Greetings. Welcome to the Align Q3 2022 earnings call. At this time, all participants are in a listen mode only. A question and answer session will follow the formal presentation. Please note this conference will be recorded. I would now like to turn the conference over to our host, Shirley Stacy with Align Technology. 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 Q3 2022 financial results today via Business Wire, 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. A telephone replay will be available today by approximately 5:30 P.M. Eastern time through 5:30 P.M. Eastern time on November 9. To access the telephone replay, domestic callers should dial 866-813-9403 with access code 119351. International callers should dial 929-458-6194 using the same access code.
As a reminder, the information provided and discussed today will include forward-looking statements, including statements about Align's future events and product outlook. These forward-looking statements are only predictions and involve risks and uncertainties that are described in more detail in our most recent periodic reports filed with the Securities and Exchange Commission, available on our website and at sec.gov. Actual results may vary significantly, and 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 reconciliations, if applicable, and our Q3 2022 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.
Thanks, Shirley. Good afternoon, and thanks for joining us. On our call today, I'll provide an overview of our Q3 results and discuss the performance of our two operating segments, system and services, and clear aligners. John will provide more detail on our financial performance and our view for the remainder of the year. Following that, I'll come back, summarize a few key points and open the call to questions. Our Q3 results reflect the continued macroeconomic uncertainty and weaker consumer confidence, as well as significant impact from unfavorable foreign exchange rates across currencies that affect our operations. On a constant currency basis, total Q3 revenues were reduced by $25 million or 2.7% sequentially, and $57.4 million or 6.1% year-over-year, one of the largest quarterly foreign exchange impacts in our history.
We remain confident in the execution of our strategic growth drivers despite the continuing economic headwinds. In Q3, we reached our 14 millionth Invisalign patient milestone during the quarter, which includes nearly 4 million teenagers and kids as young as six years old, who have been treated with Invisalign clear aligners. In Q3, teen case starts of 200,000 were up 13% sequentially and just off slightly compared to Q3 2021 a year ago, when a record 206,000 teenagers started Invisalign treatment. We're also excited to be launching significantly new products and technologies that further enhance the Align digital platform.
Leading a digital transformation of the practice of dentistry during the quarter, we also began to commercialize ClinCheck Live Update software, Invisalign Practice App, Invisalign Personalized Plan, Invisalign Smile Architect, the Invisalign Outcome Simulator Pro with in-face visualization, cone beam computed tomography integration with ClinCheck software Invisalign Virtual Care AI software, and iTero-exocad Connector. These technology advancements represent an important expansion of our digital platform that we believe will help our doctor customers increase treatment efficiency and deliver superior clinical outcomes and patient experiences, positioning us to drive growth when the market inevitably rebounds. We'll be showcasing these innovations next month at the Invisalign Ortho Summit, Las Vegas, the premier education and networking experience for Invisalign practices with the most peer-to-peer presentations of any Invisalign education event. The Q3 systems and services interest in our iTero scanners was good with increased product demos across the regions.
Doctors are increasingly recognizing the substantial benefits of intraoral scanning and end-to-end digital workflows with the iTero scanner and imaging systems. At the same time, increasing inflation, rising interest rates, and less patient traffic in dental practices are lengthening sales cycles and conversion time. For Q3, system and services revenues of $157.5 million were down sequentially year-over-year. On a constant currency basis, unfavorable foreign exchange reduced Q3 2022 systems and services revenues by approximately $4.1 million or 2.5% sequentially, and approximately $9.9 million or 5.9% year-over-year. For Q3, scanner services year-over-year revenue growth was strong across all regions, particularly due to increased subscription revenue driven by growth of the installed base of iTero scanners.
Year-over-year growth also reflects increased sales of iTero wand lease and continued growth of our scanner leasing rental programs. We continue to work closely with our doctor customers to support their practice growth and digital transformation goals. This includes understanding different ways to enable them to navigate to more uncertain economic environment. Over the past year, we've had good success rolling out new leasing programs in Latin America and certified pre-owned or CPO, as we call it, options in India and North America. We're also looking at new opportunities on the capital equipment side for our DSO partners. This is a natural progression in an equipment business with a large and growing installed base. As we introduce new products, there are more opportunities for customers to upgrade, to make trade-ins, and to provide refurbished scanners for emerging markets, too.
We expect to continue to roll out programs that are especially helpful for customers in the current macroeconomic environment. It's selling the way doctors and customers want to do business and leveraging our balance sheet. We're still early. We're pleased with the contribution and margin accretion we're seeing. For our clear aligner segment, macroeconomic uncertainty and waning consumer confidence continues to impact the dental market overall, making for a challenging operating environment across the board. For Q3, third-party reports indicate there are fewer new patient visits, less traffic flow, and lower orthodontic case starts overall. Our clear aligner volumes further reflect the underlying orthodontic market trends and a shift away from adults toward teens in Q3.
Q3 clear aligner revenues were down 8.2% sequentially and down 12.5% year-over-year compared to Q3 2021 year-over-year revenue growth rates of +35%. On a constant currency basis, Q3 2022 clear aligner revenues were reduced by unfavorable foreign exchange of approximately $21 million or approximately 2.8% sequentially, and approximately $47.4 million or approximately 6.1% year-over-year. For the quarter, Q3 aligner volumes reflect a sequential increase in Invisalign shipments from Asia Pacific and Latin America, as well as North America Invisalign Teen cases, offset by lower volume in EMEA and North America, primarily Invisalign adult cases. For Q3, Invisalign First for kids as young as six grew year-over-year and was strong across all regions.
On a trailing twelve-month basis, as of Q3, Invisalign clear aligner shipments for teens and young kids using Invisalign First, up year-over-year to over 734,000 cases. For Q3, the total number of new Invisalign trained doctors increased sequentially 8.5%, driven by North America and Asia Pacific. In terms of Invisalign submitters, the total number of doctors shipped to for Q3 increased sequentially to 84,400 doctors, the second highest number this year, driven by Asia Pacific and the Americas. From a channel perspective, ortho submitters were slightly year-over-year up, especially from doctors submitting teen cases, offset it by a few GP dentists year-over-year, especially in EMEA.
For other non-case revenues, which include retention products such as the Vivera Retainers, clinical training and education, accessories, e-commerce, and our new subscription programs such as our DSP, Q3 revenues were up both sequentially and year-over-year. This reflects strong growth in retainers sequentially and year-over-year growth across all regions driven by more submitters. In the US, revenues for our doctor subscription program increased sequentially and year-over-year. I'm very pleased to see continued momentum in non-case revenues driven by subscription-based programs that we expect to continue to expanding across the business. Now let's turn to the specifics around the Q3 results, starting with the Americas. The Q3 Invisalign case volumes for Americas was down sequentially single-digit % and primarily due to lower Invisalign adult shipments.
The environment remains challenging and feedback from our customers indicates consumer financing and patient no-shows affecting their practices in Q3, especially with adult patients. Q3 Invisalign volume also reflects increased case submissions from orthodontic channel and sequential growth in the teen segment. For Q3, teen patients were most resilient, reflecting continued momentum in younger patients with Invisalign First, as well as the new Invisalign Teen Case Packs. During Q3, Invisalign Teen Case Packs grew both sequentially and year-over-year. As a reminder, Invisalign Teen Case Packs, a new subscription program that enables orthodontists to buy clear aligners in packs in advance. They also include exclusive practice development benefits with the Invisalign brand and require an incremental volume commitment from doctors. Teen Case Packs are currently available in the U.S., Canada, and France, and we expect to be expanded more in the EMEA region.
Turning to our international business for Q3, Invisalign clear aligner volume was down very slight sequentially, 1.4%, with strong sequential growth for APAC offset by lower volume in EMEA. For EMEA, Q3 operating environment was challenging. Inflation in the Eurozone is more than 10%, and global macroeconomic factors weighed on consumer sentiment and purchasing decisions, especially for adult patients, which compounded the impact of Q3 summer seasonality. Similar to Americas, doctors in EMEA also reported increased appointment cancellations and the impact of less patients financing their purchases. EMEA teen patients also resilient in Q3, increased sequentially in Iberia as well as France, where we introduced Teen Case Packs during the quarter. In APAC, Q3 sequential growth was led by China, Japan, and ANZ, despite ongoing COVID restrictions and lockdowns in parts of China and Japan.
On a year-over-year basis, Invisalign case volumes reflected increased shipments across almost all markets, led by Taiwan, Thailand, India, and Korea, driven by increased submitters. In Q3, APAC sequential growth also reflects strong demand from our expanded Invisalign clear aligner product portfolio in China. Recall in late April Q2, we introduced two new products that better serve the expanding market in China. Invisalign Adult and Invisalign Standard Clear Aligners leverage our proven technology while broadening our appeal to more consumer segments. Q3 was the first full quarter offering these new products that provide doctors and patients in China with broader clinical and affordable options for moderate to complex adult cases. Finally, I'm pleased to share that the Invisalign system was recently awarded the Good Design Award for 2022, making it the first orthodontic appliance to win the prestigious award in Japan.
In the judges' assessment of the Invisalign system, they emphasized that the opportunity for teeth straightening is high in Japan, and cited the barrier to adoption by Japanese consumers is resistance to metal braces, and praised the Invisalign system as an orthodontic solution that can improve the quality of life during treatment. We certainly recognize the importance of the Japanese market for digital orthodontics, and it's one of the reasons we opened our first office in Tokyo nearly 15 years ago, and established treatment planning operations in Yokohama a few years ago. Turning to new innovations, we continue to deliver our technology roadmap. As I mentioned earlier, during the quarter, we began to commercialize several new products and services that we previously announced would come to market in the H2 of 2022.
These technology advancements illustrate our commitment to continuous innovation in digital orthodontics, and we remain excited about the transformational projects that we're working on as we continue to drive the evolution of our industry. No other dental company has the experience, including over 14 million patients treated to date, to lead the transformation of the practice of dentistry. Our consumer marketing are focused on educating consumers about the Invisalign system and driving that demand to Invisalign doctors' offices, ultimately capitalizing on the massive market opportunity to transform 500 million smiles globally. In Q3, we built on our successful Invis is media campaign and continued our launch of the Invis is drama-free, targeted at teens, and Invis when everything clicks, targeted at adults. Our teen campaign, Invis is drama-free, highlights the benefits of Invisalign while humorously juxtaposing them with the significant trade-offs involved with using braces.
Our Invis is when everything clicks campaign showcases Invisalign treatment transforming smiles and the resulting confidence it gives to young adults. During Q3, we had over 4.3 billion impressions delivered in 14 million visits to our websites, a 1.6% year-over-year increase as a result of right-sizing our media investments. We're also right-sizing our consumer media investments across all core EMEA markets, impacting the impressions and unique visits. In the US, we continued our influencer and creator-centric campaigns, partnering with leading Smile Squad creators like Olympic gold medalist Suni Lee, Michael Le, Josh Richards, and Marsai Martin. Each of these creators shared their personal experience of the Invisalign treatment and why they chose to transform their smile with Invisalign aligners. Most recently, Suni Lee shared her positive experience with Invisalign in major media programming, including Good Morning America, People.com, resulting in over 93 million impressions.
We continue to invest in consumer advertising across APAC region, resulting in a 72% year-over-year increase in impressions and 29% year-over-year increase in unique visitors. Our ongoing campaigns were omnipresent across the top social media platforms such as TikTok, Snapchat, Instagram, and YouTube to increase the awareness of the Invisalign brand with young adults and teens. In Q3, we launched a global pilot on the Roblox platform within the popular game Livetopia, creating a fun experience for players to learn about the benefits of Invisalign treatment. To date, we had over 5.9 million impressions delivered and over 2.6 million unique visitors on the game experience. Adoption of My Invisalign consumer and patient app continues to increase with 2.2 million downloads to date. Usage of our key digital tools also continued to increase.
Live Update was used by 41,000 doctors on more than 395,000 cases, reduced time spent in modifying treatment by 18%. Invisalign Practice App has been downloaded 314,000 times to date. Further, we received more than 110,000 patient photos in our virtual care capability to date, providing rich global data to leverage our AI capabilities and improve our services for doctors and patients. The investments that we make to drive patient demand and conversion to support our doctor customers is unparalleled in our industry, leveraging the global recognition of the Invisalign system. No other dental company equals our brand strength today. For more details on our consumer marketing programs, please see our Q3 2022 earnings and conference slides. Turning to exocad.
Overall, I'm very pleased with our progress with the exocad business and its leadership in restorative dentistry. In addition to the iTero-exocad Connector I mentioned previously, during the quarter, we also introduced iTero NIRI. NIRI is near-infrared technology, intraoral camera images that are now automatically imported into DentalCAD when designing restorations, enabling technicians to visualize the internal and external tooth structure and optimize the process of margin line tracing. The new xSNAP module is a model attachment for a printable 3D articulated system featuring a spherical head, which allows a precisely executed movement. Ivoclar's Ivotion dental system, a complete workflow for digital production of high-quality removable dentures, is now available on exocad. Together, the iTero and exocad product portfolios help accelerate the digital transformation of dental practices by facilitating the way doctors and labs collaborate to deliver better care for their patients.
As part of the Align Business platform, the integration of iTero's digital scanning and exocad's complete software solution delivers seamless end-to-end digital workflows from diagnosis to treatment, planning and then fabrication. Customers are already utilizing the automated workflows, unlocking efficiencies and productivities, which are more important than ever in the current economic climate. With the recent integration of iTero NIRI and intraoral camera images unique to iTero Element 5D imaging systems and exocad Rijeka software release, Align is redefining restorative visualization and treatment planning for the doctors and labs. We are committed to continually innovating the dental industry to drive efficiency and clinical excellence for the benefit of our customers and their patients. With that, I'll now turn it over to John.
Thanks, Joe. Now for our Q3 financial results. Total revenues for the Q3 were $890.3 million, down 8.2% from the prior quarter and down 12.4% from the corresponding quarter a year ago. On a constant currency basis, Q3 2022 unfavorable foreign exchange reduced Q3 revenues by approximately $25.1 million sequentially and approximately $57.4 million year-over-year. For clear aligners, Q3 revenues of $732.8 million were down 8.2% sequentially, primarily due to lower volumes, unfavorable foreign exchange, higher promotions and discounts, and product mix shift, partially offset by higher additional aligners. On a year-over-year basis, Q3 clear aligner revenue were down 12.5%, primarily reflecting the aforementioned items, offset somewhat by per order processing fees and higher non-case revenues.
On a constant currency basis, Q3 2022 unfavorable foreign exchange reduced Q3 clear aligner revenues by approximately $21 million or approximately 2.8% sequentially, and approximately $47.4 million or approximately 6.1% year-over-year. For Q3, Invisalign ASPs for both comprehensive and non-comprehensive treatment decreased sequentially and year-over-year. On a sequential basis, the decline in ASPs reflect unfavorable impact from foreign exchange that Joe described earlier, as well as higher discounts and product mix shift, partially offset by higher additional aligners. On a year-over-year basis, the decline in ASPs reflect the significant impact of unfavorable foreign exchange, product mix shift, and higher discounts, partially offset by the higher additional aligners and per order processing fees.
As our revenues from subscription, retainers, and other ancillary products continue to grow and expand globally, some of the historical metrics that focus only on case shipments do not account for 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 is more indicative of our overall growth strategy. Clear aligner deferred revenues on the balance sheet increased $37 million or 3.3% sequentially, and $184 million or up 18.6% year-over-year and will be recognized as the additional aligners are shipped. During the three months ended September 30, 2022, we recognized $137.2 million that was included in the clear aligner deferred revenue balance at December 31, 2021.
Q3 2022 systems and services revenue of $157.5 million were down 8% sequentially, primarily due to lower scanner volume, partially offset by higher services revenues from our larger installed base, and were down 11.7% year-over-year, primarily due to lower scanner volume and lower ASP, partially offset by higher services revenue from our larger installed base. Q3 2022 systems and services revenue were unfavorably impacted by foreign exchange of approximately $4.1 million or approximately 2.5% sequentially. On a year-over-year basis, systems and services revenues were unfavorably impacted by foreign exchange of approximately $9.9 million or approximately 5.9%.
Systems and services deferred revenues on the balance sheet was up $4.1 million or 1.6% sequentially, and up $76.5 million or 40.9% year-over-year, primarily due to the increase in scanner sales and a deferral of service revenues included with the scanner purchase, which will be recognized ratably over the service period. During the three months ended September 30th, 2022, we recognized $13.3 million that was included in the systems and services deferred revenues balance as of December 31st, 2021. Moving on to gross margin. Q3 overall gross margin was 69.5%, down 1.4 points sequentially and down 4.8 points year-over-year.
Overall gross margin was unfavorably impacted by approximately 0.8 points sequentially and 1.8 points on a year-over-year basis due to the impact of foreign exchange on our revenues. Clear aligner gross margin for the Q3 was 70.9%, down 2.4 points sequentially due to lower ASPs and increased manufacturing spend as we continue to ramp up operations at our new manufacturing facility in Poland. Clear aligner gross margin for the Q3 was down 5.3 points year-over-year due to increased manufacturing spend for the reasons stated previously, higher freight, and a higher mix of additional aligner volume and lower ASPs.
Systems and services gross margin for the Q3 was 63.3%, up 3.6 points sequentially due to improved manufacturing absorption and lower freight costs. Systems and services gross margin for the Q3 was down 2.3 points year-over-year due to higher inventory costs and manufacturing inefficiencies, coupled with lower ASPs, partially offset by higher service revenues. Q3 operating expenses were $475.5 million, down sequentially 4.8% and down 3.7% year-over-year. On a sequential basis, operating expenses were down $23.9 million, mainly due to controlled spend on advertising and marketing as part of our efforts to proactively manage costs. Year-over-year, operating expenses decreased by $18.5 million for the same reasons as sequential, as well as lower incentive compensation.
On a non-GAAP basis, excluding stock-based compensation and amortization of acquired intangibles related to certain acquisitions, operating expenses were $443.4 million, down sequentially 4.8% and down 4.9% year-over-year. Our Q3 operating income of $143.7 million resulted in an operating margin of 16.1%, down 3.3 points sequentially and down 9.6 points year-over-year. Operating margin was unfavorably impacted by approximately 1.6 points sequentially due to foreign exchange and lower gross margin. The year-over-year decrease in operating margin is primarily attributed to lower gross margin, investments in our go-to-market teams and technology, as well as unfavorable impact from foreign exchange by approximately 3.5 points.
On a non-GAAP basis, which excludes stock-based compensation and amortization of intangibles related to certain acquisition, the operating margin for the Q3 was 20.2%, down 3 points sequentially and down 8.6 points year-over-year. Interest and other income and expense net for the Q3 was a loss of $21 million, compared to a loss of $14.6 million in Q2, and an income of $0.8 million in Q3 of 2021, primarily due to larger net foreign exchange losses from the weakening of certain foreign currencies against the US dollar. The GAAP effective tax rate for the Q3 was 40.7% compared to 35% in the Q1 and 30.9% in the Q3 of the prior year.
The Q3 GAAP effective tax rate was higher than the Q1 effective tax rate, primarily due to the decrease in profits and changes in jurisdictional mix of income, resulting in lower tax benefits from foreign income taxed at different rates and higher than in the US. Our non-GAAP effective tax rate was 33.1% in the Q3 compared to 25.6% in the Q1 and 22.2% in the Q3 of the prior year. Q3 net income per diluted share was $0.93, down sequentially $0.51 and down $1.35 compared to the prior year. Our EPS was unfavorably impacted by $0.30 on a sequential basis and $0.48 on a year-over-year basis due to foreign exchange.
On a non-GAAP basis, net income per diluted share was $1.36 for the Q3, down $0.64 sequentially and down $1.51 year over year. Moving on to the balance sheet. As of September 30, 2022, cash equivalents, and short-term and long-term marketable securities were $1.1 billion, up sequentially $163.8 million and down $96.8 million year over year. Of the $1.1 billion balance, $471 million was held in the U.S., and $670 million was held by our international entities. Q3 accounts receivable balance was $859.6 million, down approximately 7.8% sequentially.
Our overall days sales outstanding was 86 days, flat sequentially and up approximately 11 days as compared to Q3 last year. Cash flow from operations for the Q3 was $266.5 million. Capital expenditures for the Q3 were $75.3 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 $191.1 million. We are well capitalized to continue to invest for growth while managing through these challenging market conditions, exiting the quarter with over $1 billion in cash on the balance sheet and zero debt. Now turning to full year 2022 and the factors that influence our views on our business outlook.
Underlying market dynamics as well as the reactions to macroeconomic headwinds by central banks, governments, and consumers remain uncertain. We will continue to focus on those matters that have been central to our historically successful business strategies by managing those things within our control. This includes maintaining fiscal controls and focused delivery on our business model so that we are positioned for success once the difficult operating environment ultimately abates.
We remain confident in the huge under-penetrated market for the digital orthodontics and restorative dentistry, our technology and industry leadership, and our ability to execute and make progress toward our long-term model of 20%-30% revenue growth. We expect to be below our fiscal 2022 GAAP operating margin target of 20%, which includes the impact from the current unfavorable foreign exchange of approximately 2-3 points that was not factored into our operating margin guidance for the fiscal year 2022 when we gave an update on the Q1 2022 earnings call in April. For 2022, we expect our investments in capital expenditures to exceed $300 million. Capital expenditures primarily relate to building construction and improvements, as well as additional manufacturing capacity to support our international expansion.
This includes our investment in the aligner fabrication facility in Wrocław, Poland, which began servicing doctors in the Q1 of 2022. In addition, during Q4 2022, we expect to repurchase up to $200 million of our common stock through either or a combination of open market repurchases or an accelerated stock repurchase agreement. With that, I'll turn it back over to Joe for final comments. Joe?
Thanks, John. As we continue to navigate a macroeconomic uncertainty, weaker consumer confidence, and the lingering impacts of COVID-19 shutdowns, primarily in China and Japan, we remain focused on our strategic initiatives as well as the incredible market opportunity for digital dentistry and our products. We believe our unwavering drive to transform smiles and change lives for millions of people around the world is one no other clear aligner company can match and positions us to better address this market opportunity. Regardless of the operating environment, we are committed to balancing investments to drive growth and long-term strategic priorities that will transform the practice of dentistry and strengthen our business. These are uncertain times. Every business is being impacted by macroeconomic environmental uncertainty.
In addition, as a multinational company based in the United States with roughly half of our sales outside the country, the negative impact from unfavorable foreign exchange has been unlike anything I've ever seen in my career. We will continue to invest in digital solutions and demand creation to help doctors and their patients. We are committed to doctor-directed care and transforming the industry together while working through these global macroeconomic challenges. Thank you for your time today. We look forward to updating you on our next earnings call. Now I'll turn the call over to the operator for questions. Operator?
At this time, we'll 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 your line is in the question queue. You may press star two if you'd 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 buttons. One moment, please, while we poll for questions. Our first question comes from Jason Bednar with Piper Sandler. Your line is now open.
Yeah. Hey, everyone. Thanks for taking the questions here. You know, Joe, from what we've seen and heard in the market, I think it goes without saying that monthly demand's just been quite choppy here in the US. I think July and September were pretty darn soft. August, maybe not as weak, but still not great. I guess, did you see a similar level of uneven demand when we look outside the US? I guess, is there anything you'd call out geographically or in any of your channels that was maybe less bad than what you were prepared for three months ago?
Well, Jason, we started with not high expectations to begin with. All right? I would say the U.S. market panned out the way we thought overall, maybe a little more strength in Latin America, a little momentum, you know, despite, you know, the elections and some economics there. Europe just wasn't quite as strong as what we thought. As we tried to explain in my notes that, you know, I really feel it's just the uncertainty that, you know, circulates Europe right now, and, you know, Ukraine situation doesn't help either. From an Asia standpoint, you know, we're affected by COVID again.
We saw it in China, even though, you know, we had growth in China, which was respectable, and in Japan also, but we saw the market impact in those two areas, too. I felt great about, you know, it's a smaller part of the business, but Korea, Taiwan, Thailand, other businesses that were up significantly. Our major three were still affected, primarily the three, as Australia and China and Japan with some COVID issues. It's a way of saying, I think in general, we anticipated where we are. We were hoping for the best year. What really grabs me too, Jason, maybe I'm giving you too much for your call, is that the teen demand we felt good about overall across the globe, in the United States, too.
The teen packs did well overall and, you know, obviously we'll roll that out in other parts of the world, too. The impact on the adult cases is what was to me is astounding in a sense. You see that flow through the orthodontic community and the GP community, too. That's not just the United States. We see that all over the world.
Okay. All right. That's real helpful. Thanks for all that. Maybe you know, Joe or John, just on the margin topic, you are backing away from that 20% margin for commentary that you had given previously. You know, fully understanding part of this is FX related. But maybe can you talk about how much of it's tied to the decremental impact from lower volumes? And then, you know, fully understand this is a tough macro environment to forecast, but you know, a lot of investors right now are really trying to get comfortable with how defensible margins and profitability are as we look out to 2023, which you know, and hope it's not, but it could very well be another tough year for the business just given the global macro environment we're in.
Are you willing to provide any guardrails around what we can consider for 2023 margins or maybe talk about how much flexibility you have in the P&L to offset pressures from lower volumes? Thank you.
Hey, Jason, it's a fair question. You know, first of all, I'll turn it over to John, but, you know, I'm the one that gave that 20% operating margin piece. I had no idea you'd see international currency swings in the way we've seen it. You know, I've been in these jobs for a long time, and you don't expect 25% decreases year-over-year in currency. You know, obviously, you know, we had to back up on that piece. I feel good about the way we managed our cost. I feel good about where we're investing and, you know, where we continue to right size. John will give you more specifics.
On a constant currency basis, we expect to be, you know, at that 20% or above. It's just that, like Joe said, it's pretty dramatic to see the FX changes that we have. As noted in the comments, we said it's gonna affect the year by 2-3 points. There's a commitment to that margin, and we're investing based on volume that we see and other priorities that we have on R&D and go-to-market activities and so on. It's just that FX piece that we're calling out. On a constant currency basis, we feel that number of 20% is still holds from earlier.
Okay.
Jason.
Thanks.
Thanks, Jason.
Our next question comes from Brandon Vazquez with William Blair. Your line is now open.
Hi, everyone. Thanks for taking my question. Hi, hi, everyone. I'd like to go back for a second kind of to the monthly progressions just to, I think what might be helpful to kind of understand underlying market dynamics, and maybe you can tease it out a little bit in Americas versus international. Just what were you seeing through the quarter? Did you exit the quarter and go into Q4? Were things stabilizing? Were they getting better? Were they getting worse? Any kind of color you can give us around what the situation is like as we go forward from Q3.
You know, again, like on the last call, Brandon, I think it played out the way our expectations were formulated. You know, we talked about teens in the Q3, and obviously that's teen season. That played out well from what we anticipated. You know, as we mentioned before, we think teens are somewhat shielded, not completely, but shielded from the economic environment because of the time window for treatment and parents, you know, that wanna help their teens through that whole process. The adult segment was the one we saw the most volatility in for sure, both in the United States, Europe, and in Asia. It's hard for me to tell you that we're, you know, that there's any kind of change from month to month or quarter to quarter. It was pretty consistent from what we've seen.
John, would you add anything?
No. I mean, that's how we saw it.
Okay. Thanks. internationally, you guys sound pretty excited about kind of the new product launches within China, specifically, offering that new, maybe lower tier product. Can you just talk a little bit about what you're seeing there? How strong has the recovery been in China? How much of that recovery has come from really opening up the product portfolio there, and how should that kind of continue going forward? Thanks.
Yeah, thanks, Brandon. That's a good question. I mean, China is a very important market for us. As we talked about on other calls, those tier 3 and tier 4 cities have been an important target for us. We've known for about two years we have a hole in our portfolio in those areas, particularly with, you know, we have comprehensive on top and, you know, and then we have a moderate product between it. We announced Invisalign Standard and Invisalign Adult, and what this does is it just helps us segment the market. These are not. They can't handle cases like Invisalign First can or mandibular advancement or some of the sophisticated cases we have out there. We don't offer, you know, CBCT, you know, five-minute ClinCheck and those kind of things around those products too.
We tailor those products for more moderate kinds of cases in those specific areas where public hospitals have been strong. We've really good results from a standpoint of what we saw and the uptake that we saw over this last quarter, and we'll continue with that strategy. We feel good about it.
It's about market expansion there. We're selling to more doctors than we've sold to in the past with these products.
Yeah. Yeah.
We're really trying to capture more of that market, as Joe said, into tier three, tier four cities. We saw good uptake from that, and it's something that we need to go to the market and be able to reach these potential customers. These are the types of products that we need.
Brandon, I think honestly, I feel really good about our positioning there. China, you know, performed well from a volume standpoint, and we'll continue to update our progress.
Great. Thank you.
Thank you.
Our next question comes from Jonathan Block with Stifel. Your line is now open.
Thanks, guys.
Hey, John.
Hey, John. Hey, Joe. Maybe just first one for me, the 3Q 2022 ASP of $1,150 versus $1,220. I'm calling down 6% quarter-over-quarter. Some of that's FX, but I think if I look at your comments, it seems like half of that 6% headwind is FX. And John, I know you said mix, but I'm calling that teen was about 35% of your 3Q 2022 cases versus 30% of your 2Q 2022 cases. You know, teen is a higher acuity, comprehensive ASP. I would think DSP is also helping pull out some of the lower ASP cases as DSP ramps quarter in, quarter out. Can you just help me with the ASP movement? What else was it outside of FX?
If it was mix, why mix based on Invisalign Teen commentary?
Yeah. I think you've hit the major pieces, John, when you look at it. Majority was FX. We saw the US dollar strengthening, that obviously hits our numbers. Then you look at the other parts to it, we do have a higher proportion of teen in the Q3, and that's a help. We also have, you know, things that we've done like we answered on the previous call about mix in China and expansion out. There's offsets to that. It's primarily FX, and then you have some mix. From a discounting standpoint or other things, there's really no overall change to how we've done stuff. It's primarily the FX piece and the mix.
Hey, John, one other thing to-
Okay.
To add to that too. On the DSP program, we look at that as incremental, not as replacing other business that we've had in the past. Like, yeah, we feel good that's an expansion play for us, and I think you see that in the numbers too.
Okay. Maybe just quickly on that last point, Joe, question one B would be, you don't really think any cases are being pulled out of the case volume number into DSP that's actually having a, an incremental negative impact to 2022. You think those are just truly largely incremental. That was one B, just to be clear.
Yeah. You know, I think you learn in business, John, never be binary, you know, either/or. I'd say the majority of those cases, if you look at it, we're picking up from an ortho standpoint, a lot of retention we never had before. We see orthos doing, you know, touch-up cases and all that might have been done in-house at times. I'm not saying that there's absolutely nothing that would transpose from one to another, but I'd say primarily we're looking at that as a growth opportunity for us.
Okay. Helpful. The last question, and it's just where I struggle the most is I think sort of, you know, who cares, but my view on teen versus how you guys have positioned it, with all due respect. I get the teen 2Q to 3Q had a good sequential growth rate, but the 1Q to 3Q because 2Q was weak, was actually below trend on a four-year average throwing out 2020. Joe, just if we can go down that road a little bit more. Teen case files were still down 3% year-over-year. This whole story is about taking, you know, maybe 200 basis points of share every year in this market. What do you think overall teen case volume was globally if you guys were down 3%?
Maybe just really the questions about market share gains and if you still feel like you've got the momentum there or if that has slowed as of late, and what can we accelerate it. Thanks for your time.
Yeah. John, again, that's a good question. I think, you know, when you talk about Q1 to Q1, you know, and the rhythm that we had there, remember, the normal rhythms we've seen in this business, the seasonality we call it, we have not seen that since really 2019. So, you know, we had muted signals on teens through 2020, 2021. Just it wasn't the same. What I liked about what I saw in the Q3 was we saw teens come back in the sense of in a pattern of what you'd expect in teen season, you know, Q3, Q4. It's too early for me to dig out the data and tell you how much share we're gaining against wires and brackets.
John, what we don't talk about a lot are products like, and we highlighted it here today. When you look at the Invisalign First product line, we're really getting tremendous results out there on young patients, six to nine years old. You know, the phase one, phase two treatments, where often the phase two can be a lot less extensive than what the phase one was with wires and brackets. Our different expansion devices. We see a big uptick in that product line from a teen standpoint. We see that as penetration too. We've seen consistent, you know, growth from a share standpoint in those teen cases in Americas globally. We just introduced curved wings mandibular advancement too, that's having a really good start in the market too.
It addresses some cases that mandibular advancement couldn't get in the past. John, both with technology, with our advertising campaigns, the teen packs and whatever, I continue to feel good about our movement. We'll have more as we, you know, analyze the trends, the share trends and stuff that we'll be able to share with you. I do like our position in the marketplace in teens.
Appreciate it. Thanks, Joe. Thanks, John.
All right, John.
Our next question comes from Brandon Couillard with Jefferies. Your line is now open.
Hey, Joe.
Hi, Brandon.
Just a question on just OpEx and how you're managing headcount, whether you've pulled back in any parts of the business globally. Maybe just talk about the levers that, you know, might be at your disposal, you know, if the environment continues to deteriorate and maybe if there are some areas that would be ring-fenced as far as potential cuts.
Hey, Brandon, it's Joe. Look, first of all, what I protect with my life here are our direct sales people and also our technology and our engineering team and what we focus on. We've made sure that we continue to reinforce those. There's just other parts of our business too that we right-sized. I mean, obviously this business is used to growing 20%-30%, and so we kinda came into the year with that mindset. We quickly realized it wasn't, and so we've taken actions in order to do that. You see that throughout the business. Don't forget, we also have really strong productivity programs in manufacturing and all that really help us during these times. Emory and his team do a terrific job, you know, to help drive that.
John will give you another insight in the sense of how we're managing OpEx across the business.
We have good insight into our P&Ls across the world. We're looking country by country and in certain regions and so on. Like Joe said, you know, from an overall focus, we wanna, you know, make sure that we're going to market and protecting the sales, make sure our R&D and technology is putting out, you know, the best products and the best technology going forward. We protect that. Then we look at what expenses, you know, make sense in the short and long term in various regions, various campaigns that we have to make sure that we're getting the return that's appropriate given the market conditions. We're constantly iterating and changing things.
It's no different on the other side of things when a year ago we were looking at the growth opportunities. We're looking at it the same type of way, kind of on a country by country, market by market basis. It's just the other way as it is now. We feel like we have a good understanding of our return on investment and a good understanding of the levers that we need to pull or not pull, given these conditions.
John, just one follow-up. Can you tell me just to kind of understand what's going on with the inventory line and why that continues to grow, you know, year over year and sequentially? Is there something tied to the new European fab facility that may be driving that, and what should we expect on that line the next few quarters?
Yeah. I think we're kind of getting to, you know, we're kind of get to a point where some of that is due to just the fact that you have a third manufacturing site, and you're gonna have raw materials related to that and other in-process inventory and so on there. So you're gonna have some of that. Some of it is also on the iTero side where you're manufacturing and you're doing some things where you're securing supply. I mean, there's been a lot of talk and, you know, and we feel good about our supply to be able to, you know, components and so on. We've purchased several components just to make sure that we had adequate supply for our forecast and so on.
nothing out of the ordinary other than, you know, some expansion that we have with new manufacturing and then making sure that we secured our supply lines and that's what we've seen in our numbers.
Great. Thank you.
Thanks, Brandon. Our next question comes from Jeff Johnson with Baird. Your line is now open.
Thank you. Good afternoon, guys. Hey, guys. So Joe, I wanna pin you down a little bit on a couple of things if I could, questions that have been asked and on the teen side especially. I mean, look, we know there were so many adult cases last year with the Zoom effect or whatever we wanna call it and stimulus spending and all that. The teen number is obviously the important number I think we're all trying to focus on here. The down 3%, I think is what you said year-over-year, up sequentially. That down 3% year-over-year on teen cases globally, I mean, how do you feel like that compares to the overall ortho market?
Were you better or worse than other teen cases done with brackets and wires when you throw in other clear aligners, from the competitors, things like that? Just how are you competing in that teen market right now?
Hey, Jeff. That's a fair question. I'd first take you to Europe. I mean, Europe was down substantially for us too. I don't think we got a clear signal out of there because of the economics in general. I mean, we did, you know, we did fairly well in from a European standpoint, but the Q3 in Europe is never, you know, a particularly strong quarter, you know, to pull a signal out of. Yeah, you look at the United States, you know, you go to Gaidge data and you'll see that, you know, inside the Gaidge data, aligners were down, but Invisalign was actually above what the generic aligners are reported in Gaidge data, which says, you know, we continue to do well with our teen portfolio and what we do.
You see wires and brackets cases actually, you know, expanded. What that is is you see they're doing fewer adults, and you know how orthos have held on to teens for a long time. You get a mixed phenomena there where it looks like they're doing more wires and brackets, but they're not. They're just doing fewer adults, and they mix down in that sense. Move over to Asia. You know, I've always felt good about Asia is different by country, but the COVID overlay in Japan in particular, but also China, I thought, you know, the teen case volume was still reasonable, but it's still hard to pull a signal out of a lot of noise with the COVID shutdowns and all in those countries.
Again, just like in John's question, Jeff, yes I do feel great about our portfolio. I feel good about how we're positioning the product. I think the teen packs are a way to sell the way doctors wanna commit in this area. I think we'll continue to get strong there. The future of those teen cases, there's no question it is digital. It's just how we approach it, the products we launch, and convincing doctors more and more that teens will use these, and showing them the results that we're seeing all over the world.
Yeah. Fair enough. All right. I'm gonna jam two questions together, kind of à la Jonathan Block here. I'll call it two A and two B, even though they're separate questions. Any update on volume-based procurement in China, how we should think about that? I didn't see a breakout for Americas versus international doctor shipments. You provided that in the past. Any way we could get that number this time? Thanks.
Well, on the doctor ship to, what we've done is consolidate them together to a total. What we saw, if you looked at international versus domestic, they're both up. The numbers that we had, this is actually our second highest ever from a ship to standpoint. We decided to consolidate those together without giving too much more details on that. They're both up.
And, and I-
Both up sequentially, John, just to be clear?
Yes. Yes.
John, both up sequentially. Thank you. Yeah. Sorry, Joe.
Yes. Yes. Correct.
Yep, on sequential. Yeah. On the volume-based purchasing in China, you know, we have our eyes all over it, Jeff, as you can guess. It represents, you know, anywhere between 15% and 18%, you know, of our business there. The way they're setting this up, you know, pretty much in what we would call not our main areas of where we do business in China. You know, I think we've positioned ourselves for this, you know, strategically. I feel we can make the right move here. Look, you know, I have friends in other medical device businesses. I was in the medical device business for a while. You know, we know what this did to stents and hip transplants and different things. I feel like the way they set this up, one is
70% of it will be VBP in those areas.30% will still be up to the doctors in the sense of what they wanna use and how they wanna use it. What's key here is that we exercise our portfolio and the capacity that we have over there to just have a strategic positioning in that. I don't expect any major differences as we move into 2023. We'll just have to wait to see how that goes and as we move into 2024, 2025, how the government, you know, which way the government moves.
Thank you.
Thank you.
Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is now open.
Hi, guys. Thanks so much for the question. I guess my first question.
Hi, Elizabeth.
is just on the equipment line. I noticed you're sort of talking more about leased equipment in the quarter. Can you sort of talk about, how, you know, how that's been growing and sort of what contribution that made to the equipment revenues in the quarter?
Yeah, I could start with that. You know, it's obviously a strategy that we have. We've got great equipment, great products, and we wanna be able to get those to our customers in a way that they wanna buy. Sometimes those doctors of ours don't necessarily wanna purchase it outright. They wanna try other things. We've tested in certain markets just alternatives, kind of the rental model and so on. We see good uptake. We see them, these doctors now wanting to get a scanner to be able to help digitize their practice.
It's really at early stage right now, Elizabeth, but it is something that when we think about how we wanna go to market, we wanna offer alternatives such as leasing or expanding rental, or other parts of our business are gonna see the certified pre-owned, where you have upgrades and other things that happen as we have a larger and larger installed base. We're gonna get some of that equipment back. We wanna be able to have a mechanism to be able to use that equipment, use it in other places, and give our customers alternatives, both in terms of the equipment that they can purchase from us and then how they purchase and use that equipment from a financing or maybe a leasing or rental options. We think that they'll end up using our equipment more and more.
We know that helps from a digital standpoint when they use that equipment, and then they'll end up using more Invisalign. It all kinda works from a ecosystem standpoint.
Got it. Just in terms of on the P&L, like, the one of the things that I obviously saw the change in the SG&A spend in the quarter, and how you pulled back on spending there. What about on the R&D line? Do you sort of see an opportunity to pull back on R&D as well going forward, or is that something you're sort of more keener to defend going forward?
Hey, Elizabeth, it's Joe. We wanna defend R&D. Very important part of the business. You can see the programs are rolling out. You know, the programs we're rolling out, we didn't do them this year, right? Some of these are three-year-old programs that we've been working on, and so I don't wanna stop the momentum on those. I mean, obviously, we'll take any steps here to preserve the cash flow and integrity of this business that we have to do. Our front lines are our sales organization and technology. You know, before we go anywhere near those, we wanna make sure we do everything we can to right-size the business in other areas.
Got it. Just in terms of my Q2 question, in terms of, like, what you're seeing through the month of October so far, if we're sort of thinking about how the cadence of 4Q is shaping up, would you sort of expect, like, the cases to be sort of flat sequentially at this point based on what you're seeing? Or, like, how do we think about sort of where we are now?
Elizabeth, you know, as you know, kind of anticipating that question, we're not seeing any major change, I'd say, from the momentum that we saw in the Q1.
You mean the Q3?
I'm sorry. Q3, that's right.
Got it. Okay.
A little bit in the rear.
Got it. Okay.
Yeah.
Thank you. Appreciate it.
Thank you.
Our next question comes from Erin Wright with MS. Your line is now open.
Great. Thanks so much. How should we think about underlying ASPs going forward, excluding the FX dynamics, from here, just given some of the mix dynamics you noted? FX is FX, and that's understandable. If we do continue to see what we're seeing in terms of the macro environment, you know, what do we think about in terms of trough margins from here? Do you see an opportunity for a sort of recovery near term or any sort of margin expansion? Anything you can give us on that front would be helpful. Thanks.
Yeah. Obviously, Erin, this is John. Obviously, gross margin, op margins, is a primary concern for us. We wanna make sure that we manage things appropriately. From an ASP standpoint, you know, take FX out of this and really FX out of our margin 'cause so much coming through from a P&L standpoint. You know, we're always looking at productivity to be able to help drive the business. As we scale up, Poland is a great example. We'll become more productive there, and that'll help our margin. It's kind of in our margins right now as an impact, but it'll get better over time through utilization.
We look at, you know, the technology that we have in the business and what it means from an ASP standpoint, and our customers understand that. You know, there's always gonna be geographical mix shifts that happen. You know, certain parts of the world are, you know, at different times throughout the year. I don't expect a dramatic shift in our overall ASPs. Take FX out of it from an overall ASP standpoint, and then we're really focusing on what can we do to, you know, to look at savings that help us from a gross margin standpoint and see that, and then also on an Op margin standpoint for all the OpEx things that we previously talked about.
Okay, thanks. Just going back to Elizabeth's question on the quarterly cadence, just in the teen market in particular, what are you seeing in terms of typical seasonality there? Did you see some of that momentum continuing here into the Q4 in that particular segment? How should we be thinking about the quarter to quarter cadence given relative to what you typically see from a seasonal standpoint?
Yeah, you know, the teen market predominantly, we look at the Q3. Obviously it bleeds some into the Q4, whatever, but I wouldn't take anything we're seeing right now and project it into the future to change, you know, what the normal Q4 sequence could be. You know, like I said previously on the question as far as when you look at Q3 moving into Q4, we're not seeing any meaningful change one way or another.
Okay. Thank you.
Thank you.
Our next question comes from Nathan Rich with Goldman Sachs. Your line is now open.
Hi, thanks for the questions. Hi, good afternoon. If I could go back to margins for a minute. You mentioned not changing the target for this year on a constant currency basis. I guess, if I could maybe ask the question this way, if we don't see further changes to FX or the kind of overall demand environment, do you think the 16% margin that you saw this quarter on a GAAP basis is indicative of what we should assume going forward again, assuming no kind of changes in the underlying environment?
I wouldn't take that. I think when we're talking about for the full year, we're kind of looking at, you know, kind of that on a constant currency basis, that 20%. I think Q3, you know, you have impacts with, you know, Poland startup and some other things in the quarter that are impacting that. When we look at the 20% and what we were calling earlier in the year, we were thinking about that, you know, less about the quarters, but more on a total year basis, on a constant currency basis.
Okay. The FX headwind for the year on margins, is that 2%-3%?
That's the way to look at it, Nate. It's you know, we're kind of looking at, yeah, as best as we could call it now, we're kind of using the latest FX rates that you have now. It's tough to predict what's gonna happen in the next two months. If you took kind of currently and kind of what we've done throughout the year and then used the current FX rates, we think that's a 2-3 point impact. Without that FX rates, our GAAP numbers would've been at the 20% like we called.
Okay. Thanks for that. If I could just ask a quick follow-up. Joe, I think you had noted less willingness of consumers to finance treatments in both the U.S. and Europe. How big is that as a % of case volumes in terms of what's typically financed? And, you know, how much in particular kind of might have this weighed on demand? And I guess bigger picture, are there ways kind of in this environment that you kind of see as kind of, you know, maybe being best able to stimulate demand, just in terms of how you might, you know, either help customers or doctors in this environment?
Yeah, Nathan, I think we don't, what we gave you is basically data that we received from the marketplace. It's what we're hearing from orthodontists and dentists in general in treatment. We don't have any quantification to say so many patients were seeking funding and didn't get it, or so many losses in that sense. That's pretty much listed as the reasons why patients have refused treatment or are thinking about treatment, and the financial considerations of it. John, would you-
No, I think you're always gonna have a mix of some patients, and you know, they'll pay for it all upfront. Some will finance it either through the doctor or some outside group. I think you're constantly gonna have that. We do things as much as we can with our doctors to give them some of the financial flexibility so that, you know, as they, you know, maybe have additional terms where they pay us, the doctors, they can maybe apply some of that to their patients, and they can help their patients as well, manage some of the cash flow. We're aware of it. We do as much as we can.
It's just kind of out there, and like Joe said, we don't have a quantification of it, but in tougher economic times, we know that patients will be looking for different alternatives.
The other part of your question.
Great. Thanks, Joe.
Nathan, about you know how do we help accounts? You know, we watch payments. You know, we try to help in that sense at times. You know, we try to drive you know direct the Invisalign docs who do a lot of Invisalign. Obviously, our advertising is extremely important to them. We have our whole lead program to help them drive those things. We just wanna be as close to our customers as possible because they're feeling what we feel, and we have strong relationships with many of them, and they're part of the family here. We work at country by country, doctor by doctor, region by region to see how we can help.
Thanks so much.
Operator, we'll take one more question, please.
Our final question comes from Kevin Caliendo with UBS. Your line is now open.
Thanks, and thanks for sneaking me in. I appreciate it. I want to expound a little bit on, like, the comment around October, saying that the momentum continued. If we think about that was, you know, sort of down 12%, right, year-over-year. I think what we're all looking for is we saw cases flat Q1 to Q2, and then we saw a step down in Q3 despite a stronger teen season. I think what we're all trying to figure out here is adjusting for the Q3 strength, the seasonality in teen, when do you actually expect to see stabilization globally in cases? Meaning, either, you know, sequentially or year-over-year flatness. Like when do you actually expect that that could happen?
Hey Kevin, it's Joe. Look, I think we could sit here and tell you, I think we're in pretty volatile economic times. I can't tell you what the US dollar's gonna be in three months. I don't know what's gonna happen in Europe. I don't know how bad COVID hits China. I don't know what it does in Japan. I know exactly what you're asking for and every investor is asking for, and we'd give you that data if we thought we had it. We are in such a volatile time right now, we're just working this thing from month to month. You know, as I mentioned, we go into the Q4, you know, obviously there's a rhythm between teens and adults from the Q3 to the Q4.
What I've mentioned from a continuation standpoint is we haven't seen much of a change between the third and the fourth right now as we move into it. That's about as well as I can tell you of what we're seeing and what we're experiencing. Trying to forecast what's gonna happen, you know, towards the end of the quarter, next quarter, I can't do that. I don't think anybody here can.
If I can just ask a follow-up. There's been a lot of talk about spending and margins and 20% and everything else. You know, and historically in the past, you guys always just invested to grow. Is it now, given the uncertainty of everything, that you're just gonna manage to a margin or try to manage to the 20% margin ex FX or, I mean, is that the strategy? Or is it still to try to get back to the, what you would need to do normally to hit certain growth targets that you've had?
It's a growth business, Kevin. If we had good economic times here, I can tell you we'd be having a much different conversation. The challenge with this business is how are we responsible on cost, and obviously a challenged demand environment, but to keep this company very strong. 'Cause when this market comes back, you just go back in history and take a look. It comes back, and it comes back hard, and we gotta make sure that we're in a good position to be able to to field that when it does occur. You'll see us be what I call fiscally responsible. We'll continue to make sure that we invest and make as many changes as we can around different areas of OpEx, but to protect those key areas where our customer interface and development of our technology.
Actually, you know, the actual operations capacity we need in this business when this thing does spring back. That's not just in manufacturing and aligners, that's in being able to service customers across the board. You'll see us balance that well, as we should do from a leadership standpoint.
Thank you so much.
Thanks for the question.
I appreciate it.
Well, thank you everyone for joining us today. We appreciate your time and look forward to speaking with you at upcoming financial conferences and industry meetings, including the Ortho Summit in Las Vegas next month. If you have any further questions or follow-up, please contact our investor relations team. Have a great day.
That concludes the conference call.