Q4 2021 Envista Holdings Corp Earnings Call

February 9, 2022

Please stand by, your program is about to begin.

Please standby your program is about to begin.

Okay.

My name is David and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Invista Holdings Corporation's 4th quarter 2021 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during that time, press the star, then the number 1 on your keypad. If you would like to withdraw your question, please press the pound key.

My name is David and I'll be your conference call facilitator. This afternoon.

At this time I would like to welcome everyone to in pistol Holdings corporations fourth quarter 2021 earnings results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time press. The star then the number.

One on your keypad, if he would like to withdraw your question. Please press the pound key.

I'll now turn the call over to Mr. Stephen Keller, Vice President of Investor Relations of INVISTA Holdings. Mr. Keller, you may be getting your conference call.

I'll now turn the call over to Mr. Steven Keller, Vice President of Investor Relations of in Vista Holdings. Mr. Kelly You May begin your conference call.

Thank you.

Hello, and thanks for joining us on the call today with US here in the room, I mean, Iraq, Dyer, President and Chief Executive Officer, and Howard Yu, Our Chief Financial Officer.

Hello and thanks for joining us on the call today. With us here in the room are Amir Agdi, our President and Chief Executive Officer, and Howard Yu, our Chief Financial Officer. I want to point out that the earnings released, the slide presentation, supplement-based calls, and the reconciliation and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are available on the investors section of our website, www.infistico.com.

I want to point out that the earnings release, the slide presentation supplement today's calls and the reconciliation and other information required by SEC regulation G relating to any non-GAAP financial measures provided during the call are available on the investors section of our website www Dot <unk> 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. It will remain archived until our next quarterly call.

The audio portion of this call will be archived on the investors section of our website later today under the heading events and presentations and will remain archived until our next quarterly call.

As announced on January 3rd, 2022, we have closed the divestiture of our Cabo treatment units and instrument business. For the 4th quarter and the full year 2021, the results of this business are reflected as discontinued operations in our financial statements as required by generally accepted accounting principles. Additionally, the financial statements to be included in our 10K for the fiscal 2021 will reflect Cabo treatment unit and instrument business as discontinued operations as required by GAAP.

As announced on January three 2022, we have closed the divestiture of our Cabo treatment units instrument business.

For the fourth quarter and full year 2021. The results of this business are reflected as discontinued operations in our financial statements as required by generally accepted accounting principles. Additionally, the financial statements to be to be included in our 10-K for the fiscal 2021 will reflect Cabo treatment unit instrument business as discontinued operations as <unk>.

Acquired by GAAP.

All references in these remarks and accompanying presentation to earnings revenues and other company specific financial metrics relate only to the continuing operations of business. Except for cash flow.

All references in these remarks and accompanying presentation to earnings revenues and other company specific financial metrics relate only to the continuing operations of <unk> business, except for cash flow measures.

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

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

Implemented materials describe additional factors that impacted year over year performance.

Unless otherwise noted, all references in these materials and supplemental materials to company specific financial metrics relate to the fourth quarter of 2021. And all references to period to period increases or decreases in financial metrics are year over year.

Unless otherwise noted all references in these materials and supplemental materials to company specific financial metrics relates to the fourth quarter of 2021, and all 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 impending certain regulatory approvals or are available only in certain markets.

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.

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 is required by law. With that, I'd like to turn the call over to Amir.

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 required by law with that I'd like to turn the call over to Amir.

Thank you, Stephen, and welcome everyone to NVISSA's fourth quarter 2021 earrings call.

Thank you Steven and welcome everyone to <unk> fourth quarter 2021 earnings call.

I want to begin by thanking our employees for delivering an outstanding 2021.

despite a challenging macro environment with COVID-related headwinds.

Despite a challenging macro environment with COVID-19 related headwinds.

numerous supply chain disruptions, and significant inflation, our employees deliver outstanding results by partnering with dental professionals to improve the lives of patients and expand access to our care.

Numerous supply chain disruption.

As significant inflation, our employees delivered outstanding results by partnering with dental professionals to improve the lives of patients.

And expand access to care.

Our employees' passion and dedication allow us to deliver on our commitment to our clinicians and our shareholders.

Our employees passionate dedication allowed us to deliver on our commitments to our clinicians and our shareholders.

For the full year 2021, it delivers core revenue growth of 29% over 2020 and 8.9% over 2019.

For the full year of 2021 with delivered core revenue growth of 29% over 2020, and eight 9% over 2019.

While we did see some softening in patient volumes in late QFO, continuing into January , our views that this is primarily related to staff shortages and patient cancellations driven by omicron variant and increasing rates of infection.

While we did see some see some softening in patient volumes in late Q4, continuing into January our view is that this is primarily related to staff shortages and patient cancellations, driven by omicron, Marianne and increasing rates of infection.

As infections peak, we believe patient volumes will come back with limited loss of the mass.

As infections peak, we believe patient volumes will come back with limited loss of the map.

We're still growing significantly above pre pandemic levels and we continue to benefit from the repositioning of our portfolio.

We're still growing significantly above pre-pandemic levels, and we continue to benefit from the repositioning of our portfolio, our improved commercial execution, and our long-term investments in innovation.

Improved commercial execution and our long term investments in innovation.

For 2021, our adjusted EBITDA margin was 19.7%, representing a greater than 650 basis point improvement over the pandemic impacted 2020, and delivering over 400 basis point of improvement versus 2019.

For 2021.

Adjusted EBITDA margin was 19, 7%.

Presenting a greater than 650 basis point improvement over the pandemic impacted 2020, and delivering over 400 basis point improvement versus 2019.

Before I turn it over to Howard to discuss our fourth quarter result, I want to provide more color on our progress towards our long-term priorities of transforming our portfolio, accelerating our growth, and expanding our operating margin.

Before I turn it over to Howard to discuss our fourth quarter results I want to provide more color on our progress towards our long term priorities of transforming our portfolio.

Accelerating our growth and expanding our operating margins.

2021 was a transformation year for in this study.

2021 was a transformational year for Envista.

It took significant steps to reorient our portfolio to higher growth, higher margin segments of the dental industry, where we can create competitive sustainable advantage.

It took significant steps to reorient, our portfolio to higher growth higher margin segments of the dental industry, where we can create competitive sustainable advantage.

We announced and completed that the divestiture of the cable treatment unit and instruments business does shift in our business from a 50-50 split.

We announced and completed the divestiture of the cable treatment unit and instruments business, thus shifting our business from a 50 50 split.

between our two reporting segments to more attractive 60-40 mix in favor of the faster growth and higher margin specialty products and technologies sector.

Between our two reporting segments to more attractive 60, 40 mix in favor of the faster growth in higher margin specialty products and technologies segment.

greater than 80% of our sales are now consumables, and over 60% of our sales are direct to clinicians.

Greater than 80% of our sales are now consumables and over 60% of our sales.

Rack to clinicians.

In late December , we also announced the plan acquisition of CareStream Dental's Inter-Or scanner business.

In late December we also announced the planned acquisition of care strength, dentals, inter or our scanner business.

expected to close in Q2 of 2022. This acquisition is consistent within MISTAs long-term strategy and will help support the digitization of dental workflows.

Expect it to close in Q2 of 2022. This acquisition is consistent and then missed this long term strategy and will help support the digitization of dental workflows.

IOSC scanners are a large, fast-growing segment of the dental industry that has above-average profitability.

IOS as scanners are a large fast growing segment of the dental industry that has above average profitability.

IOS as gas are a critical first step to many high value specialty dental procedures, including implants surgical guides prosthetics and clear aligner treatments.

IOS scans are a critical first step to many high-value specialty dental procedures, including implant surgical guides, prosthetics, and clear aligner treatments.

Carestream, dental's iOS business is a very attractive entry point into this segment.

Carol stream dental iOS business is a very attractive entry point into this segment.

Business cover the proven suite of <unk> solutions that.

Business come with a proven suite of scanning solutions that include both a proficient hardware platform and powerful software capabilities.

That includes both a proficient hardware platform and powerful software capabilities.

It is a substantial global business with significant growth upside over the long run.

The confidence that we can accelerate the growth of this business by increasing customer reach and expanding in underpenetrated geographies and customer segments.

We're confident that we can accelerate the growth of this business by increasing customer reach and expanding in underpenetrated geographies and customer segments.

This acquisition also comes with a strong R&D team and a promising development pipeline that will further accelerate dental digitization for years to come.

This acquisition also comes with a strong R&D team and a promising development.

Pipeline that will further accelerate dental digitization for years to come.

Lastly, our proven ebs tools and processes that allow us to improve quality delivery and long term operating margins of this business.

Lastly, our proven EBS tools and processes. It allow us to improve quality, delivery and long term operating margins of dispense.

While we took significant steps to transform our portfolio through inorganic action, we also focused on accelerating our growth through organic investment in innovation and commercial execution.

While we took significant steps to transform our portfolio through inorganic actions you also focus on accelerating our growth through organic investments in innovation and commercial execution.

As a result of these focused investments we have made meaningful progress across our businesses.

As a result of this focused investment, we have made meaningful progress across our businesses.

With a uniquely differentiated portfolio, our orthodontic business continues to deliver a strong result, delivering core growth of 38% versus full year 2020.

We offer clinicians a full range of orthodontic treatment options, enabling them to provide better, more personalized treatment to ask more patients for better outcomes.

We offer clinicians a full range of orthodontic treatment options, enabling them to provide better more personalized treatment path to more patients for better outcomes.

We continue to invest in innovation to accelerate our performance.

In our coal, bracket and wire business, the Damon Ultima Solution, which was designed for faster and more precise finishing, a treatment continues to go nicely in North America.

In our core bracket and wire business Damon Ultimate solution is designed for faster and more precise finishing a treatment continues to grow nicely in North America.

We recently lost launched distribution in Europe , and hosted eight Damon ultimately advance across six countries in Europe educating more than 600 clinicians and this innovation.

We recently launched a solution in Europe and hosted eight Damon Altima events across six countries in Europe , educating more than 600 clinicians on this innovation.

The broader daemon system has now been in Europe for 25 years and continues to be a leading solution in brackets and wires.

The broader payment system has now been in Europe for 25 years and continues to be a leading solution in brackets and wires.

Our spark cleaner liner business continues to grow rapidly, hitting $100 million run rate in November of 2021, more than a year ahead of our original plan. December of 2021

As far as clear Aligner business continues to grow rapidly hitting $100 million run rate in November of 2021 more than a year ahead of our original plan.

In December of 2021 Doctor.

Ignacio Arias Embal of Madrid, Spain treated 100,000 patients with a spark demonstrating global reach of this differentiated and best in class aligner treatment.

<unk> arrives and bulk of Madrid, Spain treated 100000 patient with a spark demonstrating the global reach of this differentiated best in class a line of treatment.

We're confident that our focus on partnering with professionals to deliver and drive predictable and superior outcomes for patients who will help us become the leading autonomic solution provider to a specialist boardwalk.

We're confident that our focus on partnering with professionals to deliver and drive predictable and superior outcomes for patients will help us become the leading orthodontic solution provider to specialists worldwide.

Our implant business continues to accelerate.

delivering over 30% core growth in 2021.

Delivering over 30% core growth in 2021.

Our focus on innovation and commercial execution is the key to a recent success that will allow us to drive and deliver sustainable high single digit growth in implants.

Our focus on innovation and commercial execution is a key to our recent success.

Allow us to drive and deliver sustainable high single digit growth in implants.

With over 1,300 direct feet on the street, we work with clinicians every day to deliver the best in class implant regenerative and prosthetic solution.

It over 1300 direct feet on the street people work with clinicians every day to deliver the best in class implant regenerative and prosthetic solutions.

In 2021, the hubs over 750 events and trained more than 100000 clinicians are new products, new technologies and best practices in implantology.

In 2021, we helped over 750 events and trained more than 100,000 clinicians on new products, new technologies, and best practices in implantology.

Long term innovation.

Long-term innovation remains a critical part of our success.

A critical part of our success.

We are pleased with the continued success of our high-altra and zero surfaces that are designed to promote bone and soft tissue integration.

We are pleased with the continued success of our Thai Altra and sale of surfaces that is designed to promote bone and soft tissue integration.

Globally, over 30% of premium implant cells now feature these innovative surface treatments.

Globally over 30% of premium implant sales now featured these innovative surface treatments.

In December 2021, we received FDA clearance for our <unk> implant system in the U S.

In December 2021, we received FDA clearance for our N1 implant system in the US.

Following our spark playbook will now focus on rolling out and one to our committed group of key experts and ambassadors, who will then advocate for the product and help train other clinicians.

Following our SPARC playbook, we'll now focus on rolling out N1 to a committed group of key experts and ambassadors who will then advocate for the product and help train other clinicians. Thank you publishing standards.

We expect N1 to support the continued acceleration of our in-time business growth in 2022 and beyond.

We expect and want to support the continued acceleration of our implant business growth in 2022 and beyond.

Diagnostics and digital businesses continued to perform well.

Diagnostics and digital businesses continue to perform well.

To deliver core growth of over 25% and full year 2021 is dental professionals remain confident in the outlook for their practices and remain focused on investing for the long term.

deliver core growth of over 25% in full year 2021, as dental professionals remain confident in the outlook for their practices and remain focused on investing for the long term.

Our energy offerings, combined with our DTX Studio Clinic software solution, provide our customers with a seamless diagnostic workflow and any greater digital experience.

Our energy offerings combined with our Dts as studio clinic software solution provide our customers with a seamless diagnostic workflow and any greater digital experience.

We continue to invest in Dts at Vas assisted intelligence solution.

to continue to invest in DTX at advanced assisted intelligence solutions.

In Q4, our DTX Studio Clinic 2.3 in the United States was released.

In Q4, our Gtx studio clinic, two three in the United State was released.

This new version features many improvements, including an AI-based magic sword functionality that assists clinical users automatically order the form of 2D x-rays, saving time and effort, and allowing the clinicians to spend more time with patients.

This new version features many improvement, including an AI based magic short functionality that assist clinical users automatically ordered a full month to date X to the X rays saving time and effort in that.

The clinicians to spend more time with patients.

Finally, we continue to focus on establishing a strong relationship and partnership with DSOs.

Finally, we continue to focus on establishing the strong relationship and partnership with Dsos.

which will be an important factor in achieving a long-term growth target.

This should be an important factor in achieving our long term growth targets.

In January , we announced a novel development partnership with Pacific Dental Services to focus on the AI support of clinical image analysis into PDS-supported practices as well as across dental markets.

In January Yes, Alison novel development partnership with Pacific Dental services to focus on the AI support of clinical image analysis into pdfs supported practices as well as across the dental market.

And this and Pds aimed to harness the power of data and machine learning to transform debate enriched dentists use clinical imagery to diagnose plan and treat patients.

And this one, PDS, aimed to harness the power of data and machine learning to transform the way in which dentists use clinical imagery to diagnose, plan, and treat patients.

Our long-term goal is to help clinicians identify and validate the best treatment options, leading to increased acceptance rates and an improved patient outcome.

Our long term goal is to help clinicians identify and validate the best treatment options, leading to increased acceptance rates and improve patient outcomes.

In addition to new technologies, long term, we are positioned well to meet the needs of DSOs and can offer a comprehensive set of clinical solutions to DSOs as they work to expand dental care worldwide.

In addition to new technologies long term, we are positioned well to meet the needs of Dsos and can offer a comprehensive set of clinical solutions to dsos as they work to expand dental care worldwide.

And 2021, our DSO business grew by more than 25% and now represents approximately 10% of our total sales.

In 2021, our DSO business grew by more than 25% and now represents approximately 10% of our total sales.

In addition to driving growth, we remain focused on expanding our margins.

In 2021, we achieved a full year adjusted EBITDA margin of 19.7%.

In 2021, we achieved our full year adjusted EBITDA margin of 19, 7%.

This represents over 650 basis points of a margin improvement versus 2020, and more than 400 basis points of a margin improvement since the IPO.

This represents over 650 basis point of a margin improvement versus 2020 versus 2020 and more than 400 basis point of margin improvement since the IPO.

And this the business system and our focus on continuous improvement is the foundation that drives our short and long term profitability.

The InvisTA business system and our focus on continuous improvement is a foundation that drives our short and long term profitability.

We continuously work to reduce the structure cost, consolidate our footprint, improve productivity, and drive operational improvements, all while enhancing the customer experience.

We continuously work to reduce our structural cost.

Solidago, our footprint improve productivity and drive operational improvements all while enhancing the customer experience.

Across our businesses, adjusted gross margins improve more than 250 basis points in the full year 2021.

Across our businesses adjusted gross margins improved more than 250 basis points in the full year 2021.

This is despite of some of the inflationary headwinds we have seen as well as investment and ramping up production of a spark.

This is despite of some of the inflationary headwinds we have seen as well as investment in ramping up production of a spark.

Today, our EES driven daily management and focus on execution has allowed us to mitigate many of the significant supply chain disruption that the award is currently experiencing.

Today, our EBS-driven daily management and focus on execution has allowed us to mitigate many of the significant supply chain disruptions that the world is currently experiencing.

I will now turn the call over to Howard to go through our fourth quarter financial and provide more detail on our segment performance.

Thanks, Amir before we begin I'd like to remind you that our fourth quarter results are based on continuing operations, reflecting the sale of our combo treatment unit and instruments business.

Thanks Amir. Before we begin, I'd like to remind you that our 4th quarter results are based on continuing operations, reflecting the sale of our Cabo treatment unit and instruments business.

Accordingly, the quarterly results of tableau treatment unit and instrument business are reported as discontinued operation.

Accordingly, the quarterly results of tableau treatment unit and instruments business are reported as discontinued operations.

Fourth quarter sales increased five 8% to $651 8 million.

Fourth quarter sales increased 5.8% to $651.8 million. Reported sales were negatively impacted by 0.5% due to foreign currency exchange rates and further negatively impacted by 0.3% related to other discontinued products.

Reported sales were negatively impacted by 5% due to foreign currency exchange rates and further negatively impacted by <unk>, 3% related to other discontinued product.

Our core sales growth was 6.6% compared to fourth quarter of 2020.

Our core sales growth was six six.

Per cent compared to fourth quarter of 2020.

Our year over year growth reflects solid growth from our orthodontic implant and imaging businesses, which was offset by temporary weakness in our infection prevention business.

Our year-over-year growth reflects solid growth from our orthodontics, implant, and imaging businesses, which was offset by temporary weakness in our infection prevention business.

Geographically, Western Europe grew 15%, while North America grew 1.8%, dragged down by its greater exposure to infection prevention.

Geographically Western Europe grew 15%, while North America grew one 8% dragged down by its greater exposure to infection prevention.

Overall, emerging markets continue to expand from pandemic lows, growing 12.8%, despite relative weakness in China driven by localized pandemic lockdowns.

Overall emerging markets continued to expand from pandemic lows growing 12, 8% despite relative weakness in China, driven by localized pandemic lockdown.

Our fourth quarter adjusted gross margin from continuing operations was 57.1%, increasing by 60 basis points compared to the prior year due to higher volume, favorable product mix, and productivity initiatives across our portfolio.

Our fourth quarter adjusted gross margin from continuing operations was 57, 1%, increasing by 60 basis points compared to the prior year due to higher volume favorable product mix and productivity initiatives across our portfolio.

The adjusted Q4, 2021, EBITDA margin was 18, 5%, which is a 110 basis points lower than in Q4 of 2020.

The adjusted Q4 2021 EBITDA margin was 18.5%, which is 110 basis points lower than in Q4 of 2020.

As expected, in Q4, we continue to invest in our long-term innovation while increasing spend on travel and in-person customer-facing activities.

As expected in Q4, we continued to invest in our long term innovation, while increasing spend on travel and in person customer facing activities.

with the continued easing of the pandemic-related lockdown.

The continued easing of the pandemic related lockdowns.

Our adjusted EBITDA was also negatively impacted by approximately $4 million in stranded costs related to the sale of the tableau treatment unit and instruments business.

Our adjusted EBITDA was also negatively impacted by approximately $4 million and stranded costs related to the sale of the public treatment unit and instruments business we.

we expect to address the estimated greater than $10 million of annual stranded costs in 2022.

We expect to address the estimated greater than $10 million of annual stranded costs in 2022.

Our fourth quarter adjusted diluted EPS was 46 cents from continuing operations compared to 43 cents in the comparable period of the prior year.

Our fourth quarter adjusted diluted EPS was <unk> 46.

From continuing operations compared to <unk> 43 in the comparable period of the prior year.

Our specialty products and technology segment core revenue increased 14.5% compared to the fourth quarter of 2020, driven by strong growth and premium implant and continuing strong growth from Spark. In the fourth quarter, our orthodontics business grew over 20% with our core bracket and wire business growing mid-single digit and Spark continuing to accelerate.

Our specialty products and technologies segment core revenue increased 14, 5% compared to the fourth quarter of 2020, driven by strong growth in premium implant and continuing strong growth from spark in.

In the fourth quarter, our orthodontics business grew over 20% with our core bracket and wire business growing mid single digit and spark continuing to accelerate.

As Amir mentioned, Sales of Spark hit $100 million run rate in late 2021, and we continue to invest to drive growth.

As Amir mentioned sales of spark hit $100 million run rate in late 2021, and we continue to invest to drive growth.

Our implant business grew double digits in Q4 2021 versus Q4 of 2020, and we continue to accelerate realizing double digit sequential growth in the quarter.

Our implant business grew double digits in Q4, 2021 versus Q4 of 2020, and we continue to accelerate realizing double digit sequential growth in the quarter.

Our specialty products and technology segment adjusted operating profit expanded by 150 basis points, reaching 22.1% in the fourth quarter. This expansion is despite the increase in SPARC and N1 investment and despite the increase in spend in customer facing activity.

Our specialty products and technology segment, adjusted operating profit expanded by 150 basis points, reaching 22, 1% in the fourth quarter.

This expansion is despite the increase in spark and N. One.

Investment and despite the increased spend and customer facing activities.

Our fourth quarter equipment and consumable segment core sales from continuing operations decreased by 3.3% compared to Q4 2020.

Our fourth quarter equipment, and consumable segment core sales from continuing operations decreased by three 3% compared to Q4 of 2020.

strong demand and solid execution in our imaging business drove the results in the segment with core growth of 9% compared to the fourth quarter of 2020.

Strong demand and solid execution in our imaging business drove the results in this segment with core growth of 9% compared to the fourth quarter of 2020.

Our cura resto endo business also performed well in Q4, delivering mid-single digit core growth.

Our core Resto Endo business also performed well in Q4, delivering mid single digit core growth.

This was led by strong performance in Europe and Latin America. Sales growth continues to be driven by sellout and channel inventories remain at healthy levels.

This was led by strong performance in Europe , and Latin America.

Sales growth continues to be driven by sellout and channel inventories remain at healthy levels.

As expected sales of our infection prevention solutions decline from peak pandemic demand.

As expected, sales of our infection prevention solutions decline from peak pandemic demand. Despite the lower Q4 sales, inventory sellout trends reported by our distribution partners indicate that we are gaining market share in our core dental market. Long term, we expect this business to grow mid-single digits.

The lower Q4 sales inventory sellout trends reported by our distribution partners indicate that we are gaining market share in our core dental market <unk>.

Long term, we expect this business to grow mid single digits.

Equipment and consumables adjusted operating profit margin was 21.4% from continuing operations in the fourth quarter of 2021 versus 23% in 2020.

Equipment and consumables adjusted operating profit margin was 21, 4% from continuing operations in the fourth quarter of 2021 versus 23% in 2020.

Solid margin improvement in our imaging and restorative solutions was offset by the slowdown in infection prevention.

Further, we experienced some inflation related to chemical commodities that impacted our infection prevention business.

Further we experienced some inflation related to chemical commodity that impacted our infection prevention business.

The segment was also burdened with approximately $4 million of stranded costs in the quarter related to the sale of the combo treatment unit and instruments business.

The segment was also burdened with approximately $4 million of stranded costs in the quarter related to the sale of the Cabo Treatment Unit and Instruments business.

We have begun to address these stranded costs and are confident that we will be able to minimize the impact as we move through 2022.

With the sale of the combo treatment unit and instruments business and the pending acquisition of care stream Dentals iOS business. We are confident that our equipment consumables business will grow faster and be more profitable.

With the sale of the Cabo Treatment Unit and Instruments business and the pending acquisition of Carestream Dental's IOS business, we are confident that our equipment consumable business will grow faster and be more profitable.

For the fourth quarter, we generated free cash flow of $157.1 million, and we ended the quarter with over a billion dollars in cash.

For the fourth quarter, we generated free cash flow of $157 1 million and we ended the quarter with over $1 billion in cash.

Our working capital increase in the quarter due to our increased sales, selective inventory bills associated with our restructuring activities, and proactive supplier management, allowing us to ensure supply stability while mitigating inflation.

Our working capital increased in the quarter due to our increased sales selective inventory builds associated with our restructuring activity and proactive supplier management, allowing us to ensure supply stability, while mitigating inflation.

Our balance sheet is very strong and we have ample liquidity to both close the acquisition of Carestream Dental's iOS business while also pursuing additional inorganic growth opportunities as they become available.

Our balance sheet is very strong and we have ample liquidity to both closed the acquisition of care stream dental iOS business, while also pursuing additional inorganic growth opportunities as they become available.

Looking forward to 2022, barring any major COVID related disruptions, we are expecting to deliver core growth of between six and 8% and expecting to deliver full year adjusted EBDOT margin of greater than 20%. Our guidance reflects our balanced focus on accelerating growth while continuing to expand margin of growth.

Looking forward to 2022, barring any major COVID-19 related disruptions, we are expecting to deliver core growth of between six and 8% and expecting to deliver full year adjusted EBITDA margin of greater than 20% our guidance reflects our balanced focus on accelerating growth while.

<unk> to expand margins in 2022, we expect to continue to significantly invest in our long term growth initiatives, including spark and one and our digital workflow solutions.

In 2022, we expect to continue to significantly invest in our long-term growth initiatives, including SPARK, N1, and our digital workflow solutions.

Further, we expect to continue to increase our spend on customer-facing activities, which we curtail during 2020 and 2021 due to COVID.

Further we expect to continue to increase our spend on customer facing activities, which we curtailed during 2020 and 2021 due to COVID-19 .

In terms of phasing, we expect our adjusted EBITDA margins for the first half of 2022 to be in the high teens as we continue to invest in our long term growth. While also addressing our stranded costs related to the sale of public treatment unit and instruments business.

In terms of phasing, we expect our adjusted EBDL margins for the first half of 2022 to be in the high teens as we continue to invest in our long-term growth while also addressing our stranded costs related to the sale of combo treatment unit and instruments business.

For the second half of 2022, we expect our adjusted EBDL margins to be higher as we benefit from the portfolio transformation, and we continue to focus on driving productivity while investing in growth.

For the second half of 2022, we expect our adjusted EBITDA margin to be higher as we benefit from the portfolio transformation and we continue to focus on driving productivity, while investing in growth.

It is important to note that our guidance does not reflect the impact of the pending acquisition of care stream dental iOS business.

It is important to note that our guidance does not reflect the impact of the pending acquisition of CareStreamDenals IOS business.

We currently expect this to close in Q2 and will provide updated guidance related to the underlying business, as well as planned integration and growth-related investment once we have closed the transaction. I'll turn the call over to a mirror for some closing comments. Thanks, Howard.

We currently expect this to close in Q2, and we'll provide updated guidance related to the underlying business as well as planned integration and growth related investments. Once we have closed the transaction I will turn the call over to him here for some closing comments.

We are pleased with our 2021 results and remain very optimistic about the future of the dental industry.

Given our recent portfolio moves, we are now more focused on the faster growing higher margin and most attractive segments with intent on.

Given our recent portfolio moves we are now more focused on the faster growing higher margin, our most attractive segments within dental.

We continue to work with our clinical partners to street streamline their operations and improve patient care, while expanding access to oral care around the world.

We continue to work with our clinical partners to streamline their operations and improve patient care while expanding access to oral care around the world. Moving forward, our priority.

Moving forward our priorities remain the same.

You would accelerate growth. Expand our operating margin and continue to further transform our portfolio through active and disciplined capital deployment.

We will accelerate growth expand our operating margin and continue to further transform our portfolio through active and disciplined capital deployment.

Our intention is to be the leader in orthodontics, providing a differentiated and integrated suite of treatment options, including brackets and wires and clear aligner.

Our intention is to be the leader in orthodontics, providing a differentiated and integrated suite of treatment options, including brackets and wires and clear liners.

Our comprehensive offering empowers orthodontists to provide the best treatment modality for each patient.

Our comprehensive offering empowers orthodontist to provide the best treatment modality for each patient.

Based on our broad portfolio and this powerful combination, we plan to triple our Spark business in the next three years while continuing to gain share in wire and brackets.

Based on our broad portfolio and this powerful combination we plan to triple our spot business in the next three years, while continuing to gain share in wire in brackets.

We will further accelerate our growth in implants by leveraging our premium implant franchise to provide full solutions across the implant workflow, including regenerative and prosthetic.

We will further accelerate our growth in implants by leveraging our premium implant franchise to provide full solutions across the implant workflow, including regenerative and prosthetic offerings by leveraging our diagnostics and digital capabilities.

Offerings by leveraging our diagnostics and digital capabilities.

We will continue to grow and broaden access to our highly profitable and differentiated consumables business.

Finally, it will leverage our strength in imaging and diagnostic to build a digitally integrated workflows from diagnostics to treatment planning to execution for our clinical partners.

Finally, we will leverage our strength in imaging and diagnostics to buildup digitally integrated workflows from diagnostics to treatment planning to execution for our clinical partners.

We will continue to utilize our EBS heritage to both improve our execution and drive margin expansion.

We will continue to utilize our ebs heritage to both improve our execution and drive margin expansion.

We are committed to delivering annual margin expansion.

Finally.

Finally, we continue to see significant opportunities to invest organically and inorganically. And we have the financial flexibility and management focus to further accelerate our growth to trajectory. We have disciplined capital deployment and inorganic investment.

To see significant opportunities to invest organically and inorganically and we have the financial flexibility and management focus to further accelerate our growth trajectory, we are disciplined capital deployment and inorganic investments.

As we continue in our journey to digitize, personalize, and democratize the dental industry, we are excited about hosting our first and leastest summit, designed to highlight our unique and differentiated product portfolio and digitally integrated solutions.

As we continue on our journey to digitize personalize and democratize the dental industry. We're excited about hosting our first investor summit designed to highlight our unique and differentiated product portfolio and digitally integrated solutions.

This event will bring together our historically popular OMCO forum and Nobel Biotechers symposium with a brand new technology track to create a tree track agenda designed to educate and train dental professionals in every aspect of dentistry united by our best in class customer experience and product.

This event will bring together, our historically Poplar Armco Forum and Nobel Bioterror symposia with a brand new technology track to create a treat track agenda designed to educate and train dental professionals.

Every aspect of dentistry, United by our best in class customer experience and products.

The progress we made this quarter and in 2021 is a direct reflection of our culture, centered and continuous improvement, and our commitment to our customers and the dental industry.

The progress we made this quarter and a 2021 is a direct reflection of our culture centered on continuous improvement and our commitment to our customers in the dental industry.

Our purpose is to partner with dental professionals and improve patients' lives by personalizing, digitizing, and democratizing dental care.

Our purpose is to partner with dental professionals and improve pension slides.

By Personalizing, digitizing and democratizing dental care.

We're excited about our continued growth journey in 2022 and beyond.

Thanks, Amir. That includes our formal comments. We are now ready for questions.

Thanks Samir.

That concludes our formal comments, we are now ready for questions.

At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the question queue at any time by pressing the pound.

At this time, if you'd like to ask a question. Please press the star and one Keith on your telephone keypad keep in mind, you may remove yourself from the question queue at any time by pressing the pound key.

Once again, to ask a question today, please press the star and one keys on your touchtone telephone keypad.

Once again to ask a question today. Please press the star and one key on your Touchtone telephone keypad.

And we'll take our first question from Elizabeth Anderson with Evercore. Please go ahead, your line is open.

And we will take our first question from Elizabeth Anderson with Evercore. Please go ahead. Your line is open.

Hi guys, thanks so much and congrats on a nice quarter. Maybe they kicked us off a mirror. Can you talk to us a little bit more details and the impact of Omacron this time around? It seems like it was maybe a little bit, obviously different than earlier waves, maybe either by different areas or sort of also as we go into January , how those trends have been continuing. Thanks.

Hi, guys. Thanks, so much and congrats on a nice clip.

Yeah.

Maybe Nick you guys ask EMEA can you talk give us a little bit more details on the impact of all micron. This time around it seems like it was maybe a little bit different than earlier ways.

Maybe either by different different areas and also as we go into January has those trends have been continuing thanks.

Thank you Elizabeth.

Thank you Elizabeth. What we saw at the end of Q4, the last two weeks of December , a lot of feedback from our partners in various DSOs and companies that we work with, is a significant slow down in the past, in the last two weeks of December . And that was purely because of...

What we saw at the end of Q4. The last two weeks of December a lot of feedback from our partners in various dsos and <unk>.

Companies that we work with the significant slowdown in the past in the last two weeks of December and that was purely because of the.

the infection ramping up, increase rate of infection, a lot of cancellation, as well as... Alright, let's move on.

Infection ramping up increased rate of infection a lot of cancellation.

As well as.

Staff shortages.

First this trend continued in the first two weeks of January as well.

First this trend continued in the first two weeks.

January as well.

What we are seeing now, the ramp back up, two normal demand and patient volume.

What we're seeing now.

Back up to normal demand and patient volumes.

And we think that as infections move past the peak, we believe patient volumes would come back with limited loss of demand.

And we think that as infections moved past the peak, we believe patient volumes would come back with limited loss of demand.

Overall, really optimistic about underlying demand, remain mindful of continued risk of COVID. Or we think that we are really centered in helping supporting our customers to manage through these challenging times. And we do not see that as being a major impact in our growth as we go throughout the year.

Overall, we're really optimistic about underlying demand remained mindful of continued risk of <unk>.

We think that we are really centered in healthy and supporting our customers to manage through these challenging time, and we do not see that as being a major impact in our growth as we go throughout the year.

Thanks so much and maybe the follow-up powers. I know you gave the guide for the full year with the first half versus second half margin differences and some of the details there. As you think about maybe the demand profile, can you, and any more details you can share with us about sort of how you see demand progressing as we go through the year and anything else that would be good to call out in just in terms of the phasing of the quarter.

Thanks, so much and maybe as a follow up Howard.

So you gave the guide for the full year with the first half versus second half margin differences in some of the details there as you think about maybe the demand profile can you add any more details you can share with us about sort of how you see demand.

Progressing as we go through the year and anything else that would be good to call out and just in terms of the phasing of the quarters.

Sure, sure, thanks for the question. Yeah, as we indicated, we see the full year guide is growing 68% with the adjusted EVDA margins north of 20%.

Sure sure. Thanks for the question, yes, as we indicated we see the full year guide is growing 6% to 8% with the adjusted EBITDA margins north of 20% if.

If we talk about let's say Q1, with some of the slowdown that we saw very early on in the quarter, we expect mid-single digit growth, core growth here in Q1, and high teens evidoff, particularly as we work through some of the stranded costs.

If we talk about let's say Q1.

With some of the slowdown that we saw very early on in the quarter.

We expect mid single digit growth core growth here in Q1, and high teens EBITDA, particularly as we work through some of the stranded costs as well as continue to fortify allowed the investments that we're making as Amir indicated we're really pleased with where our spark businesses and we're prepared to go ahead and continue to invest in.

as well as continue to fortify a lot of the investments that we're making.

As a mere indicator, we're really pleased with where our spark businesses and we're prepared to go ahead and continue to invest in that business. And so you're seeing a little bit of softness there. But then throughout the year, I'd say, with each quarter, you're gonna see improvements in our growth rates as well as our margins. Thank you.

That business and so youre seeing a little bit of softness there, but then throughout the year I'd say with each quarter youre going to see improvements in our growth rates as well as our margin.

That's helpful. Thanks.

Sure.

We will take our next question from Jeff Johnson with Baird. Please go ahead. Your line is open.

We'll take our next question from Jeff Johnson with Baird. Please go ahead, your line is open.

I just thank you, good <expletive> . Hey guys, good afternoon. Two questions here for me. One, just on the price increases, we've confirmed with a couple of the dealers you did take a price increase here at the start of the year. It seems like two to three percent kind of holding across most of consumables. Is that a fair way to think about it? One, and then two, is there any pricing power in any other parts of portfolio? We've heard anecdotally some of the implant guys taking price increases would like to know what you're doing there maybe, or anything else in the portfolio. Thanks.

Hi, Jeff. Thank you Hey, guys. Good afternoon, two questions here for me one just on the price increases we confirmed with a couple of the dealers you did take a price increase here at the start of the year. It seems like 2% to 3% kind of holding across most of consumables is that a fair way to think about it one and then two is there any pricing power in any other parts of the portfolio.

We've heard anecdotally some of the implant guys taking.

Price increases would like to know what youre doing there maybe.

I'll turn the portfolio. Thanks.

So yeah, Jeff, I don't think that we don't institute across the board price increases. Each of our off-coes are taking appropriate pricing actions to drive growth, while protecting, and expanding our margins.

So yes, Jeff I don't think that we don't own.

Stay tuned across the board price increases each of our <unk> are taking appropriate pricing actions to drive growth, while protecting and expanding our margin.

You know, pricing should be seen as a tailwind as you indicate it. We have done some of that in some of our businesses. I would say that it wouldn't be limited just to the consumables piece. You mentioned implants, even as it relates to orthodontics as well. We see that as being an opportunity. Longer term, I think we continue to believe that our focus on innovation is the key to maintaining and expanding average selling prices and margin as well as as we look to drive growth.

Pricing should be seen as a tailwind as you indicated we have done some of that in some of our businesses I would say that it wouldn't be limited just to the consumables piece you mentioned implant.

Even as it relates to orthodontics as well, we see that as being an opportunity longer term I think we continue to believe that our focus on innovation is the key to maintaining and expanding average selling prices and margin.

As well as we look to drive growth.

Alright, that's helpful. Thank you. And then a mirror maybe on spark, you know, it

Alright Thats helpful. Thank you and then Amir maybe on spark.

You hit that $100 million run rate earlier than I think any of us were expecting. It sounds like about $75 million for the full year. And you're talking about now tripling that over three years. So is that fair way to think about it? 75 million in 2021 going to 225 over the next three years?

You hit that $100 million run rate earlier than I think any of us were expecting it sounds like about $75 million for the full year.

You are talking about now tripling that over three years. So is that fair way to think about a $75 million in 2021 going to $2 25 over the next three years and what are you seeing just in the short run here have you.

And what do you see in just in the short run here? Have you...

you know in clear aligners i know you're in market share taking uh... position so it's hard to see kind of a slowdown if if there's been a poll forward or some discretionary spending dollars that aren't as strong this year they might have been you know in the heat of of last year but just what do you see in for the clear aligner demand side of the equation uh... over the next few quarters thanks

In clear Aligner is I know you're in market share taking position. So it's hard to see kind of a slowdown if theres been a pull forward or some discretionary spending dollars that aren't as strong this year as they might have been in the heat of last year, but just what are you seeing for the clear aligner demand side of the equation over the next few quarters. Thanks.

Yeah, of course. Your calculation is not wrong. You're close to what we are seeing, not exactly those numbers, but it's not far off. Yeah, we have created, and we have talked about this continuously differentiated solution, that it is really focused on a professional myth-tech segment of the mark.

Yes of course.

Your calculation is not wrong, we are close to what we are seeing not exactly those numbers, but it's not far off.

We are.

We have created and we have talked about this continued to see a differentiated solution that it should really focus on that.

Our professional Mestek segment of the market and that has been proven that it is truly differentiate there is people see the value of it not only on the product itself, but on training education and service and support and the way that we bring people up to speed that continue to support our moving forward.

And that has been proven that it is truly differentiated. If people see the value of it, not only on the product itself, but on training education, on service and support. And the way that we bring people up to the suite that continues to support a moment for.

Sure.

for sure that has been some poor for. But we don't expect that that would have any impact in our ramp as we go forward. As you know very well, we started through a very face approach of adding dentists every quarter and seeing them coming up to speed. That process has continued as we have gone forward.

For sure there has been some pull forward, but we don't expect that that would have any impact in a ramp as we go forward as you know very well is solid through a very phased approach of adding.

Dentist every quarter and seeing them coming up to speed that process has continued as we have gone through this give you a little bit of fulfill both on the production as well as a number of dentists that are now using spark as their primary clear aligner, we have seen double.

It'll give you a little bit of a feel, both on the production as well as the number of dentists that are now using Spark as their primary clear aligner. We're seeing a double digit growth in the number of dentists, number of doctors that they're using. And it is across geographies, in fact, in Europe , all of us are using the same type of data.

Double digit growth in the number of dentists number of doctors that they are using and it is across geographies in fact in Europe .

Our graph is exceeding what we saw in North America. So we are pretty confident that what we have done the approach that we've taken is working and some of the things that youre seeing in the market actually has proven the approach that we took strong steady make sure that we provide a differentiated solution is working and we feel that is.

exceeding what we saw in North America. So we are pretty confident that what we have done, the approach that we have taken is working. And some of the things that you're seeing in the market, they actually has proven the approach that we took, show and study, make sure that we provide a differentiated solution is working. And we feel that's gonna be the trend to continue as we go forward.

Going to be the trend to continue as we go forward.

Thank you.

Okay.

We'll take our next question from John Krieger with William Blair. Please go ahead, your line is open.

We will take our next question from John Kreger with William Blair. Please go ahead. Your line is open hey, thanks very much.

Hey, thanks very much. Amir, could you talk a little bit more about the care stream strategy? I'm curious.

Could you talk a little bit more about the care stream strategy I'm curious if.

uh... if you look at that in stalled based to uh... to one degree that those are sort of your customers already or they can have a new customer opportunity and and how is the integration at this point will you be up and running let's say with spark and other solutions right away or should be a sim that'll take some time

If you look at that installed base to what degree that those are sort of your customers already or are they kind of a new customer opportunity and and how is the integration at this point will you be up and running let's say with spark and other solutions right away or should we assume that will take some time.

Hey, John Let me, maybe just frame this on the iOS market first and then I asked that question. We think this market is over $1 billion is growing double digit.

Hey, John , let me maybe just a little bit frame this on the iOS market first, and then I ask that question. We think this market is over a billion dollars is growing double digit. We think this market has above EBITDA, compared to the rest of the product out there. And our estimates are that this is less than 15% penetrated.

Within this market is above EBITDA compared to the rest of the product out there and.

Our estimates are that this is less than 15% penetrated.

So, there's some key numbers in there, take a bath. The business was about, you know, close to about $60 million last year. If you go back, take a look at it mathematically, or since the introduction of a $3,630, $730, $3,800, then the care system has less than 10,000 install base worldwide.

Some key numbers in there if you think about the.

The business was about close to about $60 million last year.

Go back take a look at it mathematically or since the introduction of <unk> 3600, 3700 3800.

Cash same as less than 10000 installed base worldwide. So now let's take a look at the raft study has taken place to access that we can provide any correlation with the DTA and then 3400 salespeople that we have at their access to geographies and DSO is it gives us an opportunity.

So now take a look at the ramp that is taking place, the access that we can provide, integration with the DTX and then 3,400 salespeople that we have out there, access to geographies and DSOs. It gives us an opportunity to take this business and bring it to a different level.

We take this business and bring it to a different level continue to invest in R&D and integrated into our software and then EPS plays such an important role in here to improve delivery quality and margin over time.

continue to invest in R&D, integrate it into our software, and then EBS plays a such an important role in here to improve delivering quality and margin over time.

We have been looking at, as you will know, in this space for almost five or six years. And we found that here's to my OS.

We have been looking at as you well know in this space for almost five years six years and we found the <unk> iOS has and meets many of tools qualification that we have been looking for is a great product hardware is just really good.

has and meets many of those qualifications that we have been looking for. It's a great product, hardware is just really good as a suite of software that is already in place and where we can add value is really complimentary to what ChairStream has done in the past.

As a suite of software that is already in place and where we can add value is really complementary to what <unk> has done in the past.

I can't comment a lot until this deal is completely closed, but we expect an integration, the DTS, the text phase as soon as the deal is closed in Q2. And we expect a wrap throughout the year in various geographies as we go forward.

I can't comment a lot until this deal is completely closed, but we expect an integration of DTA should take space as soon as the deal is closed in Q2, and we expect a ramp throughout the year in various geographies as we go forward.

We think impact in, you know, in the next few years is going to be over 50 basis fund of a core growth to our run rate, as well as over 40 basis fund of a margin expansion.

We think impact in.

Our next few years is going to be over 50 basis point of our core growth. So our run rate as well as over 40 basis points of margin expansion. So it is a really complementary business that is going to help us not only on these core as a product, but also in our intention of digitizing the industry as a whole.

So it is a really complementary business that is going to help us, not only on its core as a product, but also in our intention of digitizing the industry as a whole.

Sounds great. Thanks for all the detail.

Thank you John .

We will take our next question from Jon Block with Stifel. Please go ahead. Your line is open.

We'll take our next question from John Block with Stiefel. Please go ahead, your line is open.

Hey John , great day. Hey, good afternoon. Just first of all, an N1. You guys can just talk to the rollout cadence in the US and will overcrondulate the pace of that rollout a little bit. And then maybe just the level set is attack on. I think previously you guys have talked about 300 doctors trained in Europe on N1. What's that off of a base of just so we can sort of size up where you are in the training process in Europe since it was obviously approved over there several quarters ago January 31st until Jan. 1 2021

Great. Thanks, Hey, good afternoon, just first of all in one.

You guys can you just talk to the rollout cadence in the U S and will over call. It a delay.

You said that rollout a little bit and then maybe just to level set as a tack on and I think previously you guys have talked about 300 doctors trained in Europe , and one was that off of a base of just so we can sort of size of where you are in the training process in Europe . Since it was obviously approved over there several quarters ago, and then I'll ask a follow up.

Yeah, I'm happy to have to give you that back, Anja. Exactly. Right. We saw a training in Europe and we have.

Happy happy to give you that back on Jeff.

Exactly correct we saw.

The solid training in Europe , and we have several 100 <unk>.

Several hundred dentists that they have are now using actively N1. Actively in our opinion is more than one time purchases, they're beginning to transition some of the current usage.

<unk> is that they are now using activity and <unk> activity in our opinion is more than one time purchases beginning to transition some of their current usage to N. One and they are beginning to see the outcome after than they've given us some really good feedback our approach in the U S is very similar.

2-1 and they're beginning to see the outcome of that and they're giving us some really good feedback.

Our approach in the US is very similar to what we did with the SPAR.

What we did with the spot we're going to have create as cohorts of five to 10 people in a smaller safe setting in fact, the first group is going to take place. This weekend, we're going to teach and train them, bringing them up to speed. These are the key expert ambassadors, let them become very familiar with the product.

We're going to have creative cohorts of 5 to 10 people in a smaller safe setting. In fact, the first group is going to take place this weekend.

We're going to teach him, train him, bring him up to speed. These are the key experts and ambassadors. Let them become very familiar with the product, use it in their facility. We're going to put people on site to work with them. And as they become comfortable, they're going to start teaching and rolling this out on our behalf. Then we would sign up the next cohort, the next cohort, and the next cohort going forward. I want to do it a little bit of a compare for you.

Use it in their facility, we're going to put people on site to work with them and as they become comfortable theyre going to start teaching and rolling this out in our on our behalf then we would sign up the next cohort. The next cohort than the next cohort going forward I wanted to do it a little bit of a compare for you.

Spark the way rollout has taken place now. Some of the key experts in some geographies, Spain as an example, now they are creating this followership model.

Barack debated rollout has taken place now some of the key export in some geographies of Spain as an example, now our COO.

Creating this fall or ship model that they trained on their own in why a large number of orthodontists. They see the value of the cash they can show cases, and they can see a migration and transition to a spark. Our goal. We then one is to replicate that model in 2022.

that they train on their own in white, a large number of orthodontists, they see the value, they can show cases.

and they can see a migration and transition to Spark.

Our goal within one is to replicate that model in 2022 in North America. Be thoughtful, be really diligent about how we want to go about it, and manage in a safe environment, a cohort of group of people that they can truly see the value of it.

In North America, the talk will be.

Really diligent about how we go about it and managed in a safe environment, a cohort a group of people that they can truly see the value of it is <unk>.

<unk>, Besides and want our implant business as specific in Nobel in Q4 premium impact.

Besides, N1 are implant businesses, specifically Nobel, NQ4, premium implant.

through double digit compared to 2020 and double digit compared to 2019.

Grew double digits compared to 2020.

<unk> digit compared to 2019.

So our performance has improved significantly and we are beginning to see, and we have seen in past six quarters, quarter after quarter, better performance. I think N1 is just going to be an addition to what our team in North America, in Europe and in China has been doing for us. This is getting this business to a high single digit growth in an ongoing basis.

Our performance has improved significantly and we are beginning to see and we have seen in the past six quarter quarter after quarter better performance I think and one is just going to be in addition to what our team in North America in Europe and in China has been doing for US This is getting.

This business to a high single digit growth in an ongoing basis.

That's right. That was very helpful. And just as a second question, and I might try to fit to in there. How are for you more than 20% of you but dot Martin's, I just felt previously when you guys used to talk high teens. I mean, we did more than 20 and you know, used to talk 50 to 75 bips per annum.

That's great that was very helpful and just as a second question and I might try to fit two and there Howard for you more than 20% EBITDA margins I. Just felt previously when you guys used to talk high teens I mean, when you say more than 20, and you should talk to 50 to 75 bps per annum.

You know, just maybe some clarity. Like what does that mean? Is the 50 to 75 bips that you used to talk about in tacked off the 1977, and then admittedly a second, separate second question in there. Can you just get this read comfortable with the mid single digit infection prevention long term? I think if there was any blemish in the quarter, it was just around infection prevention. Why the confidence you guys alluded to some of the sellout data, you know, I know you're going into new markets there, but why should you feel confident in that MSD long term? Thank you.

Just maybe some clarity like what does that mean is that 50 to 75 bps that you used to talk about intact off at 19, seven and then admittedly a second separate second question in there can you just get the street comfortable with the mid single digit infection prevention long term I think if there was any blemish in the quarter and were just around infection.

That's why the confidence you guys alluded to some of the sellout data I know youre going into new markets, there, but why should we feel confident that MST long term. Thank you.

Sure, John . So let me go ahead and answer the first one as it relates to the Yvida guide. We remain focused on delivering balance performance. We've said that all along of accelerating growth while expanding our margins. In 2022, we're raising our growth outlook and still expanding our margins.

Sure John So let me go ahead and answer the first one as it relates to the EBITDA Guide we remain focused on delivering balanced performance. We've said that all along of accelerating growth while expanding our margins in 2022, we are raising our growth outlook.

And still expanding our margins.

But we also are planning to make some pretty significant investments to assist.

But we also are planning to make some pretty significant investments to sustain and certainly into ultimately accelerate our long term growth and so as you recall.

and certainly to ultimately accelerate our long-term growth. And so as you recall, you know, at the time of IPO, we went from no growth to no growth.

At the time of IPO, we went from no growth to low single digit growth to mid single digit growth and now we're taking it up to mid single digit plus growth and looking to even drive higher over the long term and so certainly the 50 to 75 basis points was something that we committed to on a per annual basis.

to low single digit growth, to mid single digit growth, and now we're taking it up to mid single digit plus growth.

and looking to even drive higher over the long term. And so certainly the 50 to 75 basis points was something that we committed to on a per annual basis.

We've driven over 400 bits of margin expansion in the last two years. We think that we want to be balanced in our approach and we certainly want to go ahead and invest where we see the long-term growth and the opportunity. And so we're taking advantage of that opportunity. And we're still going to develop – deliver some margin expansion. Also keep in mind the reality of where we're at today. You know, we know that there is some inflationary factors that are impacting our business a little bit here as well.

We've driven over 400 bps of margin expansion in the last two years.

We think that we want to be balanced in our approach and we certainly want to go ahead, and invest where we see the long term growth and the opportunity and so we're taking advantage of that opportunity and we're still going to develop deliver some margin expansion also keep in mind, the reality of where we're at today.

We know that there is some inflationary factors that are that are that are impacting our business a little bit here as well.

And so we want to be thoughtful and prudent about what we lay out for next year or for 2020.

And so we want to be thoughtful and prudent about what we laid out for next year or for 2020.

Let me ask you the IPS question. So we all find the underlying macro drive. And so now the safety protocols is going to continue.

Let me answer the Ips question. So we all signed to underlying macro drivers sitting out.

The safety protocols is going to continue.

to exist and it's going to be in place and it's a long term trend and it's not going to change.

Exists and is going to be in place and is a long term trend and is not going to change all.

We know that there are expansion of the offices. People are getting a lot more sophisticated on how they treat patients and go forward.

All of that there are expansion after offices people are getting a lot more sophisticated on how they treat patients and go forward.

So the underlying macro trends are there and the business has been very focused on the dental. Over 50 up to about 60% market sharing the dental in the US and not a whole lot of presence in Europe as well as on their medical side. So Combine those with what has been happening if you look at the sellout on a sellout basis.

So the underlying macro trends out there and the business has been very focused on the dental yes.

<unk> 50 up to about 60% market share in the dental and the U S.

And not a whole lot of presence in Europe as well as on the medical side. So combined those with what has been happening. If you look at the sell out on a sell out basis, we continue to take share in desktop and we continue to see long term growth.

We continue to take share in the end of it. And we continue to see long-term growth opportunities in

Opportunities in medical.

What we saw in second half is a combination of overstock inventory and not necessarily wasn't all of our inventory.

What we saw in second half is a combination at overstock inventory and not necessarily wasn't all of our inventory.

You know, there was a little bit of hoaring took place in 2020. Demand pick.

There was a little bit of a holding took place in 2020 demand peak.

People need to kind of a work through that inventory. The inventories are coming down. We are pretty confident that by Q2 in the second half, this business is going to be back to what we expected to be normal. High profitability, as well as mid-single digit growth, what it used to be before COVID. With all the changes that we have done, with management effort,

People need to kind of a walk through that inventory. The inventories are coming down we are pretty confident that by Q2 and second half. This business is going to be back to what we expect it to be normal.

High profitability as well as mid single digit growth what are used to be before.

Before.

Covid at all the changes that we have done with management effort.

consolidation of some of our activities, focus, EBS focus on the commercial, we think we have runway in this business. So we're committed, confident that we can get this back on a mid-single digit growth in high profitability part of our portfolio. Most likely by second half, if not sooner.

Consolidation of some of our activities focus EES focus on our commercial we think we have runway in this business. So we committed the confident that we can get this back on our mid single digit growth and high profitability part of our portfolio.

Slightly by second half if not sooner.

That's great color to both. Thanks, guys.

That's great color thanks, guys.

Okay.

We'll take our next question from Aaron Wright with Morgan Stanley . Please go ahead, your line is open.

We'll take our next question from Erin Wright with Morgan Stanley . Please go ahead. Your line is open.

Great, thanks. I'll follow up on Spark here. Can you speak to the traction in the U.S. versus international markets and how the broader international rollout is progressing? And how also you're incorporating Spark into maybe some of your DSO relationships and the strategy on that front. Thanks. Yeah, thank you.

Great. Thanks, I'll follow up on spark here can you speak to the traction in U S versus international markets and how the broader international rollout is progressing progressing and how after year incorporating spark into maybe some of your DSO relationships any strategy on that front.

Yes, Thank you era so.

Let me, the reason that that approach to the overtaken is, I want to go back to our Bracket and Wire business. We have close about 20% share. 70% of that business is outside U.S.

So let me the reason that the approach that we've taken is I'll go back to a bracket and wire business, we have close to about 20% share.

70% of that business is outside the U S.

We have significant presence in emerging markets in Europe . We have an incredible training and education program and we have done a really good job while everybody is moving away from that business. We just continue to take shares.

We have significant presence in emerging markets in Europe .

Incredible training and education program, and we have done a really good job while everybody is moving away from that business. We just continued to take share there.

So, we have said our first effort on Spark was just to go back to the true and tested customer base of OMCO. That was in the US, in Europe , and now we're signing, we're registering, we're going through the registration process, a poor process, geography by geography. It's specific even, we are really strong and are based business of our OMCO.

So we have said our first effort on a spark was just to go back to the true and tested customer base a phone call that was in the U S. In Europe and now we are signing.

Registering we're going through.

Registration process, a poor process geography by geography as specific even we are really strong.

This business of our own.

And the way we are approaching it is make sure that orthodontists and those that they have primarily focused on these procedures see the value of a spark and also see the value of a combination of the same company given them the competitive advantage given them tools that they can become really productive. That has been our first approach.

And the way we're approaching it is make sure that orthodontists and dose that they have primers that are primarily focused in these procedures.

The value of the Spa and also see the value of a combination of same company given them a competitive advantage given them tools that they can become really productive that has been our first approach.

Dan, you're solid looking at, you know, as you said, the DSOs, we look at some of the new announcement that we have made relationship with some of the largest DSOs in US and Europe . They have a orthodontist capability inside those DSOs, specific, with a damn, they already do a large number of cases. They already use a large number of aligners. So...

These solid looking at.

As you said that Dsos.

If you look at some of the new.

The announcement that we have made relationship itself the largest dsos in U S and Europe . They have of course to dawn is capability inside those dsos specific bid that they already do a large number of cases, they already use a large number of liners. So.

our focus on orthodontics and professionalism is not changing. We're just expanding that. And last but not least, a lot of GPs now are coming to us and they're asking...

Our focus on orthodontists unprofessional and is not changing we're just expanding that and last but not least a lot of GPS now are coming to us and they are asking to learn about its spot as they are seeing the benefit of it as they're learning and coming up to speed. So.

to learn about the spark as they are seen to benefit of it, as they're learning and coming up to speed. So...

As we had said, we're not after direct consumers, but for those that are committed to the orthodontist segment and they want to give people option, improve the quality of life. We're there to help them to do better job, to provide better services to their patients.

As we had said we're not asset direct to consumers, but for those that they are committed to the orthodontist segment and they want to keep people option improved the quality of life. We are there to help them to do better job to provide better services to their patients and we're going to follow that trend and we think there is.

And we're gonna follow that trend and we think there is significant amount of runway for us in that space.

Inefficient amount of runway for us in that space.

Okay, great. And in terms of M&A, can you speak to the pipeline at the moment and where the focus is, especially following your care-story macquisition, what makes sense at this juncture?

Okay.

Okay, great and in terms of M&A can you speak to the pipeline at the moment and where the focus is.

Following your <unk> acquisition, what makes sense at this juncture.

Yeah, I'm happy to do it there. I mean, we outlined a set of priorities for us, and this is honestly, it's not a new thing. This is my year seven in dental, and in the past seven years, we have been cultivating various companies who have been analyzing the market, we're looking at various strengths. And what we are seeing, where there is an opportunity for differentiated solution in order to really improve patients' lives.

Yeah happy to do that.

Outlined.

Set a priority for us and this is.

Honestly, it's not a new things.

This is my year, 7% in dental in the past seven years, we have been cultivating various companies who have been analyzing the market. We are looking at various strength and what we have seen that there is an opportunity for differentiated solution in order to really improve patients life.

It is an implant and not necessarily only an implant itself from diagnostic all the way to prosthetic. In that space, we see opportunities for adding to our value implant portfolio regenerative.

It is.

<unk> plan and not necessarily only on the implant itself from diagnostics all the way to <unk>.

That is space, we see opportunities for adding to our value implant portfolio regenerative.

prosthetic pieces and continue to add digital capabilities around AI, guided surgery, robotic, navigated surgery.

Our steady pieces and continue to add digital capabilities around AI guide associated robotic navigate associated we look at the orthodontist space auto space.

We look at the orthodontic space, ortho space. We see this combination of bracket and wire as well as clear aligner offers significant opportunity for us to become a lot more digitally capable. I wanna put something in here. Last year, we put two new releases of a spark out there.

This combination or bracket and wire as well as clear aligner offer significant opportunity for us to become a lot more digitally capable I want to put something in here.

Last year.

We've put two new releases of our spark out there.

This year, our intention is to really wrap that up, to be the product of choice. In order to do that, we want to create an open platform that we can integrate other capabilities, other software tools, other AI tools. So we can give people choices, both on that two segment.

This year, our intention is to really ramp that up to be the product of choice in order to do that we want to create an open platform that we can any great. Other capabilities other software tools AI tools. So we can give.

Her choices both on that two segment that we talked about.

Porto implant to digitally enable workflow integration. That's where we want to be focused on. We have been cultivating company, working with company, and we're going to continue stay on that track. We have been cultivating company, and we have been cultivating company, and we're going to continue staying on that track.

Ortho implant to digitally enable workflow integration dashboard, we want to be focused on we have been cultivating company working with company and we're going to continue to stay on that track.

Great. Thank you.

We'll take our next question from Nathan Rich with Goldman Sachs. Please go ahead, your line is open. Hi, good afternoon.

We'll take our next question from Nathan Rich with Goldman Sachs. Please go ahead. Your line is open.

Hi, good afternoon, thanks for the questions.

Howard, I maybe wanted to ask on the building blocks to the six to eight percent organic growth. I think in 2021, the innovation products that you called out drove 300 basis points of growth last year. I guess could you maybe talk about what you're expecting from those products in 2022? And then going back to your comments on cadence, kind of starting a mid-single digit growth in the first quarter, it imply that you'd, I think, end the year at the high end or maybe even a bit above that six to eight percent range. You know, is that just driven by the kind of effect of sequential growth in these products as they continue to ramp appreciate any details you could share around that?

Howard I, maybe wanted to ask on the building blocks.

Percent organic growth.

I think in 2021, the innovation products that you called out drove 300 basis points of growth.

Last year I guess.

Could you maybe talk about what youre expecting from those products in 2022, and then going back to your comments on cadence kind of starting in mid single digit growth in the first quarter. It would imply that I think end the year at the high end or maybe even a bit above that 6% to 8% range.

This is driven by the kind of effect of sequential growth in these products as they continue to ramp I. Appreciate any details you could share around that.

Sure Nate. So maybe for the first part of that question, consistent with what we've said and what we believe here as it relates to the guy for 2022, we think that the spark and N1 will deliver at least north of 200, somewhere between 200 and 300 basic points of growth once again here in 2022.

Sure.

Maybe for the first part of that question consistent with what we've said and what we believe here as it relates to the guide for 2022, we think that the spark.

Spark and N. One will deliver at least north of 200 somewhere between 200 300 basis points of growth once again here in 2022.

And so, and clearly you're gonna see the mix up, as we said, in the specialty side, as that growth has been, and we've enjoyed faster growth in that segment of the business. So we'll continue to see that as well. Bearing in mind, again, that this guy does not contemplate the care stream dental IOS acquisition.

And so and clearly youre going to see the mix up as we said in the specialty side.

Is that that growth has been and we've enjoyed faster growth in that segment of the business and so we'll continue to see that as well bearing in mind again that this guidance does not contemplate.

The care stream dental iOS acquisition.

So that's the first teeth. And then as it relates to, you know, phasing and the life, yeah, we think that we see a little bit of slow down here in the first quarter. And that's why we see the mid single digit growth. And it will ramp up to get us likely, you know, on the high end of that guide, it's not slightly north of that by the end of the year. And we'll see a steady, consistent improvement in growth quarter over quarter of the planning.

So that's the first piece and then as it relates to.

Phasing and the like yes, we think that would be a little bit of slowdown here in the first quarter and Thats why you see the mid single digit growth and it will ramp up to get us likely on the high end of that guide if not slightly north of that by the end of the year and we will see a steady consistent improvement and growth quarter over quarter.

The plan here.

Okay, great. And then if I could ask on China, could you maybe just go into a bit more detail on how it performed in the fourth quarter? I know you said it was below the 13% growth in emerging markets, but could you maybe just talk about what you saw in the fourth quarter and so far here in the first quarter? And then related to that, I think you have Spark in China now as well. It's a clear liner market that's dominated by two players right now. I guess, what's the take of Spark been like in China as we think about that market opportunity? Thank you.

Okay great.

And then if I could ask on China can you maybe just go into a bit more detail on how it performed in the fourth quarter. I know you said it was below the 13% growth in emerging markets.

But can you maybe just talk about what you saw in the fourth quarter and so far here in the first quarter and then related to that I think you have spark in China now as well as the clear aligner market that's.

Dominated by two players right now I guess.

What is the uptake of spark been like.

In China, as we think about that market opportunity. Thank you.

Sureaced

Sure.

To answer that.

The channel zero COVID policy is in place and continues to be in place. 15 problems.

The Chinas zero Covid policy is in place and continues to be in place 15, Providence's hit various level of stock out in Q4 and is that.

His various levels of lockdown in Q4 and this Omicron continues to be an important factor specifically given the Winter Olympics, travel and many other elements play a role in here. Let me break that down for you. Our specialty business are Implant and Auto

<unk> continues to be an important factor specifically given the winter Olympics travel and many other elements play a role in yet so let me break that down for you.

Our specialty business.

<unk> auto.

In the quarter, it was going double digits and continues to, that trans continues as we have come through 2022.

In the quarter was growing double digits and continues to that trend continues as we have come through 2022.

What we're seeing in the consumable and special in a consumer equipment business We saw a general weakness in there and the decline was primarily in that segment in low single digit decline We expect that it's going to continue weakness in q1, but in long term We think that we are we are really confident in what what is taking place in China They have a significant presence. There is under penetrated Opportunity in there we are building continue to build capabilities manufacturing marketing itself working with DSO

Yes, what we're seeing in the consumable and especially in a consumer led equipment business. We saw a general weakness in depth and this decline was primarily in that segment and low single digit decline. We expect that it's going to continue weakness in Q1, but a long term we think that we are.

We are really confident in what has taken place in China, we have a significant presence there as an underpenetrated opportunity. There. We're building continue to build capabilities manufacturing marketing and sales working with Dsos.

Now, answering your question about this park, we have been very thoughtful about priorities. We want to start building presence, building capabilities.

And your question about the spark we have been very thoughtful about priorities, where we wanted to stop building presence building capabilities. We have the product already approved we have not only from a clinical perspective, but also manufacturing capabilities in China, but this is.

We have the product already approved. We have not only from a clinical perspective, but also manufacturing capabilities in China. But this is a process that we have taken and step by step, geography by geography. Make it successful, take the next one. That's the approach that we are taking. As part of that, that is...

Process that we have taken a step by step geography by geography make it successful pick the next one that's the approach that we're taking.

As part of that is as every other geography.

Add every other geography. We're not focused on the low-cost direct consumers in a commodity-based. Our bracket and wires growing rapidly in China, focused on the professional, mettech professional.

That focus on the low cost direct to consumers in a commodity based or bracket and wire is growing rapidly in China focused on the professional med Tech professional and as spot is exactly positioning data space, that's where we want to be.

And Spark is exactly positioning data space. That's where we want to be reading a good position. And we say we want to be the number one player in data space. That's the space that we're focusing on. And we let the pool through those people teach it.

Really in a good position and we say we want to be the number one player in that space. That's the space that we're focusing on and we'll let the pull through those people teach it.

establishes, show the outcome and it's going to create a dominant effect and network effect and we're going to see the outcome of that over time as we have seen in other geographies.

Establishing showed the outcome and it's going to create a domino effect of network effect and we're going to see the outcome of that over time as we have seen in other geographies.

Thanks very much.

In the interest of time, we'll turn the program back to Mr. Stephen Keller for any closing comment.

And in the interest of time I will turn the program back to Mr. Steven Keller for any closing comments.

I think everyone for a pro-time day, we really appreciate it. If you have any questions, we're here. Happy to take any calls, but have a great afternoon, a great evening, and thank you for your time.

And thank you everyone for your time today really appreciate it if you have any questions. We are here happy to take any calls, but <unk> have a great afternoon, and good evening and thank you for your time.

This does conclude today's program. Thank you for your participation and you may now disconnect.

Sure.

Okay.

[music].

Yes.

Okay.

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