room even there to saturate that market over the next few years. That would seem to make sense to me anyway. But, you know, is there any way to look at what that number did in China and was the sequential decline largely driven by the shutdowns in China or ex-China? Would that number have been up? And then I was a little surprised to hear cases down, I think you said, in UK year over year. Is that just a tough comp or what's going on in the UK? You know, I think we're all aware of China pressures and early Japan pressures, early quarter Japan pressures. But UK caught me off guard a little bit there. Thanks.

I'll answer the UK piece first. The UK was outstanding for us last year. Remember, Europe grew 300% for us last year, Jeff, right? The UK led that. So I'm sure that UK number is higher than what that aggregate number is. And so what you're seeing is kind of a adult, kind of a retrenchment in the UK from an order standpoint, but not an indication of a utilization issue that I'd say across the doctor base that we have in the UK.

And just on the China piece or the APEC piece for international, that was certainly an impact in terms of lockdowns and doctors just not being able to transact and therefore don't have shift to. So The international side of the doctor ship two was certainly impacted by COVID. We won't break it out by kind of the sub-regions, but that was an impact that, look, as those offices open up, as those lockdowns are minimized, we would expect that to increase from a ship two standpoint.

Thanks, guys. Yeah, thanks, sir.

Thank you, Mr. Johnson. Our next question is from the line of Justin Lin with William Bear. Please proceed.

Hi, good afternoon. Can you just touch on your sales and marketing spending strategy a little bit in the short term and longer term? I guess, when can you sort of decide to flip the switch?

Flip the switch as far as up or down?

Yep, yep.

Yeah. Well, I mean, obviously we saw our adults dramatically decrease. And so the return on investment in some specific geographies, John and I take a look at, and we don't eliminate it, but we reduce it in accordance with what we think the demand pattern is. And we spread it around into other countries that we feel we can get a higher return on. And we're just basically sizing our advertising to what we think the demand patterns are around the business in different areas. And so I wouldn't look at this as any way that We'll continue to advertise aggressively and promote our brand and to drive value in our chain to bring customers to our doctor base, but we can be responsible. We can't advertise at the rate that we did last year when we were growing at over 100% in a lot of these regions. We have to modify it somewhat in order to address that demand pattern.

And we adjust into the market, so keep the overall brand awareness, keep that advertising. Remember, still spending, even as we right-size things, hundreds of millions of dollars in marketing and media to be able to go to market, drive that awareness. But then in certain markets, if there's COVID or if there's economic concerns and so on, we're adjusting things to make sure that we right-size and continue to make sure that we make that right trade-off between how we're investing and go to market and continue to invest in the rest of the business like R&D and operations.

Yeah, that's very helpful. And I guess just pivoting to a more sort of higher-level question, any update on commercial operations in sort of your emerging markets like Brazil, India, Africa? You know, what would you say current penetration levels are over there? And I guess realistically, how much revenue can you capture from those regions in the next, I would say, five to ten years?

In the region that you mentioned, we're really underpenetrated. Huge opportunity. I mean, we've seen great, you know, great progress in brazil we're seeing good progress in india you know reported in i mean it's when we talk about those 500 million patients they're out there and the way to get them is we do you know we put sales people in place we put the right kind of capability you know on the ground this is a direct sales force that you have to have in order to sell our product line but to answer your specific question the penetration rates aren't even close and that's Again, you can see that in our script. That's where we remain so confident that in a stable environment, we'll continue to perform really well.

And we're built as a company to really expand into those markets. We've got that global footprint for manufacturing now in all three geographies. We've got treatment planning. We've got that go-to-market sales force, direct sales force with great products. So we're built in all those markets. We like the dynamics of of these markets where you have a growing middle class, big population, you've got people who want to straighten their teeth, and we've got a great way for them to get to that. So all the markets you described as well as many others, those are where we think of some of the investments because it's a great return on those investments.

Got it. Thank you very much.

Thank you.

Thank you, Mr. Lin. Our next question is from the line of Jason Bednar with Piper Sandler. Please proceed.

Jason. Hey, good afternoon. So, Joe, I'll go big picture here on the U.S. market and maybe go back to the clarifying point on John Locke's question earlier. On one hand, demand in the category broadly just did seem to show some signs of moderation the second half of last year, really seemed to be a bit of a leading indicator on the part of high-end dental and the health of the average consumer. I mean, this means we're going to be coming into some easier absolute comparisons as we head into the back half of this year, which, you know, I don't know, maybe helps reverse this downtrend in the line case growth. But I guess we're also in the early days of what still could be some more pain coming for the consumer. So I guess what dominates, in your opinion, do the easier comps dominate or does a more challenging consumer dominate? And again, just thinking about the domestic market here and ignoring, again, some of that China unpredictability that's out there.

Yeah. I have a John take a shot at this too, but I would say, I mean, obviously when you talk about easier comps, I mean, when you're pumping against 300% growth, you know, like we just talked about, it's one of the tougher comps on a large number I've had in my business career. Uh, and so, you know, obviously when you get some light under that line, you know, it helps somewhat. Uh, but it consumer confidence, I'd say outside of the COVID, the way I'd look at the business again is, is COVID affected Asia in a big way. You know, we had some COVID staffing issues or whatever, but predominantly in the West, it's consumer confidence that we look at. And so if those consumer confidence numbers, you know, start to equalize, start to get better, some of the ones we look in Europe, you know, are all-time lows. I feel that means a lot. That means more to me than those comparisons years from here. It would report more confidence in consumers in a trend where, you know, in that kind of environment, we think we'll see the adult cases resume, you know, at a pace that would be equal to our long-term growth rate.

Yeah, it's consumer confidence overall. Just real quick, I guess I would, yeah, I guess I was just focusing more on the U.S. market. I totally understand Europe and China and APAC and all the different dynamics there, but just within the U.S. market, I mean, the comps do get easier, absolute comps did tick down starting in the second half of last year. So that'd be where I'd be focusing the question here. Sorry to interrupt.

Yeah, no, Jason, that's okay. You know, I look at the United States, too, is I just give you consumer confidence, you know, more than anything. That's just saying that there's no big variant issue or something that happens with COVID. We're all kind of have PTSD in that sense. And, you know, what we experienced the last two years. But, yeah, I like the comparison year over year. That's going to be helpful. But those consumer confidence numbers, whether I'm talking about Europe or I'm talking about the states, those are the ones that we stay glued to that we think are a really good indicator in the sense of our market and that adult market that we appeal to, both in the GP segment and the adult market and the orthodontic segment, too.

And the piece that I would add to the U.S. is just that as we get into teen season now, as we go from Q2 to Q3, teens will be important to see. We've got great products. We've got great go-to-market opportunities to be able to grow in those markets and get more market share. When we think of teens everywhere in the world, it's single-digit, and even in the U.S. So we look at growth opportunities that will be you know teens maybe a little bit less of More resistant to maybe some of that consumer concerns that they have consumer concerns certainly show up on the adult side but we think teens can Can help offset that just just a bit because it's it's less discretionary Okay, just that's helpful and maybe just a quick follow-up here I

A lot of questions out there right now from investors on the decremental margin impact for the business with volumes and revenue doing what it's doing here. You added a lot of headcount. You significantly expanded branding and advertising efforts during the pandemic. It really helped widen the competitive moat, so really impressive. It sounds like some of that marketing, though, has been recalibrated here. Are there further resets with the OPEX structure that might be necessary? you know, in this environment? And I guess what's the trigger for you to decide, you know, that a further rightsizing is necessary?

Well, I mean, rightsizing, when I hear words like that, it means that we've, you know, gone to the layoffs. We haven't laid anything off. Remember, we anyone off in that sense, you know, we normally hire to a 20 to 30% growth rate. And so, and we are, you know, our OpEx spend is in that range too. So obviously we didn't, we couldn't hire in that range. And so, If you call that a cutback, it's a cutback from our normal OpEx. What we do is we normally balance OpEx to revenue at about a 50% range, and there's a lot of variables in that line from an OpEx standpoint that we can go about. Remember, our most important areas that we want to make sure we take care of is our commercial team, our engineering effort, and also our marketing. We know those are really key, and we focus on those, and we balance the business around them.

John, it's a balance for short and long term. So as we balance out our plans, we look to the growth opportunities we have. We want to make sure we continue to invest in those growth opportunities. But then, obviously, we have to be mindful of the current conditions that we're in. And we'll adjust as needed to still maximize the return on investments that we're making.

All right.

Thanks so much.

Thanks, Jason.

Thank you, Mr. Bednar. Our next question is from the line of Erin Wright with Morgan Stanley. Please proceed.

Great. Thanks. And I wanted to ask another America's Teen question here. But just given the seasonality and given this is an area where you should have some better visibility, I just want to clarify, does this mean you're going to see a meaningful sequential pickup in the coming quarter? Or why would that not happen for you? Just given that should be an area more under your control here. Thanks.

You know, our normal growth pattern between the second quarter and third quarter is flat to down a percentage point. So John can confirm that. So the second quarter to third quarter is a big team season, but there's other parts of our portfolio that kind of balance out with that. It's not traditionally a jump from second to third quarter, but again we're focused on teens because we feel teens have a lot less you know elasticity than what adults have right now based on the consumer confidence level so but i just you know i i just caution you here remember this is a wires and brackets play it's something that's systemic that we've worked on for years we have you know many new products like invisalign first and mandibular advancement and you know several new team products that help us with this the new team packs help also we think we're well positioned but you know we have to get into the quarter and be able to assess how well that market is actually holding up. John, you got it.

But specifically in the U.S., U.S. teen, we should see sequential improvement as we get into teen season, going from Q2 to Q3, notwithstanding any occurrences that happen from an economic standpoint. But the expectation is given our product, given the opportunity, given the utilization that we have, we should be able to see growth, notwithstanding anything else that gets in our way.

Okay, thanks. And then ASPs for the balance of the year, how should we be thinking about that in the FX impact?

You know, Erin, FX, obviously Q1 to Q2 was a big impact in FX. We see it in the numbers from revenue all the way down to our EPS. You know, I would think of, you know, it's tough to forecast where FX is going to go. Certainly dollar has strengthened. You know, I think you kind of take the numbers that they're at now and kind of play that forward for the rest of the year is how we'd look at that. I think from an overall ASP standpoint, you know, there's always going to be puts and takes, but we're not doing anything different from a discounting standpoint, how we're going to market and so on. You might have some mixed effects that come through, but I take the FX rates kind of as they are now, project those forward, and then ASP should be too much different than what you see now with any FX.

Okay, thank you.

Thank you, Mr. Wright. The next question is from the line of Brandon Couillard with Jefferies. Please proceed.

Thanks. John, quick follow-up on that FX question. Appreciate all the details in the deck. It is very, very helpful. Just curious, what is the estimated impact of currency on the operating margin for the year now of all parts?

Ballpark, I would look at that as about one point, maybe just over one point of impact. We saw that 1.1 point impact from Q1 to Q2 in out margin. I would kind of look at the full year at about the same.

Joe, on the scanner business, any color between the North American segment and international in terms of growth rates? And how would you sort of characterize the capital spending environment in those two regions specifically?

Yeah, I'll start with, I mean, obviously we had, you know, trouble selling scanners in China, you know, because China shut down. And, you know, China's one of our bigger markets. It's between China, you know, in Japan and Asia. So I didn't look at that so much as an overall, you know, market problem. I looked at that as more of a COVID problem. And so hopefully the hopeful, like I mentioned before, if that COVID stays clear, that'll right itself. United States, um you know i just good job by the team strong demand there uh 5d plus tends to be the you know really strong scanner out there on a restorative side you know dennis liking the niri the near infrared technology for carries detection and orthodontists continue like the exactness you know of how our workflows and all from uh from an overall itero standpoint so i feel i feel good about you know the americas and what their performance was in that piece and uh you know as i mentioned in my script is 40% with a large installed base now, 40% of services too, which is really helpful in that business overall. And look, I feel good about, again, our scanners in Europe compared to get some pretty big numbers again last year. So I wouldn't be blinded by the year over year number in that sense. But Europe has the added pressure right now from a Ukraine standpoint is it's just, it wears on that consumer sentiment piece. I think it makes doctors a little more reluctant. But there's, you know, we're, I feel good about our position in Europe from a scanner standpoint. And as the market hopefully starts to stabilize here, we'll see that business that we had return well.

Great. Thanks.

Thank you. Our next question is from the line of Kevin Caliendo with UBS. Please proceed.

Hi. Thanks for getting me in. So I just want to think about how or what it would take for you guys to feel comfortable with providing guidance again, or feeling comfortable that you can hit your longer-term targets, you know, rather than making progress towards it. Do we need to see consumer confidence go back above 99 or something like that? Or, I mean, at the beginning of the year, you caveated and said, listen, if there's no more COVID outbreaks, you know, we'd still be able to do this. What do you need to see before you can come to us and say, Hey, you know, we're, we're back on track or we think we can do this, or we feel comfortable. We're going to be able to grow at X rate going forward, even, even be able to provide guidance for like a quarter going forward. You know, even if it's not for the full year, what needs to happen in your mind?

I'll turn it over to John, but you know, first of all is remember we don't carry inventory in this business outside of scanners. So it's a real-time business. We don't have any inventory to reflect from or any, very little business from a week-to-week standpoint. So I'll move it over to John, but keep that in mind that we kind of feel these trends early on both ends. As the economy picks up, we'll probably feel it first. And as it turns down, we feel it by just the nature of the business.

It really comes down to, Kevin, just having more predictability on a macro basis. Understanding, as you mentioned, COVID and thinking that we're through it, then you have China lockdowns or some of the consumer sentiment and things that come up that are outside of our control. We feel very good about being able to control what we can control, making the right investments as we go to market or adding investments in R&D to better our products and so on and drive that return. And therefore, like I said, we can manage to that 20%. That's something that we can manage as we go through the quarter. it really comes down to having more predictability on a macro basis. And once we get confidence in that and we've worked our way to that understanding, look, if the economies are going to do what they're going to do, they're going to go up or down. But if I have more predictability on the direction that they're going and how they're going to go, then we can give a good forecast.

All right. I appreciate that. Thank you.

Thank you, Mr. Caliendo. Our next question is from the line of Michael Reiskin with Bank of America. Please proceed.

Great. Thanks for taking the question, guys. I have kind of a follow-up to one of the earlier ones, and something Kevin just asked, sort of on the moving pieces going forward. I mean, we spent a lot of time talking about China lockdowns and the impact that had, and there was some discussion on consumer confidence as well. But it was sort of brought up in the sense of, well, what happens when things improve? I hate to be the pessimist here, but can we talk about the other side of things? Inflation is one thing and consumer sentiment and consumer confidence is another thing, but recessionary impact, if unemployment goes higher, if job losses start to accelerate, there is a scenario where things actually get worse for the next couple of quarters before they get better. So can you talk through sort of how you view the likelihood of that happening, the impact you think it'll have on the business, and also what's your response going to be? What's the game plan? You talked a little bit about controlling costs in the quarter already. What would be the other levers you would pull if things for the consumer in the Americas and in Europe get materially worse over the next three to six to nine months?

Hey, it's Joe. Look, I think you've seen that I feel we've been responsible in the sense of adjusting the business to a lower demand signal than the business is used to having. I think you saw us respond the same way when COVID hit in March of 2020 and how we ran the business. It gets worse and it could get worse is the way, I mean, from a standpoint of whatever happens from an economic standpoint. I just say that, look, John and I come from businesses where we've been through these cycles. We know how to operate in a down cycle. We run a business that way. This is a growth business, and we'll treat it as a growth business, but we're responsible from a standpoint of making sure that we adjust this business to whatever economic conditions that we see out there.

And as a result, we've been able to make these adjustments. We're fortunate as a company to have the cash position, the balance sheet that we have, and all these other – you know, and in the end, you know, the story, we have a huge opportunity to be able to grow. You just have this in, in our way. And like Joe said, and what many others say is it could get worse. We have to be able to, to be able to balance those short-term, you know, worse to with our long-term goal of being able to make, you know, Invisalign the standard of care. And that's what we're balancing right now. And that could play out, that'll play out the next, you know, whatever, a year to 18 months, things will evolve. We hope that the economies improve. We hope that a lot of this is just kind of short-term and things get better. And when things do get better, we're well-positioned to be able to grow into this market. But we just have to face the realities of what's happening short-term.

Great. And a quick follow-up, if I can. On one cue, you kind of gave some comments on pacing through the quarter and gave some comments on April as it relates to March. Kind of get the sense that things probably slowed down at the end of 2Q a little bit in June, both between FX and China lockdowns being worse. Any sense you can give on sort of the progression through the course of 2Q and just any early signs you've seen from July? Again, realize that lockdowns in China and FX is playing a big role, but maybe if you could just focus on America's trends through the quarter and July, that'll be helpful.

Yeah, no, it's a good question. So if you think like an overall picture, you hit some of the effects and so on, you look, everybody can look at FX rates and see the changes and so on. You can project based on those. When you talk about a COVID lockdown or talk specifically in China, there was an impact for us in the, in the, we've seen it the first quarter, we saw it in the second quarter, but it's, it's happens in China. It happens in every place that we see where there's a lockdown. We have a reduction in volume where that lockdown goes away. The volume starts to, starts to come back. So I would say, When you think of China, as you go from lockdown to not lockdown, that's favorable for us. We start to see some of the volume come back. And I think when you look at, you know, I think part of your question is around the U.S. I think what do you see for the U.S. is, you know, it's maybe things stabilizing a little bit more. You're not seeing, you know, maybe, you know, it's pretty similar to what we exited Q2 into Q3. And I think when you look at the teen benefit that ideally comes through with some of the products and programs that we have in teen in the U.S. and other places, but focus on the U.S., we think that's helpful for us as we go from Q2 to Q3.

Okay, thanks.

Thank you, Mr. Riskin. We have reached the end of our question and answer session. I will now turn the call back over to Shirley Stacey for closing remarks.

Thank you, operator, and thank you, everyone, for joining us today. We look forward to speaking to you at upcoming financial conferences and industry meetings. And if you have any follow-up questions, please contact our investor relations team. Have a great day.

Thank you. This concludes today's conference, and you may now disconnect your lines at this time. Thank you for your participation.