The DENTSPLY SIRONA first quarter 2024 earnings call is about to begin. The Vice President of Investor Relations, Andrea Daley, will be leading the call with CEO Simon Campion, CFO Glenn Coleman, and CBO Andreas Frank. The call will discuss the company's financial results and provide insights into their business performance. The call will also include non-GAAP financial measures and a comparison to the previous year's quarter.

In the second paragraph of the article, the speaker, Simon Campion, provides a summary of the company's recent performance and financial results for the first quarter of 2024. He mentions that organic sales declined by 1.9%, driven by lower sales in certain areas but offset by growth in others. He also discusses the challenging macroeconomic environment in Germany and the results of a global customer survey. Overall, he provides an update on the company's performance and strategic operating plan.

In the China market, patient volumes are stable but low compared to other markets. The company values customer input as they work towards their strategic objectives and have maintained their outlook for organic sales and adjusted EPS for the year, but may trend towards the lower end. They are taking a cautious stance due to macro uncertainties and are actively taking measures to improve profitability. The company remains confident in their long-term trajectory and has announced plans for share repurchases. Business highlights include advancements in innovation and progress in initiatives, with a focus on DS Core and a pilot program with a large DSO in the US. The imaging business has been impacted by external factors.

The company has expanded its portfolio by relaunching a 2D and 3D imaging line in Europe, introducing new products in CTS and EDS, and partnering with organizations to promote equitable access to oral healthcare for patients with disabilities. They have also achieved a milestone in emission reduction through their Wellspect HealthCare business.

In the fifth paragraph of the article, Glenn Coleman discusses the financial performance of Wellspect HealthCare in the first quarter and provides an update on the company's full year outlook. Despite a decline in sales, the company's EBITDA margins expanded and adjusted EPS increased by 8%. The company also generated positive operating cash flow and maintains a strong balance sheet with a leverage ratio of 2.6 times.

In the second quarter, Simon expects leverage to slightly increase and end the year at 2.5 times. In the first quarter, Essential Dental Solutions sales decreased 5.5% due to a tough comp from the previous year. The Orthodontic and Implant Solutions segment saw organic sales growth of 5.6%, with strong performance from aligners and SureSmile. Byte, the direct-to-consumer aligner brand, experienced 18% growth. Implants and Prosthetics saw low single digit growth, driven by VBP in China but offset by declines in the US and Europe. CTS, the Connected Technology Solutions segment, saw a decline in organic sales due to imaging equipment.

In the first quarter, our global CAD/CAM business saw high single-digit growth, driven by increased demand in the US. Our Wellspect HealthCare division also saw strong organic sales growth of 5%, with growth across all regions. In the US, our CAD/CAM business had a particularly strong quarter, with double-digit growth in intraoral scanners, mills, and 3D printers. In Europe, organic sales declined due to lower volume in Essential Dental Solutions and Equipment and Instruments, but were partially offset by growth in SureSmile. Rest of world sales were approximately flat, with strong growth in China offset by softer demand in Japan and Canada.

The company is lowering its reported sales range due to FX headwinds, but maintaining its outlook for organic sales. They expect strong growth in the second half of the year. Their outlook for adjusted EBITDA margin remains unchanged, but adjusted EPS is trending towards the low end of the range due to lower sales expectations. In the second quarter, they expect a decline in organic sales and a slight improvement in adjusted EBITDA margin. The company also provides an update on their strategic initiatives, which are expected to contribute to long-term profitability.

The company is actively implementing initiatives that will bring financial benefits starting in the second half of 2024. These initiatives include accelerating enterprise digitalization, such as through the adoption of DS Core and implementing an ERP modernization plan. The company is also focusing on winning in high-growth categories such as ortho, implants, and continence care, with investments in SureSmile and Byte resulting in significant sales growth in Q1.

The company is seeing positive results from their Byte Plus hybrid solution and plans to launch SureSmile in Brazil in the second quarter. They have also invested in their implants business and are expanding capacity for their Wellspect HealthCare business. The company has set clear goals for 2024 and is committed to delivering on their commitments. Despite softer sales, they have delivered nearly 8% adjusted EPS growth in the first quarter.

The company has taken steps to improve its competitive position and is implementing measures to improve cost and efficiency. They have a clear strategy and are on track with their strategic initiatives. The company expects to be flat on a full year basis, with Essential Dental Solutions returning to flat growth in the second half of the year and strong double-digit growth in the Ortho segment.

The company expects their ortho business to grow over 20% in the second quarter and the rest of the year, thanks to the success of their Byte and SureSmile programs. They expect low single-digit growth for their implants business, with a slowdown in China but better performance in the US and Europe. The CTS division had a challenging first quarter but is expected to improve in the second half of the year, with a focus on CAD/CAM growth and addressing competitive dynamics in the imaging sector.

The company is pleased with the success of their new product offerings at lower price points and are seeing good traction in the first few weeks of Q2. They are implementing promotional activities and financing programs to address the challenging market environment and are confident in their sales training efforts. The North America implants business is expected to see growth in the back half of 2024 and reach market growth by 2026. The company has created a new team and provided them with the necessary tools and training, and saw positive signs in the quarter with growth in the DSO business.

The dental industry is not declining and is actually growing. The company has invested heavily in clinical education and will be hosting the World Implant Summit in Miami. Despite a slower turnaround in the implant market, customers are pleased with the company's progress. The market growth for implants is expected to be in the mid single digits. The company has also launched lower priced products such as Orthophos SL and a treatment center, and Primescan Connect a couple years ago. These decisions were not made hastily and were not just a response to short term market fluctuations.

The decision to move down the pricing scale with the Orthophos SL product line was not a rush decision, but rather a strategic move to fill a gap in the company's imaging line and cater to the needs of different types of dentists and DSOs. The company also offers lower-end treatment centers and value-based implants. The analyst asks if there is a downward pressure on blended ASPs and if they will stabilize in a better economy.

Glenn Coleman discusses the concerns of customers about cost increases and the importance of offering both premium and value products. He also mentions the company's efforts to control costs and increase profitability, which may have an impact on the bottom line in 2024 or 2025 depending on revenue softness.

The speaker discusses potential actions to address top line revenue pressure and explains that gross margins were stronger than expected due to a mix of factors. They anticipate margins to remain consistent for the rest of the year, with potential slight fluctuations in the second quarter. Pricing is stable and the focus is on driving more volume to improve gross margin performance.

Elizabeth Anderson asks Simon Campion about the trajectory of the company's results in the first quarter and whether certain areas saw improvement or decline. Campion explains that there was stable growth in the US business and strong momentum in orthopedics, but the CTS and imaging businesses were disappointing and are expected to continue declining in the second quarter. Overall, the company is expecting similar organic growth in the second quarter compared to the first. Jason Bednar then asks for more information about the imaging discussion.

The company is facing challenges in the imaging market due to macroeconomic pressures and higher interest rates. They have reintroduced a product and are working on financing and promotional programs to address the issues. The legacy Sirona side of the business is struggling in Germany due to the current economic situation. These headwinds have been identified for almost a year.

The speaker discusses the challenges faced by the company in Germany, which have been ongoing since the second quarter of last year. The market remains sluggish and there has been a reduction in sentiment, but it is still negative. The company expects double-digit declines in the second quarter and the back half of the year, with four consecutive quarters of such declines.

The speaker discusses the expected improvement in customer sentiment data with the relaunch of Orthophos. They also mention the challenging outlook for the remainder of the year, but expect it to be less challenging in the second half. A question is then asked about the shift to value in the dental industry, specifically in value implants. The speaker notes that there has been a shift towards value-based implants, and DENTSPLY SIRONA is well-positioned with a robust portfolio in both value and premium segments. They also mention the impact of China's performance on their results and the potential opportunity for their company to position themselves as a value and premium-based company in the implant market. Another speaker adds that there is still room for growth in the implant market and the company is focused on acquiring new customers.

The company has a strong innovation pipeline for both the value and premium segments. In the premium segment, digital connectivity and integration across technology and workflows are important for customers. The company has received positive feedback from dentists on its new product, Byte Plus, and is seeing an accelerating ramp in the number of offices using it. Impression kit growth is still strong, with over 50% growth.

The company discusses the growth of their impression kit and accessory products, and the success of their Byte business. They also mention that many customers who have tried their products have signed up for their practice, leading to potential growth opportunities. The company addresses concerns about the softening demand for implants in the first quarter and mentions their past performance may not make them the best source for macro analysis.

The company has seen pressure from customer surveys regarding the elective nature of procedures, but overall the sentiment is stable. The US and Europe saw a decline in implants business in the first quarter, while China saw growth. The company is confident in reaching their 2026 EPS target of $3, with a path to 4% organic growth by 2025. They assumed a normal macro environment and minimal growth in 2024, but their path to $3 remains unchanged. Two thirds of their growth is within their control through restructuring, global operations, and other improvements.

The company is executing well and is on track to meet its goals, but the success of reaching $3 in 2024 depends on the macro environment. The company assumes little growth in 2024 but expects a return to normal growth in 2025. The next question is about the sustainability of Byte's growth, which is partly due to SDC and the company's investments in advertising and financing options for lower income customers. The company expects profitable revenue growth from Byte and predicts over 20% growth this year.

The speaker discusses the margins for Byte Plus and regular Byte, stating that there is not a significant difference between the two. They also mention that they are not expecting to reach corporate margin averages in the next three years, but are working towards improving profitability. The questioner asks about restructuring savings and the speaker responds that they are on track and expect most of the savings to come in the second half of the year.

The speaker discusses the expected benefits of the DS Core platform, including increased organic growth and cost savings from restructuring. They mention that they may start quantifying the performance of DS Core in the future, but for now, they have seen over 20,000 accounts and their largest quarter of DS Core subscriptions.

The company has added new functions to their platform and plans to continue adding more throughout the year. They have high expectations for subscriptions in 2024 and are currently in pilots with some DSOs. Customers are experiencing positive results with the platform. The company is confident in mid to high single digit growth for Wellspect despite tough comps in Q4. They are investing in innovation and capacity expansion for Wellspect and have launched new products, with plans to launch another one in the coming weeks.

Confidence is high that the company will reach its target numbers for Wellspect by 2024 thanks to a new General Manager and new products. SKU rationalization efforts are focused on the endo and resto portfolios, with plans to optimize brands and transition revenue to other product lines. The company expects to see significant benefits from this program in 2025 and 2026.

Simon Campion, the speaker, thanks the listeners for joining the call and summarizes the key points discussed. DENTSPLY SIRONA is positioned well in attractive industries and has a customer-centric portfolio for dental workflows. Their Wellspect HealthCare business is investing in capacity and innovation. The company's transformation is ongoing, with a focus on innovation and customer centricity. The management team expresses gratitude to employees for their commitment to the company's transformation journey. The call ends with a thank you and a prompt to disconnect.

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