Q4 2020 Align Technology Inc Earnings Call
Greetings and welcome to the align for Q and fiscal year earnings Twenty-twenty call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference.
Is being recorded it is now my pleasure to introduce your host Shirley Stacy. Thank you Shirley 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 Joe Hogan, President and CEO and John Morici CFO, we issued fourth quarter and full year 2020 financial results today via Globe Newswire, which is available on our website at investor.
Not a line check dot com.
Today's conference call is being audio webcast and will be archived on our website for approximately one month, a telephone replay will be available today by approximately 530 P. M. Eastern time through 530 P. M. Eastern time on February 17th Jack.
To access the telephone replay domestic callers should dial 870, 766 06853 with conference number one <unk> 714292, followed by Tom International callers should dial 20161 to 7415 with the same conference number as a reminder.
The information provided and discussed today will include forward looking statements, including statements about align future events and product outlook.
These forward looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission available on our website and at SEC Gov.
Actual results may vary significantly and align expressly assumes no obligation to update any forward looking statements.
We have posted historical financial statements, including the corresponding reconciliations, including our GAAP to non-GAAP reconciliation, if applicable and our fourth quarter and full year 2020 conference call slides on our website under quarterly results. Please refer to these files for more detailed information with that I'd like to turn the call.
Over to align technology's, President and CEO, Joe Hogan Joe.
Shirley good afternoon, and thanks for joining us.
On our call today I'll provide some highlights from the fourth quarter and full year, then briefly discuss the performance of our two operating segments clear liners in systems and services John will provide more detail on our financial results and share additional color on business trends following that I'll come back and summarize a few key points and open the call to questions.
Our fourth quarter was a strong finish to the year with record revenues and volumes from both invisalign of liners and <unk> scanners as well as increased gross margins operating margins EPS and cash flow.
Our fourth quarter performance was driven by strong year over year growth across customer channels and regions and continued momentum sequentially.
During the quarter, we achieved a major milestone in EMEA with a shipment to our two millionth invisalign patient that will be amplified with the M. A Y campaign that we'll launch next month. This milestone from May reflect strong acceleration in invisalign adoption and growth for.
For Q4 total revenues were $834 5 million up 13, 7% sequentially and up 28, 4% year over year.
Q4, 'twenty clearer line of revenues of $707 million were up 12, 9% sequentially and increased 28, 9% year over year in.
In Q4, we shipped a record 568000, Invisalign cases, an increase of 14, 5% sequentially and 37, 3% year over year.
Q4 reflects increased invisalign adoption from both adults and teenagers, which were up 36, 7% and 38, 7% year over year, respectively. Our teen mom focused consumer campaign generated 77% year over year increase in unique visitors to our website and 76% increase in Lee.
Leads generation in.
In addition, <unk>.
His line social media Influencers like Charlie Damelio, Marseille, Martin Christina Milana, Tisha Campbell, Martin Rachel Zoe Tiffany mall.
And Tom as Maury continue to deliver exciting new content and increased engagement from the Invisalign brand with consumers and among the millions of followers.
Our digital platform continues to gain traction as doctors uses of Vitaros scanners increase.
Our consumer and patient that was rolled out to more than 50 markets, resulting in more than a 2.5 X increase in apps download and monthly active users in 2020 versus a year ago.
Our patient feature usage continues to increase for example, Invisalign virtual appointment was used 68000 times. Our insurance verification feature was used 26000 times and more than 30000 patients enrolled in Invisalign virtual care in 2020.
Our new consumer website was rolled out to more than 40 markets around the world and is driving increased effectiveness and lead generation.
We also launch and improve new Doctor recruitment website in the U S and Canada to support our digital conversion journey. This will be expanded to other markets in the next few months.
From a product perspective growth was strong across the invisalign portfolio, especially for non comprehensive cases, including Invisalign go and Invisalign moderate.
There are also more doctors engaging with us through the align digital and practice transformation or adapt program as more practices are moving towards digital practice optimization.
As you'll recall adaptor pilot it over two years ago and is being commercialized as a standalone service, providing the relevant work force clinical and marketing support to enable doctors to digitally transform their practices.
In Q4, we shipped a record 77000 invisalign doctors worldwide.
Of which a record $7 3000 were first time customers. We also trained over 6400, new docs in Q4, including over 3900 International doctors.
Q4, 'twenty system and services revenues of $133 8 million were up 18% sequentially driven by momentum in the Americas, and EMEA and up 26% year over year, reflecting strong growth in EMEA and Asia Pacific. Our results reflect continued strong uptake of the eye Taro element five D. The Ole.
In a world scanner with caries detection, which is scaring, which is scaling rapidly across each region and represented approximately a third of by Taro volumes in Q4.
Innovation remains a cornerstone of our business today, we announced the availability of the <unk> element plus series, which expands our portfolio Vitaros element scanners in imaging systems to include new solutions that serve a broader range of the dental marketplace.
The new <unk> element plus series of scanners in imaging systems builds on the success of the award winning I Taro element family and offers an all of the existing orthodontic and restored of digital capabilities doctors have come to rely on plus faster processing time, and advanced visualization capabilities for seamless scanning experience in a new sleek.
Economically design package.
We announced the launch of our Nexgen Quinn check pro six point O proprietary treatment planning software within face visualization and our Invisalign G. Eight improve predictability in our last earnings call, we announced the availability is being expanded across all regions. Further we launched several enhancements to our treatment planning, including improved final.
Position and auto segmentation. We also added several new features to our virtual care tool.
For the full year 2020 total net revenues were a record $2 5 billion.
Up two 7% year over year clear aligner revenues of $2 1 billion were up three 7%, reflecting a record $1 6 million invisalign shipments and growth of seven 9%.
During the year, 33% of total Invisalign cases, or nearly one half of million teens are a younger starting invisalign treatment. This is up 11, 5% from 2019 system and services revenues were down slightly compared to 2019.
2020 was a year unlike any other we've experienced.
The COVID-19 pandemic and its impact had been life changing mark by loss and separation recovering renewal record highs and lows and significant milestones and accomplishments.
Even in a time of huge disruption, we all had to adapt evaluate priorities and develop new ways of doing things both personally and professionally through it all our lines priority has been the health and wellbeing of our employees and their families and our doctor customers and their staff and that remains a constant.
Despite the swift onset of the pandemic and the uncertainty through 2020, we didn't hold our plans or change our strategy for continued growth. We completed the acquisition of XO CAD accelerated our investments in marketing to create Invisalign brand awareness and drive consumer demand for our doctors offices accelerated new technology to market with virtual tours.
That enabled our doctors to stay connected with their patients provided PPE to those in need and supported doctors and their teams with online education and digital forms that went beyond products to help them navigate the uncertainties of the pandemic.
As a result of our continued strategic focus and investments we exited the year stronger than we started in 'twenty and 'twenty one is off to a great start.
Now, let's turn to the specifics around our fourth quarter, starting with the Americas.
But the Americas region Q4, Invisalign case volume was up 12, 7% sequentially and up 34, 1% year over year, reflecting increased utilization of invisalign treatment for both orthodontic and GP channels.
Our continued investments in digital marketing and sales programs and focus on market segmentation are helping drive strong growth of Invisalign clear liners, and I Taro products do.
During the quarter, we continued offering sales initiatives to our Doctor partners to help drive adoption of Invisalign and <unk> products. The bracket buyback switch program, which we launched in North America. In Q2, 'twenty continues to drive conversion from wires and brackets to Invisalign clear liners during Q4 this.
Program resolving it has resulted in about 10000, new cases similar to Q3. We believe is also causing a halo effect with patients switching from wires and brackets to invisalign clear liners with increased awareness of the benefits of Invisalign treatment and how it is less disruptive to their lives with the outcome of a beautiful smile through an invisalign trained doctors.
The teen Austin this centers programs direct patients to Invisalign doctors, who are expert at treating teens are seen as the go to docs for treatment. We continue to see growth with Invisalign first for treatment of younger kids driving increased comprehensive treatments within North America Ortho channel.
Latin America and volume was also up year over year led by strong growth in Brazil, and Mexico. We believe the market for orthodontic treatment is huge in Latin America as we continue to grow our presence across the region.
We saw increased utilization of the G. P channel with Invisalign go into continued adoption of moderate.
The G. P accelerator program designed exclusively for general practitioner dentists provides an all encompassing support plan based on practice needs that is centered around maximizing <unk> integration clinical support needs and implementing new marketing strategies. We also see increased utilization with GP dentists that have enrolled in the eye probe.
Graham as well as with doctors that are installed the <unk> scanner D.
DSO utilization also also increased and continues to be a strong growth driver led by Heartland and smell docs for the full year America Invisalign volume was up three 6%.
For our international business Q4, Invisalign case volume was up sequentially six 7% led by strong growth in EMEA as doctors returned from summer holiday season, offset somewhat by seasonally slower period in China.
On a year over year basis International shipments were up 41, 1%, reflecting increases throughout both EMEA and APAC for the full year International Invisalign volume was up 13, 3%.
For EMEA Q4 volumes were up sequentially 47, 9% and 48, 3% on a year over year basis across all markets with strong performance across both ortho and GP channels.
Within the GP channel, specifically, we saw acceleration in both utilization and shipments with Invisalign go.
We also saw acceleration in both core and expansion markets with growth in our core markets led by Iberia, UK and France, along with continued growth in our expansion markets led by central and Eastern Europe and the Benelux.
We introduced the ortho recovery 60 program in EMEA last quarter to support our orthodontist as they started reopening their businesses as of Q4 3200 orthodontists to have enrolled in the program.
During the quarter, we launched a recovery to program with a refreshed website, featuring all digital tools growth programs and education events from EMEA of doctors to support their relief efforts during COVID-19.
We also held our digital innovation for them at the beginning of December where approximately 900 doctors, both ortho and GP attended the two day Forum event with key nodes on the Digitization of dental practices. We also continued our digital excellence series of Webinars launch why Taro team.
Throughout the quarter. The following digital innovations were also launched across EMEA Invisalign G. Eight clean check pro six point O and Invisalign go plus to help drive Invisalign clear aligner utilization to support our G. P. Doctors, we launched our G. P recovery 360 program last quarter with over 2700 GPS enrolled so far.
We continue to offer online and on demand education events, which reached over 15000 Gp's cumulatively for.
For the full year EMEA Invisalign volume was up 12, 6%.
For APAC Q.
For volumes were down sequentially 14, 7% not withstanding typical Q4 seasonality in China. Following a strong Q3, we had strong growth in Japan in ANZ in southeast Asia on a year over year basis, APAC was up 30% compared to the prior year, reflecting continued strong growth across the region.
We were pleased to see the growth in the adult segment with non comprehensive cases, with invisalign moderate product and the GP channel.
And the teen segment. We also saw an increase in utilization amongst invisalign doctors and we saw continued acceleration from Japan and ANZ for the full year APAC Invisalign volume was up 14, 3%.
Last year, we launched a new and improved digital learning environment for our doctors offering a comprehensive learning platform with with role specific content for ortho and GPS in their teens the.
The improved functionality enables more online learning opportunities with spotlight features for whats trending now recommended learning path based on doctors experiences and expanded categories, including digital treatment planning comprehensive dentistry and team education.
For the year over 127000 doctors have access to a record.
Recorded lectures completed self paced learning modules and watch how to videos with new certified doctors doing more than one 4 million pages of content.
Among new Ortho channel over 47000 unique users have engaged with a digital learning site with an additional 80000 unique users from the GP channel as.
As we've mentioned we are seeing good adoption of the adapt program, which is an expert in independent fee based business consulting service opera by align to optimize clinics operational workflow and processes to enhance the patient's experience and customers and staff satisfaction, which will in turn translate into higher growth and greater.
<unk> fourth adonic practices.
As a result, the adapt service participating processed in Q4 improved profitability significantly after implementation.
Our consumer marketing is focused on capitalizing on the massive market opportunity to transform 500 million smiles educating consumers about the invisalign system and driving that demand to our Invisalign Doctor offices. In Q4, we saw strong digital engagement globally with more than 77% increase in unique visitors 100.
8% increase in Doc locator searches and 76% increase in leads created driven by our global adult and mom focused campaigns and keen focused influencer content.
Our U S mom teen multi touch multimillion dollar multimillion dollar campaign with Influencer led Youtube videos, a month focused TV spot accustomed twitch activation and Mega Teen sensation, Charlie Damelio continued to perform very well and garnered $2 7 billion impressions in Q4.
The statistics I shared previously speak to the successful reach of this marketing campaign is having to not only drive demand with consumers, but also in educating them on the benefits of invisalign treatment through a doctor's office.
In Q4, we also launched media test in the EMEA region, and the U K, Germany, and France and in the APAC region in Australia, and Japan. These have worked very well and resulted in more than a six X increase in leads in EMEA and a three <unk> increase in leads and APAC. Several key metrics that show increased activity and engagement with the Invisalign.
Brands are included in our fourth Q4 quarterly presentation slides available on our website.
Align is always looking for new opportunities to reach consumers and be relevant to potential patients wherever they work live and play which is why we announced the invisalign brand as the official clear aligner sponsor of the National Football League, the NFL and 11, NFL teams, including the Tampa Bay Buccaneers in Kansas City Chiefs the NFL.
L. A big partnership designed to expand our reach with consumers generated over 150 million impressions in 2020, helping to drive awareness of Invisalign clear aligner treatment at a national level. While the team agreements are designed to help us engage within key markets and connect consumers with doctors in those markets.
For our systems and services business Q4 revenues were up 18% sequentially due to higher shipments and services revenue, we continue to see momentum with the <unk> element Fived imaging system, gaining traction in all regions with significant element flex sales in EMEA.
On a year over year basis systems and services revenues were up 26% due to higher shipments and services for the year our system and services total revenues were down two 8% year over year cumulatively over 3.13 points to $31 4 million orthodontic scans and $6 7 million.
Restorative scans have been performed with Vitaros scanners.
For Q4 total Invisalign cases submitted with a digital scanner in the Americas increased to 84% from 79, 5% in Q4 of last year.
Our national scans increased to 73, 7% up $64 seven and.
In the same quarter last year.
We're pleased to see that within the Americas 94, 8% of cases submitted by North American Orthodontists were submitted digitally.
We're also proud to share that I taro element inner oral scanners are the winners of the 2020 Dental town Townie Choice Award for digital impression in category also during the quarter. The National Association of Dental laboratories, judging panel selected the <unk> element Fived D. As the winner of the 2020 journal of dental technology.
While award.
The award represents a recognition of our commitment to enhancing patient engagement and communications that support efficient laboratory production from.
Our actual cash during the quarter, we launched two of the largest software releases in history.
Dental cat, an exoplanet dental CAD three point O Galloway and foods over 90, new features and over 80 enhanced functionalities with significant improvements reduced design time, such as instant and atomic morphing.
<unk> three point O. Galloway includes over 40, new features and over 60 enhanced functionalities that support planning have been dentulous cases, including the design of surgical guides during the quarter XO can also add XO cat also added two new large implant manufacturers as Oems for XO plan in Brazil.
With that I'll now turn it over to John.
Thanks, Joe now for our Q4 financial results total revenues for the fourth quarter were $834 $5 million up 13, 7% from the prior quarter and up 28, 4% from the corresponding quarter a year ago for.
For clear liners Q4 revenues of $707 million were up 12, 9% sequentially and up 28, 9% year over year, reflecting invisalign volume growth in all regions, partially offset by lower asps.
Clear aligner revenues growth was favorably impacted by foreign exchange of approximately $5 million or approximately 0.8 points sequentially.
And on a year over year basis by approximately $10 $3 million or approximately one nine points Q.
Q4, Invisalign Asps were down sequentially $15, primarily due to increased revenue deferrals related to a higher mix of new cases.
Versus additional liners, partially offset by favorable foreign exchange and lower promotional discounts.
As we mentioned last quarter, we did not implement a price increase in 2020, given our continued commitment to helping our customers in the recovery efforts during the pandemic.
On a year over year basis, Q4, Invisalign asps decreased approximately $75, primarily due to our decision not to raise prices last summer increased revenue deferrals for new cases versus additional liners and higher promotional discounts.
Partially offset by favorable foreign exchange as a result clearer line of deferred revenue on the balance sheet increased $83 million sequentially and $195 million year over year and that will be recognized as the additional liners are shipped.
Total Q4 clear aligner shipments of 568000 cases were up 14, 5% sequentially and up 37, 3% year over year.
Our system and services revenues for the fourth quarter was $133 $8 million up 18 point.
18% sequentially due to an increase in scanner sales and increased services revenues from our larger installed base and higher asps.
Year over year systems, and services revenue was up 26% due to higher scanner sales services revenue.
And the inclusion of XO Cads, Cadcam services, partially offset by lower scanner asps.
Imaging systems, and Cadcam services deferred revenue was up 30% sequentially and up 69% year over year, primarily due to the increase in scanner sales and the deferral of service revenues, which will be recognized ratably over the service period.
Moving on to gross margin fourth quarter overall gross margin was 73, 2% up 0.4 point sequentially and up <unk> five points year over year.
On a non-GAAP basis, excluding stock based compensation expense and amortization amortization of intangibles related to <unk>. Overall gross margin was 73, 6% for the fourth quarter of 0.3 points sequentially and up <unk> seven points year over year.
Clear aligner gross margin for the fourth quarter was 74, 9% up 0.1 points sequentially due to lower additional aligner volume, partially offset by higher warranty and other manufacturing costs and lower asp's.
Clearer line of gross margin was up 0.7 points year over year, primarily due to favorable product mix from increased <unk> scanner absorption as a result of increased manufacturing.
Volume was partially offset by lower Asps.
Higher warranty costs and other manufacturing costs.
Services gross margin for the fourth quarter was 64, 2% up two two points sequentially, primarily due to higher asps.
And increased manufacturing efficiencies from higher production volumes.
Systems and services gross margin was down <unk> seven points year over year due to lower asps.
Air freight and other manufacturing costs, partially offset by higher services revenue.
Q4, operating expenses were $397 $3 million up.
<unk> 11, 3% and up 23, 8% year over year. The sequential increase in operating expenses is due to increased marketing and media spend and spending commensurate with business growth year over year.
<unk> expenses increased by $76 $5 million, reflecting our continued investment in sales and marketing R&D activities and manufacturing operations on a non-GAAP basis operating expenses were.
$372 $3 million up sequentially, 12, 1% and up 23, 4% year over year due to the reasons.
As described earlier.
Our fourth quarter operating income of $213 $2 million resulted in an operating margin of 25 five.
Set up one four points sequentially and up two three points year over year. This day.
Quench AUM and year over year increases in operating income and the operating margin are primarily attributed to higher gross margin and operating leverage on a non-GAAP basis, which excludes stock based compensation amortization of intangibles related to <unk> CAD and acquisition related costs.
Operating margin for the fourth quarter was 28, 9% up <unk> nine points sequentially and up two five points year over year.
Interest and other income expense.
Net for the fourth quarter was a benefit of $1 4 million.
Primarily driven by favorable foreign exchange.
With regards to the fourth quarter tax provision our GAAP tax rate was 25, 9%, which includes tax benefits of approximately $11 million related to adjustments in prior years unrecognized tax positions.
The fourth quarter tax rate on a non-GAAP basis was 14, 5% compared to 16, 6% in prior quarter and 29% in the same quarter a year ago. The.
Fourth quarter non-GAAP tax rate was lower than the third quarter.
Orders rate, primarily due to the reasons previously stated.
Fourth quarter net income per diluted share was $2 up 24 sequentially and up 47 cents compared to the prior year.
On a non-GAAP basis net income per diluted share was $2 61 sets for the fourth quarter up 37% sequentially and up 85 year over year.
Moving onto the balance sheet.
As of December 31, 2020, cash and cash equivalents.
<unk> $968 million, an increase of approximately 343 $345 $3 million from the prior quarter, which is primarily due to higher cash flow from operations.
Of our $968 million of cash and cash equivalents $548 $3 million was held in the U S and $412 $5 million was held by our international entities.
Q4 accounts receivable balance was $657 $7 million up approximately 5% sequentially. Our overall days sales outstanding was 71 days down approximately six days sequentially and down approximately five days as compared to Q4 last year.
Due to strong cash collections.
Cash flow from operations for the fourth quarter was $381 4 million.
Capital expenditures for the fourth quarter were $53 $2 million, primarily related to our continued investment in increasing the liner capacity and facilities free.
Free cash flow defined as cash flow from operations less capital expenditures amounted to $328 $3 million.
Under our May 2018 repurchase program, we have $100 million still available for repurchase.
In stock.
Before I move to the outlook I would like to make a few comments on the full year 2020 results.
In 2020, we shipped a record $1 6 million Invisalign cases up seven 9% year over year. This reflects 13, 3% volume growth from our international doctors and three 6% volume growth from our Americas doctors.
Systems and services volumes were down 12% compared to 2019, reflecting the impact of COVID-19 pandemic on equipment sales.
Total revenue was a record $2 5 billion up two 7% year over year with clear Aligner revenues, a record $2 1 billion up three 7% year over year.
2020 systems and services revenue were $375 million, including <unk> revenues from April one 2020 forward compared to $381 million in 2019.
Full year 2020, operating income of $387 2 million down 28, 6% versus 2019 and operating margin at 15, 7% versus 22, 5%.
In 2019.
2019 operating income included a litigation benefit of $51 million and Invisalign store closures of $23 million for a net benefit on an operating margin of one 1%.
With regards to our full year tax position provision our GAAP tax rate was negative 368, 6%, which includes a onetime tax benefit of approximately $1 5 billion net of current year amortization associated with the recognition of a deferred tax asset.
<unk> two in intra entity sale of certain electrical intellectual property rights, resulting from our corporate structure reorganization completed in the first quarter of 2020.
Excluding the tax benefit related to our corporate structure reorganization and the related tax effects of stock based compensation and other non-GAAP adjustments the full year tax rate on a non-GAAP basis was 17, 6% compared to 22% for 2019.
2020 diluted EPS was 22 point $22 41.
On a non-GAAP basis 2020 diluted EPS was $5 25 sets free.
Free cash flow was $507 $3 million for 2020 down $93 million versus 2019.
Now, let me turn to our outlook overall, we are very pleased with our Q4 performance and the strong momentum in our business, which has continued through January for both clear liners and systems.
And services as we discussed at our Investor Day in November we are committed to making significant investments to drive growth and we are seeing good return on these investments across all regions and customer channels.
These strong returns give us confidence to continue investing in sales marketing innovation and manufacturing capacity to accelerate adoption in a huge underpenetrated market. These investments coupled with typical.
Typically higher seasonal operating expenses as a percentage of revenue.
Are expected to result in sequentially lower operating margin percent in Q1, as we have historically seen.
While the global operating and.
The environment surrounding the pandemic remains uncertain, we will continue to focus on what we can control and we are confident in our ability to continue to execute our responsibility is to continue driving innovation and delivering on the needs of our customer doctors and their patients.
Over the past 24 years align has invested billions in technology innovation consumer marketing and demand creation to connect millions of consumers with our doctor customers.
We will continue to invest in this business to drive demand and drive adoption of the align digital platform, including manufacturing and operational expansion.
We will always be responsible.
Just like we've done in the past.
Make investments to drive growth and maximize ROI remained we remain.
<unk> committed to our long term.
Target model of 20% to 30% revenue growth for clear liners, and systems and services and operating margin of 25% to 30% with that I'll turn it back over to Joe for final comments Joe.
Thanks, John.
As we made in 2020 to protect employees support customers and press forward on our strategy for growth where possible because of the strength of our balance sheet and the confidence we have in our business model.
Our actions reflect our conviction and the enormous opportunity we have to transform smiles and change lives.
With 15 million orthodontic cases starts annually and more than 500 million consumers, who can benefit from a better smile the market for digital orthodontics and restorative dentistry is massive and has been unleashed by the need for digital.
In a macro sense COVID-19 has accentuated the benefits and pervasiveness of the digital economy.
From a line standpoint practices across every region are embracing digital treatment in new ways and more purposefully than ever before invisalign providers are using our virtual tools to minimize in office appointments and deliver doctor directed personalized treatment that meets the needs of the moment and that will reshape the future of treatment.
Digital acceleration not just around Invisalign treatment and include digital workflows around Vitaros scanners in general Dentistry doctors tell us that the <unk> scanner is central to their practice and their practice workflows and it's key to driving digital treatment. We've also known as <unk> and now ex cat our core components of the <unk>.
<unk> digital platform, our integrated suite of unique proprietary technologies and services delivered as a seamless end to end solution for patients and consumers orthodontists and GP dentists and lab partners and particularly we now have all the building blocks to create digital workflows, leveraging the combined power of Invisalign treatment.
<unk> scanners, and extra CAD software become more relevant to the GP market, which is critical to accessing the 500 million consumer opportunity.
Align is a growth business with huge opportunities, but the environment remains uncertain due to COVID-19, our plan is still to counter uncertainty by staying focused on our long term strategy.
Living our values supporting our employees and customers and keeping in mind the demand drivers we've identified over the past year.
The redirection of disposable income from many consumers channel focus that allows us to reach and support a wider range of customers within each channel.
And most importantly, the digital mindset that is taking hold with more and more of our customers and that we are supporting through innovative products and programs that can help support their digital transformation.
We are not ignoring the reality of COVID-19, and how long it may be part of our lives, but we're also not going to stop driving the business forward for the good of the customers and their patients our employees and our stakeholders.
In closing I want to leave you with a few thoughts as we begin the new year. While there is considerable amount of turmoil in the world. Our focus is on what do we can we can control of the company.
We have strong momentum, we will stay focused on our strategic priorities international expansion patient demand and conversion orthodontist utilization and GP dentist treatment.
In summary, we're very pleased with the fourth quarter and the full year results of 2020 during a remarkable year with events beyond our control as a result of COVID-19. It is during times such as this when having a solid strategy combined with focused execution can lead to outcomes that support growth only for alliance business.
But also practice growth for alliance customers, which also leads to more and more invisalign smiles.
With that turn it over the operator, and we will take calls.
Yeah.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay.
Thank you. Our first question comes from Ravi Misra with Bahrenburg capital markets. Please proceed with your question.
Hi, Thanks for taking the question Hi, how are you.
All day.
So just wanted to maybe start one I'll, let the others, maybe talk about the quarterly trends, but one of the things that kind of stood out to me was your driving extremely strong volume growth amidst whats kind of a stable to slightly declining pricing environment. Just curious first when do you think youll be able to go back from it.
Prior model, where you're able to take pricing is that still in the cards and then secondly, I think the teen market as an area that we've kind of always been looking at is the next leg of growth kind of huge market. That's out there and you're talking about some of the conversion and the lead generation can you help us understand kind of the conversion rates around.
The leads that you generate in terms of timing and how long this takes to get the ROI that that debt.
Is put into the to the to the advertising that you're putting out there.
Hey, Roger first of all I guess your first questions on average selling prices you know we tried to communicate this as strongly as we can is to keep your eyes on gross margin because we have huge mix, whether it's international mix rich product mix you see a lot of progress and I go in products like moderate Invisalign first in those products.
The carry actually lower average selling prices, but higher margins and so you can often mix up on those things. So I'd say as we keep emphasizing is don't be overly concerned about asps are focused on asps like John said, we didnt increase asps. This year, because we're interested in supporting our customers and making sure that this is different because that really difficult transition from many practices right now.
Instituting a price increase just wouldn't have been responsible in that sense, but at the same time, we drove incredible productivity across the business and we're able to show those kind of gross margins. So I hope you and the rest of the analyst community out there can actually see that we've been talking about this for a few years, but actually taken place on the team side and the conversion spot from an advertising standpoint, I mean, we come out just from a <unk>.
A lot of different ways and a lot of different areas.
We were gonna start teen season, you really have to start in February in the United States and you have to really work through a lot of different aspects of social media you advertise differently from moms and you do teens and different things like that so I can't give you a correlation coefficient in the sense of here, we invest and how much we get back but we understand this well as a business we've been doing it for years, we understand the timing.
Of it and more and more become more specific on the social advertising pieces and how to implement that properly and John hit anything that you said I mean, there's others that are in equation you have to you have to reach the team as Joe described and we talked about social Influencers and so you have to reach to parents and we try that and then also have the right.
Formulary with the Doctor so getting those three two to think about.
Going into treatment is really the key.
Okay, and then maybe one last one if I can if I can ask one more just on the reopening and vaccination progress and kind of volumes. How are you guys kind of thinking about the consumer spending environment as the options that the patient is going to have start increasing I mean is that going to require more investment here in the near term or do you think kind of.
Where we are at a baseline where you've kind of gotten the ramp where things are starting to really click here with the advertising that you're doing.
Thank you.
Yes, Rob it's a good question I mean look we're always looking to maximize our return on investment we talk about that.
ROE in this vastly underpenetrated market in some countries like in the U S. It's just a matter of of refining how we spend we talked about the influencers talked about NFL and other things.
And in other countries, we've really started spending some of that consumer advertising and we see a great response, and we see a strong we chart and those are areas that as we see that response, we see it turn into volume.
Those are areas that will continue so we're always looking at return on investment and we will find ways to be able to grow our volume that way. Thanks.
Thanks Roger.
Thank you. Our next question comes from Jon Block with Stifel. Please proceed with your question.
Hey, John.
Hey, Joe good afternoon.
Joe You mentioned 2021 is off to a great start from 2015 to 2019 so.
So im sort of isolating pre Covid management guidance for <unk> cases, the guidance for one or two cases were up pretty consistently just low single digits off from what you did in the fourth quarter and I guess, where I'm going with this is at a high level, what's the expectation for case growth.
Sequentially and I'm, just trying to level set as the back part of 2020 likely benefited from some pent up demand. So just how we should think about the trend line. If you would until the early part of 2021.
Okay.
Hey, John.
I'll, let John have the specifics on but I'll just tell you that January was a really strong orders quarter. So that momentum really continues.
And look I think as we've said and we're controlling what we can control, making investments that that helped drive this business we look at.
As Joe said, we felt really good about how we exited Q4, we saw that in January as well and.
We don't want to guide, we specifically have it because there's things that are outside of our control and we'll leave that as it is what we're trying to give you is kind of the latest information without without projected forward.
Okay fair enough and I'll ask a quick two part, but the second one EMEA was just gangbusters everything was up 48% off a 32% comp shout out to Mark Hughes, but anything to call out there I mean, the number was huge and then the second part is <unk>.
Almost 40% Joe what do you think the underlying ortho market was growing and where I'm going with this is just your conviction of.
Short and maybe.
Type of inflection point, if you would with teen share of chair thanks, guys.
Hey, John I appreciate it appreciate you bring it up EMEA I mean that was just an amazing performance. When you see that I've been doing business in Europe. Since on 30 years, and you see growth like that by countries, It's amazing and and I think that's to me that was really the story on the fourth quarter. Two was the breadth of that growth. It wasn't just North America. It wasn't just <unk>.
Asia. It wasn't it was completely it was deep was cross segments across GPS across ortho <unk>.
So John I'm, not ready to talk about an inflection point all I can say is when you think about we had 77000 doctors that orders that I talked about in my script and then seven two to seven 3000 more doctors, what's 10% more doctors, that's a record force too. So when we see invisalign. This digital treatment really catching on in a big way.
<unk>.
It's meaningful.
Gearing up for obviously advertising to drive that demand and we will stay focused on just executing John right now.
Thanks, guys.
Thanks, John next question.
Thank you. Our next question comes from Steve <unk> with.
Wolfe Research. Please proceed with your question.
Hi, Steve Hi, Thanks for the time here guys.
I wanted to try to understand a little bit better the relationship between some of the things that you flag John in your prepared remarks as it relates to deferrals.
And ASP.
Certainly agree with the view that gross margins are really the critical metric, but I'm sure we're going to get a lot of questions about asps.
And over the next couple of days, so I Wonder if you could help us understand a little bit more deeply one why would we be seeing more deferred revenue here, both on a liners and on scanners and what's the relationship to Asps and do we see that reverse.
Yes, Steve the basic the basic way to think about this is as.
As we look at our revenue we've got revenue on a new case that we ship out and there's a certain amount that you recognized on that shipment based on based on a Rev. Rec and then theres, a certain amount for future align or as a future.
Modifications that are needed that it'll be deferred revenue and then you also get into your revenue from.
Those deferrals that you've made for maybe previous quarters or even previous year that adds a day that that doctor needs to use that additional language you're going to get revenue for that when you have a mix like we have where there is much more digits demand for future volume four for new cases, you get them.
Mix out where where we just have a lot more as a percentage of new cases, and thats what impacts.
Asps when we when we look at that from a margin standpoint, it's margin accretive we're getting as new cases.
Many of the cases that we get back from a deferred revenue standpoint, where there's refinement. We just don't make as much margin on that you get the deferred revenue, but you don't get as much of the margin. So there's those dynamic that we have we saw just when you have.
A significant volume increase like we saw in our third and fourth quarter.
Okay. Thank you John and then I wanted to follow up about the GP channel.
<unk> has been just gangbusters here lately I wonder if I could try to understand that a little bit more deeply one is do you think it continues to grow.
Cliff relative to the Ortho channel maybe two do you think <unk> has been a driver of incremental growth in that channel.
At this point and then lastly should we think about the shift to dsos being a variable one way or another and I apologize for my kids screaming in the background.
That's the life, we live now Steve we understand and it happens on every call.
From a GP standard channel standpoint, I mean, three years ago. When we first started segmenting in Europe and now we are doing the states and we do it all over the World and then we introduce products like I go that were specific to it.
And just a sales force that can communicate with GPS because it's a different conversation than with Orthos.
I can't tell you, where it's going but when we talk about that 500 million patients like I did in my script, that's where they are and that's where you touched them and it's a different it's not a big teen market. It's a lot of adults.
But it has to have a workflow that specific to two of GP and Thats why we drive our products why <unk> is so important from a front end standpoint. Your question on <unk>, We think that's going to be a big GP driver force as a big legitimate piece force, but I don't think it's adding to volume right. Now we're just rolling out these new products, we're just starting to integrate that kind of software code.
<unk> into our programs and that certainly will drive increased penetration in the future.
Got it. Thank you so much for all the perspective here.
Thanks, Steve.
Thank you. Our next question comes from Jeff Johnson with <unk>.
Robert W. Baird <unk> co. Please proceed with your question.
Thank you good evening, guys Hey, Joe.
Wanted to start with I know, it's tough and maybe there is not even a way to do it but any way to think about especially over the last two quarters. How much of this patient volume has been backlog versus the volume effect versus true kind of accelerating penetration of clear liners versus brackets and wires. Just is there any way to bucket or would it be any metrics youre looking at that tells you. This.
It is truly kind of that secular uptick we've all been waiting for versus <unk>.
Backlog and some of the zoom effect.
Well I think as we get.
Further and further from the second quarter.
Obviously, the backlog question becomes less.
Less and less as part of the noise of the structure I feel a lot of analysts Jeff. They wondering hey, we had a great third quarter, obviously and it was well how much of that was really the second quarter those roll into the third we really don't know what that was we don't and our doctors don't know it either as we talk to them before is obviously have less of that and we really felt good about our orders in January.
He too so I think were really moving away from that question here soon the number of docs like I just quoted with over 7000, new docs ordering from US 77000 total shows you the breadth of what's going on in which really struck me in this entire thing too Jeff is really that this is not just the United States. This is all over the world.
Latin America, it's APAC, it's tremendous growth in Japan in ANZ and traditional markets in China and Europe. So there.
Theres breadth of this and then the segments, we talked about both GPS and Orthos. So.
Look there have been backlog and a third part of that has to be some backlog in the fourth quarter or whatever but we don't think that's the overriding story here.
And then one other kind of maybe more conceptual question just as I think about I think about it through your advantages program, but.
Are you seeing doctors that are the high volume guys. The platinum guys moving up the diamond and double Diamond is at the lower.
Brandon or bold guys moving up.
Platinum does it matter do you, which it is but more importantly, conceptually is it getting those low volume day is to really go all in here are the high volume guys to convert completely to Invisalign and Im sure Youre going to tell me, it's a mix of both that but just kind of what youre seeing would be helpful. There on your own customer base.
Yes, you helped to answer that question, Jeff It is mix.
But it is really broad I mean, we see it in the bronze accounts and goals and all the way the diamond and Diamond plus and we see growth in all of those in all those segments.
I think it's kind of logical right. The people that know how to do digital we're going to expand on it because digital really allows them to function in this COVID-19 environment in a way that.
Allows them fjord customer touches.
They can actually carry on their practices in a normal way other doctors actually see the advantage that they have patients asking for it and they start to move toward a digital kind of a platform. So.
And overall again, it's a breath discussion it's not just one area. It's not just one country. It's about one segment of the advantage program.
We've just been seeing adoption across the board John anything to add.
I'd Echo the breadth you have new doctors like Joe said set.
7000, new doctors that come in with and wanted.
Wanted to do cases that come into our ecosystem.
And start cases, you see doctors, who have done just a few cases really start to accelerate and then at the top of the at the top of the pyramid you got people that are doing.
Lot of cases, and they do even more cases, so that's part of when we talk about the breadth of this growth and what makes it excited and it's like Joe said not just the U S.
Phenomenon, it's pretty much everywhere and definitely you have to you last thing you said is do you care, which I thought was kind of interesting is like.
We really don't care, we just want to serve the doctors who want to work with us we.
We see this market when we talk about how largest market is and how.
How underpenetrated it is and we just want to see wherever that growth is that's great. It's on the low end thats terrific on the high end that is terrific. We set this company up be able to service either side to work well with them.
Thank you I appreciate the comment.
Gotcha.
Thank you. Our next question comes from the political Beth Anderson with Evercore. Please proceed with your question.
Hi, guys. Thanks, so much for the question Hey, Joe.
Good day.
The one of the many nice price isn't quite otherwise the scanner and Cadcam revenue.
Talk a little bit about what you said its E M.
Yes.
So if market growth, there like where you're taking share or is it in the G. P. M on the ortho channel.
Dennis adding their third scanner, where people finally, saying, yes I'll go digital obviously the total number of cases, you know submitted.
Submitted digitally.
Very high.
Other color you could provide there would be really helpful.
You can work for US Okay, you've kind of described exactly how that demand is it's coming from all these different places and a lot of it when you say where are you taking share a lot of it is just analog sure. There's so much in dentistry is still just completely analog they're still doing impressions in different pieces.
And so it's it's you know the growth been tremendous in that sense.
Your question about orthodontists that start to move up into a significant part of their practice.
Being invisalign Youll see you see a scanner every chair and they use these things are constantly it's part of what they do and what we see on the GP segment is the communication tool ends up being the scanner and the front of the scanner because you know in the past it hold up a mirror and say can you see that.
That second molar back there and you'd say here, but you really couldnt right now you'd throw it on a screen. That's live you can see exactly what's going on it's it becomes an incredible patient communication tool in a sense of Where's your dentition and what needs to be done and helps to convince patients. So what the doctor wants to do and the validity of that kind of treatment so that.
This is where dentistry is going and when you look at Taro.
It is it is arguably the highest performing scanner in the world the speed of the exact Nassau the color rendering and also with Nero technology being able to see caries or cavities as a real benefit even though orthodontist, who want to make sure that before you start the treatment that that transitions in good enough shape to be accepted.
That kind of movement, so that does this.
This is this is the time for Digitization inside of Dentistry, and <unk> plays a big role in that in the front ends our digital platform, especially in it in a COVID-19 environment. Given the fact that you don't want to have as much time for the impressions and so on and you want to be able to have something that's fast and really thats going to be part of that digital workflow.
<unk> lends itself well.
Okay. That's super helpful and just a follow up more housekeeping question. One obviously you announced the new products are today and I imagine that that's something you'll be talking about it as soon as the virtual Chicago Midwinter and what you would have discussed you know a lot of it out yet.
There anything we should keep in mind in terms of the ramp up sort of new products or impact from moving to the back half of the year and then on the other side. Obviously, we saw your announcement about the move to Arizona.
Sounds exciting I just didn't know if that had any impact in terms of something we should model in on taxes or anything else just a touch on that as well.
Yes, I think.
I can answer the tax piece of it now really not a tax.
Tax impact really came down to.
When we look at the campus that we have in San Jose and the expansion that we have from a technology center.
We become a space constraint and so we want to keep that technology Center that innovation center in San Jose and expand that out and add more two to out but that innovation.
And then moving to to here in Tempe for kind of that head office, just made sense to us.
Thanks, Elizabeth on the new product pieces keep in mind like we talked about we spent half of $1 billion a year on advertising and also new product development, you'll see a lot of new products, we don't pace ourselves on those introductions based on Ibs, you know and that's why we obviously announced the new hydro scanner.
About the new 6.0 software that we have a lot of changes to five pauses or final positioning aspect it dentition.
We had the plus product from I go the.
In face visualization.
Is this a digital business and it requires constant iterations and products.
And obviously mid winter knows things were great places to highlight it but our innovation we looked at it as agile not waterfall anymore in essence waterfall used to be invent during the year released one one period of the year more and more youll see us just monthly just rolling out new products as we adapt to a more kind of an agile philosophy of development.
Then a waterfall type of if thats, what youre asking.
It makes total sense. Thank you so much.
Youre welcome.
Thank you. Our next question comes from Richard <unk> with SBB Leerink. Please proceed with your question.
Alright, Thank you for taking the questions.
Yes.
Just maybe to start off the switch program, which has really been extremely successful for you I'm curious to know how much more runway there is associated.
Program.
And maybe if you could just comment on kind of.
How you're thinking about that from your internal modeling.
Yeah look I think it has a huge amount of breadth to it I mean, it's not just U S. We started this in Japan actually years ago.
You introduced the United States and you think about just.
It's just a great winter.
Detaching those wires and brackets from People's teeth, using invisalign understanding like we said in our script is how much more simple it is and and better for people and comfortable for people to go with our product line. So.
We think it's we have a lot of room to grow and we're going to keep supporting yes, and enriches John I mean, we are always looking at those types of promotions for an ROI and.
In these cases, many cases looking at it from an incremental standpoint.
Nothing could be more incremental than it was glued onto someone's teeth and now they come off and they go to invisible.
Invisalign, so we like those dynamics.
It's a great message and those people, who had wires and brackets on new <unk> can talk about their experience with invisalign. So theres a lot of positives to it and as Joe said it started.
In Japan, and we've seen great day.
In the U S and we look to other places as well.
Got it helpful and Joe.
You said a few times, how how encouraging the trends have been in January I'm just curious.
Understanding it's only one month, but all else equal.
Trends that Youre, seeing now where the whole kind of.
For a good portion of the year, where we're in your long term kind of a long range plan of 20% to 30% do you think you'd be falling towards the mid to upper end I'm, just trying to get a sense for kind of.
What youre thinking their price.
Okay.
Look we were very committed to our long term growth model 20, 30%.
Really all I can say right now.
Rich you know, we're in a really uncertain environment.
We're happy about January.
While we're not giving guidance you, we're all living with volatility right now and we'll just continue to execute and keep our heads down, but we're committed to that 20% to 30% growth model that we've been we've been talking about for several years.
Thanks, Okay. Thanks, Thank you.
<unk>.
Thank you. Our next question comes from John Kreger with William Blair. Please proceed with your question.
John Hey, Joe Hey, just.
Just sticking with that that answer.
Obviously above that in terms of volumes in the in.
In the fourth quarter, how do you feel about your ability to deliver on that if the order flow were sustained in terms of fabrication and fulfillment how do those metrics holding up at this point.
Our supply chains are we tried to keep ahead in that sense. So I feel we have adequate plans in capacity right now to be handle the surge in demand.
Great. Okay, and then John I think you've talked about in the past a reasonable assumption is kind of a flattish ASP and realize theres a lot of puts and takes but is that still a reasonable kind of planning thing for us or are you guys thinking less on the pricing front.
And therefore, maybe more of a downward trend over the coming year.
It's tough because it really becomes kind of the end result, because if you have bought primary cases as I spoke compared to secondary you can get some of these impacted asp's I think in general there is not.
A significant change that we would expect in some of the mix or some of that some of that pricing. So that being said you wouldn't expect too much fluctuation in asp's, but like I said it depends on that demand that comes forward from our doctors.
Got it Okay, and then one more.
Joseph and in a typical year, we would assume kind of teens would be big in Q3 and in adults would be bigger in Q4 is that same sort of seasonal pattern likely do you think in <unk> and 'twenty.
'twenty one given what we know now or would you expect kind of teen order flow to day, mark kind of spread evenly throughout the year.
Yeah, John we don't know, but I would tell you. It did it became muted. This year, obviously, we saw a much stronger fourth quarter United States in teens, then we saw you know.
Normally see from a season standpoint to get continued so.
Thank all of US are expecting you know summer and fall months since COVID-19 to start to retreat, a little bit that might be.
Take us back to the patterns that we had before but I don't think it's gonna be binary I really don't I think this could have.
Could it change the pattern what is going to have to you know.
We're gonna have to just ride the curve here and see how it goes but we.
We'll continue to advertise through this.
Execute on the plays that we talked about in our script.
We really feel confident we can continue to drive significant demand.
Alright. Thank you thank.
Thanks, John.
One or two more questions. Please.
Okay.
Our next question comes from Jason Bednar with Piper Sandler. Please proceed with your question.
Hey, good afternoon, everyone. Thanks for taking the questions here hi, congrats on another really strong quarter.
Appreciate all the details you discussed maybe building out some of the real time commentary you shared in your prepared remarks, there Joe.
Curious if you can expand on what Youre seeing in January from maybe a utilization perspective, maybe the context of where we were October through December and.
Any notable call outs in January.
From a geographic perspective or teens or adults.
I think the call out Jason really is just the breadth of it really there wasn't.
Any geography in particular that dominated or.
It was just an segment to GP and ortho continues to be strong so when you.
When you exited year, new at our new year, you're obviously glued to that month to see especially in a business like this what the momentum is and we just see a continuation of the strong momentum that we had in the fourth quarter, that's Oh, John anything to add on I think the breadth of it.
As my note on this that we have.
Cross geographies between GP and ortho is into what we described as a lot of doctors that day.
Our higher up into tier there continues to do a lot of volume and then a lot of new doctors that come in that come in with cases in hand, and we can get them to start the invisalign system into our digital ecosystem. So.
That continued from from Q4 into Q1.
Okay. That's helpful guys and then just focus on China here just for a quick moment.
It wasn't a great deal of discussion probably lessen this call than maybe any other call in recent memory in China in particular, but I appreciate the seasonality that happens here in the fourth quarter, but maybe just wonder if you can expand on what youre seeing with your business.
Clear line of market in China, specifically, and maybe compare that against some of your other APAC markets.
And we felt good about our growth in China, 26% for the quarter overall.
China's we see shutdowns periodically issues in Shanghai or different places the Chinese are a pretty draconian I'd use the movies when they see COVID-19 they they move pretty quickly.
Hospitals have been throttled to certain extent electric procedures. So we felt good about the quarter and we feel honestly our investments in China, we really feel good about those the manufacturing piece helps legitimizes. Our it systems you know from a data protection standpoint has to be geared towards China. We're in good shape with that we're assembling <unk> there now.
Great about our training centers, great about our our our treatment planning capability. So overall, we remain bullish on China, and we think that China will start to you know.
The rest of the world will start to recover in the second half of next year or two and we expect to be a big part of that.
All right very helpful. Thanks, guys.
Thanks, John.
Take one more question. Please I know we ran over.
Okay. Our last question comes from Nathan Rich with Goldman Sachs. Please proceed with your question.
Hi, Nathan.
Hey, Joe Good afternoon, and thanks for squeezing me in.
Obviously results over the past couple of quarters have been really strong I guess, when we look out to 2021.
Tough to know what happens with Covid, but hopefully we'll start to get back to normal life. Later this year or 2022, I think as we look at where consensus is modeling I think kind of high teens revenue growth. It seems like you still feel comfortable with the 20% to 30% target.
So do you feel like we should be expecting that type of growth in line with our long term range off of this like this new higher level of volume that youre starting to see in the back half of this year.
You know Nathan.
We try to emphasize as much as we can we feel very confident about those 20% to 30% ranges of growth.
And continue to target, 20% to 30% operating profit to in order to do that so you'll see US you know an investment rates that John talked about we're putting in place to drive that demand. So we make we remain committed to that that model growth.
It starts with the vastly underpenetrated market and the investment opportunities. We talked about we tried to give you a kind of a breath of all the different levers that we have to pull to be able to drive that return and we continue to make that changes over time in terms of how we invest and where and so on but that that belief is still there and when we make those fall.
Investments, we're investing into that Underpenetrated market that we think we can grow 20 to 30 percentage and do it at a 25 plus percent op margin rate.
Great well congratulations on the strong quarter.
Okay. Thanks, a lot Nathan I appreciate me thanks Nate.
Thank you everyone for joining us today. This concludes our earnings call. If you have any follow up questions. Please contact our Investor Relations Department.
Forward to following up with you at upcoming conferences and virtual events have a great day.
Yeah.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.