Q3 2022 Envista Holdings Corp Earnings Call
Any forward throughout the balance of the year and into 2023, even intensify efforts to further optimize our organizational structure to improve the customer experience, while creating more flexibility to deal with the uncertainties in the macro environment.
The transformation of our portfolio continues as we emphasize our most differentiated solutions by making additional investments to our fast growing specialty businesses and continue to add to our digital capabilities.
In our traditional imaging business, we have made the strategic decision to focus on key geographies, where we have a sustainable competitive advantage.
This allows us to reduce structural cost while further optimizing our portfolio, leading to both accelerating growth and improving margins over the long term.
In the third quarter, we took steps to set this business up for lasting growth.
We have now fully rebranded the intra oral scanners to Texas ice and are expanding our customer reach and optimizing our global distribution.
The Texas portfolio offers a full range of intra oral scanners.
Coupled with a powerful and intuitive software solution.
That enables accurate digital impressions improve scanning procedures and the speeds and flexible workflows.
While the <unk> scanner the software configured as an open in the Standalone system. They are also now more closely with our <unk> studio clinic software, providing clinician the opportunity to bring all X ray images photos to the three D and extra oral <unk>.
Intra or imaging formats into one clear comprehensive view, thus simplifying their diagnostic workflows and increasing confidence.
In interaction with patients.
Gtx is studio clinic and crews assisted intelligence features like smart fusion, which automatically aligns the digital surface models from the Texas intra oral scanner with any <unk> scan and has a unique and powerful tool for efficient implant plan.
<unk>.
We are honored that.
<unk> studio software suite, which includes Gtx's studio clinic has been awarded the Celeron Best of Class Technology Award for the second consecutive year.
Selected by a distinguished panel of dental technology expert.
<unk> Award winners are recognized for ground breaking technology that expands possibilities for the world of dentistry.
In addition to our focus on digital workflows, we continued to expand our capabilities in implant based tooth replacements.
As previously announced we closed the acquisition of Austin, <unk> Biomedical a U S based manufacturer of regenerative solution in early Q3.
<unk> regenerative therapies are increasingly an important part of an implant based tooth replacement procedure.
By providing clinicians with the best in class solutions, we can better support them and delivering the best possible patient care, while also capturing more value from each implant procedure.
This business is off to a strong start within in Vista, We're excited about his ability to create lasting value for patients clinicians and our shareholders.
As we make progress in our journey to digitize personalized and democratize dental care.
It's important to also keep sustainability initiatives top of mind to that end I'm proud of our recently released sustainability report.
This support continues and all clients are progress in embedding environmental social and governance principles in our strategic approach.
While we are still relatively new as an independent company, we have made solid progress in quantifying our environmental footprint.
Addressing climate related risks and opportunities.
Fostering a diverse and inclusive workplace for our employees.
Some of our progress includes achieving 99% gender pay equity in.
<unk>.
The United States.
Ensuring efficient and the statements supply chain through proactive supplier management that reflects our values and support business continuity.
Incorporating the task force on climate related financial disclosures recommendation identifying.
Relevant climate related risks and opportunities in any grading oversight into our existing enterprise risk management processes.
Analyzing eight environmental metrics, including our scope, one and two greenhouse gas emissions water consumption and waste generation.
By investing in our ability to offer a sustainably we intend to secure the success of our communities.
Employees customers and shareholders.
We are building upon the ESG initiatives that we had undertaken as a new newly public company.
I am pleased with our achievements today and I look forward to further progress in our journey to partner with dental professionals to.
The digitized personalize and democratize dental care.
I will now turn the call over to Howard to go through our third quarter financials and provide more details on our segment performance.
Thanks Amir.
Before we begin I would like to remind you that our third quarter results are compared against prior year based on continuing operations, reflecting the sale of <unk> of our combo treatment unit and instrument business as discontinued operations.
On a reported basis third quarter sales increased three 9% $631 1 million.
Sales in the quarter were negatively impacted four 1% due to foreign currency exchange rates.
Acquisitions contributed three 1% of growth on a reported basis.
Core sales growth was four 9% compared to the third quarter of 2021.
Our year over year core sales growth reflects solid performance in our specialty products and technology segment offset by weakness in our equipment <unk> consumables segment.
On a geographic basis Western Europe delivered core sales growth of over 9%, while North America was flat is that region was weighed down by its higher exposure to traditional imaging equipment.
One driven.
Driven by strong growth in our premium implant business.
Market growth in our core brackets and wires business and continued impressive growth from spark.
In the third quarter, our combined orthodontic business grew over 20% versus prior year with brackets and wires growing mid single digits and our spark revenue continuing to accelerate rapidly.
Despite a more challenging macro environment, we remain confident that our spark business has a meaningful opportunity to grow and we are continuing to invest to capitalize on this opportunity.
Our implant based tooth replacement business grew mid single digit in Q3 2022 versus Q3 of the prior year driven by high single digit growth in premium implants, and strong growth across our emerging markets.
In addition to the growth in core implants, our regenerative business, including the newly acquired business of Osteogenic continues to accelerate.
Our specialty products and technology segment, adjusted operating profit was 28% in the third quarter.
This is down 250 basis points from Q3, 2021, primarily due to significant increase in investments to drive long term growth as well as increase in customer facing activities. We participated in during the quarter.
Our third quarter equipment, <unk> consumables segment core sales decreased by four 7% compared to Q3 of 2021. This decline was driven by a slowdown in equipment business volume offset by solid growth in price and volumes in our consumables business.
Our traditional imaging business declined double digits in the quarter with lower volumes across most geographies.
The lower volume was partially attributable to strong performance in the second half of 2021, as well as macro headwinds, including inflation rising interest rates and uncertain geopolitical environment caused by the conflict in Ukraine, and the zero Covid policy in China.
As Amir indicated we have made the decision to focus our efforts on key geographies, where we have a sustainable competitive advantage.
This will help us to accelerate both growth and margins over the long run.
In developed markets, we also experienced weaker commercial performance as well as some supply chain challenges related to certain chips, both of which negatively impacted our revenue in the quarter.
We continue to make investments in our new iOS business and are focused on setting up this business for enduring success as we quickly expand our reach and optimize our global distribution.
Clinicians are very interested in investing in iOS solutions to help them improve their overall workflow the Texas AOS solution is well positioned to outperform the market. We are taking steps to address our commercial execution in North America, and Europe and are focused on accelerating the performance across our full imaging portfolio.
Including iOS.
On the consumable side, our restorative and endodontics business grew more than 7% in Q3 benefiting from solid underlying demand increased prices and normalized volume in the channel.
As you recall this business did see a modest destocking in North America in the second quarter.
Geographically, we saw solid growth in North America, a very modest decline in western Europe , and strong double digit growth in the emerging markets.
As expected sales of our infection prevention solutions increased double digits in Q3 compared to a softer Q3 of 2021.
We believe that our infection prevention business is normalizing now that total inventory both in the channel and at clinicians offices are returning to standard levels.
Additionally, we are seeing more balanced sell in and sell out figures, suggesting that this business should return to a more stable normalized long term growth rate.
Equipment and consumables adjusted operating profit margin was 26, 1% in the third quarter of 2022 versus 28% in Q3 of 2021 or.
Our strong margin improvement was driven by favorable sales mix, our actions to increase overall productivity and price increases partially offset by cost increases related to the inflationary pressure on commodities and materials that impacted our businesses.
Overall, the inclusion of the iOS business supports our belief that our equipment and consumables business will grow faster and be more profitable as we move forward.
In the third quarter, we generated $19 $7 million of free cash flow and ended the quarter with over $500 million in cash.
Our free cash flow in Q3, 2022 was lower than prior year in part due.
Due to the elimination of free cash flow associated with our discontinued operations as well as cash payments for one time transaction costs restructuring investments and tax payments.
We also continue to make long term capital investments and spark.
That will support our growth and improve our margins through automation.
Fight the lower free cash flow in the short term we remain focused on the mid term goal of delivering free cash flow in excess of net income and expect to see significant improvements in free cash flow in the fourth quarter and into 2023.
Overall, our balance sheet is strong and we have ample liquidity and flexibility to pursue appropriate long term investments.
Turning to our full year outlook.
Fight the continued challenges in the macro environment, including persistent inflation continued supply chain issues geopolitical risks and a potential energy crisis in Europe , we are reiterating our guidance for core growth and profitability and expect to deliver mid single digit core growth for full year 2022.
Along with adjusted EBITDA margin of 20% for the full year.
We further expect our acquisitions to add greater than $40 million and sales for full year 2022.
This acquisition forecast is down modestly, reflecting a likely slower growth in Europe , and China, the impact of currency as well as the impact and timing of the dentist iOS rebranding and repositioning.
Ultimately, we expect our acquisitions to deliver more than 75 basis points of annual growth within three years.
While we do anticipate a more challenging operating environment in Q4 and in 2023, we remain confident in the future of the dental market as well as the resilience of our reshaped portfolio.
Our strategic differentiation, coupled with our proven track record of execution gives us confidence that we can continue to accelerate growth, while driving consistent margin expansion.
I'll now turn it over to Amir for some final thoughts.
Thanks Howard.
Moving forward our priorities remain the same accelerate growth expand operating margins and continued to further.
<unk> form our portfolio through active and disciplined capital deployment.
Our intention is to partner with dental professionals to improve lives.
Suffice and comprehensive portfolio positions us as the partner of choice for clinicians globally.
In Orthodontics, we will continue to provide a differentiated and integrated suite of treatment options, including brackets and wires and clear liners that empowers, especially is to provide the best personalized treatment for each patient and our implant based tooth replacement business.
We will leverage our diagnostic and digital capabilities to provide clinicians with the complete implant workflow solutions, including regenerative and prosthetic offerings.
This solution for everyday dental we will broaden access to our highly profitable and differentiate our consumable business.
We will leverage our strength in imaging and diagnostics to build seamless open and digitally integrated workflows from diagnostics to personalize treatment planning to execution for our clinical partners.
Finally, we continue to draw upon our ABS heritage to drive a balance of growth and margin expansion across the economic cycle.
Strong committed and capable team and I'm proud of our culture focused on customer Centricity innovation respect continuous improvement and leadership.
As we continue to digitize personalize and democratized into gear, we're excited about the future of dentistry.
We are strategically differentiated and have a proven track record of execution.
Even in more challenging economic environment.
See significant opportunity to accelerate growth improve margins and create long term value for patients.
Estimates employees and shareholders.
Thanks, <unk> that concludes our formal comments, we are now ready for questions.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.
Remove yourself from the queue at any time by pressing star two.
Again that is star Antoine if you would like to ask a question.
I'll take our first question from Elizabeth Anderson with Evercore ISI. Your line is now open.
Hi, guys. Thanks, so much for the question.
Thanks for all the color on.
Your thoughts on what you saw on the quarter and I appreciate it in context of the changing dynamics can you guys sort of extend that out and sort of maybe talk about what youre seeing currently as we sort of go Scott got into the first month.
In the fourth quarter, and then also to the extent I understand that you're not formally guiding this evening, but to the extent that you can sort of help us to narrow down sort of the wide spectrum of opportunities as you're seeing them for 2023 right now.
Could you is there anything you can say on that that that could help be helpful on that front. Thanks.
Yes of course, thank you Elizabeth.
What we have seen in so far in Q4 has been consistent with what we saw in Q3, so not a major change in here.
Attrition remains a little bit uncertain when it comes to a specific geography. So for example in Russia, we had some challenges in Q2.
Getting products into Russia.
But we saw a double digit growth in Q3 after a mid single digit decline in Q2.
In China. Despite the fact that we have now almost.
Low single digit decline in the first half we saw a step up in Q3 because of the robust and meet that came in place. So given the uncertainties in the ground we remain confident.
The guidance that we have provided remains intact and we're not we're not changing that but taking a step back a little bit looking at the macro environment I can tell you that this year.
I've been on the road eight weeks I've had eight weeks of customer visits step stopped in multiple cities and I've talked to hundreds of individual practitioners group practices Dsos distributors University.
There is a common trend that we hear over and over across these.
Visits.
The macro site.
The patients volume remained stable the specialty on the specialty business.
The majority of our specialties to have.
Scheduled book for the next months or two.
Resources continued to be a major challenge and inflation in here impacting Catholics and the third factor is we hear over and over the need for digital transformation.
You put all of that together come.
Come back the simple answer that I can tell you is the need for productivity is.
Higher than it has ever been this is where we shine.
Ebs.
As a competitive advantage that we can talk about the asset utilization.
We can talk about what we can do leveraging the capabilities that exist in order to help the industry to move forward.
The traditional business models that exist.
It makes it more difficult for this transformation, but there is in the past two years, we have seen.
Innovative way.
Destruction innovative disruption to move industry forward, it's going to be rock here, a little bit into short term. We are confident that this industry is ripe for growth and we are well positioned in order to really needed a variety of segments by giving people what they need in order to get the maximum.
Activity of the assets that they have in place.
We will take our next question from Michael Cherny with Bank of America. Your line is open.
Yes.
Good afternoon. Thank you for taking the question.
You spent some time, obviously talking about the now of China, Let's talk about the next in China and again against the vein of now.
Not necessarily providing guidance, but can you fill us in a little bit about what's going on on the <unk> side in terms of your communications across China, and how you think about positioning the business.
To best.
Seed or manage through any pricing headwinds that you expected to see especially among the difference between public and private hospital exposure.
Yes happy to the Michael as I mentioned in Q3, China business grew.
High single digit almost 9%.
While.
We had a mid single digit decline in the first half.
Obviously, a lot of that has to do with the Shanghai, Lockdown and slowing macro environment by China's zero co with policy.
Despite of all of that and the quality of the economic outlook, we expect continued growth.
The business in China.
Imaging business is expected to have softer performance at Doctor assessed the macroeconomic environment.
Now, let's talk about the GBP.
On the implant side the Pvp.
Is already underway and we expect to see some resolved hopefully by end of November as we have discussed before.
We think that in the public sector.
The prices will come down materially maybe over 50%.
The price decline with comp mostly com.
In return, we will see a volume increase for those that they are going to be the winning bidders.
It was going to be primarily driven by Jim in volume and more access to care in remainder of the 2023 and remainder of 2022 and 2023.
So what we have offered this is a risk adjusted.
For 2022, we the guidance that we've provided.
We need to see how these volume and price dynamic plays out before we can provide any guidance in 2023.
But to answer your question.
China is a self paid to a large degree patient.
Patient process.
We're 70% of our business in the implant side comes from the public Im sorry, the private.
Private sector.
Shifting our business continue to the private sector on the premium side of that.
And I think we have a really good positioning there and we're going to continue to build capabilities in that space and the private side is growing a lot faster.
On the auto side. This is a still nothing official.
Going to most likely is going to come in place piece by piece and he is not only going to be on the clear liners. We expect that the traditional bracket and wire is going to be impacted as well, but the details.
In flux, it's difficult to comment on impact for 2023, but we are considering various scenarios in here to make sure that we are able to manage through uncertainty and continue have that long term view that we have communicated earlier in the year and by 2026 two.
Can be a high single digit lifestyle single digit growth and 22, 5% and above.
We think regardless of what we see in the short term in China, we're going to be able to deliver on that commitment in the long term.
We will take our next question from Jeff Johnson with Baird. Your line is open.
Thank you good afternoon guys.
Can you hear me okay, yes.
Yes, we can hear you, Jeff Alright, alright, thanks, Howard So I guess two questions here from me just.
Theyre, both still kind of trying to look at 2023 again respecting that youre, not giving guidance, but Howard I guess help us understand that European core growth at nine 3% of our western European and emerging markets and 15%.
Where are we in kind of the easy.
Easy comps from last year, because of Covid shutdowns and other kind of factors going on how should we think about those two markets, especially which really helped this quarter kind of normalizing comp starting to normalize a little bit over the next quarter or two so it's really going to be kind of driven by end market pull through and not comps the growth going forward. Thanks.
Yeah sure sure Jeff, Yes, so I do think that.
We've had some pretty.
Sizable swings one way or the other because of those comps we talked about it primarily in the North America contact of infection Prevention for example, where we had.
October peak.
And as we've kind of lap some of those high during the second half as we anticipated.
We would see some growth and so things are more normalized both in the channel as well as in the clinicians offices and so we feel comfortable about that I think more broadly as it relates to Europe . There are some macro concerns there the energy crisis potentially lose a little bit there and until we get some better clarity on the macros I think that we feel.
Even better about the consistency of that business being able to grow but.
As it relates to our iOS business for example, we feel really good about the prospects for growth.
Over 70% of that business is sales driven outside of the U S. And so we continue to feel very bullish about that and expect to outperform the market. I think spark is another example, Jeff where Europe has just been an incredible frontier for us as it relates to Super.
Adoption and fast growth as Amir indicated in previous calls that ramp up in Europe as quickly.
Surpassed the growth that we've seen in any other regions that we're excited about that as well.
Alright, Thats all helpful. Thanks, and then maybe just as a follow up on that.
Where is your pricing on kind of a net basis. So far this year and maybe just remind us how that compares to passengers, but more more importantly, I think philosophically just how do you think about price going into next year. When you've got obviously rising cost yourself that you need to try to cover.
But the flip side is you've got Dennis who probably youre feeling a little less optimistic about their own business not seen their reimbursement rates go up maybe getting a little frustrated with some of the price increases that you've seen across the dental industry here over the past.
Six to 12 to 18 months. So just how do you think about going to market from a pricing standpoint next year as we get deeper into kind of this inflationary environment. Thanks.
Sure, Jeff So maybe I'll take that one as well.
With regards to pricing we're encouraged.
Know that historically we've seen.
Price degradation until probably 2021, the second half of 2021, when we were starting to see some pricing traction we continue to see that here in 2022 as well as recently in the third quarter as Amir indicated over 150 basis points of that growth coming from pricing.
We anticipate that that tailwind is going to continue certainly here in the fourth quarter and what we're trying to do is build much more around.
Systematic approach of getting pricing and so even when things as it relates to inflation and the light moderate some we still anticipate that we'll get some modest pricing. The one thing to keep in mind here is that in the long term, we've always viewed that as innovation that helps us win the day as it relates to ASP increases.
As well as profitability and so you can see that in our implants with regards to the move from Thai unite to tie ultra and deal surface technology. You also see that in our brackets and wires business as we move from Damian clear Damian Ultima and so again for long term that is that is what we hold dear.
As it relates to being able to expand margin drive growth and higher asps as well.
Alright, and that $1 50, Howard that was this quarter I must have missed that in the prepared remarks, I apologize for that but that one is the net price company wide this quarter.
That's right, it's north of 150 basis points for Q3. Thank.
Thank you.
Sure.
And well take our next question from Jon Block with Stifel. Your line is open.
Great. Thanks, guys good afternoon.
Maybe just start in S. PMT with spark where are you in regards to tapping into.
Kind of like your core 2000, or so or co or those versus <unk>.
Bringing on new non op co or those into the spark equation, just any color would be really helpful. And then maybe just to tack onto that we.
We haven't heard anything on that one for a little while with and US being taken I think implants I believe up mid single and premium I think you guys Might've mentioned Howard up high single on the premium side was a tailwind to that or what should we expect for that product into 'twenty three and then I'll ask my follow up.
Yes, Thank you John .
To answer that so.
We are seeing as we mentioned double digit growth on the number of customers active customers that they are coming in and using as spark.
Our target has always been.
Our specialist we have focus on specialties and.
As you clearly articulated we have started with <unk>.
All code Damon customers and we have started using that by offering a complete solution to them by letting them know that the same company. The same set of resources and capabilities with training education and key expert in the market can provide the best possible solution. That's how we got started and we saw <unk>.
Making that.
Expanding from geography to geography, what has been a really interesting dynamic and we have seen in the recent time than actually as far allows us to expand our bracket and wire business now.
Because by having this combination by being able to give people a choice that they can use either clear aligner or bracket on wire. They are able to provide the best possible solution on the same price from the same company. So simple answer we still have plenty of room to work with the traditional.
Payment customers, but we have branched out we are going after transitional orthodontists that may not have been as Damon customers, but they have provided clear aligner and this has given us opportunity to demonstrate not as spark as it purely best product in the market, but a combination of solution.
And seeing that transformation and transition to take place.
Results that Youre seeing is a clear indication of the number of cases, the number of new doctors as well as the performance of the business going forward and we think the commitment that we made to triple the size of this business over three years still remains intact now answering you and one question combination of spark and <unk>.
One is human us over 250 basis points of the growth year over year.
And one follows a very similar process as this fall.
You started in this product group of five.
And then we extended put credit call success team on the ground to teach to show and the transition we are doing exactly the same thing with and want it take group of five or 10 taken them 448 hours 72 hours. They are able to place five implant under supervision, we go to their offices.
This teach them how to do that and then transitioning piece by piece extending that as what we learned in Europe implemented in North America.
And one is going to be an important part of our growth over time.
Combination of commercial execution.
New innovation is really improve our premium implant performance to high single digits, and we think there is plenty of room for growth and expansion of different geographies for our placement implant base in the long run.
Got it very helpful. Thanks, Mary Anne.
Maybe just to go into different direction look I know, we're not going to get detailed 23 guidance, but I think you mentioned E&C you should get better from here as PNT seems to have a lot of solid momentum.
The other side of the equation, you've got some some GBP headwinds likely in 'twenty three so maybe just to take a step back at a high level are you guys comfortable with call. It modestly accelerating revenue growth in 2003 off sort of this mid single digit number in 'twenty two when we try to roll to try to roll up all the moving parts as we head into next year. Thanks, guys.
John It's really difficult at this point to call 2023.
Focus on delivering Q4, continuing to invest in our long term growth, we think because significant opportunities on the spark our orthodontics solution implant based tooth replacement.
S broader imaging diagnostic solution and we're going to be really thoughtful about.
The disciplined approach to inorganic activities going forward, what I can tell you is we're not moving away from the commitment that we've made the long term guidance that we have provided.
Core sales growth is going to go to mid single digit plus high single digit or EBITDA over 2012, 5%.
<unk> growth over 10%. That's the goal that we indicated that we would want to get to 2026, and we're not moving away from it in short term. We may have some challenges we need to deal with and hopefully you have seen that we have a proven track record we have been able to manage this balance of growth and margin and we're going to continue to do that moving forward.
Despite some of the challenges that youre, indicating EVP in Russia and other places.
Fair enough. Thanks for the color guys.
Well take our next question from Erin Wright with Morgan Stanley . Your line is now open.
Great. Thanks, and how would you characterize the current traction you're seeing across carrier stream and iOS business.
I think you mentioned strength of receive that how's the integration effort and how is it how are things playing out according to our relative to plan here just given the macro environment that we're in thanks.
Yes of course, thanks, Sarah so when we.
We have started the process we looked at three work streams. The first one was operational we wanted to make sure that we secure the supply operationally, we are able to produce that obviously coming out of Covid zero cohort.
Lockdown in Shanghai, we have been able to really ramp that up as quickly as possible.
The operational integration is going extremely well.
We have been able to rebrand it have been able to put significant capabilities around that and we think there is opportunity for further opportunity for continuous improvement margin expansion overtime second work stream was around innovation.
Innovation.
Step one over in this process with the software software integration with Gtx. Despite the fact that the product as a stand alone product and we can sell it as a SaaS today, we want to have.
Our ability to really integrate it to the workflow both on <unk> as well as in fact, we have the first step of that done is available now we think by end of the year, but we will have a fully integrated.
Texas, iOS with DTA or end to end solution that we can put it in place for our auto business as well as for our implant business. The third work stream was around go to market and in the go to market. What we wanted to do we wanted to expand that distribution. We wanted to make sure that we are able to.
To position this in different geographies leverage the capabilities that exist today, we have been working through the channel inventories.
Been working through take a look at the previous care same product, replacing the Texas going forward. So we've got some work to do in here.
And we feel really strong and good about it in the long run, but there is more work to be done to improve our commercial execution in various geographies and we are confident we are going to be able to move that forward. Our commitment to this business to this set of product Hasnt changed at all in fact, if anything the mortgage.
See the product the more confident we are that is a really good product has tremendous amount of potential.
Participation and you take a look at the number of offices that they do have an iOS. This is underpenetrated significantly underpenetrated, we've got a good product at the right price and there is nothing but upside as we move through 2023 and 2024.
One thing to keep in mind is 70% of this business is going to be outside the United States. So we've got to optimize our global distribution, we've got to make sure that.
<unk> some of their business that was sold through distributors in and but we are working through that and we are confident that we can get this on the right track to give you some numbers in Q2, even though we only owned the business for about two months, we've sold about $5 $5 million of it in Q3 that was $10 million. So as you saw.
At the progression of this with you we are going to be in a really good place by 2020 for 2023 and 2024.
Okay. Thank you and just a quick one on spark how should we think about it at that.
I guess, you would potentially more meaningfully enter the GP category there. Thanks.
Yes.
Our primary focus hasnt changed.
We are primarily focusing on our specialties.
We are a premium domestic company. Our goal is to make sure does that they placed in plan, but they do a large volume of it does that they do and the dose that they do also to have the best possible solution in their hands.
Our focus our specialties and we are going to continue to focus there on the other hand, we're not stopping people if they want to purchase product, we're more than happy to provide to them wanting to notice that maybe that may clarify a little bit of a pause.
<unk> shifted some of the Dsos.
Juruti Fte's companies starts dsos. They have a model that is called hub and spoke largely as soon as they have orthodontist inside the organization, we will work with those orthodontists theyre able to teach and train the GPS and they can transition over time use this product the product is just also.
Standing and this is based on what we hear priced properly software is really up to date.
As the clarity of it in service and support the key experts. So there is tremendous amount of energy around it and people are beginning to really transition.
Geography by geography, as we get approval in various geographies. So obviously there is demand for us, but our focus continues to be on our specialties.
Thank you.
Well take our next question from Nathan Rich with Goldman Sachs. Your line is open.
Great. Thank you Amir how are you thinking about the near term outlook for traditional imaging you mentioned two factors weakness in North America, and then the de emphasis of certain geographies as the weakness in North America, mainly a function.
The macro environment and then can you elaborate on the de emphasis.
Of those geographies kind of how extensive it is and what impact that might have on sales into next year.
Absolutely.
So let me just paint the picture for you on the imaging business to begin and then I'll answer the question.
A couple of key points, one third of our imaging revenue comes from sensors.
Service contract and those are fairly stable, even in a downturn environment.
Then the other part of that is the Dsos Dsos are really important group practices in Dsos and building new offices.
There have been a positive tailwind for imaging or several quarters somewhat recent softness is due to supply chain related issues that we talked about inflation resourcing and opening new stores.
<unk>.
They are all feeling that and we are obviously, we see the impact of it.
Some of the.
Macroeconomics in Europe issues in China is also impacted.
Yes.
You talked about in U S is a combination of the Dsos plus proxy compared to last year, while we saw last year compared to this year as to what makes North America, a little bit softer than before but let me answer your question about geographies.
Our commitment to imaging and diagnostic has not changed at all we think these startup every procedures and we wanted to be really present in an acquisition of iOS. It really gives us another avenue in here to give practitioners a complete set of solutions with Dts as a software and <unk>.
<unk> and <unk> workflow, but in some geographies selling that product as a standard law why does not differentiate it while it's not connected to the rest of the portfolio. It is really not a good investment in the long run if you take a look at it we have done that with our treatment unit as well if it is any grew.
<unk> to our overall offering than.
And then we would be able to create a competitive advantage and differentiation. If it is not just a stand alone by itself and the only way to get these price product in there is our true price that's not our business model our business model. It's about differentiation is about innovation is about end to end productivity gains.
That's why we have decided that we are going to deemphasize some geographies and start redirecting investment resources, where we can create sustainable competitive advantage.
That's what we have done that.
Did that with various parts of our business and we're going to continue to do that portfolio management is.
Key element of our continuous improvement and EPS. That's all we are able to continue to deliver the margin you saw that margin on the imaging.
And our equipment and consumable part of that is intentional we want to get better margin better performance. We can invest in a faster growing part of our business to balance growth versus margin continued to work through these difficult challenging environment.
Thanks Anna.
On the implant VP at this point do you have a view of how much volume has been submitted for bid or is that still to come and do you think you'll have visibility on the impact of the program. When you give guidance for 'twenty three in February .
Our expectation is by end of November beginning of December we would have.
Decision made on the top two players.
On the premium side, so that should give us a pretty good feel for what we need to expect.
What we should expect in 2023.
The volume as I mentioned, we are in.
According to understanding we can't tell you specifically, how many but we know that it's going to impact the public sector as I mentioned before about less than 30% of our business is in the public sector and again, you've got to take a look at it as a premium versus value and a combination of all of that we should give us a really good feel.
As we build our 2023 forecasts as well as our guidance.
Not there yet, but we are monitoring that pretty tight.
Type B closely we feel comfortable about Q4, and I would adjust as we need to as we enter 2023.
Thank you.
Of course.
We have reached our allotted time for questions today I would now like to turn the program back over to Mr. Taylor for any additional or closing remarks.
Thanks, everyone for joining really appreciate your continued interest in Vista.
We look forward to connecting with you in future Investor events, and then next quarter have a great. Good afternoon. Good evening. Thank you.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Sure.
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