Align Technology, Inc. Price & Performance (ALGN)

Good afternoon, and thank you for joining us. I'm Shirley Stacey, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO and John Marucci, CFO. We issued fourth quarter and full year 2024 financial results today via Business Wire, which is available on our Web website at investor.alinetec.com Align. Today's conference call is being audio webcast and will be archived on our website for approximately one month.

As a reminder, the information provided and discussed today will include forward looking statements including statements about Align's future events and product outlook, These forward looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission available on our website and at sec.gov. Actual results may vary significantly and Alline expressly assumes no obligation to update any forward looking statement.

We have posted historical financial statements with corresponding reconciliations. Including our GAAP to non GAAP reconciliations, if applicable, and our fourth quarter and full year twenty twenty four conference call slides under Quarterly Results. Please refer to these files for more detailed information. With that, I'll turn the call over to Align Technologies' President and CEO, Joe Hogan. Joe? Shirley. Good afternoon and thanks for joining us today.

On our call today, I'll provide an overview of our fourth quarter and full year results and discuss a few highlights from our two operating segments, System Services and Clear Align. John will provide more detail on our financial performance and comment on our views for 2025. Following that, I'll come back and summarize the two key points. And open the call to questions.

I'm pleased to report that Q4 total revenues clear Align volumes systems and services revenues were in line with our Q4 outlook. And both GAAP and non GAAP operating margins were better than our Q4 outlook.

Q4 Clearliner ASPs were lower than our Q4 outlook due primarily to the impact of unfavorable foreign exchange from the strengthening of the U. S. Dollar against major currencies from late October through December as John will explain in his remarks. On a year over year basis, fourth quarter revenues of $995,000,000 increased 4% reflecting 14.9% growth from systems and services revenues and 1.6% growth from clear Align revenues. On a year over year basis, clear liner volumes grew 6.1% driven by increased shipments across all regions, with strength in EMEA, APAC and LatAm regions and stability in North America. From a channel perspective, clear Align volumes in the ortho and GP channels were up year over year basis with a number of submitters and utilization amongst the highest in the past few years. On a sequential basis, fourth quarter revenue growth of 1.8% reflects continued momentum from sales of iTero LuminorScan as Luminous Scanners and increased Invisalign clear aligner volumes in the EMEA regions, especially from teens and growing patients as well as growth from the LatAm regions.

Across the orthodontists and GP dentists offset by clear aligner seasonality in APAC, mostly in China, which had a strong team quarter in Q3.

For The Americas, Q4 clear Align volumes reflect a seasonally soft orthodontic channel offset somewhat by strength in the GP channel in the adult segment. For the full year 2024, total revenues of $4,000,000,000 and clear aligner volumes of two point five million cases were both up 3.5% year over year we delivered fiscal twenty twenty four non GAAP operating margin of 21.8% above fiscal twenty twenty three and in line with our 2024 outlook.

As of Q4 twenty twenty four, we achieved several cumulative milestones including 272,000 active Invisalign trained practitioners, 19,500,000 Invisalign patients, including over 5,600,000 teens and kids, and over 2,000,000,000 clear aligners manufactured worldwide. For clear aligners in Q4, year over year volume growth in The Americas reflects strength in Latin America Align well as improving trends in North America especially for GP dentists. In the EMEA region, Q4 year over year clear Align volume growth reflects increased volumes from core Europe as well as strong growth from EMEA Eastern Europe, Middle East and Africa markets. [indiscernible] growth reflects strength in both ortho and GP as well as teens, kids and adult patients.

In APAC region, Q4 year over year clearliner volume growth was driven by China and Japan as well as strong growth from our emerging APAC countries led by India, Thailand and Korea.

For Q4, APAC growth also reflects increased utilization and submitters in both doctor channels and growth in both patient segments. Q4, we had 85,700 doctor submitters worldwide. A record total in the fourth quarter, primarily reflecting a sequential increase in clear Align volume for adults and non comprehensive cases. In the adult clear aligner segment, we're pleased to see both year over year and sequential growth across all regions.

In the teen and growing kids segment, approximately 216,000 teens and kids started treatment with Invisalign clear aligners during the fourth quarter, a decrease of 8.6% sequentially off a record Q3 teen season and an increase of 9.8% year over year reflecting growth across regions especially from Invisalign first in the APAC and EMEA Align. For Q4, number of doctors submitting cases start for teens and kids was up 6.2% year over year led by continued strength from doctors treating young kids, or growing patients. For fiscal twenty twenty four, total Invisalign clear liner shipments for teens and kids reached a record total of eight hundred and sixty eight thousand Invisalign cases and shipped up to a year up to seven point seven percent compared to the prior year and comprising approximately 35% of the $2,500,000 total Clearliner case shipments for the year. Teen specific consumer marketing and sales programs, along with the continued momentum for Invisalign First for kids, as young as six and Invisalign Align expander systems help drive adoption globally. During the quarter, we continue to commercialize the Invisalign Align expander with steady momentum for doctor submitters and shipments. In its first full year of availability in North America, Invisalign Align expander adoption was followed by similar trajectory in Invisalign Align which launched in 2017.

But Invisalign First Align not require regional or country specific regulatory approvals like Invisalign Align expanders require. In Q4, we received the CE Mark under the medical device regulation to market the Invisalign Align expander system in most of Europe and also completed registration with the medicines and healthcare products regulatory agency Both approvals are for broad patient applicability including growing children, teens and adults with surgery or other techniques. These approvals mark a significant milestone in our efforts to enhance clinical outcomes and its efficiency in orthodontics and enable us to commercialize Invisalign Align expander across most of the major major region in 2025. We are continuing to make progress in establishing the clinical efficacy and improved patient experience of Invisalign pellet expander which recently made the cover of the Journal of Clinical Orthodontics or JCO in an article published by Doctor. Jonathan Nicosis There have been multiple peer review studies published on the effectiveness of the Invisalign Align expander as well as mandibular advancement. We also are receiving positive parental feedback as reflected in the article [indiscernible] Overall, the Invisalign Pallet Expander System is gaining traction among orthodontists, and patients due to its innovative design and user friendly feature.

As more clinical data becomes available and practitioners gain experience, with the device, and parents become informed, we believe adoption will continue to grow. Q4 non case revenues were up year over year primarily to continued growth in retainers and our doctor subscription program or DSP including non Invisalign patients at getting retainers. Via case revenues, including our VIVARA retainers, retention, aligners ordered to our doctor subscription program, clinical training, education, accessories and e commerce. DSP also includes Invisalign touch up cases, which includes up to 14 stages, is currently available in North America and certain countries in Europe, was most recently launched in Brazil. For Q4, total Invisalign DSPE touch up cases were up nearly 37% year over year to more than twenty seven thousand cases, For fiscal twenty twenty four, total DSP touch up cases shipped were over one hundred thousand up 37% compared to 2023. Q24 Clearliner volume from DSO customers increased sequentially and year over year reflecting growth across all regions. The DSO business continues to outpace our retail doctors globally. And in The U. S, it's driven by our largest DSO partners Smile Doctors and Heartland Dental. And also, had strong growth in iTero scanner sales as DSO invested in their members practices end to end digital workflows.

In December, we completed $30,000,000 equity investment in Smile Doctors, the largest orthodontic focused DSO in The U. S. With more than four fifty locations in 32 states.

Smile Doctors has a rich history of developing and growing affiliated practices by providing tools and technology that allow their orthodontists to focus entirely on patient care, and we are continuously exploring collaboration with DSOs that share our vision of furthering the adoption of digital dentistry. HDSO has a different strategy and business model. We're focused on working and with encouraging the DSOs aligned with our vision strategy and business model goals.

Those DSOs that recognize the benefits of digital workflows enabled by our portfolio of products and services that make up the Align Digital platform including increased practice efficiency and profitability, as well as delivering a better patient experience for shorter cycle times and proximity to Turning to Systems and Services. Q4 was another strong quarter with year over year revenue growth of 14.9%. On a sequential basis, Q4 systems and services revenues were up 5.2%. In Q1 twenty twenty four, we launched the iTero Lumina, with orthodontic workflows as a new standalone scanner or as a Wand upgrade from our Artero Element five gs plus scanner. Overall, we continue to be very pleased with the ongoing adoption of Itera Luminouscanner, and we're looking forward to building on a success with the launch of the Itera Luminous Scanner with restorative capabilities.

During the fourth quarter, we began a limited market release of our restorative software on the Itera Luminous scanner and doctor feedback has been outstanding. Our iTera aluminum innovation represents continuous advancement in our mission to deliver unparalleled value to customers and dental professionals worldwide. Doctors can continue to purchase the current version of iTero Luminous Scanner today knowing that it will automatically update to the new version free of charge once it becomes available at the March. With that, I'll now turn the call over to John. Thanks, Joe. Now for our Q4 financial results.

Total revenues for the fourth quarter were $995,200,000 up 1.8% from the prior quarter and up 4% from the corresponding quarter a year ago. This reflects an increase in clear aligner volumes of 1.9% sequentially and 6.1% year over year and revenue growth from systems and services of 5.2% sequentially and 14.9% year over year. On a constant currency basis, Q4 twenty twenty four revenues were favorably impacted by approximately Or approximately 0.1%. For Clear Aligners, Q4 twenty twenty four revenues of $794,300,000 were up 0.9% sequentially, primarily from higher volumes geographic mix shift to higher priced countries and lower net revenue deferrals. Partially offset by product mix shift to lower priced products and higher discounts. Q4 Clear Aligner revenues were favorably impacted by approximately Four twenty four Clear Aligner per case shipment of $12.65 dollars was lower by $10 on a sequential basis primarily due to product mix shift and higher discounts partially offset by favorable geography mix and lower net deferrals. Even though FX had a minor impact on our reported quarter over quarter results, our Q4 guidance did not forecast any substantive change from the October spot rate foreign exchange rates. However, the U. S. Dollar unexpectedly strengthened in November and December, If foreign exchange rates in October had remained constant for November and December, Thin Align Aligner ASPs would have increased approximately $10 quarter over quarter, Align equivalent of $14,000,000 were up 1.6%, primarily from higher volumes lower net deferrals price increases and higher non case revenues partially offset by lower ASPs, reflecting the impact from unfavorable foreign exchange of $700,000 or approximately 0.1% product mix shift to lower priced products and geographic mix.

Q4 'twenty four Clear Aligner per case shipment $12.65 dollars was down $55 a year over year basis due to the impact of U. K. VAT of $13 product and geographic mix and higher discounts partially offset by lower net revenue deferrals and price increases. During Q4, we reached a favorable outcome with The UK backed U. K. Tax authorities regarding cumulative assessments of approximate Align aligner sales made during the period of October 2019 through October 2023. In Q4, we received a full refund of this $100,000,000 from U. K. Tax authorities. This settlement also relieved us of any potential assessments for sales through mid October twenty twenty three. As a result, we have approximately $7,000,000 of that paid for periods up to December 2023 that are still in dispute. We expect a ruling by The U. K. Courts in the first half of twenty twenty four for this remaining VAT amount. This ruling will also give clarity whether a 20% VAT is required to be applied to all clear aligner sales in The U. K. Going forward. We believe that clear aligner should continue to be exempt from VAT. Clear Align deferred revenues on the balance sheet as of 12/31/2024 decreased $51,300,000 or 4.1% sequentially and decreased $92,100,000 or 7% year over year and will be recognized as the additional liners are shipped under each sales contract.

Q4 'twenty four systems and services revenues of $200,900,000 were up 5.2% sequentially primarily due to higher scanner volumes, higher non systems revenue driven by Itera Lumina upgrades partially offset by lower scanner ASPs. Q4 twenty twenty four systems and services revenue were up 14.9% year over year, primarily due to higher scanner volumes higher ASP and increased non systems revenues mostly related to upgrades and leasing rental [indiscernible] Q4 'twenty four systems and services revenue impact by foreign exchange was approximately $100,000 flat sequentially by foreign exchange approximately $200,000 or approximately 0.1%. Systems and Services deferred revenue on the balance sheet was down $4,100,000 or 1.8% sequentially and down $40,300,000 or 15.5% year over year. Primarily due to the recognition of service [indiscernible] which are recognized ratably over the service period. The decline in deferred revenues both sequentially and year over year primarily reflects the shorter duration of service contracts applicable to initial scanner purchases. Moving on to gross margin. Fourth quarter overall gross margin was 70%. Up 0.3 points sequentially and flat year over year. Overall, total gross margin was not significantly impacted by foreign exchange sequentially or on a year over year basis. Clear Align gross margin for down 0.1 points sequentially due primarily to lower ASPs and restructuring costs partially offset by lower manufacturing costs.

Clear aligner gross margin for the fourth quarter was down one point year over year due primarily due to lower ASP and restructuring costs partially offset by lower additional aligners. Overall, Clear Aligner gross margin was not significantly impacted by foreign exchange sequentially, or on a year over year basis. Systems and Services gross margin for the fourth quarter was 69.4%, up 1.9 points sequentially due to lower manufacturing and freight costs partially offset by lower scanner ASPs. Systems and Services gross margin for the fourth quarter was up 4.7 points year over year due to manufacturing efficiencies and lower freight costs and service costs and higher scanner ASPs. Overall, Systems and Services gross margin was not impacted by foreign exchange sequentially, or on a year over year basis. Q4 operating expenses were $552,800,000 up 6.4% sequentially and up 11% year over year. On a sequential basis, operating expenses were $33,300,000 higher due primarily to restructuring costs. Year over year operating expenses increased by $54,800,000 primarily due to restructuring, advertising and marketing expenses. Q4 restructuring charges related to severance for impacted employees were higher than anticipated. A non GAAP basis, operating expenses were $474,700,000 up 0.4% sequentially and up 6.3% year over year.

Our fourth quarter operating income of $144,100,000 resulted in an operating margin of 14.5%, down 2.1 points sequentially and down 3.4 points year over year. Operating margin was favorably impacted by foreign exchange of approximately 0.1 points sequentially and unfavorably impacted by 0.2 points year over year. The effective restructuring on GAAP operating margin was approximately 3.7 points. Q4 non GAAP operating margin was 23.2%, up 1.1 points sequentially and down 0.6 points year over year. Interest and other income and expense net for the fourth quarter was an expense of $3,400,000 compared to income of $3,600,000 in Q3 twenty twenty four, primarily due to unfavorable foreign exchange movements of $15,300,000 partially offset by higher interest income and gain on investments. On a year over year basis, Q4 'twenty four interest and other income and expense was unfavorable compared to income of $1,300,000 in Q4 twenty twenty three primarily due to unfavorable foreign exchange movements partially offset by higher interest income and gain on investments. The GAAP effective tax rate in the fourth quarter was 26.3% compared to 30.1% in the third quarter and 28.3% in the fourth quarter of the prior year. The fourth quarter GAAP effective tax rate was lower than the third quarter effective tax rate, primarily due to the release of uncertain tax position reserves, partially offset by one time deferred tax adjustments in certain foreign jurisdictions.

The fourth quarter GAAP effective tax rate was lower than the fourth quarter effective tax rate of the prior year, primarily due to the release of certain tax position reserves, partially offset by one time deferred tax adjustments in certain foreign jurisdictions. On a non GAAP our non GAAP effective tax rate in the fourth quarter was 20%, which reflects our long term projected tax rate. Fourth quarter net income $1.39 down $0.16 sequentially and $0.25 compared to the prior year. Our Q4 twenty twenty four EPS was unfavorably impacted by a stronger U. S. Dollar, which amounted to to net foreign exchange losses related to the revaluation of certain balance sheet accounts. On a non GAAP basis, Q4 twenty twenty four net income per diluted share was $2.44 for the fourth quarter. Up $0.09 or $0.9 sequentially and up $0.02 year over year. Moving on to the balance sheet. As of 12/31/2024, cash and cash equivalents were $1,000,000,043,900,000 up sequentially $2,000,000 and down $106,400,000 year over year. Of our $1,000,000,043,900,000 balance dollars 188,700,000.0 was held in The U. S. And $855,200,000 was held by our international entities. During Q4 twenty twenty four, we initiated a plan to repurchase $275,000,000 of our common stock through open market repurchases.

As of 12/31/2024, we had purchased approximately 900,000.0 shares at an average price of $222.94 per share for an aggregate of approximately $202,900,000 The remaining $72,100,000 of the $275,000,000 was completed in January of of twenty twenty five. As of January 3025, two twenty five million dollars remains available for repurchases of our common stock under our stock repurchase program approved in January of twenty twenty three. As Joe mentioned earlier, during the quarter, we completed a $30,000,000 equity investment in Smile Doctors, the largest ortho focused dental support organization in The U. S. Q4 accounts receivable balance was $995,700,000 down sequentially. Our overall day sales outstanding was ninety days, down approximately three days sequentially and up approximately five days as compared to Q4 last year. Cash flow from operations for the fourth quarter was $286,100,000 Capital expenditures for the fourth quarter were $23,000,000 primarily related to investments in our manufacturing capacity and facilities. Free cash flow defined as cash flow from operations, less capital expenditures amounted to $263,000,000 Before I turn to our Q1 and fiscal twenty twenty five outlook, I'd like to provide the following context around pricing and potential new tariffs. On 03/01/2025, will raise the list price of clear aligners by about 3% on average in The Americas and EMEA regions.

At the same time, we will remove the $10 to $15 per order processing fee for all new clear aligner orders all new clear aligner refinement orders from past cases and non DSP Vovera cases. We expect a net effect from these two actions on ASP's to be zero for 2025. We currently manufacture clear aligners in Mexico Align, primarily for our U. S. Customers with the remainder eventually shipping to other international locations. S.-Mexico tariff situation remains very fluid. And we are unable to predict whether new tariffs will go into effect in the future. We are monitoring events closely. Our clear aligner COGS include material, labor, overhead and freight costs. We expect an incremental tariff if implemented, to be applied to transfer prices for Mexico shipments to The U. S. These transfer prices would not include treatment planning costs [indiscernible] and other overhead and similar costs. Alliant's global operations have evolved significantly over the past several years and we have greater flexibility to support our global business. However, assuming a new 25% tariff on shipments to The U. S. From Mexico, we believe it still would be more economically viable to ship clear aligners from The U. S. Or to The U. S. For Mexico.

Due to a variety of factors including the incremental additional freight costs incurred where we shipped from our Polish facility. Regarding China, we currently manufacture our products in China for the benefit of our customers' China. With that as a backdrop, assuming no occur beyond our control, including foreign exchange, and new tariffs for Q1 twenty twenty five and fiscal twenty twenty five, we provide the following outlook. We expect Q1 worldwide revenues to be in the range of $965,000,000 to $985,000,000 down sequentially from Q4, primarily due to the impact from foreign exchange rates at current spot rates and lower capital equipment sales reflecting historic historical Q1 seasonality. We expect Q1 clear aligner volume to be up slightly sequentially and expect Q1 clear aligner ASPs to be down sequentially primarily due to unfavorable foreign exchange at current spot rates as well as continued product mix shift to non comprehensive clear aligners. Addition to seasonality, we expect Q1 systems and services revenue [indiscernible] due to the timing of commercial availability of our iTero Luminous scanner with restorative software. Which is expected at the March. We expect our Q1 twenty twenty five GAAP operating margin to be below Q1 twenty twenty four GAAP operating margin by approximately two points, primarily due to unfavorable foreign exchange at current spot rates.

We expect our Q1 twenty twenty five non GAAP operating margin to be below Q1 twenty twenty four non GAAP operating margin by approximately one point primarily due to unfavorable foreign exchange occurrence spot rates. For fiscal twenty twenty five, we expect 2025 year over year revenue which reflects approximately two points of unfavorable foreign exchange at current spot rates. We expect 2025 clear aligner volume growth to be up approximately mid single digits year over year compared to up 3.5% year over year in 2025. We expect 2025 clear aligner ASPs to be down year over year due to unfavorable foreign exchange at current spot rates and continued product mix shift to non competitive non comprehensive clear aligners. We expect 2025 systems in [indiscernible] year over year revenues to grow faster than Clear Align revenues. We expect 2025 GAAP operating margin to be approximately two point above 2024 GAAP operating margin. And we expect 2025 non GAAP operating margin to be approximately 22.5% which both reflect the impact of unfavorable foreign exchange at current spot rates, partially offset by the benefits from restructuring actions we took in Q4 to improve profitability and give us margin accretion in 2025. Even as we scale our next generation direct three d printing fabrication.

Manufacturing. We expect our investments in capital expenditures for fiscal twenty twenty five to be between $100,000,000 and $150,000,000 Capital expenditures primarily relate to building construction and improvements as well as manufacturing capacity in support of our continued expansion.

Overall, am pleased with our fourth quarter and fiscal twenty twenty four results particularly the year over year clear aligner volume growth, the record number of submitters continued momentum from our systems and services business and our operating margin improvement.

After repurchasing $353,000,000 of our of Align common stock during 2024, which We continued we concluded the year with no debt and approximately $1,440,000,000 in cash and cash equivalents. Our goal as always is to deliver value to our shareholders. Now I'll turn the call Now I'll turn it back over to Joe for final comments. Joe? Thanks, John. In closing, 2024 was a year of solid progress across the business. Record full year total worldwide revenues of $4,000,000,000 record full year total worldwide system and services revenue of $769,000,000 record 130,400 doctors shipped to 19,500,000 total patients treated, with 5,600,000 teens and kids. We ended the year with over $1,000,000,000 in cash and equivalents, after repurchasing 1,500,000.0 shares for $353,000,000 Align another year where the dental industry is down and we continue to grow, I feel good about where we ended the year and I'm excited to kick off 2025 with a team focused on building the innovations introduced in 2024 that drive efficiency and growth for practices and committed that are committed delivering the best customer and patient experiences in the industry. I want to highlight just a few of the Align innovations that we introduced in twenty twenty twenty four that we believe will continue to drive adoption and utilization.

In January 2024, we unveiled a breakthrough technology, the Itera Lumina interoral scanner. With 3x wider field of capture and a 50% smaller one that delivers faster scanning higher accuracy and superior visualization for greater practice efficiency. And with orthodontic workflows.

We look forward to introducing at the end of Q1 twenty twenty five, the Itera Lumina interoral scanner with software capabilities to enable efficient restorative and ortho restorative workflows to help general practitioner dentists deliver exceptional restorative outcomes. The arterial scanner is the front end of the Align Digital platform designed to give doctors the capability to run simulations and communicate with patients, so the patients can see their smiles and the time that it would take them to get that outcome. It's also a big part of our growth algorithm and we've had to had good accretive margin on the Adera Luminor scanner product since its launch. We also started rolling out ClinCheck-in minutes delivering ClinCheck treatment plans based on doctors building personalized treatment preferences for almost touchless digital workflows. Which will expand to more doctors this year, bringing an unprecedented level of speed and customization to digital treatment planning. Changing the paradigm for how doctors can treat growing patients is one of our biggest opportunities as we continue to deliver innovations that help doctors achieve more of a treatment at younger ages, potentially decreasing the amount of orthodontic treatment that younger and teen patients need overall. As we continue to commercialize the Invisalign palette expander system, Align's first direct three d printed device that provides doctors with a solution set to treat the most common skeletal and dental malocclusions in growing children.

We anticipate introducing the next in a series of direct three d printed devices with a pilot for Invisalign first direct printed retainers in the first half of twenty twenty five. We have also have Invisalign mandibular advancement with the Aflusal Block now in limited market release giving doctors and patients a better option for Class II correction in younger patients while simultaneously straightening their teeth. We're also excited about the future of digital orthodontics focused on growth opportunities as a company while driving margin improvement and our unique ability to leverage aggregated anonymized data from approximately 19,500,000 Invisalign cases to continue to gain more knowledge about the science of orthodontics to move the industry forward. And while we're now in our twenty eighth year, in the same way the beginning, It's that motivating and exciting for the whole Align team. With that, I thank you for your time today. I look forward to updating you on our continued progress over the coming quarters. Now I'll turn the call back to the operator for your questions.

Operator?

At this time, we'll be conducting a question and answer session.

Comes from the line of Michael Cherny from Leerink Partners. Your line is open.

Good afternoon and thank you for a ton of detail already.

Maybe if I could just dive in a bit to the guidance, especially on the Clear Aligner side. Is there any way to give a little bit more of a breakdown as you think about the dynamics on volume versus price? Hear you loud and clear on the ASP impact.

From FX, but curious how to think about the growth dynamics on aligners as a whole, especially coming off of the mix of obviously easier comps in 2024 versus what's still a uncertain macro environment?

Yes. Michael, this is John. When we talk about kind of give the the picture for the total year, we're looking at volume for clear aligners at mid single digits. And that's kind of how we look at that. It'll vary. It varies like it does across different regions and different times of the year and so on, but we've looked at it that way. And that's that's the perspective that we have for the year. We were pleased with with how we exited in 2024. With the volumes that we had and that's the overall guidance that we have for the year. And just along those lines on the volumes, mid single digits, obviously really solid number. How do you think about the competitive dynamics in the market now? And are there opportunities either in terms of other competitors exiting or how do you think about the components of what drives that in terms of market dynamics, competitive dynamics, share gains, anything more to break down that obviously strong number would be great as well. Thank you so much.

Yes. And Michael, it's Joe. I think on the competitive dynamics, I don't see a big change in the dynamics when you look at 2024 and 2025.

Overall, we feel our new innovation continues to put us ahead Obviously, the MinuteClinCheck really drives our super users to a level of productivity they haven't had before. So I feel really good about our competitive ability all around the world, including China, including including some specific areas about it. So as we move into 2025, I really feel that we're gaining momentum in that sense. Our next question comes from Align line of Elizabeth Anderson from Evercore ISI.

Hi, guys. Congrats on the quarter and thanks so much for the question.

Hi. I was wondering if you could talk about two things. Maybe with regards to the Lumina and sort of the scanner business more broadly, it looked like you were you obviously have the launch coming up in the first quarter. So if you could talk a little bit on sort of your expectations for that maybe given what you've learned on the ortho side for Lumina? And then two, you talked about sort of the impact obviously of of more leases and things like that versus perhaps capital equipment sales. Can you talk about sort of help us understand maybe on a unit basis how you're thinking about the growth in that business I think that would be one thing that would be helpful. And then maybe if you could also help us sort of understand a little bit better that maybe some of the growth dynamics particularly in North America sort of DSO versus non DSO customers? Thank you. Elizabeth, it's Joe.

I'll take the first of your question. When you look at what we learned in the orthodontic release of Lumina was the product was everything we hoped it would be. I talked about the wider field of view, the speed, I didn't talk a lot about the optics. So the image quality is fantastic on that that product line. The likeness of the one and all, that was really important for the technicians that use that wand day in and day out because in the past we had a lot of complaints in the sense of the heaviness and kind of bulkiness the ones that are in the marketplace right now. Particularly on the confocal imaging side. So as we move that into more of the restorative market, take up of GPs using that product line last year too. This will complete that whole the whole system for GPs because they can do the restorative work they had on it. And not just the orthodontic side. So we're excited about it. We're looking forward to it.

Obviously, we'll talk about it coming up at the IDS and we look forward to launching it in March and then bringing it through the second quarter. And as Joe said, kind of to your second part of the question, Elizabeth, look this rounds out our portfolio. We've got a complete portfolio from the most advanced scanner and the latest with Lumina to all the other types of of products that we have all the way down to certified pre owned. And so that portfolio is rounded out, but we also, as you mentioned, the leasing and other rental we offer a lot of options for our customers. Some customers want to buy and they want that latest equipment That's great. And they'll buy that new equipment through trade ins or just add another scanner and so on. But some also don't want to put that capital up, especially in this environment. So we offer them a lot of different opportunities to lease that equipment, to use external financing that get them at a good rate for external financing to purchase or some just want to rent it. And so we feel like we can offer that that customer any which way that they want to be able to utilize our equipment.

And as we continue to release new products, we keep certified pre owned in and so on, We're just expanding our base which is helpful for our overall business.

Thanks, Elizabeth. Next question?

Thank you. One moment for our next question.

Line is open.

Yes, thanks for taking my question. Hey Joe, I also want to follow-up on this volume issue because it seems like in the fourth quarter and into 2025, you're forecasting some pretty decent volumes. And I'm kind of curious, could you put that in the context of where you think the overall ortho industry is now? Do you feel like You're kind of getting some share back because it's 'twenty four, in 'twenty three, the theme was macro uncertainty. But you're not really talking about that anymore. And I'm just kind of curious if you think maybe the industry is getting a little bit better or some of these DTC offerings that may be faded into the background, like what's enabling you to improve your volume should you think? And then I just had a follow-up for John.

Yes, Glenn.

It's a good question. I think we've been talking about stability for a while now too. And again, I think we stand on that platform also. Each one of these regions are different from what we've seen. We felt good about Europe in the fourth quarter. We saw some momentum there. It felt reasonable about APAC in a sense. I mentioned China and Japan and increases in Thailand and different in China and different I mean in in different parts of the APAC region. When you come to United States, the orthodontic marketplace plan has really been flat for the last three years. Now we've I think we made progress good progress the new products that we've had, but we've been challenging that segment. And I wouldn't call it so much competition as I would It's been a wires and brackets kind of regression in that marketplace because of when doctors are seeing less patient throughput, they're looking to save margin. And it's difficult to really appeal to them with clear aligners when they're not at capacity in that sense. But on the counter of that, Glenn, we've seen really good progress in GP. And good growth in GPs, not just in The U. S. But all over the world and that's really helped us.

And so remember we changed our channel strategy years ago to make sure that we went to the GP channel with GP sales force and ortho with ortho sales force too. And I think that's really helped us to give us insight into the industry and position our products properly for both those areas. So I hope that helps answer your question. I think our new technology too gives us a lot of confidence specifically in that orthodontic channel and since offering differentiation, those early patients that we talked about, we feel we have the three products I mentioned in my script. We feel we have something that's special in the orthodontic community in the sense of that younger patient piece and you'll see us push that really hard as we move into 2025.

Yes. That's awesome. And Tom, maybe if I could just follow-up with you on this ASB issue, right? I mean, obviously, everyone's focused on the fact that ASPs will be down. And then you highlighted FX and you highlighted mix shift. I was wondering if you could just unpack that a little bit to tell us and I'm sorry if I missed this exactly how much FX is playing a role here on that ASP number in 2025?

Yes. Yes, that's a good question Glenn. Overall, when we look at 2025 in terms of how we've guided, we have about two points of FX headwind on a year over year basis. It's just the strengthening of the dollar We saw that as it came out of October and it continues to be strong November December, January. We're basically forecasting what we see now on a spot rate standpoint. And expecting it to be strong and that impact is about two points unfavorable on a year over year basis.

Okay. Thank you very much.

One moment for our next question.

Our next question comes from the line of John Block from Stifel.

Line is open. Thanks, guys. Hi, John. Hey, Joe. First one, 1Q twenty twenty five revenue guidance is down around 2% at the midpoint. The full year revenue guidance is up low single digits. And I think some of that is the 1Q comp. I believe also the scanner timing, if you would, due to the rest of launch. But I think it's an important question, Joe. Can you talk about other reasons why the rest of the year you're arguably up, call it Align low to mid single digits versus the down 21.25%, again, at the guide. And then then I think what people are going to be worried about is is there an embedded assumption that things pick up in the guide or is it just sort of the moving parts again of the comp, the resto launch, etcetera. And sort of pause there and then I'll ask my follow-up.

John, I'd say, we obviously introducing the restorative scanner in March. We don't get to full benefit of that in the first quarter and you're accurate in a sense of reflecting that in your comments overall. I would say we're not talking about a build as we go through the year. I think you have to look at exchange and the whole thing and John can explain that in a sense of of how we've baked that in overall. But obviously, you have a full year of IPE coming in this year. We have the regulatory approvals for that going into Europe and different parts of Asia too. And we think we'll hit mainstream in that end too and maybe even advancing with occlusal block two is another one we think is going to be specific grower for us also. I mean, that's how I pretty much tackle that is that have new technology rolling in, you have the iTero restorative coming in also.

And John, what was your add? Yes. And we're not expecting, John, any real overall improvement in the macro economy if it it happens, great. That will be good for the entire business, but we're not expecting an overall improvement there. We did see as we came out of out of Q4, I mean, just the 6% growth in volume in Q4, that's the highest growth that we've seen in three years on a year over year basis. So that's good to see. We want to continue to see that momentum and Joe said, we're doing everything we can with new products, new innovations, new ways to go to market. To be able to continue that.

Yes. So beat on balance and guided ahead on balance for 1Q. I get that. And then just second question, I think Joe this one's for you. But for a couple of quarters now, at least two, maybe more we've heard you detail call it the faster growth from the DSOs. And so a couple of questions here. Joe, what is what are the DSOs call it as a part of your North American business? If you could just give us a rough number. But more importantly, the plays that you run with the DSOs and we've heard of some of those the marketing support, pardon, this is my language, not yours. They might be more sophisticated with your help Are those transferable to the fragmented GP market And if so, how long does that take to go ahead and manifest on your part? Because clearly, if you could extrapolate that faster growth, to the individual practices, that'd be a certainly a positive and something to get excited about. So maybe your comments on Align the percent of their waiting of your biz and more importantly, can you see yourself running the same plays with the individual practices?

Hey, John, it's a great question. Really, first of all, I'd look at I talk about it internally too. I look at DSOs as a force multiplier. They can actually take our technology, what we learned in the sense of efficiency, what we learned from a sense of brand, from a demographics on brand, can apply to and they just have an ability to be able to disseminate that within their teams much better than doing that individually door to door like we do with our normal sales force, which is kind of obvious. But that doesn't preclude us from what we're taking to the DSOs a sense of what we know and what they incorporate. Our salespeople are many of them with us many years. They understand that also. They just have to find the right orthodontist and the right general dentist who really want to implement those procedures in their marketplace. That's why talking about the sales kickoff the other day down down in Dallas and it said that we have a longest or the hardest last [indiscernible] Stupid or anything, they're very smart but they're very they're not necessarily business minded always. They're clinically minded and it takes a while to gain their confidence and move it forward.

DSOs help to accelerate that, John, is the best way I can explain that. [indiscernible] One moment for our next question. Our next question comes from the line of David Saxon from Needham.

Your line is open.

Great. Good afternoon, Joe and John. Thanks for taking my questions.

Yes, I had a couple follow ups on the guide for Align aligners. So mid single digit volume growth for clear Align. Joe, based on your answer to a previous question, it sounds like U. S. Volume growth should probably be slower than international, but just wanted to confirm that's how you're thinking about it. And then on the ASP side, so down year on year for the full year, first quarter ASPs look to be down high single digits year on year based off of the first quarter ASP guidance. But but you have this price increase starting in second quarter. So just I'd love to hear how we should think about pricing in quarters two through '4 on a year over year basis? David, I'll take the first part of your question, which yes, our forecast next year does imply a slower U. S. Than the rest of the world. And that's to me that's we're just projecting what we saw in 2024 into 2025. But we don't have any data right now that would make us change that in some way from a consumer confidence and to see any kind of change in the last several quarters, I would say that it would be different going.

As far as ASPs go, John?

Yes. Look, ASPs, they're heavily impacted with our business. Over 50% of it outside The U. S. They're impacted by a stronger dollar. And I just tried to make it very clear in terms of our guidance based on what those spot rates are as of now and saying this is how it's going to play out in the future. Obviously, it changes and but at least give you a reference point to jump off of. So when you look at Q1, you'd see that ASPs will be down. It's It's a reflection of the foreign exchange and that's the primary driver of that. It'll change as it goes through each of the quarters. I mean, by the end of the year, it kind of catches up in that strength of the dollar that we saw in November and December won't have as much of a year over year impact. But in Q1 it has that impact. Okay.

All right. That's helpful. And then maybe sticking with you John.

So operating margin down year on year in the first quarter, but guiding to expansion for the full year. So I'd love to just hear kind of the puts and takes that drive that ramp And maybe it'd be great if you could talk about quarterly cadence Yes. When you think of the margin that we'll have, we've we did actions last year to be able to get our op margin in in a place from a cost standpoint to be able to provide that margin accretion. First quarter is one where as you start to ramp up usually first quarter off margin is on a rate standpoint the lowest or one of the lowest for the quarters. As you it builds as you go through the year. It's based on volume. As we have more volume coming through our facilities, we generate additional productivity and that shows up. We have new products as as Joe described, with with the 22.5%, that's despite unfavorable FX on a year over year basis. So you can tell some of that that margin accretion that we're talking about, but it's it's all about driving productivity through volume that you have. And being smart about the other investments that you're making.

Thanks, David.

One moment for our next question. Our next question comes from the line of Jeff Johnson from Baird. Line is open.

Hey, Jeff. Hey, thanks. Hey, Joe. How are you? Good afternoon, guys. So we're all dancing around kind of this 1Q trying to understand it relative to the rest of the year.

The one thing I haven't heard and maybe I just missed it, but you guys are talking about 200 basis point headwind for the year from currency. I think that is pretty much flow through to ASP as well, about a two point headwind to ASP for the year as well. On the clear Align side. But I haven't heard you quantify Q1. My math and my currency math is terrible. My math would put currency at almost a three, three point five point headwind in 1Q. To both ASPs and global revenue. Am I close on that? Is it bigger in 1Q? Yes, that's the right way to phrase it, Jeff.

It is bigger just based on what the dollar was doing last year compared to this year. So there is a bigger currency effect in Q1 than on average for the year. Ballpark, am I close on that $3.3.5? [indiscernible] You're close on that.

Okay. And then just my other question is really kind of the same kind of FX question, but on the gross margin side or sorry, on the company margin side, on the operating margin side, you're guiding to 70 basis points of year over year improvement at the op margin line on a non GAAP basis. How much is currency weighing on I don't care if gross margin or operating margin, however you want to provide the answer. But much is currency weighing there? And then how much are the incremental direct fab investments potentially weighing this year on gross or overall margin It seems like this could have been a year if currency neutral and you didn't have the direct fab incremental investments that we really would started to see a recapture back towards those pre COVID numbers. So just trying to understand all those moving pieces. Thank you.

Yes. When Jeff, when you talk about the FX impact on op margins over a point You're right, it's two points at revenue on a year over year basis.

Falls to just over a point on an off margin basis. So a large part of that falls through. So you're right calling a 70 basis point improvement year over year, that's despite having a point of op margin pressure from a FX standpoint. And then of course, all the other things that we're doing to invest and so on, there's some offsets to that in terms of scaling up our growth platforms and so on. But that's all in the number that we have at the 22.5%. So if FX was going the other way, you would see even more margin accretion and we'll see how that foreign exchange plays out as we go through the rest of the year.

Understood. Thank you, guys. Thanks, Jeff.

One moment for our next question. Our next question comes from the line of Brandon Vasquez from William Blair.

Align line is open.

Hi, everyone. Thanks.

Hey guys, thanks for taking the question.

Joe, maybe for you on the IPE side, I think we're a little bit over a year after the launch of that product. [indiscernible] curious if you could comment on maybe two things. One, what's the adoption curve looking like relative to your expectation now that we're about a year in? And then two, is this a product that could maybe be a catalyst within the teen market to let you get that next incremental leg of adoption given that that's kind of the sturdier end market that you guys are under penetrated in, Yes. Hey, Brandon, first of all, mean, the adoption curve has been good. As I mentioned in my script, it falls Invisalign first.

And Invisalign first is what we call a dental expansion product. It's kind of moving your teeth, but it's not moving bone in that sense. In this case with IP, we're moving bone. And so that's why the regulatory things and all that I mentioned that we have to go through each region in order to move that through. I feel really good about it. It's such a breakthrough product and a different product. It takes doctors a while and a number of cases to become comfortable with it. We give wonderful feedback from patients in the sense of the comfort of the product Align, And many of the patients, their parents have gone through the Hyrax device and the wrench and those kind of things. And that makes parents a little more susceptible to wanting Invisalign palate explainer two. So I feel good about it. We've had some things too on the release. We didn't have full visualization from a scanning standpoint when we first started. There were some attach [indiscernible] And then there's also some just ability aspects about how long you wear this, but we've come over those and we're making good progress in that sense. So I'm very optimistic about it and it's great to see it really go from a regional standpoint to a global standpoint now.

And but we have a great one-two punch in that marketplace with Invisalign Align.

And that's also brand worth mentioning too. We're seeing many doctors as they do the upper palate expansion, they use Vysline first on the bottom in order to expand the T2B to make sure that they're in line with the sense of the bite as they're setting in their upper arch too. So it's good to see a synergistic effect on those two products.

I hope I mentioned your question, but that's that's the momentum that we're talking Yes. Maybe as a quick follow-up on a separate note, note, international has been more durable for you guys in The Americas these days.

Is that simply a result of just being earlier in the adoption [indiscernible] just doing a little bit better than The Americas? Trying to understand how durable international outperforming should be as we go into '25 even if macro America is stays relatively muted? Thanks.

Yeah.

It's hard to be discrete on that answer. Overall, Brendan, I would say there are certain areas where obviously the initial penetration of our product line in certain area. But certainly wouldn't say that about Latin America. We've been down there for many years. And we see continued growth in that sense. Middle East, Africa and those areas too. Some of the places of Africa are new and they'll hit a certain inflection point But overall, I feel like we faced better economies in those regions. They didn't necessarily, I think over extend their economies the way we saw in the Western world and which has affected large part of Western Europe and also United States and specifically in Asia.

Outside of China, the other countries in Asia just came back out of COVID in better position than we were before. And But some of those countries are penetration, some of those countries are just expansion too. So I think overall, it's just a good mix there, Brandon. And I like that. It's good to have And then as you roll out these new technologies, remember it offers you new opportunities in those countries too, so that expansion piece can continue.

Operator, we want to try and get through the covering analysts that are still on the line. So and if I can ask folks to limit to one question, so we can get through everyone's questions, please.

Thank you. One moment for our next question. Our next question comes from the line of Jason Bednar from Piper Sandler. Your line is open. Hey, good afternoon. Based the questions. I'll try and take your Hey, I really want to ask on just maybe a [indiscernible] kind of a combo in here, but this is is there a way to reduce frictions within the teen channel and really address what has been a a bit of a challenge or sluggish ortho environment. Anything that you can do from a marketing initiative to really create better demand pull effect? And then then also on the friction side, maybe help with the business rationale of removing that $10 to $15 processing fee while neutralizing it with price increases. Is that have you had pushback on the processing fees? Has this caused friction with doctors that you're trying to remove?

You.

Yes. Hey, Jason, that's a good question. First of all, the friction in the team channel is a lot of it has to do with the economics in an orthodontist today. We talked about the orthodontic offices in The United States haven't really in North America haven't seen really any substantial growth in the last three years. And so again, they're individual practices and I think they're trying to maximize our bottom line as much as they can. And so I think they're being very cautious from a business standpoint. The friction you talked about with our processing fees and all those are real. We have a pushback not as much in Asia. We had a lot of pushback in in Europe and The U. S. On that. And we decided to roll that back with that aggregate price increase and we have good response from our doctors in order to do that. And that is a friction piece. And it was to me, it was an annoyance to the sales team to have to fight through that when they had to talk to doctors and either joining what we were doing or having been with us for a while and explaining those things.

So I think that's very helpful. John, I just I mean, in the end, we want to focus on driving this business, driving this category, driving our products too and less about some of the other minor things like this with processing fees and so on. So this was a good opportunity to kind of put this together, get it in the right place and talk about the future of the business versus some of the other past expenses like this.

Yes. [indiscernible] Thanks. Thank you. [indiscernible] One moment for our next question.

Our next question will come from the line of Align Valiquette from Mizuho. Your line is open.

Thanks. Hello, everyone. Thanks for taking the question. So Obviously, there's a lot of puts and takes related to the evolving terror situation, but one area I was just hoping to get your thoughts on is given that there is a large competitor Chinese base, as some investors are watching closely, is competitor tries to establish a larger market share in The U. S. Market.

Really with this new political backdrop for the next four years under the new administration, I'm wondering whether some practitioners in The U. S. May be a little more hesitant to want to buy into the ecosystem of really any competitors that are headquartered or based outside The U. S. Given the heightened risk of trade wars, etcetera. So perhaps I could play into your hands favorably at least in The U. S. Market, which think is still your biggest market. So just at a high level, just curious to get your thoughts on that potential dynamic. Thanks.

Steven. It is. Just to confirm, The U. S. Is still our biggest market in the world in that sense.

Remember, I just talked about the orthodontic market, not really growing for the last three years too. So we have had competition Obviously, we know that your comments really refer to Angel Island Align maybe some other Chinese suppliers coming in. I think overall, you first win with customer service, you win with technology, you win with relationships, and that's what our sales force is really talking about. We felt that the Chinese have come in on [indiscernible] have a decent return and we think that always takes care itself one way or another. And we've seen that with other competitors in the market dollars orthos or GPs that are around The United States. And how they feel about international politics or anything they do. But our job is to make sure that we keep our heads down, we deliver the best technology, best productivity, the best brand, all those things and make sure we win in the marketplace and we'll let that other piece decide for itself.

Okay, got it. Thanks. One moment for our next question.

Our next question comes from the line of Kevin Calindo from UBS. Your line is open.

Thanks for the question. This is Dylan on from Dylan Finley on for Kevin.

A quick question on direct fabrication. You guys previously have talked to potentially commercializing products this year, I believe starting with a retainer product. So any update there?

On commercialization of products and maybe detail on the P and L too into both revenue and investment into costs into the manufacturing capabilities that you can call out?

First of all, I'd say, Our IP device is three d printed, but it's not the [indiscernible] it's not the resin that we use in the cubicure process. So as I mentioned in my script, we will begin to just with limited release an Invisalign first retainer. Invisalign first retainer is a very complicated it has to have a high modulus. It has to have a huge amount of variability in the sense of how how you structure that depending on where that person's arch is at that point in time. And it's the perfect fit for us as we try to ramp up and we ramp up our our new Cubicure process with our new resin too. So Align, like I mentioned, you'll see just the beginning of that in the first half of this year. In the second half of this year, we should begin to get ourselves more ready for a general release and third and fourth quarters of that product line. That's the beginning. After that, we'll move into what we call mandibular advancement. But any kind of aligners that have auxiliary types of things that you would have to have printed on those or difficult case where wall thicknesses need to be different in some way.

So, we're really excited about the efficiency of that particular technology, but also the design and incredible design capability and design freedom orthodontists will have in order to do that. So that's about as well as I can do for you now.

Next question please.

Our next question comes from the line of Michael Ryskin from Bank of America.

Your line is open.

Hey, thanks for squeezing me in guys.

Just one quick one for me hopefully. Jean, appreciate the commentary you had on tariffs to Mexico and realize there's still a lot of moving pieces, but I just want to make sure understood that. Just to comment on transfer prices, I mean, I hear you on overhead and freight cost, streaming planning not being included. How should we think of that as a percent of your COGS? I think if you just go through the P and L, it's something like $375 COGS per case roughly. Is the transfer Align how much would be impacted? Is it 50% to 75% of that? I just walk us through the transfer price math just so we can Okay.

No, it's a good question, Greg. And you're right, I tried to give up perspective of look, you start with COGS and then there's some parts of COGS that have nothing to do with what we're doing in Mexico freight and and treatment planning and other things. It's specifically the value add and the work that's being done there, then [indiscernible] Guess to put it in perspective in terms of I know there's been a lot of people thinking about what this could be just just based on your question and so on. But like on an average month, it that tariff, if it's at 25%, might impact us $4,000,000 to $5,000,000 of cost. Or that might be the cost perspective of this. So that gives you an idea of like how this kind of fits into this. This is something as I said in my prepared remarks, look, if it [indiscernible] amount of tariff, 25%, if that ever was implemented, it's not a big enough cost on tariff for us to switch some of the manufacturing and move from perhaps manufacturing in Mexico to Poland. But we'll evaluate that as we go forward. But I just want to kind of size that for you.

We'll evaluate as we go forward understand more as these days come about. We hope there's not anything but we have a perspective in terms of what it means from a cost standpoint and we will make decisions based on that and that will impact us what we do in the short and long term.

Operator, we'll take one last question.

One moment for our next question. And our last question comes from the line of Aaron Wright from Morgan Stanley.

Line is open.

Great. Thanks for squeezing me in. Just a follow-up on that last one. Just to clarify, so there's no buffer kind of embedded in your guidance as it stands today from a tariff perspective. And just on China, just the environment there, not necessarily from a tariff perspective, but just more so from demand trends. LandTEAM in China from a competitive standpoint. I guess expectations for the balance of the year.

If you could touch on those? Thanks.

That's great. Aaron, I'll take the first one on tariffs. So we're not in our forecast in what we've given for guidance at that up margin of 22.5%. There's no additional new tariffs that we've contemplated in that number. So we'll see how things come about. But in the framework, if there is a tariff and it should be 25% from Mexico And per month from an expense standpoint. And then on China, I don't know if you want to give Joe any other perspective on kind of the market there?

Yes. I'd say the China market we were pleased with the third quarter. The fourth quarter, obviously, it's always less than China what the third quarter There was nothing in that quarter that made me think that anything was different in China Align terms of the trajectory of the business.

From what we've seen. So overall, I'd call China stable.

Right now?

Okay. Thank you. Thank you. You're welcome.

And I will now turn the call over back to Shirley Stacey for any closing remarks.

Well, thank you everyone for joining our call today. We appreciate it if you have any follow-up questions. Please reach out to Investor Relations. We look forward to seeing you at our next industry events, including the Chicago Midwinter Dental Show coming up here later in February. Hope everyone has a great day.

This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation. Everyone have a great day.