Simon Campion: Sure. So I think your first question was around pricing, I would say, very, very modest pricing on the EDS side in 2023, and we expect rapidly even more modest pricing in 2024 and beyond. Now with respect to innovation, as we noted in November, December time frame, we brought on a new Chief Technology Officer, who is driving a far more disciplined and organized process than we’ve had historically at Dentsply Sirona. We’ve already made, I think meaningful changes to how we innovate and how we milestone and monetize new product introductions. Around innovation in EDS, I think the 4% is an okay number. For now, we have to be extraordinarily diligent with how and where we spend that 4%, and that’s what Kevin is doing right now.
A large part of that 4% is going towards the digitalization of dentistry and DS Core. We do see that as no pun intended as core to our future. And we have seen the improvement in adoption as we expand the clinical functionality of it. We do spend a, I would say, a significant amount of money on innovation in our EDS portfolio. And I mentioned the launch of the X-Smart Pro device late last year, which we’ll launch in the US later this year. So we are innovating, the feedback is positive on that. We need to be extraordinarily diligent with respect to identifying unmet clinical needs in the EDS portfolio, so that the products that we launch are meaningful and are not simply me-too products and make a difference to the patient outcomes and to clinical efficiency.
Is there an opportunity for lower prices? For sure. And we have demonstrated that we are prepared to do so where appropriate. We launched Primescan Connect in the DI space two years ago. As Glenn noted, we’ve seen, I think, rapid uptick of that, particularly in 2023. And as Glenn also noted, we have both premium and value-based implants, which showed similar growth trajectories in Q4. So we are not afraid of the value segment when we know what we’re getting into. Andreas?
Jeff Johnson: Fair enough. Thank you.
Andreas Frank: Maybe, Jeff, just one comment to add. Just on EDS specifically. It’s not just about basic chemistry. A lot of it has to do with packaging with delivery methods to make the practice more efficient, and one area that I would also point out in terms of focus is digital materials. So both in terms of milling, as well as printing that’s an investment that we lean behind and where we see good growth going forward.
Operator: And one moment for our next question. Our next question comes from Erin Wright with Morgan Stanley. Your line is open.
Erin Wright: Great. Thanks. So can you talk a little bit more about the implant competitive environment right now across the geographies and underlying demand there, but also more just from a competitor disruption standpoint, can that present any sort of opportunities for you? Thanks.
Simon Campion: Hey, Erin, thanks for the question. Let me start with China specifically. And then maybe Andreas can take the competitive piece. We’ve been super happy with China performance on implants this year. We grew significantly in implants this year in both the private and public sectors. That led to growth overall in China despite the headwinds that we had in early 2023. And as Glenn noted, we expect more than 25% growth in implants again in China in 2024. So it clearly shows that our team can execute in China with respect to implants. We’ve, as I noted previously, our portfolio across the board, but particularly in Implants, is very, very competitive. The 2,000 customer survey that we did last summer told us that our portfolio is very, very competitive and has no meaningful gaps.
So we’re quite comfortable with it. We have demonstrated, I think, progress in the U.S. where we slowed the deterioration throughout the year. And as Glenn noted, we expect to grow implants in the U.S. in 2024 at — and in response to a previous question, I noted that as part of our $3 bridge, we expect implants to be growing at market rate by 2026. That’s our expectation.
Glenn Coleman: Yes, we just add a couple of things. I mean our fourth quarter performance in Implants & Prosthetics was the best quarter that we had all year. We actually grew double digits. Obviously, a lot of that coming from China, but we also had really good performance in Europe. And so the two together obviously drove a good result for us. We did see improvements in our U.S. Implant business, but it’s still declining. So, we are not happy with where we’re at there. We do expect to dig it back to growth in the second half of 2024. We’ve done all the things to turn that business around. So, we feel good about improved performance in our U.S. implants business, but overall, we did see less of a reduction in the U.S. in the fourth quarter as well. Andreas, do you want to make a couple of comments as well?
Andreas Frank: Yes. I’m just thinking sort of back to portfolio commercial excellence where we’ve made investments, but also clinical education, which is an area that we have built upon and leaning into. So, you’ve heard the comments previously. So, I think that’s one important point. The other element is the implant part also comes with the prosthetic solutions, and that’s where we have a very competitive portfolio, including customer abutments and a highly digitized workflow that links into DS Core over time. So that’s an area that we also feel will be an important driver of incremental growth here over the period.
Erin Wright: Okay. Thanks. And then just a quick one on capital deployment. And you mentioned the near-term buybacks and your plans on that front. But I think you said previously that you’d be back in the market potentially doing deals in 2025. Is that still your thinking on that front? Do you see near-term pipeline opportunities from a deal perspective? Or where is your stated targets on that front? Thanks.
Simon Campion: So, I think near-term opportunities may be technology-type acquisitions that require little integration, Erin. And then I do think we’ll be back in the market in 2025 and beyond for large scale M&A that requires integration. But we are focused on ourselves right now in 2023 and 2024, unless we see something that’s a nice tuck-in. We’ll probably avoid it until 2025 when we’ve restored the stability of our organization.
Glenn Coleman: Yes, I think the good news is our balance sheet could support M&A activity. We have low leverage, we’re 2.6 times, and that should come down here in the next couple of quarters, have a strong liquidity position. We’re expecting to generate more cash flow. So, from a balance sheet perspective, we could support a really robust M&A strategy organization capability in the short term as we work through some of our foundational initiatives and transformation initiatives. Thanks.
Operator: Our next question comes from the line of Brandon Vazquez with William Blair.
Brandon Vazquez: Hi, thanks for taking the question. First on a modeling perspective, you guys are pointing to about 100 basis points of EBITDA margin expansion in 2024. Can you just talk about maybe the cadence of that expansion through the year? I know you guys have made a lot of recent commercial investments. So maybe they need some time. Should we think of this more as in the back half of the year, we’ll see some of this margin expansion? Or should we be modeling for this to be pretty evenly split throughout the year?
Glenn Coleman: Yes. It’s more back-end loaded, but we would expect EBITDA margin expansion both in Q1 and Q2, but more of the expansion coming in Q3 and Q4. And the main reason behind that is some of these investments that we’re making are more front-end loaded in the year and the restructuring savings obviously are more benefiting the back end of the year. So we do expect EBITDA margin expansion starting in the first quarter, but most of it will happen in the back half of the year
Brandon Vazquez: Okay. And then on — maybe just one quick follow-up on Byte here. I think the commentary around expectations for 20% plus growth were pretty notable. I guess the question is kind of like what gives you – I know you’re seeing some early pickup right now. What gives you the confidence that this can be durable given expectations for what seems to be still kind of difficult macro within dental? This seems to be a highly kind of sensitive market to the macro side. So like how do you guys feel? Do you need an improvement in macro to hit that 20% plus in Byte? Thanks.
Glenn Coleman: Yes. I think we’re counting on a stable macro environment to hit these numbers. I mentioned earlier, increase in unique visitors to our Byte website is a very positive trend for us. More importantly, impression kits going up significantly. And I won’t give you the exact number, but it’s well north of 50%, just to give you some context since the last couple of months and what we’ve seen. So it’s that type of growth. And obviously, not all of that converts to revenue, but we do think our conversion rates will also improve as we get further into the Byte plus hybrid model that Simon outlined earlier. So when we look at some of the indicators, including what we’re seeing in the back half of February when we expect to see some of this convert to revenue, we feel quite good that Byte’s going to put up some meaningful growth here in 2024.
I would just say that we did see some headwinds on the financing front in the fourth quarter with Bytes but only grew 6% in the fourth quarter, we had some financing constraints. A lot of it was subprime customers. We worked through some of that here in the first quarter as well. So that got a little bit better as we’ve gotten into 2024. But that, obviously, to your point, is macro dependent to a certain extent. So we’re keeping a close eye on that. But with the investments that we’re making now, adding more treatment planners, clinical and sales support people, I feel like we’ve got a really good path here to generate 20-plus percent growth in Byte in 2024.
Operator: Our next question comes from the line of Kevin Caliendo with UBS. Your line is open.
Kevin Caliendo: Thanks. Thanks for getting me in. I appreciate it. I just want to talk about the sort of expectations for the macro. You talked about it with Byte, but I want to talk about it just in the context of — right now, it’s a difficult macro environment, our organic growth is 0% to 1.5%. Next year, you expect it to get back to 4% to 6%. How much of that 4% to 6% is predicated on the macro returning to normal? Or how much of that is predicated on innovation and market share gains? I’m just trying — I’m really trying to understand, when do you think the macro starts to improve? Or what’s sort of predicated in your guidance for that to happen?
Simon Campion: So let me start, Kevin, about — there’s another function here, and it’s called execution. And that’s within our control. I think over the past year, we’ve demonstrated that we’re bringing improved systems and processes to our company, which includes commercial, adjusting how we pay our sales reps and investing in clinical education, which we know is crucial for dentists and welcomed by dentists and particularly by DSOs who want to partner with us on the provision of training. So part of that 4% to 6% is ourselves getting better and improving that execution, and we’ve demonstrated that that we are well-underway in that process. Glenn, do you want to comment on the macro piece?
Glenn Coleman: Yeah. I think as we look at 2025 and getting back to 4% to 6%, we’re obviously counting on a much more normalized macro environment. Share gain wise, I would say ortho is an area we would expect to continue to gain share. Sales execution wise, the implants business would be the area to expect improvement in 2025 as well. But the equipment side of our business has been the big headwind for us. And the thought is interest rates will start to come down in the back half of this year, continue to come down in 2025. That should help the overall equipment environment. And if we see a turn in the equipment side, if you look at the rest of the numbers, we’re actually performing quite well. That should get us back to more of the 4% to 6% range with the ortho gains that we’re expecting in terms of market share.
Kevin Caliendo: That’s super helpful answer. And just on SureSmile quickly, how much of the growth of SureSmile is tied to the new scanner? Meaning, is it — are you seeing a correlation there and that’s driving growth? Is SureSmile driving the scanner growth as the scanner driving SureSmile growth? Is there any correlation that you see? I’m just trying to understand how it’s being positioned in the market?
Simon Campion: I think there’s probably a correlation between both of them, Kevin, for sure. We’ve also added the SureSmile simulator to DS Core, which, as I noted in response to your previous question has driven up treatment acceptance rates in our customers. And we also have not been shy in driving what we feel is a differentiated offering compared to our competitors with respect to the fewer revisions. So I think it’s a combination of many, many factors. And back to the previous question, execution and commission plans is another factor. Glenn, you have something to add?
Glenn Coleman: I think the only thing I would add, Kevin, you probably remember in 2023, we mentioned that we equipped all of our ortho reps with scanners. And so we have seen some really good momentum post that decision. So that was an investment we made. We’re seeing some payoffs in — it’s hard to say how much of the growth scanners are driving in terms of the actual aligners versus the other way around. But I think on the whole, the decision to invest in scanners, get them in the hands of our reps is paying off and we’re seeing strong double-digit growth in SureSmile.
Kevin Caliendo: Sounds good. Thanks guys so much.
Operator: Our next question comes from the line of Jason Bednar with Piper Sandler. Your line is open.
Jason Bednar: Hey, good morning. Its Jason here. I wanted to start maybe with a follow-up on Byte. Definitely sound more bullish than I think where we were maybe in the second half of last year, maybe hard to break down. But how much of the 20% growth would you characterize as maybe share gains from the other DTC player exiting the market versus just a healthier view of the macro and I guess, maybe versus benefits you’re making yourself? Just trying to understand maybe what’s exogenous here versus what’s attributable to your own actions in that 20% growth outlook as we really try to think about what’s sustainable beyond 2024?
Simon Campion: I think the majority of the growth is coming from the competitive dynamics that have taken place over the last couple of months. So, certainly, more than half of that growth.
Jason Bednar: Okay. And I guess, Glenn, you — you’re still making a lot of investments in this category though. So, I mean, I guess as we think about the sustainability of growth, I know we had some questions earlier on macro dependency, but this can still — would you agree this can still be a growth leg for you, not necessarily 20% but still well above company-wide as we look beyond 2024? And then a separate follow-up, just you sound a little more confident I thought about or bullish on 3D printing. How much more progress has to happen, do you think on the resin side before uptake in Primeprint really flex higher?
