Q2 2021 DENTSPLY SIRONA Inc Earnings Call
[music].
Good day, Thank you for standing by and welcome to the Q2.2021it's fly Sirona earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Of financial results between periods, where certain items may vary independently of business performance and allow for greater transparency with respect of key metrics used by management and 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 for joining US. This morning for the <unk> Sirona second quarter earnings call.
We are pleased with our performance and the second quarter as we will detail today, the dental market continues to recover and demonstrates the underlying resilience that makes it attractive long term.
For the quarter of the company grew both versus 2020, and 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.
At this point, we feel the market is operating slightly below 2019 levels with the continued recovery of 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 and certain regions and some stresses to the supply chain.
1 constant throughout all of this though has been our team at <unk> 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 half of 2021 and beyond.
Moving now to slide 6.
As I mentioned, our financial performance for the quarter was solid and closes out of 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 point of <unk> $7 billion up 104, 6% on an organic basis.
Our operating margin was 25% versus -8.6% during the prior year.
Adjusted non-GAAP EPS was <unk> 71, compared to a loss of 18 cents last year and cash flow was $214 million.
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 Reconsolidation 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 second quarter performance runs out of strong first half of our fiscal year in Q2, we deliver sequential quarterly revenue growth and both consumables and TNT.
We also posted organic sales above pre COVID-19 levels in 2019.
Let's look at Q2 and more detail versus last year, the business deliver organic revenue growth of 104, 6% and.
And reported growth of 117, 3% comp.
Compared to the second quarter 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 confirms the steady recovery trend we have seen in 2021.
Gross profit was 600 and <unk>.
$626 million or 58.7 <unk>.
Percent of sales.
This strong outcome.
Flex 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 and SG&A SG&A numbers I would like to remind you that we now report R&D spend separately from SG&A.
As we indicated last quarter, we began to ramp on planned SG&A investment spend in the second quarter.
We tempered certain investments during the height of Covid, but we are now accelerating projects as the market further and normalizes.
We are increasing the investments and sales and marketing to support our short and medium term growth plans and clear liners implants and digital capabilities.
Sequentially.
SG&A increase in absolute dollars, but remained relatively flat as a percent of sales.
Versus the prior year quarter SG&A as percent of sales declined 12, 6 percentage points to 34, 4%.
Our spending on R&D was up 122, 2% in the quarter to $40 million.
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 of return on R&D investment.
Operating profit was $219 million versus a loss of $42 million last year.
The business deliver and operating margin of 25% representing continued margin expansion from the realized benefits of our restructuring program and.
At the same time, we have been able to make meaningful investments in our business to fund growth initiatives.
Slide 17 in the presentation details of our strategy. We believe the dense <unk> sirona will grow long term by delivering superior integrative workflows and critical procedures. These workflows will be built around diagnostic excellence easy to use treatment planning and essential consumables consumable products.
When we do this <unk> 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.
The <unk> Sirona is unique in the space with category, leading brands in both the X Ray imaging and the inner oral scanning spaces.
Most companies have 1 or the other but we are by far the biggest player with both.
In the imaging space <unk> 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 Shirk, the ortho <unk> family Galileo's, and our new axioms 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 million digital X ray images of year.
What really differentiate <unk> sirona, though is that the in addition to a major presence in imaging. We are also a leader in the <unk> scanning space.
There is already a large and expanding seric base that includes the prime scan an omni can enter oral scanners, while we continue to emphasize the advantage of chair side Dentistry. The company is also focused on expanding our presence in the rapidly growing <unk> space.
Our prime scan entry in addition to being the engine for chair side Dentistry offers outstanding performance as a standalone scanner.
When dental offices start with prime scans, they get a great scanner that is easy to use and extremely accurate.
But starting with prime scan as only the beginning of.
Our system offers tremendous versatility that allows for easy upgrading to full chair side capabilities and further opportunities to expand into other procedures, such as clear liners and implants.
The static areas like clear liners implants, and complex restorations had 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 increasingly important treatment planning tools.
Our well recognized treatment planning brands includes the Texas Serac sure Smiles Symplast Atlantis and M Guide all of these treatment planning tools are fully integrated with our digital equipment.
To give some context in the typical year, there will be over 275 million patient cases done instead axis and over 4 million cases done through Seric.
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 in the downtick procedure finishes with the 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&D has been increased by close to 50%, reaching $160 million in 2021. This.
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.
Of the restage of 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 of our implant businesses under the dense ply sirona brand name, including a rapidly growing Ms value implant business.
It will include strong new products highlighted by Prime paper, an immediate load implant that will position us very competitively in the marketplace.
We will also be updating our well recognized simple and treatment planning software and integrating it with <unk>.
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 half of million implant cases through simple and in Atlantis on an annual basis.
For the first time, we are offering in the dental of scanning program for <unk>, a major development in the implant space.
The in dental of scan takes advantage of prime scans unique accuracy and provides a whole new level of detail that makes full arch implant planning easier.
While we are in the process of rolling out.
We are in the process of rolling out the ASIC bone regeneration brand to further enhance our implant offering and serve the rapidly growing immediate load implant segment in general.
All of our implant training and continuing education efforts will be harmonized and rebranded to provide a comprehensive implant curriculum for Dennis.
We've been working closely with our global implant KOL community and they have started gaining 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 the 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.
<unk> platform is another critical area for US beginning in September we will be launching pro taper ultimate as part of the new platform that will include new files of Biosimilar, <unk> sealer and a new disinfection device.
In addition, we will be launching multiple new motor systems in early 2022.
The pro taper Ultimate system really takes performance to the next level. The files of the designed to cut and shaped better and faster requiring less files per procedure. The.
The complete system will offer better cleaning and operation as well.
Pro taper ultimate is the first major platform, we have launched in the Endo area in several years.
It has also been in the hands of our Kols into the met with a very positive response.
There are also several critical software upgrades and launches coming in the back half of 2021. These include a major short smile upgrade of $7..7 this upgrade improves the user interface for the G. P. Simplifying the case review screen and enhancing the order entry process.
We're also launching of <unk> 5 point to a significant upgrade in prime scan that further enhances its speed and ease of use the <unk> 5 point to upgrade supports of the new in dental the scanning capability and differentiates prime scanning the marketplace early beta testers of indicated that this software upgrades provides a level of performance of it.
Makes it feel like a whole new product.
There are also multiple new shore smile product launches coming over the next 2 quarters. These include the introduction of a V pro product as well as widening in Q4 with V Pro which came as part of the propel acquisitions sure smile will be differentiated in the marketplace.
All of these new products will be launched their DS world event in September.
Moving to the next slide and.
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 liners in implants I wanted to add to his comments by saying that we are very happy with the by the acquisition we've had bite for close to 8 months.
We 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 data to provide us with a leading both but leading bone growth regeneration product to accelerate our implant businesses.
These businesses are off to a strong start and the integrations are on target.
All of this is powered by our outstanding Global commercial team comprised of over 5000 people, we have 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 the result, we will deliver.
The $250 million savings target and the 'twenty 2 margin goal on time.
Moving to slide 23 in summary.
We had a strong first half as the market recovered in 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 the dense <unk> sirona is well positioned to deliver sustainable growth in the future.
And finally, we are pleased to confirm the DS World will again be welcoming guests to Las Vegas September 20, <unk> 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.
If you would like to ask a question at this time simply press Star then the number 1 on your telephone keypad.
We will pause for just a moment to compile the Q&A last there.
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 first question Gary.
Given the outperformance in the quarter, obviously strong and you are pointing to a lot of things of that bunch of continued momentum in the back half of the year.
Why it was 1 of you raised the guidance I know you guys have pointed to being at the upper.
And of that but just can they be helpful to hear your thought around that all of that 1.
Good morning at least of it yeah.
Good question.
You know of from a from a micro perspective, we feel really good about how the business is tracking the 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 first company that provided guidance at the beginning of this year and then right. After the first quarter 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 and we believe the second half is going to be better than the first half, but as I pointed out in my in my prepared remarks, there's a few things to keep in mind and we talk about days 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 at the pace. We were planning to spend in the first half of the year. So that that is that is important and those those investments by the way are intended to.
To fund very important priorities for US for example, clear liners of our theater liners business. As we discussed is growing and we are adding more resources because we are launching of liners and other countries. We are also making investments in our influence Don talk about what's going on with our implant business and we continue to.
The investments in our digital capabilities. Both in terms of a go to market our strategy of products that are important for our customers as well as internal infrastructure.
And then I also mentioned visit in my prepared remarks.
There is a.
And the impact from a from a planning perspective.
The resulting from our change in assumptions relative to the Euro exchange rate. So when we when we provided guidance at the beginning of the year. This was 1 of the assumptions that I share with all of you. We set at the time that we were expecting the Europe 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 of <unk> that that change in assumption is represents.
About 5 pennies 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 and but we're really we feel good about the.
The consistency in our results and performance of this year. So for all of those reasons. That's why we have.
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 <unk> program.
Is that sort of something that you may talk about as we approach the well there at the as well.
Yes, it was with the.
Implants, there's going to be a big feature of DS World because look we're really 1 we really want to talk about being the first kind of digitally native implant company. So when we start talking about Zurich and the ability of doing in dental the scan and whatnot youre going to see a fair amount of integration of our digital.
<unk> 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, youre going to see a fair amount of that of DS World.
Look the S World is going to feature we think of pretty exciting lineup of new products, whether it was what we're doing in the endo space. We're really excited about the restage of our implant business.
But also you know really I don't want to undersell. The the <unk> 5.2, I mean, the 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 and enhances accuracy and when we're adding specific treatment planning around things like in dental scanning doing it real.
Integration with short Smile with 707.
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 would like to take your pulse maybe on kind of the 2 year growth rates in the first quarter. We had you kind of versus <unk> 19 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 you don't like the better understand why maybe that 2 year of growth rate came in a few points and it seemed like it was pretty evenly split across all 3 of your geographies. We of all 3 of them, maybe 3 to 5 points.
Slower on a 2 year basis versus the <unk>. So just maybe help us understand that dynamic.
Yeah.
Yes, Jeff.
<unk> came in very strong.
That was kind of the quarter of that everybody felt that okay things have returned to some semblance of normality and I think there was a fair amount of catch up across the board.
And as we look at <unk>.
We saw a pretty.
<unk> consistent whether it's consumables technology and equipment by the way Jorge in his prepared remarks called out.
Our world spec business, you know the health care business, which obviously wasn't really impacted by the pandemic. So that's.
That's a piece of that business you 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 thousand 19, we were coming off the prime scan 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 of an <unk> type programs that were aimed directly at creating retail demand as opposed to focus on wholesale activities. So.
We were working through that specific thing.
If we hadn't been pandemic, if that's even the 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 youre looking at 'twenty, 1 versus <unk> 19.
We're working our way through that comp, which might've been a little bit higher than 19 versus what we're seeing now as we level load and really focus on stuff like 1 DS as a preferred promotional program.
Yeah understood and just as a follow up question just on bite.
You know I try to ask you. This question each quarter and you defer and I'm sure you will again this quarter, but let me ask it I guess this way, which is the 19% acquisition growth in TNA, our assumption as propel was kind of of vertical integration deal from not a whole lot of contribution out of revenue perspective, there relative to what had been happening data.
Generally of material a little bit of contribution. So is it fair to think about that 19% acquisition growth in <unk>, specifically largely or the 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 J P. Morgan.
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 re Oregon. How are you thinking about premium versus value and can you give us a sense of how material. You think this could be of the business. This re launch over the next couple of years.
Yeah. It's.
A couple of things Tycho first we've been very public about saying, we are unhappy with our implant performance and.
Basically we said it was we thought it was a 2 stage of where look we've got to get back to growth part 1 and then we got the grow with the category of faster than the category.
And you know this is historically, we've been really kind of balkanized around our implant approach we had for premium brands between Ankylose XI Astro and Astra EV I don't think people really understood. We had a very competitive value brand in the Miss that's actually been growing at if not faster than the market the.
Other thing.
We've never really called out the customer of buttons business, which is the brand name we have as Atlantis, which is again growing.
And if not faster the market. So when we step back we said Hey look we have a fairly aggressive new product set of programs and we dovetail the new products with as well as the digital offerings.
We've really.
I think done a nice job upgrading simple and integrating it with Zurich. So.
When we put this all together we think it gives us the opportunity to reset our brand image and our promise.
Across the marketplace. So I would tell you.
I think theres going to be very significant I mean, if we had been growing.
The the our implant business.
At market levels that would be significantly higher than what we've performed out of it in the last 2 to 3 years. So again, we feel good that the this gets us it's not going to happen instantly, but we feel good as we start exiting 'twenty 2 we want to be extremely competitive in this marketplace and growing at market levels.
And then in terms of tyco value premium and value.
We were excited about the businesses, we thought as you look at their unique visitors theres an opportunity to focus on segmenting, it and actually not all unique visitors are made the same and 1 of the things that we've been focusing on is doing a better job targeting.
Over time so.
As we look at that business, it's performing.
Above expectations and that is incorporated some changes that we're making the.
The stuff that we get excited about over time that was you know look we think bite continues to represent a great opportunity to bring its underserved population, which a lot of people and bite arent necessarily regular our dental.
Dental customers and how do we bring them into the fold.
Somebody just spent close to $2000 on doing.
The bite treatment.
We want to help them really understand to continue making sure that they get value out of that procedure. They go see their dentists go get of cleaning and then we're going to be working with the dentists to follow up on things like you know how do you do a retainer in the and other things, but if again 1 of the things we were attracted to around bite was really the fact that they were hitting us.
Sort of populations that werent really exposed.
The dentists and but we think we have a unique opportunity given the role we play to bring them into the dental fold.
Great last 1 I appreciate youre keeping guidance unchanged here given kind of the uncertainty around the pandemic I'm. Just curious if you could comment on what Youre hearing from your dealers as you think about inventory levels and kind of the case load is going back up and then also what youre hearing from Dsos instead of thinking about managing a broader range of practices through the.
The next slate of dependent.
Tycho the the Dsos are telling us the traffic by and large is getting pretty close to 19.
It really depends on where they are and what part of the country, how how much exposure they have to the south versus the east to west or north.
But for all intents and purposes, we think it's a couple of percentage points versus where they are of 19.
When we talk to them and whether you talk to kind of the big.
The close to 6.700.
Offices.
Or even kind of the large group practices people by and large think the vaccine and the fact that some people haven't been to the dentists in 18 months. They are really kind of trying to get back in is going to lead to a pretty steady recovery. So our.
Dictation 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 the proactively reach out to their patients and assure them about the safety.
In terms of dealer inventory you know 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 was basically shut down and now we're all the way back to 19, and our customer service levels as we track. It so as Denis had 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.
The last 6 months 9 months program, which would incorporate pandemic.
The 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.
That's an ongoing process.
And obviously there'd be a in a better position to comment on how their aggregate inventory levels is but we're working with them.
Okay I appreciate it.
Okay.
And your next question comes from the line of Nathan Rich from Goldman Sachs.
Hi, good morning, Thanks for the questions.
John maybe finding a high level.
Yes, I appreciate all the details on the new products that you have coming in the back half of the year.
Yes, it's kind of looking at the company historically it seems like there's a greater deal of innovation than what we'd maybe typically see in the 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% to 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 the main factors are as we think about kind of growth in 'twenty, 2 but as you kind of dig into it.
Anthony.
We're comfortable.
Obviously.
Saying look the digital is going to be really important and I think we're well positioned much better position going forward of implants at endo.
Talked extensively about what we think about sort of smiling.
There's parts of the business, we think are only going to be a little.
Bit more challenged.
If you look at some of the things that Jorge has talked about from a portfolio management perspective things like.
Getting out of traditional lab the ad.
A lot of lab part of the business of other things but.
Hey look.
We've said a number of times debt, 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 of the back half of 2022 is going to see more benefit from the from the introduction of things like V pro that they're going to go out of the Schwartz.
So that's how we look at it but.
We were 6 months ago talking about 3 to 4 and now we're talking 4 to 5 and.
As we've raised that guidance up we wanted to be able to consistently deliver.
The performance so.
We aspire for more of and they believe we aspire for more.
I appreciate that.
And then maybe just following up on your comments on the supply chain. The pressures can you just go into a little bit more detail on where youre seeing that and maybe what products or categories.
Youre seeing that and kind of how we should think about the.
The potential impact of that in the back half of the year and very short period of time, Yeah, Nathan and just to clarify we financially we have been able to manage the challenges really well the the supply chain team has done an outstanding job of managing situations. Like for example, we talked last quarter about.
Some risks of Bob.
Supply disruption relative to certain electronic components right and the team has done a great job doing that we are seeing the inflationary pressures on the shipping cost side and and the team has handled those well and overall with Covid, there's always concerns about the.
There are certain suppliers in certain parts of the economy that are not back to normal levels from a production standpoint, and so those are the things that we are watching closely and.
All of our projections of 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.
We thought it was worthwhile mentioning because it's happening across the board.
Great. Thanks for the questions.
Yeah.
And your next question comes from the line of Jason Bednar from Piper Sandler.
Hi, This is <unk> 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 share of Smiles. You asked then and we're just curious on how that partnership is going so far how it I'll take bandon debt really launch of the.
Mono brand and then is that something that you've already baked into your original guidance the private labels or is that on top of what you've already stated.
Yes. Thank you.
Actually we didn't announce that.
Theres 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.
Level of products and services to their customers and we're proud to partner with them.
In terms of how's it going.
It would be better to ask them and then just in terms of debt baked into our numbers, yeah and again, we've given kind of very general numbers about what we think are clear line of 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 bi 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 the other DTC brands that are really price and Mark we're not out of the advertising right now.
Yeah, I mean first there is 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 the market at competitive levels.
1 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.
The areas in whether that search engine optimization or whether that's where it goes from other places like as we begin to bring this into the dentist's 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 to continue to differentiate that business by virtue of our vibration technology, which we think is it makes the byproduct differentiated in the marketplace and.
We get out in 2022, I mean, 1 of the things that.
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 Dennys channel I mean, we're still in the very very early stages of the penetration of this business I mean, if you look at people who would be eligible for a class 1 treatment.
We think we're at 10% penetration of the U S probably not the.
The other opportunities, we have with bite as well as with share Smile is how do we take this out of the U S where he mentioned in his prepared.
Repaired remarks that at this point, where.
Probably and getting close to 10 countries now with short Smile, 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 you know 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 round and 1 of the things that we'd like to do is take a lot of the traffic that we're generating with bite and all of these unique visitors and again the introduce them to dentists that would be part of our curated network, where they would have of prime scan and we believe that the.
It can really help.
Not only make sure that the treatment that was done with bite as is being held on given the cleaning afterwards, given the retainer afterwards, but potentially start the relationship with that dentist, because we think less than 80% of of the bite unique visitors have a regular relationship with the specific dentist.
Thank you.
And your next question comes from the line of Michael Cherny from Bank of America.
Hi, This is Allen in for Mike. Thanks for taking the questions. Don you mentioned, a few new product launches around gas, where all of this year I guess, how should we think about the revenue impact from DS world relative to prior years in versus what's embedded in the guide or is that more of a 'twenty 2 theme.
Yes.
I'd almost split the question of bound.
What are we expecting from a revenue boost on DS world.
It was interesting last year, where we basically ran the virtual event 1 of the things. We saw was you didn't necessarily see the urgency to buy a round of specific like 2 week period.
We looked at kind of the purchase pattern was spread out over a 3 to 4 months and obviously when youre doing virtual in the middle of the pandemic, we probably didn't get as much of a pop as you might've seen in prior years now.
We believe that we're going to see a very successful DS world. This year, we've got some really good new products, 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 the 2019 again, it's gonna be a little bit hard because we're still working through this will be the probably the first really big dental event held globally.
And we're going to see how it works, but we have again, we have a.
We think of 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 it's on track with what we saw in 19.
In terms of the new products, you know, we kind of talked.
You know I've group into the 3 things there's the implant there's the endo there's the.
And sure Smile as kind of things that you want to focus on that are specifically product as opposed to some of the software upgrades what the the implants, it's not going to be a spike I mean, 1 of the things we noticed in our equipment business I mean, you'll launch of new piece of equipment. There's obviously, a big spike with kind of implants Endo, we think youre going to see a more gradual impact of the.
I mean, if we get the whole.
We get everything out virtually around the world by kind of the end of the first quarter 'twenty to some of that might spill into the second quarter, you know 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 the back half.
Impact from a revenue perspective, then even loaded over the course of the year.
Yeah.
Thank you.
The next 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 of squeezing me in.
You had mentioned kind of of the rebound in the preventive visits than it sounds.
Kind of like just to confirm that the U S is kind of almost at pre pandemic levels. I just wanted to confirm that that's kind of what youre seeing and also could you maybe discuss what you're seeing across the other geographies on the preventative side and how youre thinking about kind of that trajectory with the.
With respect to the guidance and into 'twenty 2.
Yes, good morning.
Yeah.
1 of the reasons, we wanted to mention that the specific category is because we believe as the good barometer for gist.
Just overall.
Dental office traffic and volume and so it's a it's been great to see how that category has rebounded really well and and it is happening.
With a few exceptions of few countries is happening pretty much okay.
Crosses the globe.
Versus 2019 of them versus 2020, so we're seeing good good recovery in that market again, theres, probably a couple of the.
Countries, where the.
The situation is still pretty complicated and so theres a lot of restrictions, but in the in most markets. It is performing well.
Great.
And then just with regards to buy it 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 to have.
Yes. So we are working on that that is that is probably going to be happening in the Q1 'twenty 'twenty 2.
The timeframe and the the economic benefit from that in sourcing it is already factored into the projections we have.
For the foreseeable future so and in 'twenty 1 the.
In fact, there was no impact essentially and then beyond it will be it's part of out of the business case, when we did the acquisition.
We bought we look at the opportunity to bring that manufacturing capabilities combine it with our with our shorts miles footprint and that cheap some synergies there so part of the business case.
Thank you.
Thank you Don next question.
We've got time for 1 more question.
And your next question comes from the line of <unk>.
Chen from H C Wainwright.
Okay.
Hi, Good morning. This is the milestone for the channel.
We just wanted to gauge the more color on the fast track mobile acquired from propel.
We were wondering if youre developing developing yet to be applicable to multiple clearer line of 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 the pro.
Yeah.
Yeah got it thanks for the question actually that sounds thanks for the question.
Yeah the.
The App that we got it we're really excited about it absolutely gives us an opportunity to understand whether people are using the.
The vibration technology and it gives us just another way combined with bite that we're creating an interactive platform with all of our unique visitors.
We will be rolling that out as part of both bite and shore Smile, obviously share smile 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 bite customers.
We've talked to them fairly frequently.
So that will become part of that process ultimately, though yeah. We believe that the vibration technology has application well beyond just share smile and bite, we think it's something that.
We will continue by the way propeller is sold that beyond the U S. But we will continue offering that the orthodontists and general dentists as a separate product if they want to combine it with their clear liners in the app would be available for that but it's it's a the ups pretty cool it really helps people. It helps us understand if we need to.
<unk>.
Kind of give a nudge to of potential patient Hey, we noticed you haven't used youre vibration technology in 7 to 10 days remember of the wonderful benefits and and again, we think that's a.
Part of the kind of the customer experience and and we're really spending a lot of time not only on shore smile, but is by the as well as to make the you know the post purchase experience a really differentiated over the long term.
Sounds good thank you and congrats on the quarter.
Thank you. Thank you.
All right that concludes our call today. Thank you all for participating have a nice day.
Okay.
This does conclude today's conference call. Thank you for your participation you may now disconnect.
Yeah.
Okay.
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John.
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Yes.