The operator introduces the Dentsply Sirona fourth quarter 2023 earnings call and reminds participants that the call is being recorded. Andrea Daley, Vice President of Investor Relations, introduces the speakers and directs listeners to the company's website for related materials. She also cautions about forward-looking statements and mentions the use of non-GAAP financial measures.

In their Q4 2023 earnings call, the company's CEO Simon Campion provided a summary of their recent performance, highlighting 2% organic sales growth and growth in three out of four segments. The Ortho business saw double-digit growth, while the EDS segment delivered mid single-digit growth and Wellspect Healthcare saw high single-digit growth. The CTS segment declined slightly more than expected due to softness in imaging, but this was partially offset by increased demand for CAD/CAM and intraoral scanners. A customer survey showed improved sentiment in the US, while Germany and Australia remained negative. The company's EBITDA margin and adjusted EPS were in line with their guidance for 2023.

In 2023, Dentsply Sirona is undergoing a transition year with a focus on cost savings and strategic reinvestment for growth. The company has made progress on transformation initiatives and expects 2024 to be an inflection year with double-digit EPS growth. They are also bringing innovation to the market, expanding their DS Core offering and focusing on digital print materials. Additionally, they have reinvigorated their focus on clinical education offerings.

In order to fully utilize the potential of digital tools in dentistry, hands-on in-person training is necessary. In 2023, the company offered over 9,200 training and education courses globally, a 30% increase from the previous year. They also partnered with DTI for digital learning platforms. Live events, such as the DS World event in Dubai and implant-focused events in the US and Europe, play a crucial role in enriching their clinical education platform. The company also achieved a record for their injury and illness prevention rate and was recognized for their sustainability efforts. They also expanded their collaboration with A-dec to integrate Primescan Connect and Cavitron into their platform.

The new offering presented by the company addresses the needs of customers and improves practice workflows and patient experience. The financial update, presented by Glenn Coleman, covers the company's fourth quarter and full year results for 2023, including a 2.9% growth in revenue and strong sales performance in key areas such as China and aligners. However, EBITDA margins declined due to lower gross margins. Adjusted EPS also decreased by 4% in the quarter. The company generated $160 million in operating cash flow, a 13% increase from the previous year, and returned $416 million to shareholders.

In the Essential Dental Solutions segment, organic sales grew 3.4% due to increased patient traffic and price increases. The Orthodontic and Implant Solutions segment saw organic sales grow 10.6%, with Aligners growing high single digits and SureSmile benefiting from market share gains and new product offerings. The direct-to-consumer aligner brand Byte grew 6%, with plans for over 20% growth this year. The Implants and Prosthetics segment saw double-digit growth, driven by VBP and market share gains in China. CTS, the Connected Technology Solutions segment, saw an 8.3% decline in organic sales, while Wellspect Healthcare saw a 16.9% increase, driven by growth in Europe and the US.

In the fourth quarter, new product launches contributed to better-than-expected growth. US sales declined due to lower sales of equipment instruments, but were partially offset by strong growth in aligners and CAD/CAM equipment. Europe returned to growth with contributions from various segments, while the Rest of World saw significant growth in China and declines in Japan. Latin America also grew, with plans to launch new products in the region in the first half of 2024.

Slide 8 covers the full year 2023 performance, with sales of $3.97 billion and 1.1% reported sales growth and 2.2% organic sales growth. Foreign currency translation had a negative impact of 110 basis points. Double-digit growth in aligners and high single-digit growth in China were highlights, while lower volumes in equipment and instruments were a challenge. EBITDA margins contracted by 210 basis points to 17.4% due to cost inflation and investments in the commercial organization. Adjusted EPS was $1.83 and operating cash flow was $377 million. Free cash flow conversion was 58% and the company aims to achieve 100% conversion in the long term. The company has a strong balance sheet with $334 million in cash and a net debt-to-EBITDA ratio of 2.6 times. A 14% increase in dividend was also announced.

In 2024, the company expects to see flat to slight growth in organic sales, with an increase in EBITDA margin and adjusted earnings per share. They also anticipate an increase in their full-year tax rate and lower reported sales due to currency exchange rates. The company plans to focus on cost savings from their restructuring plan, which is expected to contribute to their EPS. They will also be making investments in areas such as ERP, Byte, and SureSmile expansion.

The company expects net investment hedges to have a positive impact on EPS, while other factors like cost inflation, tax, and share count will have a negative impact. Overall, the adjusted EPS outlook for the year is $2.05. The company's strategy remains unchanged and they are actively implementing and advancing all five of their strategies. They have completed their restructuring program and are now focusing on foundational initiatives, such as supply chain transformation, to improve the company's performance and create value for stakeholders and employees.

The company is taking steps to improve their manufacturing and distribution network by conducting a network analysis and streamlining their portfolio. They also plan to upgrade their ERP systems to enhance efficiencies and prepare for future automation opportunities. These initiatives are expected to yield significant results and financial benefits starting in 2025, while maintaining compliance and quality as guiding principles.

The company plans to align its promises with its values and deliver long-term value for stakeholders. They have successfully executed their 2023 guidance and have established foundational initiatives and strategic objectives. They expect double-digit adjusted EPS growth in 2024 and remain confident in reaching their targeted $3 of adjusted EPS in 2026. The company is making investments in transformation efforts this year, which may become part of the run rate of the expense base. They expect 100 basis points of EBITDA margin expansion, with a combination of gross margin and operating expense improvements.

The company has been investing in crucial areas that were previously neglected, such as their sales force, commission plans, and clinical education. They have added almost 50 new employees to their commercial team and increased the number of courses offered. Going forward, they will continue to invest in areas such as Byte and their ortho business in Japan and Brazil. These investments are expected to have a positive impact on the company's growth.

The company is seeing great market opportunities and is investing more resources in those areas. They are also ramping up clinical education and advancing their ERP platform. DSOs continue to be a focus for them. They expect half of the EBITDA margin expansion to come from gross margin improvement and half from SG&A leverage. The company is also seeing a reacceleration of growth in their ortho business, particularly in their Byte brand. They are seeing positive indicators such as increased website visitors and impression kits, which should lead to revenue growth in the near future.

The speaker is confident that investments in their company will lead to at least 20% revenue growth in 2024. They are seeing market share gains and positive trends in both their office and direct-to-consumer businesses. They have also launched a pilot program called Byte Plus, which is referring customers to dentists and generating additional traffic for the practices. Anecdotally, dentists are seeing an increase in treatment acceptance rates with the launch of the SureSmile simulator.

During a conference call, Michael Cherny asks a question about the company's guidance, but due to technical difficulties, the question is not heard. The next question comes from Elizabeth Anderson, who asks about the equipment market and how it is trending for the company. Simon Campion responds by saying that sentiment in the US remains stable or positive, but Germany and Australia are facing pressure in terms of investments in capital equipment. Glenn Coleman adds that while the CTS business was down in the fourth quarter, there was growth in CAD/CAM in certain regions such as the US.

Glenn, the 2024 top line guidance of around 1% organic at the midpoint is expected to see a growth of almost 100 bps, or possibly more, from ortho alone. This is based on comments about SureSmile and Byte.

Glenn Coleman discusses the key products and growth rates for 2024. He expects ortho and implants to be the fastest-growing segment, with double-digit growth for SureSmile and over 20% growth for Byte. Essential Dental Solutions is expected to be flat, while CTS is projected to decline due to decreases in imaging. Outside of dental, Wellspect Healthcare is expected to have mid-single digit growth. Simon mentions a SKU optimization project starting this year, which he has experience with from past projects.

In response to a question about the risks of implementing SKU optimization and its impact on revenue leakage, Simon Campion explains that they have been thoughtful and have run pilots to ensure successful execution. The benefits are expected to begin in late 2024 and continue into 2025 and beyond. The company has also formed a team to work on optimizing their portfolio and will be transparent with their commercial teams and customers. Andreas Frank adds that they are working on standardized processes to have visibility into the future.

The company has taken steps to simplify their portfolio and improve inventory management, which will have yield benefits in the future. These efforts will not have a significant impact on the commercial side in the near term. However, the company has also launched new high-end products that are expected to drive revenue growth and margin improvement in the back half of the year. The company has also made improvements to their DS core, which includes new features and capabilities.

The company has seen an increase in the use of DS Core and plans to continue improving the user experience and adding clinical functionality. They recently launched the X-smart Pro endodontic system and plan to bring it to the US market later this year. The company expects to grow above the market in Aligners and connected technologies, and return to market growth in the implants business by 2026. They reiterated their target of $3 EPS in 2026 and remain confident in their assumptions and hypotheses from Investor Day.

The speaker is asking for clarification on the company's projected EPS growth and how they plan to reach their target of $3. The speaker notes that the cost savings from restructuring will only contribute a small amount to EPS growth, and the company will need significant organic growth and investments to reach their target. The speaker also mentions potential benefits from global operations and plant optimization in 2025 and 2026.

The speaker discusses the company's work with ERP and how it is currently a cost headwind but will eventually become a benefit in 2026. They also mention their confidence in the profitability of their aligners business and discuss their net investment hedges and share buyback program. The company expects EDS to be flat this year and is spending 4% on R&D. The speaker also mentions the importance of getting organic growth back to a normalized rate.

The speaker discusses the importance of innovation in consumables and the company's current R&D spending. They mention a new Chief Technology Officer who is driving a more organized process for innovation and the focus on digitalization. They also mention a recent product launch and the positive feedback received.

The company is focused on identifying unmet clinical needs in their EDS portfolio to ensure their products make a difference for patients. They are not afraid to enter the value segment and have seen success with their Primescan Connect product. They are also investing in digital materials for growth. In terms of the implant competitive environment, they have seen strong growth in China and are happy with their performance in both the private and public sectors. Andreas will speak to the competitive landscape.

The company experienced growth in China despite challenges, and expects to continue growing in the country. Their portfolio is competitive and they have seen progress in the US, with expectations to grow at market rate by 2026. The fourth quarter saw the best performance in Implants & Prosthetics, with improvements in the US and Europe. The company has made investments in portfolio commercial excellence and clinical education.

The company expects to see EBITDA margin expansion of 100 basis points in 2024 and is focused on restoring organizational stability before pursuing large-scale M&A opportunities. They have a strong balance sheet and could potentially make technology-based acquisitions in the near-term.

The company expects EBITDA margin expansion in the back half of the year due to recent investments and restructuring savings. They are confident in the growth potential of their product, Byte, despite a difficult macro environment, as they have seen an increase in unique visitors and impression kits.

The company expects conversion rates to improve as they transition to the Byte plus hybrid model. They anticipate significant growth for Byte in 2024, despite facing some headwinds in the fourth quarter due to financing constraints. The macro environment is a factor, but the company is confident in their investments and execution to drive 20%+ growth for Byte in 2024. The analyst asks about the macro environment and its impact on the company's organic growth, and the company emphasizes the importance of execution in addition to market conditions.

The company has improved its systems and processes over the past year, including adjusting how sales reps are paid and investing in clinical education. This has helped the company gain share in orthodontics and improve sales execution in the implants business. The company expects to see further growth in these areas in 2025, as well as a turnaround in the equipment side of the business due to expected lower interest rates. The company also sees a correlation between the growth of SureSmile and the new scanner, with each driving growth for the other.

The company has seen a 20% growth in their Byte product, which is attributed to a combination of factors including the addition of the SureSmile simulator and better execution and commission plans. The company also credits their investment in scanners for their strong double-digit growth in SureSmile. The majority of the growth is due to changes in the competitive landscape, rather than internal factors.

Glenn Coleman, CEO of a company, discusses the growth potential of their product Byte beyond 2024. He expects it to continue to have healthy growth, though not necessarily at a rate of 20% or more. Andreas Frank, a representative of the company, adds that they are focused on tapping into profitable opportunities and driving net income despite investments. They are also confident in the potential of their 3D printing technology, particularly in the shift towards secure and connected solutions for office use.

The company is shifting its focus from early adopters to a more workflow-focused customer segment in the printing industry. They are looking to grow their solution, Primeprint, and integrate materials and workflows for various applications. The impact of Shine's issues on the fourth quarter was minimal, and there is no significant evidence of a change in conversion rates for Byte.

Dentsply Sirona is well positioned in attractive industries and has a clear and actionable path to accelerate profitable growth. The company is undergoing a transformation and expects to see improved profitability and adjusted EPS growth in 2024. They are also building a durable and sustainable business and remain confident in their ability to deliver value in the long-term. Additionally, the company announced the retirement of Eric Brandt from the Board of Directors after nearly 20 years of service.

The speaker thanks the employees for their dedication to the business and acknowledges those who have been affected by the restructuring program. They wish them well in their future endeavors and end the conference call.

This summary was generated with AI and may contain some inaccuracies.