DENTSPLY SIRONA Inc. (XRAY) Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 came in ahead of internal expectations with revenue $0.879B and adjusted EPS $0.43, driven by Europe/ROW growth and cost discipline; GAAP EPS was $0.10 as non-GAAP margins expanded despite U.S. weakness tied to Byte and softer CAD/CAM .
• Versus S&P Global consensus, XRAY delivered a beat on revenue ($879M vs $854M*) and adjusted EPS ($0.43 vs $0.30*), and a beat on EBITDA ($150M* vs $123M*), supported by lower OpEx and an $8M Byte customer refund adjustment; management maintained FY organic sales and EPS guidance while raising reported sales on FX .
• Guidance: FY25 organic sales down 4% to 2% and adjusted EPS $1.80–$2.00 maintained; reported sales raised to $3.6–$3.7B; adjusted EBITDA margin outlook increased to >19%; Q2 organic sales expected down mid-single digits with adjusted EPS up YoY .
• Stock-relevant narrative: continued transformation and margin expansion, digital adoption (DS Core), and improving Germany offset by U.S. Byte drag and tariff headwinds (approx. $0.10 EPS, ~$50M annualized exposure), plus near-term caution on U.S. CAD/CAM demand and cash conversion .

What Went Well and What Went Wrong

What Went Well

• Adjusted EBITDA margin expanded to 19.0% (+220bps YoY) on transformational savings, tighter OpEx and an $8M Byte refund adjustment; adjusted EPS rose to $0.43 (vs $0.42 LY) despite lower sales .
• Europe posted its second consecutive quarter of growth (+1.1% organic), with Germany delivering a third straight quarter of growth; imaging performed well across all regions, and Wellspect grew +8% organically .
• Digital ecosystem traction: DS Core surpassed 42,000 unique users, >50,000 connected devices, and >100,000 monthly lab orders; new AI-powered DS Core Diagnose complements CBCT; Primescan 2 workflow sped up (e.g., 90% faster simulations) .

What Went Wrong

• U.S. organic sales fell 14.9%, with Byte a ~9.8% headwind; CAD/CAM and IPS declined, partially offset by imaging/Wellspect; distributor inventory changes were mixed (CAD/CAM +$4M seq.; imaging +$6M seq.) .
• Orthodontic & Implant Solutions declined sharply (-20.0% net; -17.7% organic), reflecting Byte roll-off (~$40M YoY, ~13%) and lab/implant weakness; SureSmile down slightly in U.S. despite double-digit growth in Europe/ROW .
• Cash conversion was soft: operating cash flow fell to $7M (vs $25M LY) due to timing of receivables and inventory build; adjusted FCF conversion was -14% .

Financial Results

Quarterly Actuals (prior year, prior quarter, current)

Q1 2025 Actual vs S&P Global Consensus

Values retrieved from S&P Global.*

Segment Net Sales

Segment Growth (Q1 2025)

Geographic Net Sales and Growth

Operating Cash Flow and Liquidity (Q1 2025)

KPIs and Channel Dynamics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Organic sales were roughly flat excluding the Byte sales impact, with growth in two of our three regions. Adjusted EBITDA margin expanded… We are delivering progress through customer-centric innovation, customer experience improvements, and operational efficiency… maintaining our outlook for organic sales and adjusted EPS.” — Simon Campion, CEO .
• “Imaging performed well… Wellspect delivered another quarter of growth… Europe also delivered growth for the second quarter in a row… EBITDA margin expansion and EPS growth… benefits from transformational savings, improving operational efficiency and Byte.” .
• “We spent 60% less [at IDS] than we did in 2023, our sales results exceeded those in 2023… focused on enabling great clinical outcomes, improving efficiency and enhancing treatment acceptance rates.” .
• “We are increasing our outlook for reported sales to $3.6–$3.7 billion… maintaining adjusted EPS $1.80–$2.00… adjusted EBITDA margin to greater than 19%.” .

Q&A Highlights

• Tariffs: Current guidance contemplates ~$0.10 EPS impact for 2025 and ~$50M annualized exposure; mitigation levers (product relocation, strategic stock builds, cost/price actions) not included in the $0.10 assumption .
• OIS margins/trajectory: Management now sees Q1 margin performance as indicative for the year, with continued SG&A discipline across segments .
• U.S. demand and channel: Survey shows stable footfall and treatment acceptance; sentiment more cautious; CAD/CAM and IPS weaker; distributor inventory in CAD/CAM +$4M seq. (vs +$9M LY), imaging +$6M seq. (vs −$7M LY) .
• Germany durability: Three consecutive quarters of growth; cautious but improving equipment demand; plans to replicate turnaround in other EMEA geographies .
• CFO search: Late-stage candidates in process (as of call); subsequently announced appointment of Matthew E. Garth effective May 30, 2025 .

Estimates Context

• Q1 2025 results exceeded S&P Global consensus: revenue $879.0M vs $853.9M*, adjusted/Primary EPS $0.43 vs $0.300*, and EBITDA $150.0M* vs $123.2M*, supported by margin expansion and cost control. Values retrieved from S&P Global.* .
• Implications: Expect near-term upward revisions to margin/EPS trajectories; however, management kept FY EPS unchanged and guided Q2 organic down mid-single digits due to Byte, suggesting caution on top-line through mid-year .

Key Takeaways for Investors

• Near-term setup: Clear beat on revenue/EPS/EBITDA vs consensus; FY EPS maintained while reported sales raised on FX and EBITDA margin outlook increased to >19%—a supportive margin narrative despite U.S. demand headwinds .
• Byte drag remains material (≈4% total sales; ~9.8% U.S. organic headwind), but Europe/ROW and Imaging/Wellspect are offsetting; watch Q2 organic decline as Byte roll-off continues .
• Tariff exposure (~$0.10 EPS, ~$50M annualized) introduces external risk; mitigation optionality exists but was not embedded in guidance—monitor policy developments and pricing actions .
• Digital flywheel: DS Core adoption and AI-enabled workflows (Primescan 2, DS Core Diagnose) are improving efficiency and treatment acceptance—medium-term growth lever in EDS/CTS and aligners .
• Germany momentum adds EMOA resilience; replicating playbook in other geographies could underpin stabilization in H2 .
• Cash conversion was soft in Q1 (OCF $7M); bridge financing adds flexibility, but monitor inventory/receivables timing and CapEx roll-off from ERP for FCF improvement in H2 .
• Leadership stability: CFO transition completed post-quarter; expect enhanced investor engagement and capital discipline under new CFO .

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Appendix: Additional Data and Reconciliations

• Non-GAAP reconciliations (Q1 2025): Adjusted EPS $0.43; GAAP EPS $0.10; key adjustments include amortization ($0.16), restructuring/other ($0.10), income tax-related adjustments ($0.07) .
• Adjusted free cash flow conversion (Q1 2025): −14% (Adjusted FCF −$12M; Adjusted Net Income $87M) .
• Balance sheet (3/31/25): Cash $398M; Total debt current + long-term $2,335M; Total equity $2,010M .
• Dividend: $0.16/sh payable July 11, 2025; record date June 27, 2025 .