Q1 2020 Earnings Call

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Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily.

And your lines will again be placed on musical thank you for your patience.

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Operator today at this time I would like to welcome everyone to the Investor Holdings Corporation first quarter 2020 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

For the speakers remarks, there will be a question didn't answer session.

He would like you asked a question during that time simply press Star then the number one on your telephone keypad.

He would like to withdraw your question. Please press the pound key on your telephone keypad, Alan I'll turn the call over to Mr. Johnson, Vice President of Investor Relations Mr. Bedford you May begin your conference.

[music].

Thanks for joining us on the call with US today, our Amir <unk>, our president and Chief Executive Officer, and Howard you, our Chief Financial Officer.

I'd like to point out that our earnings release slide presentation, supplementing today's call and 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 dot investors Dot 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 and will remain archiving until our next quarterly call. A replay of this call will also be available.

During the presentation, we will describe some of the more significant factors that impacted year over year performance supplemental materials described additional factors that impacted year over year performance.

Otherwise noted all references and these remarks and supplemental materials to company specific financial metrics relate to the first quarter of 2020, it all references to period to period increases or decreases in financial metrics our year over year.

We may also describes certain products and devices, which have applications submitted and pending for 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 laws, including statements regarding events or developments that we believe or anticipate well 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 assay SEC filings.

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're made and we did 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 time here.

Thanks, John and welcome everyone to end. This this Q1 2020 earnings call.

Oh Baby bond, Jordan, yesterday's well safe and healthy.

Sure affected by the clearly pandemic.

You already know thoughts.

Behalf I Miss I want to express our appreciation.

For those into healthcare fear, the walking dead that shouldn't be wanting to grow safe.

[music]. This includes the many dental professionals, Bob work tirelessly itself, let's see.

To ensure patients continue to have access to care.

I'd like to tank car employees for their commitment.

H. men in their communities.

Cost and focus on keeping their families.

Customers nurse.

Following pretty safe.

[music]. Thank you for that you do.

Oh stopped by walking you to approach to address cobot 19.

Before handing it off to Howard.

Who share our quarterly results.

We walked you through what we have seen in the world today and how we see in this though.

Position for the new normal.

[music] freight kinda first quarter.

[laughter] a bit about the progress we made during the first two months itself theater.

Revenue exceeding our expectations.

Good day, emergent Schuff global health and make a business experienced a significant.

<unk> impact in the last three weeks.

No.

This call is just a bit to pivot our focus.

Just a new realities, we face today.

Approach the corn health crisis is focused on what's important.

The safety off our employees.

Supporting our customers partners and communities.

Preserving financial strength.

First and foremost a number one priority.

It's the health and safety if our employees.

Actions to protect employees are driven by task force.

That was assembled very early in the first quarter.

The steam acted quickly and efficiently.

[music], who can work or multi to their homes and implemented safety protocols for other employees.

Food in social dispensing measures.

Staggered shifts.

Protective equipment.

And more frequent disinfection processes.

The increase the use of mature technology to provide better this leadership team that ability to communicate a regular basis with our employees and neighbor remote collaboration.

Most importantly, the increase the frequency of cross company communication, we did decrease CEO townhouse open to all 12000 employees.

And this sessions, we share our immediate actions strategy and offered the opportunity to.

Leadership any question.

Yeah.

Hi, this official <unk>.

Online training, the bench, which provide increased opportunity to continue learning and improving business practices.

Finally put together back to work.

To protect employees and customers as they begin to returning to the office environment.

These activities have prepared us to enter back to work more knowledgeable.

Using new tools and resources and become more productive by utilizing we're sure connectivity.

Never before.

After increase our focus is on supporting our customers partners and the communities we serve.

No more than ever a partner customers looking for us to support them to this crisis.

What's the base, we have supported not collaborated with them during this difficult period.

By expanding the availability of remote support.

Yeah, sure training and education.

The response from customers far exceeded our expectations.

Last month.

We helped the Nobel Biocare Global symposium virtually sort of first time and had a record 12000, plus clinicians registered to known from their peers.

Innovative implant workforce solutions and best practices to group their patient base.

In the first quarter.

Spatially increase online training and education content then frequency.

And have more about 200000 participants.

Also operating companies.

Many of these interactions, resulting in new Leach.

This is significantly greater than any prior period and demonstrate the strength stuff and this does customer education programs.

We are proud of our role in protecting the health of our customers and the communities we serve around the globe.

And this includes donated thousands of masks and other personal protective equipment today local communities worldwide.

In China.

In one of the first companies to donate infection prevention products did a warm government and always scope the business donated I protection to hundreds of health care professionals.

True or infection prevention business metrics, a team work tirelessly during the crisis to ensure continuity of ship man a medical grade disinfection products used by health care professionals.

Financially, we're now in a changed environment that required Josh to operate effectively to preserve our strength and ensure long term financial success.

This requires an acknowledgment of the car realities, we are confronting.

Refining priorities accelerating our portfolio optimization and relentless execution.

Our first focus is business continuity.

Tested all continuity pounds and assessed our supply chain to ensure our factories can chip producing.

We also increased inventory levels to ensure a businesses have to appropriate to stock on how to meet customers' needs.

You have not experienced any significant supply and manufacturing issues today and I maintain high levels of service to our customers.

After securing our business.

It doesn't.

Existing debt arrangement and we negotiate it we don't lenders to provide suspension debt leverage covenant to the first quarter of 2021.

It drove 250 million, though and I remember to provide additional liquidity over the coming quarters.

These actions are intended to provide us flexibility and this uncertain environment.

Operating in this new reality also requires us to noticed the need to take more aggressive actions.

Line cost structure.

Our approach has me talk Josh in a short time to preserve capital by executing executive and management pay cuts from those now for Boeing most discretionary spend and capital expenditures.

Collectively we anticipate these actions will help reduce operating expenses by more than 800 million dollar much a fish in the second quarter.

We will modulate these actions for the balance shifting you as we gain further visibility under recovery trajectory.

We also taken additional actions to change the long term financial restructuring the business and just a portfolio to one big what they'd become and you know.

As you may recall, a previous a structural cost reduction fan committed to 60 million dollar savings to be achieved over the next three years.

And this new environment.

Now moving forward, but then increase reduction program targets to reduce expenses by more than 100 million, though on an annualized basis true E. B S driven productivity gains.

Targeted reduction of more than 10% about global workforce and portfolio rationalization.

With regard with.

With regards to the portfolio rationalization.

It is off the business that we'd be more impacted than others ask me emerge from the existing crisis, particularly in capital intensive areas like treatment units.

Well this region, we have announced our intention to exit Pelton <unk> crane.

The process of taking additional actions to reduce our exposure to capital equipment.

These businesses were approximately 4% of our 2019 revenue and operate at a break even operating margin.

It began to accelerate cost actions in the first quarter and anticipate the remaining work to be completed by the end up 2020.

The old show also adjusting organic growth priorities to online it increased infection prevention needs globally, while focusing on a strategic areas have been has a competitive advantage, including spell clear Aligners <unk>.

The end, one implant system and diagnostics and work flow sulfur.

Given the flip clocks focus on infection prevention globally.

This has quickly become an area of opportunity.

When we can augment growth by helping our customers and the broader health care community to improve quality of clinical care for their patients.

Accordingly, we have increased capital investment in this area.

To further expand capacity approximately 25% by end of June.

The pay off what this investment is less than two months is.

And do they look to further expand capacity going forward.

Turning to spark assemblies.

Corn p. users showcase the clinical benefits.

Our clear aligners to more than 750 practitioners.

Many of these clinicians expressed interest in the product a sign up to participate in the next phase up as spark expansion pack.

As we shared into pass we anticipate a spark to me to be a major contributor of growth as we move to a 2020 m. beyond.

The Nobel Biocare team made significant progress on <unk> and one implant system by so many receiving CE, marking for the first portfolio launch.

And one is a patented system to support the complete implant more CLO from planning to prosthetic delivery.

It includes new techniques like all shaper.

A treatment protocol that allows clinicians.

To treat patients with two easier to use lower speed instruments.

<unk> ultimate results, unless discomforts where patients.

The team is on track to make the product available for minutes itself. During the course pandemic pounds to pursue structured phage launch during the second half of 2020.

Finally at the Chicago Dental Society Midwinter meeting in February.

We launched a flagship digital work flow product Dts BTX, a studio clinic in North America.

BTX is an open architecture platform, they love richest imaging diagnostics tubes, and any grades to work flow from multiple disciplines, including implant technology or surgery, and then totaled up alternate laboratories to one software.

<unk>.

D. T X is called base, and particularly well suited for Dsos, a multi office settings looking to implement a standardized workflows.

Well I mean have a clear set of priorities.

We recognize what sets a high performing organization apart is having agility.

Discipline and the methodology to track progress of course, correct as needed.

Then there'd be bumps into road ahead, I mean are prepared to navigate without culture of continuous improvement and our E. B S tool set.

When we started about crisis management process.

I mean, the first quarter wants to first groups. They brought in was up and misstep business system office.

As we developed our plan.

This environment Health Bill project management tools to structure ramp or ritual internal and external training and education capabilities.

Quantify and help track or cost reduction efforts are on personnel actions and expense management by installing daily and weekly standard work.

Likewise, we have applied the same principles to our scenario planning process.

We try to go into more detail later on.

We know how better visibility on a day to day basis.

Where we stand and have established a standard war to assess progress and of course, correct as needed and these critical priorities.

The E. B S. Mindset is one of the 11 this pursuit of our commitments and help us meet and exceed our expectations.

I mean, I'll turn it over to how who will provide further details on the quarter.

Thanks Amir.

First quarter sales declined 17.1% of $547.2 million.

Sales were adversely impacted 0.9% from discontinued products and 1.8% and foreign currency.

Core sales decreased 14.6%, primarily due to lower demand as a result of the global health pandemic, which we estimate impacted revenue by 16%.

Through the first two months of the quarter, we achieve mid single digit core revenue growth.

Above our forecast, including the negative impact the Tobin 19 in China.

However, revenue decline more than 50% in the last three weeks in the quarter ended April threerd.

Geographically developed markets decrease at a low teens rate led by Western Europe, which was the first major develop region impacted by the pandemic.

In North America, we saw slowdown towards the ended the quarter as most practices in Canada workloads and many states in the U.S. issued guidance to temporarily suspend elective procedures.

We were encouraged by the continued traction made at our top 10 years, so customers with our revenue from those customers going at a high single digit rate in the quarter.

Emerging market sales were down approximately 20% led by China, which declined by more than 35%.

Gross margins declined 410 basis points to 50.9% due primarily to unfavorable mix as a result of a larger decline in our higher margin specialty businesses and increase capacity building for spark clear aligners.

Adjusted operating profit margin decreased 840 basis points to 1.8% largely due to the factors above and incremental public company costs, partially offset by savings from our temporary and permanent spending reduction programs.

Our first quarter adjusted diluted EPS was three cents.

During the quarter operating cash flow was negative 62 million and our free cash flow was negative 76 million largely due to lower earning the timing of prior incentive compensation payouts and an increase in inventory to allow factory closures and provide business continuity.

We had good performance in working capital with the benefit of approximately $100 million from strong management of our collections and payables.

After quarter end, we obtained an agreement from our existing lenders for the suspension of our debt leverage covenant.

Through Q1 of 2021 among other amendments.

Finally, our cash balance was 354 million at the end of the quarter.

Obtaining the covenant waiver combined with the cost actions and our existing cash provides us with increased flexibility to manage the business.

As a mere mentioned earlier, we are actively monitoring our positioning and we'll modularly, both our cost programs and capital structure to ensure we maintain sufficient liquidity.

Turning now to our two business segments.

Our specialty products and technologies segment sales were down 21.8% well coal revenue declined 19.4% would be impacted Tobin 19, approximately 22%.

Both ortho and implant have a higher exposure to region, including China, Italy, Spain, and France that were more heavily impacted by the pandemic earlier in the quarter.

We are encouraged by their crop progress the aren't the team has made with their clear aligner product spark, which contributed approximately 50 basis points to overall growth to invest in the first quarter.

In our implant business, we previously discussed making changes to the commercial organization in both North America and Europe during the fourth quarter to help improve operational effectiveness.

The team has made tremendous progress with our premium implant business growing up mid single digit rate prior to the outbreak appropriate 19 in these geographies.

The Nobel Biocare team also obtained E U medical device regulation quality management system certification from their notified body ahead of the effective 2021 day and is one of the first in the dental industry to do so.

This is an important milestone for Nobel Biocare and shows that they are right on track to achieve MDR certification for the full portfolio products.

This further demonstrates the commitment Nobel biocare have to their customers and their patients to ensure that products and solutions remain available as these new regulations go into effect in 2021.

Specialty products and technologies adjusted operating profit margins declined 8.5% largely due to lower revenue and continued investment and strategic initiatives, including and one implant system, which received the CE Mark in Europe and spark.

Which were only partially offset by savings.

In our equipment in consumable segment core revenue decreased 9.2%, what the impact from cobot 19, approximately 10%.

Despite the decline in revenue our business is well positioned as a result of distribution management processes, we put in place over the last few years.

Inventory levels at major U.S. distributors are now at the lowest levels in recent history.

Our equipment business declined low double digits led by mid teens decline in treatment units well consumables declined mid single digits.

Within consumables are infection prevention business grew more than 35% as demand a month dental and medical institutions was robust.

As a mere mentioned previously we are investing in this business to increase capacity, a further 25% and anticipate new production will be online by the end of June.

Equipment and consumables adjusted operating profit margin increased 110 basis points to negative 0.3% largely due to the team's continued traction on refining our portfolio and reducing structural business costs.

I'll now turn it back to Amir who will walk you through some details of the current operating environment.

Thanks Howard.

Well, I mean, not providing formal guidance.

Given the uncertainty created by but a pandemic.

I want to provide you with some additional market commentary.

We're also shared the steps we've taken to assess.

And plan for the impacts of course with 19.

We hope this.

Give me you better understanding of how the business should perform short time.

And how we are ensuring we set a business up to try.

As we emerge from the crisis.

Let me have solved with our experience in China.

Beginning in February and continuing through early March.

So minimal volume as a country was effectively locked down.

From mid March through the end up to corridor, we saw a modest recovery.

To approximately 25% off the patient volumes.

By the end of April most clinics for open.

But patient volumes were just over 50% of people with 19 levels.

Over the last few weeks, we continue to see improvement in patient traffic.

While our commercial teams anticipate gradually return a volume through the remainder of the corridor.

The performance, we have seen values regionally and by country.

These Sunday infection progression and local government mandates.

Asia Pacific is further along into recovery than other regions as their their first to experience an impact.

Australia is beginning to recover and Japan offices have remained open despite of operating at their relatively low level of patient traffic.

Yes, the made about a third of European dental offices are now open.

Germany's showing encouraging signs that improvement activities through the month of April some offices has started to is stock.

Similarly.

Many areas of Scandinavia have had much slower impact than the rest of the continent.

On the other end up the spectrum southern European countries in France. Soon have very little activity is they have some of them more stringent stay at home orders imposed.

We anticipate.

These will be last to recover.

Finally in the U.S., yes, they're very early in the recovery process.

But I seen encouraging signs, but as stays through presenting more than half of the population lifting restrictions it more set to do so in the coming days.

In nearly all cases offices open first followed by gradually return a patient Wally.

In April.

The sales decline more than 60% from the prior year.

Importantly, we started to expand yes stabilization and improvement as we move to April I mean to me.

We anticipate a gradual recovery in business through the second half of the year.

To operate in this dynamic environment they have created a framework.

To provide us near term visibility.

We're tracking office openings globally, a monetary several leading indicators, including imaging usage data to ensure we can react quickly as clinicians come back to work.

We changed the baby operate by modern in a sort of scenarios to ensure behalf the financial actions prepare to be stamp environment over the next several quarters.

This framework informed decision, making process with respect to our liquidity needs and our cost actions.

As we move to the intermediate impact caused by office closure and I stay at home orders across the group. We believe a portfolio is well positioned to navigate through at a recessionary environment.

Over 70% of our total business is based in consumable.

Including more than 150 million dollar.

Infection prevention business.

We anticipate I infection control business can influence the quality of patient care and it'd be positively impacted by required changes to dental and medical office disinfection procedures.

Furthermore, our position in emerging markets and innovations, including the de T X diagnostics work flow.

And want to implant system and as far clear aligners provide sustainable competitive differentiation.

Similarly growth improve margin and gain market share as we move forward.

Approximately half of <unk> 850 million dollar equipment business.

Dental hand pieces.

What about x-ray equipment and intro all sensors that do not require third party installation.

This equipment in necessary to perform the only any office procedure largely driven by replacement demand has generally price under 5000 dollar on average, which make it makes it more transactional than other large capital equipment purchases.

We anticipate the remaining equipment business compose on higher price imaging devices and dental treatment centers to be most impacted moving forward as fewer new office is a bill and purchase this above 25000 dollar oppose phone.

As I mentioned earlier.

The exiting over 25% of doing this small expose segment up our capital business.

To summarize our near term priorities are the safety of our employees.

Supporting our customers partners and the community.

And preserving our financial strength.

These priorities are also aligned to our long term goal of enhancing our girls portfolio this strategic investments including implant.

Clear aligners and emerging markets.

Expanding operating margin.

Through cost reduction actions and improved business mix.

Continuing to transform our portfolio to create a stronger and Vista.

The ability to achieve these strategic objectives and create value is directly depend on the strength of our employees.

Our relationship with our customers and partners.

Then this the leadership team and our EPS Foundation.

Well I'd be had been a public company for less than nine month as.

We're committed to executing managing through challenging times.

And I'm confident in our ability to build the stronger in Mr for the future.

Thanks, Amir that concludes our formal comments, Eric how we're now ready for questions.

Yes.

Telephone.

Okay.

<unk>.

Your first question comes from.

Thank you good evening guys. Hopefully you can hear me, okay, Howard or a mirror.

Good evening or good afternoon.

Howard maybe starting with you just from a balance sheet cash flow perspective was wondering if you could give us an update on your.

Liquidity thoughts from here, obviously 350 million on the balance sheet. If revenue is kinda continue to trend in the way youre expecting over the next three to six months or how comfortable are you with a current liquidity I know one though the document you filed yesterday you have to keep over 125 million of liquidity each month.

I think there will be additional capital raises or need access to additional facilities from here.

Sure John So yeah, I mean, we feel good the first step was getting the Covenant Amendment, you know executed and so what that now behind US we continue to focus here on the actions to good save costs, we're looking at both the temporary costs or in excess of one.

Hundred million much of that to come in the second quarter as well as a mere mentioned structural changes that would be an additional 100 million and we had talked in the past about a 60 million cost take out over three years, we're looking to accelerate that and do a lot of those actions.

By the time, we exit 2020 here, we think that between that the cash on hand that that positions us well to work our way through this environment and whether this crisis.

You know in terms of priorities, we are focused on making sure that we have cash and liquidity throughout.

And you know we're focusing also on daily management of our of our cash and so that's looking at collections and payable I mentioned earlier in our comments that we had $100 million of cash flow positive associated with the work that we've done on our collection side as well and so we are very much plan on continuing to do those effort.

So as well in terms of liquidity and other options certainly we will continue to monitor that we'll look at it we have options such as you know short term facilities 364 day facility. We can look at convertible instruments, you know that can even limit some of the equity dilution as well.

Clearly you know we value our equity interest in ours, our stakeholders and wouldn't be very conscientious about a dilution as we think about our liquidity concerns going forward as well.

All right that's helpful. In a mere maybe one just a higher level question for you or any unique position of having both the sizable implant and orthodontic business. We all have our opinions of what's going to come back first second third and in kind of the recovery phase, but how are you thinking about recovery in in orthodontics, especially clear aligners versus brackets and wires any.

Lots on how that could or could not recover over the next couple of quarters, and maybe play that off relative to expectations on dental implant recovery. Thank you.

Yes. Thank you Jeff. Thank you for your weekly celebrate that has been really helpful to get to your perspective on the market.

As you can imagine, though a lot of unknowns at this point, but we do believe that consumable they've come back and specialty business. It come back first equip and next.

And do you purely because of the higher capital demand. That's why we took action item to.

Divest and I'm I'm, sorry to shut down some of our treatment centers.

Good morning, and expectation a gradual increases in may and June as offices, so opening by geography.

<unk> recovery to a large he has to do with the government guidelines and practices on reopening.

Between the consumer confidence macro factors play an important perspective.

From a procedure perspective, we think ortho and endoscope purely because of emergency nature of it.

I'm going to come back first distributed by P., followed by procedures that require lower speed hand pieces.

We are monitoring several factors no disease progression office opening consumer confidence yeah intervene hundreds of.

Lantus talk into Dsos and others, we're looking at information on imaging devices and through our interviews and the feeling that the other really good handle or what is taking place in here.

We have started seen some of that the spark requests coming back not only in the U.S., but also in Australia, New Zealand in some cases from a European are beginning to come in has given us a confidence that we can start ramping some of our production capabilities moving forward.

Monitoring data on a daily and weekly basis, adjusting as we go forth.

Thank you Jeff.

Next question operator.

Next question is from Tyco Peterson with JP Morgan.

Thanks, Amir given that China example, can you just conquer structural differences between the China market.

I would make a recovery there more or less relevant how you think about the lag between dental offices here reopening.

I'm trying to purchases and you mentioned infection prevention as a tailwind to maybe just talk a little bit about how you think about <unk>.

Of course, thank attack.

It is not necessarily a perfect match and a re to taught a geography is given that it's a much more government control, but we think individuals.

Oh, it's a good indicative of the gradual recovery.

In China have you started up really strong in January and he was the results were better than expected.

Oh from lunar new year too early March virtually there were no office activities.

So a gradual improvement in patient volume once the offices open.

From end of March three weeks in March we saw it steady recovery to about 15% to 25% activities.

At the end of April we have seen about recovery to all almost about 50% and it is improving.

As I said before ortho emergency cases general hygiene cleaning the first to recover but some other procedures are purely driven by government.

Demand and have been able to put a series of recovery go back to work program how to disinfect offices.

And we have had significant ramp and walked away at the end of chew on the some pass to in order to really expand this business.

In order to look at geography, as we normally look at three different segment.

15% of our businesses in a pack in Japan, China, Australia, New Zealand.

The majority of those offices so open now.

The next group.

<unk>.

A nordic about 10% of our business in those geography.

And the remaining 75% in North America, Western Europe arrests of toward.

China on a pack a photo along on a recovery coal.

And you see significant impact, but recovering very quickly.

A nordic starting to see some recovery major offices are beginning to open now.

And in category three that North America Western Europe.

Largely under lock down to April I've seen some encouraging sign.

As I said in April we saw a 60% decline.

Well, we feed that was the bottom and from then on we are beginning to see step by step improvement by geography.

Well, if I could ask one follow up on him classics early games for and one.

Current environment changed your view on value versus premium.

Recessionary environment.

<unk>.

Change your outlook ran one at all.

Well we.

Excited about the approval that'd be God. This was a major milestones and to be honest. He was add a web x. anticipated.

We'd be tall tool on.

Given pandemic to make sure that we are on board incorrectly beside a really good program with the spark Onboarding, we want to do the same thing in here.

To get infrastructure Bill to make sure an end to end solution is provided to make sure that first group are truly successful before we.

Create the next phase as we go for it.

Between the largest problem for patient and Doctor for an impact procedures are fear procedure time told a treatment time and and one improves all off this is easier to use clinically specifically for dsos too versus four or five thrills.

Easier to train new dentist it covers all indication.

Yeah.

In Europe, as we talked about we intend to start.

It's maybe as early as June.

Expand in bed and growing that over time.

But.

We haven't seen any specific information and says value would recover faster than premium.

Watching that very carefully.

When we saw in a month in the last two weeks of March and April.

Being true to trough and now all indication number of course number visits and other things that we are seeing slowly ramping up but we don't have any specific information that I can share talk about that balance between premium and value at this spot.

Oh, Okay. Thank you okay.

And whatever.

Hi, guys. Thanks.

Oh.

The cost cutting.

Standard, what you're saying regarding the T.Q. cost cutting but could you provide a few more details in terms of the longer term cost cutting like what areas are you really focused on and how do you see that progressing over the course thanks.

Yeah sure Elizabeth this is hard.

Answer the question Yeah, when we talk about the hundred million dollars that are more structural in nature.

We're looking at you know exit a less differentiated you know the low growth low margin product line that we have that we will be structurally challenged in near talked about the company Crane in North America.

And we think that there's some you know potentially some smaller capital businesses.

Likely you know about per cent of our revenue that would also fall into that that class you know, we're looking at reducing put Pratt.

Shuddering several facilities.

You know reducing complexity of the overall organization a span of control would be something that we'd look at as well and then you know really on the on the workforce restructuring side, it would target more than 10% about well forced to go ahead, yet structural savings as well.

I mean I think.

Go ahead.

Go ahead.

It's just going to say that between those activities and then the temporary ones that we talked about of an additional hundred million that will be mostly into too I will say that in April we have seen significant acceleration on cost savings both in those temporary as it relates to the <unk> the compensation adoption.

The discretionary spammed around travel and events.

You know those will be euro, but you're in the quarter will likely be down 25%.

We're seeing a lot of that accelerated cost savings take hold here in April as well as some of these more structural things that we just talked about.

Got it that's very helpful. As part is these cost cutting ourselves changes in your your thinking because of that well you have you have given some thought or made any site changes here thinking about how you guys work with distributors.

Oh, no sorted out relationship distributors have not changed at all.

Value the relationship and the partnership that'd be out.

That they provide.

How to you by being available providing supported dentist and we intend to continue to work with them as we go for.

One thing that was noticed.

We have seen is due to some of the challenges in P. won inventories have been the lowest that we have ever seen from the data and you saw the tracking these.

I think that provides opportunity on the recovery aspect process.

Gives us now, but she had to manage that a lot better than what we have done as you will now we have been added for the past several years, but simple answer is we continue to be dependent and work with them and we have every intention of to continue to work with.

Great.

<unk>.

I see.

Goldman Sachs.

I know.

Oh good afternoon.

Maybe just following up on.

And on the the cost saving holidays, just wanted to <unk>.

<unk> be cleared to the.

Hundred million assume additional product rationalization beyond what you talked about with Peltonen crate and are there.

Audits are categories, where you feel you know maybe at the drag on.

Stability right now there could be potentially beneficial to exit in that current environment.

Yeah. So so Nathan sure I think that that you know the hundred million that we talked about structurally that includes.

Some of the the recent announced actions, including the Peltonen Crane I think that we would look at other capital areas. I mean, you know some places in in Latin America potentially.

I think that would be also a an area that we'd be looking at and analyzing as well as a potential opportunity. The big thing for US is looking at you know where where do we have products that are highly capital intensive.

Lower margins lower growth and making sure that those are the areas that we scrutinized.

Okay great.

A mere maybe just a a follow up on the implant business could you talk about the performance of that business kind of since you took the restructuring actions in four four q. and kind of what you've seen kind of it you know three months in into that and as we look forward from here. Just you know can you kind of pockets or what the priorities.

For our our for that businesses as we move forward.

Of course, thank you <unk>.

Besides you know we saw were making some changes in North America invest to Europe. The service organization <unk> getting a lot closer to our customers.

The first two months January February North America invest to yourselves, but high single digits in our premium business. So we saw that traction.

In in late January I I'm, sorry late December dinosaur seen in January and February.

A lot a good feedback.

From our customers from the sales force and as a this momentum as started taking place we associate a little bit of a degradation beginning of April and the last three weeks of April are really change the trajectory of this business.

We think that the changes we have done.

It's gonna put us in a very different place as we go for.

These changes are going to set aside for the long term performance of this business. Let me let me just go back and answer the question of what the priorities.

I just want to clarify one thing I January February as Miss single digit growth.

And a premium in North America invest to Europe. So we have three cheap priorities and that <unk>.

Products as a stand today.

The best in class and feedback there'd be a getting from our customers continue to say that the product are really meeting the expectation so commercial execution getting a lot closer to our customers providing better customer experience. That's a number one priority.

Number two priority for us to make sure that investment that we have made in Nobel a specific in the past four or five years.

Give us an opportunity to get the new generation of for product run Enron or under new surface launch properly expand it properly and see the benefit of that so customer can see the benefit of it as we go for.

The third priority for us as you know all we have had we had talked about <unk>, we have some gap in our portfolio.

Regenerative by value to make sure that we chant.

Please our portfolio gaps those priorities have not changed.

You started the commercial activities in Q3 into four and one we gave you status update and continue to be an important part of the innovation moment for and.

As hopefully to come out of these crises should be in a far better place to accelerate portfolio management, adding to our portfolio to make sure that we can meet the requirements of our customers worldwide.

Thank you.

That's nice.

Yeah.

In terms of the trajectory of the market coming back I'm just curious.

<unk>.

Well you know your conversations regarding hygiene.

Lagging due to the concerns in Arizona <unk>, you're out there and so you know what are you hearing what does that mean for restored it procedures down the road is hygiene.

Indicator for restorative could that actually sort of being maybe a pocket you know once we get into the whole time frame. It hygiene does it.

I've got to follow.

Yeah. Thank you John well it wouldn't be or hearing.

Is that the highest speed as well as procedure said have create more of damage <unk> description to the tissues in bone or the one that have a little bit more of a concern.

That's why I didn't use you know in some categories.

They are more risk lower transmission risk to restore thief to hygiene to endo and and there are additional clinical benefits as well that could be used as a replacement. So for example, more risk versus other procedure using a high speed handpiece.

Ultrasonic scheduler.

Lower speed drill one or 2000 R.P.M. versus 200000, RPM that normally use in rush, though.

Normally when you look at the implant as an example.

In in most cases, you go to a environment that is really a centralized at Vassar <unk> surgical suits that already existed before any of these so we think some of those would have a really impact in some procedures coming back a lot faster than others.

John up on Saint <unk> Susi looking at product categories that have a better performance better trajectory and we are lining up very quickly very fast around it <unk> on boroughs categories to make sure that'd be a prepare as the market comes back that we can see the benefit of that.

Oh, okay.

The second.

I know it's really.

Contributed could be better.

Yeah.

From I assume there.

Oh.

<unk> their underlying wires in brackets growth remained intact. So you can tell you know those sales are truly incremental and how are they using it on the adult on the teens.

That would be great.

Yeah, Great of course, yeah. The first two months after year on core <unk> continue to operate in the same format at its has done in the bass.

Single digits.

2019 decide exactly the same things or try additional back and I'm wired business continue software that admit single digit growth by the market is zero to 1%. So why do we have introduced to spot that really hasn't taken anything away from our traditional back and I'm wire.

Me to use a spark as we had talked about before taught traditional home cooked business customers customers. They know us to have a good relationship with us and what they have done is basically offer different set of alternatives that they can use either back then wire spark or a combination of both.

There are using in in many of the cases, you know the the number of customers that they're using today. We had finally, we know exactly who they are they're providing input to us and they have told us that they can treat almost all indication in all cases, using the spark where they came from exactly as what we had expected China.

Started wrapping up pretty quickly in January.

U.S. continued to be the next phase got signed up and then we had a very early introduction in Europe, and Australia, New Zealand continue to get send US cases, what we expected in in it you want is exactly what are we receive despite the fact that we had some challenges in March and won't be a beginning to see.

Similar trajectory as we saw in January and February.

Areas that we have introduced a product where we have gone to do its face disciplined approach off treat a training education customer support change if the processes are we beginning to see that coming back and we are ramping up as we said before production to be able to make sure that.

We are in a good place answering the demand this year.

Oh.

<unk>.

<unk>.

Yeah.

Yeah.

Yeah frames.

Yep.

I'm here just back on in one what's the distinction of you describe the C. Mark being the first portfolio Lodge.

What the distinction is there and you have enough data timeline for U.S. submission.

Yeah.

Right, So and one is a complete system Brandon so his fifth them all.

The drill unit, they imply and itself the conoco connection that goes on top of it.

Surgically units the packaging all of that step by step by step is coming true. So right now the most important part which was basically they're having that implant been approved it has been approved so we can I saw selling that implant and we have been building.

Inventory in order for us to be able to go to those countries that they can they don't require any additional registration thinking about 12 to 14 countries. In Europe, you can I saw selling that immediately and the others that require registration is a very short registration process. So really pleased with what.

Well is taking place and one is a series of innovation that comes one after another face to would be coming after that and we continue to expand on it as we go pool.

So F.D.A. discussion is underway where in in in back and forth on pre submission dialogue and getting advice from a consultant and people who are really know the industry very well to make sure that we are in a good place as we go forward I cannot provide any specific times.

Line.

Are grow all along as we had indicated in the past Europe end to this year and you I stayed in 2021 later in 2021 European approval, obviously bring that forever, but I don't think that has if you have any additional information that we can share. This one about the U.S.F.D.

<unk>.

Thanks, and then just one question fall off for Howard maybe in terms of 100 million structural cost savings.

Down in terms of Weird, you know that will manifest and to what extent the sales force you know might be impacted in certain parts of the business from Medicare reduction.

Yes, so branded I don't think that you know that the structural changes we've done some of those in the sales force around the Nobel Peace last year in December as we spoke about we don't anticipate a lot of impact as it relates to the sales organizations and and feed on the street.

What we do anticipated that we'll have more structural changes around facilities backed off is as well shared service functions as well as you know looking at these things like Peltonen Crane, which we just announced which will obviously have some manufacturing footprint.

Changes as well so I think it's going to be throughout the P.N.L. largely in the G.N.A. components versus the selling component and we will also have some impact.

On the cost the sales or the manufacturing lines as well.

Pretty good thank you.

Yep.

Time for a question.

I'm trying to call back every day.

Thank you Erica and everybody will will be around for false today tomorrow for us a week. Thank you around for join US. Thank you again.

Yeah.

Thank you for participating.

Oh.

[music].