Michael Cherny: Okay. So, just relative to the spend, I want to dive in a little bit more if possible, you talked about the investment growth. Can you delineate relative to that investment, how you’re thinking about the growth into, call it, your core markets for some of the new product launches? And especially with regards to the ramp on the printing side, how much incremental printing spend, so to speak, is coming now versus where you think it’s going to grow, what the run rate should be on ramping that over time?
John Morici: Yeah. I think we have a core business that we’re running. And obviously, there’s a certain amount of investment that you have to be able to grow around sales, sales and marketing and the go-to-market activities that we have. There’s also R&D spending that we’ve had throughout the time. And now as that R&D in the case of acquiring Cubicure and now turning this into more of a platform to be able to build our 3D printing, there’s a certain amount of spend that we have. How that lays out? It varies over time that we’ll have. But rest assured, we know how to scale products. We know how to scale 3D printing. We’ll make the right investments to be able to start scaling up that direct fab printing, while making sure that the core business has the right investments for growth, and we’ll balance that as we go forward.
Michael Cherny: Got it. Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Jason Bednar with Piper Sandler. You may proceed.
Joe Hogan: Hi, Jason.
Jason Bednar: Hey, good afternoon. Thanks for taking the questions. First, I want to build on some of the macro questions that have been asked. I don’t want to belabor the point, but other consumer discretionary companies called out a downtick in March. It doesn’t sound like you saw any of that, but just wanted to confirm that’s the case with respect to Invisalign demand. And maybe speak to your confidence to drive Clear Aligner volumes going forward now that comps turn a little bit tougher. How much do you think you might need to fund that growth with investments to drive more traffic into the office?
Joe Hogan: Hey, Jason, on the first part is, we talk about the stable environment that we’ve seen that stability of it. We read and I read what’s going on there with the consumer investment, some concerns particularly on the luxury goods or what’s going on out there. But honestly, I think often what we see and analysts who follow us here just really pick up the U.S. data, and what we see is differences all around the world and that’s what’s great about having international business. You have some counter cycling in the sense of the demand patterns and what goes on out there. But I would say there’s nothing that we would highlight right now that would say that we think something has changed what we saw in the second half of 2023 to what we saw in the first quarter of this year. John, anything?
John Morici: Yeah. In terms of investments, we make the investments that we need, go-to-market and manufacture and other expansion as we continue to grow. We’ll continue those investments. But as we’ve talked about, not only for now the second quarter when we’re talking about that sequential improvement in op margin and what we’ve talked about in total year, where we expect the year-over-year improvement in margin, we’re making sure that we’re investing with that right amount of profitability. We’d still be able to grow into our market and expand the opportunity — expand on the opportunities that we have, but then being respectful in terms of what margin we need to be able to deliver for the company.
Jason Bednar: All right. Very helpful, Joe and John. And maybe one follow-up here, to maybe a multi-parter on teen, so bear with me. This might be a nuanced look. It seems like a lot of emphasis here just recently in product development and marketing that’s really trying to tap into that much younger market, that Phase 1 opportunity. IPE fits in there, your new marketing branding plan and emphasis there. There seems to be some benefits for younger patients with Lumina. So, it’s really it seems intentional, but wondering if you could bifurcate for us how your Invisalign business is performing in this younger patient population relative to teens as a whole? Where does your penetration sit in those younger patients versus the broader teen channel? And maybe what kind of outsized growth you’re expecting from this part of the channel as we look out over the near to intermediate term?
Joe Hogan: Hey, Jason. I’ll just delve back up on your question, just to give you kind of a conceptual view. When you think of Phase 1, it’s actually been controversial in the orthodontic market for years. Some orthodontists don’t want to do Phase 1, because, as I mentioned before, the kind of devices that have been used have been kind of difficult from a consumer standpoint. So, those wait for all permanent dentition and move on to there. We feel confident that with Invisalign First now for dental expansion and then for palate expansion or a morphological change, IPE will do that. And we think it will attract more orthodontists to begin Phase 1 treatment. But this is an industry that takes a while for things to bake in and for them to gain confidence and I understand it because you’re working with kids’ teeth and mouths and their dentition.
But we actually think that a significant amount of growth could come from this area, but we think it will take time. But it’s been a great focus for us and it’s going to be interesting to watch how orthodontists in the future actually focus on Phase 1, Phase 2 because these kinds of devices make it simpler for them and for patients in the future. So right now, I can’t really just kind of give you the ground rules on that, that we’ve changed those rules in a sense, but I can’t project exactly where it’s going.
Jason Bednar: Any sense penetration wise or maybe where you’re at relative to the broader teen market?
Joe Hogan: I’d say we’re just in that story. I mean, even Invisalign First is used sometimes on more permanent dentition, too. So, it’s hard — we’d have to split our cases out of Invisalign First is what the age of patients are or whatever. But as we get more data and we really get through with IPE and some more specificity around this, we’ll share it with you and the rest of the people.
Shirley Stacy: Yeah, I mean, the only thing that — I mean, if you’ve tracked us for a while, you know that our average age of teen patients gets younger and younger. I think we’re 14 now versus 15-plus before. So, I mean that’s a reflection of just being able to go after those younger patients with first.
Jason Bednar: All right, very helpful. Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Nathan Rich with Goldman Sachs. You may proceed.
Nathan Rich: Great. Good afternoon.
Joe Hogan: Hi, Nathan.
Nathan Rich: Hi. And thanks for the questions. I wanted to go back to the guidance. I know it’s kind of been touched on a few different times, but I wanted to ask on the Clear Aligner revenue outlook. It looks like you’re raising the outlook for the full year by about 1%. I guess, could you maybe just touch on what changed specifically with respect to that outlook? It sounds like maybe its expectations around IPE and DSP versus market improvement. But I’d be curious any color you could share there and maybe anything on teen versus adult within the updated guidance would be great.
John Morici: Yeah. I’ll start, Nate. So, overall, we went from — we had talked to a mid-single digit, so call it 5% to raising it to the midpoint of 7% on a year-over-year, so up 2 points. And really that’s a reflection of a few things. One is the continued stability that we’re seeing. We’re operating in an environment that’s more stable. We saw that coming into the fourth quarter and now into this quarter as well. So that’s good. We want that stability there. And then, you look at the execution that we have about — on our core business to be able to grow with a lot of the innovations that we have, the promotions and other things that we have as we get into — further into teen season, supplemented with the various new products that we talked about.
We feel really good about Lumina and the launch that we have in iTero and the further expansion that, that can drive, as well as some of the new products like IPE and others to really not only help those unit sales there, but then as Joe described, we had to pull in other products around Invisalign First and others to really help drive some of that growth that we could see in the teen business. So, it’s a combination of things, Nate, but it’s what we’re seeing in stability, how we’re executing on our core strategies and then some of the new products really supplementing that extended growth to help us. And that’s why we adjusted our total year.
Nathan Rich: Okay. That’s helpful. And then, John, maybe just sticking with you, the 2Q operating margin, I know up slightly sequentially, but down year-over-year. And I think historically it’s been a little bit variable, but you’ve seen more of a step up in the second quarter than I think what the guidance implies. Anything to call out with respect to FX or I think you mentioned some manufacturing cost spend, but just anything there that we should keep in mind as it regards the margin cadence?
John Morici: Well, and certainly, we are seeing a stronger dollar. So that’s something that we talked about when we think about our guide, too, we see a stronger dollar coming out of the first quarter into the second quarter. Our guide reflects that as well. But then you look at the continued investments that we’re making to be able to drive more submitters, more doctors into our ecosystem and then ultimately drive more and more utilization. Some of it is that the core business that we have to able to drive growth, and some of it’s some of the new products where there is a certain amount of OpEx spend that we have with that. But we’re being very mindful of what we can do to be able to drive growth and then what it also means from an operating margin standpoint. And we’re delivering that sequential improvement from 1Q to 2Q in operating margin, and then talk to the total year of being up on a year-over-year basis.
Nathan Rich: Great. Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Erin Wright with Morgan Stanley. You may proceed.
Erin Wright: Great. Thanks. Hi. I’ll ask my two upfront here, but I’ll follow-up on the guidance and I don’t want to belabor this too much. But do you think you have better visibility now just on the underlying demand trends globally? Or would you say that there’s still an element or healthy element of macro uncertainty that still embedded in your guidance and some conservatism there? And then, second would be on Lumina and the launch. And just can you talk about where you’re seeing the most success with the launch in the target markets and promotions that where you’re focused in terms of expanding share and upgrades as well? Thanks.
John Morici: Hi, Erin. This is John. I’ll talk a little bit about visibility and guidance. I think what we enjoy now and what we want to be able to have in an operator environment is more stability and that stability is there. Markets are open. There’s a higher — overall higher inflation and interest rates, but people are operating in that environment. That stability transcends it to other things that we have. We see the Michigan index or other indices that kind of point to that stability. Based on that stability, the investments that we’re making, how we’re going to market, some of the new products that we have, other things that we know that can, on a core basis, drive our business as well as the new products and initiatives that we have, that’s what gives us confidence to be able to have a guidance that we gave for Q2 and what it means for the total year.
Joe Hogan: Yeah. Erin, on the Lumina piece, it’s Joe, obviously, is, as I mentioned in the closing on my script, we’re really excited about that technology. We’ve been working on it for six years. It is a true new platform. It’s not a derivative of the old confocal imaging platform, and there’s really no other scanner in the world that’s like that and how we’ve built it. So — and it’ll take a while for the — I think the market to absorb that as you have to do this doctor by doctor and place by place. But we’ve had a very enthusiastic response from the orthodontic community, but also the general dentistry community, too, even though we’re not completely ready for the restorative piece. And we mentioned it will be the fourth quarter this year, we’ll have that capability out.
