DENTSPLY SIRONA (XRAY) Q4 2025 Earnings Transcript

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DATE

Thursday, Feb. 26, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Daniel T. Scavilla
• Interim Chief Financial Officer — Mike Popperoy
• Vice President, Investor Relations — Wade Moody

TAKEAWAYS

• Revenue -- $961 million in the quarter, a reported increase of 6.2%, and constant currency growth of 2.5%, with a 370 basis point tailwind from foreign currency, and approximately 570 basis points benefit from prior-year comparables related to Byte refunds and distributor pre-buys.
• Adjusted EBITDA Margin -- 14.1%, a decline of 10 basis points, with gross margin pressured by a 300 basis point decline due to lower volume, adverse mix, and $15 million in tariff costs, partially offset by favorable Byte-related comparables.
• Adjusted EPS -- $0.27 for the quarter, up $0.01, or 4.9%, from the prior year.
• Goodwill and Intangible Impairment -- $144 million non-cash net-of-tax charge recognized in the quarter in CTS and OIS segments due to tariff impacts and volume declines.
• Free Cash Flow -- $16 million generated in the quarter, with $101 million in operating cash flow, and $326 million in cash and cash equivalents at quarter end.
• Net Debt to EBITDA -- 3.0x, unchanged from the prior quarter.
• Total Dividend Paid in 2025 -- $128 million for the year, discontinued effective immediately per new capital allocation strategy.
• CTS Segment Sales -- Constant currency sales down 1.9% due to lower CAD/CAM sales outside the U.S., partially offset by high-single-digit U.S. growth across Equipment, Instruments, and CAD/CAM; U.S. dealer inventory levels remain low.
• EDS Segment Sales -- Constant currency sales up 4%, led by 17% growth in Preventative products in both the U.S., and Rest of World.
• OIS Segment Sales -- Constant currency sales rose 6.9%, aided by prior-year Byte refund comparison; implants declined high single digits, with sequentially weaker China demand, and 11% European growth offsetting overall declines.
• SureSmile Performance -- Low single-digit sales decline in the quarter; U.S. fell 10%, but Europe grew 15%.
• Wellspect HealthCare Segment Sales -- Constant currency growth of 1.9%, with 15% U.S. growth, stable Rest of World, and declines in Europe.
• Full-Year Revenue -- $3.68 billion, down 3% as reported, and down 4.3% constant currency; Byte accounted for a 1.9% negative impact, while currency was a 130 basis point tailwind.
• Full-Year EBITDA Margin -- 17.1%, up 150 basis points, driven by lower SG&A, but offset by gross profit decline from mix, and $23 million of tariff headwinds.
• Full-Year Adjusted EPS -- $1.60, a decrease of $0.07, or 4.6%, due to a higher tax rate; includes $0.13 of nonrecurring Byte contribution.
• 2026 Sales Guidance -- Net sales expected between $3.5 billion and $3.6 billion, corresponding to negative 3% to negative 1% operational growth, reflecting a 210 basis point Byte-related headwind, and a $30 million dealer inventory sell-through.
• 2026 Adjusted EPS Guidance -- $1.40 to $1.50, reflecting increased investments in R&D, clinical education, Wellspect penetration, and commercial initiatives.
• Restructuring Program -- Targeting $120 million in annual savings to be reinvested in growth, with $55 million to $65 million in nonrecurring charges, mainly recognized and paid in 2026 and 2027.
• Dividend Elimination -- Annual dividend discontinued to prioritize debt retirement, and opportunistic share repurchases as part of capital allocation realignment.
• Board and Leadership Changes -- Creation of a Growth and Value Creation Committee, addition of three independent directors, and hire of Mark Bajiak to lead North America sales force.
• Planned R&D Spend -- Double-digit percent increase in R&D budget for 2026, expected to raise R&D investment to about 5% of sales, and fund DS Core expansion, digital workflow, and new product acceleration.
• Dealer Channel Strategy -- Shift from a sell-in to a drop-ship model anticipated to occur by fourth quarter; $30 million in dealer inventory expected to sell through by mid-2026.
• U.S. Commercial Organization -- Commercial team redesign completed in first quarter, training and deployment underway, with full activity expected March-April.
• Geographic and Segment Priorities -- Immediate focus on U.S. business health, with sustained EDS momentum outside the U.S., and slower turnarounds in implants and ortho.

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RISKS

• Popperoy stated, "Adjusted EBITDA margins declined 10 basis points to 14.1%, resulting from a 300 basis point decline in gross profit driven by lower volume, change in sales mix, and tariff impacts," with tariffs representing a $15 million quarterly, and $23 million full-year headwind, eroding profitability.
• Popperoy confirmed a "$144 million non-cash net-of-tax charge related to the impairment of goodwill and other intangible assets within the CTS and OIS segments," attributed to tariffs and volume declines under competitive pressure.
• Scavilla flagged the Byte business wind-down in 2026 as a structural earnings headwind, stating "income from Byte will not recur and will represent a headwind going forward."
• Scavilla noted that the shift to a dealer drop-ship model entails an estimated revenue headwind of about $30 million in the first half of 2026.

SUMMARY

DENTSPLY SIRONA (NASDAQ:XRAY) reported quarterly results in line with prior guidance but faces discernible headwinds from tariffs, volume declines, and structural business model shifts. Net sales grew 6.2% reported but only 2.5% constant currency, and gross margin was challenged by adverse mix, $15 million in tariffs, and a continued unwind of the Byte business whose contribution will vanish in 2026. The company is investing in a comprehensive transformation plan, eliminating its dividend to fund both debt repayment and share repurchases, and launching a restructuring program targeting $120 million in annual savings. Management expects operational sales declines of 1%-3% for 2026 due to Byte-related drag and a $30 million inventory transition to a drop-ship model, while guiding for $1.40-$1.50 in adjusted EPS driven by accelerated R&D, commercial, and education investments.

• Scavilla said, "first out of the gate is going to be just controlling the debt, but then as soon as we can in this year, if all works well, I want to move into actually getting into buying back shares," indicating priority order for capital allocation in 2026.
• Dealer channel agreements with Patterson, Benco, Burkhart, and A-dec are expected to require onboarding and ramp-up, with revenue impact likely weighted to late third and early fourth quarter.
• R&D levels are projected to rise to about 5% of sales in 2026, and may increase further if turnaround initiatives progress, according to management commentary.
• Management identified CTS as the segment poised for fastest turnaround, while ortho will take longer as software modernization is required before meaningful growth can occur.

INDUSTRY GLOSSARY

• CTS: Clinical Technology Solutions—segment including CAD/CAM, imaging, and dental equipment.
• EDS: Endodontic Solutions—segment covering endodontics, restorative, and preventive dental consumables.
• OIS: Orthodontic and Implant Solutions—segment comprising orthodontics, dental implants, and Byte clear aligners.
• Byte: Direct-to-consumer clear aligner business, now in wind-down phase.
• DS Core: DENTSPLY SIRONA's cloud-based digital dentistry workflow platform.
• Drop-ship model: Supply chain approach where goods are shipped directly from manufacturer to end-customer, bypassing dealer inventory.
• VBP: Volume-Based Procurement—a Chinese government process that can significantly impact pricing and purchasing volumes for medical products.
• SureSmile: DENTSPLY SIRONA's dentist-directed clear aligner solution.
• Wellspect HealthCare: Business segment focused on urology and healthcare-related consumables.

Full Conference Call Transcript

Wade Moody: Thank you, Shannon, and good afternoon, everyone. Welcome to the DENTSPLY SIRONA Inc. fourth quarter 2025 earnings call. Joining me for today's call are Daniel T. Scavilla, President and Chief Executive Officer, and Mike Popperoy, Interim 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 on 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 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. I will now turn the call over to Daniel.

Daniel T. Scavilla: Thanks, Wade, and good afternoon, everyone. 2025 was an important year for DENTSPLY SIRONA Inc. We took meaningful steps to position the company for the future by building out a world-class board and leadership team, enhancing discipline and execution, and aligning the organization around our Return to Growth action plan. Thanks to the hard work of our employees, we ended the year with strong momentum underfoot and financial results in line with our expectations. In 2026, we are fully focused on executing our Return to Growth action plan by putting the customer at the center of all we do. We are going deeper, moving faster, and being bolder to drive sustained profitable growth.

I am confident in the path we have set and in our ability to deliver. The potential for DENTSPLY SIRONA Inc. has never been greater, and we have everything at our fingertips to achieve this. On today's call, Mike will review our fourth quarter and full-year 2025 financial results. I will then provide an overview of the progress we have made over the past several months in advancing our Return to Growth initiatives and strengthening execution across the business. Several of these key developments are highlighted on Slide 3 of our online presentation. I will then outline this year's priorities and walk through our 2026 financial guidance. With that, I will turn the call over to Mike.

Mike Popperoy: Thanks, Daniel, and good afternoon, and thank you all for joining us. Overall, we had a solid finish to the year in Q4 2025. Our results were in line with revenue, adjusted EBITDA margin, and adjusted EPS expectations that were provided on the Q3 earnings call. Let us begin on Slide 4. Our fourth quarter revenue was $961 million, representing a reported sales increase of 6.2% and constant currency growth of 2.5% against a lower prior-year comp that included a one-time Byte customer refund and distributor pre-buys related to our ERP implementation. Foreign currency positively impacted sales by 370 basis points compared to the prior-year quarter.

The one-time customer refund and distributor pre-buy impacts were approximately 570 basis points of tailwind on constant currency growth in the quarter. Adjusted EBITDA margins declined 10 basis points to 14.1%, resulting from a 300 basis point decline in gross profit driven by lower volume, change in sales mix, and tariff impacts. Tariffs had an approximately $15 million impact to gross in the quarter. This was partially offset by the benefit from Byte comparable in the prior-year quarter. Adjusted EPS in the quarter was $0.27, up $0.01, or 4.9%, from the prior year. During the quarter, we recorded a $144 million non-cash net-of-tax charge related to the impairment of goodwill and other intangible assets within the CTS and OIS segments.

This impairment was primarily driven by the impacts of tariffs and volume declines partially reflecting competitive pressures. In the fourth quarter, operating cash flow was $101 million and we generated $16 million of free cash flow. We finished the quarter with cash and cash equivalents of $326 million. Net debt to EBITDA ratio was 3.0x, consistent with the prior quarter. During the quarter, we paid $32 million in dividends, bringing total dividends returned to shareholders to $128 million for the full year of 2025. Now let us turn to fourth quarter segment performance on Slide 4. Starting with CTS, constant currency sales declined 1.9% due to lower sales in CAD/CAM in Rest of World and Europe.

This was partially offset by solid performance in the U.S. with high-single-digit growth across Equipment, Instruments, and CAD/CAM. U.S. distributor inventory levels remain low relative to historical averages. Turning to the EDS segment, which includes endo, rest, preventative products, sales on a constant currency basis increased 4% with growth in Rest of World in each product category. Growth was led by preventative, which increased 17% on strong performance in the U.S. and Rest of World. Moving to OIS, sales in constant currency increased 6.9%, with the issuance of customer refunds for Byte in Q4 2024 accounting for the increase against the comparable quarter. IPS declined high single digits in the quarter, driven by lower implant volumes across all three regions.

We saw single-digit growth of implants in China in the first half of the year and a double-digit decline in the second half of the year as expectations for the second phase volume-based procurement in 2026 shifted buying behavior in the region. Premium implants declined and value implants were slightly down, primarily due to China and partially offset by 11% growth in Europe. SureSmile, our clear aligner offering, declined low single digits in the quarter with a 10% decline in the U.S., partially offset by 15% growth in Europe. Wrapping up the segments with Wellspect HealthCare, constant currency sales increased 1.9%, including 15% growth in the U.S. and continued strength in Rest of World, partially offset by Europe.

Now let us turn to Slide 6 to cover our full-year 2025 performance. Sales for the full year were $3.68 billion, representing a reported sales decline of 3% and a decline of 4.3% on a constant currency basis. Byte negatively impacted constant currency by 1.9% on a full-year basis. Foreign currency positively impacted sales by 130 basis points due to a weaker dollar versus most major currencies. The largest challenges we saw in 2025 were lower volumes for CAD/CAM and implants across all regions.

Key highlights for the year include EDS growth in Rest of World across all three product categories, high-single-digit growth of imaging in Europe and Rest of World, double-digit growth of SureSmile in Europe, and growth for Wellspect HealthCare across all three regions. EBITDA margins expanded 150 basis points to 17.1%, primarily driven by lower SG&A, partially offset by the decline in gross profit due to geographical mix and tariffs. Tariffs represented $23 million of headwind to gross profit across the balance of 2025. Adjusted EPS was $1.60 for the year and down $0.07, or 4.6% year on year, driven by a higher tax rate. Full-year EPS includes approximately $0.13 of income from Byte.

As we wind down the Byte business in 2026, income from Byte will not recur and will represent a headwind going forward. Adjusted EBITDA margins of greater than 18% and adjusted EPS of $1.60 were in line with guidance provided on the Q3 call. Finally, full-year operating cash flow was $235 million and free cash flow was $104 million. Overall, our fourth quarter results demonstrate early progress as we enter 2026 with a very clear strategy, improved execution, and focused investment priorities. With that, I will turn it over to Daniel to share further business updates and our 2026 financial guidance. With 2025 behind us, it is time to move forward with urgency.

Our 24-month Return to Growth action plan is designed to restore momentum.

Daniel T. Scavilla: We will strengthen execution and deliver sustained profitable growth. This is not a short-term reset. It is a focused transformation built on going deeper, moving faster, and being bolder. The plan is anchored in five pillars. First, customer-centric mindset: placing the customer at the center of every decision to improve experience, service, and loyalty. Second, reigniting sustainable growth: sharpening our portfolio focus and accelerating innovation in the markets where we can win. Third, empowering performance: driving accountability, productivity, and commercial excellence across the organization. Fourth, scaling the organization: simplifying how we operate to increase speed and efficiency. Fifth, financial strength: strengthening margins, optimizing capital allocation, and enhancing cash generation to support shareholder returns.

Each pillar has clear actions, defined milestones, and measurable outcomes. Together, they create a roadmap to improve performance and unlock the full potential of DENTSPLY SIRONA Inc. Let me walk you through our focus areas in more detail and give an update on the progress we are making across each. Customer-centric mindset. I have learned that when the customer is the center of everything we do, we win. While that may sound obvious, parts of our company can serve customers more effectively than others, and that has limited our enterprise growth. We define the customer as any practitioner who uses our products, whether they purchase directly through a DSO or through a dealer.

They are all our customers, and we will continue partnering with DSOs and dealers to ensure customers receive timely, consistent, and high-quality support. Last quarter, I shared that we created a global customer service and tech service organization to deliver high-quality support worldwide while remaining agile to meet local market needs. As we continue to build that capability, we are taking additional customer-centric actions such as creating strategic dentist and lab advisory councils within each business segment to work directly with the DENTSPLY SIRONA Inc. leadership team for innovation and strategy development; increasing investment in clinical education by 50% starting this year.

We believe peer-to-peer education grounded in clinical data is one of the best ways to partner with our customers and fully leverage our portfolio; investing in comprehensive salesforce training focused on dentist workflow and connected dentistry to elevate the value we bring to the customer through our representatives. The field team is, and will increasingly be, a strength of our company and a critical competitive advantage. Reigniting sustained growth. Innovation and execution will define our path forward. In the last six months, we entered a new market with the launch of the Wellsurety female external catheter, a new non-invasive solution designed to support women living with severe urinary incontinence.

We have also further enhanced workflow efficiency by bringing CEREC onto DS Core and introduced new products in our EDS and IPS portfolios. In 2026, we are increasing R&D investment by double digits to accelerate DS Core capabilities, advance connected dentistry, and drive innovation across EDS, implants, and ortho. We plan to sustain and expand this elevated investment level. At the same time, restoring the health of our U.S. business is a top priority. We have a comprehensive plan to reignite growth and strengthen our commercial foundation, positioning us to compete and win more effectively in this key market. We have made meaningful progress in the past three months in our U.S. business.

We reorganized and unified our commercial teams to better compete in our markets. This realignment has been well received by our sales force and is already driving strong field engagement. We hired Mark Bajiak to lead our North America sales force. Mark joins us from Zimmer Environment, where he led high-performing commercial teams and drove sustained growth through disciplined execution and customer focus. Mark has hit the ground running and is already making an impact. We also strengthened U.S. commercial leadership with a mix of competitive external hires and internal promotions, adding deep expertise across implants, orthodontics, endodontics, and connected dentistry solutions. We are encouraged by our ability to attract top-tier talent who believe in our strategy and portfolio.

These leaders bring extensive dental experience. Recently, we entered into new or expanded agreements with key partners including Benco, Patterson, Burkhart, and A-dec, while continuing to advance discussions with additional dealers. As I have highlighted before, reengaging the dealer channel is a critical lever to broaden our reach and improve go-to-market effectiveness in the U.S., and our sales teams are excited by the opportunities this creates. This multichannel approach allows us to maintain a strong direct presence in specialty segments while expanding our dealer network in CTS to drive growth and market penetration. Our business segments are number one or two in all categories except implants and ortho.

We are initially focusing on implants in our Return to Growth plan, leveraging the best-in-class and wide range of implants we have to meet customer needs, and using our deep history of clinical data coupled with our expanded clinical education and sales training program. For our comprehensive ortho offerings, our initial focus will be on the modernization of our software. Empowering performance. To lead DENTSPLY SIRONA Inc. through this turnaround, we are strengthening our organizational foundation. We are aligning leadership, sharpening priorities, and selectively adding expertise to accelerate progress. This balanced approach builds on the strength of our existing teams while adding leaders with deep experience in global transformation, sustained growth, and consistent financial performance.

Some of the key actions we are taking: we established a transformation office responsible for execution of the Return to Growth action plan. This team will also lead our enterprise AI strategy and lean operating principles, fundamentally improving how we work. The transformation office is focused on delivering cross-functional improvements that enhance efficiency and agility. We continue to progress in our search to identify the right CFO for DENTSPLY SIRONA Inc. Mike has been an outstanding partner in his interim role, allowing us to thoughtfully evaluate candidates while we execute against our 2026 priorities and financial outlook.

We also strengthened our board with the creation of the new Growth and Value Creation Committee and the addition of three new independent directors: Jim Forbes, former Vice Chairman of Investment Banking at Morgan Stanley; Brian McKinn, former CFO of IDEXX Laboratories; and Don Surbay, former CEO of Patterson. These additions, coupled with an already strong board, will increase our governance and strategic capabilities. In connection with the board's ongoing refreshment process, Willie Dees has informed the board of his desire to retire and not stand for reelection at this year's annual shareholders meeting. Willie has been a valuable member of the board and we want to thank him for his leadership and many contributions. Scaling the organization.

To fund our investments, we are initiating a restructuring program to streamline functions, improve efficiency, and support a more competitive cost structure. The program is expected to unlock approximately $120 million annually across the P&L, which will be reinvested in the Return to Growth action plan. We expect to incur approximately $55 million to $65 million in nonrecurring charges, the majority of which will be expensed and paid in cash in 2026 and 2027. We are building a faster, more scalable, and more profitable manufacturing and distribution network. This includes consolidating resources, standardizing packaging, and implementing advanced planning and forecasting capabilities to favorably impact working capital and reduce product cost. Financial strength.

The fifth pillar is focused on strengthening our financial profile and driving shareholder returns. With that, we are initiating changes to our capital allocation approach. Following a strategic review, we have eliminated our dividend. These funds will be reallocated to our debt retirement and share repurchases. I want to emphasize that this decision reflects an assessment of an optimal capital deployment strategy and feedback from many of our shareholders. We remain committed to maintaining investment-grade credit metrics by prioritizing debt reduction and, over time, deploying excess free cash flow toward disciplined share repurchases. Now let us move to Slide 8.

For 2026, we expect net sales to be in the range of $3.5 billion to $3.6 billion, reflecting negative 3% to negative 1% operational growth. While we do not provide quarterly guidance, we anticipate positive sequential sales momentum in the back half of the year. The anticipated decline versus 2025 includes approximately 210 basis points for the 2025 Byte headwind and the 2026 one-time dealer capital equipment inventory sell-through as we work with our dealer partners and adjust inventory models. We expect adjusted earnings per share to be in the range of $1.40 to $1.50, reflecting our accelerated investments in innovation, clinical education, Wellspect market penetration, and commercial investments to drive sustained profitable growth globally as we move forward.

In conclusion, we have moved quickly and accomplished a great deal to position the company for stronger execution in 2026 and beyond. I will close my formal remarks where I began. I believe that the opportunity ahead of us is substantial. This is a moment for bold change and decisive action, rooted in ownership and urgency. With the full support of our board, we are confident in our ability to unlock the company's full potential. Before I turn it over to Q&A, I also want to express our respect for Don Casey, former CEO of DENTSPLY SIRONA Inc., who passed away last week from natural causes.

Don and I worked together for many years at Johnson & Johnson, and I will always appreciate his leadership and mentorship. DENTSPLY SIRONA Inc. employees will remember him for his passion for improving health care. We extend our condolences to Don's family and loved ones. I will now turn the call over to the operator so we can start the Q&A session. Thank you.

Operator: Thank you. We will now open for questions. To ask a question, you will need to press *11 on your telephone and wait for your name to be announced. Please stand by. Our first question comes from Vikramjeet Singh Chopra from Wells Fargo. Please go ahead.

Vikramjeet Singh Chopra: Hey, good afternoon, and thank you so much for taking the questions. Maybe just two for me. You have talked about the dividend elimination freeing up $128 million annually for capital deployment. Then maybe just talk about the optimal mix of debt retirement and share repurchases, and at what share price levels do you view the stock as compelling? And then I had a quick follow-up, please.

Daniel T. Scavilla: Hey. Thanks, Vik. So, you know, a couple of things. We do have debt that is coming up to be retired. I think we want to take advantage of that. I also want to make sure that we do not cross the line and move below investment grade. So right now, we do have our eyes focused on that. I will tell you, I think that we are at an attractive stock price right now with the potential that I see. And so, you know, my goal is to really work through this Return to Growth plan, free up the cash, execute that restructuring plan, and get as much cash as we can.

But first out of the gate is going to be just controlling the debt, but then as soon as we can in this year, if all works well, I want to move into actually getting into buying back shares. I really cannot say when exactly. I have got to work through some of the plan, but that is my target. And then, you know, just ongoing, it may not have a structured cadence, but, you know, at these prices, I want to move into next year to really remove shares at what I consider a bargain price.

Vikramjeet Singh Chopra: Great. Thank you. And just a quick follow-up, if I can. You called out the impact of the new dealer inventory model for products in your operational growth. Can you just talk about the estimated revenue headwind, when we should expect this in 2026, and how much of this is timing versus structural?

Daniel T. Scavilla: Yes. Great question, Vik. And I really did not elaborate, but what we are doing is rather than selling into dealer inventory like we have done in the past, we are going into a drop-ship model. And so, in particular, with the vendors who do have capital, we expect them to sell that through, my guess is within the first half of the year. That is really what I would think would occur. You know, it is in a range of about $30 million approximately that we think is in the inventories they would sell through before we move to a drop-ship model.

My goal as the company is to be into that full drop-ship with all vendors by the time we are walking into the fourth quarter.

Vikramjeet Singh Chopra: Thank you.

Operator: Our next question comes from Allen Lutz from Bank of America. Please go ahead.

Allen Lutz: Good afternoon and thanks for taking the question. Daniel, appreciate the Return to Growth action plan. A lot of great details in there. My first question, how do you think about the timing around some of the recent announcements you made, the expansion with Patterson, Benco, and Burkhart? Is there any way to size or provide commentary on the size or timing? And is any of that benefit included in the guide?

Daniel T. Scavilla: Yes. It is a great question. Not a major part is in the guidance. It is built in a Return to Health plan for certain, Allen. What I would tell you is just a logical thought. We are signing people up early in the year, call it first quarter. We have the reps to train and get on board for the most part and bring them up to speed. And then they have got to go out with the customers and start building a natural pipeline for capital, which you know is out there.

So, you know, for me, activity now in the first quarter and into the second quarter I think should bear fruit closer to late third quarter, early fourth quarter. I do not really have a breakout in dollars to give you. It is just a natural flow from having sold capital for so long that I do not think this comes out of the gate in the first quarter or the first half.

Allen Lutz: I think it is more of a later second-half story where we really see the lift of signing all of these good folks on. Okay. And then, for my follow-up around the EPS guide, $1.40 to $1.50. As we think about everything you talked about, accelerated investments in innovation, commercial investments, and clinical education, should we think about 2026 being the peak year for those investments? Or would you expect those investments to ramp up over the next couple of years as we think about the cadence of your SG&A over the next couple of years? Thanks.

Daniel T. Scavilla: Yes, again, really good question. I think that this is a strong year to do it. I would think it is about the same, not meaningfully different in 2027. And then, really, I am looking at that point for a lift in the health of the business to become self-funding. And I want to see something, you know, quite frankly, outpacing EPS growth as we get back to top-line growth.

Operator: Thank you. Please stand by.

Daniel T. Scavilla: Hey, Shannon. We just wrapped with Allen. You can jump to the next in the queue.

Operator: Sorry about that. Our next question comes from Elizabeth Hammell Anderson from Evercore ISI. Your line is open.

Elizabeth Hammell Anderson: Hi, guys. Good afternoon, and thanks so much for the question. I heard what you said on the call about the increase in R&D spend by double digits to drive DS Core, EDS, and ortho. Obviously, you have continued to launch a bunch of new products that we saw in Chicago last week. How do you think about sort of the cadence about where we are? Are we starting brand-new development cycles, so we should expect these kinds of products to come a couple of years from now? Are you thinking there are some things sort of in process and this just helps to speed them up and maybe there is something that launches in late 2026 or 2027?

Help us sort of think through maybe broadly your R&D philosophy and sort of how we should expect these benefits to start to phase in as part of the growth plan? Thank you.

Daniel T. Scavilla: You got it, Elizabeth. So, you know, you almost answered it with your question. So it is multifaceted, so bear with me. DS Core is an amazing platform and one of the long-term potentials of this company. Part of that funding will go in to accelerate some of those applications. So, you know, we talk about moving into implants or into ortho or deeper into endo. We are going to go do that at almost a simultaneous rate and bring those functionalities into our customers at a faster rate. I am not going to commit to dates just yet because, as you know, some things require FDA approval. But nonetheless, the accelerated funding can bring this further along the curve.

At the same time, there are several things in our EDS portfolio that we were funding at a slower rate or even possibly paused that we can now bring in and accelerate as well as products go that way. We also have some interesting opportunities within our implant business that having this funding will bring those in, I would arguably say, one year sooner than planned in this approach. I really cannot lay out the cadence of what I think, but part of it is going to be an acceleration and pull-forward in the software and creating that environment while we come up and have stronger product offerings for our customers. Some of them are brand new.

Some of them are acceleration, and some of them are things that were delayed that we can bring back. So it is really the mixed bag based on your question.

Elizabeth Hammell Anderson: Great. And maybe as a follow-up, you talked about obviously reorganizing the commercial team. Is that done now? Or is that sort of still in process and should we think about it in terms of the benefits of that? I think you mentioned we are just starting, but we should think about those happening over sort of two to three quarters before they really start ramping. Is that a fair way to think about it in this circumstance as well?

Daniel T. Scavilla: You know, again, good question. I will be honest with you. I am amazed at the speed and professional approach the team took in designing and reorganizing itself quickly. It is done. And they are out there now, forming this up at the end of the first quarter. And they are going to be active in these new structures really, honestly into March and April that soon. And, again, to me, it further flexes the potential of this company and the capability of it once you put the right focus on it.

Elizabeth Hammell Anderson: Got it. Thank you so much.

Operator: Thank you. Our next question comes from Michael Aaron Cherny from Leerink Partners. Your line is open.

Dan Clark: Great. Thank you. This is Dan Clark on for Mike. Daniel, just wanted to ask about how you are thinking about the pacing of the sales improvement here as the different pieces of the Return to Growth action plan get implemented. I mean, it sounds like we should start to see sequential growth starting in the back half of the year. How should we think about first-half, second-half weighting of sales? And then should we expect to see more sequential acceleration as we think about, you know, the early parts of 2027? Thank you.

Daniel T. Scavilla: Yes. So, and I will stay away from 2027 because that is so far off in the distance given what is in front of us right now. That is a later conversation for us for sure. You know, what I would tell you and what I am trying to signal out is this does not change overnight, and I think most people respect that. I think we have a consistent velocity perhaps in Q1 and Q2. I want to start seeing a noticeable change with what we are putting in place in that third quarter.

And, you know, I really want to see at least the U.S. come out with a plus sign in front of it, albeit small, in the fourth quarter, so we do set the stage correctly for 2027. That is where we are aimed right now. It is early innings, but I am just telling you that is the way I am looking at it as I drive this plan.

Operator: Thank you. Our next question comes from Jeffrey D. Johnson from Baird. Your line is open.

Jeffrey D. Johnson: Thank you. Good afternoon, Daniel. Hoping I could ask one kind of clarifying question that does not count as my question and then one other question. But on the clarifying front, to your SG&A answer, I just want to make sure I understand what you are saying. SG&A as a percentage of revenue up this year, but then you think you can start to kind of grow it just more in line or even below sales going forward. And I think at JPMorgan, you had talked about R&D going from four, maybe even pushing up towards six. Feels like with what you are saying, you will maybe get towards 5% this year.

So should we still expect that R&D ramp kind of eventually getting up to that six range or so? Thanks.

Daniel T. Scavilla: Yes. You got it. A couple of things. Just to your point to clarify, I think SG&A will have some influx. It should not be a large pop. Going forward, one of our rules as we control expense and really look to free up cash flow is probably to grow some of our expenses at half the rate of sales growth. And so, again, I do not see SG&A growing big and suddenly getting bigger. That is not really the intent. The majority of the spend, back to your point, Jeff, is really going into R&D, and we are hovering around 4% in 2025 and earlier.

I would expect that to be up around 5%, and as we are successful with this plan, I will put even more in this year. You know, I am not saying the target is up to 6%, but that is in the sights since what I would think even naturally is a lift this year and a lift next year in R&D, while we continue to get growth, and we have to obviously have the rest of the plan working in order to make that second piece happen.

Jeffrey D. Johnson: Thank you. And then conceptually, I guess the real question I wanted to ask. You know, this is a year where, obviously, you are going to get some leeway to really put these big turnaround plans in place and to reestablish a growth profile here. One thing I have always thought on DENTSPLY SIRONA Inc. at least recently—and you probably do not care that much about my thoughts—but when I look across the board in imaging, in IOS, in 3D printing, you guys have some fantastic products there, but we have also seen competition at lower price points really improve their product suite over the last, call it, five years, seven years, something like that.

Has there been any thought in kind of taking a reset year and maybe kind of bringing some of those price points down to more competitive levels? Or is this really going to be about investing to kind of drive innovation and, you know, go about it the way you are saying there? Thanks.

Daniel T. Scavilla: Yes. It is a great question. Listen, it is a couple of thoughts here. First off, the investments that we are doing will drive innovation. And with that, we are also assigning cost targets that allow you to be more flexible in future price and future products. But that said, I am going to give you a different industry analysis. Right? In the auto industry, you have Mercedes and you have Hyundai. The Mercedes brand will stay that way. We are not going to suddenly come down to be something we are not, or pull out of a core competency.

What we are going to do is offer differentiating and meaningful inputs to the customers who will want to use us. We have to earn that through innovation. And that is why we are increasing our investment in R&D.

Operator: Our next question comes from Jonathan David Block from Stifel. Your line is open.

Jonathan David Block: Great. Thanks, guys, and good afternoon. Daniel, when we think about 2026 versus 2025, which of the four revenue segments do you think are maybe, call it, poised to see the biggest year-over-year improvements or strength versus the segments that just might take some more time and investment to go ahead and turn when we look at further out?

Daniel T. Scavilla: Yep. Great question. Now, I mean, if you think about it, by signing on the dealers and getting that active, I would lean towards CTS as the one that I am thinking is the first mover. At the same time, as you know, we have got great products in EDS and launching those things out both in Chicago and what we are investing in. I think that should be a growth and maintaining strength there as probably secondarily. You know, the focus, as I said in my script as well, I do not like where we are with implants. We have, yet, the best implants in the market.

We have to do a better job in how to bring them out through education and application. I think that would kind of fall third in line. Ortho will take longer because we are going to spend our time this year modernizing the software. I think that is a longer play outside of this calendar that I would expect to see.

Jonathan David Block: Okay. Very helpful. Very a lot of detail. And then maybe if I could just ask as a follow-up. You gave a lot of great color. One thing that I have not heard you elaborate much on today is the company's DSO strategy. And obviously, DSOs are really important to the industry and are fast growing. And DENTSPLY SIRONA Inc., I feel, has always lagged a bit on penetrating the DSOs. And maybe part of that is just due to the company's, you know, higher-end product portfolio. So maybe if you can touch on how you can get better traction with the DSOs despite, you know, arguably the higher ASP.

And can you prove out the favorable returns to these DSOs in order to get the traction? Thank you.

Daniel T. Scavilla: Yes. You got it. And again, really honestly, a great question. And the answer is I am looking there. The reason I did not call that out yet is I am not really in a position to talk about it further. We are in exploratory thoughts, but I will talk about it further. We can go on and fill out an entire suite with everything we have. We can offer them hundreds of suites to be filled out. So we are in a position to truly partner with them in a meaningful way for all of the capital and needs they have in addition to providing the disposables. So all I would tell you is we are in talks.

You can figure out with all of them who they are. And we are looking at what our plans are as part of that Return to Health. I do not think there is a meaningful 2026 move, but you are taking some of my thunder away for that 2027, 2028 years based on where we are headed.

Operator: Thank you. Our next question comes from Michael Anthony Sarcone from Jefferies. Your line is open.

Michael Anthony Sarcone: Good afternoon and thanks for taking the question. Yeah. I guess, Daniel, you mentioned that—and I think this is a reiteration—that you would hope to see a positive sign in front of the growth for the U.S. business in Q4. I think you had previously mentioned you could get there without any turn in the market. Is that still the case or the thought? And I guess if you could just quickly comment on what you are seeing in the underlying markets, that would be great.

Daniel T. Scavilla: Yes. I do think it is regardless of the market. You know, one of the things I was saying before at JPM is our Return to Health is not market dependent. We need to do a better job than what we have, and with what we have. And I think with that, we should be capable of doing that. That said, the market to me does not look radically different. I think it is fairly stable. I think similar to what our counterparts have said, I would agree with those comments that they have made with it. And, you know, while there is some increasing optimism, you know, I am not seeing a spike of any note.

And, again, just to reiterate, we are not hoping or praying for that market to suddenly spike up in order to get to our point. We have to do that on our own. Should that occur, that is an additional benefit.

Michael Anthony Sarcone: Got it. Thanks, Daniel.

Operator: Next question comes from Brandon Vazquez from William Blair. Your line is open.

Brandon Vazquez: Wanted to go back to the increased R&D spend and kind of the focus on accelerating innovation. It feels like that is probably one of the key pillars here to keep driving interest and demand. Then maybe you can level set us, like, what is the cadence of this? Is this start putting money in today, and it does not start coming till 2027–2028? Or some of these are going to kind of get pulled forward already and we start to see some. So maybe give us the latest on what new product launches we might be expecting within 2026 more specifically? And then what are the longer-term projects that might be going into the R&D bucket? Thanks.

Daniel T. Scavilla: Yeah. Brandon, it is a good question. So a couple of things. The spending that we are accelerating today would not meaningfully pull anything into 2026. So I would tell you that historical one. It is a matter of actually closing the gap once you get into 2027 and 2028. That is really probably the first part of it that way. New product launches that we have out there or planned out there, given that we do not have approvals, I am probably not going to comment on. I would just tell you that once we reach FDA approval, we start talking about things.

So while they are out there and we have them scheduled, given the fact that we do not have the approvals needed, I am going to refrain from saying here is what I think and when I think it. But nonetheless, we have products planned. We just have to get through the FDA and regulatory requirements to get out there. And this lift in spending that I am doing, I think, is something that is a bit longer term outside of the 2026 calendar year.

Brandon Vazquez: Okay. Maybe as a quick follow-up. You are another quarter in now, just kind of getting your feet here into the portfolio. Any noticeable gaps that you are noticing that you think you need to fill or—I mean, portfolio rationalization as well, but I feel like we have talked about that. But any gaps that you need to either launch products or acquire? Thanks for the questions.

Daniel T. Scavilla: Yeah. No problem. I would say no significant gaps right now. I look at our portfolio, and it is very abundant. How we organize the portfolio and strengthen our brands and focus clinical education and rep education on those are, I think, what is needed more than new widgets. I think the transitional move from selling implants or other products into a dentist workflow through connected dentistry, I think that is something that we have, and that is one of the things we are spending our money on. And so I think the journey is really about the digitization—which I cannot say—out into the dentist to go drive it that way.

Operator: Our next question comes from David Joshua Saxon from Needham & Company. Your line is open.

David Joshua Saxon: Great. Thanks, Daniel, for taking my question. Just wanted to ask one on the commercial team. Old firm obviously is and was a really strong competitive rep hire. So is that a lever you can pull this year, or do you need to kind of fix the foundation first and the approach before that becomes a meaningful option for execution? Thanks so much.

Daniel T. Scavilla: You are welcome. I would say we may have the potential later this year. We have got to get the teams formed and functioning first. But, you know, it is on the list for Aldo and Mark to actually look at it that way, in the U.S. in particular. And you are right. We are going to take from that playbook and use that in a great way. I just do not know if I can do it as soon as the second half; certainly as we exit the year, that is going to be a key for us.

David Joshua Saxon: Great. Thanks so much.

Operator: Thank you. Our next question comes from Lily Lozada from JPMorgan. Your line is open.

Lily Lozada: In the prepared remarks, you referenced VBP in ortho and implants this year. So can you talk through how you are thinking about that? To what extent is that factored into the guidance? And do you see it being a net negative or potentially a positive to revenues ultimately if you can get volumes to offset price?

Daniel T. Scavilla: Are you talking about the accelerated R&D where we are to focus a little? I just want to make sure I answered it the right way.

Lily Lozada: No. China VBP.

Daniel T. Scavilla: Oh, China. I am sorry. I did not hear that piece of it. Thanks. I will tell you, we have our eye on China. Certainly interested. We understand the strategic impact there. But to be honest with you, the Return to Health plan right now is focused on first getting the U.S. up and on its feet, going through these processes first this year. We will pay attention to China. Make no doubt about it. We have an interest in it. But if you look at where that falls currently, even in our overall sales, it really falls in the low single digits as a percent of our total pie.

And so we are just, I would say, prioritizing more of the U.S. health first. Keeping feeding Europe as it is—EMEA, I mean by that—as second. And then, you know, we will take a look and see as the news evolves with China what our best move is. We are evaluating things. I do not want to sound like we do not have plans. We have two or three. We just have not really made a conclusion yet as to which direction we want to go in there.

Lily Lozada: Got it. That is helpful. And then as a follow-up, can you talk about how you are thinking about free cash flow this year? We know dental is a business model that is capable of generating really strong free cash flow conversion. What are some of the headwinds and tailwinds we should be keeping in mind for this year? How are you thinking about where that metric can go for you in 2026?

Daniel T. Scavilla: You got it. Well, two things. We do not really call out free cash flow with our guidance, so I will stay away from that. I do think it can improve. I think that we need to move into our working capital exercises that we have in play. And that cuts across all of those types of items. And my long-term view of this company is to be a cash engine, like you said. I think the potential is there. It will take us a bit of time to get there, but everything in our Return to Growth plan is focused on turning this into a much stronger cash flow engine.

Operator: Thank you. Our next question comes from Michael Petusky from Barrington Research. Your line is open.

Michael Petusky: Hey, good evening. Thanks for the question, Daniel. Daniel, I think it was in November, on the third quarter conference call, you sort of called out some of the things you want to do in implants to sort of turn that business around and you talked about adding more reps, better training, adjustments in branding, leveraging infrastructure, etc. And I am just curious, have you been able to sort of implement any aspects of some of the steps you feel like you need to take to turn that business around?

Daniel T. Scavilla: Yes. The answer is yes. And so creating, you know, the focused salesforce from top to bottom within implants is one of those things we are talking about within our commercial engine, and we have that done. The expansion of clinical education, because I think that is a very viable part and needed part that is out there. That is number two. A pull-forward of some of the innovation that we are doing with R&D, part of that funding, that is out there as well.

And where we are currently working on and not yet ready to talk about is just our brand strategy of how we bring everything that we have together to come out with all of the power of not only the implants, but our assortment of abutments and how best to use them with the crowns, whether it be chairside or through our labs. And so that piece is really working through, and I expect to have a better update in the second quarter. We are just in mid-stride finishing that up yet, but we have all of the firepower of the team and the education now.

We just have to finish up some of these other moves to get it active.

Michael Petusky: Great. Thank you.

Operator: Thank you. Our next question comes from Steven James Valiquette from Mizuho Securities. Your line is open.

Steven James Valiquette: Yes, thanks. Good afternoon. Just had a question around the renewal and/or expansion of the Patterson agreement. I definitely appreciate you cannot go into details on new contract terms, etc. But I guess at a high level, do the new contract terms move the needle materially for you one way or the other just for 2026? And on the one hand, you might have a little bit lower pricing, but maybe more volume. Also, you cited three other renewals as well. Just curious if any of those are, you know, equally important versus the Patterson renewal. Thanks.

Daniel T. Scavilla: Yes. You got it, Steven. So, you know, a couple things. It really is a new contract with Patterson. It is not a renewal. There are many different terms in there that actually benefit both parties. To be honest with you, it was a great conversation with the team, and I think this will come out well for both parties. For us, it is going to be favorable just again because they know us, they know our products well. They are key, especially with our CEREC systems. And I think what excites me is the ability to get the training of their team and opening those doors with them.

I do think that can be a meaningful lift coming out with that new contract with them. I believe with the other vendors, these existing or these new contracts will be even more beneficial because you are getting all of that expanded feet on the street while you are creating your new vertical salesforce teams to focus on specialty. And so I just feel like it is a faster way to penetrate the market, going through that pathway.

Steven James Valiquette: Okay. Got it. Thanks.

Operator: I am showing no further questions at this time, so this concludes the question-and-answer session. Thank you for attending today's conference. This does conclude the program and you may now disconnect.

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