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We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recently filed Form 10 ks and any updating information in subsequent SEC filings lists some of the most important risk factors that could cause actual results to differ from our predictions. On today's call, our remarks will be based on non GAAP financial results. We believe that non GAAP financial measures offer investors valuable additional insights into our business' financial performance, enable the comparison of financial results between periods, where certain items may vary independently of business performance and enhance transparency regarding key metrics utilized by management in operating our business. Please refer to our press release for the reconciliation between GAAP and non GAAP results. Comparisons provided are to the prior year quarter unless otherwise noted. A webcast replay of today's call will be available on the Investors section of the company's website following the call. And with that, I will now turn the call over to Simon.
12m 1s
Thank you, Andrea, and thank you all for joining us this morning for our Q1 twenty twenty five earnings call. Today, I'll cover our full agenda as Herman Cudo has completed his interim CFO assignment with us My prepared remarks will include an overview of our recent performance, our Q1 financial results and an update on our 2025 outlook. I'll then finish with our foundational initiatives and strategy. Before we get started, I want to provide you with some thoughts comments on the global trade situation and how we're viewing it relative to our business. As a multinational company operating in over 100 countries with a global supply chain, the current and potential tariffs create headwinds and risks in our business. We are confident that the work we've done to strengthen our foundation improves our ability to navigate these potential challenges. As the situation began to evolve, we developed plans to mitigate potential impacts to our business. We continue to monitor the changing landscape and are poised to pivot as necessary. Now let's start with some key points on Slide three. In the first quarter, we continued to make progress towards driving reliable and sustainable performance from DENTSPLY SIRONA. Let's run through a few highlights.
13m 20s
In Q1, we delivered organic growth in two of our three global regions and continued to improve operational efficiency. Organic sales exceeded our expectations and while down 4.4%, it did include a negative 4% BiTE impact. Imaging performed well in the quarter with our heightened focus resulting in growth across all regions. WellSpec Healthcare delivered another quarter of growth across all geographies fueled by new product introductions and solid execution. Europe also delivered growth for the second quarter in a row while Germany, our largest market in Europe and our second largest market globally delivered a third consecutive quarter of growth. We were pleased to see EBITDA margin expansion and EPS growth in the quarter reflecting our transformational savings improving operational efficiency and BiTE. We continue to drive internal financial discipline while also seeking to improve our commercial excellence. Including customer experience. A work in progress. Our approach for IDS this year serves as a great example of this. While we spent 60% less than we did in 2023, our sales results exceeded those in 2023. A testament to the innovation that we continue to deliver focused on enabling great clinical outcomes improving efficiency for our customers and enhancing treatment acceptance rates.
14m 47s
Our commitments to customers and investors remains on delivering meaningful progress through thoughtful transformation customer centric product innovation, and disciplined execution. During the first two weeks of April, once again conducted our quarterly customer survey with over 1,100 respondents. As planned, we also began to leverage our virtual sales team to gather customer input. Reaching nearly 1,000 additional respondents. Results indicate that our major markets remain relatively unchanged from a patient volume and procedure utilization standpoint. Not surprisingly, we saw a drop in US dentist sentiments with about half expressing concern or expecting impact in the rapidly changing economic conditions and the potential implications on patient footfall, and treatment acceptance rates. Despite this results indicated dentists remain strongly in driving efficiencies through workflow improvement. In Japan, dentists also see increased usage of digital equipment as a top opportunity. This feedback, while in a period of dental market uncertainty demonstrates a clear alignment to our strategy. Enable efficient, effective and profitable dentistry by providing tangible, meaningful and measurable outcomes for our customers through product innovation and connected technology. For 2025, we are maintaining our for organic sales and adjusted EPS while increasing reported sales for foreign currency translation changes. This outlook does reflect the current tariffs.
16m 23s
Despite the increased uncertainty in the macroeconomic environment, we delivered Q1 ahead of our expectations. And remain confident in executing against our commitments. We will cover more details on outlook a little bit later. Given the current environment, we are also taking a proactive and disciplined approach to managing our balance sheet. With actions taken in the quarter strengthen our positioning. Before we discuss financial results in more detail, I'd like to share some recent business highlights on Slide four. Starting with innovation, In March, we took the opportunity at IDS to invite our customers to experience the power of connected dentistry. Forty years ago this year, DENTSPLY SIRONA propelled dentistry into a new era with the introduction of CEREC. Those dentists who have embraced this transformational technology deliver exceptional care for their patients at the chairside, while growing their businesses meaningfully. With the introduction of our DS core ecosystem in 2022, we initiated the transition into the next chapter. Digitally connected dentistry. As we continue to expand its functionality and connectivity with our CADCAM and imaging platform, we believe our technology can further expand the penetration of digital dentistry. We see evidence of this with the platform continuing to gain traction.
17m 44s
And has now surpassed 42,000 unique users 50,000 connected devices and we are processing over 100,000 lab orders each month. We continue to add new capability to the platform, And in Q1, we added DS core diagnose complementing our three d imaging solutions. This new capability brings the flexibility and benefits of the cloud and DS core workflow to CVCT. And integrates an AI powered three d rendering tool for better patient communication. This is currently available in Europe and is pending five ten clearance in The US. We also enhanced PrimeScan two, with new functionality and accessories. Functionality enhancements include a 50% reduction in Internet speed requirements 90% faster SureSmile simulations and integrated caries detection is now available in certain markets and is also pending FDA clearance in The US. We believe these additions will facilitate an improved scanning experience and increased patient engagement. This platform embodies our clear intention to enable seamless connectivity faster workflows, and smarter integrations. This leads to our customers experiencing added flexibility improved efficiency and with that the opportunity to improve treatment acceptance rates all of which drives practice growth. Our NPD discipline and pace is also evident in our approach to seeking regulatory clearances.
19m 15s
Already this year, we have received three five ten clearances with five additional filed and pending. Moving to customer engagement and experience. In Q1, we launched revamped company and SureSmile website to improve customer interactions. We redesigned the denselyceroma.com improves navigation, search functionality and usability. Making it easier for users to find information to contact us and to purchase products. The new suresmall.com is designed to complement our company website creating a cohesive and integrated experience. Between the two sites for our customers. Additionally, and in parallel, we have also been hard at work designing a new e commerce platform to include self-service capabilities. Simplify returns, leverage AI to drive customer engagement, and optimize the reorder process. Our goal ultimately to make our digital platform simple intuitive. And easy to use. I've spoken in a variety of our investor engagements, including these earnings calls. About the robustness of our portfolio. While we continue to work earnestly at improving this portfolio for the reasons we've just [indiscernible] We also recognize that our customers experience pain points when they engage with DENTSPLY SIRONA. To ensure we capture these, we have been closely engaging with dozens of customers over the past couple of months.
20m 42s
We also recently kicked off an in-depth assessment of our U. S. Customer base to better understand how and where we need to improve. We expect this work to provide key insights that we can use to develop the next phase of our action plans focus on improving our interactions and delivering what customers need and care about most. As with everything we do, are taking a thoughtful, data driven and disciplined approach to make well informed customer centric decisions. Now let's wrap up our highlights with operational updates. In March, we announced the appointment of David Ferguson as SVP of our Global Business Unit managing our dental product portfolio. David is a seasoned healthcare executive with extensive experience in developing and executing strategic growth plans as well as building and aligning high performance teams. We continue to make progress on ERP modernization with two additional phases in The U. S. Rolled out. Both deployments have gone as expected with minimal disruption. We have leveraged learnings from each launch to drive continuous improvement into subsequent deployments. Lastly, and importantly, we are delivering on plans to optimize our global supply chain. This quarter, we completed the closure of one of the manufacturing sites we had announced last year bringing the total number of manufacturing and distribution sites now closed to 10 since we started this work.
22m 9s
Our supply chain team continues to make robust progress on optimizing our network. Improving efficiency [indiscernible] and enabling a better customer experience. Let's move to Q1 results on Slide five. Our first quarter revenue was $879,000,000 representing a decline of 7.7% over the prior year quarter. On an organic basis, sales declined 4.4% as foreign currency negatively impacted sales by approximately three thirty basis points. Byte had a negative 4% impact representing most of the decline. On a constant currency basis, sales highlights in the quarter included double digit growth for equipment and instruments SureSmile performance in Europe and rest of the world, and continued momentum for WellSpec Healthcare. These improvements were offset by declines in CADCAM, and IPS. Despite lower sales, adjusted gross margin was roughly flat Adjusted EBITDA margins expanded two twenty basis points. Benefiting from lower operating expenses and reflecting our transformational savings internal financial discipline, and an $8,000,000 BiTE customer refund adjustment in the quarter. Adjusted EPS in the quarter was $0.43 up 3.7% from prior year largely due to higher adjusted EBITDA margins and a lower share count. Partially offset by a higher tax rate. In the first quarter, we generated $7,000,000 of operating cash flow compared to $25,000,000 in the prior year quarter.
23m 47s
The year over year decline is primarily attributable to timing of cash collections and a higher build of inventory. We finished the quarter with cash and cash equivalents of $398,000,000 on March 31. Our Q1 net debt to EBITDA ratio was 3x consistent with the prior quarter. And in Q1, we entered into a bridge loan agreement to pay down short term debt. Let's now turn to first quarter segment performance on Slide six. Starting with the Essential Dental Solutions segment, [indiscernible] organic sales increased 0.4% due to growth in Europe and rest of world partially offset by lower volumes in The U. S. EDS performance in the quarter reflected stable patient traffic which I spoke to earlier, when sharing our customer survey results. Shifting to the orthodontic and implant solution segment, organic sales declined 17.7% with a net negative bite impact of approximately $40,000,000 year over year or about 13%. SureSmile declined slightly in the quarter due to the prior year loss of a DSO customer in The U. S. Partially offset by double digit growth in both Europe and rest of world. We continue to see aligners as a strategic growth opportunity for us globally. Implants and prosthetics declined mid single digits in the quarter, driven by lower lab volumes globally and lower implant sales in The U. S. And Europe.
25m 24s
Sales of premium implants grew nominally as our EZ family of implants and prosthetic solutions outpaced declines in legacy brands. Wrapping up our dental performance, [indiscernible] our connected technology solutions segment So organic sales declined 0.5% versus the prior year quarter largely due to declines in CADCAM predominantly in The U. S. Growth in equipment and instruments offset the majority of this decline with imaging performance a bright spot posting growth across all three regions. As we benefited from an easier comp with the prior year navigating a softer retail environment. Our treatment centers business also contributed to growth as a result of a onetime delivery of equipment for a large new institutional customer. In EMEA. Moving to WellSpec Healthcare, organic sales grew 8% with sales growth across all three regions as we continue to benefit from new product launches and execution. As a reminder, in Q2 of this year, will have a more difficult comp due to a distributor we onboarded in the prior year period. We continue to expect this business to deliver mid single digit growth for the full year. Now let's turn to slide seven. To discuss first quarter financial performance by region. U. S. Organic sales declined 14.9% primarily due to the negative 9.8% impact from BiTE.
26m 55s
CADCAM and IPS also declined in the quarter, which were partially offset by growth in WellSpec and Imaging. Changes in distributor inventory for CADCAM contributed to the year over year decline. Distributor Inventory Levels In The U. S. Increased sequentially by approximately 4,000,000 compared to an approximately $9,000,000 sequential increase in the prior year quarter. Meanwhile, U. S. Imaging growth benefited from changes in distributor inventory levels. Distributor inventory in The U. S. Increased sequentially by approximately $6,000,000 compared to an approximately $7,000,000 decrease in the prior year quarter. We ended Q1 at about historical averages for CADCAM and Imaging distributor inventory levels. Turning to Europe, organic sales increased 1.1% driven by performance in Germany equipment and instruments, SureSmile and WellSpecs. Germany, our largest market in the region, posted another quarter of growth driven primarily by CTS. While we remain cautious on the German economy, we have seen encouraging signs of a rebound particularly in equipment. SURE Smile posted double digit growth as it continues to show positive momentum in the region. The organic sales growth for Europe was partially offset by declines in CADCAM and IPS. Rest of World organic sales grew 3.1% with growth in Imaging, [indiscernible] and implants in China as the primary drivers partially offset by a decline in CADCAM.
28m 35s
With that, let's move to Slide eight. To discuss our updated outlook for 2025. We are maintaining our 2025 outlook for organic sales and adjusted EPS. Organic sales are expected to be down 2% to 4% with a 2% bite impact on the full year. We are revising our outlook for reported sales to reflect the change in foreign currency rates as of the end of Q1. And we now expect reported sales to be in the range of $3,600,000,000 to 3,700,000,000.0 above our previous range of $3,500,000,000 to 3,600,000,000.0 Moving to profitability. Are increasing our outlook for adjusted EBITDA margin to greater than 19%. Attributable to the positive impact of FX rates drawing through the P and L. Adjusted EPS remains unchanged from our guidance in the range of $1.8 to 2 which reflects the current state on tariffs and trade policy. Now let me provide some color on our expectations for the second quarter. We expect second quarter organic sales to decline mid single digits versus the prior year period primarily as a result of the negative sales impact from BiTE. We do not expect an impact from foreign currency based on rates at the end of the quarter.
29m 53s
Sequentially, reported sales are expected to increase in the second quarter based on normal seasonality. And the positive impact from sales associated with IBS. We anticipate second quarter adjusted EPS will be up year over year primarily due to adjusted EBITDA margin expansion offset by a higher tax rate. Now let's move to our strategic update on Slide nine. As we continue on our path to improve all aspects of our company, we've also adapted our approach along the way as needed. We've shared our formula for growth, focused on customer and return centric innovation clinical education and commercial excellence. We know that growth won't come by chance, It will come from the choices we make the focus we bring, and the value we create and deliver. Our focus on growth must also be accompanied by a scalable and lean customer. For 2025, we've embarked on the next set of strategic actions. We deliver best in class innovation, and believe we are uniquely positioned to shape connected dentistry across clinical procedures We continue to deepen our customer focus and clarify our value proposition. Which as I've noted centers on enabling great clinical outcomes improving workflow efficiency, and enhancing treatment acceptance rates.
31m 17s
We are also evolving the nature of the conversations we have with our customers to be value oriented. Our innovation pipeline is healthy. With the projected value of the NPD portfolio more than doubling over the last twelve months. To the benefits of cloud based software and solutions, we're bringing new capabilities and functionality to the market at an accelerated pace. Historically, CEREC software updates could take up to two years to complete We are now leveraging the benefits of our cloud based solutions to develop software updates on a more frequent basis as often as quarterly and releasing those updates instantaneously. And we're doing so more efficiently by increasingly leveraging AI tools alongside our software development teams supporting code generation and automating test creation. I've already spoken about our most recent enhancements for both PrimeScan two and DS Core. With each new release, we see increased adoption and stickiness as we deepen the connectivity our digital ecosystem. We've had some feedback from our customers on opportunities to further enhance the experience with PrimeScan two. And we have rapidly implemented changes. Such as improved compression and simulation speed. And we'll continue to adapt the platform to meet customer needs. We are recognized as a leader in clinical education and we continue to fulfill our commitment in this area.
32m 45s
We've already kicked off DS World twenty twenty five events with our first held in Dubai. This was the third year we've hosted the event in this market and we saw more than a 10% increase in participation as well as higher sales compared to last year. We're also broadening and deepening our customer reach and enhancing our customer experience through our virtual sales team. A team focused on The U. S. Market and based in our Charlotte headquarters. This team now makes over 2,000 customer calls a day driving sales providing quality leads to our field based sales team and gathering customer insights. As we've spoken about before, virtual sales plays an important role in creating our own demand. This team has now reached out to over 21,000 accounts. Approaching $1,000,000 in revenue and generating several million dollars in leads. We continue to shape the organization and deliver on our initiatives to strengthen the company's foundation. Our ERP modernization continues with more deployments planned later this year including the remaining U. S. Deployments. We expect to begin additional European launches later in 2025 with completion expected in 2026. We also continue to deliver on our supply chain transformation SKU optimization work.
34m 7s
Now I'll wrap up on Slide 10 with a few summary remarks. Q1 results exceeded our expectations. That said, we are not satisfied and rest assured, we will keep driving towards reliable, sustainable performance. We're maintaining our 2025 outlook for organic sales and EPS. Our financial discipline and operational efficiency are improving. Which will benefit us as we navigate through an increasingly uncertain external environment. We are executing with intention. Reshaping the organization and driving efficiencies. We are also committed to enhancing the customer experience and investing for the future. And with that, I will open it up for questions. Thank you.
34m 55s
At this time, we'll conduct the question As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 1 again. Please limit to only one question and one follow-up question. Stand by while we compile the Q and A roster.
35m 18s
Our first question comes from Elizabeth Anderson Evercore ISI. Your line is now open.
35m 24s
Hi, guys. Good morning, and thanks so much for the question. One, I was hoping that you could expand a little bit more on the tariff impact. I know you said it was incorporated in your guidance and I appreciate that. That's super helpful. I'd imagine that has some impact. But I was just wondering if you could help us sort of spell out, that in a bit more detail.
35m 46s
Good morning, Elizabeth. Simon here. So as you noted, we have we have factored the tariffs into the the current guidance with where tariffs are today. It is we have contemplated approximately $10 of impact today, and we have recovering that throughout the year. So on an annualized basis, we think the tariff exposure as of today is about about $50,000,000 As know, we have a have a large manufacturing footprint outside of outside of The US and about half of our U. S. Sales are are generated from goods that are manufactured outside outside of The US Anything else that comes in, we will we've got some options for how to deal with those. But we provide any color on what those we think that is right now. And if there is any retaliatory impacts from Europe. But we have have plans in place to deal with any subsequent issues.
37m 1s
Got it. No. That's super helpful. Thank you. Appreciate the additional color. And then one another question. Could you update us on where we are with sort of the CFO search? I know Herman was obviously temporary in an interim So just wanted to get your latest thoughts there as well.
37m 16s
Yeah, so we're good progress on that. Elizabeth. Have a number of candidates and I would say in the in the late phases of this process. So we are we are hopeful that we're going to get home on that in the not too distant future. Great.
37m 35s
Thank you so much.
37m 36s
Thanks, Elizabeth.
37m 37s
Thank you. One moment for our next question. Our next question comes from Michael Cherny of Leerink Partners. Your line is now open.
37m 48s
Good morning, and thanks for taking the question. Maybe if I can just dive in a little bit on the orthodontics side a little further. Obviously, the BiTE roll off continues, but as you go through that process, can you give us a little more sense on what you're hearing from your customer base? Kinda how the the SureSmile pitch has gone beyond here and sorry if I missed this, Simon, but any differences in your view on the eventual potential expansion beyond the current GP market? Yes. Good morning, Michael. So let me deal with the second part first. As you know, redeployed some of our BiTE resources into different parts of our business. And they have contributed to the new densifycerol.com and you can suresmall.com websites and are also working on e commerce In parallel to all of that, the software and R and D teams are at the moment collecting inputs from customer about what customers about what the new user interface needs to look like. And so we're making good progress on that and we expect to be in a position to improve that by the end of the year or maybe into early next year.
39m 4s
It's clear It's clear to us that we do need to reengage with the orthodontist community The vast majority of volume is in that area. We think we have a meaningful solution for them. With SureSmile and all the benefits that we think customers gain from that customers and patients. But we do need to improve the user experience because it's not just about the orthodontist, him or herself, It's about their staff members having to navigate a new software and challenges that causes. So we need to make that more seamless. I would say we will providing more information on our intentions in over the next quarter or two with respect to the orthodontist community. Perfect. That's it for me for now. Thank you.
39m 58s
Thank you. One moment for our next question. The next question comes from Kevin Caliendo of UBS. Your line is now open.
40m 8s
Thank you very much. This is Dylan Finlay on for Kevin Caliendo. Starting off first, you know, some impressive execution on on EBIT margin. In particular, it looks like OIS had some favorability at about a 17% EBIT margin. First off there, is this like a reasonable run rate? To start with looking at the rest of the year? Any context behind that number?
40m 36s
Yeah, good morning, Dylan. Let me be a little more a bit more general than just OIS. I think we saw an improvement in Q1 for sure. I know that when release guidance back in February, we had some what should we say, spotty margin profile throughout the year. So we're pleased now that we've managed to smooth that out. I think you should consider where we landed for the, for Q1 as indicative of where we land for rest of the year. But for sure, across all of our businesses, we're focused on a driving growth, but also being being very judicious with our SG and A. And that's all helping throughout the P and L. Very helpful context. Thanks. And then just one last follow-up. When I look at EPS, your guidance for 2Q being up on a year over year basis, sort of implies at least $0.92 $0.93 in the first half of the year. Typically, seasonally, we expect to see 4Q equipment really drive the bottom line result there. So context I guess perhaps behind why 2Q might be a bit soft. Are you conservative? Are there implications from the tariff perspective? Anything on that?
42m 5s
So, from a tariff perspective, I would say there's more in the tariffs towards the back end of the year. I would say Q2 is normal seasonality that we that we see as well. [indiscernible] So that's about as much color as I can can give you on that. You know, in the survey that we've done, your footfall is still stable within preventative and resto. But there is some slight negativity in the market around tariffs. So let's see how that shakes out. People will postpone stuff. But, yeah, normally generally that was just normal seasonality and the back end weighting of the of the tariff impact. Thank you.
43m 17s
Fran, we're having some challenges hearing you clearly. If you can please ask for the next question.
43m 56s
David, it looks like your in queue. Can you hear us? And do you want to go ahead with your question?
44m 2s
Yeah, yeah, Good morning. Hopefully you can hear me okay. So, maybe I'll start on CTS So, you know, the mix there was interesting to see. So in equipment, growth obviously accelerated. Wanted to ask how much of that was driven by the comp versus any improvement in kind of underlying demand And then on the CADCAM side, what was the impact of dealer inventory? And what are you seeing in iOS price and volumes? Yes, good morning. Good morning, David. Let me start with the second part. First. And inventory. I think as we noted in the prepared remarks, inventory dropped on the on the CADCAM side, but increased on the imaging side. So I think net net, it's probably a reasonable wash there. Between both. We are at about normal historical levels on inventory across the board here with our with our main partners. So no significant impact I would say there. On the pricing on scanners, have not seen a that much of a notable change in the quarter. I think net net for our CADCAM business there was about a $1,000,000 degradation from prior year, so not that significant. And, yeah, that's that's about it on the front piece.
45m 37s
Did you have one more part to your question there, David?
45m 41s
Yeah, I mean, I think that was about it. My second question, maybe I'll I'll ask on implants. So The U. S. On The U. S. Side, it looks like it was down in the quarter. Guess, are you seeing any progress on that front? And then premium grew nominally, I think you said in the script. Any color around what it did in The U. S. Specifically? So much for taking my questions.
46m 6s
Yeah. Premium grew nominally The degradation that we saw in some of our legacy brands was was offset by growth in EV family. So that good to see. We've been out with customers a lot over the past several weeks And the theme that continues to surface here is the importance of of commercial teams and the relationship that the the reps have from a clinical perspective, and also from, let's say, an organizational perspective with with their implant customers. And it strikes us as that we were still in the in the rebuilding phase. That's what customers are saying to us that [indiscernible] and also to be very strong at building relationships, which as you know, takes some time. We have now completed the retraining of our sales reps on the implant side, that they're more clinically savvy. We're in the process. They're actually in the building right now. Of re training our sales managers on what good sales management looks like. So again, a disappointing quarter. There's no way to it any other way, but on implants, But we are we continue to try and improve our performance there and improve the quality of our commercial team. And improve relationships with these customers.
47m 36s
It is a an area of intense focus for us as it has been for for two years. And disappointing that we have not made more bookings than we had expected.
47m 49s
Great. Thanks so much for taking my questions.
47m 53s
Thank you. Our next question comes from Vic Chopra of Wells Fargo. Your line is now open. Hi, good morning. This is Simran on for Vic. Thanks for taking the questions here. Just a quick follow-up on the tariff impact in 2025. What mitigation strategies do you have in place? And is it that assumed in the $0.10 that you're guiding to for the year? And maybe just on mitigation, you know, what are some strategies you can deploy more near term? And then what do you have sort of longer term?
48m 37s
Yeah, good morning. So there are no mitigation strategies contemplated in the point one zero dollars that we're offsetting at this point in time. And then considerations for what we we could do in the future In some areas we have have not quite dual manufacturing capability, but let's say we have one type of file that's made endo file that's made in Switzerland, one type is made in The U. S. So right now we are are trying to move a US customer to a US manufactured file. For example. So that work is underway. Right now. We are also actually right now we are building some strategic stock in certain areas, and we're going to import that into The US to prepare us for what might come in the future. We also think we have some optionality to to redistribute, stock that we have in some of our DCs around the world. Into, US based distribution sites. Which would help And then obviously, we have we will continue to be extraordinarily prudent with our expenses moving forward. And then the lever that, I'm sure people would be most reluctant to pull is some strategic price increases. I think our customers are already expressing some concern about that, what that may mean across the board.
50m 11s
Particularly with your reimbursement of dental procedures being compressed. But that is obviously a lever that, that we have contemplated. And if we were to do so, it would be very strategic and in certain areas only.
50m 27s
Okay, great. And maybe just for my follow-up, could you provide any timing updates or visibility on the resolution of the German tax situation. Sort of what is the current status of working with the authorities in Germany and risk responding to their requests?
50m 46s
Yep. I know that's a question that the front of many people's minds, including ours. The best answer I can give you is we're continuing to work with them We're continuing to meet with them. We have provided a a lot of files, we're cooperating with them. But at this point in time, I don't think they know and therefore we don't know about when there's a likely resolution, but the resolution is likely to be some time out and the magnitude of that resolution is at this point, impossible to define. As I've noted before, though, just if I can just finish in that point. We remain very confident in our position If any any ruling goes against it, will appeal it and we will go until the end here We had lots of advice when the murder happened. We continue to get advice that this is standard. As recently as Q1, And so our position is unchanged. That there's nothing to see here.
51m 56s
Okay, great. Thank you. You're welcome.
52m 1s
Thank you. Our next question comes from Jon Block of Stifel. Your line is now open.
52m 10s
Simon, maybe I'll just try to wrap up some questions in one. If you can maybe provide a bit bit more color just on current trends, simply put, there was really big 1Q upside but no change to the full year guidance. And I get it, there's certainly a ton of moving parts. Which we touched on a bit. But is it just when we look back, it was sort of a good amount of conservatism to the one 1Q guide. Or is there anything to call out that you're seeing as you look forward by product line or by region? Then I'll ask the follow-up.
52m 40s
Okay. All right. Thanks, John. I think we had, as we called out in the script, had a couple of one times in Q1, timing things there. [indiscernible] only contributed nominally to our over performance I think we're being as we were in with the original guide, I just think we're being a little prudent here with respect to the outlook for dental. Nothing from our survey and as I noted, we have over 2,000 respondents in total Nothing has materially changed with respect to [indiscernible] Nothing that we see has dramatically changed certainly in North America, with respect to customer sentiment around purchases. We're really pleased to see some improvement in Germany, at least in our performance But I think the interesting thing from the data that we've gathered, John, is the data generation straddled Liberation Day And we saw a drop in sentiment pre imposed liberation day. In general, and it didn't move from from concerns to very worried it moved from not concerned to somewhat concerned. So when you net it out, it was it was just a slight degradation. But I think we're just being prudent here. There's a lot of moving parts and in macro economy and dental in particular.
54m 17s
So I would classify it as prudence and let's see where things go from here on in.
54m 26s
Got it. That was great. That was very helpful. I don't think anyone are used with being prudent. I think just to shift gears for the second question, SureSmile was down. I think the words were slightly year over year and I get it. There's still that drag. From the DSO customer, but just to push you a bit, like when you hit the gas in ortho and you feel like the software is where you want it to be, what's the strategy on how to compete or how to win? And I just ask that because when I look at that landscape, you've got a player from China that's been very aggressive on price. You have another player that's able to leverage their wires and brackets franchise. And then you have sort of the big incumbent, if you would. So maybe just talk to us a little bit on where you see the opportunity to go into a market like that and compete and win again when the software is where you want it to be.
55m 15s
Thank you.
55m 16s
Yeah, thanks for the question, John. I think software is one area that we can leverage. DS core and our scanner are pretty powerful combination that we have. So I think that's one lever that will interest people for sure. I think the second one, here is that you mentioned price. I think our price position has been pretty competitive with respect to our aligner offering. So that's number two. And then number three, as we think about, and as keep as we keep hearing from customers all of all types, whether they're GPs or endos or orthos, they want efficient procedures and they want they want the patient to get in their chair, they want the patient to accept their treatment plan. And they don't want the patient to come back for refinements. So we do know, and we've spoken about it before that we have fewer attachments with our device, which makes it more efficient for the customer. We have fewer refinements so the patient patient isn't coming back. And so when you combine all of those things together, I think we do have a value proposition proposition that will resonate with with the orthodontic community. [indiscernible] Of course, the competition in that space, I'm not going to take it lying down.
56m 43s
I would suggest that there's lots of room for competition, in that space. The aligner market is arguably under penetrated you think of the total population. And we do have some unique opportunities with robotic wires and with our advanced SureSmile software as well. So we are not being there's no bravado here from our part. Have to fix the software. We have to redirect our sales team or add to our sales team. And we have to really develop a compelling value proposition to shift customers from a competitor into into our business. I guess the final piece I would say and we shared this data before we did a pretty robust survey late last summer think it was about two fifty orthodontists And they do have multiple brands on their shelf. Shelves that they can choose from. And you know, we just need to move our brand up up near the top and grab grab some more of that. It's, 80% of the volume is with the ortho, I'm sure we can continue to grow in the mid single double digit growth area. With the GPs, but the volumes in the ortho and so we wanna be meaningful, we need to be with orthos.
58m 7s
Understood.
58m 8s
Thank you.
58m 11s
Thank you. Our next question comes from Jeff Johnson of Baird. Your line is now open.
58m 18s
Thank you. Good morning. Simon, I think we're all learning here through this earnings season and the questions to ask about tariffs and all that. So maybe if I could ask just a couple more clarifying, I don't want to beat a dead horse here, but the $50,000,000 annualized as you're talking about, the $0.10 EPS impact, as I do the math, seems like the it's about $25,000,000 that is layering in this year. To get down to that $0.10 And so one, should we expect that $25,000,000 this year to go up to the $50,000,000 annualized next year? Or do you think you could mitigate some of that into next year? Number one. Number two, does that $50,000,000 annualized figure that you give does that assume the current 10% tariff outside of China or the kind of Liberation Day tariff rates that were higher in some of the European markets? And then the third part, just on tariffs is, do you have much exposure of products made in The U. S, sold in China or China made products sold in The U. S. Vice versa? Just, or is most of it Europe based? Thank you.
59m 23s
I'll try and remember all those parts of that question, John, or Jeff rather. So with respect to the last part, we have nominal exposure, very nominal exposure to to China. We have manufacturing there, but it's for China. Less than 5% of our materials are from China. So very, very nominal. The $0.10 $0.10 does translate to as you said $24.25. Million dollars Any further exposure I think there are as I noted in one of my previous answers, we have not contemplated any mitigation efforts whether that's stock build, whether that's product swap outs or whether that's more cost synergies for us or in certain cases, certain cases, price increases in strategic areas. So we have not contemplated that And [indiscernible] anything, were to go, it does contemplate the 10% today, If deliberation day numbers come out, then we'll have to do further work to decide what we would do there. I think in contemplation of [indiscernible] we have begun those strategic stock builds We are looking at relocating product from DCs around the world into North American DCs So that any impact that we would see from Liberation Day two point zero tariffs would be offset by product already being in country.
1h 1m 4s
All right. That's helpful. Thank you. And then just a cash flow question, if I could. I know you don't guide to cash flow, but CapEx has been up kind of in that upper 150,000,000 to 180,000,000 to $200,000,000 level the last couple of years. Free cash flow kind of down in that low to mid-one hundred million dollars level over the last couple of years. Should we expect CapEx to come down at all this year, free cash flow to go up? And just on the short term funding that you talked about, it seems like some high interest rate on that or a little bit higher interest rate, I guess, I should say. To be fair. So just wondering, how are you feeling on cash? Is any kind of cash issues we need to be worrying about here in the short run? Thank you.
1h 1m 42s
So with respect to let me take the CapEx piece first. I think we're we're doing a lot of, what shall we say, onetime longer term projects such as ERP that we would expect would begin to roll off. We've been successful so far with ERP with respect to the launches we're within a hair's breadth of our original originally contemplated budget, for ERP. So we're pleased with that. As that rolls off, we should expect CapEx to improve and free cash flow to improve With respect to the financing, we're just being prudent We had an opportunity and we decided to take it [indiscernible] There are no other issues that was put in place to address So it was just to help us out with which short term debt gives us some flexibility. And just given the current environment, we thought it was prudent to be prudent.
1h 2m 49s
Fair enough.
1h 2m 50s
Thank you.
1h 2m 54s
Thank you. Our next question comes from Jason Barnard of Piper Sandler. Your line is now open.
1h 3m 1s
Hey, good morning, everyone. I want to follow-up first on Jon Blocks. First question just to see if we can put an even finer point on The U. S. Market.
1h 3m 9s
Simon, you mentioned some maybe some more cautious commentary on U. S. Dentist sentiment from your quarterly survey. I'm trying to process that in the context, I guess, of what you're seeing real time at the patient level and also at the doctor level. Are you observing any patient reticence in moving forward on treatment, particularly in areas like ortho or implants? And then our doctors putting a pause, even a temporary pause on equipment purchase decisions? Or do you think your survey is just an indicator of mood and concern rather than anything that's yet materializing in the end market?
1h 3m 43s
Good morning, Jason. So I would say, the survey, both surveys that we've done in terms of footfall, great difference in The U. S. In terms of intent to purchase, no great difference either to be fair. In The U. S. And over the past couple of weeks, I've been out with, I visited about 17 customers over the past three or four weeks And I've asked them the same question. I've asked them about foot footfall I've asked them about patient treatment acceptance rates. Of asthma about their intent to purchase. And these 17 or so customers have said they have not seen a change in patient footfall or patient traffic. They have not seen a difference in treatment acceptance rates for the procedures that they they offer. And if they needed to buy some equipment, would buy it. In the 1,000 people that we surveyed, with our inside sales team, The vast majority were just waiting to see what would happen with tariffs. They hadn't indicated that they would trade down to lower price consumables. Or that they would, halt any capital equipment purchases. So I think the survey again, over 2,000 customers, I think there's just not much change for now It's no better or no worse.
1h 5m 14s
And I think given the situation, that we're all hearing about, I think we would take no better or no worse moving into the survey.
1h 5m 25s
Okay. All right. That's helpful. And maybe over to another important market for you. It's really good to see that Germany has been performing better. Some durability on that growth. As we think about comps in that market in particular, I think you have maybe one or two maybe three more quarters of really favorable comps, but I think it's just maybe a quarter or two. How do you think that market performs once we anniversary those easier comps? Do you think that durability you've seen in the last few few quarters, does that sustain as we exit this year and look beyond?
1h 5m 56s
Yes. So I think we have probably one more quarter of favorable comp. We've now posted three quarters in a row Jason of growth Again, with respect to the survey that we have from from Germany, stable steady as you go from Germany. We've definitely improved our execution over there Our CTS business has done well in Germany, particularly imaging and instruments. So you know, to answer your question, we have confidence moving forward in Germany, We have indeed in our our top 11 countries, we saw growth in Q1 of in six of the 11 top 11 countries. So we're pleased about that. There are certain geographies in EMEA that we are now in intently focused on. On doing a German turnaround in those geographies as well. So hopefully over the next couple of quarters, we'll begin to be able share more than just Germany with you from a performance perspective. All right. Thank you.
1h 7m 26s
Your next question comes from the line of Brandon Bazquez Brandon, go ahead. Your line is now open.
1h 7m 36s
Hi, everyone. Thanks for taking the question and squeezing me in here. Simon, maybe one for you first. When you look at, DS Core, it's started to get a a pretty good scale here and a lot of followers. Lot of subscribers. I mean, can you talk about other than, you know, the total number of people on there, What are some of the key operating metrics that you guys are looking at either from accounts that are on there when you compare it to the accounts not on d s score? What gets you excited internally when you look, at the metrics under [indiscernible] Yes, good morning, Brandon. We're pleased with where we are, as I noted in the prepared remarks, 43,000 users think an important metric here is is the number of accounts or number of connected devices that we're at in excess of 100,000 connected devices now. And we're processing over 100,000 orders every month through our labs. So they're the type of important things that we are doing. We are looking at, we're also seeing an increase in the number of accounts who are paying for the DS core subscription. I think the impact of that to be fair is nominal right now, but as we add more capability and functionality, to it, we expect that to grow It's definitely creating some stickiness for us in the marketplace.
1h 9m 1s
Seem to like it. I was I actually got to experience it myself last week when I visited visited my own dentist and it certainly changes the experience of sitting in a dental chair We have that we have a lot of innovation coming around the workflows and how they are connected into DS Core We noted previously that the first phase of implants on CORE is going to come out later this year. We have increased the speed of our SureSmile simulations by 90% when it's used with PrimeScan two and DS Core. So we're putting a lot of time and effort into ensuring that this ecosystem is is driving our performance moving forward And the important thing for us is is to get these what should we say consumable workflows onto DS Core. So you know, endo preventative aligners, implants, where the margins are [indiscernible] and where they are the bread and butter of dental offices and can become the bread and butter for DENTSPLY SIRONA as well.
1h 10m 15s
Okay. Thanks. And Simon, maybe as a follow-up, I've always appreciated you guys take very measured and data approaches when you're kinda making commercial changes here. You're once again talking about doing some surveys to better understand what areas you can improve upon, Talk to us about what segments of the business, you're still running these surveys and what segments of the business that you're most acutely focused on that still need, some commercial tweaks you think to turn around? Thanks.
1h 10m 42s
Yeah, no, I think the survey is is pointed a different way to, I think what your question is asking. Survey is is less about the work that we're doing is less about let's say implants or aligners or capital equipment, It's more about when the customer or their office staff engage with DENTSPLY SIRONA, what challenges do they face? Do they face challenges with respect to invoicing or or billing or or the speed at which we answer the phone or our e commerce platform. Or our return policy. So that we can begin to smooth out the experience the customer experience for our customers that is not related to the performance of our product. Because I think that that has been a challenge for us historically. We've spoken before about all the ERP systems that we had, the 14 of them that has certainly made things quite complex for customers. Our e commerce experience wasn't great. Compared to some of our competition. So they are the areas that we are focused on. We are that's part of the reason why we have been out in the field over the past couple of months meeting customers and this survey will will get feedback from in excess of 500 customers is our plan.
1h 12m 6s
Across the GP and specialist spaces but also from other staff members who engage, with us as well. So the office manager or the individual who places purchases or make the phone calls to DENTSPLY SIRONA or to our distributors. So going to be very comprehensive and that will form the backbone or the design input, so to speak, for how we continue to improve the company.
1h 12m 35s
Thank you.
1h 12m 36s
And we have time for one more question. The next question comes from Erin Wright with Morgan Stanley. Go ahead. Your line is open.
1h 12m 44s
Great. Thanks for squeezing me in. On margins, did you, I guess, accelerate any of the cost management kind of initiatives there? Were there any costs that were pushed out at all? I guess, should we be thinking about that quarterly progression or any sort of anomalies that we should be thinking about in terms of the second quarter? And then And then my second question, I'll just ask them both upfront, is just more bigger picture in terms of the guidance and the change in management today and the departure? I guess any sort of context [indiscernible] On the departure as well as well as who was involved in terms of formulating the guidance. Presumably, you're taking full ownership of this guidance here? Thanks.
1h 13m 27s
Yeah, good morning, Erin. So, with respect to expenses, nothing has got pushed out to any of the quarters. In fact, we see a very, very modest sequential improvement as we roll through the year with respect to OpEx. So nothing has got pushed out. And in relation to our guidance, Glenn Coleman wasn't part of it. Glenn was Glen had left by that point in time, Glen made a personal decision to leave DENTSPLY SIRONA. Herman Kudo stepped in in November and was here with us through the March and he helped us put guidance together, along with our with the great finance team that we have. So there's not much more to say in that. Then respect to our CFO search, as I answered earlier, today, we've got number of great candidates in the final phases here and I'm hopeful that in the not too distant future, we'll be we'll be in a position to an announcement about that. But yeah, expense is under control. Guidance is ours. And hopefully have some news on the CFO in the not too distant future.
1h 14m 42s
Great. You so much.
1h 14m 45s
Thank you. This does conclude the question and answer session.
1h 14m 48s
I would now like to turn it back to Simon for closing remarks.
1h 14m 52s
Thank you. In closing, I would like to recognize the entire DENTSPLY SIRONA team for their commitment to our customers and the transformational journey that we are on together. We're hitting key milestones We continue to innovate in very meaningful way. Launching new products and technology. We're taking consistent action to advance our plans. And as you hopefully have seen, we are continuing to mitigate risk. As we navigate through an increasingly uncertain external environment, we continue to be focused on what we can control maximizing the value that we can deliver for our customers which we continue to believe in turn will unlock the true potential of our company for all stakeholders. And thank you for joining us today.
1h 15m 39s
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Key Insights
Q1 results exceeded expectations, with organic sales down 4.4% (including a negative 4% BiTE impact), but EBITDA margin expanded and adjusted EPS grew 3.7% to $0.43, driven by operational efficiency and cost discipline.
2025 outlook is maintained: organic sales expected to decline 2–4% (with a 2% BiTE impact), adjusted EPS guided to $1.80–$2.00, and reported sales range raised to $3.6–$3.7 billion due to favorable FX; adjusted EBITDA margin outlook increased to >19%.
Tariff impacts are fully incorporated into guidance, with a current annualized exposure of ~$50 million (about $0.10 EPS impact in 2025); mitigation strategies such as stock builds, product swaps, and potential price increases are being considered but not yet included in guidance.
Innovation and digital transformation continue, with DS Core surpassing 43,000 users and 100,000 connected devices; new features and regulatory clearances are driving adoption and customer engagement, especially in digital dentistry workflows.
U.S. market remains stable in patient volume and treatment acceptance, though dentist sentiment is cautious due to macroeconomic uncertainty; Germany and Europe show continued growth, while efforts are ongoing to improve U.S. implant performance and overall customer experience through operational and commercial initiatives.
