DENTSPLY SIRONA Inc. 2026 Q2 Earnings Call

Good afternoon, everyone. Welcome to the DENTSPLY SIRONA second quarter 2026 earnings call. Joining me for today's call are Dan Scavilla, President and Chief Executive Officer, and John Fortson, Executive Vice President and Chief Financial Officer. I'd like to remind you that an earnings press release and slide presentation related to the call are available on the investors section of our website at www.dentsplysirona.com. Before we begin, please take a moment to read the forward-looking statements in our earnings press release. During today's call, we may make certain forward-looking statements that reflect our current views about future performance and financial results. We base these statements on certain assumptions and expectations on future events that are subject to risks and uncertainties.

Our most recently filed Form 10-K and any updated information in subsequent Form 10-Q or other SEC filings, list some of the most important risk factors that could cause actual results to differ from our predictions. On today's call, our remarks will be based on non-GAAP financial results. We believe that non-GAAP financial measures offer investors valuable additional insights into our business'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. Please refer to our press release for the reconciliation between GAAP and non-GAAP results. Comparisons provided are to the prior year quarter, unless otherwise noted. A webcast replay of today's call will be available on the Investors section of the company's website following the call.

With that, I will now turn the call over to Dan.

Thanks, Wade, and good afternoon, everyone. Before we discuss the quarter, I'd like to welcome John Fortson to his first earnings call as Executive Vice President and Chief Financial Officer of DENTSPLY SIRONA. John joined us on July 20th, and we're excited to have him on board. He is a proven finance and business leader who's worked closely with CEOs and boards through periods of transformation, strengthening operations, allocating capital with discipline, and creating long-term shareholder value. Having served both as a public company CFO and CEO, his experience is well aligned both with where DENTSPLY SIRONA is today and where we're headed in the future. I'm glad he's on our team. I'd also like to thank Mike Pomeroy for his leadership as interim CFO. I sincerely appreciate his contributions. With that, I'll turn the call over to John to review our second quarter 2026 financial results.

Thanks, Dan, and good afternoon, everyone. First off, I'd like to say it's a privilege to join DENTSPLY SIRONA. Having followed the company for many years, I am familiar with the strength of its portfolio and energized by the opportunity to help restore the business to its full potential. What ultimately drew me here was the clear commitment from the board and the leadership team to execute a disciplined turnaround. There is a strong focus on operational excellence and long-term value creation. Although I've only been with the company for a few weeks, I'm hitting the ground running and ready to execute the Return-to-Growth action plan with the team. Let's move to Q2 results on slide four. Our second quarter 2026 revenue was $898 million, representing a decrease of 4.1% as reported, or 6.3% on a constant currency basis.

Adjusting for the impact from Byte and the planned dealer inventory reduction of approximately $8 million in the quarter, revenue declined 3.6% on a constant currency basis. Adjusted EBITDA margins were approximately flat year-over-year, with the benefit from $44 million in tariff refunds offset by a decline in gross profit driven by lower volumes, sales mix, and incremental tariff impacts. OpEx was up $12 million year-over-year, including an FX headwind of approximately $8 million. A decrease in G&A was offset by investments made into sales, marketing, and R&D as was planned in support of the Return-to-Growth action plan. Adjusted EPS in the second quarter was flat versus last year at $0.52. The tariff refunds translated into a positive $0.17 per share impact. Operating cash flow in the quarter was $99 million compared to $48 million in the prior year quarter.

The year-over-year increase is primarily attributable to the receipt of the tariff refunds, in addition to improvements in working capital with better management of accounts payable and inventory. We continue to remain diligent on improving our working capital. This will be a key focus area of mine going forward. In the second quarter, we opportunistically repurchased 1.3 million shares at an average price below $10 per share. This represents the first time DENTSPLY SIRONA has repurchased shares since the third quarter of 2024. We finished the quarter with cash and cash equivalents of $239 million, and our Q2 net debt to EBITDA ratio was 3.2 times, consistent with where we ended Q1 of this year. We continue to prioritize debt reduction. Now let us turn to Q2 segment performance on slide five. Starting with the CTS segment, sales were $239 million, an as-reported decline of 1.5%.

Equipment and instruments revenue was $137 million, flat year-over-year, with declines in treatment centers. This was partially offset by growth in imaging equipment, particularly in EMEA, where we saw increased demand for our Orthophos line of imaging products. CAD/CAM revenue was $102 million, down mid-single digits, driven by lower volumes in the Americas and unfavorable price mix in EMEA, partially offset by double-digit growth in APAC. EMEA saw a slight softening of demand for select areas of capital equipment as providers deferred some investment decisions due to uncertainties from the Middle East conflict. Turning to EDS, which includes endo, resto, and preventative products, sales of $376 million declined 2.7% as reported, primarily driven by lower volumes in the Americas and EMEA.

As we shared in Q1, the impact of inventory changes for our EDS products held by our distributor partners in the EMEA region had a negative impact on results. We saw a sequential improvement in Q2 as we obtained greater visibility into the dynamics within various markets and distributors across the region. Overall, sell-out in the region was in the low single digits, consistent with expectations for dental consumables. The sell-in is lower year-over-year as certain distributors reduced their inventory levels. We do not believe this reduction in wholesale inventory is a demand-driven trend. Moving to OIS, revenue of $197 million declined 13.2% as reported. When adjusting for the year-over-year impact from Byte, OIS declined 5.7% as reported, consistent with last quarter. IPS revenue of $157 million declined mid-single digits, driven by lower volumes of premium implants in the Americas and APAC.

EMEA implants grew mid-single digits as reported, led by improved performance for MIS, our value implant brand. For ortho, SureSmile revenue of $40 million declined double digits, primarily attributable to the Americas region. Wrapping up with Wellspect Healthcare, revenue of $86 million increased 7.1% as reported, driven by the continued strength of new product sales and execution by the business, partially offset by lower inventory levels in the U.S. market. Now let's move to slide six to discuss our outlook for 2026. We are maintaining our 2026 outlook for net sales of $3.5 billion-$3.6 billion and adjusted EPS in the range of $1.40-$1.50. This EPS range excludes the benefit from tariff refunds and impact of incremental tariffs. Our decision to maintain our outlook is based on expectations as of today, including our current expectation regarding tariffs and trade policies.

Looking to the third quarter of 2026, we expect revenue to decline sequentially due to normal seasonality. As we continue to execute our Return-to-Growth priorities, we also expect Q3 earnings to be below Q2 2026 levels, excluding the $0.17 benefit from tariff refunds. We remain committed to investing in our sales force, Clinical Education programs, and R&D with the benefit of these investments expected to become increasingly visible beginning in Q4. With that, I will turn the call back to Dan.

Thanks, John. As we wrap up the second quarter since beginning our 24-month Return-to-Growth action plan, our priorities haven't changed. We're focused on putting customers at the center of every decision, improving execution, investing where we see the greatest opportunity for long-term growth, and strengthening the financial foundation of the company. We're making progress, but this is still a turnaround. Some parts of the business are improving faster than others, and there's still a lot of work ahead. As John mentioned, we expect more of the improvement weighted towards the fourth quarter, given investment timing and macroeconomic conditions. What gives me confidence is that we're beginning to see evidence that the work we're doing is gaining traction. Everything starts with the customer. Over the last six months, we've been rebuilding how we engage with our customers.

We're investing in clinical education, strengthening our commercial organization, expanding customer access through our dealer network, and making it easier to do business with DENTSPLY SIRONA. In the second quarter, clinical education was at the forefront. We brought together more than 1,000 clinicians at our global implant summit, hosted endo KOLs at our 2026 endodontic forum, and convened leading experts across restorative and multidisciplinary dentistry to help shape the next generation of clinical solutions. These opportunities enable us to learn directly from clinicians, strengthen relationships, and ensure our innovation pipeline reflects what customers need most. At the same time, we're investing in our own commercial capabilities. Every U.S. implant sales rep recently completed the most comprehensive implant certification program we've ever delivered. Our most experienced team members told us they've learned more in those four days than they had in years.