DENTSPLY SIRONA Inc.

Good day. Thank you for standing by. Welcome to Dentsply Sirona's Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Wade Moody, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to the Dentsply SIRONA second 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 investor 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 and 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 enhanced 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 investor section of the company's website following the call. And with that, I will now turn the call over to Dan. Thanks Wade and good afternoon everyone.

Before we discuss the quarter, I'd like to welcome John Fortson to his first earnings call as Executive Vice President and Chief Financial Officer of Dempster Ply Sirona. John joined us on July 20th, and we're excited to have him on board. He is a proven finance and business leader who's worked closely with CEOs and boards through periods of transformation, strengthening operations, allocating capital with discipline, and creating long-term shareholder value. Having served both as a public company CFO and CEO, His experience is well aligned both with where Densply Sirona is today and where we're headed in the future. I'm glad he's on our team. I'd also like to thank Mike Pomeroy for his leadership as interim CFO. I sincerely appreciate his contributions. With that, I'll turn the call over to John to review our second quarter 2026 financial results. Thanks, Dan, and good afternoon, everyone.

First off, I'd like to say it's a privilege to join Densply Sirona. Having followed the company for many years, I am familiar with the strength of its portfolio and energized by the opportunity to help restore the business to its full potential. What ultimately drew me here was the clear commitment from the board and the leadership team to execute the discipline turnaround. There is a strong focus on operational excellence and long-term value creation. Although I've only been with the company for a few weeks, I'm hitting the ground running and ready to execute the return to growth action plan with the team. Let's move to Q2 results on slide four. Our second quarter 2026 revenue was $898 million, representing a decrease of 4.1% as reported, or 6.3% on a constant currency basis. Adjusting for the impact from Byte and the planned dealer inventory reduction of approximately $8 million in the quarter, revenue declined 3.6% on a constant currency basis. Adjusted EBITDA margins were approximately flat year over year, with the benefit from $44 million in tariff refunds offset by a decline in gross profit driven by lower volumes, sales mix, and incremental tariff impacts. OPEX was up $12 million year over year, including a FX headwind of approximately $8 million. A decrease in G&A was offset by investments made into sales, marketing, and R&D was planned in support of the Return to Growth Action Plan. Adjusted EPS in the second quarter was flat versus last year at 52 cents. The tariff refunds translated into a positive 17 cent per share impact. Operating cash flow in the quarter was $99 million compared to $48 million in the prior year quarter. The year-over-year increase is primarily attributable to the receipt of the tariff refunds, in addition to improvements in working capital with better management of accounts payable and inventory. We continue to remain diligent on improving our working capital. This will be a key focus area of mine going forward. In the second quarter, we opportunistically repurchased 1.3 million shares at an average price below $10 per share. This represents the first time Densply SIRONA has repurchased shares since the third quarter of 2024. We finished the quarter with cash and cash equivalents of $239 million, and our Q2 net debt to EBITDA ratio was 3.2 times, consistent with where we ended Q1 of this year. We continue to prioritize debt reduction. Now let us turn to Q2 segment performance on slide five. Starting with the CTS segment, sales were $239 million, an as reported decline of 1.5%. Equipment and instruments revenue was $137 million flat year over year with declines in treatment centers. This was partially offset by growth in imaging equipment, particularly in EMEA where we saw increased demand for our Orthopos line of imaging products. TADCAM revenue was $102 million down mid-single digits, driven by lower volumes in the Americas and unfavorable price mix in EMEA, partially offset by double-digit growth in APAC. EMEA saw a slight softening of demand for select areas of capital equipment as providers deferred some investment decisions due to uncertainties from the Middle East conflict. Turning to EDS, which includes endo, resto, and preventative products, sales of 376 million declined 2.7% as reported, primarily driven by lower volumes in the Americas and EMEA. As we shared in Q1, the impact of inventory changes for EDS products held by our distributor partners in the EMEA region had a negative impact on results. We saw a sequential improvement in Q2 as we obtained greater visibility into the dynamics within various markets and distributors across the region. Overall, sell-out in the region was in the low single digits, consistent with expectations for dental consumables. The sell-in is lower year over year as certain distributors reduce their inventory levels. We do not believe this reduction in wholesale inventory is a demand-driven trend. Moving to OIS, Revenue of $197 million declined 13.2% as reported. When adjusting for the year-over-year impact from BITE, OIS declined 5.7% as reported, consistent with last quarter. IPS revenue of $157 million declined mid-single digits, driven by lower volumes of premium implants in the Americas and APAC. EMEA implants grew mid-single digits, as reported, led by improved performance for MIS, our value implant brand. For Ortho, SureSmile revenue of $40 million declined double digits, primarily attributable to the Americas region. Wrapping up with WellSpect Healthcare, revenue of $86 million increased 7.1% as reported. driven by the continued strength of new product sales and execution by the business, partially offset by lower inventory levels in the U.S. market. Now let's move to slide six to discuss our outlook for 2026. We are maintaining our 2026 outlook for net sales of $3.5 billion to $3.6 billion and adjusted EPS in the range of $1.40 to $1.50. This EPS range excludes the benefit from tariff refunds and impact of incremental tariffs. Our decision to maintain our outlook is based on expectations as of today, including our current expectation regarding tariffs and trade policies. Looking to the third quarter of 2026, we expect revenue to decline sequentially due to normal seasonality. As we continue to execute our return to growth priorities We also expect Q3 earnings to be below Q2 2026 levels, excluding the 17 cent benefit from tariff refunds. We remain committed to investing in our sales force, clinical education programs, and R&D, with the benefit of these investments expected to become increasingly visible beginning in Q4. With that, I will turn the call back to Dan.

Thanks, John. As we wrap up the second quarter since beginning our 24-month Return to Growth Action Plan, our priorities haven't changed. We're focused on putting customers at the center of every decision, improving execution, investing where we see the greatest opportunity for long-term growth, and strengthening the financial foundation of the company. We're making progress, but this is still a turnaround. Some parts of the business are improving faster than others, and there's still a lot of work ahead. As John mentioned, We expect more of the improvement weighted towards the fourth quarter given investment timing and macroeconomic conditions. What gives me confidence is that we're beginning to see evidence that the work we're doing is gaining traction. Everything starts with the customer. Over the last six months, we've been rebuilding how we engage with our customers. We're investing in clinical education, strengthening our commercial organization, expanding customer access through our dealer network, and making it easier to do business with Dentsply SIRONA. In the second quarter, clinical education was at the forefront. We brought together more than 1,000 clinicians at our Global Implant Summit, hosted endo-KOLs at our 2026 Endodontic Forum and convened leading experts across restorative and multidisciplinary dentistry to help shape the next generation of clinical solutions. These opportunities enable us to learn directly from clinicians Strengthen relationships and ensure our innovation pipeline reflects what customers need most. At the same time, we're investing in our own commercial capabilities. Every US sales implant, excuse me, every US implant sales rep recently completed the most comprehensive implant certification program we've ever delivered. Our most experienced team members told us they've learned more in those four days than they had in years. This initiative is not only encouraging, but also just the start of an ongoing investment We're also seeing momentum internationally. In APAC, we're expanding education programs, advancing implant sales training, and seeing continued adoption of our connected technology solutions, including double-digit growth in milling systems. On the digital side, DS Core continues to gain traction. During the quarter, four European DSO groups began to implement the platform. reinforcing the value of an integrated digital workflow that connects diagnosis, treatment planning, and clinical execution. We've also continued to strengthen our U.S. distribution footprint by growing our dealer network. During the quarter, we announced the expansion of our partnership with Atlanta Dental and Nashville Dental, and we advanced our longstanding relationship with Medline Sinclair in Canada. These partnerships are important building blocks for sustainable commercial growth Extending our reach and giving more customers access to our connected technology portfolio. While SPEC continues to perform exceptionally well, the business delivered another strong quarter supported by new product launches, geographic expansion, and continued adoption of our newest products. That's a good example of what consistent execution looks like, and we intend to apply those same principles across the areas of the company. We also established a small group of strategic advisory board to provide guidance on well-specced long-term priorities, innovation, and growth opportunities. Execution also means improving how we operate internally. We're simplifying the organization, enforcing accountability, standardizing processes, embedding lean operating principles and AI to eliminate routine work and accelerate decision making so our teams can spend more time serving customers and bring innovation to market faster. Financial discipline remains equally important. We're improving cash generation, strengthening the balance sheet, and continuing to deploy capital in a disciplined way. As John previously mentioned, we repurchased 1.3 million shares for approximately $12 million using a portion of the tariff refund proceeds, consistent with the capital allocation framework we introduced earlier this year. We continue balancing investments in innovation, commercial capabilities, and shareholder returns to support long-term value creation. Six months into the Return to Growth Action Plan, I believe we're going deeper, moving faster, taking bolder steps to improve our business. We're recalibrating customer relationships, we're strengthening our commercial organization, we're expanding access to our products, we're simplifying the company, and we're creating a stronger financial foundation. The path won't be linear, but we're seeing encouraging signs that our actions are beginning to translate into improved execution and stronger customer engagement. Thank you to our employees around the world for their continued hard work and dedication to our customers. I continue to believe the potential for Densply Sirena has never been greater and we have at our fingertips everything we need to achieve our plan. With that, let me turn the call over to the operator so we can start the Q&A session. Thank you.

Thank you. As mentioned, at this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. Please limit to one question and, if you wish, a follow-up. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. Your first question comes in the line of Elizabeth Anderson with Everscar ISI. Your line is now open.

Hi, guys. Good afternoon and thanks so much for the question. I guess my first question is, you know, John, maybe you could talk a little bit about, you know, why X-Ray was sort of the right next step on your career and also, you know, do you guys now think you have the full team in place to go forward? with what you need to do to help get the company on the right footing. And can you also maybe as my follow-up just talk through like how you kind of see the drivers that increase the EPS from 3Q to 4Q like you were just laying out, John. Thank you very much.

Sure. No, I'll start. Dan can talk a little bit about the team. You know, I've followed this company for a long time. I've been in the Carolinas really for 15 plus years and have followed this story. And I really feel like the board and the current leadership team under Dan are ready to do what needs to be done to take this company to the next level, right? I feel having studied for a number of months the return to growth action plan and in conversations with Dan and the other leaders, I feel like they have the right plan at the right time, and I'm pretty excited about being here. You know, I look at the prioritizations. They're pretty straightforward.

We return to growth, we maximize profitability, and we maximize cash generation.

And I think we have the opportunity to do all three.

Thanks. And I'll answer the rest of that, Elizabeth. We have a great executive committee, my direct reports. If you look through it, A vast amount of that was rebuilt, and those that remained were really strong base to go from. So I feel very bullish about that team. The rate of engagement we have around the world when it comes to our directors up as well continues to impress me. So to answer the question, yeah, we have who we need to make the changes that we need to make. I feel very strong about that. As far as the progression and heaviness perhaps of the fourth quarter, given the turnaround, and very similar to what we may have spoken to in the past, a lot of that really banks on the fact of when you're reorganizing the company and you have some of the timing of when those structural changes take place you'll see it bear more in the fourth quarter than you would previous as we go do that in addition if you remember we've added a lot of the dealers in the first quarter or second and I always mention it's about nine months before you really produce there to sell capital and so you're bringing them on board training them getting their reps out there building a pipeline and closing and so while we are positive and seeing positive results of who we brought on, I think that will be heavier in the fourth quarter than perhaps what we've seen in the first or second.

Super helpful. Thank you. Welcome, John.

Thank you. Thank you. Your next question comes to the line of Alan Lutz with Bank of America. Your line is now open.

Good afternoon and thanks for taking the question. Really a follow-up on my question from last quarter around the return to growth action plan here. Dan, you talked about a lot of the same things that you talked about last quarter, some new distribution partners, which you executed against in the quarter. You gave the example on investing in clinical education and R&D continues to trend up nicely. We'd love to get a sense in terms of where you're most excited. You sort of answered it a little bit with The last question around maybe some of the contributions from dealers coming in in the fourth quarter. But we'd love to get a sense of the parts of the return to action plan as you go through it. Now you're six months in. We'd love to get a sense where you're most excited and what do you think the first part of that is to hit the P&L?

Thanks. Thanks, Alan. I appreciate that question. Honestly, what I'm most excited about is the level of engagement we have with our dentists and seeing that accelerate at different levels of the company. I want to say it's a re-engagement and the feedback that I've been getting from different folks that how happy they are with the dentist themselves coming back on the clinical education programs or the interaction with executives or even some of the events that we have held or attended they see our recommitment into that and I've been getting a lot of good feedback from them which is encouraging to me because as we say and have said it's all about the customer first and if we're going to turn this around it's about supporting the customer first and foremost and then earning the right Thank you.

Your next question comes from the line of Michael Czerney with Lyric Partners. Your line is now open.

Thanks for taking the question. This is Dylan Finley on for Mike. Just wanted to start briefly on the tariff refund. Just a clarification point. Was that refund assumption embedded in the initial guide? And does the maintenance of the guide account for the contribution of that refund? and then secondly here, if you could just broadly comment on your quarterly run rate into COGS, what you're seeing today with the 122s and now the 301s, where do you see your quarterly spend on tariffs from here?

So Dylan, I'll answer that. So the first thing is we did not build a refund into our initial guidance. That was something that we decided not to do because it was uncertain when it would occur or what it would be. And so that's an addition. as we maintain our base guidance, as John called out, we're saying we're not changing that. And certainly in addition, we would layer in some semblance of the tariff that we were calling out earlier in that section. So it's something totally unrelated to the operations of the business and done. We do not disclose the rate of tariffs per quarter. So that would be something I'll refrain from answering.

Very helpful. Thank you. And then as a brief follow up here, You guys showed some nice gross margin improvement if I'm just looking and backing up the tariffs. But on SG&A, in the past you talked about reduction in targeted annual savings. Any updated thoughts on the magnitude of that and timing of when we should see some improvement in SG&A?

Thanks. Yeah, so it's a little bit, Dylan, of a couple of things. It's sort of a put and take here. We're reorganizing a lot of our company, whether it be through headcount or indirect spending, but I'm also redeploying that into increasing the field, increasing clinical education, increasing rep education, and accelerating innovation. And so it's not an anticipated drop through to the bottom line so much as repositioning for long-term growth that's occurring.

Great. Thank you.

Do we have Vic on the line?

Pardon me. Yes. Vic Chopra with BMO. Your line is now open.

Hi, Dan and John. It's Anton on for Vic. Thanks for taking our questions. Maybe first I'll start on the U.S. commercial expansion. Dan, you've repeatedly emphasized that the U.S. business recovery is your top priority and have been taking clear steps in building out the U.S. commercial team with Senior leadership and competitive hires. I'd be curious to hear where we stand in the U.S. commercial team build out. Do you have all the people you need or are there more seats to fill? And does the guide contemplate accelerating productivity from these hires throughout the year or is that more of a 2027 phenomenon?

Yeah, thanks, Anton. First, I would say I'll probably never have as many people as I need because there's no answer to that. I want as many reps in the field representing us as we can. That said, what we did do in the first quarter was make a significant verticalization of our commercial organization under the team. And they did a great job. And those folks that lead those verticals are dental experts with a lot of competitive experience, as you referred to, and it's there. We are, again, retraining the reps that we have, recertifying them, and then, to your point, expanding them both from new hires and competitive hires as I really do think those efficiencies, while they will continue sequentially through the quarters as you get through Q2 to Q3 to Q4, I think are going to be more impactful into next year. Because a lot of that training, a lot of that clinical education, and then just getting everybody into those moves that they need to do into the field, I think will be more of a next year impact. But I'm happy with the progress being made with that team.

That's really great to hear. And maybe one more follow up on China. Last night, one of your peers shared some updated perspectives on the China environment and VBP timing. I'd be curious to get your perspective here as well. Like, what's your latest thinking on China VBP 2.0 in 2026? And how do we think about the impact for Vansply?

Yeah, again, great question. You know, it moves, as you know, it's been delayed, it's been cast out there. So I'm probably going to line up with the timing. I know that it was pushed off several months from China that way. We don't have a significant impact baked into that for this year, nor do I expect one. China is an area of significant long-term growth for us right now. And it's one that we're keeping our eye on of how best to approach. But at this point, I would tell you that it's smaller. and we have our eyes on how to make that bigger over time and the VBR is simply just one step along the way for us to really get into that market.

Thanks so much again.

Thank you. Your next question comes to the line of John Block with Stifel. Your line is now open.

Hey everyone, Joe Federico on for John. Thanks for taking the question. Maybe just to to zoom in on implants a little bit. Is there any further detail you can provide on the performance in the quarter? I think you said EMEA was mid-single digits led by value, but maybe any other color between value and premium? How did the US perform? And then just how do you view the market growth there in the quarter and then in 3Q to date? Thanks.

Yeah, we tend not to break it down by products or things like that in a lot of detail. What I would tell you is that our value products in EMEA had a very strong quarter. There's a lot of cadence there that we're doing. You know, in the U.S., simply part of the turnaround, we lag behind that. We have incredible products. As I just said, we've recertified our team to give them more education to go out and worry about workflow and dentist needs as opposed to just selling a single product. And so it's still a continued investment in our turnaround plan, focused primarily on the U.S., still investing, obviously, in EMEA and AsiaPAC. But I would say that when you look at the competitors, we're lagging behind and we need to change that. We've got the right products. We have the right approach. We have to execute and get up to market and beyond.

Thank you.

Thank you. Your next question comes online of Michael Sarconi with Jefferies. Your line is now open.

Hey, good afternoon and thanks for taking the question. Two for me. I guess, can you just give us an update on or elaborate more on capital equipment demand? I think you mentioned some uncertainties in Europe related to mid-East tensions and maybe give us kind of an around the world view. And then just second, I'll throw it out here now is, Dan, you talked about, you know, the Salesforce ramping. How are you thinking about growth in implants as we look to 2027? Thanks.

Yeah, so what we're saying with us in the capital itself, and as you know, it's seasonal. In EMEA, because we are one of the leaders in dental, the war regions are a little bit bigger for us and perhaps our competitors. And we are seeing delays that have occurred there. We're not going to call it out. We're not going to call it down at this point. Our eyes are on it. It's an unknown ability when that resolves or when they'll pick up. But that really was just it. We're just seeing some delays in there because of the uncertainty of that situation. Do we think that that can clear through in Q3 or 4? We hope so for the sake of the people there, but eyes on it for that one. That's really kind of the thing that's going there. On the sales force itself and the productivity and the lift that would occur for implants into 2027, I'm going to refrain for now. We've got to go focus on this year and the turnaround to finish that, and we'll be giving guidance more as we get into the early part of next year along those lines. Got it. Thanks, Dan.

Thank you. Your next question comes to the line of Lily Lozada with JP Morgan. Your line is now open.

Great. Thanks so much for taking the question. Following up on the prior question about implants, when I look at the results across the segments, the one area that was really softer this quarter was OIS. So I'm hoping you can unpack that a little bit. To what extent was that a function of headwinds from a weaker consumer environment, given the price point and more elective nature of the procedures, or was there something else at play?

Yeah, thanks, Julie. I appreciate that. You know, what I think is a couple of things with OIS in particular, to us, remember, you have that bite impact that's occurring, and John called out the impact of that. We still carry that through of a significant part. That's really it. I think what we have seen particularly on SureSmile is more of a U.S. impact. And I think it's more about us, again, looking at the turnaround as we enter back to orthodontics and we hire that sales force, we modernize our software and go. So, you know, the bite removal is still something carrying. I think that SureSmile U.S. is that next one that's out there. The rest of it I was happy with. I think that's really in OIS, the two main impacts.

Great, that's helpful. And then I just want to make sure I'm understanding some of the comments you all made on macro. It sounded like you did see some pockets of lower demand due to the macro environment. I think the messaging prior was that the ebbs and flows in the market don't really impact density so much just given All of the operational improvement that you're making. So just want to make sure I get the message clear on that. What's the latest that you're hearing on macro and how much does that impact you in 2026? Thanks so much.

It's a great question. Let me expand on that too, just for clarity. So thanks for pulling it out. In the past, and I'll stick to this, I've said that we shouldn't count on a market up or down to drive our growth. We have many things we have to do ourselves. and whether the market's up or down, we have to improve and grow. So that was the latter part of your question. I'll stick with that. When I was calling out the macroeconomics, it really is about keeping our eye in the Middle East and the tensions and the roots out there, not just because it's somewhat disruptive to us from a procedure or capital. It's also the increased freight. We have to date seen impacts and we have absorbed those impacts. I anticipate that to settle down and go back to a normal rate. And so I have not backed off the return to growth investments in Salesforce, ClinEd, or innovation. And my point is, if those pressures remain high, there's a point in the future that I may choose not to absorb them and adjust accordingly on the bottom line. I don't see it yet. I'm just dropping it as a hint. That's really what I meant by that statement.

Very helpful. Thank you.

Thank you. Your next question comes to the line of Jeff Johnson with RW Baird. Your line is now open.

Thank you. Good afternoon, guys. Dan, I wanted to start in EDS, if I could. You pointed to volume declines, both EMEA and in the Americas. Any way you can qualitatively help us understand which of those might have been better or worse, I guess, how to play one off the other, number one. Distributor Changes in Europe. Maybe the answer is that was the worst side of my question. But just any clarity there, number one. And number two, you know, I think in the past you've been pretty clear you don't think you have room at this point to increase price on the EDS side. We've kind of picked up maybe in our channel conversations with some of your smaller and other dealers in the U.S. that you did push some price here recently on the consumable side. Any truth to that? And did that have any impact in the quarter or in your go forward thinking?

Yeah, you got it, Jeff. So let me kind of get after the first one. So in EVS in particular, most of the pressure remains in Europe. And I'll tell you, we've actually seen some of our bigger dealers make significant orders in the second quarter that were positive and double-digit growth. There are four other dealers. Actually, most of them are private equity-owned. And we're seeing them take historic inventory levels from about 12 or more weeks down to possibly eight weeks. Well, we talked to them. That's what we're seeing. We don't know if it's a factor of them coming into private equity or not. But that's really what we've been talking about is we're seeing this sell to occur. We feel positive as to those activities that are occurring. It is multiple dealers, not one, I think, in Europe. And that's the thing I do want to make sure folks understand. And that is really kind of coming out into the restorative and endodontic side more than anything else. I think in the U.S., there are different things we need to do with our portfolio, our pricing, our positioning to be more competitive. And I think, again, as we educate the team and refocus in endodontics in particular, but also pay attention to restorative, there's opportunity there. Some of our investment and accelerated investment in R&D is going to give us more opportunity to go provide that and capture it. So that's really the flavor between those two areas. Pricing. You know, there's always a price tweak here, there. We've not taken anything significant in pricing. I would tell you, you're hearing it through the channels. We haven't implemented anything out there. It could very well be just cleaning up price, shifting SKUs, some level of mix that might be impacting that. But really, have really had no in price or no price increases since September of 2025.

Okay, thank you. Your next question. Come to the line of Kevin Caliendo with UBS. Your line is now open.

Hey, guys. Thank you for taking my question. I just want to sort of understand what's embedded in the current guide from the market perspective. Like, what do you expect the markets to do over the second half of the year? And how do you feel you're going to do against that? Meaning, do you feel like you're going to be in line with the market, lose share, gain share? That's sort of my first question, just sort of what's the expectation for the handful of end markets that are most important to you. And then the comment about distributor inventories was interesting. Just given the new distributor relationships that you have, were you saying that, broadly speaking, inventory levels are lower or on a same-store basis? because I was wondering if you signed a new distributor relationship, would you be putting some inventory to them as well? I'm just trying to understand what that meant or how to think about that.

Okay. Well, let's start with that last one. We'll go backwards with that. So keep in mind when we're signing up the U.S. dealers, they are for capital expansion. And so we're not actually having them buy capital and hold it. We're actually working with them to move that differently. So you wouldn't see a lift My previous comment from the previous questions was focused on dealers for the EDS models that are out there. And to your point, if we were to open up a new dealer there, they would buy inventory, we would see that, but we have not done that. That's really what I'm thinking that way. And Kevin, you had the first part of the question. I just need you to kind of go through it again because I think I did slip my mind.

I'm just wondering how to think about What you're expecting in terms of the overall market?

Thank you.

How do you think you're going to do relative to that? What's embedded in the guidance? Are you going to just be along with the markets? Are you going to gain share, lose share? How should we think about it in the various segments? Again, it's what's embedded.

So a couple of things here. I think when you hear the reports out from competitors about the market stabilization, I agree with them. I think that that's there. We can all pick a number, but I'll pick one and say about 3% growth would be out there. However, what's embedded in our guidance is very different. We're calling out a turnaround, and we're trying to go from negative into flat into growth over time. That's not something we would achieve within the 12 months of 2026. And so our guidance was really more about the execution of clinical programs, rep education, and going out the execution. And what I had said in the past is I think we would have negative Q1, negative Q2, Thank you. Thank you.

Your next question comes to the line of Stephen Valliquette with Mizuho Securities. Your line is now open.

Yeah, hi, thanks. Yeah, it's Stephen Valliquette from Mizuho. You know, with some ongoing discussion this quarter among digital equipment manufacturers, seeing customers continue to move to lower price points on intraoral scanners, we heard more about some movement to leasing arrangements for digital equipment instead of straight product sales, at least from some manufacturers. So I was just curious to get your updated thoughts on the competitive landscape in iOS, but is there any inflection on leasing versus purchasing for higher-priced items from your perspective? And also just remind us on your own philosophy on leasing options to practitioners for your own digital equipment offerings. Thanks.

Okay. Great question, Stephen. So a couple of thoughts here. I think you always offer many options depending on the customer, if they want to buy it outright, if they want to do it over time, if they wish to do it through a leaser. All of those are valid things that we're open to do and have been doing as well. I think you're right. There is a growth of lower cost intramural scanners, and there's a quality that also gains with them over time. And so while I do think there's always room for premium in the future, you need to show the flexibility of how to get it into the customer's hands. And quite frankly, I think you also need to have the offerings at different levels depending on what the customer wants. It is something we're looking at. Those options are things that we have in place. And I think really for me, next gen interval scanners, we need to look at high end, mid and also low. And that's something that's important to our innovation program.

Okay, that's very helpful. Thanks.

Thank you. Your next question comes to the line of Aaron Wright with Morgan Stanley. Your line is now open.

A couple of modeling questions. One, just on the organic constant currency top line growth, I think you gave total revenue growth, but did you give a true underlying organic metric that you're anticipating, or what are you anticipating in terms of the second half there? And just remind us what's embedded from a currency perspective. And then on the tariff refund, I guess, does the guidance then reflect share buybacks associated with the tariff refund or future buybacks? I just want to be clear in terms of what's embedded in terms of the EPS number and not, especially when it comes to like share buybacks.

Yeah, so what we saw, Erin, in the beginning of the year was a very strong FX rate that we still would taper down over the quarters. That 3.5 to 3.6 for us is just what we expect to get for this year. I don't really have the exact amounts that are broken out. We didn't provide anything between constant currency as reported. We're just getting into those ranges, knowing the currencies that we anticipate for this year. The favorableness of the first quarter would diminish in second, and we actually think neutralized or possibly even at the end of the year kind of negative out. So I would say that's not going to be a big driver for us along those lines with it. Again, the tariffs, we were calling out the fact that we're not changing the base of We're just dropping the terrorists eventually out there for modeling purposes. That's really what we're trying to do is just distinguish them out. We're obviously looking to not have that as a measure year on year because it's such an oddity. It's got to be off on the side when we talk about Q2 of next year.

Okay, thanks. And then you spoke about some of the distributor relationships you inked a deal with Medline with their Sinclair offering in Canada. I guess, how is that relationship different or unique? Or how should we think about that opportunity? And then just overall, the North America distributor relationships, how are those progressing? Thanks.

You got it. So in Canada, it's just great because, again, Sinclair is a great business to get into. We do a lot with them already. It's an expansion of what we have, but expansion on the capital side, which we did not have. And so they've already got the natural reach and feet on the street to actually get our products in front of more customers in a faster pace in Canada, which is a very strong market for us and actually been an area of growth that I think if it continues, we'll call out a bit more in future calls with it. And I think on the U.S. side, what I have seen in particular without calling out names are two of the new dealers that have grown double digits so far. But again, I'm a little cautious. I want to get through Q3, maybe start looking at that at Q4. But for a few that I have added on, I'm really happy with what I'm seeing with their growth. They're smaller numbers and don't drive the overall business, but they're smaller numbers today and they will grow and become significant over time. And that's really what I'm looking at.

Thank you. Thank you. Your next question comes to the line of Daniel Grossleit with Citi. Your line is now open.

Hi, guys. Thanks for taking the question. On CTS in the Americas, I think we were down around 10-ish percent, nearly 10% constant currency. Can you just help us understand whether this is primarily being driven by CapEx deferral, just given the macro environment, the rate environment? Are you seeing any kind of competitive displacement in CAD-CAM and imaging, particularly from lower ASP type of offerings? Thanks.

Yeah, you're welcome. We're not seeing a huge bleed out competitively at this point. We think it's a little more timing. As you know, capital is always bumpy, and so I think that's what we're going to attribute it to. To your point, it's mostly in the CAD-CAM area, like we called out. But I would say at this point, I've not seen anything that would take me off task. I don't feel like we're at a competitive disadvantage with this. I think it's just a matter of closing out deals that are in the pipeline.

Got it. Okay. And just an accounting question on the... on the tariff impact or the tariff benefit this quarter. I think I heard this, but I just want to double check. That full $44 million, it's the P&L. So if I were to normalize for that, I would just subtract $44 million from gross profit and adjust it, give it dot, or is there some other dynamic I'm not accounting for there?

You are exactly right.

Okay, great. Thank you.

Thank you. Your next question comes in the line of Michael Patusky with Barrington Research. Your line is now open.

Good evening. I guess you sort of called out the formula for winning that WellSPEC is doing, and obviously that has something to do with new product launches and innovation in their space. You obviously come out of a space where innovation was a huge key to winning. I'm just curious, the incremental R&D spend you guys are doing right now, what's the mandate? Is it taking bigger swings? Is it hitting more singles? In terms of time frame, for impact. I mean, is there anything likely to actually impact, you know, the work you're doing now, impact, you know, in mid to late 27 or 28, 29 more of the time frame?

Thanks. You got it, Michael. So with WellSpect, to your point, we went back in the return to growth action plan and we've invested in them in several different ways to actually fuel the ability to get the products out and penetrate the markets. And they're responding well. and, you know, that to me is one of those ones where you can actually fund it by itself and allow it to grow. And so, you know, I look at it as a completely separate organization. We just consolidate down for reporting, but the point is they continue to perform and, you know, again, even their pipeline is rich for other products and going out that way. On the dental side, the innovation and the increase in innovation that we had done this year was really intended to accelerate things. And so, as you know, DS Core is a platform and putting more functionality into the digital dentistry flow like implants on core or ortho on core, two examples, the incremental money should move those forward meaningfully. Now, I have to get FDA approval, so I do think goal is to have it done in late 2027, but it's about when we file and get approval. Certainly in 2028 would be the thing. And had we not done that, that would have been further out by at least a year. So there are main things that are out there In addition, given the size and the importance of EDS, we've put more products and more functions therein. And so we're looking to make sure that that stays fresh and we remain a leader and we invest in it. Now to answer your question, it's a mixed bag of home runs and singles like you have to do with everything. It can't all be big risk or too small risk. And so it's a blend. It's also both organic and inorganic opportunities for us to look and exploit and grow faster. So it really kind of depends on the products and the opportunities. It really is up and down between those.

Okay, great. Yeah, can I just sneak one quick one in? I think this is a quick one. You know, obviously, historically, outside of the U.S., Germany has always been a key market, and I don't think I've heard you talk about that tonight or possibly even last quarter. Give an update on what you guys are seeing in Germany, you know, across the board. Thanks.

Yeah, no, I didn't call it out, but I would just tell you it's probably more my style than anything else. I've got nothing that I'm worried about with Germany. I was just focusing more, as you know, U.S.'s top priority, how we fund EMEA is out there, and then make sure we get Asia-Pac to grow. You are correct, it's still one of our top markets. It's doing okay. It's not going to be driving a large amount of growth. I think it's moving around market pace right now. But it really wasn't anything for me to call out with what we're trying to put out message-wise.

Gotcha. Thank you.

Thank you. Your next question comes online of Joseph Downing with PSC. Your line is now open.

Hey guys, thanks for taking the question on for Jason today. I'll keep it to one. But, Dan, when you look at the segment breakdown, it looks pretty different depending on the geography this quarter. You have CTS down high singles in the Americas, but up double digits in APAC while OIS fell in the Americas and was held closer to flat in EMEA. Just curious, like, how do you run one return to growth playbook when each unit's soft point sits in a different geography? And then which of these regions within each segment gets kind of first dibs on resources here? Just trying to think of how you're thinking about that. Thanks.

It's a fantastic question. Thanks for asking it. So listen, everything matters, but U.S.'s top priority is returning to growth. We've made that clear. And in that, getting implants and CTS up on its feet through the dealer expansions with the education we've spoken about is critical while maintaining the lead in EDS. And so that U.S. itself is fairly focused in and going. When it comes into EMEA and that leadership team, we've made sure they are funded But again, they don't need as much of a return to growth plan. That's really about addressing the EDS dealer inventories and driving through. I think they're in good shape. And again, very different will be Asia Pac and how you get into China, how you continue to expand in Australia and Japan. So the good news is they all fit into a same model of customer first, innovative products by listening to the customer, clinical education investments and strong reps that do workflow. That applies globally. and then you just put it at different points along where they are in their maturity curves.

Great, thanks so much.

Thank you. Your next question comes to the line of Keone. Kim with Morningstar, your line is now open.

Thank you for taking the question. Hey, Dan, I recall you kind of highlighting investing beyond education, especially in implantology as one of the main sources for return to growth. I guess kind of as you said today, you know, and when assessing the ROI on the front, how do you feel on that? And then do you feel like the long-term picture has improved or has stayed neutralized? Any thoughts that would be helpful?

Yeah, you got it. So the thing with clinical education is long-term investment. What I mean by that is spend it this year. You might see in Q4 some uptake, but it's really about getting the cadence throughout the multiple years by gaining users who are aware of your products and use them continuously. And so you can run through it, but it's really a main fiber of all the competition. It's really something that really works well within this market. And it's really about making sure the generalist, specialist, the referrals all work together and they're educated. So that money I know is well spent. I have seen what happens when you trim it down. And so getting it back on track and then getting it above market is key that way. I would say that I'm pretty happy with where we are with that. One thing as well with Q3 in particular, and we talked about where that was going, there will be a bolus of investment occurring there without the revenue coming up to that. That will come in later quarters. So you're going to see the return to health plan not pay attention and, quite frankly, care about quarterly outcomes. It's about spending the money at the right time for sustained long-term growth.

Great, that's helpful. And then just one more. I want to double-click on the CTS. You know, CTS and APAC has now had kind of two quarters of sequential improvements. And I'm curious if there's anything specific going on in the region that we're not seeing in other categories within the region, if there are any, like, one-timers or big inventory stocking, or do you feel like the market condition has kind of, I guess, improved a little bit in the next or since the beginning of the year?

Thanks. I want to make sure I heard you. You were talking about APAC. Is that what your question was? Yeah, you know, it's really about a program that we put in place. I'm not going to explain the program here, but it's really an execution we did in two of the key markets that's working very well. We designed it in, honestly, the fourth quarter of last year, began executing it, as you just kind of called out in Q1, and we're seeing very positive uptake with what it is we're doing there. And it is applicable throughout the world, but we're actually trying it right now within certain markets in Asia-Pacific.

Great, thanks.

Thank you. This concludes the question and answer session. Thank you for your participation in today's conference. This concludes the program and you may now disconnect.