Q4 2022 Envista Holdings Corp Earnings Call
Good afternoon, My name is Chelsea and I will be your conference call facilitator.
At this time I would like to welcome.
Vista Holdings Corp, fourth quarter of 2022 earnings results Conference call.
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After the speaker's remarks, there'll be a question and answer session.
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I will now turn the call over to Mister Stephen Keller, Vice President of Investor Relations Mister holding Mister Keller you may begin.
Good afternoon, and thanks for joining the call with US today I'm your egg dye your president and Chief Executive Officer, Howard You are Chief Financial Officer.
I want to point out that our earnings release, the slide presentation supplement today's call and the reconciliations and other information required by F. C. C regulation G relating to any non-GAAP financial measures provided during the call are available on the Investor section of our website Www Dot <unk> dot com the audio portion of this.
Call will be archived onto your visitors investor section of our website later today.
Adding events and presentations it will remain archived until our next quarterly call.
Has announced on January 3rd 20th 2022, we close the divestiture of our combo treatment to you as an instrument business for both 2021 and 2022. The results of this business are reflected.
Discontinued operations in our financial statements as required by generally accepted accounting principles.
All references in these remarks in a company presentation to earnings revenues and other companies specific financial metrics relate only to continuing operation and vistas business, except for the cash flow measures.
During the presentation, we will describe some of the more significant factors that impact of year over your performance. The supplemental materials describe additional factors that impact year over year performance.
Unless otherwise noted all references and these remarks to copy specific financial metrics relates to the fourth quarter of 2022 and references to period to period increases or decreases and financial metrics or year over year.
We may also described certain products and devices that application submitted in pending certain regulatory approvals or or.
There 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.
Forward looking statements are subject to a number of risks and uncertainties, including those set forth in a SEC filings and actual results might differ materially from any forward looking statements that we made today. These forward looking statements speak only as of the date that they're made and we do not assume any obligation to update any forward looking statements, except where as required by law.
With that I'd like to turn the call over to a mirror.
Thank you Steven and good afternoon to everyone.
I appreciate you taking the time to join us on today's call.
I'm pleased to report that for the full year 2000, 2020, twenty-two then which the team delivered another strong performance.
A core sales growth was up 4.1% for the full year.
This represented 40 basis points of expansion and adjusted EBITDA over 2021.
We experienced a slowdown in growth and some portions of our business in the fourth quarter.
This was expected.
Related to challenges.
Related to the Covid outbreak in China.
The geopolitical issues related conflict in Ukraine.
And continued depressed environments, where capital equipment driven.
Driven by higher interest rates.
Economic uncertainty.
As we reflect on outperformance in 2022.
As well as our future outlook I think it is important to provide some context about the underlying demand for dental solutions.
As I assured on previous calls my leadership team and I spent a significant amount of time.
In the field meeting with dental professionals.
Clinics to understand what is happening in real time.
It is not an overstatement to say that in 2022.
We collectively spend time with over 1000 clinicians.
Cross North America and Europe .
What I hear consistently for private.
Private practice clinicians group practices institutions.
B S shows is that they are incredibly excited.
You bought the long term prospects of students on market.
This is significant opportunities to grow their business.
Investing in an expanding their specialty treatment offerings.
The photos see opportunities to enhance their capabilities optimize their workflows.
Digitize their offices.
Wow.
Ah confidence in the long term.
They remain mindful of the short term had been driven by increased interest rates dipa.
The possibility of a recession.
General economic uncertainties and call it a global geopolitical risks.
We continued to monitor patient traffic an appointment bookings for specialty procedures.
So far patient demand has been resilient.
But we do expect continued volatility going into 2023.
Why are the market remains dynamic.
It's important to point out that in Vista continues to deliver despite the volatile global supply chains geopolitical challenges and persistent inflation.
A culture underpinned by Denton this the business system E B S.
Enables us to continuously.
Liver for our customers and shareholders.
We leverage E B S principles daily to deliver our commitments.
We quickly identify potential risks and opportunities and deploy E. B S two's, such as daily management or problem solving process I'm value stream happy.
<unk> E supply chain, uncertainties improve our operational capabilities reengineer existing processes.
Continue C drive productivity.
Ability to produce results in the face among certain times is a direct reflection of our continuous improvement and customers century culture.
Or a strategic differentiation.
And the continued transformation of our portfolio.
Before I turn it over to our to discuss a fourth quarter results in more detail.
Want to provide more color on the progress we've made in 2022.
As a long term priorities of accelerating an outgrowth.
Expanding our operating margins and transforming our portfolio.
And 20 twenty-two we.
We made significant progress and driving commercial execution across our portfolio.
Core growth in our orthodontics business was over 15% and 20 twenty-two as a spark continues to deliver industry leading performance.
We are pleased to announce that to get every dollar Teutonic partners. You haven't started over 300000 spark cases around the world.
2022, with nearly doubled the number of active spot doctors and further improve utilization rate of individuals conditions.
Leveraging R E. B S tool kit this systematically manage a funnel of new clinicians and develop standard war two flawlessly onboard <unk> customers.
The spark is widely seen as the leading nuclear liner system in the market.
Discipline execution allows us to capitalize on this promise.
In addition to spark we also salt low single digit code growth in our tradition or brackets and wires business in 2022.
This growth was despite relatively reach a performance in China, and Russia, which normally deliver all sides growth for our traditional brackets and wires.
A relative outperformance in brackets and wires is driven by our commitment towards hedonic.
Alrighty to bring effective innovation to mature industry.
Ah Damon at my product continues to go rapidly by providing orthodontists with more.
Precise finishing capabilities, allowing them to reduce share time and improve offish office efficiency.
We have developed a standard tools to bring customers true the ultimate journey Ah support them be targeted and effective education.
Outside innovation, we are focused on a commercial execution.
With over 40% of our brackets and wires business in emerging markets. It is imperative that we reinforce our position as the partner of choice for new orthodontic professionals in emerging markets.
To that end we.
We were pleased to be the only multinational supplier to be chosen during China's orthodontic volume based procurement process.
This is a testament to the valued at all <unk> brackets and wires solution provides in all markets.
Long term, we are confident in our broad.
Or to Donicker offerings, a portfolio is differentiated and uniquely position.
Both benefit from and helps drive further expansion of what's adonic treatments globally.
Turning to our solutions for implant base tooth replacements with delivered solid myths single digit code growth and 20 twenty-two despite significant volatility in China, and Russia to normally important growth drivers for this business.
That's by strong priority performance in Europe , a premium business continues to perform well.
Benefited from our focus on providing comprehensive solutions for implant base two replacements and as a result, you seen strong growth in both digital solutions and regenerative materials.
The osteogenic Spiciness that we acquired in July of 2022 is off to a strong start.
This business is now 40, any graded and it's starting to benefit from an E. B S and focus on execution in management.
You expect our strike implant franchise to continue to grow at above the market.
Critical to our long term strategy is our commitment to expand operating margins truth disciplined execution and a focus on continuous improvement.
As discussed in 2022 with deliberate of 40 basis fond of expansion of adjusted EBITDA margins.
Yeah, Chief these results while may.
Significant investments in a long term growth and also facing both meaningful inflation as well as intermittent supply chain disruptions.
Each of our businesses are driving improvements and productive at T systematically aligning our prices and driving down operational costs.
In addition, it continued to optimize our organization or the structure to improve the customer experience, while creating more flexibility to deal with uncertainties in the macro environment.
During the second half of 2022, we eliminated more than 30 million dollar off the structure cost and continued to look for ways to further to streamline our organization.
2022 was another important year in the transformation of our business.
With further shifted the portfolio to higher growth and more profitable segments of dental where we can create and sustain competitive advantage.
In 2022 with benefited from the divestiture of a slower growing lower profitability treatment units.
An instrument business.
This transition both improve our overall growth and profitability.
<unk> exposure to more secret cause segments after dental market.
Given the economic uncertainty the transformation of our portfolio.
Puts us in a much stronger position as we move forward.
In the past year, we close to a strategically important acquisitions that positions us to drive digitization of the dental market.
Exposing us to higher growth segments within the industry.
As promised our acquisitions delivered more than $40 million revenue in 2022.
Enable us to accelerate core gross longterm.
Why do we are excited about the strategic moves that we have made today.
See opportunities to further improve our portfolio.
We are committed to pursuing an active but disciplined approach to capital deployment.
We utilize an E b S driven M&A approach to manage a robust pipeline of inorganic partnerships and he is investment in our activity cultivating new opportunities.
I will now turn the call over to Howard to go through our fourth quarter financials and provide more details on our segment performance.
Thanks Amir.
Ah reported basis fourth quarter sales increased 1.4% to $660.8 million.
Sales in the quarter were negatively impacted by 4% due to foreign currency exchange rates, while acquisitions contributed 3.1% of growth in the quarter.
Our poor sales growth was 2.3% compared to the fourth quarter of 2021.
Our year over year growth reflects solid mid single digit growth in our specialty products and technologies segment offset by a slight decline in our equipment and consumables segment.
Geographically are developed markets <unk>, 3.5% driven by very strong growth in western Europe , offset by more modest growth in North America.
Taken together, China, and Russia declined significantly in queue for while other emerging markets crew low single digits.
Our fourth quarter adjusted gross margin from continuing operations was 56.2%.
A decrease of 90 basis points compared to the prior year.
The decrease in gross margin was driven by a combination of inflation and strong growth of sparked somewhat offset by pricing.
Our adjusted EBITDA margin for the quarter was 29%, which is 240 basis points higher than Q4 of 2021.
The expanded margins were primarily driven by the E B S costs and productivity initiatives undertaken by our team throughout 2022.
In queue for we took further actions to streamline our organization to ensure that we can continue to expand margins while investing for growth.
Our fourth quarter adjusted EPS was 52 cents from continuing operations compared to 46 cents and the comparable period of the prior year.
This represents a 13% increase year over year.
Core revenue in our specialty products and technologies increased 4.5% compared to the fourth quarter of 2021.
Strong growth in Western Europe was offset by significant declines in China and Russia.
Within the segment Orthodontics business grew more than 15% year over year in the fourth quarter with spark continuing to outperform.
Our bracket and wires business grew low single digits in North America, but was dragged down by double digit declines in China, and a more modest decline in western Europe .
Despite the macro volatility we're confident that our orthodontic business continues to outperform the market clinicians value our comprehensive orthodontic portfolio and our focus on the orthodontic specialist.
Our implant base tooth replacement business declined modestly in Q4 of 2022 versus Q for the prior year.
This decline was primarily driven by double digit decline in China, and Russia combined.
Outside of Russia, and China, we delivered positive low single digit growth led by solid performance in Europe .
Ah regenerative business, including the newly acquired Osteogenic business continues to accelerate.
For the fourth quarter, our specialty products and technologies segment had an adjusted operating profit of 20%.
This was down 210 basis points versus the same period in the prior mirror in the prior year, primarily due to spark and our continued investment to drive longterm growth as well as a decrease in sales in China, and some head currency headwinds.
Turning to our equipment and consumables segment core sales in queue for decreased by 0.9% compared to Q4 of 2021 the.
The decline in sales was due to the continued slowdown and equipment volumes offset by very strong growth and our consumables business.
Our traditional imaging business decline double digits in the quarter with lower volume across most geographies.
Lower growth was partially attributable to the strong performance in Q4 of 2021, driven by pent up demand as well as a macro headwinds including inflation.
Rising interest rates COVID-19 related challenges in China and geopolitical uncertainties.
Further we continue to de-emphasize nonstrategic geographies and concentrate our efforts and markets, where we can build a longterm sustainable competitive advantage.
This allows us to accelerate both growth and margins over the long term.
Our new Texas, I O S business accelerated in the fourth quarter and we continued to make investments to set this business up for long term success.
Remain focus on expanding our reach and optimizing our global distribution.
Clinicians remained very interested in investing in Iowa solutions to help them improve their overall workflow <unk>, Iowa solution is well positioned to outperform the market and we expect this business to be a contributor to our core growth in 2023 and beyond.
On the consumable side, a restorative and Endodontic business grew more than seven per cent in queue for with strong growth in most markets.
Our team continues to execute and we are well positioned to continue delivering results at or above market growth.
As expected or infection prevention business increased double digits in Q4 2022 compared to the softer Q4 of 2021.
The pandemic related spikes in demand and inventory levels have now normalized and we believe moving forward. This business will grow more in line with longterm market trends.
Equipment and consumables adjusted operating profit margin was 27.2% in the fourth quarter of 2022 versus 21.4% in Q4 of 2021.
Our continued strong margin improvement was driven by a favorable salesmen and improved pricing as well as our relentless focus on driving productivity.
As we move into 20 twenty-three inclusion of our more fully integrated iOS business will further support the growth of our equipment and consumables business, while also positively contributing to our profitability.
And the fourth quarter, we generated free cash flow of $95.1 million and we ended the year with over $600 million in cash.
For the year are free cash flow was markedly lower than prior year due to several factors, including the elimination of cash flows associated with this continued operations one time transaction costs associated with our acquisitions and divestiture the timing of tax payments and higher capital expenditures to support our longterm growth initiatives.
<unk>.
As discussed in our last earnings call. We remain committed to our mid term goal of delivering free cash flow in excess of net income.
We made significant progress in the fourth quarter, driven primarily by sequential improvement and working capital.
As we move into 20 twenty-three remain focused and driving free cash flow, while continuing to invest in our longterm growth initiatives.
Overall, our balance sheet remains strong and we have ample liquidity and the flexibility to pursue appropriate longterm investments.
I'll now turn the call over to a mirror to provide an update on our 2023 outlook as well as some closing comments.
Tanks out looking forward, we remain confident our strategy in longterm outlook.
The dental market as attractive Underpenetrated and has a strong growth trends.
Our business is a strategically differentiated and we have a proven track record of execution.
Yeah of conviction in our ability to deliver on our long term financial targets of accelerating growth to high single digits and expanding our adjusted EBITDA marches to 24, 22.5% by 2026.
While we remain confident in our long term targets.
Awesome mindful after Molotov macro environment.
Despite the resilience of the dental market, we expect 20 twenty-three global demand to be choppy.
Mountain expectations for a recession are likely to be heavy in the minds of both patients and clinicians.
The geopolitical situation related to the Ukraine conflicts and the associated risk of energy crisis in Europe , as well as China, <unk> Covid related uncertainty and V consumer sentiment will create additional volatility.
In light of this macroeconomic backdrop for 2023, we expect to deliver low single digit code growth and adjusted EBITDA marching yourself over 20 per cent.
You expect a call growth to accelerate throughout 20 twenty-three as China stabilizes that'd be benefits from the impact of acquisitions.
Marching shuttle also anticipated to accelerate through all 20 twenty-three actually benefit from the streamlining of our organization our cost reduction.
As well as the shift.
Portfolio mix toward higher margin products.
A full year guidance reflects a balance fee of managing to a more volatile economics and environment.
Continuing to invest for long term growth expanding our margins and transform in our portfolio.
We're peace without 2022 results.
Maine optimistic about the future of the dental industry.
Moving forward a priority is to remain the same.
We will accelerate growth.
Expand our operating margins and transform our portfolio <unk> active.
Active and disciplined capital deployment.
Our intention is to be the leader in orthodontics.
Providing the differentiated in any great <unk> treatment options, including brackets and wires and clear aligners.
A comprehensive offering empowers or to <unk> to provide the best treatment modality for each and every patient.
You have a further accelerate our growth in implant base to a replacement by leveraging our premium implant franchise to provide full solutions at cross the implant <unk> include in regenerative prosthetics offerings by utilizing our print.
Mia diagnostics and digital capabilities.
We will continue to grow and broaden access to highly profitable and differentiated consumable business.
Finally be able to leverage our shrimp and imaging and diagnostics to bill digitally integrated workflows from diagnostics to treatment planning to execution for a clinical partners.
Given the near term macro uncertainty, we will lean heavily and R. E B S culture.
To both improve execution drive efficiency and improve cost.
We see significant opportunities to invest organic and inorganic Clinton the dental market.
We have the financial flexibility and management focus to further accelerate the growth trajectory via a disciplined capital deployment and inorganic investments.
The private should make this quota and in 2022 is a direct reflection of our culture center and continuous improvement and commitment that'd be have to our customers and the dental industry.
Our purpose is to partner with dental professionals to improve <unk>.
Patients lives by digitizing.
Personalizing democratizing dental care.
Site, it's about our continued growth journey 2023 and beyond.
Thanks, Amir that concludes our formal comments, we are now ready quick questions.
Thank you.
At this time, if you would like to ask a question. Please press star one on your Touchtone phone.
If you find that your question has already been addressed you may have a milk.
Q at any time by pressing star Q.
Once again that is star one to ask a question.
And we'll take our first question from like.
First of all your.
<unk> no problem.
Hey, good afternoon, Mayor and Howard Ah apologies in advance for any background noise here, maybe just to start a <unk> pretty dynamic environment right now as you alluded to in your opening remarks, but the dental consumer in the U S and most of Europe seemed to help you today and I think a lot of us were fearing there've been others and dental and talk more positively about demand visibility improving.
Implants, north or outside of China, and Russia seemed like an okay spot based on your comments for today I I know it might not be perfect physical disability, but you're you're really close to the end market as you alluded to and really just like to start with getting your impression if you could expand further around your prepared remarks on the health of the dental consumer in the U S and Europe and their willingness to spend on discretionary dental procedures.
Yeah. Thanks, Jason what we have seen is the patient demand.
Remains resilient.
Well all the reviews that we have done. This is said we have what we have seen.
It.
Bookings remain the same and a specific amount of specialty businesses. There is continuity around patient traffic.
The challenges and the macro perspective is to continue to see softness in China that it started in two four and we have seen that to continue in Q1.
Volatility that'd be C in Russia seems to persist.
A large image and equipment is also.
And they are a tremendous amount of pressure from <unk>.
Investment by large dsos opening new offices.
The interest rates and inflation related.
We expect you want growth to be muted, but as we go forward through the year, if we're gonna see it faster growth through 2023.
In the long run it feel confident that.
This industry has tremendous amount of runway.
And our capabilities to manage through some of these volatilities have proven commodity sell out is stronger as we get to a more of a stable situation.
Alright, thanks for that maybe.
Maybe then on if I tip it over to that part of the guide here, Yeah, I thought that you've done margin guide here it looks pretty pretty solid guys. Considering you have to prop headwind from D V P.
How would would you be able to help us think through the magnitude of those pvp headwinds you're absorbing what EBITDA margin might've been without those pressures and then I'll also along that margin pain can you speak to where we're at with spark in terms of its impact on Utah margin profile and twenty-three whether you think about that in absolute terms or in terms of incremental margin sorry for thrown a few in there.
Together, but thanks again for taking the questions.
No problem, Jason so so as it relates to Bvt, Let me go ahead, and and you know <unk>.
Provide a little bit of quick framework here.
For us our China business on the specialty side is about 100, <unk> actually a little bit over $175 million 100, or over $100 million and the implant side and over $75 million on the or suicide.
Remember that most of our business. We focus is on the private sector. That's about 70 per cent of our collective business there and that's a faster growing segment, you know, we see that as being more opportunities to differentiate with innovation.
V V. P is primarily impacting the public sector and so of course the goal of B B P. As we know is to reduce treatment costs and therefore, you know expand access overall.
Uhm Dsos will certainly be involved in it as well and you know at this point, we do expect a little bit of spill over into the private sector. So as it relates to the outcome of B B P. M, where we sit today you know implants, it's a national program. The bidding is complete and you know it's being currently rolled out in Vista.
Our branch <unk> have won in both categories as well and so we expect that it's gonna be reasonably favourable for us as it relates to being a selected Bender uhm, but recognizing of course that the pricing on that side will probably be about a 50% drop.
On the ortho side much smaller so far b B P. S. Only impacted about 15 provinces, we think that it's less than 10% of the collective market. There we were as a mere said in the comments the only multinational selected to win on the bracket and wire side, we think that the pricing there is gonna be a head.
<unk> of about 35% roughly and you know in both these cases, where reasonably pleased with the outcome certainly being selected there.
Your next question around margins, maybe I'll address the spark question Spark is currently in investment mode. Clearly, we're seeing the momentum and are very encouraged by our growth on that business and so we will continue to invest their for the duration of 2023, I think we're gonna continue to be an investment mode.
Clearly that that business is dilutive to our <unk> margins today, we think that longer term that we can get the margins up above fleet average, but today. It is dilutive and will be likely for the duration of 2023 as well. The one thing that we have seen that that certainly is very encouraging as it relates to.
<unk> is that you know a quarter over quarter sequential productivity in the automation investments are paying off and so we're continuing to see that improved quarter over quarter.
Okay, great. Thanks, maybe just real quick I mean, any any sizing I'm expected beep margin impact from B P. P.
I think you know if you if you do the math on that I'm Gonna say, it's roughly about 70 basis point, maybe a little more than that could be in so that's you know take it somewhere around 20 plus million dollars.
Alright, thanks, so much very helpful.
Yep.
Thank you.
Question will come from Elizabeth Anderson.
<unk>.
<unk>.
Hi, guys.
Question I guess my first question is.
Maybe if you could talk a little bit more about the underlying trends that you're seeing them in the first quarter. So far I know that you you just I've actually talked about China, but maybe focusing more on North America and Europe .
Yeah happy happy to do it. Thank you that's the best.
We have to talk a little bit second by segment.
<unk> will be obscene that continuation of expansion of our spot business remain consistent.
Quarter to quarter that gives you a little bit of a feel to forward. This to three we have.
About 25%.
Step up and we're not seen anything that changes are real so far and that <unk> <unk>.
<unk> on wires in North America, and Europe continued to perform.
In emerging market as specific the China, and Russia, we haven't seen yet any major trance or change of trajectory as we saw in queue for giving you a little bit of a field, China just double digit decline for us in two four on Russia was very volatile quarter to quarter and.
And that has been really change in walking through January .
And the implant side oxide those two geography's, we have they have performed well and continue to perform well and it is get an operation of commercial execution is getting better as you recall. If you go back a couple of years later Ah ago, we decided that we have to make some.
<unk> and changes in our go to market and activities are on commercial execution in Europe .
I'll have to come off that has been a continuous improvement we're doing the same thing in North America, and the U S and we see with those changes were gonna see it continue progress as we move forward 220, 23, a consumable business.
High single digit growth in two four and really off performed the market.
How it talks about the Ips and that business now we have a lot better visibility on the selling a sell out everything that's going to be a positive approach as we move forward.
And the last part of our business, we haven't yet seen any change in the imaging side of our business as we walk into the queue want but I want to highlight a couple of things about the images.
About one third of that business is services and there's a new a T business and continuation of what we have been doing in the past several years and I O. S is Howard mentioned, we have seen a step up quarter after quarter and that his step up continues to up to one putting all of that together.
What we expect it slower rap throughout the year specific at the front part of the year and add certainty come into focus in China of you expect to see higher go higher margin has we'd walk throughout the year.
That's very helpful. Thank you I guess.
Awesome, a curious about your comments.
[noise] for Howard about the sensitivity of the operating margin guidance that you just gave us to this sort of macro garage you know obviously with the low single digit card guide if we were to get to that.
How do you see that potential flexibility there.
Yeah. So Elizabeth we we're always looking for continuous improvement even when we have you know softer top line. We're gonna continue to to E. B S and look to improve our efficiencies productivity as well as a mere indicated in the prepared comments. We we took some pretty substantial actions even on the structural sir.
<unk> and the second half and continued to fine tune that in the fourth quarter as well. So you can see and expect us to do you know what we need to operationally still protecting obviously the longterm growth drivers for US we mentioned that in the context of Sparks certainly, but in other areas, where we have an ambition that will drive growth further in the future we're going to <unk>.
<unk> invest their but as it relates to operations and ensuring that we get the productivity gains certainly that will be a focus a fundamental tenet of V. B S and one that we continue to deploy year over year.
Got it thank you so much.
Thank you.
Thank you.
Our next question will come from Jeff Johnson.
Your line is open.
Thank you good evening guys two things stood out to me in the corner, guys and and and I want to ask on both of them. One your western European Grill strong again for the second quarter in a row that I think are three your compound annual growth rate so not even a stack grow with just your your compound annual growth rate over three year period now up into the upper single with that low double digits.
I I think over the last couple of quarters that acceleration sounds like it's time pretty well to some D. S. L. When you had with spark over in Europe . So what I need is there any <unk> what can you say about the underlying market I guess X Park in Western Europe is is the consumer demand there for dental services still salad or is it more outperformance on your part and two.
How to think about that European growth and once you anniversary through a couple of those D. S. L wins in the back half of this year does does that come back down to that normalize to kind of add and market growth or can you sustain kind of that elevated growth.
Thanks, Jeff So we <unk>. The simple answer is a lot of it has to do with the execution and and but let me just walk you through y.
We feel confident that growth is gonna continue.
As you recall, if you go back and I'll walk you through both the plan as well as the auto part of our business.
Is it very systematic approach and geography by geography training, a small number of or to donna's carrying them to ramp and then we move to the next step out in the next to the next and countries such as Spain became a really a poster child for us.
How do you go systematically change the business and create a sustainable growth over time, you mentioned D. S. So yes. It is a factor, but it's a lot broader hardouin invested and use a lot broader than dsos did it get the number of individuals practitioners that they have signed up to a program and they'll wrapping up that is a very wide.
Implementation and execution.
And it wasn't only the product is training education after sales support as soon as flip it called digital clinical success capabilities that'd be put in place. We took that model. We went to the next geography envy to replicate it.
<unk> to France, and so on and so forth M. You're beginning to see that momentum taken shape geography by geography, and we have a lot more room to go in in the European side in a specific way on <unk> Ah Bracken on water had always performed well. We all are we set a great relationship with orthodontist in Europe .
And that has given us the opportunity to open door to show them additional capabilities to make them successful have you have an incredible team underground that also really plays an important role in partners that really to see this company has their own company. They see the product they have a responsibility.
Sure other peers, what products can do an implant side that you'd call I mentioned that before about two years ago really change our go to market activities. We had some challenges are on our customer experience consolidated a lot of our for the management contract activities just to <unk>.
Give you a feeling of two years' time periods behind closed about 350 people in Prof and rebuild it in <unk> Center based on continuous improvement Daily management, It's standard for the consolidated with 15 different languages really change the model of our customers.
Spinning is from a local one to want to have more of a broader holistic approach and our plan is an Oscar continued to perform every quarter positively.
I'm always to the consumer side, we have such a small share in the consumer boat in Europe .
Team has done a great job, creating a heat map again using the standards of E. B S take a look at geography by geography.
<unk> with distributors understanding dynamic under market, putting training and support in place and we have continued to gain momentum and getting <expletive>. So what you see in Europe is it raw performance across all of our businesses and we are confident that that is going to continue to grow weed.
Replicating some of those capabilities in U S and we were hoping that you will see the same moment to me U S. As we go to 2023 and 2024, hopefully that gives you a little bit of perspective on our approach and we are confident that we make those comment about 2025, 2026th you feel confident.
That <unk> that you've taken is going to pay off in the long.
Alright, that's very helpful. Thank you in there and then the other number that really stood out to me is that <unk> number up 7% in those two businesses you know unless I'm missing something in my checks I don't think the market's growing nearly that fast so how how much of that is share gains per you versus how much is pricing and it seems like that business.
Stepped up at least if I use your your E. M C margins as a proxy that your pricing efforts really kind of you know picked up in the second half of 22. So how's your anniversary some of those mid 22 price increases how are you thinking about price increases in twenty-three can you support the same <unk>.
Will a price increase again and twenty-three or just how should we think about that thank you.
Great. Let me just answer the first part of the question again I want to give you a little bit of perspective background to be <unk>.
Look up what we have done in the past six months and what is it in the next 12 US. It's just a revamp of that business complicity high margin really well executed bell differentiate it we think the consumer will business has an opportunity to be a major factor in outgrowth in March and profile of going for and comb.
<unk> exactly what you touched on price and why we we feel confident that prices that we have put in place is not across the board is not geography by geography's various specific and talk has been the iPad innovation. When we have had differentiation and waiting in 2023, we're gonna have an old sudden.
We think it's gonna be a little bit muted.
<unk> not count on across the board price increases, but we have and continue to see a price increases as I mentioned or on innovation and then we have to differentiate it. So we don't think this is going to be a radical change going for from what we have seen in the past.
Confident that that mid single digits to high single digit in a consumable and now that'd be have Ips and I'm more of a balance for might be something that we can maintain going forward in the lava.
Thank you.
Thank you.
Our next question will come from John Block quick default. Your line is no problem.
Thanks, guys good afternoon.
How old are your maybe I'll just start with like a rough branch on some of the moving parts. So.
<unk> <unk> about a 300 basis point contribution.
To revenue growth in 2022.
You know, maybe if you want to comment on that but more importantly is that a good it sounds drink for 2023, maybe 250 to 300 bench to revenue growth.
Maybe you could talk about the contribution from price this year a mere based on your comments just suggest question maybe that lands right at 100, <unk> and then you know the all set right V. V. P is that 100, perhaps the other way imaging is that 100 Pepsi other way you know maybe if you could just talk around some of those major cat.
Categories headwinds the tailwind is there anything else that I'm not you know supposedly calling out to sort of arrived without the low single digit core revenue growth. Please.
Yeah. So no no no problem John as it relates to spark you know what we called out was that our innovation spark being included in there with generate in excess of 200 basis points I think that we've done well ahead of that in 2022 and.
In 2023, we anticipate spark as well as the some other innovation to help drive over 250 basis points of that growth top line you know keep in mind that when we talk about margin headwinds and things like that that spark is again currently dilutive to our fleet average as it relates to margins and so we continued to.
[noise] work through that but longterm, we expect that to be north of the fleet average and so there was a little bit of a counter impact there as it relates to pricing. This year, we had in excess of 150 basis points for the full year of pricing a lot of that coming is Jeff had asked earlier coming by way of the equipment and <unk>.
T mobile business and so we think that there will continue to be a tailwind associated with pricing broadly now of course, that's before B B P and as we indicated earlier, we think that'd be b P can be upwards of $20 million of impact that obviously, we'd be both the top line and a margin impact so that probably is about 70.
Basis point going the other way as well and so hopefully that provides a little bit of the map and the modeling for Ya.
That's crazy, maybe it's a quick tack onto that Howard and that was great color. Yeah. When we think of <unk> you know going into 24, obviously that it's hard to normalize. The one on imaging is your imaging business. You know you were going to focus on.
Call. It some core opportunities you should've reset the base, maybe two H 23 is a good way of thinking about it where the the drag sort of diminishes at that point in time the back half of twenty-three maybe that's a component of the accelerating revenue growth throughout the year <unk> got a quicker question.
Yeah, John you're absolutely correct. So we took some very specific action that has started the two two of 2021, we decided that we are just going to participate in areas that we are really are differentiated and we can ask for a price premium and also it was more of a any grade it.
The overall offering that we have that and compete in an appointment solution.
So we have continued to that process in two three and two four and and we think that you have seen the performance in the marching out of consumable and equipment set a good part of that is attribute it to the changes that we have done and and redirect an investment redirecting our resources to.
Area that has pyatt gross margin over time, but your assumption is correct that we expect this business to kind of normalized and the second half of this year and you base and you a starting point in 2024, but I wanted to add this too I I mentioned that before that one third of this business is.
Services and I need to two business that is gonna continue and the I O S is gonna become part of our core growth. Each you two were seen momentum. That's another add to this business have you think the market is underpenetrated, we have a really good product you have a great distribution relationship.
Brand and I think that's gonna be an add on that'd be <unk> in order to be able to breathe. This business back cough in a different format that we have had it in the past.
Got it got it very helpful.
Second question that admittedly some annoying modeling questions, but when you guys say greater than 20 per cent of adjusted EBITDA margin for 2023, I mean, I think he did 20.
20.1 in 2022 and so.
<unk> are you, saying what are you, saying modestly off are you, saying, all but less than the 50 to 75 bps that you may be usually target on an annual basis and then the last one would just be you know the accelerating revenue growth to throw a dart at a starting point clearly it's gotta be pretty modest in one to you, but it is still in the green to start the year. Thanks.
<unk>.
Maybe I'll I'll answer the the margin expansion question first in and first of all John . It is you know I mean, when we when we spun and became a public company. We we had committed to 50 basis 50 to 75 basis points of margin expansion I think over the three plus years that we'd been in public company we did.
Livered over 450 basis points and so certainly you know margin expansion is one of the things that we look at and remain very focused in on that said I mean, there's there's quite a bit here as it relates to I'm packing a lot of the macros and the uncertainty going into the year and so we want to be prudent as as it relates to what will you lay out for the.
EBITDA margin and so we did 20, just north of 20% in you know 2022 or committing to do that you know at a minimum here in in 2023 as well.
Okay, that's very cute and.
And then maybe at your second question as it relates to Corps, we're gonna we see that our growth is going to accelerate through the year Q1 is is challenging I mean with all that's going on in China, and Russia, and the macros I think that you know, we wanna be prudent and say that.
It it will build throughout the year, we expect you for it to be very strong it's not gonna impact our normal seasonality you know, we see Q2 and Q4 as being the largest revenue quarters of the year, but certainly Q1's gonna be is going to be challenging yep, just wanted to get that out there. Okay. Thanks very much guys.
Right it.
Hey, Sean.
Thank you.
Next question will come spring branch with Goldman Sachs Nobody knows no problem.
Hi, good afternoon. Thanks for the questions maybe just building on John question, just in terms of a mirror, how you're thinking about the the longterm targets cause you're thinking around timeline changed at all for both realizing the accelerated growth as well as margin improvement just given the near term uncertainty.
In the market and you know I I wanted to get a better sense of kind of what you're looking for to drive improvement over the course of 2023.
And China's probably a major factor in that but some of the pressures that we're seeing on equipment. You know the V. B P impact you know those take a little bit longer to kind of annualize. So if there's any other kind of specifics that you think that you know you want a highlight in terms of kittens over the course of the year that'd be helpful.
Yeah. Thanks, Thanks ninth.
We put those targets in back and choose one of.
2021, we had made a series of assumptions assumption that we are gonna meet some challenges along the way are clear a liner is gonna continue to grow at three X target that'd be put out there. We knew that margin is gonna improve over time nothing that we have seen in the past 12 months really.
Has changed our view that those targets that'd be communicated and 2026 high single digit 20, 25% north of 22.5% nothing that'd be as soon as change our view towards that and momentum that'd be sure in 2022, specifically with some of the challenges in too.
Four despite all of that communism.
Producing resolve that we ever produce gives us a confidence that fundamental capabilities that exist. In this company, Iran continues <unk> improvement remains alive and well so walking into 20 twenty-three regard exactly as your high that is <unk> V. B P challenges rush.
China, we have contemplated that we make the assumption that these lingering issues how can I stayed with us they're not going to quickly go away with develop a set of scenarios from best case worst case scenario, a soft landing and what we think that mid single digit growth.
Ah Bob 20 per cent of EBITDA is something that is achievable do we have a upside we were fee you'll see as we go through the year to see how the market evolves, but based on visibility that we have today based on the information available today, we think targets out really achievable the continuous improvement cost reduction improve.
Men in our margin is just in our D. N. A we're gonna continue to do that regardless of what we see in the environment.
And we have plenty of opportunities just saw that what we did with Howard communicated. The two four will have a year ahead of us plenty of opportunities to become better than what we do to build a better relationship with our customer to improve our commercial execution marched down the path long service strategy of digits.
<unk> democratizing personalized in this industry, making meaningful difference and we've committed to it we have methods and tools to be able to execute on it.
Alright, great and I think with that one <unk>, sorry, I think with that right now thank you <unk> yeah.
Yeah really really appreciate it so thank you very much I appreciate your interested in Vista, and we look forward to connecting with you it's future events. Thank you.
Thank you ladies and gentlemen.
Mr Holdings Corp, Fourthquarter 2022 earnings results Conference call, Okay first of all.
Or.
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