Dentsply Sirona continues internal investigation into financial reporting practices

It’s been several months since Dentsply Sirona launched an investigation into some potentially fishy financial reporting dating back to the second half of 2021—leading to a delay in its quarterly financial reports, a warning from the Nasdaq and the resignation of its former CFO just two days after he took on the same post at Moderna.

Amid all that turmoil, Dentsply Sirona is plowing ahead with the investigation.

The probe was made public in early May, just a few weeks after the dental devicemaker fired then-CEO Don Casey, citing the lower-than-expected earnings it was planning to report for the first quarter of 2022. Rather than releasing that financial report, however, in a May 9 filing (PDF), Dentsply told the U.S. Securities and Exchange Commission its quarterly report would be delayed due to “an internal investigation of allegations regarding certain financial reporting matters.”

The probe began in March, the company said, and “is focused on the company’s use of incentives to sell products to distributors in the third and fourth quarters of 2021 and whether those incentives were appropriately accounted for and the impact of those sales was adequately disclosed” in Dentsply’s SEC filings.

The medtech’s audit committee—helped along by independent outside counsel and a forensic accounting firm—is also investigating whether certain unnamed current and former members of senior management used those incentives to reach their own executive compensation targets for 2021.

About three months after disclosing the launch of the investigation, Dentsply is still in the thick of it. The company still hasn’t submitted its first-quarter results and said in an August 4 update that it won’t be able to meet this week’s deadline to file its second-quarter financial report, either.

Dentsply previously forecasted net sales of $965 million for the first quarter in a preliminary report, representing a year-over-year drop of about 6%. But that number could slip even further, as the company said in the new update that the investigation has led it to look into “certain other accounting practices” and has determined that those preliminary results must be adjusted.

Additionally, “the company is currently evaluating whether fiscal year 2021 reported financial results also require adjustments,” it said in the statement.

As the investigation continues and Dentsply Sirona’s finalized earnings reports are further delayed, the devicemaker has fallen into hot water with the Nasdaq stock market. It received a warning letter after missing its reporting deadline for the first quarter—which could’ve resulted in Dentsply’s stock being barred from trading on the market—but was granted an extension allowing it to file all outstanding reports by August 14 and continue trading in the meantime, the company said.

Since then, however, Dentsply has notified the Nasdaq that it’s no longer expecting to meet even that delayed deadline. It plans to submit an updated compliance plan that would further extend the grace period to November 7.

Dentsply’s stock price plummeted after the news of CEO Casey’s firing in late April and, with the launch of the investigation, hasn’t been able to recover since. After spending much of the spring around the $49 mark, the stock price has hovered closer to an average of about $36 in the ensuing months, though it jumped up past $37 amid the company's latest update.