DENTSPLY SIRONA Inc. (XRAY) Earnings Call Transcript & Summary

All right. Hello, everyone. Thanks for joining our Dental event today. This is Jason Bednar. Our next fireside chat today is with Don Casey, CEO of Dentsply Sirona. Don, welcome, and thanks for joining us today.

Thank you so much for having us. Excited to be here.

Great. Great. And we also have Andrea Daley here from -- VP of Investor Relations. We've got 45 minutes here for our discussion. For those tuning in, there is no audio Q&A. So if you have questions, you can type them in the box at the bottom of the screen or you can e-mail them to me directly at [email protected], and I'll ask Don and Andrea on your behalf. So with that, why don't we dive right in. Don, just maybe before getting into some of the nitty gritty, could you reflect on your time at Dentsply Sirona I guess have you accomplished what you'd hope to accomplish? And are you pleased with how the business is positioned today? And then what gets you excited for the next 2 to 3 years?

Sure. It's a great question, Jason, because I've celebrated 4 years here, two of them during COVID, which is one of these things where it certainly gives you a lot of opportunity to reflect. But I'm pretty happy with where we are, yet recognize there's still a long way to go. If you go back into -- I started in February in '18 to where we are today. I think we've got a clean, differentiated strategy built on what I think are unique Dentsply Sirona advantages in a large installed base and then how do we digitize that installed base with a lot of the technology and equipment will be coming out. That should enable dentists all over the world to practice at a higher level, things like implants, clear aligners, endodontics and restoration. Those are kind of our priority areas. Feel that we've made good progress financially if, again, we had done a 4-year restructuring plan where we said, look, we want to get to 3% to 4% growth, which we later raised to 4% to 5% and said we should get to a 22% margin in 2022, delivered double-digit EPS. And by and large, we've hit that. And in non-COVID years, you certainly see that we're capable of growing above that 4% to 5% range. Really happy with where we are from a new product perspective. I think we're going to have probably the most aggressive launch schedule we've had in the company history over the next 18 months. But I also recognize as you look at what are opportunities we have, I don't think we made all the progress we will make eventually on the portfolio. I still think there's things that we'd like to add and a few things we'd like to track I think we've created some wonderful central functions that -- now that we've created them, how we operate them at a higher level. Think about supply chain, QARA a lot of like -- kind of the infrastructure. But what gets me excited is why I come to work every day. And I really love new products, Jason. That's -- if you ask anybody around here, I'm forever like I was just walking in with Andrea to show something like this is a full mouth model that we just printed on our 3D printer that happens to be my teeth. So first, you're appalled that you're on teeth but basically going from a scan to somebody handing you a full mouth model. And like 35 minutes, you begin to understand what the potential of digital dentistry is. And we've spent a lot of time, talent and treasure there and really excited about the first things we're launching, the print and a few other things that we'll detail on May 4. But -- we have a very, very ambitious schedule over the next 18 months, particularly in the digital dentistry area.

Great. Great. I definitely want to talk about Primescan later because it's definitely going to be exciting and as everyone knows, the most -- one of the more recent product launches and the most recent product launch that you introduced here just a little while ago. But before we get into that, maybe some more topical and maybe tougher questions, and sorry to leave with those. But everyone wants to hear about Russia and Ukraine and kind of the situation for your business there. I know it's only 3% of revenue you addressed that on the 4Q call. But I guess, what's the state of your operations if you're able to talk about the state of your operations in Russia today? Are you still active? Have you halted? And what's the ability to navigate and move product around in that market. We heard earlier today from one of your competitors that it's a little challenging right now to say the least, to get product in and around Russia. But are you seeing the same thing with your business?

Yes. And Jason, you hit the nail on the head. I mean, it's 3% of our business, if you look at Russia and Ukraine together. We are still doing business in Russia in compliance with all regulations. And it's a little more challenging. Obviously, you get cash in front of delivery of the access lanes of getting things into the country have been constricted. We've got close to 200 commercial people on the ground in Russia that we've maintained. They're saying that business continues to be solid from an end customer perspective. And look, we've had a lot of very in-depth conversations with us as a company, how are we thinking about it? We always say -- look, first, we had a significant presence in Ukraine close to 60 people. A lot of them in the software piece of our business, which we got them to safety as the first priority. And then you begin to say, okay, once you go through that, what is the appropriate response in Russia. And our sense is we're a health care company, and we're committed to people's oral health all around the world, and that's why we're going to stay in business there. It's kind of hard to say if you go back and we -- the nice thing about Dentsply, we've got 100-plus years of history and Sirona has been doing business almost since inception in Russia. And if you look at it, the sanctions tend to have a longer half life, even if you were to say the sanctions last year. it takes a while for that business to come back. So what -- how we're modeling it right now is, look, any -- we could say at 3% of our business. We expect to do some business in that area of the world in the short term. Obviously, it's a headwind that when we started doing earnings, we identified as a headwind. It was kind of too early to say. To date, again, it's difficult to do business, but you can still do business there. You just got to make sure you get paid, which we feel pretty comfortable with it. And we're going to continue focusing on our role as a health care manufacturer making product available and do it with all appropriate -- paying attention all appropriate and complying with all appropriate statutes.

Okay. So just to make sure I understand. So for you, it's not a demand issue the demand is there, but it's more of a product access and getting the channel worked out appropriately to get product in the hands of dentists?

Yes. And we'll see over time how the sanctions impact their overall economy. And again, we're 4 weeks into this. So it's too early to really see a trend. But I think your summary is fair.

Okay. And for your business in particular, do you -- I know -- I remember Sirona having a decent, not going to say a decent size in [ overlay ], but they had a good [ good ] presence in Russia. I think maybe a little bit bigger than 3% then supply historically, maybe a little under 3%, and that's about 3% today. Is there a part of the business today that you see as being as having like a different mix in Russia than the broader company? Or is the broader company mix pretty reflective of what you have in Russia today?

It's -- the mix is -- the mix in Russia isn't a whole lot different than the mix elsewhere. But again, you'll have to see. I mean, obviously, if the economy begins to change, is that going to impact things like higher value procedures like implants or is it going to impact technology and equipment differently than you might see on the consumables side. But four weeks in, it's kind of hard to develop a real trend line in terms of what part of the businesses may be more exposed or less exposed.

Got it. Okay. Makes sense. Pivot over to another tough market right now for a lot of companies, China. They're going through their own, new kind of wave of rolling lockdowns -- what's -- is there anything you can comment on there as far as the kind of real-time status of your operations there? Do you have facilities that are being impacted and affected by these lockdowns? And then I'll follow up with some other supply chain-related questions that I think are just natural in this conversation.

Yes. You almost want to divide it into commercial operations and then supply chain operations. So I think on the commercial operations, it's really kind of been a rolling lockdown. I mean, obviously, yesterday, parts of Shanghai were put under lockdown. What we tended to see basically since the beginning of the year is the lockdowns will hit a particular area. It will be locked down anywhere between 7 and 10 days, and then it might roll off around. Commercially, it has impacted the business. We think underlying demand remains very, very good. We don't think that this represents an inflection point in the market. So almost like where we were in the middle of 2020, we have people deferring procedures, but not eliminating them. So as we think about commercial -- on the commercial side of the house, again, how long are they going to stay with the one -- basically, 0 COVID policies? And will that continue to move around the country? As we think about what we've seen today, it does serve as a headwind there. But again, it doesn't feel like it's really impacting underlying demand. And we do a pretty good consumable business there. We did a pretty good implant business there and some of the technology and equipment. So at this point, we're looking at it as more deferral or potentially spreading out of demand but not an elimination of demand. And now we're going to have to see as we get through the summer, again, how that policy impacts the broader China area. Then if you sit there and say, okay, let's go into manufacturing. We do have some manufacturing in China that's been impacted. Basically, you see a plant that might go down for a week or 10 days. So far, internal manufacturing, we've been able to kind of manage through that through good planning and anticipating this was going to be an issue. Where we are seeing impact is almost secondary suppliers, so suppliers to our suppliers where specific areas, obviously, electronics, in some cases, medical-grade plastic and other things, packaging and other areas that basically, again, they're not primary suppliers, but they're suppliers to our suppliers and I think what it does is it makes the supply chain a bit more challenging when you're trying to navigate what's going on in China. And then, Jason, I'm assuming you'll then ask broader supply chain questions. So -- but I was trying to answer specifically about China.

Yes. No, you're right. I do want to go into the broader supply chain discussions that's very topical. But I guess maybe real quick and kind of piece that before we kind of commercial [indiscernible] we leave that. I mean is it your kind of working assumption right now that even if things are a little bit slower because of the lockdowns that we're experiencing real time that the rebound post-lockdowns will be similar to what we saw in 2020. Do you think that's a good analog? Or is there a reason why the quick rebound we saw in China in 2020 isn't a good kind of a good representation of what we might see now?

I think it'd be a little bit different, Jason, because in 2020, there was a lockdown across the entire country that was uniform. So it was, okay, everything went offline for 2 to 3 weeks, and then it kind of came back online all at the same time. What we're -- all of us are collectively dealing with is kind of a rolling situation. Where, again, yesterday, basically, on the west side of [ Croydon ] was going down. And we think right now, about 40% of the country is in some form of lockdown and whether that's early or middle or late and how long it's going to be locked down for. So I don't think it's going to be as precipitous on the way down or as sharp on the way back up. I tend to think this is probably going to look a little bit more like kind of a rolling challenge to underlying demand that should return. But again, because I don't think it's going to go down that shortly. I don't think you're going to model it as a U or a V. I tend to think it's going to be a little bit more gradual down, a little bit more gradual up. So rather than down 1 quarter and up in another quarter, you may see an impact over 2 quarters where you'll see eventual mitigation of pent-up demand, but you're not going to see it in sharp angles.

Got it. Okay. That definitely sounds like more -- right now, more of a shallow trough situation. So. Yes. Okay. Maybe shifting over to the supply chain piece. It's got a lot of attention. Let's see the issues here have -- whether it's product coming out of China or just the ability to access product that you need to assemble everything that you're putting together. All the material sourcing procurement, it seems like that has not gotten any easier. And I would assume some of the challenges that are going on in China right now could actually, specific more -- would be more challenges down the road. So is there anything you talk about real time on how things have been fairly stable since your call just a few weeks ago? Are you running into any other access challenges on chips or the things you talked about with respect to digital imaging and maybe some longer lead times on installed, are those still contained within imaging? Or are you seeing those bleed into maybe some other categories?

We're seeing it kind of move into other categories. If you go back to what we said in our prepared remarks, and then we did a bunch of Q&A afterwards, we said, hey, look, right now, imaging is an area -- and then, by the way, then there's costs associated with this, but let's just stay on product availability, particularly around imaging, Jason. What we're seeing is we do make progress. It's not as if somebody orders something and there's no action on it. But we're seeing extended lead times, and we have not been able to shorten those lead times. So as we look at our business over the course of 2022, we tend to think that we will see improvements over time, but it's not going to be some a quarter where there's going to be a bolus on imaging, where all of a sudden we catch up. What we're seeing is in other electronic parts related areas, things like a treatment center or other areas like a prime mill. We're seeing much shorter time periods where we're experiencing scarcity of goods, but you kind of see them rolling through kind of the T&E side of the house. So you may, all of a sudden, be fine on high flux capacitors. And then -- but you all said you can't get courts in some other areas. So the cumulative impact of that kind of moving through our supply chain is that we are seeing back orders beyond what the imaging thing is none of them are -- we're not shipping. It's mostly, okay, if there was going to be a 2-week lead time, you see it extended out. Important for us is we haven't seen underlying demand curtailed. So if we say, hey, look, we want to sell you in Axeos, delivery time might be x number of weeks. We're not seeing people throw their hands up and say, hey, that's unacceptable. And we tend to work with the dealers to try and mitigate that. As we -- our principal products for us that we stay very focused on right now, on the DI space, which is important to us. We feel very good about our ability to supply in there. Some other areas that way around treatment centers and like kind of our mill. We've seen some discussion and some kind of impact over time, but it's not something that's going to bleed out weeks and weeks and weeks. It tends to be something that you may see impact us for 3 to 4 weeks at a time. But the most important thing that we stay focused on is what's underlying demand doing. Now as we get in -- Jason, I mentioned that we've got a very aggressive set of portfolio launches coming in the back half. And we're kind of looking at -- as we get into 2023. And right now, we feel good that we're going to be able to hit those time lines, but a lot of that is chip dependent. And again, our procurement team has done a remarkable job in terms of finding alternate suppliers, qualifying secondary suppliers and whatnot. But you're kind of dealing with, okay, what you can see, what customers can see today and what we're trying to do in the back half. And that's -- so far, we're navigating it, but it's certainly taking us a lot more time and energy to get that done.

Okay. All right. Understood. You mentioned Primescan within there that so far, be able to operate, obviously, really good demand, category demand is just off the charts, but you've been able to operate without any kind of impediments or supply chain issues or challenges there. Maybe some higher costs like just everyone seen in their supply chain in terms of procurement and shipping, but otherwise, in terms of actual production, nothing there yet to call out as far as risk on the DI side.

Yes, I think you hit it -- look, cost -- costs are going up and your cost to ship stuff, particularly when we manufacture all that in Germany getting in the U.S., obviously, some of the costs associated with that transportation have risen. But now we can keep up with demand on DI right now. Okay. All right.

Great. Maybe to shift over to some rosier topics. I'm sorry to address all the Russia-China supply chain issues here, but maybe shifting over to Primeprint. I do have a lot of questions here and probably could take the rest of the time here today just talking about Primeprint but I guess, first, are you able to talk about the kind of the price point. I've seen price points and other office-based 3D printers, you have more of an elegant and unique solution that you're coming to market with I would assume. And you've referenced being a premium player in the office space 3D printing market. Any, I guess, range you're willing to provide? Or how are you thinking about the price point for Primeprint?

Stay tuned for the May time period, Jason, where we'll kind of roll out price. But look, I'm not trying to be cute. Basically, we're going to sell this as a premium. There's 2 or 3 markers in the category and we think, look, we're at 2 pieces versus a 3 to 4 piece. We're medical-grade,we've done a remarkably good job on dealing with the solvents associated with the printer. We have a lot of apps that are coming along with that, that will let people get into splints and night guard pretty easily. But -- so we think we've got a premium performing product. We think total cost of ownership is highly competitive depending on the amount of volume you used to. But I'll also tell you, we're really excited about bundling some other things with this. When you think about ink, you think about design services and other things that we'll be providing with the printer. We think it gives us an opportunity to not only will we sell a great printer at a premium price, but unlike other kind of past Sirona efforts, we're going to make a much more aggressive effort to follow-on and build revenue streams off the printer. If you go back to the mill, literally, when they introduced the first MC XL, I mean because it was Sirona, they didn't have a relationship with lab manufacturers. So to this day, we still sell less than 20% of the blocks that are run through our own mills. We're going to be much more aggressive as we think about things like Primeprint to be a much more aggressive material supplier to that in-office manufacturing capability.

Got it. Don, what do you think is the natural early buyer? I mean I'm sure you would say that the natural buyer is going to be any dentist down the road. But who's the early buyer? Who's going to be the first adopter aside from like your just tech guys who want to be having the latest and greatest toy in their office.

Well, never underestimate how important the latest toys are with some of these guys. But no, look, the -- if you go through our total business there is a significant portion of the CEREC users that are really committed to chairside, basically full chairside manufacturing capabilities. That's where your natural audience goes. Mills and the printer are not the same thing. You almost want to think, Jason, that mill is something hard that's going to be put in your mouth permanently, whereas the printer tends to be things literally like models, night guards, splits, other things, eventually appliances, which tend not to be left into the mouth full time. Now look, over with material development, whatnot, eventually the mill and the printer will begin to overlap a heck of a lot more. But our -- and again, we've probably had dozen or so printers out in the market for close to a year. And what we're hearing from our KOLs and others is this is just an absolute wonderful add-on to people who understand the economics of being able to do full chairside dentistry in about an hour. And the interesting thing is, Jason, you probably have perfect teeth. But if you don't have perfect piece like me and all of a sudden, you get to see what your teeth look like and you could do that in an hour in a dentist's office, the patient activation process where you're able to show them when a Night Guard is custom, you're able to show them what literally their mouth looks like is off the charts. So you're seeing it as a real opportunity to do in office manufacturing very quickly, and we think it's a very strong patient activation tool. So ultimately, we'll go to the CEREC users and basically, we'll start there. And then to your point, look, the versatility of this unit, we think every dentist should [ apple ].

Okay. So you don't think that the 3D printing in any way cannibalizes the mills in any way down the road is these either two separate categories. If you have a Primescan and a Primemill, you're still a candidate for a Primeprint. If you're in the market for a Primemill, you can be in the market for Primeprint, too. They're not -- they can operate in tandem.

Absolutely.

Okay. All right. And where do you think the market goes in 3 to 5 years? I mean if we're talking about penetration, we can see kind of where the trajectory has occurred on digital imaging, which we have a case example there. We have a case example on CAD/CAM. Same thing on digital impression scanners. What about 3D printing? Because this is the kind of the new latest and greatest part of the dental market.

Look, when you say 3 to 5 years, Jason, if you go full chairside with mill, we think in well-developed markets, 20% of dentists have some form of in-office manufacturing capability. It's a little different in Germany. You have a lot of dentist offices that actually have a lab capacity there. But we tend to think printer is going to look a lot like mill penetration over time. It might happen a little bit quicker because, again, the price points on mills are higher than what you see at price point on a printer is going to be. So you're looking at a smaller upfront capital outlay with an opportunity to add practice economics relatively quickly. So -- but if you look at mill kind of that penetration curve, we think printer will look probably a little bit faster than that, but it will look something like that.

Okay. Okay. And then what is the go-to-market strategy look like here for Prime print. I don't think you shared too much, but is it safe to assume that in markets where you have distribution established to work through your distributors? And then in markets where you don't you have a direct presence in terms of selling to the docs that you'll sell this on a direct basis?

Yes, it's going to follow our -- pretty much our conventional distribution patterns. There are a number of countries where it's exclusively through the dealers. There's other countries where it's kind of split what we would call omnichannel, which is if the dentist wants to buy it through a dealer grade, you want to buy it through us great. And then there's other countries where we're straight up direct. So it's really -- we start with the customer, what does the customer want and we go from there. But we're not looking at this as some U-turned in what our ultimate strategy is.

Okay. Are you able to talk down about the margin levels and not specific on this product, but is it accretive to company-wide gross margin? Just on the system itself, I'm sure the consumables piece would be, but curious on the system itself.

Yes. I would tell you, first, because we haven't announced pricing, it's not -- probably not appropriate to go do a deep dive of the margin. I would tell you that historically, Sirona was much more -- the Sirona side of the house is much more interested in a single product sale and that was the end of the discussion. We're tending to price this with the idea that how do you expand some penetration or accelerate penetration that would be available to you, but then look to create trailing revenues off this, whether it's a service component, warranty component, ink and other physical materials that go along with that. So we're doing with 2 calculations as we go through our process here, which is, one, what is the upfront margin on the equipment, but then what's the lifetime value, assuming a 3- to 5-year lifetime horizon on a 3D printer and what does it look like depending on different usage patterns.

Okay. All right. Got it. Well, we'll look forward to the May event to get maybe more details there. Maybe shifting over to Byte here. I know probably your favorite topic here in the last 6 months time. But can we talk about what you learned about the business running in here for the last 15 months or so started off really strong. Obviously, right into some challenges that weren't bionic Byte specific disinfected the fact of the entire direct-to-consumer category. So I guess, what are the learnings there? And then where does the confidence come on the guide in terms of baking in an assumption that growth does steadily improve here as we go through 2022?

Yes. I think you said it really well, Jason. Obviously, in the post-pandemic and pre-iOS kind of privacy change, you had one kind of set of economics that went across with that. Now by the way, there were a lot of competitive economics that go along with that from like a SDC and a Candid. Our commitment and the reason we like Byte, I mean, strategically, we like Byte just because of critical mass in the clear aligner space. and the idea of getting an underserved penetration underserved population, excuse me, into the dentist office was really important to us. I mean if you look at what one of our competitors does with DTC advertising, they're creating patient traffic, which is important to dentistry. We think this is another way that we can create patient traffic that's a different way of doing it. But obviously, as the pandemic loosens up as there was the change with iOS around the privacy settings that change the dynamics. Now since then -- and by the way, we had always run the business carefully. We were never going to chase CAD and we were never going to chase acquisition models that were going to lead us to something that really would be dilutive to the total business. So we said, look, we need to expand beyond just a pure play social media. Let's go on Facebook and Tik Tok and see what we can get. And we said, look, there's got to be affiliate marketing, that's stuff like insurance and other things. We really felt that a search engine optimization, where you start building up significant content that was going to be really important. It's turned out to be really important. And if you -- when you talk about '22 and going forward, first, the competitive dynamics have changed, which we're happy about. Our confidence in the guide just the nice thing about Byte literally at the end of every day, I see what they did. I mean, I can tell you week by week, day by day, how many aligner trials do we sell, how many -- what we call S1s, how we people who we send molds to, how many actually converted into Byte. And if you look at that, what that funnel looks like, we're pretty comfortable that once you kind of established the new ground of post pandemic, post iOS and understanding what that looks like, we've seen pretty consistent progress across the business. So our confidence in the guide when we said, look, we felt that we'll grow each quarter sequentially versus the prior quarter. We're basing that on a trend line we're seeing on a week-to-week basis that we've been observing for enough time that you feel pretty comfortable that in the new dynamics of the marketplace, you understand what's going on.

Yes. Okay. And then I don't want to get too granular just in this discussion, but I will just on this topic. I mean, how are those conversion rates looking? I mean because you're just inundated with this data, I mean, can you speak to anything on what you saw transpire as far as like the last call it, maybe August through December and then play into the early part of this year with the Byte business. Have those conversion rates started to show any kind of life to them? Or is this more of like, hey, like let's keep this as stable and we think some of the initiatives we have in place are going to support the growth in the second half of the year.

It's almost, Jason, the shape of the funnel hasn't changed that much. I mean once we got through kind of the April, May time period, in terms of a number of unique visitors. The number of people who will pay us to buy a trial basically by a mold, and then the number of people actually convert into [indiscernible]. The shape of that funnel hasn't changed. The discussion point for us was 2 things. First, how do you get more people into the funnel. So that's when we talk about affiliate marketing, search engine optimization and other things that we're doing. It's more about expanding the top of the funnel because the shape of the funnel doesn't differ that much. Now that being said, we have a fair amount of work going on that could change the shape of the funnel. There's two specific activities there. BytePro is one of them where, look, if you're not eligible for -- if you -- Byte is basically Class I. If you're a Class II, Class III or ultimately you feel that you really want to be in touch with the dentist again, we're cycling 600,000 to 800,000 unique visitors in the course of a month. If you're talking in the 20,000 plus people who are basically looking to buy a trial kit from us and then the shape of the funnel, there are a significant number of people that we would like to see access dental care. Like for instance, if you have a cavity, you may be eligible for Byte, you might be really interested in Byte, but if you've got an unfixed cavity, and remember, this tends to be an underserved population, you need to get to a dentist to get that fixed to come back to fight. So BytePro, in our mind, is another way of monetizing what we think of this patient traffic. And then we're pretty excited about -- if you look at our patient experience and look at some of the things we've been doing with our app and other stuff we're looking to improve the shape of that funnel by virtue of every single day working to improve the customer experience. And we've made, in my opinion, some really important strides over that in the last couple of months. So look, it's how do you get more people into the funnel and then how do you improve the shape of the funnel, and we spend time on both of those things.

All right. Very helpful. Maybe last question for me, on Byte -- you better -- I don't know if it's better to find, but what is the growth -- we have kind of the makeup of the growth outlook for '22. Without putting too much context around it to give yourself into guidance, but what is the growth outlook for this business look like beyond '22? Is it growth accretive? Is it margin accretive to broader Dentsply Sirona if we're thinking about -- again, that doesn't hit to be '23 but beyond '22?

Yes, Jason, why don't we pull back just a second. And why don't we talk a little bit about what our aggregate strategy is, and then I'll answer your question specifically. Look, we've said we've got to grow our digital base. And if that digital base, if you look at what we've done with Axeos and if you look at what we've done with DI, 2.5 years ago, we weren't in the DI business. And now I think we're going toe to toe with anybody in the category on a pure-play DI basis. All right. Why do we get so focused on DI? Well because it's going to let dentists take advantage of treatment planning and AI to let an average dentist, all of a sudden approach implants or approach clear aligners, which are a more complex procedure and deliver the outcomes they want and improve the economics of their practice. The same with restorations and we think the same with [indiscernible]. So that's kind of what our strategy was. We felt strongly that having DI without the procedures was not going to work for us. You can look at analogs in the category where if you look at [indiscernible] and Invisalign, we tend to think that we have a great DI, we didn't have the clear aligners, and we had an implant business, which we thought was underperforming, but how do we look at those higher-value, faster-growing procedures and get into it in a way that's unique and lets us be super competitive. Well, in 2018, we didn't have a clear aligner anywhere. And so we went out and bought a company or our metrics. We kind of integrated that in the back half of '18, then we went and bought Byte. And we can be excited or disappointed that we're nearing $300 million on a run rate there, but that's a $300 million run rate in a profitable category that's among the, maybe 3D printing is growing as fast as DI. There's not too many categories that we think have the growth profile of [indiscernible]. I mean whether -- you look at the dentist space, which, again, we tend to think is a 25% grower or if you look at the more DTC space, which we think continues to grow at 20%, it is a large underserved population. We haven't taken this outside the U.S. We don't have too many categories sitting in Dentsply Sirona, where we're looking at the growth profile in profitable categories like clear aligners. So that in a nutshell, look, DI is really important. We've got a big base, but DI, just for the sake of doing DI without linkage to the procedures we felt was kind of an incomplete strategy. So in our mind, Byte gives us critical mass. I mean we now have a full facility down in Mexicali, Mexico, where we've built manufacturing. We've been able to take Byte and we now do the scans of the molds that people send us in our facilities if you think about treatment planning that we're doing for Byte and treatment planning that we're doing for SureSmile, it certainly gives us an opportunity to economize that over time. So look, we think that Byte is going to be growth accretive. It is a positive. I'm not saying it's a positive aggregate to the total business, but it's a very attractive margin for us. And we think clear aligners, from a total category growth and profitability perspective is very, very competitive with a lot of the stuff we're doing in Dentsply Sirona. So if you want to -- we tend to look at total clear aligners and you look at that -- and again, not getting into guidance, Jason, where we're -- here's '23, here's '24, here's '25. But our models look at that and say we should be growing 20% plus in those categories.

Okay. All right. That's helpful. That's helpful. Maybe shifting over to pricing here quick, I know it's another topical point for a lot of folks. You and Andrea have been talking -- I think really aggressively regarding pricing opportunities, a feeling if you have kind of the right to take additional pricing in this environment, and you've done it successfully so far. It sounds like you might have another price increase planned near term, at least based on some of the comments you made on last quarter's call. I guess I'm curious how you're all settling on the timing and communication of pricing decisions in the market? And then what's been the response from some of your distribution partners and dental customers to these increases?

Yes. As we mentioned on the call, we had taken price in October. And we felt -- for the first time, we have kind of done that as a uniform company quite all around the world. We're going to do price -- and by the way, Jason, our price tends to focus a lot really on the consumables space, kind of the technology and equipment, when you have dealer rebates and stuff like that, it's not as clean to pass that on. Our intent is to take at least one price increase probably in the middle of this year. And to be honest, if prices continue to track, we would revisit potentially taking price again really early in '23 or even in late '22. The reaction from the dentists has been kind of expected. And again, because a lot of the stuff we -- the price of a trophy cup going from $0.02 to $0.022 isn't something that's extremely visible. And our dealer partners on the consumables side, we have 20-plus dealers has been -- in some years, they would have really put their hands up and said, we really can't think that we can pass this on. It's been a different kettle of fish year because their costs are going up. And to be honest, they need -- because everything is based off what the retail selling price is, if we take price up 2% or 3%, it helps them offset what their costs are. So they've been supportive of the dentists that we've talked to, and we talk -- obviously, we take the stuff from an analytical perspective very seriously. We haven't heard a whole lot of pushback from the dentists.

Okay. Understood. Maybe on -- sorry, I lost my train of thought on where I was going to go next. But I guess, in light of what we've seen just inflationary environment, oil price is changing, I'm sure your shipping costs have been rising here. Just maybe in the last minute or two, what are you doing in an effort to offset or pass along some of these higher shipping charges? Are you passing that on to in the instances where you're direct, are you adding on fuel surcharges or freight surcharges to your customers? I guess kind of the context here because it kind of leads into another investor question that came in is just in light of everything that's going on in the supply chain, how do you feel about delivering on your margin goals for the year? I understand you just gave them a year ago, I'm not asking to get to bless guidance, but what are you able to do in this environment to navigate to what you said you're going to do.

And again, we're looking at it less like here's a fuel surcharge or hey, look, if you're going to -- we're going to change the patterns of how we shift technology and equipment to the U.S. out of Germany. Now it really -- it gets factored into the price. And in some cases, our partners actually take responsibility for transportation out of Germany and some other things. So look, in terms of aggregate costs associated with increased distribution and logistic charges, we're factoring that into our price increase, which is, again, we -- Jason, we would typically -- if you look back over the last 5 years, we would try and average an annual price increase, but there were some years where it might have fallen outside that calendar year. We're saying that we're going to get 2 price increases this year. And if we need to get a third where it might be over 3 price increases over a 15- to 18-month time period that might actually affect 3 calendar years. We are going to be aggressive about trying to get our costs back that's associated with how our cost structure is going on, how it's moving. And the other thing is, look, we've -- you asked me reflections after 4 years. We're a lot more disciplined today than we were 4 years ago. I mean we -- if you go back to 2018 and what we were able to post in 2021, we're up close to 500 basis points. And we basically came out and said, look, we expect to hit the '22 and '20 our exiting growth -- our exiting margin rate in the end of '22, 2022. It's because we have -- look, we took close -- a number of manufacturing facilities. We took from 42 down to 29. Now we've added a couple back with acquisitions. But we took -- we said that we're going to take 4% to 6% of our heads out. We actually took in excess of 8%. We've learned to operate that company, particularly post pandemic at just different levels. So the amount of time and discipline we've put into managing our cost structure certainly stands us in better speed right now as we're starting to hit an inflationary environment where we really feel there we've gotten much better at analyzing and being disciplined about how we approach costs.

All right. All right. Well, I think that's a great place to sum everything up and thanks Don and Andrea for their time today. Thank you so much for joining us. Really appreciate you joining us today. For those of you in the next buyer side chat for our Dental day begins in just under 15 minutes with Patterson Company. Thanks, everyone.

Thank you.