DENTSPLY SIRONA Inc Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: David Saxon - Needham & Company, LLC - Analyst : Great. Good morning, Simon and Glenn. Thanks for taking my questions. Glenn, good luck on your next chapter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, XRAY.OQ - Q3 2024 DENTSPLY SIRONA Inc Earnings Call

Question: David Saxon - Needham & Company, LLC - Analyst : I have two questions -- yes, great. Just two questions, one on Byte, one on implants. So on Byte, can you just give us an update on how long you think the suspension might last? And then in terms of cost tied to Byte, it sounds like the cost in the quarter, at least, was around $40 million or in that range. Does that include COGS and OpEx or just OpEx? And then on the OpEx side, how much or what percent can you reallocate to other parts of the business if Byte does go away? And how much would be viewed as more discretionary?

Question: David Saxon - Needham & Company, LLC - Analyst : Okay. That's super helpful. Thanks for that. And then my second question is just on implants. So it weakened sequentially. I guess could you talk about the performance across value versus premium? And then as it relates to China, I guess, are you expecting that region to be down until you lap the VBP comps? And then lastly, on implants. You talked about some leadership changes. Can you just talk about kind of how you see the strategy going forward? And any update on kind of expectations around returning to growth and market growth? Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, XRAY.OQ - Q3 2024 DENTSPLY SIRONA Inc Earnings Call

Question: David Saxon - Needham & Company, LLC - Analyst : Great. Thanks so much.

Question: Kevin Caliendo - UBS Securities LLC - Analyst : Thanks, and thanks for all the transparency on this situation. Can you just remind us first like how big Germany is for you in terms of sales or any other numbers you can provide? And then, I guess, second question, more macro. At this point, given how the macro is, Simon, as you sit there, how do you think about investment versus cost saves? Is the macro such that it's an opportunity to try to take share as things are bad and like, let's educate everybody and let's throw money at the problem, and as things get better, we'll be in a really good situation? Or are you at a point where, hey, you know what? It's bad, let's just circle the wagons. And I know you have this cost-savings program. How do you think about investment versus cost saves when the macro is just extending worse than you had imagined?

Question: Kevin Caliendo - UBS Securities LLC - Analyst : Thanks, Simon.

Question: Jeff Johnson - Robert W. Baird & Co. Inc. - Analyst : Thank you. Good morning, guys. Simon, just on the Byte commentary you made here in the first question of the Q&A about notices going out to employees, and obviously, you're moving some of your other employees to other parts of the company, things like that. I mean, effectively, it sounds like you telling us you're shutting down the business without just saying you're shutting down the business. And I understand there's maybe people issues here involved in and it's a public call and all that. But at least from our side of the table, from an investor standpoint, is that how we should be looking at things at least for now? Take it out of our model, take it out of our expectations on a go-forward basis ad infinitum? And then if it comes back, we can deal with it then. But for now, that's maybe the safe way to think about things?

Question: Jeff Johnson - Robert W. Baird & Co. Inc. - Analyst : Yes. All fair. That's great. And then, Glenn, maybe help us out just a lot of volatility here these last couple of quarters. Can you just kind of level set us what are you exiting 2024 run rate savings on the cost savings initiatives? Where are those cost savings expected REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, XRAY.OQ - Q3 2024 DENTSPLY SIRONA Inc Earnings Call to run rate by the end of 2025? So really kind of looking at what would be the incremental potential cost savings in 2025 we can still expect through the P&L? Number one. And number two, as I look at kind of that low to mid-$0.40 guidance for Q4, I can use the last couple of years, I can use pre-COVID years, using a lot of different ways of looking at Q4 as a percentage of your typical earnings year, I can get to a number anywhere from $1.50 to $2 for next year. I know you're not guiding to 2025, but is my thinking correct, kind of that's more of the range? The Street's sitting at 2.28. It just seems impossible for me to believe we can get anywhere near that next year. So kind of take that low to mid-40s and kind of apply whatever fourth-quarter percentage we want to it to kind of be more in that range I suggested. Thank you.

Question: Jeff Johnson - Robert W. Baird & Co. Inc. - Analyst : Understood. Thank you.

Question: Jason Bednar - Piper Sandler Companies - Analyst : Hey, good morning. Thanks for taking the questions. Good luck to you, Glenn, on your next endeavors here. Wanted to dig in a little bit more in the CTS segment, your CAD/CAM comments, and apologies if this has already been addressed. I'm bouncing between a couple of calls. But the lower retail demand in CAD/CAM, do you sense whether this is at all coming ahead of your PS2 launch? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, XRAY.OQ - Q3 2024 DENTSPLY SIRONA Inc Earnings Call And then can you talk about the headwinds you're seeing and how much you attribute to the maybe the macro and the level of interest rates versus maybe how much might be competitive headwinds in scanners and printers? Really just trying to understand with these questions what might be exogenous and what maybe a cleaner trend or exit rate might look like in CAD/CAM now that you actually have PS2 launch come out there?

Question: Jason Bednar - Piper Sandler Companies - Analyst : Okay. Right. Fair enough. And then on -- for my follow-up, and maybe a little bit bigger picture and maybe a little bit of a follow-up to what Jeff had just asked, but -- and I don't mean to be critical here. But when we think strategically about the savings plans you've had in place, shareholders really haven't seen these materialize at the bottom line. Earnings are basically flat year over year. That's despite headcount coming down -- or sorry, share count coming down by about 5% this year. You've talked about deploying a large chunk of those Phase 1 savings -- some of the Phase 2 savings back into growth initiatives, but the growth just hasn't really materialized. So the question here is how or whether you think about reevaluating maybe some of those business investments, whether the returns on that spend justify the investment? And does there comes a point where you look to drop more to shareholders at the bottom line so that you can get back to growing earnings?

Question: Jason Bednar - Piper Sandler Companies - Analyst : Right, very helpful. Thank you.

Question: Jon Block - Stifel, Nicolaus & Company, Inc. - Analyst : Great. Thanks guys. Good morning. Glenn, for 4Q -- the implied 4Q organic, that might be down high single digits or so when we tie out. So do we think about maybe a 400-basis-point year-over-year impact from Byte, some impact from the EDS pull forward into 3Q from 4Q to $20 million? I guess where I'm trying to go with this is we all sharpen our pencils on '25. Just to arrive at like a normalized core revenue for 4Q, optically, again, it might be down high single digits. It's a little difficult. But do you think it's fair to say maybe it's closer to down low single digits when we make some of those adjustments, again, most notably the Byte and the EDS pull forward, just as we can get a better sort of jump off or trajectory into '25?

Question: Jon Block - Stifel, Nicolaus & Company, Inc. - Analyst : Okay. Got it. Fair enough. And then, just a bigger-picture question. There's, I guess, some chatter out there on MA for dental, and there's a good amount of talk about benefits being reduced and what that does or doesn't mean for the dental industry, and maybe more specifically, implants. So would love your thoughts on how you view that going into 2025 and what that may or may not mean for the implant market and maybe even more specifically Dentsply Sirona's initiatives, most notably in North America for implants? Thanks.

Question: Jon Block - Stifel, Nicolaus & Company, Inc. - Analyst : Thanks for the color.

Question: Erin Wright - Morgan Stanley & Co. LLC - Analyst : Great. Thanks. Could you give us an update on just like the distribution channel, your relationships there, and kind of the conversations, how those have been going since kind of the recent disclosure around sort of revisiting some of those relationships? And so how do we think about the importance of distribution across your business? And also kind of what's in the channel, some of the stocking dynamics pull forward, just how we should think about that? Thanks.

Question: Erin Wright - Morgan Stanley & Co. LLC - Analyst : Okay, thanks. And then just on SKU rationalization, you commented on it earlier, but has there been any changes in terms of that cadence of where you're at now in terms of the SKU rationalization efforts? And just remind me, some of -- that doesn't necessarily meaningfully impact the top line, right, for you? Are you thinking about that differently in terms of the mix? Thanks.

Question: Erin Wright - Morgan Stanley & Co. LLC - Analyst : Okay. Thank you.

Question: Ahmed Muhammad - Leerink Partners LLC - Analyst : Hi, good morning. This is Ahmed on for Mike. Looking ahead, how should we think about what ortho organic growth should be excluding Byte, assuming the team can be more focused on SureSmile? I know that their investments to the company is making -- in software and the push into the ortho market. And lastly, how would you characterize the current and expected uptake in SureSmile with those orthodontics? Other than the software update, is there anything else that's keeping SureSmile back, so to speak, from branching into the ortho space now? Thanks.

Question: Ahmed Muhammad - Leerink Partners LLC - Analyst : Got it, thanks. And if I could sneak in one last one. The revenue-generating SKU reduction in 2025, any idea of the impact that has on top line? Is that, if I'm correct, mostly coming from the EDS segment?

Question: Ahmed Muhammad - Leerink Partners LLC - Analyst : Got it. Thank you.

Question: Brandon Vazquez - William Blair & Company - Analyst : Good morning, everyone. Thanks for taking the question. Simon, can we go back maybe for a second on implants? And I'm kind of curious -- I'm sure you guys have done kind of a postmortem internally where you expect it to be today. And I know you're kind of adjusting things on a go-forward basis, you're hiring new leadership. But what was it you think that hasn't gone to plan in the past couple of quarters or a year or two just to better understand like where you guys are, what hasn't worked, and what needs to be fixed still on a go-forward basis?

Question: Brandon Vazquez - William Blair & Company - Analyst : Okay. And one -- maybe one quick follow up, if I could squeeze it in real quick. You guys had mentioned hiring a new virtual internal sales team. Just curious if you could give us examples of where you envision that virtual sales team really plugging into the commercial organization and when you might start to see some P&L benefits from those investments going forward? Thank you.