Dentsply Sirona Q1 2026 Earnings Call Transcript

Dentsply Sirona (NASDAQ:XRAY) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. The full earnings call is available at https://edge.media-server.com/mmc/p/554faubd/ Summary Dentsply Sirona is focused on executing initiatives to drive sustainable growth, with a strong leadership team and new competitive hires impacting positively. The company is investing in expanding clinical education and salesforce training, with early positive feedback and a focus on improving customer engagement. Significant strategic priorities include returning the US to growth, sharpening focus on the implant business, and increasing R&D investment in high-value opportunities. Recent product launches include the SmartView Detect, Reciproc Minima file system, and X Smart Go, enhancing diagnostic capabilities and treatment efficiencies. The company is expanding its US distribution network, signing an agreement with Atlanta Dental Supply and achieving milestones with other distributors. Restructuring efforts aim for $120 million in annual savings, with early proof points including a $20 million reduction in operating expenses. Capital allocation priorities focus on debt reduction and share repurchases, with an $80 million debt reduction in the quarter. Management maintains a cautious approach to guidance, with expectations for more consistent execution and growth in the second half of the year. Full Transcript OPERATOR We are applying a thoughtful, risk aware approach to our guidance while remaining focused on executing initiatives to drive sustainable growth. With that, I will turn the call back to Dan. Dan Thanks Mike. As I mentioned in my opening comments, our focus remains on disciplined execution and we're making progress against our plan. The management team and board are closely aligned, priorities are clear and the organization is engaged and motivated. I also want to recognize the strength of our leadership team, particularly our US Commercial leaders. Several competitive hires joined recently who bring deep dental experience and are already making meaningful impact. While it's still early, what we're seeing gives me continued confidence that we're on the right path. My leadership team and I have been spending more time in the field and at local customer events gaining valuable first hand perspectives. Customers are noticing a shift in how we show up. Most importantly, we're consistently putting the customer at the center of our decisions and actions with a clear focus on improving both the experience and outcome for the dental practitioners we serve. We are in the early stages of expanding our clinical education and salesforce training programs with increasing structure and scalability. Early feedback is encouraging and the teams are responding well to greater clarity, investments in their development and increased accountability. This work is strengthening our foundation as we prepare for more consistent execution in the second half of the year. At the same time, we're strengthening our processes to ensure solutions are grounded in real world customer needs. As part of this effort, we're establishing a CEO Advisory Board comprised of dentists to provide direct and ongoing customer insights. Returning the US to growth remains our top priority. The actions we are taking to strengthen talent execution, expand distribution and improve customer engagement are beginning to show early traction. At the same time, we're reinforcing the key drivers of our long term growth. A central priority is sharpening our focus on the implant business. While recent performance in this segment has been challenging, we continue to benefit from strong underlying assets and a deep heritage in the space. To build on this foundation, we initiated a disciplined set of actions to improve performance and position the business for sustainable growth. I'll provide more detailed updates in future earnings calls. Innovation also remains central, supported by increased R and D investment with a clear focus on our highest value opportunities. Let me share a few of our recent launches as seen on slide 7 in the earnings presentation. We just announced the launch of SmartView Detect, the first FDA cleared and CE marked IA enabled diagnostic aid that automatically identifies potential inflammation at the root tip in 3D scans integrated into Dscore platform. The solution works with both new and existing systems, enabling seamless adoption in clinical evaluation SmartView detect increased detection sensitivity by approximately 46% relative to unaided review, helping reduce the risk of overlooked findings while improving workflow efficiency. This innovation not only enhances diagnostic confidence but also supports clearer patient communication, reinforcing our commitment to advancing connected high quality dental care. In endodontics, we introduced the Reciproc Minima file system and the xsmartgo cordless Endo motor, both designed to simplify workflows and improve efficiency. Reciproc Minima enables treatment of narrow and complex canals with a one file approach, while X Smart Go enhances mobility and performance through cordless operation and integrated intelligence. Together, these solutions reflect our focus on practical evidence based innovation in imaging. We announced FDA clearance of our dental dedicated mri, representing an important step forward in expanding our capabilities in soft tissue diagnostics. The system has been validated in clinical setting and is expected to support broader collaboration with leading academic and research institutions. Consistent with our strategy to build clinical evidence and drive adoption, it also complements our existing imaging portfolio. Beyond dental wellspec continues to show solid momentum. Adoption of surety for females is expanding, supported by ease of use, discretion, patient comfort and with encouraging feedback from both patients and clinicians. Building on this, the recent launch of the male version extends the portfolio to a broader patient population. Finally, we're making progress in expanding and strengthening our US Distribution network. As announced yesterday, we signed an expanded agreement with Atlanta Dental Supply, adding our Connected Technology Solutions portfolio effective August 1st. This marks our fourth new distributor agreement this year and enhances our regional coverage, improving access and service levels in an important market. The other distribution agreements announced in the first quarter are beginning to build traction and expand our commercial reach. Early traction includes Benco installing its first CEREC system under the new agreement, an important milestone achieved ahead of schedule. To lead Dentsply Sirana into its next phase, we're strengthening our foundation with better tools, more integrated systems and increased automation. This builds on the strength of our existing teams while enhancing capabilities and transformation operations and financial performance. Our Transformation office continues to drive execution of the Return to Growth Action Plan with a focus on embedding lean operating principles, simplifying processes and improving how work gets done across the organization through the customer's lens. In parallel, we're advancing our enterprise AI strategy to drive efficiency and support innovation across both commercial and operational areas. In Q1, we began deploying AI enabled tools and select workflows to improve productivity with broader rollout plan throughout the year. Within finance, we're strengthening capabilities while maintaining continuity as we actively progress on our search for A permanent cfo, Mike continues to be a strong partner in his interim role, ensuring stability and focus on execution. We're simplifying and optimizing the operating model to improve efficiency and scalability. The restructuring program remains on track to deliver approximately $120 million in annual savings with benefits building through 2026 and becoming more meaningful in the second half of the year. Key actions include cost optimization, organizational simplification and supply chain efficiencies, along with reducing complexity across legal entities and IT systems. Through these actions and by driving lean principles further into the organization, we will improve our speed, competitiveness and the customer experience. Early proof points are visible, including a reduction of approximately $20 million in operating expenses during the first quarter. These savings are being reinvested into growth areas such as R and D, clinical education and commercial capabilities. While we continue to manage external headwinds, a disciplined approach to capital allocation and balance sheet management remains a priority. During the quarter, we reduced debt by approximately $80 million, reflecting our commitment to deleveraging. Capital allocation. Priorities remain focused on debt reduction and share repurchases, supported by improving working capital and free cash flow. With the dividend eliminated during the first quarter, we have increased flexibility in how we deploy capital and as performance improves, we expect to be in a position to evaluate the timing of share repurchases later this year. In closing, progress is encouraging, execution is improving, cost discipline is in place and we're building the capabilities needed to drive sustainable growth. Early proof points are emerging across the business. Visibility should continue to improve as the year progresses, particularly in the second half. We remain confident in the strategy and focused on delivering long term value for the shareholders. I believe the potential for Dentsply Sirona has never been greater and we have at our fingertips everything we need to achieve this. Thank you. OPERATOR Now let's turn to Q and A. 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 stand by while we compile the Q and A roster. We kindly ask that all attendees limit their questions to one primary question and one follow up question. Our first question comes from the line Dan of Alan Lutz of Bank of America. Please go ahead. Good afternoon and thanks for taking the questions and thanks for all the details. Dan, on the Return to Growth Action Plan, there's a lot of good steps there. You talked about new distribution relationships and expanding ones. You've already had investing in clinical education and then new product investments. So there's a lot of things on the plate. How do you think about the timing of these benefits? I think at the top of the call you mentioned maybe some benefits happening toward the second half of the year. But as we think about all those things that you're spending time on or that you've done so far, is this something where we should start to expect more significant benefits in the back half of this year, or is this effectively more of a two or three year roadmap? We'd love if you could just give us a sense of how you're thinking strategically about the timing of some of these investments you're making in that return to growth plan. Thanks. Thanks, John. I appreciate the question and I think you kind of answered it right. So when we first rolled out the return to growth plan, we called it a 24 month plan, recognizing that you Alan Lutz (Equity Analyst) can't move fast enough, but at the same time can't change this as quickly that all of us would wish. So really Q1 was really the beginning of this, where we established the 26 plan, built the teams, did all the reorganization, and this is really us out of the gate in the first quarter. What we're talking about in particular is as we begin some of the restructuring that's occurring in first, second quarter, you'll see some of those cost benefits come through more in the fourth quarter than you would in the first half of the year. But you know, as you look at the commercial cadence and what we plan to drive again, I would think we should begin to see some things in the fourth quarter. But I really do believe that more of the improvements will be seen as we get into 27 and certainly into 28. Appreciate all the color there. And then we'd love to hear an update on some of your early conversations with DSOs. Where within your portfolio is the most interest and how can X ray best help DSOs? Dan Yeah, again, great question. And there's a lot of great activity that is currently occurring with DSOs. It's something we had begun in the last quarter of last year with this. And you know, again, if you look at who we are and what we offer, you have the incredible strength of a broad portfolio. Whether you want to actually build out Alan Lutz (Equity Analyst) new dental suites and we can actually provide all of that activity there, or you want to plan for longer consumables and pull throughs, again, we can do that as well. So we're really talking with several concurrently and we're looking to have a more active plan again more towards the second half this year and into next year. But I think the strength is in the broad offering we can give them as a one stop shop and therefore bring all of the leverage bundling together for the best impact for them and ease of them with us. Great. Thanks, Dan. Thank you. John Block (Equity Analyst) Our next question comes from the line of John Block at Stifel. And maybe just the first one. I'd say the trends with the consumer are certainly a concern with the geopolitical backdrop. And you guys are so global in nature that I thought I'd take the opportunity. When you look across your book of business, anything to call out between Americas and EMEA and apac, when we think about March or April trends, whether it be weakening or maybe even something to call out in terms of more resilience than maybe you expected considering what's going on in the world. Dan Yeah. Well, again, great question, John. And there's certainly a lot of moving parts here in, you know, we haven't specifically called out Middle East. We'll keep our eyes on that. It is a small or lower single digit impact for us right now. And so I think we'll keep focused with that. The continued struggle in central Europe with Russia, it certainly has its weight, something that we've factored into our forecast. So, you know, as of now we stay with what we've planned in our initial business plan and should we see some of these risks changing or shifting, you know, we'll take more action after John Block (Equity Analyst) we get through the second quarter. Okay, fair enough. And maybe just the second question, and Dan maybe, you know, one of the half questions here, can you talk to us on where you are with the drop ship model with the distributors? You know, you've talked to more distributors coming on board, but what more needs to be done there? Maybe if you want to talk to the receptiveness, I mean, I think for them it's not tying up their cash. And if you feel like it is giving you a greater voice with the distributors and then and a completely unrelated question would just be the cadence throughout the year. How do we think about the exit EBITDA margin which might, you know, in 4Q which might help us bridge from 1Q to 4Q. Thanks guys. No problem. So I'll put a couple of things out there. So the transition into the new capital model really applies to some of the existing dealers, not necessarily new ones. Now we'll provide this for everybody, but when we talk about the inventory build or the change in inventory, inventory that you were referring to, That's a little more of a Patterson Dental and Henry Schein than all of the new players who would start at 0 anyway. The first quarter did not include any of that sell-through of those inventory. We expect to see that from Q2 John Block (Equity Analyst) through Q4 with those type items. It is well received. It's built into all of our agreements. It's honestly not a negotiating point with us because the benefits are for both sides and pretty easily accepted that way. I'll refrain right now from either Mike or I giving you what we think Q4 guidance is is not something we do. We want to get a couple quarters under our belt with all of the moving parts we have and then really help you determine what's the best way to set up your 27 model. Fair enough. Thank you. OPERATOR Thank you. One moment for our next question. Jeff Johnson (Equity Analyst) Our next question comes from the line of Jeff Johnson with R.W. baird. Please go ahead. Yeah, thank you. Good evening guys. So, Dan, I wanted to start the WellSpec business I thought showed through very consistently and nicely this quarter. OIS and CTS, we know there's a lot of moving parts there on the EDS segment. I think that was probably the biggest surprise to me. From a segment performance, just the down seven. The comp got a little bit tougher. But the switch from plus 2 to minus 7 this quarter I might have my numbers plus 4 to minus 7 this quarter. What was that 11 point shift? The markets seem like they've held in fairly consistently. What was the underlying driver of that fall off? Dan Thanks. Yeah. What I would tell you right now is I agree with you. Jeff Johnson (Equity Analyst) We looked at a little bit of softness in the fourth quarter. We saw that carry into the first quarter. I do trace that down to specific markets. I won't call them out right now. And while we believe some of it is de-stocking of dealers, especially those that may have gone into a little more PE based thing, we're actually working through the program for a better understanding of where that is. So right now it really looks like there was a bigger shift in Europe than we would have anticipated. Us is kind of in line where we thought. And even within Europe there's probably about five different markets that we're taking a look at in a certain area to understand what's being driven there for a better thing. But our current estimates and our current assumptions are there is some continued destocking that we felt. Fourth quarter. I think we're in the first quarter again. As you notice, we haven't called off of our number. We think that this is a timing issue. As we stand today. But we'll look to see how we can prove that true. Yeah, understood. And then maybe as my follow up question just you mentioned again tonight returning that US to growth by maybe later this year. Europe's actually a bigger segment for you guys geographically. Maybe the consumable thing, the EDS thing you were just referencing there drove that European number down the down 5.6% this quarter. But as you focus on the US I would assume you also plan or hope or are working towards getting that European number more consistently to growth as well. I think historically it has been, maybe it's just this quarter, but I don't see the restatements on the new segments yet on your website. So just help me understand how you're thinking about Europe over the next few quarters and eventually getting that return to growth as well. Thanks. Dan Yeah, no, it's no problem. And you kind of answered it with your question, right? Of course we want Europe to get back into growth. Jeff Johnson (Equity Analyst) It's a foundation. The US stays on track. We're happy with that. Again, this European one is really two factors you talked about eds, which I'd agree with. Keep in mind too that the treatment centers are fairly large last year as well. And so as Mike calls us out, you want to make sure we stand. You know, that's an academic type thing where they come in blips, not really something you can easily forecast and see. So I want to make sure we don't overstate the change because of that one time headwind that we're looking at therein. But of course a strong Europe and Asia PAC are needed as well as a continued growth in the Americas and we're focusing on it. I think the real message is not just detracting us or taking us off task by any stretch. And the vast majority of what we're doing to return us to growth is applicable throughout the world. Fair enough. Thank you. Thank you. OPERATOR One moment for our next question. Michael Sarcone (Equity Analyst) Our next question comes from the line of Michael Sarcone of Jefferies. Please go ahead. Good afternoon and thanks for taking the question. I just wanted to start on gross margin. You talked about 550 basis points of margin contraction. Maybe you can just give us a little more color on what's driving those and the shift in Q1 and then how we should think about the cadence of gross margin through the year. Mike (Chief Financial Officer) Yeah, a big piece of the headwind Dan in gross margin is tariffs. When you're looking year on year, tariffs didn't exist to the extent they do now. So that's a pretty Big piece. We talked about eds. Dan just did. Mike (Chief Financial Officer) EDS (Endodontic Services) is our most profitable segment. So we're experiencing negative mix as far as that goes. And then we also have, you know, there was a. There was a volume absorption situation in Q4 of 2025, which comes off the balance sheet. It's inventory. Both therefore capitalized. And that was, that was a negative. I mean, as far as going forward, you know, everybody knows what's happening with tariffs. We'll start seeing the adjustments from the SCOTUS decision and then down to the Trump 10% in Q2. Mike (Chief Financial Officer) So that piece is going to look a lot better. Dan talked about what we're working on as far as Europe, you know, getting the destocking behind us, which we believe it is. And the third piece is tariffs down the road that there's another piece there, but just pure apples to apples. I would think we should be gaining 300 basis points at a minimum back in the Q2, Q3 timeframe. Michael Sarcone (Equity Analyst) Okay, that's helpful. And then the question just about macro and geopolitics was asked from a consumer demand standpoint, but could you talk about what you're seeing in terms of input costs as it relates to higher oil prices and freight prices? Mike (Chief Financial Officer) You're kind of breaking up there. So I think I'm going to answer it. I think you're asking if we're seeing some headwinds with freight, oil, some of those natural cost increases that are occurring because of that. And I would. The answer is yes, we are. And we'll continue to monitor that and understand if it's something we can offset, OPERATOR absorb, change, or have to adjust. But again, I want more than one quarter under the belt before we make that decision. Okay, thank you. Thank you. One moment for our next question. Joe Donegan Our next question comes from the line of Jason Bednar from psc. Please go ahead. Hey, guys, this is Joe Donegan for Jason. Thanks for taking the questions. Starting on consumables more broadly, we're seeing a continued mix shift toward private label and I guess strategically curious how you're thinking about navigating this shift. And as you read that the private label trend still has runway or is it starting to plateau in the current environment?? Dan Yeah, I think it's a fair question. And private label is something that has been around and will continue to be around. It's something that we'll obviously consider and where it makes sense, compete against. We do have several programs in development to actually make this a meaningful and worthwhile approach with customers. I'm not going to lay Those out just yet because it's for competitive reasons. I want to get them launched before we actually discuss them out there. But then to your point, something that has our attention, certainly, and the need for us to penetrate the market with more creative ways to get our products into the hands of the dentist. Thanks, Ed. And then one more just to push a little bit more on kind of pricing with input costs here. Do you feel you have incremental ability to pass through price to offset these pressures? And I guess just like what is your position here throughout the year and what might be included in the guide for pricing versus how much more you could possibly take? Yeah, it's a fair question. We had initially last year taken some minor pricing on more of the capital than anything like that. Our intent is not to change that right now. And I don't see anywhere where we would benefit from price increases of any significant impact. So I. I think right now it's really about us staying focused on return to growth and actually executing in a way that is beneficial to the customer back to our growth. I don't think there's a pricing strategy of any significant impact that would really get us where we need to get to. OPERATOR Thanks. I appreciate it. Thank you. One moment for our next question. Elizabeth Anderson Our next question comes from the line of Elizabeth Anderson with Evercore isi. Please go ahead. Hi, guys. Good afternoon. Thanks so much for the question. Given sort of the RD spending in the quarter and your focus on new products and some recent dental exhibitions, can you talk about the new product contribution in the quarter and sort of how you're seeing that progress over the course of the rest of the year and possibly into 2027? Thank you very much. Dan Yeah, thanks. We don't actually disclose that level of detail. We do monitor it and it's something that we have our eye on. And to be honest with you, what I'll hint to you is while we do have the metrics, I need to see them improve for our investment in R and D. And I think there's an execution plan that should allow us to do that. But it's not something I would put out publicly of what the contributions are for this year next. But would you agree that it's sort of a ramping contribution as we go across the year into next year? We should think of that really expected to step up, maybe like 27, 28 kind of time frame. I would agree with that. OPERATOR Thank you. One moment for our next question. Michael Czerny (Equity Analyst) Our next question comes from the line of Michael Czerny with Lyrink Partners. Please Go ahead. Dan Afternoon. Thanks for taking the questions. I know we've touched on a lot of the different. I just want to dive in, I guess a bit on implants. As you think about the next couple years of go to market, where do you think you are in your combination of product reboot, sales reboot and how to factor that into the that component contributing to the return to growth opportunity? Yeah, it's a fantastic question. I would tell you that, you know, while we talk about geographically focusing on the US As a return to health as a priority, which it is, you know, therein is a couple of priorities of which implants is one of the top priorities. And again, I've commissioned a team of dental KOLs (Key Opinion Leaders) to work with us and get the voice of customer. I'm really working on several different approaches here with the team to come back with a little bit more holistic programs. I want to get them formed and launched before I speak about them. But I would just tell you that implants is an area of our focus. We are not happy with our performance to date. We recognize we have some of the best offerings in the market and we simply need to execute in a better way and utilize those assets in a stronger way. Michael Czerny (Equity Analyst) And just one quick additional question relative to your comments on the call about the buyback, as you think about the evaluation to the end of the year, I guess what are the moving pieces that are going to impact your decision on a go no go valuation? Dan Yeah, not many to be honest with you. I think there's an opportunity here by removing the dividend and redeploying it out. We had had some nearer term debt that was coming due. It made sense to retire. I just wanted to put the funds there first because it will help us reduce leverage, especially when Ebitda gets stronger. And it just didn't make sense to carry them forward. So that was really the thing I think in the second half of the year looking at the option to remove stock and to be honest with you, at this price I'm anxious to do it because I think it's going to be a great one to remove. And so all I'm saying is I'm going to get the debt in line first. I want to preserve our credit ratings the way they are and then I want to begin removing these shares in a way that makes sense not only in the second half of the year but ongoing thereafter. Michael Czerny (Equity Analyst) Thank you. OPERATOR One moment for our next question. Lily Lozada (Equity Analyst) Our next question comes from the line of Lily Lozada at JPMorgan. Please go ahead. Hi Great. Thanks so much for taking the question. Maybe I'll just start with guidance. You beat by quite a bit on the top line on a reported basis, but reiterated the guide. I appreciate it's still early, but what's the thinking behind that? Why not reflect the beat and are there any offsetting factors, 2Q through 4Q that we should be keeping in mind? Dan Lily, it's a great question and just to be honest with you, it's my style that I'm just bringing into Dents by Serone. I did the same thing back in Globus. I'm not going to make a call after one quarter. I'd like to see at least two before we do. So regardless of it, I wouldn't have brought it up or down. It's not a concern, it's just more of a style. What I do. I'd rather be appropriately conservative than anything else right now. That's all it reflects. Lily Lozada (Equity Analyst) Got it. Makes sense. And then I was hoping you could dig into CTS a little bit more. That came in nicely higher than what we were thinking. So can you talk a bit more about what drove that strength and just generally what you're seeing in terms of appetite for capital in this environment. Thanks so much. Dan Yeah, no, you're welcome. Listen, right now there's a lot of moving parts therein. I would tell you that having expanded the dealers and actually working on programs with them, we called out through Mike's script. We're seeing some, some strength in the US again. One quarter doesn't make a trend and so we just acknowledge that it's there. We'll continue to execute and you know, after a couple of quarters we can see how that's raising up. But the CTS strength I would attribute more to activity occurring in the US through our, through our partners. Lily Lozada (Equity Analyst) Thank you. OPERATOR Thank you. One moment for our next question. Kevin Caliendo (Equity Analyst) Our next question comes from the line of Kevin Caliendo at ubs. Please go ahead. Thanks for taking my question, Dan. I appreciate the lift that you have here operationally and all the things that you've initiated internally. And when you think about the growth initiatives, I'm just wondering in your mind what segments or what geographies do you think catch up or get to be growing faster than market? What products do you think you can get to quickest? Just trying to gauge where you're sort of head is around the expectations, around what the growth can actually look like. Can Dentsply again grow faster than the market, grow in line in the market, in implants or Something to that effect. And I'm just trying to gage where you think you can be and sort of when in certain product lines, like what are you most excited about or where do you think you can return to this sort of market growth or presumably better than market growth and what segment is fastest. Dan Yeah, and again, I'll refrain from giving segment by segment growth expectations. Something we have and working on. And you know, there will be an investor day somewhere probably coming up towards the end of this year, beginning of next. And we'll, we'll do that along with the strategic plan. I believe that this organization with the right structure and the right focus can grow at or above market over time. And you know, we need to work our way through that in 26 and into 27. But the guard, that is certainly the target. Kevin Caliendo (Equity Analyst) And you say, well, how and where? Well, you begin with the US has to return because that's just its size. Within that, through the actions we've already taken with dealers, it's got to be about the right placement of capital. In order to have those activities as we spoke about with other folks, it has to be in my mind, implant focused, endo-focused, or EDS-focused. Excuse me. And at the same time, with our enhanced R and D, we need to make a better or a deeper penetration into the ortho market. So all of those are in play. I want to get them functioning first before I come out and commit anything in particular. But I would say among those or combined with those, we should be at or above market as we get into a healthy cadence. And just a quick follow up to all that. You're talking about capital deployment, you're talking about share buybacks. Presumably with everything that's going on here, you know, there isn't likely a focus on M and A. But if there was, right. You look at the product portfolios that you have either in Wellspec'd or in dental, is there an area that you think that, hey, you know, a tuck in M and A acquisition or even something more material might, you know, enhance the product portfolio, be more synergistic or needed? Dan I do, I don't think there's anything needed. Let me start there. And I am looking at M and A because even if we decide not to do it over the next few quarters, we are going to revisit that. And so staying current is a plan that we have in place already. We've actually established an independent board with wellspect and we'll announce that out as we get the finalization of these people. And it is going to be a focus on hyper growth within WellSpec so that we drive way above market and penetrate deeper should we find adjacencies therein that are bolt on or can be fast in closing out the gap. That would be one area of interest to me. So in the non dental area we have several conversations currently with longer term potential within dental, but I actually want to refrain from talking about them specifically right now. What I'm obviously looking for is an accelerated way to differentiate ourselves in certain areas. Some of it would be CTs, you know, just for the fact of helping penetration. But as far as products themselves, meaning implantables or those things, there really isn't anything we're chasing down at this time or have interest in. Appreciate the candor. Thanks so much. Thank you. OPERATOR One moment for our next question. Stephen Valaquette (Equity Analyst) Our next question comes from the line of Stephen Valaquette at Mizuho Securities. Please go ahead. Great, thanks. Good afternoon. So I guess for us we heard just one of the global dental distributors today talk about some lower industry pricing trends on scanners or other digital equipment, primarily from newer market entrants in 1Q. So I'm just curious if you can Dan discuss kind of what you're seeing on the competitive landscape front in iOS, what this might mean for Prime Scan or maybe some of your other offerings. Yeah, well I think your data is correct. I think there are new entrants at low cost. I think there's different plans to address that. What we have to look at is our current model with market needs in this changing dynamic. And that's where our size and the breadth of portfolio come into play. And so we're doing a few things. One of them is obviously looking to become more competitive in that area. And with that it's probably going to be from more structured programs that we do that not only have a scanner but the pull through effect of it. Some things that some of the lower costs won't be able to compete with without bundling up. And so we're going to use our portfolio in a bundled strategy that will allow us to actually accelerate some of OPERATOR the penetration we're seeing as a way to be more market appropriate today. Okay, thanks. Thank you. One moment for our next question. Erin Wright (Equity Analyst) Our next question comes from the line of Erin Wright at Morgan Stanley. Please go ahead. Great, thanks. So you highlighted in the deck as well as your prepared remarks a lot on innovation in terms of specific products and areas of focus. I get it, you're not going to give us like an innovation contribution yet. But you Know what could really move the needle? Would you highlight a couple of those? That would be significant that we should pay attention to kind of going forward from an innovation perspective. Thanks. Dan Yeah, thanks. You know, obviously speaking only of the ones that we discussed on the call versus what has been approved yet or Erin Wright (Equity Analyst) what we haven't launched. You know, I actually like the AI detection as a way to further enhance the DS core offering to our current and even future customers. That one is one that excites me. Listen, I've been a fan of wellspec and I see the potential of this business. And so the surety is a launch into an entirely new area for them and into new geographic markets. So both of those are things that are exciting for me. I think the MRI is a much longer and a little more clinical long term play. I don't see that as a large revenue generator over time, but rather something that will lead out to future products or future approaches that I think can be very interesting. And you know, listen, I think the reciproc minima using one file is a great approach that can actually not only reduce cost to our users and speed up time, but have what appears to be great outcomes for the patients. And so, you know, true this, I like them all. I think they all have potential to move us forward. Okay, great. And I don't want to belabor the macro topic and fuel and input costs, but I just wanted to clarify. You did say you're seeing an impact now. Can you quantify that at all? Like is it material right now? And just remind us so you don't have anything included in your guidance right now as it relates to that or you just think you can mitigate it or what is why not make any changes on that front just to be conservative on that front now. Thanks. Dan Yeah, look, I'll make it simple: We're obviously not going to disclose very specifics here that we don't do. And what I'm creating is flexibility here is if we see escalation or unforeseen things that are not there today, obviously we would have to react and share with you adjustments whether we can absorb them or not. And that's really all that statement is. There's nothing that has occurred today that is material otherwise we would have disclosed it. But again, we don't know in this Erin Wright (Equity Analyst) changing world what tomorrow is. So I'm simply reserving the right to say should that change, we will probably need to come back and update your assumptions. Thank you. OPERATOR One moment for our next question. Daniel Grosslight (Equity Analyst) Our Next question comes from the line of Daniel Grosslight at Citi. Please go ahead. Hi guys, thanks for taking the question. I want to go back to implant volumes. You mentioned that across all regions implant volumes were a little bit lower than expected. I'm curious if you can kind of bifurcate between premium and value demand, realizing that the significant majority of your portfolio is premium and if there's any significant differentiation you're seeing by region and you kind of alluded to this in your prepared remarks but was hoping you could provide a little bit more detail on the strategy to stem some of that lower demand and timing of those benefits. Dan So a couple things we are down with both value and premium for the quarter. I would tell you when I look at what we call value, which is MIS specifically, it is simply underutilized. And so back to your point, what I would do to stem that is actually position that differently as a brand that can really drive something that I feel has been not fully utilized by the company. That's something that we're working on currently. I think Astra is still one of the best products out there. And so the clinical education, the rep education are all parts of that that I mentioned last quarter to go at that and drive those things. In particular, I feel implants is more of an execution than a lacking product or being other products over competing us. So I think we've got the right portfolio. I think we have to improve the Daniel Grosslight (Equity Analyst) education to do the right execution. And while we will have certainly market appropriate or competitive programs forming in the second quarter, I'm going to refrain from those now until we get them implemented. Okay, great. Thank you. And to follow up last quarter you guided to a $30 million headwind in the first half of this year due to the inventory sell through under the new drop ship model. How much of that was realized this quarter? And I don't know if you can quantify on a basis point impact how it impacted gross margins. Dan Yeah, none of it was realized this quarter. It still is in our visibility to happen with the previous guidance we gave. But it's going to be more of a late Q2 and then second half where we'll see that effect. Daniel Grosslight (Equity Analyst) Got it. Thank you. Thank you. OPERATOR One moment for our next question. Brandon Vasquez (Equity Analyst) Our next question comes from the line of Brandon Vasquez at William Blair, please go ahead. Oh great. Thanks for the question, Dan. Maybe I can ask a little bit of the portfolio question but the opposite side as you're in the seat. Another quarter here as you're looking at the portfolio. Is there anything you think that maybe Dentsply isn't the right home for anything you think on the rationalization side that might help improve the P and L to some degree? Yeah, great question, Brandon. My answer is no, not yet. Dan I really want to see how the market responds to our return to growth plan. Brandon Vasquez (Equity Analyst) I want to take a look at these from a different light. I don't like the position we're currently in right now and so I want to stabilize it, get them growing. And I think at that point we say what makes sense or not. One of the things we did announce, I believe last quarter was the creation of the Growth and Value Committee. And with that I have the board working with me to not only look at potential M and A but also does it make sense for something to be set up as a divestiture? My ask of them and right now, everybody, I still want to get through the execution phase of this before we take an evaluation of where that makes sense. Not afraid to do it. Just don't really have the right facts or positioning to do that in what I think is the best interest of all of us. Okay, makes sense. And as a follow up, you know, within CTs and EDs, APAC was actually, if I recall correctly, highlighted as an area of strength. While there's some other pockets of weakness. I was curious if you could just spend a minute on apac why things are doing relatively well there for this portfolio compared to the other reasons. Thanks, Dan I appreciate that as well. You know, really what I put it out to is simply the leadership and structure in EMEA are strong and you know, we really have some of the greatest people in there. Brandon Vasquez (Equity Analyst) They are well educated, they actually spend well on clinical education. So everything I'm saying I'm bringing into the us I don't want to say exist fully in the emea, but started out in the mea and I think that's one of the drivers that's going on that way. You know, with Asia PAC as well, we're looking at doing a similar thing. I know I want to speak a lot about them and that's more of a long term investment growth. But I think that, you know, again I point out the MEA strength really based on the execution of a team with a good plan and one that we can learn from and spread throughout the world. Thank you. 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.