Q1 2024 Dentsply Sirona Inc Earnings Call
Operator: Good day, everyone, and thank you for standing by. Welcome to the Dentsply Sirona first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your telephone. You will then hear a message advising you to hold your hand this way. To withdraw your questions, simply press star 11 again.
Good day, everyone and thank you for standing by welcome to the den supplies to run our first quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that session you will need to press.
Star one one on your telephone you will see and hear a message of dicing your hand this race.
To withdraw your question simply press Star one again.
Operator: We ask that you please keep your questions to one and one follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President of Investor Relations, Andrea Daley. Please proceed.
We ask that you. Please keep your questions to one and one follow up please be advised that today's conference is being recorded.
Speaker Change: I would like to hand, it conference over to the Vice President of Investor Relations and to a daily. Please proceed.
Andrea Daley: Thank you, operator. And good morning, everyone.
Speaker Change: Thank you operator, and good morning, everyone welcome to the den Spicer on our first quarter 'twenty 'twenty four earnings call. Joining me for today's call is Simon Campion, Chief Executive Officer, Glenn Coleman, Chief Financial Officer, and Andreas Frank Chief Business Officer.
Speaker Change: I'd like to remind you that an earnings press release and slide presentation related to the call are available in the investors section of our website at www dot dense by Sirona Dot com.
Andrea Daley: Welcome to the Dentsply Sirona first quarter 2024 earnings call. Joining me for today's call is Simon Campion, Chief Executive Officer, Glenn Coleman, Chief Financial Officer, and Andreas Frank, Chief Business Officer. I'd like to remind you that an earnings press release and slide presentation related to the call are available in the investor 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.
Speaker Change: 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 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 our most.
Andrea Daley: 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 uncertainty.
Andrea Daley: Our most recently filed Form 10-K and any updated information in subsequent SEC filings list some of the most important risk factors that could cause actual results to differ from our prediction. Additionally, 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's 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.
Speaker Change: Recently filed Form 10-K, and any updating information and subsequent SEC filings list. Some of the most important risk factors that could cause actual results to differ from our predictions.
Speaker Change: Additionally, 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 is financial performance enable the comparison of financial results between periods, where certain items may vary independently of business.
Speaker Change: 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.
Andrea Daley: 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 investor section of the company's website following the call. And with that, I will now turn the call over to Simon.
Speaker Change: Comparisons provided are to prior year quarter, unless otherwise noted.
Speaker Change: Webcast replay of today's call will be available on the investors section of the company's website following the call.
Speaker Change: And with that I will now turn the call over to Simon.
Simon Campion: Thank you, Andrea, and thank you all for being here with us this morning for our Q1-2024 earnings call. Today, I'll begin, as usual, by providing a summary of our recent performance. Glenn will cover Q1 financial results and the full-year outlook, and I will finish by providing an update on our strategic operating plan. Now, starting on slide three.
Simon Campion: Thank you Andrea and thank you all for being here with US. This morning for our Q1 2024 earnings call.
Simon Campion: Today I'll begin as usual by providing a summary of our recent performance Glen.
Simon Campion: Glenn will cover Q1 financial results and the full year outlook.
Simon Campion: And I will finish by providing an update on our strategic operating plan.
Glenn G. Coleman: I'm starting on slide three.
Simon Campion: In Q1, organic sales declined by 1.9%, driven by lower sales in connected technology solutions and essential dental solutions, partly offset by growth in orthodontic and implant solutions and well-specced healthcare. Within CTS, imaging equipment experienced larger than expected headwinds driven by continued unfavorable macroeconomic conditions and competitive pressure. Regionally, the macroeconomic environment in Germany remained challenging.
Glenn G. Coleman: In Q1 organic sales declined by one 9% driven by lower sales and connected technology solutions and the central dental solutions, partly offset by growth in orthodontic on implant solutions and well expect to health care.
Glenn G. Coleman: Within Cts imaging equipment experienced larger than expected headwinds driven by continued unfavorable macroeconomic conditions and competitive pressure.
Glenn G. Coleman: Regionally the macroeconomic environment in Germany remains challenging for.
Simon Campion: For the quarter, organic sales were roughly flat, excluding Germany. In April, we conducted our quarterly global customer survey covering 12 countries with nearly 1,500 respondents. Survey results indicate that in the US, patient volumes are stable, and dentist sentiment is relatively unchanged. In Canada, a new government health policy designed to help lower and middle-income families is rolling out in the first half of 2024, which we believe has resulted in patients delaying treatments until this benefit is in effect.
Glenn G. Coleman: For the quarter organic sales were roughly flat excluding Germany.
Glenn G. Coleman: In April we conducted our quarterly.
Glenn G. Coleman: Global customer survey covering 12 countries with nearly 1500 respondents.
Glenn G. Coleman: Survey results indicate that in the U S patient volumes are stable and dentist sentiment is relatively unchanged.
Glenn G. Coleman: In Canada, our new government health policy designed to help lower and middle income families is rolling out in the first half of 2024, which we believe has resulted in patients delaying treatments until this benefit is in effect.
Simon Campion: In Germany, we were pleased to see procedure utilization and dentists' outlook improve slightly. All other European markets included in the survey remain relatively stable. In Asia-Pacific, dentists in Australia continue to exhibit more negative sentiments.
Glenn G. Coleman: In Germany, we were pleased to see procedure utilization and dentists outlook improved slightly.
Glenn G. Coleman: All other European markets included in the survey remained relatively stable.
Glenn G. Coleman: In Asia Pacific Dentist in Australia continued to exhibit more negative sentiment.
Simon Campion: We saw mixed feedback in Japan. While there was a decline in patient volumes, dentists were positive about the imminent change in reimbursement for intraoral scans. Finally, in China, Asian volumes are stable but remain low compared to other markets.
Glenn G. Coleman: We saw mixed feedback in Japan.
Glenn G. Coleman: There was a decline in patient volumes dentists were positive around the imminent change in reimbursement for intra oral scan.
Glenn G. Coleman: Finally in China patient volumes are stable, but remained low compared to other markets.
Simon Campion: As we execute on our strategic objectives, it remains crucial that we consistently seek input from customers to inform our decisions so that we can validate that we are on the right path. We appreciate so many taking the time, quarter after quarter, to provide us with this substantial and valuable input. Our first quarter adjusted EPS was $0.42, which was an increase of nearly 8% and was in line with our expectations, despite softer sales.
Glenn G. Coleman: As we execute on our strategic objectives. It remains crucial that we consistently seek input from customers to inform our decisions. So that we can validate that we are on the right path.
Glenn G. Coleman: We appreciate so many taking the time quarter after quarter to provide us with this substantial and the valuable input.
Glenn G. Coleman: Our first quarter adjusted EPS was <unk> 42.
Glenn G. Coleman: Which was an increase of nearly 8% and in line with our expectations Despite softer sales.
Simon Campion: For the full year, we are maintaining our outlook range for organic sales and adjusted EPS but trending towards the low end of both ranges. We're taking a cautious stance here with the macro uncertainties that continue to impact parts of our business, most notably imaging. We're also adjusting net sales for an additional FX head.
Glenn G. Coleman: For the full year, we are maintaining our outlook range for organic sales and adjusted EPS, but trending towards the low end of both ranges.
Glenn G. Coleman: We're taking a cautious stance here with the macro uncertainties that continue to impact parts of our business, most notably imaging.
Glenn G. Coleman: We're also adjusting net sales for an additional FX headwind.
Simon Campion: Though we believe these headwinds are transient, we are actively taking additional measures, such as tightening cost controls, to better position us to deliver on our profitability and EPS targets for the year. We remain confident in our long-term trajectory. We have a comprehensive portfolio and are making progress on our strategic objectives. In fact, today, we announced that we plan to execute up to $150 million in share repurchases in the second quarter.
Glenn G. Coleman: Although we believe these headwinds are transient we are actively taking additional measures such as tightening cost controls to better position us to deliver on our profitability and EPS targets for the year.
Glenn G. Coleman: We remain confident in our long term trajectory.
Glenn G. Coleman: We have a comprehensive portfolio and are making progress on our strategic objectives.
Glenn G. Coleman: In fact today, we announced that we plan to execute up to $150 million in share repurchases in the second quarter.
Simon Campion: Moving to slide four, I would like to share some select business highlights. We are advancing innovation and progressing initiatives across our business. DS Core remains a key focus of our innovation. We are delivering enhancements and seeing a strong uptick in adoption rates from new users and increased utilization rates from existing users. We are also piloting the DS Core Enterprise with a large DSO in the U.S. Given the shared experience to date, we are jointly exploring increasing the scope and size of this pilot. I've already shared the dynamics impacting our imaging business.
Glenn G. Coleman: Moving to slide four I would like to share some select business highlights.
Glenn G. Coleman: We are advancing innovation and progressing initiatives across our business.
Glenn G. Coleman: DS core remains a key focus of our innovation.
Glenn G. Coleman: We are delivering enhancements and seeing strong uptick in adoption rates from new users and increase utilization rates from existing users.
Glenn G. Coleman: We also have pilot that DS core enterprise with a large DSO in the U S.
Glenn G. Coleman: The shared experience to date, we are jointly exploring increasing the scope and size of this pilot.
Glenn G. Coleman: I've already shared the dynamics impacting our imaging business.
Simon Campion: To better position our portfolio, we expanded our offerings through the relaunch of Orthophos SL, a 2D and 3D imaging line in Europe. Bringing this product line back to market broadens our imaging portfolio and provides flexibility to our customers with more options at different price points. Therefore, we believe bringing this solution back to our customers will improve performance in imaging. Additionally, in CTS, we recently launched Axana Pure, a new treatment center with advanced features at an improved price point, and Midwest Energo, a portfolio of electric handpieces.
Glenn G. Coleman: To better position our portfolio, we expanded our offerings through the relaunch of ortho <unk> S. L. A to D and three D imaging line in Europe.
Glenn G. Coleman: Bringing this product line back to market broadens, our imaging portfolio and provides flexibility to our customers with more options at different price points.
Glenn G. Coleman: Therefore, we believe bringing this solution back to our customers will improve performance in imaging.
Glenn G. Coleman: Additionally, in Cts, we recently launched Exxon a pure a new treatment center with advanced features and improved price points and Midwest <unk> a portfolio of electric hand pieces.
Simon Campion: These innovations bring new efficiencies and enhanced capabilities to our customers, a continued key demand from customers captured in our quarterly survey. In EDS, we continue to roll out ExSmart ProPlus in additional markets, which included Japan in Q1. Xmart Pro Plus is an endomotor solution that enables dentists to focus more on the procedure rather than the tool. Our data shows that the motor optimizes the performance of Dentsply Sirona's endodontic filing system and has differentiated attributes that set it apart from its competition.
Glenn G. Coleman: These innovations bring new efficiencies and enhanced capabilities to our customers a continued key demand from customers captured in our quarterly survey.
Glenn G. Coleman: In <unk>, we continue to rollout X smart pro plus an additional markets, which included Japan in Q1.
Glenn G. Coleman: <unk> Pro plus is an endo motor solution that enables dentists to focus more on the procedure rather than the tools.
Glenn G. Coleman: Our data shows that the motor Optimizes the performance of Dennis Spicer owners Endodontics filing systems and has differentiated attributes that sets. It apart from its competition and we are pleased with the uptake of this technology, thus far in Europe and in Japan.
Glenn G. Coleman: And we are pleased with the uptake of this technology thus far in Europe and in Japan. We also remain committed to advancing sustainability. We are a mission-driven organization focused on improving health and access to care, and we are proud to partner with organizations such as the International Association for Disability and Oral Health, which promote equitable access to high-quality oral health care for patients with disabilities. This partnership builds upon the work we have already done in this area with the University of Pennsylvania to provide equipment for their Care Center for Persons with Disabilities, which serves several thousand patients each year.
Glenn G. Coleman: We also remain committed to advancing sustainability.
Glenn G. Coleman: We are a mission driven organization focused on improving health and access to care and we are proud to partner with organizations such as the International Association for disability and oral health, who promote equitable access to high quality oral health care for patients with disabilities.
Glenn G. Coleman: This partnership builds upon the work we have already done in this area with the University of Pennsylvania to provide equipment for their care center for persons with disabilities, which serves several thousand patients each year.
Glenn G. Coleman: Lastly, our Wellspec Healthcare business achieved a new milestone with the validation of its emission reduction targets by the Science-Based Targets Initiative. We believe Well-Expect Healthcare has long-standing leadership and expertise in sustainability that can benefit our entire company. And with that, I will hand the call over to Glenn for a more detailed financial update.
Glenn G. Coleman: Lastly, our well Specced health care business achieved a new milestone with the validation of its emission reduction targets by the science based targets initiative.
Glenn G. Coleman: We believe well expect healthcare has long standing leadership and expertise in sustainability that can benefit our entire company.
Glenn G. Coleman: With that I will hand, the call over to Glenn for a more detailed financial update.
Glenn G. Coleman: Thanks, Simon. Good morning, and thank you all for joining us. Today, I'll provide more detail on our first quarter results and an update on our full year 2024 outlook. Let's begin with slide five. Our first quarter revenue was $953 million, representing a decline of 2.6% over the prior year quarter. On an organic basis, sales declined 1.9%. Foreign currency negatively impacted sales by approximately $7 million or 70 basis points. On a constant currency basis, sales highlights in the quarter included approximately 53% growth in China, 14% growth in our Global Aligners business, 9% growth in CAD CAM, and 5% growth in WellSpec Healthcare.
Glenn G. Coleman: Thanks, Tom and good morning, and thank you all for joining us.
Glenn G. Coleman: Today I'll provide more detail on our first quarter results and an update on our full year 2020 for outlook.
Glenn G. Coleman: These improvements are offset by declines in imaging equipment, where we continue to experience the effects of market conditions and increased competition. In addition, our Essential Dental Solutions segment had year-over-year declines, largely due to a tougher comp.
Glenn G. Coleman: Let's begin on slide five.
Glenn G. Coleman: Despite lower sales, even the margins expanded 30 basis points due to restructuring savings and net investment hedges. Gross margin was flat year over year but improved 140 basis points on a sequential basis. Adjusted EPS in the quarter was $0.42, up 8% from the prior year, largely due to higher EBITDA margins, a lower share count, and a lower effective tax rate. In the first quarter, we generated $25 million of operating cash flow, compared to an outflow of $21 million in the prior year quarter. The year-over-year improvement is attributed to improved cash collections and a lower build of inventory. We continue to maintain a strong balance sheet with cash and cash equivalents of $291 million on March 31st.
Glenn G. Coleman: Our first quarter revenue was $953 million, representing a decline of two 6% over the prior year quarter.
Glenn G. Coleman: On an organic basis sales declined one 9%.
Glenn G. Coleman: As foreign currency negatively impacted sales by approximately $7 million or 70 basis points.
Glenn G. Coleman: On a constant currency basis.
Glenn G. Coleman: Highlights in the quarter included approximately 53% growth in China.
Glenn G. Coleman: 14% growth in our global liners business, 9% growth in CAD, Cam and 5% growth and we all expect healthcare.
Glenn G. Coleman: These improvements were offset by declines in imaging equipment.
Glenn G. Coleman: We continued to experience the effects of market conditions and increased competition.
Glenn G. Coleman: In addition, our essential dental solutions segment had year over year declines largely due to a tougher comp.
Glenn G. Coleman: Despite lower sales EBIT margins expanded 30 basis points due to restructuring savings and net investment hedges.
Glenn G. Coleman: Gross margin was flat year over year, but improved 140 basis points on a sequential basis.
Glenn G. Coleman: Adjusted EPS in the quarter was 42 cents up 8% from prior year.
Glenn G. Coleman: Largely due to higher EBIT margins, a lower share count and a lower effective tax rate.
Glenn G. Coleman: In the first quarter, we generated $25 million of operating cash flow compared to an outflow of $21 million in the prior year quarter.
Glenn G. Coleman: The year over year improvement is attributed to improved cash collections and a lower build of inventory.
Glenn G. Coleman: We continue to maintain a strong balance sheet with cash and cash equivalents of $291 million on March 31.
Glenn G. Coleman: Our Q1 leverage ratio is 2.6 times, slightly higher than a long-term targeted rate of two and a half times. We expect leverage to increase marginally in the second quarter with a plan to end the year at approximately two and a half times. These projected leverage ratios reflect the share repurchases that Simon noted earlier.
Glenn G. Coleman: Our Q1 leverage ratio was two six times.
Glenn G. Coleman: Slightly higher than our long term target rate of two five times.
Glenn G. Coleman: We expect leverage to increase marginally in the second quarter with a plan to end the year at approximately two five times.
Glenn G. Coleman: These projected leverage ratios reflect the share repurchases that Simon noted earlier.
Glenn G. Coleman: Let's now turn to first quarter segment performance on slide six. Starting with the Essential Dental Solutions segment, which includes Endo, Resto, and Preventive, organic sales declined 5.5% through the tough year-over-year comp. As a reminder, EDS organic sales grew 11.5% in the first quarter of 2023, which benefited from a strong rebound in patient traffic and pre-buying ahead of price increases. Shifting to the orthodontic and implant solution segment, organic sales grew 5.6%, with strong growth from aligners up 14%.
Glenn G. Coleman: Let's now turn to first quarter segment performance on slide six.
Glenn G. Coleman: Starting with the essential data solutions segment, which includes endo resto preventative products.
Glenn G. Coleman: <unk> sales declined five 5%.
Glenn G. Coleman: Due to a tough year over year comp.
Glenn G. Coleman: As a reminder, EES organic sales grew 11, 5% in the first quarter of 2023.
Glenn G. Coleman: Which benefited from a strong rebound in patient traffic and pre buying ahead of price increases.
Glenn G. Coleman: Shifting to the orthodontic and implant solutions segment organic sales grew five 6%.
Glenn G. Coleman: With strong growth from our liners up 14%.
Glenn G. Coleman: SureSmile, our professional aligner brand, grew 9% and continues to benefit from market share gains, new product offerings, and differentiated outcomes. We're expanding further in certain international markets, including Japan and Brazil, which we believe will lead to continued momentum and a sure smile. Byte, our direct-to-consumer aligner brand, grew 18% over the prior year quarter.
Glenn G. Coleman: Sure Smile or professional Aligner brand grew 9% and continues to benefit from market share gains new product offerings and differentiated outcomes.
Glenn G. Coleman: We're expanding further in certain international markets, including Japan and Brazil.
Glenn G. Coleman: We believe will lead to continued momentum ensure smile.
Glenn G. Coleman: Our direct to consumer Aligner brands grew 18% over the prior year quarter.
Glenn G. Coleman: Light growth accelerated through the period as the increase in customer interest and impression kit orders that we discussed on our last earnings call began to align with our cases. Implants and prosthetics grew low single digits in the quarter, highlighted by growth in China due to VBP, and partially offset by declines in the U.S. and Europe. Our Value Implant segment delivered double-digit growth, and on the premium side, the new EV family of implants and prosthetic solutions grew double digits, outpacing the declines we've seen in legacy brands. Wrapping up our Dental Performance segment, CTS is our Connected Technology Solutions segment.
Glenn G. Coleman: <unk> growth accelerated through the period as the increase in customer interest an impression kit orders that we discussed on our last earnings call began to convert to align our cases.
Glenn G. Coleman: Implant prosthetics grew low single digits in the quarter.
Glenn G. Coleman: By growth in China, due to the <unk> and.
Glenn G. Coleman: And partially offset by declines in the U S and Europe.
Glenn G. Coleman: Our value implant segment delivered double digit growth and on the premium side, the new EV family of implant and prosthetic solutions grew double digits outpace.
Glenn G. Coleman: Outpacing the declines we've seen in legacy brands.
Glenn G. Coleman: Wrapping up our dental performance Cts are connected technology solutions segment.
Glenn G. Coleman: So organic sales declined 5.7% versus the prior year quarter and were below our expectations, largely due to double-digit declines in imaging equipment. Our global CAD CAM business was a bright spot and grew in high single digits driven by increased demand in the U.S. Moving to well-specced healthcare, organic sales grew about 5%, sales growth across all regions as we continue to benefit from new products launched in the last 12 months. We expect WellSpec to grow faster in the second quarter with high single-digit growth over the prior year.
Glenn G. Coleman: So organic sales declined five 7% versus the prior year quarter and was below our expectations largely due to double digit declines in imaging equipment.
Glenn G. Coleman: Our global CAD Cam business was a bright spot and grew high single digits driven by increased demand in the U S.
Glenn G. Coleman: Moving to well expect health care organic sales grew about 5%.
Glenn G. Coleman: The sales growth across all regions as we continue to benefit from new products launched in the last 12 months.
Glenn G. Coleman: We expect well expect to grow faster in the second quarter with high single digit growth over the prior year.
Glenn G. Coleman: Now let's turn to slide 7 to discuss first quarter financial performance by region. U.S. organic sales grew 1.4 percent. Due to strong growth in aligners and CAD-CAM, although partially offset by lower sales of imaging equipment, as well as a tougher comp in EDS. U.S. CAD CAM had a strong quarter with double-digit growth in intra-oil scanners, mills, and 3D printers at both the wholesale and retail level.
Glenn G. Coleman: Now, let's turn to slide seven to discuss first quarter financial performance by region.
Glenn G. Coleman: U S organic sales grew one 4%.
Glenn G. Coleman: Due to strong growth in our liners and Cadcam.
Glenn G. Coleman: Partially offset by lower sales of imaging equipment as well as a tougher comp in Etfs.
Glenn G. Coleman: U S. CAD Cam had a strong quarter with double digit growth in intra oral scanners mills and three D printers.
Glenn G. Coleman: At both the wholesale and retail level.
Glenn G. Coleman: Distributed inventory levels increased sequentially by approximately $9 million, consistent with normal seasonality. We expect U.S. CAD CAM distributor inventory levels to fluctuate quarter to quarter and be roughly flat by the end of the year compared to current levels. Returning to Europe, organic sales declined 5.8% primarily due to lower essential dental solutions and equipment and instruments volume across the region. However, this decline was partially offset by SureSmile, which grew over 20% in the region, highlighted by higher demand in Spain, France, and Italy. Germany, our largest market in the region, was down double digits versus the prior year quarter. We continue to see prolonged recessionary trends in Germany, largely affecting our equipment business. Excluding Germany, European organic sales declined 1.9%.
Glenn G. Coleman: Distributor inventory levels increased sequentially by approximately $9 million.
Glenn G. Coleman: Sister with normal seasonality.
Glenn G. Coleman: We expect U S CAD cam distributor inventory levels to fluctuate quarter to quarter.
Glenn G. Coleman: And be roughly flat by the end of the year compared to current levels.
Glenn G. Coleman: Turning to Europe organic sales declined five 8%, primarily due to lower essential dental solutions and equipment and instruments volume across the region.
Glenn G. Coleman: This decline was partially offset by share smile, which grew over 20% in the region.
Glenn G. Coleman: Alright, it by higher demand in Spain, France, and Italy.
Glenn G. Coleman: Germany, our largest market in the region was down double digits versus the prior year quarter.
Glenn G. Coleman: We continue to see prolonged recessionary trends in Germany.
Glenn G. Coleman: Largely affecting our equipment business.
Glenn G. Coleman: Excluding Germany, Europe organic sales declined one 9%.
Glenn G. Coleman: Rest of World Organic Sales were approximately flat in the quarter, and significant implant growth in China was offset by some demand for equipment in Japan and Canada. With that, let's move to slide 8 to discuss our updated outlook for 2024. We're lowering our reported sales range by $50 million to reflect the additional FX headwind. Due to the recent strengthening of the dollar versus the euro and other major currencies, at the current FX rates, we now expect reported sales to be within the range of $3.91 billion to $3.97 billion.
Glenn G. Coleman: Rest of World organic sales were approximately flat in the quarter.
Glenn G. Coleman: A significant implants growth in China was offset by softer demand for equipment in Japan and Canada.
Glenn G. Coleman: With that let's move to slide eight to discuss our updated outlook for 2024.
Glenn G. Coleman: We're lowering our reported sales range by $50 million to reflect the additional FX headwinds.
Glenn G. Coleman: The recent strengthening of the dollar versus the euro and other major currencies.
Glenn G. Coleman: At current FX rates, we now expect reported sales to be within the range of $3 91 billion to $3 $97 billion.
Glenn G. Coleman: We are maintaining our outlook range for organic sales, which is for flat to one and a half percent growth, but trending to the low end of that range based on our first quarter results and the current macro environment, largely impacting our imaging business. Our current outlook assumes stronger organic sales growth in the second half of the year, primarily driven by double-digit growth in aligners, strong CAD-CAM demand, and improvements in EDS and US implants.
Glenn G. Coleman: We are maintaining our outlook range for organic sales, which is for flat to one 5% growth.
Glenn G. Coleman: Lending to the low end of that range based on our first quarter results and the current macro environment.
Glenn G. Coleman: Largely impacting our imaging business.
Glenn G. Coleman: Our current outlook assumes stronger organic sales growth in the second half of the year, primarily driven by double digit growth in our liners strong CAD cam demand and improvements in Etfs and U S implants.
Glenn G. Coleman: Moving to profitability, our outlook for adjusted EBITDA margin of greater than 18% remains unchanged from our prior guidance, while adjusted EPS is trending towards the low end of the outlook range of $2 to $2.10 due to the lower sales expectation. Consistent with the trends we saw in the first quarter, we expect that second quarter organic sales will decline by low single digits versus the prior year period. We also expect about a $20 million headwind from foreign currency.
Glenn G. Coleman: Moving to profitability our outlook for adjusted EBIT margin of greater than 18% remains unchanged from our prior guidance.
Glenn G. Coleman: Adjusted EPS is trending towards the low end of the outlook range of $2 to $2 10.
Glenn G. Coleman: Due to the lower sales expectations.
Glenn G. Coleman: Consistent with the trends we saw in the first quarter, we expect that second quarter gas sales will decline low single digits versus the prior year period.
Glenn G. Coleman: We also expect about a $20 million headwind from foreign currency.
Glenn G. Coleman: Sequentially, reported sales are expected to increase in the second quarter based on normal seasonality. We anticipate second quarter adjusted EPS will be down slightly year-over-year, primarily due to a higher tax rate, partially offset by a slight improvement in adjusted EBITDA margins. With that, I'll now turn the call back over to Simon.
Glenn G. Coleman: Sequentially reported sales are expected to increase in the second quarter based on normal seasonality.
Glenn G. Coleman: We anticipate second quarter, adjusted EPS will be down slightly year over year.
Glenn G. Coleman: Primarily due to a higher tax rate.
Glenn G. Coleman: Partially offset by a slight improvement in adjusted EBITDA margin.
Glenn G. Coleman: With that I'll now turn the call back over to Simon.
Simon Campion: Thank you Glenn.
Simon Campion: Moving on to our strategic update on slide nine. On our last earnings call, I shared the progress we plan to make in 2024 on our foundational initiatives, including supply chain transformation and SKU optimization. We expect these programs to contribute meaningfully to enhancing and sustaining profitability over the long term.
Simon Campion: Moving onto a strategic update on slide nine.
Simon Campion: On our last earnings call I shared the progress we plan to make in 2024 on our foundational initiatives.
Simon Campion: Including supply chain transformation and SKU optimization.
Simon Campion: We expect these programs to contribute meaningfully to enhancing and sustaining profitability over the long term.
Simon Campion: We are actively executing each initiative with financial benefits expected to begin in the second half of 2024. We expect that accelerating enterprise digitalization will enable both our customers and our organization to benefit from digitalizing and harmonizing workflows. I already share the uptick in DS core adoption rates, which includes both dental practices and labs, and which we believe reflects the value it can bring.
Simon Campion: We are actively executing each initiative with financial benefits expected to begin in the second half of 2024.
Simon Campion: We expect that accelerating enterprise digitalization will enable both our customers and our organization to benefit from Digitalized and harmonizing workflows.
Simon Campion: I already shared the uptick in <unk> core adoption rates, which includes both dental practices and labs, and which we believe reflects the value it can bring.
Simon Campion: The new products in our pipeline with expanded connectivity will further enhance the value of embedding DSCore in digital workflows. We've heard firsthand that customers appreciate the workflow efficiencies that we envisioned with this unique, differentiated, and unifying platform. We expect our ERP modernization to also play a part in accelerating enterprise digitalization. It is more than a system rollout.
Simon Campion: The new products in our pipeline with expanded connectivity will further enhance the value of embedding <unk> core in digital workflows.
Simon Campion: We've heard firsthand that customers appreciate the workflow efficiencies that we envisioned with this unique differentiated and unifying platform.
Simon Campion: We expect our ERP modernization to also play a part in accelerating enterprise digitalization.
Simon Campion: It is a true business transformation. Through our phased approach, we plan to transition each country to a single commercial entity, enabling consistent business processes and implementing a range of enhancements to simplify how we conduct business with our customers, improve our operations, and accelerate our innovation. We are currently piloting this rollout in several locations, with phased deployments expected to start mid-year.
Simon Campion: It is more than a system rollout and is a true business transformation.
Simon Campion: Through our phased approach we plan to transition each country to a single commercial entity, enabling consistent business processes and implementing a range of enhancements to simplify how we conduct business with our customers improve our operations and accelerate our innovation.
Simon Campion: We are currently piloting this rollout in several locations with phased deployments expected to start mid year.
Simon Campion: Lastly, on enterprise digitalization, we are also advancing our data and AI strategy. We are leveraging the expertise of a leading cloud service provider that supports our digital platform. We expect this important work will improve our customer experience and increase efficiency as we implement our new ERP and bring more functionality to DS-Core. Next, let's discuss our progress on our objective to win in high growth categories such as ortho, implants, and continence care.
Simon Campion: Lastly on enterprise Digitalization, we are also advancing our data and AI strategy.
Simon Campion: We are leveraging the expertise of a leading cloud service provider that supports our digital platforms. We.
Simon Campion: We expect this important work will improve our customer experience and increase efficiency as we implement our new ERP and bring more functionality to <unk> core.
Simon Campion: Next let's cover our progress on our objective to win in high growth categories, such as ortho implants and continents care.
Simon Campion: And also, we have invested in Sure Smile Reps in Japan and frontline support for Bites. We are already seeing growth in BITE, with sales increasing nearly 18% in Q1, and we expect more than 20% growth for the full year. BytePlus, our hybrid solution with in-office scanning and connectivity, also continues to expand and has now moved from pilot phase into commercial launch. Feedback has been positive, and the business is exceeding its KPIs on this initiative as we continue to ramp up the model. SureSmile remains on track to launch in Brazil in the second quarter.
Simon Campion: And also we have invested ensure small reps in Japan and frontline support for Baidu.
Simon Campion: We are already seeing the growth in bike with sales increasing nearly 18% in Q1, and we expect more than 20% growth for the full year.
Simon Campion: Bite plus our hybrid solution within office scanning and connectivity also continues to expand and has now moved from pilot phase into commercial launch.
Simon Campion: Feedback has been positive and the business is exceeding its kpis on this initiative as we continue to ramp the model.
Simon Campion: <unk> remains on track to launch in Brazil in the second quarter.
Simon Campion: We believe this is an important market to further drive geographic expansion in this business. In the U.S., we have invested in our implants business, expanding the team and enabling them with tools, training, and growth-oriented compensation plans. Implants in China have been a bright spot for our business with the first year of VBP exceeding our expectations. While we expect the program to continue to result in increased volume, we anticipate growth rates in China will moderate for the remainder of the year given the tougher climate.
Simon Campion: We believe this is an important market to further drive geographic expansion in this business.
Simon Campion: In the U S. We have invested in our implant business, expanding the team and enabling them with tools training and growth oriented compensation plans.
Simon Campion: Implants in China has been a bright spot for our business with the first year of GBP exceeding our expectations.
Simon Campion: While we expect the program to continue to result in increased volume, we anticipate growth rates in China will moderate for the remainder of the year given the tougher comps.
Simon Campion: We are also investing in capacity expansion for our well-specced healthcare business to support the growth and vision from new product launches. The business delivered mid-single-digit growth in Q1, and with its innovation pipeline, we expect the momentum to continue through the remainder of the year and beyond. Lastly, supporting our ability to drive a high-performance culture, we started this year off with well-defined strategic and operational goals. We set clear 2024 KPIs across the company to monitor progress and drive performance.
Simon Campion: We are also investing in capacity expansion for a well specced healthcare business to support the growth envisioned from new product launches.
Simon Campion: The business delivered mid single digit growth in Q1 and with its innovation pipeline, we expect the momentum to continue through the remainder of the year and beyond.
Simon Campion: Lastly, supporting our ability to drive a high performance culture. We started this year off with well defined strategic and operational goals.
Simon Campion: We set clear 2024, kpis across the company to monitor progress and drive performance.
Simon Campion: We believe this rigor will enable us to make better decisions as we navigate the dynamic external environment. Moving to our final slide, I would like to reinforce a few key points. First, I want to reiterate that fulfilling our commitments is essential. In Q1, we delivered nearly 8% adjusted EPS growth despite softer sales.
Simon Campion: We believe this rigor will enable us to make better decisions as we navigate the dynamic external environment.
Speaker Change: Moving to our final slide I would like to reinforce a few key points.
Simon Campion: First I want to reiterate that fulfilling our commitments is essential.
Simon Campion: In Q1, we delivered nearly 8% adjusted EPS growth despite softer sales.
Simon Campion: While we see this as a positive, we know it is only part of what we need to deliver on, and as such, we remain focused on achieving all of our commitments. Second, we have and will continue to take proactive steps to improve our competitive position, such as our global investments in our aligners business and the reintroduction of the Orthos SL imaging line. In addition, we're continuing to put additional measures in place to improve cost and efficiency.
Simon Campion: While we see this as a positive we know it is only part of what we need to deliver on and as such we remain focused on achieving all of our commitments.
Simon Campion: Second we have and will continue to take proactive steps to improve our competitive position like a global investments in our aligner business and the reintroduction of the <unk> SL imaging line.
Simon Campion: In addition, we're continuing to put additional measures in place to improve cost and efficiency.
Simon Campion: To that point, our strategic initiatives remain on track. We have a clear strategy, detailed plans, and well-defined KPIs that we watch closely and refine as needed. As we execute these initiatives, we believe our business will be better positioned for profitable growth as laid out in the schedule shared at Investor Day in a more normal macro environment. Operator. Thank you.
Simon Campion: To that point, our strategic initiatives remain on track.
Simon Campion: We have a clear strategy detailed plans and well defined kpis that we watch closely and refine as needed.
Simon Campion: As we execute these initiatives, we believe our business will be better positioned for profitable growth as laid out in the schedule of shared at Investor day in a more normal macro environment.
Speaker Change: With that let's now open it up for questions.
Operator: Operator, thank you, and I will open the lines. As a reminder, press star 1 1 to get in the queue. To remove your question, simply press star 1 1 again, and please keep your questions to one and one follow-up.
Speaker Change: Operator, Thank you and I will open the lines and as a reminder.
Speaker Change: Star one one to get in the queue to remove your question simply press Star one one again.
Operator: Stand by while we compile the Q&A roster. And our first question comes from David Saxon. With Needham and company, please proceed.
Speaker Change: Keep your questions to one and one follow up.
Speaker Change: Standby, while we compile the Q&A roster.
Speaker Change: And our first question comes from the line of David Saxon with Needham <unk> Company. Please proceed.
David Saxon: Great. Good morning, Simon and Glenn.
David Saxon: Great Good morning, Simon and Glenn Thanks for taking my questions.
David Saxon: Thanks for taking my questions. Um, maybe to start out on guidance last quarter, you called out growth expectations for each business. So you know, one quarter in, I'd love to get an update on kind of how you're thinking about growth for each of the businesses. I'd assume CDS kind of comes down, but I would love your thoughts on that.
David Saxon: Maybe to start out on guidance last quarter, you called out growth expectations for each of the business. So one quarter and would love to get an update on kind of how you are thinking about.
David Saxon: Growth for each of the businesses.
Speaker Change: <unk> Cvs kind of comes down but.
Speaker Change: Would love your thoughts on that.
Glenn G. Coleman: I'll take that one. So just in terms of sequencing for the year, obviously, with our Q2 guidance color that we provided, we expect to be down organically about 2% in the first half of the year, which would imply we expect to be up. Close to 3% organically in the back half of the year to get us flat on a full year basis. But if we look at it by our different business segments... I would expect essential dental solutions to get back to a flattish number on a full year basis.
Speaker Change: Hey, David It's Glenn I'll take that one so I just in terms of sequencing for the year, obviously with our Q2 guidance color that we provided.
Glenn G. Coleman: Spec to be down organically about 2% in the first half of the year, which would imply we expect to be up.
Glenn G. Coleman: Close to 3% organically in the back half of the year to get us flat on a full year basis.
Speaker Change: If we look at it by our different business segments.
Speaker Change: I would expect essential dental solutions to get back to a flattish number on a full year basis.
Glenn G. Coleman: That's going to be down obviously in the first half of the year, but we expect the back half of the year to grow low single digits, pretty much in line with what patient traffic should be. Ortho, we're expecting to see really good performance there, certainly double-digit growth coming off a quarter of 14% I expected to grow faster in the second quarter and then the back half of the year. Exceeding 20% for our total ortho business is what we're projecting right now, which would put us, you know, in a really good shape relative to that part of our business, and have really good momentum. And if you look at what's happening there, obviously, we're seeing an acceleration of Byte, a combination of the Byte Plus program that's now fully commercially launched.
Speaker Change: That's going to be down obviously in the first half of the year, but we expect the back half of the year to grow low single digits pretty much in line with what patient traffic should be.
Speaker Change: Ortho, we're expecting to see really good performance, there certainly double digit growth.
Speaker Change: Coming off a quarter of 14% I expect it to grow faster in the second quarter and then the back half of the year.
Speaker Change: Exceeding 20% for auto Ortho business is what we're projecting right now which would put us.
Speaker Change: In a really good shape relative to that part of our business.
Speaker Change: Really good momentum and if you look at.
Speaker Change: What's happening there, obviously, we're seeing an acceleration of bite.
Speaker Change: Combination of the bite plus program, that's now fully commercially launched.
Glenn G. Coleman: We're seeing really good impression kit growth, which is a lead indicator for future sales, and so we're capitalizing on some of the competitive dynamics there from a bite perspective. And sure, you know, we are making some significant commercial investments both in Brazil and Japan. We talked about those in our prepared remarks and so forth, and we feel very good about our path forward in terms of putting up some very solid growth. For implants, I would say low single-digit growth, similar to what we posted here in the first quarter, so that should be pretty consistent.
Speaker Change: We're seeing really good impression kit growth, which is a lead indicator for future sales.
Speaker Change: And so we're capitalizing on some of the competitive dynamics there from a buyer perspective insurance mile. We are making some significant commercial investments both in Brazil, and Japan, we talked about those in our prepared remarks, and so forth that we feel very good about our path forward in terms of putting up some very solid growth.
Speaker Change: Four.
Speaker Change: Implants, I would say low single digit growth similar to what we posted here.
Speaker Change: In the first quarter, so that should be pretty consistent the dynamic there, though is I think we'll see a slowdown.
Glenn G. Coleman: The dynamic there, though, is I think we'll see a slowdown in China with tougher year-over-year comps offset by better performance in both our U.S. and European implant business. But overall, that should be pretty consistent growth, I would say, throughout the year. CTS, obviously, we were disappointed in the quarter; we were down close to 6% organically.
Speaker Change: In China, it's tougher year over year comps offset by better performance in both our U S and European implants business, but overall that should be pretty consistent growth I would say throughout the year.
Speaker Change: Cts, obviously, we were disappointed in the quarter, we were down close to 6% organically.
Glenn G. Coleman: I would expect another challenging quarter here in Q2. We do expect, though, to see better performance in the back half of the year. It's still expected to be down year over year in the back half of the year, but improvements from the first half. We were encouraged by the CAD CAM growth that we saw here, that should continue as we move forward. Imaging, while disappointing.
Speaker Change: I would expect another challenging quarter here in Q2.
Speaker Change: We do expect though to see better performance in the back half of the year, it's still expected to be down year over year in the back half of the year, but improvements from the first half.
Speaker Change: We were encouraged by obviously the CAD Cam growth that we saw here.
Speaker Change: That should continue as you move forward imaging while disappointing.
Glenn G. Coleman: We're obviously taking some actions internally to address the competitive dynamics, and so we're relaunching Orthophos SL in Europe. Simon commented on that in his prepared remarks.
Speaker Change: We're obviously, taking some actions internally to address the competitive dynamics or re launching or the first S. L and Europe Simon commented on that in his prepared remarks.
Glenn G. Coleman: That's great because it's a broader product offering at lower price points for our customers. And even in the first couple weeks of Q2, we're seeing some good traction there. So I feel good about that plan. We're looking at promotional activities across different countries to see where we should be providing more promotional activities for imaging equipment, implementing additional financing programs to address the higher interest rate environment, and then doing some additional sales training.
Speaker Change: It's great because it's a broader product offering at lower price points for our customers.
Speaker Change: Even in the first couple of weeks of Q2, we're seeing some good traction there. So I feel good about that plant we're looking at.
Speaker Change: Emotional activities across <unk>.
Speaker Change: Different countries to see where we should be providing more promotional activities for our imaging equipment.
Speaker Change: Implementing additional financing programs to address the higher interest rate environment, and then doing some additional sales training. So I think we're doing all the right things on imaging right now.
Glenn G. Coleman: So I think we're doing all the right things on imaging right now. It's going to be a tough environment for a full year, but that should put us overall in better shape in the second half of the year, although still, CTS is probably going to be down mid-single digits for the full year. And then obviously, WellSpec, good momentum here in Q1. We expect faster growth in Q2, and that should be growing, you know, kind of mid to high single digits on a full-year basis. So that gives you a little bit of color across our businesses. Hopefully, that was helpful.
Speaker Change: Tough environment for a full year basis, but that should put us overall.
Speaker Change: In better shape in the second half of the year, although still Cts is going to be most likely down mid single digits on a full year basis.
Speaker Change: And then obviously well expect good momentum here in Q1, we expect faster growth in Q2 and that should be growing kind of mid to high single digits on a full year basis. So that gives you a little bit of color across our businesses hopefully that was helpful.
Speaker Change: Yes Super helpful. Glenn Thanks, Thanks for all that color maybe.
Glenn G. Coleman: The North America implants business, maybe just give an update on kind of how that team is doing. You know, there's you have a competitor who's dealing with their own issues. So I wonder if, you know, that maybe accelerates your path to growth. I think original expectations were the back half. And then maybe even to market growth. I think that will be in 2026. And then, you know, I would love to hear your thoughts on what market growth actually is currently. Thanks so much.
Speaker Change: As my follow up on the North America implants business, maybe just give an update on kind of how that team is doing.
Speaker Change: You have a competitor who is dealing with their own issues. So I wonder if that maybe accelerates your path to growth.
Speaker Change: I think original expectations for the back half.
Speaker Change: And then maybe even to market growth and I think that was in 2026.
Speaker Change: Then wed love to hear your thoughts on what market growth actually is currently thanks so much.
Simon Campion: Good morning, David. It's Simon.
Speaker Change: Hey, good morning, David It's Simon.
Simon Campion: So as we've said before would you expect to be growing.
Simon Campion: So, as we've said before, we do expect to be growing or posting some growth in the back half of 2024. And then, as you said, the plan is to get to market growth by 2026. And as we said, we created a new team.
Simon Campion: Ah posting some growth in the back half of the of 2024 and then as you said the plan is to.
Simon Campion: As to get to market growth by by 26%.
Simon Campion: As as we've said we've created a a new team we've given them the tools and the training.
Simon Campion: We've given them the tools and the training. We did see some positive signs, I would say, in the quarter. We're growing in the DSO business for implants. As you know, that part of the dental industry is not going away and is, in fact, accelerating. The decline of large accounts has, for the most part, stopped.
Simon Campion: We did see some some positive signs I would say in the quarter were growing in the DSO business in implants and.
Simon Campion: No that that that drove it.
Simon Campion: The dental industry is is not going away and is in fact accelerating.
Simon Campion: The decline of of large accounts has for the most part stopped.
Simon Campion: So, we think we've stemmed the bleeding to a large extent. We have heavily invested in clinical education, which was one of the areas that the company stepped away from in the past. And we've seen a significant increase in our presence at different educational fora throughout Q1. And, as we've communicated before, in Q2, we'll have the World Implant Summit in Miami, which is another reflection of our commitment to the implant family. And we're expecting almost 500 attendees there, of which we expect in excess of 50% to be from North America.
Simon Campion: So we have we've kind of we think we've stemmed the bleeding too to a large extent.
Simon Campion: We have heavily invested in clinical education, which was one of the areas that the company stepped away from in the past and we have we've seen a significant increase in our in our presence at different educational fora throughout Q1, and as we've communicated before in Q2, we'll have the world implant summit.
Simon Campion: And in Miami, which is another reflection of our commitment to the.
Simon Campion: To the implant family.
Simon Campion: And we're expecting almost 500 attendees there of which we expect in excess of 50% to be from from North America. So.
Simon Campion: So, we feel we're making all the right steps in implants. It has, for sure, taken longer than we expected, given our history in different medtech industries. But, as we speak to customers, they're saying, you're making the right moves. It's just going to take a while to turn the corner here, given the complexity of the implant market and the complex referral network that's required. And your question on market growth, I would think market growth in implants is mid-single digits in general, notwithstanding the current macro climate, where there's probably pressure on implants, given it's electric.
Simon Campion: We feel we're making all the right steps in.
Simon Campion: In implants.
Simon Campion: For sure taking longer I think than than.
Simon Campion: Than we expected.
Simon Campion: Given our our our history and different med Tech industries, but as we speak to customers.
Simon Campion: They're saying.
Simon Campion: The right moves, it's just going to take a while to turn the corner here given the complexity of the implant market in the the complex referral network. That's that's required.
Simon Campion: And your question on market growth I would think America growth in implants as is mid single digits in general.
Simon Campion: Notwithstanding the current macro climate, where it has probably pressure on implants, given its elective nature.
David Saxon: Okay, great. Thanks so much.
Speaker Change: Okay, great. Thanks, so much.
Operator: Thank you. One moment for our next question, and it comes from the line of Jeff Johnson with Baird. Please proceed.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: And it comes from the line of Jeff Johnson with Baird. Please proceed.
Jeffrey D. Johnson: Thank you. Good morning, guys.
Jeffrey D. Johnson: Thank you good morning, guys.
Jeffrey D. Johnson: Simon I thought maybe step back here in just a second and talk about bringing <unk> back to the European market.
Jeffrey D. Johnson: You've got a lower price treatment center.
Jeffrey D. Johnson: I think youre launching as well, obviously primes can connect a couple year and half two.
Speaker Change: Two years ago, you lost with that lower price point.
Jeffrey D. Johnson: You don't rush these decisions out the door. It's just cyclical I think is just a short term interest rate shock kind of thing things like that so what does this decision to move down the pricing scale tell us maybe about and Mark asked about competition.
Simon Campion: Simon, I thought maybe step back here for just a second. You talk about bringing Orthophos SL back to the European market. You've got a lower priced treatment center that I think you're launching as well. Obviously, Prime Scan Connect, a couple years and a half, two years ago, you launched at that lower price point. You don't rush these decisions out the door if it's just cyclical, if it's just a short-term interest rate shock, kind of thing, things like that.
Simon Campion: Where your competitive positioning that historically with the Sirona brands had been at the premium end, where its going right now with just love kind of your land of land, there and kind of what's driving your thought process on some of this move to the lower price points.
Simon Campion: In relation to <unk> S L. Jeff.
Simon Campion: I think so.
Simon Campion: <unk> from any macro issues I think that was the discontinuation of that product line a number of years ago was a strategic error given the given the mix of dentist willingness to buy value or by premium and so we had a significant gap, we felt and our.
Simon Campion: In our imaging line.
Simon Campion: Thats can be addressed by by the reintroduction of ortho <unk> Orthros S. L. It fills out fills out our line.
Simon Campion: Now offers us.
Simon Campion: Set of price positions for for different types of dentists and Dsos in Europe in particular, so it's not a it's not a rush decision that given the macro situation that is.
Simon Campion: Our GAAP that we identified and we are now.
Simon Campion: Setting about about filling it and I think that's consistent with what other parts of our business. Two we have we always had lower and treatment centers and we have value based implants as well as serving the needs of the the variety of customers that we that we provide technology to it as a as.
Simon Campion: As a strategic objective of ours.
Simon Campion: So what does this decision to move down the pricing scale tell us maybe about the end market? It's about competition, you know, where you're competitive positioning historically with the Sirona brand and been at the premium end where it's going right now. We just love kind of your lay of the land there and kind of what's driving your thought process and some of this move to lower price points. Thank you.
Simon Campion: No. That's fair I guess, maybe to think about it in a more consolidated way and maybe Glenn you can help here is do you think your blended <unk>.
Simon Campion: Revenue per system sale, if we're talking to treatment centers and imaging.
Simon Campion: Within <unk>.
Simon Campion: Cadcam anything like that does that need to keep moving down over the next few years is there kind of a secular downward pressure on kind of those blended asps just as mix continues to move to those value or do you think any of that.
Simon Campion: Our economy will come back to <unk>.
Simon Campion: Premium product and premium prices.
Simon Campion: Accelerating a little bit and maybe that blended ASP per system or whatever can stabilize thanks.
Simon Campion: In relation to Orthopox SL, Jeff, aside from any macro issues, I think the discontinuation of that product line a number of years ago was a strategic error given the mix of dentists' willingness to buy value or buy premium, and so we had a significant gap, we felt, in our imaging line that could be addressed by the reintroduction of Orthopox SL. It fills out our line and now offers us a set of price positions for different types of dentists and DSOs in Europe, in particular, so it's not a rushed decision given the macro situation; it is a gap that we identified and we're now going about filling it, and I think that's consistent with other parts of our business too. We have always had lower-end treatment centers, and we have value-based implants as well, so serving the needs of the variety of customers that we provide technology to is a strategic objective of ours.
Speaker Change: Yes, listen when we talk to our customers their number one concern is costs and cost increases in their practices. So we want to make sure that we have alternatives for our customers whether it be premium priced products.
Jeffrey D. Johnson: That's fair, I guess, maybe to think about it in a more consolidated way, you know, and maybe Glenn, you could help here. Do you think your blended, you know, revenue per system sale, if we're talking about treatment centers at imaging, within, you know, CAD CAM, anything like that? Does that need to keep going down over the next few years? Is there kind of secular downward pressure on those blended ASPs just as NICS continues to move those values? Or do you think in a better economy, we'll come back to premium products and premium prices, reaccelerating a little bit, and maybe that blended ASP per system or whatever can stabilize? Thanks.
Simon Campion: Where they want a premium priced product or trade down value brands I think when we look across our portfolio.
Glenn: Well positioned in each of the different categories. So implants, we are a premium product we have.
Glenn: <unk> planned product that is very good we talked about Cts and prime scanner connect even in eds, We've got trade down in what we call fighter brands, such as <unk> as an example, and even the north outright buy is a lower cost alternative for ortho treatment. So I think it's important when you have alternatives for customers. How this plays out over the long term, we'll have to see but we do know that right.
Glenn G. Coleman: Yeah, listen, when we talk to our customers, their number one concern is cost and cost increases in their practices. So we want to make sure that we have alternatives for our customers, whether it be premium priced products where they want a premium price product or, you know, trade-down value brands. I think when we look across our portfolio, we're well positioned in each of the different categories.
Jeffrey D. Johnson: Now.
Speaker Change: Number one issue our customers are telling us that they are saying as an increase in costs in their practices. So we want to be there for them with a comprehensive portfolio and supporting whatever it is that they need whether it be premier value products.
Glenn G. Coleman: You know, implants; we have a premium product. We have a value implant product that's very good. We talk about CTS and PrimeScanConnect.
Glenn G. Coleman: Even in EDS, we've got trade down and what we call fighter brands, such as Zermak, as an example, and even in ortho, right? BITE is a lower cost alternative for ortho treatment. So I think it's important you have alternatives for customers. How this plays out over the long term, we'll have to see, but we do know that right now, our customers are telling us that they're seeing an increase in cost in their practices. So we want to be there for them with a comprehensive portfolio and support whatever it is that they need, whether it be premium or value products.
Speaker Change: Yes. Thanks.
Operator: Thank you. One moment for our next question, please. It comes from a line by Kevin Caliendo with UBS. Please proceed. Thank you very much.
Speaker Change: Thank you one moment for our next question. Please.
Operator: It comes on line of Kevin Caliendo with UBS. Please proceed.
Operator: Thank you very much this is dylan on for Kevin.
Kevin Caliendo: Question Simon in the prepared remarks talked about a tightening of cost controls to enhance profitability.
Kevin Caliendo: Is that incremental to all the efficiency reductions headquartered on the path to the two.
Kevin Caliendo: 2016, EPS target and sort of timing perspective with these efforts have an impact on the bottom line in 2024 or is this more of a 25 benefit okay.
Kevin Caliendo: Yeah, thanks for your question. This is Glenn.
Operator: Yes. Thanks for your question. This is Glenn so I think on the whole if we see more revenue softness in pressure on our top line, we're going to continue to take actions across the organization in terms of looking at how to be more efficient in different areas of the organization and looking at areas to bring our costs down where we can.
Kevin Caliendo: So these would be incremental actions, if we see additional top line revenue pressure.
Glenn G. Coleman: So I think, on the whole, if we see more revenue softness and pressure on our top line, we're going to continue to take actions across the organization in terms of looking how to be more efficient in different areas of the organization and looking at areas to bring our costs down where we can. So these would be incremental actions if we see additional top-line revenue pressure. And obviously, those would be 24 action.
Kevin Caliendo: And obviously those would be 24 actions.
Speaker Change: Okay. Thank you.
Operator: Thank you. One moment for our next question, please. Remains on the line from Elizabeth Anderson with Evercore ISI, please proceed.
Speaker Change: Thank you one moment for our next question. Please.
Operator: Coming from the line of Elizabeth Anderson with Evercore ISI. Please proceed.
Elizabeth Hammell Anderson: Hi guys, thanks so much for the question. I was wondering if you could talk a little bit more about the growth margin line. It came in a bit stronger than I had been modeling. I just want to understand, is that sort of just a reflection of NICS? Is that a reflection of some of the restructuring efforts that you guys have already changed, I guess, with a view to kind of understand what the sustainability of that looks like across the rest of the year? Thank you.
Elizabeth Hammell Anderson: Hi, guys. Thanks, so much for the question.
Elizabeth Hammell Anderson: If you could talk a little bit more about the gross margin line. It came in a bit stronger than I had been modeling.
Elizabeth Hammell Anderson: Dan is that give us the direct FX.
Elizabeth Hammell Anderson: To your question is on the restructuring efforts that you guys have already change I guess with a view to kind of understand what the sustainability of that looks like across the rest of the year. Thank you.
Glenn G. Coleman: You know, I think gross margins were a little bit better than we were expecting. We were expecting, though, to see an improvement from where we landed in Q4. Q4 was artificially low, and we talked about the reasons back in Q4 around that.
Speaker Change: Yeah, No I think gross margins were a little bit better than we were expecting we were expecting to see an improvement from where we landed in Q4 Q.
Glenn G. Coleman: Q4 was artificially low we talked about the reasons back in Q4 around that so on.
Glenn G. Coleman: So, you know, on a year over year basis, our margins are essentially flat. I would expect going forward what we just produced here in Q1 results at 56.6% or so. It's going to be pretty consistent on a full year basis.
Glenn G. Coleman: On a year over year basis, our margins are essentially flat.
Glenn G. Coleman: We'd expect going forward, what we just.
Glenn G. Coleman: Produced here in Q1 results of 56, 6% or so it's going to be pretty consistent on a full year basis I wouldn't expect much.
Glenn G. Coleman: I wouldn't expect much of a margin expansion or contraction story. It will probably go down slightly in Q2 and then, as we get more volumes in the back half of the year, go back up again, but we're probably going to be, Elizabeth, around this range I would say for the remainder of the year. Overall, pricing is stable. We're not getting price increases, but we're not seeing significant decreases anywhere in the portfolio.
Glenn G. Coleman: Margin expansion or contraction story, it will probably go down slightly in Q2, and then as we get more volumes in the back half of the year go back up again, but we're probably going to be Elizabeth around this range I would say.
Glenn G. Coleman: For the remainder of the year overall.
Glenn G. Coleman: Pricing is stable, we're not getting price increases, but we're not <unk>.
Glenn G. Coleman: Seeing significant decreases anywhere in the portfolio, obviously in certain areas. We're getting some increase other areas are going down, but overall, it's kind of flattish on a price perspective.
Glenn G. Coleman: Obviously, in certain areas, we're getting some increases. Other areas are going down. But overall, it's kind of flattish on a price perspective. The key for us is driving more volume. As we get more volume, we'll continue to see, hopefully, better gross margin performance. But right now, I would just say, you know, expect our gross margins to be pretty consistent with what we've put up here. Okay.
Glenn G. Coleman: The key for US is driving more volume as we get more volume, but we'll continue to see hopefully better gross margin performance, but right now.
Glenn G. Coleman: I would just say.
Glenn G. Coleman: Our gross margins to be pretty consistent with what we've put up here in Q1.
Elizabeth Hammell Anderson: Got it. And just in terms of the results across the months of the first quarter, would you say that was sort of like a stable trajectory across the quarter? Are you thinking that certain parts are getting incrementally better or worse? I'm just trying to make sure that we understand some of the jump-off points as we think about, particularly 2Q, but then, obviously, in the context of the broader guidance that you gave. Thanks.
Speaker Change: Got it.
Elizabeth Hammell Anderson: Cross the quarter that you saw in <unk>.
Elizabeth Hammell Anderson: Results across the months of the first quarter, how would you say.
Elizabeth Hammell Anderson: That was sort of like a stable trajectory across the quarter, you're thinking that certain parts youre getting incrementally better or worse I'm just trying to make sure that we understand.
Elizabeth Hammell Anderson: Jump off point, as we think about particularly QQ, but then obviously in the context of the broader guidance. Thank you Doug.
Glenn G. Coleman: I'm not sure I understood the question. Could you just repeat that, Elizabeth?
Speaker Change: I'm not sure I understood. The question could you just repeat that Elizabeth.
Elizabeth Hammell Anderson: both just in terms of like you I think you talked about like stable us um visit volume and things like that so I'm just trying to understand like across the first quarter like what sort of deteriorated as we moved across the first quarter maybe what got stronger um just so we kind of have a good sense of like the cadence as we're thinking about like to the 2q growth rates and then um in the context of what you said for the fully thanks
Elizabeth Hammell Anderson: In terms of like I think you've talked about like stable U S.
Elizabeth Hammell Anderson: Volume and things like that so I'm, just trying to understand like across the first quarter like what sort of deteriorated as we moved across the first quarter, maybe what got stronger just going to be fine.
Elizabeth Hammell Anderson: So as we're thinking about like the <unk> growth rate and then.
Speaker Change: Absolutely yes.
Glenn G. Coleman: Yeah, no, listen. We saw strong momentum in ortho throughout the quarter. I'm expecting that to continue, as I mentioned earlier, going into Q2. So we should see faster growth in ortho, even versus the 14% that we put up in Q1. I think the area of disappointment, and even in March, was our CTS business and imaging. And so we are expecting that challenging environment to continue going into Q2, so it, you know, models conservative numbers.
Elizabeth Hammell Anderson: Thanks.
Speaker Change: Yes, listen we saw.
Glenn G. Coleman: Strong momentum in ortho throughout the quarter I'm expecting that to continue as I mentioned earlier going into Q2, So we should see faster growth in ortho even versus the 14% that we put up in Q1 I think.
Glenn G. Coleman: The area of disappointment and even in March was disappointing was our Cts business and imaging and so we are expecting that.
Glenn G. Coleman: Challenging environment to continue going into Q2, so it yes.
Glenn G. Coleman: Model Conservative numbers.
Glenn G. Coleman: Probably similar declines or even more declines in CTS in Q2, um... So that's kind of a, I would say the dynamic relative to how the Q1 numbers played out, that CTS was disappointing. And so some good momentum in ortho, which is gonna continue going forward. But overall, again, we're expecting Q2 organic growth to be pretty similar to Q1, down about, you know, 2%.
Glenn G. Coleman: Probably similar declines or even more declines in Cts and in Q2.
Glenn G. Coleman: So thats kind of I would say the dynamic relative to how the Q1 numbers played out that Cts was disappointing and saw some good momentum in ortho, which is going to continue going into Q2.
Glenn G. Coleman: But overall again, we're expecting Q2 organic growth to be pretty similar to Q1.
Glenn G. Coleman: About two.
Glenn G. Coleman: 2% ish.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you one moment for our next question. Please.
Operator: Thank you. One moment for our next question, please, and it comes from the line of Jason Bednar with Piper Sandler. Please proceed.
Glenn G. Coleman: And it comes from the line of Jason Bednar with Piper Sandler. Please proceed.
Jason M. Bednar: Hey, good morning. Thanks for taking the questions. I wanted to zoom in here on the imaging discussion, and sorry for belaboring the point here, but really trying to understand maybe what changed versus when you first gave guidance a few months ago. Are these pricing and share dynamics that are shifting in the category, and then you're now responding accordingly, like you intimated in your response to Jeff's question? Or are you seeing offices just having set equipment budgets, and those budget dollars are shifting to other categories in high tech, especially those that are maybe more underpenetrated relative to imaging and where new product development is higher, like scanners and 3D printing? Is that what's going on?
Operator: Okay.
Jason M. Bednar: Hey, good morning, Thanks for taking the questions wanted to zoom in here on the imaging discussion.
Jason M. Bednar: And sorry for belaboring, the point here, but really trying to understand maybe what changed versus when you first gave guidance a few months ago.
Jason M. Bednar: Pricing and share dynamics that are shifting in the category.
Jason M. Bednar: And then you are now responding accordingly like you intimated in your response to Jeff's question or are you seeing offices, just having set equipment budgets and those budget dollars are shifting to other categories high tech, especially those that are.
Jason M. Bednar: Maybe more underpenetrated relative to the imaging and where our new product development is higher like scanners in three D printing is that what's going on.
Simon Campion: Jason Simon here. Listen, I think the imaging part of our business is the highest price point, arguably within the dental space. And with the macro situation and continued pressure on the macro situation, and the outlook for interest rates continuing to be higher for a longer than expected period of time, I think people are just hitting the pause button on that. As you noted, and as Jeff noted, we've been the high-priced player in this market for a couple of years.
Jason M. Bednar: Well, Jason Simon here.
Simon Campion: I think.
Simon Campion: Imaging prior to our business, it's the highest price point arguably within within the dental space and with the macro situation and continued pressure on the macro situation.
Simon Campion: And the outlook for interest rates continuing to be higher for for a longer than expected period of time I think people are just hitting the hitting the pause button on that.
Simon Campion: As as you noted and as Jeff noted, we have been the high the high high priced player in this market for a couple of years. We felt that there was a gap in that space O U S that would be addressed by <unk> and that's why while we have reintroduced it but.
Simon Campion: We felt that there was a gap in that space, OUS, that wouldn't be addressed by Orthophos SL, and that's why we have reintroduced it. But as Glenn said, and in response to one of the earlier questions, we are actively working not only with the reintroduction of Orthophos SL but also with respect to financing and promotional programs with our distribution partners to try and begin to address the challenges in the imaging market globally.
Simon Campion: As Glenn said in I think in response to one of US one of the earlier questions. We are we are actively working not only provide the reintroduction of of ortho SSL, but also with respect to financing and promotional programs with our with our distribution partners to try and begin to address.
Simon Campion: And obviously, as we have noted numerous times in the past, we are arguably outweighed in Germany, and that economy is under significant pressure now. And so the legacy Sirona side of our business continues to struggle in Germany, in particular.
Simon Campion: Address the challenges in the imaging market globally and obviously.
Simon Campion: We have noted.
Simon Campion: Numerous times in the past we are arguably outweighed it in Germany.
Simon Campion: And that economy is under is under significant pressure now and so the legacy Sirona side of our business continues to continues to struggle in Germany in particular.
Jason M. Bednar: Yeah, that makes sense. Simon, I'll actually pick up on that last part of the response.
Speaker Change: Yes that makes sense Simon will actually pick up on that last last part of the response.
Jason M. Bednar: Just with Germany, I think you've been identifying these headwinds in that market for nearly a year now. I think it was 2Q of last year that we really first started talking about challenges in Germany. Did it take another step lower in the quarter? I mean, it sounded like it was still sluggish, but I'm just trying to tease out, like, did it take another step lower? Or are we seeing more of the same in that market?
Speaker Change: Just on <unk>.
Jason M. Bednar: There are many.
Jason M. Bednar: I think you've been identifying these headwinds in that market for you.
Jason M. Bednar: Nearly a year now I think it was <unk> of last year, we really first started talking about challenges in Germany.
Jason M. Bednar: Did it take another step lower in the quarter I mean, it sounded like it was still sluggish, but I'm just trying to tease out like they have taken another step lower or are we seeing more of the same out of that market.
Jason M. Bednar: Or yes, maybe in a different way to the headwinds here that you're experiencing from Germany on your growth performance. Do those lessen meaningfully here near term as we anniversary through the first step down we saw in that market last year?
Jason M. Bednar: And maybe asked a different way to the headwinds here that you're experiencing from Germany, where growth performance because those lessen that meaningfully here in near term as we anniversary through the first step down we saw in that market last year.
Glenn G. Coleman: You know, we actually had Jason, we actually had 300 respondents to our survey in Germany this quarter, which is...
Jason M. Bednar: We actually had Jason we actually had 300 respondents to our survey in Germany. This this quarter, which is which is meaningful.
Glenn G. Coleman: There is continued pessimism in that in that market about their practices in the dental industry as a whole but.
Glenn G. Coleman: The singular bright spot arguably in the survey from Germany is that the pessimism has has reduced in fact, it's it's back to the levels that.
Glenn G. Coleman: Though we experienced when we did the survey in July of last year. When we when we begun to highlight the imminent challenges that Germany is going to face. So there was an improvement in sentiment, but it was still it's still negative.
Glenn G. Coleman: And is in line with some of the other more negative countries, such as Australia, and New Zealand as well.
Simon Campion: Yeah, we just heard Jason say that Germany in the first quarter was down, you know, over 15%. We expect double digit declines here in the second quarter. I do think we'll see better performance in the back half of the year, although it's still going to be down year over year in the back half of the year as well. But you know, these are pretty substantial headwinds that we're dealing with right now in Germany.
Speaker Change: Yes, let me just add Jason that Germany in the first quarter was down over 15%, we expect double digit declines here in the second quarter.
Simon Campion: I do think we will see better performance in the back half of the year, although it's still going to be down year over year in the back half of the year as well but.
Simon Campion: These are pretty substantial headwinds that we're dealing with right now in Germany has not gotten better from a results perspective, we've been seeing double digit declines now for four consecutive quarters. So.
Simon Campion: It has not gotten better from a results perspective. We've been seeing double-digit declines now for four consecutive quarters. Yeah, we do expect a bit of improvement with the relaunch of Orthophos with respect to some of the customer sentiment data that we're seeing, but it's going to be challenging through the remainder of the year, probably less challenging, hopefully, in the back half.
Simon Campion: Yes, we do expect a bit of improvement with the relaunch of ortho first with respect to some of the customer sentiment data that we're seeing but it's going to be challenging through the remainder of the year, probably less challenging that hopefully in the back half of the year.
Jason M. Bednar: All right, great. I appreciate the call, guys. Thank you.
Speaker Change: Alright, great I appreciate the color guys. Thank you.
Operator: Thank you. One moment for our next question, please, and it comes from the line of John Block with Stifel. Please proceed.
Speaker Change: Thank you one moment for our next question. Please.
Jonathan David Block: And it comes from the line of Jon Block with Stifel. Please proceed.
Jordan Bernstein: Good morning. Yeah, Jordan Bernstein on for Jon. Just wanted to continue a bit of the discussion on the shift to value here in dental, but specific to value implants, performance seems solid in the quarter. Another player mentioned solid performance and value implants last night as well. So are we seeing an accelerated mix shift in the industry as dentists and DSOs have now battled higher costs for a handful of quarters? And if so, what does that mean for the in-point portfolio of Dentsply Sirona and how are you positioned there?
Operator: Good morning, Jordon Bernstein on for John just wanted to continue a bit of the discussion on the shift to value here in dental.
Jordan Bernstein: Specific to value implants performance and solid in the quarter.
Speaker Change: Another player mentioned.
Jordan Bernstein: Solid performance and value implants last night as well as they are we seeing an accelerated mix shift in the industry.
Jordan Bernstein: Dsos having.
Jordan Bernstein: I don't know battled higher costs for handful of quarters.
Jordan Bernstein: And if so what does that mean for the implant portfolio.
Speaker Change: <unk> Sirona.
Jordan Bernstein: Are you positioned there thanks.
Simon Campion: I think we have seen a shift over the past several quarters that people are very interested in the value-based part of the implants business, and we are fortunate that we have a robust portfolio in the value segment and a robust portfolio in the premium segment. Obviously, our results have been dramatically affected in Q1 by the performance in China, where we have been benefiting from VBP, and as we noted, we expect to continue to see solid volumes from China, although the growth rates will drop as we anniversary the benefit that we have foreseen for that.
Speaker Change: Yes, that's what I think I think we have.
Simon Campion: You've seen a shift over the past several quarters that people are very interested in the value based part of the the implant business and we are fortunate that we have a robust portfolio in value and a robust portfolio in the premium premium segment.
Simon Campion: Our results have been dramatically affected in Q1 by the performance in China, where we've been benefiting from from GBP and as we noted we expect to continue to see solid volumes from China, although that the.
Simon Campion: The growth rates will drop as we anniversary the benefit that we have.
Simon Campion: Is there a strategic shift to value? I would say it is definitely heading that way, but as an organization where we have been under pressure for a number of years on our implants business, it may present an opportunity for us to present ourselves as a value and premium-based company within the implants world.
Simon Campion: Foreseeing for that is there is there a strategic shift to value.
Simon Campion: Say, it's definitely it's definitely heading that way.
Simon Campion: But as a as an organization, where we have been under pressure for a number of years on our implant business. It may present, an opportunity for us too.
Simon Campion: Present ourselves as the as the value and premium basis.
Simon Campion: Company within the implants World.
Simon Campion: address. Great Yeah, maybe just to add a little bit more to that is we're still talking about adding penetration, with additional accounts, additional customers. And so we have a robust innovation pipeline, both for the value and the premium segment. And in the premium segment, in particular, I think a lot of the digital connectivity, the integration across the technology and the workflows will continue to be important to those customers that really value sort of that integrated benefit that they can get in the premium segment. You know, not to say that there's also obviously a different value proposition that some of the other accounts are looking for that are moving more towards value.
Andreas: Andreas Great, Yes, maybe just to add a little bit more to that is I think the implant market. Overall is still we're still talking about adding penetration with additional accounts additional customers until we have a robust innovation pipeline both for the value add.
Simon Campion: And the premium segment and premium in particular, I think a lot of the.
Simon Campion: The digital connectivity integration.
Simon Campion: Across the technology and the workflows will continue to be important to those customers they really value.
Simon Campion: Sorry, I'd add that integrated benefit that they can get into premium segment.
Simon Campion:
Simon Campion: Not to say that there is also obviously.
Simon Campion: A different value proposition.
Simon Campion: At some of the other accounts are looking for that I'm moving more towards value.
Jordan Bernstein: Great, thanks. And then for my follow-up, I'll focus on Byte. Solid momentum there in the first quarter.
Speaker Change: Great. Thanks, and then for my follow up I'll focus on solid momentum there in the first quarter.
Jordan Bernstein: It sounds like you, you know, commercially launched Byte Plus. Seems like it's out there at 30 locations, if I have that right, which is up five, quarter over quarter from the pilot. Any early feedback that you're able to share from the dentists on Byte Plus would be appreciated. And then maybe, you know, how impression kits are trending thus far in 2Q. Thanks.
Jordan Bernstein: It sounds like you commercially launched with five plus.
Jordan Bernstein: It seems like it's out there at 30 locations, if I have that right, which was up 5% quarter over quarter.
Jordan Bernstein: From the pilot any early feedback that you're able to share for them from their dentists on pipe plus would be appreciated and then maybe how impression kits are trending thus far into Q.
Glenn G. Coleman: Yeah, thank you for the question. I think by plus, we are getting positive feedback from the accounts that we're working with. I think, as you can imagine, sort of this in-office scan allows us to capture an incremental portion of those customers or consumers that are already coming through our website. So it's, it's a very good use of our ad spend and dollars in that way. We see that as we roll out, it's very important to be locally penetrated.
Speaker Change: Yes. Thank you for the question I think by plus we're getting positive feedback from the accounts that we're working with.
Glenn G. Coleman: I think as you can imagine this.
Glenn G. Coleman: In office scan it allows us to capture an incremental portion of those cuts.
Glenn G. Coleman: Customers, who are consumers that are already coming through our website. So it's a very good use of sort of our AD spend in dollars that way.
Glenn G. Coleman: We see that as we rollout, it's very important to be locally penetrated.
Glenn G. Coleman: So, you know, we're actually accessible to those patients that come through the website. And that's why it's important to add, you know. You'll see, I think, an accelerating ramp here in terms of the actual offices that are part of the network and part of our provider. So it's still early on, right, 30 or 35 sites now, as you said, and I think, Glenn, we'll circle back on the second part of your question. Yeah.
Glenn G. Coleman: So that we are actually accessible to those patients that come through the website and thats why its important to add youll see I think.
Glenn G. Coleman: An accelerating ramp here in terms of the actual offices that are part of the network and in part of our providers.
Glenn G. Coleman: So it's still early on right.
Glenn G. Coleman: 35 sites now have you said.
Glenn G. Coleman: And I think Glenn will circle back on the second part of your question, yes on the impression kit growth I mentioned it earlier without the specific number I mean, we're still seeing impression kit growth that's in excess of 50%.
Glenn G. Coleman: Yeah, on impression kick growth. I mentioned it earlier without the specific number; we're still seeing impression kick growth of more than 50%. And obviously, not all of that's going to convert to revenue. But that's one of the lead indicators for revenue growth.
Glenn G. Coleman: And obviously not all of that is going to convert to revenue, but that's one of the lead indicators to revenue growth and so.
Glenn G. Coleman: And so Impression kit growth remains quite robust for us. I would also add that Byte has rolled out a bunch of new products, accessory products, teeth whitening, cleaners for the aligners, other wellness products, and those have actually got a really high attach rate, so that's very encouraging as well as we go forward. Still a small part of our Byte business, but that's going to be an area of growth opportunity in the future. And a final comment here, just to...
Glenn G. Coleman: Impression kit growth remains quite robust for us I would also add that bite also has rolled out a bunch of new products success three products teeth whitening.
Glenn G. Coleman: Clean Earth for the Aligner is other wellness products and Thats actually got a really high attach rates. So that's very encouraging as well as we go forward still a small part of our base business, but that's going to be an area of growth opportunity in the future.
Glenn G. Coleman: And a final comment here, just to come back to the original part of your question, you know, many of those sites where we have been in pilot have not only seen benefit from the bite portfolio, but many of those customers have now signed up to the practice so that they can begin their preventative restorative treatments as well. These are customers who, in many cases, would not have had a primary dentist previously.
Glenn G. Coleman: And a final commentary just to come back to your the original part of your question. Many of those sites, where we have been in pilot have not only seen benefit from from the byte portfolio, but many of those customers have now signed up to the practice so that they can begin their preventative restorative.
Glenn G. Coleman: Treatments as well as these are these are customers who in many cases would not have had a a primary dentist previously.
Glenn G. Coleman: Thank you. One moment for our next question, please. And he comes from the line of Nathan Rich with Goldman Sachs. Please proceed.
Speaker Change: Thank you one moment for our next question. Please.
Glenn G. Coleman: And it comes from the line of Nathan Rich with Goldman Sachs. Please proceed.
Operator: Hi, good morning. This is Sarah Conrad on for Nate.
Glenn G. Coleman: Hi, Good morning. This is Sarah on for Nate I, just wanted to dive a little more into implant performance you had pointed to a potential macro impact from the elective nature of this treatment, which is pretty consistent with what we've been hearing, but I guess, we've heard from some peers that they've been pointing to a sequential softening in the demand environment for implants in the first.
Sarah Conrad: I just wanted to dive a little more into implant performance. You pointed to a potential macro impact from the elective nature of this treatment, which is pretty consistent with what we've been hearing. But I guess we've heard from some peers that they've been pointing to a sequential softening in the demand environment for implants in the first quarter. So can you discuss any changes to implant market demand that you've seen or changes in your consumer survey? And then, as we think about that improvement needed in the U.S. implant business in the second half, can you just break out what we saw in Europe and North America for implant sales in 1Q?
Sarah Conrad: Quarter. So can you discuss any changes to implant market demand that you've seen or changes in your consumer survey and then as we think about that improvement needed in the U S implant business in the second half can you just break out what we saw in Europe, and North America implants in lung cancer.
Simon Campion: Sure. Well, listen, I think we've said before on calls such as these that with respect to implants, maybe we're not the best company to provide any macro analysis, given our performance in the past. I think we have, for sure, seen a little bit of pressure from our customer survey about the elective nature of our procedures. But, in general, overall, it's still pretty good.
Sarah Conrad: Sure.
Simon Campion: I think I think we've said before on.
Simon Campion: On calls such as these that will.
Simon Campion: Try to influence maybe maybe we're not the best company to provide any any any macro analysis, given our given our performance.
Simon Campion: In the past I think we have we have.
Speaker Change: For sure.
Simon Campion: <unk> seen a little bit of pressure from from our customer survey.
Simon Campion: The electric the elective nature of our procedures.
Simon Campion: In general overall, it's it's stable.
Simon Campion: The U S was about the same.
Simon Campion: Germany is sentiment around implants actually improved a little bit.
Simon Campion: In the quarter, but elsewhere, it's diminished so net net it's probably probably about even on a global basis.
Glenn G. Coleman: Yeah, just by geography, in the first quarter, both the U.S. and Europe were down low to mid-single digits year over year. We just look at our implant business. Obviously, overall, we grew the category, which was largely driven by China and the growth we saw there. And if you look at the portfolio, we grew double digits within value implants, and we're down in premium.
Speaker Change: Yeah, and just by geography in the first quarter, both the U S and Europe are down low to mid single digits year over year. When you just look at our implants business. Obviously overall, we grew the category that was largely driven by China and the growth we saw there.
Glenn G. Coleman: If you look at the portfolio, we grew double digits within value implants, and we're down in premium.
Glenn G. Coleman: And then as we look to those 2026 EPS targets of $3 and the, you know, path you laid out to 4% plus organic growth in 2025, can you, do you believe that, like, what level of organic growth is needed in the second half of 24 to remain on pace to reach those 25 and 26 targets?
Speaker Change: Thank you and then as we look to those 2020 EPS target of $3 and the.
Glenn G. Coleman: Pop you laid out a 4% plus organic growth in 2025.
Glenn G. Coleman: Can you do you believe that like what level of organic growth is needed in the second half of 2000, and Florida remain on pace to reach those 25 and 26 targets.
Glenn G. Coleman: Yeah, this is Glenn. I'll take that one. I think first and foremost, nothing has changed relative to our path or our confidence in getting to $3 of EPS by 2026. When we laid out our targets in November of last year relative to getting to $3, we basically assumed a normal macro environment, a non-recessionary environment, and normal patient traffic really beginning in 2025. We knew that 2024 was going to be a challenging year.
Glenn G. Coleman: Yes. This is Glenn I'll take that one I think first and foremost nothing has changed relative to our path of our confidence to getting to the $3 of EPS by 2026.
Glenn G. Coleman: When we laid out our targets in November of last year relative to <unk>.
Glenn G. Coleman: Getting into the $3, we basically assumed a normal macro environment, a non recessionary environment and normal patient traffic really beginning in 2025.
Glenn G. Coleman: We knew that 2024 was going to be a challenging year, we assumed very little growth.
Glenn G. Coleman: We assumed very little growth in those assumptions, and so we'll have to see how the rest of the year plays out, but Our path to $3 remains unchanged. We still need 4% organic growth over the period to get to $3. If you look at that bridge, though, two-thirds of it are things in our control, things such as the restructuring savings, our global operations, and transformation work that we're doing, improvements in our ortho profitability, and some of the other things around net investment, hedges, and so forth.
Glenn G. Coleman: Those assumptions.
Glenn G. Coleman: And so we'll have to see how the rest of the year plays out but.
Glenn G. Coleman: Our path to $3 remains unchanged, we still need 4% organic growth over the period to get to the $3.
Glenn G. Coleman: If you look at that bridges out two thirds of it are things in our control things such as the restructuring savings our global operations and.
Glenn G. Coleman: And transformation work that we're doing improvements in our ortho profitability in some of the other things around net investment hedges and so forth all of the things in our control are on track and we're executing against those.
Glenn G. Coleman: All the things in our control are on track, and we're executing against those. The 40 to 45 cents that's... Depending on the 4% organic growth, we'll have to see if the macro environment improves going into next year. Obviously, if it doesn't, it will create pressure on our ability to get to $3, but right now... We assume very little growth in our initial assumptions in 2024, but a return to a more normal macro environment and getting to that 4% plus growth in 2025. So obviously, we'll have to see how the rest of the year plays out.
Glenn G. Coleman: 40 to 45.
Glenn G. Coleman: Dependent on the 4% organic growth.
Glenn G. Coleman: We'll have to see if the macro environment improves going into next year, obviously, if it doesn't it will create pressure on our ability to get to $3, but right now we.
Glenn G. Coleman: We assumed very little growth in our initial assumptions in 2024, but a return to a more normal macro environment and getting to that 4% plus growth.
Glenn G. Coleman: In 2025.
Glenn G. Coleman: So obviously you have to see how the rest of the year plays out.
Glenn G. Coleman: Thank you. One moment for our next question, please. And it comes from the line between Justin Lin and William Blair. Please proceed.
Speaker Change: Thank you one moment for our next question. Please.
Glenn G. Coleman: And it comes from the line of Justin <unk> with William Blair. Please proceed.
Operator: Hey guys, good morning. Thanks for taking the questions. I'll focus first on BITE, you know, that's sort of a slightly different question. How much of the strength and acceleration you kind of alluded to is still attributable to that sort of SDC bonus, if you will, or is there some other kind of dynamic at play here, like, you know, consumers perhaps going for more affordable options given macro uncertainties, you know, really just trying to get a sense of how sustainable this growth is?
Justin Lin: Hey, guys. Good morning, Thanks for taking my questions.
Operator: I'll focus first on bi.
Operator: Slightly different question.
Operator: How much of a strengthened acceleration you've kind of alluded to do you think it's still attributable to that sort of that FCC bonus. If you will if you will or is there. Some other kind of dynamic at play here like consumers, perhaps got going for more affordable options given macro uncertainties.
Operator: Really just trying to get a sense of how sustainable this growth is.
Simon Campion: Yeah, so I think Simon, I think for sure we're benefiting from SDC. You know, we have invested in the growth that we are seeing, increasing the number of treatment planners, being very selective, but increasing our commercial activities with respect to advertising. We have provided new financing options because, as we've shared before, this population is made up of lower income families and individuals than perhaps would choose another type of liner.
Speaker Change: Yes, So I think it's Simon I think for sure we're benefiting from from.
Simon Campion: SDC.
Simon Campion: We have invested behind the growth that we are that we're seeing.
Simon Campion: Increase in number of treatment planners.
Simon Campion: Being very selective, but increasing our our commercial activities.
Simon Campion: With respect to with respect to advertising.
Simon Campion: We have provided new financing options because as we've shared before that there.
Simon Campion: This population are lower lower income families and individuals.
Simon Campion: And perhaps would choose.
Simon Campion: Another type of a liner so we've been we've been very proactive and I think that's helping drive drive performance to date, but it is select investments that drive profitable revenue growth we are not.
Simon Campion: So we've been very proactive, and I think that's helping drive performance today. But it is select investment that drives profitable revenue growth. We are not investing to lose money here. We are driving profitable revenue growth, and we continue to see profits accrue from our BITE business. And as Glenn had said, we do expect to be north of 20% growth for BITE this year.
Simon Campion: We're not investing to lose money here, we are driving profitable revenue growth.
Simon Campion: To see.
Simon Campion: Profits accrue from from our bike business.
Simon Campion: As Glenn had said, we would you expect to be north of 20% growth for <unk>.
Simon Campion: This year.
Simon Campion: Got it. And just a follow-up question on BytePlus specifically, can you kind of remind us whether BytePlus margins will be better than regular Byte and maybe, you know, the timing around Byte overall kind of getting to corporate?
Speaker Change: Got it and just a follow up question on <unk>, plus specifically can you kind of remind us whether <unk> plus margins will be better than regular bi and kind of maybe the timing around bite overall kind of getting to corporate margins.
Glenn G. Coleman: Yeah, I think overall, there's not a significant differential in the margins for BytePlus versus Byte. There's a bit of a higher cost, but we're getting some of that back through price. So I wouldn't look at the margin differential as anything significant between the two. Relative to biking getting back to corporate margin averages, right now, I would say that is not part of our plan over the next three years. We obviously are planning on seeing an improvement in our profitability over the period, but I don't yet have a clear line of sight that we can get back to our corporate averages. I think if we can get significant improvement, though, that is going to be our goal here and get faster revenue growth.
Speaker Change: Yes, I think overall, there's not a significant differential in the margins for pipe plus versus buy it there's a bit of a higher cost, but we're getting some of that back through price. So.
Glenn G. Coleman: I wouldn't look at the margin differential is there anything significant between the two.
Glenn G. Coleman: Relative to bike getting back to corporate Mara.
Glenn G. Coleman: Margin averages right now I would say that it is not part of our plan over the next three years. We obviously are planning on seeing an improvement in our bite profitability over the period, but I don't yet have a clear line of sight that we can get back to our corporate averages.
Glenn G. Coleman: I think if we can get significant improvement, though that is going to be our goal here and get faster revenue growth.
Justin Lin: Got it. Super helpful. Thank you so much. Thank you. One moment while we get our next question. And he's Allen Lutz with Bank of America.
Speaker Change: Got it Super helpful. Thank you so much.
Operator: Thank you. One moment while we get our next question. And it's from Allen Lutz with Bank of America. Please proceed. Good morning.
Allen Charles Lutz: Thank you one moment, while we get our next question.
Operator: And he's from Allen Lutz with Bank of America. Please proceed.
Operator: Please proceed. Good morning. Thanks for taking the question. A quick one for
Allen Charles Lutz: Good morning, Thanks for taking the questions a quick one for Glenn I think in your prepared remarks, you talked about a 30 basis point benefit from restructuring savings in the quarter I think that gets to about a penny against <unk>.
Allen Charles Lutz: The implied guide here as part of the EPS outlook can you talk about where restructuring savings came in versus your expectations and sort of the cadence for that AD bucket over the course of the year.
Operator: Yeah, so the 30 basis plan improvement was our overall even a margin improvement. Obviously, there's a lot of puts and takes in that number.
Allen Charles Lutz: Yes, so the 30 basis point improvement was our overall EBIT margin improvement, obviously theres a lot of puts and takes in that number so that's not necessarily the <unk>.
Glenn G. Coleman: So that's not necessarily the benefit from our restructuring activities. I would just say, though, when we look at the restructuring plans that we've got that have been ongoing and being executed against over the last, call it, five quarters, we're on track. I would expect most of the incremental savings to come here in the back half of the year. In fact, if I look at the EPS guidance. You know, if you assume, um... a 20% increase in the second half of the year versus the first half of the year based upon the comments that we've made.
Glenn G. Coleman: Like I said, the net benefit from our restructuring activities I would just say, though.
Glenn G. Coleman: When we look at the restructuring plans that we've got that have been ongoing and being executed against over the last.
Glenn G. Coleman: Call it five quarters.
Glenn G. Coleman: On track I would expect most of the incremental savings to come here.
Glenn G. Coleman: In the back half of the year in fact, if I look at the EPS guidance.
Glenn G. Coleman: If you assume.
Glenn G. Coleman: A 20, sorry, 20, <unk> increase in the second half of year versus the first half of the year based upon the comments that we've made about a third of that improvement is going to come from higher organic growth in the back half of the year and two thirds coming from the restructuring savings.
Glenn G. Coleman: About a third of that improvement is going to come from higher organic growth in the back half of the year, and two-thirds is going to come from the restructuring savings. So that's the way to think about how the cadence of the restructuring savings is going to hit. So clearly, what that means is we're expecting our operating expenses on a dollar basis to come down in the back half of the year with the work that we're doing.
Glenn G. Coleman: So thats the way to think about how the cadence of the restructuring savings is going ahead. So clearly what that means is we're expecting our operating expenses on a dollar basis to come down in the back half of the year with the work that we're doing.
Speaker Change: That's helpful. Thank you very much.
Operator: Thank you. One moment while we get our next question. And he's in the line of Michael Petusky with Barrington Research. Please proceed.
Speaker Change: Thank you one moment, while we get our next question.
Michael John Petusky: And he is from the line of Michael Pitofsky with Barrington Research. Please proceed hey, good.
Michael John Petusky: Hey, good morning. So, I was wondering, you know, DF Core was highlighted quite a bit at Investor Day, and you guys called it out again today as, you know, there's progress being made there in terms of utilization, new accounts, etc. I'm just wondering, is there a point in time when you guys start actually quantifying, hey, this is the percentage gains in terms of new accounts, these are some metrics around utilization?
Michael John Petusky: So I was wondering if core was highlighted quite a bit at the Investor day, and you guys called it out again today is there's progress being made there in terms of utilization and new accounts etcetera. I am just wondering is there a is there a is there a point in time, where you guys start actually quantifying Hey. This is this isn't the percentage gains in terms of new account.
Michael John Petusky: Like, if given that, you know, this is an initiative that, you know, certainly will take you deeper with accounts and give you some margin expansion opportunities, would it make sense to start quantifying this at some point?
Michael John Petusky: These are some metrics around utilization like as if given that.
Michael John Petusky: This is an initiative.
Speaker Change: Certainly we will.
Michael John Petusky: Take you deeper with accounts and give you some margin expansion opportunities I mean, what would it make sense to start quantifying this at some point.
Simon Campion: Well, that's a good question. We'll take it under advisement.
Michael John Petusky: Well.
Speaker Change: That's a good question, we'll take it under advisement.
Speaker Change: <unk> is has got multiple benefits for us right.
Michael John Petusky: You know, DS Core has got multiple benefits for us, right? It is a unifying platform across all of our capital equipment. And so, you know, as we roll forward, we would expect to see the benefit on the capital side of our businesses. And then, as we increase more functionality, we do expect to be able to monetize to some extent the software arm of that business in particular. But to your point on quantifying the performance of DS Core, you know, I think we've said we have in excess of 20,000 accounts now with DS Core.
Simon Campion: It is a unifying platform across all of our capital equipment.
Michael John Petusky: And so.
Michael John Petusky: As we roll forward, we would we would expect to see the benefit in the capital side of our businesses and then as we increase more functionality, we do expect to be able to months monetize to some extent the software arm of that business in particular.
Michael John Petusky: But to your point on on quantifying.
Michael John Petusky: The performance of <unk> core.
Michael John Petusky: I think we said were in excess of 20000 accounts now with that with these core we've just come off our largest quarter of <unk> core subscriptions.
Michael John Petusky: We've just come off our largest quarter of DS Core subscriptions. We've added a number of new different functions to it in the past quarter, and we will continue to add new functionality to it throughout the year. And we have a very aggressive goal for our expectations with respect to subscriptions in 2022. As I said, we see it as a unifying platform, and we are already, as we noted in the prepared remarks, in pilots with some DSOs, and we are hoping to expand that pilot. The benefits that DSCore accrues to customers, whether they're labs, DSOs, or individual practices, are significant, and customers are beginning to share sentiment on the positive experience they're having with it, vis-a-vis the efficiency of their practice.
Michael John Petusky: We've added a new.
Michael John Petusky: Number of new different functions to in the past quarter, and we will continue to add new functionality to it throughout the year and we have a very aggressive goal for our expectations.
Michael John Petusky: With respect to subscriptions in 2024.
Michael John Petusky: As I said, we see it as a unifying platform.
Michael John Petusky: And we are already as we noted in the prepared remarks and pilots with the with some dsos and where we are hoping to expand that pilot the.
Michael John Petusky: The benefits that <unk> core.
Michael John Petusky: Crews to customers whether their labs.
Michael John Petusky: Dsos or or individual practices are significant and customers are beginning to share our sentiment.
Michael John Petusky: Sentiment on the positive experience they are having with vis vis the efficiency of their practice.
Michael John Petusky: Yeah, I mean, I think I see all that, and that's why I'm interested in as much data as you guys are willing to provide. All right, a follow-up question. I'm going from that to a tiny part of your business relationship, WellSpec.
Michael John Petusky: Yes.
Michael John Petusky: Yes.
Michael John Petusky: I think I see all that in that's why I'm interested in as much.
Speaker Change: Data is you guys are willing to provide.
Speaker Change: Alright, a follow up question.
Michael John Petusky: Going from that too.
Speaker Change: A tiny part of your business relative wells back.
Michael John Petusky: I'm just curious, Glenn, so I think you said mid-single digit to high-single digit performance for 24, if I heard that correctly. And I'm just looking sort of at the back half comps there. And I guess I say this in context of the fact that you just delivered 5% growth versus a pretty easy first quarter comp. I guess, what gives you the confidence that you can sort of deliver, you know, mid to high single-digit growth in that given that, you know, the comp, particularly in Q4, is really tough?
Speaker Change: I'm just curious Glenn So I think you said mid single digit to high single digit performance for 24, if I, if I heard that correctly and I'm, just looking sort of at the back half comps there.
Michael John Petusky: And I guess I'd say, it's in context of the fact that you just delivered 5% growth versus a pretty easy first quarter comp.
Speaker Change: I guess, what gives you the confidence that you can deliver.
Speaker Change: Mid to high single digit growth in that given that.
Michael John Petusky: The comp, particularly in Q4 is really tough.
Simon Campion: Just to reflect on statements we've made before, we're pretty happy that WellSpec remains part of our business. As we noted in the remarks, we're investing in innovation and capacity expansion for WellSpec. We have launched a number of new products that are still gaining customers and performance. And in fact, over the next couple of weeks, we will launch yet another new product, Lofric Origo Sleeve, which is directed at spinal injury patients who have limited hand mobility and dexterity.
Glenn: Yeah, so listen we.
Simon Campion: Just to reflect on the statements we've made before where we're pretty happy that whilst pet remains it remains part of our business as we noted in the remarks, we're investing in innovation and capacity expansion for a four well specced.
Simon Campion: We have launched a number of new products that are still accruing customers and performance and in fact over the next couple of weeks, we will launched yet another new product.
Simon Campion: <unk> frequently rigo sleeve, which is directed at the spinal injury patients who have limited hands mobility and dexterity.
Simon Campion: So we're opening up another market for ourselves with the launch of that new product, and confidence is high that we can get to our numbers in 2024 on WellSpec. As we've noted, it's a macroimmune business. We've got a new general manager in place in Gothenburg who knows the home care business extraordinarily well. And he is reshaping the team over there, and we expect continued and indeed accelerated performance from that group moving forward.
Simon Campion: So we're opening up another market for ourselves with the with the launch of that new product.
Simon Campion: And.
Simon Campion: Yes.
Simon Campion: Confidence is high that we can get to our numbers in 2024 on <unk> as we've noted.
Simon Campion: It's a macro immune.
Simon Campion: A macro immune business.
Simon Campion: We've got a new general manager in place in Gothenburg, who knows the homecare business extraordinarily well and he is he is reshaping the team over there and we expect.
Simon Campion: <unk> and indeed accelerated performance from that from that group moving forward.
Michael John Petusky: Okay, so, you know, essentially, if I was encapsulating that response, I mean, new products are going to be a meaningful part of what helps drive that second half performance against, again, really tough comps.
Simon Campion: Okay, so essentially you're posing.
Michael John Petusky: Capsulate that response, I mean, new products are going to be a meaningful part of what helps drive.
Michael John Petusky: That second half performance against against really tough comps.
Simon Campion: New products and execution.
Michael John Petusky: New products and execution.
Michael John Petusky: Okay, very good. Thank you, guys. Thanks.
Operator: Thank you. And our last question, one moment please. Our last question is from Erin Wright with Morgan Stanley. Please proceed.
Speaker Change: Okay very good thank you guys.
Speaker Change: Thank you and our last question one moment please.
Operator: Our last question is from Erin Wright with Morgan Stanley. Please proceed.
Operator: Great.
Erin Elizabeth Wilson Wright: Excuse me thanks.
Erin Elizabeth Wilson Wright: Can you provide us with an update on the SKU rationalization, and just remind us on how that impacts kind of at the top line too as well if at all for you and then.
Erin Elizabeth Wilson Wright: How meaningful is that or where do we stand on sort of SKU rationalization and your efforts there. Thanks.
Andreas G. Frank: Hey Erin, it's Andreas. So I think we've talked about skew rationalization and optimization before, and it really is focused right now on our endo and resto portfolios. We're well on the way there. We're in the process of eliminating those SKUs that are, you know, really sitting in our system, not driving revenue. So that helps us with operational efficiencies across various plants. And we're realizing this benefit now. And then as we look at the next phase, which is optimizing a certain number of brands that we have in both of those areas, we're very closely coordinating this also with our network optimization efforts, right?
Erin Elizabeth Wilson Wright: Hey, Aaron it's Andreas so.
Andreas G. Frank: I think we've talked about before SKU rationalization and optimization.
Andreas G. Frank: It really is focused right now on our endo and resto.
Andreas G. Frank: Portfolio as well.
Andreas G. Frank: We're well underway there.
Andreas G. Frank: Sure.
Andreas G. Frank: The process of.
Andreas G. Frank: Eliminating those skus that are.
Andreas G. Frank: Really sitting in our system not driving revenue so that helps us with operational efficiencies across various plants.
Andreas G. Frank: So we are realizing this benefit now.
Andreas G. Frank: And then as we look at the next phase, which is optimizing a certain number of brands that we have in both of those areas. We're very closely coordinating does also with our network optimization efforts and we are being very I think thoughtful and selective here.
Andreas G. Frank: And we're being very thoughtful and selective here so that we can, in fact, transition the revenue and the brands to other product lines that we have in the portfolio. As of today, we're progressing towards the plan that we have laid out for 24, and I think more meaningful benefits will come out of that program in 25.
Andreas G. Frank: So that we can in fact transition the revenue and the brands.
Andreas G. Frank: Two other product lines that we have in our portfolio.
Andreas G. Frank: Thank.
Andreas G. Frank: As of today, we are progressing towards the plan that we've laid out.
Andreas G. Frank: For 24, and I think more meaningful benefit to come out of that program and program in 'twenty five 'twenty six.
Simon Campion: Thank you so much. Thank you. And now I would like to turn it back to Simon Campion for final comments.
Speaker Change: Okay alright. Thank you so much thank.
Simon Campion: Thank you and now I would like to turn it back to Simon Campion for final comments.
Simon Campion: Thank you. Thank you all for joining today's call. Before we close, I would like to leave you with some key points. Dentsply Sirona is well-positioned in attractive industries. We do have a robust customer-centric portfolio that supports end-to-end dental workflows, while on the continence care side, our well-specified healthcare business is investing in capacity and innovation. Our transformation continues to take shape operationally and culturally, and although there's much more to be done, we believe that executing on our plans will accelerate growth, profitable growth.
Simon Campion: Thank you. Thank you all for joining today's call.
Simon Campion: Before we close I would like to leave you with some some key points.
Simon Campion: Densify Rowan is well positioned in attractive industries.
Simon Campion: We do have a robust customer centric portfolio that supports end to end dental workflows, while on the continents care side are well expect health care business is investing in capacity and innovation.
Simon Campion: Our transformation continues to take shape operationally and culturally although there's much more to be done we believe that executing on our plans will accelerate growth profitable growth.
Simon Campion: Innovation stands as a vital part of our strategy. We have a healthy pipeline, and as we improve our customer centricity and disciplined execution, we expect to deliver more value for our stakeholders. And finally, on behalf of the management team, I want to extend our gratitude to all Dentsply Sirona employees for their ongoing commitment to the business and to our transformation journey. Thank you.
Simon Campion: Innovation stands as a vital part of our strategy, we have a healthy pipeline and as we improve our customer centricity and disciplined execution.
Simon Campion: We expect to deliver more value for our stakeholders.
Simon Campion: And finally on behalf of the management team I want to extend our gratitude to all dense play sirona employees for their ongoing commitment to the business and to our transformation journey.
Operator: And with that, thank you for participating. You may now disconnect.
Speaker Change: And with that thank you for participating you may now disconnect.
Operator: Okay.
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