Dentsply Sirona Q3 2026 Earnings Call Transcript

Dentsply Sirona (NASDAQ:XRAY) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Dentsply Sirona reported third-quarter revenue of $836 million, a decline of 7.6% as reported, influenced by the absence of Byte revenue and planned dealer inventory reductions.

The company lowered its full-year net sales outlook to approximately $3.5 billion and adjusted EPS to $1.20-$1.30, citing business pressures and continued investment in sales and innovation.

WellSpec Healthcare delivered record sales with a 10% revenue increase, driven by new products and strong U.S. market performance.

Despite positive momentum in the U.S. dental market, broader equipment headwinds and economic pressures continue to affect overall results.

Dentsply Sirona is focusing on its Return to Growth Action Plan, emphasizing investments in clinical education, sales force expansion, and product innovation.

Management highlighted early successes in the U.S. with improved recruitment and retention of sales teams and significant growth in value implants and endodontic products.

The company is addressing inventory benefits and cost management initiatives to stabilize financial performance, with a focus on debt reduction and efficient capital allocation.

Full Transcript

OPERATOR (Moderator)

Please be advised that today’s conference call is being recorded. I would now like to hand the conference over to the first speaker today, Suzanne Hatcher, Investor Relations. Please go ahead.

Suzanne Hatcher (Investor Relations)

Thank you, Stephanie. Welcome to the Dentsply Sirona third 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 this call, and with that I will now turn the call over to Dan.

Daniel Scavilla (President)

Thank you, Suzanne, and good afternoon, everyone. We continue to advance our Return to Growth Action Plan in the third quarter. We expanded customer access, strengthened our commercial organization and increased investment in clinical education and innovation. WellSpec Healthcare delivered record sales and we are seeing green shoots in parts of our U.S. dental business. We are making progress, but our results are not yet where they need to be. Our priority is now turning early gains into broader sustained improvement through stronger execution.

We now expect full-year net sales of approximately $3.5 billion versus the range of $3.5 to $3.6 billion previously, and adjusted EPS of $1.20 to $1.30 from $1.40 to $1.50, excluding the $0.17 one-time gain from tariff refunds. Additional cost actions have not fully offset business pressures as we continue to invest in our salesforce, clinical education and innovation. As stated before, these investments will continue because they’re essential to returning to sustainable growth.

Before I turn the call over, John joined us in July and has now completed his first full quarter with Dentsply Sirona. He brings a practical approach to improving performance and has already built close, trusted relationships with our teams to strengthen financial visibility and challenge cost. He’s an excellent partner and I’m confident he will continue to make significant contributions to Dentsply Sirona. John, over to you.

John C. Fortson (Chief Financial Officer)

Thanks, Dan, and good afternoon, everyone. Since joining Dentsply Sirona, I’ve met with our teams, distributors and partners to better understand our business’s financial performance and return to growth opportunities. These discussions have reinforced my confidence in our brands, customer relationships and innovation capabilities. We have tangible progress to build on. As Dan shared, WellSpec delivered double-digit record revenue growth this quarter supported by new products and we saw positive momentum in the U.S. dental business.

We remain diligent on costs in a dynamic environment while investing in our Return to Growth Action Plan. We are also strengthening our financial systems and access to detailed data to support better decisions. My priorities are to translate these capabilities into more consistent execution, disciplined investment and stronger cash generation. Let’s move to Q3 results. Third quarter revenue was $836 million, down 7.6% as reported and 7% in constant currency. The decline reflected continued pressure across our dental businesses, including the absence of Byte revenue and planned dealer inventory reductions. Excluding Byte, approximately $10 million of planned dealer inventory reductions, and other discrete one-time events, revenue declined 3.8% in constant currency.

Turning to profitability, adjusted gross margin improved 190 basis points year over year, while adjusted gross profit declined approximately $20 million. These results included a $39 million benefit from a change in accounting estimate in preparation for the implementation of a new financial consolidation system. More detailed data enabled us to refine our estimate of profit included in inventory transfer between our businesses. This increased third quarter gross profit and pre-tax income by approximately $39 million.

The benefit reflects a multi-year period rather than third quarter operating performance, and we do not expect a similar benefit in future periods. We will continue to refine and improve our ability to analyze and forecast our business. Lower dental volumes and higher distribution costs weighed on gross profit, partially offset by cost management initiatives and favorable manufacturing absorption. Adjusted operating expenses increased $3 million year over year as we continued to invest in sales, clinical education and R&D to support our Return to Growth Action Plan, partially offset by cost management initiatives. Together, these factors resulted in a 110 basis point decline in adjusted EBITDA margin.

Adjusted earnings per share were $0.29 in the third quarter, down $0.13 from the prior-year quarter. Turning to cash flow, operating cash flow was $32 million compared with $79 million in the prior-year quarter. The decrease was primarily driven by unfavorable working capital. In the third quarter we opportunistically repurchased 1.2 million shares. This is the second consecutive quarter where we have executed share repurchases, returning $25 million to shareholders through repurchases year to date. We finished the quarter with cash and cash equivalents of $195 million and our third quarter net debt to EBITDA ratio was 3.4.

We continue to prioritize debt reduction as a core tenet of our capital allocation strategy. Let’s now turn to third quarter segment performance. CTS sales were $230 million, down 11% as reported. Growth in Instruments in EMEA and the Americas and Japan CAD/CAM partially offset broader equipment headwinds. Equipment and Instruments revenue was $137 million, down high single digits as reported. Instruments grew low single digits supported by U.S. momentum through our ADAC partnership and 4% growth in Intego handpieces in EMEA, partially offsetting lower global imaging volumes.

CAD/CAM revenue was $93 million as reported, primarily reflecting lower Americas volumes from the planned strategic inventory shift with distributors. APAC partially offset the decline, led by strong intraoral scanner and mill performance in Japan. In EMEA, pricing pressure from lower-cost entrants and softer capital demand weighed on results, as uncertainty surrounding the Middle East conflict led some providers to defer investments. Turning to EDS, which includes endodontic, restorative and preventive products, sales declined 4% as reported to $343 million, primarily driven by lower endodontic volumes and lower pricing in EMEA. Higher Americas volumes led by strong file growth and restorative blocks partially offset the decline. U.S. Endo returned to growth for the first time since Q2 2025, while Preventive grew double digits in EMEA and APAC.

OIS revenue was $171 million, down 17% as reported, including a 6% Byte year-over-year negative impact. IPS revenue declined to $132 million as lower global premium implant volumes were partially offset by double-digit U.S. growth in MIS, our value implant brand. In Ortho, SureSmile revenue declined to $39 million, primarily attributable to the absence of Byte sales and lower U.S. volumes. EMEA growth of 8% partially offset the decline, marking the region’s sixth quarter of mid-single-digit or better growth in seven quarters year over year.

Year over year, WellSpec Healthcare revenue increased 10% to $92 million as reported, driven by higher volumes and strong new product sales, particularly Surety in the U.S. market. WellSpec has delivered consistent growth throughout 2026 as investments begun in 2025 drive new products, broader market reach and sustained commercial momentum. Now let’s discuss our 2026 outlook. As Dan shared at the start of the call, we now expect full-year net sales of approximately $3.5 billion compared with our previous range of $3.5 billion to $3.6 billion, and adjusted EPS of $1.2 to $1.3 from $1.4 to $1.5, excluding the $0.17 one-time gain from tariff refunds. This revision reflects a prudent response while sustaining investment in sales, clinical education and innovation—areas historically underfunded and that are essential to our future growth.

U.S. performance met expectations with momentum building. While WellSpec delivered record quarterly sales, EMEA distributor inventory reductions, the Middle East conflict and higher freight costs continue to pressure results. Relative to prior EPS guidance, EMEA underperformance and the Middle East conflict accounted for roughly three-quarters of the reduction, with an unfavorable tax rate and strategic investments representing the balance. The profit included an inventory benefit, and cost management initiatives provided partial offsets.

These strategic investments remain central to our Return to Growth Action Plan and sustainable long-term growth. With that, I will turn the call back to Dan.

Daniel Scavilla (President)

Thanks, John. This year we strengthened our global leadership team and rebuilt capabilities essential to our Return to Growth Action Plan. From sales and dealer coverage to clinical education, we’re also bringing greater discipline to product development and simplifying operations. Wellspect, US MIS implants, and Endo show what focused investment and commercial execution can deliver. Our priority is to build on that progress and drive more consistent performance across the portfolio.

Let me walk through our progress and what comes next. Purchasing decisions remain challenging as customers weigh investments in equipment carefully, and affordability influences elective procedures. In the Middle East and parts of Eastern Europe, conflicts continue to add pressure to sales, while Western European dealers are holding less inventory. We expect some recovery over time. Like I said before, we cannot count on the market to do this for us. We need to execute better, building on our strong brands, relevant products, and long-standing customer relationships to earn more business.

The US remains a top focus, and we are encouraged by the green shoots we are seeing. Our focus now is turning that early progress into broader, sustained improvements. In the US, we’ve aligned our commercial teams around customer needs and established a dedicated sales training team. All premium implant reps have completed certification, and the MIS team is expected to complete training and be certified by the end of this month. Recruitment and retention have improved significantly, with our ability to attract talent adding stability to our commercial teams.

Quota-carrying field vacancies are now in the mid-single digits, down from more than 20% in prior years, and voluntary sales rep attrition has declined substantially. More consistent coverage helps us deepen customer relationships to follow through on their needs. MIS offers an early example of our progress. US sales grew double digits in Q3, with customer conversions accelerating sharply in September. Overall value implant sales grew more than 7% year over year. To build on this momentum, we aim to nearly double the MIS sales force by year end. Implant education also increased more than 60%, supporting broader customer adoption.

We’re seeing early returns in Endo as well, with U.S. sales up 4% in the quarter. With seven new distribution agreements signed year to date, we have largely completed our North American dealer expansion efforts. We’re now focused on activating that network through training, joint customer visits, demonstrations, and installation support. A simpler incentive structure and inventory model also make it easier for our distributors to work with us. Engagement at our recent DS World events reinforced the opportunity to expand customer access and grow with these partners.

We’re also strengthening enterprise sales with a sharper focus on DSOs. We’ve built out a new team to expand on this opportunity and develop action plans to gain share in these markets. Clinical education is central to this effort. After redesigning our US programs in the first half, we’re executing in the second half, giving more clinicians hands-on experience with our products and workflows. Our second half 2026 clinical education investment in North America is six times greater than last year’s level, including more than 160 Endo courses and expanded hands-on programs.

We are broadening access through education centers, universities, and industry events, complemented by lectures and virtual learning. Clinician participation is high and demand remains strong. At our recent DS World events globally, we increased workshops, lectures, and hands-on continuing education courses by more than 60% versus last year. Like I said before, the value of clinical education builds over time. We are helping clinicians become more confident, consistent users of our products, with our commercial teams following through to support adoption. We’re also bringing customer perspectives directly into our decisions through our KOL advisory boards. These candid discussions with small groups of clinicians and dental professionals help us understand their needs, sharpen innovation priorities, and identify where we can be better partners.

In turn, we’re able to create more awareness of a holistic view of Dentsply Sirona’s portfolio strengths and workflow benefits. We began with implant clinicians and recently met with dental laboratory leaders, EDs, and CTs. Discussions are planned by year end, together with daily feedback from our field teams. These insights help shape product development, education, and service at Dentsply Sirona. Innovation remains a priority, supported by greater discipline in how we invest. As planned, R&D spend increased approximately 20% through September compared with last year. Our teams have established a new product development process to strengthen our innovation engine. Customer needs guide product requirements, with clear decision criteria and rigorous stage-gate reviews helping move the strongest ideas forward. Earlier planning for training and clinical education strengthens launch readiness and supports adoptions.

At DS World, we introduced Primescan Connect powered by DS Core, providing our most affordable scanner option with our high-quality Primescan performance. Practices can use an existing compatible PC without a dedicated laptop, installed scanning software, or separate scanning licenses, making it easier to enter digital dentistry. We are bringing key products in our regenerative portfolio back to the market in the U.S. and Canada. Following regulatory approval for OSSIX Plus, a collagen membrane that supports bone regeneration, we also received Canadian approval for OSSIX Volumax, a collagen scaffold that supports bone and soft tissue regeneration. With the U.S. clearance expected soon, these milestones reinforce our leadership in advanced dental regeneration and position us to rebuild momentum in the OSSIX business.

Wellspect demonstrated the opportunity from focused investments and commercial execution. Investments in new products and U.S. commercial capabilities are supporting broader market reach and continued growth. Investments increased 15% year over year as the business pursues the $7 billion urinary management market. Wellspect built its U.S. Surety Portfolio through a planned sequence of launches, culminating in the Urinary Management System alongside female and male external catheters for people managing incontinence.

The at-home Surety Portfolio recently qualified for traditional Medicare coverage, expanding access to at-home care for eligible patients. These opportunities support continued investment in the portfolio and commercial capabilities. Alongside our commercial investment, we are reducing costs and complexity. Established earlier this year, the Transformation Office is advancing our approximately $120 million 2026 savings initiative, funding the Reset and strengthening cost discipline as our focus shifts from stabilization to value creation. As John discussed, we are resolving legacy matters to sharpen our focus on improving performance. As disclosed in our Form 10-Q, we entered into a Memorandum of Understanding for a proposed settlement of the 2024 Bite securities litigation.

That proposed settlement amount will be covered by our liability insurance policies. Our global leadership team is fully in place with clear priorities and accountability for executing our Return to Growth Action Plan. Early progress in implants, Endo, and Wellspect gives us confidence in the opportunities ahead. The task is now to extend that progress across the portfolio and deliver more consistent results. There’s more work to do, but I’m encouraged by the team, the focus, and the momentum we are building. Thank you to our employees and to our partners for their commitment.

With that, let’s open the call for questions.

OPERATOR (Moderator)

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please be advised we will limit participants to one question each. Please stand by while we compile the Q&A roster. Our first question comes from Alan Lutz of Bank of America. Your line is now open.

Alan Lutz (Analyst)

Good afternoon, and thanks for taking questions. Appreciate all the color so far. Dan, I’ll start with you. We talked over the past couple quarters about the opportunity to partner with DSOs, and you mentioned that you’ve now built out a team to capture that DSO opportunity. Can you just update us on the progress there? What are these potential partners looking for, and where do you see an opportunity for X-ray to lean in? And then a quick follow-up for John, is that $39 million benefit in the quarter included in the updated EPS? Thank you both.

Daniel Scavilla (President)

You got it, Alan. So I’ll go first. We have been putting together a stronger DSO team, investing in that, and actually engaging with different levels of DSOs over the past several months, gaining traction. The thought there is we have in the past touted the broad scope of our portfolio and putting that out to customers, and we think that in particular with DSOs, that can really hit the mark. So depending on what they do, whether they are generalists or specialists, whether going into equipment or into consumables, we really do know that we can come back with a strong proposition.

We’re currently in several levels of conversations there, working our way through that. But I do think that it is one of the long-term potentials that we need to play in to be relevant and grow in the future.

John C. Fortson (Chief Financial Officer)

Well, and just to answer the second part of that question, yes, it is included, and it’s $30 million because you have to look at it on an after-tax basis. So $39 is pre-tax, but it is included in our guidance.

Alan Lutz (Analyst)

Great. Thank you.

OPERATOR (Moderator)

Thank you. Our next question is from Elizabeth Anderson of Evercore. Your line is now open.

Elizabeth Anderson (Analyst)

Hi, guys. Thanks so much for the question. I have sort of a two-parter. One, you obviously, Dan, were talking about some green shoots, and I think you pointed to sort of some double-digit growth in MIS and value implants more generally. Could you maybe talk us through sort of is that what you were referring to? And obviously Wellspect, where are you seeing kind of the different products start to accelerate and sort of how do you see that as we transition into 2027?

And maybe as a corollary to that, can you give us an update on the timing of the inventory destocking going forward? Thank you.

Daniel Scavilla (President)

I will give that a shot, Elizabeth. So let’s start with Wellspect. As you know, we’ve launched products through this year and they were planned, they tend to be on time so far, and they’re doing well. It allows us to penetrate into new areas, especially in the U.S., also covered with this Medicare coverage. It’s a very promising thing. These are great products. They’re getting readily accepted. And so what I see is very long. I want to say I see strength in Wellspect continuing through the rest of this year.

And I would say, although we’re not giving 2027 guidance, I would expect to see that strength into next year, just given how early we’re starting to really get into the U.S. That said, Wellspect was up and strong in every market that they were in. So very positive quarter for them throughout the world. I would tell you, again, U.S. value implants up high single digits, MIS U.S. up low double digits, really related to salesforce expansion, account conversion, clinical education as a main driver. There are innovations we are working on to further strengthen that going forward, but again, depending on the timing of some things that we’ll talk about in the future, we’ll see where that goes that way. ENDO is the same way we’re talking throughout the script.

We’ve been putting clinical education into ENDO and really flexing some of the strength of our products there, and we’re seeing a good market reaction with that.

Elizabeth Anderson (Analyst)

Okay, thank you.

OPERATOR (Moderator)

Thank you. And just as a reminder, if you would like to ask a question, please press star one one on your telephone and wait for your name to be announced. Our next question is from Jeff Johnson of R.W. Baird. Your line is now open.

Jeff Johnson (Analyst)

Thanks. Good morning, guys — or good afternoon, guys. Thanks for those updates on the green shoots in the U.S. Dan, you know you have talked in the past about potentially getting to a plus sign on the U.S. number. Looks to me like the stacked comps on the Americas, which I know is not a perfect proxy for the U.S., but the stack really kind of stays about the same. And you’ve been trending down 3% to 4% on an adjusted basis in the Americas the last couple quarters.

So can you swing that number a full four or five points and get to that plus sign in the fourth quarter? How should we think about that? And then just to push John a little bit on the benefit that you’re keeping in the guidance — I’ve got that at about a $0.14 after-tax benefit. One, is that math about right? I guess you gave the after-tax number so I can dial that in better if I need to. And two, if it’s a multi-year benefit, I guess I’m just a little confused as to why keep it in the 1.20 to 1.30 guidance this year. Thank you.

Daniel Scavilla (President)

So Jeff, thanks. This is Dan. I’ll go first. You know, like I said in the beginning of the year, I am going for that, looking for like even a 0.1 or a 0.2 as we get into the U.S. There’s momentum there that makes that a possibility. What I’ll say is it’s a stretch, and if I miss it in the fourth, that means I’ll get it in the first. But we’re going for it. It’s really a message of we’re moving to stabilize. Once stabilized, we move to growth. So probably not going to back off my aspiration of getting a plus sign by the fourth quarter that way.

John, I’ll hand it to you.

John C. Fortson (Chief Financial Officer)

Yeah, so, I mean, I already made it clear in that other question: it’s sort of 39 pre-tax, 30 post-tax. So you can kind of do the math. You’re a little bit high, but it’s okay — you’ll figure it out. Look, why did we include it in the guidance? At the end of the day, we are in a process of improving how we analyze and forecast this company. So we are implementing new consolidation systems, and we’re looking hard at the FP&A function of our company, right?

And you’re going to find that we have adjustments that come through this. It just so happens to be that this is a positive adjustment. But we had to book it this quarter and we think it’s appropriate to do that. You can make your own judgment as to how you want to look at it with regards to our operating EPS.

Daniel Scavilla (President)

Yeah. Something I’ll tell you, Jeff, to consider building on as well. While we call it out because of it occurring in this quarter, I also want to make sure that it’s clear it’s not a standalone event, meaning that it is a favorable — we’re calling out, we continue through John and the team to clean up several things and there are several other offsets to that number. If you actually netted those out operationally, you may have a net of 1 or 2 cents is really where I would put that.

So we’re just calling it out for its uniqueness. There’s other things that we have continued through the year to clean up and do. And I again just want to make sure we understand it’s not a standalone event, but we’re just calling it out given its size. There are offsetting one-time events bringing it down to negligible.

OPERATOR (Moderator)

Thank you. Our next question comes from Lily Lozada of JPMorgan. Your line is now open.

Lily Lozada (Analyst)

Great. Hi, everyone. Thanks for taking the question. You made some comments earlier this quarter about return to growth in 2027, so I’m hoping you can share the latest in light of today’s update. I know you’re not giving guidance just yet, but generally what are the themes — headwinds, tailwinds — we should be keeping in mind for next year, and is flat on the top and bottom lines still an okay way to think about it? Thanks so much.

Daniel Scavilla (President)

Yeah, thanks, Julie. I like how you’re trying to tease out that ’27 for me, but I’ll go along with you on that. I did say that out at the conference. I don’t really have better data just yet because we’re only just beginning to look at it over the next two months. And in particular, we’re really coming up with the next chapters of the Return to Growth plan that are fairly significant in what we plan to do. You know, I’m happy with where we are so far this year and what’s taking root. We’re moving into the next phase. There’ll be a lot of moving parts. So what I would tell you is we really do need the next one or two months to finish those out, align with our board, and then come forward with kind of how we’ll reveal this to the market. So I’m going to shy away from giving you anything specific other than what I said on stage. I would stick with that for now and let us get through this work, and when we have better data we can share it with you as we enter into next year.

OPERATOR (Moderator)

Thank you. We do have additional time for questions, so as a reminder, if you would like to ask a question, please press star one one on your telephone and wait for your name to be announced. Our next question is from Michael Cherny of Leerink Partners. Your line is now open.

Leah (Analyst)

Hi, this is Leah on for Mike Cherny. Thanks for taking the question. I was wondering if you could help us bridge from 3Q to 4Q earnings based on the implied updated outlook, especially looking through the inventory benefit this quarter and maybe what some of the puts and takes are to consider, and how much visibility you have into 4Q. Thank you.

John C. Fortson (Chief Financial Officer)

Yeah, I mean, look, you obviously can do the math to figure out what we have to achieve in Q4 to stay in the range that we talked about, right? I think when you work your way through it, you’ll realize that it’s fairly doable, assuming that we get certain upticks in some of our markets and we have a little bit of what I would call mix shift, because some of our products are obviously more profitable than others, right? So as you see us improve and stabilize in some of the equipment businesses — and normally the fourth quarter is a pretty good capital equipment quarter — you’re going to see some improvement from there.

And we feel comfortable with the range that we’ve given you guys.

OPERATOR (Moderator)

Thank you. We do have time for any additional questions. If anyone would like to ask a final question… Okay. That will conclude the question-and-answer session. Thank you for your participation in today’s conference. This does conclude the program, and you may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.