DENTSPLY SIRONA(XRAY) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Global sales for Q2 were $936 million, a decrease of 5% as reported or a negative 7% on a constant currency basis, with adjusted EBITDA margin at 21%, increasing 360 basis points year-over-year [12][20] - Adjusted earnings per share were $0.52, growing 7% compared to the prior year, driven primarily by active cost reduction programs [12][20] - Cash flow from operations was $48 million for the quarter, a decline from $28 million in the prior year quarter [21] Business Line Data and Key Metrics Changes - EDS (Endo, Resto, and preventative products) sales increased 1.1% on a constant currency basis, with growth in the rest of the world, but lower volumes in Europe and the US [22] - OIS (Orthodontic and Implant Solutions) sales declined 19.4% in constant currency, with BiTE accounting for over half of the decline [22] - CTS (Connected Technology Solutions) sales fell 5.9% in constant currency, with double-digit growth in imaging in Europe offset by declines in CADCAM and imaging in the US [22] Market Data and Key Metrics Changes - US sales in Q2 were $293 million, down 18% in total or 11% excluding the BiTE impact, primarily driven by softness in connected technology solutions and orthodontic and implant solutions [14] - European sales were approximately $400 million, flat compared to Q2 of the prior year, with Germany showing growth driven by CTS and SureSmile, which was up over 27% [15] - Rest of world sales were $239 million, slightly up versus the prior year, with growth in essential dental solutions and SureSmile up double digits [15] Company Strategy and Development Direction - The company aims to enhance customer experience and support through simplified interactions and increased strategic investments [10] - Focus on innovation and speed to market, with a goal to shape the future of markets by partnering with practitioners [10] - The DS Core platform is a critical element of the strategy, with 50,000 unique users and increasing connected devices and lab orders processed [10] Management's Comments on Operating Environment and Future Outlook - Management noted that global patient volumes and procedures remained largely unchanged, with a focus on long-term strategies rather than short-term market fluctuations [32] - The company is maintaining its full-year 2025 outlook for sales, adjusted EBITDA margin, and adjusted EPS despite current challenges [26] - Management emphasized the importance of focusing on customer needs and improving execution to drive growth [95] Other Important Information - The company recorded a non-cash after-tax charge of approximately $214 million related to the impairment of goodwill and other intangible assets within the OIS and CCS segments [20] - The company completed a $550 million hybrid bond offering in Q2, enhancing financial flexibility [21] Q&A Session Summary Question: Overview of the broader dental market - Management indicated that patient volumes remain stable, but procedural utilization in elective areas like implants and ortho continues to be soft, with a focus on long-term strategies [31] Question: Distributor stock dynamics - Management noted no significant revenue impact from distributor stock changes, with healthy positions in imaging and CADCAM [34] Question: Motivation for joining Dentsply - The new CEO expressed interest in applying operational experience to enhance Dentsply's performance and accelerate growth [39] Question: Performance of implants - Management reported a decline in premium implants due to the transition from legacy brands, with expectations for growth driven by sales force changes and new consumer experiences [43] Question: Tariff assumptions - The annualized impact of tariffs has increased from $50 million to $80 million, with ongoing efforts to mitigate costs through supply chain efficiencies [48] Question: Adjustments on BiTE - A $4 million adjustment was noted for BiTE in Q2, with no further changes anticipated for the second half of the year [52] Question: Portfolio assessment - The CEO believes Dentsply is well-positioned in the market, with a focus on organic growth while remaining open to opportunistic acquisitions [58] Question: Market share dynamics in implants - Management acknowledged challenges in the value implant segment due to Middle East volatility but expects stronger performance in the second half of the year [90]