Dentsply Sirona

Income statement

Notes on the table above:

• FY2024 gross profit and operating income are derived from reported margins of 51.6% and (23.2%) on USD 3,793m.

• FY2023 and FY2024 adjusted EPS are from company releases (prior years). FY2025 adjusted EPS of USD 1.60 is from the FY2025 release.

Margins

Revenue CAGR FY2021–FY2025: about -3.5% a year (4,251 to 3,680).

Balance sheet

Notes on the table above:

• FY2022–FY2023 total assets are derived as total liabilities plus total equity.

• Pre-tax impairments of USD 525m in FY2025 and more than USD 2bn cumulatively across 2022 and 2024 have materially reduced the balance.

Net debt to total capitalisation: was 59.9% (FY2025) versus 48.9% (FY2024), per the FY2025 10-K.

At 30 June 2026 (Q2 FY2026 8-K): total assets USD 5,204m; long-term debt USD 1,996m; total liabilities USD 3,853m; equity USD 1,351m; commercial paper outstanding USD 35m; undrawn availability USD 683m.

Cash flow

Notes on the table above:

• FY2024 dividends paid are per dividends declared (USD 0.64 a share, USD 128m).

• There were no buybacks in FY2025. USD 1.2bn of authorisation remained at 31 December 2025.

2026 year to date: - Q1 2026: OCF USD 40m, capex USD 52m, FCF USD (12)m.

• Q2 2026: OCF USD 99m, capex USD 44m, FCF USD 55m. This included about USD 44m of tariff refunds.

• The company repurchased 1.3m shares in Q2 2026.

Ratios (calculated from the data above)

• ROIC: not publicly disclosed. It is negative on a GAAP basis given operating losses.

• Cash conversion cycle: the full cycle cannot be computed because DPO is not disclosed. DSO plus DIO deteriorated by 14 days in FY2025 (FY2025 10-K).

Commentary — trends, inflections and drivers

Revenue. The FY2021 peak of USD 4.25bn reflected a post-COVID restocking surge. Every subsequent year has declined except FY2023, which was roughly flat at USD 3.97bn. The FY2024 decline (-4.3%) was driven by CTS volume and price erosion (-9.2%), the October 2024 Byte suspension and ERP-related order timing. FY2025 (-3.0% reported, -4.3% constant currency) absorbed a 1.9-percentage-point Byte headwind and continued CAD/CAM share loss in the U.S.

The FY2026 guide of USD 3.5–3.6bn implies a further decline of about 2–5%. Management also introduced a new dealer inventory model for equipment, which it excludes from its "operational growth" metric (guided at -3% to -1%).

Profitability. GAAP results have been dominated by non-cash impairments. These included about USD 1.2bn in 2022 and large charges in Q3–Q4 2024, followed by USD 525m pre-tax in FY2025 (Q2: USD 235m; Q3: USD 263m net of tax; Q4: USD 144m net of tax, concentrated in orthodontics).

Underlying profitability is more resilient:

• Adjusted EBITDA rose from USD 631m (16.6%) in FY2024 to USD 667m (18.1%) in FY2025, helped by about 320 bps of SG&A leverage from the 2023 and 2024 restructurings.

• Adjusted EPS nonetheless fell to USD 1.60 because of tariffs, mix and a higher tax rate.

• FY2026 guidance of USD 1.40–1.50 implies further compression. This reflects the deliberate reinvestment of about USD 120m into R&D, clinical education and sales training, with R&D rising to at least 5% of sales from 4.1%.

Q2 2026 inflection signals. GAAP gross margin recovered to 54.9% (from 52.4%) and adjusted EBITDA margin was 21.3%. Net income was positive at USD 37m, versus a USD 45m loss a year earlier. However, sales fell 6.3% in constant currency, and OIS declined 13.2%.

Balance sheet. Equity has fallen by about 65% since FY2022 (from 3,812 to 1,340), entirely because of impairments and losses. Net debt rose to USD 2.0bn. In June 2025 the company issued USD 550m of 8.375% junior subordinated hybrid notes due 2055. These are expensive, but they receive partial equity credit from rating agencies. The credit agreements were amended to allow total leverage of up to 4.25x through June 2026, stepping down to 3.50x by September 2027. Elimination of the dividend (about USD 128m a year) in February 2026 was the clearest signal that deleveraging now ranks above shareholder distributions.

Cash flow. OCF halved in FY2025 (from USD 461m to 235m) on working-capital deterioration, with DSO and DIO each up 7 days. Free cash flow fell to USD 104m. H1 2026 FCF of USD 43m (including USD 44m of one-off tariff refunds) indicates cash generation has not yet structurally recovered.

Management guidance (FY2026; reiterated 6 August 2026)

H1 2026 run-rate: net sales USD 1,778m and adjusted EPS of USD 0.79 (0.27 + 0.52). This implies H2 2026 sales of USD 1.72–1.82bn and adjusted EPS of USD 0.61–0.71, a back-half step-down that is consistent with reinvestment phasing.

Bull case (three arguments)

1. Valuation asymmetry. At about 6x forward EPS, about 6x EV/EBITDA and about 1.3x book, the market prices in continued decline. Stabilisation of revenue alone at around USD 3.5bn, with adjusted EBITDA margin above 20% (achieved in Q2 2026 at 21.3%), would support a meaningfully higher multiple. The consensus target of about USD 13.3 implies roughly 55% upside.

2. Channel repair plus innovation. Six dealer enhancements, the Patterson, Benco and Medline Sinclair breadth, and R&D up 22% year on year in H1 2026 address the root causes of the U.S. decline. Byte comparisons are lapsing.

3. Balance-sheet optionality. Dividend elimination frees about USD 128m a year; Wellspect (about USD 325m of sales at a 31% segment margin) is a potential monetisation lever; and the company has USD 683m of liquidity and a USD 1.2bn buyback authorisation.

Bear case (three arguments)

1. No organic growth yet. Q2 2026 sales fell 6.3% in constant currency and OIS fell 13.2%. Guidance still assumes operational decline. Q2 earnings were flattered by USD 44m of one-off tariff refunds.

2. Leverage and covenant squeeze. Net debt of about USD 2.0bn is about 3.0x adjusted EBITDA, against Moody's 3.0x downgrade trigger. Covenants tighten to 3.50x by September 2027 while EBITDA is guided lower. A downgrade to high yield would raise funding costs.

3. Structural share loss and execution credibility. CTS earns about 4% segment margins against open-platform competitors. Management churn (six CFO changes since 2022) and repeated guidance cuts (November 2025) undermine confidence that a 24-month plan can be delivered on time.

Catalysts and monitorables (next 12 months)

Q3 2026 results (estimated 5 November 2026): constant-currency trajectory, CTS orders under the new dealer model, and OIS stabilisation.

FY2027 initial guidance (February 2027): first year in which growth investments should show returns.

Leverage versus covenants: at the September and December 2026 test dates (4.00x maximum).

Rating agency actions: (Moody's negative outlook resolution; S&P BBB-).

Buyback cadence: against debt repayment.

• Further dealer agreements and DSO wins, and DS Core / AI commercialisation.

• CFO Fortson's first capital-allocation framework, including any portfolio action on Wellspect.

Tariff policy developments: and refunds.

Concluding analyst verdict

Dentsply Sirona is a category leader in a structurally attractive industry that has been badly managed for most of the past decade. Its reported numbers reflect that. Revenue has contracted at about 3.5% a year since FY2021. More than USD 2bn of goodwill has been written down in three years. Equity has fallen by two-thirds since 2022, and the dividend, once a core element of the equity story, is gone.

Yet the underlying franchise is not broken. The consumables business earns segment margins in the high 30s. Wellspect grows mid-single digits at a 31% margin. Adjusted EBITDA margins have risen from 16.6% to 21.3% in the most recent quarter despite falling sales.

The Scavilla plan correctly diagnoses the problems: a damaged channel, under-investment in R&D, a fragmented commercial organisation and an over-levered balance sheet. Its early actions are credible: six dealer agreements, R&D up 22%, operating costs down USD 20m in constant currency, the dividend cut, and a seasoned turnaround CFO.

What is not yet visible is the outcome. Constant-currency sales are still declining at mid-single digits, OIS remains in double-digit decline, and the Q2 earnings beat was aided by a one-off tariff refund.

The equity, at about USD 1.7bn of market cap against about USD 2.1bn of net debt, is effectively a leveraged option on the turnaround. Credit metrics sit near Moody's downgrade threshold, and covenant step-downs arrive in 2027.

Assessment: Hold / speculative turnaround. The risk-reward becomes attractive only on evidence of U.S. CTS order stabilisation and positive operational growth in H1 2027. Until then, the burden of proof remains on management. Investors with a two-to-three-year horizon and tolerance for credit-driven volatility may accumulate on confirmed inflection. Others should wait for the FY2027 guide.

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It does not constitute investment advice.