Dentsply Sirona (XRAY) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Investor Relations - Wade Moody
• President and Chief Executive Officer - Daniel T. Scavilla
• Executive Vice President and Chief Financial Officer - John C. Fortson

TAKEAWAYS

• Revenue -- $898 million, representing a 4.1% reported decline or 6.3% on a constant currency basis.
• Adjusted Revenue -- declined 3.6% on a constant currency basis when excluding the impact of Byte and an $8 million planned dealer inventory reduction.
• Adjusted EPS -- $0.52, which was flat year over year and included a $0.17 per share positive impact from tariff refunds.
• Tariff Refund -- $44 million, recorded in the quarter and used partially to fund opportunistic share repurchases.
• Operating Expenses -- $463 million, an increase of $12 million year over year that included $8 million in foreign exchange headwinds and increased investments in research and development.
• Operating Cash Flow -- $99 million, compared to $48 million in the prior year quarter, driven by the tariff refund and improved management of accounts payable and inventory.
• Share Repurchases -- 1.3 million shares, acquired for approximately $12 million at an average price below $10 per share.
• Net Debt to EBITDA -- 3.2x at the end of the second quarter, consistent with the first quarter of 2026.
• Connected Technology Solutions (CTS) Revenue -- $239 million, a 1.5% reported decline reflecting lower treatment center volumes partially offset by imaging growth in EMEA.
• CADCAM Revenue -- $102 million, a mid-single-digit decline due to lower volumes in the Americas and unfavorable price mix in EMEA.
• Essential Dental Solutions (EDS) Revenue -- $376 million, a 2.7% reported decline primarily resulting from lower volumes in the Americas and EMEA.
• Orthodontic and Implant Solutions (OIS) Revenue -- $197 million, a 13.2% reported decline driven significantly by the impact of the Byte wind-down.
• Implant Solutions (IPS) Revenue -- $157 million, a mid-single-digit decline as lower premium implant volumes in the Americas and APAC offset growth in EMEA.
• SureSmile Revenue -- $40 million, declining double digits primarily due to performance in the Americas region.
• Wellspect Healthcare Revenue -- $86 million, a 7.1% reported increase supported by new product sales and geographic expansion.
• Full-Year Revenue Guidance -- $3.5 billion to $3.6 billion, maintained for the fiscal year 2026.
• Full-Year Adjusted EPS Guidance -- $1.40 to $1.50, excluding the benefit from tariff refunds and the impact of incremental tariffs.
• Third Quarter Outlook -- management expects revenue to decline sequentially due to seasonality and earnings to be below second quarter levels, excluding the tariff refund.
• EMEA Implant Performance -- grew mid-single digits as reported, led by the MIS value implant brand.
• Inventory Adjustments -- management reported that certain private equity-owned dealers in Europe reduced inventory levels from 12 weeks to approximately 8 weeks.

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RISKS

• Fortson noted that "EMEA saw a slight softening of demand for select areas of capital equipment as providers preferred some investment decisions due to uncertainties from the Middle East conflict," which impacted the Connected Technology Solutions segment.
• Fortson stated that "sell in is lower year over year as certain distributors reduce their inventory levels," particularly affecting the Essential Dental Solutions segment in the EMEA region.

SUMMARY

Management is currently 6 months into a 24-month restructuring program aimed at restoring long-term growth through commercial re-alignment and distribution expansion. The company appointed John C. Fortson as the new Executive Vice President and Chief Financial Officer to oversee capital allocation and operational discipline during this period of transformation. Strategic initiatives involve verticalizing the commercial organization and investing in clinical education to strengthen customer relationships. Performance varied by geography, with growth in Asia Pacific and the Wellspect Healthcare business partially offsetting softer demand and inventory adjustments in North America and Europe.

• CEO Scavilla emphasized customer re-engagement as the primary driver for the turnaround, stating, "Everything starts with the customer. Over the last 6 months, we have been rebuilding how we engage with our customers."
• Management expanded the company's distribution reach through new or widened partnerships with Atlanta Dental, Nashville Dental, and Medline Sinclair in Canada.
• CEO Scavilla noted that U.S. implant sales representatives completed an intensive certification program and "learned more in those 4 days than they had in years."
• The company reported that four European dental support organizations began implementing the DS Core platform to integrate digital workflows across diagnosis and treatment planning.
• Management indicated that double-digit growth in milling systems in the Asia Pacific region was driven by specific execution programs initiated in the fourth quarter of 2025.
• CEO Scavilla stated that for next-generation intraoral scanners, the company's innovation program is evaluating a multi-tiered offering including high-end, mid-range, and low-cost options.

INDUSTRY GLOSSARY

• Byte: A direct-to-consumer clear aligner business that Dentsply Sirona is currently winding down.
• CADCAM: Computer-aided design and computer-aided manufacturing technology used to create dental restorations.
• CEREC: Chairside Economical Restoration of Esthetic Ceramics, a system for the production of all-ceramic dental restorations in a single visit.
• DS Core: A cloud-based digital platform that integrates dental equipment, software, and services for clinical workflows.
• DSO: Dental Support Organization, an entity that provides non-clinical business management services to dental practices.
• EDS: Essential Dental Solutions, a segment including endodontic, restorative, and preventative dental products.
• OIS: Orthodontic and Implant Solutions, a segment encompassing dental implants and orthodontic products like SureSmile.
• SureSmile: A brand of clear aligners and digital orthodontic treatment planning software.
• Wellspect Healthcare: A segment focused on continence care, including catheters and bowel irrigation systems.
• MIS: A value-segment dental implant brand owned by the company.

Full Conference Call Transcript

Operator: Good day. Thank you for standing by. Welcome to Dentsply Sirona's Q2 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Wade Moody, Investor Relations. Please go ahead.

Wade Moody: Thank you, operator, and good afternoon, everyone. Welcome to the Dentsply Sirona second quarter 26 earnings call. Joining me for today's call are Daniel T. Scavilla, President and Chief Executive Officer and John C. Fortson, Executive Vice President and Chief Financial Officer. I would like to remind you that an earnings press release and slide presentation related to the call are available on the Investors section of our website at www.dentsplysirona.com. Before we begin, please take a moment to read the forward looking statements in our earnings press release. During today's call, we may make certain forward looking statements that reflect our current views about future performance and financial results.

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 k and any updated information in subsequent form 10 q or other SEC filings list 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 Dane.

Daniel T. Scavilla: Thanks, Wade, and good afternoon, everyone. Before we discuss the quarter, I would like to welcome John C. Fortson to his first earnings call as Executive Vice President and Chief Financial Officer, Dentsply Sirona. John joined us on July 20th, and we are excited to have him on board. He is a proven finance and business leader who is worked closely with CEOs boards through periods of transformation strengthening operations, allocating capital with discipline, and creating long term shareholder value. Having served both as a public company CFO and CEO, his experience is well aligned both with where Dentsply Sirona is today and where we are headed in the future. I am glad he is on our team.

I would also like to thank Mike Pomeroy for his leadership as interim CFO. I sincerely appreciate his contributions. With that, I will turn the call over to John to review our second quarter 26 financial results.

John C. Fortson: Thanks, Dane, and good afternoon, everyone. First off, I would like to say it is a privilege to join Dentsply Sirona. Having followed the company for many years, I am familiar with the strength of the portfolio and energized by the opportunity to help restore the business to its full potential. What ultimately drew me here was the clear commitment from the board and the leadership team to execute the disciplined turnaround. There is a strong focus on operational excellence and long term value creation. Although I have only been with the company for a few weeks, I am hitting the ground running and ready to execute the return to growth action plan with the team.

Let's move to Q2 results on Slide 4. Our second quarter 26 revenue was $898 million representing a decrease of 4.1% as reported or 6.3% on a constant currency basis. Adjusting for the impact from Byte, and the planned dealer inventory reduction of approximately $8 million in the quarter, revenue declined 3.6% on a constant currency basis. Adjusted EBITDA margins were approximately flat year over year with the benefit from $44 million in tariff refunds offset by a decline in gross profit driven by lower volumes, sales mix, incremental tariff impacts. OpEx was up $12 million year over year, including an FX headwind of approximately $8 million.

A decrease in G&A was offset by investments made into sales, marketing and R&D as was planned in support of the return to growth action plan. Adjusted EPS in the second quarter was flat versus last year at $0.52. The tariff refunds translated into a positive $0.17 per share impact. Operating cash flow in the quarter was $99 million compared to $48 million in the prior year quarter. The year over year increase is primarily attributable to the receipt of the tariff refunds in addition to improvements in working capital with better management of accounts payable and inventory. We continue to remain diligent on improving our working capital. This will be a key focus area of mine going forward.

In the second quarter, we opportunistically repurchased 1.3 million shares at an average price below $10 per share. This represents the first time Dentsply Sirona has repurchased shares since the third quarter of 24. We finished the quarter with cash and cash equivalents of $239 million and our Q2 net debt to EBITDA ratio was 3.2x. Consistent with where we ended Q1 of this year. We continue to prioritize debt reduction. Now let us turn to Q2 segment performance on Slide 5. Starting with the CTS segment, sales were $239 million an as reported decline of 1.5%. Equipment and instruments revenue was $137 million, flat year over year with declines in treatment centers.

This was partially offset by growth in imaging equipment, particularly in EMEA where we saw increased demand for our OTHOBOOS line of imaging products. CADCAM revenue was $102 million, down mid single digits driven by lower volumes in The Americas and unfavorable price mix in EMEA. Partially offset by double digit growth in APAC. EMEA saw a slight softening of demand for select areas of capital equipment as providers preferred some investment decisions due to uncertainties from the Middle East conflict. Turning to EDS, which includes endo, resto, and preventative products, sales of $376 million declined 2.7% as reported. Primarily driven by lower volumes in The Americas and EMEA.

As we shared in Q1, the impact of inventory changes for our EDS products held by our distributor partners in the EMEA region had a negative impact on results. We saw a sequential improvement in Q2 as we obtained greater visibility into the dynamics within various markets and distributors across the region. Overall, sellout in the region was in the low single digits. Consistent with expectations for dental consumables. The sell in is lower year over year as certain distributors reduce their inventory levels. We do not believe this reduction in wholesale inventory is a demand-driven. Moving to OIS, revenue of $197 million declined 13.2% as reported.

When adjusting for the year over year impact from Byte, OIS declined 5.7% as reported, consistent with last quarter. IPS revenue of $157 million declined mid single digits, driven by lower volumes of premium implants in The Americas and APAC. EMEA implants grew mid single digits as reported led by improved performance for MIS, our value implant brand. For Ortho, SureSmile revenue of $40 million declined double digits primarily attributable to the Americas region. Wrapping up with Wellspect Healthcare, revenue of $86 million increased 7.1% as reported. Driven by the continued strength of new product sales and execution by the business. Partially offset by lower inventory levels in the U.S. market.

Let's move to Slide 6 to discuss our outlook for 2026. We are maintaining our 2026 outlook for net sales of $3.5 billion to $3.6 billion and adjusted EPS in the range of $1.40 to $1.50 This EPS range excludes the benefit from tariff refunds and impact of incremental tariffs. Our decision to maintain our outlook is based on expectations as of today including our current expectation regarding tariffs and trade policies. Looking to the third quarter of 26, we expect revenue to decline sequentially due to normal seasonality. As we continue to execute our return to growth priorities, we also expect Q3 earnings to be below Q2 26 levels. Excluding the $0.17 benefit from tariff refunds.

We remain committed to investing in our sales force, clinical education programs, and R&D. With the benefit of these investments expected to become increasingly visible beginning in Q4. With that, I will turn the call back to Dane.

Daniel T. Scavilla: Thanks, John. As we wrap up the second quarter since beginning our 24 month return to growth action plan, our priorities have not changed. Focused on putting customers at the center of every decision, improving execution, investing where we see the greatest opportunity for long term growth and strengthening the financial foundation of the company. We are making progress, but this is still a turnaround. Some parts of the business are improving faster than others, and there is still a lot of work ahead. As John mentioned, we expect more of the improvement weighted towards the fourth quarter given investment timing and macroeconomic conditions.

What gives me confidence is that we are beginning to see evidence that the work we are doing is gaining traction. Everything starts with the customer. Over the last 6 months, we have been rebuilding how we engage with our customers. We are investing in clinical education, strengthening our commercial organization expanding customer access through our dealer network, and making it easier to do business with Dentsply Sirona. In the second quarter, clinical education was at the forefront We brought together more than 1 thousand clinicians at our Global Implant Summit hosted endo KOLs at our 26 Endodontic Forum, and convened leading experts across restorative, multidisciplinary dentistry to help shape the next generation of clinical solutions.

These opportunities enable us to learn directly from clinicians strengthen relationships, and ensure our innovation pipeline reflects what customers need most. At the same time, we are investing in our own commercial capabilities, Every US implant sales rep recently completed the most comprehensive implant certification program we have ever delivered. Our most experienced team members told us they have learned more in those 4 days than they had in years. This initiative is not only encouraging, but also just the start of an ongoing investment in education. We are also seeing momentum internationally In APAC, we are expanding education programs. Advancing implant sales training, and seeing continued adoption of our connected technology solutions including double digit growth in milling systems.

On the digital side, DS Core continues to gain traction, During the quarter, 4 European DSO groups began to implement the platform, reinforcing the value of an integrated digital workflow that connects diagnosis, treatment planning, and clinical execution. We have also continued to strengthen our US distribution footprint by growing our dealer network. During the quarter, we announced the expansion of our partnership with Atlanta Dental and Nashville Dental, and we advanced our long standing relationship with Medline Sinclair in Canada. These partnerships are important building blocks for sustainable commercial growth extending our reach and giving more customers access to our connected technology portfolio. Wellspect continues to perform exceptionally well.

The business delivered another strong quarter supported by new product launches, geographic expansion, and continued adoption of our newest products. that is a good example of what consistent execution looks like and we intend to apply those same principles across the areas of the company. Okay. We also established a small group of strategic advisory board to provide guidance on Wellspect long term priorities, innovation and growth opportunities. Execution also means improving how we operate internally. We are simplifying the organization, enforcing accountability, standardizing processes, embedding lean operating principles in AI to eliminate routine work, and accelerate decision making so our teams can spend more time serving customers and bring innovation to market faster. Financial discipline, remains equally important.

We are improving cash generation, strengthening the balance sheet, and continuing to deploy capital in a disciplined way. As John previously mentioned, we repurchased 1.3 million shares for approximately $12 million using a portion of the tariff refund proceeds. Consistent with the capital allocation framework we introduced earlier this year. We continue balancing investments in innovation commercial capabilities and shareholder returns to support long term value creation. 6 months into the return to growth action plan, I believe we are going deeper moving faster, taking bolder steps to improve our business. We are recalibrating customer relationships. We are strengthening our commercial organization. We are expanding access to our products.

We are simplifying the company, and we are creating a stronger financial foundation. The path will not be linear, but we are seeing encouraging signs that our actions are beginning to translate into improved execution stronger customer engagement. Thank you to our employees around the world for their continued hard work and dedication to our customers. I continue to believe the potential for Dentsply Sirona has never been greater. And we have at our fingertips everything we need to achieve our plan. With that, let me turn the call over to the operator so we can start the Q&A session.

Operator: Thank you. a question and answer session. Thank you. As mentioned, at this time, we will conduct As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. Please limit to 1 question and if you wish, a follow-up. To withdraw your question, please press *11 again. Please stand by while we compile our Q and A roster. Your first question comes from the line of Elizabeth Anderson with Evercore ISI. Your line is now open.

Elizabeth Anderson: Hi, guys. Good afternoon, and thanks so much for the question. I guess my first question is, John, maybe you could talk a little bit about, why Dentsply Sirona was the right next step on your career and also, do you guys now think you have the full team in place to go forward with what you need to do to help get the company on the right footing? And can you also, maybe as my follow-up, talk through like how you see the drivers that increased EPS from 3Q to 4Q like you were just laying out, John? Thank you very much.

John C. Fortson: Sure. Sure. I will start. Dane can talk a little bit about the team. But I followed this company for a long time. I have been in the Carolinas really for 15+ years. And have followed the story I really feel like the board and the current leadership team under Dane are ready to do what needs to be done to take this company to the next level. Right? I feel having studied for a number of months, the return to growth action plan and in conversations with Dane and the other leaders, I feel like they have the right plan at the right time, and I am pretty excited about being here. You know, I look at the prioritizations.

They are pretty straightforward. We return to growth we maximize profitability, and we maximize cash generation. And I think we have the opportunity to do all 3. Thanks.

Daniel T. Scavilla: And I will take the rest of that, Elizabeth. We have a great executive committee, my direct reports. If you look through it, a vast amount of that was rebuilt, and those that remained were really strong base to go from. So I feel very bullish about that team. The rate of engagement we have around the world when it comes to our directors up as well continues to impress me. And so to answer the question, yeah. We have what we need. To make the changes that we need to make. I feel very strong about that. As far as the progression and heaviness perhaps in the fourth quarter.

Given the turnaround and very similar to what we may have spoken to in the past, a lot of that really banks on the fact of when you are reorganizing the company, and you have some of the timing of when those, structural changes take place, you will see it bear more in the fourth quarter than you would previous as we go do that In addition, if you remember, we have added a lot of the dealers in the first or second quarter. I always mentioned it is about 9 months before you can really produce there to sell capital. And so you are bringing them onboard, training them, getting their reps out there, building a pipeline, then closing.

And so while we are positive, seeing positive results of who we brought on, I think that will be heavier in the fourth quarter than perhaps what we have seen in the first or second. Super helpful. Thank you. Welcome, John.

John C. Fortson: Thank you.

Operator: Thank you. Your next question comes from the line of Allen Lutz with Bank of America. Your line is now open.

Allen Lutz: Good afternoon, and thanks for taking the question. Really a follow-up on my question from last quarter around the return-to-growth action plan here. Dane, you talked about a lot of the same things that you talked about last quarter. Some new distribution partners, which you executed against in the quarter. You gave the example on investing in clinical education, and R&D continues to trend up nicely. Would love to get a sense in terms of where you are most excited. You sort of answered it a little bit with the last question around maybe some of the contributions from dealers coming in the fourth quarter.

But would love to get a sense of the parts of the return-to-growth action plan as you go through it. Now you are 6 months in. Love to get a sense where you are most excited and what you think the first part of that is to hit the P&L. Thanks.

Daniel T. Scavilla: Thanks, Alan. I appreciate that question. Honestly, what I am most excited about is the level of engagement we have with our dentists and seeing that accelerate at different levels of the company, I want to say it is a reengagement and the feedback that I have been getting from different folks that how happy they are with the dentists themselves coming back on the clinical education programs or the interaction with executives. Or even some of the events that we have held or attended they see our recommitment into that.

And I have been getting a lot of good feedback from them, which is encouraging to me because as we say and have said, it is all about the customer first. And if we are going to turn this around, it is about supporting the customer first and foremost and then earning the right to grow and take share from there. And so that excites me. Honestly, with John joining the team and really filling out and already strong executive council that I have, that is the second thing that is exciting to me and you are right. I love the partnership expansion in The US with the dealers.

And I think that is still yet to prove out more in the second half of the year, but all 3 of those rank up for me. Great. Thank you. Thank you.

Operator: Your next question comes from the line of Michael Cherny with Leerink Partners. Your line is now open.

Dylan Finley: Thanks for taking the question. This is Dylan Finley on for Mike. Just wanted to start briefly on the tariff refund. Just a clarification point. Was that refund assumption embedded in the initial guide? And does the maintenance of the guide account for the contribution of that refund. And then secondly here, if you could just broadly comment on your quarterly run rate into COGS, what you are seeing today with the 21 twos and now the 301s, you know, where do you see your quarterly spend on tariffs from here?

Daniel T. Scavilla: So Dylan, I will answer that. So the first thing is we did not build a refund into our initial guidance. That was something that we decided not to do because it was uncertain when it would occur or what it would be. And so that is in addition As we maintain our base guidance, as John called out, we are saying we are not changing that. And certainly, in addition, we would layer in some semblance of the tariffs that we are calling out earlier. In that section. So it is something totally unrelated to the operations of the business and done.

We do not disclose the rate of tariffs per quarter, so that would be something I will refrain from answering. Very helpful. Thank you.

Dylan Finley: And then as a brief follow-up here, you know, you guys showed some nice gross margin improvement. If I am just looking and backing up the tariffs. But on SG&A, in the past, you talked about reduction in targeted annual savings. Any updated thoughts on the magnitude of that in timing of when we should see some improvement in SG&A? Thanks.

Daniel T. Scavilla: it is a little bit, Dylan, of a couple of things. it is sort of a put and take here. We are reorganizing a lot of our company, whether it be through headcount or indirect spending, But I am also redeploying that into increasing the field, increasing clinical education, increasing rep education, accelerating innovation. And so it is not an anticipated drop through to the bottom line so much as repositioning for long term growth that is occurring. Great. Thank you.

Operator: Kathy, do we have Vic on the line? Pardon me. Yes. Vikramjeet Chopra with BMO. Your line is now open.

Anton: Hi, Dane and John. it is Anton on for Vic. Thanks for taking our questions. Maybe first, I will start on the commercial U. S. Commercial expansion. Dane, you have repeatedly said the U.S. business recovery as your top priority. And have been taking clear steps in building out the US commercial team with senior leadership and competitive hires. And I would be curious to hear where we stand in the US commercial team build out. You have all the people you need or are there more seats to fill? And does the guide contemplate accelerating productivity from these hires? Throughout the year? Or is that more of a 2027 phenomenon?

Daniel T. Scavilla: Yeah. Thanks, Anton. First, I would say I will probably never have as many people as I need because there is no answer to that. I want to add as many reps in the field representing us as we can. That said, what we did do in the first quarter was make a significant verticalization of our commercial organization under the team and they did a great job. And those folks that lead those verticals are dental experts, with a lot of competitive experience as you referred to, and it is there.

We are, again, retraining the reps that we have recertifying them, and then to your point, expanding them both from new hires and competitive hires I really do think those efficiencies, while they will continue to sequentially through the quarters as you get through Q2 to Q3 to Q4, think are going to be more impactful next year. Because a lot of that training, a lot of that clinical edge clinical education, and then just getting everybody into those moves that they need to do into the field, I think, will be more of a next year impact. But I am happy with the progress being made with that team. that is that is really great to hear.

Anton: And maybe 1 more follow-up. On China. Last night, 1 of your peers shared some updated perspectives on the China environment and VBP timing. I mean, can we get your perspectives here as well. Like, what is your latest thinking on China VBP 2.0 in 2026? And how do we think about the impact for Dentsply?

Daniel T. Scavilla: Yeah. Again, great question. You know, it moves, as you know, it is been delayed. it is been cast out there. So I am probably gonna line up with the timing. I know that it was pushed off several months from China that way. We do not have a significant impact baked into that for this year nor do I expect 1. China is an area of significant long term growth for us right now.

And it is 1 that we are keeping our eye on of how best to approach But at this point, I would tell you that it is smaller and that we have our eyes on how to make that bigger over time And the VBP is simply just 1 step along the way for us to really get into that market. Thanks so much again. Thank you.

Operator: Your next question comes from the line of Jonathan Block with Stifel. Your line is now open.

Joe Federico: Hey, everyone. This is Joe Federico on for Jonathan. Thanks for taking the question. Maybe just to zoom in on implants a little bit. Is there any further detail you can provide on the performance in the quarter? I think you said EMEA was mid single digits led by value, but maybe any other color between value and premium? How did the U.S. perform? And then just how do you view the market growth there in the quarter and then in 3Q to date? Thanks.

Daniel T. Scavilla: Yes. We tend not to break it down by products things like that in a lot of detail. What I would tell you is that our value products in EMEA had a very strong quarter. there is a lot of cadence there that we are doing. In The US, simply part of the turnaround, we lag behind that. We have incredible products. As I just said, we have recertified our team to give them more to go out and worry about workflow and dentist needs, as opposed to just selling a single product.

And so it is still a continued investment in our turnaround plan focused primarily on The US, still investing obviously in EMEA and Asia Pac, But I would say that when you look at the competitors, we are lagging behind, and we need to change that We have got the right products. We have the right approach. We have to execute and get up to market and beyond. Thank you. Thank you.

Operator: Your next question comes from the line of Michael Sarcone with Jefferies. Your line is now open.

Michael Sarcone: Hey, good afternoon, and thanks for taking the question. 2 for me. I guess, can you just give us an update on or elaborate more on capital equipment demand? I think you mentioned some uncertainties in Europe related to Mideast tensions, so maybe give us a kind of around-the-world view. And then just second, I will throw it out here now is Dane, you talked about, the salesforce ramping. How are you thinking about growth in implants as we look to 2027? Thanks.

Daniel T. Scavilla: Hey. So what we are saying with us in the capital itself and as you know, it is seasonal. In EMEA, because we are 1 of the leaders in dental, the rural regions are a little bit bigger for us and perhaps our competitors. And we are seeing delays that have occurred there. We are not gonna call it out. We are not gonna call it down at this point. Our eyes are on it. it is an unknown ability when that resolves or when they will pick up. But that really was just it. It is that we are just seeing some delays in there because of the uncertainty of that situation.

Do we think that can clear through in Q3 or 4? We hope so for the sake of the people there. But eyes on it for that 1. that is really kind of the thing that is going there. On the Salesforce itself and the productivity and the lift that would occur for implants into 27. I am gonna refrain for now. Gotta go focus on this year and the turnaround to finish that, and we will be giving guidance more as we get into the early part of next year along those lines. Got it. Thanks, Dane. Thank you.

Operator: Your next question comes from the line of Lilia-Celine Lozada with JPMorgan. Your line is now open.

Lilia-Celine Lozada: Great. So much for taking the question. Following up on, the prior question about implants, when I look at the results across the segments, 1 area that was really softer this quarter was OIS. I am hoping you can unpack that a little bit To what extent was that a function of headwinds from a weaker consumer environment given the price point and more elective nature of the procedures, or was there something else at play?

Daniel T. Scavilla: Yeah. Thanks, Lilia. I appreciate that. What I think is a couple of things with OIS in particular, Lilia-Celine, remember that you have that bite impact that is occurring and John called out the impact of that. We still carry that through of a significant part that is really it. I think what we have seen particularly on SureSmile Is More Of A U. S. Impact and I think it is more about us again looking at the turnaround as we enter back to orthodontist and we hire that sales force we modernize the software and go. So, you know, the Byte removal is still something carrying. I think that SureSmile U.S. is that next 1 that is out there.

The rest of it, I was happy with. I think that is really in OIS, the 2 main impacts. Great. that is helpful.

Lilia-Celine Lozada: And then I just want to make sure I am understanding some of the comments you all made on macro. It sounded like you did see some pockets of lower demand due to the macro environment. Think the messaging prior was that the ebbs and flows in the market do not really impact much just given all of the operational improvement you are making. So I just wanna make sure I get the message clear on that. what is the latest that you are hearing on macro, and how much does that impact you in 2020? Thanks so much.

Daniel T. Scavilla: it is a great question, Lilia. Let me expand on that too just for clarity. So thanks for pulling it out. In the past, and I will stick to this, I have said that we should not count on a market up or down to drive our growth. We have many things we have to do ourselves. And whether the market's up or down, we have to improve and grow. So that was the latter part of your I will stick with that.

When I was calling out the macroeconomics, it really is about keeping our eye on the Middle East and the tension in the world that is out there, not just because it is somewhat disruptive to us from a procedure or capital, it is also the increased freight. We have to date seen impacts, and we have absorbed those impacts I anticipate that to settle down and go back to a normal rate. And so I have not backed off the return to growth investments. In Salesforce, ClinEd, or innovation. And my point is if those pressures remain high, there is a point in the future that I may choose not to absorb it.

And adjust accordingly on the bottom line. I do not see it yet, I am just dropping it as a hint. that is really what I meant by that statement. Very helpful. Thank you. Thank you.

Operator: Your next question comes from the line of Jeff Johnson with R. W. Baird. Your line is now open.

Jeff: Thank you. Good afternoon, guys. I wanted to start on EDS if I could. You pointed the volume declines, both EMEA and in The Americas. Know, any way you can qualitatively help us understand which of those might have been better or worse, I guess, how to play 1 off the other, number 1. And distributor changes in Europe, maybe, the answer is that was the worst side of my question. But just any clarity there, number 1. And number 2, you know, I think in the past, you have been pretty clear you do not think you have room at this point to increase price on the EDS side.

We have kind of picked up maybe in our channel conversations with some of your smaller and other dealers in The US that you did push some price here recently on the consumable side. Any truth to that? Did that have any impact in the quarter or in your go forward thinking?

Daniel T. Scavilla: Yeah. You got it, So let me kind of get after the first 1. So in EDS in particular, most of the pressure remains in Europe. I will tell you, we have actually seen some of our bigger dealers make significant orders in the second quarter that were positive and double digit growth. There are 4 other dealers. Actually, most of them are private equity owned. And we are seeing them take historic inventory levels from about 12 or more weeks down to possibly 8 weeks When we talk to them, that is what we are seeing. We do not know if it is a factor of them coming into private equity or if not.

But that is really what we have been talking about is we are seeing the sell through occur. We feel positive as to those activities that are occurring. It is multiple dealers, not 1. in Europe. And that is the thing I do wanna make sure folks understand. And that is really kind of coming out into the restorative and endodontics side more than anything else. I think in The US, there are different things we need to do with our portfolio or pricing or positioning. To be more competitive.

And I think, again, as we educate the team and refocus in endodontics in particular, but also pay attention to restorative, there is opportunity there Some of our investment and accelerated investment in R&D is going to give us more opportunity to go provide that and capture it. So that is really the flavor between those 2 areas. Pricing, you know, there is always a price tweak here or there. We have not taken anything significant in pricing. Would tell you, you are hearing it through the channels We have not implemented anything out there. It could very well be just cleaning up price, shifting SKUs, some level of mix that might be impacting that.

But really had no price or no price increase since September 2025. Okay. Thank you.

Operator: Your next question comes from the line of Kevin Caliendo with UBS. Your line is now open.

Kevin Caliendo: Hey, guys. Thank you for taking my question. Just want to sort of understand what is embedded in the current guide from the market perspective. Like, what do you expect the markets to do over the second half of the year, and how do you feel you are gonna do against that? Meaning, do you feel like you are gonna be in line with the market, lose share, or gain share against that? that is my first question, just sort of what is the expectation for the handful of end markets that are most important to you. And then the comment about distributor inventories was interesting.

Just given the new distributor relationships that you have, were you saying that broadly speaking, inventory levels are lower or on a same store basis? Because I was wondering if, like, you signed a new distributor relationship would you be putting some inventory to them as well? I am just trying to understand what that meant or how to think about that.

Daniel T. Scavilla: Okay. Well, let's start with that last 1. We will go backwards with that. So keep in mind when we are signing up the US dealers, they are for capital expansion. And so we are not actually having them buy capital and hold it. We are actually working with them you know, to move that differently. So you would not see a lift that way. My previous comment from the previous questions was focused on dealers for the EDS models that are out there. And to your point, if we were to open up a new dealer there, they would inventory, we would see that, but we have not done that. that is really what I am thinking that way.

And Kevin, you had the first part of the question. I just need you to kind of go through it again because I think I did slip my mind. I was just I am just wondering how to think about what you are expecting in terms of the overall market. Their market Thank you. How we think you are gonna do relative to that. That what is embedded in the guidance? Like, are you gonna be along with the markets? Are you gonna gain share, lose share? How should we think about it in the various segments? Again, it is what you are what is embedded. Yeah. Oh, yeah. So a couple of things here.

I think when you hear the reports out from competitors about the market stabilization, I agree with them. I think that is there. We can all pick a number, but I will pick 1 and say about 3% growth would be out there. However, what is embedded in our guidance is very different. We are calling out a turnaround, and we are trying to go from negative into flat into growth over time. that is not something we would achieve within the 12 months of 2026. And so our guidance was really more about the execution of clinical programs rep education, and going out the execution.

And what I had said in the past is I think we would have negative Q1, negative Q2, I am thinking somewhat more favorable, not positive, but little more favorable or less loss. In Q3. And I am looking in The US to exit the year with a plus sign. And that is really where we are getting. I think getting more into market and market dynamics for us will be more of a 2027. As we execute the return to growth plan. that is super, super helpful. Thanks so much. Thank you.

Operator: Your next question comes from the line of Steven Valiquette with Mizuho Securities. Your line is now open.

Steven Valiquette: Hi. Thanks. Yeah. it is Steven Valiquette from Mizuho. With some ongoing discussion this quarter among digital equipment manufacturers, customers seeing customers continue to move to lower price points on intraoral scanners. We heard more about some movement to leasing arrangements for digital equipment instead of straight sales, at least from some manufacturers? Was just curious to get your updated thoughts on competitive landscape in iOS, but is there any inflection on leasing versus purchasing for higher priced items from your perspective also just remind us on your own philosophy on leasing options for practitioners for your own digital equipment offerings. Thanks.

Daniel T. Scavilla: Okay. it is a great question, Steven. So a couple of thoughts here. I think you always offer many options on the customer if they want to buy it outright, if they want to do it over time, if they wish to do it through a lease. All of those are valid things that we are open to do and have been doing as well. I think you are right. There is a growth of lower cost intraoral scanners. And there is a quality that also gains with them over time.

And so while I do think there is always room for premium in the future, you need to show the flexibility of how to get it into the customer hands. And quite frankly, I think you also need to have the offerings at different levels depending on what the customer wants. It is something we are looking at. Those options are things that we have in place. And I think, really, for me, for next-gen intraoral scanners, we need to look at high end, mid and also low. And that is something that is in part of our innovation program. Okay. that is very helpful. Thanks. Thank you.

Operator: Your next question comes from the line of Erin Wilson Wright with Morgan Stanley. Your line is now open.

Erin Wilson Wright: A couple of couple of modeling questions. 1, just on the organic constant top line growth. I think you gave total revenue growth, but did you give a true underlying kind of organic metric that you are anticipating? Or what are you anticipating in terms of the second half there? And just remind us what is embedded from a currency perspective. And then on a tariff refund, I guess, does the guidance then reflect share buybacks associated with the tariff refund or future buyback? I just want to be clear in terms of what is embedded in terms of the EPS number and not, especially when it comes to, like, share buybacks.

Daniel T. Scavilla: Yeah. So what we saw, Aaron, in the beginning of the year is a very strong FX rate that we still would taper down over the quarters. That $3.5 billion to $3.6 billion for us is just what we expect to hit for this year. I do not really have the exact amounts that are broken out. We did not provide anything between constant currency or as reported. We are just getting into those ranges knowing the currencies that we anticipate for this year. The favorableness of the first quarter would diminish in second, and we think neutralize or possibly even at the end of the year kind of negative out.

So say that is not going to be a big driver for us along those lines with it. Again, the tariffs, were calling out the fact that we are not changing the base and we are just dropping the tariffs eventually, out there for modeling purposes. that is really what we were trying to do is just distinguish them out. We are obviously looking to not have that as a measure year on year because it is such an oddity. it is gotta be off on side when we talk about Q2 of next year. Okay. Thanks.

Erin Wilson Wright: And then you spoke about some of the distributor relationships you inked a deal with Medline with their Sinclair offering in Canada. I guess, how is that relationship different or unique, or how should we think about that opportunity And then just overall, the North America distributor relationships, how are those progressing? Thanks.

Daniel T. Scavilla: You got it. So in Canada, it is just great because, again, it is it is Sinclair is a great business to get into. We do a lot with them already. it is an expansion of what we have. But expansion on the capital side, which we did not have And so they have already got the natural reach and feet on the streets to actually get our products in front of more customers in a faster pace in Canada, which is a very strong market for us. And actually been an area of growth that I think if it continues, we will call out a bit more in future calls with it.

And I think on The US side, what I have seen in particular without calling out names are 2 of the new dealers that have grown double digits So far. But again, I am I am I am a little cautious. I wanna get through Q3 maybe start looking at that in Q4. But for a few that I have added on, I am really happy with what I am seeing with their growth. They are smaller numbers, and do not drive the overall business, but they are smaller numbers today. And they will grow and become significant over time. And that is really what I am I am looking at. K. Thank you. Thank you.

Operator: Your next question comes from the line of Daniel Grosslight with Citi. Your line is now open.

Daniel Grosslight: On CTS in the Americas, I think we were down around nearly 10% constant currency. You just help us understand whether this is primarily being driven by CapEx deferral just given the macro the rate environment? Are you seeing any kind of competitive displacement in CADCAM and imaging, particularly from lower ASP type of offerings.

Daniel T. Scavilla: Yeah, you are welcome. We are not seeing a huge bleed out competitively at this point. We think it is a little more timing. As you know, capital is always bumpy and so I think that is what we are going to attribute it to. To your point, it is mostly in the CADCAM area that we called out. But I would say at this point, I am not seeing anything that would take me off task. I do not feel like we are at a competitive disadvantage with this. I think it is just a matter of closing out deals that are in the pipeline.

Daniel Grosslight: Got it. Okay. And just an accounting question on the tariff impact or the tariff benefit this quarter. I think I heard this, but I just wanted to double check. That full $44 million hit the P&L. So if I were to normalize for that, I would just subtract 44 million from gross profit and adjusted EBITDA, or is there some other dynamic I am not accounting for there?

John C. Fortson: You are exactly right. Okay. Great. Thank you. Thank you.

Operator: Your next question comes from the line of Michael Petusky with Barrington Research. Your line is now open.

Michael Petusky: Good evening. Dane, I guess, you sort of called out the formula for winning the Wellspect is doing. And obviously, that has something to do with new product launches and innovation in their space. And you obviously come out of, you know, a space where innovation was a huge key to winning. And I am just curious, the R&D the incremental R&D spend you guys are doing right now. what is the what is the mandate? Is it taking bigger swings? Is it Is it hitting more singles? And I guess just in terms of time frame for impact, I mean, is there anything likely to actually impact the work you are doing now impact mid- to late 2027?

Is 2028 or 2029 more of the time frame?

Daniel T. Scavilla: You got it, Michael. So with Wellspect, to your point, we went back and then returned to growth action plan, and we have invested in them in several different ways to actually fuel the ability to get the products out and penetrate the markets. And they are responding well And, you know, that to me is 1 of those ones where, you can actually fund it by itself and allow it to grow. And so, you know, I look at it as completely separate organization. We just consolidate down for reporting. But the point is, they continue to perform and, you know, again, even their pipeline is rich for other products and going out that way.

On the dental side, the innovation and the increase in innovation that we had done this year was really intended to accelerate things. And so as you know, DS Core is a platform. And putting more functionality into the digital dentistry flow like implants on core or ortho on Core, 2 examples, the incremental money should move those forward meaningfully. Now I have to get FDA approval, so I do think goal is to have it done in late 2027. But it is about when we file and get approval. Certainly, in 2028 would be the thing. And had we not done that, that would have been further out by at least a year.

So there are main things that are out there. In addition, given the size and the importance of EDS, we have put more products and more functions therein. And so we are looking to make sure that stays fresh and we remain a leader and we invest in it. That answer your question. it is a mixed bag of home runs and singles like you have to do with everything. It cannot all be big risk or too small risk. And so it is a blend. it is also both organic and inorganic opportunities for us to look and exploit and grow faster.

So it really kind of depends on the products and the opportunities that really is up and down between those. Okay. Great. Yeah.

Michael Petusky: Can I just sneak 1 quick 1 in? I think this is a quick 1? Obviously, historically, outside of the U.S., Germany has always been a key market. And I do not think I have heard you talk about that tonight or possibly even last quarter. Can you just give an update on what you guys are seeing in Germany? Across the board? Thanks.

Daniel T. Scavilla: Yeah. No. I did not call it out, but I would just tell you it is probably more my style than anything else. I have got nothing that I am worried about with Germany. I was just focusing more, as you know, US is top priority. How we fund EMEA is out there and then, you know, make sure we get Asia Pac to grow. You are correct. it is still 1 of our top markets. it is doing okay. And not gonna be driving a large amount of growth. I think it is moving around market pace right now. But it really was not anything for me to call out with what we are trying to put out message-wise.

Gotcha. Thank you. Thank you.

Operator: Your next question comes from the line of Joseph Downing with Jason Bednar from PSC. Your line is now open.

Joseph Downing: Hey, guys. Thanks for taking the question. On for Jason today. I will keep it to 1. But, Dane, when you look at the segment break it looks pretty different depending on the geography this quarter. You have CTS down high-singles in the Americas but up double-digits in APAC. While OIS fell in The Americas and was held closer to flat in EMEA. Just curious, like, how do you run 1 return-to-growth playbook when each unit's soft points sit in different geography, and then which of these regions within each segment gets kind of first dibs on resources here? Just trying to think of how you are thinking about that. Thanks.

Daniel T. Scavilla: Yeah. it is it is a fantastic question. Thanks for asking it. So listen. Everything matters, but U.S. is top priority returning to growth. We have made that clear. And in that, you know, getting implants and CTS up on its feet through the dealer expansions with the education we have spoken about, is critical while maintaining the lead in EDS. And so that US itself is fairly focused in and going. When it comes into EMEA, in that leadership team, we have made sure they are funded. But again, they do not need as much of a return to growth plan. that is really about addressing the EDS dealer inventories and driving through.

I think they are in good shape. And again, different will be Asia Pac and how you get into China, how you continue to expand in Australia and Japan. So the good news is they all fit into a same model of customer first, innovative products by listening to the customer, clinical education investments, and strong reps that do workflow. That applies globally. Then you just put it at different points along where they are in their maturity curves. Great. Thanks so much. Thank you.

Operator: Your next question comes from the line of Brandon Vazquez with Morningstar. Your line is now open.

Brandon Vazquez: Hey, Greg. Thanks for taking the question. Hey, Dane. I recall you kind of highlighting investing beyond education, especially in implantology as 1 of the main sources for return to growth. Guess, kind of as you sit today, and when assessing the ROI on that front. How do you feel on that? And then do you feel like the long term picture has improved, or trying to stay neutralized? Any thoughts there would be helpful.

Daniel T. Scavilla: Yeah. You got it. So the thing with clinical education is it is all from investing. What I mean by that is spend it this year. You might see in Q4 some uptake, but it is really about getting the cadence throughout the multiple years by gaining users who are aware of your products and use them continuously. And so you can run through it, but it is really a main fiber of all the it is really something that really works well within this market. it is really about making sure the general specialist, the referrals all work together and they are educated. So that money, I know, is well spent.

I have seen what happens when you trim it down. And so, you know, getting it back on track and then getting above market is key that way. I would say that I am pretty happy with where we are with that. 1 thing as well with the Q3 in particular, and we talked about where that was going. Will be a bolus of investment occurring there without the revenue coming up to that. That will come in later quarters. So, you know, you are gonna see the return to health plan not pay attention and quite frankly care about quarterly outcomes. it is about spending the money at the right time for sustained long term growth. Great.

Brandon Vazquez: that is helpful. And then just 1 more. I wanted to double-click on the CTS. You know, CTS and APAC has now had kind of 2 quarters of sequential improvements. And I am curious if there is anything specific going on in the region that we are not seeing in other categories within the region. Is there any, like, 1 timers or big inventory stocking, or do you feel like the market condition has, I guess, improved a little bit in the next or since the beginning of the year.

Daniel T. Scavilla: I want to make sure I heard you. You were talking about APAC? Is that what your question was? Yeah. CTS. CTS. Yeah. You know what? it is really about a program put in place. I am not gonna explain the program here, but it is really an execution we did in 2 of the key markets that is working very well. We designed it in, honestly, the fourth quarter of last year. Began executing it as you just kind of called out in Q1. We are seeing very positive uptake with what it is we are doing there. And it is applicable throughout the world, but we are actually trying it right now within certain markets in Asia Pac.

Great. Thanks. Thank you.

Operator: This concludes the question and answer session. Thank you for your participation in today's conference. This concludes the program. And you may now disconnect.

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