DENTSPLY SIRONA Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Innovation: In March, invited customers to experience connected dentistry; launched revamped company and SureSmile websites; enhanced Primescan 2 and DS Core; received 3 510(k) clearances with 5 pending; NPD portfolio projected value more than doubled in 12 months.
• Customer Engagement: Conducted quarterly customer survey with over 1,100 respondents and leveraged virtual sales team to gather input from nearly 1,000 additional respondents; launched revamped websites to improve customer interactions; engaged with customers to understand pain points and improve experiences.
• Operational Updates: Appointed David Ferguson as SVP of Global business unit; made progress on ERP modernization with two additional US deployments; completed closure of one manufacturing site as part of supply chain optimization, with 10 sites closed since start of work.

Segment Performance

• Essential Dental Solutions (EDS): Organic sales increased 0.4% due to growth in Europe and Rest of World, partially offset by lower volumes in the US. EDS performance reflected stable patient traffic as per customer survey results.
• Orthodontic and Implant Solutions: Organic sales declined 17.7% with a net negative Byte impact of ~$40 million (13%). SureSmile declined slightly due to prior year DSO customer loss in the US but saw double-digit growth in Europe and rest of world. Implants and prosthetics declined mid-single-digits driven by lower lab volumes globally and lower sales in the US and Europe, but premium implants grew nominally with EV family outpacing legacy brands.
• Connected Technology Solutions (CTS): Organic sales declined 0.5% vs prior year quarter, with equipment and instruments growth offsetting most CAD/CAM decline. Imaging posted growth across all regions, and Treatment Centers contributed due to a one-time delivery for a large new institutional customer in EMEA.
• Wellspect Healthcare: Organic sales grew 8% across all regions, with mid-single-digit growth expected for the full year, though Q2 would have a more difficult comp due to a prior year distributor onboarding.

Guidance

• Maintained 2025 outlook for organic sales and adjusted EPS; organic sales expected down 2%-4% with 2% Byte impact. Revised reported sales range to $3.6 billion-$3.7 billion due to foreign currency changes, up from previous $3.5 billion-$3.6 billion.
• Adjusted EBITDA margin increased to >19% due to FX rates. Second quarter organic sales expected to decline mid-single digits vs prior year, reported sales expected to increase sequentially based on seasonality and IDS sales; Q2 adjusted EPS expected up year-over-year due to margin expansion, offset by higher tax rate.

Risks

• Global Trade: Current and potential tariffs create headwinds and risks for the multinational company with a global supply chain.
• German Tax: Uncertainty regarding the resolution of the German tax situation, with ongoing cooperation with authorities but no defined timeline or magnitude of resolution.

Q: Expand on tariff impact?

A: Simon mentioned tariffs factored into guidance, with ~$0.10 EPS impact annualized, ~$50 million annualized exposure, and ongoing efforts like moving manufacturing to US, building strategic stock, and considering price increases.

Q: Update on CFO search?

A: Simon said good progress with candidates in late phases, hopeful to announce soon.

Q: Orthodontic side, byte roll-off and SureSmile pitch?

A: Simon said redeployed byte resources, working on software and user interface improvements, need to reengage orthodontist community with improved user experience and value proposition.

Q: Tariff mitigation strategies?

A: Strategies include moving manufacturing, building strategic stock, redistributing product, and considering price increases, not factored into current $0.10 guidance.

Q: German tax situation status?

A: Continuing to work with authorities, cooperating, but no defined resolution timeline or magnitude.

Q: CTS mix, CAD/CAM inventory, implants?

A: CTS equipment growth due to comp and demand, CAD/CAM inventory normal, implants rebuilding phase with retraining of sales reps and managers.

Q: Cash flow and CapEx?

A: CapEx expected to improve as ERP projects roll off, short-term bridge loan for flexibility, no cash issues currently.

Q: US dentist sentiment, Germany market?

A: US survey showed no major change in patient traffic or treatment acceptance, Germany has been performing better with growth, expecting durability moving forward.

Q: DS Core metrics, commercial tweaks?

A: DS Core has 43,000 users, 50,000+ connected devices, 100,000+ lab orders monthly; commercial tweaks focused on customer experience areas like invoicing, billing, e-commerce, return policy.

Q: Margins, CFO search context?

A: Expenses under control, guidance owned by current team, CFO search in final phases with hopeful announcement soon.