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

Okay. Good morning. Thanks for joining us. My name is Elizabeth Anderson. I'm Evercore's health care services and dental analyst. I'm very pleased to be joined by Simon Campion, CEO of DENSTPLY SIRONA, many of you know. Thanks for coming today.

Welcome. Thanks for having us.

So I guess maybe a couple -- there's been a number of recent announcements. Maybe let's talk first about the situation with Byte. Any updates there in terms of the suspension and sort of your work with the FDA on the product category?

I would say we're taking a very diligent approach to a, our interactions with FDA and b, our thought process with respect to what we're doing with the business. Moving forward, I think we made a lot of progress here. It's a multifactorial thing. There are regulatory angles, clinical angles coming back to market angles, and we -- while we've done a lot of great work, we are not in a position right now to determine the future of this. But we've got some great talent at Byte in terms of demand generation, e-commerce, user experiences, continuous interaction with customers and some very talented software developers. And so we have -- we've been going through a process with our human resources team and with our R&D teams and other teams within DENSTPLY SIRONA to see where and if we reallocate some of that capability around the business. So we've already made some moves, particularly with, should we say, R&D software folks, and we think we can deploy those elsewhere to help accelerate some other key programs in our company.

DS Core.

Such as DS Core, such as what we spoke about before about our other orthodontic aligner business. So we've already begun to make those redeployments. But we are being very diligent about it. It's a big decision to make one way or the other. And so we're going to take our time and do it right.

Yes. No, that makes sense. And remind me some of those things about demand generation and R&D, those were sort of largely until this point, run separately. And so that sort of it's like integrating those within the rest of the DENSTPLY SIRONA world, like that would be sort of like an incremental benefit from this point. It's like we were running those as one standard operation from the get-go.

We would hope it would be an incremental benefit to us. The Byte was very much stand-alone even as we look at it internally, we had a separate line for Byte. And so those capabilities had not been shared across the other parts of our organization up to this point. We were focused on driving profitability of Byte, and we had done a reasonably good job at that until the state regulations kicked in meaningfully in Q3 as we discussed before.

Got it. No, that makes sense. So other news obviously, you announced a new management team member this week. Can you talk about sort of your decision-making process in there and sort of why -- how the process enrolled and sort of why you picked the person you did?

So as you know, we've had a CFO recruitment process underway since August, and we have a pretty robust slate. We -- you also know that we announced the departure of our Chief Accounting Officer and subsequent appointment of a new one recently as well. But having an interim CFO, who is also a part of the process, by the way, in all transparency, come in and help us as we go through the back end of 2024. Think about the 2025 operating plan. We felt it was a prudent move to have someone come in and fill that gap for. So Herman Cueto is a tenured finance executive with over 20 years of experience in a variety of companies. He was CFO with Azenta. He had very senior finance positions at Becton, Dickinson and C. R. Bard. So he's a known quantity. And...

And you worked with him before, right?

Yes, I did. He was the controller of the Interventional segment at BD.

Yes. Okay. No, that makes sense. And then just in terms of -- I appreciate the update on the tax situation. Probably not too much more you can share on that front. But it seems like in terms of scope limiting comments. Is there anything you can say in terms of helping people to think through this potential size of that implication? Because I think it was helpful to obviously hear the 8-K earlier this week in terms of that.

I think it's difficult right now for us to share or even size that for anyone. The tax authorities are in the data acquisition phase, shall we call it. And so what they're looking at is as of yet rather unknown to us. What we do know is that when we set up these intercompany loans and debt structures in the 2017 time frame, they were completely vetted by external partners. They were all above board legally. And so we feel -- we feel very confident in the positions that were adopted at the time. We're working closely with the German authorities. But we will vigorously assert our position when the time comes where they come to us with proposals or conclusions or however they do it.

Okay. That makes sense. And no sort of time frame to put around that because they probably work on the schedule that they work on.

They work on the schedule they work on.

Okay. Fair statement. Maybe switching to the overall demand environment. I think it's been characterized by you and others across the industry as stable-ish, stable. And so could you sort of talk about what you're seeing, both maybe on the consumable side and then in sort of specialty and then in -- on the equipment side, that would be a helpful update.

Yes. So on the consumables I think stable is an appropriate word for it. Obviously, our Q3 numbers were somewhat skewed because of the go-live we had in the U.S. with our ERP system. I'd say broadly, consumables are certainly in North America are stable. Consumables are affected by patient demand. And I think, as we shared, we did see a slight deterioration in China, for example, and Japan, but it was modest. On the specialist side, we've had a lot of success in our aligner business notwithstanding where we are with Byte. We grew over 20% in Europe on our SureSmile business, with the exception of one, what should we say, a bit of noise in North America, we would have grown mid-single digits on aligners. So we continue to get traction there. Obviously, the implant situation is well recognized by the investment community, and we're working hard to resolve that. And then finally, on demand, we have shared there's continued sensitivity to demand. It's not worsening, fortunately. And as we did say on Q3, Germany is a very important market for us. It's our second biggest market. Dentsply and Sirona have had a very large presence there. And we grew in Germany in Q3 for, I think, the first time in 5, maybe 6 quarters. So we're pleased to see that. But one swallow does not make a summer. So we'll take it, and we're working hard to make sure it's repeated.

Right. When are you doing your next survey, I like to...

We will do that in January.

In January. So in time for the 4Q call, perhaps.

In time for the 4Q call. Yes.

Okay. Nice. And if we think about sort of the economic cycle, right, in terms of dental, how do we think about like the sort of feedback of sort of improving consumer sentiment and sort of improving consumer spending vis-a-vis dental, right? Like not to make maybe a gross stereotype, but you think of somebody if they got a bonus or raise, they may not run out to the dental -- dentist later that afternoon, right? But it sort of obviously comes with that broader sentiment shift. Is there like a sort of rule of thumb that you guys think about in terms of like the lag that, that might have?

I think we've seen some reports lately about the association with dental spend and consumer health indices, which was interesting. I do think from the discussions we've had with dentists that they've said that patients are sensitive to the economic environment. They tend to spend on other things in advance or spending on dental, which is unfortunate for us in the industry and unfortunate for them because there is -- as we know that we -- we believe there's a link between oral health and general health. So I think we need a bump in sentiment in general in the consumer before they come flocking back to dentists. And we know the circle with poor or subdued throughput into a dental office. Dentist doesn't get to revenue. They don't -- we don't get the consumable -- the consumable business, I know those don't get it either, and then the dentists are more reticent to invest in some of the high-ticket items such as capital.

Right. And then on the reverse side, if they sort of see that and then they go there. How have you thought about sort of potential on sort of rates to in terms of equipment? We started to see rates come down, but perhaps not to the extent that we're hoping for and obviously, hopefully, continues. Is there sort of a tipping point or you just think it's sort of to your point that the sort of unlock on the equipment side is more a function of that kind of broader just seeing things get better, plus rates being lower, just in general, like is that the better way to characterize it?

I think we need to see another rate or 2 cut before that begins to take hold. But we are trying to address it internally ourselves. We relaunched the Orthophos SL imaging line in Europe and have now extended that to Asia Pac, and that's a more middle of the road from a pricing perspective imaging device. And we've seen really nice uptake on that. We're looking at partnering with our partners around financing to make the investment that a customer would have to put forth a little less significant for them, shall we say. So we are not just waiting for the rates to come down. We're trying to work with our partners around the world and reintroduce products that are more modestly priced shall we say.

Yes. No, that makes sense. You've also launched some innovative products this year in terms of the Primescan 2. And I think you talked about, obviously, the impact of DS World. How do we think about the uptake of Primescan 2 as we think about the fourth quarter?

So, so far, Primescan 2 has gone I would say, very well for us. We launched that at DS World in Las Vegas. We've trained all our own sales reps and those of our partners in North America. We just launched it as well in Japan, we had a DS World event in Japan 2 weeks ago, and we had, I think it was 350 dentists there, and we saw a lot of interest in Primescan 2. So I would say it's gone well, arguably very well for us. We think it's the future of connected dentistry -- of connected digital dentistry. I think people have begun to appreciate what we're talking about with DS Core as they've begun to realize the connection between this piece of hardware and that piece of software and can envision what the future would look like if they partner with DENSTPLY SIRONA around DS Core and around all their equipment. DS Core which is the driver of all of this. We launched that 2 years ago at DS World in 2022. We've brought out 85 incremental sets of capability and functionality to it in that period of time. We're now -- we're over -- at the end of Q3, we're over 32,000 subscribers to it. We saw a 15% increase in the number of pieces of equipment that were connected to DS Core. We saw a 54% increase in the number of orders passing from a dental office to a lab using DS Core. So there's a lot of positive things about our imaging, our CAD/CAM technology and DS core. And we think that's -- we believe that's the road map for digital and connected dentistry in the future. We were very deliberate over the past 2 years. We wanted to get more scanners in the market because they unlock all the digital workflows.

I call it the gateway drug.

It is the gateway drug.

But that was my phrase, I wanted to...

Okay. That's fine. You can keep that...

So if we think about the Primescan 2, who is buying it at this point? Is it sort of people refreshing their prior scanners? Is it sort of appealing to new customer base? How do we think about who the core buyers are at this point?

I'd say right now, it's probably more of the refreshing that's going on rather than...

Early day. Yes.

Rather than the new customers. When you think about scanners, it's -- given the value that they enable for a dental practice, I think it's around 40% penetration in the U.S. even a market like Germany that I think would -- people would hypothesize that is very well developed digitally only 27%. There was a survey done I think over the summer 1,005 dentist survey, only [20%] of a scanner. So continued opportunity to progress in really developed geographies like Germany and the U.S. We clearly need to articulate what the value is of a scanner, how customers can capture more margin for themselves with a scanner. And so that's what we're after right now as well.

That makes sense. And as you've pointed out this uptake of DS Core, thank you for that -- those updates on that. How -- what have been your learnings been in terms of why people are using it? What are they using it for? It seems like that's been a pain point that we've heard from customer, I have the scanner and I have this and I have that and trying to connect them all, so it clearly fits a market need. And so how do you sort of see the rollout over the next year or 2 in sort of response to some of your early learnings here?

So it's improving the ability of customers and dentist to connect with their labs. So I mentioned the 54% increase in orders going through it. So that's a lot more seamless and efficient for them. It is enabling them to connect with their customers, their patients as well. They -- again, anecdotally, several of them have said that they have seen an improvement in their treatment acceptance rates because they can send imagery to the patient and demonstrate what's going to happen next virtually without the patient having to come back in. Their efficiency in their office has also improved because you haven't -- because of the portability of the scanner and the fact that everything goes to the cloud, you're not tying up a scanner on a patient and doing the design on that scanner. You can scan the patient, you can send it to your centralized hub that's also connected to the cloud. And you can move that scanner from treatment center A to treatment center B within a matter of minutes. So it's improving the workflow efficiency in the office. And that's what we've heard from dentists. They want more efficiency. Efficiency is money in their pockets.

Got it. And in terms of the financial model, I was attributed similar to the Apple sort of like iCloud model where it sort of come in and have an early use and then as you figure sort of like it -- can you remind us of that and sort of how that financial model works in conjunction with the labs as well?

Yes. So up to this point, the financial model, has been primarily around the -- among the data that's required from a given customer. We have and will continue to release more functionality on DS Core and the scanners and whatnot over the coming year or 2. And so it will probably move to more of a combination of space and utilization of space and functionality. If someone who wants to do implants and aligners versus someone who just wants to send something to the lab, may end up having to pay a higher subscription out. It's very nominal given the value and the flexibility it's going to bring or has been very nominal. So but we continue to look at that.

Got it. That makes sense. How do you think about sort of the trajectory of SureSmile at this point? I think you've talked about, obviously, the mid-single-digit growth you're referring to in the third quarter continue to sort of outpace the broader market. How do you -- where do you see sort of the increased opportunities now and who sort of the incremental new buyer? Because I assume that's where most of the opportunity is coming from sort of adding additional doctors versus sort of increasing penetration.

I think -- so we've done well in SureSmile. We've opened up new geographies. We've opened up Japan recently and also Brazil. But obviously, North America is our biggest business, but with the growth rates we've experienced in Europe over the past couple of years, Europe is becoming rather meaningful for us with respect to SureSmile. We shared earlier this summer that we need to do, that we want to do some work on our SureSmile software and that's primarily around the front end. The back end, we feel is very, very robust. Because it originated in wires and brackets. So if we can make the front end more, what should we say, accessible, user-friendly for GPs and for orthodontists, then we feel we can bring more people into our ecosystem. And especially then we are -- we think of things less in the context of aligners versus connected technologies versus essential dental, et cetera. We're thinking of it across the workflow, right? So to do an aligner, you're going to need a scan, you probably need a CBCT. So how does all of this integrate into our complete offering. And so as we continue to evolve DS Core and our scanners and our aligner offering with the aligner software design system. We think we have a right to compete well in the aligner space. I mean there's no doubt -- we're small compared to some of the others, but we're small, but we think we should be more powerful than we think we will be.

Yes. No, that makes sense. Do you see sort of a -- in terms of the software opportunity we're talking to about on SureSmile for the ortho space, is that kind of we think -- should think that, that should be wrapped up as sort of by the end of '25 and so maybe if that sort of ortho opportunity is more sort of 2026 plus? Is that the right sort of time frame to think about for that?

Well, if you ask me, it should be wrapped up very quickly. If you ask our CTO, who's probably a lot slower than very quickly.

Moderately quickly.

Yes. I don't know if we want to put a timeframe for that. I think maybe we shared before that we would expect a lot of that work done for sure in '26. That will be my expectation. And then clearly, we have some history in the orthodontic space, and we will need to work hard to recapture their hearts and minds. But there are -- we think there are ways we can do that with the technology that we have, but the price points that we have and also with the efficiency around our aligners themselves, they require, I believe fewer anchors. We have data that says they require fewer refinements. And so when you combine all of those things together for a given GP or ortho, we feel there's an economic value/efficiency claim that will be interesting for them.

Got it. And how much of the R&D, you're talking about making the user interface better also sort of pushes up to like the acuity of the types of cases that SureSmile can treat as well.

We have -- I would say we have not contemplated that in any great detail at this point. It's -- we are more focused...

It's more focused on...

The user experience with the software rather than what the software -- what the back end of the software can do.

Got it. Okay. That makes -- certainly makes sense. Okay. And then you, obviously, in your earlier comment talked about sort of the changes you've made on the implant business. How is the sort of post those changes? What's different about the implant business in terms of how you're operating it? And any sort of early results that you can point to? Or is it sort of too soon to make that kind of decision?

Yes. So we're revisiting, shall I say, how we've gone about trying to reengage the implant community and their referral network. For sure, as we've shared it has taken a lot longer than we expected. Disappointingly so, to be, to be honest. We have -- again, we think we have a robust portfolio but our customers have obviously spoken with their feet over the last several years. We've invested in clinical education. We've invested in the sales team, and we haven't got it done, quite frankly. So we've gone back to the drawing board trying to understand where we went wrong. And it's the big red mark on our copy book right now, and we're trying to make it less red.

Okay. Focus on that. Okay. One area that I know is a relatively smaller portion of your business, but still has very nice margin is Wellspect. Can you talk to us about how that business has been faring as we end up the year in sort of the increased traction you've seen with some of the new products that have been launched there?

Yes. So we're very pleased that Wellspect is part of our portfolio. When we came into this business, we had a lot of inbound interest in Wellspect. I mean, it doesn't fit with a dental company. We had a lot of inbound interest, and we assessed it very carefully, and we decided that it was better to keep it and to make some investments behind it. We brought in a new leader who knows this business very well. And Wellspect has -- it's outperformed our dental business for sure over the past 18 months. The new products have gone very well. I think as we've shared before, new products in this industry have a slightly different dynamic to the dental industry. When you're a patient that's using an intermittent catheter, you get used to how it works, you get used to how to insert it. You are very unlikely to move away from that product once you start using it. So new product contributions tend to be slower, I would say, in this space. Because it's your new patients that you're acquiring into your funnel that are using the new products rather than the older patients. So we've been pleased with it. We are investing in Wellspect. We think it's going to be a growth driver for us on the top and bottom line for a long time to come. It's accretive to us right now, and we're very pleased despite of our business.

Okay. Great. I know we've been talking about sort of more of the demand profile across the different businesses. And I think the work that you guys have been doing on the margin line and sort of the restructuring has been focused on a variety of areas, including the SKU reduction plan. How do we think about the early eliminations of the SKUs in respect to the cost structure in the fourth quarter? And then what do you think are the incremental opportunities as we roll through 2025?

Yes. So we -- as we shared with you before, we have a lot of SKUs at DENSTPLY SIRONA, particularly in the Resto and Endo businesses. We've been diligently setting about eliminating the non-revenue SKUs. And we think we expect we're going to have that largely complete by the end of Q4 this year. And then next year, we will begin to migrate the revenue generating SKUs over to other SKUs. For the most part, we have a suitable alternative for customers to migrate to. I would say that we feel we're on track with respect to the targets that we provided at Investor Day. I think we said $30 million or so of contribution by 2026 from the SKU piece. So it's meaningful for us. We feel it's on track. We are being thoughtful about it, too. We did this before in a variety of spaces, and it hasn't worked out so well for us, and that's why we're facing some headwinds with different groups of customers in the specialist space. So we're being thoughtful. We've done pilots. We have adjusted our thoughts as a result of the feedback from those pilots and -- but we're still on track.

In fairness, you didn't do that.

In fairness, I do not.

In the SKU [initiative], have you seen customers being willing to move to other products? Or is it kind of like we think of dental as being a bit conservative, but obviously, there's some incrementals in there. How do we think about their willingness to switch?

Yes. The pilots have informed us that there is willingness. And in other areas, there's also reticence. And so we've taken that on board. As a result of some of this reticence I would say there will be -- there's probably some price taken to offset our ability to move them over. So yes, we're taking all these factors into consideration.

Got it. Okay. No, that makes sense. Obviously, you talked about the ERP rollout now in the U.K. and the U.S. What are sort of the early learnings from that in terms of those? And how do we think about the rest of the ERP implementation as we go forward at this point?

I think the most important early learning has been that we made the right call to take an off-the-shelf, for the most part, an off-the-shelf life sciences SAP model and adjust ourselves to fit it, right? Customization leads to problems and we were about 80% to 85% standardized with respect to the model, and that was very deliberate. So we've gone live in the U.K. We've gone live in the U.S. Of course, we've had problems and challenges. I would classify them up to this point as minor. Fairly limited disruption the benefit of some of it has been we have discovered some processes. Some of the challenges have led us to discover some processes that were not visible to some of us before. And so that process doesn't look right. Let's fix that. And so it's been -- it's helped us fix some other things in the company that were slightly out of kilter. But so far, so good. U.K. and the U.S. has gone well for us, so I would categorize it.

Okay. And what's your next large market that you're doing there?

Well, we have a lot of work left to do in the U.S., different parts of our U.S. business. I think -- we got to go after implants, for example, and other functions. We will revisit Europe in the second half of this year. So we're still working on other parts of our U.S. business, and we will revisit Europe in the second part of this year. But we are on track with respect to timing, we're on track, largely with respect to budget.

Got it. No, that makes sense. As we think of other opportunities across the cost structure, obviously, you've taken sort of a fine to come to many of those. Where do you see sort of incremental opportunities to sort of make -- to drive further efficiency within the business, whether that's still -- on the OpEx side in certain areas, is that further -- some of the processes, maybe you just talked about on the -- that came out in the ERP implementation as we kind of like look forward into '25.

I would say, if I could start at the end, I think ERP, our expectation -- and I think we've got -- I think we got $0.05 in the bridge to 2026 on ERP efficiency. I would expect that, that efficiency that we pick up from ERP will continue long after 2026. So that is the only -- we're only beginning to just scrape the surface by 2026. I think our network, Tony and the supply chain team have done a great job so far. I think we have continued opportunity in our network. I would say we have continued opportunity with respect to our cost base and not just from our network perspective, but also from our material sourcing perspective. I think we've shared before that we've high proportion of spend in Germany, which is not surprising. We have a very large footprint in Germany. So is there an opportunity to dual source elsewhere with respect to some of those. So everything is on the table with respect to making us a more cost-efficient organization, to help us deal with some of the downward pricing pressure that we see, particularly on the equipment side.

Yes. No, that makes sense. Speaking of sourcing, one thing that's come up in a lot of investor questions of late is the potential tariff situation, right? And I realize it's hard to comment on speculative policies that haven't been implemented yet. But as regards specifically to potential tariffs in China and Mexico, how do you manage that? Or sort of how do you think about what leverage you have to pull and where you see you could pass on costs as well?

Yes. So I think there's probably 2 angles to your question, Elizabeth. One is raw material sourcing and 2 is manufacturing. So with respect to raw material sourcing, we obviously -- it's more than just a price equation for us. It's a speed of delivery. It's a flexibility, respect to delivery, it's a quality thing, too. So it's more than price. But with respect to China, we have only a very small manufacturing location there. And we source less than 5% of our raw materials from China. With respect to Mexico, we have a site in Mexicali, we had, as we've shared before, consolidated all of our aligner manufacturing into Mexicali. That falls under the [Maquiladora] structure. So we are not expecting anything significantly there. It's less than 1% of our raw material costs there as well. So we don't think too much of an impact. And in Canada is less than 5% of our raw material sourcing as well.

Okay. And for those people who might not be quite as familiar with the Maquiladora structure, can you just spend like 20 seconds or maybe, maybe it's not possible to explain in 20 seconds, but like a brief period of time just to sort of explain how that works for...

Well, it's just a tax efficient structure that we have in Mexico that many U.S.-based multinationals have in Mexico. And just it affords us a degree of insulation from such things as tariffs.

Got it. Okay. That makes sense. Given where the stock price is today, how do you think about capital deployment at this point in time? Obviously, you've said previously M&A is probably not something you're super excited about. Why you're doing the ERP implementation of making some of these other changes? How do you think about sort of the balance would change sort of repo, reinvestment in the business and the opportunities you've sort of highlighted and the other options available?

Yes. So obviously, we've been historically very busy in the buyback market. And this year, we spent -- we bought back $250 million of stock this year. We've not approached our -- approach the board with any change to the normal trajectory at DENSTPLY SIRONA. So I don't really want to comment any further on it without discussing that detail with the Board. Obviously, our stock price is attractive right now. I think it's primarily driven by the German tax situation. So as perhaps we get more clarity on that in short order, we'll see. But clearly, the best way for us to offset that, that challenge is to begin to deliver on the top line, and that's what we're really focused on.

Yes. No. That makes sense. If we think about like sort of the long-term outlook, how do you think about like when you might feel comfortable sort of giving an updated picture about that?

Well, obviously, we'll have our Q4 earnings call in February where we'll speak about all the factors for '25 and '26. With respect to the long-term prospects of the dental market, I really do think that the interest rate is a major contributing factor, particularly for a company like DENSTPLY SIRONA, where we've got a high proportion of capital equipment, a high proportion of capital equipment in Germany, for example. And I think when we see some indicators that are showing less conservatism, shall we say, then we'd be -- feel free to talk about potential growth opportunities for us.

Got it. This 2025 is obviously an odd year, which in the exciting world of dental means it's an IDS world -- IDS year. Anything that sort of sneak previews in terms of things you guys are thinking about for new product launches or anything on that front? Obviously, you just did Primescan 2, so I assume that's part of it in terms of the broader awareness there.

Yes. I think just continued evolution of DS Core. Obviously, we've also brought out a number of other new products this year, aside from Primescan and continued enhancement of DS Core and they will be showcased at IDS. We have the X-Smart Pro+, which is our new endo motor, along with the Reciproc Blue file. I struggle to say that word, but the Reciproc Blue file, that has gone well for us. We're targeting competitive accounts. We've got solid reorder rates. We've launched a number of new products in other parts of our business. We have -- we feel we've made progress with respect to how we approach the regulatory agencies such as the FDA. We're very diligent now with respect to that. I think we shared before, we're 5 out of 5 or 6 out of 6 with respect to FDA clearances this year. But I don't want to -- I don't like obviously, new product launches, if you can schedule them around big events, that's awesome. But we will launch when we are ready. We will not wait to launch something. If it's ready in July, for example, we won't wait until the DS World Las Vegas to launch it. We will go when it's ready. We have made a lot of progress in our R&D. We have Kevin and the team have been very aggressive with respect to valuing new products. We have stopped products that we didn't think were valuable enough, double down in areas where we think there's more value. And all the launches that we've had this year and the launches that are scheduled for next year, we feel pretty good about.

Yes. One thing you've been pretty emphatic about over the last year or so is sort of becoming your own demand generators, right? We've seen innovations come from DENTSPLY about DS and things like that, that have helped to sort of help drive spending and things like that. How do you think about that as you're thinking about maybe your sort of budgets for '25 and maybe some recent activities that you've been doing in terms of incremental things you can do to drive that own demand generation?

So we -- creating our own demand is extremely important for us. And then funneling it through the appropriate channel, whether in North America, whether it's endodontics where we're direct or through our distribution partners, of which there are many in the U.S. but us getting in front of customers is really important. We have -- we recently announced the creation of an inside sales team, which are based on the fifth floor in Charlotte. I think we got in excess of 90 people in that group right now. So far, they have made almost 2,000 phone calls customers in a matter of weeks.

That's something you did this quarter. Is that to the last quarter?

Yes, that's -- yes. They've just gone live in the last couple of weeks. And the powerful thing about it is the first order that we received from a customer, that customer hadn't been -- hadn't spoken to a DENSTPLY SIRONA rep for 7 months.

Wow, okay. Yes.

Right. And that customer went and bought a couple of thousand dollars worth of equipment from us or gear from us. So there are almost 200,000 dentists and specialists in the U.S. and the footprint of many dental companies and our distribution partners is very, very large. And it's impossible to get to see everybody is often as you would like. And so the virtual sales team enables us to contact them at will and just check in. The first order, by the way, was a distributor order. So the virtual sales rep connected through the distributor. And so it just worked. We create demand for ourselves and for our partners.

Nice. That's awesome. Maybe sort of lastly on the -- you brought up earlier, the China question, sort of how do you think about that overall demand environment? Obviously, they have a certain a variety of macro issues at the moment as well. But how would you sort of characterize the broader dental demand environment there?

When we look at the surveys that we've been doing now for over, I guess, 2 years almost, the patient throughput in Chinese dental offices is about 20 percentage points less than what we hear from other regions in the world. So it's in the mid-60s. So I think there's continued opportunity for all dental companies and obviously, us in particular, that when that rebounds, if it rebounds, that there's opportunity for growth there. Obviously, there are low-cost competitors in that space, particularly around the capital equipment. But we feel we have an opportunity in implants and we've -- through the -- up until the last quarter, we had performed well in implants there with VBP. VBP 2.0 was going to show up in our doorsteps, I guess, in the next year or so. So we are thinking about what that means for us. But China with its population and increased affluence is obviously of particular significance for -- in the dental world and -- we have made some discrete investments over there and discrete redeployments. And we expect growth in China.

Makes sense. Maybe in the last 2 minutes that we have, what do you think at this point, December 2024 is most misunderstood about DENTSPLY at this point?

That's a good question. I think we have -- that is a good question. We have -- in the last 2 years, we have done a lot of work trying to restructure ourselves to be a more efficient customer-centric, demand-creating organization. We are fortunate that we are -- I think that we are a full-line supplier, but also increase the complexity of running a company like us. We have -- we've been diligently removing costs. We've been diligently looking at how we spend our money in different areas. We don't need to be the shiniest button on everyone's jacket. We need to be a great partner for customers and our distributors. And we clearly need to grow our top line, and that's what we've been heavily focused on. We've been hampered, I think, by macro, but we've also been hampered by our ability to execute in the implant space, in particular. And other areas we have executed well, I think, in -- I think in the not-too-distant future, all the hard work that the team has been doing around improving the efficiency of the company, the investments in R&D and DS Core, in particular, will really begin to make sense and be demonstrated in the P&L's and the quarterly earnings calls.

Makes sense. I think that's a great place to end it. Thank you.

Thank you.