Q3 2023 Dentsply Sirona Inc Earnings Call
Good day and thank you for standing by welcome to the Dentsply Sirona third quarter 20 twenty-three earnings conference call at.
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I wouldn't I liked the hand the conference over to your Speaker today, Andrew Daily Vice President of Investor Relations. Please go ahead.
Thank you Amy and good morning, everyone welcome to the dense place around a third quarter 20 twenty-three earnings call. Joining me for today's call is Simon Campion, Chief Executive Officer, Glen Coleman, Chief Financial Officer, and Andreas Frank Chiefs business Officer I'd.
I'd like to remind you that in earnings press release, and slide presentation related to the call are available in the investors section of our website at www dot done spice around us dot com. Additionally.
Additionally, historical financial data related to our new segment is also available on our web site.
Before we began please take a moment to read the forward looking statements and our earnings press release during today's call. We may make certain predictive 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 are most recently filed for them 10.
And any updating information in subsequent SEC filings lists some of the most important risk factors that could cause actual results to differ from our predictions.
Additionally, on today's call. Our remarks are based on non-GAAP financial results, we believe that non-GAAP financial measures provide investors with useful supplemental information about financial performance of our business enable the comparison of financial results between periods, where certain items may vary independently of business performance.
And allow for greater transparency with respect to key metrics used by management and operating our business.
Please refer to our press release for the reconciliation between gap and non-GAAP results.
Comparisons are provided provided versus the prior year quarter unless otherwise noted.
Webcast replay up today's call will be available on the investors section of the company's website following the call and with that I will now turn the call over to Simon.
Thank you Andrea and thank you all for joining us this morning.
<unk> 2023.
I'll start by providing an overview of a recent performance.
And will cover up to three results and with the revised 23.
Before we discuss the recent performance.
[noise] wants to comment on the recent events in the Middle East.
I'm deeply saddened horrific terrorist attacks on Israel.
The injuries and lots of innocent lives.
We have over 300 employees of the country.
You want employees and their families.
Alrighty.
Currently our business in Israel remains operational and Glenn will touch upon this topic again when he covers the outlook assumptions.
I would like to remind you all that we are hosting artist yesterday next Thursday November 9th.
Plan to cover our strategy.
In more detail.
Just a G P S target of $3.
Ah such for today's call our prepared remarks will be brief and focused primarily on a few key messages to three financials and our outlook for the rest of the year.
Got that and can slide four.
Two three we continue to execute on our strategic plan to transform the business to deliver sustainable performance over the long term.
We are making meaningful progress on our objective despite the challenging macroeconomic conditions that negatively impacted top line growth in the corner.
The revised 2023.
The business experience headwinds in certain markets, particularly Germany and the U S.
I'm sure you've seen the data from 88 comment momentarily.
Survey data.
However, some bright spots in the corner.
Including 20 per cent growth in China, and double digit growth and are you a cat.
Huh.
Our line of business with <unk> and your Smile, all sorts of live with another quarter of double digit growth.
Three R E Bay's emergence expanded 70 basis points for the additional contributions generated by our restructuring program.
These on this or that should remain on track to deliver the full 200 million dollar one way savings by mid 2024.
Additionally, today, we announced our plan to execute $150 million in share repurchases during the fourth quarter.
Despite the headwinds we faced and a quarter, we continued seville capability and stay focused on our transformation journey.
I'm moving to slide five let's start with D. S L.
We're seeing positive results from our reinvestment into our relationships with the service.
Continuing to repair rebuild a new phone.
It's on our relationships with this important and growing customer segments.
Hi performance in this quarter was fluffy <unk> when you're building positive momentum with a healthy for you so opportunities over the next several quarters.
We are also full feeling a renewed commitment to clinical education.
Alive education events, such as D. A squirrel's serve as an important component of our overall clinical education infrastructure.
These events give us the opportunity to engage with customers and provides unparalleled technical education.
This year, we hosted forward this world events.
U S, Spain, Italy, and you buy with three Hells this past quarter.
Approximately 7000 participants globally.
Globally and.
And we delivered over 250 education courses.
At T S World in Las Vegas, we presented the future all care.
You believe your score will play an increasingly important role in delivering the future of care.
The digital paradigm shifts come next products and technologies and delivering care of patients.
Is a key element of our strategy and we.
You guys are expanding features at this year's the best.
Now of course, we continue to focus on innovation.
Recently launched a new sure small simulator onto your score which has generated positive feedback.
Customers have highlighted patient experience and efficiency benefits with the integration of the simulator two D is cool.
We also released updates to do your score, including the communication Kansas.
Ordering and viewer functionality.
We are particularly pleased with the communication Kansas.
It enables customers to highlight the entirety of a patient's clinical data as proposed treatment plan in one place.
Alright look how much are you from customers indicates that it drives an increase in treatment acceptance rate with customers.
We look forward to discussing and showcasing vehicles capabilities and greater depth at our Investor Day next week.
I'd also like to highlight optics, agile, which we recently launched a practical implants boned me generation portfolio.
Implants remains an important part of our business.
We have a robust portfolio, we continued to increase the capabilities of our commercial teams.
Investments in clinical education, and Incentivise commercial execution.
And finally in Q3, we continued our cadence of quarterly regional business review meetings with meetings at a pack and laptops.
These meetings provide off the opportunity to dive deeper into each business at you engage with employees and customers.
As a result of these reviews, we have identified key opportunities in each region for potential growth investments.
Already taken action on Sir.
The consistent and highly positive feedback from our employees and customers strongly supports continuing this in 2024.
Just before I turn it over to plan to discuss our third quarter results in more detail.
Like to take a moment to comment on a revised outlook.
As we continue to focus on the transformation of our organization.
Clothing, driving greater discipline and accountability.
Customer Centricity would continue to stand that'd be cool.
As such we believe our quarterly surveys have helped in four of US and you have market trends.
The week sentiments in Australia, Android me, if you want followed by <unk> sentiment in Germany, and Q2 laid off to exhibit caution during a two two of those cold in August, especially given our presence in Germany.
Continued negativity, among Germany, and Australia and customers.
<unk> to reduce the patient volume trains in the U S.
Decided to revise our outlook, which now sits within the guidance range is that at the beginning of the year.
<unk>, a worsening macro economic environment.
And with that 100 over to Claire.
Plan.
Thanks, Simon good morning, and thank you all for joining us.
Today I'll provide more detail on our third quarter results in an update on our full year 20 twenty-three outlook.
Before doing so I'd like to comment on a 302 million dollar non-cash after tax charge in Q3.
Related to goodwill and other intangible asset impairments, primarily impacting our connected technology solution segment.
We recorded discharge as a result of adverse macroeconomic factors, including we can demand, particularly in Europe as well.
Well as increased discount rates, reflecting a higher interest rate environment.
I mean, I moved to our third quarter financial results.
These trends impacted our top line results, which came in below expectations.
Despite this pressure or transformation and organizational alignment work enabled us to expand even emergency 70 basis points.
And with a lower tax rate resulted in adjusted EPS growth of 20% year over year.
Line with our projections.
What's that moved to five six.
Our third quarter revenue was $947 million with reported and organic sales essentially flat year over year.
Foreign currency was slightly favorable in the quarter, however was lower than anticipated due to a stronger U S. Dollar.
On a constant currency basis, we saw a strong sales performance in China.
Screw, 20% year over year and improved sequentially from Q2.
In addition, our global liners business grew 10% and CAD Cam grew double digits in the U S.
These improvements were offset by softer demand in key markets, such as Germany, and the U S. Most notably impacting imaging implants and consumables.
Despite flat revenue performance year over year and continue to inflationary headwinds adjusted EPS in the third quarter was 49 cents of 20 per cent.
The improvement was primarily driven by adjusted EBITDA margin expansion of 70 basis points to 18.2%.
As a result of cost reductions from our restructuring program effective cost management and the benefit of price increases implemented earlier in the year.
We achieve this while continuing to invest in our commercial teams and infrastructure.
In addition are adjusted EPS growth was impacted by a lower tax rate due to the favorable geographic mix.
And the third quarter, we generate $134 million of operating cash flow.
Of 23% year over year, you can buy improve profitability.
Your bill of inventory.
And the timing of accounts receivable and accounts payable compared to the prior year.
Free cash flow conversion in the quarter was 93% compared to 88% in the prior year.
As a reminder, or a longterm goal is to achieve 100 per cent free cash flow conversion on a consistent basis. Once you move past the cash outlays associate it with our transformation initiatives.
Cash and cash equivalents amounted to $309 million at September 30th.
Our leverage ratio improved to two and a half times, which is in line with our longterm targeted right.
And the third quarter, we returned $29 million to shareholders through dividends with a total of 236 million return year to date do a combination of dividends and share repurchases.
Assignment noted we also announced this morning that we intend to repurchase an additional $150 million of shares by your end.
Let's now turn to third quarter segment performance on five seven.
Starting with C. T. S are connected technology solutions segment organic sales declined 4.6%.
But then C. T S are global CAD Cam business grew low single digits.
Driven by higher wholesale volume in the U S. As distributors increased inventory ahead of D. S World in September.
Underlying U S. Cadcam retail demand was also strong.
Particularly for Primemill and Sarak Prime scam.
Equipment and instruments business declined high single digits in the quarter due to softening demand for imaging equipment in the U S and Europe, which we attribute to rising interest rates and recessionary concerns in the market.
In the near term, we're working with our distribution partners on financing alternatives to support our customers.
Moving to E D S for the essential dental solution segment, which includes endo resto and prevented products or.
Organic sales declined about 1%.
My lower volumes in the U S and Europe.
We did see strength in the rest of the world, which mitigate some of this negative impact.
50% of your orthodontic, an implant solution segment organic sales grew 3.7%.
Aligners good double digits for the fifth consecutive quarter.
Strong performance is driven by growth in bowsher smile and bite.
Sure Smile grew 13% and continues to benefit from market share gains new product offerings and differentiated outcomes.
Our direct to consumer Aligner brand by grew 7%.
So higher customer conversion rates.
And a full year basis, we expect airliners business to grow double digits.
But anticipate the single digit growth in the fourth quarter.
Given macro pressures in our largest markets.
<unk> grew low single digits in the quarter highlighted by increased demand for value implants.
Well as growth in China, do the V B P and market share gains.
On a sequential basis, China implants, with 30% in the third quarter.
And wrapping up with the wells back to health care segment organic sales grew 6.8% with growth across all three regions.
Well expect also benefited from new product launches with novena, many a minimally invasive irrigation product for Val care.
And a loaf wreck, Oregon, flexible and intermittent male catheter both of which have been well received by customers.
Four Q4, we expect a further acceleration of growth in wells back to about 10% year over year.
Now, let's turn to slide eight to discuss third quarter financial performance by region.
U S sales declined about 1% due to lower sales of imaging equipment implants, and restorative products, partially offset by strong growth in a liners and cadcam equipment.
U S cadcam distributor inventory levels increase sequentially in the quarter by approximately $20 million.
Driven by a normal build in advance of D. S World Las Vegas in September.
We expect that most of this will support in stores in Q4, and because of this inventory levels will likely be lower by the end of the year.
Turning to Europe organic sales declined 2.8% due primarily to lower eds and Cts demand.
As we continue to see prolonged recessionary impacts in Germany, our second largest market globally.
Excluding Germany organic sales in Europe, or flat compared to the prior year.
That said, we posted strong performance in the wall spec segment and with our sure Smile Aligners.
The rest of World organic sales grew 4.5 per cent in the quarter led by China.
Which delivers significant growth in implants and E D S.
With a strong third quarter performance our year to date sales growth in China has now turned positive with volume increases more than offsetting the pricing impact sooner than expected.
Latin America, a smaller but fast growing region for US was another bright spot and grew double digits with improved performance in Brazil and Mexico.
With that let's move to slide nine to discuss our updated outlook for 2023.
We expect to see current conditions continue to impact you for.
A recent survey of over 1000 dental customers.
Together with other industry research data suggests that we're seeing negative trends with decrease patient visits and increased cancellations.
In addition, higher interest rates will likely result in deferral of some higher end equipment purchases.
These macroeconomic factors Cup.
Coupled with a more unfavorable FX impact expected for the remainder of the year.
Let us to lower our full your outlook.
We now expect full year net sales to arrange for a 3.90 billion to $3.94 billion.
This includes an additional FX headwind of $25 million compared to our prior outlook.
We expect organic sales to grow about 1% compared to our prior estimate of about three per cent growth.
Regarding Israel I'd like to Echo Simon's comments.
Our thoughts are with all the families impacted including our colleagues that call Israel home.
And their safety is the top priority.
Israel is an important country, where we have operations, including to implant manufacturing sites the.
Generate roughly 3% of our total sales.
Initiatives are underway to move inventory.
Identify alternative resources and limit potential supply disruptions.
We continue to monitor the events closely and while we have not seen as significant impact on our business to date the situation remains fluid.
R Q for outlook assumes minimal impact from the conflict in Israel.
Moving to profitability, we estimate full your EBIT margin to be greater than 17%.
One from the prior outlook to the lower expected sales and the impact of lower volumes and unfavorable absorption and our Cts business.
Are updated outlook includes a lower tax rate due to geographic mix largely driven by a reduction in pretax income projections in Germany.
As well as the lower share count due to the $150 million of additional share repurchases that are planned in the fourth quarter.
With these updates for your adjusted earnings per share is now expected to be in the range of $1.80 to $1.85.
Representing a 14 cent decrease compared to the mid point of a prior outlook range.
Of this amount 11 cents is due to lower organic sales.
Four sentences due to lower Cts gross margins, given lower volume projections and <unk> is from additional FX headwinds.
This is partially offset by a lower tax rate, which is a four cent tailwind.
With that now open the call for questions.
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Try your question. Please press star one one again.
All participants will be allowed one question and one final lap. Please standby will be compiled a Q and a roster.
Our first question comes from Elizabeth Anderson with Evercore ISI. Your line is open.
Hi, guys. Thanks, so much for that question I appreciate the updated thoughts on that.
Diamond and an outlet that that's very helpful. I was wondering if you could help US bridge like has anything changed in your sort of how you think about the operational steps that you need to take to get to that $3 and <unk> 2026 based on that sort of changing macroenvironment stinky.
Elizabeth Thanks for the question. The short answer is no I mean, a lot of progress towards a $3 is in our control is not dependent on the macro environment and so I will lay out next week at Investor day, what those specific actions are and quantification.
Obviously, a piece of is the macro environment, improving but most of the three dollar.
Ridge is things in Arkansas, and so we're continuing to move forward with all the transformation initiatives that we've previously talked about that being the restructuring program. We are on track to deliver the $200 million of annualized savings by mid 2024.
Skew optimization and rationalization work that we're doing.
The E R. P work and so all that is continuing we're on track and in our control. So nothing has changed relative to our plans.
Got it. Thank you and then you.
You mentioned that you're getting <unk> taken out can you talk about what's driving that I know you're gonna have that same increased sales focused there. There are certain products that are fascinating. If you like I can make sure and certain areas. How do you see the opportunity for kind of land and expand.
Forgotten that that'd be helpful. Thanks.
Good morning, Elizabeth So you know as you know.
We invested in a a more robust commercial footprints with Dsos last last year.
We have a team leading our relationship with them. We are we are approaching the mall with with our our broad portfolio I think one of the one of the things that.
Particularly resonates with them is our ability to.
Make workflows more efficient and to increase street treatment acceptance and that's actually came out in our in our survey results as well. So we're having a lot of traction with with D. S core with some with some dsos are very interested in that and the capability that that can begin to bring to them, but it's it's.
Like a lot of weird things here, we we need to focus we need to focus on them. They are growing segment, we will speak more to that next week at Investor Day and.
And so far so good and the engagements that we've received in return has been very positive and a big change in the past 12 months.
Alright, thanks, so much.
One moment for our next question.
Our next question comes from Kevin Caliendo with you B S. Your line is open.
Hi, guys. Thanks for thanks for taking my question.
You didn't call out any of the any impact from some of the issues at one one of the big distributors just wondering if that contributed at all in the quarter.
Yes that Kevin. Thanks for the question short answer is no. There was no impact to Q3 Uhm just a frame up the situation, though I mean, Henry Schein is our largest distributor.
We've disclose the size of the impact to our business and our 10-K, but just to give you the rough order of magnitude numbers annually, we do about $500 million of sales.
Which is about 12% of our consolidated revenues.
Over half of those are in the U S about 20 per cent in Germany. So those two markets alone represents 75 per cent of the revenues and it's mostly consumable products, so preventive and restored of products.
Henry Schein has been a great long term partner with US we've been in regular contact with them over the last several weeks, we're doing everything possible to support.
What they need as they work through their internal issue I think most importantly, or making sure customers are being supportive during this transition period and continuing to get product I would just tell you that it's difficult for us to quantify right now the potential impact to our fourth quarter results. Since we don't know how long. This situation is gonna last and whether or not the orders for our <unk>.
Products are actually going to shift.
To any other distributors in the interim so.
All that being said I would just say we factored in some level of conservatism in our guidance for the potential modest level of disruption, we may see in the fourth quarter, but no impact in the third quarter and Kevin I would just just add to that your plan has been in close contact with runs out the CFO and I'll be in touch with the <unk>.
<unk> Bergmann as well so all levels of the organization are both organizations are working together to make sure that our customers are impacted to the least extent possible.
That's super helpful guys can I, if I can ask a quick follow up.
Understanding now we've heard from two of the other publicly traded dental companies for the fourth quarter step down is pretty meaningful you have the same what are you seeing like what did you see in October is that does that what's predicating. This this sort of step down do you have the visibility going forward them on.
The macro deteriorating I'm just trying to I think we're all wondering sort of what's really happening in the marketplace that something happened at the end of September into October.
That worsened and is sort of under underwriting the guidance that we're seeing across the space.
Yeah, So Kevin I would say a couple of things number one relative to September obviously, we saw a fall off that we were not expecting.
And obviously you typically would see an uptick in September coming off the summer months, and we didn't necessarily see that to this day same extent as the previous years.
Yeah, when we look at October I've, just caveat it by saying we have not closed our books for the month of October, but when looking at our daily sales trends.
It's pretty consistent with what we've seen in September and if I exclude China from our September results, where we had an easier cop pretty.
Pretty much most of our businesses were down because of the macro environment and clearly there was a step down in September and as we look at Q for.
And how it started off pretty consistent with what we see in September so.
That's the reason why we have dropped our forecast here.
In the fourth quarter, and obviously, we spend a lotta time with customers and do a survey. So maybe somebody can comment on some of the feedback we got on our survey as well sure so Kevin.
You know.
65% or so of our business is outside the U S. So we do this global survey and we had over over a thousand respondents this quarter with more than 100 and every every job geography that that we surveyed U S. Germany, France is lead China.
And the themes are the things are common.
Patient cancellations are up.
<unk> are down in fact, 40% of those surveyed said that they did not have enough.
Appointments coming into the into the clinics.
You set the sentiments in Germany declined a small little bit the U S was flat in Australia, New Zealand was was flat as well. So it's not it's not all doom and gloom, but there are some there are some indicators that around around volumes and cancellations.
That are driving some of our thoughts here, Brazil for example is positive.
So a bit a bit of a a bit of a of a mixed bag, how 'bout again as I as I answer to the previous question the opportunities for US we feel in environments like this.
Customers are looking for more efficient workflows, they're looking for an increase in treatment acceptance.
That's why I'm, that's why our communication canvas and D. As core that can help and we're looking to do more profitable procedures. So we feel where we feel we're in it were in Ah Ah.
A good position with the technologies that we offer to.
To help customers grow their business would be more profitable even in light of the macroeconomic conditions.
Super helpful. Thank you. Thank you so much gutsy of next week.
Thanks.
One moment for our next question.
Our next question comes from Nathan Rich with Goldman Sachs. Your line is open.
Hi, This is Sarah.
Thank you so much for taking your question.
I guess, just going back to to demand pullback in macro weakness on how are you thinking about the impact.
And.
Relative performance.
34.
Yeah, So I'll take that one we're not going to give specific guidance by segment I did give some color, though in my prepared remarks. So.
And orthodontics, we're projecting to have low single digit growth or single digit growth.
Obviously, that's a slowdown from what we saw the past five quarters as a combination of the macro environment for sure a smile.
And also bite and then some likely pressures, we're going to see what the student loan repayments being put back in place and so we're being a bit more cautious in north, although we still expect to see growth.
In the fourth quarter, we expect to see very strong growth at a well expect a lot I've driven from new products, So close to 7% organic growth in the third quarter I mentioned double digit growth here in the fourth quarter. So those are our two segments that we expect to grow.
You know when we look at C. T asked for your down about 4.5% or so in the third quarter bottling, something probably a pretty consistent with that as we go into Q4.
So we're not expecting really any improvement in the overall segment there and then for eds again, we're probably projecting to be flat.
Plus or minus a point there so that just gives us some high level of color for the segments.
And then just going off Kevin.
And have you seen any changes.
Hi.
Other distributors you of our questions.
Yeah, not yet I I think it's still too early.
I think over the next couple of weeks will play out and see how the other distributors.
Purchasing may change, but right now I'm, having seen any significant impact your shift.
And our business.
Alright, <unk> next question.
Our next question comes from Jeff Johnson with Barry Your line is open.
Jeff Johnson with Bird your line is open.
If you are new please and yourself.
Please stand by for next question.
Our next question comes from Justin Lane with William Blair. Your line is open.
Hello, Justin Lane, if your line is if you're a new please I'm yourself.
Mmm.
Hi, Amy can we go to the next question. Please.
Alright, please stand by for our next question.
Our next question comes from Jason Bedner with Piper Sandler Your line is open.
Hey, Good morning can you hear me okay.
Yes can thanks, Jason.
Great. Thanks for taking my questions.
I wanted to start in China. The growth there was pretty impressive but there are obviously still the anticorruption campaign, that's been underway across that market.
Alright are there any areas, where you're feeling the effects from that can't campaign do you think that held back your growth at all and.
And any any specific category or segment, many challenges and interacting with doctors trained in education.
Alright, and I guess, along the same lines, we've seen that situation get any better has improved here has it gone August September October.
Yeah, I don't think we've seen any change from the last several months and we really haven't seen an impact on our business to date.
We were very happy with the performance in China, I mentioned, a strong year over year growth of 20% <unk>.
Implants actually grew 30% sequentially year over year almost doubled so we had a really strong and plans performance and.
We're expecting to put up some very good growth here in the fourth quarter I think one of the real positive southern China is our implants business actually on the year to date basis is now positive. So we fully offset all of the pricing erosion from VB pay.
And we're seeing really struggle I met them on the volume seifer implant. So on the hall, China's doing well I would just say we see the same pressures though.
With our Cts business in China, so areas like imaging and some of the larger high end equipment are down and and even with that we're putting up 20 per cent growth here in the third quarter. So it's not growth across the board. We are seeing some impact like we're seeing in many other markets around the higher end equipment as an example, but very happy with what we're seeing on.
Unimplanted overall performance in China.
I would just add to that you know, we've I think I spoke before but we rolled out a new code of business conduct here at dance place Rona, where we're over 90, 95%.
Compliance of that internally now in Asia Pacific, which obviously includes China has 100 per cent compliance that so.
We said when we arrived here, we would take the ethics complaints very seriously and we rolled it out and the Chinese are also required to take that take that training on our behalf as well so.
Alright very helpful. Thanks.
For my other other question in Macau up here, there's plenty of evidence out there adult orthodontics is pretty pressured right now.
We've heard from your peers same thing on this topic over the past week Uhm your economic businesses holding up relatively well, but Glenn you talked about it a little bit of a softer outlook and four Q, we think about the investments you've been making in this category to stimulate growth I'm just trying to put this all together in London.
Love to hear where do you see the marketing your business.
The adult worker down a part of the market going over the next 12 to 18 months given these elements the macro of the student loan repayment situation restarting smell direct violence filing for bankruptcy.
How do you see that part of the market right now.
So let let me jump in first thing in Glen tens of some some specifics Jason in relation to shore smarter, we just launched assure smiled simulator. So we continue to innovate in those in those in those areas as well.
That has gone very well.
Our initial rollout is suggesting that treatment acceptances up.
With respect to she was smiling because of this because of this stimulator.
And we also are in pilot with the with the bike plus program as well. So that is that has been well received by by our pilot customer. So from an innovation and engagement perspective, we're doing well or M. P. S scores are up particularly on the on the bike program in one hand, it over to Glenn to deal with some of the specifics of your question.
You know I think we we look at the intermediate and longer term. This is a very attractive market the fastest growing area in dentistry. So we still see it as a strong.
Teens growth type market for us over the long term the short term situation, we're just being very cautious given the macro environment.
Given what we're seeing with student loans and what that's gonna mean to our direct to consumer business.
And I, obviously, we look at Smiledirectclub as an opportunity. So we'll see what happens there with respect to their bankruptcy announcement and what ultimately we could get from that but.
Right now, we're being cautious going into the fourth quarter, which I think is prudent just given the macro environment and some other things that were saying, but again. This is a top focus for us in an area that we think we can grow consistently.
Consistently and the double digit range. Once you move past some of these acute pressures we're seeing in the short term.
Okay, great. Thanks, so much guys.
As a reminder to ask a question. Please press star one one on your phone.
One moment for our next question.
Our next question comes from John Black with people. Your line is open.
Thanks, guys good morning.
Is there a way to think about the headwinds that.
You experience later in the quarter you know it just seems like the exit Ray was heavily impacted or maybe call. It the velocity of what was experienced in September so where was that most acute looking just at your breakout it seemed like C. T. As what was that U S was it a mia was in both and then maybe more importantly.
Glenn what what's the assumption that you've embedded shorter for the balance of the year as we think about rounding out calendar 2023 in terms of what you're factoring into the guide and that'll just ask a quick a follow up.
Okay.
Yeah, I think two things one we definitely saw a falloff in the U S and Europe. Those are the two major markets that we saw the drop and it was really an cts imaging for sure had it'd probably the largest impact even treatment centers some of the instrument categories.
But those are the areas that we saw the falloff on the positive side CAD Cam and are milling as well as our Sarak Prime scan.
At a really strong quarter overall, including the month of September relative to the U S business. So we're very encouraged by that but yeah. Most other categories I would say we're down more acutely than we were expecting and also on the consumer side. We also did see a fall off now part of that was some of the doors reduce their inventory levels. So the retail.
Man.
Doesn't necessarily reflect the wholesale sales that we showing our results, but even with that I think consumables were a bit later as well, especially in restorative.
Okay arms of the assumptions moving forward John I would just say, we're assuming pretty much consistent trends from what we saw in September.
And that's why we reduced our forecast here in the fourth quarter.
Okay that was that was very helpful.
So we're going to obviously get more details next week on a 24, but let me just sort of noodle on something and you've got a lot of great disclosures and your and your your your releases your presentations and your <unk> I think this year going in and 23.
Minutes of price increases I think ulee's alluded to that as like a driver.
Growth if you would in the first half of 23 and now we've got a more difficult environment right with macro and so when we think about 24 is there a pricing power in the portfolio or was that lever really drawing down in 23, and when we start to frame twenty-four top why we think that might have to be a little bit more dependent on volume.
<unk> relative to price thanks, guys.
Yeah, I would say you know, we we have benefited from price thus far.
Twenty-three John at this point I would say, we need to get we need to get after our volume more than good after a price and that's what that's what we're driving with a commercial teams globally. Some segments for sure as you as you well know are are being impacted by price specifically.
Scanners.
And that's why we went to introduce crimes can connect.
About a year ago, which is which has done pretty well for us globally and we also reduce on price in certain geography's on our scanners and we.
Resonated with customers and we sold volumes and volumes pick up so we need to we need to stop relying on price and get after volume.
For our for our sales growth.
Cause our plans needed as well.
Thanks.
One moment for our next question.
Our next question comes from Jeff Johnson with Bird Your line is open.
Hey, guys, let me try a different line here can you hear me now.
Yep Alright. Thank you good morning assignment I'm trying to respect the you don't wait until the analyst day next week for for some of the comments around the L. R. P. But it sounds like you are reiterating your commitment to that three dollar number in 2026 I just wanted to make sure I'm hearing that correctly and more important.
I guess Glenn is I think about that three dollar number you know that you'll get you can put out at the beginning of this year, obviously the U S. Dollar has been much stronger this year. We've now got some and market concerns that have flared up for sure. We've got inflation that looks like it's stained more persistent and and probably higher than would've been contemplated at least a year ago. So I guess my.
Point is or my question is have you tried to quantify how much incremental headwind just from factors outside of your control that have happened since you put that three dollar number out and Simon I would assume you're not gonna have been cut back R&D or go to market commercialization spending or anything so how do you kind of bridge that incremental.
Headwind that has come up here across all those issues I in the past year. Thanks.
So so good morning, Jeff Firstly, we will be reaffirming our our three daughters in 2006.
Investor Day next week.
Then we'll walk through the bridge from where we are to the to the three daughters. During during his session.
Next week for sure we do not intend.
To reduce how we go to market or how we innovate.
We simply need to be more judicious with where we innovate in.
What we innovate and and how we spend our SG&A daughters. So that we can get afterwards and my response to Johns question, a moment ago, we can get after volume.
With our sales force in all our geography, so commercial and and R&D are sacred to US we just have to spend our money more wisely in those areas.
Yeah fair enough.
Jeff Jeff.
Sorry, I was just going to comment on your other part of your question. So you know relative to the headwinds and impact two or $3 keep in mind, when we laid out to $3 target or guidance for this year was $1.80 to $2. So we're still within that guidance range, even though we've had a recent reductions. So we had just started off of your stronger and obviously, we're dealing with some.
Headwinds at the moment, but when we laid that out where at $1.80 $2 and we're pretty much in that range. So that's why we're still confident that we can get to the $3 I will discuss more next week the path to get there.
But the probably the most important messages and take away his <unk>.
Most of the path to get the $3 is in our control and things that we've already completed or in process.
And so probably two thirds of the way there is all within our control and not dependent on the macro environment. So I'll give more specifics next week, but I think that's the key point and why we're still confident we can get to the $3, obviously, if the macro environment <unk>.
<unk> is prolonged for.
A long period of time, it will be much more challenging to get there, but our view is that this is more of a short term acute situation on the macro environment.
Alright, that's helpful. And then I guess cause my follow up questions just under dental implant business I think Simon over the last month or two referred you kind of maybe you know.
Soften your view on and win a turnaround, especially in that U S. Implant business you might expect to see I know you've been putting more sales reps out there you've been putting more clinical education and other commercialization effort behind that business, but talking about maybe that getting back to market a coupla years from now instead of more in the near term does.
Does that just take more spending there is it a pricing issue do you need to increase.
B, a reliance on a lower price product like M. I S. Notwithstanding I guess, the Israel issues right now but.
How how do you how do you look at that implant business. The strategy there over the next year or two and trying to get that back to market. Thanks.
Just so <unk>.
<unk>, it's a it's a very interesting very interesting business nice growth good margins and we have not performed historically in this in this space. We spoke before I think on the queue to call about.
About the the portfolio survey work that we were doing and we completed that in in Q3 with over 2000 respondents and I would say overwhelmingly and I don't use that word lately, but an overwhelming favorability respect to are offering across.
All categories, including implants.
I think the band as a lot tighter and <unk>.
It is in other areas.
But our customers over two thousands of them have said that we have a robust portfolio and implants.
But where.
Where we have work to do is around the capabilities of our commercial teams and the investments that we made in clinical education over the past number of years. So let me deal with the second the second piece first we have invested.
Heavily in rebuilding relationships through our clinical education programs. This year, we had a world implants symposium.
In.
Earlier earlier this year with over 400, 450, sorry, Athens, Greece earlier this year with over 450 people attending we just had a near the group of Polish.
Conditions in more so Warsaw attend and implants session Ah, we continued to reinvest in rebuilding.
Relationship with Implantologist through education, and then on the on the sales force capability clinical capability side of things you know the turnover that we've experienced in our implant salesforce over the past number of years.
Has has whittled the capability of that group down.
And I think it's.
Around 50 per cent of about 12 months of tenure, including the the new people that we brought on we are training them heavily we had a a seconds or thirds training with those that team and and May and I think it's beginning to resonate the the challenge has been.
Is that the accounts that we've lost their volume is pretty significant and as we bring on new accounts. It is not enough right now to offset those those volume losses. However, we just had a a complete business review, where we went through every sales manager in the U S and there are a lot of green shoots and to.
Terms of engagement with not only the implantologist, but also their referral network as well so for sure it's taking longer than than we would have hoped but we are investing in the capability of our team we're investing in rebuilding relationships with our with our customers and their network and we're investing in customer education, which are we.
The main thing that came out from from our survey.
Thank you.
And I'm showing no further questions at this time I would now like to turn the conference back to Simon campaign for closing comments.
Thank you everyone for your attendance on on today's call I would like to reiterate some key points before before we close firstly, we remain intensely focused on driving value.
For all stakeholders through innovation and execution.
Secondly, while the macro environment is uncertain, we see bright spots in the business and maintain our confidence and improving execution, which we believe will position is better to navigate external challenges.
And thirdly, we look forward to hosting our first Investor Day next week and I encourage you all to join US as we share details about our strategy and long term plans.
We will continue to prudently act in the best interests of the company and our stakeholders, including our investors patients customers and employees.
And finally on behalf of the management team and I want to thank all dance place her own employees for their dedication to the business and the necessary transformation work that is underway and we especially want to express our thanks to employees, who have the power to the organization in the last quarter and wished them all well into the next phase of their careers.
This concludes today's conference call. Thank you for participating you may now disconnect.
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