Good day and thank you for standing by. Welcome to the Q4 2024 DENTSPLY SIRONA Earnings Conference Call. All participants are in a listen-only mode. Please note that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Andrea Daley, Vice President of Investor Relations.

Thank you, Josh and good morning, everyone. Welcome to the Dentsply Sirona fourth quarter 2024 earnings call. Joining me for today's call is Simon Campion, Chief Executive Officer; Herman Cueto, Interim Chief Financial Officer; and Rich Rosenzweig, Executive Vice President, Corporate Development and General Counsel. I'd like to remind you that an earnings press release and slide presentation related to the call are available in the Investors section of our website at www.dentsplysirona.com. Before we begin, please take a moment to read the forward-looking statements in our earnings press release. During today's call, we may make certain predictive statements that reflect our current views about future performance and financial results. We base these statements on future events that are subject to risks and uncertainties. Our most recently filed Form 10-K and any updating information in subsequent SEC filings lists some of the most important risk factors that could cause actual results to differ from our predictions. 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, enabling comparisons of financial results between periods where certain items may vary independently of business performance and enhancing transparency regarding key metrics used by management in operating our business. Please refer to our press release for the reconciliation between GAAP and non-GAAP results. Comparisons provided are to the prior year quarter unless otherwise noted. A webcast replay of today's call will be available on the Investors section of the company's website following the call. And with that, I will now turn the call over to Simon.

Thank you, Andrea and thank you all for joining us this morning for our Q4 2024 earnings call. Today, I will start by providing an overview of our recent performance then Herman will cover Q4 and full year 2024 financial results and our 2025 outlook and I'll finish with a strategic operating update. Before we get started, earlier this month, we augmented our Board with the addition of Dan Scavilla and Mike Barber, two proven leaders with skill sets that are additive to the Board and that will be highly beneficial as we continue to execute on our transformation strategy. Dan, CEO of Globus Medical, is a seasoned executive with deep expertise in commercial deployment and business integration, having successfully led the merger of Globus and NuVasive. Mike brings over 40 years of experience in product management and innovation, including executive leadership roles at GE, where he was responsible for the transformation of the company's digital X-ray program. Now, let's start with some key points on Slide 3. In the fourth quarter, we were pleased to see green shoots in several areas of the business, including a return to organic sales growth in Europe of approximately 2% and global growth in imaging of nearly 13%. Wellspect exceeded estimated market growth rates posting approximately 7% growth. SureSmile continued to grow globally, achieving a nearly 4% increase over the prior year quarter with over 20% growth in Europe for Q4 and the full year. Fourth quarter results in Europe included continued momentum in Germany. We are encouraged by the positive step change we saw in performance in the second half of 2024. The key actions we took to improve performance and address market dynamics included reintroducing Orthophos SL, improving commercial execution by directing sales personnel towards our most significant growth opportunities and enhancing our training to address customer needs. This translated into results that exceeded sales targets since the relaunch and better positions us for success in 2025. Excluding the incremental charges associated with Byte taken in the fourth quarter, the business outperformed our latest guidance by almost 2% on the top line in Q4 and almost 4% above the midpoint of our full year adjusted EPS guidance. In 2024, we finished the year with organic sales down 3.5%, in line with our latest guidance. Let me give you some color around this. Byte reduced sales by 1.2% and there was a 2.5% impact from CTS. While CTS faced both global macroeconomic and pricing pressure, our relaunch of Orthophos SL that I've just mentioned and the launch of Primescan 2 propelled second half growth in imaging and facilitated volume growth throughout the year in scanners. This is the third year in a row that we have demonstrated volume growth in scanners, the gateway to patient treatment and clinical workflows. SureSmile posted four quarters in a row of high single-digit to double-digit growth on aligners and we'll speak a little later on about our investments to accelerate our SureSmile business. Endo demonstrated the importance of innovation with our new X-Smart Pro+ Motor and Reciproc Blue file launches leading to competitive conversions in the U.S. during the second half of the year. Wellspect delivered another year of strong growth across all regions. Our January survey of over 1,300 respondents indicated that our major markets remain relatively unchanged with utilization showing slight improvement across most categories, with continued softness in elective procedures. Survey results also continue to indicate strong interest in driving efficiencies through workflow improvement which aligns with our strategy. For 2025, we expect the external environment to remain largely unchanged. And as such, we expect organic sales to be down 2% to 4% for the year, including a negative Byte impact. As we've said, we view our current portfolio innovation engine, commercial scale and clinical education platform as key value drivers. We made a strategic decision to redeploy certain Byte resources to our SureSmile platform. They have commenced leveraging their strong capabilities to drive direct-to-consumer demand and revamp e-commerce. Furthermore, we have transitioned key software resources to our SureSmile innovation team who now focus on creating simplified product offerings, upgrading the user interface of the software and reimagining the patient and customer experience. We expect some of these improvements to launch as early as mid-2025. Earlier this month, we also announced that we are exploring strategic alternatives for our Wellspect HealthCare business. We believe that taking this step can unlock significant value for our stakeholders. Over the last 2 years, we have invested very strategically in this business. We strengthened its foundation and positioned it for the future by prioritizing product innovation and profitable revenue growth, and investing in capacity to meet anticipated demand growth. Importantly, we've developed a strong product pipeline with potential opportunities to access significant untapped markets in Wellspect's core business and other adjacencies. Our added focus and attention to this business has resulted in attractive top-line growth and profitability. We look forward to determining an outcome for this evaluation process. As we said, the company is committed to maintaining a disciplined approach in regularly evaluating our portfolio, cost structure, investments and additional pathways to drive sustainable profitable growth. We have made meaningful progress on our transformational journey, completing key initiatives and milestones in 2024 with our plans and momentum continuing into 2025. I'll share a more detailed update on our foundational initiatives later. But before we move on, I want to reiterate that we remain highly committed to taking actions to reshape the organization, unlock efficiencies, enhance customer engagement and strategically allocate spend with a return focus. We are confident that these steps will enable us to capitalize on the advantages that a broad-based dental organization has to offer. The financial contributions that we originally laid out for these initiatives during our 2023 Investor Day continue to remain on track. Now before we discuss financial results in more detail, I'd like to share some recent business highlights on Slide 4. Starting with operational updates. We announced our Phase II transformation activities back in August. Action steps are now largely complete and on track to deliver full run rate savings by the end of 2025. We also announced in August that we were investing in a virtual sales team in the U.S. with the expectation that the team would be stood up and calling customers in Q1 2025. The team is now fully staffed and has already made over 8,000 unique customer touch points to date. And as we've shared, we've completed the largest individual phase of our ERP deployment in the U.S. which went live on November 1. This deployment also laid some of the important foundation needed for future phases. Moving to innovation. In Q4, we were pleased to complete the U.S. launch of the MIS LYNX implant, part of our value implants offering. LYNX is a versatile, reliable choice for a wide range of clinical applications. It combines a thoughtful design with cost-effectiveness, offering excellent value to clinicians and patients alike. In 2024, we successfully received 8 510(k) clearances. This reflects the progress we have made in the execution of our new product development and regulatory processes, and we have already launched 6 out of 8 of these innovations to market, including Primescan 2 and LYNX. With DS Core, we continue to drive adoption surpassing over 37,000 unique users in Q4, representing approximately 15% growth sequentially. In September, we launched Primescan 2, and its link with DS Core represents further integration of our digital ecosystem. This integration provides our customers more flexibility and efficiency within their practice and enables a better patient experience which all supports practice growth. As we've seen with other key functionality adds to DS Core, we saw a nice increase in subscriptions related to the Primescan 2 launch which is powered by DS Core. Wrapping up our highlights, clinical education remains an important component of how we bring value to our customers. In 2024, we hosted thousands of training and education events across the globe, including 6 DS World hosted in different locations with over 7,000 participants. And with that, I'll turn it over to Herman for the financial update.

Thanks, Simon. Good morning and thank you all for joining us. Today, I will cover our fourth quarter and full year 2024 financial results as well as the 2025 outlook. Before we turn to discussion on our non-GAAP fourth quarter financial results, let me mention impairments recorded in the fourth quarter. We recorded noncash charges for the impairment of goodwill and other intangibles of approximately $370 million net of tax within the orthodontic and implant solutions and Connected Technology Solutions segments. These charges were largely the result of weakened demand from sustained macroeconomic and competitive pressures in implants and equipment. Also included in the charges was a full write-off of the Byte trademark as we do not plan to use it in the future operating model of our aligner business. Now, let me cover the full year '24 bridge from latest guidance as shown on Slide 5. Since November, revenue was negatively impacted by an incremental $29 million associated with Byte estimated customer refunds recognized in Q4. The remaining business performed approximately $17 million better than expected, primarily driven by stronger CTS sales in Europe. Similarly, Byte impacted adjusted EPS by an incremental $0.24 which also contributed to a higher tax rate. The remaining business drove approximately $0.07 of adjusted EPS outperformance. Moving to Slide 6. Our fourth quarter revenue was $905 million, representing a reported sales decline of 10.6% and organic sales decline of 10.7%. Two discrete items impacted our fourth quarter results. First, the voluntary suspension of sales and marketing of Byte aligners resulted in a charge for customer refunds above what we contemplated on our November call. In total, Byte had a $62 million year-over-year impact in Q4. Second was the timing of EDS distributor orders placed ahead of our November 1 ERP deployment which resulted in an approximately $20 million shift between quarters. As we previously disclosed, this positively impacted Q3 and negatively impacted Q4 but had no effect on full year sales. Other drivers were soft retail demand in CAD/CAM, primarily in the U.S. and a decline in IPS. This was partially offset by growth in Europe, Global Imaging, SureSmile and Wellspect. EBITDA margins declined 290 basis points in the quarter, mainly due to a lower gross margin which contracted 240 basis points, largely driven by Byte. Our continued focus on reducing OpEx partially offsets the decline. Adjusted EPS in the quarter was $0.26, down 41.3% from the prior year due to lower margins and a higher tax rate. In the fourth quarter, we generated $87 million of operating cash, down 45.6% year-over-year due to timing of working capital adjustments as well as refunds issued to Byte customers. Let's now turn to fourth quarter segment performance on Slide 7. Starting with the Essential Dental Solutions segment which includes endo, resto and preventive products, organic sales declined 3.4%, driven by the previously mentioned impact from the timing of U.S. distributor orders. Excluding this impact, EDS benefited from stable patient traffic in the quarter and higher volumes in Rest of World. Shifting to the Orthodontic & Implant Solutions segment, organic sales declined 28.7% primarily driven by the $62 million year-over-year impact from Byte. SureSmile grew low single digits globally, supported by another quarter of 20%-plus growth in Europe and mid-single-digit growth in rest of world. When we look at SureSmile aligner specifically, we delivered another quarter of high single-digit growth. Organic sales in implants and prosthetics increased sequentially but declined high single digits versus the prior year quarter due to lower lab volumes and lower implant sales in the U.S. Wrapping up our dental performance, CTS, our Connected Technology Solutions segment saw organic sales decline 8.2% versus the prior year quarter. Our global CAD/CAM business declined double digits, driven by the softer retail demand environment in the U.S., while Germany was a bright spot for CAD/CAM, delivering growth for a second consecutive quarter. We were pleased to see the equipment and instruments business return to growth in the quarter, posting low single-digit improvement. This quarter represented the highest sales in 6 quarters and as Simon said, Imaging benefited from the relaunch of Orthophos SL in Europe and APAC and improved focus on commercial execution led to performance ahead of our internal expectations. Moving to Wellspect; organic sales grew 6.7%, driven by growth across all 3 regions as new product launches continue to positively contribute. Now, let's move to Slide 8 to discuss fourth quarter financial performance by region. U.S. sales declined 29.9%, the majority of which was driven by Byte, CAD/CAM and the previously mentioned EDS timing impact. This was partially offset by growth in Imaging, Wellspect and low single-digit growth in Endo, driven by continued adoption of our X-Smart Pro+ Motor. U.S. CTS distributor inventory levels decreased sequentially in the quarter by approximately $45 million. This represents a $15 million year-over-year decrease in distributor inventory. Relative to historical averages, distributor inventory levels remain low. Turning to Europe; organic sales increased 1.8% with CTS, SureSmile and Wellspect driving the growth. SureSmile sales increased over 20%, with notable growth in Italy and Spain. CTS grew mid-single digits with equipment and instruments posting double-digit growth for the quarter. Germany which is our largest market in the region, had the highest quarter of sales in the last 7 quarters as imaging performance rebounded and commercial execution improved. Rest of World organic sales declined 2%, driven by declines in CTS and lab. EDS organic sales grew high single digits from increased volumes and strong Endo performance in China. Implants for the quarter, despite a difficult comp in China as a result of the volume-based procurement program. Now, let's turn to Slide 9 to briefly cover our full year '24 performance. Sales for the full year were $3.79 billion representing a reported sales decline of 4.3% and organic sales decline of 3.5%. Foreign currency translation negatively impacted sales by $34 million or 80 basis points due to a stronger dollar versus most major currencies. The majority of the negative impact was driven by CTS and Byte. CTS declined high single digits and was negatively impacted by competitive market pressures as well as higher interest rates in the U.S., Germany and other developed markets that dampened capital equipment purchasing over the course of the year. Despite this, we took actions that drove improvement in the second half of the year including the Orthophos SL relaunch. IDS was negatively impacted by a double-digit decline in lab partially offset by growth in implants, mostly attributed to the strong first half performance in China. Performance bright spots for the year included mid-single-digit growth in SureSmile with aligners growing double digit double-digit growth in China and mid-single-digit growth for Wellspect. EBITDA margins contracted 80 basis points to 16.6%, driven by lower gross margin attributed to lower volumes and product mix in CTS as well as Byte. This was partially offset by OpEx savings from foundational initiatives. Adjusted EPS was $1.67 for the year. Operating cash flow was $461 million, up 22.3% year-over-year, driven by timing of customer collections and changes in inventory and other working capital measures. Free cash flow conversion was 83%, representing a year-over-year increase of over 40%. The company finished the year with $272 million of cash and cash equivalents and a net debt-to-EBITDA ratio of approximately 3 times. The increase was partially attributed to the Byte suspension. In 2024, we returned $376 million in capital to our shareholders through $250 million of share repurchases and our quarterly dividends. As of December 31, 2024, the company had $1.2 billion of remaining board authorization available for future share repurchases. Next, let me cover our 2025 outlook on Slide 10. For 2025, we expect organic sales to be down 2% to 4% including a negative 2% Byte sales impact which represents a net sales range of $3.5 billion to $3.6 billion. We expect FX to be a headwind to reported sales based on current rates and we remain cautious on the macro environment, particularly for equipment. We expect SureSmile and Wellspect to continue to drive growth in 2025, partially offsetting anticipated declines in CTS. In EDS, we expect growth in line with global patient traffic which remained largely stable in 2024, augmented by recent product launches such as the X-Smart Pro+. We also believe the actions taken in 2024 and those planned for 2025 will improve our commercial execution and performance in areas like CTS and Implants. We expect EBITDA margin to be greater than 18% in 2025 with margin improving as we progress through the year based on the timing of investments and restructuring savings. We project an increase in the full year tax rate due to geographic income mix and the unfavorable impact of certain declining performance trends which have occurred over the last few years. We expect adjusted earnings per share to be in the range of $1.80 to $2. In Q1, we expect organic sales to decline high single digits year-over-year primarily due to Byte and current headwinds impacting CTS in the U.S. which has a tough comparison in CAD/CAM, largely attributed to lower expected distributor inventory levels in Q1. This contributes to an outsized manufacturing absorption impact in the quarter. With that said, we anticipate margin expansion over the course of the year as forecasted volume increases drive operational improvements. For purposes of modeling adjusted EBITDA margin and EPS, please look to the fourth quarter of 2024 as we expect to be in line to slightly ahead of those results. Slide 11 shows our adjusted EPS bridge, listing some of the major driver items. We wanted to try and break this down for you and walk through the moving parts. Let me start with where we finish 2024 with adjusted EPS of $1.67. We then add back one-time Byte items of $0.24 that we spoke about earlier. This gives an updated base of $1.91. From there, we layer in negative $0.02 EPS impact from expected lower organic sales. We expect a combined $0.20 EPS benefit from transformational initiatives and reduction of Byte resources. An anticipated roughly 300 basis point increase in the tax rate translates to an $0.08 headwind. Net-net, this yields approximately 5% growth in adjusted EPS on an FX-neutral basis. FX is expected to be a headwind of about $0.11 for 2025. With that, I will turn the call back over to Simon.

Thank you, Herman. Now let's move to our strategic update, starting on Slide 12. In 2024, we advanced our strategic and transformational agenda to strengthen our foundation and position the company for long-term performance and successfully adjusted our approach in certain areas as necessary. Let's briefly cover an update on each of the foundational initiatives shown on Slide 13. Our supply chain team continues to seek opportunities to improve network performance. To date, we have closed 3 manufacturing sites and 4 distribution centers, progressing towards our 10% to 15% manufacturing and distribution footprint reduction target. We are advancing the SKU optimization initiative focused on the endo and resto portfolios and are migrating revenue-generating SKUs in 2025. In 2024, we also completed the first 2 deployments as part of our ERP rollout and we will continue with our plan in 2025. We implemented this program to improve the experience of customers when working with us and to gain efficiencies across the organization. Lastly, you can see the progress we have made on Phase 1 and Phase 2 of our transformation and the reinvestments in our business. Now, I would like to address our long-term EPS objective on Slide 14. In 2023, we laid out targets in our long-range plan. At that time, we indicated that two-thirds of the adjusted EPS bridge was largely within our control with defined contributions coming from key initiatives. Organic growth on the other third was the most variable component. Since then, the macro environment, challenging marketing, and competitive dynamics underperformance in Implants and Byte have created headwinds on organic sales. These declines in organic sales have put pressure on our margins, making the $3 adjusted EPS target unachievable in 2026. That said, as I've noted, the transformational work that's underway in our company is on track, including all of our foundational initiatives, which are contributing positively to EPS. And importantly, we continue to focus on driving free cash flow conversion to return value to shareholders. Now let's take a moment to think about the reasons why Dentsply Sirona can deliver sustainable, profitable growth and let's move to Slide 15. We regularly hear from our customers about the importance of innovation, clinical education and enhancing workflow efficiency. With a pipeline of 20-plus new product launches planned through 2026 and one of the broadest and most flexible education platforms in the industry, we are well positioned to address these needs. We believe accelerating enterprise digitalization and innovation focused on increasing the digital connectivity of our portfolio through our DS Core platform will facilitate workflow improvements across all of dentistry and increase patients' acceptance of treatment plans. Moreover, this is applicable to both GPs and specialists. We've spoken about our opportunities to create our own demand, enhance the customer experience, and improve our customer proximity. Our efforts to establish a virtual sales team drive sales force effectiveness and invest in e-commerce and customer service were designed to do just that. In Implants, for example, we are increasing the digital connectivity of our portfolio driving more localized customer education and simplifying our messaging. These are important action items, all derived from insights gained and plans developed at our deep dive review on implant performance. Additionally, based on feedback from our commercial teams and our customers, we are prioritizing the enhancement of sales force capabilities across the business, both in clinical and selling skills to create improved opportunities for success. As a further initiative to accelerate OpEx reduction, we are in the process of partnering with a third party to facilitate further transformation to our G&A footprint. While this is not contemplated in our current 2025 outlook, we believe this initiative will significantly and sustainably reduce our G&A cost structure and bring us closer to market benchmarks. Moreover, the harmonization of policies and procedures as a result of this program will improve our customers' experience of partnering with us. And finally, with the evaluation of Wellspect just initiated, we are not providing further commentary on 2026 at this time. Now, I'll wrap up on Slide 16 with a few summary remarks. FY '24 proved to be a challenging year with a mix of external and internal factors hampering our progress. That said, we have made meaningful strides on our transformational initiatives in 2024, further shaping the organization, driving efficiencies, and enabling investment. We continue to act with urgency to transform our customer experience and overall cost structure. Our formula for growth hinges on innovation, clinical education, sales execution, and customer experience. We deliver best-in-class innovation and clinical education. Our strategic priorities for 2025 focus on improving sales execution and customer experience. This formula, coupled with a scalable and lean cost structure will enable us to realize the true potential of Dentsply Sirona. And with that, I'll open it up for questions.

Our first question comes from Elizabeth Anderson with Evercore ISI.

I have a question regarding the strategic alternatives for Wellspect. Thank you for the information about the new product launch and ongoing investments. Can you share some insights on the new product areas you're exploring and the opportunities you anticipate? Also, if I recall correctly, during the last review of strategic alternatives for that business, one concern was the in-mesh manufacturing footprint related to some of your core dental operations. Have you made any progress in addressing that since the last transition? An update on this would be appreciated.

Elizabeth, Simon here. Let me start with the second part of your question. Really, to all intents and purposes, Wellspect and our dental businesses that are based in Sweden are largely separated. So there's not a whole lot of unplugging to do, shall we say, if there is an opportunity to explore an alternative for Wellspect. So I would say that it is largely stand-alone with a pretty stand-alone leadership team as well. In relation to your question on innovation, last year, we addressed a significant unmet customer need or rather unmet need within our portfolio with the launch of a sleeved intermittent catheter, which has gone very well and has helped contribute significantly to the enhanced growth profile of Wellspect. And then, the other innovations that we are working on; I would say, for comparative reasons, we would not be disclosing that at this time.

Our next question comes from Erin Wright with Morgan Stanley.

On margins, if you're assuming consistent margins in the first quarter, if I heard that correctly, that assumes a pretty meaningful ramp for the balance of the year. I guess what gives you confidence in that? And then it says you mentioned you're working with a third party to address cost, I guess, getting you closer to industry margins. I guess, over what sort of time frame could that be achieved? What sort of magnitude are you thinking about on that front?

Erin, it's Herman Cueto. Thank you for the question. So maybe just start with the margin. So what you're going to see is that Q1 will be the lowest point of the year and you'll see that ramp up as the year progresses, it will get better sequentially throughout each of the next 3 quarters. Keep in mind that we do have to cycle through the impact from Byte. So that will put pressure on the margins, especially Q1, Q2. We also have the foundational initiatives that have already begun but will start to ramp up as we get into the outer quarters. And then finally, what I would say is on this back-office transformation that Simon spoke about, none of that has dialed into our 2025 plan. We do believe there could be some upside depending on how quickly we move and get things figured out. There could potentially be some upside in 2025 but it would have a longer-term benefit as we head into '26 and '27. I hope that answers your question.

I would like to elaborate on Herman's points regarding our ongoing efforts. As you know, upon joining, we outlined our goal to harmonize various systems and processes within our organization. We've previously mentioned that Dentsply has undergone numerous acquisitions, including Sirona, followed by a merger, which resulted in having different systems and processes throughout the company. Over the past two years, we have been methodically unifying these systems in areas like research and development, quality, and regulatory affairs, and we are beginning to see benefits from these efforts. However, there is still significant back-office work to be done that presents an opportunity for us to enhance our efficiency.

Okay, great. And then, just on dental utilization trends. So where do we stand now across the key markets? And you mentioned the continuation of the same expected in 2025. I guess, what does that mean? And for instance, how do we think about volume trends across EDS and the broader consumables demand environment.

Thanks, Erin. So I would say on EDS, patient volumes obviously impact EDS significantly. I think globally, it's pretty stable from what we've seen. And as you know, our survey is pretty large and global. So it's about 1,400 respondents this past quarter. So it's pretty stable from an EDS perspective. Germany, while it's still negative, has again showed some room for optimism. And I think that's synchronous with the results that we've posted in Germany. I think there's a little more appetite there for investments, particularly in our CTS business, for example. But I will say that the big issue for customers around the world are staffing shortages. And so we need to leverage our messages around the efficiency that our digital solutions and workflow solutions can afford customers to offset some of those staffing shortages.

Our next question comes from Brandon Vazquez with William Blair.

I'll ask two questions at once since they're related to Byte. There was a comment during the call that suggested the entire brand name was written off, if I understood correctly. Can you elaborate on the strategy here? It seems to imply that Byte might be integrated into SureSmile. How does this commercial strategy look for the next 12 to 24 months? Additionally, what are the implications for the profit and loss statement? It appears that Byte could provide some benefits after restructuring as we move into 2024. Please explain how this commercial strategy will affect the P&L moving forward.

Brandon, it's Simon again. Let me begin, and then Herman can address the second part of your question. When considering Byte, it consists of two main components. One is the product aspect, which is the aligner itself, and the other is the strong capabilities the Byte team has in areas like demand generation, e-commerce, software, and patient experience, including interactions with clinicians. We have made significant progress since October 24 with both current and potential customers. One aspect that has particularly resonated is the Byte capabilities' role in creating demand and guiding it to customers, which appeals to many of our existing and potential clients. Consequently, we are using that capability within our SureSmile platform. The R&D teams at Byte possess considerable expertise. As we have previously mentioned, and as discussed in today's call, our SureSmile software, which was originally designed for wires and brackets, has a reliable backend as a trusted orthodontic software solution. However, the frontend of this software needs improvement, and this has made it challenging to attract new customers. Therefore, we are leveraging Byte's resources to enhance the user experience and user interface of the SureSmile platform. Regarding the product lineup, we are now concentrating exclusively on SureSmile. We have noted the difficulties in reintroducing the Byte product to the market from clinical regulations, costs, and timelines. Thus, our focus will be on utilizing our Byte capabilities in our aligner business, while also exploring opportunities in other areas where a direct-to-consumer model could enhance awareness, for instance, in chairside dentistry. Now, I will hand it over to Herman for the second part.

Brandon, it's Herman Cueto. Thank you for the question. So I'll just talk a little bit about the Byte implications to the P&L. I would refer you to Slide 11 which kind of walks through where we were. So we finished 2024 with $1.67, then we put the $0.24 of really one-timers is how you should think about that. We put that back into the base. So that gives us an adjusted base of $1.91. And if you just look, you do see a combination, there's a bar there that talks about the benefits from the Byte resources going away, things like marketing. And there's also some of our foundational initiatives also captured in that bucket. And I think for simplicity, what I would say is I would probably call it, split that up, maybe 50-50. I think that's a close enough target to go after. That will give you some context. Let me spend a minute on sales because I think that's important. So we do have a little bit of sales that will continue. So there was the treatment plan that was recognized over a number of months. So that will carry on a little bit over the course of 2025 and I believe a little bit into '26, it's a small number. It's under $40 million but think of Byte as a very substantial headwind to Dentsply growth in 2025. I hope that answers your question, Brandon.

Our next question comes from David Saxon with Needham & Company.

Simon and Herman, maybe I wanted to ask on implants, specifically the U.S. team. It looks like it was down in the quarter. So can you just talk about the progress you're seeing in that team and thoughts of timing of returning to growth and then potentially market growth over time?

Yes. David, thank you for your question. In the U.S., it's clear that our growth expectations have not been met, and our performance over the past two years has been significantly disappointing. To tackle this, we have recently conducted a thorough analysis and, as I mentioned earlier, we will be introducing enhanced digital connectivity for Implants on DS Core this year. This is the first phase of a three-phase strategy aimed at fully digitalizing our implant business on DS Core. We've previously discussed our reinvestment in clinical education within the implant sector, which we've been doing over the past two years. However, the feedback we've received recently suggests that while our efforts were beneficial at a macro level, there is a need for localized education. Customers, as well as referring GPs, are seeking a suite of programs that fit their needs. Therefore, we will be prioritizing this moving forward, along with simplifying our messaging. Our extensive portfolio is accompanied by complex messaging, which has made it challenging for our commercial teams, especially since many have joined in the past two years. We've also evaluated our sales force capabilities specifically for Implants and are currently working on enhancing their training, which is underway. We do anticipate improved performance in implants this year. For instance, we have seen success in China. As we noted, our portfolio is strong, but we need to boost our digital presence, alter our approach to customer education, and assist our sales representatives in becoming more clinically knowledgeable.

Okay, great. That was helpful. And then just as a follow-up, I wanted to ask about this partner that's going to help you with G&A, just so we can kind of get an idea of like the potential benefit. I guess I'd love to hear what's the benchmark for G&A as a percent of sales that you're kind of targeting? And where are you at currently?

David, it's Herman. Maybe I'll let me just talk about this a little bit. We won't get specific into where we are relative to benchmarks. But I think you've been following the company for a long time, you understand where our SG&A is. There are parts of the business, especially in the back office that are over-indexed relative to where industry averages are. And as we look to do more work to simplify the company, that's certainly an area for opportunity. Now it will happen over time. It will take us a little bit of time to ramp up the teams. It will take us a little bit of time to kind of really see what the true opportunities are. But we do believe this is a value unlock for us. That might help us a little bit in 2025 and then the out years from there. But it would be focused on a lot of different things. As you can imagine, whenever you do big acquisitions there's always processes and policies, there's overlap. Where is the work? Where is it being done? How do you make it simple? Sometimes there's just duplicative efforts, there's legal entity. So it would really give us an opportunity to simplify a lot of that. And like I said, we do believe there's a value unlock there. But more to come on that in the future. Thanks, David.

Our next question comes from Jeff Johnson with Baird.

I wanted to start just on the cost transformational process. So the $80 million to $100 million in savings that you targeted through 2025, can you just level set us or remind us how much of that has run rate into the model at the end of 2024? How much is going to be incremental in 2025? And when I look at Slide 11, Herman, as you've referred to, that $0.13 benefit, I think if I'm doing the math right and kind of taking that up to a pre-tax, that's about a $35 million to $40 million pre-tax benefit. Is that the flow-through of those 2025 incremental cost savings? Is that primarily what makes up that $35 million to $40 million of benefit on a pre-tax basis in 2025?

Jeff, I'll begin and then Herman can finish your question. We haven't specified how much of those savings will occur in 2024 or 2025, nor how it will be divided between drop-through and reinvestment. As you know, we have been reinvesting. This past year, we invested in a virtual sales team to engage with customers we haven't reached in a while due to factors like the value and location of these accounts. As mentioned in the prepared remarks, we have contacted over 8,000 unique customers since launching this program and have made over 40,000 phone calls to customers across the U.S. We have generated demand for the virtual sales team, which is also collaborating with our field-based sales team to direct them towards opportunities that may not have been recognized before. We don’t disclose the specifics of where that funding goes, but we have been investing in areas that we believe will drive demand for all of our business. Herman?

Yes. Simon, I wouldn't add too much more. What I would say is that it's all contemplated in the guide. Simon touched on the investments. I've come in, I've been here for around 90 days. And I think the team here has done actually a wonderful job of finding resources to not only take out drop-through to the bottom line to create shareholder value but also invest in the future into very high growth, high-impact areas that will impact the top line in the future.

Okay. I guess let me go at it one other way or just ask 1 follow-up or a 2-part follow-up. Just one, the $0.13 savings that's been that is in the slide deck, is that primarily flow through of cost savings from the efforts you've been making on the transformational side? Or is there other stuff in that $0.13? Just so I understand that, number one. And number two, just on SureSmile, I don't have my geographic weightings all that tight. But when I listen to your description of Europe, Rest of World and U.S., I think I'd get that U.S. SureSmile down in the double digits. What is going on there? I know the end markets are challenged in the U.S. for sure, discretionary spending is. But is there anything else with SureSmile down, I think double digits in the U.S.?

Yes. Let me start with the $0.13 savings. Maybe what we could do is I think we'll have some follow-up call backs. It's more of a modeling question. So why don't we take it off-line? We'll handle it from there? And then maybe what I could do is turn the SureSmile question over to Simon.

Yes, thanks, Herman. Jeff, as we've mentioned previously, about 60% of our SureSmile business operates in the U.S., with the majority of the remainder in Europe, which has been performing well for several quarters and is becoming significant for us. Regarding your statement on U.S. performance, our SureSmile business consists of more than just aligners; it also includes some legacy products, which account for about 20% to 25% of that business. This segment is what is really affecting our overall performance in the SureSmile category. If I focus on our aligners specifically, we've experienced high single-digit to double-digit growth over the past four quarters in 2024. We also faced some unique challenges in the U.S. that we have discussed before, but if we exclude those, our aligner business is actually seeing mid-single-digit growth in the U.S. Furthermore, we are making progress with our general practitioners. While our orthodontic presence with SureSmile is relatively small, we are witnessing strong growth in that sector throughout 2024 in the U.S.

Our next question comes from Kevin Caliendo with UBS.

First, do you have any timing updates or visibility on the German tax situation? Second, one of your primary wholesalers is going private. Are you experiencing any disruptions because of this? Have you seen any opportunities? Please explain how this transaction might impact your outlook or business strategy moving forward.

Regarding your first question, I have no significant updates on the German tax situation at this moment. We are still collaborating with the authorities in Germany, supplying them with information and addressing their inquiries. Our belief, which has been recently reiterated by our teams, is that the issues identified by the German authorities are not present. We have reviewed these issues multiple times. As for the resolution timeline, it's hard to predict. I wish I could provide a clearer answer, but it appears it will take some time. We will keep working with them to find a favorable outcome. For your second question about our distributors in the U.S., we maintain a strong working relationship with them. We continue to collaborate in the field and engage with them at the management level. They consistently order our products and play a crucial role in our North American business. We have no indications that this will change, as we are an important part of their operations. Based on feedback from our customers and survey results, they're looking for ways to expand and enhance efficiency. Our digital solutions, in particular, help them become more efficient, increase patient treatment acceptance rates, and grow their practices. The technology we provide not only assists our customers in achieving success but also benefits our distribution partners significantly.

Our next question comes from Michael Cherny with Leerink Partners.

Thanks obviously, for a ton of detail so far. Maybe just asking a bigger picture question. You have the Byte wind down. You have the Wellspect evaluation being put in place. You have the G&A benchmarking work that you're doing, all of it seems very logical at this point in time. Given the broader nature of how many moving pieces you have going on, Simon, does it make sense to take even a further broader look and make sure that you have the right pieces within the portfolio going forward long term, the assets that you want to have, the other assets that may not fit going forward and kind of do it from a broader basis? How do you think about as you get through some of the especially market-oriented weaknesses that coming out the far side, Dentsply will be a better top line business, while obviously focusing on the leaner side that you've noted relative to the benchmark in work? Sorry, it's a weird question but I appreciate it.

No, that's alright, Michael. It's a good question. So I'll answer it in 2 parts. Number one, as I've noted many times, including, I think, my first call with all of you folks, we regularly assess our portfolio for opportunities to streamline it and there are different ways we can streamline it, such as the SKU rationalization work that's underway. And then there are ways like the manner in which we are discussing Wellspect. If you reflect when you have a moment on some of my prepared remarks here, we are really in a unique position as an end-to-end dental company that's been hindered by some internal execution challenges that we've noted ad nauseam and also some macro challenges. But if you step back and think about your workflow efficiency and digitalization of dentistry moving further into the century, into this decade. The scanners are the starting point for everything digital. They are the hub of all clinical workflows in the GP practice and more importantly, in the specialist practices. And through our DS Core, where we're building out workflows across each of these major procedures in the dental community, we think we'll be in a great position to get after the digital workflow and then enable our customers to use our implants, our aligners, and our endodontics moving forward. So there are certain parts of our portfolio that I think are absolutely essential to a broad-based dental business. But that being said, we do continue to evaluate them. But we do believe in the future of digital dentistry, we do believe it's underpenetrated across the world, even in the developed markets. And I shared with you all before, the data from Germany, where everyone has a picture of Germany as the most digitalized dental community in the world. Only 27% of practices in Germany have an intra-oral scanner. So that sounds like a ton of opportunity moving forward as we convey the value of digital dentistry and the value of the ecosystem that only Dentsply Sirona can provide to customers.

Our next question comes from Jon Block with Stifel.

Herman, just on Slide 5 and I must be doing something wrong here but it looks like Byte was a $29 million negative hit from the November guidance and you laid out $0.24 in terms of the headwind. But even if I flow through the $29 million like 100%, just drop it to the bottom line, I get a lot closer to a $0.15 hit, not the $0.24. So maybe I'll just start there. Can you just help me out what I'm doing wrong there? Or what's off? And then I'll just ask a follow-up.

Yes, Jon, the issue is with the tax rate. Going back to our original guidance in November, we projected it to be around 18% or 19%, but it ultimately came in closer to 22%. The way income is generated in different jurisdictions significantly influenced the tax rate. That's the calculation you need to keep in mind to understand the figures. I hope that clarifies things for you, Jon.

It does. Certainly good enough for me. And maybe I'll just stay on the Byte team and I'll get to the slides as well. The bridge on Page 11 is really helpful but it shows if I'm reading it correctly, just Byte accretive to 2025 EPS off the adjusted '24 figures of the $1.91. And I've got Byte revenue, you can let me know if I'm in the right ZIP Code of about $140 million in 2024 once you factor in the refunds you called out, it's going to be a 200 bp headwind to total company growth. So Byte to be down about $80 million year-over-year, maybe it lands $60 million in 2025, feel free to comment on all those assumptions. But this asset is going to be accretive to year-over-year EPS growth if revenues are down $80 million? And maybe is it Simon, just there's so many variable costs involved in this business. So any color or clarity around all those assumptions would be great.

Jon, we can discuss some modeling questions after this call, and I'm happy to provide more detailed insights. At a high level, it's important to note that there has been significant investment in the middle of the P&L for this business, particularly in marketing. As the business evolves, we have the opportunity to reduce some of those costs, which is reflected in the increase in EPS. I'm here to help you with more details for your model. The revenue figures you mentioned are within a reasonable range, and we can go over the calculations later.

Our next question comes from Jason Bednar with Piper Sandler.

I actually wanted to focus on some of the soft retail CAD/CAM commentary. Look, I can understand maybe some softness in the numbers. Actually, I kind of anticipated some of that, just given some of the Primescan 2 inventory load-in last quarter. Seems like that did impact the numbers here but it was more the retail commentary that struck me, especially at a time when you've got your first scanner launch really in several years, so just a bit surprising even in a challenged macro. So what do you think is going on, Simon? Why isn't PS2 resonating better in the U.S.? And then how much of the pressure in CAD/CAM do you think can be traced at all to strained relations with Patterson?

I don't believe there is any issue with Patterson or anyone else, to be honest. Regarding Primescan 2, as I mentioned during the call, we have experienced three consecutive years of growth in scanner placements, which is extremely important for us as a comprehensive digital dental supplier. The macro environment in North America remains challenging, as we've noted previously. When considering the business model of dental practices, their most profitable sectors—preventive and restorative services—are not showing growth. Reimbursements for patients are decreasing, and around 40% of elective procedures are self-funded. Therefore, given the current macro environment, dental practices might be hesitant to invest in new capital. Despite this, we performed well in imaging in the U.S., but we were disappointed with the performance in CAD/CAM. I don't think this reflects any issues with Patterson; rather, it mirrors the broader macroeconomic challenges.

Okay. Alright. That's helpful. And then maybe if I back up a little bit of a higher-level question and focusing on Germany actually. But I wonder if Germany could actually prove to be a microcosm of what you're experiencing your broader business? You had commercial challenges. You tried to push the high end but really struggled in a tough macro and with some low-price competition. And then you pivot and reintroduce a lower-priced offering that helps turn the tide. It's a big contributor to growth returning in the market. Maybe talk about that experience in Germany and that really how it informs how you think about your portfolio and positioning across the globe.

Again, thanks for the question, Jason. Listen, I think Germany is a tale of 2 cities as it were. I think one was the reintroduction of Orthophos SL as a midpoint scanner. The other piece that I again referred to in the prepared remarks was a renewed focus on execution discipline within the Imaging team in Germany. And so I think there are 2 factors to that. What we have been doing over the past number of months in different parts of Europe and in the U.S. is reigniting training for our commercial teams around such things as professional selling skills and also around equipping them to have clinical conversations and workflow conversations with their customers and creating their own demand and then funneling it through the appropriate channel, whether it's our direct business in endo and aligners, for example, or whether it's our distribution partners on our capital equipment business. So I think the lesson from Germany is it's not just about the product, it's also about the capabilities of the sales team that we can enhance and that's why we're in the process of doing that here in the U.S. as we speak.

Thank you. I would now like to turn the call back over to Simon Campion for closing remarks.

Thank you and thank you all for your thoughtful questions. In closing, I want to thank the entire Dentsply Sirona team for their dedication to our customers and our transformation. While there is still work ahead, we are making progress, bringing innovation to the market and instilling accountability and a performance-oriented mindset in our culture and positioning Dentsply Sirona for long-term success. Through disciplined decision-making and enhanced execution, we remain focused on driving value for all shareholders and stakeholders. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.