Greetings. Welcome to the Align Technology Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.
I will now turn the conference over to your host, Shirley Stacy, Vice President, Communications. Ms. Stacy, you may begin.
Good afternoon, and thank you for joining us. Joining me today for today's call is Joe Hogan, President and CEO and John Maricchi, CFO. We issued Q2 2019 financial results today via GlobeNewswire, 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 12 months.
A telephone replay will be available today by approximately 5:30 p. M. Eastern Time through 5:30 p. M. Eastern Time on August 7.
To access the telephone replay, domestic callers should dial 877-660-6853 with conference number 1,369,1835 followed by pound. International callers should dial 201-612-7415 with the same conference number. As a reminder, the information that the presenters discuss today will include forward looking statements, including statements about Align's future events, product outlook and the expected financial results for the Q3 of 2019. These forward looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the SEC. 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 and our Q2 2019 conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information. With that, I'll turn the call over to Align Technology's President and CEO, Joe Hogan. Joe?
Thanks, Shirley. Good afternoon, and thank you for joining us on our call today. I'll provide some highlights in the Q2 then briefly discuss the performance of our 2 operating segments, Clear Aligners and scanners. John will provide more detail on our financial results and discuss our outlook for the Q3. Following that, I'll come back and summarize a few key points and then open up the call to questions.
Our Q2 revenues were at the high end of our guidance, reflecting Invisalign volume growth primarily from international doctors as well as very strong sales from Itero scanner and services. Q2 Invisalign volumes were 24.6% year over year compared to 30.5 percent year over year in Q2 2018. We're expecting continued adoption from teenage and younger patients as well as increased utilization and expansion of our customer base, which totaled over 60,000 active doctors worldwide. From a product perspective, we had good growth across the Invisalign portfolio with noncomprehensive products outpacing comprehensive led by Invisalign Go globally. Total Invisalign case shipments for Q2 were lower than expected, primarily due to softness in China related to a tougher consumer environment and slower growth in young adult cases in North America.
Now let's turn to the specifics around our Q2 results starting with the Americas region. The Americas region Q2 Invisalign case volumes was up 4.2% sequentially, 16.5% year over year compared to 22% year over year in Q2 2018 reflecting growth both in the orthodontist and GP channels as well as continued strength from teenage patients in Invisalign GO! In Q2, we trained approximately 3,000 new Invisalign doctors in the Americas region, of which more than half were North American doctors. On a sequential basis, Q2 Invisalign volume growth reflects increased utilization for the Americas region overall, driven by North American orthos at 18.9 cases per doc with continued adoption of Invisalign with mandibular advancement and Invisalign First used to treat patients as young as 6 years old. We also had solid performance from GP Dentists with continued momentum from Invisalign Lite and Invisalign Go.
Invisalign Go is uniquely designed for GPs and features a digital chairside experience using the Itero intraoral scanner and streamlined tooth movement capabilities. It's a really great product and we're very pleased with its performance, including with our DSO partners who are using it to help their providers introduce Invisalign treatment into practice. Invisalign Go integrates well with the DSO model, which remains a very important part of our overall business as we continue to see DSO growth rates outpacing the non DSO doctors significantly. Year over year Q2 Invisalign volume growth in the Americas region was driven continued strength in the ortho channel with 19.7% growth compared to 25% year over year as well as increase of 11.6% from the GP channel. In Q2, we saw adult case growth for North American orthodontists reflecting a more crowded competitive environment, especially for young adults in the 20 to 29 year old demographic who really value convenience and cost.
We know there's about a 10% overlap with our adult demographic with SDC. Given increased awareness for the direct to consumer clear aligners and heavy advertising spend from DTC players, case starts may be shifting away from traditional practices. We also believe that doctors are sampling alternative products and are taking advantage of wires and bracket bundles that essentially gave clear aligners away for free or at very low prices. These competitive dynamics are not surprising and were validated during our recent customer visits. Nonetheless, they appear to be working themselves out in the 1st few weeks of Q3, we've seen improving trends in North America.
In July, our executive team and I spent a week meeting with over 200 orthodontists in 4 major U. S. Cities, Fort Lauderdale, Dallas, Denver and LA, and did not hear anything that gave me pause about a competitive performance standpoint. That's not to say that we didn't get feedback about how to make things better, especially around the health doctors compete more effectively against DTC offerings, but doctors consistently told us that the Invisalign system is the best product there is, hands down, technically and clinically. Given the changing DTC landscape, we're focused on further differentiation of Invisalign treatment for both consumers and doctors.
In Q3, we're increasing investment in consumer demand with a new advertising campaign for North America and expanding marketing programs such as our concierge service, which connects potential patients with Invisalign doctors, increasing conversion and stickiness. In addition, we're launching new sales tools and professional marketing materials. And we'll also expect to see increased productivity from the 100 plus sales representatives we added in Q1. We also look for opportunities to leverage the Invisalign product portfolio to doctors to treat patients as needed and compete with DTC offerings. Expanding on products like Invisalign Go and Light will help close the gaps many doctors see with DTC patients who are looking for price and convenience.
Finally, in Latin America, we continue to make great progress led by Brazil in developing the emerging clear aligner segment in the world's leading market for beauty and cosmetic procedures. In Q2, Invisalign volume in Latin America was up significantly year over year, reflecting our ongoing investments as we continue to build our business in the region, training approximately 1300 Invisalign doctors during the quarter. For our international business, Q2 was a good quarter with strong Invisalign volume growth of 36 0.7% year over year, reflecting increased Invisalign utilization and continued expansion of our customer base in both EMEA and the Asia Pacific region. On a sequential basis, international volume was up nicely reflecting growth in both the EMEA and Asia Pacific regions. In Q2, we trained approximately 3,500 new Invisalign doctors internationally, over half of which were in the Asia Pacific region.
In EMEA, Q2 is another strong quarter with volumes up 39% year over year driven by growth across the region with record Invisalign volumes in all but one country market, led by Iberia. We saw strength across the Invisalign product portfolio with continued momentum from Invisalign Go. We also continue to see strong growth across our key expansion markets as well led by Central and Eastern Europe. For APAC, Q2 Invisalign volume increased 33.1% year over year, reflecting continued growth from nearly all country markets led by China, Japan and ANZ. We also had strong growth from GP Dentists, which were up 52.4% year over year.
On a sequential basis, Q2 Invisalign volume for APAC was up nicely led by Japan, Southeast Asia, Hong Kong and Taiwan. We also had an uptick in adult patients in Q2 following a very strong quarter for teen cases in Q1 in conjunction with a teenage promotion to help drive trial and adoption in the very important teen segment. During Q2, we trained over 1900 new doctors in APAC, over 40% were in China. Notwithstanding current consumer sentiment, we remain confident in the long term opportunity in China. We'll continue to invest in our manufacturing operations and training centers to ensure that we operate like a local company and have the capabilities to expand and scale our business as the environment improves.
We're also focusing on what we can influence directly to help mitigate consumer sentiment in China. We're expanding our reach and scope in Tier 3 and Tier 4 cities across China, including investment in a GP dentist sales force and sales program centered on Invisalign Go. In the last year, since the launch of Invisalign Go and APAC, we have learned that doctors benefit from a differentiated approach in training and support and will align our resources accordingly. We're also increasing consumer marketing spend in APAC including new advertising like our doctor centered ad that is launching in North America next week. Finally, in the second half of this year, we expect to have dozens of Invisalign pop up centers in China to ensure we educate consumers and connect more with Invisalign doctors.
Outside of China, we have strong growth across APAC including Japan, ANZ, Hong Kong, Taiwan. We will continue to drive adoption and utilization by investing through sales and marketing programs in clinical education with new training centers like the one we just announced in Taiwan. Through this center, we have also launched the 1st integrated postgraduate Invisalign training program in Asia with National Taiwan University Hospital. Clinical education and peer to peer learning is one of the most impactful ways we help drive adoption of Invisalign treatment. During Q2, we engaged directly with thousands of Invisalign trained doctors around the world, providing them with the ability to learn from clinical experts and practice development leaders and share their experience and insights with each other.
In April, we held the 2019 Invisalign China Forum in Xi'an, attracting 1300 industry practitioners and gathering together over 40 experienced orthodontists from all over the country. During the 2 day forum, participants held in-depth discussions on frontier topics such as adolescent orthodontics, extraction and orthodontic treatment and digital dentistry. In May, 300 high volume dentists from 37 countries across the Americas, EMEA and APAC participated in an inaugural edition of the Invisalign Symposium on digital practice in London. The 2 day doctor event featured specially designed sessions combining plenary interaction, small group of working sessions covering such topics as understanding consumers, practice optimization, challenges of building a digital practice among others. I was able to address specifically on the digital practice and driving the evolution of digital orthodontics with supporting talks on digital transformation in health care and the power of digital treatment planning along with the practice optimization with Adapt.
Adapt is aligned to consultive program to provide practices with personalized support to help doctors and staff navigate the journey from abrasives model to an aligner model in a timely, efficient and profitable manner. Emphasis is on digital workflow, finances and consumer acquisition. And early results from test sites in the Americas, EMEA and APAC show significant improvements in conversion, revenue growth, practice, profits and other key metrics as practices shift to a digital model and increase their Invisalign share of share. In June, we hosted the 1st Invisalign Scientific Symposium in EMEA located in Valencia, Spain. The scientific symposium focused on evidence based success cases for Invisalign treatment and growing patients with dedicated focus on treatments with Invisalign First and mandibular advancement feature, bringing together nearly 200 of EMEA's most experienced Invisalign doctors.
In July, more than 175 general dentists from all across Europe attended the 2nd annual Invisalign GP Growth Summit in Berlin focused on peer to peer learning and emerging industry trends. We also just hosted our first Invisalign Teen Summit with about 300 doctors and staff in Los Angeles. The summit program was focused completely on teen treatment and teen culture and included a tie in with VidCon, the top teen culture and community event where Align held a multiyear relationship and strong brand presence. Teen Summit is designed to turn low teen submitters into high teen submitters by combining Invisalign specific clinical and practice how tos with an immersive teen culture experience, social media support and training and insight from teen influencers. Speaking of teens, in Q2, over 100,000 teenagers started treatment with Invisalign clear aligners, an increase of 32.2% year over year, driven by continued strong adoption across all major regions.
For Q2, year over year Invisalign team patient growth for North America orthodontists increased 25% and international doctors were up 44.4%. Invisalign First and Invisalign treatment with mandibular advancement continue to ramp globally and are helping to increase our share of teenagers and younger patients worldwide. Overall, we're very pleased to see the use of Invisalign treatment among teenagers continues to outpace adults and that Invisalign First is driving really strong growth in the kid tween segment. In fact, we reached our 7 millionth Invisalign patient during the quarter, a child in the United States being treated with Invisalign First. Since the launch of Invisalign First a year ago, kids under 10 years old have become our fastest growing demographic, up 140% year over year, which also bodes well for the continued adoption of teens too.
Our consumer marketing efforts are designed to build the category and drive demand for Invisalign treatment through a doctor's office. We invest over $120,000,000 each year in consumer marketing programs, including TV, digital and social media, PR, event marketing and our patient concierge service. Our goals are to make the Invisalign brand a household name worldwide and to motivate consumers to seek Invisalign treatment through a doctor's office. In Q2, we continue to see strong digital engagement with consumers reaching nearly 4,300,000 unique visitors on invisalign.comsites worldwide for a total of 57,500,000 visitors to date. Our other key metrics show increased activity engagement with the Invisalign brand and are included in our Q2 quarterly slides.
During the quarter, we developed a new consumer advertising campaign for 3 largest markets, the U. S, Canada and China. This new multi channel campaign, which launches across North America this Monday, educates consumers on the significant benefits of Invisalign treatment, highlighting our patented SmartTrak technology based on years of research, which moves teeth more predictably and comfortably combined with a personalized care of a doctor. We are more than doubling our media investment behind this new multichannel campaign to extend our reach across adults and parents of teens, increasing our reach frequency from 50% over 70% in order to capture even more of our target audiences. In the U.
S, our new campaign will run across all media channels, including broadcast and TV networks, connected TV such as Hulu and other streaming services, digital media and all social media channels. In Canada, our new ad will go live on digital channels first and then we will layer in TV in the coming weeks and China will follow suit in the second half. Q2 was another outstanding quarter for our Itero scanner and services business with revenues up 82.4% year over year, reflecting continued strength across all regions and customer channels, including large account DSOs. On a sequential basis, revenues were up 30.4% sequentially, reflecting higher scanner sales falling with seasonally weaker Q1, especially in North America and Asia Pacific. Increased services revenues reflect higher subscriptions from installed base growth and multiyear deals.
During the quarter, we saw continued adoption of the Itero Element 5D imaging system in EMEA, APAC in Canada since its commercial launch at IDS in the Q1 of the year. Cumulatively, over 13,700,000 orthodontic scans and 3,600,000 restorative scans have started with Itero scanners. Use of the Itero scanners for Invisalign case submission continues to grow and remains a positive catalyst for Invisalign utilization. For Q2, total Invisalign cases submitted with digital scanner in the Americas increased to 77.3 percent from 69.6% in Q2 last year. International scans increased 60.8 percent, up from 47.8% in the same quarter last year.
Within the Americas, 92.3% of cases submitted by North American Orthos were submitted digitally. We continue to expand Foundation, extending the portfolio to offer dentists digital workflow capabilities to address their restorative and patient monitoring and intraoral scanning needs. The streamlined workflows to dental laboratories includes an option for on demand chairside milling and exclusive time lapse technology for patient communication and monitoring with the Itero Element Foundation, which provides dentists with capabilities beyond basic STL support scanners. Software upgrade pathways are also available for Invisalign clear aligners. The Itero scanner and services business has become an integral part of our business and is key to our end to end digital workflow.
We believe that every exam should begin with an Itero digital scan because it's a better experience and improves treatment outcomes and it provides doctor with chairside tool that enables patients to visualize their full their future smiles at chairside in less than a minute without any goop, which increases treatment acceptance and drive practice growth. Before I turn the call over to John, I want to mention the decision to terminate settlement, Align and Straumann signed a non binding letter of intent As part of the settlement, Align and Straumann signed a non binding letter of intent to assess the possibility of a 5 year global development and distribution agreement whereby Straumann would distribute 5,000 Itero and Element scanners. Additionally, we considered exploring the possibility of offering existing Itero users access to Straumann's prosthetic and surgical planning workflows. In June, after months of deliberation, we'd announced the decision to terminate these discussions. And as a result, we received an additional $16,000,000 from Straumann for a total of $51,000,000 settlement.
With that, I'll now turn the call over to John.
Thanks, Joe. Now for our Q2 financial results. Total revenue for the 2nd quarter was 600 $700,000 up 9.4 percent from the prior quarter and up 22.5% from the corresponding quarter a year ago. Year over year revenue growth includes approximately $19,000,000 or 4 points of unfavorable foreign exchange. For clear aligners, Q2 revenue of $496,700,000 was flat sequentially due to Invisalign volume growth in most geographies, partially offset by lower Invisalign ASPs and lower SDC volume.
Year over year clear aligner revenue growth of 14.6% reflects strong Invisalign shipment growth across all customer channels and geographies, partially offset by lower ASPs. On June 1, we had a minor issue with a standard software release that impacted some ClinCheck modifications. It was addressed and communicated to customers quickly. However, it required some Invisalign doctors to re review their treatment plans. This disrupted the workflow for many doctors, which was compounded by an increase in call volumes to our treat operations and customer care center that degraded service levels and customer experience.
While it's impossible to quantify, on the margin probably didn't help the quarter. Q2 Invisalign ASPs were down sequentially by approximately $15 to $12.30 primarily due to unfavorable foreign exchange and discounts. On a year over year basis, Q2 Invisalign ASPs were down $85 primarily reflecting promotional discounts, unfavorable foreign exchange, higher deferrals related to additional liners and product mix shift, partially offset by price increases. Total Q2 Invisalign shipments of 377,100 cases were up 8% sequentially and up 24.6% year over year. For Americas Orthodontists, Q2 Invisalign case volume was up 3.7% sequentially and up 19.7% year over year.
For Americas GP Dentists, Invisalign case volume was up 4.9% sequentially and up 11.6% year over year. For international doctors, Invisalign case volume was up 13.4% sequentially and up 36.7% year over year. Our scanner and services revenue for the Q2 was $104,000,000 up 30.4% sequentially, reflecting growth across all regions and channels, including DSOs, partially offset by lower ASP. Year over year revenue was up 82.4%, primarily due to higher scanner units across regions and related services revenues, partially offset by lower ASP. Moving on to gross margin.
2nd quarter overall gross margin was 72%, down 1.2 points sequentially and down 2.6 points year over year. Gross margin was impacted by approximately 1 point year over year due to unfavorable foreign exchange. Clear aligner gross margin for the 2nd quarter was 73.7%, down 1.2 points sequentially, primarily due to costs from seasonally higher doctor training and freight. Clear aligner gross margin was down 2.8 points year over year, primarily due to increased aligners per case and lower ASPs as just described. Scanner gross margin for the 2nd quarter was 63.6%, flat sequentially and up 4 points year over year, primarily due to increased manufacturing efficiencies, partially offset by lower ASP driven by mix.
Q2 operating expenses were $255,800,000 down sequentially 18.6% and up 5.3% year over year. The sequential decrease in operating expenses reflects a benefit of $51,000,000 related to the Straumann litigation settlement, partially offset by our continued investment in sales and R and D activities. Additionally, Q1 operating expenses included $29,800,000 related to Invisalign store closure costs. On a year over year basis, operating expense increased due to sales and R and D activities and was partially offset by the Straumann settlement. 2nd quarter operating expense included a $51,000,000 benefit from the Straumann litigation settlement, which increased Q2 operating margin by approximately 8 points and diluted earnings per share by $0.57 respectively.
This settlement was higher than anticipated in our Q2 guidance because it included an additional $16,000,000 benefit from the termination of development and distribution agreement along with $5,000,000 that would have been incurred for development. Our 2nd quarter operating income was $176,500,000 up 101.2 percent sequentially and up 43.8 percent year over year. Our 2nd quarter operating margin was 29.4%, up 13.4 points sequentially and up 4.4 points year over year. The sequential increases in both operating income and operating margin are primarily attributed to the $51,000,000 benefit related to the Straumann settlement recorded in the 2nd quarter and the Invisalign store closure costs recorded in Q1 of 2019. On a year over year basis, the increases in operating income and operating margin primarily reflect the benefit from the Straumann settlement, partially offset by lower gross margin and continued investments in sales and R and D.
Interest, other income and expense of $17,400,000 includes the $15,800,000 gain that is related to our sale of equity investment in SmileDirectClub during the Q2. With regards to 2nd quarter tax provision, our tax rate was 22.2 percent, which includes approximately $10,000,000 of tax expense related to gains from the Straumann settlement and the sale of the SDC Equity Investment. 2nd quarter diluted earnings per share was $1.83 up $0.94 sequentially and up $0.53 compared to the prior year. Moving on to the balance sheet. As of June 30, 2019, cash, cash equivalents and marketable securities, including both short and long term investments, were $765,900,000 an increase of $33,400,000 from the prior quarter, which is primarily due to higher cash flow from operations, partially offset by $49,500,000 used to repurchase approximately 161,000 shares of our stock.
Of our $765,900,000 of cash, cash equivalents and marketable securities, $582,400,000 was held in the U. S. And $183,500,000 was held by our international Q2 accounts receivable balance was $520,100,000 up approximately 8.5% sequentially. Our overall day sales outstanding, DSO, was 77 days, down one day sequentially and up 9 days Q2 last year. Cash flow from operations for the 2nd quarter was $177,400,000 up $37,600,000 compared to the prior year.
Capital expenditures for the Q2 were $45,300,000 primarily related to our continued investment in increasing aligner capacity and facilities. Free cash flow for the Q2, defined as cash flow from operations less capital expenditures amounted to $132,000,000 During Q2 2019, we purchased on the open market approximately 161,000 shares of our common stock at an average price of $307.48 per share, including commission for an aggregate purchase price of $49,500,000 We have $400,500,000 remaining available for our repurchase under the May 2018 repurchase program. With that, let's turn to our Q2 Q3 outlook and the factors that inform our view, starting with the demand outlook. As we exited Q2 and now into the 1st weeks of Q3, we are seeing improving volume trends. For international, we expect Q3 volumes to be down sequentially, reflecting a seasonality slower period for EMEA, partially offset by seasonally stronger period for the APAC regions.
However, given the uncertainty in China, we are reflecting a more cautious outlook for APAC growth. For the Americas, we expect Q3 volumes to be up sequentially, reflecting growth across all key country markets as well as a seasonally stronger period for North America. Orthodontists, as with the peak of the summer teen season along with increased media spend and the launch of our new customer advertising campaign as Joe described earlier. As we typically see, we expect overall Invisalign volume to be flat to slightly up from Q2. We expect our Itero business to be down sequentially coming off of another very strong quarter and record growth in Q2.
Year over year, the Itero business continues to grow across all regions. And regarding SmileDirectClub, we expect no clear aligner volume from in Q3. With this as a backdrop, we expect the Q3 to shape up as follows. Invisalign case volume is expected to be in the range of 370,000 to 380,000 cases, up approximately 16% to 19% year over year on a tough comp from Q3 last year, which had record shipments that benefited from the teen and adult promotions by approximately 2% higher growth rate. We expect Q3 revenue to be in the range of $585,000,000 to $600,000,000 up approximately 16% to 19% year.
Our Q3 revenue outlook assumes no SmileDirectClub volume compared to the same quarter a year ago, where aligners supplied to SDC contributed about $8,000,000 to revenue. In addition, as just mentioned, in Q3 2018, we had higher Invisalign volumes due to promotions but lower ASPs. We expect Q3 gross margin to be in the range of 71.9% to 72.5%. Q3 gross margin is up slightly compared to Q2 as we expect improvement due to price increases and manufacturing productivity. We expect Q3 operating expenses to be in the range of $305,000,000 to $312,000,000 Our Q3 operating expenses are expected to be significantly higher sequentially as a result of the benefit of $51,000,000 Straumann settlement in Q2, which reduced operating expenses.
We are very pleased with the settlement and are putting the funds to work by stepping up our investment in consumer advertising with a brand new campaign and stepping up our reach and coverage. The new ads focus on the significant technical and clinical advantages of our Invisalign system and differentiates our doctor center model for consumers. It will launch next week in North America and soon after in China. These ads will carry on throughout the second half of twenty nineteen. Q3 operating margin should be in the range of 19.8 percent to 20.5 percent.
Our effective tax rate is expected to be approximately 24%. Diluted shares outstanding is expected to be approximately 80,600,000 exclusive of any share repurchases. Taken together, we expect our Q3 diluted earnings per share to be in the range of $1.09 to $1.16 In addition, we expect to repurchase at least $100,000,000 of our stock in the open market in Q3. As we continue our operational expansion efforts, we expect capital expenditures for Q3 to be approximately $50,000,000 to $55,000,000 and we expect depreciation and amortization to be $24,000,000 to $26,000,000 Given our Q3 outlook, I want to make a few comments on the full year. Based on the current growth rates in our business to date and our planned investments for the remainder of the year, we now anticipate 2019 total revenue growth rate to be at the low end of our long term operating model target of 20% to 30%.
We also expect Invisalign revenue and volume growth to be at the low end of our long term operating model target. We anticipate operating margin to be below the low end of our long term model at approximately 22%, which reflect the impact from increased legal fees and the planned corporate structure reorganization as well as increased investment in consumer marketing, Invisalign store closure costs, partially offset by the benefit from the Straumann settlement. Now I'll turn the call back to Joe for closing comments.
Thanks, John, and thanks for joining our call today. Before we close, I want to comment on few things that I think are important to remember given our lower than expected Invisalign volumes this quarter and a more cautious outlook for China in Q3. First, our fundamentals are squarely in place and our outlook for the remainder of the year is clearly within our long term model on top of a record 35% last year. We don't believe the second and third quarter in any way reflects our full potential. Our product technology, operational scale and consumer brand awareness are all significant advantages in a huge market that we're addressing with only 10% share today.
The opportunity to bring better smiles to 1,000,000 is not a zero sum game, and we're working hard to ensure that we continue to gain share. So while we acknowledge competition, we also embrace it because it drives our own innovation, which ultimately is great for millions of global patients who have yet to reap the benefits of this. Finally, before I open the call for questions, I want to take a minute to congratulate Simon Beard, who has taken on a new role as Senior VP for the Americas. I also want to welcome Marcus Sebastian to our executive management team as the new Senior VP of EMEA. As many of you know, Simon was responsible for the market development and operational execution of all products and services in EMEA region since 2014.
Under Simon's leadership, the EMEA region has consistently grown more than 30% compound annual growth rate with strong performance across the entire region and customer base. His knowledge of the market and ability to drive strategic programs and initiatives across the region have delivered exceptional results and make him an ideal leader for the Americas region. Marcus also joined Align a year ago and has been responsible for Align's core European commercial organization focused on the orthodontic channel. He's also served as the interim GM of Germany and France Country Markets. Marcus is an experienced leader and General Manager with a proven track record in global commercial operations and sales, strategic marketing, product development and change management processes.
His deep understanding of the health care markets in EMEA, Asia Pacific and the U. S. Are an asset to align. We're very glad to have Marcus assume responsibility for the EMEA region. With that, I want to thank you again for joining our call.
I look forward to seeing many of you at upcoming financial conferences and meetings, including the Invisalign GP Summit in November in Las Vegas, where we'll host an analyst meeting. Stay tuned for more information. With that, I'll turn the call over to the operator for questions. Operator?
At this time, we'll be conducting a question and answer session. Our first question comes from the line of Erin Wright from Credit Suisse. Please proceed with your question.
Great, thanks. Can you parse out some of the components of the sequentially slower growth in Americas where maybe there were pockets of stronger growth that you could at least call out that were obviously offset by some of those competitive dynamics that you were speaking to? And how should we be thinking about the quarterly progression there? And also where are you seeing most of the competition stemming from? Is it mostly DTC or is it some component of the GP offerings as well?
And how do you expect that to progress? Thanks.
Yes. Hi, Aaron. First of all, when you look at the Americas, this is split up because the Americas side includes Latin America and Brazil, which is growing over 100%. There's terrific growth down there. So our focus is mainly when we talk about a little bit of a slowdown has been in the North American marketplace in the U.
S. And Canada. When you talk about segments that have done well is what I read in my script too is when you look at teens or we call them tweens between 7 10, they're up 140 percent year on year in the Americas. It's our fastest growing group. And that reflects the technology we put in place around Invisalign First, which is made for dental expansion in that age of patient.
And also our mandibular advancement product also that I think you know about, too. So that's been a terrific segment for us. Our adult segment, too, has been strong. It's that 20 to 29 year old that we saw some amount of slowdown over time. But when you get into the older classifications, we're still seeing really good strong growth in those areas.
So I feel well that our portfolio that I talked about in my script, which is iGo and also our light product, can address that segment of $20,000,000 to $29,000,000 that we think is looking for a price point and also some convenience that we're sure that we can offer through our ortho channels and also our GP channels too. On the competition in general is how I framed your second part of your question. When you think about DTC versus I would interpret that as just standard competition. It's really hard to say exactly how to break this up. But in general, we feel that when you look at that specific consumer segment, it's more of a DTC segment, Not necessarily a traditional segment that they would be appealing to.
So in general, I feel good about our positioning. I think our position with orthos and GPs continues to be strong. I mean, look at our most it was great to be in this field. We were in Asia last week. We're also in North America that I mentioned the previous week.
And we've been involved with a lot of customers. And just what I said in my script, I mean, there's we know that things are being tried out there from a consumer standpoint. We feel so good about the feedback we get about the clinical capabilities of Invisalign, the consistency of it, its interaction with Itero, which is it's really unmatched in the marketplace. And then all of them reaching out to say how they want to compete against that DTC segment. And we're the only company that can really join hands with them help them to compete in that area.
Thanks, Erin. Next question please. Okay, great. Thanks.
Our next question comes from the line of Jon Block from Stifel. Please proceed with your question.
Great. I'm going to try to ask 2 and I'll ask them 1 at a time. So the first long term guidance is 20% to 30% rev guide, but the guide for next quarter is 17% at the midpoint. It looks like high teens, Joe, for the back half of 2019. I know you had some commentary, but I guess the real question is 1 or 2 quarters don't make a trend, but how do we foot sort of that high teens 2H year over year growth guide versus the long term of 20% to 30%?
And what would drive the reacceleration? And then I'll ask hopefully a tighter follow-up. Thanks.
Yes. Hey, John. General from a team standpoint, you know what our product portfolio is and how well it competes in that sense. And when we talk about the slowdown right now, the part of it is a huge part of it is China. And China obviously is a big teen season as we roll into China now.
And we're confident we'll be able to perform in that marketplace too, John, and there's still demand there. There's just after what we saw in the second quarter, we have some basic uncertainty there and that's reflected in what our guidance is. But it certainly doesn't decrease our confidence in the sense of our portfolio, our positioning and the movements that we're making in the Tier 3 and Tier 4 cities that I mentioned in my script. It's a really important part of us expanding in that geography and just giving us more mass in the sense of being exposed to broader patients across that area. So overall, I feel good about that.
Okay. And then just the follow-up there. Can you just expand a little bit on the competitive dynamics? You said things seem to work itself out in early 3Q. So what was that, Joe?
Was that commentary specific more to the traditional ortho channel where there might have been some trialing and then they said, hey, we don't have a comparable product or maybe you can just split what those comments were specific to?
Well, they're specific to North America in the ortho channel that you mentioned, John. And we see in the first basic 24 days in July, we're seeing a significant uptick in that part of the marketplace. So we say work that out. It just seems that we've had doctors tell us they've tried these products. They haven't been satisfied with the software, the results that they've had to date or whatever.
And then we see an inflection point from a growth standpoint as we move into July, that's significant. Secondly is when we look at Asia in the July orders also, including China, we've seen an uptick in China also. So just in general, I'm talking about and we're talking about as a team is from a volume standpoint, we've seen an increase in that sense. It gives us confidence that those things are working themselves out.
Okay. Thank you.
Our next question comes from the line of Glenn Santangelo from Guggenheim Securities. Please proceed with your question.
No worries. Joe, I just want to talk to you about, clearly the competitive landscape seems like it's getting worse, but yet you raised your prices on July 1. I mean, are you seeing any price sensitivity in the market? And then when you think about the competitive landscape, put the DTC channel aside for sake. But when you think about the traditional players that are also now selling into the GP and the ortho market, are you seeing any sort of price sensitivity from your customer base at all?
Hi, Glenn. I'd start to say our market's always been price sensitive. And when you look at our portfolio in the sense of how we put things together with our comprehensive product and then our light products, products like E5 and E7 and the iGo that I talked about too, These have all been positioned to hit a certain price point, not just for doctors but for doctors with their patients, too. When you talk about competition increasing or whatever, again, it's out there, the traditional players that we know about. I'll talk about the DTC channel in a second.
But in general, what we find is there's no scale yet. There's no scale in the software side. There's no scale in the supply side. There's a ways to go. There's no challenge in the teen segment at all.
It's primarily simple cases on the adult side. And so it's not that we don't take it seriously. It's just that we feel that we have a really strong sales force. The Itero integration with our product line is so strong. In that way, it makes it easier for doctors to work with us and to work with patients also.
Our operations are unmatched in the sense of now we produce 500,000 to 600,000 aligners a day. It's not easy to do those things. So overall, is the landscape changing? Sure, it is. I mean, our key patents ran off at the end of 2017, as you know.
We're in the 2019, and we're seeing competition slowly ramp up. But we're not saying that it's been material this quarter. We're just recognizing that it's been out there. On the DCC's channel price, again, I'll go back to our portfolio, the products like Lite, products like iGo, our simpler products like E7 specifically, those are designed for simple cases. Basically, that's what DTC does.
They do Social 6, lower crowding, things that are orthodontically simple. These products are going to align for that too. Our job is to get those products in our doctors' hands and to get in front of the patients and show them what an opportunity is to work with a doctor and its product line to give them the kind of outcomes that they expect. And also they give them a chance to be able to work with the doctor hand in hand if they don't like the treatment at some point in time, they can continue to progress with that doctor to make it better too.
I appreciate those comments. Anything regarding ASP slight downtick sequentially? Was it mix? Was it discounting? Anything you can add on that front?
Primarily, it was exchange, right? And that's what we're leaning into. John, you could
Yes. I mean, it's like you said, glanced down about $15 $10 of that was exchange and then the rest of it was mix. So nothing material from the previous quarter.
Thank you very much.
Our next question comes from the line of Brandon Couillard from Jefferies. Please proceed with your question.
Thanks. Good afternoon. Joe, just starting in the Americas region, why do you think the DC channel, the DTC channel is having a negative impact now? You kind of talked about perhaps having a positive halo effect. And then could you speak to the productivity of the 100 new reps that you've hired and whether or not those are ramping in line with your expectations or not?
Yes. Hey Brandon, first of all, on the DTC piece is look, I think it's there's light and dark in that, right? I do feel that SmileDirectClub and Candid, they've raised the category of awareness significantly. And we hear throughout our doctor base, whether it be orthodontic side or GP side, the patients come in asking about clear aligners much more than they have before. So it forces that conversation.
It gives an opportunity to engage at a level that I feel with just our advertising alone, it would have never gotten to that level. So that's a positive side. The negative side is it's there's some price competition. That segment offers $2,000 or less kind of a case for a simple case, and it's pushed some of the doctor office models and it's pushed our portfolio too. And we're saying is that we've always known there's a 10% overlap.
And educating our customers, having customers be able to which is our doctors, having the customers be able to use an iTero scanner to help to communicate and visualize exactly what the treatment plan would be, giving patients some off in the sense that they have issues during the treatment time that they can be addressed by a doctor directly. All those things are things that we just have to make sure we take better advantage of with our doctors and the channels that we work with in order to take advantage of that increased interest that we see out there. From a new rep standpoint, it was second part of your question, Brandon. We put roughly 100 in North America last year. We watch these statistics, I do, really closely.
And it's amazing to watch the productivity, what happens. It's almost like clockwork. It takes 9 months, we're certain, before they're really up to speed and you can see the productivity versus what our normal territory managers would have. And as we move into the Q3 right now and looking at those statistics, we see they're almost, we call it, breadth and reach. And the number of accounts they're calling on and the depth of those accounts are almost equal today.
So as we go into the second half of this year, we're really confident about higher productivity with these reps. And combine that with our new consumer ad campaign and the breadth of that consumer ad campaign that John talked about, we think will help to drive that demand. And with the concierge service increase also, which is significant, will allow us to be able to take advantage of that demand in a way we really couldn't in the past without with those resources.
Okay. Thanks. And then for the follow-up, John, could you help us reconcile some of the components of the higher OpEx outlook or the reduced operating margin outlook for the second half? And is the legal and corporate reorganization spend still 150 to 200 basis points in terms of headwind for the year now? Is there any reason that extends perhaps into 2020?
No, Brandon. It is 100 it's the 1.5 to 2 points of expenses that's for the full year for that legal and reorganization and we don't expect that to continue into next year. Thanks.
Our next question comes from the line of Robbie Misra from Barrington Capital. Please proceed with your question.
Hi, good morning. Thanks for taking the questions. Just two quick ones on AquaGuard. Number 1, I think you had said on the last call the gross margin profile at the end of the year, you'd still be kind of towards the low end of that 70 3% to 78% range. Is that still the case?
And then secondly, just a little bit more detail, if I may, ask for on the dynamics in your North American business. Just curious, are you seeing the detailing more on your lower volume GPs or orthos? Or who is really feeling the most competitive pressure in terms of your customer base?
Thanks.
So on your first question, Ravi, on the gross margin improvement, we still expect to see sequential improvement. So we've guided up from Q2 for gross margin in the Q3 and we expect that improvement to continue into the 4th quarter.
Hey, Robbie, it's Joe. Your second question is the dynamics of that. It's a really good question. When we look at that on the GP side, I mean, it's hitting us both on the orthos and the GP side. Our orthodontic data for the Q2 indicated there was really a reduction in number of adults that were going through orthodontists.
And we know we recognize that. On the GP side, it hits the GP side also. But what we see with our DSOs specifically is they're up significantly in growth. I mean they've been focused on Invisalign and hit it harder. So within that segment, it's GP.
I think the individual practices, it's hit a little bit harder. The DSOs have really grabbed products like iGo and institute that in your organization and done much better with it.
Our next question comes from Elizabeth Anderson. Please proceed with your question.
Hi, good afternoon guys. Hey, Elizabeth. Hey, Elizabeth.
We can barely hear you.
Oh, sorry about that. Can you hear me better now? Oh, that's better.
We got it now.
Okay. Perfect. Sorry about that. So just in terms of mix in between your comprehensive and non comprehensive products, can you talk about if there were certain like areas in particular the non comprehensive products where you saw like a shift between the 1st and second quarters?
Elizabeth, when you look at that, our comprehensive held in there really well. You remember with it's really important to remember that comprehensive, our larger sized docs like Diamond, Diamond Plus, Platinum rely almost exclusively on those product lines because the discount that we give them really it makes it easier for them to be able to move up and down the portfolio. They like that product line, the comprehensive side, only because you get the 5 year additional liners. So when you move to the non comp and that increase, our light product line stood out really well. Our E7 did extremely well.
And also, iGo, by far, was a real winner in that piece. So remember a product like Igo to has 1 individual additional liner that's offered with the 2. So for those kind of simple cases that also gives the doctors confidence to be able to attack those things with a more of a middle range kind of a product.
That makes sense. And from an R and D perspective, I know you sort of over time have had like a steady drip of new products and mandibular advancement and Design First. Is there anything you could sort of talk about that you guys are working on in terms of further clinical advancements?
We'd have to kill you, Elizabeth, if we told you that. It's top secret, okay? It's no mystery that we've been working on what's called a rapid palate expander. So when we talk about Invisalign first, think about that's a dental arch expansion product. So you take your teeth that are in your arch and you basically expand those teeth.
A palate expander actually takes more from a more biological standpoint, it just widens your mouth completely. That is something we've been working on. I feel we have a good line of sight on how to get that done. But it'll be several more quarters before we introduce anything like that.
Okay. That's helpful. Thank you.
Our next question comes from the line of John Kreger from William Blair. Please proceed with your question.
Thanks very much. Joe, can you just expand a little bit more on what you're seeing in China? If you're willing, how much is it slowing? Are you seeing any signs of market maturation? And are there any competitive pressures that you're seeing there?
Or are you seeing it just in terms of a little bit more reticence on the part of the consumer to spend?
John, I'd start with the end of your question. It's a little more reticence on consumers to spend. I mean, you've seen that in other consumer channels when you look at what's going on, particularly with some U. S.-based companies and obviously the issues that we have between the United States and China right now. As far as the competition goes, John, I'd say Angel Align is a very competent competitor in China from an overall standpoint, but it's not that we feel that there's been any dramatic change in the sense of their competitive positioning or their ability to do certain cases or others.
But mean, we recognize them as a competent competitor. It's just when you look at the different cities too, Tier 3, Tier 4, there's a huge GP area in the Tier 3 and Tier 4 city. That's why we put iGo and the GP sales force to go into it. The Tier 1 cities are more orthodontic. And so we do segment in that way.
When you talk about maturation or some kind of saturation, we just don't feel that. Again, we're moving into the teen season in China and the 3rd quarter is normally our biggest quarter. Obviously, there's still a lot of spending that goes on in China around the teen side. And so, no, I honestly feel that this is consumer sentiment in general. It's reflected in other consumer based businesses.
It's not to your point, broadly driven by competition or by any kind of, I'd say, saturation of clear aligners in that marketplace. I think we still have a long way to go before we'd ever reach that point.
Great. Thanks. And maybe one quick follow-up for this young adult demographic that you've been talking about. What other levers do you have to really kind of improve the convenience that they perceive with Invisalign versus other options beyond sort of that classic price trade off?
Well, with I'd say young adults is it's how many doctor visits that they have to make, John. And there are some technologies I don't want to get into right now, but they're more remote technologies that would allow a doctor to see these patients less frequently from an office standpoint and be able to monitor their progress remotely. And I think those kind of things that hit the convenience side, but it also hits the cost side because the less time they spend in an office, there's less doctor time associated with it. So it's lower cost, too. So there is a convenience and a price point.
We think the technology and doctor understanding of specific kind of products and when and where to use them will allow us to be able to get at that segment better.
Great. Thank you.
All right, John. Our next question comes from the line of Steve Gishaw from Wolfe Research. Please proceed with your question.
Hi, Steve. First, just one more clarification on China. Embedded in the outlook for the back half, am I hearing you right that you assume China actually gets worse? And then I know John Kreger asked this, but could you put any numbers around China in 2Q and what you're assuming for the balance of the year?
Yes, Steve, this is John. We assume China kind of stays as we've seen. So we saw some of that slowdown in the second half of the quarter, second quarter and we assume that that continues not knowing how that consumer sentiment is going to change over the next few months.
Okay. And then the e mail that I'm getting most frequently here is how are they thinking now about the LRP, the 20% to 30% growth range beyond the next couple of quarters? And what are the drivers there? Joe, I appreciate that you called out that the competitive trialing might fade in China, we all would imagine gets better. Is that the whole story?
We feel good about the LRP because of those two things?
Yes. We're sticking to the 20%, 30% with confidence, Steve. There's nothing that really changed in that sense. And John, you'd
That's how we're allocating resources and investing for that long term growth model of revenue 20% to 30%. We're making investments where they're appropriate and looking for return on those investments to work with our long term growth model.
So does that mean
Yes, Steve, I just reemphasize, China is not going away, right? I mean, that's a big market. It's a phenomena. The other part that I think we talked about it, but it's not we just got back we were in Asia last week. It's not necessarily apparent is the rest of them the rest of when you look at APAC is so strong.
You have Japan approaching 50% growth rates or more. You have just it's an incredibly strong region overall. We think that we'll get through this China situation. It's going to continue to be our 2nd biggest marketplace. And I feel really good about our investments over there too because I think it addresses this consumer sentiment piece that we can be more like a Chinese company than be viewed as just an American company.
Okay. That's clear. Thanks a bunch.
Our next question comes from the line of Jeff Johnson from Baird. Please proceed with your question.
Thank you. Good afternoon, guys. Can you hear me okay?
Yes. Hi, Jeff.
Hey, all. John, I wanted to go back to Brandon's question just on margins. Obviously, you reiterated the 150 to 200 basis point impact from the legal and the reorg and what have you for the year. But the rest of the takedown kind of in the second half guidance from a margin perspective, ending up around 20% or so, is that just the increased spend to try to reinvigorate top line or what other kind of levers get you to that 20% operating margin instead of kind of the mid-20s we were thinking?
Yes, that gets us lower, Brandon, Jeff, from the investments that we're making in marketing. So we're making those media investments in the Q3. We expect that to continue into the 4th quarter. And that's a reflection in the overall op margin rate that I gave.
All right, fair enough. And Joe, maybe just a question on ClinCheck and kind of your confidence that those software glitches issues, whatever the saving issues were, all of that rolled into 1, confidence that you're past that, number 1. And then maybe talk about your employee base in Costa Rica. Obviously, you've had a couple of competitors go down there in open treatment planning facilities in pretty close locations. Was that impacting in the Q2 at all?
Does that impact over the short term going forward? Just how to think about that?
Yes, Jeff. On the software release we had, I mean, it was unfortunate, but we it's contained and we know exactly what happened and that's been cleaned up broadly across the world. On the when you think about Costa Rica, too, we've had a lot of pressure on that organization. It's not necessarily because competitors have moved down there, and we have lost some employees to them. It's just been our capacity.
We've had our growth has been phenomenal. You still look at these stack rates, they're huge. It takes us I think I've mentioned before, Jeff, it takes us about 6 months to add capacity, basically people, technicians to Costa Rica to really get them up to speed where they can deal with customers. And we're a little bit behind the curve on that and customers felt it. The software that we released that you referenced did put pressure on them because we had to go back and reduce some cases and that obviously put pressure on them and put pressure across our whole customer base when we did that.
But it has nothing to do with SDC, obviously, has treatment planning down there and some of our more traditional competitors have moved people down there. But we haven't had an attrition rate that's significantly different in that area than what we've had before. So we've added capacity there. We're going to add more capacity in the second half of this year so that we can take care of some of the increases in volume that we see at times because if you when you do see these increases in volume, it's not like they go away in 2 weeks. They ripple through this organization for 30 or 40 days and we need to be able to have some little extra capacity to allow us to be able to address that.
Thank you.
Our next question comes from the line of Matthew O'Brien for Piper Jaffray. Please proceed with your question.
All right. Thanks. Afternoon. Thanks for taking my questions. Joe, as I think about the quarter and the outlook for the business, I continually hear that Align has better products from clinicians.
That's clear. It's just it seems like in the marketplace that message isn't being heard. So I'm wondering what you can do to turn things around there. And I know there's some of these investments, but can you be more specific on how you turn things around in North America somewhat medically necessary product versus us encountering kind of a slow bleed as you have more competition in both geographies over the next several years?
Matthew, I'm not sure how to talk about the competition part more than what I have so far, right? I think we've categorized them well. We know what their capabilities are. It's somewhat limited. When you say how to get at that, when some of these cases are offered for free or they're offered for $800 or $7.50 orthos are going to try it.
If I was an ortho, I'd try it too, given where we've been in the marketplace and where our prices are or whatever. And so I think that's just part of the competitive environment or whatever. But what we're being very clear about, we don't see a systemic loss to our traditional competitors in any way. So don't want to infer that at all either. From a China standpoint, look, China, again, I think we talked about that in a few other calls a few seconds ago.
China will continue to be strong. Consumer sentiment there is consumer sentiment. We're going to continue to invest there. We're going to put more salespeople in place. We'll follow through with our continuing our training centers, our manufacturing centers, all put in place and we expect that China will continue to grow and be for the foreseeable future, the 2nd largest area that we sell to.
Johnny?
Sorry.
Okay. And
then everybody is focusing on the negatives here and there's I get that. But there was some positives in the quarter. I'd love to hear a little bit more about you. You started touching on it a bit, but the iTero number and I know there was some seasonality to it was just phenomenal again. Some of that's DSO related, I'd love to hear a little bit more about outside the DSOs, what was driving that and when we expect to see a lot more of that volume from all the iTero placements.
And same thing goes with doc training. I think those are some of the best numbers that we've seen in a while. When some of that training may manifest into higher volumes for the entire organization.
Yes, Matt, we appreciate a positive comment like that because there were a lot of good things in this quarter. One thing you missed is you look at EMEA, up 39 percent and the consistency of the growth across that EMEA region has really been amazing in that sense. I mentioned the other parts of APAC too is the strong growth that we saw. And again, we verified that last week when we were over to see the team. And in the North America side, I mean, when you look at these tween 7% to 10%, up 100 and percent and some of our other age groups, they've been very extremely strong.
DSO marketplace has been great for us. And GP is still growing double digits and is not taken for granted in this business because we've had some terrible go back years ago of GP growth that were sub double digits. We continue to do well in that segment. But you pointed to Itero specifically, and I mean, it was really an amazing quarter for Itero. So you have world leading technology in Itero.
And with our 5 d launch, it wasn't available in the United States. It's not yet. We're still working through the FDA. But in other parts of the world, it hasn't made available. We're seeing both orthos and dental dentist or general practitioners are really interested in that product line, too.
We have good sales force combined with our iTero sales force, it's direct, but also with our Invisalign sales force too. And more and more as it's no secret that dental is going digital. To start the whole digital piece, the front end of it is a scanner. Having the kind of technology we have with iTero, you can see in some of the statistics that I mentioned in my opening, 13,700,000 scans done. I think 3,800,000 that were done for restorative scans, meaning they had really nothing to do for the most part with Invisalign in that sense kind of shows you the versatility of that product line too.
So those areas are very strong in the area. You talked about doc training. We did have some terrific numbers across all geographies for the quarter. That's always a strong leading indicator of docs interest in future Invisalign cases. It breaks down differently by different regions of how fast they'll go.
But as an overall signal in the sense of what's in front of us and the interest from a doctor standpoint, the doctor training thing is good and I'm glad you picked up on
it. Thank you. Our next question comes from the line of Steven Valiquette from Barclays. Please proceed with your question.
Thanks. Good afternoon everybody. So, hey guys, so not to get too granular on what transpired over the past 3, 4 months, but just coming back to the June quarter case volume for a moment. I guess when you guys provided guidance for 2Q, obviously that was in late April. Then you guys read a lot of conferences through mid June that put the message and everything seemed okay.
I guess I'm just wondering if most of these negative pressure points hit you maybe late in the quarter and in the month of June in particular. And when we come back to your comment that in North America you're seeing improving trends in the 1st few weeks of Q3. Are you just comparing July to June in particular? Just curious to kind of get a little more color of how things kind of transpired throughout the quarter as we think about some of these pros and cons and the results? Thanks.
Hey, Steve, like you said, not to be over granular though. I think China by far was one where when you got to June and all, it was more difficult than what we had anticipated. Our China team is terrific too. So you do count on these guys to be able to deliver toward the end of the quarter and we see that time and time again. It just didn't materialize and that consumer sentiment piece became more and more visible to us as we got through the quarter in that way.
In North America, I'd say in general, we're good with the teen volume. It was up 24%, same as what we had in the previous quarter, up 24%, too. So there wasn't really a teen issue from a North America standpoint. But we did see some slowdown as we went into the quarter also. As you think about July in general, when we talk about that increase, we're not just comparing it to June.
We're talking about the entire quarter, the first and second quarters and what we look at when we talk about that increase. Also we wouldn't mention it.
Okay. I appreciate the extra color. Thanks.
Yes. Our next question comes from the line of Michael Ryskin from Bank of America Merrill Lynch. Please proceed with your question.
Hey, guys. Thanks for squeezing me in. Quick one on the follow-up quarter and then one just to follow-up again on something that Steve just touched on with the last one. For starters for 3Q, if you just sort of look at your commentary on international sequentially down with the China pressures and you look at U. S, North America, even if you account for the 2% impact you had in 3Q last year, it seems like it's a pretty aggressive cut to the North America outlook.
So I'm just wondering how much conservative is built for that, especially since your point on improving trends in the 1st part of July, I guess, I'm saying is, was it really kitchen sink guide or sort of what's your outlook there?
Mike, this is John. Really, there's no change in how we guide. We look at a lot of factors and understanding of the market being a few weeks into the quarter. So we're no change in terms of how we guide. We're just trying to put the pieces that we see.
And as we mentioned with 2Q, we had some slowdown, primarily China in June and we want to be reflective of what we see. So no change in how we guide. We give our best estimate at a point in time and that's what we've done.
All right.
I appreciate that. And a quick follow-up again just going to the sort of the bridge in 2Q. If you look at where international came in versus expectations, it may have been a little bit light, but it feels like the majority of the delta was actually in North America and especially on your comments on just June softness in China. We know roughly how big your China business is for you, so it shouldn't have been that meaningful of an impact, especially if it was only a 1 month dynamic. So is there anything going on outside of China?
I mean, is there anything that you can comment on in terms of your local presence there? You've got the manufacturing site built out. You've got some of your other facilities that you're establishing there. Any other dynamics in play besides just the June consumer sentiment?
Nothing that we saw out of the ordinary, Mike. It was we looked at the demand that we saw, some of the pressure that we saw in June, but it was around the consumer sentiment. Like Joe said, that China team delivers quarter after quarter. So we felt very confident that we've got a great business there in terms of the investments that we've made in treatment planning and now manufacturing and training centers and so on. So we're continuing to invest and grow, just calling a number that we see.
Thanks Mike. Operator, we'll take one more question please.
Our next question comes from the line of Nathan Rich from Goldman Sachs. Please proceed with your question.
Thanks for fitting me in. John, I actually just had a question on the ASP outlook and how we should be thinking about that sequentially. And as you look going forward, do you have any change in kind of promotional activity or discounts kind of baked into how you're thinking about where ASPs trend from here?
Yes, Nate. When we think about ASPs and really what we saw at the end of and we guided for at the end of last year was essentially flat ASPs. We have puts and takes, as you know, with our business between international growth and comprehensive versus non comprehensive. But what we've seen through this year and our Q3 guide is consistent to the fact that notwithstanding FX, we expect it to be about flat as we go through. So we have puts and takes to it, but from an overall ASP that is flat.
And the promotions that we have, like we have every quarter, no different in terms of how we're thinking. We're trying to drive increased utilization, trying to drive growth in our business and promotions continue as usual.
Okay. I appreciate that. And then just with the case guidance for 3Q, is it possible to just kind of give us a sense in terms of orders of magnitude in the step down in the growth rate, how much was from the slowdown that you saw in China versus maybe a more competitive environment in North America just as we think about the relative impact of those factors?
Yes, Nate, most of what we saw that slowdown or the guidance that we gave was related to China. Like you said, we saw this in June, and that's a reflection of how we've guided. So the majority of that was related to China.
Great. Thanks a lot.
All right, Nate. See you.
Thanks, Nate. And thank you, everyone, for joining us. This concludes our conference call today. If you have further questions, please contact myself or Madeline Helmick in Investor Relations. Thanks and have a great day.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.