Envista Holdings Corporation

Good afternoon. My name is Chelsea, and I will be your conference call facilitator. At this time, I would like to welcome everyone to Invista Holdings Corporation's fourth 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 keypad. If you would like to withdraw your question, simply press star 2. I will now turn the call over to Mr. Stephen Keller, Vice President of Investor Relations of Invista Holdings. Mr. Keller, you may begin.

Good afternoon, and thanks for joining 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 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 closed the divestiture of our CAVO treatment units and instrument business. For both 2021 and 2022, 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 a company presentation to earnings, revenues, and other company-specific financial metrics relate only to the continuing operation of Invista's business, except for the 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 impact year-over-year performance. Unless otherwise noted, all references and these remarks to company-specific financial metrics relate to the fourth 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 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 good afternoon to everyone. We appreciate you taking the time to join us on today's call. I'm pleased to report that for the full year 2020, 2022, the investor team delivered another strong performance. Our core sales growth was up 4.1% for the full year. We then achieved an adjusted EBITDA margin of 20.1%. This represents a 40 basis point of expansion in adjusted EBITDA over 2021. We experienced a slowdown in growth in some portions of our business in the fourth quarter. This was expected and primarily related to challenges related to the COVID outbreak in China, the geopolitical issues related to the conflict in Ukraine, and continued depressed environment for capital equipment driven by higher interest rates and lingering economic uncertainty. As we reflect on our performance in 2022, as well as our future outlook, I think it is important to provide some context about the underlying demand for dental solutions. As I have shared on previous calls, my leadership team and I have spent a significant amount of our time in the field meeting with dental professionals in their clinics to understand what is happening in real time. It is not an overstatement to say that in 2022, we collectively spend time with over 1,000 clinicians across North America and Europe. What I hear consistently for private practice clinicians, group practices, institutions, as well as DSOs, is that they are incredibly excited about the long-term prospects of dental markets. They see significant opportunities to grow their business by investing in and expanding their specialty treatment offerings. They further see opportunities to enhance their capabilities, optimize their workflows, and digitize their offices. While clinicians are confident in the long term, they remain mindful of the short-term headwinds driven by increased interest rates, the possibility of recession, general economic uncertainties, and global geopolitical risks. We continue to monitor patient traffic and appointment bookings for specialty procedures. So far, patient demand has been resilient, but we do expect continued volatility going into 2023. While the market remains dynamic, I think it's important to point out that INVISTA continues to deliver despite the volatile global supply chains, geopolitical challenges, and persistent inflation. Our culture underpinned by the INVISTA business system, EBS, enables us to continuously deliver for our customers and shareholders. We leverage EBS principles daily to deliver our commitments. We quickly identify potential risks and opportunities and deploy EBS tools such as daily management or problem-solving process and value stream mapping to ease supply chain uncertainties, improve our operational capabilities, re-engineer existing processes, and continuously drive productivity. Our ability to produce results in the face of uncertain times is a direct reflection of our continuous improvement and customer-centric culture, our strategic differentiation, and the continued transformation of our portfolio. Before I turn it over to Howard to discuss our fourth quarter results in more detail, I want to provide more color on the progress we made in 2022 against our long-term priorities of accelerating our growth, expanding our operating margins, and transforming our portfolio. In 2022, we made significant progress in driving commercial execution across our portfolio. Poor growth in our orthodontics business was over 15% in 2022 as Aspark continues to deliver industry-leading performance. We're pleased to announce that together with our orthodontic partners, we have started over 300,000 Spark cases around the world. In 2022, we nearly doubled the number of active Spark doctors and further improved utilization rates of individual clinicians. Leveraging our EBS toolkit, we systematically manage our funnel of new clinicians and develop standard work to flawlessly onboard new Spark customers. Spark is widely seen as the leading nuclear aligner system in the market and our discipline execution allows us to capitalize on this promise. In addition to Spark, we also saw low single digit core growth in our traditional brackets and wires business in 2022. This growth was despite relatively weaker performance in China and Russia, which normally deliver outsized growth for our traditional brackets and wires. Our relative outperformance in brackets and wires is driven by our commitment to orthodontics and our ability to bring effective innovation to a mature industry. A Damon Altima product continues to go rapidly by providing orthodontists with more precise finishing capabilities, allowing them to reduce share time and improve office efficiency. We have developed standard tools to bring customers through the ultimate journey and support them with targeted and effective education. Outside innovation, we are focused on our commercial execution. With over 40% of our brackets and wires business in emerging markets, it is imperative that we reinforce our position as the partner of choice for new orthodontic professionals in emerging markets. To that end, we are pleased to be the only multinational supplier to be chosen during China's orthodontic volume-based procurement process. This is a testament to the value that Ormco Brackets and Wires solution provides in all markets. Long term, we are confident in our broad orthodontics offerings. Our portfolio is differentiated and uniquely positioned to both benefit from and help drive further expansion of orthodontic treatments globally. Turning to our solutions for implant-based tooth replacements, we delivered solid mid-single-digit core growth in 2022, despite significant volatility in China and Russia, two normally important growth drivers for this business. Led by strong relative performance in Europe, our premium business continues to perform well. We benefited from our focus on providing comprehensive solutions for implant-based tooth replacements, and as a result, we are seeing strong growth in both digital solutions and regenerative materials. The osteogenics business that we acquired in July of 2022 is off to a strong start. This business is now fully integrated and is starting to benefit from an EBS-driven focus on execution and management. We expect our strong implant franchise to continue to grow at or above the market. Critical to our long-term strategy is our commitment to expand operating margins through disciplined execution and a focus on continuous improvement. As discussed in 2022, which deliver a 40 basis point of expansion of adjusted EBITDA margins. We achieved these results while making significant investments in our long-term growth and also facing both meaningful inflation as well as intermittent supply chain disruptions. Each of our businesses are driving improvements in productivity, systematically aligning our prices, and driving down operational costs. In addition, we continue to optimize our organizational structure to improve the customer experience while creating more flexibility to deal with uncertainties in the macro environment. During the second half of 2022, we eliminated more than $30 million of structure costs and continue to look for ways to further streamline our organization. 2022 was another important year in the transformation of our business. We further shifted the portfolio to higher growth and more profitable segments of dental where we can create and sustain competitive advantage. In 2022, we benefited from the divestiture of a slower growing lower profitability, treatment unit, and instrument business. This transition both improved our overall growth and profitability while reducing our exposure to more cyclical segments of the dental market. Given the economic uncertainty, the transformation of our portfolio puts us in a much stronger position as we move forward. In the past year, we closed two strategically important acquisitions that positions us to drive digitization of the dental market while exposing us to higher growth segments within the industry. As promised, our acquisitions delivered more than $40 million in revenue in 2022 and will enable us to accelerate core growth long term. While we are excited about the strategic moves that we have made today, we see opportunities to further improve our portfolio. We're committed to pursuing an active but disciplined approach to capital deployment. We utilize an EBS-driven M&A approach to manage our robust pipeline of inorganic partnerships and its investment and are actively cultivating new opportunities. I will now turn the call over to Howard to go through our fourth quarter financials and provide more details on our segment performance.