Q4 2023 Envista Holdings Corp Earnings Call

February 7, 2024

Operator: Please stand by, your program is about to begin. My name is David and I will be your conference call facilitator this afternoon. At this time, I'd like to welcome everyone to Envista Holdings Corporation's 4th Quarter 2023 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise.

Program is about to begin.

Okay.

Moderator: My name is David, and I will be your conference call facilitator this afternoon. At this time, I'd like to welcome everyone to Envista Holdings Corporation's fourth quarter 2023 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, press star, then the number one on your keypad. If you would like to withdraw your question, please press star and two on your telephone keypad. I will now turn the call over to Mr. Stephen Keller, Principal Financial Officer of Envista Holdings. Mr. Keller, you may begin your conference call.

David: My name is David and I will be your conference call facilitator of this afternoon at this time I'd like to welcome everyone to invest our holdings Corporation's fourth quarter 2023 earnings results Conference call.

David: 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 Star then the number one on your keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star then the number 1 on your keypad. If you would like to withdraw your question, please press star and 2 on your telephone keypad. I will now turn the call over to Mr. Stephen Keller, Principal Financial Officer of Envista Holdings. Mr. Keller, you may begin your conference call. Good afternoon, and thanks for joining us.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star then the number 1 on your keypad. If you would like to withdraw your question, please press star and 2 on your telephone keypad. I will now turn the call over to Mr. Stephen Keller, Principal Financial Officer of Envista Holdings. Mr. Keller, you may begin your conference call.

David: If you would like to withdraw your question. Please press star and two on your telephone keypad.

David: I will now turn the call over to Mr. Steven Keller Principal financial officer of in Vista Holdings. Mr. Kelly You May begin your conference calls.

Operator: Stephen Keller, Principal Financial Officer of Envista Holdings. Mr. Keller, you may begin your conference call.

Stephen Keller: Good afternoon and thanks for joining the call. With me today is Amir Aghdaei, our President and Chief Executive Officer. I want to point out that our earnings release, the slide presentation supplementing today's call and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call, are all available on the Investor section of our website, www.envistaco.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.

Stephen Keller: Good afternoon, and thanks for joining the call. With me today is Amir Aghdaei, our President and Chief Executive Officer. I want to point out that our earnings release, the slide presentation supplementing today's call, and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call, are all available on the investor section of our website, www.envistaco.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. During the presentation, we will describe some of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance.

Steven Keller: Good afternoon, and thanks for joining the call with me today is our myriad <unk>, our president and Chief Executive Officer.

Stephen Keller: With me today is Amir Agdai, our President and Chief Executive Officer. I want to point out that our earnings release, the slide presentation supplementing today's call, and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the investor section of our website, www.envistacode.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.

Steven Keller: I want to point out that our earnings release, the slide presentation, supplementing today's call and the reconciliations and other information required by SEC regulation G relating to any non-GAAP financial measures because I. During the call are all available on the investors section of our website www.

Steven Keller: Dot com.

Steven Keller: 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.

Stephen Keller: During the presentation, we will describe some of the more significant factors that impacted year-over-year performance, the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the 4th quarter of 2023 and references to period-to-period increases or decreases in financial metrics are year-over-year. During the call, we may describe certain products and devices that have applications submitted and pending certain regulatory approvals or are available only in certain markets. We will also make forward-looking statements within the meaning of the federal security laws, including statements regarding events or developments that we believe, anticipate or may occur in the future.

During the presentation, we will describe some of the more significant factors that impacted year-over-year performance, the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the 4th quarter of 2023 and references to period-to-period increases or decreases in financial metrics are year-over-year.

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

Stephen Keller: Unless otherwise noted, references in these remarks to company-specific financial metrics relate to Q4 2023, and references to period-to-period increases or decreases in financial metrics are year-over-year. During the call, we may describe certain products and devices that have applications submitted and pending certain regulatory approvals or are available only in certain markets. We will also make forward-looking statements within the meaning of the federal securities laws, 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. Actual results might differ materially from any forward-looking statements that we make today.

Steven Keller: Unless otherwise noted references in these remarks to company specific financial metrics relate to the fourth quarter of 2023.

Steven Keller: And references to period to period to period increases or decreases in financial metrics are year over year.

During the call, we may describe certain products and devices that have applications submitted and pending certain regulatory approvals or are available only in certain markets. We will also make forward-looking statements within the meaning of the federal security laws, including statements regarding events or developments that we believe, anticipate or may occur in the future.

Steven Keller: During the call we may describe certain products and devices that have applications submitted and pending certain regulatory approvals.

Steven Keller: Or are available only in certain markets.

Steven Keller: We will also make forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe anticipate what 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 actual results may differ materially from any forward looking.

Stephen Keller: These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward-looking statements, except where it is required by law. With that, I'd like to turn the call over to Stephen. Thank you, Stephen. Good afternoon, and welcome to Envista's fourth quarter 2023 earnings call. We appreciate you taking the time to join us today.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward-looking statements, except where it is required by law.

Steven Keller: 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 required by law, but that I'd like to turn the call over to them here.

Stephen Keller: 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 as required by law. With that, I'd like to turn the call over to Amir.

With that, I'd like to turn the call over to Stephen. Thank you, Stephen. Good afternoon, and welcome to Envista's fourth quarter 2023 earnings call. We appreciate you taking the time to join us today.

With that, I'd like to turn the call over to Amir.

Amir Aghdaei: Thank you, Stephen. Good afternoon and welcome to Envista's Q4 2023 earnings call. We appreciate you taking the time to join us today. Despite a volatile macro backdrop, we are making progress against our long-term strategic priorities. In line with our expectations, we finished 2023 with a modest sales decline for the full year and delivered an adjusted EBITDA margin of 18.1%. We improved our free cash flow generation in 2023 and delivered greater than $220 million while continuing to invest in our strategic priorities to accelerate our long-term growth and enhance our margin. Before we reflect on our performance in 2023 as well as our future outlook, I think it is important to provide some context about the current operating environment as well as the underlying demand for dental solutions.

Speaker Change: Thank you Steven good afternoon, and welcome to investors fourth quarter 2023 earnings call.

Amir Aghdaei: Thank you, Stephen. Good afternoon and welcome to Envista's 4th quarter 2023 Earnings Call. We appreciate you taking the time to join us today.

Speaker Change: We appreciate you taking the time to join us today.

Amir Agdai: Despite a volatile macro backdrop, we are making progress against our long-term strategic priorities, in line with our expectations to finish 2023 with a modest sales decline for the full year and deliver an adjusted EBITDA margin of 18.1%. We improved our free cash flow generation in 2023 and delivered greater than $220 million while continuing to invest in our strategic priorities, to accelerate our long-term growth and enhance our margin. Before we reflect on our performance in 2023 as well as our future outlook, I think it is important to provide some context about the current operating environment, as well as the underlying demand for dental solutions. Globally, the market remains dynamic, with macro uncertainty and geopolitical risks continuing to create a challenging operating environment. Conflicts in the Middle East and the Ukraine, as well as cyber security attacks impacting the North America distribution channel, created volatility in 2023. While our team has navigated

Despite a volatile macro backdrop, we are making progress against our long-term strategic priorities, in line with our expectations to finish 2023 with a modest sales decline for the full year and deliver an adjusted EBITDA margin of 18.1%. We improved our free cash flow generation in 2023 and delivered greater than $220 million while continuing to invest in our strategic priorities, to accelerate our long-term growth and enhance our margin. Before we reflect on our performance in 2023 as well as our future outlook, I think it is important to provide some context about the current operating environment, as well as the underlying demand for dental solutions. Globally, the market remains dynamic, with macro uncertainty and geopolitical risks continuing to create a challenging operating environment. Conflicts in the Middle East and the Ukraine, as well as cyber security attacks impacting the North America distribution channel, created volatility in 2023.

Steven Keller: Despite a volatile macro backdrop, we are making progress against our long term strategic priorities.

Steven Keller: In line with our expectations. It finished 2023 with a modest sales decline for the full year and deliver an adjusted EBITDA margin of 18, 1%.

Steven Keller: We improved our free cash flow generation in 'twenty, two 'twenty, three and delivered greater than $220 million.

Steven Keller: While continuing to invest in our strategic priorities.

Steven Keller: Celebrate our long term growth and enhance our margin.

Steven Keller: Before we reflect on our performance in 2023 as well as our future outlook.

Steven Keller: It is important to provide some context about the current operating environment as well as the underlying demand for dental solutions.

Amir Aghdaei: Globally, the market remains dynamic, with macro uncertainty and geopolitical risks continuing to create a challenging operating environment. Conflicts in the Middle East and Ukraine, as well as cybersecurity attacks impacting the North America distribution channel, created volatility in 2023. While our team has navigated each of these challenges well, collectively, they have moderated our near-term performance. As we move into 2024, we believe we are well positioned to navigate potential short-term uncertainties while executing our long-term value creation model. While we continued to see resilient patient traffic throughout 2023, we did see a weakening of demand for higher-end dental procedures, including both adult orthodontic cases and full arch implant restorations. Private practice clinicians and DSOs remain thoughtful about near-term investments in both equipment and clinic-level inventories.

Steven Keller: Globally the market remains dynamic.

Steven Keller: Macro uncertainty and geopolitical risks continue to create a challenging operating environment.

Steven Keller: Conflicts in the middle East and the Ukraine as well as cybersecurity attacks impacting the North America distribution channel created volatility in 'twenty two 'twenty three.

While our team has navigated each of these challenges well, collectively, they have moderated our near-term performance. As we move into 2024, we believe we are well-positioned to navigate potential short-term uncertainties while executing a long-term value creation model. While we continue to see resilient patient traffic throughout 2023, we did see a weakening of demand for higher-end dental procedures, including both adult orthodontic cases and full-arch implant restoration. Private practice clinicians and DSOs remain thoughtful about near-term investments in both equipment and clinic-level inventories. While this has created pressure in the short-term, longer-term, we are confident that patients will prioritize dental care and that clinicians will proactively invest in areas that help them digitize their practice, making them more productive and ensuring they can provide the high-quality personalized care. Despite the volatility seen throughout 2023,

Steven Keller: While our team has navigated.

Amir Agdai: Each of these challenges, well, collectively, they have moderated our near-term performance. As we move into 2024, we believe we are well positioned to navigate potential short-term uncertainties while executing a long-term value creation model. While we continue to see resilient patient traffic throughout 2023, we did see a weakening of demand for higher-end dental procedures, including both adult orthodontic cases and Full Arch In-Plan Restoration. Private practice clinicians and DSOs remain thoughtful about near-term investments in both equipment and clinic-level inventory. While this has created pressure in the short term, longer term, we are confident that patients will prioritize dental care and that clinicians will proactively invest in areas that help them digitize their practice, making them more productive and ensuring they can provide high-quality personalized care, despite the volatility seen throughout 2023.

Steven Keller: Each of these challenges well collectively there have moderated.

Steven Keller: Near term performance.

Steven Keller: As we move into 'twenty 'twenty four.

Steven Keller: We are well positioned to navigate potential short term uncertainty.

Steven Keller: Executing our long term value creation model.

Steven Keller: While we continue to see resilience patient traffic throughout 2023.

Steven Keller: We did see a weakening of demand for.

Steven Keller: Or higher and dental procedures, including both adult orthodontic cases.

Steven Keller: And full arch implant restorations.

Steven Keller: Private practice clinicians and Dsos remain thoughtful about near term investments in both equipment and clinic level inventories.

Amir Aghdaei: While this has created pressure in the short term, longer term, we are confident that patients will prioritize dental care, and that clinicians will proactively invest in areas that help them digitize their practice, making them more productive, and ensuring they can provide the high-quality personal- personalized care. Despite the volatility seen throughout 2023, the Envista team has focused on driving our key initiatives, and we continued our progress to drive long-term growth, accelerate margins, and transform our portfolio. Our orthodontic business is performing well, growing double digits for the full year. This performance significantly outpaced a global market where orthodontic case starts declined for the year. Ormco's comprehensive portfolio, including bracket, wires, and aligners, and our clear focus on the orthodontic specialists, creates a sustained competitive advantage and a more stable business with ample opportunity for long-term share gains.

Steven Keller: While this has created pressure in the short time.

Steven Keller: As long as town, we are confident that patience will prioritize dental care and that clinicians we are proactively invest in areas that help them digitize their practice, making them more productive.

Steven Keller: And ensuring they can provide that.

Steven Keller: High quality person a personalized care.

Despite the volatility seen throughout 2023, the Envista team has focused on driving our key initiatives and we continued our progress to drive long-term growth, accelerate margins and transform our portfolio. Our orthodontic business is performing well, growing double digits for the full year. This performance significantly outpaced a global market where orthodontic case stats declined for the year. Ormco's comprehensive portfolio, including bracket and wires and aligners and our clear focus on the orthodontic specialists, creates a sustained competitive advantage and a more stable business with ample opportunity for long-term share gains. During the year, we leveraged the Envista Business System, EBS, to drive our Spark growth formula and consistently added new doctors, increased case volumes with existing doctors and grew revenue per case. The Spark business delivered over 50% year-over-year growth and we are positioned to double this business by 2026. In 2023, our implant business declined low single digits, as challenges in North America offset at or above market growth in other geographies. Excluding North America, our implant business collectively grew mid-single digits for 2023.

Steven Keller: Despite the volatility seen throughout 2023.

Amir Agdai: The Envista team has focused on driving our key initiatives, and we continued our progress to drive long-term growth, accelerate margins, and transform our portfolio. Our orthodontic business is performing well, growing double digits for the full year. This performance significantly outpaced a global market where orthodontic case stats declined for the year. Allco's comprehensive portfolio, including brackets and wires and aligners, and our clear focus on the orthodontic specialists creates a Sustain Competitive Advantage and a more stable business with ample opportunity for long-term share gains.

Steven Keller: This is the team has focused on driving our key initiatives and we continued our progress to drive long term growth accelerate margins and transform our portfolio.

Steven Keller: Our <unk> business is performing well growing double digits for the full year.

Steven Keller: This performance significantly outpaced the global market, there or to Donnie Kish stocks declined 40, yet.

Steven Keller: All coast comprehensive portfolio, including bracket on wires, how liners and our clear focus on the orthodontic specialties creates.

Steven Keller: Sustain competitive advantage and a more stable business.

Steven Keller: Ample opportunity for long term share gains.

Amir Agdai: During the year, we leveraged the Envista business system, EBS, to drive our SPARC growth formula and consistently added new doctors, increased case volumes with existing doctors, and grew revenue per case. The SPARC business delivered over 50% year-over-year growth, and we are positioned to double this business by 2026. In 2023, our implant business declined low single digits, as challenges in North America upset at or above market growth in other geographies. Excluding North America, our implant business collectively grew mid-single digits in 2023.

Amir Aghdaei: During the year, we leveraged the Envista business system, EBS, to drive our Spark growth formula and consistently added new doctors, increased case volumes with existing doctors, and grew revenue per case. The Spark business delivered over 50% year-over-year growth, and we are positioned to double this business by 2026. In 2023, our implant business declined low single digits as challenges in North America offset at or above market growth in other geographies. Excluding North America, our implant business collectively grew mid-single digits for 2023. We have strong brands, a leading product portfolio, a passionate and capable team, and a dedicated community of implant specialists around the world. Leveraging our strong foundation, we have taken aggressive steps to address our performance issues in North America.

Steven Keller: During the year and leveraged in which the business is that E. B S to drive our spark growth formula and consistently adding new doctors.

Steven Keller: Increased case volumes with existing doctors and grew revenue per case.

As far as business delivered over 50% year over year growth and we are positioned to Seattle This business by 2026.

Steven Keller: In 2023, our implant business declined low single digits as challenges in North America upset at or above market growth in other geographies.

Steven Keller: Excluding North America, our implant business collectively grew mid single digits or 2023.

Amir Agdai: We have a strong brand, a leading product portfolio, a passionate and capable team and a dedicated community of implant specialists around the world. Leveraging our strong foundation, we have taken aggressive steps to address our performance issues in North America. We're making total investments in sales and marketing, training and education and community development and are leveraging a successful European leadership model and playbook, which has resulted in over 300 basis point share gains in the past three years to re-invigorate growth in North America. The North America business is expected to return to market level growth by the end of 2024. Turning to our equipment and consumables segment, we declined mid-single digits for the full year 2023. Much of the decline can be attributed to the de-emphasis of non-strategic markets and product in our diagnostics business and the cybersecurity issues that disrupted the North American distribution channel for our consumables products. Despite these isolated changes, we made progress in both businesses. In our diagnostics business, DEXIS IOS delivered core growth of over 30% for the year.

Steven Keller: We have a strong brands with leading product portfolio, a passionate and capable team and a dedicated community of implant specialists around the war.

Steven Keller: Leveraging our strong foundation, we have taken aggressive steps to address our performance issues in North America.

Amir Aghdaei: We're making thoughtful investments in sales and marketing, training and education, and community development, and are leveraging a successful European leadership model and playbook, which has resulted in over 300 basis points share gains in the past 3 years to reinvigorate growth in North America. The North America business is expected to return to market-level growth by the end of 2024. Turning to our equipment and consumables segment, we declined mid-single digits for the full year of 2023. Much of the decline can be attributed to the de-emphasis of non-strategic markets and products in our diagnostics business and the cybersecurity issues that disrupted the North American distribution channel for our consumables products. Despite these isolated changes, we made progress in both businesses. In our diagnostics business, DEXIS IOS delivered core growth of over 30% for the year.

Steven Keller: We're making toward investments in sales and marketing training and education and community development and are leveraging our successful European leadership model and playbook.

Steven Keller: This has resulted in over 300 basis point share gains in the past three years to reinvigorate growth in North America.

Steven Keller: The North America business is expected to return to market level growth.

Steven Keller: The end of 'twenty 'twenty four.

Steven Keller: Turning to our equipment and consumables Sigma because decline mid single digits for the full year 2023.

Amir Agdai: Much of the decline can be attributed to the de-emphasis of non-strategic markets and products in our diagnostics business and the cyber security issues that disrupted the North American distribution channel for our consumables products. Despite these isolated changes, we may progress in both businesses in our diagnostics business. Dexis iOS delivered core growth of over 30% for the year.

Steven Keller: Much of the decline can be attributed to the de emphasis of non strategic markets and products.

Steven Keller: In our diagnostics business and the cyber security issues, that's destructive to North American distribution channel.

Steven Keller: Our consumables products.

Steven Keller: Despite these isolated changes.

Steven Keller: <unk>.

Steven Keller: Progress in both businesses.

Steven Keller: In our diagnostics business decks.

Steven Keller: Texas I O S delivered core growth of over 30% 40 year.

Amir Aghdaei: We saw a strong volume growth and a stabilizing price environment as we exited the year. Our traditional imaging solutions performed at or above the market in our focus geographies, and we successfully launched two innovative new products. The OP 3D LX, our next-generation CBCT scanner in the OP 3D platform, features a larger field of view and expanded 3D diagnostic capabilities through seamless integration with our DTX Studio Clinic software. The OP 3D LX provides more flexibility and improved workflow, allowing doctors to augment their diagnostics, planning, and treatment of patients. On the software side, we also released the DEXassist solution to integrate AI features into the DEXIS 10 imaging software suite.

Steven Keller: We saw strong volume growth and a stabilizing price environment as we exited the year.

Steven Keller: Our traditional imaging solutions performed.

Steven Keller: Or above the market in our focused geographies and we successfully launched two innovative new products.

Steven Keller: The old P. Three D. Alex on next generation C. B C T. A scanner in the old P. Three D platform features a larger field of view and expanded three D diagnostic capabilities through seamless integration with our D T extra steel.

Steven Keller: Your clinic shuffler.

Amir Agdai: The OP 3D LX provides more flexibility and improved workflow, allowing doctors to augment their diagnostics, planning and treatment of patients. On the software side, we also released the DEXassist Solution to integrate AI features into the DEXIS 10 imaging software suite. The DEXassist Solution helps practitioners to detect six pathological findings in 2D deficiency and 2D intraoral x-rays, including caries, calculus, bolus, periapical radiolucency, root canal filing deficiency and discrepancies at the margin of an existing restoration. We now have over 50,000 computers running the DTX software globally and have processed over 200 million images on our platform. Sellout in the consumable business remained a highlight during 2023, as we performed at or above the market in most product categories and geographies. With the North American Distribution Channel stabilizing. We expect this business to grow at or above the long-term market growth rate of a low single digit globally. As expected, in 2023, our adjusted EBITDA margins declined due to lower sales, as a result of the volatile macro conditions, our strategic investments in our specialty and technology segment and our rapid growth of Spark. As we have discussed, Spark margins, while improving, are still below fleet average.

Steven Keller: The old P. Three D. Alex provides more flexibility and improve workflow, allowing doctors to augment their diagnostics planning and treatment of patients.

Steven Keller: And the software side. We also released the decks assist solution to any great AI features into the Texas 10 imaging software suite.

Amir Aghdaei: The DEXassist solution helps practitioners to detect 6 pathopathological findings in 2D dentistry, in 2D intraoral X-rays, including caries, calculus, bone loss, periapical radiolucency, root canal filing deficiency, and discrepancies at the margin of an existing restoration. We now have over 50,000 computers running the DTX software globally and have processed over 200 million images on our platform. Sell-out in the consumable business remained a highlight during 2023, as we performed at or above the market in most product categories and geographies. With the North American distribution channel stabilizing, we expect this business to grow at or above the long-term market growth rate of a low single digits globally. As expected, in 2023, our adjusted EBITDA margins declined due to lower sales as a result of the volatile macro conditions, our strategic investments in our specialty and technology segment, and our rapid growth of Spark.

Steven Keller: The Texas. This solution helps practitioners to detect six top it's a logical findings in two D deficiency.

Steven Keller: It's two D intra oral X rays, including carries.

Amir Agdai: Calculus, Bollas, pre-epical radiolucency, root canal filing deficiency, and discrepancies at the margin of an existing restoration. We now have over 50,000 computers running the DTX software globally and have processed over 200 million images on our platform. Sellout in the consumable business remained a highlight during 2023, as we performed at or above the market in most product categories and geographies, with the North American Distribution Channel stabilizing. We expect this business to grow at or above the long-term market growth rate of a low single digit globally. As expected, in 2023, our adjusted EBITDA margins declined due to lower sales as a result of the volatile macro conditions, our strategic investments in our specialty and technology segment, and our rapid growth of SPARC. However, as we have discussed, Spark margins, while improving, are still below fleet average.

Steven Keller: Calculus.

Steven Keller: The loss pre ethical radio booster seat.

Steven Keller: Root canal filing deficiency and discrepancies at the margin of an existing restoration.

We now have over 50,000 computers running the DTX software globally and have processed over 200 million images on our platform. Sellout in the consumable business remained a highlight during 2023, as we performed at or above the market in most product categories and geographies. With the North American Distribution Channel stabilizing. We expect this business to grow at or above the long-term market growth rate of a low single digit globally. As expected, in 2023, our adjusted EBITDA margins declined due to lower sales, as a result of the volatile macro conditions, our strategic investments in our specialty and technology segment and our rapid growth of Spark. As we have discussed, Spark margins, while improving, are still below fleet average.

Steven Keller: We now have over 50000 computers, Ronnie the D T X software globally.

Steven Keller: I've have processed over 200 million images on our platform.

Steven Keller: Sell out in the consumable business remained a highlight during 2023.

Steven Keller: As we performed at or above the market in most product categories and geographies.

Steven Keller: With the North American distribution channel is stabilizing.

Steven Keller: We expect this business to grow at or above the long term market growth rate of low single digits globally.

Steven Keller: As expected in 'twenty two 'twenty three.

Steven Keller: Adjusted EBITDA margins declined due to lower sales as a result of the volatile macro conditions are of strategic investments in our specialty and technology segment and our rapid growth of spark.

Amir Aghdaei: As we have discussed, the Spark margins, while improving, are still below fleet average. Our 2023 performance is consistent with our intention of balancing investments for both growth and margin improvements. We believe that the focus investments we are making in both Spark and North American implants will support our margin expansion over the long term. We continue to leverage EBS to systematically drive operational improvements, footprint rationalization, price optimization, expense controls, and structural cost reductions. Spark margins are improving sequentially as we drive down the production cost of aligners and improve our process automation. Further, we are proactively managing price across the portfolio and delivered 50 basis points of a positive price, excluding the impact of volume-based pricing. Across our emerging markets, we streamlined our organization, reduced our expenses, and concentrated our efforts in areas where we have the most sustainable competitive advantage.

Steven Keller: As we have discussed this.

Steven Keller: Spot margins, while improving although still below fleet average.

Amir Agdai: Our 2023 performances consist of our intention of balancing investments for both growth and margin improvement. We believe that the focus investments we are making in both SPARC and North American implants will support our margin expansion over the long term. We continue to leverage EBS to systematically drive operational improvement. Price Optimization, Expense Controls, and Structural Cost Reduction. Spot margins are improving sequentially as we drive down the production cost of aligners and improve our process automation. Further, we are proactively managing price across the portfolio and delivering 50 basis points of positive price, excluding the impact of volume-based pricing. In our emerging markets, we streamlined our organization, reduced our expenses, and concentrated our efforts in areas where we have the most sustainable competitive advantage. One of our primary priorities is to build a better, stronger, and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of it. Our Diagnostic Solutions business has been optimized and creates a competitive advantage, as we help clinicians digitize their workflow. Dexis iOS, and also Jenny, complement our strategy and are key to our ongoing transformation.

Our 2023 performances consist of our intention of balancing investments for both growth and margin improvement.

Steven Keller: A 2023 performance is consistent with our intention of balancing investments for both growth and margin improvements.

We believe that the focus investments we are making in both Spark and North American implants will support our margin expansion over the long-term. We continue to leverage EBS to systematically drive operational improvements, footprint rationalization, price optimization, expense controls and structural cost reductions. Spark margins are improving sequentially as we drive down the production cost of aligners and improve our process automation. Further, we are proactively managing price across the portfolio and delivered 50 basis points of positive price, excluding the impact of volume-based pricing. Across our emerging markets, we streamlined our organization, reduced our expenses and concentrated our efforts in areas where we have the most sustainable competitive advantage. One of our primary priorities is to build a better, stronger and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our diagnostic solutions business has been optimized and creates competitive advantage, as we help clinicians digitize their workflows. Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation.

Steven Keller: We believe that the.

Steven Keller: The focus investments, we're making in both spot and North American implants will support our margin expansion.

Steven Keller: But the long term.

Steven Keller: We continue to leverage E B S to systematically drive operational improvements.

Steven Keller: Footprint rationalization probably.

Amir Agdai: Price Optimization, Expense Controls, and Structural Cost Reduction. Spot margins are improving sequentially as we drive down the production cost of aligners and improve our process automation. Further, we are proactively managing price across the portfolio and delivering 50 basis points of positive price, excluding the impact of volume-based pricing. In our emerging markets, we streamlined our organization, reduced our expenses, and concentrated our efforts in areas where we have the most sustainable competitive advantage. One of our primary priorities is to build a better, stronger, and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of it. Our Diagnostic Solutions business has been optimized and creates a competitive advantage, as we help clinicians digitize their workflow. Dexis iOS, and also Jenny, complement our strategy and are key to our ongoing transformation.

Steven Keller: This optimization expense controls on our structural cost reductions.

Steven Keller: Spot margins are improving sequentially actually drive down the production cost of <unk>.

<unk> and improve our process automation.

Further, we are proactively managing price across the portfolio and delivered 50 basis points of positive price, excluding the impact of volume-based pricing. Across our emerging markets, we streamlined our organization, reduced our expenses and concentrated our efforts in areas where we have the most sustainable competitive advantage. One of our primary priorities is to build a better, stronger and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our diagnostic solutions business has been optimized and creates competitive advantage, as we help clinicians digitize their workflows. Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation.

Steven Keller: Further there.

Steven Keller: We are proactively managing price across the portfolio and deliver 50 basis points of positive price, excluding the impact of volume based pricing.

Steven Keller: Across all the emerging markets, we streamlined our organization.

Steven Keller: Reduce our expenses.

Steven Keller: And concentrated our efforts in the areas, where we have the most sustainable competitive advantage.

Amir Aghdaei: One of our primary priorities is to build a better, stronger, and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our diagnostic solutions business has been optimized and creates competitive advantage as we help clinicians digitize their workflows. Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation. Both acquisitions saw growth accelerated throughout 2023 and are positioned well for future growth. We are committed to pursuing a disciplined approach to capital deployment. We utilize our EBS-driven M&A approach to manage our robust pipeline of inorganic partnerships and investments, and are constantly cultivating new opportunities. I will now turn the call over to Stephen to go through our Q4 financials and provide more details on our segment performance.

Steven Keller: One of our primary priorities is to build a better.

Steven Keller: Stronger.

Steven Keller: More growth oriented portfolio.

By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our diagnostic solutions business has been optimized and creates competitive advantage, as we help clinicians digitize their workflows. Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation.

Steven Keller: By providing comprehensive solutions for orthodontists and implant a specialist.

Steven Keller: Continued to shift our portfolio to the most attractive segments of dental.

Steven Keller: Our diagnostic solutions business has been optimized and creates competitive advantage as we help clinicians digitize their workflows.

Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation. Both acquisitions saw growth accelerated throughout 2023 and are positioned well for future growth. We are committed to pursuing a disciplined approach to capital deployment. We utilize our EBS-driven M&A approach to manage a robust pipeline of inorganic partnerships and investments and are constantly cultivating new opportunities. I will now turn the call over to Stephen to go through our 4th quarter financials and provide more details on our segment performance. Thanks, Amir.

Steven Keller: Our two most recent acquisitions.

Steven Keller: Texas, iOS and Asa Jennings complement our strategy and.

And a key to our ongoing transformation.

Stephen Keller: Both acquisitions saw growth accelerate throughout 2023 and are positioned well for future growth. We are committed to pursuing a disciplined approach to capital deployment. We utilize our EBS-driven M&A approach to manage a robust pipeline of inorganic partnerships and investments and are constantly cultivating new opportunities. I will now turn the call over to Stephen to go through our fourth-quarter financials and provide more details on our segment performance. Thanks, Amir.

Steven Keller: Both acquisitions soft growth accelerated throughout 2023 and are positioned well for future growth.

Steven Keller: We are committed to pursuing a disciplined approach to capital deployment.

Steven Keller: We utilize our E. B S. There'd been an M&A approach to manage a robust pipeline of inorganic partnerships and investments and all costs suddenly cultivating new opportunities.

Steven Keller: I will now turn the call over to Stephen.

Stephen: To go through our fourth quarter financials and provide more details on our segment performance.

Thanks, Amir. Before reviewing our 4th quarter results in detail, I would like to quickly comment on the $258.3 million non-cash impairment charge related to goodwill and intangible assets that we recorded in Q4. This impairment was primarily the result of an increase in the discount rate driven by sustained higher interest rates and the impact of a more volatile macro environment. On a reported basis, 4th quarter sales declined 2.3% to $645.6 million. Sales in the quarter declined by 0.3% due to the impact of foreign currency exchange rates and our core sales were down 2% compared to the 4th quarter of 2022. While our year-over-year growth was supported by solid mid-single-digit growth in our specialty products and technology segment, this was more than offset by a double-digit decline in our equipment and consumables segment. Geographically, our developed markets declined by 4.8%, with strong growth in Western Europe, offset by a double-digit decline in North America. Our emerging markets grew by greater than 9% in the 4th quarter. Our 4th quarter adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes, an unfavorable product mix, VBP-driven price reductions and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins,

Stephen Keller: Thanks, Amir. Before reviewing our fourth quarter results in detail, I would like to quickly comment on the $258.3 million non-cash and share impairment charge related to goodwill and intangible assets that we recorded in Q4. This impairment was primarily the result of an increase in the discount rate, driven by sustained higher interest rates and the impact of a more volatile macro environment. On a reported basis, fourth quarter sales declined 2.3% to $645.6 million. Sales in the quarter declined by 0.3% due to the impact of foreign currency exchange rates, and our core sales were down 2% compared to the fourth quarter of 2022....

Stephen Keller: Before reviewing our fourth-quarter results in detail, I would like to quickly comment on the $258.3 million non-cash impairment charge related to goodwill and intangible assets that we recorded in Q4. This impairment was primarily the result of an increase in the discount rate driven by sustained higher interest rates and the impact of a more volatile macro environment. On a reported basis, fourth-quarter sales declined 2.3% to $645.6 million. However, sales in the quarter declined by 0.3% due to the impact of foreign currency exchange rates.

Stephen: Thanks, Tim here before reviewing our fourth quarter results in detail I would like to quickly comment on the $258.3 million noncash impairment charge related to goodwill and intangible assets that we recorded in Q4.

Tim: This impairment was primarily the result of an increase in the discount rate driven by sustained higher interest rates and the impact of the more volatile macro environment.

Tim: On a reported basis fourth quarter sales declined two 3% to $645 $6 million sales in the quarter declined by 0.3% to the impact of foreign currency exchange rates.

On a reported basis, 4th quarter sales declined 2.3% to $645.6 million. Sales in the quarter declined by 0.3% due to the impact of foreign currency exchange rates and our core sales were down 2% compared to the 4th quarter of 2022. While our year-over-year growth was supported by solid mid-single-digit growth in our specialty products and technology segment, this was more than offset by a double-digit decline in our equipment and consumables segment. Geographically, our developed markets declined by 4.8%, with strong growth in Western Europe, offset by a double-digit decline in North America. Our emerging markets grew by greater than 9% in the 4th quarter. Our 4th quarter adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes, an unfavorable product mix, VBP-driven price reductions and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins,

Stephen Keller: And our core sales were down 2% compared to the fourth quarter of 2022. While our year-over-year growth was supported by solid mid-single-digit growth in our specialty products and technology segment, this was more than offset by a double-digit decline in our equipment and consumables segment. Geographically, our developed markets declined by 4.8%, with strong growth in Western Europe offset by a double-digit decline in North America. Our emerging markets grew by greater than 9% in the fourth. Our fourth quarter adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes, an unfavorable product mix, VBP-driven price reductions, and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins.

Tim: And of course sales were down 2% compared to the fourth quarter of 2022.

Stephen Keller: While our year-over-year growth was supported by solid mid-single-digit growth in our specialty products and technology segment, this was more than offset by a double-digit decline in our equipment and consumables segment. Geographically, our developed markets declined by 4.8%, with strong growth in Western Europe, offset by a double-digit decline in North America. Our emerging markets grew greater than 9% in Q4. Our Q4 adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes, an unfavorable product mix, VBP-driven price reductions, and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022.

Tim: While our year over year growth was supported by solid mid single digit growth in our specialty products and technology segment. This was more than offset by a double digit decline in our equipment and consumables segments.

Geographically, our developed markets declined by 4.8%, with strong growth in Western Europe, offset by a double-digit decline in North America. Our emerging markets grew by greater than 9% in the 4th quarter. Our 4th quarter adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes, an unfavorable product mix, VBP-driven price reductions and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins,

Tim: Geographically our developed markets declined by four 8% with strong growth in Western Europe, offset by a double digit decline in North America.

Tim: Our emerging markets grew greater than 9% in the fourth quarter.

Tim: Our fourth quarter adjusted gross margin was 52, 4% a decrease of 380 basis points compared to the prior year.

Tim: Decrease in gross margin was the result of lower volumes and unfavorable product mix.

Tim: B P driven price reductions and currency headwinds.

Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins, unfavorable geographic mix and investments in both Spark and a turnaround in North American implants. Our 4th quarter adjusted diluted EPS was $0.29 compared to $0.52 in the comparable period of the prior year. Core revenue in our Specialty Products and Technology segments increased by 4.8% compared to the 4th quarter of 2022. Strong growth in Western Europe and emerging markets was offset by declines in North America. Within this segment, our orthodontic business grew nearly 15%, with Spark continuing to outperform. Our Brackets & Wires business delivered mid-single-digit growth, with emerging markets performing especially well.

Tim: Our adjusted EBITDA margin for the quarter was 15, 6%.

Tim: Which is 530 basis points lower than Q4 2022.

Stephen Keller: The lower Adjusted EBITDA margins were anticipated and driven by lower gross margins, unfavorable geographic mix, and investments in both Spark and a turnaround North American implants. Our Q4 adjusted diluted EPS was $0.29, compared to $0.52 in the comparable period of the prior year. Core revenue in our specialty products and technology segments increased by 4.8% compared to Q4 2022. Strong growth in Western Europe and emerging markets was offset by declines in North America. Within this segment, our orthodontic business grew nearly 15%, with Spark continuing to outperform. Our bracket and wires business delivered mid-single digit growth, with emerging markets performing especially well. Overall, we are confident that our orthodontic business is outperforming the market, with clinicians continuing to value our comprehensive portfolio and our focus on the orthodontic specialist.

Tim: The lower adjusted EBITDA margins were anticipated and driven by lower gross margins unsafe.

Stephen Keller: Unfavorable Geographic Mix, and investments in both SPARC and a turnaround North America. Our fourth quarter adjusted diluted EPS was $0.29 compared to $0.52 in the comparable period of the prior year. Core revenue and our specialty products and technology segments increased by 4.8% compared to the fourth quarter of 2020. However, strong growth in Western Europe and emerging markets was offset by declines in North America.

Tim: Unfavorable geographic mix and investments in both spark and a turnaround of North American plants.

Tim: Our fourth quarter adjusted diluted EPS was <unk> 29 cents compared to 52 cents in the comparable period of the prior year.

Tim: Core revenue in our specialty products and technology segments increased by four 8% compared to the fourth quarter of 2022.

Tim: Strong growth in Western Europe, and emerging markets was offset by declines in North America.

Stephen Keller: Within this segment, our orthodontic business grew nearly 15%, with Spark continuing to outperform. Our Brackets & Wires business delivered mid-single-digit growth, with emerging markets performing especially well. Overall, we are confident that our orthodontic business is outperforming the market, with clinicians continuing to value our comprehensive portfolio and our focus on the orthodontic specialist. Our implant business declined modestly in the 4th quarter, as strong growth in China was offset by underperformance in North America.

Within this segment, our orthodontic business grew nearly 15%, with Spark continuing to outperform. Our Brackets & Wires business delivered mid-single-digit growth, with emerging markets performing especially well.

Tim: Within the segment, our orthodontic business grew nearly 15% with spark continuing to outperform.

Tim: Our brackets and wires business delivered mid single digit growth with emerging markets performing especially well.

Tim: Overall, we are confident that our orthodontic business is outperforming the market with conditions continuing to value our comprehensive portfolio.

Before we reflect on our performance in 2023 as well as our future outlook, I think it is important to provide some context about the current operating environment, as well as the underlying demand for dental solutions. Globally, the market remains dynamic, with macro uncertainty and geopolitical risks continuing to create a challenging operating environment. Conflicts in the Middle East and the Ukraine, as well as cybersecurity attacks impacting the North America distribution channel, created volatility in 2023.

Tim: And our focus on the orthodontic specialist.

Stephen Keller: Our implant business declined modestly in the fourth quarter, as strong growth in China was offset by underperformance in North America. Overall, we see signs our implant business is stabilizing, with our Q4 performance improving relative to the first three quarters of the year. As we have discussed, we are making significant investments in North America and leveraging our commercial EBS capabilities and standard work to get this business to return to market level growth as we exit 2024. For the fourth quarter, our specialty products and technology segment had an adjusted operating profit of 15.4%. This was down 460 basis points versus the same period in the prior year, with the decline largely due to unfavorable mix, the pricing impact of the China VBP program, continuing investment in Spark, and targeted investments in North American implants.

Tim: Our implant business declined modestly in the fourth quarter as strong growth in China was offset by underperformance in North America.

Stephen Keller: Overall, we see signs that our implant business is stabilizing, with our Q4 performance improving relative to the first three quarters of the year. As we have discussed, we are making significant investments in North America and leveraging our commercial EBS capabilities and standard work to get this business to return to market level growth as we exit 2024. For the 4th quarter, our Specialty Products and Technology segment had an adjusted operating profit of 15.4%. This was down 460 basis points versus the same period in the prior year, with the decline largely due to unfavorable mix, the pricing impact of the China VBP program, continued investment in Spark and targeted investments in North American implants. Turning to our Equipment and Consumables segment, core sales in the 4th quarter decreased by 12.4%, compared to Q4 2022. Our Consumables business declined in Q4, primarily due to the timing of orders in the North American distribution channel.

Overall, we see signs that our implant business is stabilizing, with our Q4 performance improving relative to the first three quarters of the year. As we have discussed, we are making significant investments in North America and leveraging our commercial EBS capabilities and standard work to get this business to return to market level growth as we exit 2024. For the 4th quarter, our Specialty Products and Technology segment had an adjusted operating profit of 15.4%. This was down 460 basis points versus the same period in the prior year, with the decline largely due to unfavorable mix, the pricing impact of the China VBP program, continued investment in Spark and targeted investments in North American implants.

Tim: Overall, we see signs of implant business is stabilizing with a Q4 event Q4 performance improving relative to the first three quarters of the year.

Tim: As we have discussed we are making significant investments in North America, and leveraging our commercial E. P. S capabilities and standard work to get this business to return to market level growth as we exit 2024.

Tim: For the fourth quarter, our specialty products and technology segment had an adjusted operating profit of 15, 4%.

Stephen Keller: This was down 460 basis points versus the same period in the prior year, with the decline largely due to an unfavorable mix, the price impact of the China VBP program, continuing investment spur, and targeted investments in North American investors. Turning to our equipment and consumables segment, core sales in the fourth quarter decreased by 12.4% compared to Q4 2022. Our consumables business declined in Q4 primarily due to the timing of orders in the North American Distribution Channel.

Tim: This was down 460 basis points versus the same period in the prior year.

Tim: With the decline largely due to unfavorable mix price and impact of the China V. P program.

Tim: New investments spark and targeted investments in North American implants.

Turning to our Equipment and Consumables segment, core sales in the 4th quarter decreased by 12.4%, compared to Q4 2022. Our Consumables business declined in Q4, primarily due to the timing of orders in the North American distribution channel. As we have discussed, the cyber attack experienced by our largest distribution partner reduced the visibility of channel inventory levels and slowed stocking orders throughout much of Q4. It's important to note that while sales into the distribution channel were down, sellout to end customers in Q4 performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our Consumables business and we continue to drive sellout that is at, or above market growth in most geographies. Our Equipment business also declined in the 4th quarter, relative to the prior year, as higher interest rates and concerns around the macroeconomic environment reduced global demand for large imaging equipment. Despite this dynamic, our performance in North America stabilized, showing a more modest decline over the quarter. Emerging markets saw a large decline in the quarter, driven by the combined effect of challenging macro conditions and a de-emphasizing of non-strategic geographies and solutions.

Stephen Keller: Turning to our equipment and consumables segment, core sales in the fourth quarter decreased by 12.4% compared to Q4 2022. Our consumables business declined in Q4, primarily due to the timing of orders in North American distribution channel. As we have discussed, the cyberattack experienced by our largest distribution partner reduced the visibility of channel inventory levels and slowed stocking orders throughout much of Q4. It's important to note that while sales into the distribution channel were down, sellout to end customers in Q4 performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our consumables business, and we continued to drive sellout that is at or above market growth in most geographies.

Tim: Turning to our equipment and consumable segment.

Tim: Core sales in the fourth quarter decreased by 12, 4% compared to Q4 2022.

Tim: Our consumables business declined in Q4, primarily due to the timing of orders in North American distribution channel.

Stephen Keller: As we have discussed, the cyber attack experienced by our largest distribution partner reduced the visibility of channel inventory levels and slowed stocking orders throughout much. It's important to note that while sales into the distribution channel were down, sell out to end customers in queue performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our consumables business, and we continue to drive sellout that is at or above market growth in most geographies. Our equipment business also declined in the fourth quarter, relative to the prior year, as higher interest rates and concerns around the macroeconomic environment reduced global demand for large imaging. Despite this dynamic, our performance in North America stabilized, showing a more modest decline over the course. Emerging markets saw a large decline in the quarter, driven by the combined effect of challenging macro conditions and a de-emphasizing of non-strategic geographies and systems.

Tim: As we have discussed the cyber attack experienced by our largest distribution partner reduced visibility of channel inventory levels and slowed stocking orders throughout much of Q4.

Q4. It's important to note that while sales into the distribution channel were down, sellout to end customers in Q4 performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our Consumables business and we continue to drive sellout that is at, or above market growth in most geographies. Our Equipment business also declined in the 4th quarter, relative to the prior year, as higher interest rates and concerns around the macroeconomic environment reduced global demand for large imaging equipment. Despite this dynamic, our performance in North America stabilized, showing a more modest decline over the quarter. Emerging markets saw a large decline in the quarter, driven by the combined effect of challenging macro conditions and a de-emphasizing of non-strategic geographies and solutions.

Q4.

Tim: It's important to note that while sales into the distribution channel were down sell off to end customers in Q4 performed well.

Private practice clinicians and DSOs remain thoughtful about near-term investments in both equipment and clinic-level inventories. While this has created pressure in the short-term, longer-term, we are confident that patients will prioritize dental care and that clinicians will proactively invest in areas that help them digitize their practice, making them more productive and ensuring they can provide the high-quality personalized care.

Tim: Moving forward, we expect inventory levels to stabilize throughout 2024, and our sales to normalize as we move through the year.

Tim: Outside of North America.

Tim: We saw solid growth in our consumables business and we continue to drive sell out that is at or above market growth in most geographies.

Stephen Keller: Our equipment business also declined in the Q4 relative to the prior year, as higher interest rates and concerns around the macroeconomic environment reduced global demand for large imaging equipment. Despite this dynamic, our performance in North America stabilized, showing a more modest decline in the quarter. Emerging markets saw a large decline in the quarter, driven by the combined effect of a challenging macro conditions and a de-emphasizing of non-strategic geographies and solutions. Our intention is to refine our focus and then concentrate our efforts in those markets where we can build and maintain a sustainable competitive advantage. While this will create a modest headwind to core growth in the short term, long term, it will allow us to improve both the growth and margin profile of this business.

Tim: Our equipment business also declined in the fourth quarter relative to the prior year as higher interest rates and concerns around the macro economic environment reduced global demand for large imaging equipment.

Tim: Despite this dynamic our performance in North America stabilized showing a more modest decline in the quarter.

Tim: Emerging markets saw a large decline in the quarter driven by the combined effect of a challenging macro conditions and deemphasizing nonstrategic geographies and solutions.

Stephen Keller: Our intention is to refine our focus and then concentrate our efforts in those markets where we can build and maintain a sustainable competitive advantage. While this will create a modest headwind to core growth in the short-term, in the long-term, it will allow us to improve both the growth and margin profile of this business. Our IOS business grew greater than 30% in the 4th quarter, driven by strong unit demand and a stabilizing price environment. We continue to see DEXIS IOS as a long-term growth driver for Envista and are focused on expanding our global reach, by partnering with our distributors and system integrators to help clinicians digitize their office. In addition to driving growth for Envista, the DEXIS IOS Solutions enhances our end-to-end orthodontic and implant solutions. Equipment and Consumables adjusted operating profit margin was 19.5% in the 4th quarter of 2023, versus 27.2% in Q4 of 2022. The decline in margins was primarily driven by lower sales of Consumables in the quarter.

Tim: Our intention is to refine our focus and a concentrated effort.

Tim: And those markets, where we can build and maintain a set of sustainable competitive advantage.

Tim: While this will create a modest headwind to core growth in the short term long term it will allow us to improve both the growth and margin profile of this business.

Stephen Keller: Our IOS business grew greater than 30% in Q4, driven by strong unit demand and a stabilizing price environment. We continue to see DEXIS IOS as a long-term growth driver for Envista and are focused on expanding our global reach by partnering with our distributors and system integrators to help clinicians digitize their office. In addition to driving growth for Envista, the DEXIS IOS solutions enhances our end-to-end orthodontic and implant solutions. Equipment and consumables adjusted operating profit margin was 19.5% in Q4 of 2023, versus 27.2% in Q4 of 2022. The decline in margins was primarily driven by the lower sales of consumables in the quarter. This decline was anticipated and is expected to be temporary.

Tim: I O S business grew greater than 30% in the fourth quarter, driven by strong unit demand and a stabilizing price environment.

Our IOS business grew greater than 30% in the 4th quarter, driven by strong unit demand and a stabilizing price environment. We continue to see DEXIS IOS as a long-term growth driver for Envista and are focused on expanding our global reach, by partnering with our distributors and system integrators to help clinicians digitize their office. In addition to driving growth for Envista, the DEXIS IOS Solutions enhances our end-to-end orthodontic and implant solutions. Equipment and Consumables adjusted operating profit margin was 19.5% in the 4th quarter of 2023, versus 27.2% in Q4 of 2022. The decline in margins was primarily driven by lower sales of Consumables in the quarter.

Tim: We continue to see Texas, Iowa, as a long term growth driver for Vista.

Tim: And their focus on expanding our global reach by partnering with our distributors and system integrators to help clinicians digitize their office.

In addition to driving girlfriend Vista exercise AOS solution enhances our end to end Orthotopic an implant solutions.

During the year, we leveraged the Envista Business System, EBS, to drive our Spark growth formula and consistently added new doctors, increased case volumes with existing doctors and grew revenue per case. The Spark business delivered over 50% year-over-year growth and we are positioned to double this business by 2026. In 2023, our implant business declined low single-digits, as challenges in North America offset at, or above market growth in other geographies. Excluding North America, our implant business collectively grew mid-single-digits for 2023.

Tim: Equipment and consumables adjusted operating profit margin was 19, 5% in the fourth quarter 2023 first.

Equipment and Consumables adjusted operating profit margin was 19.5% in the 4th quarter of 2023, versus 27.2% in Q4 of 2022. The decline in margins was primarily driven by lower sales of Consumables in the quarter. This decline was anticipated and is expected to be temporary. As we have discussed throughout 2023, we have taken significant actions to reduce our costs, streamline our operations and improve our focus in this segment. Long-term, this segment is positioned to accelerate growth and improve operations. In the 4th quarter, we generated a free cash flow of $99.9 million and delivered $223.6 million of free cash flow for the full year.

Tim: 27, 2% in Q4 of 2022.

Tim: The decline in margins was primarily driven by lower sales of consumables in the quarter.

Stephen Keller: This decline was anticipated and is expected to be temporary. As we have discussed throughout 2023, we have taken significant actions to reduce our costs, streamline our operations, and improve our focus in this segment. Long-term, this segment is positioned to accelerate growth and improve operations. In the fourth quarter, we generated a free cash flow of $99.9 million and delivered $223.6 million of free cash flow for the full year.

Tim: <unk> was anticipated and is expected to be temporary.

Stephen Keller: As we have discussed, throughout 2023, we have took significant actions to reduce our costs, streamline our operations, and improve our focus in this segment. Long-term, this segment is positioned to accelerate growth and improve operating margins. In Q4, we generated free cash flow of $99.9 million, and delivered $223.6 million of free cash flow for the full year. This represents a greater than $100 million improvement in free cash flow over the full year of 2022. Overall, we were pleased with our progress in improving our free cash flow management and are committed to our long-term goal of delivering annual free cash flow in excess of net income. I'll now turn the call over to Amir to provide an update on our outlook for 2024, as well as some closing comments.

Tim: As we have discussed throughout 2023, we have tics.

Tim: And actions to reduce our costs streamline our operations and improve our focus in this segment.

Tim: Long term this segment is positioned to accelerate growth and improve operating margins.

Tim: In the fourth quarter, we generated free cash flow of $99 9 million.

Tim: And delivered $223 $6 million of free cash flow for the full year.

In the 4th quarter, we generated a free cash flow of $99.9 million and delivered $223.6 million of free cash flow for the full year. This represents a greater than $100 million improvement in free cash flow over the full year of 2022. Overall, we are pleased with our progress in improving our free cash flow management and are committed to our long-term goal of delivering annual free cash flow in excess of net income. I'll now turn the call over to Amir to provide an update on our outlook for 2024, as well as some closing comments. Thanks, Steve.

Tim: This represents a greater than 100 million dollar improvement to free cash flow over the full year of 2022.

We have a strong brand, a leading product portfolio, a passionate and capable team and a dedicated community of implant specialists around the world. Leveraging our strong foundation, we have taken aggressive steps to address our performance issues in North America. We're making total investments in sales and marketing, training and education and community development and are leveraging a successful European leadership model and playbook, which has resulted in over 300 basis point share gains in the past three years to re-invigorate growth in North America. The North America business is expected to return to market level growth by the end of 2024.

Tim: Overall, we were pleased with our progress in improving our free cash flow management and are committed to our long term goal of delivering annual free cash flow in excess of that ink.

Amir Agdai: This represents a greater than $100 million improvement in free cash flow over the full year of 2020. Overall, we are pleased with our progress in improving our free cash flow management and are committed to our long-term goal of delivering annual free cash flow in excess of net income. I'll now turn the call over to Amir to provide an update on our outlook for 2024, as well as some closing comments. Thanks, Steve.

Tim: I'll now turn the call over to Amir to provide an update on our outlook for 2024 as well as some closing comments.

Amir Aghdaei: Thanks, Stephen. We remain confident in our strategy and long-term outlook. The dental market is attractive, under-penetrated, and has solid growth trends. Our business is strategically differentiated, and we have a proven track record of executing in a dynamic environment. We have conviction in our ability to create meaningful value over the long term. While we remain confident in the future of the dental industry, the current backdrop causes us to be more cautious in the near term. For 2024, we expect demand for higher-end dental procedures, including full arch restorations and adult orthodontic cases, to remain somewhat restrained. We further expect private practices and DSOs to remain cautious before making large investments in new clinics. For the full year 2024, we expect core sales to grow, to grow low single digits and deliver Adjusted EBITDA margins of between 16% to 17%.

Amir: Thanks Steven.

Amir: We remain confident in our strategy and long term outlook.

Dental market is attractive underpenetrated and has solid growth trends.

Amir: Our business is strategically differentiated and we have a proven track record of executing in a dynamic environment.

Amir: We have conviction.

Amir Agdai: We remain confident in our strategy and long-term alternatives. The dental market is attractive, underpenetrated, and has a solid growth trend. Our business is strategically differentiated, and we have a proven track record of executing in a dynamic environment. We have conviction in our ability to create meaningful value. Over to you.

Thanks, Stephen. We remain confident in our strategy and long-term outlook. The dental market is attractive, underpenetrated and has solid growth trends. Our businesses is strategically differentiated and we have a proven track record of executing in a dynamic environment. We have conviction in our ability to create meaningful value over the long-term. While we remain confident in the future of the dental industry, the current backdrop causes us to be more cautious in the near-term. For 2024, we expect demand for higher-end dental procedures, including full-arch restorations and adult orthodontic cases, to remain somewhat restrained. We further expect private practices and DSOs to remain cautious before making large investments in new clinics.

Amir: <unk> to create meaningful value.

Amir: Over the long term.

Amir: While we remain confident in the future of the dental industry. The current backdrop causes us to be more cautious in the near term.

Turning to our Equipment and Consumables segment, we declined mid-single-digits for the full year 2023. Much of the decline can be attributed to the de-emphasis of non-strategic markets and product in our diagnostics business and the cybersecurity issues that disrupted the North American distribution channel for our Consumables products. Despite these isolated changes, we made progress in both businesses. In our diagnostics business, DEXIS IOS delivered core growth of over 30% for the year.

Amir: For 'twenty 'twenty four we expect demand for higher end dental procedures.

Amir: <unk> four Australians and adult orthodontic cases to remain somewhat restrained.

Amir Agdai: While we remain confident in the future of the dental industry, the current backdrop causes us to be more cautious in the near term. For 2024, we expect demand for higher-end dental procedures, including full arch restorations and adult orthodontic cases, to remain somewhat restrained. We further expect private practices and DSOs to remain cautious before making large investments in new clinics.

Amir: We further expect private practices and dsos to remain cautious before making large investments in new clinics.

For 2024, we expect demand for higher-end dental procedures, including full-arch restorations and adult orthodontic cases, to remain somewhat restrained. We further expect private practices and DSOs to remain cautious before making large investments in new clinics. For the full year 2024, we expect core sales to go low single-digits and deliver adjusted EBITDA margins of between 16% to 17%. We further anticipate that our margins will accelerate as we move through 2024. Our guidance takes into consideration, both our investments for the long-term and the continued uncertainty in the macro environment. In 2024, we're focused on three main priorities to improve our short-term execution and build a foundation for long-term value creation. First,

Amir: For the full year 'twenty 'twenty four we.

Amir: Expect core sales to grow to grow low single digits.

Amir: Deliver adjusted EBITDA margins of between 16% to 17%.

Amir Aghdaei: We further anticipate that our margins will accelerate as we move through 2024. Our guidance takes into consideration both our investments for the long term and the continued uncertainty in the macro environment. In 2024, we're focused on three main priorities to improve our short-term execution and build a foundation for long-term value creation. First, we will further accelerate our orthodontic business by providing orthodontic specialists with a differentiated and integrated suite of treatment options, including brackets and wires, and clear aligners. We anticipate doubling our Spark business by 2026, while simultaneously driving sequential margin improvements. Our second area of focus is on re-accelerating the growth of our implant business. Globally, we will leverage both our premium and value implant franchises to provide full solutions across the implant workflow, including regenerative and prosthetic offerings.

Amir: You sort of anticipate that our margins will accelerate as we move through 'twenty 'twenty four.

Amir Agdai: We saw strong volume growth and a stabilizing price environment as we exited the year. Our traditional imaging solutions perform at, or above the market in our focused geographies and we successfully launched two innovative, new products. The OP 3D LX, our next generation CBCT scanner in the OP 3D platform, features a larger field of view and expanded 3D diagnostic capabilities through seamless integration with our DTX Studio Clinic software.

Amir Agdai: For the full year 2024, we expect core sales to grow low single digits and deliver adjusted EBITDA margins of between 16 to 17 percent. We further anticipate that our margins will accelerate as we move through 2024. Our guidance takes into consideration that both are investments for the long term and the continued uncertainty in the macro environment. In 2024, we're focused on three main priorities to improve our short-term execution and build a foundation for long-term value creation. First

Amir: Our guidance takes into consideration.

Amir: Our investments for the long term.

Amir: And the continued uncertainty in the macro environment.

Amir: In 'twenty 'twenty four will focus on three main priorities to improve our short term execution and build the foundation for long term value creation.

Our guidance takes into consideration, both our investments for the long-term and the continued uncertainty in the macro environment. In 2024, we're focused on three main priorities to improve our short-term execution and build a foundation for long-term value creation. First, we will further accelerate our orthodontic business by providing orthodontic specialists with a differentiated and integrated suite of treatment options, including brackets and wires and clear aligners. We anticipate gathering our Spark business by 2026 while simultaneously driving sequential margin improvements. Our second area of focus is on re-accelerating the growth of our implant business. Globally, we will leverage both our premium and value implant franchises to provide full solutions across the implant workflow, including regenerative and prosthetic offerings. We will continue to utilize our premiere diagnostics and digital capabilities to create differentiation and win customers. In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education and further support our clinical community. We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce the structural cost by an additional $13 million annually for the full year, impact being realized in 2025.

Amir: First.

Amir: He will further accelerate our orthodontic business by providing orthodontic, especially <unk> with its differentiated and integrated suite of treatment options, including bracket on wires and clear liners.

Amir Agdai: We will further accelerate our orthodontic business by providing orthodontic specialists with a differentiated and integrated suite of treatment options, including brackets and wires and clear aligners. We anticipate growing our SPARC business by 2026 while simultaneously driving sequential margin improvement. Our second area of focus is on reaccelerating the growth of our infant business. Globally, we will leverage both our premium and value implant franchises to provide full solutions across the implant workflow, including regenerative and prosthetic offerings. We will continue to utilize our premier diagnostics and digital capabilities to create differentiation and win customers. In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education, and further support our clinical community. We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce the structural cost by an additional $13 million annually for the full year impact being realized in 2025.

The OP 3D LX provides more flexibility and improved workflow, allowing doctors to augment their diagnostics, planning and treatment of patients. On the software side, we also released the DEXassist Solution to integrate AI features into the DEXIS 10 imaging software suite. The DEXassist Solution helps practitioners to detect six pathological findings in 2D deficiency and 2D intraoral x-rays, including caries, calculus, bone loss, periapical radiolucency, root canal filing deficiency and discrepancies at the margin of an existing restoration.

Amir: We anticipate the Abilene, our spark business by 2026, while simultaneously driving sequential margin improvements.

We anticipate gathering our Spark business by 2026 while simultaneously driving sequential margin improvements. Our second area of focus is on re-accelerating the growth of our implant business. Globally, we will leverage both our premium and value implant franchises to provide full solutions across the implant workflow, including regenerative and prosthetic offerings. We will continue to utilize our premiere diagnostics and digital capabilities to create differentiation and win customers. In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education and further support our clinical community. We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce the structural cost by an additional $13 million annually for the full year, impact being realized in 2025.

Amir: Our second area of focus is on re accelerating the growth of our implant business.

Amir: Globally, we will leverage both our premium and value implants franchises to provide full solutions across the entire workflow, including regenerative and prosthetic offerings.

Amir Aghdaei: We will continue to utilize our premier diagnostics and digital capabilities to create differentiation and win customers. In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education, and further support our clinical community. We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce the structural cost by an additional $30 million annually for the full year impact being realized in 2025. Our continuous improvement culture will allow us to further consolidate operations, and streamline our corporate functions, and drive our G&A spending across the organization.

Amir: We will continue to utilize our premier diagnostics and digital capabilities to create differentiation and win customers.

In North America, we are making targeted investments to improve our commercial execution.

Amir: Fresh our approach to marketing improve our training and education and further support our clinical community.

Amir: We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 'twenty 'twenty four.

Amir: As we move forward. This year, we further utilize E B S.

Amir: Optimize our cost structure.

Amir: We expect to reduce our structural costs by an additional $30 million annually for the full year impact being realized in 2025.

As expected, in 2023, our adjusted EBITDA margins declined due to lower sales, as a result of the volatile macro conditions, our strategic investments in our Specialty and Technology segment and our rapid growth of Spark. As we have discussed, Spark margins, while improving, are still below fleet average. Our 2023 performance is consistent with our intention of balancing investments for both growth and margin improvements.

Amir Agdai: Our continuous improvement culture will allow us to further consolidate operations, streamline our corporate functions and drive up G&A spending across the organization. We believe that 2024 will be a transformational year for Envista as we continue to balance investments in growth with our goal of expanding margins. Given our desire to drive improved execution of this transformation in 2024, we believe it's prudent to revisit our long-range targets. Further, because of this focus, recent leadership changes and our process to name a permanent CFO, we have decided to postpone our Investor Day and we'll reschedule. Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change of the timing of the Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals, to improve patient lives by digitizing, personalizing and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees and our shareholders. Thanks, Amir.

Our continuous improvement culture will allow us to further consolidate operations, streamline our corporate functions and drive up G&A spending across the organization. We believe that 2024 will be a transformational year for Envista as we continue to balance investments in growth with our goal of expanding margins. Given our desire to drive improved execution of this transformation in 2024, we believe it's prudent to revisit our long-range targets. Further, because of this focus, recent leadership changes and our process to name a permanent CFO, we have decided to postpone our Investor Day and we'll reschedule. Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change of the timing of the Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals, to improve patient lives by digitizing, personalizing and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees and our shareholders.

Amir: Our continuous improvement culture will allow us to further consolidate the operations streamline our corporate functions and drive our G&A spending across the organization.

Amir Aghdaei: We believe that 2024 will be a transformational year for Envista as we continue to balance investments in growth with our goal of expanding margins. Given our desire to drive improved execution of this transformation in 2024, we believe it's prudent to revisit our long-range targets. Further, because of this focus, recent leadership changes, and our process to name a permanent CFO, we have decided to postpone our Investor Day and will reschedule. Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change of the timing of Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals to improve patient lives by digitizing, personalizing, and democratizing dental care.

Amir: We believe.

Amir: The 'twenty 'twenty four will be a transformational year for Vista.

Amir: As we continue to balance investments in growth with our goal of expanding margins.

Given our desire to drive improved execution of this transformation in 2024, we believe it's prudent to revisit our long-range targets. Further, because of this focus, recent leadership changes and our process to name a permanent CFO, we have decided to postpone our Investor Day and we'll reschedule. Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change of the timing of the Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals, to improve patient lives by digitizing, personalizing and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees and our shareholders.

Given our desire to drive improved execution of this transformation in 2024, we believe it's prudent to revisit our long-range targets.

Amir: Given our desire to drive improved execution of this transformation in 'twenty 'twenty four.

Amir: We believe it's prudent to revisit our long range targets.

Further, because of this focus, recent leadership changes and our process to name a permanent CFO, we have decided to postpone our Investor Day and we'll reschedule. Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change of the timing of the Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals, to improve patient lives by digitizing, personalizing and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees and our shareholders.

Amir: Further because of this focus recent leadership changes and our process to name a permanent CFO, we have decided to postpone our investor day, and we'll reschedule.

Amir Agdai: Postponing would allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change in the timing of the investor date does not diminish our excitement about the future of the industry and the future of Envista. Our purpose... to partner with dental professionals to improve patient lives by digitizing, personalizing, and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees, and our shareholders. Thanks, Amir.

Amir: Postponing would allow us to provide a more comprehensive update with our full leadership team.

Amir: I want to stress that this change of the timing of Investor day does not diminish our.

Amir: Excitement about the future of didn't tell the industry and the future of and Vista.

Amir: Our purpose.

Amir: Is to partner with dental professionals to improve patient lives.

Amir: By digitizing personalizing democratizing dental care.

Amir Aghdaei: We remain focused on delivering long-term value for patients, our customers, our employees, and our shareholders.

Amir: We remain focused on delivering long term value for patients.

Customers, our employees and our shareholders.

Thanks, Amir. 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 star and two. We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead; your line is open.

Stephen Keller: Thanks, Amir. That concludes our formal comments. We are now ready for questions.

Speaker Change: Thanks, Amir that concludes our formal comments, we are now ready for questions.

Operator: 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 star and two. We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead; your line is open.

Operator: At this time, if you'd like to ask a question, please press the star and 1 keys on your telephone keypad. Keep in mind, you may remove yourself from the question queue at any time by pressing star and 2. We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead, your line is open.

Operator: 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 star and two. We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead. Your line is open.

Moderator: 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 star and two. We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead. Your line is open.

Speaker Change: 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 star and two.

Speaker Change: We will take our first question from Elizabeth Anderson with Evercore ISI. Please.

By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our Diagnostic Solutions business has been optimized and creates competitive advantage, as we help clinicians digitize their workflows.

Elizabeth Anderson: Please go ahead your line is open.

Elizabeth Hammell Anderson: Hi, guys. Thanks for the question. Maybe just start off with the operating guide, margin guidance for 2024. I mean, that came in pretty disappointing in our view. And if we look at this recently, as Q3, you guys were talking about operating margin expansion. So can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then the what, the current guidance that you guys are giving us tonight?

Elizabeth Anderson: Hi, guys. Thanks for the question. Maybe just start off with the operating guide, margin guidance for 2024. I mean, that came in pretty disappointing in our view. And if we look at this recently, as Q3, you guys were talking about operating margin expansion. So can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then the what, the current guidance that you guys are giving us tonight?

Elizabeth Anderson: Hi, guys. Thanks for the question, maybe just start off with the operating Guy a margin guidance for 2024, I mean that came in pretty disappointing in RVO and if we look at this as recently as three Q you guys were talking about operating margin expansion. So can you talk a bit more about what happened in between that.

Amir Agdai: And if we look at this recently as 3Q, you guys were talking about operating margin expansion. So can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then what the current guidance that you guys are giving us tonight? Of course. Thank you, Elizabeth.

And if we look at this recently as 3Q, you guys were talking about operating margin expansion. So can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then what the current guidance that you guys are giving us tonight?

Elizabeth Anderson: Where are you sort of thinking about expansion and then what is the current guidance that you guys are giving us Tonight.

Amir Aghdaei: Of course. Thank you, Elizabeth. Thanks for asking the question. As we move through Q4, and as we close the quarter, it became really apparent to us several key factors. To be specific, one is around the macro environment. We do not expect 2024 to be any different than what we have seen in the past several quarters. Uncertain economic environment, interest rate, inflation, consumer sentiment. We think that demand for our high-end dental procedures is going to be below long-run growth expectation, and we are cautioned about capital spending, specifically on DSOs and some clinicians, and inventory management. On top of it, geopolitical uncertainties, we do not think that that would change over time. So with that backdrop, that has impact in our mix.

Elizabeth Anderson: Yeah.

Of course. Thank you, Elizabeth. Thanks for asking the question. As we move through Q4 and as we close the quarter, it became really apparent to us, several key factors. To be specific, one is around the macro environment. We do not expect 2024 to be any different than what we have seen in the past several quarters in certain economic environment, interest rate, inflation, consumer sentiment. We think that demand for our high-end dental procedures is going to be below long-run growth expectations and they are caution about capitalist spending, specifically on DSOs and some clinicians and inventory management. On top of it, geopolitical uncertainties, we do not think that that will change over time. So, with that backdrop, that has impact in our mix. If you take a look at it, that backdrop of a macro really impacts some of our highest, most profitable businesses in different geographies. In addition, the growth that we are seeing today in our Spark, that accelerates that mix change over time. As an outcome of that, we did a series of scenario planning. We looked at opportunities and risks, we also took a look at what we need to do to put the organization in a format that we can create long-term value,

Amir Aghdaei: Of course. Thank you, Elizabeth. Thanks for asking the question. As we move through Q4 and as we close the quarter, it became really apparent to us, several key factors. To be specific, one is around the macro environment. We do not expect 2024 to be any different than what we have seen in the past several quarters in certain economic environment, interest rate, inflation, consumer sentiment. We think that demand for our high-end dental procedures is going to be below long-run growth expectations and they are caution about capitalist spending, specifically on DSOs and some clinicians and inventory management.

Speaker Change: Of course, thank God, it's too bad thanks for asking the question down as we move through Q4.

Amir Agdai: Thanks for asking the question. As we move through Q4 and as we close the quarter, it became really apparent to us, several key factors. To be specific, one is around the macroin one.

Guy: And as we close the quarter it became really apparent to us.

Speaker Change: Several key factors to be a specific.

Speaker Change: One is around the macro environment.

Speaker Change: We do not expect 2024 to be any different than what we have seen in the past several quarters and.

Amir Agdai: We do not expect 2024 to be any different than what we have seen in the past several quarters, and certain economic environments, interest rates, inflation, and consumer sentiment. We think that demand for our high-end dental procedures is going to be below long-run growth expectations and their caution about Capitalist Spending, specifically on DSOs and some clinicians and inventory management.

Speaker Change: Uncertain economic environment.

Interest rate inflation consumer sentiment.

We think that demand for our high-end dental procedures is going to be below long-run growth expectations and they are caution about capitalist spending, specifically on DSOs and some clinicians and inventory management. On top of it, geopolitical uncertainties, we do not think that that will change over time. So, with that backdrop, that has impact in our mix. If you take a look at it, that backdrop of a macro really impacts some of our highest, most profitable businesses in different geographies. In addition, the growth that we are seeing today in our Spark, that accelerates that mix change over time.

Speaker Change: We think that demand for our high end dental procedures, there's going to be below long run.

Speaker Change: Growth expectation and you are cautioned about capital spending.

I will now turn the call over to Stephen to go through our 4th quarter financials and provide more details on our segment performance.

Speaker Change: The specific and Dsos and some key initiatives and inventory management on top of a geopolitical uncertainties, we do not think that that route.

On top of it, geopolitical uncertainties, we do not think that that will change over time. So, with that backdrop, that has impact in our mix. If you take a look at it, that backdrop of a macro really impacts some of our highest, most profitable businesses in different geographies. In addition, the growth that we are seeing today in our Spark, that accelerates that mix change over time. As an outcome of that, we did a series of scenario planning. We looked at opportunities and risks, we also took a look at what we need to do to put the organization in a format that we can create long-term value, realign investment between margin expansion in the Spark and growth, go back to the North America implant, now that we have a really good feel for what it takes to reinvigorate the growth in there as well as the G&A spending. And we thought we need to be more cautious here, to provide a guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. And we think throughout the year, we will see acceleration of our margin as well as our growth, throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place. Got it.

Amir Agdai: On top of that, we do not think that that will change over time. So with that backdrop, that has an impact on our mix. So if you take a look at it, that backdrop of a macro really impacts some of our highest, most profitable business to different geographers. In addition, the growth that we are seeing today in our SPAR that accelerates that mixed change over time. As an outcome of that, we did a series of scenario planning. We look at opportunities and risks. We also take a look at what we need to do to put the organization in a format that we can sustain long-term. Rawr!

Stephen Keller: Thanks, Amir. Before reviewing our 4th quarter results in detail, I would like to quickly comment on the $258.3 million non-cash impairment charge related to goodwill and intangible assets that we recorded in Q4. This impairment was primarily the result of an increase in the discount rate driven by sustained higher interest rates and the impact of a more volatile macro environment.

Speaker Change: Change over time.

Speaker Change: So with that backdrop that has.

Speaker Change: Impact.

Speaker Change: Our mix. So if you take a look at it that backdrop of the macro.

Amir Aghdaei: So if you take a look at it, that backdrop of a macro really impacts some of our highest, most profitable businesses in different geographies. In addition, the growth that we are seeing today in our Spark, that accelerates that mix change over time. As an outcome of that, we did a series of scenario planning. We look at opportunities and risks. We also take a look at what we need to do to put the organization in a format that we can create long-term value, realign investment between margin expansion, the Spark, and growth. Go back to the North America implant, now that we have a really good feel for what it takes to invigorate the growth in there, as well as the G&A spending. And we thought we need to be more cautious in here to provide a guidance that considers all that background.

Speaker Change: Really impact some of our highest.

In addition, the growth that we are seeing today in our Spark, that accelerates that mix change over time. As an outcome of that, we did a series of scenario planning. We looked at opportunities and risks, we also took a look at what we need to do to put the organization in a format that we can create long-term value, realign investment between margin expansion in the Spark and growth, go back to the North America implant, now that we have a really good feel for what it takes to reinvigorate the growth in there as well as the G&A spending. And we thought we need to be more cautious here, to provide a guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. And we think throughout the year, we will see acceleration of our margin as well as our growth, throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place.

Speaker Change: Most profitable businesses and different geographies.

Speaker Change: In addition, the growth that youre seeing today.

As an outcome of that, we did a series of scenario planning. We looked at opportunities and risks, we also took a look at what we need to do to put the organization in a format that we can create long-term value, realign investment between margin expansion in the Spark and growth, go back to the North America implant, now that we have a really good feel for what it takes to reinvigorate the growth in there as well as the G&A spending. And we thought we need to be more cautious here, to provide a guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. And we think throughout the year, we will see acceleration of our margin as well as our growth, throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place.

Speaker Change: Thus far that accelerate that mix change overtime.

Speaker Change: There's the odd come up that we did a series of scenario planning, we looked at the opportunities and risks. We also take a look at what we need to do.

Speaker Change: To put the organization in a format that they can create long term.

Speaker Change: Bad.

Amir Agdai: realign investment between margin expansion and the spark and growth. Go back to North America, now that we have a really good feel for what it takes to reinvigorate the growth in their, as well as the GNA, is spending, and we thought we need to be more cautious here, provide the guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. And we think throughout the year, we will see acceleration of our margins as well as our growth, throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place. Got it.

Speaker Change: Realign investment between margin expansion on the spark and growth.

Speaker Change: Go back to the North America implant now that we have a really good feel for what it takes.

Speaker Change: To invigorate the growth in there.

Speaker Change: As well as the G&A and.

Speaker Change: In our spending and we thought we need to be more caution here.

Speaker Change: To provide guidance.

Speaker Change: Ah considered all of that background of course, if the environment improves as we go forward, we have an opportunity to perform better and we see throughout the year.

Amir Aghdaei: Of course, if the environment improves as we go forward, we have an opportunity to perform better. We think throughout the year, we will see acceleration of our margin as well as our growth throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place.

See acceleration of our margin as well as our growth.

Speaker Change: Throughout the year every quarter.

Speaker Change: That's basically our assessment of the assumption of how we put that guidance in place.

Got it. That's helpful. So, how do we think about the long-term guide and sort of the longer-term margin expansion possibility with this new step down in '24? Yeah. And you know, we have been fairly consistent, as you know, about creating long-term value by expanding growth, by expanding margin, by shifting our portfolio. We don't think that really has radically changed; that framework that we created in the past four, four and a half years has stayed intact. The realities of what we're dealing with here are, one, we have new leadership in formation, a CFO, hopefully, soon to be named. We are placing the Nobel, our implant president, over time.

Elizabeth Hammell Anderson: Got it. That's helpful. So how do we think about the long-term guide? I know you talk, and sort of the longer-term margin expansion possibility with this new step down in 2024.

Elizabeth Anderson: Got it. That's helpful. So how do we think about the long-term guide? I know you talk, and sort of the longer-term margin expansion possibility with this new step down in 2024.

Amir Agdai: That's helpful. So how do we think about the long-term guide and sort of the longer-term margin expansion possibility with this new step down in 24? Yeah, and you know, we have been fairly consistent, as you know, about creating long-term value by expanding growth, by expanding margin, by shifting our portfolio. We don't think that really has radically changed; that framework that we created in the past four, four and a half years has stayed intact. The realities of what we're dealing with here are, one, we have new leadership in formation, a CFO, hopefully, soon to be named. We are placing the Nobel, our implant president, over time.

Speaker Change: Got it that's helpful. So how do we think about the long term guide I know you kind of answered it.

Speaker Change: The longer term margin expansion possibility with this new stepped out in 'twenty four.

Amir Aghdaei: Yeah, and you know, we have been, we have been fairly consistent, as you know, about creating long-term value by expanding growth, by expanding margin, by shifting our portfolio. We don't think that really has radically changed. That framework that we have created in the past 4, 4.5 years has stayed intact. The realities of what we are dealing with in here is, one, we have a new leadership in formation. I have a CFO, hopefully soon to be named. We are placing the Nobel, our implant president, over time, and we wanted to make sure that we have a solid leadership team in place. We also wanted to show progression on those three key priorities that we talked about: Spark growth and margin, Nobel back to growth, as well as resizing our infrastructure.

Yeah, and you know we have been we have been fairly consistent as you know about creating long term value by expanding growth by expanding marching, but shifting our portfolio. We don't think that really has radically changed.

Core revenue in our Specialty Products and Technology segments increased by 4.8% compared to the 4th quarter of 2022. Strong growth in Western Europe and emerging markets was offset by declines in North America. Within this segment, our orthodontic business grew nearly 15%, with Spark continuing to outperform. Our Brackets & Wires business delivered mid-single-digit growth, with emerging markets performing especially well.

Speaker Change: That framework that we have created in the past for four and a half years hasn't stayed intact.

Speaker Change: The realities of what we are dealing within here is one we have a new leadership in formation.

CFO: And as CFO hopefully soon to be named we are placing the Nobel our implant precedent overtime.

Overall, we are confident that our orthodontic business is outperforming the market, with clinicians continuing to value our comprehensive portfolio and our focus on the orthodontic specialist. Our implant business declined modestly in the 4th quarter, as strong growth in China was offset by underperformance in North America.

Amir Agdai: And we wanted to make sure that we had a solid leadership team in place. We also wanted to show progress on those three key priorities that we talked about. Spark, growth and margin; Nobel, back to growth, as well as resizing our infrastructure. We wanted to show tangible result and show the progression in there and then come back and have a discussion about long-term guidance that we have provided. We think that over time, our view around growth, margin and portfolio is still valid and we need to talk about the capital structure as well. That's why we decided to postpone that conversation until we are in a better place to provide better insight. We're not canceling it, we are postponing it; we should be ready when the team is in place, when we have momentum to come back and have that conversation. And one last one for me.

And we wanted to make sure that we had a solid leadership team in place. We also wanted to show progress on those three key priorities that we talked about. Spark, growth and margin; Nobel, back to growth, as well as resizing our infrastructure. We wanted to show tangible result and show the progression in there and then come back and have a discussion about long-term guidance that we have provided. We think that over time, our view around growth, margin and portfolio is still valid and we need to talk about the capital structure as well. That's why we decided to postpone that conversation until we are in a better place to provide better insight. We're not canceling it, we are postponing it; we should be ready when the team is in place, when we have momentum to come back and have that conversation.

CFO: Wanted to make sure that we have a solid.

CFO: The leadership team in place. We also wanted to show progression on those three key priorities that we talked about.

CFO: As far as growth in margin Nobel back to growth.

Let us resizing, our infrastructure, we wanted to show tangible results and show the progression in there and then come back and have a discussion about long term guidance that we have provided we think that over time, our view around growth Maher.

Amir Aghdaei: We wanted to show tangible results and show the progression in there, and then come back and have a discussion about long-term guidance that we have provided. We think that over time, our view around growth, margin, and portfolio is still valid, and we need to talk about the capital structure as well. That's why we decided to postpone that conversation until we are in a better place to provide better insight. We're not canceling it. We are postponing it. We should be ready when the team is in place, when we have momentum, to come back and have that conversation.

For the 4th quarter, our Specialty Products and Technology segment had an adjusted operating profit of 15.4%. This was down 460 basis points versus the same period in the prior year, with the decline largely due to unfavorable mix, the pricing impact of the China VBP program, continued investment in Spark and targeted investments in North American implants.

CFO: Sheen and portfolio is still valid.

CFO: And we need to talk about the capital structure as well that's why we decided to postpone that conversation until we are in a better place to provide better insight.

CFO: We're not canceling it we are postponing it should be ready when the team is in place then behalf momentum to come back and have that conversation.

Elizabeth Hammell Anderson: Got it. And one last one for me. You just said you have a potential CFO announcement shortly. Would you like to put any, time parameters around that?

Elizabeth Anderson: Got it. And one last one for me. You just said you have a potential CFO announcement shortly. Would you like to put any, time parameters around that?

Speaker Change: Got it and one last one for me I know you just said you have a potential CFO announcement shortly I would like to put any time parameters around that.

Amir Aghdaei: We're working on it. We have been working on it, as I mentioned, continuously. We have some very strong candidates, and our goal is to have that name as quickly as possible in the near future.

Speaker Change: We're working on it as we have been working on it as I mentioned continue to see if you have some very strong candidates and our goal is to have that name as quickly as possible in the near future.

And one last one for me. You just said you have a potential CFO announcement shortly. Would you like to put any time parameters around that? We're working on it. We have been working on it. As I mentioned, continuously, we have some very strong candidates, and our goal is to have that name as quickly as possible in the near future. Got it.

It's important to note that while sales into the distribution channel were down, sellout to end customers in Q4 performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our Consumables business and we continue to drive sellout that is at, or above market growth in most geographies.

Elizabeth Anderson: You just said you have a potential CFO announcement shortly. Would you like to put any time parameters around that? We're working on it. We have been working on it. As I mentioned, continuously, we have some very strong candidates, and our goal is to have that name as quickly as possible in the near future. Got it.

Elizabeth Hammell Anderson: Got it. Thank you.

Elizabeth Anderson: Got it. Thank you.

Speaker Change: Got it thank you.

Speaker Change: Okay.

Operator: We'll take our next question from Jeff Johnson with Baird. Please go ahead. Your line is open.

Moderator: We'll take our next question from Jeff Johnson with Baird. Please go ahead. Your line is open.

Speaker Change: We'll take our next question from Jeff Johnson with Baird. Please go ahead. Your line is open.

Jeffrey D. Johnson: Thank you. Good afternoon, guys. Amir, I wanted to follow up on the margin question Elizabeth answered, Elizabeth asked, primarily around your answer kind of included some things that you've really been dealing with for the last few quarters now. None of the stuff you talked about sounded overly new, relative, at least to the past couple, few quarters. But this quarter really dragged down those gross margins that flowed through to both specialty and the Envista operating margins. You know, with that drop-through on the gross margin, and you've mentioned targeted investments in the North American dental implant business, several times in your prepared remarks, it all sounds to me like there could be some pricing, you know-...

Jeffrey Johnson: Thank you. Good afternoon, guys. Amir, I wanted to follow up on the margin question Elizabeth answered, Elizabeth asked, primarily around your answer kind of included some things that you've really been dealing with for the last few quarters now. None of the stuff you talked about sounded overly new, relative, at least to the past couple, few quarters. But this quarter really dragged down those gross margins that flowed through to both specialty and the Envista operating margins. You know, with that drop-through on the gross margin, and you've mentioned targeted investments in the North American dental implant business, several times in your prepared remarks, it all sounds to me like there could be some pricing, you know-...

Speaker Change: Yeah.

Amir Aghdaei: We're working on it. We have been working on it, as I mentioned, continuously. We have some very strong candidates and our goal is to have that name as quickly as possible in the near future. Got it.

Jeffrey D. Johnson: Thank you good afternoon guys.

Jeffrey D. Johnson: I wanted to follow up on the margin question Elizabeth answer.

Jeffrey D. Johnson: Was it the vast.

Jeffrey D. Johnson: Primarily around your your answer kind of included some things that you've really been dealing with for the last few quarters now none of the stuff you talked about sounded overly new relative at least for the past couple of few quarters.

Our Equipment business also declined in the 4th quarter, relative to the prior year, as higher interest rates and concerns around the macroeconomic environment reduced global demand for large imaging equipment. Despite this dynamic, our performance in North America stabilized, showing a more modest decline over the quarter. Emerging markets saw a large decline in the quarter, driven by the combined effect of challenging macro conditions and a de-emphasizing of non-strategic geographies and solutions.

Speaker Change: But this quarter really dragged down those gross margins that flowed through to both specialty and the E&C operating margins.

Amir Agdai: Thank you. We'll take our next question from Jeff Johnson with Baird. Please go ahead. Your line is open.

Thank you.

Speaker Change: With that drop through on the gross margin.

Speaker Change: And you've mentioned targeted investments in the North American dental implant business several times in your prepared remarks. It all sounds to me like there could be some pricing.

Jeffrey D. Johnson: Thank you. Good afternoon, guys. Amir, I wanted to follow up on the margin question Elizabeth asked. Primarily around -- your answer kind of included some things that you've really been dealing with for the last few quarters now. None of the stuff you talked about sounded overly new, relative at least, to the past couple few quarters. But this quarter really dragged down those gross margins, that flowed through to both Specialty and the E&C operating margins. You know, with that drop through on the gross margin -- and you've mentioned targeted investments in the North American dental implant business several times in your prepared remarks -- it all sounds to me like there could be some pricing re-thought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on and how do we think about the flow through, the gross versus operating margin for that, if it is happening over the next few quarters? Thanks. Thanks, Jeff.

Thank you. Good afternoon, guys. Amir, I wanted to follow up on the margin question Elizabeth asked. Primarily around -- your answer kind of included some things that you've really been dealing with for the last few quarters now. None of the stuff you talked about sounded overly new, relative at least, to the past couple few quarters. But this quarter really dragged down those gross margins, that flowed through to both Specialty and the E&C operating margins. You know, with that drop through on the gross margin -- and you've mentioned targeted investments in the North American dental implant business several times in your prepared remarks -- it all sounds to me like there could be some pricing re-thought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on and how do we think about the flow through, the gross versus operating margin for that, if it is happening over the next few quarters? Thanks.

Speaker Change: Yes.

Jeffrey D. Johnson: Rethought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on, and how do we think about the flow through the gross versus operating margin for that, if it is happening over the next few quarters? Thanks.

Jeffrey Johnson: Rethought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on, and how do we think about the flow through the gross versus operating margin for that, if it is happening over the next few quarters? Thanks.

Speaker Change: Rethought going on here.

Speaker Change: Some change in maybe your pricing strategy on the premium implant side is any of that going on and how do we think about the flow through the gross versus operating margin for that if it is happening over the next few quarters. Thanks.

Our intention is to refine our focus and then concentrate our efforts in those markets where we can build and maintain a sustainable competitive advantage. While this will create a modest headwind to core growth in the short-term, in the long-term, it will allow us to improve both the growth and margin profile of this business.

Amir Aghdaei: Thanks, Jeff. Very good question, but let me, let me answer that margin first, then we'll talk about the pricing specifically. So mix, as I mentioned, plays such an important role in here. When we put the plan together in 2022 and also the long-term plan that we put in place, there was a sort of assumption about the mix that we were putting in place. As you correctly pointed out, mix has shifted over time. You know, the China challenges, Russia challenges, and these are the businesses that have had the most impact in our margin. If you take a look at it, in our bracket and wire business, which is one of the most profitable businesses that we have, 1/3 of that business is outside the United States.

Thanks, Jeff.

Speaker Change: Good question, but let me, let me ask that that margin first and we will talk about the pricing specifically.

Speaker Change: So.

Speaker Change: Mix as I mentioned play such an important role in a year when we put the plan together.

Speaker Change: Our 2022 and also the long term plan that we put in place. There is a set of assumptions about the mix that we're putting in place as you correctly pointed out.

Speaker Change: Mix has shifted over time.

Speaker Change: China challenges.

Russia, China. These are the businesses that have had the most impacting our margin. If you take a look at it in our Bracken I'm wired business, which is one of them. Our most profitable business that we have one third of that business is outside the United States and really it has been impacted the most are those geographies that they're in the middle of this year.

Amir Aghdaei: And where it has been impacted the most are those geographies that they are in the middle of these geopolitical challenges. So you take a look at that, and we consider that would not change, not in near term, going forward. We have considered the impact of volume-based purchases in China. 35% to 40% price reduction in our implant business, despite the fact that we have responded to that and we have seen significant growth, it has direct impact in our margin structure. And last but not least, the shift on the Spark. The higher, the faster that this growth, it is below average, and it has a significant impact in our margin structure. If I take the VBP out, we actually got price. We were able to get good momentum on various pieces of our business. I should have mentioned one more thing, and that's the IOS.

Speaker Change: Political challenges. So you take a look at that and we consider that would not change not in near term going forward we have.

Thanks, Jeff. Very good question, but let me answer that margin first then we'll talk about the price specifically. So mix, as I mentioned, plays such an important role in here. When we put a plan together in 2022 and also the long-term plan that we put in place, there is a sort of assumption about the mix that we were putting in place. As you correctly pointed out, the mix has shifted over time. You know, the China challenges, the Russia challenges -- these are the businesses that have the most impact on our market. If you take a look at it, in our Bracket and Wire business, which is one of the most profitable business that we have, one-third of that business is outside the United States. And where it has been impacted the most, are those geographies that are in the middle of these geopolitical challenges. So, you take a look at that and we consider that will not change, not in the near-term, going forward. We have considered the impact of volume-based purchases in China.

Amir Agdai: Very good question, but let me ask you about margin first. Then we'll talk about price in specific. So mix, as I mentioned, plays such an important role here.

Speaker Change: Considered the impact of volume based purchases in China.

Long-term, this segment is positioned to accelerate growth and improve operations. In the 4th quarter, we generated a free cash flow of $99.9 million and delivered $223.6 million of free cash flow for the full year. This represents a greater than $100 million improvement in free cash flow over the full year of 2022.

Speaker Change: 35% to 40% price reduction in our implant business. Despite the fact that we have responded to that that'd be a significant growth. It has direct impact on our margin structure.

Amir Agdai: When we put the plan together in 2022 and also the long-term plan that we put in place, there is a sort of assumption about the mix that we were putting in place. As you correctly pointed out, the mix has shifted over time. You know, the China challenges, the Russia challenges, and these are the businesses that have the most impact on our market. If you take a look at it, in our Bracken and Wire business, which is one of the most profitable businesses that we have, one-third of that business is outside the United States. And where it has been impacted the most are those geographies that are in the middle of these geopolitical challenges. So you take a look at that, and we consider that will not change, not in the near term, going forward. We have considered the impact of volume-based purchases in China.

Speaker Change: And last but not least the shift in sparks the higher the fastest that this growth is below average and it has a significant impact on our margin structure, if I take the <unk> out.

Overall, we are pleased with our progress in improving our free cash flow management and are committed to our long-term goal of delivering annual free cash flow in excess of net income.

You know, the China challenges, the Russia challenges -- these are the businesses that have the most impact on our market. If you take a look at it, in our Bracket and Wire business, which is one of the most profitable business that we have, one-third of that business is outside the United States. And where it has been impacted the most, are those geographies that are in the middle of these geopolitical challenges. So, you take a look at that and we consider that will not change, not in the near-term, going forward. We have considered the impact of volume-based purchases in China.

Speaker Change: We actually got price, we were able to get good momentum on values pieces of our business I should have mentioned one more thing and that's the I O S. Despite the fact that that grew almost 30%.

I'll now turn the call over to Amir to provide an update on our outlook for 2024, as well as some closing comments.

Amir Aghdaei: Despite the fact that that grew almost 30% last year, the prices were declining very quickly until about Q4, then it stabilized. But now we have a stable situation. We know what that look like. With that, we made assumption that, you know, let's assume nothing radically changes in here. Let's not hope that the macro would change radically. Let's not assume the geopolitical will get a lot better going forward. But coming back to your question about implant, we have not seen a degradation or price reduction on our premium implant. That has not been the case. It is, has the discussion in here, specifically around North America, has not been about price. It has been around customer experience, it has been around training and education, it has been around the community and clinical community. And comparison, this is exactly what we saw.

Amir Aghdaei: Thanks, Stephen. We remain confident in our strategy and long-term outlook. The dental market is attractive, underpenetrated and has solid growth trends. Our businesses is strategically differentiated and we have a proven track record of executing in a dynamic environment. We have conviction in our ability to create meaningful value over the long-term. While we remain confident in the future of the dental industry, the current backdrop causes us to be more cautious in the near-term.

Speaker Change: Last year the prices are declining very quickly I'm talking about Q4 than stabilized, but now we have a stable situation. We know what that would look like with that he made the assumption that you know, let's assume nothing radically changes again, that's not hope that the macro would changed radically and that's not us.

Speaker Change: Assume the geopolitical we'll get a lot better going forward, but coming back to your question about impact we have not seen it.

So, you take a look at that and we consider that will not change, not in the near-term, going forward. We have considered the impact of volume-based purchases in China. 35% to 40% price reduction in our implant business, despite the fact that we have responded to that, that we have seen significant growth -- it has direct impact in our margin structure. And last but not least, shift on Spark, the higher, the faster that this growth, it is below average and it has a significant impact in our margin structure. If I take the VBP out,

Gradation or price reduction on our premium impact that has not been the case. It is how does the discussion in here are specific to our North America has not been about price. It has been Iran customer experience. It has been around training and education has been around the community and clear.

Amir Agdai: 35 to 40 percent price reduction in our in-plant business, despite the fact that we have responded to that, that we have seen significant growth, it has a direct impact on our margin structure. And last but not least, the shift on SPARC, the higher, the faster this growth, it is below average, and it has a significant impact on our margin structure. If I take the VBP out.

Speaker Change: And of course community.

Speaker Change: And.

Speaker Change: Comparison. This is exactly what we saw in 2019, we corrected it in Europe. We saw 14 quarters outgrowth. We took 300 basis funded share the replicating that model in North America price was not a factor in New York and we do not see he is going to be a major.

Amir Aghdaei: In 2019, we corrected it in Europe. We saw 14 quarters of growth. We took 300 basis points a share. We're replicating that model in North America. Price was not a factor in Europe, and we do not think it's going to be a major factor on the premium side of our business.

If I take the VBP out, we actually got price. We were able to get good momentum on various pieces of our business. I should have mentioned one more thing, and that's the IOS. Despite the fact that that grew almost 30% last year, the prices were declining very quickly until about Q4, then it stabilized. But now we have a stable situation. We know what that looks like. With that, we made an assumption that, you know, let's assume nothing radically changes in here. Let's not hope that the macro will change radically, let's not assume the geopolitical will get a lot better going forward. But coming back to your question about impact, we have not seen a degradation or price reduction on our premium implant. That has not been the case.

If I take the VBP out, we actually got price. We were able to get good momentum on various pieces of our business.

Amir Agdai: We actually got the price. We were able to get good momentum on various pieces of our business. I should have mentioned one more thing, and that's the iOS. Despite the fact that it grew almost 30% last year, the prices were declining very quickly until about Q4, then it stabilized. But now we have a stable situation. We know what that looks like.

Speaker Change: Factor on the premium side of apartments.

Jeffrey D. Johnson: All right, that's fair. I guess, if I take your comments there about when you did go back above market several years ago, you know, that was right when the TiUltra deal had come out. You were getting some mixed benefits there. You know, N-One hasn't scaled here at this point. You're really, I think, relying primarily on NobelActive, which is an older product in the market. So how do you reengage these doctors with an older product? Should we think about getting back to market growth because there's a newer product coming out, there's new feature sets coming out that will help drive that? Is this just purely gonna be heavy lifting of going out and reengaging the doctors and trying to get them to come back and use NobelActive?

Jeffrey Johnson: All right, that's fair. I guess, if I take your comments there about when you did go back above market several years ago, you know, that was right when the TiUltra deal had come out. You were getting some mixed benefits there. You know, N-One hasn't scaled here at this point. You're really, I think, relying primarily on NobelActive, which is an older product in the market. So how do you reengage these doctors with an older product? Should we think about getting back to market growth because there's a newer product coming out, there's new feature sets coming out that will help drive that? Is this just purely gonna be heavy lifting of going out and reengaging the doctors and trying to get them to come back and use NobelActive?

Alright, that's fair I guess.

Speaker Change: If I if I take your comments there about when you did go back above market. Several years ago that was right when not tie altra deal had come out you were getting some mix benefits there.

Speaker Change: And one hasnt scaled here at this point Youre really I think relying primarily on our novel active which is an older product in the market. So how do you reengage. These doctors with an older product is it should we think about getting back to market growth because there is a newer product coming out theres new feature sets coming out that will help drive that is this just pure.

But now we have a stable situation. We know what that looks like. With that, we made an assumption that, you know, let's assume nothing radically changes in here. Let's not hope that the macro will change radically, let's not assume the geopolitical will get a lot better going forward.

But now we have a stable situation. We know what that looks like.

With that, we made an assumption that, you know, let's assume nothing radically changes in here. Let's not hope that the macro will change radically, let's not assume the geopolitical will get a lot better going forward.

Amir Agdai: With that, we made an assumption that, you know, let's assume nothing radically changes here. Let's not hope that the macro will change radically. Let's not assume the geopolitical situation will get a lot better going forward. But coming back to your question about impact, we have not seen a degradation or price reduction on our premium impact. That has not been the case.

Speaker Change: Are we going to be heavy lifting of Boeing out and re engaging the doctors and trying to get them to come back and use Nobel active just what's the path to that back to market growth and by the end of <unk> 24 in the North American market. Thanks.

But coming back to your question about impact, we have not seen a degradation or price reduction on our premium implant. That has not been the case. The discussion in here, specifically on North America, has not been about price. It has been around customer experience, it has been around training and education, it has been about the community and clinical community. And, comparison, this is exactly what we saw in 2019. We corrected it in Europe, we saw 14 quarters of growth, we took 300 basis points a share -- we're replicating that model in North America. Price was not a factor in Europe and we do not think it's going to be a major factor on the premium side of our business.

Jeffrey D. Johnson: Just what's the path to that, you know, back to market growth by the end of 2024 in the North American market? Thanks.

Jeffrey Johnson: Just what's the path to that, you know, back to market growth by the end of 2024 in the North American market? Thanks.

Amir Aghdaei: I will answer that, but I wanna just define one specific. About 50% of our business is North America, 50% outside North America. That 50% that is outside North America has been growing mid-single digit with the same product. In the past, probably 5 months specifically, we have done a detailed analysis, interviewing hundreds of doctors. We have done a competitive study of our product, our pricing, our coverage, and what we have seen, product is not the most important thing in how we have really not performed as well as we should have performed in here. If I may, I give you a little bit of more detail in here, which I think it would be helpful. The 200,000 dentists in North America, 70% of all implants are placed by less than 5% of those dentists.

Speaker Change: I will answer that but I wanted to just that defined one that specific and about 50% of our business is North America, 50% outside North America.

Amir Agdai: The discussion here, specifically in North America, has not been about price. It has been about customer experience. It has been about training and education. It has been about the community and clinical community, and, Comparison, this is exactly what we saw in 2019. We corrected it in Europe.

Speaker Change: 50% of its outside North America has been growing mid single digits with the same product.

Speaker Change: In the past Bobby five months, specifically, we have done a detailed analysis interviewing hundreds of doctors have done a comparative study of a product or pricing or coverage and what we have seen.

Speaker Change: Product is not the most important thing in how we have really not perform is vital as we should've performed in here and if I may give you a little bit of more detail would be helpful too.

Amir Agdai: We saw 14 quarters of growth. We took 300 basis points of funding a share, replicating that model in North America. Price was not a factor in Europe, and we do not think it's going to be a major factor on the premium side of our business.

Speaker Change: 200000, dentists in North America.

Speaker Change: 70% of our impact are placed by less than 5% of those dentists there.

Amir Aghdaei: There are two groups in that category of the 10,000. Let's say 50% of them are specialists. These specialists depend on a referral network. The other 50% are GPs, that they provide one-stop solution. They diagnose, they plan, they place implant, and they work with labs, or they have in-house lab to provide that prosthetics. Both this group, which is a target for our premium implant, have three major requirements. Okay? Customer experience, and customer experience has a very wide definition about coverage, about order management, about return. Clinical training, training that has really hit the mark, and the model has changed over time. You got to provide a wide range of training... online, through social media, through clinical advisory teams in, at the local level. And last but not least, a lot of it is through advocacy.

In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education and further support our clinical community. We see a clear path to reinvigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce the structural cost by an additional $13 million annually for the full year, impact being realized in 2025.

Speaker Change: There are two groups in that category of at 10000.

Speaker Change: Let's say, 50% of them are especially these especially is depend on our referral network.

Speaker Change: The other 50% are GPS that they provide one stop solution.

Speaker Change: Diagnosed they plan the pacing fine and they work with labs or they have in house staff to provide that percentage.

Jeffrey D. Johnson: So how do you re-engage these doctors with an older product? Should we think about getting back to market growth because there's a newer product coming out, there's new feature sets coming out that will help drive that? Is this just purely going to be the heavy lifting of going out and re-engaging the doctors and trying to get them to come back and use Noble Active? Just what's the path to that, you know, back to market growth by the end of 24 in the North American market? Thanks. I will answer that, but I want to just define one specific thing.

Speaker Change: Both this group, which is the target for our premium impact.

Speaker Change: Three major requirements.

Speaker Change: Customer experience and customer experience is a very wide definition about coverage about order management about return.

Speaker Change: Clinical training training that is really hit the mark.

Speaker Change: And the model has changed overtime, you've got to provide a wide range of training.

Online through social media through clinical advisory team and at the local level.

Speaker Change: Last but not least a lot of it is through our advocacy.

I will answer that but I want to just define one specific thing. About 50% of our business is in North America, 50% outside North America. That 50% that is outside North America has been going mid-single-digit with the same product in the past probably, five months, specifically. We have done a detailed analysis, interviewing hundreds of doctors that have done a comparative study of our product, our pricing, our coverage. And what we have seen, product is not the most important thing in how we have really not performed as well as we should have performed in here. If I may, I'll give you a little bit of more detail in here, which I think would be helpful. There are 200,000 dentists in North America.

Amir Aghdaei: If you have individuals that they advocate and show results and teach it to other people, and that would have an impact. And that's the definition of what we call community, customer experience, coverage, go-to-market, training, education, advocacy, or clinical support. You take a look at those, and you figure out that what has really been a challenge for us; we haven't done as good a job building this referral network. A lot of those have been acquired by DSOs. We need to work with these specialists to provide support and training to them, study clubs, lunch and learn, so they can rebuild that referral network at the local level. We need to make sure the training education that we provide is relevant. This is exactly what we did in Europe. We took the decision to go at the local level.

Speaker Change: If you have individuals that the advocate and shown resolve and teach it to other people and that would have an impact and that's the definition of what we call community customer experience.

Amir Agdai: About 50% of our business is in North America, 50% outside North America. That 50% that is outside North America has been going mid-single digit with the same product for the past probably five months, specifically.

Speaker Change: Coverage go to market training and education.

Speaker Change: Advocacy or clinical support.

Speaker Change: You take a look at dose and you figure out that what has really been a challenge for US we haven't done as good a job building. This referral network a lot of those have been acquired by Dsos, we need to work with these especially these to provide support and training to them.

Amir Agdai: We have done a detailed analysis, interviewing hundreds of doctors that have done a comparative study of our product, our pricing, our coverage, and what we have seen, the product is not the most important thing in how we have really not performed as well as we should have performed. If I may, I'll give you a little bit more detail here, which I think would be helpful. There are 200,000 dentists in North America.

Speaker Change: Study clubs lunch and dinner, so they kind of rebuilt that referral network at the local level.

Speaker Change: We need to make sure the training and education that we provide is relevant.

Speaker Change: This is exactly what we did in Europe, we took the decision to go at the local level and then I mentioned local level I don't even mean countries. We went to Madrid, we went to Barcelona, reenter Paris replicated this model and we have seen growth. We have seen growth continues to be doing exactly the same thing in North America.

Amir Agdai: 70% of all implants are placed by less than 5% of those dentists. There are two groups in that category of 10,000. Let's say 50% of them are specialists. These specialists depend on a referral network. The other 50% are general practitioners who provide one-stop solutions. They diagnose, plan, place in plan, and work with labs or they have an in-house lab to provide that prosthesis.

Amir Aghdaei: When I mention local level, I don't even mean countries. We went to Madrid, we went to Barcelona, we went to Paris. We replicated this model, and we have seen growth. We have seen growth continuously. We're doing exactly the same thing in North America. I'm not suggesting, Jeff, that the product is not an issue. I'm not saying that it's irrelevant, but what I- I'm responding to your question, that we are in a good place from brand, from recognition, from product, from pricing, from quality, and what we do from our operations. We need to change our commercial execution, marketing, and training education. That's what we are after. That's what we are doing as we speak.

Our purpose is to partner with dental professionals, to improve patient lives by digitizing, personalizing and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees and our shareholders.

Speaker Change: I'm not suggesting Jeff that the product is not an issue I'm not saying that it's irrelevant.

Speaker Change: Well, what I'm responding to your question that we are in a good place from bran from recognition from product from pricing from quality, what we do from operation, we need to change our commercial execution marketing and training and education. That's what we're after and that's what we're doing as we speak.

Stephen Keller: Thanks, Amir. That concludes our formal comments, we are now ready for questions.

Operator: Very helpful. Thank you.

Jeffrey Johnson: Very helpful. Thank you.

Speaker Change: Very helpful. Thank you.

Amir Aghdaei: Of course.

Speaker Change: Of course.

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

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

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

Erin Elizabeth Wilson Wright: Great, thanks. And you said you remain cautious on the underlying demand environment, which is obvious, but what did you see on a monthly basis throughout the quarter or year to date? And how are... Are there any signs of stabilization in certain pockets of the market that you're looking at, or anything to call out on that front in terms of areas where there's disproportionate, either deterioration or stabilization? Thanks.

Erin Wright: Great, thanks. And you said you remain cautious on the underlying demand environment, which is obvious, but what did you see on a monthly basis throughout the quarter or year to date? And how are... Are there any signs of stabilization in certain pockets of the market that you're looking at, or anything to call out on that front in terms of areas where there's disproportionate, either deterioration or stabilization? Thanks.

We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead, your line is open.

Erin Wright: Great. Thanks, and you said you remain cautious on near line demand environment.

Erin Wright: Yes.

Erin Wright: What did you see on a monthly basis throughout the quarter or year to date and in Howard are there any signs of stabilization in certain pockets of the markets that youre looking at or anything to call out on that front in terms of areas, where theres disproportionate either deterioration or stabilization.

Elizabeth Anderson: Hi guys, thanks for the question. Maybe to start off with the operating margin guidance for 2024. I mean, that came in pretty disappointing, in our view. And if we look at this recently as 3Q, you guys were talking about operating margin expansion. So, can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then what the current guidance that you guys are giving us tonight?

Amir Agdai: And last but not least, a lot of it is through advocacy. If you have individuals who advocate for and show results and teach it to other people, that would have an impact. And that's the definition of what we call a community.

Amir Aghdaei: Yeah. Thank you. Thank you, Erin. So, it, it's worth mentioning a couple of things, like in China, as you know, Q4 of 2022, as well as the Q1 of 2023, we really didn't have a whole lot of business. First it was COVID, and then VBP, and then we had this, for lack of a better word, we had this Zoom boom that we saw in US. We saw it in Q2 of 2023 in China, and we have seen a more of a stabilization, stabilization of the patient volume, and that's what we are counting on. And that assumption, that what we saw in Q3, Q4, is carrying itself forward throughout at least the first months of this year. Outside of that, what we are seeing is a stabilization of a patient volume.

Speaker Change: Yeah. Thank you. Thank you.

Speaker Change: It's worth mentioning a couple of things that in China. As you know Q4 of 2022 as well as in Q1 of 2023, what really it didn't have a whole lot of business. Firstly was cold weather and then <unk> and then we have this [laughter] for lack of better word we have to assume boom that we saw in U S. Besides in Q.

Speaker Change: Two of our 2023 in China, and we have seen them more of his stipulate station.

Speaker Change: Musician after patient volume and that's what we are counting on and that assumption that what we saw in Q3 Q4 is carrying itself for toward at least the first months of this year.

Amir Agdai: This is exactly what we did in Europe. We took the decision to go at the local level. And when I mention the local level, I don't even mean countries. We went to Madrid, we went to Barcelona, we went to Paris -- we replicated this model and we have seen growth. We have seen growth continuously; we're doing exactly the same thing in North America. I'm not suggesting, Jeff, that the product is not an issue; I'm not saying that it's irrelevant. I'm responding to your question that we are in a good place from brand, from recognition, from product, from pricing, from quality, what we do from operations. We need to change our commercial execution, marketing and training and education. That's what we're after, that's what we're doing as we speak. Very helpful, thank you, of course. We'll take our next question from Aaron Wright with Morgan Stanley. Please go ahead; your line is open.

This is exactly what we did in Europe. We took the decision to go at the local level. And when I mention the local level, I don't even mean countries. We went to Madrid, we went to Barcelona, we went to Paris -- we replicated this model and we have seen growth. We have seen growth continuously; we're doing exactly the same thing in North America. I'm not suggesting, Jeff, that the product is not an issue; I'm not saying that it's irrelevant. I'm responding to your question that we are in a good place from brand, from recognition, from product, from pricing, from quality, what we do from operations. We need to change our commercial execution, marketing and training and education. That's what we're after, that's what we're doing as we speak.

Speaker Change: Outside of that what we see is the stabilization of our patient volume we have a really good relationship with a large number of dsos, that's what they tell us that's what we see.

Amir Aghdaei: We have a really good relationship with a large number of DSOs. That's what they tell us. That's what we see. Spending per patient has been challenging for a lot of these DSOs in the past several months, and that's what we see. And how is that impacted? Is because of these high-end procedures, adult orthodontic cases, full arch restoration, $25,000 to $30,000, that can get postponed. So, so far, during the year, what we have seen is a consistent with what we saw in Q4, not a radical change one way or another.

Speaker Change: Spending per patient has been challenging for a lot of these dsos in the past several months and Thats, what we see on how is that impacted us because of these high end procedures.

Amir Agdai: We went to Madrid, we went to Barcelona, we went to Paris, we replicated this model, and we have seen growth. We have seen growth continuously; we're doing exactly the same thing in North America. I'm not suggesting, Jeff, that the product is not an issue; I'm not saying that it's irrelevant.

Speaker Change: Adult orthodontic cases, fool ourselves <unk> 25 to $30000 that can get postponed.

Speaker Change: So so far during the year, while we have seen is it consistent with what we saw in Q4, not a radical change one way or another.

Amir Agdai: I'm responding to your question that we are in a good place from the brand, from recognition, from product, from pricing, from quality, what we do from operations. We need to change our commercial execution, marketing, and training education. That's what we're after, that's what we're doing as we speak. Very helpful, thank you, of course. We'll take our next question from Aaron Wright with Morgan Stanley. Please go ahead; your line is open.

Erin Elizabeth Wilson Wright: Okay, thank you.

Erin Wright: Okay, thank you.

Speaker Change: Okay. Thank you.

Amir Aghdaei: Of course.

Speaker Change: Of course.

Operator: We'll take our next question from Jon Block with Stifel. Please go ahead. Your line is open.

Moderator: We'll take our next question from Jon Block with Stifel. Please go ahead. Your line is open.

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

Jonathan David Block: Yeah, thanks, guys. Good afternoon. I guess the first one will be the longer one, and sort of follows up a little bit where Elizabeth and, and Jeff were going. But, you know, Amir, in, in February 2023, so at the Analyst Day, right, 12 months ago, I think we all had about 21% EBITDA margins for 2024, and now we're all going to be about 500 basis points lower as of tomorrow morning. And I know dental has softened, but everyone's dealing with that. And I know you've got VBP and IOS pricing, but again, everyone's dealing with that. It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that.

Jonathan Block: Yeah, thanks, guys. Good afternoon. I guess the first one will be the longer one, and sort of follows up a little bit where Elizabeth and, and Jeff were going. But, you know, Amir, in, in February 2023, so at the Analyst Day, right, 12 months ago, I think we all had about 21% EBITDA margins for 2024, and now we're all going to be about 500 basis points lower as of tomorrow morning. And I know dental has softened, but everyone's dealing with that. And I know you've got VBP and IOS pricing, but again, everyone's dealing with that. It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that.

Jonathan David Block: Yeah. Thanks, guys good afternoon.

Jonathan David Block: The first one will be the longer one.

Jonathan David Block: It sort of follows up a little bit where Elizabeth and Jeff, we're going but yeah I'm here.

Jonathan David Block: February 23.

Very helpful, thank you. Of course. We'll take our next question from Aaron Wright with Morgan Stanley. Please go ahead; your line is open.

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

Jonathan David Block: So at the analyst day rate 12 months ago.

Jonathan David Block: We all had about 21% EBITDA margins for 2024.

Now, we're all going to be about 500 basis points lower as of Tomorrow morning.

Aaron Wright: Right, thanks. You said you remain cautious on the underlying demand environment, which is obvious, but what did you see on a monthly basis throughout the quarter or year-to-date? And are there any signs of stabilization in certain pockets of the markets that you're looking at or anything to call out on that front in terms of areas where there's disproportionate, either deterioration or stabilization? Thanks. Yeah, thank you.

Jonathan David Block: I know dental has softened, but everyone's dealing with that and I know, you've got GBP and iOS pricing.

And we thought we need to be more cautious here, to provide a guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. And we think throughout the year, we will see acceleration of our margin as well as our growth, throughout the year, every quarter. That's basically our assessment and assumption on how we put that guidance in place.

Jonathan David Block: But again everyone's dealing with that.

Jonathan David Block: Doesn't sound like the trajectory of the spark gross margin ramp has really changed or at least I haven't picked up on that.

Jonathan David Block: None of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing, like yours are being revised down to that magnitude. So what I- I'm just getting jammed up on, and maybe you can help, is: What is this specific to in regards to, to Envista? Is it all about implants? Is it the consumables that's being worked down, arguably? Because the decremental seems so extreme specific to Envista-

Jonathan Block: None of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing, like yours are being revised down to that magnitude. So what I- I'm just getting jammed up on, and maybe you can help, is: What is this specific to in regards to, to Envista? Is it all about implants? Is it the consumables that's being worked down, arguably? Because the decremental seems so extreme specific to Envista-

Jonathan David Block: And none of the other dental companies have 2024, EBITDA margins that are coming anywhere close to compressing like yours are being revised down to that magnitude. So what im just getting jammed up on and maybe you can help us.

Speaker Change: What is.

Speaker Change: This specific two in regards to to invest or is it all about implants.

Speaker Change: Is it the consumables, that's being worked down arguably because the decrementals seem show extreme specific to envision.

Yeah, thank you. So, it's worth mentioning a couple of things. In China, as you know, in Q4 of 2022 as well as in Q1 of 2023, we really didn't have a whole lot of business. First, it was COVID and then VBP and then we had this, for lack of a better word, we had this Zoom boom that we saw in the US. We saw it in Q2 of 2023 in China and we have seen more of a stabilization -- stabilization of the patient volume. And that's what we're counting on. And that assumption, that what we saw in Q3, Q4 is carrying itself forward throughout, at least, the first months of this year. Outside of that, what we are seeing is a stabilization of patient volume.

Amir Aghdaei: Yeah, thank you. So, it's worth mentioning a couple of things. In China, as you know, in Q4 of 2022 as well as in Q1 of 2023, we really didn't have a whole lot of business. First, it was COVID and then VBP and then we had this, for lack of a better word, we had this Zoom boom that we saw in the US. We saw it in Q2 of 2023 in China and we have seen more of a stabilization -- stabilization of the patient volume. And that's what we're counting on. And that assumption, that what we saw in Q3, Q4 is carrying itself forward throughout, at least, the first months of this year.

Amir Agdai: So it's worth mentioning a couple of things that in China, as you know, in Q4 of 2022, as well as in Q1 of 2023, we really didn't have a whole lot of business. First it was COVID and then VVP, and then we had this, for lack of a better word, we had this Zoom boom that we saw in the U.S. We saw it in Q2 of 2023 in China, and we have seen more of a stabilization, stabilization of patient volume, and that's what we're counting on. And that assumption that what we saw in Q3, Q4 is carrying itself forward throughout at least the first Outside of that, what we are seeing is a stabilization of patient volume.

Elizabeth Anderson: Got it. That's helpful. So, how do we think about the long-term guide and sort of the longer-term margin expansion possibility with this new step down in '24?

Amir Aghdaei: Yeah

Jonathan David Block: ... when a lot of those challenges are more dental industry. Thank you.

Jonathan Block: ... when a lot of those challenges are more dental industry. Thank you.

Speaker Change: When a lot of those challenges are more dental industry. Thank you.

Amir Aghdaei: Yeah, of course. Of course. I, I definitely understand where you're coming from, and this is a challenge that we are trying to make sure that we are thoughtful about this, and we put a guidance in place that considers the realities of what we see in place. We are well aware of where we started in 2021, 2022, where we have ended up in 2023. So I want to get- take us back to about Q4. Stephen talked about that, where we ended up in Q4. So it's dynamics that you talked about, Jon, is exactly what we are faced with. The Spark is rapidly growing. It's growing and becoming such a bigger part of our equation.... And, you know, if you go back, we're a year ahead of what we have considered, where we not needed to be.

Speaker Change: Yeah of course of course, I definitely understand where you're coming from and this is a challenge that we are trying to make sure that your thoughtful about this and you put a guidance in place that considers the realities of what we see in place we are well aware of where we started in 'twenty. One 'twenty two where we have ended up in 2020.

Yeah. And you know, we have been fairly consistent, as you know, about creating long-term value by expanding growth, by expanding margin, by shifting our portfolio. We don't think that really has radically changed, that framework that we created in the past four, four and a half years has stayed intact. The realities of what we're dealing with in here is, one, we have a new leadership in formation. A CFO, hopefully, soon to be named. We are placing the Nobel, our implant president, over time.

Speaker Change: So.

Speaker Change: I Wanna get take us back to by Q4 as Steven talked about that where we ended up in Q4. So its dynamics that you talked about John is exactly what we have faced.

And that's what we're counting on. And that assumption, that what we saw in Q3, Q4 is carrying itself forward throughout, at least, the first months of this year. Outside of that, what we are seeing is a stabilization of patient volume. We have a really good relationship with a large number of DSOs, that's what they tell us, that's what we see. Spending per patient has been challenging for a lot of these DSOs in the past several months and that's what we see. And how is that impacted is because of this high-end procedures: adult orthodontic cases, full-arch restoration, $25,000 to $30,000 that can get postponed. So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another.

And that assumption, that what we saw in Q3, Q4 is carrying itself forward throughout, at least, the first months of this year. Outside of that, what we are seeing is a stabilization of patient volume.

And that assumption, that what we saw in Q3, Q4 is carrying itself forward throughout, at least, the first months of this year.

Speaker Change: As far as rapidly grown is growing and becoming such a bigger part of our equation.

Outside of that, what we are seeing is a stabilization of patient volume. We have a really good relationship with a large number of DSOs, that's what they tell us, that's what we see. Spending per patient has been challenging for a lot of these DSOs in the past several months and that's what we see. And how is that impacted is because of this high-end procedures: adult orthodontic cases, full-arch restoration, $25,000 to $30,000 that can get postponed. So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another.

Speaker Change: And if.

Speaker Change: If you go back a year ahead of what we have considered it will be not needed to be that one year ahead has significant impact in that mix.

Amir Agdai: We have a really good relationship with a large number of DSOs. That's what they tell us. That's what we see. Spending per patient has been challenging for a lot of these DSOs in the past several months. And that's what we see. And how is that impacted because of this high-end procedure, adult orthodontic cases, full hour registration, $25,000 to $30,000 that can get postponed.

Amir Aghdaei: That one year ahead has significant impact in that mix equation, one. Two, I mentioned that repeatedly, because it's worth mentioning it again; it, the bracket and wire business is not a business that is growing rapidly, but we have been taking share. And the reason we have been taking share, because 1/3 of our business is sitting outside developed market. These businesses, they have been growing high single digit, double digit, with the high margin. That is not in the picture. It wasn't in the picture; it is not coming back as rapidly as we expect. And not only that, we're faced with the VBP in China, which is really uncertain when it's gonna happen. We are assuming second half of this year. We wanna be thoughtful, again, not to be surprised.

Speaker Change: <unk> watched too I mentioned that repeated because it's worth mentioning it again.

Speaker Change: The bracket and wire business is another business that is growing rapidly, but we have been taking share.

And how is that impacted is because of this high-end procedures: adult orthodontic cases, full-arch restoration, $25,000 to $30,000 that can get postponed. So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another.

Speaker Change: And the reason we have been taking share because one third of our business is sitting outside.

Speaker Change: <unk> market. This business has that been growing high single digit double digit with the high March.

Aaron Wright: So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another. Okay, thank you. Of course. We'll take our next question from John Block with Stiefel. Please go ahead, your line is open.

So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another.

We think that over time, our view around growth, margin and portfolio is still valid and we need to talk about the capital structure as well. That's why we decided to postpone that conversation until we are in a better place to provide better insight. We're not canceling it, we are postponing it; we should be ready when the team is in place, when we have momentum to come back and have that conversation.

That is not in the picture it wasn't in the picture is not coming back as rapidly as we expect and not only that we're faced with the <unk> in China, which is really uncertain. When he is going to happen. We are assuming a second half of this year, we want to be thoughtful again not to be survives.

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

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

Jonathan David Block: Yeah. Thanks, guys. Good afternoon. I guess the first one will be the longer one, it sort of follows up a little bit where Elizabeth and Jeff were going. But, Amir, in February '23 -- so, at the Analyst Day, right, 12 months ago -- I think we all had about 21% EBITDA margins for 2024. And now we're all going to be about 500 basis points lower as of tomorrow morning. And I know dental has softened but everyone's dealing with that. And I know you've got VBP and IOS pricing but, again, everyone's dealing with that.

Amir Aghdaei: This volume that is impacting us on the high margin on areas like Russia and China is really radically changing that mix. The North America Nobel, we know we're gonna turn this around. There is absolutely no question in my mind, because we know exactly where the problems and the challenges are, but it's gonna take some time. We have to layer some investment in here in order to be able to get it to that market growth over time. You combine all of that, you put in place, you say, I'm not gonna make any assumption on macro. The realities are what the realities are. If it changes, absolutely, we'd be the first one to come back and communicate that.

Speaker Change: This volume that is impacting us on the high margin areas like Russia, and China. It is really it radically changing that mix the North America Nobel We know we're going to totally surround there's absolutely no question in my mind, because we know exactly where the proppant and the challenge itself, but it.

Elizabeth Anderson: Got it. And one last one for me. You just said you have a potential CFO announcement shortly, would you like to put any time parameters around that?

Jonathan David Block: So at the animal stay right 12 months ago, I think we all had about 21% EBITDA margins for 2024. And now we're all going to be about 500 basis points lower as of tomorrow morning. And I know Dental has softened, but everyone's dealing with that.

Speaker Change: It's going to take some time, we have to layer some investment in order to be able to get it to that market growth overtime. You combine all of that you put in place you say I'm not going to make any assumption on macro.

Amir Agdai: And I know you've got VBP and IOS pricing but, again, everyone's dealing with that. It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that, and none of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing like yours are, being revised down to that magnitude. So what I'm -- I'm just getting jammed up on, and maybe you can help, is what is this specific to, in regards to Envista? Is it all about implants?

And I know you've got VBP and IOS pricing but, again, everyone's dealing with that. It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that, and none of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing like yours are, being revised down to that magnitude. So what I'm -- I'm just getting jammed up on, and maybe you can help, is what is this specific to, in regards to Envista?

And I know you've got VBP and IOS pricing but, again, everyone's dealing with that.

Elizabeth Anderson: Got it. Thank you.

It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that, and none of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing like yours are, being revised down to that magnitude.

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

Speaker Change: <unk> of what the reality shops, if it changes absolutely we'd be the first one to come back and communicate that but what we see today, what we saw in the past several months is the realities that we're dealing with and we wanted to make sure that you're thoughtful about this we put our guidance in place that we can deliver on it we'll put the right setup.

Amir Aghdaei: What we see today, what we saw in the past several months, is the realities that we are dealing in, and we wanted to make sure that we are thoughtful about this. We put a guidance in place that we can deliver on it. We put the right set of measures, growth, and margin in place to be able to deliver on what we promise.

So what I'm -- I'm just getting jammed up on, and maybe you can help, is what is this specific to, in regards to Envista? Is it all about implants? Is it the consumables that's being worked down? Arguably, because the decremental seems so extreme, specific to Envista, when a lot of those challenges are more in the dental industry? Thank you. Yeah, of course, of course, I definitely understand where you're coming from. And this is a challenge that we are trying to make sure that we are thoughtful about. And we put guidance in place that considers the realities of what we see in place. We are well aware of where we started in 21, 22, and where we have ended up in 20, 23. So, I want to take us back to Q4. Stephen talked about that where we ended up in Q4. Those dynamics that you talked about, John, are exactly what we are facing. Spark is rapidly growing; it's growing and becoming such a bigger part of our equation.

Speaker Change: Measures and growth in March and in place to be able to deliver what we promise. Okay. That's very helpful and maybe just a quick follow up Steven This one might be for you, but just a lot of moving parts with the <unk> G. M compressing, notably so if we say EBITDA margins are down 160 basis points year over year sort of going from there.

Jonathan David Block: Okay, that was very helpful. And maybe just a quicker follow-up. Stephen, this one might be for you, but just a lot of moving parts with the Q4 GM compressing notably. So if we say EBITDA margins are down 160 basis points year-over-year, sort of going from the 18.1 to the midpoint of next year, any way to think about that, just like sort of the breakdown between GM and OpEx? Because obviously, you know, you're still gonna be sort of investing in the business, so any color between those would be helpful. Thank you.

Jonathan Block: Okay, that was very helpful. And maybe just a quicker follow-up. Stephen, this one might be for you, but just a lot of moving parts with the Q4 GM compressing notably. So if we say EBITDA margins are down 160 basis points year-over-year, sort of going from the 18.1 to the midpoint of next year, any way to think about that, just like sort of the breakdown between GM and OpEx? Because obviously, you know, you're still gonna be sort of investing in the business, so any color between those would be helpful. Thank you.

Is it all about implants? Is it the consumables that's being worked down, arguably, because the decline seems so extreme, specific to Envista, when a lot of those challenges are more in the dental industry? Thank you. Yeah, of course, of course, I definitely understand where you're coming from. And this is a challenge that we are trying to make sure that we are thoughtful about. And we put guidance in place that considers the realities of what we see in place. We are well aware of where we started in 21, 22, and where we have ended up in 20, 23. So, I want to take us back to Q4. Stephen talked about that where we ended up in Q4. Those dynamics that you talked about, John, are exactly what we are facing. Spark is rapidly growing; it's growing and becoming such a bigger part of our equation.

Amir Agdai: Is it the consumables that's being worked down, arguably, because the decline seems so extreme, specific to Envista, when a lot of those challenges are more in the dental industry? Thank you. Yeah, of course, of course, I definitely understand where you're coming from. And this is a challenge that we are trying to make sure that we are thoughtful about. And we put guidance in place that considers the realities of what we see in place. We are well aware of where we started in 21, 22, and where we have ended up in 20, 23. So, I want to take us back to Q4. Stephen talked about that where we ended up in Q4. Those dynamics that you talked about, John, are exactly what we are facing. Spark is rapidly growing; it's growing and becoming such a bigger part of our equation.

You know, with that drop through on the gross margin -- and you've mentioned targeted investments in the North American dental implant business several times in your prepared remarks -- it all sounds to me like there could be some pricing re-thought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on and how do we think about the flow through, the gross versus operating margin for that, if it is happening over the next few quarters? Thanks.

Speaker Change: The 18, one to the midpoint of next year any way to think about that just like sort of the breakdown between GM and opex.

Yeah. Of course, I definitely understand where you're coming from and this is a challenge that we are trying to make sure that we are thoughtful about this. And we put guidance in place that considers the realities of what we see in place. We are well aware of where we started in '21, '22 and where we have ended up in '23. So, I want to take us back to about Q4. Stephen talked about that, where we ended up in Q4. Those dynamics that you talked about, Jon, is exactly what we are facing. Spark is rapidly growing; it's growing and becoming such a bigger part of our equation.

Speaker Change: Because obviously you know you're still going to be sort of investing in the business. So any color between those would be helpful. Thank you.

Stephen Keller: Yeah, so I, I think you can assume, given where our guide is, I think we can assume that our gross margins for the year, year-over-year, will be down, will be down a little bit. That would be our expectation. Obviously, Q4 with margins and gross margins were quite a bit lower. That's a little bit more related to some specific issues that we had in Q4. So I think for the year, it's a better comparison for the full year, with margins down a little bit due to mix.

Speaker Change: Yeah, So I think youre going to sale, given where our guidance I think we're going to see that our gross margins for the year year over year will be down will be down a little bit.

Amir Aghdaei: Thanks, Jeff. Very good question, but let me answer that margin first then we'll talk about the price specifically. So mix, as I mentioned, plays such an important role in here. When we put a plan together in 2022 and also the long-term plan that we put in place, there is a sort of assumption about the mix that we were putting in place. As you correctly pointed out, the mix has shifted over time.

Speaker Change: That that would be our expectation, obviously Q4 with margin at gross margins were.

Speaker Change: We're quite a bit lower that's a little bit more related to some specific issue that we had in Q4. So I think for the year. It's a better comparison for the full year with margins down a little bit due to mix.

Jonathan David Block: Thank you.

Jonathan Block: Thank you.

Speaker Change: Thank you.

Spark is rapidly growing; it's growing and becoming such a bigger part of our equation. And you know, if you go back, we're a year ahead of what we have considered where we not needed to be. That one year ahead has significant impact in that mix equation. One, two. I mentioned that repeatedly because it's worth mentioning it again, is the Bracket and Wire business is not a business that is growing rapidly but we have been taking share. And the reason we have been taking share is because one third of our business is sitting outside developed markets. These businesses that have been growing high single-digit, double-digit with high margins -- that is not in the picture. It wasn't in the picture, it is not coming back as rapidly as we expect. And not only that, we're faced with the VBP in China, which is really uncertain when it's going to happen. We are assuming second half of this year. We want to be thoughtful again, not to be surprised. This volume that is impacting us on the high margin and areas like Russia and China, it is really radically changing that mix. The North America Nobel, we know we're going to turn this around.

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

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

Speaker Change: We will take our next question from Nathan Rich with Goldman Sachs. Please go ahead. Your line is open.

Amir Agdai: And, you know, if you go back, we're a year ahead of where we considered where we needed to be. That one year ahead has a significant impact on that mix, equation. One. Two.

Nathan Rich: Hi, good afternoon. Thanks for taking the questions. I guess, first is just, you know, we think about the margin progression over the year. You know, you talked about seeing improvement, you know, through the year and by Q4. I guess, you know, if you could maybe help us think about, you know, the magnitude or range that we should think about, you know, where the company is targeting to end the year relative to where you're starting.

Nathan Rich: Hi, good afternoon, thanks for taking the questions.

Nathan Rich: I guess first as we think about the margin progression over the year, you talked about seeing improvement.

Amir Agdai: I mentioned that repeatedly because it's worth mentioning it again. The bracket and wire business is not a business that is growing rapidly, but we have been taking share. And the reason we have been taking share is because one third of our business is sitting outside developed markets. These businesses that have been growing high single digit, double digit with high margins. That is not in the picture. It wasn't in the picture.

Nathan Rich: Through the year and by <unk> I guess, if you could maybe help us think about the magnitude or a range that we should think about you know where the company is targeting to end the year relative to where you're starting.

And the reason we have been taking share is because one third of our business is sitting outside developed markets. These businesses that have been growing high single-digit, double-digit with high margins -- that is not in the picture. It wasn't in the picture, it is not coming back as rapidly as we expect. And not only that, we're faced with the VBP in China, which is really uncertain when it's going to happen. We are assuming second half of this year. We want to be thoughtful again, not to be surprised. This volume that is impacting us on the high margin and areas like Russia and China, it is really radically changing that mix. The North America Nobel, we know we're going to turn this around.

And the reason we have been taking share is because one third of our business is sitting outside developed markets.

So, you take a look at that and we consider that will not change, not in the near-term, going forward. We have considered the impact of volume-based purchases in China. 35% to 40% price reduction in our implant business, despite the fact that we have responded to that, that we have seen significant growth -- it has direct impact in our margin structure. And last but not least, shift on Spark -- the higher, the faster that this growth, it is below average and it has a significant impact in our margin structure. If I take the VBP out, we actually got price. We were able to get good momentum on various pieces of our business.

Amir Aghdaei: Yeah. Thank you. Thank you, Nate. So let's, let's work through that a little bit and see if we can build a kind of a bridge in here. So every quarter, the Spark margin has improved. Every quarter. It is coming up every quarter, and we expect that trend to continue. As it ramps up to double the business over three years, our goal is to get it to the fleet average. So for that to take place, we got to see this progression every quarter. And the other part of that equation is Nobel. Nobel is one of our most profitable businesses. We expect that to get to a market proxies by end of the year. So if we start where we were for the whole year in Q4, and it start making progress every quarter, we're gonna see this margin progression throughout the year.

Speaker Change: Yes. Thank you thanks Nate.

Speaker Change: So, let's just walk through that a little bit and see if we can build a kind of a bridge in here. So.

These businesses that have been growing high single-digit, double-digit with high margins -- that is not in the picture. It wasn't in the picture, it is not coming back as rapidly as we expect. And not only that, we're faced with the VBP in China, which is really uncertain when it's going to happen. We are assuming second half of this year. We want to be thoughtful again, not to be surprised. This volume that is impacting us on the high margin and areas like Russia and China, it is really radically changing that mix. The North America Nobel, we know we're going to turn this around. There is absolutely no question in my mind because we know exactly where the problems and the challenges are, but it's going to take some time. We have to layer some investment in here in order to be able to get it to that market growth over time. You combine all of that, you put in place, you say, I'm not going to make any assumptions about macro. The realities are what the realities are.

Speaker Change: Pre quarter.

Speaker Change: Margin has improved every quarter.

Amir Agdai: It is not coming back as rapidly as we expect. And not only that, we're faced with the VVP in China, which is really uncertain when it's going to happen. We are assuming the second half of this year.

Speaker Change: <unk> is coming out every quarter and we expect that trend to continue as it ramps up to double the business over three years. Our goal is to get it to the fleet average so for that to take place we got to see this progression every quarter.

And not only that, we're faced with the VBP in China, which is really uncertain when it's going to happen. We are assuming second half of this year. We want to be thoughtful again, not to be surprised. This volume that is impacting us on the high margin and areas like Russia and China, it is really radically changing that mix. The North America Nobel, we know we're going to turn this around. There is absolutely no question in my mind because we know exactly where the problems and the challenges are, but it's going to take some time. We have to layer some investment in here in order to be able to get it to that market growth over time. You combine all of that, you put in place, you say, I'm not going to make any assumptions about macro. The realities are what the realities are.

Amir Agdai: We want to be thoughtful again, not to be surprised. This volume that is impacting us on the high margin and areas like Russia and China is really radically changing that mix. The North America Nobel, we know we're going to turn this around.

Speaker Change: And.

Speaker Change: The other part of that equation is Nobel Nobel is one of our most profitable businesses.

Speaker Change: We expect that to get to it.

The North America Nobel, we know we're going to turn this around. There is absolutely no question in my mind because we know exactly where the problems and the challenges are but it's going to take some time. We have to layer some investment in here, in order to be able to get it to that market growth over time. You combine all of that, you put in place, you say 'I'm not going to make any assumption on macro. The realities are what the realities are'. If it changes, absolutely, we'd be the first ones to come back and communicate that.

Speaker Change: Market proxies by end of the year. So if you start where we were for the whole year, each Q4 and start making progress every quarter, we're going to see this margin progression throughout the year. We think Q1 is gonna be nominally better than Q4, and we expect as we go through the year wanted to see that.

I should have mentioned one more thing, and that's the IOS. Despite the fact that that grew almost 30% last year, the prices were declining very quickly until about Q4, then it stabilized. But now we have a stable situation. We know what that looks like. With that, we made an assumption that, you know, let's assume nothing radically changes in here. Let's not hope that the macro will change radically, let's not assume the geopolitical will get a lot better going forward.

Amir Agdai: There is absolutely no question in my mind because we know exactly where the problems and the challenges are, but it's going to take some time. We have to layer some investment in here in order to be able to get it to that market growth over time. You combine all of that, you put in place, you say, I'm not going to make any assumptions about macro. The realities are what the realities are.

Amir Aghdaei: We think Q1 is gonna be nominally better than Q4, and we expect as we go through the year, we wanna see that progression every quarter. We see better performance on margin until we get to end of Q4. And, and that's what we put that guidance in place to take a look at. It, it range that we can manage with the opportunity, if macro improves, to respond to it as necessary.

Speaker Change: Progression every quarter, we see better performance.

Speaker Change: On March <unk>.

Speaker Change: Until we get to end of Q4.

Speaker Change: And that's what we put that guidance in place to take a look at it range that we can manage is the opportunity if macro improves.

If it changes, absolutely, we'd be the first ones to come back and communicate that. But what we see today, what we saw in the past several months, is the realities that we are dealing with and we wanted to make sure that we were thoughtful about this. We put a guidance in place that we can deliver on it. We put the right set of measures and growth and margin in place to be able to deliver on what we promise. Okay, that was very helpful. And maybe just a quicker follow up. Stephen, this one might be for you but just a lot of moving parts with the 4Q GM compressing notably.

Jonathan David Block: If it changes, absolutely, we'd be the first ones to come back and communicate that. But what we see today, and what we saw in the past several months, are the realities that we are dealing with, and we wanted to make sure that we were thoughtful about them. We put a guidance in place that we can deliver on. We put the right set of measures, growth, and margin in place to be able to deliver on what we promise. Okay, that was very helpful. And maybe just a quicker follow up. Steven, this one might be for you, but there are just a lot of moving parts with the 4Q GM compressing notably.

If it changes, absolutely, we'd be the first ones to come back and communicate that.

But what we see today, and what we saw in the past several months, are the realities that we are dealing with, and we wanted to make sure that we were thoughtful about them. We put a guidance in place that we can deliver on. We put the right set of measures, growth, and margin in place to be able to deliver on what we promise. Okay, that was very helpful. And maybe just a quicker follow up. Steven, this one might be for you, but there are just a lot of moving parts with the 4Q GM compressing notably.

Speaker Change: To respond to it as necessary.

Nathan Rich: Okay, great. And if I could just ask a quick follow-up. I wanted to just get a bit more details on your outlook for China. You know, you had good performance in the quarter. I kind of, I understand it was against, you know, an easier comp. It sounds like, you know, you'll have one more quarter like that in the first quarter of the year. But I guess beyond that, you know, could you maybe just talk about how you feel about the demand environment, in China overall, and what type of growth you'd expect as, you know, the comparisons normalize? And I just wanted to also clarify, I think you said you may be expecting a VBP related to wires and brackets in the second half of the year. I just wanted to make sure I caught that right.

Speaker Change: Okay, great and if I could just ask a quick follow up I wanted to just get a bit more details on your outlook for China. You know you had good performance in the quarter I kind of understand it was again you know what.

Speaker Change: An easier comp it sounds like you have one more quarter like that in the first quarter of the year, but I guess beyond that could you maybe just talk about how you feel.

And in comparison, this is exactly what we saw in 2019. We corrected it in Europe, we saw 14 quarters of growth, we took 300 basis points a share -- we're replicating that model in North America. Price was not a factor in Europe and we do not think it's going to be a major factor on the premium side of our business.

Speaker Change: About the demand environment in China overall and in what type of growth you would expect is the comparisons normalize and I. Just wanted to also clarify I think you said you may be expecting a V B P.

Stephen Keller: So if we say EBITDA margins are down 160 basis points year over year, sort of going from 18.1 to the midpoint of next year. Any way to think about that? Just like sort of the breakdown between GM and OPEX? Because obviously, you know, you're still going to be sort of investing in the business. So any color between those would be helpful. Thank you.

Speaker Change: Related to your wires and brackets in the second half of the year I just wanted to make sure I caught that right of course.

Amir Aghdaei: Of course, Nate. So what we saw in Q4, China sales increased by almost 15%. And that's, as you mentioned, that's a good indication of proxies play a really important role in it. But if I take a look at the entire year, China was flat. And normally, about 10% of our business have had been going double-digit for years. And, so in 2024, what we see in here, Q1, because the easier comp, we expect a strong growth. As we go through Q2 to Q4, we're going to have a more difficult comp in here. VBP of implant comes in place, so we know exactly what that looks like, but it's more of a moderate thing. Our assumption is that the ortho VBP is going to be in place in second half, and that's how we have planned for.

Jeffrey D. Johnson: All right, that's fair. I guess if I take your comments there about when you did go back above market several years ago, that was right when [inaudible] UltraSeal had come out, you were getting some mixed benefits there. You know, N1 hasn't scaled here at this point. You're really, I think, relying primarily on Nobel Active, which is an older product in the market.

Speaker Change: So what we saw in Q4, China sales increased by almost 15%.

Speaker Change: And as you mentioned, that's a good indication of boxes play a really important role in it but if I take a look at the entire China was flat and.

Stephen Keller: Thank you. Yeah, so I think you can assume, given where our guide is, I think you can assume that our gross margins for the year, year over year, will be down a little bit. That would be our expectation. Obviously, Q4 gross margins were quite a bit lower.

Thank you.

Yeah. So, I think you can assume -- given where our guide is -- I think you can assume that our gross margins for the year, year-over-year, will be down a little bit. That would be our expectation. Obviously, Q4 gross margins were quite a bit lower. That's a little bit more related to some specific issues that we had in Q4. So, I think for the year, it's a better comparison for the full year, with margins down a little bit due to mix. Thank you. We'll take our next question from Nathan Rich with Goldman Sachs. Please go ahead, your line is open.

And normally it's about 10% of our business have had been growing double digit for years and so.

So, how do you re-engage these doctors with an older product? Should we think about getting back to market growth because there's a newer product coming out, there's new feature sets coming out that will help drive that? Is this just purely going to be heavy lifting of going out, re-engaging the doctors and trying to get them to come back and use Nobel Active? Just what's the path to that back to market growth by the end of '24 in the North American market? Thanks

Speaker Change: So in 2020 for what we see in here Q1, because the easier comp we expect this strong growth.

Stephen Keller: That's a little bit more related to some specific issues that we had in Q4. So I think for the year, it's a better comparison for the full year, with margins down a little bit due to MEC. Thank you. We'll take our next question from Nathan Rich with Goldman Sachs. Please go ahead, your line is open.

As we go through Q2 to Q4, we're going to have a more difficult comp in here.

Speaker Change: We'd VP of impact comes in place. So we know exactly what that looks like but it's more of a moderate.

Amir Aghdaei: I will answer that but I want to just define one specific thing. About 50% of our business is in North America, 50% outside North America. That 50% that is outside North America has been going mid-single-digit with the same product in the past probably, five months, specifically. We have done a detailed analysis, interviewing hundreds of doctors that have done a comparative study of our product, our pricing, our coverage. And what we have seen, product is not the most important thing in how we have really not performed as well as we should have performed in here.

Speaker Change: Our assumption is that the or Toby EVP, it's going to be in place in second half and basketball, we have planned for it if it doesn't happen then okay, well, we will have a different model to discuss we expect some volatility in China and the reason for it is purely because of our consumer spending and incentive.

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

Amir Aghdaei: If it doesn't happen, then okay, we will have a different model to discuss. We expect some volatility in China, and the reason for it is purely because of a consumer spending and sentiment. What we hear from our team, what you hear, I'm sure, the housing crisis, the slower growth, and government intervention in some of the areas. We are considering all of that to be an issue that we need to deal with, but we have not taken our eyes off China. We think China is going to be a growth driver for Envista. It's underpenetrated. We got a great reputation and brand. Our specialty business is really well positioned.

Nathan Rich: Hi, good afternoon. Thanks for taking the questions. I guess first is, we think about the margin progression over the year, you talked about seeing improvement through the year and by 4Q. If you could maybe help us think about the magnitude or range that we should think about where the company is targeting to end the year relative to where you're starting. Yeah, thank you.

Speaker Change: But what we hear from our team, but you hear I'm sure the housing prices the slower growth and government intervention in some of the areas. We are considering all of that to be an issue that we need to deal with but we have not taken our eyes off China, we see China as.

Yeah, thank you. Thank, Nate. So, let's just walk through that a little bit and see if we can build kind of a bridge in here. Every quarter, Spark margin has improved. Every quarter. It's coming up every quarter and we expect that trend to continue. As it ramps up to double the business over three years, our goal is to get it to the fleet average. So, for that to take place, we've got to see this progression every quarter. And the other part of that equation is Nobel. Nobel is one of our most profitable businesses.

Amir Agdai: Thank you. So let's just walk through that a little bit and see if we can build a kind of bridge here. So every quarter, Spark Margin has improved every quarter, is coming up every quarter, and we expect that trend to continue. As it ramps up to double the business over three years, our goal is to get it to the fleet average. So for that to take place, we've got to see this progression every quarter, and the other part of that equation is Nobel. Nobel is one of our most profitable businesses.

If I may, I'll give you a little bit of more detail in here, which I think would be helpful. There are 200,000 dentists in North America. 70% of all implants are placed by less than 5% of those dentists. There are two groups in that category of 10,000. Let's say 50% of them are specialists. These specialists depend on a referral network. The other 50% are GPs that they provide one-stop solutions. They diagnose, they plan, they place in plan and they work with labs or they have in-house lab to provide that prosthetics.

Speaker Change: We're gonna be a growth driver for an Mr is underpenetrated, we've got a great reputation in bras, our specialty business is really well positioned we just need to deal with these short term issues and find the new model transform our business as we did with our implant do that and also get our search.

Amir Aghdaei: We just need to deal with these short-term issues and find a new model, transform our business as we did with our implant, do that on ortho, get ourselves in a better place on equipment and consumable, and we expect this to stabilize as we go forward. The patient demand in China, based on the latest information that we have, seems to be resilient as it stabilized. We're not getting any major feedback that we are seeing a major change. As you can imagine, February 9, Chinese New Year to 16, we're going to have a little bit of a break in here. Our hope is after they come back, we're going to see that momentum to continue.

Speaker Change: In a better place on equipment and consumable and we expect it to stabilize as we go forward.

And the other part of that equation is Nobel. Nobel is one of our most profitable businesses. We expect that to get to market proxies by end of the year. So, we start where we were for the whole year in Q4 and then start making progress every quarter. We're gonna see this margin progression throughout the year. We think Q1 is gonna be nominally better than Q4 and we expect, as we go through the year, we're gonna see that progression every quarter. We see better performance on margin until we get to end of Q4. And that's why we put that guidance in place to take a look at a range that we can manage with the opportunity, if macro improves, to respond to it as necessary. Okay, great. And if I could just ask you a quick follow-up question.

Speaker Change: Patient demand in China based on the latest information that we have seems to be a resilient has it stabilized we're not getting any major feedback that we are seeing a major change as you can imagine February nine Chinese new year 2016, we can have a little bit of a break India. Our hope is after that.

Amir Agdai: We expect that to get to market proxies by the end of the year. So if we start where we were for the whole year in Q4 and start making progress every quarter, we're gonna see this margin progression throughout the year. We think Q1 is gonna be nominally better than Q4, and we expect as we go through the year, we're gonna see that progression every quarter. We see better performance on March 8 until we get to the end of June. And that's why we put that guidance in place to take a look at a range that we can manage with the opportunity, if macro improves, to respond to it as necessary. Okay, great. And if I could just ask you a quick follow-up question.

Amir Agdai: Both these groups, which is the target for our premium impact, have three major requirements. Customer experience. And customer experience has a very wide definition -- about coverage, about order management, about return. Clinical training. Training that really hits the mark. And the model has changed over time, you've got to provide a wide range of training. Online through social media, through clinical advisory teams at the local level. And last but not least, a lot of it is through advocacy. If you have individuals that they advocate and show results and teach it to other people, that would have an impact. And that's the definition of what we call a community.

Speaker Change: Come back we're going to see that momentum to continue.

Operator: Thanks so much for the comments.

Nathan Rich: Thanks so much for the comments.

Speaker Change: Thanks, so much for the comments.

Operator: And I'll now turn the call back to our speakers for any closing comments.

Moderator: And I'll now turn the call back to our speakers for any closing comments.

Speaker Change: And I'll now turn the call back to our speakers for any closing comments.

Stephen Keller: Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, look forward to delivering on our 2024 key priorities, and we'll, we'll talk to you next quarter. Thank you very much.

Speaker Change: Thank you very much for spending time with us today really appreciate it we look forward to talk to you.

Speaker Change: Look forward to delivering on our 2020 for Keith.

Speaker Change: Key priorities and we will talk to you next quarter. Thank you very much.

Okay, great. And if I could just ask you a quick follow-up question. I wanted to just get a bit more details on your outlook for China. You had good performance in the quarter, I kind of understand it was against an easier comp, it sounds like you have one more quarter like that in the first quarter of the year. But I guess, beyond that, could you maybe just talk about how you feel about the demand environment in China overall and what type of growth you'd expect as the comparisons normalize? And I just wanted to also clarify, I think you said you may be expecting a VBP related to Wires and Brackets in the second half of the year. I just wanted to make sure I caught that right. So, what we saw in Q4, China's sales increased by almost 15%. And that, as you mentioned, that's a good indication that proxies play a really important role in it. But if I take a look at the entire year, China was flat.

Speaker Change: Yeah.

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

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

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

Nathan Rich: I wanted to just get a bit more details on your outlook for China. You know, you had a good performance in the quarter. I kind of understand it was against, you know, an easier comparison.

Speaker Change: Mhm.

Amir Agdai: Customer experience, coverage, go-to-market, training, education, advocacy or clinical support. You take a look at those and you figure out that what has really been a challenge for us, we haven't done as good a job building this referral network. A lot of those have been acquired by DSOs. We need to work with these specialists to provide support and training to them; study clubs, luncheon dinners -- so they can rebuild that referral network at the local level. We need to make sure the training and education that we provide is relevant.

Speaker Change: [music].

Amir Agdai: It sounds like, you know, you have one more quarter like that in the first quarter of the year. But I guess, beyond that, you could maybe just talk about how you feel about the demand environment in China overall and what type of growth you'd expect as the comparisons normalize. And I just wanted to also clarify. I think you said you may be expecting a VBP related to wires and brackets in the second half of the year. I just wanted to make sure I understood that right. So what we saw in Q4, China's sales increased by almost 15%. And that, as you mentioned, that's a good indication that proxies play a really important role in it. But if I take a look at the entire year, China was flat.

Speaker Change: Hum.

Speaker Change:

Speaker Change: Yeah.

Yeah.

Speaker Change: Hum.

So, what we saw in Q4, China's sales increased by almost 15%. And that, as you mentioned, that's a good indication that proxies play a really important role in it. But if I take a look at the entire year, China was flat. And normally, about 10% of our business has been going double-digit for years. And so in 2024, what we see in here, Q1 -- because it's an easier comp, we expect strong growth. As we go through Q2 to Q4, we're going to have a more difficult comp in here. VBP of implant comes in place so, we know exactly what that looks like but it's more of a moderate thing.

Speaker Change: Yeah.

I'm not suggesting, Jeff, that the product is not an issue; I'm not saying that it's irrelevant. I'm responding to your question that we are in a good place from brand, from recognition, from product, from pricing, from quality, what we do from operations. We need to change our commercial execution, marketing and training and education. That's what we're after, that's what we're doing as we speak.

Speaker Change: Okay.

Amir Agdai: And normally, about 10% of our business has been going double-digit for years. And so in 2024, what we see here, Q1, because it's an easier comp, we expect strong growth. As we go through Q2 to Q4, we're going to have a more difficult comp in Q3, of implant comes in place. So we know exactly what that looks like, but it's more of a moderate thing.

Speaker Change: Yeah.

Hum.

Speaker Change: [music].

Jeffrey D. Johnson: Very helpful, thank you.

Speaker Change: Hum.

Amir Aghdaei: Of course.

Speaker Change: Uh huh.

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

Speaker Change: [music].

Erin Wright: Right, thanks. You said you remain cautious on the underlying demand environment, which is obvious, but what did you see on a monthly basis throughout the quarter or year-to-date? And are there any signs of stabilization in certain pockets of the markets that you're looking at or anything to call out on that front in terms of areas where there's disproportionate, either deterioration or stabilization? Thanks.

Speaker Change: Okay.

Amir Agdai: Our assumption is that the ortho-VVP is gonna be in place in the second half, and that's how we have planned. If it doesn't happen, then OK, we will have a different model to discuss. We expect some volatility in China, and the reason for it is purely because of a consumer spending incentive.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change:

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change:

Speaker Change: [music].

Amir Agdai: We've got a great reputation and brand. Our specialty business is really well positioned. We just need to deal with these short-term issues and find a new model, transform our business as we did with our implant, do that on auto, get ourselves in a better place on equipment and consumables, and we expect this to stabilize as we go forward. The patient demand in China, based on the latest information that we have, seems to be resilient and has stabilized. We're not getting any major feedback that we are seeing a major change.

We've got a great reputation and brand.

Spending per patient has been challenging for a lot of these DSOs in the past several months and that's what we see. And how is that impacted is because of this high-end procedures: adult orthodontic cases, full-arch restoration, $25,000 to $30,000 that can get postponed. So, so far, during the year, what we have seen is consistent with what we saw in Q4. Not a radical change one way or another.

Amir Agdai: As you can imagine -- February 9, Chinese New Year, to 16 -- we're going to have a little bit of a break in here. Our hope is after they come back, we're going to see that momentum to continue. Thanks so much for the comments. And I'll now turn the call back to our speakers for any closing comments. Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, to delivering on our 2024 key priorities, and we'll talk to you next quarter. Thank you very much. This does conclude today's program. Thank you for your participation, and you may now disconnect.

Erin Wright: Okay, thank you.

Amir Aghdaei: Of course.

Operator: We'll take our next question from Jon Block with Stifel. Please go ahead, your line is open.

Thanks so much for the comments. And I'll now turn the call back to our speakers for any closing comments. Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, to delivering on our 2024 key priorities, and we'll talk to you next quarter. Thank you very much. This does conclude today's program. Thank you for your participation, and you may now disconnect.

And I'll now turn the call back to our speakers for any closing comments. Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, to delivering on our 2024 key priorities, and we'll talk to you next quarter. Thank you very much. This does conclude today's program. Thank you for your participation, and you may now disconnect.

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change: [music].

Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, to delivering on our 2024 key priorities and we'll talk to you next quarter. Thank you very much. This does conclude today's program. Thank you for your participation and you may now disconnect.

Speaker Change: Hum.

Speaker Change: [music].

And I know dental has softened but everyone's dealing with that. And I know you've got VBP and IOS pricing but, again, everyone's dealing with that. It doesn't sound like the trajectory of the Spark gross margin ramp has really changed, or at least I haven't picked up on that, and none of the other dental companies have 2024 EBITDA margins that are coming anywhere close to compressing like yours are, being revised down to that magnitude.

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Hum.

[music].

Operator: BF-WATCH TV 2021, www.youtube.com or www.youtube.com or www.youtube.com, Thanks for watching! and Michael B, www. EnvistaHoldings.com www. Envista.com and Envista Holdings, wehuehuehue However, there is one exception. The same person, high-ranking government officials, would conceal information for arbitrary reasons under that very text. www. EnvistaHoldings.com signing off. Please subscribe to my YouTube Channel, BF-WATCH TV 2021 www. EnvistaHoldings.com or oh BF-WATCH TV 2021, Will be back next week for another session. www. EnvistaHoldings.com, The Ultimate Parody Site! www. EnvistaHoldings.com Subscribe if you watched my video earlier, www. EnvistaHoldings.com BF-WATCH TV 2021, trumpet music plays trumpet music plays www. EnvistaHoldings.com BF-WATCH TV 2021, Link in the description: https://www.youtube.com BF-WATCH TV 2021, www.envistaHoldings.com We're gonna be talking about Softball Technology and Magic Palm!" BF-WATCH TV 2021. Thanks for watching! The End,....

Amir Aghdaei: Yeah. Of course, I definitely understand where you're coming from and this is a challenge that we are trying to make sure that we are thoughtful about this. And we put guidance in place that considers the realities of what we see in place. We are well aware of where we started in '21, '22 and where we have ended up in '23. So, I want to take us back to about Q4. Stephen talked about that, where we ended up in Q4. Those dynamics that you talked about, Jon, is exactly what we are facing.

Speaker Change: Hum.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: Hum.

Operator: www. EnvistaHoldings.com signing off. Please subscribe to my YouTube Channel, BF-WATCH TV 2021 www. EnvistaHoldings.com or oh BF-WATCH TV 2021, Will be back next week for another session. www. EnvistaHoldings.com, The Ultimate Parody Site! www.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Operator: EnvistaHoldings.com Subscribe if you watched my video earlier, www. EnvistaHoldings.com BF-WATCH TV 2021, trumpet music plays trumpet music plays www. EnvistaHoldings.com BF-WATCH TV 2021, Link in the description: https://www.youtube.com BF-WATCH TV 2021, www.envistaHoldings.com We're gonna be talking about Softball Technology and Magic Palm!" BF-WATCH TV 2021. Thanks for watching! The End,....

Speaker Change: Okay.

Speaker Change: Uh-huh.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Mhm.

Speaker Change: [music].

Jonathan David Block: Okay, that was very helpful. And maybe just a quicker follow up. Stephen, this one might be for you but just a lot of moving parts with the 4Q GM compressing notably. So, if we say EBITDA margins are down 160 basis points year-over-year, sort of going from 18,1 to the midpoint of next year -- any way to think about that? Just like sort of the breakdown between GM and OpEx? Because obviously, you know, you're still going to be sort of investing in the business. Any color between those would be helpful. Thank you.

Stephen Keller: Yeah. So, I think you can assume -- given where our guide is -- I think you can assume that our gross margins for the year, year-over-year, will be down a little bit. That would be our expectation. Obviously, Q4 gross margins were quite a bit lower. That's a little bit more related to some specific issues that we had in Q4. So, I think for the year, it's a better comparison for the full year, with margins down a little bit due to mix.

Jonathan David Block: Thank you.

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

Nathan Allen Rich: Hi, good afternoon. Thanks for taking the questions. I guess first is, we think about the margin progression over the year, you talked about seeing improvement through the year and by 4Q. If you could maybe help us think about the magnitude or range that we should think about where the company is targeting to end the year relative to where you're starting.

Amir Aghdaei: Yeah, thank you. Thank, Nate. So, let's just walk through that a little bit and see if we can build kind of a bridge in here. Every quarter, Spark margin has improved. Every quarter. It's coming up every quarter and we expect that trend to continue. As it ramps up to double the business over three years, our goal is to get it to the fleet average. So, for that to take place, we've got to see this progression every quarter.

We think Q1 is gonna be nominally better than Q4 and we expect, as we go through the year, we're gonna see that progression every quarter. We see better performance on margin until we get to end of Q4. And that's why we put that guidance in place to take a look at a range that we can manage with the opportunity, if macro improves, to respond to it as necessary.

Nathan Allen Rich: Okay, great. And if I could just ask you a quick follow-up question. I wanted to just get a bit more details on your outlook for China. You had good performance in the quarter, I kind of understand it was against an easier comp, it sounds like you have one more quarter like that in the first quarter of the year.

But I guess, beyond that, could you maybe just talk about how you feel about the demand environment in China overall and what type of growth you'd expect as the comparisons normalize? And I just wanted to also clarify, I think you said you may be expecting a VBP related to Wires and Brackets in the second half of the year. I just wanted to make sure I caught that right.

Amir Aghdaei: So, what we saw in Q4, China's sales increased by almost 15%. And that, as you mentioned, that's a good indication that proxies play a really important role in it. But if I take a look at the entire year, China was flat. And normally, about 10% of our business has been going double-digit for years. And so in 2024, what we see in here, Q1 -- because it's an easier comp, we expect strong growth.

As we go through Q2 to Q4, we're going to have a more difficult comp in here. VBP of implant comes in place so, we know exactly what that looks like but it's more of a moderate thing. Our assumption is that the Ortho VBP is gonna be in place in second half and that's how we have planned for. If it doesn't happen, then OK, we will have a different model to discuss. We expect some volatility in China and the reason for it is purely because of a consumer spending sentiment.

Amir Agdai: What we hear from our team, what you hear I'm sure, the housing crisis, the slower growth and government intervention in some of the areas -- we are considering all of that to be an issue that we need to deal with but we have not taken our eyes off China. We think China is going to be a growth driver for Envista. It's underpenetrated. We've got a great reputation and brand.

Our specialty business is really well-positioned. We just need to deal with these short-term issues and find a new model, transform our business as we did with our implant, do that on ortho, get ourselves in a better place on Equipment and Consumables and we expect this to stabilize as we go forward. The patient demand in China, based on the latest information that we have, seems to be resilient, has stabilized. We're not getting any major feedback that we are seeing a major change.

As you can imagine -- February 9, Chinese New Year, to 16 -- we're going to have a little bit of a break in here. Our hope is after they come back, we're going to see that momentum to continue.

Nathan Allen Rich: Thanks so much for the comments.

Operator: And I'll now turn the call back to our speakers for any closing comments.

Stephen Keller: Thank you very much for spending time with us today. We really appreciate it. We look forward to talking, you know, to delivering on our 2024 key priorities and we'll talk to you next quarter. Thank you very much.

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

Q4 2023 Envista Holdings Corp Earnings Call

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