Good afternoon, everyone. Welcome to this session for the Leerink Global Healthcare Conference. I'm Mike Cherny, the Healthcare Tech Distribution Analyst here at Leerink Partners. It's my pleasure to have with us the Dentsply Sirona team, Simon Campion, CEO, Herman Cueto, CFO, interim CFO, I forget the exact title, but we'll go CFO for now, Andrea Daley in the IRC as well. I got a bunch of questions I'm going to rip through here in a very friendly fashion. I mean, maybe just start from the top and work our way down. You're in a market right now where I think it's widely acknowledged that there's varying degrees of demand differences both in the U.S. and abroad. Let's start with the positive.
Where are you seeing the biggest pockets of strength in your business and the level of products, your market leaders in so many different areas, but level of products that have been most in demand currently given what's been a, call it more challenging backdrop?
Yeah, thanks, Mike. I think for sure, let me start with our aligner business. While it's rather insignificant, I would say, as compared to our competitors, we have demonstrated growth in Europe of in excess of 20%, excluding one-times. In North America, we grew mid to, let's say, high single digits in Q4. We feel we have a differentiated offering there. We've committed to resolve some of the front-end attributes of our software and try and begin to re-engage in the area where most of the volume in ortho is, and that's with the orthodontists. We see that as a bright spot and an opportunity for us moving forward.
A big high spot for us in the past two quarters in particular, which I think is a reflection on both a hyper focus on execution and also eliminating some of the sins of the past, was in Germany where we reintroduced a mid-range CBCT in the April timeframe last year. We actually grew Germany the last two quarters in totality. The last quarter was our biggest quarter in seven or eight quarters in Germany. I think we grew every part of our CTS business. As you know, Germany is extraordinarily important for us for two reasons. Number one, that's our second biggest market. It's 10% or 11% of our total company revenue. Number two, we have a very large manufacturing footprint there. Germany is very important to us. I think obviously Wellspect has been a beacon in our business.
I know it's not dental, but it's been a beacon in our business. Mid-single digit growth. We knew we'd get there and we've got there, and we think we're going to do the same again in 2025. The final piece, we have been hyper focused on the ecosystem that our technology affords customers, whether they're a standalone dental practice, a small group of dental practices, or a DSO, that the digital ecosystem can afford us. The entry point for a lot of that is a scanner. We placed more scanners in 2023 than we did in 2022. We placed more scanners in 2024 than we did in 2023. That's the when you all think of, I see probably many of you have iPhones and iPads and AirPods and MacBook Pros, the starting point is nearly always the iPhone.
I think the corollary here is the starting point is a scanner. As we roll forward, we'll have CBCT, we'll have Primemills, our DS Core is the Apple operating system. Just think of the interoperability that Apple affords you all with their ecosystem. We view ourselves as being unique providers of that ecosystem in dental as well.
By the way, just on the Wellspect, do not sell it short. Growth is growth, cash flow is cash flow. Obviously important. Maybe just to come back to SureSmile at the start, you have had a differentiated go-to-market approach versus some of your other non-aligned peers in terms of focusing on the GP market. As you think about transitioning into the orthodontic market with that product, what have been the lessons you have learned with GPs and where do you think the best opportunities for success are with a new product? What is a competitive market, but not one that is so competitive that there is not a position for another strong product?
Yeah, I think we did a lot of research over the past several months on the orthodontic market in general and the orthodontist market in particular. We know that there are three, four, five brands available in an orthodontist's practice. They're not unique to Align or anyone else. They pick and choose depending on, I guess, price point or capability of patient pay, whatever it may be. Today, for the most part, we are not one of those products. There's a variety of reasons for that. Number one, I think we have a checkered past with the orthodontist community when we exited wires and brackets back in the day. Number two, as I noted, I think certainly what we hear is that our SureSmile software is well renowned from a, does it solve the orthodontic problem the patient has?
I think it's well respected in that regard because it originated in wires and brackets. Where it lets itself down is the front end. How easy is it to use? In Q2 of last year, we committed that we would fix that. We are in the process of fixing that right now. I think when we fix that and make the playing field a bit more even with respect to the ability to do business with us, when a customer thinks about your customer in our mind has got three things on their mind. They want to grow their business, they want their business to be as efficient as possible, and they want good clinical outcomes. I think partnering with us allows us to get to at least two, maybe three of those things.
They need fewer anchoring points or attachments with our aligner than the competitive aligner. They need fewer refinements with our aligner than with the competitive aligner. Fewer attachments and fewer refinements means more efficiency and the patient does not need to show up for checkups as frequently. They can put another bum in the seat and get another aligner system sold. I think the software, the value proposition are going to help us get back in there. Clearly we will have work to do to regain their trust.
Along those lines, you've had some tough, but I think important decisions to make on Byte and the Byte platform. Obviously a deal that was done before your tenure in the market clearly changed pretty drastically on you recently with some of the state regulations and other FDA dynamics. As you think about though the transition of some of the value of Byte into the broader SureSmile platform, I know it's early days, but what are you seeing as the most interesting pieces, the areas of Byte that you think have the most applicability, the most usage? I don't want to use the term salvage, so to speak, but there's certainly pieces of Byte that were really successful. Where do you think those pieces can be best applied to your future aligner platform?
You know, Mike, when I think of Byte, I think of two things. I think of a product and I think of capability. It is clear that we have moved on from the product for the reasons that have been well discussed. The capability that the group at the Byte facilities has around demand generation, around e-commerce, around interfacing with patients, we think is very meaningful. We did a big survey on orthodontics several months ago. More recently, we have done yet another survey about perceptions of Byte and perceptions of demand generation and the interface with patients. We did that with 150 customers and non-customers of ours. Demand generation resonates with them. Can the capability that the Byte team has help generate demand for existing customers of ours? Customers would be very interested in that.
They're also very interested in can the capability that Byte has improve the experience, improve the interface of the experience between the customer, i.e., a dentist, GP, or orthodontist, and their patient. We had a really good patient interface with Byte where we were able to communicate seamlessly with the patient back and forth during the course of their treatment. Those two things in particular have resonated with customers and non-customers alike about how we could redeploy those resources. That's on the orthodontic side. I also hypothesized based on prior experience that Herman and I both had around educating patients in the surgery world that we came from originally. If you educate a patient and enable the patient to have a discussion about their surgical choices with a surgeon, if it's clinically feasible, 70% of surgeons will do as the patient requests.
Unfortunately, when we did this work and we spent quite a bit of money helping educate patients, only 5% of patients felt equipped to have that conversation. Now we want to equip patients to have similar conversations with their dentist around chairside. Could we educate patients on, hey, if you go to this dentist here, he has the CEREC system and you can get your crown done that day versus going to the other guy who does not have CEREC? I hypothesize that there may be something in that too. We have not done any work on it.
I think if you think of, if you all think, those of you who cover med tech, if you think back 10, 15 years ago when you drive up and down the freeway, you see all the signs for Intuitive Surgical, go to such and such a hospital because they got the robot, zero clinical difference in outcomes at the time. Patients went to that hospital because of the robot. Could we do something the same with, you want your crown done on the day, go to Dr. Jones on Strip Mall A?
If there's a corollary to Intuitive, I'll be happy to see it when it happens. Certainly not a bad way to target and emulate. Maybe flipping over a bit to implants. I think it's been well diagnosed, market challenges, company-specific challenges. I always love a company that is transparent, that doesn't hide from the truth and what's been going on. Particularly in the U.S., you've talked numerous times about your plan to reboot growth. As you think about where you stand now, what do you think are the biggest near-term opportunities you have to execute on that potential success? How much of it is a, how much of it's product versus marketing?
I think it's more of the latter and less of the former. I think we have a, again, data shows it. We have a robust portfolio. No one has a complete portfolio, so to speak. We have a portfolio that should enable us to compete. We just launched another new product in the value part of that portfolio. We will put implants on DS Core later this year. I think we have a profile that should enable us to compete in the marketplace. Maybe not grow as fast as our competitors, but still compete nonetheless. I think the challenges that we have faced, you said being well diagnosed, I would say they've been well documented, maybe less so diagnosed. For sure, we had significant turnover in our sales team between 2019 and 2022, where I think we had in excess of 20% a year turnover.
We have remediated that. We invested in the sales team in early 2023. We added 40 or 50 new heads. We have trained them. It's clear that we need to train them again. Implant dentistry is the most clinically, shall we say, significant or challenging part of dentistry. We need to enable our reps to create more value in the clinical value in the interactions they have with their customers. We've heard it from our customers. Our reps need to be better. That's incumbent on us to educate them in a more meaningful way. We've actually just completed testing of every single implant rep. A whole lot of them are getting retrained. They'll be tested again. If they don't pass, I guess they'll go work for someone else. On the other side, we invested a lot in clinical education.
I think we took a wrong step here. We did spend more money, but we spent it at big events. We had, I think, almost 1,000 implantologists at events last year. Maybe rather than doing that, we should have taken those events locally and had small rooms of an implantologist and their referral network and one or two advocates from one or two supporters of our company come and talk to them about, here's why you should partner with Dentsply Sirona, et cetera, et cetera. That is the pivot we're going to make. More rep education, more local education. I think one of the benefits we spoke at the earnings call, excuse me, about the work we're doing on back office, trying to take cost out. Given our history, there are probably easier companies to do business with than Dentsply Sirona.
We're two separate companies that grew through acquisition. Then they merged and integration was never done. We have multiple policies and procedures. Arguably we're a challenge to do business with. ERP is already making it a bit easier. I think the work we're doing with a third party is going to streamline some of the back office stuff that will help us be more efficient, but also will help the customer interface between us and the customer too. I think once we put all those things in better shape, we will be in a stronger position. Make no mistake, Straumann are a very strong competitor. They have a great profile. They got one focus and one focus only. Disrupting them is not going to be easy, but there's no reason why we shouldn't be able to compete.
I'm going to come back with a more implant question, but you mentioned the third party consultant that you're working with. How are you measuring yourself? What are the check marks? What should we expect to hear as an investment community about how that relationship is going, when you'll see tangible results that they want you to focus on? How should we think about the story of that piece from here?
I mean, I think it's starting with industry benchmarks, looking at all of our back office functions and where do we index relative to those benchmarks. We're in really a diagnosis phase of that, really trying to understand where we are and why we're over-indexed. Because sometimes there's a business reason that requires more finance people. Bad example. We're trying to do all that work. We've put none of that in our guide. If there is upside, maybe we see a little bit inside of 2025. It helps us a little bit. We're thinking it's more of a 2026 and a 2027 thing. To Simon's point, I think there are technologies and enablements, AI as an example in customer service, that are game-changing in a lot of ways.
That if we were able to get that in the hands of our customer service associates, I think it could be game-changing for our customer experience.
Just to build on that comment on AI and investments we've made, we put our neck out there last year and we invested in a virtual or inside sales team. We've got over 100 people now up to speed, at least making phone calls. The update we gave you on the Q4 call was that they had made about 40,000 calls and contacted about 8,000 separate accounts. That number is now 16,000 separate accounts. When you think about, as you all go home tomorrow, the next day and you drive from the airport to your home, how many dental practices do you pass by? I mean, they're on every street corner. Some of them just are not worth sending a rep into for us. Some of them are worth $5,000 a year.
I'm not sending a rep in for $5,000 a year, but I'll call you up. We've already seen traction with this, not only selling a piece of product to a customer who historically may not have had a call from a Dentsply Sirona rep for several months in many cases, but we are now gathering market intelligence to go, hey, the guy in the strip mall on South Beach, he's in the market for a new scanner. We have an extraordinarily robust, maybe that's a bit aggressive. We have a robust funnel now of leads that we would not have had if we weren't calling these customers.
The other angle on AI is now when we call a customer, we should have all this data coming in to say, hey, the last time they ordered was this, that, they should be in the market for tube of toothpaste or whatever it may be that they would not have had otherwise.
Along those lines on the inside sales force, because you've spent a lot of time in, I think it's a very prudent investment. Is your hope that you're going from, you mentioned a $5,000 client is the number, that $5,000 client becomes a $6,000 client or that $5,000 client becomes a $30,000 client because a Primescan 2 opportunity unveils? Clearly, more revenue is always better, but are you happy if it's just some incremental sell-through from someone who just didn't pay enough attention to for a while?
I would be really pleased if all the accounts less than $10,000 doubled. That would be meaningful.
You know, I would say the other thing is it also frees up the time of the sales rep to go after the bigger customer. Instead of maybe going after a customer who's somewhere between $5,000 and $10,000, you have this inside sales group who is handling that. A lot of the cold calling, the idea generation, trying to understand what they want, that goes away to a lower cost rep, so to speak. They can go and focus on bigger and better things. I think that's an opportunity as well.
It is also huge market intelligence. As I said, they had made 40,000 phone calls, 8,000 accounts. Now they are talking to 16,000 accounts. That is just pure intelligence we can gather from the market about who is doing what in the market, what they think of any competitive launches, et cetera. It is just a repository of data that we should be able to leverage.
Turning page a bit, let's go to Primescan 2. Your latest kind of notable large introduction of a product. I know obviously you're constantly introducing products, but that was last year. I know it was a big part of the DS World presentation. I remember all the lights and the circles. It's certainly eye-catching from that perspective, but there was a lot of innovation on Primescan 2 in terms of both usability of the wand, but also workflow software, the whole package behind it, the tie-in to DS Core. Basically six months past DS World now. Maybe just could we do a check-in on how the Primescan 2 evolution has gone, where broad availability is globally right now, and how to think about that in terms of what's embedded in the guidance for this year?
Yeah, so Primescan 2 I think has gone fine. It's gone well. It has released in all the markets we wanted it to be released in. It's obviously available in Europe and the U.S. and Australia. We continue to innovate. Primescan 2 and DS Core are synonymous, really. Later this month at IDS, we will launch more software for DS Core and Primescan 2, which I think is going to not only increase the functionality of DS Core and Primescan 2, but also aid in things like upload speed and download speed for the product as well. Because obviously it's contingent on customers' Wi-Fi connectivity and speeds and whatnot. We're releasing new compressibility software, I think later this week, in fact, that's going to aid a customer who may have been sitting on the fence because my Wi-Fi isn't good enough.
Now the acceptable limit of Wi-Fi is going to be halved for Primescan 2. I think that's going to aid us a whole lot. Back to the whole ecosystem. A scanner, whether it's Primescan 2 or AC or Primescan, that's the starting point for everything digital. We want to be really relevant in that space. We want to create an ecosystem for our customers. We launched DS Core Enterprise in Q4, which I think has a bunch of diagnostics about performance of PC equipment for DSOs, which I think has resonated with them. As we put more of our workflows on DS Core, you should see us begin to really be able to get leverage from the presence. I think we shared at earnings. We've got now 37,000 unique accounts on DS Core. Some more data.
We tripled the number of connected devices to DS Core in 2024. We increased the number of orders going through labs by over 400% in 2024. It is getting traction. I would love it to be faster. I would love to be able to monetize it far more meaningfully than we have. We want to create an ecosystem and own the ecosystem. It takes a while, but we are making solid progress.
How should we think about the further expansion of DS Core in terms of, call it a chicken and the egg argument? Are you going out to sell a product and then pitching the wares of DS Core? Or is it an opportunity to go out and sell the ecosystem and then use that as the hub and spoke approach where you can then branch out to other connected devices? I guess strategically, how is your team thinking about that?
Yeah, I think Primescan 2 has changed the name of the game when DS Core released two years ago. Now Primescan 2, it's synonymous with DS Core. I think they both go hand in hand. We want to create, again, back to what I noted earlier, customers are in, I think I mentioned it earlier. I said it a few times today. Customers are interested in practice growth, practice efficiency, and clinical outcomes. DS Core enables all of those three things, whether because it's DS Core and the connectivity of it, or whether it's, hey, instead of three scanners, I now need two scanners because it's so portable. The great thing about dentistry, I think two great things about dentistry is, number one, you have two avenues to innovate. Number one is the clinical avenue where you can improve outcomes.
Number two is the process avenue where you can improve efficiency. That is really important. It is a bit like surgery in that regard. You want to improve efficiency. The second area that is really interesting is digital remains very under-penetrated. Digital, 40%-50% of customers in the U.S. have a scanner. That is not great. Everyone has got an iPhone. Why does not everyone have a scanner? Even in Germany, the most advanced dental nation in the world, 27% of customers have a scanner. There is still a huge opportunity for digital ecosystems to be created in dentistry. I think we had the right to win a number of years ago. I think we did not innovate fast enough and meaningfully enough, and we probably lost momentum. I think we are now in the process of regaining momentum in that space. We are placing more scanners than we ever had before.
We got DS Core. I think I feel we are now leading connected dentistry, or if you think about a grading system for dentistry, when we were kids, it was dentistry 1.0. The beginning of digital dentistry was dentistry 2.0. I think we're now at dentistry 3.0, which is connected cloud-based dentistry.
Maybe if I can ask the dumb question, because it comes up all the time, but I don't think we ever address it. Why are penetration rates so low? We just went through a cycle where the price point on intraoral scanners came down meaningfully across the board, not because people were discounting, just introduced products at a completely different price point across the market. What's the hindrance that you think, whether it's the U.S., whether it's Germany? Emerging markets obviously are a different animal, but for two very developed dental markets with plenty of product available, what's the holdup?
I think part of it's, I think there are two dynamics there. Part of it's the university education that students get. If you talk to some DSOs, the number that they provided me was that it cost them about $100,000 to prepare a dental graduate to actually practice dentistry. They're not ready when they graduate. We do know that many of these universities are not digitally orientated. The systems are not providing graduates who are digitally savvy. That's point number one. I think point number two is the changing demographic, let's say, of graduate students who are less interested today in owning a practice than they were 20 years ago. They're prepared to go work for someone and take a salary and have a nice quiet life.
If the guy or gal they go work for is a 60-year-old and uses impression kits, I guess they're going to take an impression kit until they take it over. I think they are the two dynamics. We've been working more closely with universities this past 18 months. We've had some good traction. I think the starting point is having graduates who are savvy with digital dentistry.
A couple more quick ones before we run out of time.
Sorry, just one more thing to state there. We, and I think we are arguably better equipped than others to have this discussion. You mentioned the dirty word price a moment ago. We need to stop talking about price and start talking about value. Think about it in terms of the efficiency and outcomes that we can provide that leads to growth.
No, of course. It is a great point. It is not discounting. It is just different approaches to how to build the products. Obviously, IDS in two weeks. You mentioned Orthophos, which was into Germany. Is there a desire and expectation to build that beyond Germany? Is that just the German market demand is so unique and that product has been so successful there historically that it made sense to have a product for what is obviously a big market?
Orthophos has released in, or SL has released in Europe again, and it's released in some areas of Asia-Pacific. It was never released in the United States. That would be arguably a bridge too far. We'd have to go through FDA and whatnot. IDS is in two weeks, the biggest dental show in the world. We got some more innovation coming through, mainly on the software side, on the AI side at IDS based around DS Core. We're looking forward to it. Someone asked me a couple of weeks ago, do you have any big releases coming out at DS World, or rather IDS? My product launch philosophy is it will launch when it's ready to launch. If it's ready on Tuesday, I'm not waiting until Thursday. That's my way of looking at things.
Last question. On the last earnings call, you completely understandably walked away from your multi-year targets, the $3 of earnings. You've been extremely transparent the whole time up about, here is our target, but here is what gets us there. That bridge slide has been in every deck that you've done. Obviously the market has nowhere close to cooperate amongst other items. What are you looking for within your organization to feel comfortable though with putting out whatever a new long-term guidance may be? What needs to happen operationally? How are you thinking about the positioning of the business to give you the comfort and that level of visibility that you had previously with the targets?
I think if I think of, if I break it up internally and externally, I think we are comfortable internally with what we put out two years ago and where we are today with respect to that. I think we noted that we feel we are on track with all of the internal pieces. Some of the internal stuff affects the external stuff too. Clearly, we thought we would be growing at market in implants by 2026, and we will not be. We thought we would be, we felt we would be growing. I forgot exactly what we said about aligners, but double digits for sure on aligners and increased profitability because of more efficiency within Byte in particular. Obviously, I think we can still grow double digit on a smaller base, but the profitability of Byte will not contribute. I think the big, and I think there is discussion in the marketplace.
If you look at the guide that, or the guides that our friendly competitors have put out there, there are mixed signals there. Some of them are going macro is the same. Others have gone modest rebound on macro. Our guide for the year has said macro is the same. I think until we kind of know who's right and who's wrong, if that's the case, until we have a full-time CFO in place and get his or her eyes on that, I think it's unwise to put a number out. Internally, we are still committed to, as Herman was saying, to getting ourselves, beginning to get on the road to benchmark with respect to some of the back office stuff. We've already taken out almost $300 million of costs or are on track to take out $300 million of cost.
We have reduced our operational footprint meaningfully, and I think we need to continue to do that. We've innovated, and we've got better and more predictable at innovation. We are relentlessly focused on getting the growth line moving. We know we can't cut our way to growth. It's not sustainable for us. We have to grow. We see pockets of light at the end of tunnels. We need to see more pockets of light, and we're committed to committing ourselves to help the commercial teams do that.
Perfect. Simon and Herman, thank you so much for being here.
Thank you.
Thank you so much.