DENTSPLY SIRONA(XRAY) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, the company reported revenue of $905 million, representing a decline of 10.6% year-over-year and an organic sales decline of 10.7% [34][46] - Adjusted EPS for the quarter was$ 0.26, down 41.3% from the prior year due to lower margins and a higher tax rate [37][50] - The company recorded noncash charges for impairment of goodwill and other intangibles of approximately $370 million, primarily due to weakened demand [31][32] Business Line Data and Key Metrics Changes - Essential Dental Solutions segment saw organic sales decline of 3.4%, while Orthodontic & Implant Solutions segment experienced a significant decline of 28.7% primarily due to Byte's impact [38][39] - Connected Technology Solutions (CTS) segment reported an organic sales decline of 8.2%, with double-digit declines in global CAD/CAM business [40][46] - Wellspect delivered organic sales growth of 6.7%, driven by new product launches across all regions [41] Market Data and Key Metrics Changes - U.S. sales declined 29.9%, largely driven by Byte and CAD/CAM impacts, while Europe saw organic sales increase of 1.8% [42][43] - Rest of World organic sales declined 2%, with EDS organic sales growing high single digits in China [44][45] Company Strategy and Development Direction - The company is exploring strategic alternatives for its Wellspect HealthCare business to unlock significant value for stakeholders [18][20] - A strategic decision was made to redeploy Byte resources to the SureSmile platform, focusing on enhancing direct-to-consumer demand and e-commerce [17][19] - The company aims to improve operational efficiencies and customer engagement through foundational initiatives and a virtual sales team [60][61] Management's Comments on Operating Environment and Future Outlook - Management expects organic sales to decline by 2% to 4% in 2025, including a negative impact from Byte [51][52] - The external environment is anticipated to remain largely unchanged, with continued focus on innovation and clinical education as key value drivers [16][22] - Management expressed confidence in the transformational initiatives underway, which are expected to contribute positively to EPS in the long term [64][66] Other Important Information - The company completed the largest phase of its ERP deployment in the U.S. on November 1, 2024, which is expected to improve customer experience and operational efficiencies [24][61] - The company returned$ 376 million in capital to shareholders through share repurchases and dividends in 2024 [50] Q&A Session Summary Question: Can you talk about some of the new product areas that you're working on in Wellspect? - Management indicated that Wellspect and dental businesses are largely separated, allowing for independent strategic exploration [76] Question: What gives you confidence in margin improvement throughout 2025? - Management stated that Q1 will be the lowest point of the year, with expectations for sequential improvement in margins as foundational initiatives ramp up [81][82] Question: Can you discuss the strategy for Byte and its implications on P&L? - Management confirmed that Byte's capabilities will be redeployed to enhance the SureSmile platform, with expectations of a substantial headwind to growth in 2025 [91][100] Question: What is the outlook for the U.S. implant team and its return to growth? - Management acknowledged disappointing growth in the U.S. implant team but emphasized ongoing efforts to enhance digital connectivity and customer education [104][108] Question: Can you provide an update on the German tax situation? - Management stated there is no meaningful update at this time, continuing to work with authorities [131][132]