NVST

• Overall Q2 2026 Financial Performance

  • Total sales reached $731 million, with core revenue growth of 5% and total revenue growth of just over 7% year-over-year. 200 basis points of additional growth came from FX and recent acquisitions.
  • Adjusted gross margin was 55.1%, up 70 basis points year-over-year, driven by volume, price, productivity, and FX. Adjusted EBITDA increased 28% year-over-year to a margin of 14.7% (up 230 basis points). Adjusted EPS was 41 cents, growing 58% year-over-year.
  • Q2 free cash flow was $105 million, a $29 million increase year-over-year, including a $13 million recovery of previously paid IEPA tariffs. The full-year 2026 non-GAAP tax rate is now expected to be 26%, 2 percentage points lower than initial guidance.
  • The balance sheet remains strong, with net debt to adjusted EBITDA of 0.7x, providing flexibility amid macro uncertainty. The company repurchased 2.4 million shares at an average price of $24 per share in Q2.

• Strategic and Operational Progress

  • The company has materially ramped investments in new product development and commercialization over the past two years, which is now delivering positive returns.
  • Growth was broad-based across geographies and business segments, with volume contributing $17 million of sales growth, net pricing adding $12 million, FX contributing $11 million, SPARC deferral changes adding $5 million, and acquisitions contributing $4 million.
  • The Versa acquisition (Osseo densification technology) is the largest driver of recent acquisition-related growth, and is off to a strong start ahead of plan. New implant product launches (S-series, upcoming abutment launch) are also performing ahead of expectations.
  • An investor day is scheduled for September 17, 2026, which will include updates on the 2025 value creation plan, innovation priorities, and leadership presentations.

• Portfolio Performance Drivers

  • The global dental market has shown resilience amid ongoing macro uncertainty, with the company's balanced portfolio offsetting weakness in more elective categories (e.g. implants) with stronger performance in less macro-sensitive categories (e.g. consumables, diagnostics).
  • The E&C segment has delivered five straight quarters of high single-digit to low double-digit growth, driven by market tailwinds, market share gains, and new product innovation. Diagnostics has returned to growth after a post-COVID contraction, with North America posting consistent above-market growth.

• The company raised and narrowed its full year 2026 guidance, now expecting 3.5% to 4.5% core growth, 11% to 14% adjusted EBITDA growth, adjusted EPS of $1.50 to $1.55, and free cash flow conversion of approximately 100%.
  • Second half revenue growth is expected to be lower than the first half due to a calendar billing day effect: Q4 2026 has four fewer selling days than Q4 2025, which will push Q4 core growth to flat to slightly down. Absent this effect, Q4 core growth is expected to be in line with the full year guidance range.
  • The revised guidance assumes China VBP1 (orthodontics) and VBP2 (implants) will both launch in the second half of 2026, with the bidding processes already underway. Excluding China VBP, price capture is expected to remain strong in the second half.
  • Adjusted EBITDA growth in Q3 and Q4 is expected to be roughly in line with sales growth for each quarter. The full-year adjusted non-GAAP tax rate is confirmed at 26%, 2 percentage points lower than initial guidance.
  • After normalizing for selling days, SPARC deferral impacts, and VBP changes, the underlying core growth rate for the second half is expected to be approximately 3.5%, which is very similar to the 4% underlying growth rate in the first half. No material FX translation impact on revenues is expected for the second half.

1. Specialty Products and Technology (SP&T): Revenue grew nearly 6% year-over-year, with core sales up 3.1%. Within the segment: Spark orthodontics delivered double-digit growth (high single-digits after adjusting for the SPARC deferral change), brackets and wires declined high single-digits year-over-year, and implant core growth was up low single digits. Adjusted operating profit grew $9 million year-over-year (up 15%), with a 120 basis point margin improvement. 2. Equipment and Consumables (E&C): Revenue increased 8.5% year-over-year, with high single-digit growth in both consumables and diagnostics. Adjusted operating profit increased 25% year-over-year, with operating margins up 250 basis points, driven by strong pricing, volume benefits, and FX tailwinds.

• Ongoing macroeconomic uncertainty creates pressure on more elective dental procedures (e.g. implants), with consumer confidence impacting procedure volumes, particularly in the North American market.
  • China VBP implementation introduces short-term pricing pressure: VBP1 for orthodontics is expected to result in ~45% price compression, while VBP2 for implants will result in 10-15% price compression. While the company expects market share gains and volume growth to offset this, the magnitude of patient demand response to price changes for orthodontics remains uncertain, due to longer procedure timelines and clinician training requirements.
  • Tariff costs remain a headwind: Q2 2026 tariff costs were $5 million higher than Q2 2025, and quarterly tariff costs are expected to remain at similar levels in the second half as new Section 301 levies replace prior tariffs, though the company has offset these costs to date via supply chain, G&A, and pricing actions.

Q: E&C has posted five straight quarters of accelerated high single-digit growth. Is this driven by market upturn or company-specific factors like share gains and new products? / A: Three factors support the current growth trajectory. First, the segment benefits from market tailwinds: consumables are well-insulated from macro volatility since they are covered by insurance, and diagnostics has returned to growth after a multi-year post-COVID contraction. Second, the company is gaining share in both consumables and diagnostics, growing faster than the mid-single digit overall market growth, driven in large part by new product activity. Third, the balanced portfolio offsets macro pressure on elective categories like implants, with geographic diversification further softening the impact of current softness in North America.

Q: If China VBP1 and VBP2 launch in H2 2026 as expected, will this be dilutive to 2026 results and accretive/a tailwind to 2027 results? / A: The company was down slightly in China year-over-year in the first half, with most compression in Q1. With VBP implementation in H2, China is expected to return to moderate growth in the second half, with stronger growth in Q4. A tight, lean pre-VBP channel will allow faster post-VBP response, and the company expects to gain market share as a leading branded player, leading to volume rebound. With easier year-over-year comps in the first half of 2027, China is expected to deliver growth in 2027. For VBP, past experience shows that while price compression occurs, volume more than doubles, leading to higher total gross margin dollars and an improved market position.

Q: Outside of China, what is driving implant performance, and what is the new product cadence looking forward into 2027 and beyond? / A: Implant performance in Q2 was consistent with recent quarters, with balanced growth across geographies and between challenger and premium product lines. In addition to titanium screws, the company has strong positions in higher-growth regenerative biomaterials and digital workflow, which add to overall segment growth. Investments to restart the implant new product pipeline made in 2024 are now bearing fruit: the S-series implant launch in Q1 is running ahead of plan, with ~25% of sales coming from competitive conversion, a new abutment product is launching in Europe and expected to launch in North America H2 2026 pending regulatory approval, and the acquired Versa Osseo densification technology is also off to a strong start ahead of commercial plan.

Q: Given your strong recent M&A activity in implants, what is your M&A strategy going forward? / A: Over the past 18 months, the company has completed three small acquisitions in the implant space, and this is representative of the type of deals the company will pursue going forward. The company targets strategically aligned, financially accretive small deals where it is the logical owner that can drive better performance than the current owner, leveraging the company's strong balance sheet, global commercial footprint, and improved M&A capabilities built through recent deals. Currently, the company is focused on growing its challenger implant business organically, where it already has two strong existing brands.