愛齊科技 (ALGN) 2014 Q3 法說會逐字稿

Greetings, and welcome to the third-quarter 2014 earnings conference 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.

I would now like to turn the conference over to your host, Shirley Stacy. Thank you. You may begin.

Good afternoon, and thank you for joining us. I'm Shirley Stacy, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Tom Prescott, President and CEO; and David White, CFO.

We issued third-quarter 2014 financial results today via Market Wired, 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.

The telephone replay will be available today by approximately 5.30 p.m. Eastern Time through 5.30 p.m. Eastern Time on October 30. To access the telephone replay, domestic callers should dial 877-660-6853 with conference number 13591983 followed by pound. International callers should dial 201-612-7415 with the same 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 fourth-quarter 2014. These forward-looking statements are only predictions, and involve risks and uncertainties such that actual results may vary significantly. These and other risks are set forth in more detail in our Form 10-K for the fiscal year ended December 31, 2013, and our Form 10-Q for the third quarter of fiscal 2014.

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. We have posted a set of GAAP and non-GAAP historical financial statements, including the corresponding reconciliations, and our third-quarter conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information.

With that, I will turn the call over to Align Technologies' President and CEO, Tom Prescott. Tom?

Thanks, Shirley. Good afternoon, everyone, and thank you all for joining us. On the call today, I'll provide some highlights from our third quarter, and briefly discuss the performance of our two operating segments, Invisalign Clear Aligner, and Scanner and Services. I'll also provide some color on our customers, as well as progress in our geographies around the world.

David will then share more detail on our third-quarter financials and discuss our outlook for the fourth-quarter. Following that, I'll come back and summarize a few key points and open up the call to your questions.

Q3 revenues of $189.9 million increased 15.4% year-over-year, driven by higher Invisalign volume across all customer channels and geographies, with continued strong growth from our international doctors. Scanner and Services revenues of $11.7 million were up over 7.1% year-over-year. As a result of better-than-expected gross margin and management of operating expenses, EPS was $0.03 above the high-end range of our outlook.

Our Q3 results reflect continued execution of our strategic plan, including our three key growth drivers, which are -- market expansion, product innovation, and brand strength. I'll provide a brief update on each of these before discussing our results further.

First, market expansion. This strategic growth driver encompasses the many ways we are working to open up new geographies, such as the additional countries in the EMEA region that were recently added to our direct sales coverage area; expanding the adult treatment category for those consumers unwilling to seek orthodontic treatment with brackets and wires; and increasing our share of the teenage market, the largest segment of the orthodontic market worldwide.

Summer months of June, July, and August are typically a seasonally strong period for teenage orthodontic case starts, and 20.4% year-over-year growth of Invisalign teenage cases in Q2 marked a very good start to the summer. This continued into Q3 and resulted in a sequential increase of 17.4% for a total of [33,200] teenagers starting treatment with Invisalign worldwide.

On a year-over-year basis, the total number of teenagers in Q3 starting treatment with Invisalign increased 14.8%, reflecting slightly less effectiveness of our teen promotions than in the prior year. On a combined basis, teen volumes for Q2 and Q3 were up 17.3% year-over-year, which may suggest it was an earlier start to the teen season than we previously experienced.

Our second growth driver is product innovation, which aims to create greater doctor preference for Invisalign through a focus on innovation by delivering new features and functionality that increases our doctors' confidence to treat patients with Invisalign more often and on more complex cases. Earlier this year, we launched Invisalign G5 for deep bite. We continue to receive positive feedback from our customers, specifically North American orthodontists, on their overall awareness of Invisalign G5 and their intentions to increase their use of Invisalign for those types of cases.

We expect this trend to increase over time, as we continue to reach out to train and support our customers, and are confident that Invisalign G5 will help drive further adoption of deep bite cases. We also continue to receive positive feedback on ClinCheck Pro with 3-D controls, which was launched in North America in Q1. ClinCheck Pro provides a doctor with more precise control over the final tooth position, helping them better achieve their treatment goals. ClinCheck Pro becomes even more valuable, offering even greater utility for our doctors, as we further broaden our clinical applicability by delivering new solutions for more complex cases, like Invisalign G5.

Our customers also find that ClinCheck Pro serves as an efficient means of communicating their treatment goals for final tooth position. Since the launch, we have seen strong adoption across North America, and expect a similar response from our international doctors when ClinCheck Pro is launched outside the US in Q1 of next year.

And finally, brand strength, our third key growth driver. We continue to make progress in building and leveraging the strength of the Invisalign brand to create consumer demand and drive purchase intent among consumers in more and more countries worldwide. This is most obvious here in North America, our largest market for consumer marketing. Let's start there.

In Q3, we created more than 850 million consumer impressions through paid media, reaching women, moms, and teams across the country. Much of our Q3 traditional media, PR and social media activity, focused on reaching teens and moms during the busy teen summer treatment season. Whenever possible, we encourage our customers and their patients to share their personal stories on how their Invisalign treatment helped transform their lives.

As consumers, we all benefit from real people sharing their experience. And this summer, that included partnering with YouTube personality, Amanda Steel, to share her Invisalign treatment journey with other teens. Her initial Invisalign posts have garnered more than 1.5 million video views, and an impressive Instagram following, as she documents her experience with Invisalign. In addition, an extensive media tour with popular technology journalist, Jennifer Jolly, reached more than 100 million consumers through 36 media placements, including national placement in Jennifer's USA Today column.

Our transition to back-to-school messaging for moms, to help them cope with their kids being back in the classroom, included our first efforts on a new team confidence study we commissioned to examine the impact of braces on teen self-esteem and confidence. Key takeaways from the study revealed that teens in Invisalign treatment are more confident and teased less often than teams that are in metal braces. The point is, this really matters to teens and their parents, and is one less thing for them to worry about.

Switching to EMEA, our new, more localized consumer initiatives and continued integrated media activities created over 51 million impressions throughout key markets in Europe in Q3. These targeted social media advertising and media engagement activities have led to over 100,000 people to search for an Invisalign provider during Q3. And we have seen the European Invisalign social media community continue to grow. We now have a fan base of over 100,000 consumers, the highest engagement scores we have seen this year.

The introduction of our Real Patient campaigns continues to be effective, and we have recently partnered with UK Olympian cyclists Laura Trott and Jason Kenny to share their Invisalign journey. This partnership has resulted in over 60 million opportunities for consumers to see the Invisalign message across the UK. In combination, these three key strategic growth drivers -- market expansion, product innovation, and brand strength -- are proving, over time, to support growth in our most important country markets, while helping us open up new ones.

Let's now touch on the progress we're making in these regions, starting with North America. For Q3, North American Invisalign volume was up a little less than 1% sequentially and 6.6% year-over-year, reflecting a softer market environment than we originally expected, especially for North American GPs. On a sequential basis, Q3 reflects growth from North American orthodontists, offset by an expected decline among North American GPs who typically have fewer days in office during the summer.

On a year-over-year basis, both customer channels were up, and growth was driven primarily by increased utilization from North American orthos, as well as by continued expansion of our GP customer base. Despite solid progress in North America in a number of areas, Invisalign growth, based on some of the initiatives that were expected to accelerate adoption, has not occurred at the pace we expected. While we continue to build upon our strong base of GP customers, we are not making enough progress in growing GP utilization.

We will continue to work on overcoming the challenges we see in keeping these practices, which provide a wide range of dental services, fully engaged in treating moderate orthodontic cases with Invisalign. We have a number of opportunities to improve our effectiveness with these extremely important customers, and expect to make progress over time.

You may recall that during our Analyst Day presentation commentary on the GP market, we discussed the emergence of corporate-owned, multi-office dental service organizations, or DSOs, and their long-term potential as partners. While we are still early in our engagement with many of these players, the training and program rollout for this initiative is now in progress. We are working to establish the systems and processes to best train and implement clinical and practice development programs in the DSO environment.

In Q3, part of the significant year-over-year growth in new Invisalign doctors included a number of DSO clinicians we trained. It will take some time to help these organizations ramp their volume, given the need to engage doctors and practices across a wide geographic and Invisalign experience range, with a systematic approach. We see a tremendous potential to provide practice-building impact to these groups and are deploying the resources to do so.

Q3 was another strong quarter for our international business, especially in the Asia-Pacific region. Total international Invisalign case volume for Q3 was essentially flat sequentially, despite the typical slowdown in Europe, while up 27.8% year-over-year. In EMEA, Invisalign case volume increased 20% year-over-year.

Our strong performance was driven by a combination of increased utilization by orthodontists in all countries amid a continuous effort to add new Invisalign-trained doctors. With a significant number of training and education events planned for delivery through November, we expect the trend to continue through the year-end, as doctors continue to increase their confidence in Invisalign treatment outcomes.

In the APAC region, Invisalign case volume increased 43.3% year-over-year, and all country markets achieved record shipments. China continues to deliver above our high expectations, doubling case volumes when compared to the same quarter last year, and is now roughly equivalent in size to our business in Japan.

We also continue to see strong growth from Japan, Australia, and New Zealand, as well as the Southeast Asia countries. This is driven by an expanding customer base, coupled with higher utilization, which reaffirms the value of investing in the right coverage as well as the importance of product evolution to treat higher complexity cases. There were 502 first-time submitters from the APAC region in the quarter, an all-time high, as our training programs continue to evolve.

Now turning now to our Scanner business, for Q3, our Scanner and Services business revenues were down 8.3% sequentially, consistent with our expectations for lower capital equipment sales in the summer, and yet were up 7.1% year-over-year. As part of our commitment to providing the greatest utility for our restorative dentist customers, in Q3, we expanded the workflow options for iTero intra-oral scanner, with DENTSPLY implants, ATLANTIS Custom Abutments, and Zimmer Zfx custom abutments.

ITero certified connectivity for custom implant abutments helps simplify the treatment process for clinicians by reducing the number of required patient visits, saving valuable time for the practice, and ensuring an improved patient experience. Intraoral scanning also helps improve the treatment workflow, offering process efficiency for the dental laboratory the practice is working with. Our scanner business continues to have a positive impact on our Invisalign franchise, helping to drive utilization, especially among our North American orthodontist customers.

For Q3, the percentage of Invisalign cases submitted digitally from a scanner in North America rose to 34% compared to 32.7% in Q2 and 25.3% in Q3 a year ago. To take advantage of the increasing trend towards digital dentistry, we will continue to do everything we can to grow our iTero installed base, with the goal of creating additional leverage for the Invisalign business. This includes working with other intraoral scanning companies to enable interoperability for use with Invisalign treatment. Invisalign interoperability is good for our customers, their patients and for extending the Invisalign franchise.

And with that, I'll now turn the call over to David for a review of our Q3 financial results. David?

Thanks, Tom. Before I get into the details, I'd like to note that unless stated otherwise, all of the financial information I will discuss will be presented on a GAAP basis.

With that, let's review our third-quarter financial results. Revenue for the third quarter was $189.9 million, down 1.4% from the prior quarter, consistent with normal Q3 seasonality and up 15.4% from the corresponding quarter a year ago. Third-quarter Clear Aligner revenue of $178.1 million was down 0.9% sequentially, and up 16.0% year-over-year. Q3 ASP's were down sequentially $11, primarily due to foreign exchange losses related to the weakening euro, which primarily impacts us in September. I'll make further comments about the impact of currency later.

Our year-over-year revenue growth reflected Invisalign case volume growth across all customer channels, as well as favorable ASP's from a higher mix of Invisalign full products and a higher mix of international business. For the third quarter, total Invisalign shipments of [119,600] cases were flat sequentially, reflecting increases from North America ortho case volume and Asia-Pacific growth, offset by expected seasonal decreases of North America GPs and EMEA.

Year-over-year growth of 11.9% reflects continued strong international growth, increased utilization from international doctors and North American orthos, as well as expansion of our customer base. For North American orthodontists, Q3 Invisalign case volume increased 5.6% sequentially and 10.6% year-over-year. For North American GP dentists, case volume decreased 4.6% sequentially and increased 2.3% year-over-year. For international doctors, Invisalign case volume decreased 0.7% sequentially and increased 27.8% year-over-year.

In Q3, we added 1,125 new North American doctors and 1,400 new international doctors, a year-over-year increase of roughly 42% and 60%, respectively. In Q3, Asia-Pacific trained a total of 745 new doctors -- the most ever in a single quarter, with 50% coming from China. In total for Q3, we added 2,525 new Invisalign doctors worldwide, a year-over-year increase of 51%. While the number of doctors trained was relatively flat on a quarter-over-quarter basis, we normally experience less training events in the summer quarter.

In Q3, total Invisalign utilization of 4.4 cases per doctor increased slightly from 4.3 in Q3 2013. North American ortho utilization of 8.8 was a record, and increased from 8.4 in the prior quarter. North America GP utilization of 2.8 decreased slightly from 2.9 in the prior year. And international doctor utilization of 4.3 increased from 4.1 in Q3 2013.

Third-quarter revenue for our Scanner and Services segment was $11.7 million, an 8.3% sequential decrease as expected, due to lower capital equipment purchasing during the summer months. On a year-over-year basis, our Scanner and Services revenue increased 7.1%, reflecting increased OrthoCAD services offset by a slight decrease in scanner volume.

Moving on to gross margin. Third-quarter overall gross margin was 76.4%, up sequentially 0.8 points and up 0.4 points year-over-year. Clear Aligner gross margin for the third quarter was 79.2%, up 0.4 points sequentially, and down 0.7 points year-over-year. The sequential increase was primarily the result of fewer training events in Q3 and lower freight expense. The year-over-year decrease was primarily the result of a benefit recorded in the prior year relating to the change we made in our midcourse correction policy in June 2013. This was partially offset by higher ASP's in the current quarter.

Q3 gross margin for our Scanner segment was 33.5%, up 4.0 points sequentially and up 11.3 points year-over-year. The sequential increase was primarily the result of favorable product and service costs. The year-over-year increase was primarily the result of more favorable product costs, and the prior year's results being unfavorably impacted by the sale of older end-of-life products.

Q3 operating expenses were $93.5 million. On a sequential basis, operating expenses were down $3.2 million, due primarily to lower sales and marketing spend. Also recall that operating expenses in the prior quarter, Q2 2014, benefited from a $1.2 million refund of medical device excise taxes that we had paid earlier this year in Q1. On a year-over-year basis, Q3 operating expenses were up $9.9 million, incidental to the growth of the business, which primarily relates to continued market expansion, and new and existing markets and geographies.

Our third-quarter operating margin was 27.1%, up 1.8 points sequentially, and 1.9 points year-over-year. Our quarter-over-quarter improvement was primarily driven by higher Invisalign gross margin and lower operating expenses, as just described. Other income and expense for the quarter included a charge of approximately $2.1 million associated with foreign exchange losses, which primarily relate to the decline of the euro to the US dollar. Including this impact and the euro's impact on revenue, net of operating expenses and taxes, it amounted to approximately $0.02 per share.

With regards to our third-quarter tax provision, our tax rate was 22.8%. Third-quarter diluted earnings per share was $0.47, compared to $0.43 reported in Q2, and $0.42 reported in the same quarter last year.

Moving on to the balance sheet. For the third quarter, our Accounts Receivable balance was $130.0 million, down approximately 0.7% sequentially. Our overall DSO was 62 days, up one day sequentially and up two days over the same period a year ago. Capital expenditures for the third quarter were $7 million, primarily relating to manufacturing capacity additions.

Cash flow from operations for the third quarter was $57.6 million. And free cash flow for the third quarter, defined as cash flow from operations less capital expenditures, amounted to $60.6 million. Cash, cash equivalents, and marketable securities, including both short and long-term investments, were $561.5 million. This compares to $472 million at the end of 2013, an increase of $89.5 million.

During Q3, 2014, the Company repurchased 500,000 shares of stock, including 364,000 shares related to the completion of the Company's previously announced $70 million accelerated stock repurchase, and 136,000 shares amounting to $7.4 million in open market repurchases. The repurchases are part of Align's three-year $300 million stock repurchase program announced on April 23, 2014, with $100 million of that amount authorized to be purchased through April 2015.

Year-to-date, the Company repurchased 1.5 million shares for $77.4 million. The Company anticipates repurchasing the remaining $22.6 million of the first $100 million of the authorization over the next six months.

Let's now turn to our business outlook for the fourth quarter and the factors that inform our view. Fourth quarter is typically a seasonally slower period for North America orthos, as fewer teenagers start orthodontic treatment after the school year is started. This is typically offset by North American GPs, as they recover from a slower summer season due to vacations. In aggregate, we expect Invisalign volume for North America to be up sequentially in Q4.

Our fourth quarter has historically been a stronger quarter for our international doctors as they rebound from a seasonally slower summer. We expect Invisalign volume for international to be up sequentially in Q4.

Our Scanner business performed very well this past quarter, despite it being a seasonally slower period. And similarly, we expect our Scanner volumes to be up sequentially on a stronger Q4. With this as a backdrop, we expect the fourth quarter to shape up as follows. Invisalign case volume is anticipated to be in the range of [125,100 to 127,600] cases, an increase of 4.6% to 6.7% from Q3.

We expect net revenues to be in the range of [$194.9 million to $199.1 million], an increase of 2.6% to 4.9% from Q3, reflecting lower ASP's, primarily as a result of the weaker euro. We expect gross margin to be in the range of 74.2% to 74.6%, down sequentially from Q3, primarily reflecting slightly lower ASP's, as just mentioned; increased freight costs for higher international mix and increased training expense for Q4, which is seasonally a stronger training quarter.

We expect operating expenses to be in the range of $94.7 million to $95.5 million. This is higher when compared to Q3, reflecting continued investment in our strategic growth drivers. These increased investments are partially offset by the translation of our international SG&A expenses at weaker exchange rates. Our operating margin should be in the range of 25.6% to 26.6%.

Our effective tax rate should be approximately 23%, and diluted shares outstanding to be approximately 81.9 million, net of anticipated stock repurchases. Taken together, we expect diluted EPS to be in the range of $0.47 to $0.50.

With that, I'll now turn the time back over to Tom for closing comments.

Thanks, David. We are pleased to have delivered another good quarter with progress across the business, paced by the strong growth in our EMEA and APAC regions. North America delivered solid results in a softer market, and yet we know we can do better.

Despite a challenging global environment, we are confident we can continue to deliver growth rates at multiples above market growth in every geography we serve. Our confidence is based on continued strong execution of product innovation, combined with continued investments in the right sales coverage and go-to-market initiatives, each of which become far more effective when we add in high-impact consumer marketing campaigns.

The Align team is excited by the opportunities ahead of us. We look forward to a very busy fourth quarter with important tradeshows; major customer events like our North America Orthodontic Summit; and a full calendar of new customer training events. We look forward to seeing many of you at upcoming investor conferences, and to sharing our continued progress when we discuss our year-end results in late January.

That's it for now. And we can move to take your questions. Operator?

(Operator Instructions) Jon Block, Stifel.

I think the first one, David, just for you. Maybe a two-part question. One, if you can comment at all on trends throughout the quarter maybe what you saw? And then to the guide, could we have some more detail there?

It just seems to me like a big sequential step-up. You called out North America being up 4Q versus 3Q, but when I look back in 2012, you were down 3% sequentially 3Q to 4Q. Last year, you were flat in North America sequentially. And you're still positioning this as a tough environment here with a slower return on some of your investments. So, what gives you the confidence North American cases will be up 3Q to 4Q? Thanks, guys.

Okay, Jon, back to the first question on trends in Q3. I don't know if there's anything peculiar in terms of trends versus any other Q3 we've experienced. I think one -- perhaps one anomaly that Tom mentioned in his prepared remarks had to do with our team season potentially being a little bit earlier in the year than what we saw last year, since we got a very good uplift in the second quarter. But the uplift in the third quarter was a little bit softer than what we have anticipated.

But other than that, I think the case -- our business is fairly linear through the quarter. And in the summer months, typically, we see a soft August, particularly in the international area, particularly EMEA, as people are taking vacations and closing their offices, and so forth. And then we hold our breath for a little bit, you might say, for September, waiting for things to kind of pick back up, as people wake up from vacation and get back engaged.

But other than those trends there, I'd say fairly consistent with third quarter at least a year ago and other quarters that we've seen. As it relates to Q4 in North America, a couple things. If we look at our three-year average, sequential average, it's typically been up just a little bit under 1% quarter-over-quarter. And as we look at North America in our guidance -- excuse me, I'm sorry -- it's typically been up around -- roughly flat quarter-over-quarter from Q3 to Q4. And our guide is up -- I think I want to say about 5% or so.

One of the things that influence that is -- you know, Tom talked about DSO's. And so, as we engage with more of those selling organizations and so forth, we expect to see uplift as those doctors are trained, and as they become engaged with the Invisalign product. And so that's part of the uplift we are expecting to see in the fourth quarter.

And then we are continuing also with some of the promotions we ran in Q3; expecting them to receive some further traction in Q4. And we'll also see some more media spend in Q4 as well. And so those things tend to give us a little bit more of a seasonal uptick in Q4 from Q3.

Okay.

(multiple speakers) Jon, if I pile on for just a second, I mean, the couple of years you called out were really nonlinear for us. And the reason why we were sequentially down going into -- in 2012, especially -- and there were a couple of other ones -- is because volume disappeared late in the quarter. And we went into the quarter with a little less flow of business.

So, when David speaks to some reasonable linearity, not as strong as we like in North America, that's actually a good thing. And linearity means it's building, so we've got solid progress going into the quarter, which means, for the first month of the quarter, the pipe's reasonably full.

With all that said, the second thing is, we continue to build in Asia. And as that's becoming more meaningful in total volume, that has a bigger contribution to the total egg. And all the signs so far are in Europe that they continue their trajectory, are doctors are back to work and building. And despite the more challenging economy and the news that you hear there, solid. So I think when you put all the building blocks together with the same methodology we always use, reasonably confident that we can go deliver that guidance.

Okay. That was very helpful. And Tom, just as a follow-up. Maybe at a high-level, if you can just speak to return on investment and sales reps. And I guess where I'm going with this is, the North American GP market has just proven to be challenging. And you guys have thrown more bodies at it over the past 18 to 24 months. Of course, four or five years ago -- I've got to bring up the P word -- you tried the Proficiency Program.

Where I'm going with this is, is there an opportunity to redeploy investments elsewhere? You are doing so well in teen. International is crushing it -- where you sort of say, you know what? GPs, we'll get some growth there as we add and train new docs, but let's throw bodies and investments elsewhere, that seems more ripe for accelerating growth. Thanks, guys.

It sounds like you've been sitting in some of our meetings, as we do resource allocation hard choices. Let me start with your very last point around DSO's. That is a place we've deployed more resources in terms of program and approach and training. And we are getting some early traction there.

It takes time, since they have anywhere from dozens to hundreds of offices scattered across the country in some cases. And as we activate, we want kind of -- we want them to have high-quality capability when that patient comes in, even if this is a new line of practice for them. So this is -- these are all very different the way they work, but we are deploying a way to do that. So that's one example of deploying additional resources there.

Secondly, we are deploying more resources. And in our really fast-growing geographies like China, we don't have an annual resource allocation discussion with an annual plan. We look at that every quarter, literally. And if they can keep delivering on their plan, we give them more resources against a game plan. So that's going on as a consistent theme.

To some extent, the same is true in EMEA. With that more frequent relook at resource allocation, they earned the right to get more headcount, a little more for consumer, and in some cases, acceleration of a key product initiative.

When you come back to North America, we actually are making progress in GP utilization. It's just that it's hard to see against the 20,000 or more GPs that we do business with at some level of frequency. And if I go back to late last year when we rolled out and piloted our new fundamentals training course, we had hopes that would help. And, in fact, in general, these are smaller attended groups, more intensely supported by coordinated marketing and sales. And we can look back and see that in virtually every case, the doctors, the GPs that go to those classes, start their cases -- their first cases much sooner, and they adopt more quickly. Kind of the angle of attack is better.

So, that's really where we already have redirected some of the selling time and effort away from the mass towards those GP practices that want to make this more of a priority. And that's one reason why the tail is pulling utilization down. But again, I'll step back to -- the strategic importance of the GP market is high for us. We do know that it's going to take a while. And it's going to take all three of our levers to do it.

But your point is well-taken. Our job is to thread the needle between all the investment choices we've got, and managing the combination of short or tactical investments to drive the business in the very near-term, against things that are very, very important to our owners for the long-term. And that's the line we are trying to walk.

Great. Thank you, guys.

Robert Jones, Goldman Sachs.

Thanks for the questions. Just looking out at the 4Q in the guidance, the cases certainly there seem stronger than what we were looking for. And I know you guys just commented on that. But I guess I would say at those levels, I think we would've been looking for a sales range to be a touch higher than what the guidance is.

I was wondering if you guys could maybe spend just a little bit of time talking about your expectations for ASP growth from both a product level, and then also from a geographic standpoint, just given some of the trends we saw in the quarter?

Bob, I'll start with a few broad strokes, and then I'll let David fill in behind that with some of the facts that we laid out in the framework for guidance.

First would be -- we expect a little bit of mix shift. We've already got a little bit of FX headwind. I'm not going to speak to it. Everything is captured in guidance. But -- and so that bleeds a little bit off right off the top. But we expect a little more mix shift. As the team is going a little more aggressively after I7 and 14 in EMEA, and Express 5 and 10 in North America.

And part of that is promotions; part of that is a little bit of increasing interest from our GPs and some orthos. So, we never quite get that right. It's been pretty stable. If that stays where it is, the mix will be a little higher and we'll have a little more revenue lift out of that. But as we see it today going in, our internal outlook, which informs this, says there is low mix shift. And then there's some promos with that.

Other than that, those are the two big factors. But I'll let David build on that just a little.

Yes, just to add to the foreign exchange piece of it, most of our international business in EMEA is billed in euro. And if you track currency trends -- I'm sure you have -- we've seen some big moves in that just in the last couple of months, principally beginning in early September. And that's certainly influenced our third quarter in amounts that we've not seen historically in the Company for a long time, at least.

And so, as we look about that going forward, that certainly does have some impact on ASP's going forward when you translate those back into dollars. And that has put a little bit of, you might say, headwind into the revenue guide for Q4, but it is included in the guidance -- I'll make that clear.

But one point, I think, to make note of is the fact that when you look at the countries that we are selling -- where we are selling internationally, most of those revenues are denoted -- denominated in local currency. And we incur our selling, marketing, and to some extent, some G&A expense, locally in those markets as well.

So, while it puts a little bit of headroom, you might say, or headwind into the top line, we have somewhat of a natural hedge to some extent, given that the expenses will translate back into a lower amount as well. And then when you net that of a tax, it mitigates them even further. So if you look at our Q4 guide and so forth, about $0.01 a share roughly is the impact of currency relative to where it was earlier in Q3.

That's helpful. And that might actually partially answer my follow-up question, which was just -- if I look at SG&A, it was actually a little lighter than what we were looking for. And yet you seem to be rolling out a lot of new initiatives to reach the consumer. I guess I was wondering, kind of outside of FX, is there any level of efficiency that you guys are realizing and getting the word out? Or should we be thinking about investments in sales and marketing kind of re-accelerating back to more normal levels from this point forward?

Well, we're always looking at new investments. And we are constantly evaluating new opportunities to invest in the business, whether it's on the product side or whether it's on the sales or marketing side. And so I don't think there's anything new there.

Clearly, one of our objectives is to -- as we penetrate further and further into the market, one of our objectives, obviously, is to get with better adoption, to get better field efficiency, you might say, with the people we have out in the field that are in that selling position.

But if you look at the Q3 expenses, as you look at that, some of that is just some seasonality. Lower media spend in Q3 is very typical for us, and the fact that payroll taxes begin rolling off for some of the employees here in the US. And so, those are some of the contributing factors why Q3 was a little bit lower.

Bob, before we maybe finish beating this one to death, there are a couple of examples explicitly on marketing spend that we do get efficiency out of. And I'll give you a small example, but it's big dollars.

We can lock in -- especially when the market is a little softer for media -- we can lock in traditional media out multiple quarters, and sometimes as far as a year, to get placement rates in the programs that fit with our brand. And we can get literally millions of dollars of improvement or leverage out of those working media dollars.

And then, in addition, one of the things that comes with a little bit of mass now that Invisalign is becoming a well-known brand, at least in North America, and we're taking first steps in Europe, is that we call paid media, traditional media. Unpaid media is people doing their own videos on YouTube and talking about, on their blogging, how it changed their lives.

And so we get that -- that all goes into the impact in search and impressions that people form in total .And in many cases, that has greater weight than paid media. So we tend to tune off ads and listen more carefully to what I'll call honest conversation. And that is a place that efficiency shows up for us. And we see some of that in North America for sure. Starting to see a little bit of it on the digital side in Europe. Again, we are still earlier days there. But that's a very specific example of some leverage.

That's helpful. Thanks so much.

Thanks.

Glen Santangelo, Credit Suisse.

Tom, I just wanted to follow-up on this North American GP issue just one more time. I mean, it's clear this seems to be sort of the one fly in the ointment for you guys in terms of achieving higher growth. And I'm just kind of want to get your perspective. I mean, do you feel at all concerned that maybe the North American GP market is becoming maybe a little bit saturated with your product? Do you feel like you are choking on the law of large numbers in this market? Or you just really feel that the Company hasn't really executed that well in this customer class, and you just need to do a better job?

I'll start with that last part and say, yes, we can do -- I think we've executed well. There aren't that many companies that have built a great standalone business with the North American GP, given the enormous amount of fragmentation. But I'll go to your -- so I'm saying yes, we can do better. We have lots of ideas on how to do that. And we've got experiments going on all of the place to make that happen.

The saturation point -- it's actually the opposite. We are so far from saturation, in fact, even our -- even routine customers do Invisalign almost as a hobby in GP. Even our biggest customers on the GP side have multiple practices. And Invisalign is still a very small fraction of the 3,000 to 5,000 to 7,000 procedures they do a year, even if they are a multispecialty office.

And so our job is becoming more relevant and meaningful, and making Invisalign, which is orthodontics, which isn't as typical a part of a GP practice, work towards mainstream. We know what success looks like, Glen. I mean, you've been an observer here of not just us, but others for a long time. And we know how to replicate that success. We have to do it office by office across the country. And I think we know how to do that. It just takes time.

And I'll point back to a comment I made earlier. We've completely overhauled our clinical education front-end, and it's working much better. That's the foundation. We wind up with a rep meeting the doctor literally within a week or a bit more, of when they were in class where they met them. And they are out there working together to get the staff and everybody else onboard. In many cases, they bring the staff with them to training.

So, the goal is, get the whole team organized and involved versus the doctor coming back from a weekend program on their own. And it's working better.

Second pillar maybe to long-term is building a core part of this to be with the DSOs that are growing fairly rapidly. Very business-focused and increasingly upscale. And where we can bring the same brand leverage for individual practice, we can leverage that much more broadly on a regional basis with a partner, a significant partner, who understands compliance with programs.

So there are a whole lot of things we're working on that will take time to move the needle to where you'll see it in the utilization number, but we do know what success looks like. And I'll go back -- we can do better.

You know, Tom, just maybe one more point that I want to make. Obviously, everyone is focused on the uptick in the case volume in Q4 guidance. And I think in your remarks, you sort of said that Europe has continued its trajectory so far here in the fourth quarter from the third quarter. Is there any comment to make on North America in that regard? Have you seen an uptick post the summer lull in the North American GP market?

Yes. I think, as David said, part of his framework for thinking about guidance was that these are GPs returning. In fact, orthos maybe tune it down a little bit and start treating more adults after the summer rush for teens. GP's offices get busy again after Labor Day, and that's in our thinking. We expect GP's offices to pick up. We expect EMEA to get busy. They came screaming back in September, and that pushes on until the end of the year. And again, APAC is still running like the dickens. So all of those factors go together and are reflected in the guidance that David provided.

And maybe just (multiple speakers) --

I was just going to say in relation to APAC, just to kind of pile on, I guess, we saw a very strong September in APAC, which was very encouraging for us as we think about Q4.

Okay. Maybe if I just ask my last question on the margin side.

this is your last one, Glen. (laughter)

This is number 2b.

Oh, you know what? I'll jump off. I'll give others a chance.

No, no, no, that's okay. Go ahead.

I'm just going to ask on the margin side, I mean, basically this is the second best operating margin we've seen in the Company's history, at least as long as my history with it. And obviously, you got a benefit on your gross margin line and you control the expenses. I mean should we think about maybe pushing higher into that 25% to 30% operating profit range? I mean, do you think you can finally push into the higher end of that range, given the groundwork you've laid this quarter?

Well, let's not get into a discussion between the CEO and CFO here, so I'll take that one. (laughter) Look, let us -- what we've said consistently is we've got a long-term model out there. We're trying to thread the needle quarter-to-quarter through that. We want you to think about a whole year of performance. And we have a lot of investments we are -- we always throw up against the wall to make. And where we are confident we can continue to generate leverage in the business, we'll make more. But we are not ready yet to think about the long-term financial model. I'd like to put that aside for the moment.

Yes, and I'll just add to that. I think we've said consistently that, as it relates to our long-term model, our objective has been, and continues to be, to deliver a full-year within that model. We've yet to do that. We hope we're on track to do that this year. But at the end of the year, we'll -- we can talk more about what that model looks like if we change it or otherwise.

Thank you.

Thanks, Glen.

Thanks, Glen.

Jeff Johnson, Robert W. Baird.

David, I wanted to start with you on ASP's. I want to go back to a point there. It looks like your ASP's have been running up -- I don't know, about 4% or 5% on average over the last four quarters or so. If I back into your ASP guidance for fourth quarter, it looks, to me, down a point or two year-over-year. And maybe that's a little aggressive, but that's where my math has taken me.

You know, is that all currency? Because if I do the math on that, that's about an $8 million swing. And in the past, your currency swings, when they've been bad, have been maybe $1 million or $2 million. So it seems like it's bigger than that. So I'm wondering if it's all currency on that swing? Or if there's something else in there that might be swinging the ASP's even more than currency?

Currency is probably the largest component of it. Mix, as we talked about a few minutes ago, is also a component of it. Because we are expecting to see some traction on the Express side of our business in the fourth quarter with some promotions we are running, particularly internationally. So, those two are the biggest contributing factors to it.

Long-term, however, I guess I would still emphasize the point that we believe that our ASPs long-term are going to continue to grow as our international business treats more complex cases, and is growing at a rate faster than North America. And as that -- and particularly APAC, where they treat the most complex cases. So, while we might see some -- a little bit of volatility in the ASP from a quarter-over-quarter basis, and that's reflected in our Q4 guidance, I think long-term, we still accept -- would expect the ASPs is to be stable to modestly up.

Yes. That's (multiple speakers) --

Hey, Jeff, if I just pile on for a moment -- we would look at a mix shift -- ASP because a mix shift to be a positive effect, because it's something we are actually trying to engineer. Even though, in our fall-through in terms of operating margin, is as good as or better than a full case. So for us, that's a good thing. It's a case we might not have participated in, in a growing area.

And then secondly, I think as David said, if you think about our business in Europe, specifically, almost all of our volume ships in September. And that's exactly when the big -- it was the biggest step we've ever seen in a percentage basis in the Company. And because of all -- virtually all of our shipments -- because our doctors ask us to hold their cases until they are back from holiday -- ship in September, it all got -- it was all based on revenue based on a completely different euro.

And literally, I think September 2nd or something, it took a dive. So I think those -- that's the rationale for why it changed. FX will give and take. But I think on the mix side, we are actually trying to do that. So we wanted to separate those two factors.

All right, that's helpful. And then -- interesting September point there. Let me just -- I guess on my follow-up, Tom, on the I7/I14 and the mix shift there -- and I understand kind of trying to engineer some volumes you might not have had in the past -- but I know it's been two or three quarters in a row here where you and I have had conversations where, when the mix has been going the other way, to the full, in some of the teen cases, and that especially in the international markets, your explanation to me has been the docs really don't see an advantage from a price standpoint. They'd just as soon pay a little bit more to get all the flexibility of 30 Aligners instead of 7 or 14 or something.

And you've made it sound like docs just don't even see a reason to use I7/I14, it's the full and the teen are a much better product for a lot of the guys in the international markets. And now it seems like that argument is kind of shifting here. And I'm just trying to understand why you'd promote the I7/I14, if you've been seeing this kind of shift towards the full in the higher revenue cases?

The short answer is, we will continue to see, in very underpenetrated markets around the world, a bias towards comprehensive treatments, because the bulk of adults never got treatment as kids. We are -- because we're making progress because the brand is getting out there, and because there were children that were treated as kids by the National Health System in the UK, by the German health program in Germany, et cetera, and never had retainers and relapsed, they are starting to see some cases with people that just want -- they basically have a good bite and a solid occlusion, but they are wanting to be straightened up in front.

And so they are open-minded about doing something for themselves. This is actually a wonderful thing because it means the idea of oral health and a better smile is slowly starting to catch on in Europe. And it has not been at the top of their list ever. And so it's really, I think, a good positive dynamic of market growth. And this is feedback from some of our customers. And we are trying to be responsive to that and give them incentives to try the product more.

All right. That's helpful, thank you.

Sure.

Brandon Couillard, Jefferies.

David, just on the 4Q gross margin guidance, can you quantify those moving parts between ASP's, freight, and training costs in terms of magnitude of effect? Because this will be the lowest gross margin I think in quite some time. If you could just give us some color there, that would be helpful.

Well, some of that is -- there's probably three pieces to it -- ASP, which we've talked about, freight, and higher training. And as you've listened to calls in the past, right, which we've talked about training, training ebbs and flows with some certain amount of seasonality in it. It's relatively a breakeven proposition for us financially.

And so, as training increases in one particular quarter, it's going to be -- it's going to tend to be a drag on margins. It won't be a drag on dollars, but it winds up being a little bit of a drag on percent.

The other piece to it is, you know our Scanner business, we are anticipating that to be a little bit down from a gross margin standpoint. So probably those three things together. I don't have a weighting here to give you between them. If I was to put them in order, rank order, I'd probably put ASP as the first item, and primarily as a result of FX. And then, training and freight and the Scanner business.

Thanks. And then, Tom, one for you. As we look at the North American business, I know you don't usually talk about it this way, but in terms of the growth rates we've seen and case volumes over the last couple of quarters, can you speak to the trend between teen and non-teen markets? And if you've seen, I guess, any deceleration in the non-teen segment over the past in terms of the trajectory in recent periods?

Let me answer it this way. The numbers show a deceleration in volumes or in rate of growth. We are growing steadily, but the rate of growth is slowing over a number of quarters. This is mostly the case in the GP space. And I think, going back to an earlier question, we have not generated leverage there yet. It's something that's highly, highly important to us, and we're working hard on it.

If I strip all those parts away, there is still this huge latent demand in North America -- 20 million to 25 million adults that want a better smile that do not want brackets and wires, that know that treatment cost is about $5,000. And what they need is it to become more important on their list of 20 or 30 things they'd like to do. And we know because we've talked to thousands of consumers.

And so I think our job is, when they're ready, to make sure they go ask for Invisalign. And then when they ask for Invisalign, they get to a practice that says we're thrilled to put you into Invisalign. All those things don't happen perfectly each time, and -- but we are working on fixing that.

So we have lots of opportunity. We can do a better and better job of creating demand, of activating that at a doctor's office and making sure the doctor's office is ready to rock. And it just takes some time.

I would say, finally, we don't pat ourselves on the back, but one of the things I said purposely is, we expect to grow multiples above market growth and competitive growth in every market we serve. And we still do that, even though we are a little frustrated with our pace in North America right now. But I think our view is, it was a softer orthodontic market and a softer dental procedures market during the quarter.

And we take no comfort there, because our expectations were higher. But we see all the opportunity. It drives us crazy sometimes, but it's there to be had.

Thank you.

Thank you.

(Operator Instructions) Jeffrey Matthews, Ram Partners.

Two things. One is, the progress you're making with DSOs seems more significant at this point than I would've expected. And I wonder if there is something about what you offer that is attractive to that organization, as opposed to an individual GP? Is it an easier sell for you for some reason?

And then my second question is about China. I'm sort of gob smacked by the growth there. And I wonder really what your outlook is for the next couple of years in China, and why you seem to be kind of hitting this inflection point?

Let me start with the second. I wouldn't want you to be hanging there gob smacked. (laughter) As you're an observer, you've spent real-time over there, and I think you had told me at one point that when you were in Shanghai, you saw Invisalign signs or something.

The receptivity -- I think we've got the formula right. We tried a multiple of different ways in countries in Europe and in Asia. And when we went into China, we decided that it was more important to build the right foundation than it was to go for volume. And part of that was based on launching with G4 several years ago in May. And we waited till G4 was available, because it was our first real opportunity to really treat the most complex cases.

And then we brought in SmartTrack shortly behind that when we got approval in China. So I think the second thing we did was we worked for three or four years building relationships with universities and clinical leaders, and tried to do it in a very Chinese way, as they would describe it. And we were very patient about starting to train doctors. It was only until we felt we had clinical supporters that had treated and finished cases there, that could teach, to other Chinese doctors with those Chinese cases, and demonstrate great results, where we were really ready to step on the gas, which we've done over the last couple of years.

So, we're pleased. We think long-term -- I won't put guidance kind of language around this. And I think we talked about this a little bit -- Raphael Pascaud, our VP of International, spoke about it in our Analyst Day -- I think China is probably the one country in the world that offers the kind of rough size opportunity of the US. And so we are approaching it with that kind of potential.

I wouldn't want to put a finer point on it for the next few years, but it's one of our biggest investment opportunities, and we continue to work hard to scale it. I'll stop there and pivot over to DSOs, if I can.

Thanks.

Sure. I don't want to let you think that the business results are screaming with DSOs yet. I'm reflecting on it because, A, it's showed up significantly in training new doctors, and we've been on this for about a year and a half to two years working on this. And I think we've got the formula down pretty well, even though their different DSOs have different approaches.

We are attractive to them and they are attractive to us. They bring regional breadth -- cross-country breadth in some cases. They bring a very operational mindset, where they are used to driving for efficiency and cost, yet still delivering great results clinically for patients. They're used to developing their own brand at a series of treatment centers.

And so, we come in and they work hard to develop demand for each of their offices in each of their areas. We come in alongside it, and we're one of the best practice building opportunities in dentistry today with the Invisalign brand. And so, what they can bring is a mindset with clinical leadership and a compliance mentality, that this is one of the three things we're going to focus on this year, and everybody is going to get trained; we're all going to do it, we are going to measure it; and the Company is going to line up behind us to help us.

And I would say we are in the early days there, but we think this is a more focused approach to move the GP market. We are not at all giving up on office by office. We have great customers out there doing incredible things. It's just that 90-plus-percent of all dental procedures in North America happen in individual proprietor offices. And fragmentation is the operative term.

So we have to do it from both directions, and make sure our value proposition, our coverage, our product and our support model fit every side. But DSO, early days; it will turn into business results in the coming years.

Got it. Thanks very much.

Sure. Take care.

Steve Beuchaw, Morgan Stanley.

Thank you for taking the questions. (multiple speakers) So, there's been a fair amount of attention on the GP channel. I wonder if, Tom, you could look at it from a different angle, maybe reflect back on your experience one year in, to the Realine initiative? And I wonder if you have any updated views on how it may or may not make sense to push the gas pedal a little bit on the distribution channel in that way?

And then my second question, which is also actually about distribution, relates to Europe. That business is growing quite nicely. I wondered if you could give us a sense for how much runway you think you have there? And more specifically, how your view on execution and the growth opportunity in Europe is changing, now that you have a more direct line of sight into how that channel is evolving? Thanks so much.

Let's see, the first one here. Realine is still not meaningful. We are learning a lot. And as we think about a long-term evolution of our business model and customers, many GP customers that want to respond to a patient's request, but maybe don't want to do a weekend course, don't want to go deep -- there's something there to be had. And I'd say the Shine organization and our team are both working on how to make that scale.

And with, I would say, good success in a handful of regions. But it has not been replicated across the Shine team or across our team.

The -- I think the second piece goes back to something I said in my prepared comments, which is about -- we are still not relevant enough to the average GP -- I guess it was an earlier question -- we're still not relevant enough to get them to lean towards orthodontics, when it's not something they do routinely. In fact, they got very little of it in most of their dental programs. And they spent much more time on drill and fill, and aesthetic, and cosmetic and veneers, and all that.

So that's their -- that's what they normally do, that's where most of their business is, preventive and restorative. So, where we come along, we try to get them to do something different. I think when this really comes visible with Realine, where it's hard to assess what you can treat in five stages with a Realine case, and don't even have the benefit of scaling up to an Express 10 if you are a direct customer, or a full case automatically in our systems and stuff.

And so, I think a couple of things will happen to change this over time, Steve. One is that, as scanners become ubiquitous, and chairside applications that provide utility and value, we, with iTero and other high-quality scanner manufacturers, are going to be helping to reduce friction, support clinical decision-making right at chair side. And they will be able to look at a patient's dentition, and it won't just be malocclusion, but it will be other things.

It could be other problems they are having, whether it's bruxism from grinding, or whether they are starting to show early signs of periodontal decay and decline. There will be tools surrounding that dentist net, the clinical practice, that will help them look to a solution. And at that point in time, there will be a whole series of products we believe digitally informed like Realine, or to a direct -- through distribution, or to a direct customer of ours that can use a range of things.

So, in our minds, this is a very early step. It's great learning. We're learning a lot from the Shine team; they're learning from us. We can do a lot more. But I'd say it will be easier when we get scanners in there. And I think that's coming.

I'm going to flip the second thing -- mindful of time here. And you talked about -- can the growth rates we are seeing in EMEA be persistent? And we believe so. The degree of penetration of orthodontic treatment is an order of magnitude lower than in North America, which is already underpenetrated against the incidence and widespread nature of orthodontic -- of malocclusion here. So -- and it tends to be more acute. In other words, they have -- the malocclusion is worse. And people lose teeth more frequently because of that malocclusion as they age.

So, with all that, they have a great opportunity. Adults are more conscious of it now. They are more conscious -- you know, you have some countries in Europe that are very fashion-conscious, so there is a reason why they care about their aesthetic feel and look. And you look at countries like Spain or Italy that, on paper, look like economic basket cases, and yet our businesses are very, very strong there.

And that's being driven by adults that want to look and feel better. And, in many cases, adults that are 50, 60 and 70. So, this is -- we look at this as we've now earned the opportunity to build a bigger business. We are in the process of doing that.

The more we can feed that with evolving clinical product, scanners that surround the orthodontist and make it easier, reduce friction all around that process, it just gets better and better. And I think the biggest test I'd show you is in Asia, where they treat the hardest case in the world right now, and we are growing like crazy. Because we finally have, I'd say, critical mass, and more coming, around that clinical product experience, where the doctor can deliver that great results with confidence.

So, two very different extremes here are the examples you just asked. But hopefully, that answers your question.

That was perfect. Thanks so much, Tom.

Thanks, Steve.

Thanks, Steve. Operator, we'll take one last question, please.

Sure. Our next question is from John Kreger with William Blair. Please proceed.

Mindful of time, I'll just ask -- I've got two quick ones. Tom, you just mentioned a minute ago that a key is getting more scanners out there. Any progress you can give us on your efforts to get more interoperability with other scanner operators? That would be helpful. And then the second, you talked a fair amount about DSOs on the call. As that ramps, do you think that will have any impact on your ASP or on your margins? Thanks.

Can I take that one first. As we look at programs, we look at contribution margin more than we look at ASP. And, as long as we're sure that contribution margins will drop through to operating margins based on the entire support model, we are comfortable with different price points.

And a good example of that is our elite or super elite customers that we support with different resources in trying to teach them how to use the product, we work with them on business planning for what their year is going to look like. And with the accompanying resources look at helping them do great local campaigns to get word-of-mouth out and all that.

So, while we trade a higher discount or lower ASP with those elite customers, we also don't put all the resources into training and support that we do for a low volume customer that ultimately pays list. The same can be said for DSOs. They have other -- they have clinical leaders that, on a regional basis and a national basis, that own programs and support. And these DSOs working alongside us, we tailor training for those groups in language they use.

And then they go work and support and challenge in a positive way the local offices and regional teams. And they put experts out there in the field right alongside. And, in many cases, they don't want our reps even calling on their accounts. They say, look, let's -- you have a corporate rep call on me; pull your reps out of those accounts. And you don't have to put that energy and effort in.

So, we can then take that rep and deploy them to another account that's not owned by that DSO. So, in our mind, all that you would see maybe some lower ASPs going down. Imagine that's like an advantage effect. But operating margins, contribution margins, still very, very attractive and worth doing.

If -- and I completely forgot the second one you asked. I'm sorry.

Yes, it was just a follow-up on any interoperability progress (multiple speakers) --.

I wasn't trying to shine you on the topic. We continue to work with leading players on -- if we could and how we could validate and confirm interoperability. As I've been saying clearly, it's in our best interest to do so. And while it will cost us some installed base sockets for iTero scanners, not everybody is going to buy an iTero scanner, even though we believe it's the best scanner in the world.

So, the upshot is, when there's more news, we'll let you know. And until then, you should assume it's in our interest to do so.

Great. Thanks.

Thank you, everyone. That concludes our conference call today. We look forward to speaking with you at upcoming conferences and meetings. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.