Envista(US:NVST)2022-02-10 01:24Financial Data and Key Metrics Changes - For the full year 2021, core revenue growth was 29% over 2020 and 8.9% over 2019 [11] - Adjusted EBITDA margin for 2021 was 19.7%, representing a greater than 650 basis point improvement over 2020 and over 400 basis points improvement versus 2019 [12][24] - Fourth quarter sales increased 5.8% to $651.8 million, with core sales growth of 6.6% compared to Q4 2020 [28][29] - Adjusted gross margin for Q4 2021 was 57.1%, increasing by 60 basis points compared to the prior year [30] Business Line Data and Key Metrics Changes - Specialty Products & Technologies segment core revenue increased 14.5% compared to Q4 2020, driven by strong growth in premium implants and Spark [31] - Orthodontics business grew over 20% in Q4 2021, with Spark achieving a $100 million run rate [32][19] - Implant business delivered over 30% core growth in 2021, with double-digit growth in Q4 [20] - Equipment & Consumables segment core sales decreased by 3.3% compared to Q4 2020, with strong demand in imaging but a decline in Infection Prevention solutions [33] Market Data and Key Metrics Changes - Western Europe grew 15%, while North America grew 1.8%, impacted by greater exposure to Infection Prevention [29] - Emerging markets grew 12.8% despite weakness in China due to localized pandemic lockdowns [29] Company Strategy and Development Direction - The company aims to transform its portfolio towards higher growth, higher margin segments of the dental industry [13] - Plans to triple the Spark business in the next three years while expanding its orthodontic offerings [41] - Focus on leveraging premium implant franchises and enhancing digital capabilities [42] - The acquisition of Carestream Dental's intraoral scanner business is expected to close in Q2 2022, aligning with the company's strategy to support dental digitization [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of patient volumes post-Omicron peak, with limited loss of demand anticipated [10][50] - Guidance for 2022 includes core growth of 6% to 8% and adjusted EBITDA margin greater than 20% [36][37] - Confidence in achieving mid-single-digit growth in Infection Prevention solutions by the second half of 2022 [86] Other Important Information - The divestiture of the KaVo Treatment Unit and Instrument business has shifted the business mix to a more favorable 60:40 split in favor of the Specialty Products & Technologies segment [13] - Free cash flow for Q4 was $157.1 million, with over $1 billion in cash at the end of the quarter [35] Q&A Session Summary Question: Impact of Omicron on business - Management noted a significant slowdown in patient volumes due to increased infections and staff shortages, but expects a return to normal demand as infections peak [49][50] Question: Demand profile and growth expectations - Management anticipates mid-single-digit growth in Q1, with improvements expected throughout the year [51][52] Question: Pricing power and increases - Management confirmed selective price increases across various segments, including consumables and implants, to protect margins [56][58] Question: Spark business growth expectations - Management confirmed a goal to triple Spark's revenue over the next three years, with strong growth in the number of dentists using the product [59][61] Question: Carestream acquisition strategy - The Carestream acquisition is expected to enhance the company's market presence and integration with existing products, with significant growth potential [66][68] Question: N1 rollout and training - Management outlined a phased approach for N1 training in the U.S., similar to the successful Spark rollout [75][78] Question: Infection Prevention long-term growth - Management expressed confidence in returning to mid-single-digit growth in Infection Prevention by addressing overstock inventory and focusing on market share [86][87] Question: Spark traction in international markets - Management highlighted strong international growth and ongoing efforts to integrate Spark into DSO relationships [91][95] Question: M&A pipeline and focus - The company is actively pursuing opportunities in the implant and orthodontic spaces, focusing on digital capabilities and differentiated solutions [97][99]