Envista Holdings Corp Q1 FY2025 earnings call

Opening Thoughts on Q1 Results: Envista had a solid start to 2025 with core growth of 0.2%, adjusted EBITDA margin around 13%, and adjusted EPS of $0.24, ahead of expectations. Progressed on the $250 million share repurchase program. ### Progress on Capital Markets Day Plan: Delivered growth across most of the portfolio, made broad-based progress on operations (customer service, price, G&A productivity, Spark margins), and saw a 4-point jump in employee engagement. ### Navigating the Environment: Global dental market was stable in Q1. Addressed geopolitical uncertainty through restructuring, cost controls, and tariff task force actions. Maintained 2025 guidance. ### Growth Across Portfolio: Consumables, Nobel Biocare, and Ormco (excluding China) showed growth. ### Operational Progress: High on-time delivery (around 95%), improved G&A productivity, Spark posted successive quarter of gross margin improvement on track to turn operating profit positive in second half. ### People Priorities: Increased employee engagement, improved retention, and a refreshed leadership team working well.

In the specialty products and technology segment, revenue declined 70 basis points year-on-year. Its adjusted operating margin was 14.1%, down about 100 basis points year-over-year. The equipment and consumables segment had core sales increase by 170 basis points versus prior year, but its adjusted operating margin declined 360 basis points versus Q1 2024, mainly driven by FX transaction losses within the quarter and partially offset by volume and price growth in consumables.

Maintained 2025 guidance of 1% to 3% core growth, roughly 14% adjusted EBITDA margins, and adjusted EPS of $0.95 to $1.05. The confidence interval is wider due to fluid tariff landscape. Expected to offset tariff impact through various mitigating actions across the year, with Spark deferral expected to provide tailwinds in Q3 and Q4.

Tariff Uncertainties: Exposure to tariffs in areas like U.S. goods into China, Chinese goods into U.S., and European imports into U.S. with fluid implementation timelines. ### Geopolitical Risks: Impact on supply chain, raw material supply, and currency fluctuations. ### Consumer Confidence Impact: Dental elective categories may be affected by deteriorating consumer confidence. ### VBP in China: Uncertainty around timing and extent of ortho VBP in China, with potential impact on brackets and wires business.

Q: Please go ahead on tariffs and current exposure and mitigation?

A: Paul Keel discussed tariff exposure in three areas: U.S. goods to China, Chinese goods to U.S., and European imports to U.S., with mitigation efforts like shifting supply and working with suppliers.

Q: Thoughts on April trends and volume-based?

A: Paul Keel said April started well, market is slow but stable, no major shifts in procedure types.

Q: Tariff growth and net impacts in guide?

A: Paul Keel said guide includes current tariff activity, confidence in mitigation but wider confidence interval.

Q: VBP timing and impact?

A: Paul Keel said ortho VBP in China is progressing, expected soft first half in brackets and wires in China, benefit in second half.

Q: Consumable sell-through dynamics?

A: Paul Keel said consumables did well as non-elective categories hold up better in slow market, and good operational capabilities ensure stable sell-through.

Q: Pricing power in tariff environment?

A: Paul Keel said clinicians valuing innovation allow price capture, with differences by country, customer type, and category.

Q: Spark deferral and restructuring savings?

A: Eric Hammes said two-thirds of Spark deferral headwind expected in second half, restructuring savings on track with $20 million target.

Q: Implants performance and expectations?

A: Paul Keel and Eric Hammes said premium implants had positive growth, Challenger had softness due to billing days, but no change in trajectory.

Q: Spark ASP and competitors' pricing?

A: Eric Hammes said no major change in Spark ASP, consistent with innovation and value capture, competitive landscape is challenging.

Q: China tariffs and tax entities?

A: Paul Keel said shifting premium implant supply from U.S. to Sweden, Eric Hammes said tax rate expected to be 37% for the year, with progress on tax entity structure.

Q: Competitors and supplier disruptions?

A: Paul Keel said suppliers are responsive, competitors are capable but dental is attractive and competitive. Eric Hammes said price realization expected to be in line with prior guidance with tariff mitigation.

Q: M&A potential?

A: Paul Keel said accretive M&A is a capital allocation priority, with dental being attractive and potential to consolidate lower capitalized players.