Align Technology, Inc. (ALGN) Q1 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the Align Technology First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Shirley Stacy, VP of Corporate and Investor Communications. Thank you. You may begin.

Thank you. Good afternoon everyone. Thank you for joining us. Joining me today is Joe Hogan, President and CEO; and John Morici, CFO. We issued first quarter 2020 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 one month. Telephone replay will be available today by approximately 5:30 P.M. Eastern Time through 5:30 P.M. Eastern Time on May 13th. To access the telephone replay, domestic callers should dial 877-660-6853 with conference number 13701221 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 and product outlook. 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 Securities and Exchange Commission available on our website and at sec.gov. Actual results vary significantly, and Align expressly assumes no obligation to update any forward-looking statement. We have posted historical financial statements, including the corresponding reconciliations, if applicable, and our first quarter 2020 conference and earnings release and 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 thanks for joining us. I hope that you and your families are well. Given the significant disruption to our business caused by the extraordinary measures taken by governments, public and private institutions, and businesses around the world to fight the spread of COVID-19, most of the performance metrics I would normally discuss are less meaningful. Therefore, on our call today, in addition to the highlights from our Q1 results, I'll discuss the trends that we're seeing through early March prior to the escalation in the COVID-19 cases that resulted in shutdowns across Europe and North America, and compounded the initial impact from similar shutdowns in China beginning in January. I'll also talk about our view of recovery and strategy to help our doctor-customers navigate this challenging environment and ensure our business continuity. John will provide more detail on our financial performance and comment on the current trends across our business globally, including the momentum we're beginning to see in China. Following that, I'll come back and summarize a few key points and open up the call to questions. With that, let me start with a few comments on our first quarter results through early March. At that time, China was progressing in line with our original guidance for Q1, which include approximately 20,000 to 25,000 fewer cases and $30 million to $35 million less revenues for Invisalign and iTero products, and other regions were performing ahead of our Q1 outlook. However, the situation quickly changed in mid-March as most governments in EMEA and North America closed down non-essential businesses initiated stay-at-home orders. As a result, the vast majority of Invisalign practices shut down and stopped seeing patients, and our business fell off sharply. We believe the incremental impact of COVID-19 on our Q1 results was approximately 50,000 fewer cases and approximately $85 million less revenues for Invisalign and iTero products. At the same time, while EMEA, North America and other parts of APAC fell off in mid-March, we began to see improvements in China as the country started to open up again. While it's still early in the recovery process and the situation is different in every city and for every practice, we're working closely with our doctors to support their current needs and ensure they have a game plan to resume operations in a very different environment for the foreseeable future. More on that in a few minutes. Now let's go through our first quarter results. For Q1, total revenues were $551 million, down 15.2% sequentially and unchanged year-over-year, reflecting significantly lower-than-expected sales of Invisalign clear aligners and iTero scanners due to the COVID-19 pandemic. Revenues from clear aligners were $481.6 million, and iTero scanners and services were $69.4 million. Clear aligner shipments were 359.4 thousand cases. Notwithstanding the impact of COVID-19, shipment volumes were up 2.9% year-over-year, reflecting solid growth from non-comprehensive products driven by Invisalign Go systems across all regions, as well as Invisalign Moderate. This was offset by a lower mix of comprehensive products primarily due to the shortfall in China. For the quarter, we shipped Invisalign cases to approximately 61,000 doctors, of which 4,100 were first time customers. We also trained over 4,600 new doctors in Q1, including 2,600 international doctors. Overall for the teen market in Q1, 104,000 teens and preteens started treatment with Invisalign clear aligners, representing 29% of total cases shipped, reflecting growth from EMEA and the Americas regions and across comprehensive products. During the quarter, we reached another major milestone with our 2 millionth Invisalign teenage patient, treatment of orthos. A student and athlete, we started treatment recently with Dr. Tom Hartzog, a U.S. based orthodontist in Kentucky. Dr. Hartzog has been a terrific practicing orthodontic for about 30 years and credits Invisalign with revitalizing his practice at a time when a lot of doctors think about slowing down. He says his approach is to lead with Invisalign, and he's got a new digital mindset now, and we're excited he's going to share more about that at our upcoming Invisalign Team Forum Virtual Edition, this July. The teen segment represents the largest portion of existing orthodontic case starts each year. And as we head into the summer season, the busiest time in orthos practice, we are working to help doctors capture as much of the teen season as possible under the circumstances. Now let's turn to specifics around our first quarter results, starting with the Americas region. For the Americas region, through early March, solid sequential growth was driven primarily by North American GP dentists and DSOs, along with continued strength in Latin American doctors. On a reported basis, Q1 Invisalign case volume was down 5.5% sequentially and up 5.2% year-over-year, reflecting significantly less-than-expected Invisalign case shipments in March due to the impact of COVID-19. Year-over-year growth for Q1 reflects growth from both orthodontists and GP dentist channels, which were up 5.6% and 4.6%, respectively. Latin America volume was up 83% year-over-year led by strong growth from Brazil. For our international business, through early March, with the exception of China, the EMEA and APAC regions were performing well. On a reported basis, Q1 Invisalign case volume was down 22.3%, sequentially, reflecting significant decrease in APAC, primarily China, due to the impact from COVID-19, partially offset by growth in EMEA. On a year-over-year basis, international shipments are flat, reflecting growth from EMEA, offset by a decline in APAC. For EMEA, Q1 volumes were down sequentially and up 11.1% on a year-over-year basis driven by growth in Spain, the U.K. and Germany, along with our expansion markets led by Central Eastern Europe and Benelux, including the teen segment. For APAC, Q1 was down sequentially as expected, reflecting a significant reduction in volume in China due to COVID-19. On a year-over-year basis, APAC was down 18.2% compared to the prior year, reflecting a longer duration of COVID-19 measures implemented in China, and was the only region down year-over-year. Japan, Taiwan, Korea and India saw continued year-over-year growth in Q1. And as noted earlier, we began to see signs of improvement in China in early March as the government began to relax some, or all of the restrictions and business began the road to recovery. Our consumer marketing is focused on building the clear aligner category and driving demand for Invisalign treatment through a doctor's office. In Q1, we saw strong digital engagement globally, including 7.1 million unique visitors to our websites and 274,000 leads, both metrics growing by more than 40%. Consumer engagement growth for Invisalign was enabled by the launch of our new consumer campaign, Invis, strong media spend and a robust omni-channel presence. Our Invisalign concierge team is nurturing consumer leads and virtually until doctor's office is open, which is key to realizing and converting consumer interest into cases. Further, our modeling indicates that consumer marketing drove incremental growth in Q1 and reinforces our strategy to invest in brand building and maintain high visibility with consumers through the COVID-19 crisis. Other key metrics showing increased activity and engagement with the Invisalign brand and are included in our Q1 quarterly slides. For iTero scanner and services business, Q1 revenues were down sequentially as expected, following a seasonally strong Q4 and consistent with trends in the capital equipment market. Q1 also reflects the impact of COVID-19 across all regions in especially North America, Australia, China, Japan and other APAC countries. On a year-over-year basis, iTero scanner revenues were down 13.1%, due to lower sales in North America and APAC region primarily due to COVID-19 despite increased revenues in EMEA and Latin America, reflecting the addition of Zimmer Biomet distribution agreement, the introduction of our iTero 5D going direct to Mexico and additional LATAM distributor markets. The total year-over-year decrease in scanner revenue was slightly offset by increased services revenue from a larger iTero installed base. Cumulatively, over 23 million orthodontic scans, 5.2 million restorative scans have been performed with iTero scanners. For Q1, total Invisalign cases submitted with a digital scanner in the Americas increased to 80.5% from 76.1% in Q1 last year. International scans increased 68.7%, up from 59.3% in the same quarter last year. We're pleased to see that within the Americas, 93.6% of cases submitted by North American orthodontists were submitted digitally. I'm also pleased to share that we received FDA 510(k) clearance for iTero Element 5D Imaging System. The iTero Element 5D Imaging System seamlessly combines three scanning technologies, 3D data, intraoral color photos and NIRI images. NIRI is near-infrared imaging technology, which allows you to see carries in different aspects from a dentition standpoint. It's an integrated scan, and we're excited to bring the advancement in inter oral scan technology to the United States market to help doctors provide better oral care for their patients. At this time, we're mindful of the current environment and the impact that COVID-19 pandemic is having across the world and are focused on customer education and training regarding this new technology while so many dental practices in the U.S. are operating on a limited schedule. We remain confident that the iTero business will continue to help drive our overall long-term growth and help increase adoption of the digital platform with Invisalign treatment. To that end, during the quarter, we announced the acquisition of exocad, a global CAD/CAM software leader, and completed the transaction on April 1st. John will talk more about the acquisition in a moment, but let me say just that the rise in consumer awareness around dentistry extends beyond the benefits of straight teeth and orthodontics. There are significant opportunities for all kinds of treatments, from simple cosmetic fixes to ortho-restorative that can help us accelerate growth of our digital solutions for ortho-restorative cases and really drive growth and adoption of the Invisalign iTero digital platform. I'm very excited about the addition of exocad's proven restorative experience, expertise, and functionality to our platform, and I want to welcome exocad Founders, Till Steinbrecher and Maik Gerth and the entire exocad team to Align. Let me now turn to some of the initiatives we've taken to support our doctors and their patients. We recognize the enormous hardship that COVID-19 has caused Invisalign practices around the world. We're working in every region to support doctors and find ways to minimize disruptions to their businesses and to strengthen the experiences their patients have with Invisalign treatment. We have learned a lot from our doctor partners and teams in the Asia-Pacific region, and we've been navigating the impact of COVID-19 for months. We're applying their experiences and insights across all regions. Many of our customers are sharing creative ideas and suggestions as we all work to manage the situation together. One of the first things we did was address clinical education, an integral part of doctor engagement. Across all three of our regions, we moved most of our education programs to online digital platforms, continuing to provide hundreds of valuable Invisalign and iTero training and education resources, many peer-to-peer for doctors and their teams in a virtual setting. We also identified opportunities to collaborate with Invisalign practices to manage ongoing cases and explore new ways for doctors to conduct consultations. Early on, many doctors began using video calls, text, and patients submitted photos through a variety of platforms to help monitor patient progress, reduce in-office appointments, and ensure continuity of patient care during treatment. It quickly became clear that doctors needed a better way to connect and monitor patients. So, we accelerated the launch of new tools that were still in pilot mode. The Invisalign virtual appointment tool enables doctors to easily set up HIPAA-compliant video appointments to monitor existing patients and to have an initial conversation with patients interested in learning more about Invisalign clear aligner treatment for the doctor. The Invisalign virtual care program can also use video appointments and enables doctors to monitor treatment progress and stay connected with patients through a virtual platform. Patients use the intuitive My Invisalign app to stay engaged in the treatment and convey progress photos to their doctor who review these photos on their Invisalign doctor's site, communicates any needed instruction, and ensures treatment is on track. These tools are available through our Invisalign Doctor Site, IDS, in the My Invisalign app and work as part of the end-to-end digital platform for Invisalign treatment. While both tools are still in early stages of rollout, our goal is to provide doctors with a way to maintain care until patients are again able to visit the doctor's office. Feedback to-date has been relatively positive, and we believe that doctors will continue using these tools to improve patient experience and increase efficiencies well after COVID-19 restrictions have been listed. We're also supporting doctors through financial and operating challenges and are providing additional resources, including industry experts to help navigate this ongoing crisis. This includes webcast, e-blast and micro sites on IDS again, the Invisalign Doctor Site, with advice on extending aligner wear and holding patients at specific treatment stages; options for redirecting aligner shipments and helping address customer cash flow concerns caused by the pandemic. We're creating programs with partners like LendingPoint that are part of recovery playbooks to help doctors with speed to cash that is expected to launch in May -- on May 1. Before I turn the call over to John, I'd like to spend a few minutes talking about the strength and resiliency of Align and our business model and our view of the path to recovery. There's no question that we are in uncharted territory. And while supporting our doctors in their current situation is still critical right now, planning for recovery is just as important. Overcoming challenges is not new to Align and our employees. Our response to COVID-19, decisions and investments we are making, now to anticipate customer needs and adapt in a dynamic environment are based in part on the lessons learned throughout our history and will further our competitive advantage and position us to capitalize on the market as it returns. We serve a huge under-penetrated market, and our share of more than 300 million people who want a better smile is less than 3%. Teens are an important segment, and our share is a small fraction of the market. And yet, we know that teens remain the heart and soul of orthodontic practices and will drive their recovery. There's no single blueprint for us to follow in this recovery. Our underlying business is healthy. We have an excellent balance sheet with no debt. And over the last 5 years, we've grown a business that has generated 25% compounded revenue growth and consistently delivered 72% gross margins, 22% operating margins and generated cash flow from operations in excess of 22% of revenues each year. We also have operational resiliency in terms of global manufacturing that has taken us years to develop and is simply unmatched, and is a key reason why we're able to continue operations in the crisis and expect to ramp up quickly in recovery. The core components being supply chain, digital treatment planning, treat aligner fabrication, AFAB, supply chain. During normal business, we carry enough buffer stock in our warehouse to handle 2 disruptions to the supply chain. So if a batch go sideways, we can handle that twice. After COVID-19 broke in China, we anticipated that we needed to mobilize existing suppliers and add 3 to 6 months of additional inventory so that we could weather the potential storm. For many of our suppliers, we have alternative redundant suppliers in case of shutdown in one geography impacts a supplier. Treat, the investments we have made over the years in having Treat in multiple locations, allows us some flexibility in business continuity to respond to customer needs. Before COVID-19, we had evaluated potential for doing treatment planning from home or remote locations and the implications to hardware needs, data security and productivity. When COVID-19 hit China, we ramped up our ability to do that and started transitioning our CAD designers to do treatment planning at home and have been successful in that sense. We are confident we could have maintained 80% of our normal output, but volumes fell off before we could prove that point. China hit first, so we load balanced with our other Treat locations. So as this went from east to west, we didn't have significant issues in our treatment operations. This is our model, and we'll continue to strengthen it going forward. Aligner fabrication, we have aligner fabrication operations in Huang, China and Juarez, Mexico and plans for a third facility in Europe that we're looking to accelerate into 2021. Our facilities have excess capacity built in. And while we never have 100% redundancy, we do have the ability to shift production volumes based on that excess capacity. Worst case scenario, if one of these facilities goes down, then customers wait a little longer for their aligners, but production will continue, and we believe we can recover swiftly. In short, when we have an issue in one part of the world, we have designed our operations to enable us to load balance across facilities. We've had to do this, because of our growth and huge growth spurts that made it necessary to remain flexible. Additionally, the steps we've implemented during COVID crisis like work-from-home for CAD designers gives us even more flexibility, and we'll leverage that going forward as we evaluate facilities requirements and potential cost savings. Beyond our business strength and operational resiliency, we are at the forefront of digital dentistry. And this pandemic has exposed the weakness of analog approaches and strengthens and benefits the digital technology in every aspect of our life. There's been a lot of concern over the years about digital driving us apart and keeping people from interacting. People focused on their screens in social media rather than with each other, interacting with businesses online rather than in person, et cetera. I think what we're seeing through this terrible situation is that digital actually unites us. It keeps us connected, gives us flexibility and options. Without digital technology during this crisis, how would kids go to school? How would any of us be productive working from home? How would universities and public health experts, model the curve without data mining and AI? I am proud and thankful of our digital platform is able to Invisalign patients moving forward in treatment, while physical practices are closed, that it can connect doctors and patients to monitor issues and track treatment, that because of digital, we can get a replacement aligner for some new retainers to a kid sheltering in place. And together with doctors, we're going to leverage that power of digital for dentistry and orthodontics more than ever. Doctors are not going back to before. We all know that digital dentistry is the future, and that is a part of why Align is weathering this pandemic and why I believe we are well positioned for success going into recovery. With that, I'll now turn it over to John.

Thanks, Joe. Now for our Q1 financial results. Total revenue for the first quarter was $551 million, down 15.2% from the prior quarter and up 0.4% from the corresponding quarter a year ago. For clear aligners, Q1 revenues of $481.6 million, was down 11.4% sequentially across all regions driven by Asia Pacific. Year-over-year clear aligner revenues growth of 2.6% reflects growth from EMEA and the Americas, offset by APAC. Clear aligner revenue growth was unfavorably impacted by approximately $6 million or approximately 1 point year-over-year from foreign exchange. Q1 Invisalign ASPs were up sequentially by approximately $15 to $1,255, primarily due to lower net deferrals due to a decrease in primary case shipments across all regions. On a year-over-year basis, Q1 Invisalign ASPs increased approximately $10, primarily reflecting price increases in all regions and increased additional aligner revenues, partially offset by promotional discounts and unfavorable foreign exchange. Total Q1 Invisalign shipments of 359,400 cases were down 13.1% sequentially and up 2.9% year-over-year. Our scanner and services revenue for the first quarter was $69.4 million, down 34.7% sequentially due to volume decreases in all regions. Year-over-year revenues were down 13.1%, primarily due to volume decreases in North America, partially offset by increases in EMEA and LatAm, and increases in service revenue off an increased installed base. Moving on to gross margin, first quarter overall gross margin was 71.6%, down one point sequentially and down 1.6 points year-over-year. On a non-GAAP basis, excluding stock-based compensation expense, overall gross margin was 71.8% for the first quarter, down one point sequentially and down 1.6 points year-over-year. Clear aligner gross margin for the first quarter was 73%, down 1.1 points sequentially and down 1.9 points year-over-year, primarily due to lower volumes and higher cost per case, partially offset by an increase in Invisalign ASPs. Scanner gross margin for the first quarter was 61.8%, down 3.1 points sequentially and 1.8 points year-over-year due to increased manufacturing variances, lower ASPs and partially offset by higher service revenue. Q1 operating expenses were $324.4 million, up sequentially 1.1% and up 3.2% year-over-year. The sequential increase in operating expenses reflects higher legal and outside services. Year-over-year, the increase reflects our continued investment in sales and R&D activities, including increased compensation from additional headcount and consumer marketing spend, partially offset by the $29.8 million charge related to the Invisalign store closure costs recorded in Q1 of 2019. Our first quarter operating income was $69.9 million, down 53.7% sequentially and down 20.3% year-over-year. Our first quarter operating margin was 12.7%, down 10.6 points sequentially and down 3.3 points year-over-year. The sequential decrease in operating income and operating margin are primarily attributed to lower volume, revenue, and gross margin as a result of the COVID-19 impact. Operating margin was impacted by approximately 0.8 points year-over-year from foreign exchange. On a year-over-year basis, the decrease in operating margin and operating margin primarily reflects lower gross profit and higher operating expenses related to go-to-market activities, partially offset by the $29.8 million charge related to the Invisalign store closure in Q1 2019. On a non-GAAP basis, which excludes stock-based compensation, acquisition-related costs and impairment, and other costs related to Invisalign store closures in the prior year, operating margin for the first quarter was 17. 1%, down 9.3 points sequentially and down 8.1 points year-over-year. Interest and other income expense net for the first quarter was an expense of $16.9 million, including a $9.2 million hedge loss related to the anticipated exocad acquisition. Excluding the hedge loss, interest and other income expense net was $7.4 million expense on a non-GAAP basis. With regards to the first quarter tax provision, our tax rate was negative 2,745%, which includes a onetime tax benefit of approximately $1.5 billion associated with the recognition of a deferred tax asset related to the intra entity sale of certain intellectual property rights, resulting from our corporate structure reorganization completed during the quarter. This deferred tax benefit will be amortized starting in 2020 and continue into subsequent quarters and years. The period over which the tax benefit will be recognized depends on the profitability of our Swiss headquarters and is still under assessment and review with the Swiss tax authorities. Excluding the tax benefit related to our corporate structure reorganization and the related tax effects on stock-based compensation and other non-GAAP adjustments, the first quarter tax rate on a non-GAAP basis was 33.2% compared to 29 -- 20.9% in prior quarter and 22.8% in the same quarter a year ago. The non-GAAP tax rate was higher-than-forecasted due to lower-than-expected profits in regions outside the U.S. First quarter diluted earnings per share was $19.21, up $17.68 sequentially and up $18.32 compared to the prior year. On a non-GAAP basis diluted earnings per share was $0.73 for the first quarter, down $1.03 sequentially and down $0.52 year-over-year. Moving on to the balance sheet, as of March 31, 2020, cash, cash equivalents and marketable securities were $790.7 million, a decrease of approximately $77.9 million from the prior quarter, which is primarily due to the annual bonus payout and the purchase of an additional San Jose, California facility combined with slower AR collections. Of our $790.7 million of cash and cash equivalents, $119.2 million was held in the U.S. and $671.5 million was held by our international entities. Q1 accounts receivable balance was $533 million, down approximately 3.1% sequentially. Our overall days sales outstanding, DSOs, was 87 days, up 11 days sequentially and up 9 days as compared to Q1 last year. We expect DSOs to increase in Q2 as a result of anticipated lower collections. Cash flow from operations for the first quarter was $9.8 million. Capital expenditures for the first quarter were $46.1 million, primarily related to our continued investment in increasing aligner capacity and facilities. Free cash flow, defined as cash flow from operations less capital expenditures, amounted to negative $36.3 million. Under our May 2018 repurchase program, we still have $100 million available for repurchase of our common stock. On April 1, 2020, we completed the acquisition of privately held exocad global whole needs, GMBH, a global leader in the dental CAD/CAM software market for a purchase price of approximately $430 million in cash. The acquisition of exocad broadens our digital platform reached by adding technology that addresses restorative needs in an end-to-end digital platform workflow to facilitate ortho restorative and comprehensive dentistry and also brings exocad's expertise in restorative dentistry, implantology, guided surgery and smile design of the Align Technology portfolio. We expected to complement and extend our Invisalign and iTero digital solutions paving the way for new seamless cross-disciplinary dentistry in the lab and at chairside. exocad also broadened our platform reach in the digital dentistry with close to 200 partners and more than 35,000 licenses installed worldwide. Now, let me turn to our outlook. As Joe described earlier, through early March, our business was performing well, and we believe we would exceed our Q1 guidance. However, things quickly changed in the latter part of March as the majority of Invisalign practices in our core markets in EMEA and the Americas regions closed their offices and stop seeing patients, which caused Invisalign case receipts to drop rapidly and continue into April. At this time, due to the fluid market condition caused by the COVID-19 pandemic, we are not providing guidance for Q2, and we are withdrawing our prior commentary regarding our full year 2020. What I can offer is the following directional commentary. For China, which was the first major country impacted by COVID-19 and was shut down almost overnight at the end of January, as reflected in our Q1 guidance provided on the January earnings call. It has shown continued improvement beginning in early March. Our case receipts or orders in China are currently running at 80-plus percent of mid-January's level, but with fair amount of variability week-to-week in between various provinces and cities. Keep in mind that there is about a three to four week lag between case receipts and orders to case shipments. China provinces are not uniform in their recovery, but all continue to improve. Guangdong, Shanghai and Ziyang are now at or above pre-pandemic levels. Beijing and Hubei's slower recovery is consistent with later reopening and/or heavier restrictions. Early indications of patient flow is also positive, but it's too early to determine, if it is pent-up demand due to the lockdown. We also heard today that China is lifting travel restrictions within China, which should facilitate business. APAC, excluding China, is still very fluid as Japan shut down later than the rest of APAC and other countries like Taiwan and Korea are also improving, but our trailing China For the Americas, its unclear how volume will evolve due to staggered lockdown and subsequent staggered re-openings by state. We would expect the situation in the U.S. to be similar to what we've seen in China with recovery starting in the states in the middle of the country working its way out to the coast, on a city-by-city basis. In LATAM, it is still fluid as it is shut down later than the rest of the Americas. The EMEA market is beginning to open up, and Germany is making good strides. We are monitoring each market to see how each is responding to the various government isolation regulations and is still fluid and a lot of variability week-to-week. For iTero, as a result of COVID-19, we did see some deferral purchase decisions at the end of the quarter, and I would expect that to continue. We finished Q1 with $791 million in cash and cash equivalents. Since then, we have closed our purchase of exocad for $431 million on April 1st. Align's priorities during the pandemic are to take care of our employees, customers and shareholders. With these priorities in mind, we are taking actions to ensure the business is well positioned to weather the pandemic. In order to maintain our financial health, we are taking the following actions; holding our current headcount level steady to support the initiatives Joe discussed while making sure we are prepared for the market recovery; controlling discretionary spending such as travel and meeting-related expenses; slowing some of our capital expenditures; and working with many vendors who have allowed us to increase payment terms, while providing extended payment terms to many of our customers. As always, we are balancing future investments to drive growth in a vastly underpenetrated market versus making the appropriate cost reductions and cash actions that have less impact to the business. With that, I'll turn it over to Joe for final comments. Joe?

Thanks John and thanks again for joining us today. Before I close, I want to take a minute to talk about some of Align's actions to support relief efforts in the communities in which we live and work. One of the things that makes Align a great place to work is the concern our employees have for the world around us and their commitment to helping others. The passion is core to our purpose of transforming smiles and changing lives. And in this time of need, how we support our employees and customers and serve our communities is more important than ever. Early on in the outbreak, we donated RMB1 million to the Chinese Red Cross to support relief efforts and what were then some of the hardest hit areas. More recently, we committed $1 million to the Align Foundation, Align's donor advised fund through Fidelity Charitable. And our teams have been working together to source and supply additional personal protection equipment, or PPE, and medical supply donations for frontline health care workers in the communities we serve. Here's some slides to give you more details on this. Finally, thanks to the ingenuity and diligence of our manufacturing engineering team, we're able to leverage our 3D printing technology and manufacturing expertise to produce face shields and medical swabs for COVID-19 testing kits. Through our network of connections with hospitals across the globe, we are donating them to hospitals with the most critical needs. As our existing 3D printing equipment is highly customized for aligner fabrication and can't be reconfigured, we acquired some new separate 3D printers to specifically help with relief efforts. I'm extremely proud of what our employees are doing individually to make a difference in what Align is doing as a business overall. In summary, we're all operating in a tough environment. And even as we start to see signs of recovery in some geographies, we don't know when we'll get back to normal or even near-normal operations. As always, we're committed to the safety and well-being of our employees, doctor partners, their staff and patients. That remains our top priority in the weeks and months ahead. That and working with our stakeholders and communities to get through this together. With that said, I want to make it clear that we are not resting on our laurels waiting for the business in better days. Align Technology believes in playing offense and investing for our future. And that includes, first and foremost, protecting the jobs of our employees and keeping them ready to pivot for a fast recovery. That means no furloughs, no reduced salaries, staying focused on our long-term strategy. Employees remain our most strategic asset. Closing the exocad acquisition in early April to help expand our digital platform for the ortho restorative treatment. We are very excited about this opportunity. Adding resources to support international expansion. For example, approximately 100 new sales reps in China, improving virtual treatment options, and releasing new products and digital tools to meet our customers' needs like Invisalign virtual appointment and Invisalign virtual care to help doctors and patients connect while practices are closed and beyond. Key to expanding our digital platform in a post-COVID-19 environment, investing in marketing in media to reach of consumers while they're at home during the pandemic and keep our brand top of mind, something that other companies have stopped to conserve cash. Extending our working capital to help our customers manage their cash flow and expenses. We are very aware of the near-term volume challenges of consumer sheltering in place, closed ortho and dental offices and possible delays in new treatment as consumers go back to work and evaluate their priorities. But we're still focused on investing in a vastly under-penetrated market and believe that Align is uniquely positioned for recovery and continued growth coming out of the pandemic. COVID-19 will continue to have significant implications to the world and to our industry. Our digital platform has made it possible for thousands of doctors and patients to continue Invisalign treatments throughout this global disruption, thanks to the digital orthodontics and Invisalign aligners, digital treatment planning and virtual monitoring and care. I think coming out of this, more doctors than ever will have experience the benefit of digital treatment and digital tools for their practices and many we have seen firsthand the limitations and frustrations of the traditional analog approach to patient treatment like wires and brackets. With that said, I want to thank you again for joining the call. I look forward to updating you on our progress as the year unfolds. Now I'll turn the call over to our operator for questions.

[Operator Instructions] Our first question comes from the line of Nathan Rich with Goldman Sachs. Please proceed with your question.

Good afternoon. Thanks for the question and hope you and Align team are all doing well. Appreciate all the color you gave on the call. I guess, Joe, maybe starting with China, serving potentially as a guide for how the U.S. and EMEA might recover. Was there anything that you would call out in terms of either the types of cases or the channels that started to come back first, I guess, in China? And as we think about, if China does serve as a guide for the U.S., does that sort of mean that we're looking at sort of like 3 to 4 months for kind of those case receipts to get back to that 80% level that you referenced in your remark.

You know first of all you know China is China, right. China has a very rigid lockdown procedures they were into this first; I don’t think you can really take up that from China in this vector work at United States from a Western geography in general. We also see as John indicated in his written script, is that this is coming up in China by city. And we see Beijing and Wuhan area and all Hubei Province being behind in that sense. So I think as you look at the United States, too, New York and California will come up differently than the middle part of the nation is what we're seeing right now, too. So you talked about some segmentation in the sense of how it's come back in China, too, remember, it's primarily a comprehensive product base that we have in China. And it's pretty much stay. I mean we're selling some moderate there and some different things. But it's primarily coming back as a comprehensive piece. So again, I don't think that's a vector that we'll use when you look at other areas, too. So I mean there's no question, Nathan, the other countries will come back. I'm just very reluctant to take a vector from China and really relate that to the Western economies in different countries because it's all being handled differently around the world.

Okay. Joe, I appreciate that. I guess just a quick follow-up. I mean when you think about these practices kind of opening back up, and you made some comments about how you're supporting customers, are there any changes that you're thinking about from like a marketing or levers that you've kind of used in the past, maybe gearing those up as you think about helping volumes start to kind of get back to more normalized levels?

And we honestly feel that, particularly in the orthodontic community, there'll be a much harder leaning toward a digital kind of environment because with the chance of re-infection rates with COVID-19 and concerns about future shutdowns or slowdowns, as we mentioned in our scripts, you just have a lot of variability and flexibility that you can use in a digital format that you can't use in an analog format. So we'll be going to our customers with programs that really help them through to figure out, how to convert more and more of their volume to a digital environment. Not that, we haven't done that before, but we'll be very specific about it. And as we move into teen season, teen season in second quarter, you'll see us really focused on teens because we know Orthos will be focused on teens, too. And that's a different demographic. It segments differently in a sense of our product lines like first and math. And we'll also be ready with PPE equipment and other things. They'll prepare doctors for the concerns that they're going to have of protecting their patients and also their employees, too. Did I miss anything, John, or anything you'd add?

Thanks, Nathan. Next question, please.

Thank you. Our next question comes from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Hi. Thanks. Good afternoon.

Hey, Brandon.

Joe and John, can you sort of just talk about the flexibility you have in your cost structure, how much of OpEx is discretionary or variable? It sounds like you're focused on kind of holding Align in terms of headcount and marketing. But how should we think about the leverage you have to kind of control costs during this period right now?

Hey, Brandon, this is John. Yes, as we said, there are levers that we could pull. Just as we accelerate growth, there's levers we pull. And when we look at our existing OpEx, as we look to spend some of our marketing dollars, where we spend it, how we spend it, there's levers around that spend. As with the travel restrictions and less conferences and so on there's a lot of other operating expenditures that can be pushed out and not spent currently. So we're focused in on and still investing for the future to be able to work with our doctors, as Joe has mentioned, on a lot of new technologies and making sure that we keep the employees and the focus that we have on our structure that we have, but we'll modulate as we needed -- as we need to going forward, if it's needed.

Okay. Thanks. And then a follow-up for Joe. As you think about sort of the leverage you have to drive demand, would you expect to be somewhat more aggressive in terms of ASPs? And are you planning to adjust your Advantage program levels or hurdles to give that as a bit of a break given they've had their offices closed? Thanks.

Brandon, we've already extended up from an Advantage tier standpoint with our customers, when they went into that. So, I don't know, how much of an effect that will have on an ASP standpoint, because we basically be holding them to where they are. But overall, it's not price. It's our strategy here as we come up out of here. It's how do we support our customers in a digital environment. We're trying to explain how do we -- how do we really support them from a PPE standpoint and an export standpoint. We talked about loans, different things from a cash flow standpoint. We know many of them are going to be challenged in that way. And we have been offering some payables relief and deferral going forward. So it's a broad aspect of needs, we think, our customers will have. Advantage is one part of that, but it's what we can bring to these customers holistically to help their practice and help them grow.

Okay. Thanks.

Yes.

Thank you. Our next question comes from the line of Jon Block with Stifel. Please proceed with your question.

Great, thanks guys.

Hey Joe.

Joe, you mentioned protecting employees, no furloughs or salary cuts. I'm just curious about the competition. And has anything changed in the marketplace around the competitive landscape? We've heard some chatter about sort of, call it, cut back in the orthodontic divisions -- of some of the other players, but maybe you can elaborate on what you're hearing or seeing out there.

Hey Jon, I won't be specific, but I mean, most of our competitors have had layoffs or cutbacks in some way. We've been just been blessed with a really strong balance sheet going in. This allows us to have the flexibility and do it as we do. We're a growth business. You know that Jon well. We're set up for 20% to 30% kind of growth, and we have to position ourselves for that. In that sense, making sure that our production capacity is ready, that our employee base is ready, too. Our sales teams are really critical in that sense, too and it's wonderful. We can see some of the investments like Invisalign Virtual Assistance and things that we're working with customers right now, that we can launch those products and continue to drive those products going forward with a full force engineering team also. So, from a competitive standpoint, I mean, we're seeing varying degrees of cutbacks and moves in that sense. But we're not focused on that, Jon, really. We're just focused on what we think we should do, what's important in our portfolio, and how we can help our doctors out.

Okay. Helpful. The second one is a little bit long. But just some Swift. I know you kicked off a pilot recently. I think it's an important sort of initiative long-term to better get after the lower acuity market. I'm just curious, Joe, you kicked it off when there was a lot going on, so did you get enough of a signal during that time to share some takeaways from the Swift initiative? And then could we see you lean on that a little bit more in coming months? Because it is a little bit more price-sensitive for the consumer. It has a monthly. And in this environment of job uncertainty might really resonate. So curious your thoughts there. Thanks guys.

Yes, Jon, when we launched Swift, timing couldn't be worse in that sense because COVID hit pretty far after that, but we got a pretty strong signal in that, that we think we understand at least part of the demand equation. We're going to look at rolling that out in a broader sense going forward in the United States and maybe in different parts of the world. But I think when you talked about the price point on ASP and different things, and obviously, we broach that with the doctors who are part of the Swift program. But Jon, you know this; I want to make sure our colleagues understand. This is -- our margins on this product line are accretive to our gross margin area and how we're going into it. So, it's really important in how we position that going forward. But again, those 300 million patients out there, we know there's some price sensitivity and then there's some clinical aspects from a simplicity standpoint that we're going out with that product line. And we think it will respond real well in a broader sense as we begin to roll that out.

Okay. Perfect. Thanks guys.

Thanks Jon.

Thank you. Our next question comes from the line of Steve Beuchaw with Wolfe Research. Please proceed with your question.

Hi Steve.

Hey there. Thanks for the time here. I also wanted to ask in a way about Swift, but with a very different angle. As we think about the operating environment prospectively for some amount of time, people are going to be concerned about safety. And so I wonder to what extent, and you definitely alluded to this in your prepared remarks, can you flex some of the technology that you have with Swift and some of the things you have in development to decrease the amount of face-to-face contact? Again, I know you alluded to this, but I wonder if you could take it a few steps further, give us more context, a little bit more insight into your plans. How do you think about making Invisalign treatment achievable with a minimum of in-person interaction for those who might be concerned about that even in an environment where PPE is more widely used?

Steve, that's top of mind as we do things today, too. So actually, even before COVID, when we designed Swift, Swift was designed for basically 2 to 3-doctor direct contact and that's it. And that was part of making the equation for doctors a profitable equation, too. Then you roll in our remote monitoring capability we just rolled out, which gives doctors a tool to be able to do that, and we'll be able to enhance that tool going forward. There's limited amount of attachments in IPR on things like Swift, too. And it's not that our clinical protocols are going to, in some way, decrease in the sense of what the clinical capability are and what we can do. We're also cognizant in the sense of time and mouth. And we'll adjust that. We might tie those things differently to help doctors, too. But there's a lot of different things that we're contemplating. We talked about at the conference last year about direct printed attachments and those kinds of things that in the future and not-too-distant future, will allow a lot less contact and a lot of speed from a productivity standpoint with doctors and patients be able to do those things. So it's the right line of questioning, Steve. So remote monitoring, a digital platform that allows us to anticipate exactly when you'll be seeing a patient and what will need to be done in that sense, not duplicating treatments at the office that don't need to be done and keeping up with patients in a sense remotely and only calling them in when something goes away or a doctor has a concern in some way. So we feel our digital platform and things we have in the pipeline, Steve, we're really well positioned to address that.

Okay. Good. Good to hear. The second question I wanted to ask actually relates to the practice in the U.S. So it's been -- well, for some of us months, but for -- in practices, certainly many weeks. How do you think about the most likely, as you talk to the orthodontic and dental societies, the most likely path forward for practice reopening in the U.S.? And I know it's a complicated question because there will be a lot of regional variation in staging, but to what extent -- to any extent you can, can you give us your sense for how you guys are thinking about that and your planning specific to the U.S.?

Yes, Steve, I think it's going to be -- it's certainly not going to be uniform in the sense of how we go about that, whether it's in the states or anywhere around the world, there are going to be certain government restrictions. I think there's going to be certain -- when I say restrictions, too, it's going to be equipment that's available from a PPE standpoint, what patients are going to be prepared to do? We see some -- if you look at treatment planning alternatives or when patients enter an office right now, they're not even coming into the office. At the time, they stay in their car until they're summoned in some way to make sure that there's less interaction and proper social distancing within the office itself. So I can't really tell you yet. The only thing is I think there's going to be a lot more caution about, obviously, transmission of the disease. That's going to include how you stage patients, how often you see these patients. And I think from a dental versus orthodontic standpoint, they are obviously going to be different protocols because of the different procedures that take place there. Steve, there's an interesting article in the New York Times yesterday that really did an X/Y kind of a graph on different types of professions that interface with customers and which ones are most time from an intimacy standpoint and could transmit a virus. And dentistry came up almost on the top of that whole thing. So I mean that's going to be watched closely, and I think we have to make sure we work with our customers -- I mean doctors and to help them through this, too.

Thanks for all the -- for the perspective there.

Yes. Thanks, Steve.

Thank you, Steve.

Thank you. Our next question comes from the line of Elizabeth Anderson with Evercore ISI. Please proceed with your question.

Hi, guys. Thanks for taking the question.

Hi, Elizabeth.

Hope everyone is doing okay. I want to ask a question on the sort of digital access of what you guys can do in the near-term. I know you said that, you were sort of unveiling the app as sort of like a beta test, and you were rapidly rolling that forward and allowing more access and training and things to that. Can you speak to any more of the details in terms of sort of like the uptake or how the training is going or the case use of that for like ongoing patients?

Elizabeth, just to make clear, you're talking about Virtual -- appointment of Virtual Care, right?

Yes. Yes.

Elizabeth, you're talking about just training of doctors online rather than face-to-face?

Oh, no. Sorry. I meant on the Virtual Care side.

Okay. And so your question is on the workflow of that. Is that --

Yes. As you said -- you said they were going slow and sort of like how have you seen uptake of that so far? Is it -- I assume that there's some sort of training that has happened beforehand or how have you been able to roll that out considering that -- data testing right before you this all happen.

I get it, Elizabeth. Look, first of all, we've been -- we didn't just roll -- we just rolled this out. We've been working on it for over a year. And so we actually rush this to the market. And as we rush into the market, we were cautious in a sense of how many doctors we -- you had in the program. And we started here in the United States, and now we're gradually moving it to broader to more doctors in the U.S. and across the world, too. We had to train the doctors to do this, but the great thing it is on our IDS platform. And it has a great user interface that the team put together. So from the feedback that, I've gotten from the teams and the doctors, too, that user interface has been pretty simple in how they've been able to put that piece together. And remember, the whole idea there is just that how do you stay -- and these kind of lockdown periods or future workflows where patients don't want to come into the office all the time to see a doctor, how in the world can you track treatment and how can you communicate? And it's gone really well. And we will have actually more doctors who want it that we can give it to right now. We just want to make sure we don't burden them, and we just roll it out piece-by-piece to make sure that it's robust enough to handle more and more doctors over time.

Okay. Perfect. And so just on -- you did a virtual visit with some of that in the first quarter -- over next set of patients?

Yes. More than 2,000 doctors, we have more than 2,000 doctors trained right now -- trained and beginning to use Virtual Care. And obviously, we have tens of thousands of doctors out there that we'll want to roll this out, too, and we think they'll have an interest in it.

Okay. Perfect. That's helpful. Thank you.

And we've had over -- just I'm getting some other data here, too. We have over 3,500 appointments right now that have been done through Virtual Care. Elizabeth, if we think about this, too, it just makes sense, right? I mean in everybody's kind of -- in today's COVID environment, it obviously makes sense to try to eliminate patients trying to have this person-to-person contact. But I mean going forward, too, in a digital kind of environment, having these kind of tools just make sense from a productivity standpoint for both doctors and patients, too. So we'll continue to invest pretty heavily in this to get better and better at it. This is our initial launch, but you'll see more and more iterations to help to enhance this

Thank you. Our next question comes from the line of Jeff Johnson with Baird. Please proceed with your question.

Hi Jeff.

Thank you, guys. Hey Joe, how are you? Good afternoon. Just two questions, I guess. One, we've seen some news in the last couple of days from one of your DTC competitors on some patents they were able to get and some better business bureau recommendations on some advertising. I would love your view not so much on what that means for them, but does that have any implications for you either on the Swift product where some of that is kind of a monthly fee? I don't think any of that would trip any of the stuff in their new patent, but also if they have to rein in a little bit of their advertising. I would assume that's a good thing for you, but would just like to get your view.

Jeff, overall, that's not a model that competes with us. We go directly to doctors in everything we do, work through a doctor base. And so from what we know of the -- I haven't looked at the patent or whatever. I just read most of the information that's out there. That has to do with Invisalign. And we have to do with just scanning a patient in a store and transferring a file that the -- never really reaches a doctor in any way except from a teledentistry standpoint. So, we don't see it being an issue for us at all.

Sorry, I was on mute. Thank you. And then just my follow-up question. Obviously, we're all going to be watching PPE. We're all going to be watching patients' willingness to go into these offices. What are you hearing from the doctor side? From an orthodontist standpoint, the office is maybe a little cleaner, less aerosolization, if that's even a word, of fluids and what have you. So, are your orthodontists, especially kind of chomping at the bit to get back? I'm sure they are financially. But do they feel safe? Do they feel like this will be an environment they can bring their staff back into it can bring patients into things like that? Thanks.

From an orthodontist standpoint, Jeff, you're right to segment those two because, obviously, dentistry is a lot different than orthodontist and whatever. The orthodontists that we look to, I would say that they're not concerned, but they're cautious in the sense of what they have to do, the precautions they have to make with the patients and also with their employees internally. They are anxious to get back. But I mean there's a good degree of caution to make sure that they come back in the right way, in a thoughtful way, too. And again, I think this could vary by state also in the sense of how it's applied and what kind of regulations are put in place. But I know there's -- they're really interested to come back. And the ones that really went into this was a significant amount of Invisalign feel good that they've been able to stay in contact with their patients and be able to send passive aligners with different things that's helped in any kind of course correction or holding patients to where they are. So, on the dentistry side, I mean, that's obviously going to be different. But when you think about it, an Invisalign is one of the least invasive procedures that you're going to see in dentistry. And we'll certainly be emphasizing that and trying to work with doctors to help them through. And we talked about iGo and the growth of iGo, and that's a great -- when you think about you think when we talk about a digital platform, that's a terrific product for GPs in the sense of being able to leverage that and then send a more difficult cases of the orthodontist side. We'll be working with GPs to really help through that transition.

Understood. Thank you.

All right, Jeff. Thank you.

Thank you. Our next question comes from the line of John Kreger with William Blair. Please proceed with your question.

Hi thanks very much. Joe, could you remind us what's the lag time between order receipt from a customer -- from when -- to the point where you can actually ship the aligners?

So we call it CCA, and CCA would be in order. And I'd say, John can correct me on this; I'd say it's four days to five days.

But from an order to an after shipment, it could be three to four weeks because it's the back and forth. He's describing kind of initial to the actual shipment. It could be three to four weeks depending on how much back and forth. As you know, John, getting that treatment plan just exactly the way the doctor has and wants it takes a number of iterations. And then the actual manufacture and shipment can do. So on the outset, it could be 4 weeks in total.

Okay. Great. So from a fabrication standpoint, for a region like the U.S. that got locked down in mid-March that backlog probably would have -- would be reasonable to assume that kind of carried through to mid-April.

Well, there's still going to be back and forth that goes on. So I mean you have patients that have not been able to make it into the office to look at the final plan for doctors to meet other things that go on. So it's going to vary by this until the doctor actually approve the treatment plan and then it gets manufactured. So remember, our business is a made-to-order business. I mean there's no inventory. And as things change in the environment, when there -- people can't come to the office to seek treatment or to make sure that they're going to prove that treatment plan, things shut down right away. And it takes some time to see that ramp back up.

Great. That's helpful. And then anything you can give us in terms of contribution from exocad since that'll be in there for the full second quarter?

Yes. Nothing on that John that we're giving on any forward guidance other than what we've had in our prepared remarks.

Thanks John, next question please.

Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Please proceed with your question.

Thank you. First question, you're talking about a digital and analog world. But if I think about Align a year from now, and hopefully, we're through this, competitively, not just with other manufacturers, but against wires and brackets. I mean, is there a marketing pitch here that the orthodontist can go and say, hey, instead of using wires and brackets or you can even pitch to the orthodontist, that there might be a greater demand to use clear aligners versus wires and brackets simply because you're able to keep patients out of the -- keep them out of the orthodontist office or the dentist office more frequently? Is that something that you've contemplated that could necessarily be a positive for market share for you?

Kevin, prior to the COVID-19, we have a program called ADAPT where doctors -- orthodontists come to us and say, look, you want to go primarily 80%, 90% Invisalign. How do we do that, right? And so how do you do that, you're going to crank up your volume in a significant way. And to do that, you just needed to drive more productivity. And so we were pushing that piece is you don't have to see patients as often, right? You might have patients come back every 3 or 4 weeks to adjust wires and brackets. Likely, they're going to come back doing their episode with a wire that comes out, and it's an emergency procedure, about 20% of an orthos time that doesn't have wires and brackets or emergency cases. We talk to doctors about how you can really control your schedule much better in a digital environment and how patients don't have to come back so often. We talk about 7 weeks, 8 weeks seeing patients. Now that becomes even more magnified when you think about profitability of infection and concern about COVID-19. It's not just a productivity play. It's a way of being able to treat patients in a way that's safer for your staff and safer for those patients, too. So we'll certainly be emphasizing that. And -- but it goes -- it just goes along with a digital platform. It is -- it's much more productive. And doctors will need less time per patient. And I mean, we know that well from the millions of patients that we've done.

One quick follow-up. The DSO spiked. I know you made some comments earlier about offering payment terms and loans and the like. Does that explain the bump-up the nine day you said expect DSOs to continue to move higher? So what was the impact of, I guess, would be improved payment terms for the doctors on your DSOs?

Yes. It varies by doctors and so on. But as they have working capital concerns, we're in a fortunate position to be able to help out. So we work with them to kind of manage their cash flow in terms of paying us. And then the DSO impact is obviously impacted by lower revenue as well, which causes that to increase. So -- but we're working closely with our customers, and making sure that they can help weather the storm, stay close with them. And as they start to ramp up, we want to be their partners with them, and cash is an important part of that.

Great. Thanks. Stay safe everybody.

Thanks, Kevin, you too.

Operator, we'll take one more question, please.

Thank you. Our final question comes from the line of Richard Newitter with SVB Leerink. Please proceed with your question.

Hi, guys. This is Jaime on for Rich, this afternoon. Thanks for taking my questions. Just a housekeeping one. You guys had said in the beginning of your prepared remarks, incremental impact from COVID-19 was about 50 fewer cases and, I think, $85 million less revenue. So I just wanted to make sure that, that is something -- like the way that we should be thinking about that is incremental to what you had originally contemplated in your 1Q guidance of, I think, about 20,000 to 25,000 case impact in a $30 million to $35 million revenue impact?

That's correct, Jaime. You would think of that as incremental to how we guided.

Got it. So the fair way to think about that in total would be about $115 million to $120 million of impact to revenue from the coronavirus in the first quarter?

That's correct.

Got it. Okay. And just last one for me. Any sort of update on where you guys stand with launching the Palate Expander product?

Hi, Jaime. I'll take that. We're still -- we have the design. We're still working that piece. We have to find an effective way to manufacture it. So I don't have a date that I can give you, but I can tell you that it's high on our priority list.

Thank you.

Thank you, Jamie.

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the call back over to Ms. Stacy Shirley for any closing remarks.

Well, thank you, everyone, for joining us. We look forward to speaking with you at upcoming virtual financial conferences in the future. If you have any questions, please contact Investor Relations, and hope you have a great day. Take care.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.