DENTSPLY SIRONA Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: New CEO Dan Scavilla outlined strategic priorities to deepen customer focus, accelerate innovation, and streamline operations for sustained long-term growth.
  • Negative Sentiment: Q2 net sales fell 4.9% to $936 million (6.7% decline on a constant currency basis), driven by continued softness in connected technology solutions, orthodontic, and implant segments in the U.S.
  • Positive Sentiment: Despite lower revenue, adjusted EBITDA margin expanded 360 basis points to 21.1%, and adjusted EPS rose 6.6% to $0.52, reflecting cost-reduction programs and the suspension of lower-margin sales.
  • Negative Sentiment: The company recorded a $214 million non-cash impairment charge for goodwill and intangibles in the OIS and CCS segments, citing tariff impacts and volume shortfalls versus initial expectations.
  • Negative Sentiment: Annualized tariff headwinds have risen to about $80 million (versus $50 million previously expected), with approximately $25 million to hit in 2025 despite ongoing mitigation efforts.
AI Generated. May Contain Errors.
Earnings Conference Call
DENTSPLY SIRONA Q2 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Welcome to the Q2 twenty twenty five Dentsply Sirona Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised.

Operator

To withdraw your question, please press 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Andrea Daley, Vice President of Investor Relations. Please go ahead.

Andrea Daley
Andrea Daley
VP - IR at DENTSPLY SIRONA

Thank you, operator, and good morning, everyone. Welcome to the Dentsply Sirona second quarter twenty twenty five earnings call. Joining me for today's call is Dan Scavilla, Chief Executive Officer and Matt Garth, Chief Financial Officer. 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.densifysirona.com. Before we begin, please take a moment to read the forward looking statements in our earnings press release.

Andrea Daley
Andrea Daley
VP - IR at DENTSPLY SIRONA

During today's call, we may make certain forward looking statements that reflect our current views about future performance and financial results. We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recently filed Form 10 ks and any updated information in subsequent Form 10 Q or other SEC filings list some of the most important risk factors that could cause actual results to differ from our predictions. On today's call, our remarks will be based on non GAAP financial results. We believe that non GAAP financial measures offer investors valuable additional insights into our business' financial performance, enable the comparison of financial results between periods where certain items may vary independently of business performance and enhance transparency regarding key metrics utilized by management in operating our business.

Andrea Daley
Andrea Daley
VP - IR at DENTSPLY SIRONA

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 Dan.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thank you, Andrea, and good morning, everyone. This is my first earnings call since taking the CEO role on August 1, so I thought it would be appropriate to open with a few statements before progressing into the Q2 business results. Then Matt will cover Q2 financials and give an update on our 2025 outlook. First, I want to thank Simon for his nearly three years in the role where he built a strong team, strengthened communications with our customers and initiated multiple programs to improve Dentsply Sirona's position in the market. Having come from our Board of Directors, I can tell you that I personally appreciate the work he's done and I plan to build on these programs with an eye on moving deeper, faster, and strengthening our long term position in the market.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Second, I look forward to partnering with Matt as our new CFO. I believe Matt's experience and background are exactly what we need, and we're forming a strong partnership as we move forward together. I've also had the opportunity to engage with senior leadership at Dentsply Sirona, and my initial assessment is that we have the core foundation to shape this company's future. I'm sure many of you are wondering what I plan on doing or what changes you should expect from me. While I do have several hypotheses and ideas on what to focus on, I'm currently working with the team and our customers to listen and learn so we can prioritize and focus our approach before fully developing pathways.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

There are a few areas that are immediately apparent that I will share with you now, starting on slide three. I've been focusing initially on providing stability to the organization through the CEO change, so we can focus on execution and drive results. I've been active with the DS team connecting, interacting and conducting deep dives to listen, learn and align on our go forward approach. We will continue to improve our focus on the customer and the customer experience. Every position in every department will make this a priority.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

We will enhance our support of the customers and our field based employees through simplifying interactions, speed of response, and increased strategic investments. The field team is and will become even more so a strength of our company, the tip of our spear. We will focus on enhancing investments in innovation, including speed to market and adding value to our clinicians and their workflows so that they can offer the best products and services to their patients and grow their skills and practices. As market leaders, we will need to shape the future of our markets, partnering with our practitioners to migrate from product offerings into proceduralization, focusing on the complete provider patient experience, leveraging the strength of our entire company's broad portfolio to outpace competition. DS Core platform is a critical element of the company's strategy and it continues to gain traction with 50,000 unique users now using the platform and more connected devices and lab orders processed each month.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

We have a strong supply chain under great leadership that I believe we can enhance even further through streamlining several components to unlock value, reduce cost and free funds to invest in fueling future growth. As you've heard from us, we have programs underway that will continue, but we'll also be looking at more strategic moves to better position ourselves for the future. Wrapped around our commercial enablement, innovation engine and operations muscle will be streamlined support functions that will add value through simplifying and standardizing systems, processes and structure that will allow us to move faster, support customers better and unlock funds that can be redirected into sustained profitable growth. The team has made progress here seen in our financial results, but there's more work to do in this area. I believe that focusing on the customer and moving with urgency while investing in our sales team and product development capabilities will unlock value throughout our P and L.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

We will make decisions to support long term sustained growth that lead to stronger financial performance, benefiting our business and our shareholders. Moving into our Q2 business results on Slide four. Global sales were $936,000,000 decreasing five percent as reported or negative 7% on a constant currency basis. Excluding the BITE impact, sales declined approximately 4%. Adjusted EBITDA margin was 21%, increasing three sixty basis points versus prior year Q2.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Adjusted earnings per share were $0.52 growing 7% versus prior year. Both adjusted EBITDA and EPS results are driven primarily from bite impact and active cost reduction programs. Cash flow from operation was $48,000,000 for the quarter. Our data and customer survey in the second quarter show global patient volumes and procedures largely unchanged from previous quarters. From a regional perspective, U.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

S. Sales in Q2 were $293,000,000 down 18% in total or 11% excluding the BiTE impact. Results were driven primarily by continued softness in connected technology solutions and orthodontic and implant solutions. Given the performance, this is a priority area for us to address. We've already kicked off activities in my first week.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

European sales were $4.00 $4,000,000 basically flat versus Q2 prior year. Germany delivered its fourth consecutive quarter of growth driven by CTS and SureSmile, which was up over 27% offset by softness in IPS. Rest of world sales were $239,000,000 up slightly versus prior year with growth in essential dental solutions and SureSmile up double digits, partially offset by softness in CTS. Before I hand the call to Matt, I want to say that I'm excited to join the Dentsply Sirona team and be part of shaping the future of this organization. I believe our potential has never been greater, but it's up to us to harness our resources and shape the future of our markets, placing our customers at the center of all we do and making thoughtful investments to drive long term sustained profitable growth.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thank you. I will now turn the call over to Matt.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Thanks, Dan. Hello, everyone, and thank you for joining us. As Dan noted, it's early days for us, but we are working closely together and share the belief that DENTSPLY SIRONA's potential has never been greater than it is now. Since joining DS, my priority has been helping the team focus on value accretive activities. There is very strong engagement across the company in this regard, and Dan's arrival is helping to further our efforts and increase our pace.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Our areas of immediate focus are fully aligned and currently being actioned. First, customer experience. We're directing our firepower to establish the best outcomes for customers through service and innovation. Second, margin enhancement. We are raising the speed of transformation by eliminating waste throughout our operations and focusing the organization on value accretive actions.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

And lastly, capital allocation. We're taking a disciplined approach in making appropriate investments to deliver increasing rates of return and shareholder value. And now let me turn to our second quarter results and a review of our full year 2025 outlook. Let's begin on slide five. Our second quarter net sales were $936,000,000 representing a decline of 4.9% versus the prior year quarter and a 6.7% decline on a constant currency basis, of which roughly half was due to BiTE.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Adjusted EBITDA margins expanded three sixty basis points to 21.1%, benefiting from the suspension of BiTE sales and lower operating expenses. Despite lower sales, adjusted gross margin expanded 60 basis points to 55.9%. Adjusted EPS in the quarter was $0.52 up 6.6 from prior year, largely due to higher adjusted EBITDA margins, FX and a lower share count, partially offset by below the line items and a higher tax rate. As you will have seen, we recorded a roughly $214,000,000 noncash after tax charge related to the impairment of goodwill and other intangible assets within the OIS and CCS segments. These impairments were driven by the impacts of tariffs and current period volume changes relative to the initial investment thesis.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

In the second quarter, we generated $48,000,000 of operating cash flow compared to $2.00 $8,000,000 in the prior year quarter. The year over year decline is primarily attributable to timing of cash collections, a higher build of inventory in anticipation of ERP go buys and tariffs, along with an approximately $42,000,000 foreign tax refund received in the prior year quarter. We finished the quarter with cash and cash equivalents of $359,000,000 Our Q2 net debt to EBITDA ratio was 3.1 times and flat on a sequential basis. We also completed a $550,000,000 hybrid bond offering in Q2, which helped to increase our ongoing financial flexibility. And now let's turn to second quarter segment performance, beginning on slide six.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Starting with EDS, which includes Endo, Resto and preventative products, sales on a constant currency basis increased 1.1% with growth in the rest of the world, partially offset by lower volumes in Europe and The US. It's worth noting that EDS performance in the quarter reflected stable patient traffic across our major markets, a good indicator of the relatively stable environment and consistent with our customer surveys. Shifting to OIS, sales in constant currency declined 19.4 with BiTE accounting for over half of the decline. IPS declined double digits in the quarter, driven by lower lab volumes globally and lower implant sales in The US and Europe, which were partially offset by growth of implants in China. Strissmile continued to make solid gains, rising 3.3%, driven by strong performance in Europe and rest of world, partially offset by softness in The US.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Turning to CTS, sales in constant currency fell 5.9% versus the prior year quarter, as double digit growth in imaging in Europe was more than offset by declines in CADCAM and imaging in The US. Note that changes in distributor inventories did not impact the comparison of CTS sales year over year. Moving to Wellspect Healthcare, sales in constant currency declined 2.5%. As expected, year over year results were negatively impacted by a U. S.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Dealer initial stocking order, which occurred in the prior year period and had an approximately 4.5% negative impact, which was partially offset by the benefit of new product launches. We continue to expect this business to deliver mid single digit growth for the full year. With that, let's move to slide seven to discuss our updated outlook for 2025. We are maintaining our full year 2025 outlook for sales, adjusted EBITDA margin and adjusted EPS. Now, looking to the third quarter, on a sequential basis, reported sales are expected to be down slightly following normal seasonality, while adjusted EBITDA margin is expected to decline due to tariff related costs beginning to roll through the P and L.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

We expect that these factors, combined with a higher tax rate, will result in sequentially lower adjusted EPS. This outlook helps us maintain our full year projection in a relatively balanced first and second half of the year. Before we wrap up, I'd like to share an additional thought on capital allocation. We believe that DENTSPLY SIRONA has the potential to yield sustainably high levels of free cash flow. Effort is underway to work down inventories and reduce our overall working capital requirements.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

We plan to prioritize investments in innovation and growth, financial flexibility, and returns to shareholders. And now let me summarize on slide eight. In the second quarter, our top line continued to be challenged. However, we delivered adjusted EBITDA margin expansion and adjusted EPS growth through continued financial discipline. We're maintaining our full year outlook for sales and adjusted EPS.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

We've added flexibility to our balance sheet, and we are actively working to enhance our cash flow generation. We see significant untapped opportunity at Dentsply Sirona. Unlocking it starts with taking a value creation oriented approach to financial management, and that work has already started. We believe combining this approach with the customer experience transformation underway at DS will allow us to yield greater results faster, and we look forward to sharing our proof points in the coming quarters. With that, let's open it up for questions.

Operator

Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please limit to one question and one follow-up.

Operator

Please stand by while we compile the Q and A roster. Our first question comes from Elizabeth Anderson of Evercore ISI. Your line is now open.

Elizabeth Anderson
Senior MD at Evercore

Hey, guys. Good morning, and thanks for the question. Welcome, Dan and Matt. You know, there's obviously lots going on in terms of some of the product changes, you guys are new and things like that. I was wondering if you might be able to give us a little bit of like a state of the union as you see the broader overall dental market, so we can kind of set out what you're seeing on that level, and then obviously some of the specific idiosyncratic factors that you were discussing on top of that.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thanks for the question, Elizabeth. This is Dan. So I'll give you my perspective of being five days in the seat here and go out of that way. But just using data that we have and that we've talked about, the Q2 survey in particular, which we found consistent with the ADA survey, saying that patient volumes remain stable, procedural utilization in the electives like implants and ortho continue to be soft. And we see some shifts, but nothing meaningful.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Maybe Germany, the dentist looks like it's slightly better. Tough to call, right? You have a lot of activity on the macro with tariffs and activities that fluctuate every hour. I think the real thing is remain focused on the patient and the chair and the dentist, give them the right products and drive this. When you do that the right way, all those other things can soften out.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Our thought is focus on the long term and not react to the short term noise that's out there. So that's really where we're headed.

Elizabeth Anderson
Senior MD at Evercore

Got it. That's very helpful perspective and makes sense. Maybe just as a follow-up, anything to call out in terms of distributor stock ups or destocking dynamics in the quarter, maybe particularly in CTS and EDS? That might be more of a question for Matt.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yeah, it is. Hi, this is Matt. Again, we said in the prepared remarks that we really didn't see a significant revenue impact on a year over year basis related to stocks at dealers. And in fact, when you look at it on a year over year basis, they're both on an imaging basis and on a CADCAM basis in a good healthy position and the deltas year over year were pretty similar. So feeling good about the overall stock situation.

Elizabeth Anderson
Senior MD at Evercore

Got it. Thanks so much.

Operator

Thank you. Our next question comes from David Saxon of Needham And Company. Your line is now open.

David Saxon
Managing Director at Needham & Company

Great. Dan and Matt, thanks for taking my questions. Dan, maybe I'll start with a higher level question for you and nice talking to you again on a DENTSPLY call. So just wanted to understand kind of what about the opportunity at DENTSPLY motivated you to switch over. And then with backgrounds in spine, most recently in vision care and other areas at J and J, anything you learned in those markets that might be particularly useful as it relates to Dentsply's positioning in dental and how you're thinking about profitability?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Yeah, thanks for the question, David. It is good to connect with you in another part here, so I look forward to going forward with you. There's a couple of things. Globus is such a great company and there's such a great learning there, followed by, as you said, the breadth of moving around and different things with J and J. What I saw with Dentsply is the opportunity to honestly apply all of those.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

And I think it's more about the operational experience and the execution coming from those and bringing it in here that I think would be what interested me most. And there's a lot of areas to focus on. I think the vast majority I've had my hands in in the past, and I think I can apply and help the team. So for me, it's about taking my experience, helping what I think is truly great team accelerate to get where we need to get to.

David Saxon
Managing Director at Needham & Company

Great. Thanks for that. And then as my follow-up, I wanted to ask on implants. So, maybe you can give a little more color on how that part of the portfolio did both geographically and then across premium and value. And then in the script, you talked about it being a priority area and already had some initiatives going.

David Saxon
Managing Director at Needham & Company

So can you give a little more color there? Like what exactly are you doing in that part of the business? And how should we think about the impact they might have? Thanks so much.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yes. And the implant story continued this quarter from what you have seen earlier in the year, where we've seen slower legacy brands transitioning to our new products, particularly as we looked at the premium side of the business. On the value side of the business, the Middle East volatility, I think you know that we produce a lot of our value implants in that region. And so the volatility there did impact our volumes with the limitations on being able to get product out of certain countries and into other countries. But that should be passed as we move forward.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

From a headline perspective, we saw premium down about 5% and that is due to the exchange that we are seeing as we roll out the new products and the shift from legacy brands. We do expect for the full year that we are going to have some growth expected because of the sales force changes that we've made and that we've talked about and what Dan just spoke to in terms of driving some new consumer experiences. And then also from the China VDP program that we've seen so far this year that should carry us. From a value perspective, Q2 was down, let's call it low double digits. And again, largely due to what was taking place in The Middle East.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

And that will carry through for the full year as we look forward. But overall, the big driver as we're looking at implants has been from the lab side of the house. And so we'll expect to see that continue through EMEA and The U. S. Both in the quarter and then over the year.

David Saxon
Managing Director at Needham & Company

Great. Thank you.

Operator

Thank you. Our next question comes from Kevin Caliendo of UBS. Your line is now open.

Dylan Finley
Dylan Finley
Equity Research Associate at UBS Group

Thanks for the question. Welcome, Dan and Matt. This is Dylan Finley on for Kevin. To start, just wondering if you could maybe reframe some of your tariff assumptions for the year. I believe previously the team had sized it about $50,000,000 in annual cost per year.

Dylan Finley
Dylan Finley
Equity Research Associate at UBS Group

So wonder if there's any changes around that. And then, second of all, does the guide contemplate any mitigation efforts in any kind of supply chain action or price action you can talk about there?

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yeah, let me start with the activities that the teams are driving today, which have been extremely good results on expense control and driving efficiencies through the supply chain organization. You see that showing up in our margin as we speak. Last quarter, we told you that we were expecting about a $50,000,000 annualized impact from tariffs. What has happened over the past couple of weeks with Europe and with Switzerland and Sweden has showed us that that has grown to about $80,000,000 that we were looking at on an annualized basis. So the interesting thing there for 2025 is that we have a similar situation on the twenty five million dollars that we spoke about last quarter.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

The puts and takes and the timing impacts that we've seen are going to result in the same level of impact here in 2025. So that $25,000,000 roughly spread across Q3 and Q4. The mitigation factors, we continue to look at ways, including cost savings, including activities that we are driving towards finding initiatives and finding mitigation efforts. And I think that will continue through the end of this year, and we'll look hard at what we're going to do for 2026.

Dylan Finley
Dylan Finley
Equity Research Associate at UBS Group

Great, thank you very much. And then on orthodontics, quick clarification. Did you see any adjustments or kind of charge backs on BiTE? I know last quarter, there was like a reverse of some of the refunds. It was a bit of a positive.

Dylan Finley
Dylan Finley
Equity Research Associate at UBS Group

So just wondering if there's any adjustment there on BITE. And then second of all, just quickly if you could talk about SureSmile, and what you're seeing in The U. S. Today. One of your competitors called out challenging conversion rates, a potential shift to wires and brackets from orthodontists. Just any commentary you can provide on that market?

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yes. So the assumptions that we put into place, as you know, you saw last quarter around BiTE and what's happening there, the patient load has come off faster. We did see about a $4,000,000 adjustment here in the second quarter. For the second half of the year, we now believe we are in line appropriately with the rates of the drop off. So not anticipating any further changes in that assumption.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

As you look at SureSmile, again, we said good performance, 3.3% growth on a year over year basis. The US, like many other areas that we are seeing in The US, there is a little bit of a drag there. The things that we are doing to try and drive change, education programs, working with our sales force, and driving new ways of working specifically with specialists and orthodontists, that's what you will see help us drive a change in The US.

Dylan Finley
Dylan Finley
Equity Research Associate at UBS Group

Thank you.

Operator

You. Our next question comes from Michael Cherny of Leerink Partners. Your line is now open.

Michael Cherny
Senior Managing Director - Healthcare Technology & Distribution Equity Research Analyst at Leerink Partners

Good morning, and thanks for taking the question. This might be getting a little ahead of ourselves, but maybe tying back a little bit to what Elizabeth asked off the top. She talked about the end market. I'd love to talk internally about how you see the portfolio. Dan, as you settle in, obviously, have the Wellspect review going on, but how do you see the rest of the portfolio?

Michael Cherny
Senior Managing Director - Healthcare Technology & Distribution Equity Research Analyst at Leerink Partners

And relative to the business, do you feel this early point in time, like there are areas where you have holes that you want to pursue? And how do you think about the build of inorganic versus organic growth along that front? It might be a philosophical question, but thought I'd at least start there.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

No problem, Michael. I appreciate the question. So there's a couple of things. I actually believe that no one else is better suited to compete holistically in this market than Dentsply Sirona. We have everything that we need to do this and drive it.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

It's about focus and execution. I don't think there's major gaps that are out there and any minor gaps. I think you've got an incredible innovation engine seriously that is working on those things. Should we do it faster? Can we penetrate deeper?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

The answer is, of course. And that will always be it no matter what the performance is that way. But but the potential and when I talk about unlocking the potential, it's about using every single thing that we have to impact further than what we've been doing. I think that's really it that way, where it comes. Organic versus inorganic, the answer is both.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

I lean more towards the organic because I think you build the right in house capabilities and right productions, and you can actually do that in usually a more profitable way, eliminate unnecessary impairments and other external costs. But opportunistically when we have a strong cash flow, the ability to buy and accelerate speed, of course, is something that we'll consider and do at the appropriate times.

Michael Cherny
Senior Managing Director - Healthcare Technology & Distribution Equity Research Analyst at Leerink Partners

Got it. And then just one more on implants, if I can. As you think about the market, I know that under the previous leadership team, there's a major focus on reinvigorating various different areas of growth. How do you feel about where those pieces of the reboot on implants fit as you settle into the seat? Again, I know these are early questions, but just trying to get a sense of some of the key trends we should expect going forward. Thank you.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

No, I appreciate your positioning with it. Listen, I think the following I think the team's moving in the right direction in several areas. I haven't come in and said we're changing this, we're making a radical shift. What I don't want to do is create a disruption that slows us and puts us at a temporary competitive disadvantage. I will continue to look.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

I might change my opinion as I go deeper in my listen and learn sessions. But to date, while I've seen the things that are in progress, I think I'm going to keep them in progress. I want to go deeper and faster in a lot of the areas. I probably won't be as specific and focused in key areas. I think all of these are meaningful areas for us and I want to see growth and health in all of them.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

How we do that, in which order and prioritize order we do that, let me step back and take some time to learn and get you later on. But so far, continue the path, accelerate it, and probably broaden where I think we ought to be focused.

Michael Cherny
Senior Managing Director - Healthcare Technology & Distribution Equity Research Analyst at Leerink Partners

Great, thanks.

Operator

Thank you. Our next question comes from Steven Valiquette of Mizuho Securities. Your line is now open. Our next question comes from Steven Valquette. Our next question comes from Michael Sarcone of Jefferies. Your line is now open.

Michael Sarcone
Michael Sarcone
Analyst at Jefferies

Good morning, and thanks for taking the questions. And Dan, congrats on the new role.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thanks, Michael.

Michael Sarcone
Michael Sarcone
Analyst at Jefferies

You're welcome. Just a follow-up on the tariff stuff and how it relates to margin expansion. You talked about the updated thoughts being about $80,000,000 annualized impact. Don't want to get too far ahead of ourselves here, but when you think about 2026 and you do see that full impact, how do you think about your ability to continue to expand growth and EBITDA margins?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Michael, let me start. This is Dan. I'll hand it over to Matt. But right now, we're not in a position to project what we want to do in 2026 and the volatility of every hour of every day of the change in tariffs would certainly tell you that prudence says to pause and focus before reacting. And so ultimately what I think we're going to do is assess the situation and see.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

You keep in mind that we have the manufacturing and logistic firepower globally to position ourselves for a benefit longer term, but we just simply aren't going to react in such a volatile market at this point.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yeah, the only thing I would add to that, Dan, is as you look at how we're building the rest of 2025 and the outlook that we gave you, it does embed the tariff impact into our outlook. And the things that are allowing us to manage through that are the good activities that are taking place in the organization. And that's why having a longer term view here as to what the value is that we can drive through innovation, through our product pipeline and the changes that Dan spoke about at the top of the prepared remarks, that's why we're taking some time to really develop what that's going to mean for 2026.

Michael Sarcone
Michael Sarcone
Analyst at Jefferies

Got it. Okay. That's helpful. And then second one for me. Dan, in the prepared remarks, you mentioned you've already started taking some activities to address the softness in CTS. Any chance you can elaborate on some of those?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

I appreciate the question, but I think that let me do it and execute it and tell you what we did versus tell you where we're going. I'd rather keep that for competitive reasons into this team to go execute.

Michael Sarcone
Michael Sarcone
Analyst at Jefferies

Okay, thank you.

Operator

Thank you. Our next question comes from Jonathan Block of Stifel. Your line is now open.

Jonathan Block
Jonathan Block
Managing Director at Stifel Financial Corp

Great. Thanks, guys. Maybe I'll just start with a clarification. The $50,000,000 that I thought you said go into $80,000,000 tariff annualized headwind, sorry, was that a net number or arguably is that gross before any mitigating initiatives that maybe you're able to put in place over the coming months? Just the clarification there.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

That is the gross annualized impact. And again, 2025, though, based on how we see the components moving, impact to us in 2025 is still roughly $25,000,000

Jonathan Block
Jonathan Block
Managing Director at Stifel Financial Corp

Yep, got it. Not a full year and maybe some inventory that's at pre tariff levels on the '25. Got it. Okay. And then, Dan, this one might be too early to ask, but just when we think about some of the company's prior initiatives, right, there was a lot there.

Jonathan Block
Jonathan Block
Managing Director at Stifel Financial Corp

I mean, there was ERP, there was SKU rationalization, there was some call it consolidating of the manufacturing footprint. Inherit some of those things that are at various stages of completion. Would love your thoughts. I mean, are those top of the list initiatives? Do those all make sense to you?

Jonathan Block
Jonathan Block
Managing Director at Stifel Financial Corp

Are those on track according to prior timelines? Any update that you're able to give there would be great. Thanks.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thanks, Jonathan. Yeah, it's a great question. And so what I'd say is, I think all of those are the right moves. I think we have to go deeper and faster for sure. And again, let me go assess some of that, come back at a later date with a bigger broader plan.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

But there's nothing in there that I would step in and say, stop this or don't do this. It made sense. Listen, the real focus in the macro approach here for this company is we need to return The US to health sustained growth period. And there's different mechanisms to do that, but it simply starts with remaining focused and improving our focus on the dentists, the customers and the field, supplying them with great innovation and with a consistent supply chain, and it's all of us supporting it in house. That's really where we're going to stay focused.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

If there are sub activities to strengthen that, that's really where we'll go along those lines. There'll be some broader things later, but again, more with the focus of the U. S. Health First, Rest of World and Europe continuing to feed and then driving through that engine, and naturally what we're focusing in with the team now.

Jonathan Block
Jonathan Block
Managing Director at Stifel Financial Corp

Great color. Thank you.

Operator

Thank you. Our next question comes from Jeff Johnson of Baird. Your line is now open.

Jeffrey Johnson
Senior Research Analyst at Robert W. Baird & Co

Thank you. Good morning, guys. And Dan, I think John just asked you on kind of your commitment to some of those cost savings initiatives and other kind of middle of the P and L kind of efforts that prior management has been focused on. Maybe I'll go the opposite direction. Just kind of on the top line, there's been an intense focus over the last couple of years on some of this cloud based DS core strategy, some of the equipment becoming cloud native equipment.

Jeffrey Johnson
Senior Research Analyst at Robert W. Baird & Co

My view on that, not that you care about that, I guess, but has always been that it might be a great long term opportunity, harder to monetize that in the short run. Would love to get your input on kind of how you're thinking about that commitment to DS Core and the intense focus there versus maybe improving some of the actual hardware and products themselves, especially in some of the specialty areas. Thanks.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Yeah, and Jeff, that's a fantastic question, seriously. So thanks for asking it. So there's two pathways that you kind of asked, and I'll go through both. I believe that the world is moving into a proceduralization model, the holistic experience and not just individual components. And so having software and implants and instruments, all that are the best in class are what companies are going to need to go.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

And of course there's data and machine learning and all sorts of things like that that can create connectivity and better outcomes and better planning. We have to pursue that path. DS Core is obviously a foundation for that, but as you said, the best software in the world is meaningless unless you have great implants and great instrumentation and a procedural flow that benefits the practitioner. So the answer is we have to go through all of those will remain on our course with DS Core. We have to make sure that the investments are healthy and that innovation is consistent in all of those other things of instrumentation and implants as well.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

So when Matt and I discuss how to unlock value or where to go, we're signaling that we need to streamline throughout the entire P and L, not just the middle to free up cash so that we can reinvest and drive sustained growth through all of those mechanisms.

Jeffrey Johnson
Senior Research Analyst at Robert W. Baird & Co

Fair enough. And then maybe just one follow-up question, just on your value implant commentary around MIS and maybe some manufacturing headwinds there throughout the rest of the year. How confident are you or how are you able to assess whether it's truly getting product out the door versus market share gains for some of your competitors who have really focused on those value implants as well over the last couple of years? It seems like the value implant side of the market still has a little more strength than premium. So for that to remain down, and I don't know if you said down double digits the rest of year, but still down the rest of the year, a little surprised to hear that. Thanks.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yes. No, that's a good point of reference. The second half of the year will definitely be stronger on the value side. Again, event in The Middle East that went down obviously had an impact on our ability to ship out of the region. And so you've seen some headwinds there, but that will flip and we will be competitive as we move into the second half of the year on the volume side.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

The bigger piece of the overall implant story though, you also noted, which is overall competitiveness and what is taking shape in the market. And I think those lean purely into what Dan was talking about with changes and movements and evolutions that are taking place with our sales force in The US. We've seen over the last couple of weeks a significant retraining and education program that the U. S. Team has launched.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Those are the types of efforts that are going to allow us to be able to get back into the game and drive growth in premium.

Jeffrey Johnson
Senior Research Analyst at Robert W. Baird & Co

Thank you.

Operator

Thank you. Our next question comes from Brandon Vasquez of William Baird. Your line is now open.

Brandon Vazquez
Research Analyst at William Blair & Company, L.L.C

Hi, everyone. Thanks for taking the question. I wanted to follow-up on a comment, sharing of thought that was going on. I think it was John's question, but how much of The U. S.

Brandon Vazquez
Research Analyst at William Blair & Company, L.L.C

Business in your mind as you come into this seat is underperforming simply because of execution on behalf of Dentsply? Or how much of it is simply underperformance of the dental macro market?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Brandon, it's a great question. And my honest answer is, let me evaluate it and go deeper and see, to make that split this early on, I'm not really quite comfortable doing it. I do have the belief that we have an incredibly strong team in the field and a great bag. I think we have to look at ourselves and say, how can we move with better speed and decision making, so that we give our field the chance to actually come out and perform stronger than they've been. What that percent split is versus macro, I don't really know, but I happen to believe that when you have the right team doing the right things, it softens a lot of those macro impacts anyway.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

And so let me dig deeper and come back to you once I have some better understanding.

Brandon Vazquez
Research Analyst at William Blair & Company, L.L.C

Okay, and I guess my follow-up is related and it somewhat leads into this, which is the dental market has seen macro headwinds for several years now. I'm not sure. And you guys, I'd be curious if you guys disagree with me, but I'm not sure we see kind of like a silver lining here and where things are meaningfully improving for dental in the foreseeable future, or at least in the next six, let's call it 2025. Again, if you disagree, please let me know. But in that, if this is the case for a little bit of time now, does Dentsply need to readjust to operate in this new environment?

Brandon Vazquez
Research Analyst at William Blair & Company, L.L.C

I think the prior leadership team, while there were a lot of great execution initiatives going on, there was a chunk of kind of their EPS goals that was built on improving macro. Is this something that you guys think you will bank on as you start to develop plans or do you think the macro is weighing on the sector so much that you need to just build plans to execute regardless and anything that macro would just be upside to that?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

I'll take a swing at that. So I think macro changes over time. And I think that as we look even for your point to the foreseeable future, it will obviously evolve both stronger and weaker over our lifetimes. And that's something that you need to think about us focused on the long term anyway. How do you thrive in that?

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

I happen to believe that a strong cash flow and a strong profitability that allows you to go buy and execute and do what you want will allow you to react in a very meaningful way and eventually lead the market in a stronger way. And so U. S. Growth right now that generates more profitability through our programs continuing and expanding that give us stronger profit and cash are going to allow us to not only react to, but shape the macro as we go forward. It's about making sure we focus on the holistic set of our teams and portfolios to be able to do that.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

And while that sounds lofty, I truly believe that it is more than doable.

Operator

Thank you. Our next question comes from Alan Lutz of Bank of America. Your line is now open.

Allen Lutz
Allen Lutz
Senior Equity Research Analyst at Bank of America Merrill Lynch

Good morning, and thanks for taking the questions. I have a high level question for Dan There's a lot of areas where you can focus investments as you've talked about, Salesforce, implants aligners, clinical education. You talked about DS Core. I know it's very early, so not looking for any specifics on where you're looking to invest.

Allen Lutz
Allen Lutz
Senior Equity Research Analyst at Bank of America Merrill Lynch

But just any early learnings and thoughts you've had as you've looked at the business? And then moving forward, how should we think about timing of potential investments here? And would this be a shift of dollars you're already spending? Or would this be incremental spend? Thank you.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Yeah, I'll go first and then let Matt kind of go in there. So my experience, not just Dentsply, but my experience would show that a focus in investing on the customer in the field are always going to be the thing that will help us be the strongest and go. And so that's going to be there. There's nothing that Matt and I would signal as a significant shift that would throw off your models at this point, but rather us looking with our eyes where we can find efficiencies and free up cash to reinvest and ideally do that in a way that can generate growth. So I would tell you, we're not going to see a radical shift that's going to throw you off.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

We are going to dig deep and move fast for sure. But ultimately, I think giving the field what they need, providing the customers what they need is really the key here. Doing that in a faster manner with more options in an easier way is what I think we're going to focus on.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Just to add, because I think Dan and I are in 100% alignment. And I frankly, in my time here so far, I think the entire team is, which is there is a repurposing of spend that we can do to drive speed, to drive growth, and put areas where the team was already looking for efficiencies, namely in those middle P and L elements, but certainly within the corporate, shifting those into the field, shifting those into innovation. And so I think that's the primary viewpoint that I have that I'm going to try and keep and build out with Dan. And the team is of the same mindset. So I know yet if there's a significant amount of additional incremental spend.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

I will tell you, we're going to go through our strategic planning process. We will go through our annual planning process. That will be a great time after that to really hone in on some of the changes that we want to drive from a modeling perspective. But all of it is to reformulate a financial model for DS that returns higher cash, that gives us the optionality for growth and returns to shareholders.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Yeah, and I would just add one last thing. Matt and I are big fans of spending what we earn and actually reducing leverage that will create longer term flexibility.

Allen Lutz
Allen Lutz
Senior Equity Research Analyst at Bank of America Merrill Lynch

Great. Thank you very much.

Operator

Thank you. Our next question comes from Vic Chopra of Wells Fargo. Your line is now open.

Vik Chopra
Vik Chopra
Equity Research Analyst at Wells Fargo

Hey. Good morning, and thanks for taking the questions. Dan, congrats on the new role and looking forward to continue to work with you. I just had a quick high level question. Dan, maybe just talk about some of the lessons you've learned from your time at Globus Medical that you think are applicable here. And then I had a quick follow-up, please.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Hey, Vic, thanks. It is great talking to you. Look forward to getting together again. Again, Globus is such a great facility with such great teams. I could talk a lot about that, but I won't.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

What I learned from that team is hands on, literally hands on, not some executive talking from a tower, but getting in the field with the reps and living their life eye to eye with the dentist, and then owning it back and making sure there's execution where you as CEO are accountable to that person in the field to do it and do it better. I think that is the strength of Globus, that's what I'm gonna bring in here with that learning.

Vik Chopra
Vik Chopra
Equity Research Analyst at Wells Fargo

Great. And I had a follow-up question. Apologies if this has been asked. I've been bouncing on a couple of calls, but I noted a double digit decline in implants and prosthetics in the quarter. This is sort of worse than you saw in Q2, which I believe was a mid single digit decline.

Vik Chopra
Vik Chopra
Equity Research Analyst at Wells Fargo

Can you maybe provide some additional color on what you're seeing in the market and your expectations for the rest of the year? Thank you.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

Yes. We went over it earlier, but let me do a quick summary here. So we did see a performance trend, and the way that we spoke about it was breaking out premium and value. In the quarter, premium down slightly. We continue to see the shift from our legacy brands to the new evolutionary products that we made in the market, some changeover headwinds there.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

On the value side, the volatility in The Middle East did provide a bit of a headwind for us in the quarter. It was significant double digit low double digits on the value side. That will carry through for the rest of the year. So on the value side, you will see performance improve, but it will still be down overall for the year. The labs was the other place that we called out that had a significant double digit decline, primarily anemia in The US.

Matthew Garth
Matthew Garth
EVP & CFO at DENTSPLY SIRONA

And so that rounds out, I think, on the implant side. When you look at the aligner side of the house, SureSmile up 3.3%, and then you adjust out the bite performance from the overall segment, that gets you back to that double digits.

Operator

Thank you. Our next question comes from Steven Valiquette of Mizuho Securities. Your line is now open.

Steven Valiquette
MD - Healthcare Technology & Distribution Analyst at Mizuho Securities

Thanks. Yeah, good morning. I apologize earlier. I was kind of juggling multiple calls at once. Dan, there's obviously a ton for you to focus on in the short term as you're joining the company. One area that was somewhat in limbo over the past year was some of the relationships with major dental distributors. So I guess I'm just curious if you could provide a little more color on where that ranks on the totem pole of your priorities. And do you have a general bias coming into the role that distributors are vital? Could the door be open maybe somewhere down the road where maybe a larger portion of your sales are direct?

Steven Valiquette
MD - Healthcare Technology & Distribution Analyst at Mizuho Securities

Just curious to get any early thoughts around this whole topic. Thanks.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Hey guys, Stephen, I appreciate the question. So a couple of things, I did have a chance to connect with both Shine and Patterson CEOs And we're going to get together as I get further up to speed, have conversations. I would tell you, I'll refrain from telling you what I think and where we're going and what we're doing right now till I have a chance to better engage and learn this. I am not really focused on the short term. Everything we're doing is going to be about long term here.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

That would include what our relationship is with those. So for now, I'm active in speaking and engaging with them. I need to go further. But let's kind of readdress that after I've got a little bit of time under me.

Steven Valiquette
MD - Healthcare Technology & Distribution Analyst at Mizuho Securities

Okay, makes sense. All right, thank you.

Operator

Thank you. Our next question comes from Erin Wright of Morgan Stanley. Your line is now open.

Erin Wright
Erin Wright
Senior Equity Research Analyst - Healthcare at Morgan Stanley

Thanks for taking my questions here. There's been several iterations of turnaround stories, not just at Dentsply, but also across Dental, I guess. How can you talk about what's different in your approach? And outside of some of these investments that you're making and execution and everything, what do you really think is like the optimal mix across your business? Like, to really set yourself up for success in dental and more consistent growth?

Erin Wright
Erin Wright
Senior Equity Research Analyst - Healthcare at Morgan Stanley

And are you taking a hard look at even some of the strategies around some of the more flagship areas? For instance, like, how do you feel about the game plan around CADCAM and how much are you taking into account the evolution of the competitive landscape there and other parts of your business that you're taking a hard look at? Thanks.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Erin, I appreciate the question and I think it's a legitimate question. Being five days in, let me dig deep, listen, learn, engage with the field, engage with customers, evaluate this out. Again, I do feel like the company is tracking in the right direction, but not deep and fast enough. I think there are some things we can do better internally. But again, let me get through my listen and learn sessions, and I will connect with you and probably give you broader scopes as I get a quarter or two under my belt to further answer that question the right way.

Erin Wright
Erin Wright
Senior Equity Research Analyst - Healthcare at Morgan Stanley

-Okay, great. Understood. Thank you.

Operator

-Thank you. This concludes the question and answer session.

Operator

I would like to turn it over to Dan Scavilla, CEO, for closing remarks.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Thank you all for joining the call today. Matt and I look forward to engaging the investment community as we settle into our respective roles. Before we close, I want to take a moment to thank the entire Dentsply Sirona team for the warm welcome and for their unwavering commitment to our customers. As I shared earlier, I'm truly excited to be here and to be part of shaping the future of the organization so that we can accelerate the value we provide to our customers and unlock the true potential of the company. In addition, I want to thank Andrea Daley for her dedication and leadership in the Investor Relations role.

Daniel Scavilla
Daniel Scavilla
President, CEO & Director at DENTSPLY SIRONA

Andrea will be moving into a new opportunity elsewhere. We're grateful for her contribution and we wish her continued success in her new role. Thank you everyone.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Executives
    • Andrea Daley
      Andrea Daley
      VP - IR
    • Daniel Scavilla
      Daniel Scavilla
      President, CEO & Director
    • Matthew Garth
      Matthew Garth
      EVP & CFO
Analysts
    • Elizabeth Anderson
      Senior MD at Evercore
    • David Saxon
      Managing Director at Needham & Company
    • Dylan Finley
      Equity Research Associate at UBS Group
    • Michael Cherny
      Senior Managing Director - Healthcare Technology & Distribution Equity Research Analyst at Leerink Partners
    • Michael Sarcone
      Analyst at Jefferies
    • Jonathan Block
      Managing Director at Stifel Financial Corp
    • Jeffrey Johnson
      Senior Research Analyst at Robert W. Baird & Co
    • Brandon Vazquez
      Research Analyst at William Blair & Company, L.L.C
    • Allen Lutz
      Senior Equity Research Analyst at Bank of America Merrill Lynch
    • Vik Chopra
      Equity Research Analyst at Wells Fargo
    • Steven Valiquette
      MD - Healthcare Technology & Distribution Analyst at Mizuho Securities
    • Erin Wright
      Senior Equity Research Analyst - Healthcare at Morgan Stanley
Powered by Quartr