Align Technology Inc (ALGN) Q1 2019 Earnings Call Transcript

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Align Technology Inc (NASDAQ: ALGN)Q1 2019 Earnings CallApril 24, 2019, 4:30 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Align Technology First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) Please note, this conference is being recorded.

I would now like to turn the conference over to Shirley Stacy, Vice President, Corporate and Investor Communications. Thank you. You may begin.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thank you. Good afternoon and thank you for joining us. I'm Shirley Stacy, Vice President of Corporate and Investor Communications. Joining me today is Joe Hogan, President and CEO; and John Morici, CFO.

We issued first quarter 2019 financial results today via GlobeNewswire, which is available on our website at investor.aligntech.com. Today's conference call is being audio webcast and will be archived on our website for approximately 12 months. A telephone replay will be available today by approximately 5:30 p.m. Eastern Time through 5:30 p.m. Eastern Time May 8th. To access telephone replay, domestic callers should dial 877-660-6853, with conference number 13689188, followed by pound. International callers should dial 201-612-7415, with the same conference number.

As a reminder, the information that the presenters discuss today will include forward-looking statements, including statements about Align's future events, product outlook and the expected financial results for the second quarter of 2019. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission. Actual results may vary significantly and Align expressly assumes no obligation to update any forward-looking statements. We have posted historical financial statements, including the corresponding reconciliations and our first quarter 2019 conference call slides on our webcast 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?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Thanks, Shirley. Good afternoon and thanks for joining us. On our call today, I'll provide some highlights from the first quarter and briefly discuss the performance of our two operating segments, clear aligners and intraoral scanners. John will provide more detail on our financial results and discuss our outlook for the second quarter. Following that, I'll come back and summarize a few key points and open up the call to questions.

Our first quarter was a very good start to the year with revenues, volumes, gross margin and EPS, all above our guidance. Record Q1 revenues and Invisalign volumes were up 25.6% and 28.3% year-over-year respectively, reflecting continued strong growth across all geographies and customer channels as well as strong iTero scanner and services revenues, which were up 55.1% year-over-year. Q1 sequential growth was driven primarily by North America and EMEA volumes, reflecting strength across the Invisalign product portfolio. We saw a nice uptick in adoption of Invisalign treatment with the record utilization overall as well as expansion of our customer base, which totaled 57,000 active doctors worldwide in Q1.

Now, let's turn to the specifics around our first quarter results, starting with the Americas region. For the Americas region, Q1 was a solid quarter with Invisalign case volume up 7.1% sequentially and 21.8% year-over-year, reflecting growth in both our orthodontic and GP dentist channels. Q1, we trained 1,700 new Invisalign doctors in the Americas region, of which 1,400 were North American doctors. On a sequential basis, Q1 Invisalign volume growth reflects record utilization for the Americas region overall, driven by North American orthos at 18.3 cases per doctor with good initial adoption of Invisalign mandibular advancement in North America driven by the mid-Q4 launch in the US.

We also had solid performance from GP dentists with continued momentum from Invisalign Lite and Invisalign Go. Invisalign Go provides a simple pathway for dentists to integrate mild to moderate tooth movement into comprehensive care. And it makes it easy for GPs to refer out more complex cases to orthodontics in the network. Year-over-year, Q1 Invisalign volume growth in the Americas region was driven by continued strength in the ortho channel, especially from our high-volume doctors with 25.9% growth as well as an increase of 15.5% from the GP channel.

In March, we announced the collaboration with Digital Smile Design or we call DSD, a leader in holistic digital dentistry solutions for dental clinics, which features the Invisalign system and iTero Element scanners as a digital solutions of choice for tooth movement and scanning. As part of the cooperation, Align and DSD will deliver dedicated education programs, enable simplified streamlined integration of digital end-to-end workflows into GP practices and offer doctors more opportunities to learn about digital tools and treatment planning support.

We also continue to make great progress in Latin America, led by Brazil. In Q1, Invisalign volume in Latin America was up significantly year-over-year, reflecting our ongoing investments as we continue to build our business in the region, training over 300 Invisalign doctors during the quarter. Next month, I'll be in Brazil with the Executive Team hosting a major customer event with more than 200 doctors discussing the future of digital orthodontics, including the science and technology behind both the Invisalign system as well of our -- as well as our iTero scanners. We also have local social media influencers on hand as we kick off our very first Invisalign consumer campaign in Brazil and plan to live stream portions of the event to more than 500 doctors across the region.

For international business, Q1 was another good quarter with strong Invisalign volume growth of 38.5% year-over-year, reflecting increased Invisalign utilization and continued expansion of our customer base in both EMEA and Asia-Pacific regions. On a sequential basis, international volume was up slightly reflecting strong growth in the EMEA region and offset somewhat by seasonally lower period in Asia-Pacific, as expected. In Q1, we trained over 2,400 new Invisalign doctors internationally split roughly between each of the two regions.

In EMEA, Q1 was a strong quarter with volumes up 37.4% year-over-year, driven by growth across the region with record Invisalign volumes in all but one country, led by Iberia and France. We saw strength across the Invisalign product portfolio with continued momentum from Invisalign First and Invisalign Go. We also continue to see strong growth across our key expansion markets as well led by the Nordics and Benelux.

For APAC, Q1 Invisalign volume increased 40.4% year-over-year, reflecting continued strong growth from nearly all-country markets led by China, Japan and ANZ. But we also had a strong uptick in teenage patients in Q1 due in part to a teen promotion in China offered along with our Teen-edge sales program intended to increase adoption of Invisalign treatment with teenagers. We also had strong growth from GP dentists, which were up 63.5% year-over-year. On a sequential basis, Q1 was flat as expected due primarily to a seasonally lower period with the lunar New Year holiday.

During Q1, we trained nearly 1,100 new doctors in APAC, over half of which were in China. We opened our second state-of-the-art training facility in China located in Shanghai. Our new manufacturing facility in Ziyang, China is continuing to ramp. And while we are making good progress, we still expect to take a couple of quarters before we transition aligner fabrication from Juarez, Mexico to Ziyang, China to serve the Chinese market and expect manufacturing overhead in Ziyang to be underutilized during this transition period.

Overall, for the teen market in Q1, nearly 100,000 teenagers started treatment with Invisalign clear aligners, an increase of 41.1% year-over-year driven by continued strong adoption across all major regions, especially in APAC and EMEA regions. For Q1, year-over-year Invisalign teen patient growth for North American orthodontists increased 29.2% and international doctors were up 67.2%. Invisalign First and Invisalign treatment with mandibular advancement continue to ramp and grow globally and are helping to increase our share of teenagers and younger patients worldwide. Overall, we are pleased to see that the use of Invisalign teen treatment among teenagers continues to outpace adults and then Invisalign First is driving a really strong growth in kid/tween -- in the kid-tween segment.

We'll continue to drive utilization and growth in our Americas teen business this year, with the first Invisalign Teen Summit in July. We know this summit's increased engagement in Invisalign adoption. So for the first time, we are focusing a summit program completely on teen treatment and teen culture, including a tie-in to 2019 VidCon, the top teen culture and community event. Teen Summit is designed to turn low teen submitters into high teen submitters by combining Invisalign-specific clinical practice, how tos with an immersive teen culture experience.

Our consumer marketing efforts are designed to build the category and drive demand for Invisalign treatment through a doctor's office. We invest over $100 million each year in consumer marketing programs, including TV, digital and social media, PR, event marketing and our patient concierge service. Our goals are to make the Invisalign brand a household name worldwide to motivate consumers to seek Invisalign treatment through a doctor's office.

In Q1, we continue to see strong digital engagement with consumers, reaching nearly 4 million unique visitors on Invisalign.com sites worldwide for a total of 53 million visitors to-date. Other key metrics show increased activity and engagement with the Invisalign brand are included in our Q1 quarterly slides.

In March, we launched a new online tool called SmileView at the International Dental Show, IDS in Cologne, Germany. SmileView is designed to help prospective Invisalign patients visualize a new straighter smile before they opt for Invisalign treatment. Within 60 seconds of taking a small selfie using a SmileView online tool with their smartphone or tablet, prospective patients can see what their new smile and straighter teeth may look like, with their own facial features. SmileView is available online or in GP practices in beta testing in the UK and the US and we are getting really positive feedback.

In North America, we continue to invest in strong digital plans for adults and teens. Our teen focused content developed by Awesomeness TV, the fastest growing news channel and teen influencer program helped strengthen our brand presence among teens and parents, making Invisalign relevant and fun. During South by Southwest, we've reached an adult consumers with an immersive experience with the RealSelf House and Modern Beauty, where consumers can learn more about Invisalign and see a simulation of their future using Invisalign SmileView technology. And Invisalign was voted by consumers as the Most Worth It treatment continuing to demonstrate continued strength with consumers.

In EMEA, we held a recruitment drive for our influencer program called Invisalign Smile Squad, generating over 100 plus new influencer applications and 350 plus doctor registrations to take part in the program. And our Parent of the Teen campaign went live in the UK and France, raising awareness among the new consumer audience. Q2 will see a launch of our revised patient journey with media campaign strategy for focus markets, better integrating new conversion tools like SmileView and Concierge into the journey.

In APAC, we continue to build awareness for Invisalign treatment through the use of paid media and influencer campaign, including expansion of our influencer program in the region and a pilot Invisalign First social media campaign to target parents of younger children. To leverage increasing consumer awareness and demand, we also began to expand the Invisalign Concierge program that connects interested consumers with Invisalign doctors for treatment in new countries. Globally, in the second half of the year, we will launch a new consumer advertising campaign that emphasizes the importance of doctor-led treatment with Invisalign clear aligners, while also differentiating our brand.

On the professional marketing side, we recently launched two dedicated professional Invisalign brand campaigns that feature orthodontists and GP dentists. As -- the Ortho as Hero campaign focuses on Invisalign orthodontists as clinical leaders and the heroes of transformative life-changing smiles, especially teen and younger patients. The campaign showcases modern orthodontic practices that leverage digital approaches to treatment and are warm and inviting. The Go Beyond campaign is designed to celebrate dentists who go above and beyond everyday to serve their patients. It also demonstrates the relevance of tooth movement to general dentists and the importance of integrating Invisalign with comprehensive dentistry. This was launched in North America and is now being rolled out in EMEA and APAC regions.

For our iTero scanner and services business, iTero revenues increased 55.1% year-over-year, reflecting continued strength across all regions and customer channels. On a sequential basis, revenues were down 9.8% sequentially, as expected, reflecting lower scanner sales following a strong Q4 and consistent with the seasonality in the capital equipment business, partially offset by continued growth in services revenues due to the increasing installed base.

During the quarter, we launched the new iTero Element 5D Imaging System for comprehensive preventive and restorative oral care at the International Dental Show. The iTero Element 5D scanner is the first integrated dental imaging system that simultaneously records 3D intraoral color and NIRI images or near-infrared images and enables comparison over time using iTero TimeLapse. Integrated 3D, intraoral color and NIRI technology of the new iTero 5D Imaging System aids in detection and monitoring of interproximal caries lesions above the gingiva without using harmful radiation. The iTero Element 5D scanner is available for sale in majority of European and APAC countries and is not yet available in the United States or Latin America. Cumulatively, 13.5 million orthodontic scans and 3.6 million restorative scans have started with iTero scanners.

Use of the iTero scanners for Invisalign case submissions continues to grow and remains a positive catalyst for Invisalign utilization. For Q1, total Invisalign cases submitted with the digital scanner in the Americas increased 76% from -- to 76% from 67.3%. In Q1 last year, international scans increased to 59.3%, up from 43.5% in the same quarter last year. Within the Americas, 91.2% of cases submitted by North American orthos were submitted digitally and China remains at 45% for the quarter. We continue to anticipate that in another year or two, nearly all Invisalign cases will be submitted digitally, primarily through an iTero scanner.

Given our continued progress and increased use of digital scans for Invisalign case submission, we continue to get questions regarding interoperability with third party scanners. With recent product introductions, we want to make sure we are clear about which scanners are not qualified to submit Invisalign case submissions. We developed an interoperability matrix that has been distributed to our sales and customer-facing teams to help inform doctors. It also included our Q1 '19 conference call slides, so please reference it for more detail.

However, to ensure there is no confusion in the marketplace, let me quickly reiterate our interoperability position on this call. With two new scanners, the Trios 4 and Primescan. Regarding the Trios 4, Align will not qualify Trios 4 for any future 3Shape scanner -- or any future 3Shape scanning product for Invisalign interoperability in the US or globally. Regarding Primescan, Align has received a request from Dentsply/Sirona to evaluate Primescan for Invisalign case submissions and we are considering that request. Until we make a decision to move forward and can conduct testing, Primescan is not qualified for Invisalign case submissions.

Before I turn the call over to John, I want to update you on two other important topics, our plans to reorganize Align's corporate entity structure to better align with the growing international nature of our business and the recent settlement agreement with Straumann. First, our plans to reorganize our corporate entity structure.

Given the rapid expansion of our business globally, we must continue to scale and optimize our operations to help support our growth and financial profile. In March, we announced internally that we would be marketing -- making changes to our EMEA headquarters located in Amsterdam, The Netherlands. Specifically, we'll relocate our current EMEA headquarters and move the majority of our corporate functions, finance, IT, HR, legal and the regional EMEA marketing from Amsterdam to Switzerland. We'll begin the transition to the new headquarter location mid-year and expect to complete it in 2020, early. We will maintain an Amsterdam office to support local commercial operations.

In addition, in August, we will be relocating our current order acquisition or OA facility from Amsterdam to Poland to create a centralized operational hub for EMEA co-located with our new treatment planning facility that we just opened. This new hub in Poland will include iTero business operations, customer success and clinical support teams and IT operations. As we evaluated our options relocating our EMEA headquarters to Switzerland, quickly became our top choice on many factors, including a more favorable and stable operating environment, an opportunity to accelerate our transition to a more decentralized commercial structure for EMEA that reflects the localization we've been working toward, a more centralized geographic location in Europe within EMEA's largest potential market and available talent pool to support key strategic roles required in the new EMEA headquarters. While we expect these proposed changes will allow us to obtain financial and operational efficiencies, it was a difficult decision to make and we're committed to supporting our impacted employees throughout this transition.

Moving on to the settlement with Straumann. On March 28, we announced a settlement with the Straumann Group to settle patent disputes with ClearCorrect, who was purchased by Straumann in 2017. As many of you know, for years, Align has been engaged in complicated multi-country, multi-court patent litigation with ClearCorrect. The settlement with Straumann ends all current and pending litigation, provides $35 million in settlement fees to Align. In addition, we've signed a non-binding letter of intent, LOI, with Straumann for an iTero development and distribution agreement. If we reach an agreement, Straumann will purchase and distribute 5,000 iTero scanners over the next five years and co-fund development with us to integrate Straumann's digital workflow into those scanners. The letter of intent we've signed is non-binding, which means either one of us can walk away from the LOI. However, if we don't reach a development and distribution agreement with Straumann by early July, Straumann will pay us an additional $16 million for a total of $51 million.

We have always been passionate about defending our intellectual property and the hard work and innovation by the Align team that it represents. We will continue to do that and to protect our technology through all the ways that our legal system provides.

With that, I'll now turn the call over to John.

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Thanks, Joe. Now, for our Q1 financial results.

Total revenue for the first quarter was $549 million, up 2.8% from the prior quarter and up 25.6% from the corresponding quarter a year ago. Year-over-year revenue growth includes $16.5 million of unfavorable foreign exchange. For clear aligners, Q1 revenue of $469.2 million was up 5.3% sequentially on strong Invisalign volume from North America and EMEA, and higher than expected Invisalign ASPs. Year-over-year clear aligner revenue growth of 21.7% reflected strong Invisalign shipment growth across all customer channels and geographies.

Q1 Invisalign ASPs were up sequentially by approximately $10 to $1,245, reflecting favorable impacts from FX and product mix shift, partially offset by higher promotions. On a year-over-year basis, Q1 Invisalign ASPs were down $65, primarily reflecting promotional discounts, unfavorable foreign exchange and product mix shift, partially offset by price increases in July 2018.

Total Q1 Invisalign shipments of 349,200 cases were up 4.6% sequentially and up 28.3% year-over-year. For Americas orthodontists, Q1 Invisalign case volume was up 9.5% sequentially and up 25.9% year-over-year. For Americas GP dentists, Invisalign case volume was up 3.5% sequentially and up 15.5% year-over-year. For international doctors, Invisalign case volume was up 1.3% sequentially and up 38.5% year-over-year.

Our scanner and services revenue for the first quarter was $79.8 million, down 9.8% sequentially due to seasonality as Q4 is typically stronger due to end of year capital equipment purchases. Year-over-year revenue was up 55.1%, primarily due to higher scanner units across regions and related service revenues.

Moving on to gross margin. First quarter overall gross margin was 73.2%, up 1.5 points sequentially and down 1.7 points year-over-year. Clear aligner gross margin for the first quarter was 74.9%, up 0.8 points sequentially primarily due to improved manufacturing leverage, approximately $4 million of one-time benefits related to freight refunds and rebates and seasonally lower training costs, partially offset by higher number of aligners per case. Clear aligner gross margin was down 2.1 points year-over-year, primarily due to higher number of aligners per case, lower ASPs, partially offset by favorable manufacturing leverage and one-time benefits related to freight refunds and rebates as described above, along with lower doctor training costs scanner. Scanner gross margin for the first quarter was 63.6%, up 3.7 points sequentially and up 4.4 points year-over-year, primarily due to higher ASPs and one-time benefits related to freight refunds along with manufacturing efficiencies.

Q1 operating expenses were $314.4 million, up sequentially 19.7% and up 37.2% year-over-year. The sequential increase in operating expenses reflects continued investment in sales and R&D activities along with higher legal, consulting expenses as well as increased compensation related to expenses due to higher headcount and our planned annual increase in employee compensation programs, partially offset by season -- seasonally lower advertising spending. Additionally, our Q1 operating expenses include impairments and other charges related to Invisalign store closures of $29.8 million.

Our first quarter operating income was $87.7 million, down 27.2% sequentially and down 10.7% year-over-year. The sequential decrease in operating income is primarily attributed to higher operating expenses, offset in part by higher gross profit. On a year-over-year basis, the decrease in operating income primarily reflects higher operating expenses, commensurate from growth, which includes charges related to our Invisalign store closures.

Our first quarter operating margin was 16%, down 6.6 points sequentially and down 6.5 points year-over-year. The sequential decrease in operating margin is primarily due to higher operating expenses and the Invisalign store closure costs, partially offset by higher gross margin. The year-over-year decrease in operating margin is primarily due to higher operating expenses and Invisalign store closure costs and lower gross margin. The Q1 operating margin impact from the store closures was approximately 540 basis points.

With regards to the first quarter tax provision, our tax rate was 10.4%, which includes approximately $12 million of excess tax benefit related to stock-based compensation from restricted stock vesting during the quarter and approximately $8 million of discrete tax benefit related to the tax impact of the Invisalign store closure costs. First quarter diluted earnings per share was $0.89, down $0.31 sequentially and down $0.28 compared to the prior year. Invisalign store related closure costs, net of tax, impacted Q1 diluted earnings per share by approximately $0.28.

Moving on to the balance sheet. As of March 31, 2019, cash, cash equivalents and marketable securities, including both short and long-term investments, were $732.5 million, a decrease of $11.9 million from the prior quarter, which is primarily from $50 million used to repurchase approximately 205,000 shares of our stock. Of the $732.5 million of cash, cash equivalents and marketable securities, $372.6 million was held in the US and $359.9 million was held by our international entities. Q1 accounts receivable balance was $479.3 million, up approximately 9.2% sequentially. Our overall days sales outstanding was 78 days, up 4 days sequentially and up 4 days from Q1 last year. Cash flow from operations for the first quarter was $117.2 million, up $39.9 million compared to the prior year.

Capital expenditures for the first quarter were $35.3 million, primarily related to our continued investment in increasing aligner capacity and facilities. Free cash flow for the first quarter, defined as cash flow from operations less capital expenditures, amounted to $81.9 million. During Q1, we repurchased on the open market approximately 200,000 shares of our common stock at an average price of $243.42 per share, including commission for the aggregate purchase price of approximately $50 million. We have $450 million remaining available for repurchase under the May 2018 repurchase program. Also, during the first quarter, we adopted the new lease standard and now record operating leases -- lease assets and related liabilities on our consolidated balance sheet. However, there was no significant impact to our operating results.

With that, let's turn to our Q2 outlook and the factors that inform our view, starting with the demand outlook. For international, we expect Q2 volumes to be up sequentially, reflecting seasonally stronger periods for both EMEA and APAC regions. For Americas, we expect Q2 volumes to be up sequentially, reflecting growth across all key markets as well as seasonally stronger period for North America orthodontists with the beginning of the summer teen season. We expect our iTero business to be up sequentially coming off a slower period for capital equipment in Q1. And regarding SmileDirectClub, we expect almost no clear aligner volume from SDC in Q2.

With this as a backdrop, we expect the second quarter to shape up as follows. Invisalign case volume is expected to be in the range of 380,000 to 385,000 cases, up approximately 26% to 27% year-over-year. We expect Q2 revenues to be in the range of $590 million to $600 million, up approximately 20% to 22% year-over-year. Our Q2 revenue outlook assumes almost no SDC volume compared to the same quarter a year ago when aligners supplied to SDC contributed $8.6 million to revenue. We expect Q2 gross margin to be in the range of 71.5% to 72.5%. Q2 gross margin is sequentially lower than Q1 due to the one-time benefits of approximately 1% realized in Q1 that do not -- that we do not expect to repeat.

We expect Q2 operating expenses to be in the range of $277 million to $282 million, which includes a one-time benefit of approximately $30 million from the Straumann settlement gain, net of our estimated costs for the iTero development agreement. Q2 operating expenses reflect continued investment in sales, marketing and R&D, including increased consumer media advertising spend as well as higher legal fees and costs related to our corporate structure reorganization announced last quarter.

Q2 operating margin should be in the range of 24.5% to 25.4%, which includes the expected benefit from the Straumann settlement gain mentioned above and approximately 2% negative impact to the operating margin due to higher legal fees and costs related to our corporate structure reorganization. Note, as we described on our Q4 earnings call in January, we expect the impact from higher legal and corporate structure reorganization costs to be about 1.5% to 2% for the full year.

Our effective tax rate is expected to be approximately 24%. Diluted shares outstanding is expected to be approximately $80.6 million, exclusive of any share repurchases. Taken together, we expect our Q2 diluted earnings per share to be in the range of $1.47 to $1.54. Q2 diluted earnings per share guidance includes $0.28 gain from the Straumann settlement and $0.10 gain from the SDC equity settlement, net of the income tax effects and approximately $0.09 expense related to the corporate structure reorganization costs and higher legal litigation costs. In addition, as we continue our operational expansion efforts, we expect CapEx for Q2 to be approximately $85 million to $90 million and we expect depreciation and amortization to be $20 million to $22 million.

With that, I'll turn it back over to Joe for final comments. Joe?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Thanks, John.

Overall, Q1 was another solid quarter and I'm pleased with the continued progress we're making in executing on our strategic growth drivers and I'm excited about the opportunity we have. Just want to highlight those four growth drivers here of -- for the quarter. From an international expansion standpoint Invisalign volume was up 38.5%. On our ortho teen utilization, our worldwide Invisalign teen patient growth was over 41%. GP Treat and Refer leading with iTero scanners, our worldwide GP volumes for Invisalign were up 27.3% and 15.5% for GPs in the Americas, and iTero scanner revenues were up 55%. Consumer and patient conversion with Invisalign treatment, we engaged with 4 million consumers globally in Q1 and are building the most recognized orthodontic brand in the industry.

In Q2, we have a number of exciting programs and initiatives heading into the summer season, kicking off with the AAO in early May and the Invisalign Symposium on the Digital Practice in London, which is our first ever truly global event and designed to foster a global community of Invisalign doctors. The symposium will bring together 300 of the most experienced and most high-volume Invisalign orthodontists from across the world to discuss the digital orthodontics and the challenges and opportunities digital transformation provides for their practices.

Finally, before I open the call up to questions, I want to take a minute to welcome Raj Pudipeddi who joined Align last month as Senior Vice President and Chief Marketing Officer, CMO, reporting to me. Raj has -- joins us with more than 24 years of business leadership experience and brand building experience for companies, including Procter & Gamble and Bharti Airtel, an Indian telecom leader. He has an outstanding track record of delivering results across the North America, Latin America and Asia-Pacific regions. Raj also brings great consumer acumen and marketing expertise in terms of building brands, launching new products and accelerating digital businesses globally. His knowledge and understanding of how to leverage big data and consumer personalization will be instrumental as we continue to lead the transformation of digital orthodontics and dentistry and help millions of consumers get a smile they love with Invisalign doctors. Raj is a strong addition to our leadership team. I'm thrilled to have him on-board.

With that, I want to thank you again for joining our call. I look forward to updating you on our progress as the year unfolds. We'll see many of you at the American Association of Orthodontic Meeting in Los Angeles next month as well as the upcoming financial conferences, including Bank of America Merrill Lynch, Northcoast, Stifel, Goldman Sachs and William Blair.

Now, I'll turn the call over to the operator for questions. Operator?

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question is from Erin Wright with Credit Suisse. Please proceed.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Hey Erin, are you there?

Operator

Please check and see if your line is muted.

Erin Wright -- Credit Suisse -- Analyst

Apologies. Can you hear me now?

Operator

Yes.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Hi, Erin.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hi, Erin.

Erin Wright -- Credit Suisse -- Analyst

Hi, hi. So on the gross margin, how should we be thinking about the run rate for the remainder of the year? I understand, there were some one-time factors in freight refunds rebates. Are there other moving parts we should be thinking about in the second quarter from a gross margin perspective? And more broadly, can you characterize how we should be thinking about that longer-term leverage to that metric over the next few years? Thanks.

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Hi, Erin. This is John. Yeah. What we saw in Q1, we saw good improvement in our gross margin. We've talked about $4 million or so of some of the unusuals. You strip that out, what we expect as we go forward in our Q2 guidance is that progression. We're going to continue to improve our gross margin. Some of that comes to some of the operational efficiencies in China and other places that we'll see as the year progresses.

Erin Wright -- Credit Suisse -- Analyst

Okay, great. And then, can you speak to some of the incremental costs and opportunities associated with this reorganization of your corporate entity structure? Are there incremental costs there from what you said in the fourth quarter? And what are those longer-term financial efficiencies that this can generate from a tax perspective or from an operational perspective as well?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah, Erin. This is John again. So no additional than what we had talked about. We laid out, from a reorganization standpoint, about 1% in total for the year. And that'll really progress from Q2 on. But really what we see is a more agile organization and one that can accommodate changes to the -- any global changes that might come up around taxes or anything else. So that's really the benefits that we have. EMEA is growing so much it centralizes that location, but it also gives us an operating structure that we can use in the future.

Erin Wright -- Credit Suisse -- Analyst

Okay, great. Thank you.

Operator

Our next question is from Jeff Johnson with Baird. Please proceed with your question.

Jeff Johnson -- Baird -- Analyst

Thank you for the question guys. Can you hear me OK? Hey, Joe. How are you? So let me start with you and then -- hey all. So let me start with you Joe and then I have a question for John as well on the margin front. But Joe, with the store shut down here in April, I guess, what are you seeing impact-wise on volumes maybe in the near-term, whether that's 2Q or over the next couple of quarters? And then how might that impact how you allocate some expenses this year? Is there some way you can reallocate those expenses into other kind of growth initiatives, whether that's with DSOs or other private docs or what have you?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey, Jeff. First of all, I mean, I think we -- when we announced this issue with SDC and having to close the stores, we just said it wasn't going to be material from a revenue standpoint and what we -- for the year. And so we're sticking with that overall. I mean, obviously, there will be some case loss from a store standpoint. The other part of your question, as we shift some of that spend back into advertising, back into other activities that we have going on to help to drive that demand. So we are -- we will reallocate that expense, it's reallocated into marketing and sales, we'll be able to do that and we expect to have good results from that too. We have I think good experience in understanding what that investment return rate is.

Jeff Johnson -- Baird -- Analyst

All right. That's helpful. Thanks. And then John on the margin front, I mean, if I exclude some of the one-time costs in the 1Q, it seems like your operating margin probably would have beaten by it maybe 500 basis points or so relative to your guidance. And then if I take into account the gains in 2Q, it seems like margins are going to be down 400, 500 basis points year-over-year in the 2Q, which is kind of worse than we were thinking. So I guess, I'm just trying to get my arms around kind of volatility around margin. Is there more volatility ex the noise in the base business going on right now? Is there just conservatism in your base business guidance for 2Q? How should we think about kind of recent and future margin trends?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah. So from -- you are talking specific gross margin and when you look at that, we're seeing good improvement from some of the manufacturing efficiencies and things that happened in the first quarter. We expect that to continue. We saw ASPs up $10 in Q1, which helps contribute to that, but this is about being able to continue to leverage the manufacturing and the other operations that we have and that should continue to get better as the year progresses. And so that's similar to what we talked about at the end of Q4 as well. This is something that we -- we'll get those efficiencies as the year progresses.

Jeff Johnson -- Baird -- Analyst

Well, let me just clarify, I guess, that question and focus just on the first quarter. Ex the charges in the 1Q, it seems like your margin probably would be even at the operating line by almost 500 basis points relative to your guidance because I think your guidance did not anticipate these one-time store closure costs in that. So what drove that upside and how did you get the 500 basis points of upside in the quarter?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah. So really when we saw, as we look through, Jeff, we saw, I said, some improvement on the gross margin standpoint, some of the OpEx leverage that we were able to achieve in the first quarter as well and that started our year in a very strong position from an operating margin standpoint. And then as we go through the year, as we've talked about, there will be some litigation and some reorganization costs that we've been calling out as we go through. But it was really a strong start to the year from a gross margin standpoint. And then managing the op expenditures and we saw that leverage really show up in Q1.

Jeff Johnson -- Baird -- Analyst

Thank you.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Thanks, Jeff.

Operator

Our next question is from Jon Block with Stifel. Please proceed with your question.

Jon Block -- Stifel -- Analyst

Great. Thanks guys, good afternoon. I'm also going to ask a margin related question and then I'll pin it. But just, John, big normalized EPS beat for 1Q, obviously there's been sort of no shortage of news flow over the past couple of months. I just wanted to check it, I'm going to drill down or make sure that I'm clear on the op margins. In other words, if I were to check in on the 2H '19 op margin, should that get back to the 25% to 30% OM range that you alluded to last quarter? That's sort of part A of number one. And then part B would be, your 2Q revenue guidance, the revs are slightly ahead with the cases a smidge below. So do we assume a sort of flattish 1Q to 2Q ASP? And then I'll ask my second one.

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Okay. Yeah. From an op margin standpoint and what we tried to do is lay that out a little bit in the slides for you, Jon. But when we look at -- as we reported on a GAAP basis, just talk to the high guide of 25.4% from a guidance standpoint and we're staying within there because of that GAAP. Within there is a Straumann settlement of approximately 5 points. And then we have some of the corporate structure and reorganization costs as well as the legal costs and you back out or add back a couple of points to that. So that gets you to 22.5% or so from an op margin standpoint in Q2 on an operational basis.

Jon Block -- Stifel -- Analyst

John, I'm sorry, if I could jump in there really quick. I didn't mean 2Q, I meant 2H. Last quarter, you talked about 2H '19 op margins falling back in your long-term guidance range of 25% to 30%. Here we are today. Do you still have high conviction in 2H '19 the op margins of 25% to 30%?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah. Certainly, Jon. Yeah. In the second half, the conviction that we have and what we expect to have in the second half is consistent, it's the 25% range in the second half of the year.

Jon Block -- Stifel -- Analyst

Okay. And on the implied ASPs for 2Q flattish with 1Q, is that the correct ballpark to be in?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

That -- there is a little bit of FX from 1Q to Q2, but essentially flat.

Jon Block -- Stifel -- Analyst

Okay. Okay, great. And then for 1Q '19, Simon's EMEA growth rate is now within 300 bps relative to Julie's, which I view is a good thing from a diversification standpoint and congrats to Simon who I know has been chasing Julie for several years. But I'm just curious, how we should think about that going forward, especially with the scanner that's technically newer in China? And Joe, you talked about the teen opportunity in China. Do we think that, call it, closer to parity, Joe, is here to stay or is there anything unique in one market or the other teen iTero scanner that can cause APAC to sort of separate again? Thanks.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Jon, I think, first of all, you got to take cyclicality into that when you look at China and APAC versus EMEA. EMEA goes around the dark side of the moon right after the second quarter. China has a really strong third quarter like they always do. You get the lunar New Year in the fourth quarter, you got a stronger EMEA in the first quarter. So I think you can't do this kind of an apples-to-oranges comparison when you look at what Simon did this quarter. So what I would take away from this one is you got a continuing growth rate in EMEA and continuing penetration rates there that are terrific. We still have a great business in APAC from a growth standpoint overall. So, I love the competition between those two, I'm cheering for them both Jon.

Jon Block -- Stifel -- Analyst

Okay, fair enough. Thanks guys.

Operator

Our next question is from Robert Jones with Goldman Sachs. Please proceed.

Nathan Rich -- Goldman Sachs -- Analyst

Hi. This is Nathan Rich on for Bob this evening. Maybe just going back to ASPs, it looks like you saw a pretty nice step-up sequentially in the quarter, mostly on the international side. Can you maybe just talk about what came in better than expectations in the quarter? And then you kind of talked about the 2Q guidance for ASPs to be flat, but it does seem like you're seeing some nice progression there relative to your kind of full year guidance for ASPs to be flat to 4Q of last year. So how should we think about the progression of ASPs going forward over the balance of the year?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Hey Nate, this is John. Similar to what we've said in the past where we see better comprehensive cases like we saw I think compared to what we had expected, driven by mandibular advancement and other products that we have, that was in the teen growth that we saw, the 41%. That all contributes to higher ASP that showed up in Q1. And when we think about -- as we're looking forward, take FX out of that, we think that the -- it's pretty balanced. We'll have that -- overall, we'll have a good international growth, we have that growth in the comprehensive cases with teens, but then we have the low stage mix shift that we see, where the low stage is growing faster than our comprehensive cases. But in balance, we think it's -- it balances out.

Nathan Rich -- Goldman Sachs -- Analyst

Okay. That makes sense. And then, Joe, maybe one for you. The ortho utilization in the quarter was very impressive. Can you maybe just talk to kind of what's resonating in the market and where you think this could go? It seems like you should still have a lot of traction with some of the recent launches, like MA and the marketing initiatives that you guys talked about. So just curious to get your thoughts on where you think this could ultimately end up?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Nathan, overall, when you look at what's going on, I'd say there's two prime drivers in that ortho segment. One is what you mentioned is you have our MAF product now that was qualified in November of last year, you have our Invisalign teen product, which we're doing a lot of cases, seven-year old patients, eight-year old patients that we really never touched before. So that's obviously a big driver from an increased utilization standpoint. Secondly, I think it's just increasing awareness of the preference of consumers for clear aligners and I think orthodontists know that and we see more and more orthodontists really adopting that. Thirdly, when you think about the segment overall is -- from a long-term standpoint, like we talk about, that's our second strategic imperative, is we see a lot of runway in teens. And that's why we're having our Teen Summit coming up this year, we'll have a lot of focus on our top 300 in London this year also on teens and we see more and more uptake on that as we work with orthos on the teens and we go directly to consumers and parents about it.

Nathan Rich -- Goldman Sachs -- Analyst

Great, thank you.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Nate, thanks. Next question, please.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Yeah. Thanks.

Operator

Our next question is from Glen Santangelo with Guggenheim Securities. Please proceed.

Glen Santangelo -- Guggenheim Securities -- Analyst

Thanks and good evening. Joe, I just want to follow up on the previous sort of ASP question because I almost look out a little bit differently, right. I mean, you clearly had a decent uptick on an international basis and your worldwide ASP was up slightly. Does that kind of imply that North America might have been flat or even maybe down? And I know there's a lot of moving parts and I think, John, you talked about some of those like mix and promotional discounts and FX. Could you just peel back the onion a little bit on North American ASPs and give us a sense because I think it's important, given the market's focus on the competitive landscape? So just give us a sense for what's going on there.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Yeah. Glen, when we look at the ASPs, totally like you said, up about $10 on a worldwide basis. In North America, slightly down from Q4, but from a standpoint of -- really coming from a mix standpoint, it's just a matter of how and what type of cases the doctors are taking on, whether it's more comprehensive or some of the low-stage. And remember from a low-stage standpoint, those are some of our highest margin rate products. So when we look at that in total, we'll go to where the volume is and what makes sense for our business.

Glen Santangelo -- Guggenheim Securities -- Analyst

Maybe I'll just ask one follow-up question on your utilization. Within North American orthodontists, you saw a healthy sequential uptick in the number of cases, maybe -- any idea what drove that and maybe could you give us a better sense for where maybe market penetration stands now for clear tray aligner and maybe what your market share numbers might look like to give us a sense for how much runway there maybe to go?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey, Glen. It's Joe. On the utilization for orthos, think about two big vectors there, it's just our product line in teens, MAF and our Invisalign First product line. It really brings us into, what is about 25% to 30% of the teen market that we couldn't access before before we had those products. Overall, I just think we have good momentum in that sense and we're going to continue to see continued increase in utilization as more and more doctors gain confidence in those products.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks, Glen. Next question, please?

Operator

Our next question is from Ravi Misra with Berenberg Capital Markets. Please proceed.

Ravi Misra -- Berenberg Capital Markets -- Analyst

Hi, thank you for taking the questions. So I guess, just following up on that, Joe. Can we just talk a little bit about how the Invisalign First and mandibular advancement are contributing to that growth rate in that kind of teen, the strong teen growth number that you put there? And a little bit related, can you maybe touch upon what you're seeing out there with the competition and how your strategy is evolving now that the store closure has become under way? Thanks.

Joseph M. Hogan -- Director, President and Chief Executive Officer

First of all, Ravi, I'll just say, again, the utilization rates that you referenced and all and for teens, again, it's new product. We feel we're still having underutilization in teens. I mean, we're still in the United States, 9%, 10% from a teen standpoint. I'd say from a clinical standpoint, we can handle 80% to 90% of those cases, depending on how you want to rate them. Many of our Invisalign docs say they can do anything in teen than they can in Invisalign. So we have a long way to go from a growth standpoint. From a competitive standpoint, we really have no competitors in those kind of products. Okay? Those are highly proprietary products that -- it just take a lot of history and knowledge to be able to make them and have them function well in the marketplace. As far as how we're competing out there with Invisalign stores or whatever, look, Invisalign stores or what they always have been was how do you drive more demand for our product line, it was way instead of -- we've been advertising consumers for years. This was a way of just taking those advertisement kind of capabilities and bring them in the store and exciting patients, moving those patients to doctors. It was nothing different in our business model. I mean, it's a shame in the sense of what the arbitrator ruled, but look, we respect that decision and we'll move on in the sense of continuing to generate demand the way we know how to generate demand. From a competitive standpoint, SDC is a different kind of competitor. Obviously, they have high growth rates, we have high growth rates too, we show we can mutually co-exist in the marketplace and we continue to both grow.

Ravi Misra -- Berenberg Capital Markets -- Analyst

Great, thanks.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks, Ravi. Next question, please?

Operator

Our next question is from John Kreger with William Blair. Please proceed.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey, John.

John Kreger -- William Blair -- Analyst

How are you?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Good.

John Kreger -- William Blair -- Analyst

So I'd like to go back to China. Can you just talk about the next steps there? What do you have to do to continue growing as quickly as you have? We noticed that the number of doctors trained in APAC and China declined a little bit compared to where it was at the end of '18. Is that in any way related to the slowing economic outlook in your opinion or is that seasonality? And can you just talk about how you expect the competitive dynamics in China to change, now that Straumann is making an entrance via a partnership there?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey. Look, it's -- it -- you're back to Joe here. Look, China is great growth market for us, we have -- we're manufacturing in China now. We've put treatment planning in Chengdu, we handle all of our Chinese doctors right now out of China itself. We have two wonderful training centers, one in Shanghai, one in Chengdu. We feel very capable in China, we lead in China. Straumann's move with a third or fourth tier player from a clear aligner standpoint, I don't see that as a dramatic effect on this market now or in the immediate future at all.

John Kreger -- William Blair -- Analyst

Okay, great. And then just one quick clarifying question on operating margin. So if you strip out the one-time gains and losses that you've discussed, does your full year outlook that you discussed a quarter ago for operating margin that's below the long-term outlook, does that still hold?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yes. Yes, it does.

John Kreger -- William Blair -- Analyst

Okay, thank you.

Joseph M. Hogan -- Director, President and Chief Executive Officer

You're welcome.

Operator

Our next question is from Brandon Couillard with Jefferies. Please proceed.

Brandon Couillard -- Jefferies -- Analyst

Thanks, good afternoon. Joe, two part question on the scanner business. First, would like to get your perspective on how you sort of see the competitive landscape developing, number of new launches, all the ideas? Do you anticipate any stepped up level in just noise or evaluations as customers kind of digest these new intros? And then secondly, could you give us a sense of the relative growth rates in the scanner business between O-US and North America? And then I guess, thirdly, any help you can give us in terms of the expected timing of the US approval for the new iTero 5D?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Starting with your broader question on the scanner business is -- look, we feel really good about our scanner. I mean, 5D leads, I mean, obviously, you see the 3Shape product came out, but you got two separate scans that kind of use the near-infrared. And I mean, we're so focused on workflow of GPs, we just known over the years that, goodness, GP's time is such an important commodity in that sense and you want to do things as fast as you possibly can. So combining the near-infrared together for caries detection and tooth cracking together with just a normal digital scan is a big breakthrough for us in the industry. And we've gotten great feedback. Obviously, they're starting off well. From a standpoint of US approval, it's the FDA. All right. I won't talk too much about it, but there are some issues in the sense of how the FDA wants this one to be designed from a disease control standpoint. But we have a good vector on what needs to be done, it's going to take a little bit longer, just like our MAF product did, but we're confident. And I would say late fourth quarter early first quarter next year, we'll be able to get approval.

Brandon Couillard -- Jefferies -- Analyst

Thanks. And a couple for John, housekeeping items. First, could you quantify the impact of the China facility on gross margins in the first quarter? Secondly, were there any legal or corporate expense or corporate reorg expenses absorbed in the first quarter? And then lastly, the $0.10 SDC equity gain in 2Q, just confirm, is that below the line?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Well, I can answer that one first. Yes, that's below the line. That's the equity gain that we will have. And then the corporate restructuring costs, very small amount in Q1, it really started in Q2 and handles the rest of the rest of the year. And then in terms of the China gross margin or the impact on costs, I mean, we saw higher utilization in those plants, drives efficiencies and we see that come through to our bottom line. So as we described earlier, it starts in Q1 and it progresses through the year.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks, Brandon. Next question, please?

Operator

Our next question is from Elizabeth Anderson with Evercore. Please proceed.

Elizabeth Anderson -- Evercore -- Analyst

Hi, good afternoon. Could you talk a little bit about the feedback that you guys have received on the doctor-owned experience centers, now they're sort of switching over more to that strategy?

Joseph M. Hogan -- Director, President and Chief Executive Officer

Elizabeth, this is Joe. It's -- we have about two of those out there right now. Feedback is good. I mean, we've had Invisalign stores out there for years, basically, and these are ones just dedicated Invisalign stores with brand and all. And feedback has been terrific, uptick has been good. So overall, it's a good place for us to invest.

Elizabeth Anderson -- Evercore -- Analyst

Okay. And if you -- the new plan for sort of that growth going forward there, you don't anticipate sort of any major changes versus what you've been sort of seeing recently with those?

Joseph M. Hogan -- Director, President and Chief Executive Officer

No, I think we'll just -- we will continue with the pace that we've been going and there's a lot of interest out there. We're just working through it right now. But overall, the interest from an orthodontic standpoint has been extremely good and also from the GP practices.

Elizabeth Anderson -- Evercore -- Analyst

Okay, perfect. Thank you.

Operator

Our next question is from Steven Valiquette with Barclays. Please proceed.

Steven Valiquette -- Barclays -- Analyst

Hi. Thanks, good afternoon. So I just have a question here around the Straumann settlement. The $35 million initial payment, I mean, that seems pretty straightforward. But for the extra non-binding part of the agreement, seems like the potential for Straumann to sell 5,000 extra iTero scanners would be much more positive for Align versus just receiving an extra $16 million from them. So I guess the questions are, first, do you agree or disagree with that? But then also, secondarily, just from the Straumann perspective, what would be the incentives for them to sell iTero instead of just paying you the $16 million? So just curious to get more color around this. Thanks.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey, Steve, it's Joe. First of all when you look at Straumann, they don't -- they have their own internal scanner, but it really doesn't -- it doesn't fit the broad application base that you need for both clear aligners and also for the restorative aspect of GP. So they primarily use 3Shape for those kind of scans today. So your comment about which is better, the $60 million or this. It's a good question. I mean, you have to assume with the 5,000 that they would sell will be 5,000 we can't sell. And -- I mean, that's not necessarily true or a discrete variable in this whole equation. So, look, ideally, I think having the scanner sold by Straumann and having a good restorative workflow together would be helpful. But I wouldn't -- it's not a live or die proposition. I feel we have good distribution in the marketplace. We have good coverage in three different regions and we'll be able to function well in either scenario.

Steven Valiquette -- Barclays -- Analyst

Okay. Got it. Thanks.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Yeah.

Operator

Our next question is from Matt O'Brien with Piper Jaffray. Please proceed.

Kevin Farshchi -- Piper Jaffray -- Analyst

Thanks for squeezing me in. This is Kevin on for Matt today. First one just quickly on iTero. Assume the seasonality in Q1, likely the low watermark there and assume the outlook for the sequential increase in Q2 that you provided, but can you put any numbers or a trend around iTero growth for the second half of the year? The comps there are obviously difficult, but I assume you have a bigger specialized sales force just on that and then you're lapping some DSO partnerships.

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah. Kevin, this is John. So good growth in Q1. When -- we expect is to be able to continue to, globally, be able to have more and more iTeros sold. We think it's a great scanner, new 5D and so on really contributes to that growth. But we've seen good growth so far. Really no change in what -- in how we think about it for the total year, but it's going to continue to expand and work through as many doctors as possible.

Kevin Farshchi -- Piper Jaffray -- Analyst

Okay, sounds great. If I could squeeze one more in for Joe. It seems like the initiatives in Brazil are continuing to ramp up with those 3,000 docs trained and you've obviously been highly under index there historically as a percentage of Americas, despite it being a big market. Can you frame up that opportunity a little bit and talk about the type of revenue contribution you can get this year and in the coming years from that region? Is it upside to the plan? How do you think about that region? Thank you.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Well, I mean, I think it's in our plan for 2019 is already baked in there from a Brazil and Latin America standpoint. I can tell by your question, you do recognize the opportunity that we have in Latin America and also Brazil, given the focus on orthodontics in both of those regions. And look, your comment also, we were late to the game there. And that's why you see us making significant investments now in the sense of training doctors, putting people in place and building infrastructure there. So we haven't broken out those numbers yet. When they really become material to the business, we will do that. But right now, we're not making any projections or specifics about it. But rest assured, as you know, this is a big opportunity for us, it's a good product at the right time and we feel we have good leadership there and good momentum.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks very much. Next question, please?

Operator

Our next question is from Michael Ryskin with Bank of America. Please proceed.

Michael Ryskin -- Bank of America -- Analyst

Thanks for squeezing me in guys. Just two real quick ones. One on the mandibular advancement, it's been a few months now since it's been out in the States. And you mentioned that you saw a positive adoption response in 1Q. Could you go a little bit deeper? Did it show up materially in the numbers? Do you think it contributed and sort of how does it feel going into the ramp for the rest of the year?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Hey, Mike. This is John. It certainly helps. It's a slow adoption. I mean, these are doctors that they just started trying some of these cases, they want to see and experience it for themselves to be able to see that it works in the way they want. So it's a slow rollout and adoption, but it gets that some of the key parts of our business that we want to grow, which is teen.

Michael Ryskin -- Bank of America -- Analyst

Got it. I was just trying to get if that contributed to the North American ortho boost in the quarter. And then a quick follow on. The China fabrication facility you mentioned is still being underutilized, continues to ramp. Any thoughts for when you think you could hit full ramp or close to it? Is it later this year? Is it early 2020 just to give us a sense for how that moves through?

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Yeah, Mike. This is John again. So we will see a progression and we saw a good improvement in Q1 and it will continue to improve as you utilize that facility more and more, but that will take the rest of this year.

Michael Ryskin -- Bank of America -- Analyst

Okay.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks, Mike. Next question, please?

Operator

Our next question is from Richard Newitter with SVB Leerink. Please proceed.

Jaime Morgan -- SVB Leerink -- Analyst

Hi, this is Jaime on for Rich. Thanks for squeezing me in. I just wanted to circle back on competition. I know some of your competitors have recently launched more price favorable lines geared toward the GP channel. So I was wondering, if you're seeing -- or running (inaudible) a little bit more in that channel? And then also just kind of a sense of the ortho channel as well as you're now several quarters into seeing some competition. Thanks.

Joseph M. Hogan -- Director, President and Chief Executive Officer

Hey, Jaime, it's Joe. Just a quick question for you, would you tell me who that competitor is with the price favorable lines of GP?

Jaime Morgan -- SVB Leerink -- Analyst

I believe Henry Schein had been -- they had -- launched a new product, geared...

Joseph M. Hogan -- Director, President and Chief Executive Officer

Yeah. We haven't really seen China, felt China in the marketplace at all. And we don't even know what their pricing is, frankly. And so we really haven't had to respond to that piece. I think if you look at the marketplace, you'd say that ClearCorrect traditionally has been in that GP segment. They're obviously owned by Straumann now. Straumann has been taking them throughout that channel. But we really haven't felt a higher degree of competitive pressure since that piece either. So I just find your question interesting. I know there's a lot of speculation out there right now, but we don't necessarily feel that. And remember, ClearCorrect always had a price favorable line from a GP standpoint. And we're basically being able to fight that with technology and coverage in the marketplace.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Thanks for your question. We'll take one last question, operator.

Operator

Our last question is from Kevin Caliendo with UBS Investment Bank. Please proceed.

Kevin Caliendo -- UBS Investment Bank -- Analyst

Hi, thanks for taking one last question. Appreciate it. Just any color around the doctors trained in the quarter? Noticed a sequential decline. There's always some seasonality to this, but just the number of docs trained was pretty meaningfully lower both O-US and in the Americas. Just any color around that.

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Hey Kevin, this is John. From a doctor's standpoint, Q1 is typically lower from a training standpoint. So things build as you go through the year and we saw that from Q4 to Q1, but nothing more. We want to work with doctors that want to come with cases and really get into being able to use more and more Invisalign. So, some of it's just the timing of making that all happen, but nothing more than that.

Kevin Caliendo -- UBS Investment Bank -- Analyst

Great, thank you very much.

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Well, thank you, everyone. This wraps up our first quarter conference call. If you have any follow-up questions, please follow up with Investor Relations. We hope you have a great day. We look forward to seeing you at future meetings.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.

Duration: 68 minutes

Call participants:

Shirley Stacy -- Vice President, Corporate Communications and Investor Relations

Joseph M. Hogan -- Director, President and Chief Executive Officer

John F. Morici -- Chief Financial Officer and Senior Vice President, Global Finance

Erin Wright -- Credit Suisse -- Analyst

Jeff Johnson -- Baird -- Analyst

Jon Block -- Stifel -- Analyst

Nathan Rich -- Goldman Sachs -- Analyst

Glen Santangelo -- Guggenheim Securities -- Analyst

Ravi Misra -- Berenberg Capital Markets -- Analyst

John Kreger -- William Blair -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Elizabeth Anderson -- Evercore -- Analyst

Steven Valiquette -- Barclays -- Analyst

Kevin Farshchi -- Piper Jaffray -- Analyst

Michael Ryskin -- Bank of America -- Analyst

Jaime Morgan -- SVB Leerink -- Analyst

Kevin Caliendo -- UBS Investment Bank -- Analyst

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