Jeffrey Johnson

Jeffrey Johnson inquired about the high single-digit growth in Spark, asking if there were any changes in competitive positioning or market trends, especially given the previous quarter's high-teens growth. He also asked about Spark's profitability improvements in Q4 and the expected trajectory towards fleet average profitability.

Answer

CEO Paul Keel noted that Spark continued to outgrow the market, potentially benefiting from a slight boost in the clear aligner market and incremental growth from new product introductions. CFO Eric Hammes confirmed Spark's continued profitability in Q4 at consistent levels with Q3, driven by underlying operational improvements, including a mid-teens year-over-year reduction in unit costs, and outlined future improvements from automation, growth, portfolio, and design costs.

Jeffrey Johnson asked about the high single-digit growth of Envista's Spark business in Q4 2025, comparing it to the high-teens growth reported last quarter, and sought insights into competitive positioning or market trend changes. He also asked Eric Hammes about further improvements in Spark's profitability beyond Q3 and the expected trajectory towards fleet average profitability.

Answer

Paul Keel, President and Chief Executive Officer, confirmed that Spark continued to outgrow the market, potentially benefiting from a broader clear aligner market boost and four new product introductions in 2025, which contributed incremental growth. He noted no material change in the competitive landscape. Eric Hammes, Chief Financial Officer, stated that Spark remained profitable in Q4 2025 at levels consistent with Q3, driven by underlying profitability improvements, including a mid-teens year-over-year reduction in unit costs. He expects continued profitability improvement in 2026 from automation, manufacturing cost reduction, portfolio optimization, and design cost efficiencies.

Jeffrey Johnson asked for specifics on the year-over-year performance of the China brackets and wires business ahead of Volume-Based Procurement (VBP) and whether inventory levels are now set for growth. He also questioned the potential impact of a second round of implant VBP and the role of new local manufacturing infrastructure.

Answer

CFO Eric Hammes detailed that the China ortho business was down significantly in H1 but is expected to see robust growth in H2, dependent on VBP timing. CEO Paul Keel stated that local manufacturing is not a direct criterion for VBP but helps indirectly by supporting market share and customer satisfaction. He added that Envista has received no official communication on the timing for a second implant VBP.

Jeffrey Johnson questioned the sustainability of Envista's pricing power in a tariff environment and asked for clarification on the Spark revenue deferral and restructuring savings for 2025.

Answer

President and CEO Paul Keel stated that pricing power is achievable for innovative products that offer clinical or efficiency benefits, though it is more challenging for commodity items. CFO Eric Hammes confirmed that about two-thirds of the prior year's $45 million Spark revenue deferral will return as a tailwind in H2 2025, and the company remains on track to realize $20 million in restructuring savings for the year.

Jeffrey Johnson sought clarification on Spark's performance metrics, contrasting revenue with case growth, and asked about rumors of a new internally developed iOS scanner under the DEXIS brand.

Answer

CEO Paul Keel clarified that both Spark revenue (ex-deferral) and the number of ordering doctors grew by double digits in Q4 and for the full year 2024. He also confirmed that a new version of their iOS scanner with additional functionality is forthcoming, with more details to be shared at upcoming dental shows.

Jeffrey Johnson of Baird sought clarification on the Spark revenue deferral, questioning the $27 million Q3 impact, the calculation of the deferral rate, the significant change from Q2, and the margin profile of this revenue upon future recognition.

Answer

CFO Eric Hammes explained the $27 million impact was driven two-thirds by the timing of deferred revenue recognition and one-third by initial recognition, with no change in the deferral rate from Q2. He confirmed the impact will be lower in Q4 and that a significant portion of the revenue, when recognized, will drop down to operating profit.

Jeffrey Johnson from Robert W. Baird & Co. sought to reconcile the immediate headwind from Clarity's decline with the delayed revenue benefit from MyDay's fitting activity, questioning why this doesn't lead to a stronger CVI growth inflection in Q4. He also asked for more details on the competitive pricing actions in the Asia-Pacific e-commerce channel.

Answer

President and CEO Al White acknowledged the validity of the question, explaining that the Q4 guidance assumes a similar dynamic to Q3 to avoid being overly optimistic about the conversion speed of MyDay fitting activity into revenue. He stated the company wanted to provide reasonable guidance after getting ahead of itself in prior quarters. Regarding e-commerce, he confirmed the aggressive pricing came from larger competitors in the Asia-Pacific region, leading to share loss in that low-margin channel.

Jeffrey Johnson asked for clarification on the contact lens market, questioning the discrepancy between reported revenue growth and underlying on-eye data, and the impact of channel inventory shifts.

Answer

President & CEO Albert White acknowledged that channel inventory fluctuations are creating volatility in reported numbers for Cooper and its competitors. However, he emphasized that underlying fit data remains strong and is accelerating for key products like MyDay and MiSight as the company becomes more aggressive with fitting sets and trial lenses.

Jeffrey Johnson of Robert W. Baird & Co. asked about the growth potential from easing MyDay manufacturing constraints and the relative growth trajectory of Cooper's private label business versus its branded portfolio.

Answer

CEO Al White confirmed that increased MyDay availability creates significant growth opportunities by allowing re-entry into certain markets and fulfilling pent-up demand. He also stated that while private label growth has recently been in line with branded products, he anticipates it will grow slightly faster for the remainder of the year due to shifts in customer purchasing habits.

Jeffrey Johnson from Baird sought to clarify if the general market softness was distinct from the MiSight inventory reduction in Q4. He also asked about Cooper's confidence in taking market share in a competitive U.S. market, given strong results from competitors.

Answer

CEO Al White confirmed the market softness was a separate issue from the MiSight inventory correction, which he described as a leveling out after a strong Q3. On competitiveness, White noted Cooper grew 9% in calendar Q3 versus the market's 7%. He expressed confidence in continuing to outpace the market, driven by MyDay and MiSight, and suggested the initial FY25 guidance might be conservative.

Jeffrey Johnson inquired about the health of the contact lens end market, noting consumer softness and rebate chatter, and asked about the drivers behind the fertility segment's return to double-digit growth, including any lingering impact from a prior culture media recall.

Answer

CEO Al White confirmed the contact lens market remains healthy globally, with growth in premium products outweighing minor rebate noise. Regarding fertility, he stated that litigation from the recall is being managed and is covered by insurance, and credited the fertility team's transparent communication with customers for rebuilding trust and driving the strong recovery to double-digit growth.

Jeffrey Johnson from Robert W. Baird & Co. asked for details on Alcon's premium IOL market share stabilization in the U.S. versus international markets and inquired about the conceptual financial setup for 2026 given recent M&A and tariff pressures.

Answer

CEO David Endicott confirmed a sequential U.S. share improvement for premium IOLs, driven by PanOptix Pro and a competitor outage, but noted pressure in international markets. CFO Tim Stonesifer addressed the 2026 outlook, stating the largest acquisition (STAAR) will have limited impact next year and that Alcon's infrastructure can create synergies, with more guidance to come.

Jeffrey Johnson asked about the phasing of the VBP tailwinds in China for the implantables business and whether the 0% growth in Q1 represented a trough. He also inquired about the potential pricing strategy for PanOptix versus the new PanOptix Pro.

Answer

Chief Executive Officer David Endicott attributed the flat implantable growth primarily to the suppressed U.S. market. He expects the VBP tailwind to continue until mid-2026. Chief Financial Officer Tim Stonesifer added that the year-over-year VBP comparison normalizes in Q2. Regarding pricing, David Endicott declined to detail the strategy but acknowledged that having both products provides significant market flexibility.

Jeffrey Johnson pressed for more detail on U.S. AT-IOL market share, asking where it might trend before the PanOptix Pro launch, and questioned if the 2% growth in implantables represents a trough.

Answer

CEO David Endicott stated that global IOL share is relatively stable, with strong performance in China offsetting U.S. competitive pressures. He highlighted that the value difference between U.S. and China pricing affects revenue growth despite global unit gains. CFO Tim Stonesifer declined to guide by segment per quarter but expressed confidence that the PanOptix Pro launch would drive future revenue growth.

Jeffrey Johnson inquired about the performance of Alcon's contact lens business, specifically the drivers behind its 9% growth, pricing dynamics, and recent rebate activity. He also asked for an update on the U.S. market share for advanced technology IOLs and the outlook amid upcoming competition.

Answer

CEO David Endicott explained that the contact lens business outpaced the market, with growth driven roughly half by price and half by favorable product mix from new technology trade-ups. He noted that Alcon's rebate strategy has been consistent, though some competitors have increased promotional activity. Regarding implantables, Endicott stated that while the toric market remains competitive, Alcon's PC-IOL share is holding above 80%. He highlighted that the key positive driver was the significant increase in AT-IOL penetration globally and in the U.S., which is more impactful than minor share shifts.

Jeffrey Johnson of Baird questioned the strategic focus on the cloud-based DS Core platform versus improving physical hardware. He also asked for assurance that the weakness in value implants was due to manufacturing issues rather than market share losses.

Answer

CEO Dan Scavilla affirmed the company must pursue both software and hardware excellence, describing the future as a 'proceduralization model' that requires both. He stated that cash freed from efficiencies will be reinvested across all innovation. CFO Matt Garth acknowledged the manufacturing headwinds for value implants but stated the business will be competitive in the second half. He also highlighted U.S. sales force retraining as a key effort to improve overall competitiveness.

Jeffrey Johnson sought clarification on the tariff impact math, the company's exposure to China, and trends in cash flow and CapEx. He also asked about the rationale for the recent short-term debt financing.

Answer

CEO Simon Campion confirmed the $0.10 EPS impact equates to about $25 million for the current year and stated that China exposure is nominal. He expects CapEx to decline as the ERP project winds down, which should improve free cash flow. The financing was described as a prudent measure to provide flexibility with short-term debt in the current environment.

Jeffrey Johnson sought to clarify the cost transformation savings, asking how much of the targeted $80-$100 million has already been realized and how much of the $0.13 EPS benefit in the 2025 bridge is from these incremental savings. He also questioned the performance of SureSmile in the U.S., which appeared to be down double digits.

Answer

CEO Simon Campion explained that savings are being partially reinvested into initiatives like the new virtual sales team and did not provide a specific breakdown. Regarding SureSmile, he clarified that legacy products within the category are impacting overall growth, while the core aligner business itself saw high single-digit to double-digit growth globally in 2024 and is growing mid-single digits in the U.S. when excluding certain unique losses.

Jeffrey Johnson sought clarification on the Byte business, asking if investors should effectively assume it is being shut down. He also requested details on the run-rate savings from restructuring and questioned the feasibility of the current 2025 street consensus for EPS.

Answer

CEO Simon Campion clarified he was not stating the Byte business is being shut down, emphasizing the complexity of the ongoing regulatory and commercial review. CFO Glenn Coleman detailed that the first $200 million restructuring program is complete, with the second $80-$100 million program on track to deliver run-rate savings in 2025. He noted the Q4 forecast is significantly impacted by the removal of Byte revenue while costs are still being worked through.

Jeffrey Johnson of Robert W. Baird & Co. asked about CEO Ashley McEvoy's personal philosophy on setting financial guidance, particularly following the significant guidance raise in Q2.

Answer

President and CEO Ashley McEvoy stated that her philosophy on guidance is consistent with Insulet's historical approach. EVP & CFO Ana Maria Chadwick added that the company sets guidance with the full intent to achieve it, and the current raise reflects the strong business momentum, noting the increase was three times the size of the Q2 revenue beat.

Jeffrey Johnson inquired about CEO Ashley McEvoy's personal philosophy on setting financial guidance, particularly in light of the significant Q2 guidance raise, and whether her approach is typically realistic, conservative, or aggressive.

Answer

Ashley McEvoy, Director, President & CEO, stated that her philosophy on guidance is consistent with Insulet's historical approach. EVP & CFO Ana Maria Chadwick added that the company sets guidance with the full intention of achieving it and that the substantial raise reflects the strong business momentum they are currently experiencing.

Jeffrey Johnson posed a modeling question regarding the U.S. revenue guidance, pointing out that strong Q1 results and Q2 guidance imply a significant growth deceleration in the second half of the year. He asked if there were any factors beyond conservatism driving this implied slowdown.

Answer

CFO and Treasurer Ana Maria Chadwick responded that while business trends are very strong, it is still early in the year. She noted that in the context of a new CEO transition, the company believes the raised guidance is appropriate and reiterated their full intention to deliver on it.

Jeffrey Johnson of Baird asked for qualitative insights on the adoption of Omnipod 5 for Type 2 diabetes among different physician groups, specifically comparing the enthusiasm of key opinion leaders (KOLs) to that of general endocrinologists and primary care physicians (PCPs).

Answer

President and CEO Jim Hollingshead stated that feedback is broadly positive, with patients loving the system's ease of use. He noted that while some endocrinologists were already prescribing off-label, the official FDA indication spurred a clear lift in adoption. Hollingshead emphasized that the company is actively educating the market, as pump therapy for Type 2 is a new concept for many, but the early reception is "really, really strong," supported by updated ADA guidelines.

Jeffrey Johnson inquired about the diabetes industry's overall capacity—across manufacturers, payers, and HCPs—to handle a significant increase in Type 2 patient penetration while maintaining the current growth pace in Type 1.

Answer

President and CEO Jim Hollingshead stated that Insulet views the Type 2 opportunity as additive and intends to lead growth in both the Type 1 and Type 2 markets. He expressed confidence that the company can drive penetration in both segments simultaneously, suggesting Type 2 penetration could grow two to three times over the next several years.

Jeffrey Johnson from Robert W. Baird & Co. questioned the international new pump starts number for the quarter, noting his model suggested a decline, and asked for clarification on the underlying fundamental trend.

Answer

EVP, CFO & Treasurer Leigh Vosseller clarified that external numbers were affected by a $5 million timing shift of sales from Q2 into Q1 and the beginning of some distributor destocking in a key market. She confirmed that, despite these shipment dynamics, the actual number of pump placements on new patients internationally grew year-over-year, indicating a healthy underlying demand trend.

Jeffrey Johnson of Baird asked how competitive market share dynamics in the Type 2 space might shift now that both Tandem and its primary competitor have on-label indications, compared to the previous off-label environment.

Answer

John Sheridan, President and CEO, responded that the overall opportunity is growing as new technology makes pump therapy more appealing. He expressed confidence that Tandem's competitive pipeline and market access initiatives will allow the company to begin taking more share in both the Type 1 and Type 2 markets.

Jeffrey Johnson asked about the necessity of the pharmacy channel for accessing the Type 2 diabetes market, particularly within Medicare.

Answer

President and CEO John Sheridan agreed that pharmacy access is important for the Type 2 market. He also highlighted that a coalition of companies and physicians is actively working to eliminate unnecessary requirements like the C-peptide test for pump therapy, with a recommendation currently under review by regulators. He expressed hope for a favorable ruling.

Jeffrey Johnson requested a breakdown of the Q2 gross margin pressure, seeking to understand the relative impacts from glove pricing, promotional activities, and other core pressures. He also asked whether the new KKR Capstone initiatives are expected to deliver large, upfront cost savings or facilitate a more gradual return to the company's long-term earnings growth target.

Answer

Senior VP & CFO Ronald South estimated that the glove product category accounted for about one-third of the year-over-year gross margin pressure, with the remainder from other targeted promotions, and he expects stabilization in the second half. Executive Chairman & CEO Stanley Bergman clarified that the KKR initiatives are not about a single large saving but are part of a broader strategy to drive efficiencies and complement the 'Bold+One' plan's growth in high-margin businesses, collectively aiming to restore consistent high-single to low-double-digit earnings growth.

Jeffrey Johnson asked for the Q1 run-rate of the company's cost-saving initiatives to better model the progression towards the $100 million goal. He also inquired about the recent additions of KKR representatives to the board and their potential strategic influence.

Answer

CFO Ron South clarified that the $100 million in savings is an annualized run-rate target, not the full P&L impact for 2025, and noted the company entered the year with a run-rate of approximately $60 million. CEO Stanley Bergman confirmed the board additions and stated that KKR is supportive of the existing BOLD+1 strategy and is collaborating on initiatives to create additional shareholder value.

Jeffrey Johnson from Baird questioned the significant Q4 revenue shortfall relative to guidance provided mid-quarter and asked about market share dynamics, noting that the two-year stacked growth for U.S. consumables remained negative.

Answer

CFO Ron South attributed the Q4 revenue miss to underestimated impacts from the timing of Christmas and a late start to the flu season affecting medical sales. He stated that market share stabilized in Q4 (flat vs. Q3) after sequential gains earlier in 2024 and that the company is confident in its ability to continue regaining share.

Jeffrey Johnson asked if management's initial 2025 commentary implied that current street estimates for revenue and EPS growth are too high. He also requested clarification on the significant year-over-year EPS decline in Q3 after adjusting for remeasurement gains.

Answer

Ron South, SVP and CFO, stated that official 2025 guidance will be provided in February and that the company needs to see how the rest of the year plays out. Regarding the Q3 EPS variance, he attributed the performance gap primarily to the ongoing, gradual recovery of market share in the distribution businesses following the prior year's cyber incident.

Jeffrey Johnson of Robert W. Baird & Co. asked if practice profitability pressure on doctors was a greater factor in the slowdown than patient reluctance. He also requested details on the manufacturing restructuring and its impact on the shift to direct fabrication printing.

Answer

President & CEO Joe Hogan maintained that a reluctant consumer is the primary issue, though he acknowledged doctor behavior is a contributing factor. Regarding the restructuring, he explained it involves regionalizing production to be closer to customers, upgrading to more productive vacuum-forming technology, and retiring older assets. This new footprint is designed to support a future move into direct printing.

Jeffrey Johnson asked for a detailed breakdown of the Q1 year-over-year ASP decline, questioning the specific impacts from FX and the U.K. VAT discount. He also inquired about future ASP drivers, including FX turning positive, potential U.K. price changes, and the new MAOB product.

Answer

CFO John Morici clarified that the U.K. VAT impact was already in the prior-year baseline. He confirmed FX was a headwind in Q1 but should be a slight tailwind going forward at current rates. Morici noted that while not in the forecast, the company has flexibility to adjust U.K. pricing if the favorable VAT ruling holds. He also confirmed the new, higher-priced Mandibular Advancement with Occlusal Blocks (MAOB) product would be a positive contributor to ASPs.

Jeffrey Johnson requested quantification of the Q1 foreign exchange headwind and asked about the combined impact of FX and direct fabrication investments on the 2025 operating margin.

Answer

CFO John Morici confirmed the Q1 FX headwind is larger than the full-year average, in the ballpark of 3-3.5%. He stated the full-year operating margin guidance of 22.5% already includes over a 1-point negative impact from FX, meaning the guided 70 basis points of expansion is achieved despite this pressure and ongoing investments.

Jeffrey Johnson asked if recent actions like reduced R&D and CapEx, increased buybacks, and restructuring point to Align becoming a more mature company. He also questioned if this changes management's style and whether the long-term 20-30% growth target should be re-evaluated.

Answer

CEO Joe Hogan asserted that the company is responding to current economic times but remains focused on a vast, underpenetrated global market. He emphasized that significant investments in key technologies like 3D printing and Lumina will drive the next growth cycle. Hogan maintained that the 20-30% long-range plan represents the market's potential under the right economic conditions.

Jeffrey Johnson from Robert W. Baird & Co asked if the new Envision platform contributed significantly to the strong non-invasive sales and requested clarification on whether the 'no change in behavior' comment applied to both physician capital purchases and patient procedure demand.

Answer

CEO Moshe Mizrahy confirmed that a 5-10% contribution from Envision to U.S. system sales was a reasonable estimate. CFO Yair Malca clarified that while physician capital spending remains challenged, the decline in consumer demand for procedures appears to have 'plateaued,' which he viewed as a potential positive sign. He also noted the new CO2 device contributed to non-invasive strength.

Jeffrey Johnson asked for the reasons behind the fourth-quarter gross margin dipping below 80%, questioning if it was due to manufacturing inefficiencies, the regional conflict, or discounting. He also asked if the new CO2 laser product would have a different margin profile than the company's core RF products.

Answer

CEO Moshe Mizrahy attributed the margin pressure to lower revenue against fixed operational costs and higher component prices, not manufacturing inefficiencies from the war. He confirmed that the CO2 laser technology is more costly to produce than RF, which means its gross margin will be lower, affecting the company's overall average margin.

Jeffrey Johnson of Baird asked why the pharmacy channel mix growth might slow in H2 2025 and inquired about a potential path for durable pumps into Medicare Part D.

Answer

CFO Stephen Feider explained the Prime Therapeutics contract was unique as PBM and health plan adoption occurred simultaneously, whereas other PBMs require a separate sales cycle for underlying health plans. Regarding Medicare, Feider stated he would not predict a timeline for Part D coverage of durable pumps but noted the CMS proposal could accelerate the discussion. He confirmed the proposal does not mention Part D, so it would not apply to devices covered under it.

Jeffrey Johnson asked two clarifying questions: where the company might implement opportunistic price increases, and whether using the Q4 2025 tariff impact as a quarterly run-rate for 2026 would be a reasonable modeling assumption.

Answer

CFO and EVP Suketu Upadhyay indicated that any price increases would likely be in non-contracted areas like capital equipment and surgical products. He advised against using the Q4 2025 tariff impact as a run-rate for 2026, explaining that due to inventory capitalization, the full financial effect of the tariffs will take longer to manifest in the P&L.

Jeffrey Johnson of Robert W. Baird & Co. asked for clarification on selling days and for anecdotal updates on the progress of the ROSA Shoulder system since its initial cases.

Answer

CFO Suketu Upadhyay clarified that selling days were a minor tailwind in Q3 but not meaningful for the full year. CEO Ivan Tornos reported that hundreds of ROSA Shoulder cases have now been performed, validating the system's value in providing accuracy, efficiency, and improved recovery times.

Jeffrey Johnson of Robert W. Baird & Co. asked for confirmation on the expected gross margin cadence for the rest of the year and questioned whether ongoing manufacturing issues exist or if the focus is purely on rebuilding inventory.

Answer

CFO Jereme Sylvain confirmed the analyst's math on the gross margin cadence was accurate. COO Jacob Leach clarified there are no inherent manufacturing issues to fix and product quality is high; the current challenge is rebuilding internal inventory levels, which necessitates costly expedited shipping.

Jeffrey Johnson asked for more detail on the convergence of U.S. volume growth and U.S. revenue growth, questioning how the gap between the two metrics will narrow throughout 2025.

Answer

Jereme Sylvain, Chief Financial Officer, explained that the gap will converge as the company laps rebate dynamics in Q1 and as channel mix stabilizes in the second half of the year. He noted that the 2025 guidance, which implies ~12% core revenue growth against a 25% increase in the patient base exiting 2024, already shows this convergence beginning.

Jeffrey Johnson asked if the record new U.S. patient starts included Stelo and requested help bridging the large gap between his estimated installed base growth and the reported decline in U.S. revenue.

Answer

CFO Jereme Sylvain clarified that the record new patient starts figure excludes Stelo. He explained the revenue gap is primarily due to channel shift, where a majority of new patients are acquired through the lower-priced pharmacy channel, in addition to the previously mentioned 6-point headwind from rebates. He noted this dynamic is stabilizing.

Jeffrey Johnson asked about the pricing assumptions embedded in the 2025 guidance for both the Recon and P&R segments. He also inquired about the U.S. Hip business, specifically the launch status of the collared stem and growth expectations for 2025.

Answer

CEO Matthew Trerotola confirmed the 2025 plan assumes 1-2 points of downward price pressure in Recon and flat pricing in P&R. He also stated the new collared stem for the Hip business will launch in H1 2025, which is expected to help recapture surgeons and drive growth in that anatomy.

Jeffrey Johnson sought clarification on the absolute dollar amount of Lima-related dis-synergies and asked if the company had quantified Q4 headwinds. He also asked if 2025 growth should conceptually fall within the company's long-term plan.

Answer

CFO Phillip Berry confirmed the analyst's dis-synergy math was in the right range but stated the Q4 headwinds were not quantified, only factored into guidance. CEO Matthew Trerotola affirmed that their long-range plan (LRP) for growth remains the right framework for thinking about 2025, implying an acceleration from 2024.

Jeffrey Johnson asked for confirmation that this was the first quarter of positive orthopedic pricing in over a decade and whether the MedSurg divisions can now sustain double-digit growth without historical cyclicality.

Answer

CFO Glenn Boehnlein confirmed it was the first quarter of positive ortho pricing, clarifying it was driven by international markets, while U.S. pricing is just 'less negative.' CEO Kevin Lobo agreed with the assessment that the MedSurg divisions are now larger and more diversified, enabling them to deliver more sustainable and consistent growth without the peaks and troughs seen in the past.

Asked for clarification on the sustainability of market share gains in consumables, the source of their above-market growth, and the outlook for the basic equipment market in private practices.

Answer

The company is optimistic about retaining the recent share gains. The underlying consumables growth is broad-based. They view the core equipment market outlook as flat to slightly up over time.