愛齊科技 (ALGN) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Align Technology first-quarter 2012 earnings call.

At this time all participants are in a listen only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Ms.

Shirley Stacy of Align Technology.

Ms.

Stacy, you may begin

Good afternoon and thank you for joining us.

I am Shirley Stacy, Vice President of Corporate and Investor Communications.

Joining me today is Tom Prescott, President and CEO; and Ken Arola, our Vice President and CFO.

We issued our first-quarter fiscal 2012 financial results press release today via GlobeNewswire, 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 12 months.

A telephone replay will be available today by approximately 5.30 PM Eastern time through 5.30 PM Eastern Time on May 1, 2012.

To access the telephone replay domestic callers should dial 877-660-6853 with account number 292 followed by pound and conference number 391936 followed by pound.

International callers should dial 201-612-7415 with the same account number and conference number.

As a reminder, the information that the presenters discuss today will include forward-looking statements including without limitation statements about Align's future events, product outlook and the expected financial results for the second quarter of fiscal 2012.

These forward-looking statements are only predictions and involve risks and uncertainties such that actual results may vary significantly.

These and other results are set forth in more detail on our Form 10-K for the fiscal year ended December 31, 2011.

These forward-looking statements reflect beliefs, estimates and predictions as of today, and Align expressly assumes no obligation to update any such forward-looking statements.

Please also note that on this conference call we will provide listeners with several financial metrics determined on a non-GAAP basis for comparisons to previous quarters.

Most of these items, together with the corresponding GAAP numbers and the reconciliations of the comparable GAAP financial measures, where practical, are contained in today's financial results press release, which have been posted on our website at investor.aligntech.com under Financial Releases, and have been furnished to the SEC on Form 8-K.

We encourage listeners to review these items.

We have also posted a set of GAAP and non-GAAP historical financial statements, including the corresponding reconciliation, and our first-quarter conference call slides on our website at investor.aligntech.com under Quarterly Results.

Please refer to these files for more detailed information.

With that I would like to turn the call over to Align Technology's President and CEO, Tom Prescott.

Tom?

Thanks, Shirley.

Good afternoon everyone.

On the call today I will provide an overview of our performance in two operating segments, Invisalign Clear Aligners, as well as Scanner and CAD/CAM services, and comment on a few highlights from each during the quarter.

Ken will discuss or Q1 financial results and our outlook for Q2 in more detail.

And then I will come back with a few closing comments and open the call to your questions.

I am pleased to report a very strong quarter and a great start to the year.

Strong Invisalign volume, particularly from North American Orthodontists, drove better-than-expected revenue, margins and EPS.

And we achieved a major milestone, our first $100 million quarter in North American sales.

In addition, our Scanner and CAD/CAM services business was up nicely this quarter.

I'm very proud of our team and the great results they delivered, which reflect on their continued focus and execution of our strategic growth initiatives.

I will start with an overview of Invisalign performance by customer channels.

For our North American ortho customers total case volume for Q1 was 32,200 cases, an increase of 8% from Q4 and 20% year-over-year, driven primarily from increased utilization.

Our Ortho customers continue to report increased confidence in using Invisalign because of the clinical improvements from Invisalign G3 and Invisalign G4, and from our ever-improving ability to create patient demand for Invisalign.

These drivers are especially important in helping increase use of Invisalign for teenage patients.

For our North American GP Dentists Q1 case volume of 33,000 was basically flat from a strong Q4, and up 17% from the same quarter last year.

Year-over-year growth among GPs reflects continued expansion in our customer base, as well as utilization growth across all tiers, low, mid and high-volume GPs.

Our GP customers continue to report solid patient traffic in their offices, along with increased interest in higher-value procedures, both of which are important contributors to their positive outlook.

A recent dental industry survey of 200 doctors by AFG reaffirmed this view as GPs reported positive trends for practice activity, procedure volume, appointment calendars and increased patient inquiries for elective procedures.

For our international doctors Q1 case volume of 20,000 cases increased 2% sequentially, bucking typical seasonality in Europe which tends to be down a bit in Q1 given that many practices close for extended winter holiday.

Our core European countries, which make up the majority of international revenue, continued to perform well despite economic concerns.

Growth this quarter was driven primarily by Italy and Spain, and we are making progress in the UK, where we are reestablishing growth.

On a year-over-year basis international volumes increased over 23%, reflecting growth across all core European countries as well as through our Invisalign distributors.

We continue to make good progress with our distribution partners in the numerous small and emerging country markets as their growth rates continue to outpace those of core Europe and North America.

Continuing this progress requires us to integrate all our strategic initiatives, particularly technology and product innovation.

The prevalence of more complex cases and an ever-demanding -- an ever more demanding clinical environment outside North America increases the importance of key features in Invisalign G3 and G4 that are designed to make challenging tooth movement easier for doctors to achieve.

We believe this type of product innovation should continue supporting growth in these geographies.

This continued adoption growth across our customer base really shows up in our key Invisalign metrics of utilization and new customer training.

Overall, utilization rates remain strong and continue to increase, reflecting the positive effect on adoption from improved clinical features in G3 and G4.

We are also on track with new doctor training, which was down slightly in Q1, as expected, as we typically offer fewer CE1 training courses during the first quarter of the year.

Now I would like to provide a brief update on our continued progress with G3 and G4, and the very important teenage orthodontic market as we head into the busy summer months.

In October we launched Invisalign G4, our next generation of clinical and product innovation.

New and improved SmartForce features in G4 helped doctors achieve even better clinical results in more difficult clinical situations, including treatment for open bite cases, which is really gaining traction with our doctors.

G4 expands on the success of G3, which introduced new aligner and software features that make it easier to use Invisalign when treating Class II and Class III patients.

Customer response to G4 features has been very positive.

To more fully make this point, I will share some new findings from a recent quantitative survey we did covering over 1,300 North American doctors.

The findings clearly indicate that G4 is having a significant positive impact on doctor perceptions and usage of Invisalign in North America.

The objective of the survey was to help us gauge doctor awareness of G4 features and benefits, as well as the impact G4 is having on their perceptions and use of Invisalign.

While we have a lot of feedback from both orthos and GPs, I will focus primarily on ortho responses, as they are more likely to use and benefit from the features designed for complex treatment.

These results included awareness of G4 is high.

Over 99% of preferred, premiere and elite doctors, both Ortho and GP, are aware of G4.

Doctors believe they will get better clinical outcomes because of G4, and are now more likely to use Invisalign for complex cases.

Specifically 93% of the elite and premier orthos and 84% of preferred orthos believe G4 will help them achieve better clinical outcomes.

And 80% of elite and premier orthos say that because of G4 they will treat more complex cases with Invisalign than they would have treated in the past.

And, finally, these survey results indicate that the innovations in G4 are increasing doctors' clinical confidence with Invisalign and their likelihood to recommend Invisalign to patients.

There is a lot of rich detail in this research, which will inform our continuing product evolution strategy and gives us lots of confidence that our progress should continue.

Now I will move on to the teenage orthodontics segment, which for us consists of teenagers 19 and younger using any Invisalign product.

The teenage market is the largest segment of orthodontic case starts, and represents a great opportunity for us to continue taking share in existing wires and brackets case starts.

In Q1 the total number of teenagers starting treatment with Invisalign products decreased slightly from Q4.

Teenage cases grew sequentially among North American orthos, but were offset by fewer starts among North American GPs and international doctors.

On a year-over-year basis teenage use of Invisalign increased 21%, and was up nicely across all customer channels, especially North American orthos, which grew 26%.

This is solid progress, considering approximately 40% of teenage starts are initiated in the summer months.

Overall, we are seeing orthos using Invisalign on teenage patients more often.

An additional piece of market research of over 400 -- 500 customers, like the previous research I described a moment ago, reaffirmed that increased utilization for teens among orthos is based on improved perceptions of Invisalign's clinical efficacy and our ability to create patient demand for Invisalign.

A few key takeaways from this study include the following.

55% of orthos said they increased their use of Invisalign with teenage patients in 2011.

47% of orthos cited Invisalign's improved efficacy as the primary reason why they increased their usage of Invisalign with teenage patients.

30% cited greater patient demand, prospective patients asking for Invisalign by name as the primary reason why they increased their usage with teens.

And, finally, looking out the remainder of the year, 63% of orthos said they expect an increased usage of Invisalign among their teenage patient population.

Use of the Invisalign Teen product, which is primarily targeted at younger teens 11 to 15, and has specific features such as compliance indicators and eruption tabs to address the needs of younger patients, grew slightly sequentially and 25% year-over-year, positive indication of our continued progress.

We are very pleased with our results within the teenager segment.

It remains very competitive, and it is not easy to win share from the traditional wires and bracket suppliers that still own most of the case starts in this area.

The clinical standard for excellent finishes is even higher for teenage patients than it is for adults, and doctors and parents are unwilling to make clinical trade-offs, which is both our greatest opportunity and challenge.

That said, we are confident we'll continue to make steady progress in increasing Invisalign's share, especially among the teenage population.

Now let's shift to our Invisalign consumer strategy.

Our goal for this important series of initiatives is to raise awareness of Invisalign and Invisalign Teen as the best options for a healthy, beautiful smile among adults, as well as teens and their parents, particularly moms.

On that basis our consumer strategy supports continued share gain among the teenage segment, as well as driving long-term category expansion of orthodontics, especially among adults.

We were on TV for much of Q1 with our ads focused on women, along with complementary radio ads in key markets, as well as online media.

In Q2 we will continue to focus on the adult audience using TV, radio and print, and we will also leverage our media placement to reach moms and teams ahead of the busy summer season for ortho case starts.

Earlier this month we began airing our Twins TV commercial which will run for 14 weeks through August.

It will be supplemented by radio, digital and traditional PR and event marketing.

On the public relations front Invisalign was featured in the April issue of InStyle, one of the most popular women's lifestyle magazines.

We are also focusing PR efforts on the release of our new consumer smile survey, including media interviews with beauty and health experts.

Finally, we are gearing up for the 2012 Disney Next Big Thing Tour, sponsored by Invisalign Teen.

This is our second-year working with a leader like Disney, and has been a very successful partnership for us in terms of reaching teens and their parents at a local market level.

This year's tour kicks off in six cities starting in July, so the Align team is looking forward to another successful summer with Disney.

Generating consumer demand is important for sustained growth in North America as well as to build long-term brand equity.

Increasingly, albeit on a small base, it is both strategically valuable and tactically useful to raise the level of our consumer efforts in Europe.

Over the past few years we have been laying the foundation for direct-to-consumer advertising by helping customers in key markets get ready for increased consumer demand.

This quarter we launched our first TV ad in Spain focused primarily on Madrid and Barcelona, and expect to run through the end of this month.

Similar to North America, the focus of our advertising is to raise awareness of Invisalign, principally among women as the best option.

Moving onto our Scanner and CAD/CAM services segment, Q1 revenues for both was $11.8 million compared with $10 million in Q4.

The sequential increase was primarily driven by increased scan fees and OrthoCAD services.

In addition, we recognized subscription revenue that had previously been deferred to the new iTero dual scanner software upgrade that became available in January.

The new iTero dual scanner allows multispecialty practices to utilize one iTero scanner to service all their scanning needs, including crown and bridge, implants and orthodontic treatment.

Existing iTero customers who want to add the iOC orthodontic functionality can also upgrade their scanner software.

As we have come upon our one year anniversary of the Cadent acquisition next week, I'm proud of our team and the integration of business milestones we have achieved.

I would like to briefly recap our progress and update you on the key areas of focus going forward.

Our goal from the beginning was to continue solid execution of the Invisalign business, while managing through the Cadent acquisition and integration.

As you can see from our results, the core Invisalign business remains very strong.

As we originally set up our priorities for the integration, the key objectives were, one, to drive growth of Invisalign through interoperability with Cadent scanners, and by using Cadent internal scanning system as a platform for chair-side Invisalign applications.

Two, to accelerate adoption of intra-oral scanning and dental practices through Align's global sales and marketing reach and our large customer base.

Three, to accelerate development and delivery of unique chair-side digital tools for a range of procedures, such as real-time Invisalign case treatment planning.

And, four, accelerate the key Cadent product and technology programs already underway.

Overall, we're executing well, and the majority of our goals and objectives are on track.

In many ways we are ahead of our original key milestones.

Interoperability for iTero and iOC is available in market.

The Invisalign outcome simulator is in beta test mode, and is expected to launch later this year.

Additional chair-side applications are in development and a whole series of scanner-enabling technology is in the pipeline.

At the same time, this progress has not been achieved without some challenges.

Over the past year we have been working to integrate the Cadent business into Align's larger global infrastructure.

Unfortunately, in the course of creating a more integrated business, we have negatively impacted several important customer-facing functions like customer service, tech support and even delivery schedules in some cases.

We are disappointed to have inconvenienced our customers and their patients and are committed to getting that back on track.

We continue to be very bullish about the Scanner and CAD/CAM services business, and the enormous opportunity for bringing digital technology and treatment to chair-side and helping to improve the practice of dentistry.

And I will now turn the call over to Ken for a review of our Q1 financial results, and I will see you in a minute or two.

Ken?

Thanks, Tom.

Before I get started, I would like to remind everyone that there are several items we excluded from our GAAP results when we report non-GAAP results.

These include acquisition and integration related costs, amortization of intangible assets, and severance and benefits costs for the New Jersey consolidation.

In my comments today I will not review the total dollars excluded for non-GAAP gross margin, operating expense and operating margin, and instead will refer you to our press release tables for reconciliation of GAAP to non-GAAP key financial metrics and the business outlook summary for a complete reconciliation.

Now let's review our first-quarter financial results beginning with revenue.

Q1 net revenue was a total of $135.1 million, which consisted of Invisalign revenue of $123.3 million and Scanner CAD/CAM Services revenue of $11.8 million.

This is a sequential increase of 4.8% from $128.9 million in quarter four 2011, and a year-over-year increase of 28.8% from $104.9 million in Q1 2011.

In Q1 Invisalign revenue of $123.3 million increased 3.7% compared to Q4 revenue of $118.9 million, an increase of 17.6% compared to Q1 2011 revenue of $104.9 million.

The sequential increase in Q1 revenue reflects increased North America ortho case volume, with international being up slightly and North America GPs being essentially flat from quarter four.

This volume growth was partially offset by lower international ASPs driven by the successful uptake of a promotion targeted towards lower-volume doctors in Europe and foreign exchange rates.

On a year-over-year basis Q1 Invisalign revenue growth was driven primarily by higher volumes across all customer channels.

In Q1 Scanner and CAD/CAM services revenue of $11.8 million increased from $10 million in quarter four, and was driven by the CAD/CAM services with scanner revenue slightly up from quarter four.

Now moving on to gross margins and operating expenses.

Q1 GAAP gross margin was $100.8 million or 74.6%.

This compares to $95.6 million or 74.1% in quarter four and $82.2 million or 78.4% in the same quarter last year.

Q1 GAAP gross margin for Invisalign was 79% and scanner and CAD/CAM services was 28.7%.

This is compared to 78.7% and 20%, respectively, in quarter four.

Non-GAAP gross margin for Q1 was $101.5 million or 75.1%.

This compares to non-GAAP gross margin of $96.9 million or 74.9% in quarter four.

There was no difference between GAAP and non-GAAP gross margin for Q1 2011.

For Invisalign there was no difference between GAAP and non-GAAP gross margin for Q1 2012 or Q1 and Q4 2011.

For Scanner and CAD/CAM services Q1 non-GAAP gross margin was 34.6% compared to 30% last quarter.

The sequential increase in Q1 non-GAAP gross margin primarily reflects the increased Invisalign case volume which resulted in greater absorption of manufacturing costs.

In addition, the Scanner and CAD/CAM services segment also drove better-than-expected absorption of manufacturing costs.

Q1 GAAP operating expense was $72.8 million, and this compares to Q4 operating expense of $69.1 million and $61.2 million in the same quarter last year.

Q1 GAAP -- Q1 non-GAAP operating expense was $71.1 million, and this compares to $66.9 million in Q4 and $59.7 million in the same quarter last year.

As expected, the sequential increase in Q1 non-GAAP operating expense was primarily driven by increased media spend after being off air for much of the fourth quarter, and as expected, annual increases in employee compensation and benefits programs.

Q1 GAAP operating income was $28 million or 20.7%, and this compares to GAAP operating income of $26.4 million or 20.5% in quarter four and $21 million or 20% in the same quarter a year ago.

Q1 non-GAAP operating income was $30.3 million or 22.4%.

This compares to $29.7 million or 23% in Q4 and $22.5 million or 21.5% in the same quarter last year.

Q1 GAAP diluted earnings per share was $0.26 compared to $0.25 in quarter four and $0.20 in the same quarter last year.

Q1 non-GAAP earnings per share on a diluted basis was $0.27 compared to $0.28 in Q4 and $0.21 in Q1 of last year.

Now moving on to the balance sheet.

Cash, cash equivalents and marketable securities were $257.2 million, and this comparison $248.1 million at the end of 2011.

In Q1 we generated roughly $15.4 million in cash from operations compared to $42 million in quarter four and $17.2 million in the same quarter last year.

Q1 DSOs were 63 days compared to 64 days in Q4 and 63 days in the same quarter last year.

As you may recall, last quarter we announced that our Board of Directors had authorized a stock repurchase program of up to $150 million.

During Q1 we repurchased approximately 100,000 shares at an average price of $24.68 per share for a total of $2.5 million.

We have $139.7 million remaining under the authorization.

Now let's turn to our business outlook for Q2 2012.

As we come off a strong quarter one and enter quarter two, our Invisalign doctors in North America continue to report steady patient flow in their offices.

In international the Invisalign business showed solid Q1 performance, especially in Italy and Spain, and we have begun to restage growth in the UK.

For Scanner and CAD/CAM services North America had a good start for the year and we anticipate building on this in quarter two.

Internationally we continue to see a more challenging environment for Scanners and CAD/CAM Services.

With that as a backdrop, we expect Q2 revenues to be in a range of $140.2 million to $143.7 million.

Invisalign case volume is expected to be in a range of 91,300 to 93,300 cases, year-over-year an increase of 20.1% to 22.7% when compared to Q2 2011.

Let's move on to gross margin.

We expect Q2 GAAP gross margin to be in a range of 73.5% to 74.2%, and we expect non-GAAP gross margin to be in a range of 73.8% to 74.5%.

The expected sequential decrease in non-GAAP gross margin reflects a full quarter of depreciation associated with bringing our new facility in Juarez online, and we will be training more doctors in Q2.

Remember, training revenues carry virtually no gross margin.

In Q2 we expect GAAP operating expense to be in a range of $74.8 million to $76.3 million.

We expect Q2 non-GAAP operating expense to be in a range of $73.5 million to $75 million.

The sequential increase in non-GAAP operating expense reflects increase in TV, media spend as we get in front of the teenage summer rush, continued international investments, and our participation in a number of dental conferences including the upcoming AAO meeting.

We expect Q2 GAAP operating margin to be in a range of 20.1% to 21.1% and GAAP earnings per share to be in a range of $0.25 to $0.27.

We expect Q2 non-GAAP operating margin to be in a range of 21.3% to 22.3%, and non-GAAP earnings per share to be in a range of $0.26 to $0.28.

In Q2 we expect the effective tax rate to be approximately 25%.

We expect diluted shares outstanding to be approximately 83 million, and cash on hand to be in the range of $272 million to $280 million.

With that I will now turn the call back over to Tom for some closing comments.

Thanks, Ken.

Well, it is a great feeling to get 2012 started off with such a strong quarter.

It is also very gratifying to see our hard work pay off in the form of great results for our customers and their patients, as well as our shareholders, employees and business partners.

While proud of these accomplishments, I am mindful of the importance of continued focus and effort and execution of our strategies and plans so that we can continue on our path to become a leader in orthodontics and digital dentistry.

We fully intend to use this momentum as we head into a busy time of year with our major orthodontic industry tradeshow, AAO, here in a week or so, a series of other dental conferences, forums around the country, a busy training calendar both in North America and Europe.

In short, it is a great time to be out with our customers.

In addition, we are on track to bring further new products, technology and key initiatives to the market over the summer months, and we will build our highly successful consumer marketing program.

This team is focused on execution of our winning strategy, committed to delivering on these results, and passionate about bringing positive change to this industry.

We continue to set tough goals and I look forward to sharing more of our progress towards them during our call this time next quarter.

And with that I will turn it over to the operator for some questions.

(Operator Instructions).

Brandon Couillard, Jefferies.

Thanks for taking the question.

Ken or Tom, could you speak to the second-quarter revenue guidance?

It appears to assume, at least from a case volume perspective, a little bit stronger sequential growth from the first quarter to the second than Then we have seen historically.

Anything else underlying the strength there, whether it is international or in the US that may be stronger than usual?

You know, I guess what I would point to is that some of the comments we just made, which has to do with the clinical innovation in the products to get doctors to use the product more frequently in their practice and recommend it more frequently, that coupled with the fact that patient flow seems to be there and pretty steady in the doctors' offices is certainly contributing to that overall volume as well.

And if you go over to Europe, we've certainly seen -- you know, coming off a strong fourth-quarter Europe had a very strong first quarter, even though it was only slightly up, typically they are down.

And we see the UK starting to resurge there a bit as well.

So I don't know, is there, Tom, anything else you want to add?

I think you covered it, Ken.

Thanks, that is helpful.

And then the Cadent demand appeared to be much healthier in the first quarter then sentiment seemed when we were here back in February.

How do we think about the outlook for that business going into the second quarter?

And can you quantify the impact of the deferred revenue booked in the first?

Yes, it was about $500,000 roughly that was -- we took -- it was purchased -- it came in as part of the purchased accounting that we did with the acquisition.

And we had to deliver dual scanners to the doctors with that capability.

And once we did, we had some -- about $0.5 million of revenue deferred.

There is a little bit more coming in the next quarter or two as we continue to upgrade a few other systems out there in the field.

Brandon, just to follow on that.

I think we are -- as I said, we are bullish about this business over the long term, and notwithstanding some softness in Europe on capital.

And then secondarily we see -- we are very early in the process for this whole segment, but we see real strong interest out there among potential buyers.

It doesn't mean it is going to turn out (inaudible) growing a rocket, it just means we see the opportunity to build an installed base and start to leverage that over time.

Great, thank you.

Glen Santangelo, Credit Suisse.

Tom, could you kind of comment a little bit on ASP in terms of what you saw this quarter?

I think if I go back to your comments last quarter I think you guys were expecting that the ASP would be down on a sequential basis, and yet it was obviously a little bit stronger on a sequential basis.

And so I am kind of curious was it mix or was it less of the rebate program or was it something -- change with respect to FX?

And then how should we think about that as we look out over the next quarter or two?

Yes, Glen --.

I am going to say, yes, and let Ken answer.

Okay.

This is Ken, I will respond to that.

So during the quarter here we saw a little better ASP in North America with -- we saw doctors overall increase in doing business with us -- a number of doctors, so the base of doctors.

Overall we thought we would see higher levels of rebates from all doctors in general.

So the good thing is we saw more doctors participating, but -- and starting more volume in the business, but they were lower-volume doctors this quarter as opposed to some of the higher-volume doctors, achieving higher levels of rebates.

So that had a favorable impact to ASPs.

There were other miscellaneous discounting programs in North America that were probably a little bit favorable as well.

On the international side, FX came in a little bit better than we were anticipating from an ASP perspective also.

And then looking at quarter two -- you know, coming into quarter one, boy, we were looking at FX rates around EUR1.28, EUR1.29 to the dollar for the euro.

They seem to be a little more stable right now, I guess, at EUR1.32, EUR1.33-ish range.

So we take into account where we think FX is going to go.

And the program I referred to as -- had an impact on ASPs in international in my prepared comments, had to do with a program we were running on a very focused basis in the basically January and February to get lower-volume doctors to utilize Invisalign more in their practice.

And that was again targeted, it is not going to be necessarily repeated every quarter.

It was successful, so the team is evaluating that.

So, Ken, just to follow up.

So it doesn't sound like it -- and I didn't get a chance to go back through all the different product lines in the back of the press release -- but it sounds like it wasn't so much mix, it was more that there were less rebates that you had to pay out versus what you thought.

That is correct.

Glen, this is probably I think the largest number of docs participating we have ever had in our history, ortho and North America, GP North America as well as international.

And as our customer base gets wider, it is mix in a way.

It is doctors that aren't yet necessarily in Advantage yet, or aren't participating at the same level as Advantage, so on a total basis more of the case volume and the shipments came from those doctors that were low-volume customers.

So that is a positive ASP effect, not one that is simple for us to forecast.

Okay.

And then, Ken, maybe if I could just kind of follow up.

It seems like you backed off the share repurchase a little bit this quarter.

What do you anticipate as you look out to the remainder of the year given the cash build you have?

So at this point we look at it from an opportunistic point of view.

And when we feel that it is right to buy in the marketplace, we will be out there, and then I would probably just stop at that.

Okay.

All right, thanks so much.

John Kreger, William Blair.

Could you just give us a little bit more of an update on the New Jersey consolidation practice, their progress for Cadent?

Sure.

We are actually about midway through the transition here.

We have -- with our goal of being completed by the end of quarter three.

We are making some good progress.

We are on track with the various aspects of the transition.

We are in the process of hiring folks down in Costa Rica as well as in Juarez for the transition and start to do cross training.

We have actually started a lot of that because we manufactured a fair amount of volume for the restorative side of the business out of Juarez this quarter that we just completed.

So things are on track, and anticipating at the end of Q3 we should be able to complete the transition.

Excellent, thanks.

And how about an update on the sales strategy across both your core products and Cadent?

How are the sales first handled, the second product line, have you seen any signs of distractions there?

Well, I guess, as I said, our first criteria toward shareholders, our Board, was don't take our eye off the Invisalign ball, so I think that is the first place you should look to make sure we maintain focus on our game plan.

The second is that we wanted to use the relationships we had with 20,000 plus customers in North America -- 25,000 customers in North America to at least introduce them to the idea for inter-oral scanner.

Cadent had, I think, at the time of acquisition eight or nine reps and we have more than doubled that now.

But more importantly, they are deployed in a way that has them working closely with each region for our Invisalign business.

And so instead of driving around demoing individual offices, we use literally hundreds of Invisalign-focused events -- study clubs, workshops, training events, to -- in a very efficient way to introduce scanner and CAD/CAM services technology to GPs and orthos.

That is working very, very well.

The Invisalign reps don't have quotas for scanners, and scanner reps don't have quotas for Invisalign, but we find little ways to -- little spiffs and stuff to keep them interested.

And more importantly, they love keeping scores at teams.

So we are -- I think we are still in the early days.

We're just -- next week will be a year in.

But this is one area where we are -- where I would say we are ahead of our original plans.

I think over time as we are able to scale what Cadent have for OrthoCAD services and those kinds of things, then we can start putting effort into building out the suite of other orthodontic opportunities, the OrthoCAD products and elsewhere.

Cadent was in a place where they really couldn't scale that business.

They didn't have capacity, and I think as we bring Juarez and Costa Rica resources online and get through a few growing pains here, we will be able to think about how to drive not just scanner placement growth, but the services around that.

So still very interested in doing that.

Great, thanks.

And just one other question.

It has been a few months since you launched the Express 10 product.

Can you comment on the competitive traction that you are seeing there versus the new, I think, Clear Guide entrance?

We literally shipped our first Express 5 case at the end of January.

And feedback we're getting is very, very positive from the docs.

It is still small, but it is growing nicely.

And in general we are not seeing this be so much of an entry-level product.

Instead it is a more experienced customer that says, I have a very, very mild malocclusion of space, a little bit of crowding.

I can comfortably offer a very cost effective treatment to this patient that doesn't want comprehensive treatment or might have a very subtle relapse.

And so that is more the initial uptake.

I guess, I don't want to go into a lot of detail about how it lines up against Ormco's product offering.

We have a lot of respect for Ormco as a company, and we will be able to shout at each other next week at AAO.

But I think we are pretty comfortable with our overall offering with -- because for any five stages you can get, we should be able to do more treatment than anybody else in the world.

Great, thanks.

Matt Dolan, ROTH Capital Partners.

Congratulations.

So clearly the numbers look great and this question partially depends on your sequential outlook for Cadent.

But now that we have the first-quarter results in hand it would appear your guidance for Invisalign growth on a year-over-year basis is a little slower.

So maybe you can comment, Tom, on what you are seeing in the environment there on a month-to-month basis throughout the year so far that would lead you to those Q2 numbers?

Kind of following up on that earlier question about the sequential growth.

I guess maybe I would ask Ken to jump in with a few details.

I will come back and maybe make a few overarching comments about specific guidance on Q2.

Yes, gosh, you know, I guess my view of it is we are showing some, I think, pretty strong growth Q2 to Q2, 20 plus percent on a year-over-year basis.

And coming off of a strong quarter one into quarter two, and even sequential growth was stronger than it normally is where you might look back and see Invisalign volumes growing 5% or 6% sequentially.

Guidance is more in that 7% to 9% range.

So from my perspective, again, it goes back to the technology, the clinical efficacy of the product now.

And things we are doing on the advertising front going into the teen summer, building up for the teenage case starts that start in the month of June basically, and getting ahead of that, and educating parents and moms and kids about Invisalign.

So from my perspective I think 20% growth is pretty respectable on a year-over-year basis.

Yes, okay.

And that is the first part of the question surrounding what Cadent was doing, which we don't have, so thank you.

And then, secondly, on the operating expense side of things, it looks like last year your spend came off in Q3.

I know you have talked about entering into the Olympic season and so forth this year.

Can you walk us through the pacing of spend into the back half of the year, what we should expect after Q2?

Thanks.

Yes, let me frame it for you a little bit here.

Last quarter we talked about adding in scanner sales force, and we have got the scanner sales team fully up to speed and up and running now.

So that ought to level itself out as we move through the remainder of the year here, unless we add in on a spot basis someone here and there.

The Invisalign sales team, we will be looking at expanding a couple of territories of the business.

It is growing pretty significantly.

We have got reps in territories that are twice the size of what they were several years ago.

So we will have a few salespeople we will be feathering into the business over the second half of the year.

And the way with our advertising, we are pretty -- we'll be pretty heavy in Q2 here in advertising, much more than we were in quarter one.

And in quarter three we will keep relatively strong with our advertising and fall off more in the fourth quarter again.

Just (inaudible).

With advanced purchases and a much more integrated media platform than just TV, and not in the old days having to buy remnants and spot, we are more buffered against a once every four-year that like a Summer Olympics.

If I go back eight years or even four years it was easy to displace us.

We have a much more integrated program now and we're working with different kinds of programs, like Disney, where we get access.

So certainly ad rates go up, and they will go up at the end of the year with the election.

But we have a much more integrated platform, and we are a little more buffered against that effect.

So I guess just to clarify, the pattern we saw last year, should we not see that again this year?

Well, the couple of items that occurred last year, if you recall, were we got behind in some hiring in the summer months.

And that impacted some of our spending in relation to some of the marketing programs that we were trying to accomplish over in Europe for specifically.

I think this year we have gotten back on track with some hiring, like I've mentioned.

And I would hope that we don't get surprised on the short side of spending because we just haven't added the right amount of people at the right timing.

But it is always a matter of finding the right person at the right time to bring on board.

Okay, thanks a lot.

Steve Beuchaw, Morgan Stanley.

Thanks for taking the questions everyone.

I wanted to drill down just a little bit on the number of users in the quarter and the growth of that base.

The growth rate for that user base is -- as far as I can tell, it is at or near an historic high.

But can you speak to the sustainability of that rate of growth, of that user base?

Can we see more double-digit growth over the balance of the year?

That is -- it is a good question.

We are not -- that is a bit more of an outcome than a design criteria for us.

Let me explain what I mean by that.

The number we focus on a little more is new doctors trained.

And we have to work around when they want to be trained.

We deliver CE1 training to interested new doctors at a time when they are willing to travel and go for a place for a weekend, etc.

So, for example, early in Q1 or late in Q4 not available, parts of the summer not available.

So every year we budget, if you will, number of courses and number of new doctors and then we market to them and sign them up.

And we are on track but that in general.

The second part of that is -- and then we train doctors in their dental schools or coming out of ortho departments or whatever.

And then the second part of that is how quickly we are able to engage doctors to start doing cases.

And these lower-volume doctors might be out of it for a couple of quarters and then come back in with two or three cases.

So in this case there are two effects.

One we can control, which is the new doctor training.

And by pointing them towards Assist and giving them incentives to do more cases soon, meaning, we want them to get some repetitions and get to use the product so they will know how to do it, that is working better and better.

The docs that are coming back to the game, are -- that patients are asking about, those are all positive things, but we can't necessarily predict that as well as we can with new doctors starts.

So as true sustainability, we are going to get variability quarter to quarter.

We worry less about that and more about the core utilization and the repeat customers that we have, and those are all going in the right direction.

So all these newer doctors and less involved doctors for us, that is just gravy; it is wonderful.

We will take it, and now we are going to build and our [momentum].

That is really helpful.

Thanks, Tom.

And then one question on the broader dental markets in the quarter, I mean, thinking about this very broadly, outside of just the clear aligner space.

I wonder if you could spend a little bit more time on your views on inpatient flows in dentistry in the US?

And I ask the question because one of the major dental players last week gave a more conservative view of the volume picture there.

So any color you could give that would help reconcile the comments would be really helpful.

Thanks everyone.

Sure, well, we have referenced a series of things, two of which are proprietary; one that is available out there with a third party.

The third-party piece that is available out there I talked about you have both -- dentists will be the first to admit they aren't the best forecasters in the world.

But the way to get at that is to look at their calendars and their schedule books and their appointments and then the actual volume of procedures they are seeing against, say, a period a year ago or a quarter ago.

And when those elements collectively are positive, their attitudes are fundamentally different.

And that is probably the most important secular trend for us in dentistry is are our customers or the doctors more confident that their business is going in the right direction, that patients are coming in, and they are more amenable to considering higher value procedures.

All of the indicators we are seeing, these aren't sharply up, but they are directionally up, and that is all a good thing.

And the reason why there is more leverage for us there compared to, say, more the traditional consumables players is that it doesn't take much of a move around attitude for the dentists and their practice to be much more comfortable.

The patients are already there, but for them to be much more comfortable in offering these higher-value procedures.

And so, again, the first secular trend we watch is relative attitudes and outlook and confidence about the future state.

We know that our GP dentists and our orthos will be more likely to offer higher-value procedures like Invisalign if their attitudes are positive.

And it is just the opposite on a downside.

Again, small changes, up or down, have a pretty big impact the way they behave.

So, again, I think we will know more.

We will get a read through when DENTSPLY reports, when [Patterson & Shine] report.

We aren't the proxy for broad dentistry.

But again, we are extremely under-penetrated.

And the first time for us, especially among our dentists, is when they have positive attitudes about the quarter ahead, the year ahead, and that is what gives them the most confidence to move forward.

Spencer Nam, ThinkEquity.

Thanks for taking my question.

I just have two quick questions for you guys.

The first one is, if we didn't have G3 and G4, I know that is a hypothetical situation since you guys have those, how would be Invisalign -- the original, if you will, would -- case volume would look like year-over-year?

How would you characterize that volume growth if there is any?

I guess I am just thinking about the best way to deal with it hypothetically.

Hypothetically, we had a basis for looking at growth years ago.

And the reasons why doctors didn't do certain cases was because they didn't think they could get the right finishes.

Removing those reasons by giving them the ability to get those -- treat those more complex cases, get those finishes, is exactly what is driving utilization growth.

So I guess you would look back three, four or five years and say, while there is still an appetite for consumers and patients, there were good reasons for practices not to do more complex cases, and we are taking those down.

So G3 and G4 and the latest there is going to be a lot more of that to come, and we intend to be a brutally efficient competitor here at bringing technology like this forward.

So are you seeing -- still seeing increased growth in the regular Invisalign cases relative to the previous year?

Well, yes, I will remind you that G3 and G4 is embedded completely into every product, whether it is Express 5 or whether it is Teen or whether it is Full or Assist.

And so the question that came up earlier about competitor pressure with another product is for any length of treatment we are going to bring the best technology possible, which should give you the most movement per stage, the most predictable case, the best finish.

So we literally have -- we want our best technology, G4, G5, whatever is coming next into every single case.

That is what is creating greater predictability.

That is what is giving confidence to docs, and that is what is leading to increased utilization.

I see.

That is helpful.

And then just a second quick question.

Any update on China, where it is at?

What kind of stage you guys are at in terms of pushing the product through the markets out there -- or any update would be great?

Sure, I will keep it simple.

China is one of the few countries we think -- individual countries that offers the same kind of size potential as say the US does.

So we are taking a very, very thoughtful, careful approach to building the right base, ensuring that our research and clinical education partners at the major universities there are treating a lot of cases and getting that case experience.

By definition, they are much more complex cases.

And many of them are 2, 2.5 years long or more.

And as we get that foundation built over the next year or two, I think we are going to be in a position to step on the gas a little bit.

But we believe this will be a contributor to growth in the mid to long term and not in the near term.

But again, we are taking a thoughtful and very organized and disciplined approach to building the business there.

Thank you.

Jonathan Bloch, SunTrust.

Maybe the first one just on gross margin.

I think your Invisalign gross margin of 79%, I believe was the highest -- I don't know if in the Company's history but maybe the past four or five years.

So if you can give some comments there.

You're doing more complex cases.

You think that would be more aligners and maybe somewhat cap the margin, but yet we see it continue to trend higher.

Where do these go or can you talk to directionally once you conclude most of the ongoing initiatives that are taking place in Juarez right now?

Thanks.

This is Ken.

So one of the biggest factors here really of overall gross margin is the volume of the product going through the factory.

If -- as we are doing more complex cases, you may have a few aligners per case of an increase, but that gets compensated when we saw that the volume that went through the factory this past quarter to actually drive gross margins up a bit here.

And that is what you see in the business pretty routinely.

If volumes move up pretty significantly in a quarter, we are relatively fixed cost in the factory overall, at least in the near term, so you see the leverage of not showing up right away in the P&L.

And on an ongoing basis, I would say the operation guys -- they are continuously looking for ways to optimize the manufacturing process, continue to get cost out.

They have obviously done a great job over the last four or five years, but that there is still more opportunity.

Okay, and then just my follow-up question there.

Ken, would just be -- so I am making sure that I am understanding you correctly.

There are duplicative costs right now that you are carrying in your non-GAAP gross margin from the Juarez initiative, is that correct?

That is correct.

We still have people in New Jersey and we still have -- we are hiring people in Juarez and in Costa Rica for that transition.

So we have duplicative cost not only in people but in facilities costs.

Yes, the same thing for Invisalign, yes.

Okay, great.

And then maybe just to shift gears for a second.

You just talked to China and still think about that as longer term.

But you have done a great job ramping a lot of your trained doctors in the various EMEA countries.

And maybe you if can speak to what is going on over there, how that has been ramping up?

And even if you can provide us with maybe an EMEA growth rate or Europe versus non-Europe growth rate would be very helpful.

Thanks, guys.

So just to play it back -- make sure I got the question.

You are wanting -- you're passing China.

You are wanting to go look at Europe versus our distributor geography specifically?

Exactly.

I want to know what is going on from a case volume perspective.

You have gone from just a handful of trained docs to -- I got to look at my (inaudible) -- 400 or 500 trained docs in EMEA over the past several months.

So how do you see that business evolving over the next 12 to 24 months?

Thanks.

Well, first of all, not just EMEA, which is starting -- with an existing business and ramping up in Russia and other places, but we expect Asia-Pacific had basically been outstripping all of them to continue to grow very nicely.

We have got critical mass in a whole set of countries, and we expect that to continue.

Their volume is growing faster than even Europe's volume or North America.

So in general between the three of them, Asia-Pacific, Latin America and EMEA, we expect collectively the volume to grow to outstrip by a little or a lot what we are seeing in Europe, which is healthy.

So if you just lay that line out five years, we would say that the nondirect volume outside US is going to continue to take a larger piece of the total volume.

And we expect -- but we expect in that order, distributor rates to grow faster than international than US, and yet all of them collectively are growing pretty nicely.

So I don't see a reason why that would continue.

Part of that is new doctor training.

But I would remind you that a lot of that is the cases that get treated outside the US are generally far more complex than what gets treated in the US.

In Asia specifically and parts of Europe, you are dealing with far more complex facial structural change and Class II and Class III cases.

So the G3, G4, etc., really plays to that.

That is part of what is helping us pick up incremental volume.

Okay, so the follow-up to that one would be, real quick, over the next 1 to 2 years think about more of distributor impact on incremental from an international standpoint, China would be more year, two-year, three and beyond?

I think what you're seeing right now is exactly what you should expect in the nearer term, volume growing faster.

And certainly with the discount, the revenue growth is a little slower, but volume growing faster in distributor geographies, and then Europe growing faster.

I think we are going to restage growth in Europe as we are already seeing.

And then North America continue to do pretty darn well, so high-quality problems.

Thanks guys.

Jeffrey Warshauer, Sidoti & Company.

I was just hoping you guys could add a little bit more color to your international scanner revenue, looking at the first two quarters you had the business versus the last two?

Well, the scanner business, we have -- as far as volume is concerned, we are continuing to work through our third-party distributor, Straumann, with them.

And like we said last square, working with them to try to get growth going again in Europe with scanners.

On the services side of the business, it has been a little bit slower as well the last couple of quarters.

And that has to do -- a combination with the economy and also just the fact that scanner placements are a bit slower in Europe than they have been in North America.

Where North America we have been right on track with our -- and maybe even ahead of our view of what is going on with scanner placements in North America and getting some good traction with the sales force.

I would maybe amplify that a little bit.

The network of labs and the services flow around a scanner -- many of the scanners we have sold to at this state and this point have been orthodontically focused in Europe.

And the lab infrastructure is different country by country and certainly different for North America.

So that we think the stream of services around the scanner varies.

It is probably -- it could be maximized North America and some European countries.

In other countries they are saying the lab opportunities don't exist.

So I would say that part of the reason why we put most of the focus on go to market initiatives and bundling initiatives was directly for that reason in North America.

For every installed base unit in a GP's office there are more opportunities to drive value to help the dentist office drive productivity, and for us to get rewarded for that by getting some more revenue and margin out of it in North America versus other geographies.

That is still where most of our effort is.

We are very supportive and working with our partners Straumann in a difficult environment to place more capital.

But also mindful that the services stream around those scanners is a bit lighter.

And as we scale the business better on the former Cadent side, we think we will be able to grow the services side, which is a bit of a perpetuity over time, even faster.

But we are -- as I said, we are coming up on your one here and we've got a lot more work to do.

Great, that is helpful.

And looking at just Q1 Cadent revenue, the deferred revenue aside, how much of that do you think was pushed out from Q4?

You mean, decisions to differ capital purchased?.

Correct.

Boy, I don't know.

It is too early.

I think it would have false precision calling that.

We don't get great information from a customer if they decide to close and take possession in January or February versus November or December.

Maybe when we have been at this for a while longer, we will have a better view of that, but I don't know that we would have any commentary on that at this point.

Okay, great.

Thanks a lot.

Jose Haresco, JMP Securities.

First, actually it has been a very good quarter.

Secondly, could you give us a sense for where you think you guys are in terms of having penetrated the teenager market with Invisalign Teen?

I know you talk about Invisalign as teenagers who are using Invisalign, but particularly around Teen as a product, where do you think you guys are in penetrating the market right now?

Well, in terms of units, the numbers we use have been pretty consistent.

And, again, once we waterfall out the cases that are too complex for us to even be in the discussion for, or the younger kids, we come back with a unit share of around 3% to Teen worldwide.

So we really view that we have a lot of headroom for growth there for Teen, which is part of the reason for the focus.

Sure.

Can you break that 3% out US versus OUS?

Today it is more US than not.

And again, we are disadvantaged a bit more OUS because in many of those countries there are formal reimbursement programs, which only reimburse brackets and wires or traditional treatments.

Some of those are going away over time but, again, I think 3% in terms of unit share is a number that we always get to.

Okay.

You talked about some of the advertising spend and continue to work with Disney.

We have seen your advertising get a lot more effective since the product first launched.

Could you walk us through what is working for you out there in terms of -- plus all your marketing efforts, and where have you seen the need perhaps to recalibrate what you're doing and who you're marketing to with regard to the teenage market and driving demand there?

So I think you have seen us adjust over the last year or two -- two years, is a few years ago we, in terms of events, in terms, which is part of our platform, in terms of ads, we were facing some research were going much more after the teen as decision-maker.

And the fact is for this purchase, for many purchases, teens are decision-makers.

For this purchase mom typically is still the decision-maker.

And so we are advertising to moms and teens and that changes your tone on a lot of things.

Along the way we can still advertise to mom, appeal to her own interest in having a better smile, and also position Teen.

So that is one adjustment, and that plays out through a lot of different programs, and a lot of different approaches and pieces of the mix.

Secondly, we are far more balanced.

If I go back three years, certainly five years, we were much more push versus pull.

We have a very complimentary and balanced mix of PR and traditional advertising and radio and optimized search and social media, and a whole range of other tools that allows us to make the sum more effective than the parts.

Five years ago we were pretty much media, and now we even have some high-end print and all those things together.

And so for every incremental dollar we can get a bigger kick than we would if we were just using one part of the platform.

And then, finally, we can actually -- we track this internally for cost per lead, cost per qualified lead, conversion rates and all that, and all those elements continue to get better and better.

With advertising and marketing you always know you're leaving money on the table, but our net effectiveness continues to get a lot better.

Okay, great.

Thank you very much.

Operator, we will take one last question please.

Jeffrey Matthews, Ram Partners.

So what do you ascribe the pick up in low-volume doctors last quarter?

Is it something you have done to -- what you have done to the product or is it more about Invisalign becoming a standard of care or is it random noise or something else?

I hope it is not random noise.

I think it is a set of things.

Someone asked a question earlier about primary demand.

What we do know is that when the fundamental conditions get better in dentistry it really helps us.

Maybe the way I would say this is when things are lousy we do better than most, and when things are good, we do better than most.

That is an okay kind of outcome for us.

But in this case, especially with GPs, if you saw the number of say lower-volume GPs that came in, they are having the confidence to come in and start cases that if they bring up this topic their hygiene staff, the doctor -- the patients are more willing to engage with them in that idea about treatment, or if patients raise the topic with them they are more comfortable to move forward.

The second thing is, and we hear this in some of our research, is that when the orthodontist -- years ago when the orthodontist said Invisalign doesn't really work, it really -- there is a negative halo effect for the GPs.

It took years to dig out of that.

orthos, even those orthos that don't choose to do much with us are saying, you know, this product is actually really working.

I'm not sure it is for me, but this thing actually really works.

I amazed with what I am seeing.

Right.

That has a huge positive halo effect for a GP that mostly worries about messing something up and losing a patient.

So I think the -- and then the third thing is, we've had a lot of recommitment to more training and webinars.

And our low-volume, medium- and high-volume customers, orthos and GPs, have -- are all very aware of the technology and they're becoming more comfortable that this is a very predictable product to use.

It is still very technique sensitive, but I just think those things together are taking us to the right direction.

Great, thanks.

And then it has been a year since the Cadent deal was announced, and two questions related to that.

One is you identified some customer-facing issues at Cadent that cropped up as a result of the integration.

Has Cadent been hurt by those, and what are you doing about it?

And then related to that, it has been a year since the deal, and if anything the move to digital seems to be more compelling now than it might have looked back then.

What has surprised you about the deal positively or negatively?

Well, let me take the negative first, because we came to a logical -- first of all, we decided to fully integrate this business, not run it as a stand-alone business.

It was too much like us and they did such terrific things and we had such complimentary skills.

We were kind of landlocked.

We didn't have any more capacity to put milling and customer support and tech support in New Jersey.

And given the opportunity, we decided to accelerate moving all of that to Juarez or to Costa Rica.

We gave the employees there a year notice, and more in some cases and retention, and thought this is how we would talk to our own employees if we are going to make a change.

And on the way we found is we were disconnecting some things that we hadn't quite rebuilt capabilities in the new place yet -- not everything was documented.

And so I think in the areas of customer support and access to a skilled person to answer a question, and a few other things, we underperformed there.

And I am being -- just being brutally candid here that that is an opportunity for us to do better.

We have tripled the number of resources there.

We have got a great team in Costa Rica and Juarez.

They are pulling that, and within a month or two I think we are going to be well past that -- moving past it.

So I think that is -- that was a little harder than we thought, and there were some pieces we didn't understand as well as we could have.

In retrospect, if I had to play that back, we probably would have moved slower to make that happen.

But, again, I think you do this a lot the risks of moving too slow are often greater of moving too fast.

So we erred on the side of moving fast.

On the positive side, there is so many that the amount -- the acceleration we have actually had in our technology and product side, the impact from our -- small efforts by our large sales team and marketing teams with great relationships, we have been far more effective at moving scanners and placing scanners in our -- in the Invisalign base.

And I think at a strategic level we ere a little afraid that we were ahead of the party too much.

Our customers really get it.

And I think as we start bringing on these tools that improve their workflow and make them more productive and delight the patient, that is going to just start -- those things will start to be multiplicative.

We are -- I think we are couple of months away from feeling the leverage for the Cadent customers.

We will get through it.

We are out talking to all of our lab customers and everybody else, but I'm being brutally honest here.

We can do better here and we are.

But the rest of it is just so positive.

We are extremely excited about the long-term here.

Great.

Terrific.

Thanks again and good luck.

Well, thank you everyone for joining us today.

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