Envista Holdings Corporation

My name is Chelsea and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Invista Holdings Corporation's second quarter 2022 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 star then the number one on your telephone keypad. If you would like to withdraw your question, you may press the pound key on your telephone. I will 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.

Hello, 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 want 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 provided 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. It will remain archived until our next quarterly call. As announced on January 3rd, 2022, we have closed the vestiture of Cabo Treatment Units and Vet Instrument business. For the first and second quarters of 2022 and the full year of 2021, the results of this business are reflected as discontinued operations in our financial statements as required by generally accepted accounting principles. All references in these remarks and accompanying presentations to earnings, revenues, and other company-specific financial metrics relate only to 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. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the second quarter of 2022, and 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 and pending certain regulatory approvals or available only in certain markets. During the call, we will make forward-looking statements within the media 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 of the date that they were 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.

Thank you, Stephen, and welcome everyone to Invista's Q2 2022 earnings call. I want to start today's call by thanking our employees for delivering another solid quarter. Despite supply chain disruptions, accelerating inflation, and its severe COVID-related lockdown in China, our team delivered mid-single-digit core growth, expanded our adjusted EBITDA margins, and successfully integrated our newly acquired intraoral scanner, iOS Business. Our resilient performance is a testament to our strategic differentiation and our proven track record of execution. Before I turn it over to Howard to discuss our second quarter results in more detail, I want to reiterate our long-term vision, provide some insight on current market conditions, and offer a quick update on our progress toward our strategic priorities of accelerating growth, expanding operating margins, and transforming our portfolio. At Invista, our focus is to partner with dental professionals to improve patients' quality of life by digitizing, personalizing, and democratizing oral care. We're committed to the dental community by spending a significant amount of time in the market meeting with dental professionals to further understand their businesses, their workflows, and their needs. I just recently returned from a road trip where I met with over 100 customers across the U.S. While there is no doubt that talk of inflation and potential for an economic slowdown is weighing heavily on clinicians' minds as they look out over the next six to 12 months, it is also clear that currently patient traffic remains robust and dental professionals remain confident in the long-term prospects of the industry and their businesses. Doctors in private and group practices continue to invest in their specialty treatments and are looking for ways to expand their capabilities, improving their workflows and digitizing their offices. They see opportunity to enhance their efficiency and the predictability of treatments. DSOs remain committed to opening new offices, but are limited by supply chain and capacity constraints, including the lack of staff in dental offices. While we expect there may be additional uncertainties in the market short term, we continue to believe that the dental market is resilient and has ample room to grow over the long term. Turning to our Q2 progress, with a uniquely positioned portfolio, our orthodontic business continues to deliver strong results. Our core bracket and wire business grew low single-digit as a result of our differentiated Daemen solution. The new Daemen Ultima system, which provides orthodontists more control for faster and more precise finishing, continues to gain share. This innovative solution commands a premium price by improving the way orthodontists move teeth. While we are proud of the strength of our bracket and wire business, it is our spark aligner business that continues to accelerate rapidly, again delivering year-over-year core growth of over 100%. It initially took us three years to achieve 100,000 new spark case starts. In the last six months, we have started an additional 50,000 cases, and we expect to further expand our position. The SPARC solution is gaining momentum as we partner with top orthodontic professionals and clinics globally. In Q2, we are proud to sign a long-term agreement with Sveta Ravnatec, an orthodontic clinic based in the Czech Republic. The vet from Onitech is a global leader in clear aligner therapy and is responsible for more clear aligner case tests than any other clinic in the world. This long term partnership with the leading orthodontic clinic further validates the strength of the SPARC aligner solution. Our solutions for implant-based tooth replacement grew mid-single digits in the quarter. We continue to see robust growth in premium implants and our regenerative solutions. In addition to our strong commercial execution, we also signed two important agreements to further our mission of partnering with dental professionals to digitize, personalize, and democratize dental care. First, we entered into a long-term agreement with Dental Corp., North America's only publicly traded DSO. Based in Canada, Dental Corp has more than 500 offices and is a leader in the placement of implants in Canada. Together, Nobel Biocare and Dental Corp have trained hundreds of clinicians and created a network that offers the latest tooth replacement solutions from Nobel Biocare. This agreement extends our partnership and further strengthens Dental Corps' ability to provide the highest quality of care to its patients. Earlier this month, we also announced that Nobel Biocare and Boston University will partner on philanthropic initiatives for the next decade. Through this partnership, Nobel Biocare will provide $4 million per year in products as-in-kind educational grant to the Boston University's Henry M. Goldman School of Dental Medicine . Students and residents at GSDM will have an opportunity to place and restore implants using this grant. This partnership will help us train the next generation of implant placers in North America. In addition to driving growth and investing in our strategic initiatives, we remain intently focused on expanding our margins. In Q2 2022, we achieved an adjusted EBITDA margin of 19.7%. This represents a 40 basis point of a margin improvement versus Q2 2021. The investor business system, EBS, and its focus on continuous improvement drives our execution. It helps us to offset and countermeasure the impacts of inflation and supply chain challenges while supporting our ability to invest for long-term, sustainable differentiation and growth. In the quarter, we use EBS to drive discipline in pricing, achieving greater than 200 basis points of net pricing. Further, we took additional actions to streamline our organization and ensure that we can continue to invest in our strategic priorities while managing inflation and expanding our margins. We optimized our regional organizational structure and de-layered our operating companies to improve customer experience and provide us more flexibility as we move throughout the year. We're proud of the work we have done today and remain focused on further optimizing our operations to effectively deal with the challenging macro environment. While we expect persistent inflation-related concerns, supply chain challenges, and geopolitical issues to impact 2022 and beyond, we're confident that our continuous improvement culture rooted in EBS will allow us to deliver short-term results and invest in our long-term priorities. The transformation of our portfolio continues. The acquisition of CareStream Dental's iOS business has been successfully integrated into Invista and we have relaunched the product under the DEXIS brand name. We intend to integrate the DEXIS scanner into our DTX platform to further simplify and optimize our specialty implant and ortho workflows. During the period, that we own this business in the second quarter, we achieved $5.5 million in revenue despite the lockdown in Shanghai that limited our ability to source scanners. With the factory open since early June and scanners now being built in bulk, we are well positioned to drive above-market growth in the second half of the year. We see significant interest from clinicians and our distribution channel. The Texas iOS solution is well regarded scanner, providing high performance and attractive price point. The 3800 virus scanner recently received a 2022 Red Dot Design Award that recognized its lightweight, convenient, and effective design. The jury specifically called out its balanced symmetry and minimalist elegance that is not only practical but also a pleasure to operate. With our attractive portfolio and robust R&D pipeline, we expect the Texas IOS solution to accelerate our growth and enable us to partner with clinicians to digitize, personalize, and democratize dental care. On July 5th, we closed the acquisition of Ostergenics Biomedical, a US-based manufacturer of regenerative solutions. This acquisition is consistent with our strategy of focusing on the fastest-growing segments of the dental market and providing dental professionals with complete workflow solutions. Ostergenics is a well-respected company with a solid brand, a history of innovation, and strong ties with leading clinicians. This business is complementary to our implant offerings, and we further position us as the leader in implant-based tooth replacement, and provides in this a significant opportunity to create value for patients, our clinicians, and our shareholders. While we're excited about the strategic moves that we have made today, we see opportunities to further improve our portfolio. We're committed to pursuing a disciplined approach to capital deployment. We utilize our EBS-driven M&A approach to manage a robust pipeline of inorganic partnership and investment and are actively cultivating new opportunities. I will now turn the call over to Howard to go through our second quarter financials and provide more details on our segment performance. Thanks, Amir.