Envista(US:NVST)2023-05-04 03:35Financial Data and Key Metrics Changes - The company reported Q1 2023 sales of $627.2 million, a decrease of 0.7% compared to Q1 2022, with core sales declining by 2.4% [53][56] - Adjusted EBITDA margin declined by 150 basis points to 18.2% compared to Q1 2022, primarily due to lower volumes and increased interest expenses [11][56] - Adjusted diluted EPS was $0.38, down from $0.47 in the same period last year [56] Business Line Data and Key Metrics Changes - Core revenue in the Specialty Products & Technologies segment grew by 3%, with the Orthodontics business growing over 12% [34][56] - The Equipment & Consumables segment saw core sales decrease by 11.7%, attributed to a slowdown in equipment volumes and a modest decline in consumable sales [57] - The implant business experienced a low single-digit decline, negatively impacted by challenges in China and Russia [34][56] Market Data and Key Metrics Changes - Demand in China was significantly down in early Q1 due to COVID-related slowdowns but began to recover in March [15][26] - Outside of China and Russia, other markets showed mixed results, with double-digit growth in emerging markets and high single-digit growth in Europe [15][32] - The company noted that the traditional imaging business in North America declined mid-single digits, affected by high exposure to capital equipment [33] Company Strategy and Development Direction - The company is focused on long-term strategic priorities, including accelerating organic growth, expanding operating margins, and transforming its portfolio [21][22] - Investments are being made to enhance operational capabilities and improve productivity through the Envista Business System (EBS) [22][39] - The company aims to build a stronger, differentiated, and growth-oriented portfolio while pursuing disciplined capital deployment [30][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth of the dental market, despite short-term uncertainties due to higher interest rates and geopolitical risks [25][27] - The company anticipates core sales growth to accelerate throughout 2023 as China stabilizes and benefits from acquisitions are realized [63][64] - Management expects to achieve over 20% adjusted EBITDA margins for the full year, with margin expansion anticipated as the organization streamlines operations [29][63] Other Important Information - The company hosted over 1,600 dental professionals at the Envista Summit, focusing on training and introducing advancements in dental care [28] - The DEXIS IOS and Osteogenics acquisitions are expected to contribute significantly to core growth in 2023 [52][59] Q&A Session Summary Question: Update on China and North America performance - Management noted that patient demand in China improved significantly in Q2 compared to Q1, with dental offices reopening and increased patient comfort seeking care [67] - In North America, the company is addressing execution challenges in the implant business and expects improved performance as operational issues are resolved [70][87] Question: Performance of the Spark Aligner business - The Spark Aligner business has seen over 70% year-over-year growth, with a record number of active new doctors added [49][109] Question: VBP program impact - The VBP program in China is expected to have a $20 million impact on the business in 2023, with initial indications showing a positive effect on long-term patient demand [27][97] Question: Equipment & Consumables segment performance - The Equipment & Consumables segment has faced challenges, but management is confident in long-term profitability improvements through strategic shifts and operational enhancements [101][118] Question: Outlook for the remainder of the year - Management reaffirmed guidance for low single-digit growth and improved margins throughout the year, despite ongoing macroeconomic uncertainties [119][120]