DENTSPLY (XRAY) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Investor Relations - Suzanne Hatcher
• President and Chief Executive Officer - Dan Scavilla
• Executive Vice President and Chief Financial Officer - John Fortson

TAKEAWAYS

• Net Sales -- $836 million, decreasing 7.6% as reported and 7% in constant currency due to lower dental volumes and the absence of Byte revenue.
• Adjusted EPS -- $0.29, declining from $0.42 in the prior year quarter, reflecting lower sales and increased strategic investments.
• Full-Year Sales Guidance -- Approximately $3.5 billion, narrowed from the previous range of $3.5 billion to $3.6 billion due to regional headwinds in Europe and the Middle East.
• Full-Year Adjusted EPS Guidance -- $1.20 to $1.30, revised downward from $1.40 to $1.50 to reflect EMEA underperformance and higher operating costs.
• Accounting Refinement Benefit -- $39 million pre-tax, representing a change in accounting estimate for profit in inventory that increased third quarter gross profit.
• Wellspect Healthcare Revenue -- $92 million, growing 10.1% as reported behind strong sales of the Surity portfolio in the U.S. market.
• Connected Technology Solutions (CTS) Revenue -- $230 million, declining 11% as reported due to lower global imaging volumes and strategic inventory shifts with distributors.
• Essential Dental Solutions (EDS) Revenue -- $343 million, decreasing 4% as reported because of lower endodontic volumes and pricing pressure in the EMEA region.
• Orthodontic and Implant Solutions (OAS) Revenue -- $171 million, falling 16.6% as reported, which included a 6 percentage point negative impact from the absence of Byte sales.
• Adjusted Gross Margin -- 54.5%, expanding 190 basis points year over year, primarily driven by the inventory accounting refinement and manufacturing efficiencies.
• Adjusted EBITDA Margin -- 17.3%, representing a 110 basis point decrease as higher distribution and freight costs offset gross margin gains.
• Operating Cash Flow -- $32 million, down from $79 million in the prior year quarter, reflecting unfavorable working capital movements.
• Share Repurchases -- 1.2 million shares, purchased for approximately $13 million in the third quarter as part of a $25 million year-to-date return to shareholders.
• Net Debt to EBITDA Ratio -- 3.4, with the company maintaining $195 million in cash and cash equivalents at the end of the quarter.
• Research and Development Investment -- 20% increase, representing higher spending through September to support a new product development process and innovation engine.
• Sales Force Stability -- Mid-single digit vacancies, improving from vacancy rates exceeding 20% in prior years while voluntary attrition has declined.
• U.S. Value Implant Growth -- Double-digit revenue growth for the MIS brand, supported by an expansion in the dedicated sales force and account conversions.
• Clinical Education Investment -- Sixfold increase, for North American programs in the second half of 2026 compared to the prior year period.
• CAD/CAM Revenue -- $93 million, declining from the prior year as higher volumes in Japan were offset by strategic dealer inventory reductions in the Americas.
• Transformational Savings -- $120 million, target for the 2026 savings initiative focused on reducing complexity and funding strategic growth investments.
• North American Dealer Expansion -- Seven new agreements, signed year to date to complete the company's regional dealer coverage strategy.

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RISKS

• Fortson warned that "EMEA underperformance and the Middle East conflict accounted for roughly three-fourths of the reduction" in the company's full-year earnings guidance.
• Scavilla noted that "uncertainty surrounding the Middle East conflict led some providers to defer investments," specifically impacting capital equipment demand in the EMEA region.
• Fortson stated that "lower dental volumes and higher distribution costs weighed on gross profit" during the third quarter.

SUMMARY

DENTSPLY SIRONA Inc. (NASDAQ:XRAY) reported third quarter results impacted by significant macroeconomic pressures in Europe and the Middle East while continuing to execute its Return-to-Growth Action Plan. Management lowered full-year revenue and earnings guidance to reflect these regional challenges and strategic inventory reductions with distributors. The company reported operational stabilization in the U.S. dental market, specifically within value implants and endodontics, while Wellspect Healthcare reached record quarterly sales. Strategic focus remains on clinical education, commercial organization stability, and cost transformation to drive more consistent performance across the global portfolio.

• Management reported that voluntary sales rep attrition has declined substantially, with quota-carrying field vacancies now in the mid-single digits compared to over 20% previously.
• The company launched Primescan Connect, which Scavilla stated allows practices to "use an existing compatible PC without a dedicated laptop" to lower the entry barrier for digital dentistry.
• U.S. clinical education investment in the second half of 2026 is six times higher than the prior year, including more than 160 specialized endodontic courses.
• The company established a dedicated sales team focused on Dental Service Organizations (DSOs) to gain share in that market segment.
• Wellspect Healthcare received traditional Medicare coverage for its Surity urinary management portfolio, expanding patient access to at-home care in the U.S.
• The company expects to nearly double its MIS value implant sales force by the end of the year to build on double-digit growth in that segment.
• Management reached a proposed settlement for the 2024 Byte securities litigation, which will be covered by existing liability insurance policies.

INDUSTRY GLOSSARY

• Byte: A direct-to-consumer clear aligner business that DENTSPLY SIRONA previously operated and recently ceased operations for.
• CAD/CAM: Computer-aided design and computer-aided manufacturing technologies used to create dental restorations like crowns and bridges.
• DS Core: A cloud-based platform that integrates dental equipment, software, and services for digital dentistry workflows.
• DSO: Dental Service Organization, an entity that provides business management and support to dental practices.
• MIS: A brand within the company's implant portfolio focused on the value segment of the market.
• OSSIX: A portfolio of regenerative dental products, including collagen membranes and scaffolds used in bone and soft tissue regeneration.
• Primescan Connect: A laptop-based version of the company’s intraoral scanning technology designed for affordability and ease of use.
• SureSmile: The company's clear aligner treatment solution.
• Wellspect Healthcare: A segment of the company focused on continence care and urological medical devices.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Q3 2026 DENTSPLY SIRONA earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to the first speaker today, Suzanne Hatcher, Investor Relations. Please go ahead.

Suzanne Hatcher: Thank you, Stephanie. Welcome to the DENTSPLY SIRONA third quarter 2026 earnings call. Joining me for today's call are Dan Scavilla, President and Chief Executive Officer, and John Fortson, Executive Vice President and Chief Financial Officer. I'd like to remind you that an earnings press release and slide presentation related to the call are available on 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 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-K 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's 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. 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 this call. With that, I will now turn the call over to Dan.

Dan Scavilla: Thank you, Suzanne, and good afternoon, everyone. We continue to advance our Return-to-Growth Action Plan in the third quarter. We expanded customer access, strengthened our commercial organization, and increased investment in clinical education and innovation. Wellspect Healthcare delivered record sales, and we are seeing green shoots in parts of our U.S. dental business. We are making progress, but our results are not yet where they need to be. Our priority is now turning early gains into broader sustained improvement through stronger execution. We now expect full-year net sales of approximately $3.5 billion versus the range of $3.5 billion-$3.6 billion previously, and adjusted EPS of $1.20-$1.30 from $1.40-$1.50, excluding the $0.17 one-time gain from tariff refunds.

Additional cost actions have not fully offset business pressures as we continue to invest in our sales force, clinical education, and innovation. As stated before, these investments will continue because they are essential to returning to sustainable growth. Before I turn the call over, John joined us in July and has now completed his first full quarter with DENTSPLY SIRONA. He brings a practical approach to improving performance and has already built close, trusted relationships with our teams to strengthen financial visibility and challenge cost. He is an excellent partner, and I am confident he will continue to make significant contribution to DENTSPLY SIRONA. John, over to you.

John Fortson: Thanks, Dan, and good afternoon, everyone. Since joining DENTSPLY SIRONA, I have met with our teams, distributors, and partners to better understand our businesses, financial performance, and return to growth opportunities. These discussions have reinforced my confidence in our brands, customer relationships, and innovation capabilities. We have tangible progress to build on. As Dan shared, Wellspect delivered double-digit record revenue growth this quarter, supported by new products, and we saw positive momentum in the U.S. dental business. We remain diligent on costs in a dynamic environment while investing in our Return-to-Growth Action Plan. We are also strengthening our financial systems and access to detailed data to support better decisions.

My priorities are to translate these capabilities into more consistent execution, disciplined investment, and stronger cash generation. Let's move to Q3 results. Third quarter revenue was $836 million, down 7.6% as reported and 7% in constant currency. The decline reflected continued pressure across our dental businesses, including the absence of Byte revenue and planned dealer inventory reductions. Excluding Byte, approximately $10 million of planned dealer inventory reductions and other discrete one-time events, revenue declined 3.8% in constant currency. Turning to profitability, adjusted gross margin improved 190 basis points year-over-year, while adjusted gross profit declined approximately $20 million.

These results included a $39 million benefit from a change in accounting estimate in preparation for the implementation of a new financial consolidation system. More detailed data enabled us to refine our estimate of profit included in inventory transfer between our businesses. This increased third quarter gross profit and pre-tax income by approximately $39 million. The benefit reflects a multi-year period rather than third quarter operating performance, and we do not expect a similar benefit in future periods. We will continue to refine and improve our ability to analyze and forecast our business. Lower dental volumes and higher distribution costs weighed on gross profit, partially offset by cost management initiatives and favorable manufacturing absorption.

Adjusted operating expenses increased $3 million year-over-year as we continued to invest in sales, clinical education, and R&D to support our Return-to-Growth Action Plan, partially offset by cost management initiatives. Together, these factors resulted in a 110 basis point decline in adjusted EBITDA margin. Adjusted EPS were $0.29 in the third quarter, down $0.13 from the prior year quarter. Turning to cash flow, operating cash flow was $32 million compared with $79 million in the prior year quarter. The decrease was primarily driven by unfavorable working capital. In the third quarter, we opportunistically repurchased 1.2 million shares. This is the second consecutive quarter where we have executed share repurchases, returning $25 million to shareholders through repurchases year to date.

We finished the quarter with cash and cash equivalents of $195 million, and our third quarter net debt to EBITDA ratio was 3.4. We continue to prioritize debt reduction as a core tenet of our capital allocation strategy. Let's now turn to third quarter segment performance. CTS sales were $230 million, down 11% as reported. Growth in instruments in EMEA and the Americas and Japan CAD/CAM partially offset broader equipment headwinds. Equipment and instruments revenue was $137 million, down high single digits as reported. Instruments grew low single digits, supported by U.S. momentum through our ADAC partnership and 4% growth in Intego handpieces in EMEA, partially offsetting lower global imaging volumes.

CAD/CAM revenue was $93 million as reported, primarily reflecting lower Americas volumes from the planned strategic inventory shift with distributors. APAC partially offset the decline, led by strong intraoral scanner and mill performance in Japan. In EMEA, pricing pressure from lower-cost entrants and softer capital demand weighed on results as uncertainty surrounding the Middle East conflict led some providers to defer investments. Turning to EDS, which includes endodontic, restorative, and preventive products, sales declined 4% as reported to $343 million, primarily driven by lower endodontic volumes and lower pricing in EMEA. Higher Americas volumes, led by strong file growth and restorative blocks, partially offset the decline. U.S.

Endo returned to growth for the first time since Q2 2025, while Preventive grew double digits in EMEA and APAC. OAS revenue was $171 million, down 17% as reported, including a 6% Byte year-over-year negative impact. IPS revenue declined to $132 million as lower global premium implant volumes were partially offset by double-digit U.S. growth in MIS, our value implant brand. In ortho, SureSmile revenue declined to $39 million, primarily attributable to the absence of Byte sales and lower U.S. volumes. EMEA growth of 8% partially offset the decline, marking the region's sixth quarter of mid-single digit or better growth in seven quarters year-over-year.

Wellspect Healthcare revenue increased 10% to $92 million as reported, driven by higher volumes and strong new product sales, particularly Surity in the U.S. market. Wellspect has delivered consistent growth throughout 2026 as investments begun in 2025 drive new products, broader market reach, and sustained commercial momentum. Now let's discuss our 2026 outlook. As Dan shared at the start of the call, we now expect full-year net sales of approximately $3.5 billion, compared with our previous range of $3.5 billion-$3.6 billion, and adjusted EPS of $1.20-$1.30 from $1.40-$1.50, excluding the $0.17 one-time gain from tariff refunds.

This revision reflects a prudent response while sustaining investment in sales, clinical education, and innovation, areas historically underfunded and that are essential to our future growth. U.S. performance met expectations with momentum building, while Wellspect delivered record quarterly sales. EMEA distributor inventory reductions, the Middle East conflict, and higher freight costs continued to pressure results. Relative to prior EPS guidance, EMEA underperformance and the Middle East conflict accounted for roughly three-fourths of the reduction, with an unfavorable tax rate and strategic investments representing the balance. The profit included an inventory benefit, and cost management initiatives provided partial offsets. These strategic investments remain central to our Return-to-Growth Action Plan and sustainable long-term growth.

With that, I will turn the call back to Dan.

Dan Scavilla: Thanks, John. This year, we strengthened our global leadership team and rebuilt capabilities essential to our Return-to-Growth Action Plan, from sales and dealer coverage to clinical education. We are also bringing greater discipline to product development and simplifying operations. Wellspect U.S. MIS implants and endo show what focused investment and commercial execution can deliver. Our priority is to build on that progress and drive more consistent performance across the portfolio. Let me walk through our progress and what comes next. Purchasing decisions remain challenging as customers weigh investments in equipment carefully, and affordability influences elective procedures. In the Middle East and parts of Eastern Europe, conflicts continue to add pressure to sales, while Western European dealers are holding less inventory.

We expect some recovery over time. Like I said before, we cannot count on the market to do this for us. We need to execute better, building on our strong brands, relevant products, and longstanding customer relationships to earn more business. The U.S. remains a top focus, and we are encouraged by the green shoots we are seeing. Our focus now is turning that early progress into broader sustained improvements. In the U.S., we have aligned our commercial teams around customer needs and established a dedicated sales training team. All premium implant reps have completed certification, and the MIS team is expected to complete training and be certified by the end of this month.

Recruitment and retention have improved significantly, with our ability to attract talent, adding stability to our commercial teams. Quota-carrying field vacancies are now in the mid-single digits, down from more than 20% in prior years, and voluntary sales rep attrition has declined substantially. More consistent coverage helps us deepen customer relationships and follow through on their needs. MIS offers an early example of our progress. U.S. sales grew double digits in Q3, with customer conversions accelerating sharply in September. Overall, value implant sales grew more than 7% year-over-year. To build on this momentum, we aim to nearly double the MIS sales force by year-end. Implant education also increased more than 60%, supporting broader customer adoption.

We're seeing early returns in endo as well, with U.S. sales up 4% in the quarter. With seven new distribution agreements signed year to date, we have largely completed our North American dealer expansion efforts. We're now focused on activating that network through training, joint customer visits, demonstrations, and installation support. A simpler incentive structure and inventory model also make it easier for our distributors to work with us. Engagement at our recent DS World events reinforced the opportunity to expand customer access and grow with these partners. We're also strengthening enterprise sales with a sharper focus on DSOs. We've built out a new team to expand on this opportunity and develop action plans to gain share in these markets.

Clinical education is central to this effort. After redesigning our U.S. programs in the first half, we're executing in the second half, giving more clinicians hands-on experience with our products and workflows. Our second half 2026 clinical education investment in North America is six times greater than last year's level, including more than 160 endo courses and expanded hands-on programs. We are broadening access through education centers, universities, and industry events, complemented by lectures and virtual learning. Clinician participation is high, and demand remains strong. At our recent DS World events globally, we increased workshops, lectures, and hands-on continuing education courses by more than 60% versus last year. Like I said before, the value of clinical education builds over time.

We are helping clinicians become more confident, consistent users of our products, with our commercial teams following through to support adoption. We're also bringing customer perspectives directly into our decisions through our KOL advisory boards. These candid discussions with small groups of clinicians and dental professionals help us understand their needs, sharpen innovation priorities, and identify where we can be better partners. In turn, we're able to create more awareness of a holistic view of DENTSPLY SIRONA's portfolio strengths and workflow benefits. We began with implant clinicians and recently met with dental laboratory leaders. EDS and CTS discussions are planned by year-end. Together with daily feedback from our field teams, these insights help shape product development, education, and service.

At DENTSPLY SIRONA, innovation remains a priority, supported by greater discipline in how we invest. As planned, R&D spend increased approximately 20% through September compared with last year. Our teams have established a new product development process to strengthen our innovation engine. Customer needs guide product requirements, with clear decision criteria and rigorous stage gate reviews, helping move the strongest ideas forward. Earlier planning for training and clinical education strengthens launch readiness and supports adoptions. At DS World, we introduced Primescan Connect, powered by DS Core, providing our most affordable scanner option with our high-quality Primescan performance.

Practices can use an existing compatible PC without a dedicated laptop, installed scanning software, or separate scanning licenses, making it easier to enter digital dentistry. We are bringing key products in our regenerative portfolio back to the market in the U.S. and Canada, following regulatory approval for OSSIX Plus, a collagen membrane that supports bone regeneration. We also received Canadian approval for OSSIX Volumax, a collagen scaffold that supports bone and soft tissue regeneration, with the U.S. clearance expected soon. These milestones reinforce our leadership in advanced dental regeneration and position us to rebuild momentum in the OSSIX business. Wellspect demonstrated the opportunity from focused investments and commercial execution.

Investments in new products and U.S. commercial capabilities are supporting broader market reach and continued growth. Investments increased 15% year-over-year as the business pursues the $7 billion urinary management market. Wellspect built a U.S. Surity portfolio through a planned sequence of launches, culminating in the urinary management system alongside female and male external catheters for people managing incontinence at home. The Surity portfolio recently qualified for traditional Medicare coverage, expanding access to at-home care for eligible patients. These opportunities support continued investment in the portfolio and commercial capabilities. Alongside our commercial investment, we are reducing costs and complexity.

Established earlier this year, the transformation office is advancing our approximately $120 million 2026 savings initiative, funding the reset and strengthening cost discipline as our focus shifts from stabilization to value creation. As John discussed, we are resolving legacy matters to sharpen our focus on improving performance. As disclosed in our Form 10-Q, we entered into a memorandum of understanding for a proposed settlement of the 2024 Byte securities litigation. That proposed settlement amount will be covered by our liability insurance policies. Our global leadership team is fully in place with clear priorities and accountability for executing our Return-to-Growth Action Plan. Early progress in implants, Endo, and Wellspect give us confidence in the opportunities ahead.

The task is now to extend that progress across the portfolio and deliver more consistent results. There's more work to do, but I'm encouraged by the team, the focus, and the momentum we are building. Thank you to our employees and to our partners for their commitment. With that, let's open the call for questions.

Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please be advised, we will limit participants to one question each. Please stand by while we compile the Q&A roster. Our first question comes from Allen Lutz of Bank of America. Your line is now open.

Allen Lutz: Good afternoon, and thanks for taking questions. Appreciate all the color so far. Dan, I will start with you. We have talked over the past couple quarters about the opportunity to partner with DSOs, and you mentioned that you have now built out a team to capture that DSO opportunity. Can you just update us on the progress there? What are these potential partners looking for, and where do you see an opportunity for XRAY to lean in? Then a quick follow-up for John. Is that $39 million benefit in the quarter included in the updated EPS? Thank you both.

Dan Scavilla: You got it, Allen. I will go first. We have been putting together a stronger DSO team, investing in that, and actually engaging with different levels of DSOs over the past several months, gaining traction. The thought there is we have in the past touted the broad scope of our portfolio and putting that out to customers, and we think that in particular with DSOs, that can really hit the mark. Depending on what they do, whether they are generalists or specialists, whether they are going into equipment or into consumables, we really do know that we can come back with a strong proposition.

We are currently in several levels of conversations there, working our way through that, but I do think that it is one of the long-term potentials that we need to play in to be relevant and grow in the future.

John Fortson: Well, just to answer the second part of that question, yes, it is included in our, the $30 million, because you have to look at it on an after-tax basis, so $39 million is pre-tax, but it is included in our guidance.

Allen Lutz: Great. Thank you.

Operator: Thank you. Our next question is from Elizabeth Anderson of Evercore. Your line is now open.

Elizabeth Anderson: Hi, guys. Thanks so much for the question. I have sort of a two-parter. One, you obviously, Dan, were talking about some green shoots, and I think you pointed to sort of some double-digit growth in MIS and value implants more generally. Could you maybe talk us through sort of, is that what you were referring to? And obviously, Wellspect as well, like, where are you seeing kind of the different products start to accelerate, and sort of how do you see that as we transition into 2027? And maybe as a corollary to that, can you give us an update on the timing of the inventory de-stocking going forward? Thank you.

Dan Scavilla: I will give that a shot, Elizabeth. So let's start with Wellspect. As you know, we've launched products through this year, and they were planned. They tend to be on time so far, and they're doing well. It allows us to penetrate into new areas, especially in the U.S., covered also with this Medicare coverage. It's a very promising thing. These are great products. They're getting readily accepted.

So what I see is very long I want to say I see strength in Wellspect continuing through the rest of this year, and I would say, although while we're not giving 2027 guidance, I would expect to see that strength into next year, just given how early we're starting to really get into the U.S. That said, Wellspect was up and strong in every market that they were in, so a very positive quarter for them throughout the world. I would tell you with, again, U.S. value implants up high single digits, MIS U.S. up low double digits, really related to sales force expansion, account conversion, clinical education as a main driver.

There are innovations we are working on to further strengthen that going forward, but again, depending on the timing of some things that we'll talk about in the future, we'll see where that goes that way. Endo is the same way we're talking throughout the script. We've been putting clinical education into Endo and really flexing some of the strength of our products there, and we're seeing a good market reaction with that.

Elizabeth Anderson: Thank you.

Operator: Thank you. And just as a reminder, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. Our next question is from Jeff Johnson of RW Baird. Your line is now open.

Jeff Johnson: Yeah, thanks. Good morning, guys, or good afternoon, guys. Thanks for those updates on the green shoots in the U.S., Dan. You have talked in the past about potentially getting to a plus sign on the U.S. number. Looks to me like the stacked comps on the Americas, which I know is not a perfect proxy for the U.S., but the stack really kind of stays about the same, and you've been trending down 3%-4% on an adjusted basis in the Americas the last couple quarters. So, can you swing that number a full 4 or 5 points and get to that plus sign in the fourth quarter? How should we think about that?

And then just to push John a little bit, just on the benefit that you're keeping in the guidance, I've got that at about a $0.14 after-tax benefit. One, is that math about right? I guess you gave the after-tax number, so I can dial that in better if I need to. And two, if it's a multi-year benefit, I guess I'm just a little confused as to why keep it in the $1.20-$1.30 guidance this year. Thank you.

Dan Scavilla: Jeff, thanks. This is Dan. I will go first. Like I said in the beginning of the year, I am going for that, looking for even a 0.1 or a 0.2 as we get into the U.S. There is momentum there that make that a possibility. What I will say is it is a stretch, and if I miss it in the fourth, that means I will get it in the first, but we are going for it. It is really a message of we are moving to stabilize. Once stabilized, we move to grow. Probably not going to back off my aspiration of getting a plus sign by the fourth quarter that way.

John, I will hand it to you.

John Fortson: Yeah, so I already made it clear in the earlier question, it is sort of $39 pre-tax, $30 post-tax, so you can kind of do the math. They are a little bit high, but it is okay. You will figure it out. Look, why do we include it in the guidance? At the end of the day, we are in a process of improving how we analyze and forecast this company. We are implementing new consolidation systems, and we are looking hard at sort of the FP&A function of our company, right? And you are going to find that we have adjustments that come through this.

It just so happens to be that this is a positive adjustment, but we had to book it this quarter, and we think it is appropriate to do that. You can make your own judgment as to how you want to look at it with regards to our operating EPS.

Dan Scavilla: Yeah, something I like to tell you, Jeff, to consider building on as well, while we call it out because of it occurring in this quarter, I also want to make sure that it is clear it is not a standalone event, meaning that it is a favorable we are calling out. We continue through John and the team to clean up several things, and there are several other offsets to that number. If you actually netted those out operationally, you may have a net of one or two cents, is really where I would put that. So, we are just calling it out for its uniqueness.

There is other things that we have continued through the year to clean up and do. And I, again, just want to make sure we understand it is not a standalone event, but we are just calling it out given its size. There are offsetting one-time events bringing it down to negligible.

Operator: Thank you. Our next question comes from Lily Lozada of JPMorgan. Your line is now open.

Lily Lozada: Great. Hi, everyone. Thanks for taking the question. You made some comments earlier this quarter about return to growth in 2027, so I am hoping you can share the latest in light of today's update. I know you are not giving guidance just yet, but generally, what are the themes, headwinds, tailwinds we should be keeping in mind for next year? Is flat on the top and bottom lines still an okay way to think about it? Thanks so much.

Dan Scavilla: Yeah, thanks, Lily. I like how you are trying to tease out that 2027 from me, but I will go along with you on that. I did say that out at the conference. I do not really have better data just yet because we are only just beginning to look at it over the next two months. In particular, we are really coming up with the next chapters of the Return-to-Growth Action Plan that are fairly significant in what we plan to do. I am happy with where we are so far this year and what is taking root. We are moving into the next phase. There will be a lot of moving parts.

So, what I would tell you is we really do need the next one or two months to finish those out, align with our board, and then come forward with kind of how we will reveal this to the market. I am going to shy away from giving you anything specific other than what I said on stage. I would stick with that for now and let us get through this work, and when we have better data, we can share it with you as we enter into next year.

Operator: Thank you. We do have additional time for questions. As a reminder, if you would like to ask a question, just please press star one on your telephone and wait for your name to be announced. Our next question is from Michael Cherny of Leerink Partners. Your line is now open.

Leah: Hi, this is Leah on for Michael Cherny. Thanks for taking the question. I was wondering if you could help us bridge from Q3 to Q4 earnings based on the implied updated outlook, especially looking through the inventory benefit this quarter, and maybe what some of the puts and takes are to consider and how much visibility you have into Q4. Thank you.

John Fortson: Yeah, I mean, look, you obviously can do the math to figure out what we have to achieve in Q4 to stay in the range that we talked about. I think when you work your way through it, you will realize that it is fairly doable, assuming that we get certain upticks in some of our markets and we have a little bit of what I would call mix shift, because some of our products are obviously more profitable than others. So, as you see us improve and stabilize in some of the equipment businesses, and normally the fourth quarter is a pretty good capital equipment quarter, you are going to see some improvement from there.

And we feel comfortable with the range that we have given you guys.

Operator: Okay, thank you. We do have time for any additional questions, if anyone would like to ask a final question. That will conclude the question and answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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