Strategic Execution and Operational Context

• Management characterized Q1 as the initial phase of a business in transition, focusing on establishing the ‘Return to Growth’ plan, building teams, and initiating reorganization.

• Performance was impacted by a strong prior-year comparison in treatment center sales and the strategic exit from Byte, which masked underlying market stability.

• The company is shifting its U.S. commercial strategy by strengthening leadership with competitive hires and expanding distribution networks to improve regional coverage.

• Operational efficiency is being driven by a restructuring program on track to deliver $120 million in annual savings, with $20 million already realized in Q1.

• Management attributed recent implant underperformance to execution and education gaps rather than product quality, initiating a ‘voice of the customer’ project via a new CEO advisory board.

• A new regional reporting structure (Americas, EMEA, APAC) was implemented to better align financial reporting with internal management and evaluation processes.

Outlook and Strategic Roadmap

• The 2026 full-year outlook remains unchanged, reflecting a ‘thoughtful, risk-aware’ approach given current geopolitical fluidity and macro uncertainty.

• Management expects the financial benefits of commercial restructuring and cost-saving initiatives to contribute more meaningfully as 2026 progresses, with more consistent execution expected in the second half of the year.

• A $30 million headwind related to the transition to a new distributor drop-ship model is expected to impact results between Q2 and Q4 2026.

• Capital allocation will prioritize debt reduction in the near term to maintain investment-grade metrics, with potential share repurchases evaluated for later in the year.

• Innovation strategy is shifting toward high-value opportunities like AI-enabled diagnostics and soft tissue imaging to differentiate the portfolio from low-cost entrants.

Risk Factors and Structural Adjustments

• Gross margins were significantly pressured by a 560 basis point decline driven by lower volumes, sales mix, and the impact of tariffs.

• The company eliminated its dividend during the quarter to increase financial flexibility for debt retirement and future share buybacks.

• Management noted external headwinds from rising freight and oil prices but stated there is currently no material impact requiring a guidance adjustment.

• Inventory destocking among European dealers and those with private-equity-based approaches contributed to softness in the Endodontic and Restorative (EDS) segment.