DENTSPLY SIRONA Inc.

Form 8K, filed on August 2, 2023. 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 predictive statements that reflect our current views about the future performance and financial results. We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recently filed Form 10-K and any updating information in subsequent SEC filings lists some of the most important risk factors that could cause actual results to differ from our predictions. Additionally, on today's call, our remarks will be based on non-GAAP financial results. We believe that non-GAAP financial measures provide investors with useful supplemental information about financial performance of our business. Enable the comparison of financial results between periods where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used 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 investor section of the company's website following the call. And with that, I will now turn the call over to Simon.

Thank you, Andrea. And thank you all for joining us this morning for our Q2 2023 earnings call. Today, I'll start by providing an overview of our recent performance. Glenn will cover Q2 results and the updated 2023 outlook. And then I will finish by providing a strategic operating update. Starting on slide four, We were pleased with the second quarter results delivering more than 2% organic sales growth. These results rounded out a strong first half of the year in which we exceeded our commitments and delivered over 3% organic growth, well above our expectations. Fulfilling our commitments, financial and otherwise, both internally and externally, remains a top priority for this leadership team. Q2 performance was highlighted by organic growth in all four new segments. Based on the momentum in the first half of the year and our increasing confidence in the back half of the year, we are raising the full year 2023 outlook for net sales, organic sales, and adjusted EPS, which Glenn will cover in a moment. We continue to execute on our transformational and strategic initiatives. The progress we are making is beginning to take shape in our results. We believe we are on the right path, driving improvement, and transforming the business to deliver sustainable performance over the long term. As previously shared, we had received several inquiries about our WellSpec healthcare business from interested parties. After a thorough review of these and other alternatives, we have decided to keep the WellSpec business in the Dentsply Sirona portfolio as the options explored did not adequately reflect the value of the business. We have now commenced the incorporation of WellSpec into the operating model and will share performance data as part of our investor updates. We have initiated quarterly business reviews with our second one recently held in Europe to discuss performance and strategy for each country and business group. While there, we review the connected technology solutions R&D pipeline, which we feel is robust. Spending time with our local teams also plays a critical role in building an accountable high-performance culture. These meetings give us the opportunity to dive deeper into the business and engage with employees and customers. Additionally, in Europe, we continue to engage in productive and positive conversations with the workers' councils regarding the restructuring plan. We are also continuing to deliver on our sustainability commitments. We have developed and launched the first sustainability educational curriculum for dentistry through the Dents by Serona Academy. The curriculum was developed in response to an international study Densplicerona conducted in 2022 on sustainability. To complement the course, the team developed a sustainability in dentistry resource kit to assist dentists in their effort. And now I'll turn it over to Glenn to discuss our second quarter results in greater detail. Glenn?

Thanks, Simon. Good morning, and thank you all for joining us. Today I'll provide more detail on our second quarter results and an update on our 2023 outlook. As Simon mentioned, we delivered top and bottom line results above expectations. The second quarter performance was highlighted by organic growth in all four segments, which coupled with favorable margins and a lower tax rate drove better than expected adjusted EPS. Notably, the second quarter represents another quarter of delivering on our commitments. Let's begin on slide five. Our second quarter revenue was $1.028 billion, representing reported sales growth of 0.5%. Foreign currency negatively impacted sales by $18 million and was larger than expected due to the strengthening of the U.S. dollar versus the Japanese yen and Russian ruble. On a constant currency basis, sales grew 2.3% led by continued double-digit growth in our aligners business, and broad-based strength in Asia Pacific, led by China, which grew 25%. EBITDA margins were 17.7% and were better than expected, driven by leverage from higher sales and effective cost management. Year over year, EBITDA margins were lower due to continued inflationary headwinds impacting our cost of goods sold and higher commercial and infrastructure investments, partially offset by price increases and cost reductions from our restructuring program. Adjusted EPS in the second quarter was $0.51 and was well above expectations, despite a $0.02 FX headwind. On a year-over-year basis, adjusted EPS declined by $0.18, largely due to lower operating margins. Operating cash flow was $104 million as compared to $173 million in the prior year quarter. The decline was primarily due to changes in working capital, which was impacted by the timing of AR and AP compared to the prior year, and higher operating expenses associated with commercial and infrastructure investments. In the second quarter, we returned $30 million to shareholders through dividends, with a total of $207 million returned year-to-date through a combination of dividends and share repurchases. Let me now turn to our second quarter segment performance on slide six. Starting with the Connected Technology Solutions segment, or CTS, organic sales grew 2.8%, primarily due to improvements in the supply chain and shorter lead times for certain high-tech equipment, partially offset by softer demand in Europe. Within CTS, our CAD CAM business declined by mid-single digits, driven by lower demand in Europe, particularly in Germany, along with broader macroeconomic challenges across the region. That said, underlying retail demand in the U.S. improved sequentially. The equipment and instruments business grew high single digits, driven by improvements in treatment centers and imaging in Europe, as well as solid demand across all product categories in Asia Pacific. Organic sales in the essential dental solution segment, which includes endo, resto, and preventive products grew 0.7%, driven by stable patient traffic in the U.S., partially offset by softer demand in Europe. We attribute a portion of the softness in Europe to pre-buying activity in the first quarter. Moving to the orthodontic and implant solution segment, organic sales grew 3.7%. Aligners grew double digits for the fourth consecutive quarter, driven by growth in both SureSmile and Byte. SureSmile grew over 20% and continues to benefit from market share gains, regional expansion, new product offerings, and differentiated outcomes. Our direct-to-consumer aligner brand, Byte, grew high single digits driven by improved customer conversion rates and lower customer acquisition costs, which not only drove higher revenues but also better profitability. On a full-year basis, we continue to expect our aligners business to grow double digits. Implants returned to growth in the quarter, highlighted by demand for value implants, as well as growth in China due to VBP volumes and a recovery from COVID-related shutdowns. Our U.S. implants declined in the quarter, but we expect to see gradual improvement for the remainder of the year. And wrapping up with the WellSPECT healthcare segment, organic sales grew 3.1% with growth across all three regions. For WellSPECT, we expect to see faster growth in the second half of the year, which will include recent and planned new product launches. Now let's turn to slide seven to discuss second quarter financial performance by region. U.S. organic sales grew 1.1%, driven by stable demand in essential dental solutions and double-digit growth in aligners, partially offset by lower sales of imaging equipment and implants. U.S. CAD-CAM distributor inventory levels declined approximately $20 million sequentially in the quarter, driven by solid underlying retail demand. Distributor inventory levels for CAD-CAM products remain low at the end of the second quarter relative to historical averages. Because of this, for Q3, we expect to see a sequential increase in US distributor inventory levels in advance of DS World in September. Turning to Europe, organic sales declined 2% due to lower implants and CAD-CAM sales, which we attribute to macroeconomic headwinds in the market and unfavorable timing of orders for essential dental solutions. These declines were partially offset by continued trust model growth in the region. We also saw a more pronounced demand softness in Germany, which is a key market for our business due to recessionary pressures in the country. Rest of world organic sales grew 11% in the quarter, driven by growth in all four segments. China and Australia posted solid growth, and we also saw strong equipment demand across the region. With that, let's move to slide 8 to discuss our updated outlook for 2023. We've updated fully our outlook to reflect our performance in the first half of the year, as well as our increased confidence for the remainder of 2023. While we recognize macro uncertainties cloud the economic outlook in the second half, We are seeing stable to improving patient traffic in most key markets, and our execution is improving. We are increasing our outlook for the full-year net sales to a new range of $3.98 billion to $4.02 billion. This represents a $75 million increase at the midpoint of the range, which is now at $4 billion. We expect organic sales to grow approximately 3%, which is an increase compared to our prior range of flat to 2% growth. And we expect to show growth in all four of our segments. We estimate full year EBITDA margin to be greater than 18%, unchanged from prior outlook. While we continue to face cost headwinds impacting gross margin, we're seeing these headwinds stabilize and expect gross margins in the second half of the year to be consistent with the first half. Given the better than expected top line performance, we're also raising our full year adjusted EPS outlook by $0.05 at the midpoint to a new range of $1.92 to $2.02. Keep in mind that the improved outlook also includes a $0.03 FX translation headwind. Overall, we're pleased to be raising our adjusted EPS outlook for the second consecutive quarter. Our first half performance gives us even more confidence that we're on the right path towards achieving our target of $3 adjusted EPS in 2026. For the second half of the year, we expect organic sales growth to be approximately 3%, with Q3 growth below 3% and Q4 growth above 3%. For the third quarter, we expect adjusted EPS to grow mid-teens year over year, but be lower sequentially due to seasonality. A return to earnings growth in the third quarter would mark an important milestone in our turnaround story. And with that, I'll turn the call back over to Simon.