Envista Holdings Corporation

My name is David, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Invista Holdings Corporation's fourth quarter 2021 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, press the star, then the number one on your keypad. If you would like to withdraw your question, please press the pound key. I'll now turn the call over to Mr. Stephen Keller, Vice President of Investor Relations of Invista Holdings. Mr. Keller, you may begin your conference call.

Thank you. Hello, and thanks for joining us on the call today. With us here in the room are Amir Agday, our President and Chief Executive Officer, and Howard Yu, our Chief Financial Officer. I want to point out that the earnings release, the slide presentation, supplement phase calls, and the reconciliation and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are available on the investor section of our website, www.infistico.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. It will remain archived until our next quarterly call. As announced on January 3, 2022, we have closed the divestiture of our CAVO treatment unit and instrument business. For the fourth quarter and the full year 2021, the results of this business are reflected as discontinued operations in our financial statements as required by generally accepted accounting principles. Additionally, the financial statements to be included in our 10-K for the fiscal 2021 will reflect CAVO treatment unit and instrument business as discontinued operations as required by GAAP. All references in these remarks and accompanying presentation to earnings, revenues, and other company-specific financial metrics relate only to the continuing operations of Invista's business, except for cash flow measures. During the presentation, we will describe some of the more significant factors that impacted year-over-year performance. Supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these materials and supplemental materials to company-specific financial metrics relate to the fourth quarter of 2021, 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 that have applications submitted impending 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 Law, including statements regarding events or developments that we believe, anticipate, 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 where as required by law. With that, I'd like to turn the call over to Amir.

Thank you, Stephen, and welcome everyone to NVISA's fourth quarter 2021 earnings call. I want to begin by thanking our employees for delivering an outstanding 2021. Despite a challenging macro environment with COVID-related headwinds, numerous supply chain disruptions, At significant inflation, our employees deliver outstanding results by partnering with dental professionals to improve the lives of patients and expand access to oral care. Our employees' passion and dedication allow us to deliver on our commitment to our clinicians and our shareholders. For the full year 2021, we delivered core revenue growth of 29%, over 2020 and 8.9% over 2019. While we did see some softening in patient volumes in late QFO, continuing into January, our views that this is primarily related to staff shortages and patient cancellations driven by Omicron variant and increasing rates of infection. As infections peak, we believe patient volumes will come back with limited loss of demand. We're still growing significantly above pre-pandemic levels, and we continue to benefit from the repositioning of our portfolio, our improved commercial execution, and our long-term investments in innovation. For 2021, our adjusted EBITDA margin was 19.7%, representing a greater than 650 basis point improvement over the pandemic impacted 2020 and delivering over 400 basis point of improvement versus 2019. Before I turn it over to Howard to discuss our fourth quarter result, I want to provide more color on our progress towards our long-term priorities of transforming our portfolio accelerating our growth and expanding our operating margins. 2021 was a transformational year for Invista. It took significant steps to reorient our portfolio to higher growth, higher margin segments of the dental industry where we can create competitive sustainable advantage. We announced and completed that the divestiture of the CAVO treatment unit and instruments business, thus shifting our business from a 50-50 split between our two reporting segments to a more attractive 60-40 mix in favor of the faster growth and higher margin specialty products and technology segment. Greater than 80% of our sales are now consumables, and over 60% of our sales are direct to clinicians. In late December, we also announced the planned acquisition of CareStream Dental's inter-oral scanner business. Expected to close in Q2 of 2022, this acquisition is consistent with InVista's long-term strategy and will help support the digitization of dental workflows. iOS scanners are a large, fast-growing segment of the dental industry that has above-average profitability. IOS scans are a critical first step to many high-value specialty dental procedures, including implant surgical guides, prosthetics, and clear aligner treatments. CareStream Dental's IOS business is a very attractive entry point into this segment. Business comes with a proven suite of scanning solutions, that include both a proficient hardware platform and powerful software capabilities. It is a substantial global business with significant growth upside over the long run. We're confident that we can accelerate the growth of this business by increasing customer reach and expanding in under-penetrated geographies and customer segments. This acquisition also comes with a strong R&D team and a promising development pipeline that will further accelerate dental digitization for years to come. Lastly, our proven EBS tools and processes will allow us to improve quality, delivery, and long-term operating margins of this business. While we took significant steps to transform our portfolio through inorganic actions, We also focus on accelerating our growth through organic investment in innovation and commercial execution. As a result of this focused investment, we have made meaningful progress across our businesses. With a uniquely differentiated portfolio, our orthodontic business continues to deliver a strong result, delivering core growth of 38% versus full year 2020. We offer clinicians a full range of orthodontic treatment options, enabling them to provide better, more personalized treatment plans to more patients for better outcomes. We continue to invest in innovation to accelerate our performance. In our core bracket and wire business, the Daemen Ultima solution, which was designed for faster and more precise finishing in treatment, continues to grow nicely in North America. We recently launched a solution in Europe and hosted eight Daemon Ultima events across six countries in Europe, educating more than 600 clinicians on this innovation. The broader Daemon system has now been in Europe for 25 years and continues to be a leading solution in brackets and wires. Our SPARC cleaner aligner business continues to grow rapidly, hitting a $100 million run rate in November of 2021, more than a year ahead of our original plan. In December of 2021, Dr. Ignacio Arias Embal of Madrid, Spain, treated 100,000 patients with SPARC, demonstrating the global reach of this differentiated and best-in-class aligner treatment. We're confident that our focus on partnering with professionals to deliver and drive predictable and superior outcomes for patients will help us become the leading orthodontic solution provider to specialists worldwide. Our implant business continues to accelerate, delivering over 30% core growth in 2021. Our focus on innovation and commercial execution is a key to our recent success that will allow us to drive and deliver sustainable high single-digit growth in implants. With over 1,300 direct feet on the street, we work with clinicians every day to deliver the best-in-class implant, regenerative, and prosthetic solutions. In 2021, over 750 events and trained more than 100,000 clinicians on new products, new technologies, and best practices in implantology. Long-term innovation remains a critical part of our success. We are pleased with the continued success of our TiUltra and Zeal surfaces that are designed to promote bone and soft tissue integration. Globally, over 30% of premium implant sales now feature these innovative surface treatments. In December 2021, we received FDA clearance for our N1 implant system in the US. Following our SPARC playbook, we're now focused on rolling out N1 to a committed group of Qi experts and ambassadors who will then advocate for the product and help train other clinicians. We expect N1 to support the continued acceleration of our in-plan business growth in 2022 and beyond. Our diagnostics and digital businesses continue to perform well. It delivered core growth of over 25% in full year 2021, as dental professionals remain confident in the outlook for their practices and remain focused on investing for the long term. Our imaging offerings, combined with our DTX Studio Clinic software solution, provide our customers with a seamless diagnostic workflow and integrated digital experience. We continue to invest in DTX as an advanced assisted intelligence solution. In Q4, our DTX Studio Clinic 2.3 in the United States was released. This new version features many improvements, including an AI-based magic sword functionality that assists clinical users automatically ordering full-mouth 2D x-rays, saving time and effort, and allowing the clinicians to spend more time with patients. Finally, we continue to focus on establishing a strong relationship and partnership with DSOs, which will be an important factor in achieving our long-term growth targets. In January, we announced a novel development partnership with Pacific Dental Services to focus on the AI support of clinical image analysis into PDS-supported practices, as well as across the dental market. NVISA and PDS aim to harness the power of data and machine learning to transform the way in which dentists use clinical imagery to diagnose, plan, and treat patients. Our long-term goal is to help clinicians identify and validate the best treatment options, leading to increased acceptance rates and improved patient outcomes. In addition to new technologies, long-term we are positioned well to meet the needs of DSOs and can offer a comprehensive set of clinical solutions to DSOs as they work to expand dental care worldwide. In 2021, our DSO business grew by more than 25%, and now represents approximately 10% of our total sales. In addition to driving growth, we remain focused on expanding our margins. In 2021, we achieved a full-year adjusted EBITDA margin of 19.7%. This represents over 650 basis points of a margin improvement versus 2020, and more than 400 basis points of a margin improvement since the IPO. The investor business system and our focus on continuous improvement is a foundation that drives our short- and long-term profitability. We continuously work to reduce the structural costs, consolidate our footprint, improve productivity, and drive operational improvements, all while enhancing the customer experience. Across our businesses, adjusted gross margins improved more than 250 basis points in the full year 2021. This is despite of some of the inflationary headwind we have seen as well as investment and ramping up production of Spark. Today, our EBS-driven daily management and focus on execution has allowed us to mitigate many of the significant supply chain disruptions that the world is currently experiencing. I will now turn the call over to Howard to go through our fourth quarter financial and provide more detail on our segment performance.