Align Technology, Inc. (ALGN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to day 3 of the UBS Healthcare Conference. I am Kevin Caliendo, UBS health care services analyst, and I'm very proud to have with us the management team from Align Technology. Joining us today from Align are CFO, John Morici; and Senior VP and Managing Director of the Americas, Simon Beard. Gentlemen, thanks so much for joining us today.

Good to see you, Kevin.

Good morning.

I want to kick off with the topic that's -- I've had this conversation so often with investors, which is trying to understand really the impact of COVID, the work from home, the masking, the Zoom, and what -- and how to think about that as we come out of COVID as hopefully, the masking is over for a period of time or a majority of the population, as people are going back to work, and trying to understand -- and trying to quantify just how much of a positive impact that environment had for orthodontia and for Align. How do you guys think about it when you model going forward?

Hey, Kevin, this is John. So it's a good question. And really, when we look at it and we start with our model and we look at the fact that we have a vastly underpenetrated market. So we have a lot of potential cases, whether you're on the orthodontic side, 15 million potential patients every year that are on the orthodontic side, or you look at the 500 million plus potential patients on kind of the general population across the world. And when you look at that with our strategy of being able to expand out internationally, drive utilization across the orthodontic side or the general practice side, we look at this as a continued opportunity. Coming into COVID, we knew that we had this opportunity from penetrating this underpenetrated market. And post COVID, we feel the same way. So it's a continuation of things that we've done throughout the pandemic. As we've talked about, we continue to make investments in R&D, continue to make investments in marketing, adding salespeople, expanding our operations. And that helped us in our recovery, and that continues to help fuel us as we move past that environment. But it really starts from the fact that we have this clear market opportunity, and we continue to make investments into that opportunity.

Well, maybe let me ask it this way or a little bit differently. As we think about COVID, did it help in terms of getting messaging out? Were there more dentists globally who were available to be trained? Did it -- I don't want to say accelerate things, but maybe create a larger base TAM from -- off which to start and that's sort of what helps accelerate volumes a little bit through the second half and first quarter of this year?

It certainly drove that awareness, Kevin. I mean when you have people who couldn't -- they didn't want to go out to their orthodontists or dentists and they wanted to be safe and wanted to look for alternatives instead of going back and forth to that doctor's office, look to our type of platform where you don't have to go maybe as back -- back and forth as much and need as much of that chair time. Certainly, doctors look at it from the standpoint that they wanted to be able to maintain their practice, didn't want to have potential shutdown, didn't want to expose themselves or their staff to COVID and, I think, were much more willing to at least try different alternatives. So we saw that in training. A lot of doctors trained, a lot of visual and virtual care that we help provide those doctors so that they could really take care of their patients as they went through this crisis and into the recovery. So I guess from that standpoint, it just created more of a focus and an awareness that there's a lot of different alternatives. And with our -- with Invisalign, to be able to have this digital orthodontics and really, if you think of what the pandemic and now the recovery has done, it's really turned that digital orthodontics to become part of everyday dentistry. And that's really our goal going in to this environment and certainly post COVID, that's what we've seen.

And I get why that would meaningfully expand the GP presence. It all makes sense. It's very logical as a means for -- means to an end for them, too, in terms of growing their revenue base when things were down. But how has it impacted the share within the orthodontia market for clear aligners? Meaning have you seen -- anecdotally, we see an uptick. We hear more about teen cases going to clear aligners than before. But when you guys look at market share within orthodontia between clear aligners and wires and brackets, What are you seeing? What's the trend like? Maybe talk about where you were prepandemic versus where you are now, if you can quantify it.

Okay. Kevin, I think it's difficult to accurately say what exactly the market share is, right? But I think there's no doubt that through the COVID lockdown and coming out of COVID, that it's opened up the eyes of orthodontists to treat more of their patients with clear aligners. That was the trend before COVID, right? So that wasn't a COVID phenomenon. I think what we saw is, and we saw this across all of our different segments and really across a number of countries, there were more orthodontists who were using some Invisalign but started to use it more. And I think a classic example of that is you might remember that in quarter 3 and quarter 4, we ran a kind of a promo around doctors being able to switch patients out of wires and brackets into clear aligners. So we -- over 10,000 in North America actually made that switch, that is proactively move patients out of wires and brackets. But I think there's no doubt that when you look into the future, we've always believed that more doctors will move more of their share of chair to clear aligners. I don't know if John wants to add anything. But...

10,000 dentists or 10,000 cases that were switched? 10,000 individual cases?

Cases.

Okay. I was like, that's a huge number of dentists, that would be great. The -- I have to ask this. I know you guys would always love to talk about current trends. But how are things trending through the middle of May? What changes have you seen in any of the different markets? Anything surprise to the upside? Or is any market still a little bit hampered by COVID relative to your original expectations?

Yes. I could take this one, Kevin. And look, we're not going to give any further updates to what we gave on our guidance at -- after the Q1 earnings. But I can say this, what we saw through this time and really what we've talked about through our updates and so on is we see continuing recovery. As the world opens up, more and more people are out. They're also going to their dentists and orthodontists. We see strength in the GP and ortho side. And we see strength in our geographies as well. We've seen good growth as other countries have opened up. Certainly, there's some impacts for COVID in countries that you hear a lot about, India and other places, but we work with our doctors and work to help try to manage through that. But broadly, we've seen very strong growth as we've gone through the recovery, and you've seen that in the numbers that we posted.

Fair enough. You know I have to ask the questions. That being said, I think that when you provided guidance on your last call, the biggest sort of surprise wasn't the upside to the quarter, but really the guidance that you provided for the second half of the year. I think some investors were a little bit worried given the difficult comps of what you saw in the second half of last year. And maybe just touch on what prompted you to sort of say the 25% growth for the second half of the year. Like where were you expecting that to come from? What are you seeing to provide such conviction around that kind of number? I mean it was a strong statement. And I think it was meant to be a strong statement about where your business is right now. Maybe any specifics you can provide that said, "You know what, hey, we're still going to grow 25% off a very difficult growth comp in the second half of this year."

Yes. I think it really came from, Kevin, when we looked at the recovery. So really, it started for -- after Q2 of last year. So it started in Q3 and Q4 and then Q1. Those were 3 record quarters of performance that we saw. And based on our performance, based on what we look at as our -- the investments that we're making, the return on investments that we're seeing, we wanted to update everybody with what we saw and give the view that we see in our business. So we wanted to give a total year view in revenue, and we did that, $3.7 billion to $3.9 billion. And we also wanted to talk about kind of how we see it through the year and kind of give some color to it. So as you said, kind of the midpoint of our long-term growth model in the second half, around that 25%. But we also wanted to let all of you know that it still takes investments. There's investments in marketing, there's investments in sales and other go-to-market activities. There's continued expansion. We talked about expanding into EMEA with our plant -- manufacturing plant in Poland. We talked about some of the R&D investments that we continue to have to make to make our products better for -- ultimately for our customers and their patients. So there's a lot of different investments, and we wanted to convey that as well. But it's really a continuation of what we see, broad growth domestically and internationally, like I said, GP and ortho. And we see it across various tiers of doctors where -- whether they're a new doctor just coming in and starting to do Invisalign and starting that journey to do more cases or if it's doctors that we've been with 20 years and they're able to utilize our products more and more and be able to see increased volume that way. So that's why we wanted to give that overall view, just based on what we are seeing and based on the investments that we've been making.

Okay. That's helpful. So Simon, I want to switch over. I've unfortunately had to go to my dentist in Stanford, Connecticut 3 times in the last month or so. And he is an Invisalign user. In every single one of his offices, there are TV screens, which was great. I always want to watch TV when you're sitting there, except that there isn't really TV to watch. I'm constantly bombarded with Invisalign ads, which are targeted both to adults and to teens. It's interesting, and he is killing it on Invisalign, at least that's what he tells me. Take me through the strategy around the marketing there. How much are you targeting teens in particular? Maybe talk a little bit about the consumer experience too and how you're fitting the ads to that? Because it's obviously resonating and it's certainly there, front and center.

Yes. Well, look -- well, first of all, sorry, you've had to go to your dentist and watch Invisalign videos. But no, look, John mentioned earlier, we've continued to invest very heavily not only in the U.S. but throughout the globe around our consumer advertising, actually getting that message out, create awareness and understanding of the product because that's a constant battle for us, probably less so in the U.S. where we've been doing this level of advertising for a number of years. But when the team looks at the kind of the whole consumer marketing mix, we're doing a mixture of search, digital and social and then also obviously, advertising to -- on TV. We just actually recently launched a new campaign, which is primarily focused on teens and parents because we know that those 2 groups are equally important. And then other times of the year we'll probably ramp up a little bit more around the adult advertising. But no, so we're investing -- as John said, we're investing heavily. We know consumer advertising is important. But at the same time, we're also advertising to professionals as well just to make them aware of that. So the kind of things you see in the office, in a general dentist's office, a lot of doctors kind of take our materials, et cetera, and deploy them on their own social media platforms, within their own offices just to create awareness for patients who are actually walking into their office on a day-to-day basis. So yes, I'm really pleased with the level of investment that we've been able to deliver this year and keeping Invisalign really front of mind to both the doctor but also to the consumer.

Is it -- I mean, are we still at the awareness level in terms of marketing? Or are you trying to sort of differentiate now? I guess my question is sort of what -- where is the Comscore? How aware are people that clear aligners are an option for them at this point maybe, say, versus a year or so ago? And at what point do you go -- and your brand is obviously already strong. So at some point, does the marketing switch to, this is why you need to use Invisalign? Or are we still at the, this is why you should use clear aligners, and Invisalign is the best?

Well, it's always going to be, this is why you should use Invisalign. But I think there clearly is an awareness component, particularly in the teen segment who traditionally, and still today, the majority of them, over 90% of them still get wires and brackets. So there's a huge education piece, both with the teen but also with the parents as well. So that's why our campaign is around, not your parent's braces, right? So really showing them that there's a different alternative, a different approach. So like I said, probably -- well, not probably, the U.S. is -- the awareness in the U.S. is probably stronger than any other country in the world just because of the history of the company, but there's still a big play for us to make those teens and those parents aware who probably didn't have Invisalign, they had wires and brackets as well, there's a different alternative now. And that's really where we're trying to differentiate, right? Is -- because so much of the market is still wires and brackets, our differentiation is really against wires and brackets. That's where the potential is for us to grow, not necessarily other clear aligners.

So when you say 90%, you still think, are wires and brackets, is that globally? Or is that in the Americas?

Well, it's globally. When we talk about the teen segment, it's different in adults. We've progressively been able to penetrate the adult market and essentially, in some countries, actually create the adult market because that was really not what adults wanted to treat themselves with. But in adults, we are still single-digit market share in many markets globally. So huge opportunity for us to really grow our franchise in that area.

In the Americas, is it better than that 90%? I would think that it would be, given the experience that -- and the length of time you've been here. But you tell me it's...

Yes. Slightly better, still low-teen kind of levels. So yes, it's better than other countries, but still a long way to go for us.

So what do you find resonates best in the teen -- getting to the teen market? Is it marketing to the parents? Is it marketing to the teens?

It's a combination, Kevin. It's as I said earlier, it's a combination. Because whilst teens can be very, very kind of independent when it comes to making the decision, parents ultimately still, in the majority of situations, still pay the bill, right? So we've got to educate parents that compliance isn't an issue, the oral health benefits, how it kind of is more convenient for them as a parent because they're not going to have to take their child in to see the orthodontists every 4 to 6 weeks. So yes, we've got to really target both the parent and the teenager to ensure that we get that success.

How much of the teen market is really determined by the orthodontists, in your opinion? Meaning what -- the decision process being made, is it by the patient or by the practitioner more, when it comes to the teen?

Well, I think historically, we've seen a -- you see a combination of scenarios, right? There's -- you'll have orthodontists who want to use more Invisalign, but they maybe find it difficult to convince the parents. And then you see orthodontists who are not confident to treat more complex cases, and therefore, will talk the parents into using wires and brackets. So that's why we have this multifaceted approach. We do -- we obviously focus on consumers in the different segments within consumers, but then the professional play is really important as well. So how we -- that's why we have the sales team that are out there trying to help customers with their clinical confidence with the product and also their workflows and the whole kind of economic piece with doctors. So yes, it's -- I think Joe Hogan has used this before, it's kind of a multivariable equation. It's not one thing. It's a series of different things that we really need to focus on from a commercial execution perspective.

Realistically, where do you think that percentage of teen share can go, if we're in low teens in the Americas right now? I mean are -- is the goal to get to 20% over time? Do you think that you could, by the end of the decade, get to 30%? Or are we looking at like 1% a year? How do you guys think about that?

Well, I don't think we constrain ourselves by thinking about a specific percentage. I think the belief within the organization, and John can probably talk to this also more globally, is there's no reasons why we couldn't ultimately get to a much higher level than we're currently at. So no, I think we don't necessarily have a specific 1% goal a year. We're looking at kind of maximizing the opportunity and utilizing the investments that we've been given to really drive adoption within the professional community, but also awareness and desire within the consumer group as well. So John, I don't know if you want to comment on that.

Yes. I would look at it like this, Kevin. I mean you start from the product standpoint and say, look, in a qualified doctor's hands, some doctors do 100% of their cases. But let's just say that there are 85%, 90% of the cases that they see -- that a doctor sees, we're talking about teens, that they can do -- they can finish those cases. So you start with the opportunity and say, look, there's -- there -- we're much lower than that now. The product capability is there. It's just the doctor and that patient kind of having that understanding and agreement that they want to go into this type of treatment. The capability is there. So when we look at it, it's not one specific percentage. It's just what do we have to do? We have to continue to improve the product. We have to continue to drive that awareness. We add salespeople to help train these doctors and try to drive that conversion. We're adding capacity to meet the demands and so on. So we're doing all these other investments to get -- to drive that higher and higher volume. But really from a product capability standpoint, should be much higher. It should be much higher than it is. We're pleased with the progress that we've made, particularly in teen over the years. But as Simon said, we're coming from such a low percentage when the market opportunity is so much greater.

Well, maybe that's a nice segue into R&D. You talked about R&D spending before. We've basically gone an entire year without dental conferences and dental meetings and the like. And potentially, we could be going to Germany or there could be conferences this fall. Now might be a really great time to talk about some of the new R&D projects you've been working on for the last year. Maybe is there anything that we can expect to see as we start to reopen and do some of the more mass marketing events? Anything that we can expect coming out of Align's R&D factory?

What you'll see, Kevin, is continued investments that we're making around driving the productivity to make sure that as doctors take on more cases, it's very -- more straightforward and easier for them to do these cases, whether they're simple cases or more complicated cases. So a lot of work around some of the treatment planning and the productivity around there. Investments that we're making on the scanner side to be able to drive improvements in iTero, new products that will come regarding that to be able to -- again, when we think about the digital platform that we've created, it's really enhancing that digital platform. Goes to some of the investments that we've made already with exocad and so on, but really integrating that further into our system, really providing that digital experience that our doctors expect. So really try to build that out more and more from a digital platform standpoint. But you'll see various investments that we'll make -- that we continue to make, but it's a great portfolio of products that we have. And we'll add to that digital platform, and you'll see us with some of the improvements and new products that come out in the near future.

What are dentists asking for? When you go and talk to them and say, hey, listen, you're only doing 40% to 50% of your cases with Invisalign. What do they want? Do they need palate expanders? Do they need -- is it the digital experience? Is it the software interface? What do they need to get more comfort, in your opinion? Like if you could present them with something that they're asking for or what they need, what is it that's really preventing the uptake to move higher into higher acuity cases?

I think well, it's slightly different whether you're talking about dentists or orthodontists, right, they have very different environments. I think with orthodontists, what we've really realized over the last few years, there are very few orthodontists out there who really don't believe that a product like Invisalign doesn't work. And in some cases, they believe it works better than wires and brackets. I think a lot of it comes down to workflow, Kevin, and the business model around a digital orthodontic appliance. So yes, we do have to do -- we do see -- we train doctors on particular malocclusions, et cetera. But particularly from a specialist side, these guys are highly trained. So it's really -- it's developing that confidence around the business model of digital orthodontics. So we have products like ADAPT, where we actually send [ pro ] consultants in and really enable them to change their workflows, to change the roles and responsibilities of their staff and just change the whole kind of business model. And that's been working really well. But then I think we're constantly -- as John has just said, we're constantly developing our technology to be quicker, more reliable, more intuitive, just to kind of simplify the whole process, the treatment planning process all the way through to the visualization. So anything we can do to help to use technology to make that whole workflow even more efficient, I think, is really going to be key. I think on the dentist side, I think we see -- we obviously, we acquired exocad last year. It's really bringing Invisalign really into the kind of the restorative world, right? So linking what we do from a kind of a ClinCheck and a scanning perspective so that we encourage more dentists to use Invisalign as a prerestorative product and so building products that really kind of accentuate what doctors do today, whether it's kind of crown and bridge work or implant work, we believe that Invisalign can really help them. And then we've launched obviously products like Invisalign Go, which make case assessment a lot easier. So I think we're getting a lot better as an organization thinking about, what is the environment an orthodontist works in? How can our technology help them on a day-to-day basis? And then the same thing with general dentists and the different kind of challenges they have. So I'm pretty pleased with the progress we've been made even through COVID, where, as John said, we'd launched probably more technology through the whole COVID period than we have done historically. So it's not really slowed us down from an innovation perspective.

That's helpful. Let's talk a little bit about exocad. It's been a year. The deal surprised The Street a little bit, and I don't think a lot of us really understood the leverage points as well as maybe we should have. It's obviously been pretty successful. Talk about where we are with that. How fully integrated -- it sounds like you're still doing stuff with exocad and there's still some leverage. Where can it go? Meaning like what's left to do? How far along are we in the fifth inning of sort of integrating exocad across your platform? And maybe what -- is there another exocad out there after this? Is there another -- is there other M&A out there that's super interesting? Obviously, not specifics, but around a broad idea of what -- something out there that could exist that might be really helpful to the platform.

Yes. I could take that. Exocad, is as you said, it's about a year now. We just celebrated the year anniversary. And look, it's a great software company, a company that was really a pioneer in the digital dentistry, about the visualization, the interface to the labs and being able to provide that digital view of how that implant or other type of dental work would be manufactured by the lab. We're continuing to work on the technical and commercial integration, but it is a key part of our digital platform, what we're trying to create from that overall digital dentistry and digital orthodontics that we're creating. And really, when you think about what exocad can bring, coupled with Invisalign and teeth straightening, so you can straighten teeth, you can get things properly positioned. And then as that crown or implant needs to be made, that software that exocad specializes in can really help with that. So it's coupled with the strength that we have from moving teeth and moving them to the proper place and then using exocad software to properly position the tooth, and then ultimately, get that to the lab so that they can manufacture an implant or anything else that needs to go in. It's a huge benefit. And really, when we think about everyday digital dentistry, this is a key part to that, where you come into your general dentists, you're getting the scan. They're being able to understand why your teeth have moved, be able to show the patient how their teeth have shifted and moved over time. And then to be able to show them, while they're in the chair, while they're just getting a regular treatment -- and be able to show them what their teeth could look like with teeth straightening to align their teeth and then also show them that restorative piece and be able to show them, here's what your teeth could look like with some type of alignment plus restorative. And then to be able to take that, once they've agreed to something like that, to be able to take that and get that set in the lab and then also get the aligners made. It's just a smart integrated approach, and exocad is key to that.

Does it make sense for you guys to provide implants or any of the restorative hardware? Do you want to be in that market? Is that an adjunct that you -- that would benefit Align?

We look at that. We have so much opportunity in our space to help kind of provide that digital dentistry and orthodontics and be able to help move teeth. And we talked about it earlier on this call about just the underpenetrated market. We're focusing on our space and really want to help drive that. We don't want to be a general dentistry type company. We want to focus on digital orthodontics and being able to help move teeth in that manner.

Fair enough. I want to switch up a little bit and talk about the DSO market. One thing that COVID has certainly accelerated has been the growth of DSOs. I don't think a day goes by when I don't get a blast about another DSO buying either another -- a smaller DSO or buying practices. You guys were early in partnering with some of the DSOs. I'd love to hear a little bit about where the strategy sits now. Back then, there was a lot of scanner bundling involved. There are scanner placements involved. Is that still the selling point? And how has the DSO market evolved over the last year or 2 in terms of its wanting and willingness to do clear aligners and partner with you? And some of the other players have talked also about trying to partner with DSOs and how competitive that market might be now.

Okay, Kevin, it's always been a competitive market. When you can -- as a company, when you can kind of form those types of relationships and obviously the volume of doctors, particularly now when you look at the larger ones like Heartlands and Aspen and Pacific Dental, they've got a large kind of footprint now across the U.S. and growing, as you know. I think the way that we looked at it, we're very, very focused on building a proper partnership. What I mean by that is we have -- we've developed kind of a bespoke team that kind of works just in the DSO space. And we work very, very closely with those partners. These ideas of just contracting with the DSO, them negotiating a lower price and then nothing really happens, I think, has historically been one of the challenges. But we've been very fortunate over the last few years to develop real partnerships, which is we got very strong engagement from their leadership teams and we work very, very closely with them to train doctors. And that training is a continual process because you do see some turnover in doctors within those groups. And then build the kind of the belief and the value around the platform that we can offer, which is obviously the iTero scanner and the Invisalign appliance. So I think we're seeing the same thing as you. There's a combination of what I'd say is consolidation within the DSO space, so -- which isn't really expanding the number of DSOs. It's just -- they're just getting kind of bigger. And then their kind of organic growth where they're setting up either new builds or they're buying kind of individual practices. So I'd say we've got great partnerships with some of the majors. We're continually kind of communicating, working with them on a day-to-day basis. And we see strong uptake from whether it's a Heartlands, who are obviously principally a general dentist DSO, or something like Smile Doctors, who's principally an orthodontic DSO. And we see strong take-up from our products in both of those types of DSO.

See, when we think about DSOs growing, one of the concerns that investors have for the dental market is that they would have a negative or a negative impact on the margins for all the players in the industry, the distributors, the manufacturers, as a group purchaser or as a large organization. Is there any real meaningful difference in terms of the profitability of a DSO customer versus a regular practice customer?

I think when you look at it, Kevin, there's -- certainly, you get the volume, and I think you get -- with that volume as a DSO, they get certain amount of price benefits. But when you look further past ASPs, I mean, you look at gross margins, and certainly, when you look at op margin, we like the economics of a DSO. You think about DSOs are -- they're taking our products, whether it's on the scanner side, as Simon described, or the clear aligners, and really taking those and pushing them throughout their organization. And you get a lot of leverage and benefit from that. So that we're not having to specifically train every doctor. There's a lot of work that's done within the DSO to help those doctors move forward. There's a lot of work that they'll -- training and other advertising and other things that the DSO will do that we won't have to do to be able to help drive volume. So you get leverage in other parts of the P&L. It's not just an ASP discussion. It's really the benefits that it brings from a gross margin and an op margin standpoint for those DSOs. And look, that's where the market is going. We know that there's a lot of consolidation and other changes that are happening on the DSO side, and we have a platform that certainly can help drive volume within those DSOs and really get them into this digital ecosystem that we talk a lot about. So that's why they have iTeros. That's why they use Invisalign. And we have a platform that can help them.

I think, Kevin, I'd just add to that and say that I think that the kind of the traditional thinking around the DSO model is that they just squeeze suppliers on ASP, right? They really focus on getting low, low prices. Actually in reality, if you look at the people leading a lot of these DSOs, they're very, very small business people. And what they are looking for is value, right? So if you can provide them with a quality product, whether it's a scanner or a brand like Invisalign, they get that, that brings tremendous value to their franchise and also to their doctors because they want to provide the best quality products to their clinicians as well. So I think that's what we've really focused on, is really, really driving what is the value that we bring to them and also what value do they bring to us as well. So it doesn't turn into kind of a price squeeze type of discussion. It's all about how can we grow, how can we help each other really increase our footprint. So that's really -- that's where we are focusing. And if there are DSOs who just want to play the price game, then to be perfectly honest with you, we're not interested in that because we know it doesn't work.

Fair enough. How do you service -- this is just as an aside. But when you have placements -- and I know you have some relationship with distributors, but when you have relationships with DSOs and even individual practices, who does the service work for you guys? Does the DSO handle that, if there's an issue with the system or iTero or the software planning or anything like that? Do you guys manage that process? Is it outsourced? Who does that?

Well, we manage the process directly. We don't need any external service. A lot of it is around software. So you don't need actually people to go and kind of [ twist it ].

Repair the machines.

Yes. You can do everything remotely. If there is an issue where, based on a telephone conversation and something can't be fixed, then we replace the device, right? That's part of kind of the overall value proposition. So we can either -- we could probably treat 90-odd percent of the issues we have remotely. And then in certain cases, we just would bring the unit back and replace the unit. That's the approach we take. I don't know if you got anything to add on that, John.

No. I think that's accurate. I think really, when we look at it, we have a direct model. It's great to have a DSO that has so many doctors that are really bought into the system. And as we -- as Simon said, when we have software updates or things that we want to work through, it's nice having that larger group that you can really expand out quickly. And like you said earlier, the DSOs are very, very smart about return on investment. They're all about making investments and then seeing a return. And they've taken the profit -- the productivity that we can drive -- that we could help drive with our digital platform from iTero on the front end up through Invisalign and so on and turn that productivity into profitability. And that's what the DSO is about. That's what any good business is about, and they really take that forward.

We only have a couple of minutes left. And Simon, while we have you here, one market we haven't really talked about is Lat Am. And would love to hear sort of the opportunity there. What's different about that market? In some of the diligence we did there, there was a handful of local competitors that were pretty low end, it felt like. What's the opportunity in Lat Am? Do you expect that to be one of the faster-growing markets from here? I'd love to get some color because it feels like we don't spend a lot of time thinking about it or talking about it.

Yes. So look, we're relatively new as a direct operation in Lat Am, specifically Brazil. That's probably our major focus at the moment, although we've got direct operations in Mexico and Colombia and a few others. So when I talk about Lat Am, a lot of this will be referencing Brazil. I think we all know, if you look at some of the leading aesthetic markets in the world, then Brazil would be probably in the top 3 of anybody's ranking. So there's a real desire from consumers to look good, to have good oral health and straight white teeth, right? So I think what's attractive to us about Brazil is one, clearly, when we talked about levels of penetration, we're so early in the journey there. And then you look at the population size, but they're probably -- there are close to 30,000 orthodontists in Brazil, which is kind of 3x of what you see in the U.S. There's 250,000 dentists as well. And the majority of these doctors are new to Invisalign. The other thing that I've really noticed in the last couple of years is just how digitally savvy the doctors are down there. They're all on social media marketing their services. They're very open to digital technology that we develop for them. So we see a kind of a fast uptake there. So a lot of the kind of market dynamics that we've seen in other countries around the world are really accentuated in Lat Am and specifically Brazil. I think we've invested heavily around putting the right infrastructure in there from a commercial operation. So we have an office, we have a fairly large sales force down there, and we have a really strong team of people. So we're very focused on really running some of the best practices that we've used in other countries as well. So around education, around consumer, around sales force excellence. So I'm very positive about Brazil. But at the same time, I'm also realistic, right? There's some of the kind of macro volatility that we've seen down there around exchange rates. You've seen some of the challenges that they've had around COVID. So it's a country where you have to -- you kind of balance the opportunity with also the risks and manage the risks. But I think it should be a strong contributor as far as growth over the next few years. But without [indiscernible].

[indiscernible]

Pardon?

Do you think it can be your third largest market after the U.S. and China?

I think somebody may have said that at our analyst meeting, right? I think that was me. I think in a number of years, absolutely, it can be. It has all the potential. It has all the right kind of components. You mentioned kind of low-cost competitors. We have those in every market, right? So it's no different in Brazil. I had those when I worked in EMEA. We have them in North America as well. So that's not really a kind of a primary concern for us at the moment. But yes, great fundamentals. As you know, a volatile market, but we're really excited about the potential for our technology to really increase in usage down there.

Fair enough. Well, gentlemen, we're actually a couple of minutes past our time. I want to thank you both very much for joining us today. This has been really insightful and helpful. Best of luck. Have a great day today at the conference, and we'll talk with you soon.

Thanks a lot, Kevin. Thank you.

Thank you.

Bye-bye.

Bye-bye.