2Q17 Technologies business performance
In 2Q17, Dentsply Sirona’s (XRAY) Technologies business contributed ~44% to the company’s total revenues and registered sales of ~$439 million. This segment’s sales represented a YoY (year-over-year) sales decline of ~83%.
The Technologies business of Dentsply Sirona registered an ~10% fall in internal growth in the quarter. The constant currency segment sales fell ~5.6%. The acquisitions benefited the segment’s growth by ~4.4%.
What were the factors behind the Technologies sales decline?
The major factors that dragged down XRAY’s Technologies segment revenues in 2Q17 included the negative impact of ~$19 million, or 400 basis points. This impact resulted from the change in equipment inventory levels with some distributors in Europe and North America.
The inventory level changes are related to the company’s distribution strategy transition in North America. The company expected its go-to-market strategy to create a headwind in 1H17. However, it expects to result in expanded market access and accelerated adoption of the company’s technologies in 2H17.
Notably, the changes in inventory levels as a result of the company’s distribution strategy transition was the major factor that dragged down Dentsply Sirona’s 1Q17 sales as well. It had a negative impact of ~$40 million, or 890 basis points, in 1Q17.
XRAY’s Technologies business reported a YoY net sales growth of ~37% in 1Q17. However, on a constant currency basis and on an organic basis, the segment registered a decline in sales.
For recent developments under the company’s new distribution strategy, please read Dentsply Sirona’s New Growth Strategy to Accelerate Digital Dentistry Penetration.
The lower equipment sales to end users due to the transition challenges at one of the company’s exclusive distributors, Patterson Companies (PDCO), was another factor that impacted the segment’s sales in 2Q17. The development mainly impacted the company’s United States sales. Moreover, the company’s integration efforts are still under execution and are not yet fully implemented, which impacted the company’s sales.
Danaher (DHR) and Zimmer Biomet Holdings (ZBH) are other major companies in the dental equipment market in the United States. Investors seeking exposure to XRAY can invest in the iShares Russell 1000 Value ETF (IWD), which has ~0.11% of its total holdings in XRAY.
In the next article in this series, we’ll discuss the company’s updated guidance for fiscal 2017.