Envista Holdings Corporation

My name is Angela, and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Invista Holdings Corporation's third 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 that time, simply press star through the number one key on your telephone keypad. If you would like to withdraw your question, please press the pound key. I would now like to turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Thanks, Angela. 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 reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures providing during the call are all available on the investor section of our website, www.investico.com. The audio portion of this call will be archived on the investor section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. 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 third 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 third quarter 2020 earnings call. We are pleased with our third quarter results, the dental market's recovery to date, and our progress on strategic initiatives leading to a meaningful improvement in our revenue, adjusted EBITDA, and a free cash flow. This September marked our first anniversary as a public company. Over the past year, we have made tremendous progress to improve the long-term prospects of Invista. In our effort to create a more focused and competitively advantaged company, we launched several transformative products, undertook an effort to permanently improve our cost structure, and exited non-strategic businesses. To date, the combination of these efforts is a strong business model with more than 85% of our revenues driven from consumables and small equipment. One of our most important accomplishments is the refinement of our company culture, which is one of customer centricity, diversity and inclusion, innovation, and continuous improvement. I want to recognize our manufacturing and distribution employees who have embodied many of these attributes throughout the last several months. They were the last to leave and first back to work to help ensure our customers have the products that they need to provide dental care to their patients. I also want to thank our employees, customers and partners for their sacrifices, dedication and support. Your passion to improve the quality of life of patients is what makes this industry great. Together, We are furthering our objective to improve access to dental care across the globe. Let me now provide you with an update on our priorities to accelerate growth, improve margin, and reshape our portfolio. We started to improve Invista's underlying growth rate with revenue from infection prevention, the spark clear aligners, and the N1 implant system, Contributing more than 300 basis points to Invista in the quarter. Additionally, our orthodontic business grew at low double digit rate, showing the strength of both our brackets and wires and clear aligner businesses. Our infection prevention team in Romulus is a great example of how the roots of EBS, the continuous improvement mindset, is impacting our business. The team held several Kaizans and process improvement events to enhance and sustain operational efficiency of the manufacturing and distribution process. These efforts, combined with our capacity investment in the business, helped to increase output of our disinfectants by more than 50% in Q3 and drive over 30% revenue growth in our infection business overall. We also obtained EPA approval for Kaabi Wipes 2.0, our latest version of surface disinfectant wipes which has kill claims for over 40 pathogens. This short two-minute kill time is effectiveness on many pathogens and good material compatibility with help differentiate our business in the medical industry. We believe building a bigger presence in the medical market will lead to more sustainable demand for infection prevention products as pandemics subsides. Our orthodontic business performance further validates our strategy of providing a continuum of options that allow clinicians to make best treatment choices for their patients. The business is well positioned to capitalize on growth in an under-penetrated industry with a significant international position, a healthy new product pipeline in both brackets and wires and clear aligners, and an innovative education program. Our orthodontic business has more than 70% of its revenue outside North America with a leading position In China, a geography which has sustained double-digit growth over the past several years and has grown through the first nine months of 2020. Our most recent orthodontic innovation is our Spark Aligner, clear aligner system, which has gained popularity among our customers and their patients due to ease of use of its software, a clear, more stain-resistant, and comfortable aligner design. In the third quarter, we doubled our aligner manufacturing capacity while reducing customer lead time by more than 40%. Commercially, the number of active doctors using SPARC has grown by more than 50%, helping to drive an increase of daily case submissions from the beginning of July to September. This puts SPARC on track to contribute over 100 basis points of growth to INVISTA in the fourth quarter. Training and education are also important differentiators, and in 2020, we have partnered with key experts to train thousands of orthodontists across the globe. Finally, with less than 15 million orthodontic cases globally per year and an addressable market of more than 500 million people who need and can afford orthodontic treatment, this is a substantial long-term growth runway for the industry. Turning to our margin improvement program, we manage expenses and execute it well against our $100 million permanent cost reduction program, which is a testament to to the discipline approach the investor business system brings to planning and deployment. Our EBS office has led this initiative since March, driving focus by creating a detailed project roadmap and holding weekly progress meetings involving senior management where we address key obstacles to ensure that we deliver on our commitments. We continue to make progress on our permanent cost savings initiatives. Realizing more than $15 million savings during the quarter. In total, we reduced our operating expenses by more than $35 million through a combination of these efforts, temporary savings measures, and other discretionary spend reductions. Execution of these margin initiatives helped to drive our adjusted EBITDA margins above 20% for the third quarter. As we move forward, we will continue to strike a balance of margin expansion while accelerating investment in some of our best growth opportunities. We also made progress in building a better, stronger, and more integrated workflow-oriented portfolio. We believe the ability to integrate the industry's largest installed base of imaging solutions with our DTX workflow software and innovative treatment solutions that help our customers become more productive while providing their patients with better predictable outcomes. We took our last orders for our Brazilian and Pelton and Crane treatment unit businesses in the second quarter and anticipate completing most remaining obligations by end of the year. Going forward, we intend to maintain an active view towards portfolio management and are in the process of exiting certain lower growth, lower margin product categories and geographies which collectively amount to less than 2% of 2019 revenues. Finally, the strong cash flow performance in the quarter has placed our balance sheet in the best shape since our IPO with net debt now approximately $1 billion. This will position us well to further our inorganic capital deployment strategy as we move into a more normalized environment. Let me now turn it to Howard to go through the financials in more detail.