Good day. Thank you for standing by, and welcome to the Q2 2021 Dentsply Sirona Earnings Conference Call. At this At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Session.
I would now like to hand the conference over to your speaker today, Andrea Daley. Thank you. Please go ahead.
Thank you, Calandra, and good morning, everyone. Welcome to our Q2 2021 earnings conference call. I'd like to remind you that an earnings call, press release and slide presentation related to the call are available in the Investors section of our Web site at www.demsplicerona.com. Before we begin, please take a moment to read the forward looking statements in our earnings press release. During today's call, we make certain predictive statements that reflect our current views about future performance and financial results.
We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recent Form 10 ks lists some of the most important risk factors that could cause actual results to differ from our predictions. In today's conference call, our remarks will be based on non GAAP financial results. We believe that non GAAP financial measures provide investors with useful supplemental information about financial performance of our business, enable the comparison of financial results between periods where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. Please refer to our press release for the reconciliation between GAAP and non GAAP results.
And with that, I'd like to now turn the call over to Don Casey, our Chief Executive Officer.
Thank you, Andrea, and thank all of you 20 21. Thank you for joining us this morning for the Dentsply Sirona's 2nd quarter earnings call. We are pleased with our performance in the 2nd quarter. As we will detail today, the dental market continues to recover and demonstrate the underlying resilience that makes it attractive long term. For the quarter, the company grew both versus 2020 2019 as well as sequentially quarter to quarter.
The team also made progress against our strategic and operational priorities, giving us confidence as we head into the back half of the year. The pandemic remains a key consideration for us as we evaluate our performance for the quarter and plan for the remainder of the year. At this point, we feel the market is operating slightly below 2019 levels with a continued recovery expected for the remainder of the year. As we navigate through the newest phase of the pandemic, we are mindful that there continues to be some ongoing impact in certain regions and some stresses to the supply chain. One constant throughout all of this though has been our team at Dentsply Sirona.
Their performance over the past 18 months has been exceptional and I would like to thank them for their tremendous commitment to our customers as they demonstrate every day. On today's call, Jorge and I will talk about our results for the quarter and provide our outlook for the remainder of the year and discuss our growth plans for the back 21 and beyond. Moving now to Slide 6. As I mentioned, our financial performance for the quarter was solid and closes at strong first half of the year. The results reflect the continued recovery of the market, progress on our growth initiatives and good operating discipline.
Revenues reached $1,060,000,000 up 104.6 percent on an organic basis. Our operating margin was 20.5% versus minus 8.6% during the prior year. Adjusted non GAAP EPS was $0.71 compared to a loss of $0.18 last year and cash flow was 214,000,000 To provide more details around the quarter, I will now turn the call over to Jorge.
Thanks, Don. Good morning and thanks for joining us. As a reminder, my remarks today will be based on non GAAP financial results unless otherwise noted. Please refer to the reconciliation tables at the back of the press release and slides, both of which are posted in the Investors section of our website. As Don said, our 2nd quarter performance runs out a strong first half of our fiscal year.
In Q2, We delivered sequential quarterly revenue growth in both consumables and T and E. We also posted organic sales above free COVID levels in 2019. Let's look at Q2 in more detail. Versus last year, The business delivered organic revenue growth of 104.6 percent and reported growth of 117.3%. Compared to the Q2 of 2019, reported sales grew 5.7% and organic sales grew 3.1%.
Both segments also grew versus Q2 2019. This performance against the 2019 baseline $626,000,000 or 58.7 percent of sales. This strong outcome reflects the continuation of a favorable mix similar to Q1 as well as the overall portfolio optimization work we have done to focus on higher growth, higher margin businesses. We're also seeing some challenges from a supply chain cost perspective, and our teams are working diligently to address them. Before I start discussing SG and A numbers, I would like to remind you that we now report R and D spend separately from SG and A.
As we indicated last quarter, we began to ramp on planned SG and A investment debt expense in the Q2. We tempered certain investments during the height of COVID, but we are now accelerating projects as the market further normalizes. We are increasing investments in sales and marketing to support our short and medium term growth plans in clear aligners, Implants and Digital Capabilities. Sequentially, SG and A increased in absolute dollars but remained relatively flat as percent of sales. Versus the prior year quarter, SG and A as a percent of sales declined 12.6 percentage points to 34.4%.
Spending on R and D was up 122.2 percent in the quarter to 40,000,000 We expect this level of spend to continue as we are committed to delivering innovation and great solutions to our customers. We are taking a disciplined approach to ensure alignment with our strategic priorities and track return on R and D investment. Operating profit was $219,000,000 versus a loss of $42,000,000 last year. The business delivered an operating margin of 20.5%, representing continued margin expansion from the realized benefits of our restructuring program. At the same time, we have been able to make meaningful investments in our business to fund growth initiatives.
Net interest and other expense was flat versus last year. The non GAAP tax rate in the 2nd quarter was 23.9%, Non GAAP EPS was $0.71 versus a loss of $0.18 in the prior year quarter. Moving to segment performance. Versus the Q2 of 2020, Consumables and Technologies and Equipment posted organic growth of 135.3% and 85.2%, respectively. Both segments posted strong growth across all product categories.
Consumables sales were 445,000,000 an increase of 138% versus the prior year. Growth was strong across all regions and in all categories, most notably within the ENDO and REST two parts of our portfolio, which represent strategic priorities for our business. Additionally, the rebound in the preventative business, particularly in the U. S, continued in Q2. The consumables market has been resilient and our team is executing well through the recovery.
Currency favorably impacted consumables by 11.2%, offset by a reduction of 8.5% due to divestitures and discontinued products. Moving on to Technology Technologies and Equipment segment results. T and E sales grew 104.6% versus the prior year, with a strong growth coming from all regions and product categories. The growth was driven by digital dentistry and equipment and instruments, which grew well in excess of 100%. The T and E segment also includes our healthcare business, which saw a smaller pandemic related impact than the dental business in Q2 2020 resulting in a less significant year on year growth.
Within T and E, The launch of our new Axios Imaging unit continues to go very well. We're also seeing a strong momentum in digital dentistry with digital adoption and upgrade cycles fueling growth for PrimeScan. Our clear aligners franchise performed very well in the quarter. Sales growth is strong, and we are confident in the team's ability to deliver on the $300,000,000 2021 exit run rate shared previously. This quarter, we also announced the acquisition of Propel Orthodontics and a strategic partnership with FreeShape, further complementing our clear aligners offering.
We expect to see the benefits from these two initiatives starting in 2022. Currency favorably impacted sales by 10.4% as well as a benefit from acquisitions of 19%, offset by a reduction of 10% due to divestitures and discontinued products. Now turning to financial performance by region during the 2nd quarter. U. S.
Sales were $366,000,000 a growth of 179.4% versus last year. Organic sales growth was 145.8 percent. We were pleased to see dental sales volumes return close to normal levels in both segments and across all product categories. European sales were 431,000,000 A growth of 99.5 percent versus last year. Organic growth was 91.8% compared to the prior year.
Similar to U. S. Sales, all areas in consumables and T and E rebounded well from the low point last year. Rest of the world sales were $270,000,000 a growth of 87.5% versus last year. Organic sales growth was 86.2%, reflecting the recovery in demand across consumables and T and E.
The Asia Pacific region, in particular, has been an area of continued growth for our business. Next, I'd like to cover cash flows. In the Q2 of 2021, our operating cash flow was $214,000,000 a $39,000,000 improvement versus last year. The company finished the Q2 with cash on hand of $332,000,000 and committed credit facilities of another 744,000,000 On a year to date basis, we deployed more than $241,000,000 to fund strategic acquisitions, including Datum and Propel Orthodontics. We also returned a total of $134,000,000 to shareholders through dividends and share buybacks.
During the Q2, we increased the quarterly dividend by 10%. The Board also authorized an increase to our share repurchase program, Bringing the total amount to $1,000,000,000 This is inclusive of the $260,000,000 we had remaining from our previous authorization. Now let me provide an update on our financial expectations for 2021. We completed a strong first half of the year. We believe the healthy demand will continue through the second half of the year, We are reaffirming our outlook for fiscal 2021.
We also expect non GAAP EPS to be close to the top end of the $2.75 to $2.90 range that we provided last quarter. Here are a couple of considerations with respect to our outlook. We have updated our assumption for the euro U. S. Dollar exchange rate for the remainder of the year from $1.22 to $1.18.
We estimate the impact from this change to be a reduction in projected earnings of approximately $0.05 in the second half of the year. 2nd, This full year outlook includes commitments on investment spend that will be incurred over the remainder of the year. We will continue to operate with a Our key 2021 planning assumptions are listed within the supplemental materials posted on the Investors section of our website. There are 2 risks to this outlook that are worth highlighting: COVID-nineteen and ongoing supply disruptions. We are watching closely how the situation evolves, especially considering the increased number of cases in some countries and the actions taken by government to reinstate certain restrictions.
Before I turn the call back to Don, we would like to share a quick update on our efforts around ESG. During the Q2 of 2021, we published our sustainability fact sheet and environmental scorecard. They are available for review on the sustainability page of our website. Additionally, in May, We announced a global partnership with FDI, the World Dental Federation, as one of 5 industry founding partners to lead the new sustainability in dentistry initiative. Also, we are planning to publish our sustainability report in Q3.
As we look forward in our ESG evolution, there are a few guiding principles we are keeping in mind. First, We believe purpose and economic value intersect in a clear way in our business. 2nd, We want to be transparent about our progress by increasing the disclosure of key ESG metrics. And third, We are measuring and analyzing our ESG data, and we'll make sure we adhere to high standards of data integrity. With that, I will now turn the call back to Don.
Thank you, Jorge.
I would now like to provide some Our priorities have been consistent for the past 3 years. They are to grow organic revenues 4% to 5% long term through a combination of organic and inorganic activities. The team continues to focus on improving margins and expects to achieve our goal of 22% by the end of 2022. Supporting this goal, our efforts to simplify the organization and take better advantage of our scale. This formula leads to our target of delivering consistent Double Digit EPS Growth.
Slide 17 in the presentation details our strategy. We believe that Dentsply Sirona will grow long term by delivering easy to use treatment planning and essential consumable products. When we do this, Dentsply Sirona becomes the essential solution provider that improves outcomes for patients while delivering better efficiency and economics for the dental professional. Moving to the next slide. Dentsply Sirona is unique in the space with category leading brands in both the x-ray imaging and the inter oral scanning spaces.
Most companies have 1 or the other, but we are by far the biggest player with both. In the imaging space, Dentsply Sirona has a significant installed base comprised of many well recognized brands that are at the heart of the dental practice. Our imaging brands include Schick, the Orthophos family, Galileo's and our new Axios wide field of view system. Dentists all over the world recognize these brands for their high quality and innovative features. For perspective, our imaging systems combined to take over 400,000,000 digital x-ray images a year.
What really differentiates Dentsply Sirona though Is that in addition to our major presence in imaging, we are also a leader in the intraoral scanning space. There is already a large and expanding CEREC base that includes PrimeScan and Omnican inter oral scanners. While we continue to emphasize the advantage Chairside Dentistry, the company is also focused on expanding our presence in the rapidly growing DI space. Our PrimeScan entry in addition to being the engine for Chairside Dentistry offers outstanding performance as a standalone scanner. When dental offices start with PrimeScan, they get a great scanner That is easy to use and extremely accurate.
But starting with PrimeScan is only the beginning. Our system offers tremendous versatility that allows Aesthetic areas like clear aligners, implants and complex restorations have been among the fastest growing in the dental market. These higher value procedures are made easier and more efficient when using digital tools. And we are the leader in providing these Our well recognized treatment planning brands include Codexis, Cerec, SureSmile, Simplant, Atlantis and MGuide. All of these treatment planning tools are fully integrated with our digital equipment.
To give some context, in a typical year, there will be over 275,000,000 patient cases done in Codexis and over 4,000,000 cases done through CEREC. The large volume of these cases also provides important fuel for our AI efforts. The final element of the strategy is linking the diagnosis and workflow tools with our essential consumables business. Every implant and endodontic procedure finishes with a restoration, which is why we are optimistic about our ability to drive consumables in the future. Our 4% to 5% growth target is built on a strong commitment to organic innovation, acquisitions and other inorganic opportunities built on a foundation of global commercial excellence.
Organic innovation is our lifeblood. And as Jorge mentioned, our investment in R and D has been increased by close to 50%, reaching $160,000,000 in 2021. This investment is helping drive a very robust pipeline for the back half of this year with continued progress in 2022. Moving now to Slide 19. In September, we will be launching a comprehensive restage of our implant business.
The restage puts together our digital base, historical product strength with other key elements like custom abutments and continuing education and training. The program starts with harmonizing all our implant businesses under the Dentsply Sirona brand name, including our rapidly growing MIS value implant business. It will include strong new products highlighted by PrimeTaper, an immediate load implant that will position us very competitively in the marketplace. We will also be updating our well recognized Simplant treatment planning software and integrating it with CEREC. We're also focusing on our Atlantis Custom Abutment business, which has very easy to use planning software for custom abutments.
For perspective, we process well over 500,000 implant cases through Simplant and Atlantis on an annual basis. For the first time, we are offering an indentalist scanning program for CEREC, a major development in the implant space. The indentalist While we are in the process of rolling out the Aussiek bone regeneration brand to further enhance our implant offering and serve the rapidly growing immediate load implant segment in general. All our implant training and continuing education efforts will be harmonized and rebranded experience with the product. The reaction has been very positive.
They are very comfortable with the new products in part because they are based on a procedure they know well. The revitalization of our implant business is an important piece of our overall growth strategy. This relaunch will begin in September and continue rolling out globally throughout Q2 2022. Moving now to Slide 20. Our endodontic platform is another critical area for us.
Beginning in September, we will be launching ProTaper Ultimate as part of a new platform that will include new files, a biometric sealer and a new disinfection device. In addition, we will be launching multiple new motor systems in early 2022. The ProTaper Ultimate System really takes performance to the next level. The files have been designed to cut and shape better and faster, requiring less files per procedure. The complete system will offer better cleaning and obturation as well.
ProTaper Ultimate is the 1st major platform we have launched in the endo area in several years. It has also been in the hands of our KOLs and has met with a very positive response. There are also several critical software upgrades and launches coming in the back half of twenty twenty one. These include a major SureSmile upgrade 7.7. This upgrade improves the user interface for the GP, simplifying the case review screen and enhancing the order entry process.
We're also launching CEREC 5.2, a significant upgrade in PrimeScan that further enhances its speed and ease of use. The CEREC 5.2 upgrade supports the new indentalist scanning capability and differentiates PrimeScan in the marketplace. Early beta testers have indicated that this software upgrades provides a level of performance that makes it feel like a whole new product. There are also multiple new SureSmile product launches coming over the next two quarters. These include the introduction of a vPro product as well as whitening in Q4.
With vPro, which came as part of the Propel acquisition, SureSmile will be differentiated in the marketplace. All of these new products will be launched at our DS World event in September. Moving to the next slide. In addition to our organic innovation program, Jorge detailed some of the strategic acquisitions made over the last several months. All of these are designed to enhance our competitiveness in higher growth, higher margin categories, including clear aligners and implants.
I wanted to add to his comments by saying that we are very happy with the BiTE acquisition. We've had Bite for close to 8 months and are very pleased with the integration program and excited about its future growth prospects. As mentioned earlier, we also closed on PROPEL in Q2 and we recently acquired Datum to provide us with a leading bone growth regeneration product to accelerate our implant businesses. These businesses are off to a strong start and their integrations All of this is powered by our outstanding global commercial team comprised of over 5,000 people. We've been investing in a comprehensive sales force effectiveness program that will be close to completed in our 10 largest countries by the end of this year.
Over the past 2 years, the team has also made solid progress against our goal of improving our operating margin and simplifying the organization. We've rationalized our manufacturing and supply chain, launched a comprehensive enterprise modernization program around key functions, all while maintaining strong expense discipline. As a result, we will deliver the $250,000,000 savings target and the 2022 margin goal on time. Moving to Slide 23. In summary, we had a strong first half as the market recovered and the company Made progress on key strategic goals.
We are reaffirming our 2021 outlook. The dental market continues to show resilience as well as strong underlying fundamentals. We believe that Dentsply Siron is well positioned to deliver sustainable growth in the future. And finally, we are pleased to confirm that DS World will again be welcoming guests to Las Vegas September 23 through the 25th at Caesars Forum, while also offering a hybrid option. It is an excellent way to build momentum in the back half of the year.
And with that, we can open the call to questions.
And your first question comes from the line of Elizabeth Anderson from Evercore.
Hi, guys. Congrats on the quarter and thanks so much for the question. I guess on my first question, Vince. Given the outperformance in the quarter, obviously strong and you're pointing to a lot of things that point to debt. Why not raise the guidance?
I know you guys obviously pointed to being at the upper end of that, but just can it be helpful to hear your thought process around that
a little bit more?
Good morning, Elizabeth. Yes, Good question. And listen, from a macro perspective, we feel really good about how the business is The execution by our teams has been solid all year. And the progression of the business, as demonstrated by The last several quarters is consistent. Also, I mean, if you remember, we were the 1st company that provided guidance at the beginning of this year.
And then right after the Q1, given the performance we had in Q1, we actually raised our guidance in a meaningful way for the rest of the year. Q2, we performed very much according to our expectations. It was a solid quarter. Vince. And we believe the second half is going to be better than the first half.
But as I pointed out in my prepared remarks, There's a few things to keep in mind, and we talk about this in Q1. First, we have investment spend that we move From Q1 and partially from Q2 into the second half of the year because we didn't spend at the pace we were planning to spend in the first half of the year. So that is important. And those investments, by the way, are intended to fund very important priorities for us. For example, clear aligners.
Our clear aligners business, as we discussed, is growing, and we are adding Don talk about what's going on with our implants business and we continue to make investments in our digital capabilities, both in terms of a go to market strategy and products That are important for our customers as well as internal infrastructure. And then I also mentioned this in my prepared remarks. There is an impact from a planning perspective resulting from our change in assumptions relative to the euro exchange rate. So when we provided guidance at the beginning of the year, this was one of the assumptions that I shared with all of you. We said at the time That we were expecting the euro to be at the 122 level, and we have not seen that this year.
So For the remainder of the year, we decided to change the assumption, and now we are using $1.18 That change in assumptions represents about $0.05 in the second half of the year. So when you kind of look at all of those pieces and do the math, I think we feel good about being at the top end of our range. And we always we are never satisfied. We always want to do better and but we are really we feel good about the consistency in our results and performance this year. So for all those reasons, that's why we have kept the guidance where it is now.
Got it. That's super helpful. And just talking about a little bit about more of the implant relaunch, how do you guys see that integrating with your 1DS program. I assume that's sort of something that you might talk about as we approach DS World or DS World.
Yes, Elizabeth, implants is going to be a big feature of DS World, because look, we're really one We really want to talk about being the 1st kind of digitally native implant company. So when we start talking about CEREC and the ability to do a dental Scan and whatnot, you're going to see a fair amount of integration of our digital technology with easy to use treatment planning, Principally aimed at the general practitioner as a way of giving them a lot more confidence from stepping up from Doing some procedures to making it a regular part of their practice. So yes, you're going to see a fair amount of that at DS World. Look, DS World is going to feature, we think, a pretty exciting lineup of new products, whether it was Vince. What we're doing in the endo space, we're really excited about the restage of our implant business.
But also, really, I don't want to undersell the CEREC 5.2. I mean the folks who've been using this for a while really say it's like almost a new product because it cuts The time you need to do a scan, it enhances accuracy. And when we're adding specific treatment planning around things like in dental scanning, Doing a real integration with SureSmile with 77. We're really trying to make digital workflows the heart of everything we do.
Makes sense. Thank you.
Thank you.
And your next question comes from the line of Jeff Johnson from Baird.
Thank you. Good morning, guys. Hey, Don, I'd like to take your pulse maybe on kind of the 2 year growth rates. In the Q1, we had you kind of versus 1Q 2019 at about 7%, maybe a little north of that, as Jorge said today about just over 3%. Your commentary about the markets continuing to improve and that seems consistent with our checks.
So just like to better understand why maybe that 2 year growth rate came in a few points and it seemed like it was pretty evenly split across all three of your geographies. We have all 3 of them maybe 3 to 5 points slower on a 2 year basis versus 1Q. So just maybe help us understand that dynamic.
Yes, Jeff. Look, 1Q came in very strong. I think that was kind of the quarter that everybody felt that, okay, things have returned To some semblance of normalcy, and I think there was a fair amount of catch up across the board. And as we look at 2Q, We saw a pretty again consistent whether it's consumables, technology and equipment. By the way, Jorge in his prepared remarks called out Our Wellspect business, the healthcare business, which obviously wasn't really impacted by the pandemic.
So that's a piece of that business. Kind of have a normal growth rate there compared to the really significant dental growth rates of triple digits. The only other thing I'd point out, Jeff, when you start looking versus 2019, there's 2 points I direct your attention to. The first is, remember Q1, Q2 in 2019, we were coming off the PrimeScan launch and we were actually a little bit Back ordered in there with a lot of that actually delivered in the first and second quarter. And the second point in that around the consumable business.
We had really begun to implement a comprehensive program to change how we promote things and looking to focus much more on 1 DS type programs that were aimed directly at creating retail demand as opposed to focus on wholesale activity. So there's We were working through that specific thing. If we hadn't been pandemic, if that's even a word, Jeff, We would have seen that kind of level out through 2020. So you had that distortion associated with the pandemic. And so now when you're looking at 21 versus 2019.
We're working our way through that comp, which might have been a little bit higher in 2019 versus What we're seeing now as we level load and really focus on stuff like 1DS as our preferred promotional program.
Yes, understood. And just as a
follow-up question, just on
Bite, I try to ask you this question each quarter and you I'm sure you will again this quarter, but let me ask it I guess this way, which is the 19% acquisition growth in T and E, Vince. Our assumption is PROPEL was kind of a vertical integration deal, so not a whole lot of contribution on a revenue perspective there relative to what had been happening. Datum, generally immaterial, a little bit of contribution. So is it fair to think about that 19% acquisition growth in T and E Specifically largely or majority of that being driven by Bite and that would suggest kind of sequentially Bite stepped up probably 20% plus. Is that reasonable as well?
Thanks.
Yes.
Easy enough. Thank you.
And your next question comes from the line of Tycho Peterson from JPMorgan.
Hey, thanks. Don, I want to go back to the implant relaunch. I'm just curious how much of this is trying to revitalize growth from new products. How much of this is reorg? And how are you thinking about premium versus value?
And can you give us a sense of how material you think this could be to the business, This relaunch over the next couple of years.
Yes. It's a couple of things Tycho. First, We've been very public about saying we're unhappy with our implant performance. And basically, we said it was we thought it was a 2 stager where, Look, we've got to get back to growth Part 1 and then we got to grow with the category or faster than the category. And you know this, historically, we've been really kind of Falconized around our implant approach.
We had 4 premium brands between Ankylou, Xybe, ASTRA and ASTRA EV. I don't think people really understood we had a very competitive value brand in MIS, that's actually been growing at, if not faster than the market. The other thing, We've never really called out the our custom button business, which is the brand name we have is Atlantis, which is again growing At if not faster than market. So when we step back, we said, hey, look, we have a fairly aggressive new product set of programs and we dovetailed the new products with as well as the digital offerings. We've really, I think done a nice job upgrading SimPlan and integrating with CEREC.
So when we put this all together, we think it gives us the opportunity to reset I mean, if we had been growing our implant business At market levels that would be significantly higher than what we performed at in the last 2 to 3 years. So again, we feel good that This gets us it's not going to happen instantly, but we feel good as we start exiting 2022. We want to be And then in terms of Tycho value, premium value, It's they really kind of go hand in hand. I mean, the growth rate of our MIS business has been faster than our premium business. I think with the relaunch, we'll accelerate the premium side and we'd like to see both of them growing at market levels.
Okay. And then a follow-up on the ortho outlook. I appreciate your commentary on Bite a minute ago. There's been some concern kind of web traffic dropping off there, but it sounds like the business is doing incredibly well. As we think about that $300,000,000 target you've laid out, PROPEL now gets Added to that, I know it's small today, but how much of that $300,000,000 target do you think will be from PROPEL if we go out a couple of years?
Tycho, for this year, the impact from Propel is really, really minor. It is, for the most part, a vertical integration acquisition, But we have a lot of interesting ideas for that business, how to deploy it across the portfolio, SureSmile International. We're working on those plans. There's a lot of work going on there, but we won't see the impact from those efforts until 2022. Yes.
And Tycho, I wanted to add one other comment because you mentioned the unique visitors and some concern about that. Just a couple of general comments And then you can follow-up. The first is, Bite is performing as we expected it to. And one of the things that we were excited about businesses. We thought as you look at their unique visitors, there's an opportunity to focus on segmenting it and actually Not all unique visitors are made the same.
And one of the things that we've been focusing on is doing a better job of targeting over time. Vince. As we look at that business, it's performing above expectations and that incorporated some changes that we were making. The stuff that we get excited about over time though is, look, we think, BiTE continues to represent a great opportunity to bring It's underserved population, which a lot of people invite aren't necessarily regular dental customers. And how do we bring them into the fold?
If somebody just spent close to $2,000 on doing a BiTE treatment, we want to help them really understand continue making sure that they get value out of that procedure. They go see their dentist, go get a cleaning. And then we're going to be working with the dentist follow-up on things like how do you do a retainer and other things. But if again, one of the things we were attracted to around BiTE was really the fact that They were hitting underserved populations that weren't really exposed to dentists and but we think we have a unique opportunity Vince. Given the role we play to bring them into the dental fold.
Great. Last one, I appreciate you're keeping guidance unchanged here given kind of the uncertainties I'm just curious if you could comment on what you're hearing from your dealers as they think about inventory levels and kind of caseloads going back up? And then also what you're hearing from DSOs as they're thinking about managing a broader range of practices through the next wave of the pandemic? Thanks.
Tycho, the DSOs are telling us the traffic by and large is getting pretty close It really depends on where they are and what part of the country, how much exposure they have The South versus the East, West or North. But for all intent purposes, we think it's a couple of percentage points versus where they are in 2019. When we talk to them and whether you talk to kind of the big close to 600, 700 offices or even kind of large group practices. People by and large think the vaccine and The fact that some people haven't been to the dentist in 18 months, they're really kind of trying to get back in is going to lead to a pretty steady recovery. So our expectation is even if the Delta variant kind of forces people to shut down, I think The dental community has learned to deal with that and proactively reach out to their patients and assure them about their safety.
In terms of dealer inventory, first, We've been super happy with our dealer partners, I mean, both the large and small. They've done a really good job in our opinion on helping us buffer Some pretty radical supply chain swing, not supply chain swings, demand swings. If you look at where we were a year ago, it was basically shut down and now we're all the way back 2019 and our customer service levels as we track it to the dentists have been pretty good. I would tell you they've been challenged to maintain inventory. Obviously, a lot of their planning looks back on kind of a last 6 month, 9 month program, which would incorporate pandemic related reductions.
And we're working with them every day to make sure that they're getting adequate inventory to service the customer needs. And That's an ongoing process. And obviously, they'd be in a better position to comment how their aggregate inventory levels is, but we're working with them.
Okay. I appreciate it. Thanks.
And your next question comes from the line of Nathan Rich from Goldman Sachs.
Hi, good morning. Thanks for the questions. Don, maybe starting at high level, I appreciate all the details on the new products that you have coming We see in a normal year. It sounds like the demand for digital technology also remains strong. And I guess, so what I'm asking is, do you feel like 4 5% is the right benchmark as we think about top line growth for next year as you get the benefit from some of these launches.
And I'd just be curious to get your kind of high level thoughts on kind of what The main factors are as we think about kind of growth in 2022.
But as you kind of
dig into it and see maybe bid. We're comfortable with the 4% to 5%. I mean, obviously, we're saying, look, digital is going to be really important. We think we're well positioned, much better positioned Going forward in implants and endo, we talked extensively about what we think about short smile and bite.
There's parts of
the business we think are going to be a little bit more challenged. And if you look at some of the things that Jorge has talked about from a portfolio management Things like getting out of traditional lab, the analog lab part of the business and other things. But Hey, look, we've said a number of times that we would like to exceed the 4% to 5%. I think Jorge said that a minute ago. Right now, look, for 2022, I would tell you the back half of twenty twenty two is going to see more benefit From the introductions, things like vPro that are going to go out with short smile and other things.
So that's how we look at it. But We were 6 months ago talking about 3 to 4, now we're talking 4 to 5. And as we've raised that guidance up, we want to be able to
And then, Jorge, maybe just following up on your comments on the supply chain pressures. Can you just go into a little bit more detail on where you're seeing that? Maybe what products or categories You're seeing that and kind of how we should think about the potential impact of that in the back half of the year.
Yes, Nathan, and just to clarify, we financially, we have been able to manage these challenges really well. The supply chain team has done an outstanding job of managing situations like, for example, we talked last quarter about Some risks of supply disruption relative to certain electronic components, right? And the team has done a great job doing that. We are seeing inflationary pressures on the shipping cost side, and the team has handled those well. And overall with COVID, there's always concerns about there are certain suppliers in certain parts of the Economies that are not back to normal levels from a production standpoint.
And so those are things that we are watching closely. And all of our projections, the guidance include the risk as we see it. And but again, for the most part, the team so far has done a great job of managing those things. But we think it was We thought it was worthwhile mentioning because it's happening across the board.
Great. Thanks for the questions.
And your next question comes from the line of Jason Bednar from Piper Sandler.
Hi, this is Corrine on for Jason. Thanks for taking the questions and congrats on the quarter. So first for us, not too long ago, you announced the private labeling of SureSmile to Aspen. And we're just curious on how that partnership is going so far, how has uptake been in the early launch of that Motto brand? And then is that something that you've already baked into your original guidance, these private labels or is that on top of what you've already stated?
Yes. Thank you. Actually, we didn't announce that. There's been a lot of discussion about that in the marketplace. We are supplying Aspen, we're very proud of our partnership with Aspen.
We think they provide great level of products and services to their customers and we're proud to partner with them. In terms of how is it going, it'd be better to ask them. And then just in terms of that baked into our numbers, Yes. And again, we've given kind of very general numbers about what we think our Clear aligner business is going to look like between Bite and Sure smile and those numbers are incorporated in there.
Great. Thank you. And then just to dive a little further On the Bite acquisition, can you provide any color on what some of your marketing efforts are there for the balance of the year and into 2022 to Make sure you stay competitive with those other DTC brands that are really pushing marketing and advertising right now.
Yes. I mean, first, there's a lot of things that are going to go on with Bite that we're extremely happy with. I mean, We first from a marketing in the U. S. Perspective, we expect that market at competitive levels.
Some of the things we're beginning to do though is we had been a very paid social kind of focused business where we're looking at bringing other Areas in whether that's search engine optimization or whether that's recos from other places like as we begin to bring this into the dentist office. We've got some great new products coming and some updates around that. Obviously, as PROPEL has become part of our business, we're going to look continue to differentiate that business by virtue of our vibration technology, which we think is it makes the byproduct differentiated in the marketplace. And as we get out in 2022, I mean, one of the things that we get excited about the Clear aligner business in general is Whether it's the direct to consumer or whether it's through the dentist channel, I mean, we're still in the very, very early stages of penetration Of this business. I mean, if you look at people who would be eligible for a Class 1 treatment, do we think we're at 10% penetration in the U.
S? Probably not. The other opportunities we have with Bite as well as with SureSmile is how do we take this out of the U. S. Jorge mentioned in In his prepared remarks that at this point, we're probably in getting close to 10 countries now with SureSmile And we're going to look to expand that and we think BiTE has got real application because it's a unique product and it's a unique way to reach Potentially underserved populations outside the U.
S. So we think it can grow that way. And I've mentioned a couple of times, we really think that we have an outstanding relationship with the dental community all around. And one of the things that we'd like to do is take a lot of the traffic that we're generating with BiTE and all these unique visitors. And again, introduce them to dentists that would be part of our curated network where they would have a PrimeScan and we believe that they can really help Not only make sure that the treatment that was done with BiTE is being held on, give them a cleaning afterwards, give them retainer afterwards, But potentially start a relationship with that dentist because we think less than 80% of the BiTE unique visitors have a regular relationship with a specific dentist.
Thank you.
And your next question comes from the line of Michael Chaney from Bank of America.
Hi, this is Alan in for Mike. Thanks for taking the questions. Don, you mentioned a few new product launches around DS World this year. I guess, how should we think about the revenue impact from DS World relative prior years and versus what's embedded in the guide or is that more of a 2022 theme? Thanks.
I'd almost split the question up, Al. What are we expecting from a revenue boost on DS World? It was interesting. Last year where we basically ran the virtual event, one of the things we saw was you didn't necessarily see the urgency to buy around a specific like 2 week period. So we looked at kind of the purchase pattern was spread out over 3 to 4 months.
And obviously, when you're doing virtual in the middle of the pandemic, we probably didn't get as much of a pop as you might have seen in prior years. We've got excellent promotions in place with our dealer partners. So we think we're going to have a good DS world. Now, How does that compare exactly to 2019? Again, it's going to be a little bit hard because we're still working through this will be probably the first really big dental event held globally, and we're going to see how it works.
But we have again, we have We think a very, very full new product lineup. We've got great promotions in place. We're excited. By the way, it's not just the products. We have Close to 200 continuing education courses, sign up for DS World right now has been really positive.
It's on track with what we saw in 2019. In terms of new products, we kind of talked I'd group them into 3 things. There's the implant, there's the endo, There's the and SureSmile is kind of things that you want to focus on that are specifically product as opposed to some of the software upgrades. Look, the implants, it's not going to be a spike. I mean, one of the things we noticed in our equipment business, I mean, you launch a new piece of equipment, there's obviously a big spike with kind of implants endo, we think you're going to see a more gradual impact of those.
I mean, we get the whole We get everything out virtually around the world by kind of the end of the Q1 'twenty two. Some of that might spill into the second quarter. Things like the Endo Motors and there's a lot of supplemental implant products that will follow off what we're launching at DS World. So I tend to look at that more as a back half impact from a revenue perspective than even loaded over the course of the year.
Thank you.
Thanks.
And your next question comes from the line of Liza Garcia from Wolfe Research.
Hey, guys. Congrats on the quarter. Thank you for taking the questions and squeezing me in. So you had mentioned kind of the rebound in the Preventative visits. And it sounds kind of like just to confirm that the U.
S. Is kind of almost at pre pandemic levels. I just want to confirm that that's kind of what you're seeing. And also could you maybe discuss what you're seeing across other geographies on the preventative side and how you're thinking about kind of that trajectory with respect to the guidance and into 2022?
Yes. Good morning, Lisa. Yes. One of the reasons we wanted to mention that specific category is because we believe it's a good barometer See how that category has rebounded really well. And it's happening with a few exceptions, a few countries.
It's happening pretty much across the globe versus 2019 and versus 2020. So we're seeing good recovery in that market. Again, there's probably a couple of countries where COVID situation is still pretty complicated, and so there's a lot of But in the in most markets, it's performing well.
Great. And then just with regards To bite and bringing the manufacturing in house, can you remind us the timelines around that? And then kind of what the incremental opportunity really is for bringing the product in house?
Yes. So we are working on that. That is probably going to be happening in the Q1 2022 timeframe. And the economic benefit from that in sourcing is already factored into the projections we have for the foreseeable future. So in 2021, the impact there is no impact essentially.
And then beyond, it will be as part of the business case when we did the acquisition. We look at the opportunity to bring that manufacturing
Thank
you. Thank you, Liza. Next question?
We've got time for one more question.
And your next question comes from the line of Yi Chen from H. C. Wainwright.
Hi, good morning. This is Maoz on for Yi Chen. We just wanted to gauge some more color on the Fast Track mobile app from PROPEL. We were wondering if you're developing it to be applicable to multiple clear aligner assets in your portfolio. And if so, if you could talk us through how you're doing so, and if the launch of the app will coincide with the rollout of vPro.
Thanks.
Yes, Guy, thanks for the question. Actually, Matt, thanks for the question. Yes. The app that we got, we're really excited about. It absolutely gives us an opportunity to understand whether people are using The vibration technology and it gives us just another way combined with Bite that we're creating an interactive platform with our unique visitors.
We will be rolling that out as part of both Bite and SureSmile. Obviously, SureSmile is going to get that in Q4. In terms of I don't necessarily think we're going to look at that as kind of a separate app, but I think it's part of the ongoing Again, we have a very interactive relationship with our bike customers. I mean, we talk to them fairly frequently. So that will become part of that process.
Ultimately, though, yes, we believe that the vibration technology has application well beyond just Sure, smile and bite. We think it's something that we will continue by the way, PROPEL had sold that beyond the U. S, We will continue offering that to orthodontists and general dentists as a separate product if they want to combine it with their clear liners and the app would be available for that. It's a the app is pretty cool. It really helps people it helps us understand if we need to Kind of give a nudge to a potential patient.
Hey, we noticed you haven't used your vibration technology in 7 to 10 days, remember of the wonderful benefits. And again, we think that's part of the kind of the customer experience. And we're really spending a lot of time not only on SureSmile, but
Sounds good. Thank you and congrats on the quarter.
Okay. Thank you. Thank you.
All right. That concludes our call today. Thank you all for participating. Have a nice day.