Envista Holdings Corporation

My name is Stephanie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the InVista Holdings Corporation's second quarter 2020 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now turn the conference over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Thanks, Stephanie. Hello, everyone, and thanks for joining us on the call. With us today are Amir Agday, our President and Chief Executive Officer, and Howard Yu, our Chief Financial Officer. I'd like to point out that our earnings release, the slide presentation supplementing today's call, and the reconciliation and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the Investors section of our website, www.investico.com. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A replay of this call will also be available. During the presentation, we will describe some of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company specific financial metrics relate to the second quarter of 2020 and all references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. With that, I'd like to turn the call over to Amir.

Thanks, John, and welcome everyone to INVISTA's second quarter 2020 earnings call. Before we begin the call, I would like to express my gratitude for our employees' tremendous work in the first half of the year. While it has been a challenging operating environment, I'm grateful for their efforts put forth and humbled leading such a customer-centric, hardworking, and committed team. Thank you for all that you do for InVista, our customers, and our key stakeholders. Additionally, in support of the social reform movements that are occurring globally, we affirm our commitment to create an environment for our employees to work as their authentic selves and continue making diversity and inclusion a priority for our business. We are encouraged by the pace of recovery in the global dental markets, which has steadily progressed during the quarter. As a result of dental offices and businesses beginning to reopen, our core growth, which declined over 60% in April, We have experienced the most visible improvement in our orthodontic and implant businesses and continue to have record demand for our infection prevention products. When we began the second quarter, we redefined our near-term priorities to focus on the safety of our employees, providing exceptional service to our customers and preserving InVista's financial strength. Safety is at the top of the mind every day and we are taking a thoughtful approach focused on our employees' health. Our workforce has been incredibly agile and those who are able to work remotely will continue to do so in areas of the world where returning to an office is unsafe. Our manufacturing and distribution centers continue to undergo daily sanitation procedures and employees are following appropriate protocols which has allowed us to minimize disruption within our business. We treat our customers at the forefront of everything we do. We are embracing adopting and many more. During the first half of the year, we completed several hundred educational courses and trained more than 250,000 professionals. These trainings generated thousands of new leads For our sales force, we are now converting into new customers. We are beginning to see the results, particularly in our mobile business, where we experienced double-digit growth for our DSO customers in June. This acceleration was due in part to our successful efforts to help customers accelerate education during the COVID-19 shutdown. With the infection prevention procedures different across the world, our metrics team provided customers with guidance and recommendations on sanitation procedures to help ensure they have the resources needed to restart their businesses. We also developed, in collaboration with our partners, a practice recovery program offering packages to support dental practice recovery. The feedback from our customers and our partners has been extremely positive with hundreds of new customer leads generated for our partners and the ability to cross-promote other Kerr consumable products. It took significant actions to preserve our financial strength, which has enabled us to maintain our strategic investments. We exceeded our temporary cost reduction target and reduced operating expenses excluding restructuring and other exceptional charges by approximately $110 million or 35% year-over-year. This was driven by a combination of temporary and permanent initiatives including furloughs, compensation reduction, and a strong discretionary These efforts, in combination with aggressive working capital management, helped improve our liquidity position while generating positive operating cash flow in the quarter. Our near-term priorities were important to ensure that we were able to advance our strategic growth priorities, reduce structural costs, and reshape The portfolio. During the quarter, we advance these long-term objectives which will lead to a stronger investor over time. Starting with our growth investments in China, we maintain our investment. Through the outbreak, align our team to implement a targeted program to train and onboard new orthodontic and implant customers The private sector is approximately half of our overall China business. As a result, our orthodontic business grew a double-digit rate in the second quarter, including more than 25% growth in the private sector, which we believe outpaced the market. Our implant business is beginning to build positive momentum. and grew at a mid-single-digit rate in the month of June. In our infection prevention business, we completed the installation of two new production lines for our Kaviside branded disinfectant in late June, which will increase production capacity by 25%. Our infection business grew at double-digit rate in the first half of the year. We anticipate the other lines will help drive more than 30% growth in the second half of the year, which is approximately 200 basis points of revenue growth for Envista. We will continue to add additional production capacity and expect demand to continue as customers adapt to more stringent procedures designed to mitigate wireless spread globally. Our cabi wipes and Kaviside Solution received registration by the EPA confirming their use against disinfection of COVID-19. In June, we delivered our innovative N1 implant system to 10 of our key experts in Europe. This is a major milestone for the Nobel Biocare team after more than four, five years of product development. Customer can look forward to an integrated implant workflow from planning to prosthetic delivery, including new techniques like Osseoshaper, a treatment protocol that allows clinicians to treat patients with two easier-to-use lower-speed instruments, which ultimately results in less discomfort and faster healing time for patients. We will continue to roll out N1 to select customers as we move into the second half of the year. Similarly, our Spark Clear aligners continue to be well received by customers, including one key expert who has now treated over 600 cases with more than 25 other customers who have completed more than 100 cases each. Customers valued the excellent clinical outcomes, clarity, stain resistance, and software workflow that the product offers. During the COVID-19 shutdown, we made a substantial effort to train new providers and installed several new manufacturing lines, which will increase our case capacity moving into the second half of the year. We are pleased by the rebound in case submission rates, which are now exceeding pre-COVID levels. Plans are in place to double the current customer base by the end of the year. Collectively, we anticipate that Spark and Enron will contribute more than 1% of growth to InVista in the second half of 2020 Moving in 2021, we expect both products will make meaningful contributions to investors' growth. We also made substantial progress on the structural cost actions we outlined in Q1, which are targeted to generate permanent savings of more than $100 million on an annualized basis and substantially improve our operating margins. Today we have completed planned headcount reduction action which will secure more than $70 million of the targeted savings. We will continue consolidation and simplification of our footprint and anticipate the remainder of the permanent cost reduction program will be completed by the end of the fourth quarter. We are actively managing the portfolio and in the second quarter we announced our intention to exit the treatment unit business in Brazil and Pelton and Crane in North America. Together we presented approximately 4% of our total 2019 revenue. Last orders were taken in the second quarter and we anticipate being exited from these businesses by the end of the third quarter. These businesses had near break-even EBITDA margins and were declining prior to the COVID-19 outbreak. Finally, Gail Shepherd, a seasoned executive with extensive experience, joined our board of directors, adding a broad set of capabilities and expertise to the board. While the last three months have been challenging, our continuous improvement mindset and process discipline, both hallmarks of the INVISTA business system, have helped us successfully navigate and exceed our commitments while furthering our strategic priorities. I will now turn it to Howard, who will provide further details on the quarter.