Dentsply Sirona (NASDAQ:XRAY) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/554faubd/
Summary
Dentsply Sirona is focused on executing initiatives to drive sustainable growth, with a strong leadership team and new competitive hires impacting positively.
The company is investing in expanding clinical education and salesforce training, with early positive feedback and a focus on improving customer engagement.
Significant strategic priorities include returning the US to growth, sharpening focus on the implant business, and increasing R&D investment in high-value opportunities.
Recent product launches include the SmartView Detect, Reciproc Minima file system, and X Smart Go, enhancing diagnostic capabilities and treatment efficiencies.
The company is expanding its US distribution network, signing an agreement with Atlanta Dental Supply and achieving milestones with other distributors.
Restructuring efforts aim for $120 million in annual savings, with early proof points including a $20 million reduction in operating expenses.
Capital allocation priorities focus on debt reduction and share repurchases, with an $80 million debt reduction in the quarter.
Management maintains a cautious approach to guidance, with expectations for more consistent execution and growth in the second half of the year.
Full Transcript
OPERATOR
We are applying a thoughtful, risk aware approach to our guidance while remaining focused on executing initiatives to drive sustainable growth. With that, I will turn the call back to Dan.
Dan
Thanks Mike. As I mentioned in my opening comments, our focus remains on disciplined execution and we’re making progress against our plan. The management team and board are closely aligned, priorities are clear and the organization is engaged and motivated. I also want to recognize the strength of our leadership team, particularly our US Commercial leaders. Several competitive hires joined recently who bring deep dental experience and are already making meaningful impact. While it’s still early, what we’re seeing gives me continued confidence that we’re on the right path. My leadership team and I have been spending more time in the field and at local customer events gaining valuable first hand perspectives. Customers are noticing a shift in how we show up. Most importantly, we’re consistently putting the customer at the center of our decisions and actions with a clear focus on improving both the experience and outcome for the dental practitioners we serve. We are in the early stages of expanding our clinical education and salesforce training programs with increasing structure and scalability. Early feedback is encouraging and the teams are responding well to greater clarity, investments in their development and increased accountability. This work is strengthening our foundation as we prepare for more consistent execution in the second half of the year. At the same time, we’re strengthening our processes to ensure solutions are grounded in real world customer needs. As part of this effort, we’re establishing a CEO Advisory Board comprised of dentists to provide direct and ongoing customer insights. Returning the US to growth remains our top priority. The actions we are taking to strengthen talent execution, expand distribution and improve customer engagement are beginning to show early traction. At the same time, we’re reinforcing the key drivers of our long term growth. A central priority is sharpening our focus on the implant business. While recent performance in this segment has been challenging, we continue to benefit from strong underlying assets and a deep heritage in the space. To build on this foundation, we initiated a disciplined set of actions to improve performance and position the business for sustainable growth. I’ll provide more detailed updates in future earnings calls. Innovation also remains central, supported by increased R and D investment with a clear focus on our highest value opportunities. Let me share a few of our recent launches as seen on slide 7 in the earnings presentation. We just announced the launch of SmartView Detect, the first FDA cleared and CE marked IA enabled diagnostic aid that automatically identifies potential inflammation at the root tip in 3D scans integrated into Dscore platform. The solution works with both new and existing systems, enabling seamless adoption in clinical evaluation SmartView detect increased detection sensitivity by approximately 46% relative to unaided review, helping reduce the risk of overlooked findings while improving workflow efficiency. This innovation not only enhances diagnostic confidence but also supports clearer patient communication, reinforcing our commitment to advancing connected high quality dental care. In endodontics, we introduced the Reciproc Minima file system and the xsmartgo cordless Endo motor, both designed to simplify workflows and improve efficiency. Reciproc Minima enables treatment of narrow and complex canals with a one file approach, while X Smart Go enhances mobility and performance through cordless operation and integrated intelligence. Together, these solutions reflect our focus on practical evidence based innovation in imaging. We announced FDA clearance of our dental dedicated mri, representing an important step forward in expanding our capabilities in soft tissue diagnostics. The system has been validated in clinical setting and is expected to support broader collaboration with leading academic and research institutions. Consistent with our strategy to build clinical evidence and drive adoption, it also complements our existing imaging portfolio. Beyond dental wellspec continues to show solid momentum. Adoption of surety for females is expanding, supported by ease of use, discretion, patient comfort and with encouraging feedback from both patients and clinicians. Building on this, the recent launch of the male version extends the portfolio to a broader patient population. Finally, we’re making progress in expanding and strengthening our US Distribution network. As announced yesterday, we signed an expanded agreement with Atlanta Dental Supply, adding our Connected Technology Solutions portfolio effective August 1st. This marks our fourth new distributor agreement this year and enhances our regional coverage, improving access and service levels in an important market. The other distribution agreements announced in the first quarter are beginning to build traction and expand our commercial reach. Early traction includes Benco installing its first CEREC system under the new agreement, an important milestone achieved ahead of schedule. To lead Dentsply Sirana into its next phase, we’re strengthening our foundation with better tools, more integrated systems and increased automation. This builds on the strength of our existing teams while enhancing capabilities and transformation operations and financial performance. Our Transformation office continues to drive execution of the Return to Growth Action Plan with a focus on embedding lean operating principles, simplifying processes and improving how work gets done across the organization through the customer’s lens. In parallel, we’re advancing our enterprise AI strategy to drive efficiency and support innovation across both commercial and operational areas. In Q1, we began deploying AI enabled tools and select workflows to improve productivity with broader rollout plan throughout the year. Within finance, we’re strengthening capabilities while maintaining continuity as we actively progress on our search for A permanent cfo, Mike continues to be a strong partner in his interim role, ensuring stability and focus on execution. We’re simplifying and optimizing the operating model to improve efficiency and scalability. The restructuring program remains on track to deliver approximately $120 million in annual savings with benefits building through 2026 and becoming more meaningful in the second half of the year. Key actions include cost optimization, organizational simplification and supply chain efficiencies, along with reducing complexity across legal entities and IT systems. Through these actions and by driving lean principles further into the organization, we will improve our speed, competitiveness and the customer experience. Early proof points are visible, including a reduction of approximately $20 million in operating expenses during the first quarter. These savings are being reinvested into growth areas such as R and D, clinical education and commercial capabilities. While we continue to manage external headwinds, a disciplined approach to capital allocation and balance sheet management remains a priority. During the quarter, we reduced debt by approximately $80 million, reflecting our commitment to deleveraging. Capital allocation. Priorities remain focused on debt reduction and share repurchases, supported by improving working capital and free cash flow. With the dividend eliminated during the first quarter, we have increased flexibility in how we deploy capital and as performance improves, we expect to be in a position to evaluate the timing of share repurchases later this year. In closing, progress is encouraging, execution is improving, cost discipline is in place and we’re building the capabilities needed to drive sustainable growth. Early proof points are emerging across the business. Visibility should continue to improve as the year progresses, particularly in the second half. We remain confident in the strategy and focused on delivering long term value for the shareholders. I believe the potential for Dentsply Sirona has never been greater and we have at our fingertips everything we need to achieve this. Thank you.
OPERATOR
Now let’s turn to Q and A. Thank you. At this time we will conduct the question and answer session as a reminder to ask a question. You will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. We kindly ask that all attendees limit their questions to one primary question and one follow up question. Our first question comes from the line
Dan
of Alan Lutz of Bank of America. Please go ahead. Good afternoon and thanks for taking the questions and thanks for all the details. Dan, on the Return to Growth Action Plan, there’s a lot of good steps there. You talked about new distribution relationships and expanding ones. You’ve already had investing in clinical education and then new product investments. So there’s a lot of things on the plate. How do you think about the timing of these benefits? I think at the top of the call you mentioned maybe some benefits happening toward the second half of the year. But as we think about all those things that you’re spending time on or that you’ve done so far, is this something where we should start to expect more significant benefits in the back half of this year, or is this effectively more of a two or three year roadmap? We’d love if you could just give us a sense of how you’re thinking strategically about the timing of some of these investments you’re making in that return to growth plan. Thanks. Thanks, John. I appreciate the question and I think you kind of answered it right. So when we first rolled out the return to growth plan, we called it a 24 month plan, recognizing that you
Alan Lutz (Equity Analyst)
can’t move fast enough, but at the same time can’t change this as quickly that all of us would wish. So really Q1 was really the beginning of this, where we established the 26 plan, built the teams, did all the reorganization, and this is really us out of the gate in the first quarter. What we’re talking about in particular is as we begin some of the restructuring that’s occurring in first, second quarter, you’ll see some of those cost benefits come through more in the fourth quarter than you would in the first half of the year. But you know, as you look at the commercial cadence and what we plan to drive again, I would think we should begin to see some things in the fourth quarter. But I really do believe that more of the improvements will be seen as we get into 27 and certainly into 28. Appreciate all the color there. And then we’d love to hear an update on some of your early conversations with DSOs. Where within your portfolio is the most interest and how can X ray best help DSOs?
Dan
Yeah, again, great question. And there’s a lot of great activity that is currently occurring with DSOs. It’s something we had begun in the last quarter of last year with this. And you know, again, if you look at who we are and what we offer, you have the incredible strength of a broad portfolio. Whether you want to actually build out
Alan Lutz (Equity Analyst)
new dental suites and we can actually provide all of that activity there, or you want to plan for longer consumables and pull throughs, again, we can do that as well. So we’re really talking with several concurrently and we’re looking to have a more active plan again more towards the second half this year and into next year. But I think the strength is in the broad offering we can give them as a one stop shop and therefore bring all of the leverage bundling together for the best impact for them and ease of them with us. Great. Thanks, Dan. Thank you.
John Block (Equity Analyst)
Our next question comes from the line of John Block at Stifel. And maybe just the first one. I’d say the trends with the consumer are certainly a concern with the geopolitical backdrop. And you guys are so global in nature that I thought I’d take the opportunity. When you look across your book of business, anything to call out between Americas and EMEA and apac, when we think about March or April trends, whether it be weakening or maybe even something to call out in terms of more resilience than maybe you expected considering what’s going on in the world.
Dan
Yeah. Well, again, great question, John. And there’s certainly a lot of moving parts here in, you know, we haven’t specifically called out Middle East. We’ll keep our eyes on that. It is a small or lower single digit impact for us right now. And so I think we’ll keep focused with that. The continued struggle in central Europe with Russia, it certainly has its weight, something that we’ve factored into our forecast. So, you know, as of now we stay with what we’ve …
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