• Revenue: $905 million in Q4, representing a reported sales decline of 10.6% and organic sales decline of 10.7%.
• EBITDA Margin: Declined 290 basis points in Q4, mainly due to a lower gross margin.
• Adjusted EPS: $0.26 in Q4, down 41.3% from the prior year.
• Operating Cash Flow: $87 million in Q4, down 45.6% year over year.
• Full Year Revenue: $3.79 billion, a reported sales decline of 4.3% and organic sales decline of 3.5%.
• Full Year EBITDA Margin: Contracted 80 basis points to 16.6%.
• Full Year Adjusted EPS: $1.67.
• Free Cash Flow Conversion: 83% for the year, a year-over-year increase of over 40%.
• Net Debt-to-EBITDA Ratio: Approximately 3x at year-end.
• 2025 Outlook - Organic Sales: Expected to be down 2% to 4%, including a negative 2% Byte sales impact.
• 2025 Outlook - Adjusted EPS: Expected to be in the range of $1.80 to $2.

• Warning! GuruFocus has detected 5 Warning Signs with XRAY.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dentsply Sirona Inc (NASDAQ:XRAY) saw a return to organic sales growth in Europe, with approximately 2% growth in Q4 2024.
• Global growth in Imaging was nearly 13%, indicating strong performance in this segment.
• SureSmile continued to grow globally, achieving a nearly 4% increase over the prior year quarter, with over 20% growth in Europe for Q4 and the full year.
• Wellspect exceeded estimated market growth rates, posting approximately 7% growth.
• The company completed the largest individual phase of its ERP deployment in the US, which went live on November 1, 2024, laying important foundations for future phases.

Negative Points

• Dentsply Sirona Inc (NASDAQ:XRAY) recorded non-cash charges for the impairment of goodwill and other intangibles of approximately $370 million net of tax.
• The voluntary suspension of sales and marketing of Byte aligners resulted in a charge for customer refunds, negatively impacting Q4 results.
• Organic sales in the Orthodontic & Implant Solutions segment declined 28.7%, primarily driven by the impact from Byte.
• US sales declined 29.9%, largely due to Byte, CAD/CAM, and the timing of EDS distributor orders.
• The macro environment, challenging marketing, and competitive dynamics have created headwinds on organic sales, making the $3 adjusted EPS target unachievable in 2026.

Q & A Highlights

Q: Can you discuss the strategic alternatives for Wellspect and any updates on the manufacturing footprint integration with dental businesses? A: Simon Campion, CEO, explained that Wellspect and the dental businesses in Sweden are largely separate, minimizing the need for integration adjustments. Regarding innovation, Wellspect launched a sleeved intermittent catheter, significantly enhancing growth. Further product details are not disclosed for competitive reasons.

Q: What gives you confidence in margin improvement throughout 2025, and how will the third-party partnership impact costs? A: Herman Cueto, Interim CFO, stated that Q1 will be the lowest margin point, with improvements expected as the year progresses due to foundational initiatives and Byte's impact cycling out. The third-party partnership for G&A transformation is not included in the 2025 plan but could provide upside benefits in 2026 and 2027.

Q: What is the strategy for Byte, and how will it impact the P&L? A: Simon Campion, CEO, explained that Byte's capabilities in demand generation and e-commerce will be integrated into the SureSmile platform. The Byte brand will not be used, focusing instead on SureSmile. Herman Cueto, Interim CFO, added that Byte's restructuring will provide a tailwind to EPS, with some sales continuing into 2025.

Q: Can you provide an update on the US implant team and the timing for returning to growth? A: Simon Campion, CEO, acknowledged disappointing performance in the US implant market. The company is enhancing digital connectivity, localizing customer education, simplifying messaging, and improving sales force capabilities to drive growth. Improvements are expected in 2025.

Q: How does the current macro environment affect dental utilization trends, and what are the expectations for 2025? A: Simon Campion, CEO, noted that global patient volumes are stable, with Germany showing signs of improvement. Staffing shortages remain a significant issue, and the company is focusing on promoting digital solutions to enhance workflow efficiency and offset these challenges.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.