Greetings, and welcome to the Align Technology Q4 Full Year 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. I would now like to turn the conference over to Shirley Stacy with Align. Thank you. Please begin.

Good afternoon, and thank you for joining us. I'm Shirley Stacy, Vice President of Corporate Communications and Investor Relations. Joining me for today's call is Joe Hogan, President and CEO; and John Morici, CFO. We issued fourth quarter and full year 2018 financial results today via GlobeNewswire, which is available on our website at investor.aligntech.com. Today's conference call is also being audio webcast and will be archived on our website for approximately 12 months. A telephone replay will be available today by approximately 5:30 p.m. Eastern time through 5:30 p.m. Eastern time on February 12. To access the telephone replay, domestic callers should dial (877) 660-6853 with conference number 13685779 followed by #. International callers should dial (201) 612-7415, with the same conference number. As a reminder, the information that the presenters discuss today will include forward-looking statements, including statements about Align's future events, product outlook and the expected financial results for the first quarter and full year outlook for 2019. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statement. We have posted historical financial statements, including the corresponding reconciliations and our fourth quarter and full year 2018 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. On our call today, I'll provide some highlights in the fourth quarter and the full year, then briefly discuss the performance of our two operating segments, Clear aligners and intraoral scanners. John will provide more detail on our financial results, discuss our outlook for the first quarter and share our thoughts for 2019. Following that, I'll come back and summarize a few key points and open up the call to questions. Our fourth quarter was a strong finish to a great year. Q4 revenues were better than expected, reflecting higher Invisalign ASPs and volume growth of 31% year-over-year. As well as another record quarter for iTero scanners with revenue up 55% year-over-year. Q4 sequential growth was driven by a strong quarter for EMEA with record growth for teens as well as continued traction with Invisalign Lite and iGo. Q4 operating margin of 22.6% reflects higher doctor training and manufacturing costs as well as higher legal fees than anticipated, partially offset by sequential improvement in Invisalign ASPs. For the quarter, we trained a record 5,270 new doctors in Q4, which includes about 3,000 international doctors, of which, half were in EMEA and half were in APAC. For the year, we achieved record revenues of nearly $2 billion and had over 1.2 million people start treatment with Invisalign clear aligners for the first time, resulting in our 6 millionth Invisalign patient, a teenager from China. These results reflect record revenues and volumes for both Invisalign and iTero. Across customer channels and country markets and continued strength from teens, which grew 40%. The total number of teenagers treated with Invisalign this year was over 333,000, representing 27% of our volume. Finally, in 2018, we trained a record number of new Invisalign doctors, nearly 20,000…

Thanks, Joe. Now for our Q4 financial results. Total revenue for the fourth quarter was $534 million, up 5.7% from the prior quarter and up 26.7% from the corresponding quarter a year ago. For the full year, revenue of about $2 billion was up 33.5% year-over-year, reflecting a record 1.2 million Invisalign shipments and 31.9% year-over-year growth, with strength across all regions and customer channels as well as record iTero scanners volume, which was up 77.2%. For clear aligners, Q4 revenue of $445.6 million was up 4.3% sequentially on higher-than-expected Invisalign ASPs and strong Invisalign volume from EMEA. Year-over-year clear aligner revenue growth of 22.4% reflected strong Invisalign shipment across all customer channels and geographies. Q4 Invisalign ASPs were up sequentially by approximately $5 to $1,235, reflecting price increases and lower discounts, partially offset by higher growth on non-comprehensive cases and includes a $10 of unfavorable foreign exchange. On a year-over-year basis, Q4 Invisalign ASPs were down approximately $70, reflecting promotional discounts, higher growth on non-comprehensive cases and includes $25 of unfavorable foreign exchange, partially offset by price increases. Total Q4 Invisalign shipments of 333,800 cases were up 4.5% sequentially and up 30.9% year-over-year. For Americas orthodontists, Q4 Invisalign case volume was slightly lower than our Q4 outlook, primarily due to longer cycle times in Latin America, and was down 2.9% sequentially and up 24.7% year-over-year. For Americas GP dentists, Invisalign case volume was up 3.2% sequentially and up 17.3% year-over-year. For international doctors, Invisalign case volume was up 12.2% sequentially and up 45.3% year-over-year. Our scanner and services revenue for the fourth quarter was $88.4 million, up 13% sequentially due to volume increases in Americas and EMEA. Year-over-year revenue was up 54.8%, primarily due to higher scanner units across regions. Moving on to gross margin. Fourth quarter overall gross…

Thanks, John, and thanks to those who joined our call today. Overall, 2018 was a great year for Align, and I'm very pleased with the strong performance for Invisalign and iTero across all key regions, customers channels and products. This year, not only do we celebrate our 21st year in business, we also achieved several major milestones, including our 6 millionth Invisalign patient and $2 billion in revenue for the first time. It took nearly 20 years to reach our first $1 billion in sales and only 2 years to reach our second billion dollars. We also delivered in our strategic growth drivers with new product and technology innovation, expansion of our manufacturing and treatment planning operations, and raising awareness of Invisalign treatment with consumers and engaging with them in more innovative ways than ever before. As I step back and look ahead to 2019 and beyond, I want to reinforce the importance of the investments we're making to drive growth globally. The underlying opportunity for doctors and their patients is expanding based on digital technology that Align has spent over 21 years developing. And while we have a huge amount of accumulated expertise and knowledge in digital technology and orthodontics, we have to ensure that we have the capabilities to further expand and regionalize our operations, extend our competitive lead and protect our business from companies willing to take shortcuts with respect to intellectual property. It is incumbent upon us to drive the transition to a fully digital workflow and continue to deliver new products and services that not only benefit Invisalign doctors but their patients and consumers alike. Following our Ortho Summit in November, I met with hundreds of Invisalign doctors and their staff, I had the opportunity to travel to our regional kickoff meetings and connect with…

Thank you. [Operator Instructions] Our first question comes from the line of Robert Jones with Goldman Sachs. Please proceed.

Great. Thanks for the questions. I guess, just to start on ASPs. Joe, could you maybe talk through the progression of ASPs that you saw over the quarter? On a worldwide basis, certainly seems like you guys were able to stabilize ASPs in 4Q relative to 3Q and looking at the implied guidance from 1Q, seems like that's expected to continue, and in the full year, you're calling for that to be at the kind of level we should look for. So I guess, just how did they progress throughout 4Q? And then just related to that, what are the major pushes and pulls as you think about ASPs over the course of '19?

Bob, that's a big question, but I'll make it simple, okay? We had an issue in the third quarter in the Americas with our Advantage Program that I think kicked off this ASP concern. As we said, we retracted that $300 that we offered on teens and also adults at that point in time. After that, basically, out ASPs are what they normally are, in the sense of mixes and matches across the spectrum of EMEA in different places. So I mean, that's the total -- you want to talk about we have an exchange hit this quarter also but again, I think we prepared you for that in the last quarter. So overall, the only change is we didn't have an advantage issue in the third quarter as in the fourth quarter.

Yes. I guess just to follow on, on that, Joe. I mean, I think the question really is as you think about '19, obviously, those programs go away. I guess, the expectation looks like here in the slides that you're still thinking that it's going to be flat to the 4Q levels. So just trying to understand a little bit better what could move the ASPs up over the course of the year as we think about some of the things that hopefully, would not reoccur in '19 what happened in '18.

Yes, John will jump in on this.

Bob, this is John. So the couple of positive mix that we talk a lot about, the international growth, we continue to see strong growth internationally. Mandibular advancement in the U.S. contributes overall to our team growth, which are comprehensive cases and those help. And we are also seeing growth on the comprehensive side. So we think those three, we've seen some balance and that's what we would expect for 2019.

Great. And then I guess just as a follow-up from me, John, while I have you. If you think about the margin outlook for the year, it looks like you guys are calling for the growth in operating margins to get into the long-term ranges in the back half. Just at a high level, I guess, how much visibility and control do you guys have over that trajectory into the back half of '19 around the margins?

Yes, Bob. It really starts with some of the manufacturing efficiencies that we expect to get as we start to ramp up in China and continue to ramp up with our treatment planning. We'll see that continue to ramp as we move through the year. We have other products and programs that will also help us from a mix standpoint as well. So we feel really good about how we're -- how we view the year and the expectation of margin improvement throughout the year.

That’s helpful. Thanks.

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

Hi, good afternoon. I was wondering if you could talk to us a little bit more about the reorganization expenses. Are you sort of thinking of those on an ongoing basis or more onetime? I guess, my question stems in part because I was wondering if you were thinking about perhaps potentially backing those out of your 2019 results?

Elizabeth, this is John. This is a onetime. I mean, it's -- as the company expands and grows internationally, it's looking at some of the efficiencies that we can gain through that change. And we report numbers on a GAAP basis. We'll continue to do so, but we'll give you highlights as the year goes on as update.

Okay. That's helpful. And I guess, also could you just talk a little bit more about the sales investments that you guys are making into the Americas in terms of any particular details you could provide on that? That will be helpful.

Yes, Elizabeth. It's Joe. Look, in Americas, we're still really underpenetrated in the marketplace, particularly on the GP segment, and so we decided we'd add 100 salespeople. We feel really good about that investment giving us good short-term returns. We've done this before almost in every cycle since I've been here. It's a play we know how to run, and we know the importance of it overall. So don't look at it as an anomaly. It's just a continuation of building out our sales force and taking advantages of some of the man out there. Elizabeth, I'll also tell you. It's a high touch thing. You have to touch doctors in this business to drive sales. It's really -- and it -- this doesn't happen on itself. It's -- there's a constant touch to it. So we're really aware of that. Often, our treatment is much different than what these doctors have done before. Our salespeople, we train them well clinically but also from a business standpoint so that they can talk about clinically how to use a product line but also from a business standpoint how you integrate it into the practice. So adding salespeople is really important.

Thank you.

Our next question comes from the line of Jonathan Block with Stifel. Please proceed.

Great. Thanks, guys. Good afternoon. I think the paranoia is going to sort of move from ASPs to volumes and margins tomorrow. So maybe on the margin side, John, for '19, you mentioned expectations to be below your long-term op margin goal of 25% to 30%. Specifically, you called out 150 to 200 bps from increased legal fees in the reorg. So a couple of questions there. Is that reorg all specific to '19? And then if we were to normalize for the 150 to 200 bps, would your '19 op margin approach the lower band of your long-term 25% to 30% goal? And then I got a quicker follow-up.

Yes, that's the right way to look at it, Jon. So this is 2019 expenses. And these expenses, we think we would have been in the long-term range that we have of 25% to 30% if we didn't have these expenses.

Okay. One question, short answer. I'll take it. And then maybe, Joe, for you, on the vols. Just any more color. I mean, any thoughts on the North American ortho weakness? I do have a hard time believing that all the weakness was Latin America just looking at the size of that business. But anything more North American ortho weakness? Is this a pause before mandibular and Invisalign First greater hold in 2019? And maybe, if you don't mind, any thoughts on what MAF and First could contribute to North America this year? Thanks, guys.

Yes, Jon, look, I - the America's growth this year, I know we had the blip in the third quarter overall, but 2018 is a good year for us. If you look at the last 6 years, this is actually the second highest growth profile we've had. America's growth is about 17% on an average over those 6 years. The orthos grew -- this is the only -- this is the second -- from a percentage standpoint, best year we've had from an ortho standpoint. What happened between the third and fourth quarter, again, we think it was a -- that I mentioned on my opening, was the uptake that we have at that Advantage Program in the third quarter. And that was repeated in the fourth quarter, and we think we have this quarter-over-quarter kind of discrepancy. GP is at an all-time high from a growth standpoint overall. And then obviously, from a Brazil standpoint, too, it's starting to become material in the sense of the size of that business, and we're looking for good contributions this year. So Jon, I hope I'm answering your question. But I'd say then if you look at the volume overall, you see how strong EMEA has been. The expansion of EMEA, in the areas like Turkey and Russia and in the Middle East, has been important to us. But also France is growing well. Spain has been strong. Italy came back. We saw it. We've had great success with Go in -- with the GPs out of the U.K. but also in Germany, too. So we really feel great about that region. And then APAC, again, we see strength. We've seen strength in China. We see strength in APAC overall. Japan's growth has been phenomenal. And then bleed that in with our iTero growth, too, that you see across the spectrum. Overall, we feel good about volume.

Okay, fair enough. Thanks for your time guys,

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

Thanks. Good afternoon. Just a couple of housekeeping items, John, in terms of the fourth quarter. Could you quantify the impact in Latin America from the longer cycle times? And you expect that to normalize in the first quarter? And then in terms of the fourth quarter OpEx, it looks like it was about $12 million above your guidance, which is very atypical and unusual. Can you point us to the areas of spend that -- or perhaps accelerated or brought you in above your plan?

Yes. So for the fourth quarter in Latin America, I mean, it's a growing business, as Joe said, and it's a couple of thousand cases that were kind of in transition on a -- from -- right at the end of the fourth quarter. And then as far as spend, were you specifically talking about spend in fourth quarter or compared to the guide in the first quarter?

Yes, the fourth quarter OpEx relative to your guidance.

Yes. We saw added litigation expenses as we've been going -- as a part of our process that we have on the legal side. There's some added costs that we're showing there. And as Joe said, we added some salespeople, and some of that, those hires and those expenses came into fourth quarter. But we wanted people on the ground and ready to be able to sell and give us volume as soon as possible into 2019. So some of those costs hit there as well.

And coming back to ASPs for 2019. It would seem to imply that worldwide ASPs for the year would be down about 3% year-over-year. I understand currency is probably half of that. Mix is another dynamic. But would it be your expectation that promotional activity would be sort of consistent year-over-year? Or is there some cushion built-in perhaps for more, I guess, promo activity in '19 relative to last year?

I would say there's nothing that specifically that we're looking at additional promotions or others. We look at the business as various products and new products that come out, changes that we make. We look at promotions to better drive volume and drive uptake across the regions. So they vary by region, but nothing out of the ordinary. And we were pleased to see where ASPs finished and have a good expectation of -- given the positive growth internationally, the positive growth that we see on teens, and we're seeing strong non-comprehensive growth. All that taking into account keeps us flat for ASPs.

Okay, thank you.

Thank you. Our next question comes from the line of Steve Beuchaw with Morgan Stanley. Please proceed.

Hi, good afternoon, Thanks for time here. I wanted to focus on how you thought about incorporating any potential contribution from the sales force additions in the outlook for 2019. If I think back to -- in past years where there had been substantial adds to the sales force, something like 6 months after those [pit] hit the Street, we saw a benefit. So in 2019, are you modeling in any benefit from these rep adds that you may have already? If so, can you give us a sense for how big those might be? And I'm just curious. As we think about the outlook for the year, let's call it 25% on volumes, 25%, 27% in the first quarter, it just doesn't look like there's any anticipation of acceleration or benefit from those hires.

Yes, Steve. This is John. Yes, 6 months to 9 months is kind of the range you would expect to really start seeing those salespeople that you add once they're fully trained and have their territories and kind of hit. So we should see an acceleration in the second half given the adds that we have. And as we see, we factored in into our guide as much as we can see now based on those adds.

Okay. And then I would agree with the comment that was made earlier about where the paranoia is going to shift. And so I just wanted, given in part in response to the many e-mails I've gotten here in the last 45 minutes or so, give you a chance to just comment on your thinking on competition. Is there any sign of competition being relevant in the field that you can pick out at this point or still the view that it's just not material, not something that people ought to be thinking about?

Steve, it's Joe. We -- obviously, we're seeing Ormco down in ANSI, and I think we saw recent announcement that they are going to kind of pace themselves as they go through 2019. I think you're seeing the same thing out of 3M, too. So honestly, we know you guys do surveys, and we read your surveys. We do our own or whatever. We know some of the docs out there trying these product lines. And we have access to some of the software that's going on out there and the product lines that they're representing or whatever. But I don't want to -- I don't diminish it. But as far as 2019 goes, we're not thinking about any major competitive issues that we're going to face in any of our key areas or key geographies right now. We think this will take some time for them to ramp. We've talked about this before. This business is not easy. You have to be able to hit on a lot of cylinders. You got to have a good sales force that touches the customers and can make that doctor feel really strong about the product line. Secondly, you have to have really good treatment planning and consistent treatment planning that can deliver. And third, you got to have an operation organization that can deliver these things in sequence and on time and on high quality. And putting those things together is difficult. And so 2019, we're not factoring in a huge amount of what we think is competitive pressure.

Okay, got. Thanks so much.

Thank you. Our next question comes from the line of Erin Wright with Credit Suisse. Please proceed.

Hey, thanks. A couple of international ones here. I guess, can you speak to the dynamics in terms of fundamental demand trends in China given the broader macro dynamics? And could you also speak to the competitive landscape and how that's evolving there? And then also on Brazil, just as you build out that market, any sort of surprises there that you're seeing in the broader traction in Brazil?

Yes. Erin, it's Joe. From a China standpoint, look, our demand there has been great. I think as I talked about in my opening, it's a really underpenetrated marketplace. And so -- and there's a lot of demand for our product lines. So our manufacturing investments we're making there, our treatment planning, all those things that make us a local company, we think will allow us to really penetrate that market at a higher rate. So look, I mean, we're not numb to the international scene right now, where people are concerned about China demand. We don't have anything to report right now that would say that we have a diminishing or a paranoia over China demand as we go into 2019. As far as competition over there, Erin, Angela Align is the most credible competitor that we have there. I would say that Angel has really focused on kind of Tier 3 cities in areas of China where we really focused on in the first 5 years or so of our logistics in China in Tier 1 or two cities, and moved into Tier 3. We don't feel that Angel is throttling our growth there at all. They are a fast follower. We see them in different areas that come after us. But we -- there's not a whole lot of head-to-head competition we feel right now, and I think that reflects not a whole lot about Angel being either good or bad. It just reflects the size of this marketplace and the investments you have to make in the sales force, how you really have to service that marketplace. There's a lot of work that you have to do. The channels just don't exist right now in the sense that you have to build those channels and really make them viable. So right now, we consider them a competitor and our largest competitor, I'd say, in the world, in the sense of a number of clear aligners that they supply. We don't look at them right now as slowing us down in China. And the Brazil surprise. I'd say that the surprises were always in Brazil. It's the Incredible uptake of our product line there. You saw the 1,300 doctors that we've trained there recently. They're so excited about the product line. It's -- we talked about Spain often in the sense of the uptick of our product in Spain and the growth there. We see the same kind of enthusiasm and the same kind of, what I would call, Latin enthusiasm for what our product can do and really bring to that area. So we look to make major investments there and increasing our sales force and our presence in the Brazilian area. We really feel good about Brazil from a standpoint of future growth of our product aligner.

Okay. Great. And a broader question on promotional activity. I'm just curious kind of what other promotional activity could you implement that isn't necessarily prized-driven, whether the co-marketing arrangements or other types of incentives. Is this something that it is in your game plan for 2019 or something that you're planning?

Erin, there's no lack of creativity in our commercial forces as promotions go, so there's a lot of adult supervision that we have to supply as we do those things. And what -- you can look at our [Adapt] program as a good one. That's a program where we're trying to take doctors to 80% Invisalign and really demonstrate, as I mentioned in my opening, is that when you get to a digital practice, when you get to 80%, first of all, no one goes back, no one goes back to wires and brackets. You really set a precedent that you have control over your practice. You don't have 30% of your cases resulting in emergencies. Doctors aren't spending 45 minutes a day with patients. It's just a much -- but you have to get to 80% to make that work. We'll continue to put money into that. That's not like a promotional program that we would offer at a lower price. That's just a program we work with docs that really want to get there. There's always promotional programs that we do that we offer aligners to staff at orthos that are starting up with us or also with GPs or whatever so that they can understand the product and have that experience and be able to communicate that well to patients. They come into the practice. Those are ongoing promotions that we do in all 3 geographies, too. We do have seasonal promotions at times in different countries at different areas. But I'd say that we have a -- this is outside of the third quarter issue obviously we reported on kind of ad nauseam over the last 6 months. We have a good handle right now on what promotions that we'll offer throughout the year.

Our next question comes from the line of Ravi Misra with Berenberg Capital Markets. Please proceed.

Hi. Thank you for taking the question. So I wanted to get into the kind of the gross margin outlook in the commentary that you were providing. Can you help us understand maybe what the pushes and takes are between the 1Q guidance and kind of the 4Q guidance ramp? And especially in terms of what's that fixed overhead that's strapped there, kind of the ball park? Is that somewhere around $10 million, $15 million a quarter right now that's annualized into your COGS on that that's going to fall off once the China sales ramp?

Yes. Ravi, it's John. It's not that high. But when we think of our operation that we've had to date, really it's been a -- it's treatment planning in Costa Rica, and it's been manufacturing in Mexico. We are now -- as we've been expanding our treatment planning and now expanding out to China manufacturing, it's -- we want volume. We want to better push volume through those centers and get as much productivity as possible. So as we see some of the volume in -- the margin impact in the fourth quarter, that continues a bit into the fourth quarter. But as that volume comes through and as you don't have to add as much overhead, you see more and more productivity to be able to come through those whether the treatment planning or the China manufacturing. And so we expect to see this kind of quarter-over-quarter of improvement through 2019 as we get more and more productive at these facilities.

So it sounds like that's really going to be led by a step-up in the clear aligner gross margin versus the scanners?

Yes, definitely. When you look at kind of where we're seeing that volume leverage as we expand out globally, it'll be on the clear aligners side, and we should see that progress through the year.

Right. And then maybe just 2 more questions. Just on the -- one on the orthodontics and then another kind of just on the consultations through the Invisalign brand experience. So just on the orthodontics step-down. I'm curious. That's the first time in, gosh, I think about 12, 14 quarters. I've seen that number stepped down. Any kind of impact -- I know you're saying that the impact from Ormco. 3M was kind of limited. But how about some of the other direct-to-consumer manufacturers there? Is that playing into that at all? And in the sense that, that end-user volume might actually be going down? And then second, you talked about the 85 -- I think the 85,000 people that have visited the store and gotten a consult. What's the conversion rate on that? Are those getting scans to actually becoming consumers of your product?

Ravi, Joe again. From a standpoint of Americas and orthodontics standpoint, again, I'll tell you we had our second best year in history following from the standpoint of overall orthodontic growth. When you talk about SDC, my feeling on SDC is they don't really take orthodontic cases. Remember, the normal orthodontist in the United States is 75% to 80% teen. You won't see many teens being done by SDC, and so those cases would primarily come out of GPs. Adults, kind of simple cases that are going on. As I mentioned, we had our highest GP sales rate ever in North America in 2018. So neither of those dimensions do I think that we or experience competition enthralling the business in some way whether it will affect us in 2019. As far as the Invisalign stores and the scan ratios, all those things, look, we just -- we're still working through this as well. We haven't released that information from an overall standpoint yet, and at some point in time when we think we're ready and we really have that ironed out. And I'd say that, Ravi, not that we're hiding anything. It's just we found that when you look at CCAs, we call it clear order in this business, this can take anywhere from 4 to 6 months to 7 months to really iron itself out. We see patients going and get scanned. And then there's a huge halo effect because when we do this local advertising, it benefits not just the doctors in the program but also in a broader sense, any doctor that's within that 10-mile or 15-mile range. So when we're really -- when we're ready to report this, we'll report it in a broad sense to that halo effect, the whole, what you talked about, the conversion rate and also what that means from a timing standpoint, okay?

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

Thanks. Joe, a few times on the call, I think you talk about your view that it's sort of critical to get your customers to really make the digital conversion of their practices. Can you just talk a bit more about what that really means? And is that an expense on your part? Obviously, it's got some positive implications for volumes if and when it happens. But what are the sort of practical implications of getting an ortho practice to make that transition? Thanks.

John, that's a good question. There's 3 key parameters, right, is first of all, there's extended payment terms that you have to deal with. Because when you go with a clear aligner product versus wires and brackets, their cost overall are about 4x from a variable cost standpoint of which you'd have with wires and brackets. So you just have to get ready for that cash play and try in some way to extend those kinds of payments. Secondly, you have to look at their workflows. Because when you really go to a full digital practice, it changes completely really. We find out in our [Adapt] program that you need fewer chairs but you'd need more consultation rooms to put people in, to show them simulations, to talk them through what it would be. With no emergency cases, it completely redefines in the sense of how a day goes in a doctor's office. It's not 30% of the time are people scrambling around trying to find someone that can fix something to occur with wires and brackets in some way. And then third is a demand component, is you're going to have to drive more demand within that practice, which Invisalign does. And so obviously, with $100 million spend that we do a year in attracting patients and moving them into doctors, how we pipe those patients into doctors, how they prepare themselves for both teens and adults to do that. So it's on those 3 dimensions. And John, specifically on the Adapt program, we're just going through that program right now and how we'll offer that to customers and whether it will cost to actually do that to customers at that point. And after we've done probably 5 to 8 of these and have them complete, we'll have a better story in the sense of -- a more complete story in the sense of here is how we'll do it, what those costs will be. But don't look at those as being overly broad. Remember, we have iPro today that we basically use to take customers through clinical kind of episodes. So we have our concierge service that grabs patients to move them through doctors, too. So the big components of operations that you need to work around the Adapt , we have those in place. We just have to modify them more to this 80% or digital treatment play.

Very helpful. One quick one, John. As you think about the '19 outlook that you described for us, what sort of number of stores is that envisioned by year-end?

Yes, we have 12 as we noted now. It's really not a material change from that. We're evaluating what's best locations, what makes sense for us. But we really want to drive productivity and conversion at the stores we have before we go on a larger scale.

Okay. So we shouldn't expect that to be materially different by December of '19?

That's correct.

Okay. Thank you.

Thank you. Our next question comes from the line of Steven Valiquette with Barclays. Please proceed.

Thanks, good afternoon, everybody. So I guess just given the ramp in investments in 2019, likely some slower EPS growth. I kind of feel that 2019 is maybe somewhat similar to what Align went through back in 2015, where that was, let's call it, somewhat of a throwaway year for earnings growth because of heavy spending. But then the company came out of that and really had 3 strong years of growth in 2016 through 2018. I know it's a different management team back in 2015. But should we draw really any sort of parallels through 2019? Or maybe you're just setting yourself up for another strong earnings growth cycle in the next couple of years beyond 2019 with the investments that you're making this year?

Steve, it's Joe. I think first of all, I'd say we play offense in this business. So even though we talk about restructuring or if we talk about adding salespeople, when we talk about defending our IP, all of those things are, to me, setting a foundation for future growth in the business. When you sit back and you look at this business, we're incredibly underpenetrated based on consumer preference for clear aligners to move teeth and also the size of the market that digital opens up even beyond, the 12 million orthodontic case starts that we talk about globally. So please don't call 2019 a throwaway year. Hopefully, the earnings and the growth that we're projecting here are substantial. And we haven't even mentioned the law of large number on you guys over the last 3 years, right? Because we continue to build these huge percentages over top incredibly larger numbers than what we had previously. So I look at this as -- don't -- look at is as these are aggressive investments in a young business to lay a foundation to allow us to be better in the future. And that's -- we have to take these.

Yes. I guess a quick follow-up to that, which is the, how important is consistent EPS growth at Align at this stage of the corporate life cycle? Or it's just still mainly about driving top line growth for all the things that you just mentioned?

Steve, this is John. It's both. I mean, we want to drive top line. We want to be able to grow this business. As Joe mentioned, we're vastly underpenetrated, and we have products and technology to be able to increase that market. But at the same time, we want to be able to grow profitably. And as we layer on some of these investments, we expect -- whether it's China or sales force addition or others that we're adding in, over time, we'll be able to see those benefits. And that over time, as we laid out, is over 2019. We should see that sequential improvement quarter-over-quarter as those investments start to pay off as we move forward. But we want to make sure that we're returning the most back to our shareholders, and that comes from revenue growth and the volume that we drive as well as doing this from a profitability standpoint. And we're very aware of the long-term growth model, and we stick with that.

Okay, got. Thanks.

Thanks, Steve. Operator, we’ll take one more question please.

Thank you. Our next question will come from the line of Richard Newitter with SVB-Leerink. Please proceed.

Hi. Thanks for taking the question. Joe, I was just wondering -- I know you guys are still -- it's still really, really early days in China, and the opportunities are enormous, including your growth rate in that region, haven't really shown any slowdown. But can you just talk a little bit about what -- we've seen some headlines and some other companies talking about the macro slowdown in China and the consumer discretionary realm. Can you give us your thoughts from the way you see things? Clearly, you're investing, so I would imagine there's nothing there that would suggest there's any slow in growth. But what are you seeing kind of at the ground level in terms of the macro?

I mean, we - like I mentioned before, Richard, this is -- the growth that we saw throughout 2018 was really strong in China. I mean, obviously, we're making these investments in China. It's a commitment. They are the second largest country in the world right now. The under-penetration, the opportunity there is huge. Look, I mean, we're up with global events. We see the issues going on with China and United States. And hopefully, they'll come to a trade deal sooner or later. I look at that investment. When I talked about manufacturing there, it is moving closer and having a Chinese business and being able to operate in that country with a lot of fluidity. But it also makes me feel good that we have a good insurance policy in the sense of the trade dynamics between the two countries, too. So right now, again, we haven't seen what other companies are reporting. I think the penetration piece we're talking about is probably maybe the variable of difference between the two. We're not saying that we're recession-proof ever. I think that's a ridiculous position to take. But what we've seen right now in the growth rates and what we've been experiencing, right now, we're looking for a good 2019 in China.

Excellent. And just if you could maybe just -- maybe you mentioned it earlier, mandibular advancement. What's contemplated? Or how are you thinking about the contribution in 2019? Should we think of that launch kind of hitting the ground running right off the bat? Is that more of a gradual cadence? And what's contemplated in the outlook?

I'll take the high level of it. John, take the specific level. But remember, MAF was just approved in November of 2018. As you can see, we have -- I expect our normal uptick in the United States, which is -- what those will do, 2 or 3 cases and get used to it. It's a phenomenal product. It really is. To think you straighten your teeth. It can move your mandible forward in that sense and build bone. It's just -- it's incredible. But when it's something that big and that revolutionary, doctors -- orthos are conservative anyway. And obviously, they're going to take their time in the sense of proving it. Now [indiscernible] MAF has been outside the United States for a while, too. So we have, I think, 17,000 cases we talked about that we've gone through it. What's really interesting, too, is we have several updates from [Jelco] and the engineering team on MAF also. When teeth are shorter, how you arrange your aligners to make it work, making sure the wings are a lot stronger than before. So this is approved in the United States. We think we've significantly improved the product over the last 12 months, too. Now we find, too, is just the great halo effect around MAF and Teen. If you start to do more MAF, you do more Teen. And so we're looking forward to that. But again, it's new days in the United States, and we'll give you updates as we go through the year.

And so when we look at our forecast and we think about flat ASPs, this is one that helps us. This is a positive move back to our ASPs because it's a full case, it's a teen case, it's complicated. Like Joe said, it gives us more and more teen volume, and we look at that as favorable mix and favorable growth for us.

Okay. Well, thank you, everyone, for joining us on the call today. We look forward to catching up with you at subsequent conferences. And if you have any questions, please contact Investor Relations. Have a great day.