Envista Holdings Corp Q1 FY2026 earnings call

Paul Keel started by summarizing Q1 performance, noting 9.5% core growth, double-digit growth in major businesses, and reinvestment in sales/marketing and R&D. Eric Hammes then went into financials, stating sales of $706 million, 9.5% core sales growth, 25% adjusted EBITDA growth, 50% EPS growth. Progress in growth, operations, and people was discussed. Growth had broad-based performance across the portfolio. Operations saw benefits from INVISTA business system with gross margin expansion and adjusted EBITDA margin expansion. People focus on engagement, development, and community impact with gains in colleague engagement and talent development program launch. New product innovation played a central role, including Novell S-Series in implants, Spark launch in Japan, and DEXIS DTX Studio Clinic with enhanced AI. An accretive tuck-in acquisition in the implants platform was completed.

Specialty products and technologies grew core revenue by more than 8%, with core sales up 8.4%. Equipment and consumables was up nearly 12%. North America and Europe both grew double digits. Developing markets grew high single digits, with China having declines due to BBP and the Middle East due to conflict. Implant core growth was up low single digits in the quarter as solid growth in developed markets was offset by declines in China as channel partners are reducing inventories in preparation for an expected VVP process. Specialty products and technologies posted adjusted operating profit growth of $10 million year-on-year, up 18%, with a 40 basis point improvement in margin rate. Equipment and consumables core sales in the quarter increased 11.5% versus prior year, with double-digit growth in both consumables and diagnostics. Adjusted operating profits increased 33% over last year, with operating margins up nearly 300 basis points.

Reaffirmed the 2026 guidance issued on Q4 2025 call, with core growth range 2% to 4%, adjusted EBITDA growth range 7% to 13%, EPS range $1.35 to $1.45, and approximately 100% free cash flow conversion. Board authorized an incremental $300 million addition to the share repurchase program.

Macro volatility, including the situation in the Middle East with minimal impact so far but monitoring needed. Impact of VBP process on China's implant market with potential short-term revenue compression. Geopolitical shifts and related impacts on input costs like fuel and logistics, with mitigation plans in place. Uncertainty around timing and details of VBP processes for ortho and implants.

Q: Elizabeth with Evercore asked about what's clicking nicely and difficult to get traction in.

A: Paul Keel discussed growth investments in clinical education, customer support, new product development, operations improvements with Invista business system, and people improvements.

Q: Michael with Lyric Partners asked about VBP timing and implants performance.

A: Eric Hammes said VBP processes for ortho and implants expected to start in Q2 or Q3, with channel headwinds and later benefits.

Q: Jeff with Baird asked about VBP impact in China and ortho BVP timing.

A: Eric Hammes discussed VBP headwinds in China and ortho BVP planning assumption of Q3.

Q: Michael with Jefferies asked about Middle East input costs and Versa acquisition.

A: Paul Keel and Eric Hammes discussed minimal impact on revenues and operations, and Versa system remains open.

Q: John with Stifel asked about next wave of innovation.

A: Paul Keel talked about investing in growth with new product development and commercial programs.

Q: Erin with Morgan Stanley asked about capital deployment and acquisitions.

A: Paul Keel discussed organic growth, accretive M&A, and share repurchase program.

Q: Glenn with Barclays asked about core growth cadence.

A: Eric Hammes discussed normalized core growth and guidance range.

Q: Jason with Piper Stanley asked about Spark.

A: Paul Keel talked about Spark runway with core bracket and wire users converting.

Q: Daniel with Citi asked about EBITDA margin cadence and growth investments.

A: Eric Hammes discussed growth investment ramp, margin rate pacing, and productivity benefits.