Align Technology, Inc. (NASDAQ:ALGN) Q3 2023 Earnings Call Transcript

Align Technology, Inc. (NASDAQ:ALGN) Q3 2023 Earnings Call Transcript October 25, 2023

Align Technology, Inc. misses on earnings expectations. Reported EPS is $2.14 EPS, expectations were $2.26.

Operator: Welcome to Align Technology, Third Quarter 2023 Earnings Call. [Operator Instructions] Please note that this conference call is being recorded. I would now like to turn the conference over to your host, Shirley Stacy, with Align Technologies. You may begin.

Shirley Stacy: Thank you. 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 third quarter 2023 financial results today via Businesswire, which is available on our website at investor.aligntech.com. Today’s conference call is being audio webcast and will be archived on our website for approximately one month. As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Align’s future events, products and 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.

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Actual results may vary significantly and Align expressly assumes no obligation to update any forward-looking statement. We have posted historical financial statements, including the corresponding reconciliations, including our gap to non-GAAP reconciliation if applicable, and our third quarter 2023 conference call slides on our website under Quarterly Results. Please refer to these files for more detail. Note as of Q3, DSP touch-up cases and associated revenues have been reclassified to the non-comprehensive clear Aligner segment and are now reflected in our reported clear Aligner case volumes, revenues and business metrics. Prior to this quarter, they were not reported in the non-case category. Unless otherwise stated all metrics include DSP touch up cases in reported clear Aligner volumes.

With that, I’ll turn the call over to Align technologies President and CEO Joe Hogan. Joe?

Joseph Hogan: Thanks, Shirley. Good afternoon and thanks for joining us. On our call today I’ll provide an overview of our third quarter results and discuss a few highlights from our two operating segments, Systems and Services and Clear Liners. Jon will provide more detail on our Q3 financial performance and comment on our views for the remainder of the year. Following that, we’ll come back and summarize a few key points and we’ll take questions. Our third quarter results reflect lower than expected demand in a more difficult macro environment than we experienced in the first half of 2023. Dental practices and industry research firms have reported deteriorating trends, including decreased patient visits and increased patient cancellations, along with fewer orthodontic case starts overall, especially among adult patients.

The September Gauge report, which reflect more than 1200 North American Orthopactices shows deceleration for orthodontic treatment, and new orthodontic patient appointments were down 8.7% year over year, and ortho case starts were down 6.9% year over year, the biggest decrease in over a year. Despite these headwinds, total Q3 worldwide revenues of 960 million were up 7.8% year over year, with growth across all regions. For Q3, we had record clear liner shipments to teenage and younger patients, which increased 10% sequentially, and 8.4% year over year, driven by continued strength from iInvisalign First. Q3 year over year revenue growth also reflects improvement in APAC, offset by more pronounced summer seasonality in EMEA and North America.

Our Q3 systems and services revenues were up 4.9% year over year despite continued challenges for capital equipment, primarily due to higher iTero scanner volumes in the Americas and APAC regions, reflecting certified preowned or what we call CPO sales, scanner, leasing and rental programs, as well as increased services revenue. Q3 systems and services revenues were down sequentially, primarily due to a weaker capital equipment cycle, as well as lower non-systems revenues. This was partially offset by higher scanner volumes in the Americas, reflecting an increased mix of iTero 5D plus scanners, including more trade in trade ups for DSO customer in Q3. Q3 non-case revenues were up 13.5% year over year, primarily due to continued growth from Vivera retainers and increased adoption of Invisalign Doctor Subscription Program, or DSP, our monthly subscription based clear liner program, which includes retainers, low stage touchup and clear liner treatment.

For Q3, we shipped over 19,000 DSP touchup cases, primarily in North America, an increase of more than 70% year over year from Q3 ’22. DSP continues to be well received by our customers and is currently available in the US, Canada, Iberia and the Nordics. We are excited about the DSP is proving helpful to doctors and their patients. We’re continuing to expand the program in EMEA and with certain DSO partners in Q4. For Q3, total clear aligner volumes were down 3.3% sequentially and up 2.3% year over year, primarily reflecting weaker than expected demand for orthodontic treatment, especially for adult patients. As I said earlier, despite soft consumer trends, our teen and younger patient business was strong across all regions, up both sequentially and year over year, primarily due to continued adoption of invisalign first for kids as young as six years old.

In terms of invisalign submitters, the total number of doctors shipped for Q3 increased sequentially to approximately 85.2 thousand doctors, the highest number in two years, driven by the Americas and APAC regions. From a channel perspective, orthodontist submitters were up year over year, especially from doctors submitting teenage cases, offset by fewer GP dentists year over year, particularly in the Americas. On a geographic basis, Q3 clear aligner volumes reflect a sequential increase in invisalign shipments from the APAC and Latin American regions, as well as North American Invisalign teenage cases, this is offset by lower volume and more pronounced softness from summer seasonality in EMEA and North America, primarily invisalign adult cases.

For the America’s invisalign case volume, Q3 ’23 was down sequentially, primarily due to lower invisalign adult shipments in the GP channel and slightly down year over year. Q3 ’23 clear aligner volumes reflect increased submitters in the Ortho channel, with an increase in teen and younger case starts driven by momentum from invisalign first. This is reflected in the September Gauge data, which shows an invisalign orthostart performed better than wires and brackets and other clear liners. In North America, adoption of invisalign comprehensive three and three product drove sequential volume growth in Q3 ’23. Invisalign DSP touchup cases in North America also drove growth sequentially year over year. For a EMEA [ph] Q3 Three clear liner volumes were down sequentially, primarily from the impact of Q3 summer seasonality when doctors offices are closed for summer vacations and more consumers are traveling.

This was partially offset by sequential growth in Italy, Benelux, Turkey and the Middle East. Year over year clear liner volumes were up reflecting continued adoption of invisalign moderate, the comprehensive three and three product, as well as an increase in Teen Case starts, driven primarily by Invisalign first and our new Invisalign Teen Case packs. For APAC Q3’23 Clear Aligner volumes were up sequentially and up year over year reflecting improving trends in China as well as other key markets like India, Taiwan, Korea, Japan and Thailand. Q3 APAC results also reflected increased invisalign submitters and higher utilization, especially for teen patients driven by growth from invisalign first in the Orthodontic channel during our typically strong teen season in China.

Q3 APAC results also reflect growth in a GP channel with increased invisalign submitters and higher utilization sequentially and year over year. During Q3, we continue the rollout of Invisalign comprehensive three and three product in APAC most recently launched in China. Invisalign comprehensive three and three is also available in Hong Kong, Korea, Taiwan and India. We are pleased with the adoption of the three and three product in APAC, where the majority of cases treated are comprehensive, allowing our doctor customers more flexibility within the invisalign product portfolio. During the quarter, we also shipped to a record number of doctors in APAC, increasing both sequentially and year over year. Invisalign is the most trusted brand in the orthodontic industry globally, and it’s important that we continue to create demand for invisalign clear aligners, especially given the macroeconomic pressures on doctors and their patients.

In Q3- three, we delivered 11.1 billion impressions and had 27.7 million visits to our websites globally. To increase awareness and educate young adults, parents and teens about the benefits of the invisalign brand, we continue to invest and create campaigns in top media platforms such as TikTok, Instagram, YouTube, Snapchat, WeChat and Dillion across markets. The underlying market opportunity for clear liner of treatment, especially for teens and kids, remains huge and significantly underpenetrated. We know invisalign clear liner of treatment is faster and more effective than Braces [ph] yet the vast majority of orthodontic cases are still treated using brackets and wires. Differentiation is key to increasing invisalign share of the orthodontic case starts, especially among teens and their parents.

We are continuing to differentiate through novel campaigns such as our new Invis is Drama Free campaign ., which uses humor to juxtapose the significant benefits of invisalign treatment over metal braces. Similarly, to differentiate invisalign treatment for adults, we launched new campaigns globally using powerful patient stories that share how important a smile is and how invisalign treatment increases self confidence that transforms lives. Reaching young adults as well as teens and their parents also requires the right engagement through invisalign influencers and creator centric campaigns, which delivered 5.8 billion impressions in the Americas in Q3. Creators such as Michael Simoneau, Jalen Hall, NFL player Darren Warren and also Leilani Green showed their results and why they chose to transform their smiles with invisalign aligners.

In the EMEA [ph] region, we partnered with Influencers to reach consumers across social media platforms including TikTok and Meta, and launched our Global Consumer Campaign for teens and parents of teens, highlighting the benefits of invisalign treatment versus braces. In Germany, we continue to see positive engagement with our patient testimonial campaigns launched in the previous quarter. Our consumer campaigns delivered more than 1.4 billion media impressions and 6.9 million visitors to our website. We continue to invest in consumer advertising across the APAC region, resulting in more than 3.9 billion impressions and 11.9 million visitors to our websites in the quarter. We expanded our reach in Japan and India via Meta and YouTube, and partnered with key Influencers to reach consumers across social media.

We saw increased brand interest from consumers, as evidenced by an over 800% increase in unique visitors to our website in India and 135% increase in Japan. Finally, digital tools such as My Invisalign Consumer and Patient app continue to increase with 3.4 million downloads to date and over 367,000 monthly active users, representing a 19% year over year growth. With that, I’ll now turn the call over to John.

John Morici: Thanks Joe. Now for our Q3 ’23 financial results. Total revenues for the third quarter were $960.2 million, down 4.2% from the prior quarter and up 7.8% from the corresponding quarter a year ago. On a constant currency basis, Q3 revenues were impacted by unfavorable foreign exchange of approximately $2.7 million, or approximately 0.3% sequentially and favorably impacted by approximately $4.2 million year over year, or approximately 0.4%. For clear aligners, Q3 revenues of $794.9 million were down 4.5% sequentially, primarily from lower volumes and lower ASPs. On a year over year basis, Q3 clear aligner revenues were up 8.5%, primarily due to higher ASPs, higher volumes and higher non case revenues. For Q3 invisalign ASPs for comprehensive treatment were down sequentially and up year over year.

On a sequential basis, ASPs reflect larger discounts, product shift, mix shift to lower priced products and unfavorable foreign exchange, partially offset by higher additional aligners. On a year over year basis, the increase in comprehensive ASPs reflect higher additional aligners and price increases, partially offset by larger discounts and unfavorable product mix shift. For Q3 invisalign ASPs for non-comprehensive treatment were down sequentially and up year over year. On a sequential basis the decrease in ASPs reflects larger discounts, higher sales credits, and unfavorable product mix, partially offset by higher additional liners and favorable foreign exchange. On a year over year basis, the increase in non-comprehensive ASPs reflects price increases, higher additional aligners and favorable foreign exchange, partially offset by product mix shift.

In Q1 ’23 we launched the invisalign comprehensive Three and Three product. The Three and Three configuration offers our doctor customers invisalign comprehensive treatment with three additional liners included within three years of the treatment end date, instead of unlimited additional liners within five years of the treatment end date. At the 2022 Invisalign comprehensive product price, Invisalign comprehensive Three and Three product is available in North America and in certain markets in EMEA and APAC, most recently launching in China, Korea, Hong Kong and Taiwan. We are pleased with the continued adoption of the Invisalign comprehensive Three and Three product and anticipate it will continue to increase, providing doctors the flexibility they want and allowing us to recognize more revenue upfront with deferred revenue being recognized over a shorter period of time compared to our traditional Invisalign comprehensive product.

As we begin to ship more additional aligners for comprehensive Three and Three products, we expect to see an ASB benefit. As revenues from subscriptions, retainers and other ancillary products continue to grow globally some of the historical metrics that only focus on case shipments are expected to account for a lesser percentage of our overall growth. In our earnings release and financial slides, you will see that we have added our total clear aligner revenue per case shipment, which we believe to be a more indicative measure of our overall growth strategy. Q3 ’23 clear aligner revenues were impacted by unfavorable foreign exchange of approximately $2 million, or approximately 0.3% sequentially. On a year over year basis clear aligner revenues were favorably impacted by foreign exchange of approximately $3.8 million, or approximately 0.5%.

Clear aligner deferred revenues on the balance sheet increased $14.1 million, or up 1.1% sequentially and up $116 million or up 9.9% year over year, and will be recognized as the additional liners are shipped. Q3 ’23 systems and service revenues of $165.3 million were down 2.5% sequentially, mostly due to unfavorable ASPs and lower revenues from our certified preowned program, partially offset by higher scanner volume and higher services revenues. On a year over year basis, Q3 ’23 systems and services revenue were up 4.9% due to higher scanner volume, higher services revenue from our larger base of scanners sold, and higher revenues from our certified preowned and leasing rental programs, partially offset by unfavorable ASPs. Q3 ’23 systems and services revenues were impacted by unfavorable foreign exchange of approximately $0.7 million, or approximately 0.4% sequentially.

On a year over year basis system and services revenues were favorably impacted by foreign exchange of approximately $0.4 million, or approximately 0.3%. Systems and services deferred revenues on the balance sheet was down $4.4 million, or 1.6% sequentially, primarily due to the decrease in the deferral of service revenues included with scanner purchases and essentially flat or up slightly to 0.1 million or 0.1% year over year. Services deferred revenues will be recognized ratably over the service period. As our scanner portfolio expands and we introduce new products, we increase the opportunities for customers to upgrade, make trade ins and purchase certified pre owned scanners in certain markets. Developing new capital equipment opportunities to meet the digital transformation needs of our customers and DSO partners is a natural progression for our equipment business with a large and growing base of scanners sold.

Moving on to gross margin, third quarter overall gross margin was 69.1%, down 2.1 points sequentially and down 0.5 points year over year. Overall gross margin was unfavorably impacted by foreign exchange by approximately 0.1 point on a sequential basis, and favorably impacted by foreign exchange by approximately 0.1 point on a year over year basis. Clear aligner gross margin for the third quarter was 70.7%, down 1.7 points sequentially, primarily from higher manufacturing spend and a higher mix of additional aligner volume and lower ASPs. Clear aligner gross margin for the third quarter was roughly flat year over year, primarily due to increased manufacturing spend as we continue to ramp up operations at our new manufacturing facility in Poland, partially offset by higher ASPs. Systems and services gross margin for the third quarter was 61%, down 4.1 points sequentially, primarily from lower ASPs, partially offset by favorable manufacturing variances, lower service and freight costs, and higher services revenues.

Systems and services gross margin for the third quarter was down 2.3 points year over year, primarily from lower ASPs, partially offset by favorable manufacturing variances, lower service and freight costs, favorable foreign exchange, and higher service revenues. Q3 ’23 operating expenses were $496.7 million, down sequentially 8.3% and up 4.5% year over year. On a sequential basis, operating expenses were down $44.9 million, primarily from lower consumer marketing spend and lower incentive compensation. Year over year, operating expenses increased by $21.2 million, primarily due to higher incentive compensation in our continued investments in sales and R&D activities, partially offset by controlled spending on advertising and marketing, as part of our efforts to proactively manage costs.

On a non-GAAP basis, excluding stock based compensation and amortization of acquired intangibles related to certain acquisitions, operating expenses were $458.2 million, down 9.3% sequentially and up 3.3% year over year. Our third quarter operating income of $166.3 million resulted in an operating margin of 17.3%, up 0.1 points sequentially and up 1.2 points year over year. Operating margin was unfavorably impacted by approximately 0.3 points sequentially, primarily due to foreign exchange. The year over year increase in operating margin is primarily attributable to operating leverage, partially offset by investments in our go to market teams and technology, as well as unfavorable impact from foreign exchange by approximately 0.1 point. On a non-GAAP basis, which excludes stock based compensation and amortization of intangibles related to certain acquisitions, operating margin for the third quarter was 21.8%, up 0.5 points sequentially and up 1.6 points year over year.

Interest and other income expense net for the third quarter was a loss of $4.2 million, compared to a loss of $0.3 million in the second quarter and a loss of $21 million in the third quarter a year ago, primarily due to foreign exchange. The GAAP effective tax rate for the third quarter was 25.1% lower than the second quarter effective tax rate of 34.8%, and lower than the third quarter effective tax rate of 40.7% of the prior year. The third quarter GAAP effective tax rate was lower than the second quarter effective tax rate, primarily due to the application of newly issued tax guidance and lower US taxes on foreign earnings in Q3. As a reminder, in Q4 ’22, we changed our methodology for the computation of our non-GAAP effective tax rate to a long term projected tax rate and have given effect to the new methodology from January 1, 2022, and recast previously reported quarterly periods in 2022 2022.

Our non-GAAP effective tax rate in the third quarter was 20%, reflecting the change in our methodology. Third quarter net income per diluted share was $1.58, up sequentially $0.12 [ph] and up $0.65 compared to the prior year. Our EPS was unfavorably impacted by $0.08 on a sequential basis and unfavorably impacted by $0.05 on a year over year basis due to foreign exchange. On a non GAAP basis, net income per diluted share was $2.14 for the third quarter, down $0.08 sequentially and up $0.51 year over year. Note that the prior year 2022 non-GAAP net income and prior year 2022 non-GAAP EPS reflects the Q4 ’22 change in our methodology for the computation of our non-GAAP effective tax rate. Moving on to the balance sheet. As of September 30, 2023, cash equivalents and short and long term marketable securities were $1,301.9 billion [ph] up sequentially, $268.1 million, and up $160.9 million year over year.

Of our $1.3 billion dollar balance, 381 million was held in the US and $920.6 million was held by our international entities. Q3 accounts receivable balance was $904.2 million down sequentially, our overall day sales outstanding was 84 days, up approximately three days sequentially and down approximately two days as compared to Q3 last year. Cash flow from our operations for the third quarter was $287.2 million. Capital expenditures for the third quarter were $21.6 million, primarily related to our continued investments to increase aligner manufacturing capacity and facilities. Free cash flow, defined as cash flow from operations, less capital expenditures amounted to $265.6 million. Now, turning to our fourth quarter outlook. For Q4 ’23, assuming no circumstances occur that are beyond our control, we anticipate our worldwide revenue to be in the range of $920 to $940 million down sequentially from Q3 of ’23.

We expect both clear aligner and systems and services revenues to be down sequentially, reflecting a more challenging macro environment for doctors and patients with fewer orthodontic case starts overall unfavorable foreign exchange given the strengthening of the US dollar against key currencies and longer sales cycles for capital equipment purchases. For our clear aligner business, we expect clear aligner teen volume to be seasonally lower in Q4 of ’23, and we don’t anticipate improvement in adult volumes. For Q4 ’23, we also expect clear aligner ASPs to be down sequentially, primarily due to the strengthening US dollar. For our systems and services business, we anticipate increasing headwinds for macro uncertainty and potential supply issues related to the war in the Middle East.

We expect our Q4 ’23 GAAP operating margin to be down sequentially from Q3 of ’23 due to restructuring primarily related to severance as we adjust headcount for this environment. We anticipate our non-GAAP operating margin to be up sequentially from Q3 of ’23. During Q1 ’23, we announced that our Board of Directors authorized a new $1 billion stock repurchase program to succeed the 2021 $1 billion program. Currently, $1 billion remains available for repurchase under the 2023 stock repurchase program. During Q4 ’23, we expect to repurchase up to $250 million of our common stock through either or a combination of open market repurchases or an accelerated stock repurchase agreement. For full year 2023, assuming no circumstances occur that are beyond our control, we anticipate our 2023 worldwide revenue to be in the range of $3.83 billion to $3.85 billion.

We also expect our full year 2023 GAAP operating margin to be roughly one point lower than 2022 and our 2023 non-GAAP operating margin to be slightly above 21%. For 2023, we expect investments in capital expenditures to be approximately $200 million. Capital expenditures are expected to primarily relate to building construction and improvements as well as manufacturing capacity in support of our continued international expansion. With that, I’ll turn it back over to Joe for final comments. Joe.

Joseph Hogan: Thanks, John. While our third quarter results and fourth quarter outlook reflect weaker consumer sentiment and increased headwinds including foreign exchange, Align is in a unique position to continue driving the digital revolution in the dental industry to help doctors transform and grow their practices with invisalign clear aligners, Itero Scanners and Align digital platform. We are very excited about the recent innovations developed to further revolutionize digital treatment planning for Orthodontics and also restore to dentistry by providing doctors with greater flexibility, real time treatment plan modification capabilities, and digital solutions to help improve practice productivity and patient experience, which are even more important to our customers in the current environment.

This includes clincheck live update for 3D controls invisalign practice App, invisalign personal plan or IPP, Invisalign Smile Architect, Itero exocad [ph] connector Invisalign Outcome Simulator pro and invisalign virtual Care AI software. These digital tools are continuing to gain adoption and help doctors gain efficiencies. In Q3 Clincheck Live Update was used by 41,000 doctors on more than 560,000 cases, reducing time spent and modifying treatment by 21%. Invisalign Practice app is now actively used by about 87,000 doctors, with over 5.2 million photos uploaded during the quarter via the Practice app. In addition, we will launch Invisalign Pallet expander or IPE system in Canada this quarter. IP is our first direct printed orthodontic device that provides a safe, comfortable, and clinically effective alternative to metal paddled, expanders and boosts our market opportunity in the teen market by addressing a portion of cases we couldn’t otherwise treat without IPE.

In summary, we’re committed to balancing our investments in near and long term growth drivers while delivering improved operating margin as we navigate one of the most challenging operating environments in recent history with increasing macroeconomic pressure on doctors and their patients, we have an enormous opportunity to continue driving adoption of digital orthodontics and restorative dentistry and a responsibility to optimize our investments for the current environment. Before turning the call over for questions, I’d like to address the war in the Middle East and our Itero scanner business. The situation continues to evolve and is very fluid. We are monitoring developments closely. Our singular focus at this stage is on the safety and security of our employees and their families and our doctors and their staff and patients.

Align offices and scanner manufacturing facility in Israel are currently open and operating. While we hope the situation will improve, we’re preparing mitigation plans to ensure business continuity and we’ll update our customers and other stakeholders as needed. Now I’ll turn the call back over to the operator for questions.

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Q&A Session

Operator: Certainly. [Operator Instructions] And our first question comes from the line of Jason Bednar from Piper Sandler. Your question, please.

Joseph Hogan: Hi, Jason.

Operator: Jason, you might have your phone on mute.

Shirley Stacy: Operator, you want to go to the next question?

Operator: Certainly.

Shirley Stacy: And we’ll come back.

Operator: Certainly. One moment. And our next question comes in line Brandon Vazquez from William Blair. Your question, please.

Brandon Vazquez: Hey, everyone, thanks for taking the question. On the first one, maybe can we just start a little bit? It sounds like macro, and given the data that you guys were talking about is probably getting a little worse into the end of the year. Maybe just talk about how that kind of trended through the quarter, how we’re trending now. I think what a lot of us are trying to get our head around is what’s the direction of macro in the dental space going into the end of the year and into 2024, especially as you look at kind of the consumer and then CapEx on scanners. So how are you guys seeing that from your end right now?

Joseph Hogan: When you look at the fourth quarter and the way we have done our forecast overall, we felt great about teens in the third quarter and what we reported to, but adults were really highly affected. And when you run through the fourth quarter, it’s primarily an adult season for us. And China is a big teen season in the third quarter, too. When you look at the gauge data for September and what we see in October so far, and even some of the consumer profiles around how they’re feeling about their finances and all, we’ve basically just projected what we’ve seen in September forward to the fourth quarter.

Brandon Vazquez: Okay. And then maybe as a follow up on the teen side, it sounds like the Ortho channel, based off the market data you have, is that teens are declining year over year. But you guys, or at least sequentially, you guys are up both, it looks like. So are you guys taking share within the teen market? It’s a little bit of a funny dynamic because I think earlier this year, as the Ortho channel got a little weaker, they were going to wires and brackets. But it seems like now you’re taking share. How durable is that and what are you guys kind of seeing that’s driving that in the underlying market? Thanks.

Joseph Hogan: We were happy to see that change and the gauge data that showed wires and brackets going down and competitive aligners going down and us going up. But you can’t draw a line through one dot. We feel good again about the technology and all that. We’re presenting the Efficiencies and all we’re offering to Orthodontists, and we think that’s a good stimulant in that sense. But right now, we’re going to have to take this thing quarter to quarter.

Operator: Thank you. One moment for our next question. And Jason Bednar from Piper Sandler. Your line is open.

Joseph Hogan: Hi, Jason.

Operator: Jason, we’re still not hearing you. Shall I move on? Yes, please. Certainly. One moment for our next question. And our next question comes from the line of Jeff Johnson from Baird. Your question, please.

Operator: Mr. Johnson, your line is open. One moment – certainly as we go to our next question. Our next question comes from the line of Jon Block from Stifel. Your question, please.

Jon Block: Hey, guys, can you hear me okay?

Joseph Hogan: Hey, John. Just fine.

Jon Block: All right, so far so good. Maybe a couple of questions. I’ll start right now, you just seem highly tethered to the consumer. But in ’24, you’ve got some incrementals, right? You just launched IP in Canada. You’ve got remote monitoring. We think maybe you have a new scanner. So just like your thoughts on the ability for the company to manufacture more of your own growth in 2024, and any commitment to grow revenues year over year in ’24. And where I’m going with that is even the revised guidance you’ll grow year over year in 2H ’23. But if I annualize your 4Q number and just sort of run rate that you arguably land down year over year with call it a more dynamic set of innovation. So not asking for a number, but clearly things are moving around. And how do we think about what that means again, to manufacture your own growth in ’24 and any commitment to have positive revenue growth in ’24?

Joseph Hogan: Hey, John, it’s a good question that’s one of the things we talk about obviously here is with what we presented at the Investors conference and the new technology that we’re offering, those are areas that we can really expand what we call our penetration in the marketplace and control a certain amount of our destiny. I think you know as well as know we can’t fight a market from a down standpoint in the sense of that that won’t affect us in some way. I would throw DSP into that whole question also because you see the continued growth in DSP and I’d say a business model change. And so those kinds of things, I feel like we can drive more demand in the marketplace as we get into 2024. I just can’t preclude what that consumer sentiment is going to look like at that point in time, but it certainly gives us also the efficiency gains that we show through the software that I just talked about in my script, too, with different orthodontists that seem to be taking hold and you pick up in your surveys also, John.

So we do feel good about that. It’s just the uncertainty of this marketplace and it obviously surprised us coming out of the third quarter. We’re going to have to get through this quarter, and as we go into 2024, we can be more specific about what we think, what that opportunity is.

Jon Block: Okay, that was very helpful. And then maybe just this might build on Brandon’s question earlier, but when you guys guide, you’ve got almost half the quarter in the bag. So clearly things changed, notably in the last seven weeks of the third quarter. I know you guys called out Gage’s September data. Joe, you referenced the October what was the 3Q deviation? I mean seems like it was largely North America. And EMEA, did APAC perform as expected, if you could answer that. And then I guess where I’m struggling is I think we all know it’s not a robust consumer out there and that narrative around soft landing or not, if that holds true, but it doesn’t seem like things changed all that dramatically in the last seven weeks. And so anything you can give Joe to elaborate, because clearly the exit rate in the quarter was very different than the way things started. Thank you.